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Giving customers
fantastic value
Big brands, big savings
B&M European Value Retail S.A.
Annual Report and Accounts 2019
INTRODUCTION
The B&M Group
is growing, with stores
operating in the UK,
Germany and now
also in France.
The Group includes:
B&M
Our B&M general merchandise
and grocery stores, with a chain
of 620 stores throughout the UK.
Heron Foods
Our Heron Foods convenience
stores, with a chain of 281 stores
which are predominantly in the
North of England.
Contents
Strategic Report
Highlights
Company overview
Geographic presence
Chairman’s statement
Market overview
Business model
Strategy
Chief Executive Officer’s review
Feature: European expansion
Financial review
Key performance indicators
Principal risks and uncertainties
Corporate social responsibility
Corporate Governance
Board of Directors
Corporate governance report
Audit & Risk Committee report
Directors’ remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
Jawoll
Our Jawoll general merchandise
and grocery stores, with a chain of
96 stores which are predominantly in
the North-West of Germany.
Babou
Our Babou general merchandise
and grocery stores, with a chain of
96 stores in France.
Financial Statements
Independent Auditor’s Report
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement of changes
in shareholders’ equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Independent auditor’s report
Company balance sheet
Company profit and loss account
Notes to the annual accounts
General information
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B&M European Value Retail S.A. Annual Report and Accounts 2019
Strategic Report
Strategic Report
Corporate Governance
Financial Statements
Highlights
Financial highlights
UK and European store estate
Group revenues
£3,486.3m
+15.0%
2018: £3,029.8m1
Profit before tax
£249.4m
+8.8%
2018: £229.3m1
Adjusted EBITDA2
£312.3m
+11.9%
2018: £279.0m
Cash generated from operations
£259.4m
+7.2%
2018: £242.0m1
Diluted earnings per share
20.5p
+10.2%
2018: 18.6p1
B&M stores
+7.6%
Heron Foods stores
+6.0%
Jawoll stores
+11.6%
• 44 net new B&M stores opened in FY19,
growing the estate by 7.6% to 620 stores
in the UK.
• Strong pipeline of new stores and on track
to achieve about 45 net new UK store
openings in FY20.
• 16 net new Heron Foods stores opened in
FY19, growing the estate by 6.0% to 281
stores in the UK.
• Strong pipeline of new stores and on track
to achieve between 15 and 20 net new UK
store openings in FY20.
• 10 net new Jawoll stores opened in FY19,
growing the estate by 11.6% to 96 stores in
Germany.
• On track to achieve around 5 net new
German store openings in FY20.
Read more about our latest acquisition of Babou on page 18
Babou stores
96 stores
Notes
1. Where these items relate to 2018, they are for the 53 week statutory reporting period ended
2.
31 March 2018.
The Directors consider adjusted figures to be more reflective of the underlying business performance
of the Group and believe that this measure provides additional useful information for investors on the
Group’s performance. Adjusted EBITDA is a non-IFRS measure and therefore we provide a
reconciliation from the statement of comprehensive income. See the reconciliation of adjusted
measures to statutory measures on page 21 for further details. EBITDA represents profit on ordinary
activities before net finance costs, taxation, depreciation and amortisation. The figures presented
in the strategic report are for the 52 weeks ended 30 March 2019, and unless otherwise stated,
the comparable figures for the previous year are for the 52 week period ended 24 March 2018 rather
than the statutory reported 53 week period for that prior year.
B&M European Value Retail S.A. Annual Report and Accounts 2019
1
Page Title at start:Content Section at start: Company overview
B&M is a value retailer
with stores in the UK, Germany and
France, selling a limited assortment
range of general merchandise and
grocery products.
How we operate
Our UK brands
In our B&M and Heron Foods stores we provide customers with a limited
assortment within each of our product ranges so they can access the best-selling
items at value retail prices. Our products are mainly sourced direct from
manufacturers and leading brand household names. The combination of this
gives our customers the goods they want at the prices they want. This is what
we achieve through the successful execution of our business model. The same
approach applies to our bargain stores, homestores and convenience stores in
all of our value retail businesses.
Our German and French brands
Our stores in Northern Germany for general merchandise and grocery trade
under the Jawoll brand through both in-town and out-of town retail park store
formats. Our general merchandise and grocery stores in France trade under the
Babou brand also through in-town and out-of-town retail park store formats. Each
of these businesses are continuing to develop as they take advantage of the
buying power of the Group.
Delivering great value and service to customers
B&M’s direct sourcing and simple low cost approach means we can provide our
customers with great bargains on everyday household general merchandise and
grocery products. Our limited assortment model means that within each category
of our products we can continually refresh products, regularly introduce new
products and seasonally adjust lines to suit the requirements of our customers.
This flexibility enables us to provide products to customers when they want them
and at the prices they want, which is all about delivering a great service and
shopping experience all year round to our customers.
1.
The Directors consider adjusted figures to be more reflective of the underlying business performance of the
Group and believe that this measure provides additional useful information for investors on the Group’s
performance. See further the footnotes on page 1. Where items relate to 2018 they are for the 52 week period
ended 24 March 2018, which is comparable with the 2019 year (rather than the statutory reported 53 week
period for B&M in 2018), except as provided in note 2 below.
2. The 2018 figure represents the 34 week period from the acquisition of Heron Foods by the Group in August 2017
to 31 March 2018.
3. The 2019 figure represents the 23 week period from the acquisition of Babou by the Group to 30 March 2019.
4. Babou’s store colleagues are not employees of Babou. They are direct employees of the Manager of each store.
5. B&M includes the corporate segment.
Revenue
£2,789.4m
+8.7%
2018: £2,566.0m
Adjusted EBITDA1, 5
£297.0m
+13.5%
2018: £261.7m
Number of stores
620
+7.6%
Number of employees
27,384
+3.4%
See page 15 for more information
2
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Revenue
Revenue
Revenue3
£354.1m
+68.6%
2018: £210.0m2
£213.7m
+6.7%
2018: £200.3m
EBITDA1
EBITDA1
£129.1m
EBITDA1, 3
£5.6m
(£10.2m)
-281.9%
2018: £5.6m
Number of stores
Number of stores
96
+11.6%
Number of employees
2,034
+28.7%
96
Number of employees4
92
£19.9m
+69.6%
2018: £11.7m2
Number of stores
281
+6.0%
Number of employees
4,284
+8.3%
B&M European Value Retail S.A. Annual Report and Accounts 2019
3
Page Title at start:Content Section at start: Geographic presence
Each of our
businesses
remains well
positioned for
further continued
expansion in the
UK and Europe in
the years ahead.
The B&M Group is a fast growing business with a
long runway for further growth ahead of it. In each of
its markets in the UK, Germany and France its overall
market share is small compared with specialist
merchandise retailers and grocery retailers. There is
a big opportunity for further expansion of the store
estates we have in each of our businesses in those
territories in the years ahead.
Each new B&M store we open in the UK continues to produce
excellent returns. There is substantial scope for yet further expansion
with a target of at least 950 stores in the UK.
Heron Foods has continued to grow successfully under our ownership
since we acquired the business in August 2017. This has provided our
Group with an additional platform for growth by our entry into the
value convenience sector. We see many years of continued growth
ahead of us in that sector, with store expansion both within the
heartland of the Heron Foods business in the North of England and
throughout the rest of the UK.
With our Jawoll business in Germany, we are refining our value retail
offering with more direct sourcing of products through the B&M supply
chain, principally for the coming financial year and onward. The Jawoll
business is being developed to provide us with access to the significant
opportunities which exist in the German value retail sector.
We acquired the Babou stores chain in France in October 2018, as part of
our strategy to expand into other European markets in the longer term.
There are significant opportunities in the French value retail market for
both the Grocery and Non-Grocery product offerings, particularly
through the proven sourcing model which has driven our growth for
many years in the UK. We can see opportunities for store expansion in
the years ahead throughout the main regions of France.
See page 12 for more information
68
32
110
57
132
116
8
39
113
83
1
100
42
Key:
B&M
Heron Foods
UK
B&M:
Number of stores
Number of employees
Heron Foods:
Number of stores
Number of employees
2019
2018
620
27,384
281
4,284
576
26,496
265
3,956
4
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
16
35
1
3
1
2
15
12
6
4
13
15
12
8
5
5
4
9
10
6
5
5
Germany
Number of Jawoll stores
Number of employees
2019
96
2,034
2018
86
1,581
France
Number of Babou stores
Number of employees
2019
96
921
1. Babou’s store colleagues are not employees of Babou. They are direct employees
of the Manager of each store.
