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Big Brands
Big Savings
B&M European Value Retail S.A.
Annual Report and Accounts 2015
B&M is a fast-growing discount retailer, operating from
over 425 high street and out of town stores across the UK,
as well as 50 stores under the Jawoll brand in Germany.
We offer customers a broad range of grocery and general
merchandise products at sensational prices.
Our aim is to provide customers with a fun and exciting shopping
experience, offering them great products and fantastic value so that they
return again and again to a B&M store.
Our success is down to our customers and built on “word of mouth”.
Last year we enjoyed an average 2.9 million customer transactions
across our stores each week. We spend very little on advertising so that
we can focus on keeping the prices of our products as low as possible.
B&M offers customers a great alternative to specialist and general
retailers. We sell a broad range of product categories, as you will see
from our consumer website (www.bmstores.co.uk). However, within
these categories we don’t over complicate things. We focus on the key
best-selling products within a category, at great prices.
Contents
Strategic Report
01 Highlights
02 Company overview
04 Chairman’s statement
06 Chief Executive Officer’s review
08 Our markets
10 Our business model
12 Our strategy
14 Financial review and
key performance indicators
18 Principal risks and uncertainties
20 Corporate social responsibility
Corporate Governance
24 Board of Directors
26 Corporate governance statement
31 Audit & risk committee report
33 Directors’ remuneration report
47 Directors’ report and business review
51 Statement of Director’s responsibilities
Financial Statements
52 Independent Auditor’s report
53 Consolidated statement of
comprehensive income
54 Consolidated statement of financial position
55 Consolidated statement of
changes in shareholders’ equity
56 Consolidated statement of cash flows
57 Notes to the consolidated financial statements
92 Independent Auditor’s report
93 Company balance sheet
94 Company profit and loss account
95 Notes to the annual accounts
Strategic Report
Highlights
• Group revenues have increased by 29.5% to £1,646.8m
• UK like-for-like revenues +4.4%
• Group adjusted EBITDA increased by 33.6% to £174.2m
• Adjusted Profit Before Tax increased by 55.7% to £135.0m
• 52 net new stores opened, growing the estate by 14% to
425 stores and the creation of over 3,500 new jobs
• Strong pipeline of further new stores and on track to achieve
60 net new store openings in FY2016
• Integration of Jawoll Germany proceeding to plan
• Net cash flow from operations £152.9m, an increase of 33.3%
• Continued investment in infrastructure and a reduction in net
debt to EBITDA to 2.2 times
Revenues
+29.5%
2015: £1,646.8m
2014: £1,272.0m
Adjusted EBITDA
+33.6%
2015: £174.2m
2014: £130.4m
Operating cash flow
+33.3%
2015: £152.9m
2014: £114.7m
01
Financial StatementsCorporate GovernanceStrategic Report Company
overview
Our aim: to provide customers with a fun and exciting shopping experience, offering them
great products and fantastic value so that they return again and again to a B&M store.
Geographical overview
425 B&M stores
in the UK
• Liverpool – Head office
50 Jawoll stores
in Germany
• Soltau – Head office
Northern Ireland
28
North West
98
Wales
27
South West
21
Scotland
51
North East / Yorkshire
78
Midlands
72
South East
50
Regional snapshot
B&M in the UK
2015
Revenue
£1,526.2m
+20.0%
New locations
52
+14%
Adjusted EBIT
£150.7m
+25.0%
Employees
18,316
+20.0%
Jawoll in Germany¹
2015
Revenue
£120.6m
–
Adjusted EBIT
£7.9m
–
New locations
1
–
Employees
1,146
–
¹
Jawoll figures for 11 months ending 28 March 2015
02
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Product overview
Our focus: is on general merchandise, supplemented by a focused range of grocery and
FMCG products, sold in our B&M stores throughout the UK and now Jawoll in Germany
Products
DIY & decorating
Electricals
Household goods
Gardening, outdoor & leisure
Petcare
Seasonal goods (Halloween and
Christmas)
Toys
Clothing & footwear
Stationery
Giftware
Home adornment
Food
Confectionery
Soft drinks
Alcohol
Toiletries
03
Financial StatementsCorporate GovernanceStrategic Report Chairman’s
statement
B&M has delivered strong increases in sales,
profits and cash generation whilst pushing
on with rapid store rollout and investing in
new infrastructure.
Results
The business performed well in the year,
delivering strong growth in revenues, profits
and cash flow, whilst exceeding its new store
target. Revenues reached £1,646.8m on a 52
week comparison basis, representing growth
of almost 30%, including the benefit of the
Jawoll acquisition in Germany. UK like-for-like
revenues grew strongly, up by 4.4%.
Group profits and earnings also grew well
on an underlying basis (that is, excluding
the effects of the capital restructuring and
exceptional costs which were predominantly
linked to the IPO). Profit before tax rose by 55.7%
excluding these items, on a 52 week
comparable basis.
Given the strong financial performance of the
Group, an interim dividend of 0.9p was paid in
January 2015 and the Board is recommending
a final dividend of 2.5p per share. The total
dividend of 3.4p reflects the upper end of the
Group’s dividend policy.¹
Introduction
It is a pleasure to report to shareholders on
B&M’s successful first year as a public
company. It has been particularly pleasing
to see such a supportive response from UK
and international investors for a talented,
entrepreneurial management team at the
helm of a business which it has developed
and nurtured into one of the UK’s leading
value-based retailers.
It is also gratifying to be able to describe a
year of strong, broadly-based progress in
the business itself as it implements its strategy
for growth in a retail market which remains
highly competitive.
B&M’s IPO was a major milestone in its
development. Having grown rapidly and
profitably to become the UK’s leading limited
range general merchandise discounter and
made its first move towards international
expansion, going public was a natural
next step. Welcoming a new institutional
shareholder base and assembling the broader
skills, experience and governance that go
with being a listed company are also key
foundations for the next stage of B&M’s growth.
This is important because B&M is a business
which we believe, with its strong customer
appeal and exceptional investment returns, can
become multiple times larger. It has scope to
double the size of its store network in the UK
over the medium term and the opportunity to
be a leader in the emerging discount general
merchandise sector elsewhere in Europe, which
at present is just a fraction of the size of this
vibrant sector of retailing in the United States.
Sir Terry Leahy, Chairman
“B&M is a business which
we believe, with its strong
customer appeal and
exceptional investment
returns, can become multiple
times larger”
Revenue
+29.5%
2015: £1,646.8m
2014: £1,272.0m
04
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report History
2014
B&M lists on the London Stock Exchange as
part of the next stage of its development.
The listing is designed to support the
Company’s ambitious growth plans, both in
the UK and continental Europe. The listing
follows B&M’s acquisition of a majority
stake in German discount retailer Jawoll
and the opening of an additional 500,000
square foot distribution centre.
2013
Clayton, Dubilier and Rice, one of the
world’s leading private equity firms
acquired a significant stake in B&M and
Sir Terry Leahy was appointed Chairman.
2012
The business opened its 300th store.
2011
New Operations, Distribution and Finance
Directors joined the business.
2010
The business moved into a new head office
and modern 620,000 sq ft distribution
centre based in Speke, Liverpool.
2004
B&M was acquired by Simon and Bobby
Arora in December 2004 from Phildrew
Investments, at which time the Company
traded from just 21 stores.
1978
The business was founded in 1978 with
the first store opening in Blackpool.
Governance & the Board
We have put together a high calibre, balanced
Board with a good blend of skills and relevant
experience. Simon Arora, our CEO, was joined
by our CFO, Paul McDonald, as the Executive
Directors of B&M European Value Retail S.A. in
May 2014. At the same time, four independent
Non-Executive Directors were appointed to the
Board ahead of the IPO. Thomas Hübner is the
Senior Non-Executive Director, Ron McMillan is
Chair of the Audit & Risk Committee, Kathleen
Guion is Chair of the Remuneration Committee
and Harry Brouwer also joined the Board as a
Non-Executive Director. They have each brought
diverse, thoughtful and informed perspectives,
enabled our committees to be fully functional
from an early stage and, I am confident, will
also apply independent judgement and diligent
oversight to the operation of the Board.
Full details of the Committees’ responsibilities
and activities during year are contained in the
Corporate Governance Statement, beginning on
page 26 and the reports from the Audit & Risk
Committee and the Remuneration Committee,
which begin on pages 31 and 33 respectively of
this report.
Colleagues
The continued hard work of all our 19,000+
employees right across the Group in the UK and
Europe in retail stores, distribution centres and
logistics, and central support is what delivers
success and excellent customer service, which
makes us all proud to be B&M.
Outlook
We look forward to the future with confidence.
We have a strong management team, a
customer offer with potent appeal, a high
returning business model and a proven growth
strategy with a long runway for growth. An
improving UK consumer background, including
the prospect of rising real disposable incomes,
can only be helpful to our business after several
years of strong economic headwinds.
We can always improve and of course the
pace of structural change in retailing and its
competitive character will inevitably present
challenges but I believe B&M is well positioned
to make further progress in the year ahead.
Sir Terry Leahy
Chairman
27 May 2015
¹
Dividends are stated as gross amounts before
deduction of Luxembourg withholding tax which is
currently 15%
05
Financial StatementsCorporate GovernanceStrategic Report Chief Executive
Officer’s review
Our aim is to provide customers with a fun and
exciting shopping experience.
Overview
B&M opened its first store in Blackpool in 1978, and
the business was acquired by my family in 2004,
when it comprised 21 stores in North West England.
We identified strong consumer demand in the UK
for attractively-priced, well-designed and
presented homewares, household textiles, toys
and seasonal goods, and we set about re-
designing the B&M model and its customer
proposition around meeting those needs.
The business we started has evolved and
expanded in just over a decade into the fast-
growing chain of over 425 limited assortment
general merchandise discount stores trading as
B&M Bargains and the larger B&M Homestores
that we operate across the country today,
employing over 19,000 staff and serving over
2.9 million customers a week.
The B&M customer offer is a simple one.
We sell a wide but disciplined range of products
at everyday best prices which are consistently
and significantly below those offered by both
specialist and general retailers. We offer a range of
categories from soft drinks to DIY and from pet care
to stationery, but in each we focus on just the best-
selling products.
We try to source direct, including major brands from
the large multi-national FMCG companies, as
well as our own exclusive ranges through long-
established supplier relationships in the Far East.
Our supplier base has been very stable and
supportive to B&M over the years. Our growth is
part of their success as well and we appreciate
their efforts on our behalf. Our low cost,
uncomplicated but disruptive model means that
we can pass on big savings to our customers.
Our range is constantly changing so that customers
can always find something new in store. We also
flex a big portion of our store space from season to
season, for example, emphasising toys in the
period up to Christmas and gardening in the Spring
and Summer months.
For many shoppers across the UK, B&M is now
an established part of their regular shopping habits
and, in tandem with our strong roll-out programme,
this has enabled us to become one of the leaders
in the rapid growth of value-led retailing in the UK.
This structural shift to value is re-shaping the retail
industry and has underpinned B&M’s track record
of consistent, strong and profitable growth.
In the Spring of 2014 we also took a significant
further step towards establishing an international
business with the acquisition of Jawoll, a profitable,
family-owned variety retailer based in North-West
Germany. The acquisition added 49 general
merchandise discount stores with a similar market
positioning to B&M’s and, in time, we see this
business providing a good platform for growth in
Europe’s largest consumer market.
Simon Arora, Chief Executive Officer
“For many shoppers across
the UK, B&M is now an
established part of their
regular shopping habits and,
in tandem with our strong
roll-out programme, this has
enabled us to become one of
the leaders in the rapid
growth of value-led retailing”
Adjusted EBITDA:
+33.6%
2015: £174.2m
2014: £130.4m
06
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report 2014 was an important milestone in the
development of B&M because we became a public
company with the success of our IPO, which valued
the business at £2.7 billion. We understand that
our IPO marked the largest ever flotation of a retail
business on the London Stock Exchange. It is
particularly important therefore to be able to report
a record year, strong trading and a pleasing set
of results in our first year as a listed company,
which demonstrates to our new shareholders the
momentum in B&M and its excellent prospects for
further growth in the UK and Europe.
Results
Performance was strong in the year. On a
comparable 52 week basis Group revenue grew
by 29.5% to over £1.6bn, and by 20.0%, excluding
Jawoll. UK like-for-like revenue growth of 4.4%
was pleasing, particularly against the very strong
growth in consecutive prior years.
In addition to the strong performance of existing
stores, our new stores also performed well. These
elements, combined with B&M’s embedded cost
discipline and robust gross margins supported by
unusually low markdown activity on seasonal
goods, delivered very strong profit growth.
Adjusted EBITDA increased by 33.6% to £174.2m
on a comparable basis – and by 25.4% excluding
Jawoll. Underlying pre-tax profit rose 55.7% on a
comparable 52 week basis.
Expansion
We opened 52 stores in the UK in the year and
acquired a further 49 though our acquisition of
a majority stake in Jawoll, an established and
profitable general merchandise discount business
in North & West Germany with a similar market
positioning to B&M’s.
We believe our total store base in the UK can be
doubled in size during the years ahead and we
continue to see a good flow of attractive new
site opportunities, including a steady stream of
suitable stores coming from the larger-spaced
retailers as they downsize their portfolios in
response to shifts in consumer demand in their
markets. We were able to exceed our original
expectations for new store openings in the year
because conditions in the retail property market
remain particularly helpful. Our strong reputation in
the UK property industry meant we were awarded
“Occupier of The Year” at this year’s Property Week
Annual Awards.
We are pleased with Jawoll’s progress. It is still
early days but the business has performed
well and we are starting to see the benefits
of it accessing our sourcing model. This year
Jawoll also successfully invested in new
electronic point-of-sale systems and trialled a
new size format. We have plenty of work to do to
understand and refine the Jawoll model but we
are excited by the potential of the German market
where general merchandise discounting is
underdeveloped and highly fragmented.
Colleagues & corporate
social responsibility
B&M is about doing what we can to help our
customers spend less on everyday things for
their homes and for their families, helping tight
household budgets go further. But whilst this is our
key purpose we also fully recognise that as
a responsible business we also have obligations to
other key stakeholders, particularly our colleagues
and our suppliers, as well as to the wider
community and the environment.
I am proud to say that our expansion has created
many opportunities for new colleagues to join
B&M. On behalf of the Board I would like to thank
the whole team. The hard work and dedication of
all our colleagues in looking after and delivering
great value for our customers day-in, day-out is the
basis of our success.
Our stores are popular and busy. Working at a B&M
store is hard work, but we try to make it fun and
rewarding. We actively encourage stores to engage
with their local communities and charities. We
regularly participate in fund-raising initiatives, both
at store and national level.
We have made good progress this year on
our broader corporate responsibility agenda.
To highlight a few areas, we have:
• created 3,500 new local jobs through
our expansion programme
• maintained our record of long-term
supplier relationships
• maintained prompt supplier payment, with UK
suppliers paid on average 24 days after
delivery
reduced supply chain waste, with 99% of trade
packaging now recycled
•
• put in place management reporting protocols to
bring particular focus to other key areas such as
greenhouse gas emissions, health & safety,
employee diversity and charitable giving and
related activities.
Further details are available in the Corporate
Social Responsibility Report on pages 20 to 23
of this document.
Outlook
We look forward to the year ahead and the longer
term with confidence. We have a strong, high
returning business model, a clear and deliverable
strategy for growth and an excellent, experienced
team. B&M is right at the centre of one of the
most appealing sweet spots in retailing today; a
winning, value-led, low cost, focused assortment
aimed at customers who enjoy or who need
a bargain.
We have an excellent pipeline of new stores and
we anticipate that our opening programme in the
UK will be 60 net new stores in this new financial
year. An improving economic background, with
recovering disposable incomes and consumer
confidence levels will be helpful to B&M. We sell
mainly discretionary items and so we are likely
to benefit if customers have a little more money
to spend.
We continue to invest in the infrastructure,
technology and the skills we need to manage
our growth in the future and will incur modest
additional warehousing costs in support of
the accelerated roll-out programme in the
year ahead.
The retail industry remains competitive and a
cold May has led a slow start for Outdoor ranges.
Despite this, we remain confident for the year
ahead. We believe that our disruptive business
model and the value for money which we offer
to our customers will continue to deliver strong,
profitable, cash generative growth into the
long-term as we roll out the B&M offer to more
shoppers across our chosen markets.
Simon Arora
Chief Executive Officer
27 May 2015
07
Financial StatementsCorporate GovernanceStrategic Report Our markets
4,379
retail catchments screened
Proximity to existing
B&M store
Transport/
Factory outlet
Population
density
Population
affluence
Competitive
intensity
Rent
affordability
Total c. 850 UK catchments
could support a B&M store
We are in a position to capitalise
on the huge white space opportunity
within our chosen markets.
UK
Our largest market is the UK, which we would
broadly split into two main segments, grocery
retailers and general merchandise retailers.
Grocery
The grocery market is approximately £157
billion. B&M’s UK grocery sales are focused on
a limited assortment of ambient food, drink and
confectionery lines, which are typically impulse
buys across market leading brands. Our small
market share, combined with our low cost and
uncomplicated model, means we are well
placed for future growth.
General merchandise
We believe the UK market for general
merchandise exceeds £120 billion. In the UK
speciality retail segment we compete against a
wide range of the category specialist retailers
but we only carry a limited assortment in
each individual product category. This limited
assortment offering allows us to buy in volumes
on the lines we stock, source direct from
manufacturers and to keep our costs down.
We can achieve acceptable net financial
returns without needing excessively high gross
margins, which means our pricing can be
highly disruptive. We actively avoid products
that would add complexity and cost to our
business, such as products that require a high
level of administration, customer returns, home
delivery or technical customer service. Our
policy of passing on savings from our direct
sourcing model and our limited advertising
spend means that consumers are our greatest
advocates, as they tell friends and family about
our value for money. We also flex our range
according to the selling season, so for example
in the Spring/Summer season we will carry
ranges of the best-selling gardening and
outdoor products whereas in the Autumn/
Winter season this space will be used to sell
the most popular toys and seasonal Christmas
products. We believe we offer consumers a
compelling proposition based on convenience
and value within these important seasonal
categories. The size of the general merchandise
market in the UK is such that we believe we
could potentially double in size without reaching
constraints on market share.
New store opportunity
B&M is able to trade profitably across a broad
range of locations in the UK: town centres,
urban district centres, shopping malls, city
centre secondary pitches, retail parks and solus
standalone sites. We can also operate a broad
range of store size. The sales areas of our UK
stores typically range from 8,000 sq ft to 35,000
sq ft, with an average of approximately 18,500
sq ft. This location and size flexibility increases
the potential size of our UK store estate, indeed
many towns and cities could support multiple
stores both in-town and out-of-town.
UK store target
Prior to our IPO, we commissioned external
consultancy research on the white space
opportunity within the UK. This research
employed 6 filters to identify the total number of
potential catchments that could support a B&M
store. The conclusion (see box, left) was a UK
store target of 850 stores, which we believe
would be achievable without compromising on
key criteria such as (for example) population
density or affordability of rent costs.
08
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Germany
We now operate in the German market
following the acquisition of a majority stake in
Jawoll in April 2014. The German retail market
had total store based sales of €405 billion
in 2013.
Jawoll principally competes in the variety
retailing segment with only a limited range
of grocery items and therefore differentiates
itself from the highly competitive grocery
discount channel.
Its 49 stores at acquisition average
approximately 28,000 sq ft and are mostly
located in North-West Germany. All its stores
have an attached Garden Centre, and so the
Gardening category is one in which it has a
particular strength.
We believe the Jawoll business has the
opportunity to further develop outside its
North-West core region, as the industry
appears fragmented without a leading variety
goods retailer operating successfully on a
national basis in Germany. We have trialled
a smaller format store of 10,000 sq ft sales
area, in order to broaden the store opening
opportunities, as they are for our UK business.
09
Financial StatementsCorporate GovernanceStrategic Report Our business
model
B&M is a variety discount retailer offering excellent
value for money to our customers. We sell a limited
assortment of grocery and non-grocery products
throughout our B&M stores in the UK and our Jawoll
stores in Germany.
7
Targeted grocery
offering
1
Cost
efficiency
Compelling
non-grocery
offer
2
Disruptive
sourcing
process
3
5
Seasonal
flex
4
SKU
discipline
6
Format
flexibility
10
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report The B&M flywheel
There are a number of key
elements to the B&M business
model that we refer to as the B&M
flywheel since each element in
the flywheel supports the other
elements to create a unique
business model.
1
2
Targeted grocery offering
We offer a targeted range of branded
convenience grocery products at competitive
prices which are located at the front of each
B&M store, which delivers exceptional value to
our customers. The offer is complementary to,
rather than a substitute for, a customer’s
weekly grocery shop, since our stores stock
very little fresh produce and customer footfall
is driven by great value and convenience. We
enjoy long standing relationships with many
global FMCG suppliers ensuring consistency
of supply and delivery.
Compelling non-grocery offer
We sell non-grocery products across a
broad range of product categories including
housewares, electrical, gardening, toys
and petcare. This broad choice of general
merchandise at sensational value encourages
a “treasure hunt” browsing experience, which
is something the customer enjoys and offers
us the opportunity to drive average
transaction values.
3
4
Disruptive sourcing process
Our direct sourcing process is a key element
of our ability to offer non-grocery products
at competitive or disruptive prices without
compromising on product quality. Our buying
teams are constantly monitoring the prevailing
consumer trends and we invest in our
in-house design capability to develop new
products and designs, which we then source
directly from factories in the Far East without
the need for a Far East exporter or UK
distributor in the supply chain, ensuring we
benefit from advantageous cost prices.
SKU discipline
We maintain a disciplined approach to SKUs
(“Stock Keeping Unit”), focused on the “best
sellers” only. This focus and hence volume for
the selected SKU creates buying power and
allows us to benefit from advantageous
buying terms. This SKU discipline also ensures
that our buying teams adopt a “clear as you
go” strategy since an under-performing SKU
needs to be sold through prior to introducing
a new product into the range.
5
6
7
Seasonal flex
We actively change our store floor space
throughout the year so that the product
offering is aligned to seasonal trading
patterns. The seasonal space is typically
20% of the store footprint and in the Spring/
Summer season we offer a compelling range
of garden and outdoor living products,
whereas in the Autumn/Winter season this
space is occupied by ranges of toys and
Christmas decorations. This allows us to avoid
seasonal low trading periods, unlike single
category specialist retailers.
Format flexibility
We are able to successfully trade from both
town centre and out of town locations. The
town centre stores are well positioned to
benefit from convenience shopping and have
a greater emphasis on grocery and FMCG
products, whereas the out of town stores carry
the full product offering. This flexible approach
ensures we have the ability to open new
stores in a wide range of locations and that
new store growth is not inhibited.
Cost efficiency
The adherence to a low cost discipline is key to
ensuring we can maintain a price advantage
over our competitors. We do not seek to open
stores in prime shopping centres or prime city
centre locations where there is more demand
for retail space. We are therefore able to
maintain a low store rent base. Our limited
SKU discipline ensures that variable operating
costs as a percentage of sales can be tightly
controlled. We pass the savings from our low
cost model to our consumers in the form of
everyday low prices.
11
Financial StatementsCorporate GovernanceStrategic Report Our
strategy
How we plan to accomplish our aims:
Objective
1
Progress
Performance
Deliver exceptional value to our customers
We plan to continue to offer our shoppers extremely
attractive prices across a range of both grocery and
general merchandise products. This leaves us well
placed to take advantage of the structural shift in the
UK retail market to value-led retailing.
We have continued to expand our own label programme in the
general merchandise product categories which has allowed
us to continue to increase our mix of directly sourced products
from the Far East.
• UK sales growth +20%
• Registered proprietary brands increased by
37.5% to 132
Our “Direct to Retail” licensing model, whereby we utilise
heritage brands to enhance the product quality and value
to the customer has been expanded into new areas such
as electrical.
We constantly look to develop new product sub-categories
within our existing product mix to which we can apply our
sourcing model and this year we have introduced a range
of greeting cards and an American candy confectionery
product offer.
+20%
UK sales growth
Since its acquisition the Jawoll business has traded in line with
our expectations and it has made good progress on a number
of strategic initiatives. The Group has provided the Jawoll
buying team access to the Group’s Far East supplier base and
over 1,200 lines have already been introduced into the Jawoll
stores for the Spring/Summer season in 2015. These have
received a positive customer reaction and there are plans to
further extend the number of directly sourced lines for the
coming Autumn/Winter season.
Jawoll has invested in one new trial store at the very end of the
year under review.
Jawoll has also completed the roll out of a new EPOS system
across the store estate in order to enhance its supply chain and
reporting.
• Opened 1 new format pilot Jawoll store
increasing the store estate to 50 stores
• 1,200 B&M product lines introduced into
Jawoll
1,200
Product lines introduced
Within our grocery areas our emphasis is on leading
brands at Every Day Low Prices. Within our general
merchandise areas we look to develop our own label
expertise and maintain a focus on directly sourcing
these products. Our sourcing strategy and in-house
design capability allows us to have a high proportion
of goods sourced directly from factories in the
Far East, the benefits of which we pass on to
our customers.
2
Develop our international business
We wish to replicate our variety retailing model
in appropriate markets outside of the UK and
we believe that there exists a significant opportunity
for growth through a disciplined expansion in the
European market.
In April 2014 the Group acquired a majority stake in
Jawoll, a 49 store, out of town variety goods retailer
based in North-West Germany.
12
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Objective
3
Investing in new stores
We believe that the UK has the potential for
approximately 850 B&M stores over the long term
and our flexible store format and product offering
allows us to successfully trade in both out of town
and town centre locations across a wide range of
store sizes, ranging from 8,000 to 35,000 sq ft.
Progress
Performance
The UK property market remains highly favourable to support
our new store opening programme and we have opened 54
new stores in FY2015, this includes vacant existing properties,
space from national retailers who are “right-sizing” their
estates and design and build new development.
The stores have been opened across a wide geographical
area of the UK, including both new markets and infill within our
existing heartland. The new stores are trading in line with our
expectations.
• Opened 54 new stores (net 52 stores),
increasing the UK estate by 14.0% to 425
stores
4
Infrastructure
The Group will continue to invest in its infrastructure
to support the long-term growth opportunities
including both the physical infrastructure and its
people.
Our transport and warehouse operations, following the
opening of a new 500,000 sq ft distribution facility in Liverpool
in February 2014, performed well during the busy Autumn/
Winter trading season. The business has also continued to
invest in its HGV fleet and double decker trailers to ensure
deliveries are on time and to minimise transport costs.
In FY2016 we are investing in additional warehouse capacity to
support the new store opening programme and we are also
making an investment in a new warehouse management
system to drive efficiencies and enhance resilience.
Key upgrades were also made to our IT networks and a £1.0m
investment was made in our hardware infrastructure and
disaster recovery resilience.
We also recognise the need to continually refresh our existing
store estate and we invested £6.6m in maintenance capital
expenditure as part of a rolling programme of continuous
investment in the store estate.
The Board is also keen to maintain investment in our senior
management teams. Our UK business was strengthened in
October 2014 with the appointment of Karen Hubbard as Chief
Operating Officer and across the key functions we continue to
increase headcount or invest in training to improve the
sustainability of our growth.
52
Net new UK stores
• Investment in store and IT maintenance
capital expenditure, £6.6m
£6.6m
Capital expenditure
13
Financial StatementsCorporate GovernanceStrategic Report Financial review and
key performance indicators
Operating cash flow significantly
improved due to EBITDA growth and
tight working capital discipline.
Accounting period
The accounting period represents the 52 trading
weeks to 28 March 2015 and the comparative
period represents trading for the 55 weeks to
29 March 2014 although in order to provide
constant period comparisons the profit and
loss account for the 52 weeks trading ending
29 March 2014 has also been included.
Revenue
The Group revenue for FY2015 was £1,646.8m
(FY2014: £1,351.2) an increase of 21.9% and
against the 52 week comparison there was
an increase of 29.5%. In the UK on the 52 week
comparison basis revenues increased by
20.0% to £1,526.2m driven by the growth in the
like-for-like store estate of 4.4%. This growth
was against a strong like-for-like comparable
of 6.5% in 2014, and a contribution from net
new store openings of 15.6%, including both the
annualisation of revenues from the 42 net new
store openings in FY2014 and the 52 net new
store openings in FY2015. A further £120.6m of
revenues arose from Jawoll in Germany for the
11 months of its ownership by the Group.
Gross margin
Our gross margin improved by 59 basis points
to 34.6% (FY2014: 34.0%). This improvement was
driven in the UK by the strong sell through on
both the Spring/Summer and Autumn/Winter
seasonal ranges and increased buying power,
with UK margins increasing 41 basis points to
34.4%. The overall Group gross margin also
benefited from the modest beneficial effect of
our Jawoll subsidiary.
Operating costs and adjusted EBITDA
Costs continue to be carefully controlled whilst
allowing for strategic investment in our head
office functions in anticipation of future growth.
Overall operating costs including depreciation
grew by 22.6% to £411.3m and by 32.1% on the
comparable 52 week basis. In the UK operating
costs were £374.7m (FY2014: £311.4m), an
increase of 20.3% on a 52 week basis, this
was principally driven by the rise in store
numbers and investments made in the central
infrastructure, including the full year impact of
the new warehouse facility in Liverpool and
costs associated with being a listed company.
The business continues to maintain rigorous
discipline over its key operating metrics and
store rent as a percentage of sales was 4.1%
which was consistent with FY2014, and store
wages at 8.9% were also in line with FY2014.
Operating costs including depreciation in the
Jawoll business were £36.6m.
We report an adjusted EBITDA to allow the
Board and investors to better understand the
underlying performance of the business and
the items that we have adjusted are detailed
in notes 3 and 4 on pages 68 and 69 of the
financial statements. These adjustments were
costs totalling £24.1m in FY2015 (FY2014: £17.7m),
the majority of which totalling £19.7m related
to the IPO and the related Group restructuring.
The adjusted EBITDA increased in the year by
33.6% on a 52 week basis to £174.2m (FY2014:
£130.4m), with the UK business increasing
by 25.4% to £163.4m and the Jawoll business
contributing a further £10.8m of adjusted EBITDA.
Paul McDonald, Chief Financial Officer
“Our Group revenue
increased by 29.5% to
£1,646.8m driven by the
growth in the UK like-for-like
store estate of 4.4% and the
contribution from net new
store openings and £120.6m
of revenues from our German
business acquired in
the year“
Adjusted Profit Before Tax:
+55.7%
2015: £135.0m
2014: £86.7m
14
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Summary operating profit
£ millions
Number of Stores
UK
Germany
Total Stores
Revenue
Gross Profit
%
Operating Costs
UK
Germany
Adjusted EBITDA
%
Depreciation
Interest
Adjusted Profit Before Tax
Exceptional Costs
Exceptional Interest Costs
Profit Before Tax
2015
2014(1)
%
425
50
475
373
0
373
1,646.8
569.9
34.6%
1,272.0
432.0
34.0%
13.9%
–
27.3%
29.5%
31.9%
0.6%
(361.9)
(33.8)
174.2
10.6%
(15.6)
(23.6)
135.0
(24.1)
(49.2)
61.7
(301.6)
–
130.4
10.2%
(9.7)
(33.9)
86.7
(17.7)
(65.4)
3.6
20.0%
–
33.6%
0.4%
60.2%
-30.4%
55.7%
36.6%
-24.9%
1,602.2%
Financing Costs
Following the capital restructuring of the Group
prior to the IPO and subsequent refinancing,
the results for the year reflect a very different
capital structure and as such the financing
cost comparisons versus the prior year are not
meaningful. However, we have analysed the
finance costs such that the underlying finance
costs can be understood.
Finance costs were £72.8m, comprising £28.8m
of previously unamortised fees that were
written off in the year relating to the March 2013
refinancing, £16.2m of non-cash interest on
the preferred equity certificates that were
subsequently converted to equity, £2.2m mark
to market value of interest rate hedges, £2.0m
relating to the non-cash charge on the Jawoll
put/call option, with the remaining £23.6m
relating to bank and finance lease interest
and FRS4 fees and this reflects the underlying
finance costs of the Group. The corresponding
interest charge in FY2014 was £33.9m.
Profit before Tax
The statutory profit before tax was £61.7m
and the 52 week figure for 2014 was £3.6m,
although as previously described the headline
profit before tax is distorted by both the
exceptional costs and also the previous
financing structure. The comparable profit
before tax excluding these items was £135.0m
(FY2014: £86.7m) which rose 55.7% on the 52
week comparison basis.
Notes:-
(1) The FY2014 figures represent the 52 week performance to 29 March 2014.
15
Financial StatementsCorporate GovernanceStrategic Report Financial review continued
Net debt and cashflow
The Group continues to be strongly cash
generative and during the year the cash
flow from operations increased by 33.3% to
£152.9m (FY2014: £114.7m). This reflects both
the strong trading performance of the Group,
the maintenance of a tight control over working
capital and rapid payback from recently
opened new stores.
The Group’s net debt in the year has reduced
to £381.0m (FY2014: £432.8m) and the net debt
to adjusted EBITDA has fallen to 2.2 times from
3.3 times at the end of FY2014.
Dividend
An interim dividend of 0.9p was paid in January
2015 and it is proposed to pay a final dividend
of 2.5p per share. The total dividend of 3.4p
reflects the upper end of the dividend policy,
which was announced at IPO of paying 30–40%
of normalised post IPO earnings.¹
¹ Dividends are stated as gross amounts before
deduction of Luxembourg withholding tax which is
currently 15%
Paul McDonald
Chief Financial Officer
27 May 2015
Taxation
The tax charge for the year was £21.9m of profit
before tax compared with £5.1m in FY2014. The
underlying charge was 22.9% (FY2014: 20.4%)
after allowing for financing costs associated
with the pre-IPO capital structure and the
disallowable IPO costs. We expect the tax
charge going forward to reflect the mix impact
of the tax rates in the countries in which we
operate, 21% UK and 30% Germany, with the
effective rate 70 basis points higher reflecting
non-qualifying expenditure.
Profit after tax and adjusted earnings
per share
The adjusted profit after tax was £104.1m which
was a 50.6% increase compared to the 52 week
figure for the previous year.
The basic and fully diluted adjusted earnings
per share for the year ended 28 March 2015
was 10.3p; (FY2014: 6.9p), an increase of 49.3%.
Investing activities
The Group’s net capital expenditure during the
year was £33.2m, which was principally driven
by our new store opening programme relating
to £21.7m and in the UK we ended the year with
425 stores (FY2014: 373 stores). We opened one
new store in Germany, bringing the total there
to 50 stores. We have also continued to invest in
refitting the existing portfolio as well upgrading
our IT infrastructure, including the investment
in a new electronic point of sale system in the
Jawoll business.
The Group also invested a further £54.5m
(net of cash acquired) in acquiring our
German subsidiary, Jawoll in April 2014.
16
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Total sales growth (%)
Capital expenditure (£m)
2015
2014
2013
2015
2014
2013
29.5
28.1
29.9
35.7
32.9
21.8
Return on capital employed (%)
2015
2014
2013
50.0
65.6
68.3
Adjusted diluted earnings per share (p)
10.3
6.9
6.2
Key performance
indicators
2015
2013
2014
Total sales growth (%)
We use the following key financial performance indicators (KPIs)
2015
to monitor the performance of the Group against our strategy.
2014
These KPIs and how we performed against them are as follows:
2013
UK like-for-like sales growth (%)
2015
29.5
2014
29.9
28.1
4.4
2013
6.5
6.6
Capital expenditure (£m)
Total sales growth (%)
Adjusted EBITDA (£m)
2015
2015
2014
2014
2013
2013
35.7
29.5
32.9
28.1
29.9
21.8
2015
2014
2013
130.4
105.2
Return on capital employed (%)
Capital expenditure (£m)
Adjusted EBITDA (%)
2015
2015
2014
2014
2013
2013
50.0
35.7
32.9
65.6
68.3
21.8
2015
2014
2013
Adjusted diluted earnings per share (p)
Return on capital employed (%)
Cash generated from operations (£m)
174.2
10.6
10.2
10.6
152.9
2015
2014
2013
89.5
103.9
2015
2015
2014
2014
2013
2013
50.0
10.3
6.9
65.6
6.2
68.3
UK like-for-like sales growth (%)
Adjusted diluted earnings per share (p)
2015
2015
2014
2014
2013
2013
4.4
6.9
6.2
10.3
6.5
6.6
Adjusted EBITDA (£m)
UK like-for-like sales growth (%)
2015
2015
2014
2014
2013
2013
4.4
174.2
130.4
105.2
6.5
6.6
Adjusted EBITDA (%)
Adjusted EBITDA (£m)
2015
2015
2014
2014
2013
2013
10.6
174.2
130.4
10.2
105.2
10.6
Cash generated from operations (£m)
Adjusted EBITDA (%)
2015
2015
2014
2014
2013
2013
2015
2014
2013
152.9
10.6
10.2
10.6
152.9
89.5
103.9
89.5
103.9
Cash generated from operations (£m)
Non financial KPIs
52
Net new UK stores opened
17
Financial StatementsCorporate GovernanceStrategic Report Principal risks
and uncertainties
Risks and uncertainties
The following principal risks and uncertainties could have an impact on our business model and strategy. Mitigating
steps aimed at managing and reducing those impacts are being employed by the Group as summarised below.
Risks and mitigation are reviewed as part of the oversight by the Audit & Risk Committee of the system of internal
controls and reported on to the Board which takes overall responsibility for risk management.
Risk Type
Description
Risk Mitigations
Competition
The Group operates in a highly competitive
retail market both in the UK and Germany
and this could materially impact the Group’s
profitability and limit the growth
opportunities.
Economic
Environment
A reduction in consumer confidence
resulting in a fall in customer spending as a
result of the prevailing macro economic
conditions in the markets in which we
operate.
IT Systems
and Business
Continuity
The Group is reliant upon key IT systems,
and disruption to these would adversely
affect the businesses operations. Data
protection failure may lead to a potential
prosecution and reputational damage to
the brand. This risk also encompasses the
risk of management over-ride of controls.
Regulation
and
Compliance
The Group is exposed to regulatory and
legislative requirements, including those
surrounding the import of goods, the
Bribery Act, health & safety, employment
law, data protection, the environment and
the listing rules, which could lead to
financial penalties and reputational
damage.
• Continuous monitoring of competitor pricing and product offering.
• Development of new product ranges within the product categories to
identify new market opportunities to target new customers.
• We offer a range of products and price points for consumers which
allows them to trade up and down.
• We maintain a low cost business model that allows us to maintain our
selling prices as low as possible.
• We have an extensive forecasting process that enables actions to be
undertaken reflecting the economic conditions.
• All critical business systems have third party maintenance contracts in
place and are industry standard.
• We utilise the services of a third party IT consultancy support to ensure
that any investments made in technology are fit for purpose.
• We have a disaster recovery strategy.
• We have an on-going PCI compliance strategy.
• Significant decisions for the business are made by the Group or
Operational boards with segregation of duties enforced on key business
processes, such as the payables process and a robust IT control
environment is in place.
• We have a number of policies and codes across the business outlining
the mandatory requirements within the business. These are
communicated to the staff via an employee handbook which is made
available to anyone joining the company.
• Operational management are also responsible for liaising with the
general counsel and external advisors where required to ensure that we
identify and manage any new legislation.
• We have an internal audit function, and a whistle blowing procedure and
policy which allow colleagues to confidentially report any concerns or
inappropriate behaviour within the business.
Credit Risk
and Liquidity
The Group’s level of indebtedness and
exposure to interest rate and currency rate
volatility could impact the business and its
growth plans.
• A treasury policy is in place to govern foreign exchange, interest rate and
surplus cash.
• Regular weekly cash flow forecasts are produced and monitored.
• Forward looking cash flow forecasts and covenants test forecasts are
prepared to ensure sufficient liquidity and covenant headroom exists.
18
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Risk Type
Description
Risk Mitigations
Commodity
Prices/Cost
Inflation
Supply Chain
Escalation of costs within the supply chain
arising from factors such as increases in
raw material and wage costs. Additionally
increased fuel and energy costs impacting
on distribution and the store and
warehouse overhead base.
The lead times in the supply chain could
lead to a greater risk in buying decisions
and potential loss of margins through
higher markdowns. Disruption to the supply
chain arising from civil unrest, natural
disasters, ethical or quality standards failure
could lead to reputational damage and a
risk that consumers maybe harmed.
Stock
Management
Ineffective controls over the management of
stock could impact on the achievement of
our gross margin objectives, lack of product
availability could impact on working capital
and cashflows.
Infrastructure
The Group could suffer the loss of one of its
warehousing facilities which would impact
short/medium term trading and could
materially impact the profitability of the
business. Failure to maintain and invest in
the warehousing and transport
infrastructure as the business continues to
grow the store portfolio.
• Freight rates, energy and currency are bought forward to mitigate
volatility and allow the business to plan and maintain margins.
• Wage increases are offset where possible by productivity improvements.
• An experienced sourcing team responsible for maintaining an efficient
and effective supply chain.
• A range of alternative supply sources are maintained across the product
categories and no single supplier accounts for more than 3% of
purchases.
• The combination of individual buyers and supplier employees conduct
factory visits.
• Highly disciplined SKU count by season and effective and regular
•
markdown action on slow moving product lines.
Initial stock orders do not exceed c. 14 weeks of forecast sales and action
is undertaken after c. 4 weeks of trading to either repeat the order,
refresh the product design or delete the product line.
• Consistent levels of stock cover by product category are maintained
through regular reviews of open to buy, supported by the disciplined SKU
count.
• Plans are in place for additional warehousing capacity to support the
new store opening programme.
• The Group has 4 separate warehousing locations and conducts disaster
recovery planning.
• The Group maintains adequate business interruption and increased cost
of working insurance in the event of such a loss.
Key
Management
Reliance
The Group is reliant on the high quality and
ethos of the executive team as well as
strong management and operational
teams.
• The key senior and operational management are appropriately
incentivised through bonus and share arrangements such that talent is
retained.
• The composition of the executive team is kept under constant review to
ensure that it is appropriate to the delivery of the Group’s plans.
Store
Expansion
The ability to identify suitably profitable new
store locations is key to delivering our
growth plans.
• Our property acquisition managers actively monitor the availability of
retail space with the support of external property acquisition consultants.
• The flexibility of the trading format allows us to take advantage of a range
International
Expansion
The ability to develop into new territories is
important to the Group’s future growth
plans. Expanding into new markets creates
additional challenges and risks.
store sizes and locations.
• Each new store opening is approved by the CEO ensuring that property
risks are minimised and ensuring that lease lengths are appropriate.
•
Increased international experience on the main Board. The senior
leadership team in Germany is experienced and incentivised.
• Clear focus on markets in which we operate to ensure they are
appropriate for value retailing and the product ranges are developed
and selected by local buying teams rather than through the parent
company.
• Continuing to invest in both the infrastructure and technology of the
acquired company.
Warehouse
Management
The failure to implement the new
warehouse management system
effectively.
• A project management team has been set up and this is being headed
by an experienced project leader.
• External experts will provide support for the duration of the project.
All of these risks have an owner on the Group Board, or on the operational board of B&M Retail Limited, the main UK trading entity.
19
Financial StatementsCorporate GovernanceStrategic Report Corporate social
responsibility
At B&M we see our core purpose as helping our
customers to spend less on everyday products for
their homes and families – and in so doing, make
it easier for often limited or strained household
budgets to go further. At the same time of course,
we recognise that as a responsible business we
have an obligation to operate in a manner that is
both ethical and sustainable.
At B&M, Corporate Social Responsibility is
therefore a key part of our business model.
It is something that we are committed to
embedding in everything we do because we
know that it is important to our reputation in
the market place and to our customers and
colleagues, as well as to the wider stakeholders
in our business, from our suppliers to the
communities we serve.
Our Corporate Social Responsibility strategy
focuses on four key areas: the Environment,
Suppliers, Health and Safety and our
Colleagues. The KPIs described in this report
relate to our UK operations.
Environment
As a retailer we recognise that our operations
will impact the environment and that we have a
duty to ensure that both now and in the future
we seek to minimise this impact. There are a
number of important key areas that we put
particular emphasis on in order to minimise the
environmental impact of the business. These
reflect the uncomplicated nature of the B&M
model and they comprise: maximising the level
of waste recycling, reducing our electricity
usage and improving our fuel efficiencies.
20
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report Waste recycling
B&M is committed to reducing waste. We return
all of the waste cardboard, plastic, metal and
wood from our 425 stores, which principally
originates from product outer packaging, to our
own modern, purpose built recycling centre in
Liverpool. In 2014, some 63% of this waste was
directly recycled by this facility.
In addition, the remaining waste that we are
unable to recycle ourselves within the business
is sent to a specialist third party for further
recycling so that other recyclable content can be
extracted. This process leads to a further 36.1%
of waste being recycled. In total therefore 99.1%
our waste is recycled with the remaining 0.9%
sent to landfill.
B&M participates in a battery recycling scheme
and we provide customers with the option
to utilise re-usable carrier bags and an
eco-friendly Jute bag rather than single use
plastic bags.
Greenhouse gas emissions reporting
We aim to reduce our carbon footprint. In the
UK, electricity usage across our store estate
and warehouses accounts for over 73% of our
carbon footprint, with diesel accounting for 27%.
Given that we are a retailer which is growing
its store estate our absolute level of emissions
is unavoidably increasing and this is likely
to continue.
In order to express our annual emissions in
relation to a quantifiable factor we are using
revenues as the basis for our intensity ratio.
Scope 1 GHG emissions have been calculated
based upon the quantities of fuel purchased
for our commercial fleet and Scope 2 GHG
emissions are calculated from electricity
usage and then using the published factors.
Greenhouse gas data
For the period April 2014 to March 2015
Scope 1 Emissions
Scope 2 Emissions
Total Emissions
Scope 1 Intensity Ratio
(Tonnes/£m revenues)
Scope 2 Intensity Ratio
(Tonnes/£m revenues)
Total
Tonnes CO2
20,194
56,861
77,055
13.2
37.3
50.5
In order to reduce our carbon emissions we
have a number of key initiatives:-
•
in our stores we have an on-going
investment programme to ensure we have
more energy efficient lighting, including LED
lighting on recent openings;
• we have been upgrading our transport fleet
and over the last two years we have
introduced new HGV tractor units that have
the latest fuel efficient engines;
• similarly, we have been investing in a fleet of
double-deck trailers to maximise transport
utilisation and therefore minimise
distribution mileage travelled.
Suppliers
The Group sources its products from a range of
suppliers and manufacturers in the UK, Europe
and the Far East and is committed to ensuring
that these supply sources meet rigorous quality
and ethical standards so that our customers
can rely upon the safety, quality and integrity of
the products they purchase from us.
The Group’s largest suppliers are the UK
subsidiaries of global FMCG brands. We also
import directly approximately 29% of goods
from the Far East, principally from China, across
a range of product categories. The majority of
our Far East suppliers are those with whom we
have good, long-standing supply relationships
and we require those suppliers to adhere to the
Ethical Trading Initiatives (ETI) Base Code.
The ETI code requires that staff working
conditions are safe, employment is freely
chosen, no child labour is used, that living
wages are paid, working hours are not
excessive and that suppliers comply with the
relevant national laws in operation in the
countries of origin.
21
Financial StatementsCorporate GovernanceStrategic Report Corporate social responsibility continued
We aim, and believe it is in the long-term
commercial interest of the business, to have
good relations with all our suppliers and we
have a standard set of terms and conditions in
operation. Once we have placed a purchase
order, provided the goods meet the required
quality standards then we will pay the supplier
in line with the agreed terms. Our UK suppliers
are paid on average 24.2 days after delivery
(FY2014: 23.1 days).
Employee responsibility
Colleagues
We recognise that our people and our teams
make the difference in our business, whether
in our stores, our warehouses or our support
centre. B&M is a growing business and in the
last 12 months we have recruited over 3,500
employees. Ensuring that we recruit, retain,
motivate and reward our colleagues is key to
ensuring that we deliver our growth plans.
Health and safety
We take the welfare of our customers and
employees very seriously. We are therefore
committed to ensuring that our business
has appropriate health and safety standards
across our store portfolio as well as our
warehouses and offices, such that our
customers and employees can shop and
work in a safe environment.
The Board has the ultimate responsibility for
ensuring health and safety compliance and
health and safety is a standard Board agenda
item. There are a number of KPIs reported to the
Board including the number of accidents,
particularly those that are required to be
reported to the Health and Safety Executive.
In FY2015 there were 112 reported accidents
(0.3 per store) reportable to the Health & Safety
Executive, (FY2014: 67 reported accident and
0.2 per store), which should be viewed in the
context of 152 million shopper visits per annum.
Our health and safety policy is communicated
throughout the business. Our dedicated team
of qualified health and safety professionals,
both at head office and in the regions,
ensures that we are abreast of all current
statutory requirements.
We are an equal opportunities employer
and we strive to ensure that no employee
is discriminated against on the grounds of
gender, race, colour, religion, disability, sexual
orientation or age and that B&M is seen as a
great place to work and everyone working in
it has an equal opportunity to progress within
the business.
We launched our apprenticeship programme
in January 2015. The scheme allows the
colleagues the opportunity to get recognised
qualifications and learn new skills within our
fast paced retail environment.
We also have a successful initiative focused on
getting the long-term unemployed back into
work. Last year 819 long term unemployed
people secured a role within B&M.
Last year saw the start of an important initiative
in B&M aimed at developing our own talent
from within, which is called the Step Up
programme. In this programme we encourage
our store colleagues to put themselves forward
to progress to a deputy store manager position
and above.
22
B&M European Value Retail S.A. Annual Report and Accounts 2015Strategic Report We reward our store management teams
through an annual bonus scheme and we
also run regular incentive schemes to drive
performance and excite the teams. In April
2015, we launched a share incentive plan that
will allow all employees the opportunity to
participate in the future success of B&M.
We communicate to our teams through our
newsletter, the “B&M Standard”, with
updates on business strategy, new stores,
new products, and the work of our support
centre teams.
Diversity
Given our equal opportunities approach at
B&M we actively encourage the benefits of a
diverse workforce across the business. Our
Board comprises one female member. Full
details of the composition of B&M’s Board are
set out on pages 24, 25 and 27.
Below the Board and at the senior
management level the percentage of
employees who are female increases to
40% and for all employees the percentage
of females increases to 54%.
Directors
Senior managers
All employees
Male
7
9
8,437
Female
1
6
10,105
Community
B&M recognises its broader role in the local
community and new stores are typically opened
by a ‘local hero’ – these are members of the
local community who make life better for
people in the area or they are renowned for
their charity work. We provide B&M vouchers
for their chosen charity on the day and we
encourage them to build a relationship with
the store manager, allowing them to raise the
profile of their charity through different fund
raising opportunities. On a national level, all
stores have the opportunity to fundraise for
national events such as Children in Need
or Comic Relief. We support various different
local and national charities based on the
recommendation of a panel of colleagues.
The Company’s Strategic Report is set out
on pages 1 to 23. Approved by the Board
on 27 May 2015 and signed on its behalf by:
Simon Arora
Chief Executive Officer
B&M European Value Retail S.A.
23
Financial StatementsCorporate GovernanceStrategic Report Board of
Directors
The Board of Directors of B&M European Value Retail S.A.
Sir Terry Leahy
Non-Executive Chairman of the Board and Chairman of
the Nomination Committee
Sir Terry joined the Group as Non-Executive Chairman on
6 March 2013. He is a senior adviser to Clayton, Dubilier &
Rice LLC. Previously Sir Terry worked at Tesco for 32 years
during which time he served in a number of senior positions,
including Chief Executive Officer from 1997 to 2011. Sir Terry
is the Chairman of the Board of Directors and he Chairs the
Nomination Committee. Age 59.
Simon Arora
Chief Executive Officer
Simon has been Chief Executive Officer of the Group since
1 December 2004. Prior to B&M, he was co-founder and
Managing Director of wholesale houseware business Orient
Sourcing Services Limited, and held various positions with
McKinsey & Co., 3i and Barclays Bank. Simon is a member of
the Nomination Committee. Age 45.
Paul McDonald
Chief Financial Officer
Paul joined the Group as Chief Financial Officer on 3 May 2011.
He is a chartered certified accountant and has over 20 years of
experience in the discount retail sector having held senior roles
at Littlewoods, Ethel Austin and TJ Hughes. Age 49.
Thomas Hübner
Senior Independent Non-Executive Director
Thomas joined the Board on 29 May 2014. He is currently
Chairman at Burger King SEE, Independent Non-Executive
Director of Geberit and Advisory Board Member of VR
Equitypartner. Previously Thomas has held Senior Executive
roles in Carrefour, Metro and McDonald’s. Thomas is a
member of the Audit & Risk Committee as well as the
Nomination Committee. Age 57.
24
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Kathleen Guion
Independent Non-Executive Director and Chair of the
Remuneration Committee
Ron McMillan
Independent Non-Executive Director and Chairman of the
Audit & Risk Committee
Kathleen joined the Board on 29 May 2014. She is currently
a non-executive director and chairperson of the nominating
and governance committee of the True Value Company in the
US. Prior to joining the Board, she was division president and
executive vice president of Dollar General Corporation from
2003 to 2011, and held senior positions in E-Z Serve Corporation,
Devon Partners, Duke and Long Distributing and 7-Eleven
Corporation. Kathleen chairs the Remuneration Committee
and is a member of the Nomination Committee. Age 63.
Ron joined the Board on 29 May 2014. He is the Senior
Independent Director of N Brown Group PLC and SCS PLC and a
Non-Executive Director of 888 Holdings PLC. Previously, Ron was
the Northern Regional Chairman of PwC in the UK and Deputy
Chairman of PwC in the Middle East. Ron chairs the Audit & Risk
Committee and is a member of the Remuneration Committee
and the Nomination Committee. Age 62.
Harry Brouwer
Independent Non-Executive Director
David Novak
Non-Executive Director
Harry was appointed to the Board on 29 May 2014. He is
currently the Executive Vice President of Unilever Food Solutions
globally and prior to that held senior general management,
marketing, and customer development roles at Unilever in
Germany, Austria, Switzerland, Benelux, UK, Ireland, United
States of America and Asia. Harry is a member of the Audit
& Risk Committee, the Remuneration Committee and the
Nomination Committee. Age 56.
David joined the Board on 29 May 2014. He is a partner at
Clayton, Dubilier & Rice LLC (“CD&R”) and is a member of CD&R’s
investment and management committees. David is a non-
executive director of Mauser in Germany. David was previously
a non-executive director of British Car Auctions, Jafra Cosmetics
International Inc., Brakes Group and HD Supply among others
and a member of the supervisory board at Rexel. Age 46.
25
Financial StatementsCorporate GovernanceStrategic Report Corporate governance statement
Introduction
This corporate governance statement sets out the main elements of the Company’s corporate governance structure and how it complies with the UK
Corporate Governance Code. It also includes information required by the Listing Rules and the Disclosure Rules and Transparency Rules (“DTR’s”).
Structure chart
The overall governance structure of the Group is as follows:
Group Board
Executive Directors
Committees
UK Retail
Germany Retail
Audit
Remuneration
Nomination
Role of the Board
The Board is committed to high standards of corporate governance.
The Company has complied (except where otherwise stated below) and
intends to continue to comply with the requirements of the UK Corporate
Governance Code.
The Company is led and controlled by the Board which is collectively
responsible for the long-term performance of the Group. The Board
focuses on the strategy, performance and governance of the Group.
The Board has delegated certain responsibilities to Committees to assist
in discharging its duties and the implementation of matters approved by
the Board. A summary of the terms of reference of each Committee is set
out on pages 28 and 29, and the reports of each of the Committees are
set out on pages 29, 31 to 32 and 33 to 46.
Detailed implementation of matters approved by the Board and
operational day-to-day matters are delegated to the Executive Directors.
The Executive Directors are also supported by operational senior
management in each of the UK Retail and German Retail operations of
the business.
Matters reserved to the Board
A formal schedule of matters is reserved to the Board for its approval,
which includes:
• approving the long-term strategy and objectives of the Group and
reviewing the Group’s performance and management controls;
• approving any changes to the capital structure of the Group;
• approving the financial reporting, budgets, dividend policy and any
significant changes in accounting policies and practices of the Group;
• approval of any major capital projects of the Group;
• ensuring a satisfactory dialogue with shareholders based on the
mutual understanding of objectives;
• approval of the structure, size and composition of the Board and
remuneration of the Non-Executive Directors;
• ensure maintenance of a sound system of internal controls and risk
•
management;
reviewing the Company’s overall corporate governance and approving
the division of responsibilities of members of the Board;
• approval and supervision of any material litigation, insurance levels of
the Group and the appointment of the Group’s professional advisers.
26
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance There is a rolling programme of Board meetings throughout the year and
there are six Board meetings presently scheduled for 2015/16.
All Board and Committee members receive sets of Board packs in
advance of the Board and Committee meetings. For Board meetings this
includes current trading, financial and operational management accounts
and information in relation to the business, and detailed papers on other
matters where Board approval is required. The CEO and CFO present
reports to the Board at each meeting on trading, financial performance,
and operational matters, along with updates on any significant health
and safety, litigation or regulatory matters.
Composition of the Board
The Board comprises the Chairman, two Executive Directors, four
independent Non-Executive Directors and a Non-Executive Director
appointed by CD&R European Value Retail Investment S.á.r.l. (“CD&R
Holdco”) in their capacity as a significant shareholder.
The UK Corporate Governance Code recommends that at least half of the
board, excluding the Chairman, should comprise independent non-
executive directors. The Company meets this requirement and has done
so during the period from the IPO to the date of this report, with the
appointments of Thomas Hübner (Senior Independent Director), Kathleen
Guion, Ron McMillan and Harry Brouwer having been made to the Board
as independent Non-Executive Directors, in each case on 29 May 2014 in
preparation for the IPO. Each of them are considered by the Board to be
independent in character and judgement and free from relationships or
circumstances which may affect, or could appear to affect the director’s
judgement. Independence is determined by ensuring that the Non-
Executive Directors do not have any material business relationships or
arrangements (apart from their fees for acting as Non-Executive Directors)
with the Group or its Directors which in the opinion of the Board could
affect their independent judgement.
The Chairman, Sir Terry Leahy, and David Novak are not regarded as
independent for the purpose of the UK Corporate Governance Code in
view of their positions respectively as a senior adviser and partner in
Clayton, Dubilier & Rice, LLC (“CD&R”) and their respective interests in
funds advised by CD&R which hold shares through CD&R European Value
Retail Investment S.á.r.l (“CD&R Holdco”) in the Company.
The Company does not comply with the independence criteria in relation
to the appointment of the Chairman under UK Corporate Governance
Code. The Directors believe that it remains appropriate that Sir Terry Leahy
continues to hold office as Chairman as his knowledge and experience
from his time previously as CEO of Tesco plc provides significant value and
benefit to the Company. The Directors consider that he exercises his role
as Chairman independently of management and exercises his judgement
in the interests of all shareholders.
At the time of the IPO CD&R Holdco entered into a Relationship Agreement
with the Company. Under the terms of that agreement CD&R Holdco are
entitled to appoint two Non-Executive Directors to the Board for so long as
CD&R Holdco (together with its associates) holds 10% or more of the
ordinary shares in the capital of the Company, and one Non-Executive
Director for so long as CD&R Holdco (together with its associates) holds
5% or more (but less than 10%) of the ordinary shares in the capital of the
Company. While Sir Terry Leahy remains a Director of the Company, CD&R
Holdco have the right to appoint only one other Non-Executive Director,
and the first such other Director appointed by it is David Novak. At the year
ended 28 March 2015, CD&R Holdco held 17.41% of the total issued shares
in the Company.
At the time of the IPO Simon Arora, Bobby Arora and Robin Arora and SSA
Investments S.à r.l. (“SSA Investments”) (together “Arora Family”) entered
into a Relationship Agreement with the Company. Under the terms of that
agreement for as long as the Arora Family, together with their associates,
hold 10% or more of the ordinary shares in the capital of the Company,
they are entitled to appoint one Director to the Board, and the first Director
appointed by them is Simon Arora. At the year ended 28 March 2015, SSA
Investments held 26.99% of the total issued shares in the Company.
The Board believe that the terms of the Relationship Agreements referred
to above will ensure that the Company and other members of the Group
are capable of carrying on their business independently of CD&R Holdco
and the Arora Family and that transactions and relationships between
those parties and the Group are at arm’s length on normal commercial
terms.
All Directors have service agreements or letters of appointment in place
and the details of their terms are set out in the Directors’ Remuneration
Report on pages 33 to 46.
The Nomination Committee review on an annual basis the Board’s
composition, experience and skills to ensure the effective working of the
Board and the standing Committees and the commitment of their
members. In the last financial year following the IPO, it carried out an
initial review of the size, structure and composition of the Board, with
regard to the experience and skills represented on it and the balance of
Executive and Non-Executive Directors represented on it. The Chairman
has met with each of the Non-Executive Directors during the year on a one
to one basis without the Executive Directors being present to discuss
matters relating to the Board, its balance and the monitoring of the
powers of the Executive Directors.