B&M European Value Retail S.A. Annual Report and Accounts 2019
5
Page Title at start:Content Section at start: Chairman’s statement
A year of good
progress
I am delighted to be able to report to shareholders
on another year of good progress at B&M, with the
Group again delivering continued growth in revenues,
profits and cash generation.
Against the backdrop of another difficult year for a retailing industry
that is still struggling to cope with the combined pressures of profound
structural change, rising costs and uncertain economic times for
consumers, B&M has continued to demonstrate that its value model
remains well-adapted and highly relevant to the needs of our growing
customer base.
Whilst overall progress was good, the year was not without its
challenges. We saw a strong start to the financial year in the UK
subsequently disrupted by prolonged warm weather leaving us short
of seasonal stock in the summer months and we had a weak
performance in our key Homewares categories for several months.
Whilst some retailers have closed stores or exited the UK market other
competitors have continued to grow and prosper. B&M has worked
hard to maintain its value leadership in key categories. In Germany,
we have continued to introduce the B&M ranging and sourcing model
while we have applied the lessons of our experience. This has required
us to clear legacy inventory at a substantial cost to the business. To
have achieved the overall progress we did in the year, despite these
challenges, I believe demonstrates both the robustness of our business
model as well as the skill and hard work of our teams.
In addition to driving a fast pace of change in Jawoll, we took the
opportunity, after detailed due diligence, to purchase Babou in France,
which had a 95-strong national chain (at the time of acquisition) of
general merchandise discount stores. With a good, well-invested store
network and infrastructure, Babou gives B&M a platform on which to
build a potentially substantial business in another of Europe’s largest
consumer markets. At the time of acquisition Babou was a profitable
business but struggling to grow in a relatively buoyant but fragmented
French discount sector. With the core of a new management team
already in place before the acquisition, we have moved quickly to begin
the introduction of the necessary changes to the business as we move
it towards the B&M model.
Much work remains to be done in both Jawoll and Babou but the
Board believes, based on our initial experience of trading outside
the UK, that we now have clarity on how to apply the B&M model in
these two large markets and we are confident of making progress
during the year ahead.
Peter Bamford
Chairman
Group revenues
£3,486.3m
+15.0%
2018: £3,029.8m1
Adjusted earnings per share2
19.7p
10.7%
2018: 17.8p
Earnings per share
20.5p
10.2%
2018: 18.6p
1.
This is for the 53 week statutory reporting period ended
31 March 2018.
2. The Directors consider adjusted figures to be more reflective
of the underlying business performance of the Group and
believe that this measure provides additional useful
information for investors on the Group’s performance.
See further the footnotes on page 1.
I am very pleased to report that we have taken further important steps
in the process of evolving the composition of our Board, introducing
new, experienced Non-Executive Directors from leading consumer-
facing businesses and ensuring an orderly succession as we enter
our sixth financial year as a public company. I warmly welcome to the
Board Tiffany Hall and Carolyn Bradley who joined the Board during the
6
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
Our Values
The main values which underpin our success as a
business are as follows:
Simplicity
Trust
We value honesty,
loyalty and hard work.
We trust our colleagues
and empower and
support them to help
them to make the right
decisions for our
business.
We like to keep our
business simple, fun
and uncomplicated.
This generates speed
and efficiency, allowing
us to deliver great value
for money to our
customers. Simplicity
brings with it clarity
on how best we can
operate our business
to succeed.
Fairness
Proud
We believe that acting
fairly and responsibly in
all our dealings with
customers, colleagues
and suppliers will drive
our long-term success.
Our ethos is to treat
B&M’s property and
money with care like our
own. We take pride in
our success and ability
to provide our
customers with great
value for money all year
round.
year, and Gilles Petit who joined on 2 May 2019. On behalf of the Board,
I also thank Harry Brouwer and Thomas Hübner who retired from the
Board in November 2018 and May 2019 respectively. They made a
significant contribution to the Board in B&M’s successful transition to a
public company after the IPO in 2014. Their experience, commitment
and wise counsel have been invaluable to both myself and my
predecessor. I am also delighted that Ron McMillan has agreed to
take on the role of Senior Independent Director.
In the year ahead, our trading priorities are to see the restored trading
momentum in the UK business in the fourth quarter of the year
continue, the completed process of clearing legacy stock in Germany
to provide Jawoll with the opportunity to rebuild margins and for Babou
to deliver on promising early signs since the new B&M-sourced ranges
have begun to be introduced.
The Board has evolved to a significant degree over the last year
and I am keen that we get maximum benefit from the experience,
perspectives and insights that the new Non-Executive Directors bring
to the Board. With the development of B&M’s business across three
European markets, the organisation is evolving to manage that
increased scale and complexity. It is critical that we build the capability
and approach to realise the growth opportunity in these markets
together with the potential scale benefits for B&M. This requires an
element of a matrix organisation while retaining the simplicity and
clarity which lies at the heart of the B&M model.
We have started preparing for the application of the UK Corporate
Governance Code 2018 (the “2018 Code”) which will apply to us in the
coming financial year 2019/20. One of the key requirements for the
Board under the 2018 Code is to ensure that the Company’s purpose,
values and strategy are aligned with its culture. The purpose of our
business is to deliver great value to our customers, so they keep
returning to our stores time and time again, through the application of
our limited assortment, direct sourcing and simple low cost business
model. Aligned to that our values are simplicity, trust, fairness and
being proud of what we offer to our customers (see the box opposite).
Together these are the guiding principles behind the culture which
we have continued to build as a business, to deliver our strategy of
continuing to grow our business successfully by rolling-out our high
returning business model in areas of the UK where we are still
under-represented and to develop that model in our chosen
European markets.
Finally, I would like to take this opportunity to thank our shareholders
for their support and the whole B&M team, whose hard work and
commitment drives our success.
Peter Bamford
Chairman
22 May 2019
B&M European Value Retail S.A. Annual Report and Accounts 2019
7
Page Title at start:Content Section at start:
Market overview
Growth opportunities
We are a growth business operating in markets where our overall market share is small
compared with specialist merchandise retailers and grocery retailers, which means we
have a big opportunity for continued expansion right across our B&M, Heron Foods,
Jawoll and Babou businesses and store estates.
Macro trends
Against a background of tightening real
disposable income since the global
financial crisis of 2008 we believe there
has been a structural shift in UK retailing
towards much more value conscious
consumer behaviour.
This is relevant to many elements of consumer
non-discretionary and discretionary spending.
The flight to value has continued, and we
believe will continue for the foreseeable future,
with consumers either needing or wanting to
save money. These conditions play to B&M’s
core value-retailing strengths.
Also convenience stores and the ability for
consumers to have easy local access to
everyday items have become increasingly
important in the UK market and through our
convenience store chain, Heron Foods, we are
able to take advantage of this opportunity and
service that demand.
Expansion
There is considerable scope for growth in
each of our chosen markets in the UK,
Germany and France.
In the UK we have a store target of 950 stores
which we consider to be achievable based on
updated analysis of external consultancy
research carried out in 2017. With 620 trading
stores opened to date there is still a long
runway for growth ahead of us for the B&M
stores fascia in the UK.
Our Heron Foods convenience store chain
business with 281 stores has the capacity to
become multiple times larger as we look to roll
it out in the future beyond the North of England
where most of those stores are located into
other regions across the UK.
There are considerable store expansion
opportunities in Germany and France where
our Jawoll and Babou store estates are modest
both in terms of numbers of stores and
revenues relative to the size of those markets
and the population demographics of those
countries.
Brands
B&M’s model is to provide big brands at big
savings through our direct sourcing, limited
assortment and simple low cost approach.
B&M has a targeted range of branded food and
grocery products. Many of those products are
from global FMCG suppliers. Our customers
enjoy the value pricing of big brand products
which we offer within those categories.
Within our general merchandise ranges we offer
branded products where brands are an important
customer requirement, and also heritage
branded products through our relationships with
leading national and global brands.
We have actively expanded our offering of leading
branded products, for example this year in our toy
range, where other specialist retailers have exited
the market creating space for variety goods
retailers such as ourselves to take up the demand.
The addition of other branded product ranges
will continue to evolve in a targeted way as
market opportunities continue to open up
further over time.
Customer appeal
The attraction for customers visiting our
stores is that we offer the best selling
products, constantly refresh them and
stock seasonal goods, all at great value
prices all year round. This means they can
buy what they want, when they want it
and at the price they want.
Customers visiting a B&M store are typically
looking for specific destination purchases, but
they will often also buy impulse products as
they browse around the store. This impulse
buying or treasure hunt is supported by us
constantly refreshing our product ranges and
introducing new products in our stores. Our
limited assortment SKU discipline model
enables us to flex our products, refresh them
and have a quick turnaround of seasonal
goods in comparatively short time frames
compared with many other retailers.