The Chairman believes the current Board and standing Committees have
an appropriate balance of skills and experience to enable them to
discharge their responsibilities effectively. Where Directors have external
appointments, the Board is satisfied that they do not impact on the time
the Director needs to devote to the Company.
27
Financial StatementsCorporate GovernanceStrategic Report Corporate governance statement continued
Committees of the Board
The Board has established and delegated authority to an Audit & Risk
Committee, Remuneration Committee and Nomination Committee. A
summary of the terms of reference of each of these Committees is set out
below. The full terms of reference of each of the Committees is available
on our website at www.bandmretail.com.
Audit & Risk Committee
The Audit & Risk Committee was set up in May 2014, immediately prior to
the IPO, and it comprises three independent Non-Executive Directors and
is chaired by Ron McMillan. The duties of the Audit & Risk Committee as
delegated by the Board are contained in the terms of reference available
on the Group’s corporate website (as referred to above), which in
summary include:
• monitoring the quality, effectiveness and independence of the external
auditors and approving their appointment, re-appointment and fee
level;
reviewing and approving the audit plan, and ensure that it is
consistent with the scope of the audit engagement;
reviewing and monitoring the integrity of the financial statements and
any other price sensitive releases of the Group;
•
•
• assisting the Board with the definition and execution of a risk
management strategy, risk policies and current risk exposures
including maintenance of the Group’s risk register;
• keeping under review the adequacy and effectiveness of the Group’s
internal financial controls and internal control and risk management
systems;
• monitoring the activities of the Internal Audit function.
The members of the Audit & Risk Committee are Ron McMillan (Chair),
Thomas Hübner and Harry Brouwer. Ron McMillan is an ICAEW chartered
accountant and his experience formerly as an audit partner of PwC fulfills
the requirement under the UK Corporate Governance Code that one
member of the Committee has recent and relevant financial experience.
All three members have been on the Committee since its inception
immediately before the IPO, and all three remain in place at the date of
this report.
The Audit & Risk Committee meets not less than 3 times a year. Details of
the activities of the Committee in the last financial year are set out on
pages 31 and 32.
Remuneration Committee
The Remuneration Committee was set up in May 2014, immediately prior
to the IPO, and it comprises three independent Non-Executive Directors
and is chaired by Kathleen Guion. The Remuneration Committee sets the
policy for the Group on executive remuneration. It determines the level of
remuneration of the Chairman and the Executive Directors of the
Company and makes recommendations in relation to other senior
management.
In accordance with its terms of reference, the Committee prepares an
annual Directors’ Remuneration Report for approval by shareholders at
the Annual General Meeting of the Company. The terms of reference for
the Remuneration Committee are available on the Group’s corporate
website (as referred to above).
Division of responsibilities
The positions of the Chairman and CEO are occupied by different
individuals. There is a clear division of the roles and responsibilities
between the Chairman and the CEO and no individual has unrestricted
powers of decision making.
Sir Terry Leahy, as the Chairman of the Board, is responsible for leading
the Board, setting its agenda and overseeing its effectiveness. The
Chairman facilitates the contribution of the Non-Executive Directors
and constructive relations between them and the Executive Directors.
Simon Arora, as the CEO, together with Paul McDonald as the CFO,
is responsible for the day to day management of the Group and
implementation of strategy approved by the Board and implementation
of other Board decisions.
Diversity
Details of the Company’s diversity and involvement of women in the
management of the Group are included in the Corporate Social
Responsibility Report on pages 20 to 23. The Group is pleased overall with
its record of diversity and is aware of the need to monitor and review its
level of diversity. Appointments will always be made on merit as opposed
to having gender targets, which is considered to be in the best interests of
the Group and the shareholders.
Conflict of interests
The Chairman and David Novak have an interest in the shares held by
CD&R Holdco, which holds 17.41% of the ordinary share capital and voting
rights in the Company, as a result of their interests in Clayton, Dubilier &
Rice Fund VIII, L.P.
Simon and Bobby Arora own shares in SSA Investments S.á.r.l., which
(together with Praxis Nominees Limited as its nominee) holds 26.99% of
the ordinary share capital and voting rights in the Company either directly
or indirectly as the beneficial owner.
Simon Arora, Bobby Arora, Ropley Properties Ltd and Triple Jersey Ltd are
all landlords of certain properties leased by the Group. Ropley Properties
Ltd and Triple Jersey Ltd are owned by Arora family trusts.
Except as referred to above there are no potential conflicts of interest
between any of the Directors or senior management with the Group and
their private interests.
There is an established process of the Board for regularly reviewing actual
or potential conflicts of interest. In particular there is a process for
reviewing transactions proposed to be entered into by related parties of
Directors with any entities in the Group, including professional advice and
consideration of it by the Board and the Company’s corporate brokers on
the application of the Listing Rules, the applicability and appropriateness
of any exemptions in respect of any transactions in the ordinary course of
business and reporting to general meetings of shareholders’ under
Luxembourg Company Law. This process also includes consideration of
the extent to which the Board may require external and any other reports
and evaluations to be presented to it on any proposed transactions.
Details of related party transactions entered into in the financial year
2014/15 are set out in note 28 on page 89 of the financial statements.
28
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance The members of the Remuneration Committee are Kathleen Guion (Chair),
Ron McMillan and Harry Brouwer. All three members have been on the
Committee since its inception immediately before the IPO, and all three
remain in place at the date of this report.
The Remuneration Committee meets not less than 3 times a year. Details
of the activities of the Committee in the last financial year are set out on
pages 33 to 46.
Nomination Committee
The Nomination Committee was set up in May 2014, immediately prior
to the IPO, and it comprises Sir Terry Leahy (Chair), Simon Arora, Ron
McMillan, Thomas Hübner, Harry Brouwer and Kathleen Guion, the latter
four members, representing a majority, are independent Non-Executive
Directors of the Company.
In the lead up to the IPO the Company appointed the Non-Executive
Directors to the Board before the Committee was constituted. The
Chairman and CEO met each of them as part of the recruitment process.
The Non-Executive Directors were selected based on a range of criteria
including retail and consumer goods sector, public company and
international knowledge and experience.
The duties of the Nomination Committee as delegated to it by the Board
are contained in the terms of reference available on the Company’s
corporate website (as referred to above), which in summary include:
•
reviewing the structure, size and composition of the Board, including
the balance of executive and non-executive directors;
• putting in place plans for the orderly succession of appointments to the
•
Board and to senior management;
identifying and nominating candidates, for the approval of the Board,
to fill Board vacancies as and when they arise;
• ensuring, in conjunction with the Chairman of the Company, that new
Directors receive a full, formal and tailored induction.
During the period from IPO to 28 March 2015, the Committee met once in
that period, being less than a full 12 month calendar cycle. It will meet
twice yearly starting from the beginning of the current financial year.
During the last financial year the Nomination Committee has reviewed the
size, structure and composition of the Board, with regard to the
experience and skills represented on it and the balance of Executive and
Non-Executive Directors represented on it. The Committee has also
formulated a succession plan for the offices of the Chairman and CEO.
The Committee has not recommended any additional appointments be
made to the Board during the last financial year, but it has recognised the
need to keep under review certain areas where, over the course of time,
appointments may be appropriate to consider.
The Nomination Committee has recommended and the Board has
proposed the re-election of all members of the Board at the Company’s
Annual General Meeting.
As referred to on page 23, the Company has one female Board member.
Of the three Committees of the Board one of them is also chaired by that
female member. The Nomination Committee recognises the need to
monitor and review diversity in relation to how the Group is led and
represented. Appointments will always be made on merit based on
objective criteria with recognition of diversity policy but without having
gender targets, which is considered to be in the best interests of the
Group and the shareholders.
Appointments, induction and development
Where any new Director may need to be appointed by the Board, the
Nomination Committee will lead the process, evaluate the balance of
skills, experience, independence, knowledge and diversity on the Board,
and in the light of that prepare a description of the role and capabilities
required and identify candidates for the Board to consider using external
consultants as appropriate.
All new Directors will receive a full, formal and tailored induction program
and briefing with members of senior management. They will also be
required to meet major shareholders where requested.
A manual is available for new Directors containing information about the
Group, Directors duties and liabilities under Luxembourg Company Law
and obligations under the Listing Rules and DTR’s, together with
governance policies and the UK Corporate Governance Code.
The Directors update their knowledge and familiarity with the business
throughout the year by a mix of central operations tours, store tours and
senior management briefings and presentations. The Chairman meets
each Non-Executive Director on their own at least once a year and this
includes discussion where necessary of any further training and
development needs. The Nomination Committee also considers training
and development needs of the Executive Directors.
There is a procedure for Directors to have access to independent
professional advice, at the Company’s expense, in relation to their duties
should they require it at any time.
Director’s attendance
The Board held 8 meetings from the date of its incorporation prior to
the IPO up to 28 March 2015 and the attendance at the meetings was
as follows:
Sir Terry Leahy
Simon Arora
Paul McDonald
Thomas Hübner
Kathleen Guion
Ron McMillan
Harry Brouwer
David Novak
Audit & Risk
Committee
(3 meetings)
Nomination
Committee
(1 meeting)
Remuneration
Committee
(4 meetings)
Board
8
8
8
7
7
8
7
7
–
–
–
2
–
3
3
–
1
1
–
0
1
1
1
–
–
–
–
–
4
3
4
–
Further meetings of the Board, Audit & Risk Committee and the
Remuneration Committee have also been held since the year end.
29
Financial StatementsCorporate GovernanceStrategic Report Corporate governance statement continued
Board performance evaluation
Given the period from the IPO to the end of the 2014/15 financial year
being shorter than a 12 month cycle, the Board has not yet undertaken a
formal evaluation of the performance of the Board as a whole, the
Chairman, individual directors or the Committees of the Board. A formal
performance evaluation will be undertaken during 2015/16 following a full
year’s cycle of the Board following the IPO. This will be repeated on an
annual basis going forward, and at least once every three years with
external consultants to assist in the process as required by the UK
Corporate Governance Code.
Re-election of Directors
While performance reviews are being undertaken in 2015/16, from the
initial review during the last financial year by the Nomination Committee
of the size, structure and composition of the Board with regard to the
experience and skills represented on it, the Nomination Committee has
recommended that each of the Directors be re-elected to the Board.
Following the recommendation of the Nomination Committee and one to
one meetings of the Chairman with Non-Executive Directors, the Board
and the Chairman consider that all the members of the Board continue to
be effective and to demonstrate commitment to their roles, and are able
to devote sufficient time to their Board and Committee roles and duties.
Accordingly, each of the Directors seek re-election at the Company’s
Annual General Meeting on 30 July 2015.
Risk Management and Internal Control
The Board has overall responsibility for ensuring that the Group maintains
a strong system of internal control.
Monitoring of controls: following the establishment of the internal audit
function, the Audit & Risk Committee will receive going-forward regular
reports from the internal audit function as well as those from the external
auditors. There are formal policies and procedures in place to ensure the
integrity and accuracy of the accounting records of the Group and to
safeguard its assets;
Staff policies: there are formal policies in place in relation to anti-bribery
and corruption and whistle-blowing policies in relation to reporting of any
suspected wrong doing or malpractice. The Board and the Audit & Risk
Committee have carried out a review of the effectiveness of the system of
internal controls during the year ended 28 March 2015 and for the period
up to the date of approving the Annual Report and Financial Statements.
The Board were satisfied on a presentation to it by the Audit & Risk
Committee of its review of the key risks to the business and relevant
mitigating actions that they were acceptable for a business of the type,
size and complexity as that operated by the Group.
Information on the key risks and uncertainties of the Group are set out on
pages 18 and 19.
Compliance statement – The UK Corporate Governance Code
For the period prior to listing on the London Stock Exchange on 17 June
2014, the Company did not have an obligation to comply with the
provisions of the UK Corporate Governance Code published in September
2012 (the “Code”). Since IPO the Code applies to the Company. A copy of
the Code is available on the UK Financial Reporting Councils website at
www.frc.org.uk. The Company has complied with the provisions of the
Code during the period from IPO to 28 March 2015, as applicable, except
where stated above in this report.
The system of internal control is designed to identify, manage and
evaluate, rather than eliminate, the risk of failing to achieve business
objectives. It can therefore provide reasonable but not absolute assurance
against material misstatement, loss or failure to meet objectives of the
business, due to the inherent limitations of any such system.
Shareholder Relations
The Board recognises that good communication is key to maintaining
shareholder relations, and as such we will endeavour to explain our actions
and financial results on a regular basis, and to respond to investor feedback.
In place of the practice previously adopted as a privately owned group,
where risk was principally reviewed by the executive directors and
members of senior management only, an internal audit function has been
established during the last financial year, following a review of the
monitoring and reporting systems of the Group by the Audit & Risk
Committee.
The key elements of the Group’s system of internal controls are as follows:
Financial reporting: monthly management accounts are provided to the
members of the Board which contain current financial and operational
reports. Reporting includes an analysis of actual versus budgeted
performance and overviews of reasons for significant differences in
outcomes. The annual budget is reviewed and approved by the Board.
The Company reports half yearly and publishes trading updates in line
with market practice;
Risk management: the creation and maintenance of a risk register, which
is continuously updated and monitored, with full reviews occurring on an
at least annual basis, facilitated by the internal audit function of the
Group. Each risk identified on the risk register is allocated an owner, at
least at the level of a senior manager within the business, and the action
required, or acceptance of the risk is also recorded. The risk registers are
provided to the Audit & Risk Committee and the Committee will report key
risks and mitigating actions to the Board for monitoring as appropriate;
Meetings and calls are regularly made with institutional investors and
analysts in order to provide the best quality information to the market.
The formal reporting of our full year results will be a combination of
webcasts, presentations, group calls and one-to-one meetings in a
variety of locations. The Board members, including the Chairman and the
Non-Executives, are available to meet with major shareholders if they
wish to raise issues outside of the above environments.
The Company will also communicate with its Shareholders through the
Annual General Meeting, at which the Chairman will give an account of
the progress of the business over the past year, and will provide the
opportunity for Shareholders to raise questions with the Chairman and
the Chairs of each of the Committees of the Board.
The Company also runs a corporate website at www.bandmretail.com which
is regularly updated with our releases to the market and other information
and which includes a copy of this Annual Report and Financial Statements.
Other disclosures
Where information is applicable under Listing Rule 9.8.4R in relation to the
Group, the following matters can be found on the following pages of this
report:
(a) interest capitalised by the Group – page 58
(b) future emoluments which a Director has agreed to waive are included
– page 42
(c) relationship agreements and independence statement – page 49
30
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Audit & Risk Committee report
Dear Shareholder,
The Audit & RIsk Committee exercises oversight of the Group’s financial policies and reporting. It
monitors the integrity of the financial statements and reviews and considers significant financial and
accounting estimates and judgements. The Committee satisfies itself that the disclosures in the
financial statements about these judgements and estimates are appropriate and obtains from the
external auditor an independent view of the key disclosure issues and risks.
During the year the Committee considered the following:
•
the Group’s approach to and methodology for provisioning for inventory which may end up
being sold below cost;
the Group’s exposure to tax and VAT risks;
•
the Group’s approach to managing its treasury function and credit risk;
•
•
the risk register prepared by management;
• various accounting matters relating to the IPO;
•
•
fraud risk and its mitigation; and
the Group’s disaster recovery procedures.
Ron McMillan
Chairman of the Audit Committee
“I am pleased to present the
inaugural Audit & Risk
Committee Report”
A key responsibility of the Committee is to review the scope of the work undertaken by the internal
and external auditors and to consider their effectiveness.
Further information on the Committee’s responsibilities and the manner in which these have been
discharged are set out below.
I shall be available at the Annual General Meeting on 30 July 2015 to answer any questions you may
have on this report and would like to thank my colleagues for their help and support during the year.
Ron McMillan
Chairman of the Audit & Risk Committee
27 May 2015
Committee Composition
The Committee comprises the minimum of three members, all of which are independent Non-
Executive Directors of the Company. Two members constitute a quorum. The Committee must
include one financially qualified member with recent and relevant financial experience. The
Committee Chairman fulfills that requirement. All members are expected to have an understanding
of financial reporting, the Group’s internal control environment, relevant corporate legislation, the
roles and functions of internal and external audit and the regulatory framework of the business.
The members of the Committee from its inception until the date of this report were Ron McMillan,
Thomas Hübner and Harry Brouwer. Details of the Committee meetings and attendance are set out
in the Corporate Governance Statement on page 29.
Although not members of the Committee, Paul McDonald as CFO and representatives from the
internal and external auditors attend the meetings.
Responsibilities
The responsibilities of the Audit Committee, as delegated by the Board are set out in its terms of
reference and are available on the Group’s corporate website. They include the following:
• monitoring the quality, effectiveness and independence of the external auditors and approving
•
•
their appointment, reappointment and fee level;
reviewing and approving the audit plan, and ensuring that it is consistent with the scope of the
audit engagement;
reviewing and monitoring the integrity of the financial statements and other price sensitive
financial releases of the Group;
• assisting the Board with the development and execution of a risk management strategy, risk
policies and current risk exposures including maintenance of the Group’s risk register;
• keeping under review the adequacy and effectiveness of the Group’s internal financial controls
and internal control and risk management systems; and
• monitoring the activities of the internal and external audit functions.
31
Financial StatementsCorporate GovernanceStrategic Report Audit & Risk Committee report continued
Activities
In discharging its oversight of the matters referred to in the introductory letter to this report the Committee was assisted by management and the internal
and external auditors.
In relation to its review of the Group’s approach to inventory provisioning and its exposure to and management of tax and treasury risks, the Committee
received presentations from the CFO. The risk register was developed in relation to the IPO and has been updated during the year. This work is on-going.
In respect of the accounting matters relating to the IPO, Grant Thornton confirmed the appropriateness of their treatment at the time of the interim
financial statements, and in relation to fraud and disaster recovery planning the Committee received reports from the CFO.
In addition to the above the Committee undertook the following:
• approval of the external auditors terms of engagement, audit plan and proposed fees;
• consideration of the level of non-audit services provided by the Group’s auditor and the formulation of a policy in relation to non-audit services
provided to the Group, such that non-audit services fees will not exceed 70% of the audit fee over a three year period. The Committee is satisfied that
there are no conflicts of interest in relation to the non-audit work;
• consideration of the significant risks included in the annual report;
• consideration of the interim results and non-statutory financial statements of the Group for the half year ended September 2014;
• consideration of this set of full year annual report and financial statements of the Group;
• consideration of significant areas of accounting estimation or judgment, including the initial valuation of the accounting for the Jawoll put/call option,
the Group reconstruction and accounting for the IPO fees and share options;
• consideration of the initial work plan and first set of reports of the internal audit function; and
• making recommendations to the Board in respect of the Committee’s findings, and reporting on how the Committee has discharged its duties.
The Board considers that the processes undertaken by the Committee are appropriately robust and effective and in compliance with the guidance
issued by the Financial Reporting Council. During the year the Board has not been advised by the Committee of, nor identified itself, any failings frauds or
weaknesses in internal controls which it has determined to be material in the context of the financial statements.
External Auditors
Grant Thornton have been the Groups auditors for at least the last 18 years and in light of changing practice, it is the Groups intention to formally review
their appointment in the coming year. The Committee has formally recommended that Grant Thornton Lux Audit S.A. be re-appointed as auditors
(réviseur d’entreprises agréé) at the forthcoming Annual General Meeting and Grant Thornton Lux Audit S.A. signalled its willingness to continue in office.
Resolutions appointing Grant Thornton Lux Audit S.A. as auditors (réviseur d’entreprises agréé) and authorising the Directors to set their remuneration
will be proposed at the Annual General Meeting. The total fees paid to Grant Thornton in the year ended 28 March 2015 were £873,000, of which
£525,000 was in respect of non-audit services. Further details are set out in note 5 to the financial statements.
Risk Management
The Directors have overall responsibility for ensuring that the Group maintains a sound system of internal control. There are inherent limitations in any
system of internal control and no system can provide absolute assurance against material misstatement, loss or failure. Equally, no system can
guarantee elimination of the risk of failure to meet the objectives of the business. Against this background, the Board is committed to maintaining a risk
register and reviewing actions which are necessary to mitigate identified risk, responsibility for which rests with identified executives. A summary of the
most significant risks faced by the Group together with mitigating activities is set out on pages 18 and 19.
Prior to the listing the Company did not have an internal audit function and relied upon the internal management controls and the retail operations loss
prevention teams given the relatively low complexity of the business, to provide assurance over the operational procedures and systems upon which the
financial reporting is based. However, given the growth of the business both in the UK and internationally the Group has recognised the need to
establish an independent internal audit team within the business.
A risk register was established during the year, under the oversight of the Audit Committee. This underpins the ongoing process for identifying,
evaluating and managing the significant risks faced by the Group which remains in place at the date of this report. These risks are reviewed by the Audit
& Risk Committee and by the Board and a list of the most significant risks faced by the Group as at the year-end date has been provided on pages
18 and 19.
The internal audit team commenced work during the year under review and have completed audits on some of the key operational areas of the
business, merchandise procurement including a review of the Far East sourcing operations via the associate company Multilines, a review of property
matters including, the new store acquisition and related party stores and the treasury and payroll procedures.
The head of internal audit has a direct reporting line to the Committee and the Committee will work with him to further strengthen the function next year.
The Committee believes that appropriate internal controls are in place throughout the Group. The Group has a well defined organisational structure, with
clear lines of responsibility. The Group has a comprehensive financial reporting system and the Committee believes that the Group complies with the
provisions of the UK Corporate Governance Code on internal controls.
32
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Directors’ remuneration report
Annual statement by the Chairman of the Remuneration Committee
Kathleen Guion
Chairman of the Remuneration Committee
“The key objective from the
work undertaken by the
Committee in reviewing and
setting a forward-looking
remuneration policy to apply
from 2015/16 onward has
been to deliver simple,
transparent and market
competitive but not excessive
packages to the Executive
Directors”
Dear Shareholder,
On behalf of the Board, I am pleased to present the first Remuneration Committee (the “Committee”)
report since the initial public offering (“IPO”) of the Company and its admission to trading on the
London Stock Exchange (“Admission”) on 17 June 2014. The report provides both details of the
remuneration of the Directors for the financial year 2014/15 and the forward looking remuneration
policy for the Directors of the Group.
Performance and rewards for 2014/15
The remuneration of the two Executive Directors of the Company up to the IPO and Admission on 17
June 2014 was set on a different basis as it was a privately owned company. The salaries of the CEO
and CFO at IPO were consciously below market rates for those of a listed company.
On the IPO, the remuneration of the Executive Directors and senior management of the Group
remained mainly unchanged. Following the IPO, the Committee has conducted a thorough review of
the remuneration structure and policy for the Executive Directors and senior management of the
Group during the 2014/15 financial year. The implementation of that review and forward looking
remuneration policy is effective from the beginning of the 2015/16 financial year.
For the remainder of the financial year 2014/15 following the IPO, the CEO’s remuneration was not
revised but an interim increase was made to the CFO’s salary in advance of the full year overall
remuneration policy review for 2015/16.
Awards were made in 2014/15 under the Long-Term Incentive Plan (“LTIP”) adopted by the Company
in preparation for the IPO, to the CFO and to other senior management within the Group.
Based on pre-IPO practice, the CFO was granted discretionary bonuses in respect of the 2014/15
financial year in total of £270,000.
Remuneration policy from 2015/16
The report sets out the Group’s proposed forward-looking Directors’ Remuneration Policy for 2015/16
onward following the work of the Committee in 2014/15 for which shareholder approval is being
sought at the AGM.
The key objective from the work undertaken by the Committee in reviewing and setting a forward-
looking remuneration policy to apply from 2015/16 onward has been to deliver simple, transparent
and market competitive but not excessive packages to the Executive Directors and senior
management, taking into account the interests and expectations of shareholders.
Given the indirect shareholding interests of the CEO (and of the Trading Director), their on-going
packages will not include participation in the Company’s LTIP.
The forward looking remuneration policy is designed to achieve these objectives by ensuring that
performance is rewarded against clearly defined targets for the Executive Directors and senior
management in both the short and long term. Incentivising the management in this way should
help to drive the delivery by them of the strategic aims of the Group and align their pay to those
objectives.
A key objective of the implementation of the remuneration policy from 2015/16 and going forward is
to recognise the importance of both retaining and attracting high quality talent by the Group by
offering packages closer to, but in the case of both Executive Directors, below the market median.
Format of the report
The report below sets out:
•
•
the Company’s forward-looking Directors’ Remuneration Policy from 2015/16, set out in pages 35
to 41, which is subject to a shareholder advisory vote at our 2015 AGM; and
the Company’s Annual Remuneration Report which details the remuneration paid to the
Directors’ in the 2014/15 financial year, set out in pages 42 to 46, which is subject to a separate
shareholder advisory vote at our 2015 AGM.
33
Financial StatementsCorporate GovernanceStrategic Report Directors’ remuneration report continued
As the Company is a Luxembourg registered company, it is not subject to the UK regime under the Companies Act 2006 (the
“Act”) and regulations made under the Act in relation to this report. However, the Committee considers those regulations to be
reflective of best practice and, accordingly, this report has been prepared under the regime adopted in the UK in 2013 for the
reporting of executive pay, while maintaining our status as a Luxembourg registered company.
Shareholder feedback
The Committee recognises that developing close relationships with shareholders can help the work of it in developing the
remuneration policy. Accordingly, the Company has voluntarily adopted the UK approach to reporting and also is seeking
shareholder feedback through offering a separate vote on each part of the report, while maintaining our status as a
Luxembourg registered company.
The Committee has consulted with a number of our shareholders and investor bodies, before the publication of this report.
The Committee welcomes any feedback you may have in relation to this report and the forward-looking remuneration policy
from 2015/16.
Kathleen Guion
Chairman of the Remuneration Committee
27 May 2015
34
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Remuneration policy report
Remuneration policy overview
Total remuneration packages for the Executive Directors for the first full
financial year as a listed Company in 2015/16 will replace the previous
structure of Director remuneration of the Group. Variable elements of
reward including performance based annual bonuses and long-term
incentives will form a significant part of the overall remuneration package
for Executive Directors and senior management. For the current year
2014/15 that policy has already started to be implemented in part.
Long-term incentive awards were reviewed and also a base salary review
of the CFO was undertaken in 2014/15. Further details are set out in the
Annual Remuneration Report on pages 42 to 46 below. During the year
the Committee has undertaken a full remuneration policy review for
implementation in 2015/16. The Committee engaged FIT Remuneration
Consultants LLP (“FIT”), who carried out a benchmarking review and
advised on remuneration structure, to assist the Committee with the
formulation of the forward-looking remuneration policy set out below.
The Directors’ remuneration policy
The Remuneration Committee presents the Directors’ Remuneration Policy
looking forward from 2015/16, which will be put to an advisory vote at the
Annual General Meeting on 30 July 2015.
Introduction
Key developments for 2015/16
The Remuneration Committee (the “Committee”) has reviewed and put in
place a forward-looking Directors’ Remuneration Policy for the Company
with effect from 2015/16 in relation to the Executive Directors, introducing a
balanced structure between each of basic pay and performance related
short-and long-term rewards. It is currently intended that the policy will
continue to apply from 29 March 2015 until the 2018 AGM.
Awards made from the beginning of the 2015/16 financial year in line with
the policy are referred to in the Annual Remuneration Report on pages 42
to 46 below.
Details of the forward-looking policy are set out on pages 35 to 41 below.
Role of the Remuneration Committee
The Committee has responsibility for determining the Company’s policy
on remuneration of the Executive Directors and the Chairman and to
recommend and monitor the level and structure of remuneration of other
senior management of the Group.
The Committee’s key aims in developing the remuneration policy are to
attract, retain and motivate high-calibre senior management and to focus
them on the delivery of the Group’s strategic business objectives, to
promote a strong and sustainable performance culture, to incentivise high
growth and to align the interests of Executive Directors and senior
management with those of shareholders. In promoting these objectives,
the Committee’s aims are to develop a remuneration policy in a simple,
transparent and understandable way and to ensure that no more than is
necessary is paid. The framework for the forward-looking policy from
2015/16 has been structured to adhere to the principles of good corporate
governance and having regard to pay across the wider workforce and to
appropriate risk management.
The Committee’s terms of reference are available on the Company’s
website.
How the views of shareholders are taken into account
The Committee recognises that developing a dialogue with shareholders
is constructive and informative in developing and applying the
remuneration policy. The Committee has consulted with a number of
shareholders and investor bodies, before the publication of the policy in
this report.
There will also be a vote on the forward-looking remuneration policy and
the remuneration report for 2014/15 at this year’s AGM.
The Committee also welcomes feedback generally at any time which will
be considered as part of its annual review of remuneration policy.
35
Financial StatementsCorporate GovernanceStrategic Report Directors’ remuneration report continued
Policy Table
The table below describes the elements of remuneration paid to the Executive Directors:
Element and
purpose
Policy and
opportunity
Operation and performance
conditions
Base salaries are reviewed annually. Changes typically take
effect from the beginning of the relevant financial year
Base salary is paid 4 weekly in cash
On reviews, consideration is given by the Committee to a
range of factors including the Group’s overall performance,
market conditions and individual performance of executives
and the level of salary increase given to employees across
the Group
Base salaries are benchmarked against companies with a
comparable market capitalisation, with base salaries
generally being set then by the Committee against a median
or lower level
Similarly, in practice the Committee will typically discount the
data to recognise that the cost of living in the North West is
lower than in some other parts of the UK
Given the requirement under UK regulations for a formal cap,
the Committee has limited the maximum salary it may award
to 110% of the median of salaries for the role in the FTSE 350
retailers. In practice though the Committee would normally
expect to keep it below the median of this benchmark
Provide market competitive benefits
The Group may periodically review benefits available to
employees. Executives will generally be eligible to receive
those benefits on similar terms to other senior employees
The cost of benefits paid to an Executive in any one year are
capped at £75,000, but this may be exceeded in exceptional
circumstances if the cost of a benefit were to increase
significantly
In addition, where the Committee considers it appropriate to
do so, additional relocation expenses may be paid
Provide a market competitive pension contribution (or
equivalent cash allowance) of a total maximum value up to
20% of base salary for the CEO and 15% (or equivalent cash
allowance) for other Executive Directors
Base salaries are reviewed annually with changes
usually taking effect from 1 April
Executives are entitled to a car allowance or a company
car, car insurance and other running costs and fuel for
business use, death in service life assurance, permanent
disability and critical illness insurance and any other
Group wide benefits including a 10% B&M stores
discount card
Business travel and associated hospitality are provided
in the normal course of business and authorised by the
Committee on a standing basis
Executives may take pension benefits as contributions to
defined contribution personal pension plans, or elect to
receive cash in lieu of all or part of that benefit (this is not
taken into account as salary for calculating bonus, LTIP or
other benefit awards)
If the individual elects to receive any part of their pension
contribution benefit as a cash allowance instead,
employers’ NICs are deducted from that element
Base salary
This is the basic pay
and reflects the
individual’s role,
responsibility and
contribution to the
Group
Benefits
To provide benefits
which are valued by
the individual and
assist them in
carrying out their
duties
Pension
To provide an
appropriate level of
contribution to
retirement planning
36
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Element and
purpose
Policy and
opportunity
Operation and performance
conditions
Annual bonus
To incentivise and
reward individuals
for the delivery of
annual performance
targets
Long-term
incentives
To incentivise the
delivery of strategic
objectives over the
longer term, the
Group operates the
Long-Term Incentive
Plan (“LTIP”) which
was adopted prior to
Admission
The current annual bonus potential for the CEO is 150% of
base salary and 100% of base salary for other Executive
Directors. Their threshold bonus levels will be no more than
25% of their respective maxima, and, their target bonus levels
50% of their respective maxima. As the regulations require a
formal cap for a three year period, future bonus potential will
only increase where appropriate against market data and, in
any event, will be subject to an overall maxima of 200% of
salary for any Executive Director
Clawback provisions apply to the annual bonus plan
Bonuses are paid in cash although the Committee
reserves the power to impose deferral should it consider
that to be appropriate
The performance measures are reviewed annually by
the Committee in line with the Company’s strategy
The performance measures applied may be financial and/or
operational and corporate, divisional and/or individual
Performance conditions once set will generally remain
unaltered, but the Committee has the right in its absolute
discretion to make adjustments during any performance
period to reflect any events arising which were
unforeseen when the performance conditions were
originally set by the Committee
The policy is to make awards to Executive Directors of shares
with a face value on grant of up to 100% of base salary each
year under the LTIP
Awards of up to 200% of base salary can be made if the
Committee considers that exceptional circumstances exist
No LTIP awards are proposed to be made to the CEO while he
continues to hold a significant shareholding above the
minimum shareholding guidelines set out below
The LTIP does not credit participants with dividends paid
during the performance period.
Clawback and malus provisions apply to awards made
under the LTIP from 29 March 2015 onward
LTIP awards may, subject to the discretion of the Committee,
be made subject to holding periods during which the
participant may not dispose of the shares for a period of time
after they become exercisable
Awards may be made annually of nil cost options based
on performance conditions
The Committee may set three year performance
conditions based on financial and/or operational and
corporate, divisional and/or individual criteria as it
considers appropriate
Performance conditions once set will generally remain
unaltered, but the Committee has the right in its absolute
discretion to make adjustments during any performance
period in case of any events arising which were
unforeseen when the performance conditions were
originally set by the Committee
No more than 25% of an award can be earned for
threshold performance
Where a holding period is imposed in the discretion of
the Committee in relation to any LTIP award, the default
position (unless the Committee determines otherwise) is
for the holding period to expire on the fifth anniversary of
the date of grant of the relevant award
37
Financial StatementsCorporate GovernanceStrategic Report Directors’ remuneration report continued
Element and
purpose
Policy and
opportunity
Operation and performance
conditions
Shareholding
guidelines
To encourage share
ownership and
create alignment of
interests of Executive
Directors and
shareholders
All-employee
share plans
To encourage share
ownership by
employees and
participate in the
long-term success of
the Group, the
Group operates an
all-employee share
incentive plan for UK
employees which
was adopted prior to
Admission
Executive Directors are expected to retain all shares which
vest under the LTIP (or any other plans which may be adopted
in the future) on a net of tax basis until they hold shares of a
specified value
Shares subject to these guidelines and any unvested share
awards may not be hedged or used as security for loans
Executive Directors can participate in the all-employee share
incentive plan (“SIP”) on the same terms as other employees
of the Group in the UK
The required level of shareholding is 200% of the base
salary of the relevant executive
Executive Directors are expected to maintain their
minimum shareholding levels once they have obtained
those shareholding levels. The Committee will review
shareholdings annually against the policy and as share
awards mature
The Committee reserves the right to alter the shareholding
guidelines during the period of the policy but without
making the guidelines any less onerous overall
Under the rules of the SIP employees can purchase a
maximum of £1,800 worth of shares per annum from
their pre-tax and pre-national insurance salary through
a UK resident SIP Trust
The rules also permit an award of free shares worth up
to £3,600 per year and for purchased shares to be
matched on up to a 2:1 basis although these elements
have not been operated to date
Notes to the policy table:
The Company has received advice that, under the 2013 regulations made under amendments to the Companies Act 2006 relating to reporting of executive director remuneration,
caps are required on each element of pay which are included in the policy. This report has therefore been prepared on that basis, notwithstanding any variations in market practice
generally on company remuneration policy reporting and also while maintaining our status as a Luxembourg registered company. Any maximum caps in the table, on any element
of pay in the policy, are not intended to represent amounts which will necessarily be awarded at any time but are caps only.
38
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Operation of variable pay
Annual Incentive Plan
The Committee will set the performance targets annually under the
annual incentive plan to take account of the Company’s strategic plan and
financial performance. The performance targets are set by the Committee
based on a range of factors including against the budget for the financial
year. The metrics adopted by the Committee and the weighting of them
may vary in relation to the Company’s strategy each year.
The Committee sets a threshold pay-out, target and a maximum pay-out
target under the plan. There is a straight line vesting between those
points.
Long Term Incentive Plan
The Committee will regularly review the performance targets in relation to
the LTIP to take account of the Company’s strategic plan and financial
performance. Targets will be set by the Committee at the time of the grant
of each award. In making awards for 2015/16 the Committee is adopting a
combination of financial and market-based performance conditions for
the LTIP, with 50% based on relative TSR and 50% EPS growth as a target
approach to reward long-term performance. The target ranges for
2015/16 awards are set out in the Annual Remuneration Report.
Clawback
The Annual Incentive Plan and LTIP rules include provision for clawback
(and malus during any holding period under the LTIP) within a 3 year
period following payment or vesting if the Committee concludes that there
has been material misstatement of financial results, or there are
circumstances which would have warranted summary dismissal of the
participant, or there are circumstances having an impact on the
reputation of the Company or the Group which justify clawback being
operated, or where the Committee discovers information from which it
concludes that a bonus or award was paid or vested to a greater extent
than it should have been.
Existing awards
In putting the Directors’ Remuneration Policy to an advisory vote of
shareholders, the Company will honour any commitments already
entered into in the 2015/16 financial year with Executive Directors, which
are detailed in the Annual Remuneration Report.
Remuneration policy and other employees
As part of the review of the remuneration policy for 2015/16, the
benchmarking review of the Executive Directors’ remuneration also
included a review of the remuneration of senior management. Their base
salaries have also been reviewed with effect from 29 March 2015.
As well as the Executive Directors, other senior management will also
participate in the performance based Annual Incentive Plan to be
adopted under the remuneration policy above. A small group of senior
management also participate in the long-term incentive plan for
performance share awards.
The remuneration policy from 2015/16 onward for senior executives is
more weighted toward variable pay than for other employees. However
the Company is committed to widespread share ownership. Following the
IPO, the Company made a number of awards under the Company Share
Option Plan (“CSOP”) which was adopted prior to Admission, to managers
and other employees across the Group. Executive Directors are not
eligible to participate in the CSOP. Also the Company All-employee UK
Share Incentive Plan (“SIP”), which was adopted prior to Admission, has
been launched. Under the SIP, Executive Directors are eligible to
participate on a consistent basis to all other employees.
Under the CSOP the Board may grant eligible employees share options at
a price not less than the market value of a share at or around the date of
grant. For UK employees, the first £30,000 of share options held at any
time by an employee under the CSOP will be granted as HMRC approved
options. The options vest after 3 years subject to performance conditions
and continued employment.
In setting the remuneration policy for Executive Directors going forward
following the market alignments made for 2015/16, the Committee will
also have regard to pay structures across the broader Group. The
Committee does not consult directly with employees when reviewing
Executive Directors remuneration, but it will take account of the general
basic salary increase for the broader workforce when undertaking annual
salary reviews for the Executive Directors going forward. The Committee
takes advice from FIT, its independent remuneration consultants, on the
benchmarking and structure of remuneration packages for Executive
Directors and senior management.
39
Financial StatementsCorporate GovernanceStrategic Report Directors’ remuneration report continued
Potential reward scenarios
The table below shows an estimate of the total potential rewards of the
Executive Directors’ remuneration packages for the financial year ending
26 March 2016, as a percentage of total potential remuneration and total
value, for the policy as it will be implemented in 2015/16. Share price
movements and dividend accrual have been excluded from the indicative
scenarios below.
Simon Arora
Maximum
41%
59%
£1,468
Target
58%
42%
£1,036
Minimum
100%
£605
0
300
600
900
1,200
1,500
£’000
Paul McDonald
Maximum
38%
31%
31%
£927
Target
61%
26% 13%
£564
Minimum
100%
£347
0
200
400
600
800
1,000
£’000
Fixed
Short-term incentive
Long-term incentive
Assumptions:
•
•
•
the minimum scenario reflects fixed remuneration only which is base
salary, pension and benefits. For the CEO, his pension allowance has
been ignored as he has waived his entitlement for 2015/16;
the on-target scenario reflects fixed remuneration plus 50% of the
maximum annual bonus under the annual incentive plan, no LTIP
participation by the CEO and (for the CFO only) 25% vesting under the
LTIP being the threshold level (assuming an award of 100% of salary to
the CFO under the LTIP);
the maximum scenario reflects fixed remuneration plus 100% of the
maximum annual bonus under the annual incentive plan which is
150% of base salary for the CEO and 100% of base salary for the CFO,
no LTIP participation by the CEO and (for the CFO only) 100% vesting
under the LTIP (assuming an award of 100% of salary to the CFO under
the LTIP).
Recruitment and promotions
The remuneration package for a new Executive Director would be set in
accordance with the terms of the Company’s remuneration policy at the
time of the appointment.
Additionally, on the appointment of any new Executive Director (whether
by external recruitment or internal promotion) the remuneration policy will
permit the following:
•
the UK regulations do not require that the caps on fixed pay apply to a
new recruit and the Committee reserves the right to set fixed pay at
such levels as it considers necessary although, in practice, it envisages
abiding by the caps set out in the policy;
if a new executive’s salary is set on appointment below the median
market rates, phased increases (as a percentage of salary) above
those granted generally to other employees may be awarded subject
to the individual’s performance and development;
the Company may compensate a new Executive Director for amounts
foregone from the individual’s former employer (as permitted under
the Listing Rules) taking account of the amount forfeited, the extent of
any performance conditions, the nature of the award and the time
period to vesting;
the annual incentive plan would operate in accordance with its terms,
pro-rated for the period of employment and, dependant on the
appointment and timing, different performance targets might be set
as the Committee considers appropriate;
•
•
•
• on an internal appointment, any variable pay element awarded in
respect of the individual’s former role would be allowed to pay out
according to its terms, with any relevant adjustment to take account of
the appointment. Any other ongoing remuneration obligations existing
prior to the appointment would also continue;
• on any appointments, the Committee may agree that the Company
will meet appropriate relocation expenses.
Service contracts and payments for loss of office
Main provisions on termination
The service contract for the CEO is terminable by either the Company or
the CEO on 12 months’ notice and the service contract for the CFO by either
party on 6 months’ notice. Both service contracts are dated 29 May 2014.
An Executive Director’s service contract can also be terminated without
notice or payment of compensation except for pay accrued up to the
termination date on the occurrence of certain events such as gross
misconduct.
Payment in lieu of notice equal to base salary only for the unexpired
period of notice can be paid under the CEO’s service agreement. There is
no pay in lieu of notice under the CFO’s service agreement.
There are no enhanced provisions on a change of control under the
Executive Directors’ service contracts.
There has been no payment for loss of office in the financial year 2014/15
or in the financial year 2013/14.
Any new contracts will be on similar terms.
The service contracts of the Executive Directors are available for inspection
at the registered office of the Company.
40
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Letters of appointment
All the Non-Executive Directors of the Company have letters of
appointment dated 29 May 2014 with the Company for an initial period of
3 years subject to 3 months’ notice of termination by either side at any
time and subject to annual re appointment as a Director by the
shareholders. The appointment letters provide that no other
compensation is payable on termination. The Chairman and one of the
other Non-Executive Directors of the Company, David Novak, do not
receive any fees from the Company.
Insurance
All of the members of the Board have the benefit of Directors’ and Officers’
liability insurance which gives them cover for legal action which may arise
against them personally.
Annual bonus on termination
There is no contractual entitlement to annual bonus on termination.
Under the Annual Incentive Plan, the Committee has an absolute
discretion to permit a bonus to be paid to a leaver based on the full or
part year performance, subject to consideration by the Committee of the
reasons for the individual leaving. A full or pro-rata time based bonus
may be awarded, and this may be paid either at or before the normal
payment date.
Performance share plans on termination
Share-based awards made under the Company’s share plans are
governed by the relevant plan rules. Under the rules of the LTIP, awards
lapse if they have not vested on giving or being given notice of termination
of employment for any reason, unless the Committee in its discretion
permits an award to vest in whole or in part and on such terms as it may
specify in its absolute discretion. Awards which have vested before giving
or receiving notice of termination of employment remain exercisable for a
periods of 12 months after leaving or (if later) the expiry of any holding
period which the award was subject to.
Chairman and Non-Executive Directors
Fees
The fee levels and structure of the Non-Executive Directors was set by the
Board from Admission. The fees of the Non-Executive Directors are set by
the Board (excluding the Non-Executive Directors) taking account of
Chairmanship of Board committee’s and the time and responsibility of the
roles of each of them. The fees are paid in cash. The Committee has
responsibility for determining fees paid to the Chairman of the Board,
although the current Chairman does not receive any fees. All fees are
subject to the aggregate fee cap for Directors in the Articles of Association
of the Company, which is currently £800,000 per annum.
A review of the Non-Executive Directors fees (other than in relation to the
Chairman and one other Non-Independent Director) will be carried out in
2015/16. Following completion of that exercise, details of the policy on
Non-Executive Directors fees will be set out in the 2015/16 report.
Details of the fees paid in 2014/15 to Non-Executive Directors are set out
on page 44 below. The Chairman and Non-Executive Directors are
entitled to reimbursement of all expenses reasonably incurred by them in
the performance of their duties. The Chairman and Non-Executive
Directors do not participate in any bonus or share plans of the Company.
41
Financial StatementsCorporate GovernanceStrategic Report Directors’ remuneration report continued
Annual Remuneration Report
Executive Directors remuneration in 2014/15
Elements of remuneration
The Executive Directors receive a base salary and other benefits. The CEO
has not been paid any annual bonus or received any long-term incentive
awards in financial year 2014/15. The CFO has been paid discretionary
bonuses in the financial year 2014/15 on the basis of the practice applied
from the time when the Group was privately owned.
Pension and other benefits
For 2014/15, the Company provided only modest benefits consistent with
pre-IPO practice as a privately owned group.
The Executive Directors did not receive any employer’s pension
contribution or contribution to any personal pension plans. Both of them
participate in the Group’s auto-enrolment pension plan to which the
Group make employer contributions for all participants.
The Executive Directors did not receive any benefits or payments towards
any private medical cover or death in service life assurance or permanent
disability insurance.
The CEO had an expensed company car as a benefit in kind.
From 2015/16 pension and other benefits in kind to Executive Directors
have been reviewed as part of the remuneration policy review. Details of
the policy on pension and other benefits in kind are set out in the
Remuneration Policy Report on pages 35 to 41 above.
In relation to pensions:
•
the CEO has been granted an annual pension benefit of 20% of base
salary (or cash equivalent less Employers’ NICs) effective from 29
March 2015, but he has waived this entitlement in full for the financial
year 2015/16;
the CFO has been granted an annual pension benefit of 15% of base
salary (or cash equivalent less Employers’ NICs), effective from 29
March 2015.
With regard to other benefits:
•
•
the CEO has retained his existing company car benefit;
the CFO has a car allowance of £8,000 per annum as a benefit
effective from 29 March 2015;
it is expected that each of the CEO and CFO will be taking-up death in
service life assurance benefits with cover of up to 4 times base salary
respectively and permanent disability insurance under policies to be
arranged after the time of the circulation of this report.
Long-term incentive awards have been made to the CFO in 2014/15. The
vesting of the long-term incentives are dependent upon the achievement
of performance targets which were set by the Committee before the
awards were made. Details of the performance targets for the awards
made in 2014/15 are set out on page 44.
Salary
The CEO’s basic salary was not reviewed from IPO for the remainder of the
financial year 2014/15, pending the full remuneration policy review being
completed by the Committee for 2015/16. The CFO’s base salary was
increased following Admission as an interim review by the Committee
from a base of £135,000 to £200,000.
A benchmarking review of the Executive Directors’ remuneration has been
carried out by the Committee for 2015/16 and basic salary increases have
been implemented with effect from 29 March 2015.
•
The Executive Directors will next be eligible for a salary review on
27 March 2016.
Their current basic salaries as at 29 March 2015 compared with 30 March
2014 are as follows:
Director
Simon Arora (CEO)
Paul McDonald (CFO)
Salary as at
29 March 2015
Salary as at
30 March 2014
•
£575,000
£290,000
£144,000
£135,000
The CEO’s salary is considered to be broadly reflective of a median
position after allowing for a 5% discount to reflect the relatively lower cost
of living in the North West versus some other parts of the UK. The CFO’s
salary has been set at circa. 20% below the median level to recognise the
existence of a COO role within the Group as well as that of a CFO.
42
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Annual bonus
The CEO was not eligible for a bonus in respect of 2014/15 pending the full
remuneration policy review being completed by the Committee for
2015/16. The CFO was granted discretionary bonus payments totalling
£270,000 in the financial year 2014/15 in accordance with pre-IPO
practice.
The bonuses for the Executive Directors going forward are subject to the
terms of the performance based Annual Incentive Plan set out in the
Remuneration Policy on pages 35 to 41 above.
For 2015/16, the maximum bonus opportunity for the CEO is 150% of base
salary and for the CFO 100% of base salary. Under the awards for 2015/16,
50% of the maximum bonus opportunity is based on the achievement of
an EBITDA target, 30% on achievement of individual KPI’s and 20% on
other personal leadership and development criteria (although the EBITDA
condition applies as a gateway to the individual and personal measures
as explained below).
The maximum level of bonus is dependent on achievement of the
maximum EBITDA target and the highest individual and other personal
performance ratings. No bonus is paid unless a threshold level of EBITDA
is achieved. Also the percentage rate achieved of the EDITDA target
applies as a similar percentage rate cap on the amounts due in respect of
the individual and other personal targets. Therefore, any amounts due
under the individual and personal targets will be the lower of the EBITDA
achievement and the achievement under those targets. The Committee
does not disclose those targets in advance as they are commercially
sensitive and it is not market practice to do so. Suitable disclosure of the
financial target ranges will be included in next year’s report
retrospectively.
Long-term incentives
The Committee’s policy is for performance share awards to be considered
annually in relation to the Executive Directors under the Company’s
Long-Term Incentive Plan (“LTIP”).
Under the LTIP, subject to meeting performance conditions set by the
Committee, awards will ordinarily vest on the third anniversary of the date
of grant. The maximum individual limits for awards are capped at 100% of
basic salary (or 200% in exceptional circumstances).
No awards were made to the CEO under the LTIP in 2014/15 and none are
envisaged in 2015/16.
An award was made to the CFO under the LTIP on 1 August 2014 over
shares worth 100% of his basic salary. Details of the award are set out on
page 44.
For 2015/16, an award is to be made to the CFOs equal to 100% of base
salary. The performance conditions for the LTIP for 2015/16 are as follows:
(i) 50% of the award shares vest based on the Company’s relative TSR
performance against the FTSE 350 retailers (being both the FTSE
General Retailers Sector and the FTSE Food and Drug Retailers Index
constituents) over the three year period commencing from the
beginning of the 2015/16 financial year (the “Performance Period”) as
derived by comparing the one month prior to the start and end of the
Performance Period. Vesting occurs on achievement (as a threshold
level) of a median relative TSR performance ranking being attained at
the end of the Performance Period, with 25% of that portion of the
award shares then becoming exercisable. On attaining an upper
quartile relative TSR performance ranking at the end of the
Performance Period, 100% of that portion of the award shares would
become exercisable at the expiry of the holding period explained
below, with a straight-line proportion vesting between median and
upper quartile ranking being achieved;
(ii) 50% of the award shares vest based on growth in adjusted EPS of the
Company over the Performance Period. Vesting occurs on
achievement (as a threshold level) of an adjusted diluted EPS of 15p for
2017/18, with 25% of that portion of the award shares then becoming
exercisable. On an EPS of 19p, 100% of that portion of the award shares
would become exercisable at the expiry of the holding period
explained below, with a straight-line proportion vesting between
those targets being achieved.
The award will have a holding period expiring on the fifth anniversary of
the date of the grant.
All-employee share plans
The Company adopted an all-employee UK Share Incentive Plan (“SIP”)
immediately prior to Admission which has been registered with HMRC. All
employees with 12 months’ service become eligible to join. Under the SIP
employees may elect to acquire up to £138 worth of shares in the
Company every 4 weeks or by a maximum one off lump sum of £1,800 in
a tax year.
The Executive Directors are eligible to participate in the SIP on the same
basis as other employees.
Shareholding guidelines
There was no shareholding guideline in force for 2014/15. The
shareholding guidelines from adoption of the remuneration policy are set
out in the table on page 38 of the Remuneration Policy Report.
43
Financial StatementsCorporate GovernanceStrategic Report
Directors’ remuneration report continued
Single figure table of total remuneration (Executive Directors) – audited
The audited table below shows the aggregate remuneration of the Directors of the Company during the financial year 2014/15 and for 2013/141.
Executive Directors
Simon Arora
Paul McDonald
Salaries
£
Benefits2
£
Bonus
£
Value of
long term
incentives3
£
Pension4
£
Total
£
144,000
144,000
155,577
173,750
21,009
22,248
–
–
–
–
35,000
270,000
–
–
750,000
–
275
358
275
358
165,284
166,606
940,852
444,108
Year1
2013/14
2014/15
2013/14
2014/15
The 2013/14 year is for the 55 weeks ended 29 March 2014 and the 2014/15 year is for the 52 weeks ended 28 March 2015.
1
2 Benefits for 2013/14 and 2014/15 include company car/car allowance cash equivalent as a benefit in kind, fuel and running costs.
3 No share based long term incentive plans were in place prior to the IPO and so there were no awards or vesting based on performance ending in the financial year 2013/14. There
was a non-share based long term incentive plan, the payment of which matured in 2013/14 which is included above. All awards in 2014/15 were subject to pre-vest performance
conditions so will be included on the satisfaction of those conditions.
4 Auto-enrolment pension employer contributions.
Remuneration of the Chairman and Non-Executive Directors – audited
The fee levels and structure of the Non-Executive Directors was set by the Board from Admission. They will be reviewed in 2015/16.
The Chairman does not receive any fees as he is not an independent Chairman of the Company. One of the other five Non-Executive Directors, David
Novak, does not receive any fees as he is not an independent Director.
The fees of the Non-Executive Directors are set by the Board and take account of Chairmanship of Board committee’s and the time and responsibility of
the roles of each of them.
The fees paid for 2014/15 to the Non-Executive Directors were as follows:
Sir Terry Leahy
Thomas Hübner
Kathleen Guion
Ron McMillan
Harry Brouwer
David Novak
Fee
£
–
59,153
54,603
54,603
45,502
–
Performance share awards made to Directors – audited
The audited table shows all the share awards which were made during the financial year 2014/15 to the Directors. No previous grants had been made.
Director
Type of award and
date of grant
Basis of grant of award
Paul McDonald
Nil cost option
Granted 1 August
2014
100% of base salary of
£200,000 based on share
price on Admission
Share price at
date of grant1
Number of shares
over which award
was granted
Face value
of award
% of face value
that would vest
at threshold
performance
Vesting on performance
over date
£2.715
74,074
£201,110.91
Third anniversary of
the date of grant
100%
1
The number of shares in the award was determined based on the Admission share price of £2.70. The closing price on the trading day immediately before the date of grant was
£2.715 resulting in a higher face value.
The performance conditions for this award are, 100% of the shares included in the award shall vest on 1 August 2017 if:
a. the Company’s underlying UK consolidated EBITDA in the financial year ended 31 March 2017 is not less than 130% of its underlying UK consolidated
EBITDA in the financial year ended 31 March 2014; and
b. the total shareholder return over the period 1 August 2014 to 1 August 2017 is at least 15%. The “shareholder return” includes the difference in the
share price at the end of that period less the price at the beginning of the period plus the total cash value of dividends, distributions, bonus shares
and dividend reinvestments relating to the shares on or before 1 August 2017.
Payments to past Directors and loss of office payments – audited
There were no payments to past Directors or for loss of office in the year ended 28 March 2015.
44
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Directors’ shareholdings and share interests – audited
The table below sets out the number of shares held or potentially held by
Directors (including their connected persons or related parties where
relevant) as at the financial year ended 2014/15. There were no share
ownership guidelines or requirements for either the Executive Directors or
the Non-Executive Directors in the financial year ended 2014/15.
Director
Sir Terry Leahy2
Simon Arora
Paul McDonald
Thomas Hübner
Kathleen Guion
Ron McMillan
Harry Brouwer
David Novak2
Shares held
beneficially1
Unvested options
with performance
conditions3
–
269,880,828
–
11,111
11,111
37,037
18,518
–
–
–
74,074
–
–
–
–
–
¹
2
Includes any shares held by connected persons or related parties.
Sir Terry Leahy and David Novak have an interest in the shares held by CD&R
European Value Retail Investment S.á.r.l, which holds 174,100,528 of the ordinary share
capital being 17.41% of the voting rights in the Company, as a result of their interests in
Clayton, Dubilier & Rice Fund VIII, L.P.
3 Nil cost options.
Performance graph and pay table
The chart below illustrates the Company’s Total Shareholder Return (“TSR”)
performance against the performance of the FTSE 250 Index excluding
investment trusts, from the date of the IPO of the Company. This index was
selected as it represents a broad equity market index which includes
companies of a comparable size.
Total Shareholder Return (Rebased)
Source: Datastream (Thomas Reuters)
e
d
a
m
t
n
e
m
t
s
e
v
i
t
i
n
u
0
0
1
a
f
l
o
e
u
a
V
-
R
S
T
4
1
0
2
e
n
u
J
2
1
n
o
114
112
110
108
106
104
102
100
12 June 2014
28 March 2015
B&M European Value Retail S.A.
FTSE 250 (exc. investment trusts)
This graph shows the value by 28 March 2015 of £100 invested in B&M
from 12 June 2014 (the date of the IPO of the Company) compared with the
value of £100 invested in the FTSE 250 Index (excluding investment trusts).
Remuneration of the CEO
2014/15
Single Figure
£166,606
Bonus as a %
of max
LTIP as a %
of max
N/A
N/A
Change in the remuneration of the Chief Executive
The table below shows the percentage changes in the CEO’s
remuneration between the financial year ended 29 March 2014 and
28 March 2015 compared to the amounts for UK full time employees
of the Group for each of the following elements of pay:
CEO
UK full time employees
(average)1
Salary increase/
(decrease)
Annual bonus
increase/
(decrease)
Taxable benefits
increase/
(decrease)
0.0%
0.0%
5.89%
3.51%
20.58%
8.05%
¹
This includes all salaried UK employees.
Relative importance of the spend on pay
The table below shows the movement in spend on pay for all employees
compared with distributions to shareholders.
£’000
Total pay for employees
Distributions to shareholders
2013/14
2014/15
% change
159,146
–
197,657
9,000
+24.2
–
¹
Distributions to shareholders prior to the date of listing have been excluded. There
have not been any buy-backs of shares so this element has been excluded from the
above table.
External appointments
Subject to Board approval, Executive Directors are permitted to take on
non-executive positions with other companies and to retain their fees in
respect of such positions. Simon Arora is a non-executive director of
Anglesource Limited. No fees were received by him for that external
appointment during the year ended 28 March 2015.
Remuneration Committee
The members of the Committee for 2014/15 comprise 3 independent
Non-Executive Directors, being, Kathleen Guion (Committee Chairman),
Harry Brouwer and Ron McMillan.
The responsibilities of the Committee are set out in the Corporate
Governance section of the Annual Report on page 28.
The Committee is assisted by the General Counsel of the Group who is
invited to attend Committee meetings. The Committee may invite the
Chairman, Executive Directors or other members of the senior
management to attend meetings and assist the Committee in its
deliberations as appropriate. No person is present during any
deliberations relating to their own remuneration or involved in
determining their own remuneration.
45
Financial StatementsCorporate GovernanceStrategic Report
Directors’ remuneration report continued
The attendance of members of the Committee at meetings of it was as
follows.
Director
Role
Meetings attended
Kathleen Guion
Harry Brouwer
Ron McMillan
Committee Chairman
Committee Member
Committee Member
4 out of 4
4 out of 4
3 out of 4*
*
The meeting not attended by Ron McMillan was an additional meeting to the annual
calendar of meetings called at short notice and he had given his comments in relation
to the business proposed for the meeting in advance to the Chairman of the
Committee.
Advisors to the Committee
FIT Remuneration Consultants LLP (“FIT”) has been appointed as
remuneration consultants by the Committee. FIT are retained to provide
advice on remuneration for the Executive Directors and the senior
management. FIT does not provide any other services to the Group. FIT
were appointed by the Committee after appropriate consideration of their
experience in this sector.
FIT are a member of the Remuneration Consultants Group and subscribes
to its Code of Conduct which requires that its advice must be objective
and impartial. For the financial year 2014/15 FIT’s total fees were £19,279
excluding vat and expenses. Those fees primarily relate to the work
undertaken in a market review of the remuneration of the Executive
Directors and senior management, advice on structuring of remuneration
packages and the formulation of the overall remuneration policy in the
lead up to implementation immediately following the 2014/15 year end.
This report has been approved by the Board of Directors of the Company
and signed on behalf of the Board by:
Kathleen Guion
Chairman of the Remuneration Committee
27 May 2015
46
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Directors’ report and business review
The Directors present their report (the “Management Report”) under
Luxembourg Law and DTR4.1.5R, together with the consolidated financial
statements and annual accounts of the Group and of the Company as at
28 and 31 March 2015 respectively and for the accounting periods then
ended. As permitted under Luxembourg Law, the Directors have elected
to prepare a single Management Report covering both the Group and the
Company. The Strategic Report, Corporate Governance Statement and
Directors’ Remuneration Report on pages 1 to 23, 26 to 30 and 33 to 46
respectively form part of this report.