Geographic markets
United Kingdom
The UK retail market in which B&M operates
had total store-based retail sales of c.£300
billion in 20171. B&M has a small share of this
market, being less than 1%. We believe that a
store target of 950 B&M fascia stores overall in
the UK is achievable.
B&M currently has 620 stores, which leaves
considerable room for further growth still in the
UK alone.
Heron Foods operates in the convenience
sub-sector of the UK Grocery market of c.£160
billion in 20171. Convenience is an area of growth
in grocery retailing in the UK. Heron Foods is an
attractive value proposition in a market which
has been primarily dominated by the premium
pricing models of other retailers.
Heron Foods currently has 281 stores with room
for expansion from its North of England
heartland to other regions of the UK.
Germany
The German retail market had store-based retail
value sales of over c.€400 billion in 20171. The
general merchandise value retail market remains
fragmented in Germany and there are few variety
goods retailers operating successfully on a
national scale.
Jawoll principally competes in the German
general merchandise value and discount
segment with only a limited range of grocery
lines, thereby differentiating itself from the highly
competitive grocery discount channel dominated
by Aldi and Lidl.
As part of B&M’s Group, Jawoll is also beginning
to leverage the opportunity to expand the breadth
of its non-grocery range, as well as developing
its producer branded grocery and FMCG offering.
Given both the size of the German market and the
small market share of Jawoll, the Jawoll business
has the potential to expand in both its core
regions and beyond those regions in the future.
Jawoll has 96 stores predominantly in North-
Western Germany with considerable
scope for expansion in that and other regions.
8
B&M European Value Retail S.A. Annual Report and Accounts 2019
See page 4 for more information
See page 5 for more information
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
France
The French retail market is the second largest in
continental Europe behind Germany. The market
has attractive dynamics including the overall
market size, the popularity of the growing
discount channel and healthy operating
margins achieved by several of the incumbent
operators.
Babou is in the process of adopting the direct
product sourcing and limited assortment sku
discipline model of B&M. It is also introducing
food and grocery products into its product
mix and refining its general merchandise
product ranges, to position itself in a similar way
to the B&M offering which has achieved
considerable growth in the UK over
many years.
Babou currently has 96 stores and
predominantly operates in the general
merchandise, clothing and footwear sector
of the market.
Given both the size of the French market and the
small market share that Babou currently has in
the market opportunity exists for Babou to grow
its store footprint.
Notes
1.
Figures are based on management estimates
having regard to external market research on the
size of the relevant market in 2016/17.
Customer experience
We only offer the best selling lines of products
within each of our food, grocery and general
merchandise ranges. This limited SKU
discipline means we can refresh our product
offering, frequently introduce new products
and seasonally alter our lines to meet the
changing demand of our customers for
different types of products all year round.
This provides customers with a shopping
experience that meets their needs and which
is also fun and exciting as new product
offerings come into our stores constantly.
From our own exit survey, 70% of our B&M UK
store customers visit our stores at least once
every two weeks.
New products
A key part of the B&M product offering is
the number of new products which are
introduced into our B&M UK stores each
week. We average around 100 new products
per week predominately within our general
merchandise categories, whilst still
maintaining the discipline of our limited
assortment model. The number of new
products introduced gives customers a good
reason to visit our stores frequently to see
what is new. Last year we averaged 4.4
million customer transactions a week across
the B&M UK store estate.
Destination purchase
Based upon our own research c. 80% of
customers visits to our B&M UK stores are
planned, with customers regarding B&M as a
destination store across the full range of
product categories. The targeted grocery
offering at competitive prices and also the
attraction of general merchandise goods (for
example kitchen goods, homewares, toys,
DIY and gardening products and seasonal
goods) at great value prices are the main
reasons for customer visits to our stores.
Impulse buying/treasure hunt
When a destination customer has completed
their primary shopping mission at B&M, it
develops into a “treasure hunt” as they also
see other product lines at great value prices.
This gives us the opportunity to increase the
basket size of sales to customers. From our
own research while c.80% of customers come
to our stores for a destination purchase,
when the basket is analysed nearly 50% of
purchases made by them are impulse buys.
See page 5 for more information
B&M European Value Retail S.A. Annual Report and Accounts 2019
9
Page Title at start:Content Section at start: Business model
Great products
and fantastic value
Our aim is to provide customers with a fun and
exciting shopping experience, offering them great
products and fantastic value so they return again
and again to our B&M, Heron Foods, Jawoll and
Babou stores.
Competitive strengths
Operations
Modern store network
Our network of over 1,000 well-located and well-invested stores
in the UK, Germany and France are in convenient locations in
modern retail parks, popular district centres and high streets.
They are close to where people live, so it makes it easy for
customers to shop.
Well-invested infrastructure
We have a modern supply chain and scalable infrastructure to
support the operations and growth of the business. In the UK
we are in the construction phase in relation to the development
of an additional Distribution Centre in the South of England. This
will provide B&M with a further 1 million sq ft of warehouse
capacity, which will be operational in January 2020.
Strong brand reputation
The B&M, Heron Foods, Jawoll and Babou names are
recognised established brands in the markets in which we
operate our respective store chains. Those brands each have a
strong and growing reputation for delivering consistently great
value, innovation and newness in relation to the products
people buy regularly for their homes and families. This keeps
customers coming back to our stores week-in, week-out.
Skilled buying teams
Developing products and ranges to constantly provide great
value as well as being fresh and on-trend takes skill,
experience and discipline. We have colleagues with many
years of combined experience and skills within the specialist
buying and merchandising teams in each of our Group
businesses. They know what customers want and they know
how to design and deliver it at value price points.
Strong supplier relationships
Maintaining our competitive value led price model is also about
developing and retaining strong long-term supplier
relationships. Many of our suppliers have grown and
developed established trading relationships with us over many
years with our Group businesses.
Sound governance & risk management
Our corporate governance and risk management approach is
geared toward ensuring we have effective and robust
corporate governance structures and processes in place. Our
Directors have many years of retail and consumer product
business experience across a range of international markets.
They provide constructive challenge to our management teams,
so that the best outcomes are achieved for all our stakeholders
in how we operate our businesses, provide value and manage
risk appropriately.
r m
g t e
Targeted
grocery offering
rating lo n
e
n
e
G
Cost
efficiency
Format
flexibility
Underpinned by:
Corporate social
responsibility
Risk
management
See page 32 for more information
See page 26 for more information
10
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
Operations
Stakeholder value
r m
g t e
rating lo n
e
n
e
G
Underpinned by:
Compelling
non-grocery offer
y
t
i
l
i
Disruptive
sourcing process
b
a
n
i
a
t
s
u
w th and s
Seasonal
flex
o
g r
SKU
discipline
Sustainability
Financial
performance
See page 36 for more information
See page 20 for more information
Happy customers
Giving great value to customers is at the heart of our
business. Helping our customers spend less on the
things they buy regularly for their homes and families is
what our business model is designed to constantly
deliver whatever the broader economic outlook.
Valued colleagues
Our colleagues are vital to the delivery of our products
throughout all our stores to customers. Our continued
growth provides new job opportunities and promotions
in the communities where we trade. There is plenty of
scope for colleagues throughout our store network,
supply chain and central operations to build long-term
and successful careers in each of our businesses as we
continue to expand at a significant rate. We pride
ourselves in our businesses being innovative and
exciting places for colleagues to work, grow and
develop their full potential.
Respected partners
Our growth is also very good for our suppliers. Many
of them have established relationships with us over a
number of years. We have strong relationships which
include well-known household name brands for food,
grocery and FMCG. We also have a number of partners
with growing long-term relationships with both our
exclusive and other branded general merchandise
product ranges. We are proud to promote the brands
we own and those of our partners for the mutual benefit
of our respective businesses.
Supporting communities
Our store opening programmes are aimed at making
investments in new stores in communities where we are
under-represented or not represented at all. This
provides new jobs in local communities each time we
open a new store, and access to local communities to
value for money products. We are also proud to
contribute to the revitalisation of local communities
where other retailers have retrenched and we have
been able to provide new investment through our range
of different store formats to suit the relevant locality.
Returns for investors
Creating value for our other stakeholders is an essential
underpin to creating shareholder value for investors.
Our characteristics of low capital-intensity and
high-returning cash generative growth, is a relatively
rare and powerful combination in retailing. These
characteristics feed into the sustainability of our
business model which enhances our ability to provide
growth and returns to investors.
B&M European Value Retail S.A. Annual Report and Accounts 2019
11
Page Title at start:Content Section at start:
Strategy
Long-term strategy
Our strategy is to deliver long-term success and sustainability
through our continued growth and expansion.