Company status
B&M European Value Retail S.A. (the “Company”) is the holding company
of the Group. It was incorporated on 19 May 2014 as a public limited
liability company (Société Anonyme) under the laws of the Grand-Duchy of
Luxembourg and it is domiciled in Luxembourg. The Company has a
premium listing on the London Stock Exchange.
Branches
The Group had no registered external branches during the reporting
period.
Principal activity
The principal activity of the Group is variety retailing in the UK and
Germany. The Company has a corporate office in Luxembourg.
Business review
This report together with the Strategic Report on pages 1 to 23, sets out the
review of the Group’s business during the financial year ended 28 March
2015, including factors likely to affect the future development and
performance of the business and a description of the principal risks and
uncertainties the Group faces, and the Strategic Report is incorporated by
reference in this report.
Going concern
As a discount retailer, the Group is well placed to withstand the current
economic conditions. 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, the Directors are confident that the Group has adequate
resources to continue its successful growth. Accordingly, they continue to
adopt the going concern basis in preparing the financial statements.
Results and dividend
The Group’s profit after tax for the financial year ended 28 March 2015 of
GBP £39.9m is reported in the consolidated statement of comprehensive
income on page 53.
The Board is recommending a final dividend of 2.5p per ordinary share,
which together with the interim dividend of 0.9p per ordinary share paid in
January 2015 is a total dividend for the year of 3.4p, which reflects the
upper end of the dividend policy which was announced at IPO of paying
30-40% of normalised post IPO earnings.¹
¹
Dividends are stated as gross amounts before deduction of Luxembourg withholding
tax which is currently 15%
Post balance sheet events
There have been no post balance sheet events that either require
adjustment to the financial statements or are important in the
understanding of the Company’s current position.
Corporate social responsibility
Our CSR activity is set out in the Corporate Social Responsibility report on
pages 20 to 23.
Greenhouse gas emissions
Details of the Group’s greenhouse gas emissions are contained with the
Corporate Social Responsibility on pages 20 to 23 which forms part of this
report.
Employees
The Group has continued its practice of keeping staff informed of matters
affecting them as employees through local meetings, company newsletters
and notice boards. The Group seeks to ensure that disabled people, whether
applying for a vacancy or already in employment, receive equal opportunities
in respect of those vacancies that they are able to fill and are not
discriminated against on the grounds of their disability and are given full and
fair consideration of applications, continuing training while employed and
equal opportunity for career development and promotion.
Directors
The Directors of the Company as at 31 March 2015 and their interests in
shares and share awards made to them under share incentive schemes
in the Company are shown on page 45. There have been no changes in
the Board of the Company between 31 March 2015 and the date of this
report.
In accordance with the Articles of Association of the Company (the “Articles”),
all the Directors will retire at the Annual General Meeting ‘”AGM”). All the
retiring Directors, being eligible, will stand for re-election as Directors.
Directors indemnities
The Company’s Articles of Association permit the Company to indemnify
its Directors in certain circumstances, as well as to provide insurance for
the benefit of its Directors. The Company has Director’s and Officer’s
insurance in place in respect of all the Directors. The insurance does not
provide cover where a Director has acted fraudulently or dishonestly.
Political donations
No political donations were made in the financial year.
Financial instruments
Details of the Group’s objectives and policies on financial risk
management, and of the financial instruments currently in use, are set out
in note 20 to the consolidated financial accounts.
Share capital
The Company’s share capital and changes to it in the financial year, are
set out on page 49 below and in note 23 to the consolidated financial
statements on page 83 which form part of this report.
In common with other Luxembourg registered companies, the Directors
have authority to allot ordinary shares in the Company and to dis-apply
pre-emption rights under certain conditions as permitted under the
Articles of Association of the Company. The Directors intend to comply
with pre-emption guidelines supported by the Investment Association
and the National Association of Pension Funds in relation to any issue of
shares of the Company to the extent practicable as a Luxembourg
registered company.
47
Financial StatementsCorporate GovernanceStrategic Report Directors’ report and business review continued
The Board intends to seek an authorisation of shareholders at the AGM on
30 July 2015 that the Company may purchase, acquire or receive B&M
European Value Retail S.A.‘s own shares. This resolution will usually be
requested at each AGM. No shares of the Company have been
purchased and no contract has been entered into at any time since the
incorporation of the Company.
Each ordinary share entitles the holder to vote at general meetings of
the Company in person or by proxy. Unless otherwise provided by
Luxembourg Company Law or the Articles of Association of the Company,
all decisions by an annual or general shareholders’ meeting are taken by
a simple majority of votes cast regardless of the proportion of capital
represented by shareholders in attendance at the meeting. The notice of
the Annual General Meeting specifies deadlines for exercising voting
rights and appointing a proxy to vote.
Holders of ordinary shares may receive a dividend and on liquidation
may share in the assets of the Company. Subject to meeting certain
thresholds, holders of ordinary shares may requisition a general meeting
of the Company or the proposal of resolutions at general meetings. The
rights (including full details relating to voting), obligations and any
restrictions on transfer relating to the Company’s ordinary shares, as well
as the powers of the Directors, are set out in the Articles of Association.
Details of agreements and control rights which may result in restrictions
on transfers of shares are set out in section (b) on page 49 below. The
Company is not aware of any other agreements between shareholders
that restrict the transfer of shares or voting rights attached to the shares.
Employee share ownership trust
The Company established a trust with Capita Trustees Limited as the
trustee in Jersey on 14 October 2014 (the “ESOT”) to facilitate the holding of
shares in the Company by employees and the Executive Directors. The
trustee of the trust has waived its right to receive dividends on the
Company’s shares which it holds from time to time. Where the Company
directs at any time that the trustee may vote in relation to any unallocated
shares held by it, the trustee has power in its absolute discretion to vote or
not to vote in such manner it thinks fit. During the financial year to 28
March 2015 and up to the date of this report, no shares in the Company
have been held at any time by the ESOT.
Shareholders
As at 27 May 2015, the following shareholders have notified the Company
of their interest in 5% or more of the Company’s issued ordinary shares:
Shareholder
The Capital Group Companies, Inc.
CD&R European Value Retail
Investment S.á.r.l.
SSA Investments S.á.r.l.*
No of ordinary
shares
52,163,144
174,100,528
% share
capital
5.22
17.41
269,880,828
26.99
*
Includes 8,055,494 shares held by Praxis Nominees Limited on its account.
Amendment to the Articles of Association
The Company’s Articles of Association may only be amended at an
extraordinary shareholders’ meeting where at least one half of the issued
share capital is represented (or if that condition is not satisfied at a second
meeting regardless of the capital represented at that meeting) and when
adopted by a resolution passed by at least two-thirds of the votes cast. No
amendments are proposed to be made to the existing Articles of
Association at the Annual General Meeting on 30 July 2015.
Change of control
The Group’s credit and loan facilities with its banks and fleet finance
agreements for HGV’s contain customary cancellation and repayment
provisions upon a change of control. Employee share incentive schemes
also have customary change of control provisions triggering vesting and
exercise on performance conditions being met or (in the discretion of the
Company) being waived.
Annual General Meeting
A notice convening the Company’s first Annual General Meeting on 30
July 2015 will be issued to shareholders separately. In addition to the
ordinary business of the AGM, the Directors are seeking certain other
approvals and authorities, details of which are set out in the notice.
Corporate governance
The compliance by the Company with the UK Corporate Governance Code
and the requirements of Article 68bis of the Luxembourg Company Law of
10 December 2010 are set out in the Principal Risks and Uncertainties on
pages 18 and 19, the Corporate Governance report on pages 26 to 30 and
the Directors’ Remuneration Report on pages 33 to 46, each of which form
part of this report.
The Statement of Directors’ Responsibilities in relation to the consolidated
financial statements and annual accounts of the Group and the
unconsolidated financial statements and annual accounts of the
Company appears on page 51, which forms part of this report.
Independent Auditor
Grant Thornton Lux Audit S.A. is the independent auditor (“réviseur
d’entreprises agréé”) of the Company. Its reappointment as the Company’s
auditor, together with authority for the Directors to fix the auditor’s
remuneration, will be proposed at the AGM as set out in the notice.
Information on forward looking statements
The Annual Report and financial statements include forward-looking
statements that reflect the Company’s or, as appropriate, the Directors’
current views with respect to, among other things the intentions, beliefs
and current expectations of the Company or the Directors concerning,
amongst other things, the results of operations, the financial condition,
prospects, growth, strategies and dividend policy of the Company and the
industry in which it operates.
Statements that include the words “expects”, “intends”, “plans”, “believes”,
“projects”, “forecasts”, “predicts”, “assumes”, “anticipates”, “will”, “targets”,
“aims”, “may”, “should”, “shall”, “would”, “could”, “continue”, “risk” and
similar statements of a future or forward-looking nature can be used to
identify forward-looking statements.
48
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance
All forward-looking statements involve risks and uncertainties because they
relate to events and depend on circumstances that may or may not occur in
the future. Undue reliance should not be placed on such forward-looking
statements because they involve known and unknown risks, uncertainties
and other factors that are in many cases beyond the Group’s control.
Independence compliance statement
CD&R European Value Retail Investment S.a.r.l. (“CD&R Holdco”) and
Simon Arora, Bobby Arora, Robin Arora and SSA Investments S.a.r.l. (“SSA
Holdco”) (the “Arora Family”) entered into relationship agreements with the
Company with effect from the admission of the Company to trading on the
London Stock Exchange (“Admission”), which regulate the ongoing
relationship between the Company and CD&R Holdco and the Arora
Family, respectively, following Admission (together the “Relationship
Agreements” and each, a “Relationship Agreement”).
The principal purpose of the Relationship Agreements is to ensure that the
Company and its subsidiaries are capable of carrying on their business
independently of CD&R Holdco and the Arora Family (and their respective
associates), that transactions and relationships between the Group and
CD&R Holdco and the Arora Family (and their respective associates) are at
arm’s length and on normal commercial terms.
For the purpose of this section of the Annual Report, the terms “controlling
shareholder(s)” and “associate(s)” have the same meanings as in the UK
Listing Rules.
The Relationship Agreements contain undertakings, that each of CD&R
Holdco and the Arora Family and each of its respective associates, will:
(a) conduct all transactions and relationships with the Company at arm’s
length and on normal commercial terms;
(b) not take any action that would have the effect of preventing the Company
from complying with its obligations under the Listing Rules; and
(c) not propose or procure the proposal of a shareholder resolution which
is intended or appears to be intended to circumvent the proper
application of the Listing Rules.
(together the “Independence Provisions”).
The Relationship Agreements will continue for so long as CD&R Holdco or the
Arora Family together with their respective associates, as the case may be,
hold 5% or more, respectively, of the issued ordinary shares of the Company.
Details of transactions entered into during the period between 17 June 2014
(the date each of the Relationship Agreements become effective) and
28 March 2015 with CD&R Holdco and the Arora Family (and their respective
associates) are given in note 28 of the Financial Statements on page 89.
The Board confirms that between 17 June 2014 (the date each of the
Relationship Agreements became effective) and 28 March 2015 (and also
since then to the date of this report):
(i)
the Company has complied with the independence provisions
included in each of the Relationship Agreements; and
(ii) so far as the Company is aware, the independence provisions
included in each of the Relationship Agreements have been complied
with by the controlling shareholders and their respective associates.
(iii) so far as the Company is aware, the procurement obligations in each
of the Relationship Agreements have been complied with during the
period under review by the controlling shareholders and their
respective associates,
and that the Company has acted independently of CD&R Holdco and the
Arora Family (and their respective associates).
The Board confirms that this statement is supported by each of the
independent Directors of the Company and there have been no instances
where any of them declined to support this statement.
In accordance with Article 13.10 of the Articles of Association of the
Company a report will be made at the 2015 AGM of transactions with the
Company or its subsidiary undertakings in which any Directors may have
had an interest, including each of the related party transactions with
Directors (or which they may have directly or indirectly had an interest)
referred to in note 28 of the Financial Statements on page 89, together
with any other such transactions entered into after the financial year-end
on 28 March 2015 up to the date of the AGM.
Article 11 report
The following disclosures are made in accordance with Article 11 of the
Luxembourg Law on Takeovers of 19 May 2006 and form part of this
Directors’ Report.
Section (a) – Share capital structure
B&M European Value Retail S.A. has issued one class of shares which is
admitted to trading on the London Stock Exchange. No other shares have
been issued by B&M European Value Retail S.A. The issued share capital
of B&M European Value Retail S.A. as of 28 March 2015 amounts to
£100,000,000 represented by 1,000,000,000 shares with a nominal value
of £0.10 each. B&M European Value Retail S.A. has a total authorised
share capital of £297,222,222.20. All shares issued by B&M European
Value Retail S.A. have equal rights as set out in the Articles of Association
of the Company (the “Articles”).
Section (b) – Transfer restrictions
As at the date of this report, all B&M European Value Retail S.A. shares are
freely transferable subject to the conditions set out in Article 6.3 of the
Articles, except as set out below.
Pursuant to the Underwriting Agreement entered on the listing of the
Company, each of the Company, the Directors, Simon Arora, Bobby Arora and
Robin Arora has agreed that during the period of 365 days from the date of
admission of the Company to listing on the premium listing segment of the
Official List of the London Stock Exchange and the admission to trading of the
shares of the Company on the main market for listed securities of the London
Stock Exchange on 17 June 2014 (the “Admission”), subject to certain
customary exceptions, they will not directly or indirectly, without the prior
consent of BofA Merrill Lynch and Goldman Sachs International as the joint
global co-ordinators (the “Joint Global Co-ordinators”) (not to be unreasonably
withheld or delayed), offer, issue, lend, sell or contract to sell, issue options in
respect of, or otherwise dispose of, directly or indirectly, or announce an
offering or issue of, any shares of the Company (or any interest therein or in
respect thereof) or any other securities exchangeable for or convertible into,
or substantially similar to, shares of the Company or enter into any transaction
with the same economic effect as, or agree to do, any of the foregoing (other
than as already made previously pursuant to the ‘Offer’ as defined in and in
the manner described in the Prospectus issued on the listing of the
Company).
Pursuant to a lock-up deed, SSA Investments S.à r.l. has agreed that during
the period of 365 days from the date of Admission, subject to certain
customary exceptions, it will not without the prior written consent of the Joint
Global Co-ordinators (not to be unreasonably withheld or delayed)
49
Financial StatementsCorporate GovernanceStrategic Report Directors’ report and business review continued
directly or indirectly, offer, issue, lend, sell or contract to sell, issue options in
respect of, or otherwise dispose of, directly or indirectly, or announce an
offering or issue of, any shares of the Company (or any interest therein or in
respect thereof) or any other securities exchangeable for or convertible into,
or substantially similar to, shares of the Company or enter into any transaction
with the same economic effect as, or agree to do, any of the foregoing (other
than as already made previously pursuant to the ‘Global Offer’ as defined
in and in the manner described in the Prospectus issued on the listing of
the Company).
On 12 June 2014, CD&R European Value Retail Investment S.à r.l., SSA
Investments S.à r.l., Simon Arora, Bobby Arora, Robin Arora, Rani 1 Life Interest
Trust, Rani 2 Life Interest Trust and Praxis Nominees Limited entered into an
agreement pursuant to which SSA Investments S.à r.l. shall require the
consent of CD&R European Value Retail S.à r.l. for the sale of any shares of the
Company for a period of a further two years after expiry of their initial twelve
month lock-up. This restriction applies to fifty percent (50%) of their
shareholding in the Company following the ‘Global Offer’ as defined in the
Prospectus issued on the listing of the Company. This Agreement requires all
parties to co-operate for a three year period (subject to certain permitted
exemptions) to maintain an orderly market in the event of the proposed sale
of any shares in the Company by any of the parties.
Section (c) – Major shareholdings
Details of shareholders holding more than 5% of the issued share capital of
B&M European Value Retail S.A. as notified to B&M European Value Retail S.A.
in accordance with Luxembourg Transparency Law are set out on page 48.
Section (d) – Special control rights
All the issued and outstanding shares of B&M European Value Retail S.A.
have equal voting rights and there are no special control rights attached to
shares of B&M European Value Retail S.A., except that B&M European Value
Retail S.A. can direct that shares held in the ESOT be applied by the trustee to
satisfy the vesting of outstanding awards under its long-term incentive plan
or any other employee share schemes established by the Group.
Section (e) – Control system on employee share scheme
B&M European Value Retail S.A. is not aware of any matters regarding
section(e) of Article 11 of the Luxembourg Law on Takeovers of 19 May
2006, save where referred to in (d) above.
Section (f) – Voting rights
Each share issued and outstanding in B&M European Value Retail S.A.
represents one vote. The Articles do not provide for any voting restrictions. In
accordance with the Articles shareholders may be represented and proxies
shall be received by the Company a certain time before the date of the
relevant meeting. In accordance with the Articles, the Board of Directors may
determine such other conditions that must be fulfilled by shareholders in
person or by proxy. Additional provisions may apply under Luxembourg Law.
Luxembourg legislation requires shareholders to register their intention to
vote at least 14 days before the date of the meeting (the “Record Date”). In
accordance with Article 24.6.12 of the Articles, the right of a shareholder to
participate to a general meeting and to exercise the voting rights attached to
its shares are determined by reference to the number of shares held by such
shareholder at midnight on the Record Date. In accordance with article 28 of
the Luxembourg law on transparency obligations of securities issuers dated
11 January 2008 (“Luxembourg Transparency Law“), as long as the notice of
crossing a major shareholding in the Company has not been notified to the
Company in the manner prescribed, the exercise of the voting rights relating
to those shares which exceed the threshold that should have been notified is
suspended. The suspension of the voting rights is lifted when the shareholder
makes the notification provided for in the Luxembourg Transparency Law.
50
Section (g) – Shareholders’ agreements with transfer restrictions
B&M European Value Retail S.A. has no information about any
agreements between shareholders which may result in restrictions on the
transfer of securities or voting rights other than restrictions on transfer
under the lock up arrangements referred to in section (b) above.
Section (h) – Appointment of Board members, amendment of Articles
of Association
The appointment and replacement of Board members and the
amendment of the Articles are governed by Luxembourg Law and the
Articles of Association of the Company (in particular Article 10 and Article
24.6). The Articles of Association are published under the Investors section
on the Company’s website at www.bandmretail.com
Section (i) – Powers of the Board of Directors
The Board of Directors is vested with the broadest powers to take any
action necessary or useful to realise the purposes of the Company with
the exception of the powers reserved to the general meeting of
shareholders by the Luxembourg law on commercial companies dated 10
August 1915 and by the Articles.
In common with the articles of association of other Luxembourg public
limited liability companies, the Articles provide full power to the Board of
Directors to issue shares on a non-pre-emptive basis under certain
conditions. The Board as a matter of policy intends to comply with
pre-emption guidelines supported by the Investment Association and the
National Association of Pension Funds to the extent practical as a
Luxembourg company.
The Board of Directors intends to seek an authorisation of shareholders at
the AGM on 30 July 2015 that the Company may purchase, acquire or
receive B&M European Value Retail S.A.‘s own shares in the Company
representing up to 10% of the issued share capital from time to time of
B&M European Value Retail S.A. on such terms as the Board may decide
in accordance with the law.
Section (j) – Significant agreements or essential business contracts
The Board of Directors is not aware of any significant agreements to which
B&M European Value Retail S.A. is a party and which take effect, alter or
terminate upon a change of control of the Company following a takeover
bid. The Board of Directors has considered essential business contracts
and concluded that there are none other than the Group’s credit and loan
facilities with its banks and fleet finance agreements for HGV’s contain
customary cancellation and repayment provisions upon a change of
control. Employee share incentive schemes also have customary change
of control provisions triggering vesting and exercise on performance
conditions being met or (in the discretion of the Company) being waived.
Section (k) – Agreements with Directors and employees
No agreements exist between B&M European Value Retail S.A. and its
Directors or employees which provide for compensation if Directors or
employees resign or are made redundant without valid reason, or if their
employment ceases because of a takeover bid other than as disclosed in
the Directors’ Remuneration Report on page 40.
Approved by order of the Board
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
27 May 2015
B&M European Value Retail S.A. Annual Report and Accounts 2015Corporate Governance Statement of Director’s responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to
prepare the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the EU and applicable
law and have prepared the Company financial statements in accordance with Luxemburg legal and regulatory requirements regarding the preparation
of annual accounts (“Lux GAAP”).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of their profit or loss for that period. In preparing each of the Group and Company financial statements, the
Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• present the financial statements and policies in a manner that provides relevant, reliable, comparable and understandable information;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• provide additional disclosures when compliance with the specific requirements in IFRSs or in accordance with Lux GAAP are insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the
Company Law. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for preparing the Annual Report in accordance with applicable laws and regulations. Having taken advice from the Audit &
Risk Committee the Directors consider the Annual Report and the financial statements taken as a whole, provides the information necessary to assess
the Group’s performance, business model and strategy and is fair balanced and understandable.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. The
financial statements are published on the Company’s website.
Legislation in Luxembourg governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
•
•
•
•
the consolidated financial statements of B&M European Value Retail S.A. (“Company”) presented in this Annual Report and established in conformity
with International Financial Reporting Standards as adopted in the European Union give a true and fair view of the assets, liabilities, financial position,
cash flows and profits of the Company and the undertakings included within the consolidation taken as a whole;
the annual accounts of the Company presented in this Annual Report and established in conformity with the Luxembourg legal and regulatory
requirements relating to the preparation of annual accounts give a true and fair view of the assets, liabilities, financial position and profits of the
Company;
the Strategic Report includes a fair review of the development and performance of the business and position of the Company and the undertakings
included within the consolidation taken as a whole, together with a description of the principal risks and uncertainties it faces; and
this Annual Report (including the financial statements), taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s performance, business model and strategy.
Approved by order of the Board
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
27 May 2015
51
Financial StatementsCorporate GovernanceStrategic Report Independent Auditor’s report to the shareholders
of B&M European Value Retail S.A.
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of B&M European Value Retail S.A. and its subsidiaries (the “Group”), which
comprise the consolidated statement of financial position as at 28 March 2015 and the consolidated statement of comprehensive income, consolidated
statement of changes in shareholders’ equity, consolidated statement of cash flows for the year then ended and a summary of significant accounting
policies and other explanatory information.
Responsibility of the Board of Director’s for the consolidated financial statements
The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of Directors determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the Réviseur d’entreprises agréé
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the judgement of the “Réviseur d’entreprises agréé”, including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the “Réviseur d’entreprises agréé” considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 28 March 2015,
and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
Report on other legal and regulatory requirements
The Directors’ report, which is the responsibility of the Board of Directors, is consistent with the consolidated financial statements.
The accompanying Corporate Governance Statement on pages 26 to 30, which is the responsibility of the Board of Directors, is consistent with the
consolidated financial statements and includes the information required by the law with respect to the Corporate Governance Statement.
Luxembourg, 1 June 2015
Hugues Wangen
Réviseur d’entreprises agréé
Grant Thornton Lux Audit S.A.
52
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Consolidated statement of comprehensive income
Period ended
Revenue
Cost of sales
Gross profit
Transaction/IPO fees included in administrative expenses
Other administrative expenses
Total administrative expenses
Operating Profit
Share of profits of investments in associates
Profit on ordinary activities before interest and tax
Finance costs
Finance income
Profit/(loss) on ordinary activities before tax
Income tax expense
Profit/(loss) for the period
Attributable to non-controlling interests
Attributable to owners of the parent
Other comprehensive income for the period
Items which may be reclassified to profit and loss:
Exchange differences on retranslation of subsidiary and associate accounts
Actuarial loss on the defined benefit pension scheme
Tax effect of other comprehensive income
Total comprehensive income/(loss) for the period
Attributable to non-controlling interests
Attributable to owners of the parent
Earnings/(loss) per share
Basic earnings/(loss) per share attributable to ordinary equity holders (pence)
Diluted earnings/(loss) per share attributable to ordinary equity holders (pence)
52 weeks
ended 28
March 2015
£’000
55 weeks
ended 29
March 2014
£’000
Note
1,646,824
1,351,236
(1,076,916)
(891,566)
2
569,908
459,670
1, 12
(20,536)
(416,513)
(6,355)
(351,290)
(437,049)
(357,645)
132,859
102,025
11
1,632
269
134,491
102,294
(72,875)
99
(118,526)
1,913
61,715
(14,319)
(21,852)
(5,096)
39,863
1,223
38,640
(19,415)
–
(19,415)
(4,236)
(35)
11
35,603
1,218
34,385
4
–
–
(19,411)
–
(19,411)
3.4
3.4
(1.9)
(1.9)
6
6
9
3
29
10
10
All operations are classified as continuing and new acquisitions as disclosed above. The accompanying accounting policies and notes form an integral
part of these financial statements.
53
Corporate GovernanceFinancial StatementsStrategic Report Consolidated statement of financial position
As at
Assets
Non-current
Goodwill
Intangible assets
Property, plant and equipment
Other non-current financial assets
Investments in associates
Deferred tax asset
Current assets
Cash and cash equivalents
Inventories
Trade and other receivables
Other current financial assets
Total assets
Equity
Share capital
Share premium
Merger reserve
Retained (earnings)/loss
Put/call option reserve
Foreign exchange reserve
Non-controlling interest
Non-current liabilities
Interest bearing loans and borrowings
Finance lease liabilities
Other financial liabilities
Other liabilities
Deferred tax liabilities
Provisions
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Finance lease liabilities
Other financial liabilities
Income tax payable
Provisions
Total liabilities
Total equity and liabilities
28 March
2015
£’000
29 March
2014
£’000
Note
13
13
14
20
11
9
17
15
16
20
23
1
21
25
20
19
9
22
18
21
25
20
22
835,258
99,695
101,823
–
3,822
354
1,040,952
64,943
238,922
64,845
1,145
369,855
807,496
94,307
64,996
1,819
2,093
233
970,944
24,854
170,371
45,952
–
241,177
1,410,807
1,212,121
(100,000)
(2,600,000)
1,979,131
(10,392)
13,855
4,232
(10,655)
(723,829)
(433,758)
(4,918)
(14,219)
(52,381)
(21,199)
(1,430)
(527,905)
(143,595)
–
(1,066)
(642)
(7,940)
(5,830)
(159,073)
(97,222)
(2,527,778)
2,625,000
19,415
–
(4)
–
19,411
(423,930)
–
–
(34,857)
(19,032)
(2,149)
(479,968)
(110,219)
(632,741)
(22)
(1,448)
(160)
(6,974)
(751,564)
(686,978)
(1,231,532)
(1,410,807)
(1,212,121)
The accompanying accounting policies and notes form an integral part of these financial statements. This statement of financial position was approved
by the Board of Directors and authorised for issue on 27 May 2015 and signed on its behalf by:
Simon Arora
Chief Executive Officer
54
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Consolidated statement of changes in shareholders’ equity
Balances on 6 March 2013
Share
capital
£’000
–
Share
premium
£’000
–
Retained
earnings
£’000
–
Merger
reserve
£’000
–
Effect of Group reconstruction
97,222
2,527,778
– (2,625,000)
Profit for the period ended 29 March 2014
Other comprehensive income
Exchange differences on retranslation of subsidiary
Total comprehensive income for the period
–
–
–
–
–
–
(19,415)
–
(19,415)
–
–
–
Balance at 29 March 2014
97,222
2,527,778
(19,415)
(2,625,000)
Reserve balances recognised on acquisition
–
–
–
–
Effect of Group reconstruction
Effect of raising equity during IPO exercise
Dividend payment to owners
Dividend payment to non-controlling interest
Effect of share options
Total for transactions with owners
–
2,778
–
–
–
2,778
–
72,222
–
–
–
72,222
–
–
(9,000)
–
186
645,869
–
–
–
–
(8,814)
645,869
Profit for the period
Other comprehensive income
Exchange differences on retranslation of
subsidiaries and associates
Other items and tax effect
Total comprehensive income for the period
–
–
–
–
–
–
–
–
38,640
–
(19)
38,621
–
–
–
–
Foreign
exchange
reserve
£’000
Put/call
option
reserve
£’000
Non-
controlling
interest
£’000
Total share-
holders’
equity
£’000
–
–
–
4
4
4
–
–
–
–
–
–
–
–
(4,236)
–
(4,236)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,415)
4
(19,411)
(19,411)
(13,855)
9,515
(4,340)
–
–
–
–
–
–
–
–
–
–
–
–
–
(78)
–
(78)
645,869
75,000
(9,000)
(78)
186
711,977
1,223
39,863
–
(5)
(4,236)
(24)
1,218
35,603
Balance at 28 March 2015
100,000 2,600,000
10,392
(1,979,131)
(4,232)
(13,855)
10,655
723,829
The accompanying accounting policies and notes form an integral part of these financial statements.
55
Corporate GovernanceFinancial StatementsStrategic Report Consolidated statement of cash flows
Period ended
Cash flows from operating activities
Cash generated from operations
Fees associated with acquisitions and refinancing
Fees associated with the IPO and associated restructuring
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiaries net of cash received
Settlement of PLTA liability on the acquired balance sheet
Proceeds from sale of property, plant and equipment
Interest received
Net cash flows from investing activities
Cash flows from financing activities
Net (payment)/receipt of bank loans
Net receipt of loan from owners
Receipt from share issue
Interest paid
Dividends paid to non-controlling interest
Dividends paid to owners of the parent
Repayment of finance lease
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents comprise:
Cash at bank and in hand
The accompanying accounting policies and notes form an integral part of these financial statements.
52 weeks
ended 28
March
2015
£’000
152,880
(8,160)
(19,709)
(13,726)
55 weeks
ended 29
March
2014
£’000
114,680
(50,130)
–
(11,428)
111,285
53,122
(35,667)
(248)
(54,356)
(5,465)
2,735
99
(34,150)
(474)
(757,845)
–
318
94
(92,902)
(792,057)
(17,625)
–
75,000
(25,534)
(78)
(9,000)
(1,057)
457,625
334,810
–
(28,394)
–
–
(252)
21,706
763,789
40,089
24,854
64,943
64,943
64,943
24,854
–
24,854
24,854
24,854
Note
24
1,12
1
12
12
17
56
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Notes to the consolidated financial statements
1 General Information and Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting
Standards Board (IASB) as adopted by the European Union.
The Group’s trade is general retail, with trading taking place in the UK and Germany. The Group has been listed on the London Stock Exchange since
June 2014.