Operations
Progress
£
Deliver great
value to our
customers
Our Food and Grocery product offering remains strong, which provides shoppers with the attraction of
knowing they can access household name branded products at value prices.
We have increased our market share of Toys in the UK over the last year, taking advantage of the
opportunity left by there now being a smaller number of bricks and mortar specialist category retailers
operating in this space. Our range includes a number of leading brand products, which we have
successfully expanded over the last two years resulting in particularly strong growth in this category.
We have continued to increase the development of our direct to retail licensing model to more product
lines and categories in the year, in particular with heritage brands in electrical and DIY ranges.
See page 15 for more information
In the B&M business we have opened 54 new stores in FY19, (44 net of closures and relocations),
including both vacant existing properties and new build stores.
In our convenience store chain, Heron Foods, we have opened 20 new stores, (16 net of closures and
relocations) in FY19.
In Germany our new store expansion in the year was 10 net new stores (see further below).
In France we have opened one new store since the acquisition in October 2018.
See page 15 for more information
Jawoll opened 10 net new stores by organic growth, taking the store estate to 96, representing a 11.6%
increase in its store estate.
Since the beginning of FY19/20 Jawoll is now increasingly sourcing more general merchandise
products through the B&M direct sourcing supply chain.
In October 2018 B&M acquired Babou Stores in France, which had a chain of 95 stores at the date of
the acquisition. We are already starting to introduce the direct sourcing of stock through the B&M
supply chain as quickly as possible following the acquisition, and we are expanding the Grocery/
FMCG offering of Babou. This is already underway and the early signs are that these changes are
proving to be appealing with customers.
See page 16 for more information
In the Group we created over 1,600 new jobs (not including those in Babou in France).
New colleagues across the Group
We plan to have completed the construction of the Southern distribution centre and for it to be
We are well underway with the construction phase for a new 1 million sq ft UK warehouse based in
the South of the UK, which will have capacity for at least a further 300 stores.
We have continued to refresh our existing store estate and we invested £34.9m across the Group in
maintenance capital expenditure as part of a rolling programme of continuous investment in the
Group’s store estate in FY19.
We have invested in a digital Workforce Management System for our stores which will be live in FY20.
See page 32 for more information
(including Babou)
+5.2%
See page 17 for more information
See principal risk number 5 on page 28
operational by January 2020.
We continue to invest to ensure that we have appropriate training and processes to attract, retain
and incentivise colleagues, as well as continuing to invest in strengthening the management
team and the central head office functions of each of the businesses in the Group.
We are investing in a digital technology compatible Workforce Management System which will
be implemented during the course of FY20. This investment will help to plan work rotas between
colleagues, time and attendance management and scheduling of training, and allowing
colleagues to use smart phones instead of paperbased processes, for the benefit of both the
business and colleagues.
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
12
B&M European Value Retail S.A. Annual Report and Accounts 2019
Performance
UK revenue growth1
+11.1%
UK like-for-like sales growth (B&M)2
+0.7%
See page 20 for more information
See principal risk number 1 on page 27
UK gross new store openings
54 B&M
20 Heron Foods
10 Jawoll
See page 15 for more information
See principal risk number 12 on page 30
Germany revenue growth
+6.7%
See page 20 for more information
See principal risk numbers 1 and 5
on pages 27 and 28
Looking ahead
We will continue with our successful proven strategy of concentrating on providing the best-
selling branded and private label products at our stores.
We are planning to build on our success in FY19 by continuing to exploit opportunities to introduce
more Toy branded products to provide more authoritative ranges for our customers.
Our continuing programme of investment in re-fitting our older generation stores is a key part
of our strategy to ensure that we provide our customers with an attractive shopping experience
within modern, pleasant and safe store shopping environments.
We have a UK target to grow our B&M estate to at least 950 stores. We currently have 620 stores
and we are targeting to open 40-50 stores per annum, dependent on the availability of suitable
locations. We have a healthy pipeline of new store opportunities for both FY20 and FY21.
While we have not provided an overall store target for our Heron Foods convenience store chain,
given the current geographical representation of Heron Foods, we are targeting at least 15 to 20
new store openings per annum.
We will continue to deploy our direct sourcing limited assortment model in our Jawoll and Babou
stores, to accelerate the rate of products sourced through the B&M supply chain. This is designed
to increase the general availability of those ranges in our European store networks and integrate
them into the successful B&M sourcing and ranging model.
We plan to grow our store estate in Germany through organic store openings, with 5 new
openings planned for FY20.
We continue to look for other acquisition opportunities or bolt-on businesses in Germany where
they would be complementary to our existing Jawoll store network.
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Operations
Progress
£
Deliver great
value to our
customers
Our Food and Grocery product offering remains strong, which provides shoppers with the attraction of
knowing they can access household name branded products at value prices.
We have increased our market share of Toys in the UK over the last year, taking advantage of the
opportunity left by there now being a smaller number of bricks and mortar specialist category retailers
operating in this space. Our range includes a number of leading brand products, which we have
successfully expanded over the last two years resulting in particularly strong growth in this category.
We have continued to increase the development of our direct to retail licensing model to more product
lines and categories in the year, in particular with heritage brands in electrical and DIY ranges.
See page 15 for more information
In the B&M business we have opened 54 new stores in FY19, (44 net of closures and relocations),
including both vacant existing properties and new build stores.
In our convenience store chain, Heron Foods, we have opened 20 new stores, (16 net of closures and
relocations) in FY19.
In Germany our new store expansion in the year was 10 net new stores (see further below).
In France we have opened one new store since the acquisition in October 2018.
See page 15 for more information
increase in its store estate.
Since the beginning of FY19/20 Jawoll is now increasingly sourcing more general merchandise
products through the B&M direct sourcing supply chain.
In October 2018 B&M acquired Babou Stores in France, which had a chain of 95 stores at the date of
the acquisition. We are already starting to introduce the direct sourcing of stock through the B&M
supply chain as quickly as possible following the acquisition, and we are expanding the Grocery/
FMCG offering of Babou. This is already underway and the early signs are that these changes are
proving to be appealing with customers.
See page 16 for more information
In the Group we created over 1,600 new jobs (not including those in Babou in France).
We are well underway with the construction phase for a new 1 million sq ft UK warehouse based in
the South of the UK, which will have capacity for at least a further 300 stores.
We have continued to refresh our existing store estate and we invested £34.9m across the Group in
maintenance capital expenditure as part of a rolling programme of continuous investment in the
Group’s store estate in FY19.
We have invested in a digital Workforce Management System for our stores which will be live in FY20.
See page 32 for more information
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
Performance
UK revenue growth1
+11.1%
UK like-for-like sales growth (B&M)2
+0.7%
See page 20 for more information
See principal risk number 1 on page 27
UK gross new store openings
54 B&M
20 Heron Foods
10 Jawoll
See page 15 for more information
See principal risk number 12 on page 30
Jawoll opened 10 net new stores by organic growth, taking the store estate to 96, representing a 11.6%
Germany revenue growth
+6.7%
See page 20 for more information
See principal risk numbers 1 and 5
on pages 27 and 28
Looking ahead
We will continue with our successful proven strategy of concentrating on providing the best-
selling branded and private label products at our stores.
We are planning to build on our success in FY19 by continuing to exploit opportunities to introduce
more Toy branded products to provide more authoritative ranges for our customers.
Our continuing programme of investment in re-fitting our older generation stores is a key part
of our strategy to ensure that we provide our customers with an attractive shopping experience
within modern, pleasant and safe store shopping environments.
We have a UK target to grow our B&M estate to at least 950 stores. We currently have 620 stores
and we are targeting to open 40-50 stores per annum, dependent on the availability of suitable
locations. We have a healthy pipeline of new store opportunities for both FY20 and FY21.
While we have not provided an overall store target for our Heron Foods convenience store chain,
given the current geographical representation of Heron Foods, we are targeting at least 15 to 20
new store openings per annum.
We will continue to deploy our direct sourcing limited assortment model in our Jawoll and Babou
stores, to accelerate the rate of products sourced through the B&M supply chain. This is designed
to increase the general availability of those ranges in our European store networks and integrate
them into the successful B&M sourcing and ranging model.
We plan to grow our store estate in Germany through organic store openings, with 5 new
openings planned for FY20.
We continue to look for other acquisition opportunities or bolt-on businesses in Germany where
they would be complementary to our existing Jawoll store network.
New colleagues across the Group
(including Babou)
We plan to have completed the construction of the Southern distribution centre and for it to be
operational by January 2020.
+5.2%
See page 17 for more information
See principal risk number 5 on page 28
We continue to invest to ensure that we have appropriate training and processes to attract, retain
and incentivise colleagues, as well as continuing to invest in strengthening the management
team and the central head office functions of each of the businesses in the Group.
We are investing in a digital technology compatible Workforce Management System which will
be implemented during the course of FY20. This investment will help to plan work rotas between
colleagues, time and attendance management and scheduling of training, and allowing
colleagues to use smart phones instead of paperbased processes, for the benefit of both the
business and colleagues.
1.
2.
The prior year period was a 53 week statutory reporting period ended 31 March 2018.
Like-for-like revenues relate to the B&M estate only and include each store’s revenue for that part of the current period that falls at least 14 months after it opened; compared with its revenue
for the corresponding part of the previous period. This 14 month approach has been used as it excludes the two month halo period which new stores experience following opening.
B&M European Value Retail S.A. Annual Report and Accounts 2019
13
Page Title at start:Content Section at start: Chief Executive Officer’s review
Driving forward
B&M’s growth strategy
Simon Arora
Chief Executive Officer
Profit before tax
£249.4m
+8.8%
2018: £229.3m1
2019
2018
2017
£249.4m
£229.3m
£182.9m
Overview
It is pleasing to report another year of continued revenue and
earnings growth and renewed trading momentum, whilst absorbing
the necessary costs of preparing the business for long-term growth
and success.
The core B&M business had a good year, tempered in part by the
weak performance of our Homewares categories during the second
and third quarters; an issue which was temporary and which has
now been resolved, as referred to below. A strong return to trading
form in the fourth quarter, with a strong performance from new stores
and a robust gross margin, combined with diligent control of costs,
delivered a good overall outcome in terms of profit growth and cash
generation. We remain pleased by our acquisition of Heron Foods,
which continued to perform well.
In Germany, performance was hampered by the need to clear
obsolete stock to make way for new ranges and a greater proportion
of product sourced through B&M’s supply chain. With most of this
costly activity now concluded, the Jawoll team are able to offer its
shoppers a more compelling product range, utilising B&M’s approach
to limited assortment and directly-sourced product, being the key
drivers of our disruptive pricing in the UK.
We are delighted to have completed the acquisition of Babou in
France last October. It is a business with modern, well-invested stores
and infrastructure, ideally suited we believe for the introduction of our
model. The new management team have made good early progress
but we are at the beginning of a far-reaching change to the product
offer in the business. This is an ongoing process which will continue
over the coming financial year.
Strategic development
Driving forward B&M’s growth strategy in the UK and in Europe’s two
largest consumer markets in Germany and France are the key areas
of our focus. We are applying the lessons learned from our early
experience of operating in Germany to France, with the aim of
unlocking substantial long term value for the Group in those markets.
We have a long growth runway in the UK, a winning formula and
plentiful opportunities to add new stores profitably. The same is not
yet proven in Germany and France but I am hopeful that we have
made significant strides towards that objective in recent months
as we deal with legacy slow-moving stock issues in both those
businesses. We remain excited about the strategic opportunity
in all our chosen markets.
B&M’s strategy for driving sustainable growth in revenues, earnings
and free cash flow has four key elements and the business has made
further progress during the year with each of these priorities:
1
This relates to the 52 week period ended 24 March 2018,
which is comparable with the 52 week 2018/19 financial
year.
14
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
“The opportunity to expand B&M’s
UK store network remains large.”
1. Delivering great value to our customers
Consistently good value across a limited range of products and
categories, which customers buy regularly for their homes and
families, is at the heart of our appeal. Combined with constant
newness in our general merchandise offer, with typically c.100 new
lines per week, it is why over 4 million shoppers now come to our UK
stores each week. A significant proportion of our customers visit our
stores at least once every two weeks, reflecting our success in
becoming a core part of their shopping habits.
Our disciplined approach to keeping running costs low, buying large
volumes per product line direct from factories and stocking only a
limited assortment of the best-selling items in any one category, is why
we are able to be so competitive and also profitable. Successful value
retailing is centred on an obsession with keeping costs and prices low;
but it is more than that for B&M, we are not just about selling cheap
products, we are about selling good quality products, including many
leading brands, at discounted prices to customers who either need or
enjoy a bargain.
This year we have achieved significant progress in some key
categories which suggest customers increasingly see B&M as a
destination retailer. This is an important change from even a few years
ago and one that augers well for the future. For example, our share of
the UK Toy market today is c.7% versus our share of total retail
spending in the UK at under 1%. Toy category revenues have grown
faster than the business for some time with the result that more key
suppliers, such as Lego, Disney and MGA, are partnering with us and
helping us build more authoritative ranges for customers. We see
more opportunity in this already important category.
Our Homewares ranges endured a period of marked
underperformance in the second and third quarters of the year but
after a complete category review, reset and re-merchandising of our
stores, featuring improved product and display, Homewares have
resumed growth and have returned to positive like-for-like growth on
the prior year. This remains a large, highly fragmented market from
which a number of existing retailers are continuing to exit space either
locally or nationally and, with our strengthening offer, we see this as
an important opportunity for B&M.
Our seasonal category sales had a very good year. We saw strong
demand during the summer months for Garden and Outdoor Leisure
products, but with the prolonged summer we were short on stock.
Christmas Decorations sold well at full price during the peak trading
period for those lines. Our great sell-through in both those seasons led
to a robust overall gross margin performance. These products are
right in B&M’s sweet spot; they are where our pricing is at its most
disruptive, and where the flexible use of our store space can be used
to its best advantage. We believe there is an opportunity to continue to
grow our market share in these large categories, given our competitive
advantage and the structural challenges faced by incumbent retailers
in those sectors.
2. Investing in new stores
The opportunity to expand B&M’s UK store network, both in heartland
areas and in areas where we have few or no stores, remains large.
Our 950 store target for the UK, excluding Heron Foods and B&M
Express, gives us years of growth runway at current rates of
expansion. New store performance and investment returns continue
to be excellent and the flow of attractive, profitable opportunities to
open either purpose-built or existing real estate is strong. Importantly,
this is allowing us to open a number of new stores over and above
our long-term planned objective, and it also means that we are able
to be very selective, maintaining a high level of site and asset quality
as well as competitive rental levels.
Some 54 main B&M fascia stores were opened in the year. Five of
these were relocations, principally where we were able to secure a
larger, more modern unit in the same catchment area. Ten stores
were closed, reflecting mainly end-of-lease circumstances, leaving
the B&M fascia with overall net new openings in the year at 44 and
total store numbers at 620 at the year-end. The programme for the
current year is strong, with some 50 gross new stores now planned
compared with our initial forecast for the year of 45. The forward
pipeline for FY21 is also in very good shape.
Heron Foods traded well throughout the year, continuing to benefit
from improvements to its product assortment. Heron Foods opened
20 new stores in the year and closed or replaced 4 stores, ending the
year with 281 total stores. A similar new store programme for Heron
Foods is planned for the current year.
In Germany, Jawoll opened, as planned, a total of 10 new stores,
including 6 under the B&M fascia in regions outside its heartland
trading area. A further existing store was also converted to the B&M
fascia, with pleasing results. Jawoll finished the year with 96 total
stores. Approximately 5 new stores are planned for the current year,
with a strong pipeline of potential new stores in place which could
support an acceleration of openings in the future if the performance
of the business improves sufficiently quickly. Babou has plans to open
5 new stores most of which had been committed to and were under
negotiation before acquisition. Babou operated 96 total stores at the
year-end.
B&M European Value Retail S.A. Annual Report and Accounts 2019
15
Page Title at start:Content Section at start: Chief Executive Officer’s review continued
Strategic development continued
3. Developing our international business
We took two significant steps in the year as we pursue our ambition
to develop a substantial international business. The first was to
accelerate the clearing through of poor-selling legacy ranges in
our German business, Jawoll. The second was to acquire Babou,
a 95-strong discount store chain in France, giving us a platform to
develop in a third large European market. In France we have adopted
a fast pace of change in the business as we apply the lessons
learned from our early experience of operating in Germany.
These are important steps. The Jawoll management team’s ability to
drive revenue and earnings growth has been hindered by the poor
performance of product ranges assembled by the previous
management team. Whilst progress has been made, the overall
performance, in both revenue and profit terms, has been hindered
by the need to mark down and clear that slow selling legacy
inventory. This activity has been costly but is now largely complete,
which will allow the team to now focus on further improving the
offer for customers alongside improving the efficiency of logistics
and distribution.
The performance of the Jawoll categories in which the range changes
are advanced or completed has been encouraging. Significantly, the
product departments that benefited from the B&M Supply Chain have
performed well, particularly where they have not been hindered by
legacy stock still in the business. Much work remains to be done in
logistics and distribution but we have much greater clarity in terms
of how to generate profitable growth in new markets.