The 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 financial statements.
The financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000), except when otherwise indicated.
The consolidated accounts represent the results for the Group for the 52 week period ended 28 March 2015, B&M European Value Retail S.A. is the head
of the Group and there is no consolidation that takes place above the level of this company.
The results of the Group were previously reported as B&M European Value Retail Holdco 1 Limited (UK Holdco 1) for the 55 week period ended 29 March
2014, however, due to a reorganisation (see below) the Group is now headed by B&M European Value Retail S.A. The comparative period was a long
period of account from incorporation of the Group on 6 March 2013 to 29 March 2014.
The principal accounting policies of the Group are set out below.
Reconstruction, refinancing and listing of the Group
On 19 May 2014, B&M European Value Retail S.A. (the “Company”) was incorporated. On 17 June 2014 the Company acquired the entire issued share
capital of B&M European Value Retail 1 S.à r.l. Group (the “Business”) via a share for share exchange with the shareholders of the Business. Following the
share for share exchange, the Company became the ultimate legal parent of the Group. B&M European Value Retail 1 S.à r.l. is the parent company of UK
Holdco 1 referred to above.
The share for share transaction is deemed outside the scope of IFRS 3 (revised 2008) and as such is not considered a business combination as prior to
the transaction the Company was not considered a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3 B7-B12 due
to the Company being essentially a shell company that had no processes or capability for outputs (IFRS 3 B7).
The share for share transaction has been accounted for as a Group reconstruction (following the principles of merger accounting). As such comparative
information has been presented on a pro-forma basis as though the Group had been in existence throughout the current and prior periods.
Accordingly;
• The assets and liabilities of the Business and its subsidiaries are recognised in the financial information at the pre-combination carrying amounts,
without restatement to fair value.
• The retained losses and other equity balances recognised in the financial information reflect the retained losses and other equity balances of the
business recorded before the share for share exchange.
• The equity structure, however, reflects the equity structure of the Company, including those balances which arose due to the equity instruments
issued under the share for share exchange.
• The resulting difference has been recognised as a component of equity, being the merger accounting reserve.
• Because, immediately prior to the reconstruction, the equity balances in the Business were held as debt, this debt has remained within the restated
balance sheet as a liability and has been reclassed upon redemption which occurred as part of the share for share exchange. The net effect of this is
a decrease in the merger reserve on the date of the reconstruction.
Immediately after the reconstruction, on the same date, the Group listed on the London Stock Exchange via an IPO which valued the company at £2.7bn
and raised £75.0m cash less £19.7m of fees (which were expensed to profit and loss in the period) for the Group itself.
As part of this process a refinancing also took place, with terms agreed on new banking facilities until June 2019 and June 2020. The refinancing incurred
£7.3m of fees, which are being amortised over the length of the term. £28.8m of previously unamortised fees, relating to the refinancing that took place
in March 2013, were written off to profit and loss.
57
Corporate GovernanceFinancial StatementsStrategic Report 1 General Information and Basis of Preparation continued
Overall the key steps in the processes were:
1. B&M European Value Retail S.A. was incorporated with 972.2 million ordinary shares of 10p each.
2. These were exchanged for the preferred equity certificates, preference shares and ordinary share capital of B&M European Value Retail 1 S.à r.l. – the
previous Group parent.
3. The Group reconstruction resulted in the Group’s share capital, preferred equity certificates of £556.1m, with accrued interest of £87.8m, and
preference share balances being replaced by the £97.2m share capital, and £2,527.8m of share premium – being the technical valuation of the
contribution in kind made by the prior owners via their instruments held in B&M European Value Retail 1 S.à r.l.
4. This resulted in the recognition of a merger reserve of £1,979.1m.
5. No cash was exchanged as part of the above steps.
6. A further 27.8million ordinary shares of 10p each were released as part of the IPO. These were sold at £2.70 each, leading to the receipt of £75million
and the recognition of £72.2m of share premium.
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 30 March 2014 to 28 March 2015. 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 arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• 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
The Group has in place significant financing facilities which are due for renewal in 2019 and 2020, and operations which are cash generative. The
directors have considered this and the company’s current forecasts, and determined that it is appropriate to continue to use the going concern basis for
production of these financial statements.
Turnover
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured,
regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable.
Revenue is the total amount receivable by the Group for goods supplied, in the ordinary course of business excluding VAT and trade discounts, returns
and relevant vouchers and offers. Store retail turnover is recognised at the initial point of sale of goods to customers, when the risks and rewards of the
ownership of the goods have been transferred to the buyer.
Other administrative expenses
Administrative expenses contain all running costs of the business, except those relating to inventory (which are expensed through cost of sales), tax,
interest and other comprehensive income.
Elements which are unusual and significant have been separated into a separate line item.
58
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 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 that are expected to benefit from the
combination.
Goodwill is tested for impairment at each year end and at any time where there is any indication that goodwill 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 board is responsible for assessing the performance of the business for
the purpose of making decisions about resources to be allocated.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at the acquisition date fair value. Acquisition-related costs are expensed depending on their nature with costs of raising finance
amortised over the term of the relevant element of finance provided and the remainder expensed when incurred.
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 each of the Group’s cash-generating units or group of cash-generating units that
are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Brands
Brands acquired as part of a business combination are initially recognised at fair value and subsequently 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 written down accordingly, and charged to
administration expenses.
Brands are considered to have an indefinite life on the basis that they form part of the cash generating units within the company which will continue in
operation indefinitely, with no foreseeable limit to the period over which they are expected to generate net cash inflows.
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
4 years
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 profit and loss.
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.
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.
59
Corporate GovernanceFinancial StatementsStrategic Report
1 General Information and Basis of Preparation continued
Depreciation
Depreciation is provided on all other items of property, plant and equipment and the effect is to write off the carrying value of items by equal instalments
over their expected useful economic lives. It is applied at the following rates.
Leasehold buildings
Freehold buildings
Plant, fixtures and equipment
Fixtures, fittings and vehicles
-
-
-
-
Life of lease
2% straight line
10% – 25% straight line
20% – 25% 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.
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. Acquired investments in associates are also
subject to acquisition method accounting. However any goodwill or fair value adjustment attributable to the share in the associate 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. Changes
resulting from the profit or loss generated by the associate are reported in “share of profits of associates” in the consolidated income statement 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, including any unsecured
receivables, 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 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.
An asset’s recoverable amount is the higher of an asset’s or cash-generating units (CGU) 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.
The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group’s CGUs to which the
individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement 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.
60
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued
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 income statement, except for impairment of goodwill which is not reversed.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The
arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a
right to use the asset or assets even if that right is not explicitly specified in an arrangement.
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards
related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset, or, if
lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is
recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit and loss over the
period of the lease.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the
end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
All other leases are regarded as operating leases and the payments made under them are charged to the statement of comprehensive income on a
straight line basis over the lease term. Lease incentives are spread over the term of the lease.
Onerous leases
The Group carries a property provision which is recognised on specific sites within the Group’s leasehold property portfolio where an exit can be
reasonably expected to occur, and a lease is considered onerous.
A lease is considered onerous when the economic benefits of occupying the leased properties are less than the obligations payable under the lease.
The amount held covers any costs expected to accrue before the end of the contract, netted against any income, as well as a portion related to any
dilapidation expense which may arise.
Inventories
Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Net realisable
value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs to sell.
Share options
The Group operates share option schemes, with the first such scheme commencing in August 2014.
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 profit and loss 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.
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 income statement, 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, respectively.
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.
61
Corporate GovernanceFinancial StatementsStrategic Report 1 General Information and Basis of Preparation continued
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 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 assets
Initial recognition and measurement
The classification of financial instruments is determined at initial recognition. The Group has the following types of financial assets; Trade and other receivables
and cash which are classified within the IAS 39 definition of loans and receivables and derivative contracts which are classified within the IAS 39 definition of fair
value through profit and loss. All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial
assets are initially recognised at fair value plus transaction costs other than for financial assets carried at fair value through profit or loss.
The Group does not have any held-to-maturity or available-for-sale financial assets.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as described below:
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial
measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment.
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 and the losses arising from impairment are recognised in profit and loss.
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 IAS 39. 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 whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A
financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more events that
has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 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.
62
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
Gains and losses are recognised in the income statement 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.
Derivative financial instruments
The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign currency
risk, commodity price risk and interest rate risk. Such derivative financial instruments are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, less bank overdrafts.
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.
“Merger reserve” representing the reserve created during the reorganisation of the Group.
“Retained earnings reserve” represents retained profits.
“Put/call option reserve” representing the initial valuation of the put/call option held by the company over the non-controlling interest of J.A. Woll
Handels GmbH (Jawoll), see note 12.
“Foreign exchange reserve’’ represents the cumulative differences arising in retranslation of the subsidiary and associate results.
“Non-controlling interest” representing the portion of the equity which belongs to the non-controlling interest in the Group’s subsidiaries.
Foreign currency translation
The 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
• Meltore Ltd
• Opus Homewares Ltd
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 European Value Retail Germany GmbH (Germany Holdco)
• J.A. Woll Handels GmbH (Jawoll)
• Jawoll Vertriebs GmbH
• Jawoll Sonderposten GmbH
• Jawoll Sonderposten Vertriebs GmbH
• Stern Sonderposten Vertriebs GmbH
• Stern Handels GmbH
• BestFlora GmbH
63
Corporate GovernanceFinancial StatementsStrategic Report 1 General Information and Basis of Preparation continued
Foreign currency translation continued
The Group companies whose functional currency is the Euro have been consolidated into the Group via retranslation of their accounts in line with IAS 21
The Effects of Changes in Foreign Exchange Rates. The assets and liabilities are translated into pounds sterling at the year 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.
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. Existing circumstances and assumptions about
future developments, however, 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.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less
costs to sell and its value in use.
The fair value less costs to sell calculation is based on available data from binding sales transactions, conducted at arm’s length for similar assets or
observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The
cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or
significant future investments that will enhance the performance of the CGU being tested.
The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and
the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different CGUs, including a
sensitivity analysis, are disclosed and further explained in note 13.
Investments in Associates
Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the Group, has been considered 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, Multi-lines have their own independent management who operate without direct oversight of Group management on a day to
day basis. 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 hence it
has been treated as such within these consolidated accounts.
64
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued Recognition of intangible assets on acquisition
On acquisition of SBR Group in March 2013, a brand intangible asset was identified with indefinite life.
On acquisition of Jawoll (through Germany Holdco) in April 2014, brand intangible assets were identified with indefinite lives.
These was the only identifiable assets recognised on these acquisitions that were considered to be likely to have a value above a set materiality
threshold.
The indefinite life was considered appropriate because of several factors, chief amongst which was the growth potential of the B&M and Jawoll
businesses, which are considered by management to be long-term phenomenon.
Transaction and IPO costs
Transaction costs have been fully expensed through the P&L. See note 12.
Put/call options on Jawoll non-controlling interest
The purchase agreement for Jawoll included call and put options over the shares not purchased by the Group, representing 20% of Jawoll. The options
are arranged such that it is considered likely that either the call or put option will be taken at the exercise date in 2019.
The exercise price of the options contain a variable element and as such the risk and rewards of the options are considered to remain with the non-
controlling interest. The purchase of the non-controlling interest will be recognised upon exercise of one of the options.
A financial liability has been recognised carried at amortised cost to represent the expected exercise price, with the corresponding debit entry to the put/
call option reserve. Management have estimated the future measurement inputs in arriving at this value, using knowledge of current performance,
expected growth and planned strategy. Any subsequent movements in the liability will be recognised in profit or loss.
Standards and Interpretations not yet applied by the Group
New and amended standards and interpretations adopted by the Group
The following standards, amendments to standards and new interpretations are mandatory for the first time for the financial period beginning
1 April 2014:
•
•
•
•
•
•
•
•
IAS 27, “Separate financial statements” (revised 2011). The application of this standard has no impact for the Group.
IAS 28, “Associates and joint ventures” (revised 2011). The application of this standard has no impact for the Group.
IAS 32 (amendments), “Financial instruments: presentation – offsetting financial assets and financial liabilities”. The application of this standard has
no impact for the Group.
IAS 39 (amendments), “Financial instruments: recognition and measurement”. The application of this standard has no impact for the Group.
IFRS 10, “Consolidated financial statements”. Under IFRS 10, subsidiaries are all entities including structured entities over which the Group has control.
The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the
entity, and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control ceases. The Group has reassessed the control over its investees in the
light of the provisions of IFRS 10 and concluded that no change was necessary. The application of this standard has no significant impact for the
Group.
IFRS 11, “Joint arrangements”. Under IFRS 11, investments in joint arrangements are classified either as joint operations or joint ventures, depending on
the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. The Group has assessed the nature
of its joint arrangements and determined that all are joint ventures. The Group’s joint arrangements which were previously included by proportionate
consolidation, are now classified as Joint Ventures under IFRS 11 and are therefore accounted for using the equity method in accordance with the
provisions of the amended IAS 28, “Associates and Joint Ventures”. The application of this standard has no impact for the Group.
IFRS 12, “Disclosures of interests in other entities” includes the disclosure requirements for all forms of interests in other entities including joint
arrangements, associates, and unconsolidated structured entities. The Group has made the required disclosures in these consolidated financial
statements.
IFRIC 21, “Levies”. This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of
a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The
interpretation addresses what the obligating event is that gives rise to the payment of a levy and when a liability should be recognised. This
interpretation was endorsed on 17 June 2014 and is applicable to the annual period beginning on or after this date. This will therefore be considered
by the Group for its affect for the period starting 29 March 2015.
65
Corporate GovernanceFinancial StatementsStrategic Report 1 General Information and Basis of Preparation continued
Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group
The following new standards and amendments have been issued by the IASB or the IFRIC but are not effective for the Group’s accounting period
beginning on 1 April 2014. The Group has yet to assess the impact of the new standards and amendments.
•
•
“Disclosure Initiative (Amendments to IAS 1)” – effective from 1 January 2016 to encourage companies to apply professional judgement in determining
the information to disclose in their financial statements. These amendments have not yet been endorsed by the European Union.
IAS 19 revised, “Defined Benefit Plans: Employee Contributions” – effective from 1 July 2014. These amendments have been endorsed by the European
Union in January 2015 with effective date 1 February 2015.
• Amendments to IAS 16, “Property, plant and equipment” and IAS 38,”Intangible assets” on depreciation and amortisation and IAS 16, “Property, plant
and equipment” and IAS 41, “Agriculture” related to accounting for bearer plants – effective from 1 January 2016. In the first amendment, the IASB has
clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an
activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The
IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits
embodied in an intangible asset. However, past the headline is a rebuttable presumption, and revenue-based amortisation is permitted when it can
be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. These amendments have
not yet been endorsed by the European Union.
• Amendment to IAS 27, “Separate financial statements”, on equity method on separate financial statements – effective from 1 January 2016. These
•
amendments have not yet been endorsed by the European Union.
“Investments Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)” – effective from 1 January 2016. These
amendments have not yet been endorsed by the European Union.
• Annual improvements 2010-2012 and 2011-2013 – effective from 1 July 2014. These amendments have been endorsed by the European Union in
January 2015 with effective date 1 February 2015.
•
•
• Annual improvements 2012-2014 – effective from 1 January 2016. These amendments have not yet been endorsed by the European Union.
•
IFRS 9, “Financial instruments” (and related amendment on general hedge accounting) – effective from 1 January 2018. The complete version of IFRS 9
replaces most of the guidance in IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s
business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at
fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI. There is now a new expected credit
losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and
measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value, through
profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for
risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. This standard
has not yet been endorsed by the European Union.
IFRS 14, “Regulatory deferral accounts” – effective from 1 January 2016. This standard has not yet been endorsed by the European Union.
IFRS 15, This is the converged standard on revenue recognition. It replaces IAS 11, ‘Construction contracts’, IAS 18,’Revenue’ and related interpretations.
Revenue is recognised when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of
and obtain the benefits from the good or service. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. An entity recognises revenue in accordance with that core principle by applying the following steps:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
IFRS 15 also includes a cohesive set of disclosure requirements that will result in an entity providing users of financial statements with comprehensive
information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 will
be applicable for reporting periods beginning on or after 1 January 2017. This standard has not yet been endorsed by the European Union.
• Amendments to IFRS 10, “Consolidated financial statements” and IAS 28, “Investments in associates and joint ventures”, on investment entities
•
applying the consolidation exception – effective from 1 January 2016. This standard has not yet been endorsed by the European Union.
66
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 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.
For management purposes, the Group is organised into two reportable segments, being the UK retail segment and the German retail segment (since
acquisition of Jawoll on April 30 2014).
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.
The Group’s financing (including finance costs and finance income) and income taxes are managed on a Group basis. Due to this, all income taxes were
previously allocated to corporate services expenses. However, to aid comparison between retail segments in different tax jurisdictions, an allocation has
been made based upon the underlying company tax rates in the appropriate country, and this has also been applied to the prior year figures.
Further, additional segment specific assets, the largest of which being those related to the brands, have now been allocated within the total assets
category, whereas previously they were stated as corporate assets. This reclassification has also been applied to the comparative figures, which are
therefore stated on a consistent basis with the current year figures.
52 week period to 28 March 2015
Revenue
Gross profit
EBITDA
Interest received
Interest expense
Income tax expense
Segment profit/(loss)
Total assets
Total liabilities
Other disclosures:
Capital expenditure (including intangible)
Depreciation and amortisation
Share of profit of associates
Investment in associates accounted for by the equity method
55 week period to 29 March 2014
Revenue
Gross profit
EBITDA
Interest received
Interest expense
Income tax expense
Segment profit/(loss)
Total assets
Total liabilities
Other disclosures:
Capital expenditure (including intangible)
Depreciation and amortisation
Share of profit of associates
Investment in associates accounted for by the equity method
UK
Retail
£’000
Germany
Retail
£’000
1,526,181
525,497
163,166
80
(112)
(31,558)
118,717
120,643
44,411
10,659
19
(181)
(2,305)
5,379
Corporate
£’000
–
–
(23,660)
–
(72,582)
12,011
(84,233)
Total
£’000
1,646,824
569,908
150,165
99
(72,875)
(21,852)
39,863
1,312,280
(187,665)
92,981
(19,763)
5,546
(479,550)
1,410,807
(686,978)
(34,246)
(12,859)
–
–
(1,669)
(2,813)
–
–
–
(2)
1,632
3,822
(35,915)
(15,674)
1,632
3,822
UK
Retail
£’000
Germany
Retail
£’000
1,351,236
459,670
126,287
93
(182)
(26,642)
89,194
1,206,489
(148,412)
(34,602)
(10,362)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Corporate
£’000
–
–
(13,627)
1,820
(118,344)
21,546
(108,609)
Total
£’000
1,351,236
459,670
112,660
1,913
(118,526)
(5,096)
(19,415)
5,632
(1,083,120)
1,212,121
(1,231,532)
(22)
(4)
269
2,093
(34,624)
(10,366)
269
2,093
67
Corporate GovernanceFinancial StatementsStrategic Report 3 Adjusted profit and loss statement
Period ended
Revenue
Cost of sales
Gross profit
Transaction/IPO fees included in administrative expenses
Other administrative expenses
Add back depreciation & amortisation
Share of profits of investments in associates
52 weeks
ended
28 March
2015
£’000
1,646,824
(1,076,916)
569,908
(20,536)
(416,513)
15,674
1,632
Adjusting
items
(Note 4)
£’000
Adjusted 52
weeks ended
28 March
2015
£’000
55 weeks
ended
29 March
2014
£’000
Adjusting
items
(Note 4)
£’000
Adjusted 3
weeks ended
30 March
2013
£’000
Adjusted 52
weeks ended
29 March
2014
£’000
–
–
–
1,646,824
1,351,236
(1,076,916)
(891,566)
569,908
459,670
–
–
–
79,256
1,271,980
(51,594)
(839,972)
27,662
432,008
(20,536)
(3,567)
–
–
–
(412,946)
15,674
1,632
(6,355)
(351,290)
10,366
269
(6,355)
(18,638)
–
–
–
(21,001)
617
–
–
(311,651)
9,749
269
EBITDA
150,165
(24,103)
174,268
112,660
(24,993)
7,278
130,375
Depreciation & amortisation
(15,674)
–
(15,674)
(10,366)
–
(617)
(9,749)
Profit on ordinary activities before interest and tax
134,491
(24,103)
158,594
102,294
(24,993)
6,661
120,626
Finance costs
Finance income
(72,875)
99
(49,173)
–
(23,702)
99
(118,526)
1,913
(82,415)
1,819
(2,211)
58
(33,900)
36
Profit/(loss) on ordinary activities before tax
61,715
(73,276)
134,991
(14,319)
(105,589)
4,508
86,762
Income tax expense
(21,852)
9,064
(30,916)
(5,096)
13,602
(1,053)
(17,645)
Profit/(loss) for the period
Attributable to non-controlling interests
Attributable to owners of the parent
39,863
(64,212)
104,075
1,223
38,640
(18)
(64,194)
1,241
102,834
(19,415)
–
(19,415)
(91,987)
–
(91,987)
3,455
–
3,455
69,117
–
69,117
Other comprehensive income for the period
Items which may be reclassified to profit and loss:
Exchange differences on retranslation of subsidiary and
associate accounts
Actuarial loss on the defined benefit pension scheme
Tax effect of other comprehensive income
(4,236)
(35)
11
(4,236)
(35)
11
–
–
–
Total comprehensive income/(loss) for the period
35,603
(68,472)
104,075
Attributable to non-controlling interests
Attributable to owners of the parent
1,218
34,385
(23)
(68,449)
1,241
102,834
4
–
–
4
–
–
(19,411)
–
(19,411)
(91,983)
–
(91,983)
Earnings/(loss) per share
Basic earnings/(loss) per share attributable to ordinary equity
holders (pence)
Diluted earnings/(loss) per share attributable to ordinary equity
holders (pence)
3.4
3.4
(6.8)
(6.8)
10.3
10.3
(1.9)
(1.9)
(9.2)
(9.2)
–
–
–
3,455
–
3,455
0.3
0.3
–
–
–
69,117
–
69,117
6.9
6.9
68
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 4 Adjusting Items
Period ended
Transaction/IPO fees included in administrative expenses
Fees related to the IPO
Fees related to the acquisition of the German entities
Fees related to the acquisition of the UK entities
Other administrative expenses
Fair value adjustments to foreign exchange and fuel derivatives
Professional fees associated with the prior financing structure
New store pre-opening costs
HMRC excise duty dispute
Long-term incentive plan
Foreign exchange movements on intercompany balances
Property provision and compulsory purchase order income
Other items which management considered one off in nature
Finance costs and income
Interest on loans from owners
One off costs incurred on raising debt finance
Fair value adjustments on interest swap derivatives
Unwinding of the call/put option held over the minority interest of Jawoll
Income tax expense
Tax adjustment relating to items adjusting administrative costs
Tax adjustment relating to items adjusting finance costs
Other comprehensive income
Exchange differences relating to retranslation of Group entities
Actuarial change in the defined benefit pension liability
Tax adjustment relating to the pension liability
52 weeks
ended 28
March
2015
£’000
(19,709)
(827)
–
(20,536)
2,270
(970)
(5,272)
–
–
(2,840)
3,148
97
(3,567)
52 weeks
ended
29 March
2014
£’000
–
–
–
–
(1,872)
(5,628)
(3,813)
(3,560)
(1,381)
–
(722)
(684)
55 weeks
ended
29 March
2014
£’000
–
–
(6,355)
(6,355)
(2,034)
(6,039)
(4,168)
(3,560)
(1,381)
–
(772)
(684)
(17,660)
(18,638)
(16,170)
(28,815)
(2,214)
(1,974)
(67,295)
–
1,819
–
(71,865)
(10,550)
1,819
–
(49,173)
(65,476)
(80,596)
557
8,507
9,064
3,544
7,162
10,706
3,099
10,503
13,602
(4,236)
(35)
11
(4,260)
5
–
–
5
4
–
–
4
Adjusting items are exceptional and non-trading items considered by the directors to not be incurred in the usual underlying running of the trade of the
Group. The directors consider the adjusted figures to be a more accurate reflection of the underlying business performance of the Group and believe
that this measure provides additional useful information for investors on the Group’s performance, as well as being consistent with how business
performance is monitored internally.
Adjusting items include expenses relating to new acquisitions, special projects and restructuring expenses (such as IPO, refinancing, maintaining
ownership structures), pre-opening new store costs, provisions for onerous leases, regulatory investigations or fines, dilapidation provisions,
compulsory purchase order income, foreign exchange gains/(losses), fair value gains/(losses) on derivatives, other comprehensive income items,
unwinding interest on items not directly related to the trade of the business, impairment on non-financial assets, profit/(loss) on fixed assets disposal, the
expired management LTIP bonus scheme, and the estimated tax effect of these items.
Adjusted EBITDA and related measures are not a measurement 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.
69
Corporate GovernanceFinancial StatementsStrategic Report 5 Operating profit
The following items have been charged in arriving at operating profit:
Period ended
Auditor’s remuneration
Payments to auditors in respect of non-audit services:
Audit related assurance services
Taxation advisory services
Other assurance services
Inventories:
Cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment:
Owned assets
Leased assets
Amortisation (included within administration costs)
Operating lease rentals
(Profit)/loss on sale of property, plant and equipment
Exchange losses
52 weeks
ended 28
March
2015
£’000
55 weeks
ended
29 March
2014
£’000
348
–
48
477
158
100
10
–
1,079,873
902,189
14,096
751
827
74,376
(70)
(2,844)
9,965
197
204
63,774
72
83
6 Finance costs and finance income
Finance costs include all interest related income and expenses. The following amounts have been included in the statement of comprehensive income
line for each reporting period presented:
52 weeks to
28 March
2015
£’000
55 weeks to
29 March
2014
£’000
(21,694)
(1,844)
(164)
(32,541)
(3,567)
(3)
(23,702)
(36,111)
(16,170)
(28,815)
(2,214)
(1,974)
(71,865)
(10,550)
–
–
(72,875)
(118,526)
52 weeks to
28 March
2015
£’000
55 weeks to
29 March
2014
£’000
99
–
99
94
1,819
1,913
Period ended
Interest on debt and borrowings
Ongoing amortised finance fees
Finance charges payable under finance leases and hire purchase contracts
Total adjusted interest expense
Interest on loans from owners
One-off costs incurred on raising debt finance
Loss on financial instruments at fair value through profit or loss
Unwinding of the call/put option held over the minority interest of Jawoll
Total finance costs
Period ended
Interest income on loans and bank accounts
Gain on financial instruments at fair value through profit or loss
Total finance income
70
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 7 Employee Remuneration
Expense recognised for employee benefits is analysed below:
Period ended
Wages and salaries
Social security costs
Pensions – defined contribution plans
52 weeks to
28 March
2015
£’000
186,079
10,914
664
55 weeks to
29 March
2014
£’000
152,232
6,529
385
197,657
159,146
There are £47k of defined contribution pension liabilities held by the Group at the period end (2014: £nil).
As a result of the acquisition of Jawoll, the Group inherited one employee who is a member of a defined benefit scheme (2014: no employees).
The liability held on the balance sheet at the year end was £276k (2014: £nil).
The scheme is considered immaterial to the Group and the effect of the year end actuarial valuation can be seen within other comprehensive income.
The average monthly number of persons employed by the Group during the period was:
Period ended
Sales staff
Administration
8 Key Management Remuneration
Key management personnel and Directors’ remuneration includes the following:
Period ended
Directors’ remuneration
Short term employee benefits
Benefits accrued under the share option scheme
Long term incentive plan
Key management expense (includes Directors’ remuneration)
Short term employee benefits
Benefits accrued under the share option scheme
Long term incentive plan
Amounts in respect of the highest paid director emoluments
Short term employee benefits
Benefits accrued under the share option scheme
Long term incentive plan
52 weeks to
28 March
2015
55 weeks to
29 March
2014
18,910
552
19,462
14,986
269
15,255
52 weeks to
28 March
2015
£’000
55 weeks to
29 March
2014
£’000
833
22
–
855
2,122
22
–
2,144
376
22
–
398
1,084
–
750
1,834
2,649
–
1,707
4,356
174
–
750
924
The emoluments disclosed above are of the directors and key management personnel who have served as a director within any of the Group
companies.
71
Corporate GovernanceFinancial StatementsStrategic Report 9 Taxation
The relationship between the expected tax expense based on the standard rate of corporation tax in the UK of 21% (2014: 23%) and the tax expense
actually recognised in the statement of comprehensive income can be reconciled as follows:
Period ended
Current tax expense
Deferred tax charge
Total tax expense
Result for the year before tax
Expected tax credit at the standard tax rate
Effect of:
Expenses not deductible for tax purposes
Foreign operation taxed at local rate
Changes in the rate of corporation tax
Adjustment in respect of prior years
Non-deductible finance charges
Other
Actual tax expense
Deferred taxation
Accelerated tax depreciation
Lease incentive rent adjustment
Relating to intangible brand asset
Fair valuing of assets and liabilities (asset)
Fair valuing of assets and liabilities (liability)
Movement in provision
Relating to share options
Other temporary differences (asset)
Other temporary differences (liability)
Net deferred tax liability
Total deferred tax asset
Total deferred tax liability
Total deferred tax expense
52 weeks to
28 March
2015
£’000
55 weeks to
29 March
2014
£’000
20,667
1,185
21,852
4,308
788
5,096
61,715
(14,319)
12,960
(3,293)
5,891
964
(33)
128
1,926
16
21,852
1,330
(41)
(765)
–
7,865
–
5,096
Statement of
financial position
Statement of
comprehensive income
2015
£’000
(913)
–
(19,813)
134
(164)
104
37
79
(309)
2014
£’000
214
–
(18,740)
–
–
–
–
19
(292)
(20,845)
(18,799)
354
(21,199)
–
233
(19,032)
–
2015
£’000
(1,127)
–
–
79
(164)
9
37
(19)
–
–
–
–
(1,185)
2014
£’000
804
(1,979)
937
–
134
(747)
–
19
44
–
–
–
(788)
There was a tax effect of £11k gain in other comprehensive income relating to the loss recorded on the defined benefit pension (2014: no tax effect in
other comprehensive income).
Note the movement in the deferred tax balance sheet position is not fully recognised in the statement of comprehensive income because of the purchase
of Jawoll, and the incorporation of their deferred tax balances.
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.
72
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 10 Earnings/(loss) per share
Basic earnings/(loss) 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.
As the Group undertook a Group reconstruction in June 2014, the number of shares in the prior periods has been adjusted to match the post-
restructuring position such that the figures remain comparable.