It is early days in France but the new management team has already
benefited from the knowledge and experience gained in Germany
and from the opportunity to gain an understanding of the B&M
sourcing and ranging model. We have a comprehensive integration
plan which we developed well ahead of the acquisition. Furthermore,
the costs associated with the necessary changes in Babou’s product
ranges have also been built into our plans. The initial phase of
inventory clearance in Babou, focused primarily on clothing, is already
underway, as is the forward ordering of B&M sourced general
merchandise and also impulse grocery and FMCG items. The team
has a lot to do but the transformation of Babou is on track and the
initial reaction to B&M sourced products has been pleasing and gives
us confidence to believe that the deliberate shift to reduce the size
of the Clothing and Footwear categories is the correct strategy for
that business.
4. Investing in our people and infrastructure
Construction of our new Southern UK Distribution Centre in Bedford is
nearing completion. We expect handover to take place in the next few
weeks, and indeed our fit-out of the early phases of the building has
commenced. We are on track for the initial operational phase of the
centre from January 2020 onward, after Christmas peak trading. In
FY20 we will incur rental and occupation costs (subject to completion
of a sale and lease back) of approximately £6m and also
commissioning costs of approximately £6m, which we expect to
recover through the cash development profit realised on a sale and
leaseback. From FY21 onwards we expect efficiency savings in our
Transport function to largely offset the additional rent. We expect the
new Distribution Centre will provide sufficient capacity for our
expansion plans into the foreseeable future, including our 950 store
target for B&M.
Over the course of the financial year under review, we completed the
roll-out of a best-in-class Warehouse Management System across
our key Distribution Centres in the North West. The cost of the roll-out,
training and implementation had impacted the costs of the
warehouse operation but this investment should now lead to
improved productivity, resilience and scalability going forward.
At our store level in the coming year we are investing in a digital
technology compatible Workforce Management System which will be
implemented over the course of that year. This investment will help to
plan work rotas between colleagues, manage Time & Attendance
effectively and allow colleagues to use smart phones to carry out
what were previously paper-based processes. This investment will
benefit both the business and our colleagues.
We have created a plan to invest in strengthening our senior
management to support the continued rapid expansion of the
business of the Group. The implementation of the plan has
commenced during the year with senior manager recruitments in
European-wide areas of responsibility in the Group for Finance and
FMCG. Other senior recruitments have been made in our Buying
teams in the UK and France in particular, and others are planned in
relation to other areas of strategic and operational importance as the
Group continues to grow.
16
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
“Babou is a business with modern,
well-invested stores and
infrastructure, ideally suited to the
introduction of our model.”
Corporate social responsibility
B&M’s presence in local towns and communities helps to create new
jobs each time we open a new store and it extends our reach to more
new customers who want or need a bargain on everyday purchases
for their households. This helps limited spending budgets go further.
Our Heron Foods, Jawoll and Babou stores similarly serve the
communities in which those stores are located and where new
ones are opened each year. We also recognise the important part
we have to play in relation to other aspects of our operations and
their impacts in relation to colleagues, suppliers, the wider
community socially and the environment. Some points I would like
to highlight this year include:
•
•
the creation of over 1,600 new local jobs in the UK and Germany
together, mainly through our store expansion;
the development and training of our own talent through our
Step-Up Programme promoting 202 colleagues to B&M Deputy
and Store Manager positions;
• our recycling of high levels of supply chain waste, with 99.5% of
the Group’s trade packaging waste being recycled; and
• proudly supporting for a third year the Mission Christmas charity
appeal through sponsorship, with yet more of our stores
participating as collection points for presents donated for
underprivileged or poorly children for the appeal.
Outlook
Our UK strategy for high-returning growth is on track and our new
Southern warehouse infrastructure is almost ready. This will give us
the capacity to fulfil our long-term objectives in a market where we
see considerable opportunity for our winning formula. Consequently,
we look forward to the year ahead and beyond with confidence.
The source of our competitive advantage is the model itself and the
next challenge for us is to bring the same price disruption and value
for money to our new markets in Germany and France when fully
applied as it does in our home market. That is the task we have set
for ourselves. Success must ultimately be measured in revenues,
profits and returns and we recognise there is much work to be done
over the next 2 years in these two subsidiaries.
Our core B&M fascia, representing 80% of our Group Revenues,
ended the year with good trading momentum, despite the fourth
quarter not having the benefit of Easter trading and the continued
general political uncertainty. I am pleased to report that this strong
positive momentum has continued into the new financial year. We just
achieved our best ever Easter trading season, with healthy positive
like-for-likes, but it would be prudent to expect more moderate
like-for-like growth in the full year as a whole.
On behalf of the Board I would like to thank all of our colleagues in
stores, distribution centres and offices across the Group for their
continued hard work and commitment.
Simon Arora
Chief Executive Officer
22 May 2019
B&M European Value Retail S.A. Annual Report and Accounts 2019
17
Page Title at start:Content Section at start: Feature
European expansion
Store network and distribution
Following on from B&M’s initial expansion into Germany in 2014,
with our acquisition of an 80% shareholding in Jawoll, the Group has
continued to look for other opportunities to develop its disruptive
value retail model in other European markets.
In October 2018 the B&M Group acquired the Babou general
merchandise value retail group with a network of 95 stores in France.
The French market is an attractive discount retail channel which has
grown in popularity in recent years with a number of other
established operators. The acquisition of Babou is a platform to enable
B&M to develop and grow its value retail model in the French market.
Babou’s stores are mainly in out-of-town locations and have an
average store size of c.27,000sq ft. This is comparable to the highly
successful B&M Homestore format in the UK, in terms of size,
locations and customers.
Number of stores
96
Average store size
c.27,000 sq ft
18
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
European expansion
The store network is supported by a 540,000 sq ft Distribution
Centre in central France near the City of Clermont-Ferrand where
the Head Office of Babou is also located. The central location of
the Distribution Centre enables it to operate as a hub supporting
the whole of the existing store network.
Integration plan
Our strategy for the Babou business is to apply B&M’s direct
product sourcing and limited assortment SKU model, while
refining Babou’s existing product offering.
To achieve this the SKU count is being reduced from the c.30,000
SKU’s which the business was carrying at the time of acquisition,
to a much smaller number of SKU’s going forward by focusing on
the best sellers only in each product category.
The deployment of the limited assortment model is now already
well underway in the sourcing and procurement processes
which Babou has adopted in relation to new product ordering
from the B&M general merchandise supply chain.
Customer profile and product categories
Targeting a customer profile of those shoppers who either need or
are simply looking for a bargain in relation to their weekly food and
grocery basket, while also offering general merchandise products
on the same shopping visit all at disruptive value prices, we believe
will provide a winning formula in France which has proved to be
enduringly appealing to B&M’s customers in the UK.
Therefore as well as the introduction of general merchandise
products sourced by Babou’s own French buyers from the B&M
supply chain, the food and grocery offering of Babou is being
supplemented to provide customers with the attraction of leading
brand products at value prices, which has been a key to B&M’s
success in attracting millions of customers to our stores, week-in,
week-out in the UK over many years.
Product Categories
General Merchandise
51.3%
Seasonal General Merchandise 9.0%
Clothing and Footwear
39.7%
B&M European Value Retail S.A. Annual Report and Accounts 2019
19
Page Title at start:Content Section at start:
Financial review
A strong performance
again this year
Paul McDonald
Chief Financial Officer
Increase in store estate FY19
17.9%
Number of stores 31 March 2019
1,093
2018: 927
Profit after tax
£202.7m
+9.1%
2018: £185.5m
2019
2018
2017
£202.7m
£185.5m
£144.0m
Accounting period
The FY19 accounting period represents the 52 weeks trading to
30 March 2019 and the comparative financial period represents the
53 week period for the B&M UK segment to 31 March 2018. Throughout
the financial review and unless otherwise stated, the FY19 commentary
will refer to the 52 weeks to 24 March 2018 for the FY18 comparative,
so as to better reflect the underlying business performance.
Financial performance
Group
The Group revenue in FY19 was £3,486.3m (FY18: £2,976.3m), this
represents an increase of 17.1% and on a constant currency basis,
a 17.0% increase1. The overall gross margin was 34.1% (FY18: 33.9%).
The operating costs of the Group, excluding depreciation and
amortisation, grew by 20.0% to £877.1m, including new store
pre-opening costs. Depreciation and amortisation expenses grew
by 37.4% to £49.7m, reflecting the investment in new stores and the
additional depreciation on the non-comparable period relating to
Heron Foods and Babou.
We report an adjusted EBITDA2 to allow investors to understand better
the underlying performance of the business. The items that we have
adjusted are detailed in note 3 on page 85, they totalled £(2.5)m in
FY19 (FY18: £4.9m).
Overall Group adjusted EBITDA2 increased by 11.9% to £312.3m.
B&M UK
In the UK, B&M revenues increased by 8.7% to £2.789.4m, principally
driven by the new store opening programme, including both the
annualisation of revenues from the 39 net new store openings in FY18
and the 44 net new store openings in FY19, and an additional £11.5m
from wholesale revenue.
There were 54 gross new store openings in the year, and 10 closures,
with 5 of the closures being relocations. The 54 openings contributed
£100.7m of revenues in FY19, and the stores continue to deliver attractive
returns on investment, and where appropriate, we will continue to take
advantage of relocation opportunities that allow us to open modern,
large stores that allow our customers access to our full product offering.
Revenues in the like-for-like3 store estate grew by 0.7% (FY18: 4.7%)
and we are continuing to see a strong performance on the Grocery /
FMCG ranges as the UK consumer structurally continues to seek out
value. The Homewares categories account for c. 16% of the revenue
mix and have had a disappointing year, which has been a drag on
the overall like-for-like3 of 1.8% but it was encouraging that the new
Homeware ranges that have been introduced in the fourth quarter
have performed well and we had a strong finish to the year with the
overall fourth quarter like-for-like revenues growing by 5.8% despite
the headwind of the timing of Easter trading.
20
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
In the B&M UK business the margin increased
by 29 basis points reflecting the strong sell
through on the seasonal ranges despite the
drag from the mix effect of the strong
like-for-like3 revenue performance on the
lower margin Grocery and FMCG products.
In the B&M UK business, operating costs,
excluding depreciation and adjusting costs,
grew by 8.0% to £657.0m, while costs as a
percentage of revenues decreased by 16
basis points to 23.6%. Within the year the
business has managed to largely absorb
the impact of the living wage through
efficiency savings, although there have been
inflationary cost pressures on transport and
distribution costs. The absolute cash increase
in costs was principally driven by the new
store opening programme, from both the
new stores opened in the year and the
annualisation of costs from the new stores
opened in FY18 and also the variable
operating costs required to service the
new stores.
In the B&M UK business the adjusted EBITDA2
increased by 13.5% to £297.0m (FY18: £261.7m)
and the adjusted EBITDA2 margin increased
by 49bps to 10.6%.
Jawoll
At our German business, Jawoll, revenues
grew to £213.7m, which was a 6.7% increase
over the £200.3m achieved in FY18. The
growth was driven by the annualisation of
the 11 net stores opened in FY18 and the
10 openings in FY19 and some modest
like-for-like sales growth.
In our German business, margins reduced
by 392 basis points as we have continued
to clear old slow-moving stocks ahead of
the new Spring/Summer seasonal ranges
arriving in store from the B&M Far East
supply chain.
Operating costs excluding depreciation,
grew by 18.4% to £79.4m, with costs as a
percentage of revenues increasing by 368
basis points to 37.2%. This increase is largely
as a result of increased warehouse costs
supporting the move to direct sourcing.
The EBITDA decreased by 281.9% to £(10.2)m
(FY18: £5.6m).
Summary operating profit
£ millions
Number of stores
UK
Germany
France
Total stores
Revenue
Gross profit
%
Operating costs
Adjusted EBITDA
%
Depreciation
Interest
Adjusted profit before tax
Adjusted costs
Adjusted interest income
Profit before tax
Pro-Forma
52 weeks to
24 March 2018
53 weeks to
31 March 2018
Versus
Pro-Forma
52 weeks
841
86
–
927
841
86
–
927
2,976.3
1,010.2
33.9%
3,029.8
1,028.4
33.9%
(731.2)
279.0
9.4%
(36.2)
(21.4)
221.5
(4.9)
9.4
226.1
(745.1)
283.3
9.3%
(36.9)
(21.6)
224.8
(4.9)
9.4
229.3
7.1%
11.6%
17.9%
17.1%
17.7%
0.2%
20.0%
11.9%
-0.4%
37.3%
7.3%
8.2%
-150.9%
-23.7%
10.3%
2019
901
96
96
1093
3,486.3
1,189.4
34.1%
(877.1)
312.3
9.0%
(49.7)
(22.9)
239.8
2.5
7.1
249.4
Reconciliation of adjusted items
Profit on ordinary activities before interest
and tax
Add back depreciation and amortisation
EBITDA2
Effect of derivatives in cost of sales
Effect of derivatives in administrative expenses
Heron/Babou acquisition costs
Foreign exchange on inter company balances
Audited
52 weeks to
30 March
2019
Pro-Forma
52 weeks to
24 March
2018
Audited
53 weeks to
31 March
2018
265,151
49,674
314,825
(61)
(5,646)
425
2,799
238,020
36,155
274,175
(509)
4,334
1,049
–
241,514
36,882
278,396
(509)
4,334
1,049
–
Adjusted EBITDA2
312,342
279,049
283,270
For further information and segmental detail of adjusted measures see notes 2, 3 and 4 to the financial
statements on pages 84 to 86.
Heron
Revenues at our convenience store
business, Heron Foods grew to £354.1m
(FY18: £210.0m) of which £121.0m was
attributable to the period when there was no
FY18 comparison with the business having
being acquired in August 2017. The business
has delivered a strong sales performance
with revenues benefitting from an improved
ambient food offer leveraging from the
B&M supply chain and relationships. The
new store programme has accelerated and
we opened 20 gross stores in FY19 (net 16
stores) and we have plans to open at least
15 in FY20.
The impact of a higher mix of branded product
has resulted in a gross margin reduction of
54bps but as a result of strong cost control and
the operating leverage on the fixed cost base,
operating costs as a percentage of revenues
decreased by 57bps to 25.9% (FY18: 26.4%).
The EBITDA2 was £19.9m, which compares
to the £11.7m for the part period of ownership
in FY18 and the EBITDA margin improved by
3 bps to 5.6%.
B&M European Value Retail S.A. Annual Report and Accounts 2019
21
Page Title at start:Content Section at start: Financial review continued
Babou
Following the acquisition of Babou in October 2018, we have
generated revenues of £129.1m and the business is progressing with
the planned changes to the product mix and direct sourcing, as we
move the business closer to the B&M format in the UK. One new store
was opened in March 2019, taking the total store estate to 96. There
are 5 new store units most of which had been committed to and were
under negotiation before the acquisition. Those openings will be
second half weighted. An additional £5.6m of EBITDA2 was achieved
under our ownership of Babou.
Financing costs
The net interest charge in the year was £15.7m (FY18: £12.2m)
representing an increase of 28.9%.
The interest cost represents the underlying cost of £22.9m (FY18:
£21.6m) which was an increase of 6.0% reflecting the impact of the
additional borrowings undertaken to finance the acquisition of
Babou. The underlying charge can be analysed between bank, high
yield bond, finance lease interest and interest receivable of £21.0m
(FY18: £20.1m) and amortised fees of £1.9m (FY18: £1.5m).
Interest income on an unadjusted basis amounted to £7.2m (FY18:
£9.4m) and comprised a £8.1m revaluation in the put/call option
relating to the 20% shareholding in Jawoll that is not owned by the
Group (FY18: £8.0m) and a £0.9m expense relating to the accounting
for the deferred consideration following the Heron Foods acquisition.
Profit before tax
The statutory profit before tax was £249.4m, which compares to
£229.3m in FY18 for the 53 week statutory period in that year. We also
report an adjusted profit before tax to allow investors to understand
better the operating performance of the business (see note 3). The
adjusted profit before tax2 was £239.8m (FY18: £221.5m) which
reflected a 8.3% increase.
The Group’s net capital expenditure4 during the year was £105.7m,
which was principally driven by the new store programme across the
fascias, with a capital expenditure of £30.9m, £2.9m, £5.1m and
£1.2m respectively in B&M, Heron Foods, Jawoll and Babou.
The Group continues to invest in its store estate and an additional
£34.9m was incurred on maintenance expenditure. The overall
maintenance expenditure represented 1.0% of revenues and included
other in-store investments and IT investments.
Following the acquisition of the land in the UK in FY18 for the new UK
distribution centre in Bedford in the South of the UK we have incurred
a further £20.5m on the build costs of the facility. An additional
£10.3m was incurred in acquiring 5 freehold retail properties.
It remains the Groups intention to enter into a sale and leaseback
of the facility in FY20.
Net debt and cash flow
As a Group we continue to be strongly cash generative and the cash
flow from operations increased by 7.2% to £259.4m (FY18: £242.0m for
the 53 week statutory period).