Diluted earnings/(loss) 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 basic and diluted earnings/(loss) per share are calculated on the same basis except using the 52-week adjusted profit or loss attributable to
the equity holders of the parent.
There are no dilutive potential ordinary shares for the period ended 29 March 2014. There was a share option scheme put in place in August 2014 which
has a dilutive effect on the 28 March 2015 figures.
The following reflects the income and share data used in the basic and diluted earnings/(loss) per share computations:
Period ended
Profit/(loss) for the period attributable to ordinary equity holders of the Group
Adjusted (52-week) profit/(loss) for the period attributable to ordinary equity holders of the Group
Weighted average number of ordinary shares for basic earnings/(loss) per share
Effect of dilution:
Employee share options
Weighted average number of ordinary shares adjusted for the effect of dilution
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
11
Investments in associates
Period ended
Cost and net book value
Carrying value at the start of the period
Investments acquired
Share of profits in associates
Effect of foreign exchange on translation
Carrying value at the end of the period
28 March
2015
£’000
34,385
102,834
29 March
2014
£’000
(19,411)
69,117
Thousands
Thousands
1,000,000
1,000,000
521
–
1,000,521
1,000,000
Pence
Pence
3.4
3.4
10.3
10.3
(1.9)
(1.9)
6.9
6.9
28 March
2015
£’000
29 March
2014
£’000
2,093
–
1,632
97
3,822
–
1,824
269
–
2,093
The Group has a 50% interest in Multi-lines International Company Ltd, a company incorporated in Hong Kong. The principal activity of the company is
purchase and sale of goods. The Group also holds 40% of the ordinary share capital of Home Focus Group Ltd, a company incorporated in Republic of
Ireland and whose principal activity is retail sales.
73
Corporate GovernanceFinancial StatementsStrategic Report Investments in associates continued
11
No dividends have been received from either entity in 2015 (2014: £nil). Neither entity has discontinued operations or other comprehensive income,
except that on consolidation both entities have a foreign exchange translation difference.
Period ended
Multi-lines
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Revenue
Profit
Home Focus Group
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Revenue
Profit
28 March
2015
£’000
29 March
2014
£’000
1,000
21,176
–
(14,296)
7,880
316
18,354
–
(13,807)
4,863
71,341
2,435
62,895
1,642
292
4,040
–
(2,542)
1,790
157
4,685
(41)
(2,771)
2,030
13,677
132
13,463
(7)
The movement in the valuation of the investment in both entities also reflects an adjustment in respect of prior years.
12 Business combinations
On 30 April 2014 the Group completed the acquisition of J.A. Woll Handels GmbH (Jawoll) through B&M European Value Retail Germany GmbH (Germany
Holdco). Jawoll is a discount retailer incorporated within Germany.
The acquisition has been accounted for via the acquisition method of accounting.
The Group purchased 80% of the share capital for a cash consideration of €80,182k, funded by the Group’s existing banking facilities.
The purchase agreement also included call and put options over the remaining 20% exercisable in 2019. Per the discussion in note 1, the risks and
rewards of the exercise price remain with the non-controlling interest, and therefore the non-controlling interest is recognised below. The put/call options
have then been recognised on acquisition as a liability based upon the discounted estimated price of the options, with the corresponding debit
recognised in the put/call option reserve.
The valuation of the put/call option on the purchase date was £13,855k.
The fair values of the identifiable assets and liabilities of Jawoll on the date of the acquisition were valued via a PPA exercise with each material area
addressed independently. The non-controlling interest was calculated at 20% of the fair value of assets to which the non-controlling interest was held.
74
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued The fair values held by Jawoll on the date of acquisition were as follows:
Assets
Property, plant and equipment
Brand assets
Other intangible assets
Inventories
Receivables and other assets
Cash
Total assets
Liabilities
Finance lease liabilities
Payables and accruals
Bank overdraft
Corporation tax creditor
Dilapidation provision
Deferred tax liability
Total liabilities
Total fair value of assets
Pre-existing non-controlling interest in Jawoll’s own accounts
Non-controlling interest in Jawoll’s net assets
Total non-controlling interest
Total fair value of assets acquired
Total consideration (made in cash)
Goodwill asset recognised
£’000
20,954
4,901
1,779
33,165
3,933
11,686
76,418
(7,824)
(22,123)
(146)
(845)
(173)
(1,008)
(32,119)
44,299
(433)
(9,082)
(9,515)
34,784
66,042
31,258
None of the receivables recognised were considered irrecoverable at the acquisition date.
Fees of £827k were incurred during the acquisition. These have been expensed through the profit and loss in the period.
Included in the creditors balance is a liability of £5.7m relating to a profit & loss transfer agreement (“PLTA”). As part of the acquisition Jawoll Group
performed a necessary reorganisation in order to separate the businesses to be acquired and those not to be acquired. This resulted in a profit & loss
transfer agreement claim which Jawoll agreed to meet on behalf of those subsidiaries to which it applied.
This was therefore expensed on the pre-acquisition profit & loss account, but at the date of the acquisition the liability had not been settled. This resulted
in the liability being present on the acquisition balance sheet, as well as a higher than usual cash balance.
The liability was settled shortly after acquisition, and appears on the cashflow statement at a different value due to being translated at the period
average rate instead of the acquisition date rate at which it is included above.
The goodwill largely relates to the growth potential of the business with smaller elements representing the workforce and current location of the stores.
None of the elements which make up goodwill can, or are not material enough to, be recognised as a separate intangible asset.
The effect the acquisition has had on the P&L can be seen in the segmental note (note 2) as the Germany Retail segment comprises the whole of Jawoll.
Had the company been bought at the start of the year it would have contributed an estimated extra £14.4m to revenue and £2.1m to operating profit
(figures under German GAAP).
75
Corporate GovernanceFinancial StatementsStrategic Report 13 Intangible assets
Cost or valuation
Opening values
Acquired via purchase of SBR Europe
Additions
At 29 March 2014
Acquired via purchase of Jawoll
Additions
Effect of retranslation
At 28 March 2015
Accumulated amortisation / impairment
Opening values
Charge for the year
At 29 March 2014
Charge for the year
Effect of retranslation
At 28 March 2015
Net book value at 28 March 2015
Net book value at 29 March 2014
Goodwill
£’000
Software
£’000
Brands
£’000
Other
£’000
Total
£’000
–
807,496
–
807,496
31,258
–
(3,496)
–
337
474
811
357
248
(44)
–
93,700
–
93,700
4,901
–
(548)
–
–
–
–
1,422
–
(159)
–
901,533
474
902,007
37,938
248
(4,247)
835,258
1,372
98,053
1,263
935,946
–
–
–
–
–
–
835,258
807,496
–
204
204
391
(9)
586
786
607
–
–
–
–
–
–
–
–
–
436
(29)
407
–
204
204
827
(38)
993
98,053
93,700
856
934,953
–
901,803
Impairment Review of Goodwill and Brand assets
Assets arising upon the acquisition of B&M European Value Retail 2 S.à r.l. (SBR Europe)
A goodwill asset of £807,496k and a brand asset of £93,700k arose as a result of the business combination undertaken as at 6 March 2013, the
acquisition of B&M European Value Retail 2 S.à r.l. (SBR Europe) ultimately by B&M European Value Retail Holdco 1 Limited (formerly CDR Bounty Holdco 1
Limited).
The brand intangible asset was identified with indefinite life. This was the only identifiable asset recognised that was considered to be likely to have a
value above a set materiality threshold. The indefinite life was considered appropriate because of several factors, chief amongst which was that the
growth potential of the B&M business was considered by management to be a long-term phenomenon.
The goodwill and brand have been allocated to two groups of cash generating units (CGUs), being the two fascias that the Group operates within its
retail segment (bargain stores and home stores).
The allocation split is as follows:
Goodwill
Brand
Bargain Stores
£’000
Home Stores
£’000
Total
£’000
439,438
50,991
368,058
42,709
807,496
93,700
490,429
410,767
901,196
The Group has performed impairment tests as at each period end and at the acquisition date. The impairment test involves assessing the net present
value (NPV) of the expected cashflows in relation to the stores within each CGU according to a number of assumptions (more detail on which follows
below) to calculate the value in use (VIU) for the group of CGUs. The results of the impairment tests identified that each VIU was significantly in excess of
the carrying value of assets within each CGU at the period end dates and date of initial recognition. No other indicators of impairment were noted.
The key assumptions used were
(i). The Group’s cost of capital, calculated according to a weighted cost of capital model with appropriate assumptions made regarding the inputs to
the model.
(ii). The Inflation rate, which has been based upon the consumer price index for the UK.
(iii). The like for like sales growth within each shop, a prudent estimate made by management.
76
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued The values for the assumptions used were:
As at
Discount rate (cost of capital)
Inflation rate
Like-for-like sales growth
28 March
2015
8.18%
0.00%
3.00%
29 March
2014
9.50%
2.50%
3.00%
6 March
2013
9.33%
3.57%
3.00%
These assumptions are held for 10 years in the forecast and then a perpetuity is performed over the year 10 figures, effectively assuming no further
like-for-like growth, or inflation after that point.
In order to demonstrate the sensitivity of the assumptions, it was calculated that a CGU would first require impairment if (all other assumptions being
held equal);
(i). The Group’s cost of capital was 26.5% (2014: 23.8%, 2013: 22.6%).
(ii). The Inflation rate was 14.6% (2014: 13.8%, 2013: 14.1%).
(iii). The like-for-like sales suffered a contraction of 7.6% (2014: 4.9%, 2013: 4.6%) per annum.
Assets arising upon the acquisition of J.A. Woll Handels GmbH and their subsidiaries (Jawoll)
A goodwill asset of €37,952k and brand assets of €5,950k arose as a result of the business combination undertaken as at 30 April 2014, the acquisition of
J.A. Woll Handels GmbH and their subsidiaries (Jawoll) by the Group.
At the acquisition date this was translated to £31,258k for the goodwill and £4,901k for the brand assets. However as the functional currency of Jawoll is
the Euro, all impairment calculations have been calculated in Euros and therefore it is that currency we shall refer to in the following discussion.
The brand intangible assets were recognised as having indefinite life and were the only identifiable assets recognised that were considered to be likely
to have a value above a set materiality threshold. The indefinite life was considered appropriate because of several factors, chief amongst which was
that the growth potential of the Jawoll business was considered by management to be a long-term phenomenon.
The goodwill and brand have been allocated to two groups of cash generating units (CGUs), being the two fascia’s that the Group operates within its
retail segment (Jawoll and Hafu) in the following proportions:
Jawoll
€’000
Hafu
€’000
Total
€’000
Goodwill
Brand
33,058
5,929
38,987
4,894
21
4,915
37,952
5,950
43,902
The Group has performed impairment tests as at the period end and at the acquisition date. The impairment test involves assessing the net present
value (NPV) of the expected cashflows in relation to the stores within each CGU according to a number of assumptions (more detail on which follows
below) to calculate the value in use (VIU) for the group of CGUs. The results of the impairment tests identified that each VIU was significantly in excess of
the carrying value of assets within each CGU at the period end dates and date of initial recognition. No other indicators of impairment were noted.
The key assumptions used were;
(i). The Group’s cost of capital, is as per above.
(ii). The Inflation rate, which has been based upon the consumer price index for Germany
(iii). The like for like sales growth within each shop, a prudent estimate made by management.
The values for the assumptions were:
As at
Discount rate (cost of capital)
Inflation rate
Like for like sales growth
28 March
2015
8.18%
0.28%
2.60%
30 April
2014
9.50%
1.33%
2.60%
These assumptions are held for 10 years in the forecast and then a perpetuity is performed over the year 10 figures, effectively assuming no further like
for like growth, or inflation after that point.
77
Corporate GovernanceFinancial StatementsStrategic Report 13 Intangible assets continued
In order to demonstrate the sensitivity of the assumptions, it was calculated that a CGU would first require impairment if (all other assumptions being
held equal);
(i). The Group’s cost of capital was 39.0% (2014: 31.3%).
(ii). The Inflation rate was 5.3% (2014: 5.3%).
(iii). The like for like sales suffered a contraction of 2.2% (2014: 0.8%).
14 Property, plant & equipment
Land and
buildings
£’000
Motor
Vehicles
£’000
Plant,
fixtures and
equipment
£’000
Cost or valuation
Opening values
Arising on acquisition of SBR Europe
Additions
Disposals
29 March 2014
Arising on acquisition of Jawoll
Additions
Disposals
Effect of retranslation
Adjustment
28 March 2015
Accumulated depreciation
Opening values
Charge for the period
Disposals
At 29 March 2014
Charge for the period
Disposals
Effect of retranslation
Adjustment
At 28 March 2015
Net book value at 28 March 2015
Net book value at 29 March 2014
Total
£’000
–
41,397
34,150
(1,339)
74,208
20,955
35,667
(3,033)
(2,424)
509
–
34,031
28,988
(636)
62,383
4,688
29,155
(395)
(589)
203
95,445
125,882
–
7,210
(460)
6,750
11,026
(162)
(69)
203
17,749
–
10,162
(950)
9,212
14,847
(368)
(143)
509
24,057
–
5,383
4,248
(94)
9,537
16,078
5,593
(2,157)
(1,799)
(38)
27,214
–
2,123
(68)
2,055
2,988
(4)
(69)
(38)
4,932
–
1,983
914
(609)
2,288
189
919
(481)
(36)
344
3,223
–
829
(422)
407
833
(202)
(5)
344
1,377
22,282
7,482
1,846
1,881
77,696
101,823
55,633
64,996
On the acquisition of the SBR Europe group on 6 March 2013, the fixed assets were restated such that their net book value equalled their cost. At the prior
year end an estimation technique was used to perform this task due to the number of assets on the fixed asset register. At this year end the values have
been calculated on an asset by asset basis leading to some adjustments between cost and depreciation as shown in the table above. This has no
impact on net book value.
The carrying value of assets held under finance lease and hire purchase contracts at 28 March 2015 was £5,029k (2014: £164k), total depreciation
charged on these assets during the period was £751k (2014: £197k). The assets held under hire purchase contracts are pledged as security for the related
finance lease and hire purchase liabilities.
Under the terms of the loan facility in place at 28 March 2015. A fixed charge existed over £6.2m of the net book value of land & buildings, £1.1m of the
net book value of motor vehicles and £50.7m of the net book value of the plant, fixtures and equipment. A floating charge was held over all the other
assets.
Under the terms of the loan facility in place at 29 March 2014, a fixed charge existed over all except £1.1m of the net book value of land & buildings and
all except £12.0m of the net book value of the plant, fixtures and equipment. A floating charge was held over all the other assets.
78
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued Included within land and buildings is land with a cost of £1,822k (2014: £100k) which is not depreciated.
As at
The net book value of land and buildings comprises:
Freehold land and buildings
Short leasehold improvements
15 Inventories
As at
Goods for resale
28 March
2015
£’000
29 March
2014
£’000
7,208
15,074
22,282
148
7,334
7,482
28 March
2015
£’000
29 March
2014
£’000
238,922
170,371
Included in the amount above for the period ended 28 March 2015 was a net gain of £0.8m related to inventory provisions (2014: £1.2m net loss). In the
period to 28 March 2015 £1,080m (2014: £902m) was recognised as an expense for inventories.
16 Trade and other receivables
As at
Trade receivables
Deposits on account
Provision for impairment
Net trade receivables to non-related parties
Prepayments
Related party receivables
Other receivables
28 March
2015
£’000
4,784
22,325
(9)
27,100
17,864
18,863
1,018
64,845
29 March
2014
£’000
6,074
4,128
(2)
10,200
12,110
23,352
290
45,952
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.
The following table sets out an analysis of provisions for impairment of trade and other receivables:
As at
Provision for impairment at the start of the period
Impairment during the period
Utilised/released during the period
Balance at the period end
28 March
2015
£’000
29 March
2014
£’000
(2)
(9)
2
(9)
–
(2)
–
(2)
Trade receivables are non-interest bearing and are generally on terms of 30 days or less.
At the period end a significant balance (£21.7m; 2014: £23.3m) was held with Multi-lines International Company Ltd. Multi-lines are a supplier with whom
the Group carries a large deposit, they are also an associate of the Group and due to this and the long trading history between the companies, including
no history of issues regarding recovery of the deposit balance, the management do not believe this balance to be at risk.
At 29 March 2014 a significant balance (£3.8m) was held with Barclays Mercantile Business Finance Limited in respect of a sale and leaseback
transaction. However this was settled immediately following the year end.
79
Corporate GovernanceFinancial StatementsStrategic Report 16 Trade and other receivables continued
There are no significant balances within the remaining debtors and as such there is no specific concentration of credit risk.
The following table sets out a maturity analysis of total trade and other receivables, including those which are past due but not impaired:
As at
Neither past due nor impaired
Past due less than one month
Past due between one and three months
Past due for longer than three months
Balance at the period end
17 Cash and cash equivalents
As at
Cash at bank and in hand
As at 28 March 2015 the Group had available £139.2m of undrawn committed borrowing facilities (2014: £110.5m).
18 Trade and other payables
As at
Trade payables
Other tax and social security payments
Accruals and deferred income
Reverse lease premium
Accrued interest on loans held with owners
Related party trade payables
Other payables
28 March
2015
£’000
62,187
503
1,360
795
29 March
2014
£’000
45,621
203
128
–
64,845
45,952
28 March
2015
£’000
29 March
2014
£’000
64,943
24,854
28 March
2015
£’000
86,935
17,555
24,491
6,816
–
1,332
6,466
143,595
29 March
2014
£’000
59,238
19,097
21,138
4,923
4,927
858
38
110,219
Trade payables are generally on 30 day terms and are not interest bearing. The directors consider that the carrying value of trade payables
approximates to their fair value. For further details on the related party trade payables, see note 28.
19 Non-current liabilities
As at
Reverse lease premium
Accruals
20 Other financial assets and liabilities
Other financial assets
As at
Non-current financial assets at fair value through profit and loss:
Interest rate swaps
Total non-current other financial assets
Current financial assets at fair value through profit and loss:
Foreign exchange forward contracts
Total current other financial assets
Total other financial assets
80
28 March
2015
£’000
51,173
1,208
52,381
29 March
2014
£’000
34,857
–
34,857
28 March
2015
£’000
29 March
2014
£’000
–
–
1,145
1,145
1,145
1,819
1,819
–
–
1,819
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued Financial assets through profit and loss reflect the fair value of those interest rate swaps 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
Non-current financial liabilities at fair value through profit and loss:
Interest rate swaps
Put/call options over the non-controlling interest of Jawoll
Total non-current other financial liabilities
Current financial liabilities at fair value through profit and loss:
Foreign exchange forward contracts
Fuel swap contracts
Interest rate swaps
Total current other financial liabilities
Total other financial liabilities
28 March
2015
£’000
29 March
2014
£’000
75
14,144
14,219
–
322
320
642
14,861
–
–
–
1,429
19
–
1,448
1,448
The put/call options over the non-controlling interest in Jawoll arose as part of the acquisition of the entity as detailed in note 12. The valuation here
reflects the initial valuation unwound to the year end date, and exchanged at the year end foreign exchange rate. The option matures in 2019 and the
carrying value has been discounted to present value.
The other financial liabilities through profit or loss reflect the fair value of those foreign exchange forward contracts and fuel swaps 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:
28 March 2015
Foreign exchange contracts
Interest rate swaps
Fuel swap contract
Put/call options on Jawoll non-controlling interest
29 March 2014
Foreign exchange contracts
Interest rate swaps
Fuel swap contract
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
1,145
(395)
(322)
(14,144)
(1,429)
1,819
(19)
–
–
–
–
–
–
–
1,145
(395)
(322)
–
(1,429)
1,819
(19)
–
–
–
(14,144)
–
–
–
The put/call option was valued with reference to the Sale and Purchase Agreement underpinning the acquisition, and the key variable in determining the
fair value of the option, the forecast EBITDA of Jawoll as prepared by management.
The other instruments have been valued by the issuing bank, using a mark to market method. The bank has used various inputs to compute the
valuations and these include inter alia the relevant maturity date and strike rates, the current exchange rate, fuel prices and LIBOR levels.
The Group’s financial instruments are either carried at fair value or have a carrying value which is considered a reasonable approximation of fair value.
81
Corporate GovernanceFinancial StatementsStrategic Report 21 Financial liabilities – borrowings
As at
Current
Term facility bank loans
Preferred equity certificates
Compounded interest on preferred equity certificates
Preference shares classified as debt
Compounded interest on the preference shares
Ordinary share capital classified as debt
Non-current
Term facility bank loans
28 March
2015
£’000
29 March
2014
£’000
–
–
–
–
–
–
–
7,750
556,050
66,725
1,750
210
256
632,741
433,758
423,930
The term facility bank loans are held at amortised cost and were initially capitalised in June 2014 with £7.3m of fees attributed to them (2014; in March
2013 with £33.1m of fees). See note 1 for further details of the refinancing that took place in June 2014.
The maturities of the loan facilities are as follows.
Current interest bearing loans and borrowings
Preferred equity certificates
Preference shares
Ordinary shares
UK Holdco term loan A (pre-refinancing)
Finance leases
Non-current interest bearing loans and borrowings
UK Holdco term loan A (pre-refinancing)
UK Holdco term loan B (pre-refinancing)
UK Holdco term loan A (post-refinancing)
UK Holdco term loan B (post-refinancing)
Finance leases
Interest Rate
%
12%
12%
0.01-0.05%
5%/4.75% + LIBOR
1.2% – 12.4%
5%/4.75% + LIBOR
5.5%/5.25% + LIBOR
3.25% + LIBOR
3.5% + LIBOR
1.2% – 3.9%
28 March
2015
£’000
29 March
2014
£’000
–
–
–
–
1,066
–
–
300,000
140,000
4,918
622,775
1,960
256
7,750
22
114,875
335,000
–
–
–
Maturity
2014
2014
2014
2013-15
2014-16
2014–19
2020
2019
2020
2019-24
Term loans A and B have carrying values which include transaction fees allocated on inception.
22 Provisions
Opening balances
Arising on acquisition of SBR Europe
Provided in the period
Utilised/released during the period
At 29 March 2014
Arising on acquisition of Jawoll
Provided in the period
Utilised/released during the period
Effect of retranslation
At 28 March 2015
Current liabilities 2015
Non-current liabilities 2015
Current liabilities 2014
Non-current liabilities 2014
82
Property
provisions
£’000
LTIP
£’000
Other
£’000
Total
£’000
–
3,796
1,801
(971)
4,626
173
1,542
(3,167)
(19)
3,155
1,725
1,430
2,477
2,149
–
3,556
–
(3,556)
–
–
–
–
–
–
–
–
–
–
–
1,507
4,746
(1,756)
4,497
–
2,016
(2,408)
–
4,105
4,105
–
4,497
–
–
8,859
6,547
(6,283)
9,123
173
3,558
(5,575)
(19)
7,260
5,830
1,430
6,974
2,149
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 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 LTIP provision relates to the management LTIP which matured at December 2013.
The other provisions principally relate to disputes concerning insurance 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 £8.3k per claim (£9.1k in 2014).
23 Share Capital
As at
Allotted, called up and fully paid
B&M European Value Retail S.A.
1,000,000,000 ordinary shares of 10p each
B&M European Value Retail 1 S.à r.l.
2,166,690 “A” ordinary shares of 1p each
8,699,985 “B” ordinary shares of 1p each
13,050,000 “C” ordinary shares of 1p each
Ordinary share capital
174,999,998 12% preference shares of 1p each
28 March
2015
£’000
29 March
2014
£’000
100,000
–
–
–
100,000
–
100,000
–
22
87
131
240
1,750
1,990
Note that prior to the restructuring that took place in June 2014, the share capital of the group parent was classified as debt along with the associated
share premium (also see note 21) and also that the balance sheet reserve balances, including share capital, have been stated in line with the accounting
in respect of the restructuring as outlined in note 1.
The £97,222k balance on the statement of financial position represents the share capital of the new group parent on their incorporation, being 972.2m
ordinary shares of 10p each (note 1). These shares are included in the 1bn ordinary shares in issue at the year end.
B&M European Value Retail S.A.
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 release up to a
maximum of 2,972,222,222 ordinary shares.
B&M European Value Retail 1 S.à r.l.
Preference Shares
Preference shares rank ahead of ordinary shares in terms of distributions. Each preference share carries one vote. The preference shares were classified
as debt on the balance sheet.
A, B and C Ordinary Shares
Each class of share ranked pari passu with each other class and each share carried one vote. Each class of share was separated into 5 equal
subclasses (A1-A5, B1-B5, C1-C5). Each ordinary share was entitled to a fixed dividend of between 0.05% and 0.25%.
Preferred Equity Certificates
In 2013 and 2014 the company had issued preferred equity certificates with a nominal value of £556,050k made up of 55,604,952,750 12% certificates of
1p each. These certificates were mandatorily redeemed in March 2062, or on event of a listing (amongst other events). The preferred equity certificates
ranked pari passu with each other, and ahead of all ordinary and preference shares in terms of distribution. They did not carry voting rights. The preferred
equity certificates were classified as debt on the balance sheet.
83
Corporate GovernanceFinancial StatementsStrategic Report 24 Cash generated from operations
Period ended
Profit/(loss) before tax
Adjustments for:
Interest expense
Depreciation
Amortisation of intangible assets
Transaction fees through administrative expenses
(Profit)/loss on disposal of property, plant and equipment
Loss on share options
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Change in provisions
Share of profit from associates
Non-cash foreign exchange effect from retranslation of subsidiary cashflows
(Profit)/loss resulting from fair value of financial derivatives
Cash generated from operations
52 weeks
ended
28 March
2015
£’000
55 weeks
ended
29 March
2014
£’000
61,715
(14,319)
72,776
14,847
827
20,536
(70)
186
(39,192)
(15,399)
40,845
(1,863)
(1,632)
1,574
(2,270)
116,613
10,162
204
6,445
72
–
(34,710)
(11,521)
39,660
309
(269)
–
2,034
152,880
114,680
25 Commitments
Operating leases
The vast majority of the Group’s operating lease commitments relate to the property comprising its store network. At the year end over 95% of these
leases expire in the next 15 years (2014: >90%) The leases are separately negotiated and no subgroup is considered to be individually significant nor to
contain individually significant terms. The Group was not subject to contingent rent agreements at the year end date. The following table sets out the total
future minimum lease payments under non-cancellable operating leases, taking account of lease premiums.
28 March
2015
£’000
87,524
335,401
389,913
29 March
2014
£’000
61,852
253,403
337,242
812,838
652,497
28 March
2015
£’000
74,595
(219)
74,376
29 March
2014
£’000
63,899
(125)
63,774
As at
Not later than one year
Later than one year and not later than five years
Later than 5 years
The lease and sublease payments recognised as an expense in the periods were as follows:
Period ended
Lease payments
Sublease receipts
84
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued Finance leases
At the year end, all of the Group’s finance leases related to buildings used in the operation of the German business.
Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments
are as follows:
As at
Not later than one year
Later than one year and not later than five years
Later than five years
28 March 2015
29 March 2014
Minimum
payments
£’000
1,191
3,735
1,519
6,445
PV of
minimum
payments
£’000
1,066
3,459
1,459
5,984
Minimum
payments
£’000
PV of
minimum
payments
£’000
22
–
–
22
22
–
–
22
Capital commitments
There were £5.1m of contractual capital commitments not provided within the Group financial statements as at 28 March 2015 (2014: £nil).
26 Group information and ultimate parent undertaking
The financial results of the group include the following entities.
Company name
Country
Date of incorporation
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)
B&M European Value Retail 2 S.à r.l. (SBR Europe)
EV Retail Limited
B&M Retail Limited
Opus Homewares Limited
Meltore Limited
B&M European Value Retail Germany GmbH (Germany Holdco)
J.A. Woll Handels GmbH (Jawoll)
Jawoll Vertriebs GmbH I
Jawoll Sonderposten GmbH
Jawoll Sonderposten Vertriebs GmbH
Stern Sonderposten Vertriebs GmbH
Stern Handels GmbH
BestFlora GmbH
Luxembourg
UK
UK
UK
UK
Luxembourg
UK
UK
UK
UK
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
November 2012
December 2012
December 2012
November 2012
November 2012
September 2012
September 1996
March 1978
April 2003
November 2006
November 2013
November 1987
September 2007
December 1988
September 1992
March 2003
December 1980
July 2002
Percent held
within the
Group
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
80%
80%
80%
80%
60%
Principal activity
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
General retailer
Dormant
Dormant
Holding company
General retailer
General retailer
General retailer
General retailer
General retailer
General retailer
Supplier of items for retail
Associates
The Group has a 50% interest in Multi-lines International Company Limited, a company incorporated in Hong Kong and a 40% interest in Home Focus
Group Limited, a company incorporated in the Republic of Ireland following the acquisition of SBR Europe on 6 March 2013. The share of profit/loss from
the associates is included in the statement of comprehensive income.
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.
85
Corporate GovernanceFinancial StatementsStrategic Report
27 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. The Group does not apply hedge accounting as outlined under IAS 39.
Market Risk
Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and commodity price risk. Commodity price risk is not
considered material to the business as the group is able to pass on pricing changes to its customers.
Despite the impact of price risk not being considered material, the Group engages in a swap contract over the cost of fuel in order to minimise the
impact of any volatility.
The sensitivity to these contracts for a reasonable change in the year end fuel price is as follows
As at
Effect on profit before tax
Change in
fuel price
28 March
2015
£’000
29 March
2014
£’000
+5%
–5%
52
(50)
93
(88)
This has been calculated by taking the spot price of fuel at the year end, applying the change indicated in the table, and projecting this over the life of the
contract assuming all other variables remain equal.
The Group’s policies for managing fair value interest rate risk are considered along with those for managing cash flow interest rate risk and are set out in
the subsection entitled “interest rate risk” below.
Currency Risk
The Group is exposed to translation and transaction foreign exchange risk arising from exchange rate fluctuation on its purchases from overseas suppliers.
In relation to translation risk, this is not considered material to the business as amounts owed in foreign currency are short term of up to 30 days and are
of a relatively modest nature. Transaction exposures, including those associated with forecast transactions, are hedged when known, principally using
forward currency contracts. Whilst the aim is to achieve an economic hedge, the Group does not adopt an accounting policy of hedge accounting for this
financial information.
All of the Group’s sales are to customers in the UK and Germany and there is no currency exposure in this respect, approximately 29% (2014: 27%) of the
Group’s purchases are priced in US Dollars and the Group uses forward currency contracts to minimise the risk associated with that exposure.
Foreign Currency Sensitivity
The following tables demonstrate 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 is largely due to changes in the fair value of the FX options.
As at
Effect on profit before tax
Change in
USD rate
+2.5%
–2.5%
28 March
2015
£’000
(2,446)
2,571
29 March
2014
£’000
(2,506)
2,634
86
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued The following tables demonstrate the sensitivity to a reasonably possible change in the Euro period end exchange rates with all other variables held
constant.
As at
Effect on profit before tax
Change in
Euro rate
+2.5%
–2.5%
28 March
2015
£’000
29 March
2014
£’000
(13)
14
(5)
4
These calculations have been performed by taking the year end translation rate used on the accounts and applying the change noted above. The
balance sheet valuations are then directly calculated. The valuation of the foreign exchange derivatives are projected based upon the spot rate
changing and all other variables being held equal.
Interest Rate Risk
Interest rate risk is the risk of variability of the Group cash flows due to changes in the interest rate. The Group is exposed to changes in interest rates as
all of the company’s bank borrowings are subject to a floating rate based on LIBOR.
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 uses interest rate swaps to minimise the
impact.
At year end, if LIBOR interest rates had been 50 basis points higher/lower with all other variables held constant, the effect upon calculated pre-tax profit
for the year would have been:
As at
Effect on profit before tax
Basis Point
increase /
decrease
28 March
2015
£’000
29 March
2014
£’000
+50
–50
1,429
(1,429)
5,413
(5,418)
This sensitivity has been calculated by changing the interest rate for each interest payment and accrual made by the company over the period, by the
amount specified in the table above, and then calculating the difference that would have been required.
It also includes the effect on the year end valuation of the interest rate swap contract, where the percentage change in LIBOR indicated above has been
applied to the year end spot rate and this has then been projected over the remaining life of the contracts with the assumption that all other variables
are held equal.
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 and trade receivables. The credit risk associated with cash is limited as the main counterparty is a UK
clearing bank with a high credit rating (A Long term and A-1 short term (standard & poor), unchanged from the prior year). The principal credit risk arises
therefore from the company’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.
87
Corporate GovernanceFinancial StatementsStrategic Report 27 Financial risk management continued
Liquidity Risk
Any impact on available cash and therefore the liquidity of the Group could have a material effect on the business as a result.
The Group’s borrowings are subject to quarterly banking covenants against which the company 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:
28 March 2015
Interest bearing loans
Fuel swap contract
Interest swap contract
Trade payables
29 March 2014
Interest bearing loans
Amounts due to owners
Fuel swap contract
Forward foreign exchange contracts
Trade payables
Within 1 year
£’000
17,464
322
320
88,267
32,480
624,991
19
1,429
65,097
Between 1
and 2 years
£’000
Between 2
and 5 years
£’000
More than 5
years
£’000
Total
£’000
17,464
–
75
–
343,820
–
–
–
141,509
–
–
–
520,257
322
395
88,267
40,100
–
–
–
–
151,675
–
–
–
–
372,413
–
–
–
–
596,668
624,991
19
1,429
65,097
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.
28 March
2015
£’000
29 March
2014
£’000
–
1,145
64,943
45,963
1,018
1,819
–
24,854
33,551
290
–
322
395
14,144
1,429
19
–
–
433,758
94,733
1,056,671
60,134
As at
Financial Assets
Fair value through profit and loss
Interest rate swap
Forward foreign exchange contracts
Loans and receivables
Cash and cash equivalents
Trade receivables
Other receivables
Financial Liabilities
Fair value through profit and loss
Forward foreign exchange contracts
Fuel price swap
Interest rate swap
Put/call options over the non-controlling interest of Jawoll
Amortised cost
Interest-bearing loans and borrowings
Trade payables
88
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued 28 Related party transactions
The Group has transacted with the following related parties over the period:
Multi-lines International Company Limited, a supplier, and Home Focus Group, a customer, have been associates of the Group since the purchase of SBR
Europe on March 6, 2013.
Ropley Properties Ltd, Triple Jersey Ltd, Rani Investments, Multi-lines International (Properties) Ltd and Speke Point Ltd, all landlords of properties occupied
by the group, are directly or indirectly owned by director Simon Arora, his family, or his family trusts.
Rani 1 Life Interest Trust and Rani 2 Life Interest Trust, directly or indirectly owned by director Simon Arora, his family, or his family trusts, were reimbursed
for management and financial consulting services provided to the Group. These services ceased upon listing.
Clayton, Dubilier & Rice, the part-owners of the previous ultimate parent undertaking, and current shareholders, provided management and financial
consulting services to the Group. These services ceased upon listing.
The following table sets out the total amount of trading transactions with related parties included in the statement of comprehensive income:
Period ended
Sales to associates of the Group
Home Focus Group Limited
Total sales to related parties
Purchases from associates of the Group
Multi-lines International Company Ltd
Purchases from owners of the business
Clayton, Dubilier & Rice
Purchases from companies owned by key management personnel
Multi-lines International (Properties) Ltd
Rani Investments
Rani 1 Life Interest Trust
Rani 2 Life Interest Trust
Ropley Properties Ltd
Speke Point Ltd
Triple Jersey Ltd
Total purchases from related parties
28 March
2015
£’000
29 March
2014
£’000
737
737
267
267
67,216
50,558
17,608
9,995
120
191
36
36
2,632
2,125
2,925
81
208
221
221
2,817
1,116
1,608
92,889
66,825
Included in the current year figures above are 4 leases on new stores, or extensions to existing stores, entered into by Group companies since the IPO
date. The total expense on these leases in the period was £188k.
The following table sets out the total amount of trading balances with related parties outstanding at the period end. Note that the debtors balance held
by Multi-lines International is a deposit on account and includes a GRNI balance of £2.9m (2014: £28.3m).
As at
Trade receivables from associates of the group
Home Focus Group Ltd
Multi-lines International Company Ltd
Total related party trade receivables
Trade payables to companies owned by key management personnel
Rani Investments
Ropley Properties Ltd
Triple Jersey Ltd
Total related party trade payables
28 March
2015
£’000
29 March
2014
£’000
79
18,784
18,863
29
23,323
23,352
39
727
566
1,332
57
530
271
858
89
Corporate GovernanceFinancial StatementsStrategic Report
28 Related party transactions continued
Outstanding trade balances at the balance sheet date 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 business has not recorded any impairment of trade receivables relating to amounts owed by related parties at 28 March 2015 (2014: 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 following table sets out information relating to financing activities with the owners of the business, all of which ceased in June 2014 immediately
prior to the Group’s listing.
As at
Preferred equity certificates held by owners
Compounded interest on preferred equity certificates held by owners
Interest bearing ordinary and preference shares held by owners
Compounded interest on ordinary and preference shares
28 March
2015
£’000
29 March
2014
£’000
–
–
–
–
556,050
66,725
2,006
210
For further details on the transactions with key management personnel, see note 8 and the remuneration report.
29 Non-controlling interest
Non-controlling interest balances are valued on acquisition as a proportion of the fair value of net assets to which the non-controlling interest relates.
Post acquisition the non-controlling interest is valued as the original value plus/minus the profit/loss owed to the non-controlling interest and minus any
dividend paid to the non-controlling interest.
There exists a non-controlling interest in Jawoll, an 80% subsidiary of B&M European Value Retail GmbH, which was created on purchase of that
company on 30 April 2014. The percentage has not changed over the period of ownership.
In the period to 28 March 2015, £1,179k has been accrued to the non-controlling interest in Jawoll, and no dividends have been paid.
The summarised financial information of the subsidiary is as follows.
Revenue
EBITDA
Profit after tax
Net cashflow
As at
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
11 months
ended
28 March
2015
£’000
120,643
10,659
5,918
(3,890)
28 March
2015
£’000
24,476
42,065
(7,216)
(13,516)
45,809
There exists a non-controlling interest in BestFlora GmbH, a 75% subsidiary of Jawoll. This company was incorporated into the group on 30 April 2014
and the percentage has not changed over the period of ownership.
In the period to 28 March 2015, £39k has been accrued to the non-controlling interest in BestFlora GmbH and £78k of dividends have been paid.
Bestflora is considered immaterial for further disclosure.
90
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial StatementsNotes to the consolidated financial statements continued
30 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
Interest bearing loans and borrowings (note 21)
Less: Cash and short term deposits (note 17)
Net debt
28 March
2015
£’000
440,000
(64,943)
29 March
2014
£’000
457,625
(24,854)
375,057
432,771
31 Post balance sheet events
There have been no material events between the balance sheet date and the date of issue of these accounts.
32 Dividends
An interim dividend of 0.9 pence per share (£9,000,000) was paid on 16 January 2015.
A final dividend of 2.5 pence per share (£25,000,000), giving a full year dividend of 3.4 pence per share (£34,000,000) has been proposed.
33 Contingent liabilities and guarantees
As at 28 March 2015, 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, Meltore Ltd and Opus Homewares Ltd are all guarantors to the loan agreement which is formally held within B&M European Value
Retail S.A. The amount outstanding as at the period end was £440.0m, with the balance in B&M European Value Retail Holdco 4 Ltd.
As at 29 March 2014, B&M European Value Retail Holdco 3 Ltd, B&M European Value Retail Holdco 4 Ltd, B&M European Value Retail 2 S.à r.l, EV Retail
Ltd, B&M Retail Ltd, Meltore Ltd and Opus Homewares Ltd are all guarantors to the loan agreement, which is formally held within B&M European Value
Retail 3 Ltd. The amount outstanding at the period end was £457.6m, with the balance in B&M European Value Retail 4 Ltd.
91
Corporate GovernanceFinancial StatementsStrategic Report Independent Auditor’s report to the shareholders of
B&M European Value Retail S.A.
Report on the annual accounts
We have audited the accompanying annual accounts of B&M European Value Retail S.A., which comprise the balance sheet as at 31 March 2015, and the
profit and loss account for the year then ended, and a summary of significant accounting policies and other explanatory information.
Board of Directors’ responsibility for the annual accounts
The Board of Directors is responsible for the preparation and fair presentation of these annual accounts in accordance with Luxembourg legal and
regulatory requirements relating to the preparation of the annual accounts, and for such internal control as the Board of Directors determines is
necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error.
Responsibility of the Réviseur d’entreprises agréé
Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International
Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual accounts are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected
depend on the judgement of the “Réviseur d’entreprises agréé”, including the assessment of the risks of material misstatement of the annual accounts,
whether due to fraud or error. In making those risks assessments, the Réviseur d’entreprises agréé considers internal control relevant to the entity’s
preparation and fair presentation of the annual accounts in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board
of Directors, as well as evaluating the overall presentation of the annual accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audit opinion.
Opinion
In our opinion, the annual accounts give a true and fair view of the financial position of B&M European Value Retail S.A. as of 31 March 2015, and of the
results of its operations for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the
annual accounts.
Report on other legal and regulatory requirements
The Directors’ report, which is the responsibility of the Board of Directors, is consistent with the annual accounts.
The accompanying Corporate Governance Statement on pages 26 to 30 which is the responsibility of the Board of Directors, is consistent with the annual
accounts and includes the information required by the law with respect to the Corporate Governance Statement.
Luxembourg, 1 June 2015
Hugues Wangen
Réviseur d’entreprises agréé
Grant Thornton Lux Audit S.A.
92
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Company balance sheet
As at March 31, 2015
ASSETS
FIXED ASSETS
Tangible fixed assets
Other fixtures and fittings, tools and equipment
Financial fixed assets
Shares in affiliated undertakings
CURRENT ASSETS
Debtors
Amounts owed by affiliated undertakings
becoming due and payable within one year
Other receivables
becoming due and payable within one year
Cash at bank, cash in postal cheque accounts, cheques and cash in hand
TOTAL ASSETS
LIABILITIES
CAPITAL AND RESERVES
Subscribed capital
Share premium and similar premiums
Reserves
Legal reserve
Profit or loss brought forward
Profit or loss for the financial year
Interim dividends
NON SUBORDINATED DEBTS
Trade creditors
becoming due and payable within one year
Amounts owed to affiliated undertakings
becoming due and payable within one year
Tax and social security debts
Tax debts
Income tax
Social security debts
Other creditors
becoming due and payable within one year
TOTAL LIABILITIES
The accompanying notes form an integral part of these annual accounts.
Notes
March 31, 2015
GBP
3
4
5
6
6
6
6
4,041
2,624,999,999
79,549,090
26,322
79,575,412
90,943
2,704,670,395
100,000,000
2,600,000,000
–
–
12,282,196
(9,000,000)
2,703,282,196
1,348,634
19,963
13,176
3,210
3,216
–
1,388,199
2,704,670,395
93
Corporate GovernanceFinancial StatementsStrategic Report Company profit and loss account
For the financial period from May 19, 2014 (date of incorporation) to March 31, 2015
CHARGES
Use of merchandise, raw materials and consumable materials
Other external charges
Staff costs
Salaries and wages
Social security on salaries and wages
Value adjustments
on formation expenses and on tangible and intangible fixed assets
Other operating charges
Interest and other financial charges
other interest and similar financial charges
Extraordinary charges
Income tax
Other taxes not included in the previous caption
Profit for the financial year
TOTAL
INCOME
Income from financial fixed assets
derived from affiliated undertakings
Other interest and other financial income
derived from affiliated undertakings
Extraordinary income
TOTAL
The accompanying notes form an integral part of these annual accounts.
Notes
7
8
9
11
11
10
Period from
19/05/2014 to
31/03/2015
GBP
646
19,966,613
77,276
10,416
87,692
1,147
351,221
14,123
43
3,210
11,750
12,282,196
32,718,641
30,816,000
1,898,952
3,689
32,718,641
94
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Notes to the annual accounts
For the financial period from May 19, 2014 (date of incorporation) to March 31, 2015
Note 1 – General information
B&M European Value Retail S.A., hereinafter the “Company”, was incorporated on May 19, 2014 as a “société anonyme” for an unlimited period. The
Company is organised under the laws of Luxembourg, in particular the law of August 10, 1915 on commercial companies, as amended.
The registered office of the Company is established in Luxembourg City and is registered at the Trade and Companies register in Luxembourg under the
number B187275.
On May 29, 2014, the registered office of the Company was moved from 9, allée Scheffer, L-2520 Luxembourg to 16, avenue Pasteur, L-2310 Luxembourg.
The financial year of the Company starts on April 1 and ends on March 31 of each year. Exceptionally, the first financial period runs from the date of
incorporation to March 31, 2015.
The main purpose of the Company is to act as an investment holding company and to coordinate the business of any corporate bodies in which the
Company is for the time being directly or indirectly interested and to acquired (whether by original subscription, tender, purchase, exchange or
otherwise) the whole or any part of the stock, shares, debentures, debenture stocks, bonds and other securities issued or guaranteed by any person
and any other asset of any kind and to hold the same as investments, and to sell, exchange and dispose of the same.
The Company may also carry on any trade or business whatsover and to acquire, undertake and carry on the whole or any part of the business,
property and/or liabilities of any person carrying on any business.
The Company is listed on the London Stock Exchange under the ticker symbol “BME”.
Note 2 – Summary of significant accounting policies
Basis of preparation
These annual accounts have been prepared in accordance with Luxembourg legal and regulatory requirements under the historical cost convention.
Accounting policies and valuation rules are, besides the ones laid down by the law of December 19, 2002, as amended by the law of December 10, 2010
and July 30, 2013 (the “Law”), determined and applied by the directors of the Company (the “Board of Directors”).
The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires Management to exercise its judgement in
the process of applying the accounting policies. Changes in assumptions may have a significant impact on the annual accounts in the period in which
the assumptions changed. Management believes that the underlying assumptions are appropriate and that the annual accounts therefore present the
financial position and results fairly.
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities in the next financial year. Estimates and
judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances.
Significant accounting policies
The main valuation rules applied by the Company are the following:
Formation expenses
The formation expenses of the Company are directly charged to the profit and loss account of the year in which they are incurred.
Foreign currency translation
The Company maintains its accounting records in pounds sterling (GBP) and the balance sheet and the profit and loss accounts are expressed in this currency.
Transactions expressed in currencies other than GBP are translated into GBP at the exchange rate effective at the time of the transaction.
Long term non-monetary assets expressed in currencies other than GBP are translated into GBP at the exchange rate effective at the time of the
transaction. At the balance sheet date, these assets remain converted using the exchange rate at the time of the transaction (the “historical exchange
rate”).
Cash at bank is translated at the exchange rate effective at the balance sheet date. Exchange losses and gains are recorded in the profit and loss
account of the year.
In accordance with prudence principles found within generally accepted accounting principles in Luxembourg (“LuxGaap”), other assets are translated
separately, at the lower of the value converted using the historical exchange rate and the value converted using the exchange rate at the balance sheet
date. Conversely, other liabilities are translated separately, at the higher of the value converted using the historical exchange rate and the exchange rate
at the balance sheet date. Consequently, both realised and unrealised exchange losses are recorded in the profit and loss account while exchange
gains are recorded in the profit and loss account when realised only.
Where there is an economic link between an asset and a liability, these are valued in total according to the method described above and the net
unrealised losses are recorded in the profit and loss account while the net unrealised gains are not recognised.
95
Corporate GovernanceFinancial StatementsStrategic Report Notes to the annual accounts continued
For the financial period from May 19, 2014 (date of incorporation) to March 31, 2015
Note 2 – Summary of significant accounting policies continued
Financial Fixed Assets
Shares in affiliated holdings are valued at purchase price including the expenses incidental thereto. In the case of durable depreciation in value
according to the opinion of the Board of Directors, value adjustments are made in respect of financial fixed assets, so that they are valued at the lower
figure to be attributed to them at the balance sheet date. These value adjustments are not continued if the reasons for which the value adjustments were
made have ceased to apply.
Debtors
Debtors are valued at their nominal value. They are subject to value adjustments where their recovery is compromised. These value adjustments are not
continued if the reasons for which the value adjustments were made have ceased to apply.
Prepayments
This asset caption comprises expenditures incurred during the financial year but relating to a subsequent financial year.
Provisions
Provisions are intended to cover losses or debts, the nature of which is clearly defined and which, at the date of the balance sheet are either likely to be
incurred or certain to be incurred but uncertain as to their amount or as to the date at which they will arise.
Provisions may also be created to cover charges which originate in the financial year under review or in a previous financial year, the nature of which is
clearly defined and which at the date of the balance sheet are either likely to be incurred or certain to be incurred but uncertain as to their amount or the
date at which they will arise.
Debts
Debts are stated as their nominal value. Where the amount repayable on account is greater than the amount received, the difference is shown in the
profit and loss account when the debt is issued.
Debts are recorded under subordinated debts when their status is subordinated to unsecured debts.
Current tax provisions
Provisions for taxation corresponding to the tax liability estimated by the Company for the financial years for which the tax return has not yet been filed
are recorded under the caption “Tax debts”. The advance payments are shown in the assets of the balance sheet under the caption “Other receivables”,
if applicable.
Note 3 – Financial fixed assets
a) The movements for the period are as follows:
Gross book value – opening balance
Transfers for the period
Net book value – closing balance
Affiliated
undertakings
Shares
GBP
–
2,624,999,999
2,624,999,999
b) The undertaking in which the Company holds interests in its share capital is as follows:
Undertaking’s name
B&M EVR 1*
Total
Registered office
Luxembourg
*
B&M EVR 1 refers to B&M European Value Retail 1 S.à r.l.
Percentage
of holding
Net equity as at
Dec. 31, 2014
GBP
Net result for the
2014 fiscal period
GBP
Net book value as
at March 31, 2014
GBP
100%
646,809,261
560,639
2,624,999,999
2,624,999,999
On June 17, 2014, the shareholder of the Company approved an increase in the share capital of the Company by an amount of GBP 97,196,222 in order to
raise its value to GBP 97,222,222. The subscription by the shareholders of the share capital increase were paid by the contribution of shares and claims it
held with B&M EVR 1 in exchange for issuance of 971,962,222 new shares with a nominal value of ten pence (GBP 0.10). Total value of the contribution
amounted to GBP 2,624,999,999 with a resulting increase in share premium by GBP 2,527,777,777.
At the balance sheet date, the Managers assessed the valuation of the underlying operations and concluded that no value adjustment is deemed
necessary on the investment.
96
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Note 4 – Amounts owed by affiliated undertakings
Becoming due and payable within one year:
B&M European Value Retail Holdco 4 Ltd (B&M EVR 4)
B&M EVR 1
Total
March 2015
GBP
79,541,426
7,664
79,549,090
The amounts owed by B&M EVR 4 are interest bearing and payable on demand. The amounts owed by B&M EVR 1 are non-interest bearing and payable
on demand. Where interest is calculated it has been done on an arms length basis.
Note 5 – Capital and reserves
Subscribed capital and share premium
The Company was incorporated on May 19, 2014 as CD&R European Value Retail Investment S.à r.l. The share capital was set at GBP 26,000 divided into
260,000 shares of GBP 0.10 each. The authorised share capital was fixed at GBP 300,000,000.
On June 13, 2014, the sole shareholder resolved, conditional upon Listing, to increase the share capital of the Company by an amount of GBP
97,196,222.20 in order to raise it from GBP 26,000 to GBP 97,222,222.20 by creating and issuing 971,962,222 new shares of GBP 0.10 each together with a
total share premium of GBP 2,527,777,777.20. All shares were subscribed by the contribution from the sole shareholder and new shareholders of shares
held in B&M EVR 1 having a value of GBP 1,981,135,475.5 and claims held against B&M EVR 1 for GBP 643,864,523.90.
By resolutions dated 11 June 2014, the Board of Directors has resolved to approve the issuances to and the subscription of 27,777,778 new shares of the
Company so as to increase the share capital of the Company by a total amount of GBP 2,777,778 so as to raise it from its current amount of GBP
97,222,222.20 to GBP 100,000,000.-, together with the payment of a share premium of a total amount of GBP 72,222,222.80.
As a consequence of the above mentioned capital increase, the subscribed share capital of the Company presently amounts to GBP 100,000,000 and
the un-issued but authorised share capital set at GBP 297,222,222.20.
As March 31, 2015, the share capital is set at GBP 100,000,000 divided into 1,000,000,000 shares of GBP 0.10 each and the un-issued but authorised
share capital set at GBP 297,222,222.20
The movements on the “Capital and reserves” caption during the year are as follows:
At incorporation
Resolution June 11, 2014
Resolution June 17, 2014
Profit or loss for the year
Closing balance
Share premium
and similar
premiums
GBP
–
72,222,223
2,527,777,777
–
Share capital
GBP
26,000
2,777,778
97,196,222
–
100,000,000 2,600,000,000
Legal reserve
GBP
Profit or loss for the
financial year
GBP
Total
GBP
–
–
–
–
–
–
–
–
12,282,196
26,000
75,000,001
2,624,973,999
12,282,196
12,282,196 2,712,282,196
On January 16, 2015, the Company declared an interim dividend of GBP 9,000,000.
Legal reserve
Luxembourg companies are required to allocate to a legal reserve a minimum of 5% of its annual net profit until this reserve equals 10% of the
subscribed share capital. This reserve may not be distributed.
97
Corporate GovernanceFinancial StatementsStrategic Report Notes to the company financial statements continued
Note 6 – Non subordinated debts
Amounts owed to affiliated undertakings (Note 6.1)
B&M European Value Retail Holdco 4 Ltd (B&M EVR 4)
Others
Trade creditors
Suppliers (Note 6.2)
Suppliers – invoices not yet received
Tax and social security debts
Withholding taxes
Income tax
Social security debts
Total
After
one year
and within
five years
GBP
After
more than
five years
GBP
Total
March 2015
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,963
45,776
1,302,858
13,176
3,210
3,216
1,388,199
Within
one year
GBP
–
19,963
45,776
1,302,858
13,176
3,210
3,216
1,388,199
Note 6.1: Amount owed to affiliated undertakings are interest bearing and repayable on demand. Where interest is calculated it has been done on an
arms-length basis.
Note 6.2: Supplier balance of GBP 1,348,634 relates mostly to outstanding liabilities in relation to advisory and consultancy work in relation to the Initial
Public Offering (IPO) for the London Stock Exchange.
Note 7 – Other external charges
Termination fee (Note 7.1)
Advisory and consultancy fees (Note 7.2)
Tax consulting fees
Audit fees
Accounting and administrative fees
Marketing, communication and travel expenses
Catalogue and printed matters and publications
Government regulatory fees
Legal fees
Underwriter’s fees (Note 7.3)
Stock exchange fees
Bank account charges
Others
Total
March 2015
GBP
10,000,000
6,220,478
633,925
581,368
127,405
91,680
65,462
62,234
14,497
1,631,847
467,734
5,376
64,607
19,966,613
Note 7.1: During March 2013, the Company’s subsidiaries entered into “Indemnification Agreement” and “Management Rights Agreement” with Clayton,
Dubilier & Rice, LLC (“CDR”) and its affiliates. On June 12, 2014, the “Indemnification Agreement” and ”Management Rights Agreement” was terminated
and as such, the Company agreed to pay a termination fee.
Note 7.2: Advisory and consultancy fees pertains to fees paid in relation to the Company’s IPO proceedings and professional fees billings coming from
various financial & advisory firms.
Note 7.3: On June 12, 2014, the Company, its Directors and its Shareholders entered into an “Underwriting and Sponsors Agreement” in which it agrees to
pay a commission and legal fees in relation to the services performed by the Underwriters in seeking subscribers for the Company’s IPO for the London
Stock Exchange.
98
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements Note 8 – Staff costs
During the financial year, the Company employed one part time employee and two full time employees.
Note 9 – Other operating charges
Director fees
Group recharge
Tax on vehicle
Total
March 2015
GBP
217,289
133,415
517
351,221
Note 10 – Income from financial fixed assets
This account relates to dividend income from B&M EVR 1 with a dividend declaration date of January 6, 2015. On the same date as its dividend
declaration, B&M EVR 1 extinguishes its dividend payable to the Company by assigning its receivables from B&M EVR 4 of the same amount.
Note 11 – Taxation
The Company is subject to the general tax regulation applicable to all Luxembourg commercial companies.
The income tax expense of the Company for the financial year is broken down as follows:
Withholding tax
Tax expense on ordinary activities for the year
Total
March 2015
GBP
11,750
3,210
14,960
Note 12 – Off balance sheet commitments and contingencies
The financial commitments of the Company are shares to be issued under the share option plans operated by the Company
The Company operates three share option plans. The details of which are as follows:
(1) The B&M European Value Retail S.A. Tax Advantaged and non-tax advantaged Company Share Option Plans (The CSOPs) (i) Starting 1/8/2014, (ii)
starting 11/8/2014.
(2) The B&M European Value Retail S.A. Long-Term Incentive Plan (The LTIP).
CSOPs
The CSOP schemes are market-value options with a non-market performance condition. They vest after a period of three years.
The options were valued using a black/scholes model. Given the grant date, no options have been exercised in the period.
Date of grant
1 Aug 2014
11 Aug 2014
Date of vesting
1 Aug 2017
11 Aug 2017
Exercise price
271.5p
267.0p
Fair value of
option
GBP
0.83
0.81
Options granted
596,646
104,860
Options lapsed
in the period
(14,732)
0
Options
outstanding at
31 March 2015
581,914
104,860
If the performance condition is met and the options vest, then the option holders have a further 7 years in which to exercise their options.
LTIP
These awards are ordinary shares subject to a mixture of market based and non-market based performance conditions. They vest after a period of
three years.
The options were valued using a monte carlo method. Given the grant date, no options have been exercised in the period.
Date of grant
1 Aug 2014
Date of vesting
1 Aug 2017
Exercise price
Nil
Fair value of
option
GBP
1.34
Options granted
200,000
Options lapsed
in the period
Options
outstanding at
31 March 2015
0
200,000
99
Corporate GovernanceFinancial StatementsStrategic Report Notes to the annual accounts continued
For the financial period from May 19, 2014 (date of incorporation) to March 31, 2015
Note 12 – Off balance sheet commitments and contingencies continued
Assumptions
The fair valuing exercise uses several assumptions including the share price at grant (taken as the closing price on the day prior to the grant), the volatility
(see below), the expected life (3 years for the LTIP, 6.5years for the CSOP) and the risk free rate of interest, using the Bank of England’s zero coupon yield
over the expected life.
The volatility assumption should usually use the Company’s own volatility metric, however given the short period of time for which the shares had been
listed when the awards were granted, the historic volatility of a group of comparable companies was used instead. This resulted in a 25% assumption
being used.
The sensitivity to the volatility and expected life assumptions are indicated below.
Scheme
CSOP – 1 Aug
CSOP – 11 Aug
LTIP
Fair value of option
GBP
Fair value for
-500bps volatility
GBP
Fair value for
+500bps volatility
GBP
Fair value for
3 year term (CSOP)
GBP
Fair value for
8 year term (CSOP)
GBP
0.83
0.81
1.34
0.71
0.70
1.24
0.95
0.93
1.43
0.51
0.50
N/A
0.95
0.93
N/A
Note 13 – Subsequent events
No other matters or circumstances of importance other than those already described in the present notes to the accounts have arisen since the end of
the financial year which could have significantly affected or might significantly affect the operations of the Company, the results of those operations or
the affairs of the Company.
The financial statements were approved by the Board of Directors and authorised for issue on 27 May 2015 and signed on its behalf by:
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
100
B&M European Value Retail S.A. Annual Report and Accounts 2015Financial Statements General information
Registered Office & Company Number
B&M European Value Retail S.A.
16, Avenue Pasteur
L-2310 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
Tel: +352 246 130 207
www.bandmretail.com
Share Registrar
(Shareholders)
Capita Fiduciary S.A.
16, Avenue Pasteur
L-2310 Luxembourg
Grand-Duchy of Luxembourg
Tel: +352 440 929
Email: shareholderenquiries@capita.co.uk
www.capitaassetservices.com
Depositary Interests Registrar
(Depositary Interest holders)
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey
GY2 4LH
Channel Islands
Email: custodymgt@capitaregistrars.com
Listing
Ordinary shares of B&M European Value Retail S.A. are listed with a
premium listing on the London Stock Exchange.
Auditor
Grant Thornton Lux Audit S.A.
89A, Pafebruch
L-8308 Capellen
Luxembourg
Réviseur d’entreprises agréé
Grand-Duchy of Luxembourg
Tel: +352 40 12 99 1
www.grantthornton.lu
Joint Brokers
Merrill Lynch International
2 King Edward Street
London EC1A 1HQ
Tel: +44(0)20 7628 1000
www.baml.com
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
Tel: +44(0)270 7260 1000
www.numis.com
Principal Bankers
Barclays Bank PLC
Bank of America N.A.
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B&M European Value Retail S.A.
©2015. All rights reserved. B&M
and the B&M logo are registered trademarks