The cash generation reflects the continued growth in the Group’s
EBITDA2 and the continued attractive cash paybacks from the new
store opening programme, combined with the Group’s working
capital control.
During the year the Group paid £75.0m of dividends.
The Group’s net debt6 in the year was increased to £621.6m
(FY18: £535.3m) and the net debt6 to adjusted EBITDA2 has increased
to 1.99 times (FY18: 1.92 times). This remains comfortably within our
2.25 times leverage target, and excluding the costs incurred on the
new Southern distribution centre, the leverage would have reduced to
1.75 times.
Taxation
The tax charge in the year was £46.7m (£43.5m in FY18 for the
53 week statutory period) and the effective rate was 19.0%. We expect
the tax rate going forward to reflect the mix of the impact of the tax
rates in the countries in which we operate being 19% in the UK, 30% in
Germany and 28% in France, with an effective rate of 20% in FY20.
The Board adopted a long-term capital allocation policy in 2016 to
provide a framework to help investors understand how the Group will
continue to balance the funding requirements of a growth business
like B&M with the desire to return surplus capital to shareholders. The
Board will continue to evaluate opportunities to invest and support
the growth of the business along with the scope for any incremental
return of capital to shareholders in the context of that framework.
As a Group we are committed to paying the right tax in the territories
in which we operate. In the UK the total tax paid was £277.0m. This is
mostly those taxes which are ultimately borne by the company
amounting to £153.5m which includes corporation tax, customs
duties, business rates, employers national insurance contributions
and stamp duty and land taxes. The balance of £123.5m are taxes we
collect from customers and employees on behalf of the UK Exchequer
which includes Value Added Tax, Pay As You Earn and employee
national insurance contributions.
Profit after tax and earnings per share
The profit after tax was £202.7m compared to £185.8m in FY18 and
the fully diluted earnings per share was 20.5p (FY18: 18.6p for the 53
week statutory period), being an increase of 10.2%.
On an adjusted profit after tax basis2, which we consider to be a
better measure of performance due to the reasons outlined above,
it was £194.6m which was a 9.5% increase over last year
(FY18: £177.7m) and the adjusted fully diluted earnings per
share2 was 19.7p (FY18: 17.8p), being an increase of 10.7%.
Investing activities
There was a net cash outflow of £75.9m (net of cash acquired)
following the acquisition of Babou in October 2018, this was financed
by an additional loan facility.
New accounting standards
The Group will adopt IFRS16, being the new accounting standard
relating to leases, which will apply to the financial statements of
the Group for the financial year 2019/20. The adoption of this
new standard will have a significant impact on the statement of
comprehensive income and the statement of financial position
and there will be a presentational change on the statement of cash
flows although there will be no change to the overall cash flow of
the Group.
The new standard requires that all leases are recognised on the balance
sheet with a lease liability equal to the discounted future payments
expected to be made under the lease, and a right to use the asset
which is initially equal to the lease liability. The rental payments will
be accounted for as a repayment of the lease liability, which includes
an implied interest element and the asset that has been recognised
will be amortised on a straight line basis over the length of the lease.
The Group has decided to adopt the fully retrospective approach
which means that we will restate the brought forward equity balance
and we will recognise a lease liability in the region of £1.1bn and a
right of use asset in the region of £1.0bn, with an adjustment to be
made to retained earnings in the region of £60m. This is based on the
duration of contracts and judgments we have made in relation to
cases where the Group is reasonably certain that it will exercise any
22
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
contractual extension or break options, but not in relation to leases
which have expired (including those where the Group continues to
trade) where the Group has not concluded lease renewal terms.
companies do not carry on retail trading business operations and
there are no dividend blocks of any material amounts in any year
from expenses which those companies may incur.
In terms of the impact on the profit before tax and earnings per share
(“EPS”), this is dependent upon the lease maturity profile of the Group.
IFRS16 is dilutive at the commencement of a lease and accretive
towards the end of a lease, with the interest charge being front-end
loaded relative to the straight-line rental charge under IAS 17. Given
the Group has a typically younger lease profile, we are therefore in
the period when IFRS is dilutive and this is likely to remain the same
whilst we continue to open new stores. The impact on the FY19 profit
before tax would have been a reduction in the region of £14m, with
the rental expense of £167m being replaced by an amortisation and
interest charge in the region of £126m and £55m respectively.
The Board is satisfied that as the Group remains strongly cash
generative it is in a very good position to fund and maintain its
dividend policy. The principal risks of the Group and in particular
those relating to competition, economic environment, commodity
prices, supply chain, infrastructure and international expansion are
relevant to the ability of the Group to maintain its dividend policy in the
future. The Group however maintains strategies to mitigate those
risks and the Board believes the Group has a robust and resilient
business model through the combination of having a value-led
product assortment which competes across a very broad section of
the retail markets in our chosen locations.
As previously described there is no cash flow impact from the
transition to IFRS16 and the adoption of this standard will have no
impact on the way we commercially evaluate new store opportunities
and lease renewals. Additional detail is contained in note 31 on
pages 114 and 115.
In the last year the Group has continued to invest to support the
growth of the business with particular highlights being the acquisition
by the Group of Babou with an enterprise value of €91.2m and also the
construction in Bedford of a 1 million sq ft Southern distribution centre.
There are two new accounting standards that apply to the Group in
the financial year under review. IFRS 9 (Financial Instruments)
introduced a new impairment model on expected loss and limited
changes to the classification and measurements of financial assets.
IFRS 15 (Revenue from Contracts with Customers) was in relation to
some changes to the recognition of revenues. We have adopted both
of these new standards and neither standard had any material
impact in relation to the accounting of the Group.
Dividends
The Group has a dividend policy which targets a pay-out ratio of
between 30 to 40% of net income on a normalised tax basis. The
Group generally pays the interim and final dividends for each
financial year approximately in proportions of one-third and
two-thirds respectively of the total annual dividend.
The Group is strongly cash generative and its capital policy is to
allocate cash surpluses in the following order of priority:
the roll-out of new stores with a strong payback profile;
1.
2. ordinary dividend cover to shareholders;
3. mergers & acquisition opportunities; and
4. returns of surplus cash to shareholders.
The above list is a summary of the main items, but it is not an exhaustive
list as other factors may arise from time to time which require
investment to support the long-term growth objectives of the Group.
The parent company of the Group is an investment holding company
which does not carry on retail commercial trading operations. Its
distributable reserves are derived from intra-group dividends
originating from its subsidiaries. As the parent company is a
Luxembourg registered company the Board is permitted, subject to
using distributable profits first, to have recourse to the company’s share
premium account as a distributable reserve. It remains the Groups
policy though generally to have recourse to distributable profits from
within the Group, and accordingly, ahead of interim dividends, and also
ahead of the year end in relation to final dividends, the Board reviews
the levels of dividend cover in the parent company to maintain sufficient
levels of distributable profits in the parent company for each of those
dividends. The Group’s consolidated balance sheet position as at
30 March 2019 includes distributable profit reserves of £458m.
The vast majority of these reserves have been generated by and are
on the balance sheet of the principal trading subsidiary of the Group
in the UK, B&M Retail Limited. There are intermediate holding
companies in the Group structure between B&M Retail Limited and
the Group’s ultimate parent company, but those intermediate holding
When the construction phase of the Southern distribution centre has
been completed, it is intended to release the cash investment made
in that project back to the Group by a sale and leaseback of the
distribution centre.
Notwithstanding those investments the Group has maintained its
dividend this year at the higher end of its dividend policy. An interim
dividend of 2.7p per share was paid in December 2018 and it is
proposed to pay a final dividend of 4.9p per share5. Subject to
approval of the dividend by shareholders at the AGM on 26 July 2019,
the final dividend of 4.9p per share is to be paid on 2 August 2019 to
shareholders on the register of the Company at the close of business
on 21 June 2019. The ex-dividend date will be 20 June 2019.
Paul McDonald
Chief Financial Officer
22 May 2019
1
2
3
Constant currency comparison involves restating the prior year Euro revenues using
the same exchange rate as used to translate the current year Euro revenues.
The Directors consider adjusted figures to be more reflective of the underlying business
performance of the Group and believe that this measure provides additional useful
information for investors on the Group’s performance. EBITDA, Adjusted EBITDA and
Adjusted Profit are non-IFRS measures and therefore we provide a reconciliation from
the statement of comprehensive income. See the reconciliation of adjusted measures to
statutory measures on page 21 for further details. EBITDA represents profit on ordinary
activities before net finance costs, taxation, depreciation and amortisation. The figures
presented in the strategic report are for the 52 weeks ended 30 March 2019, and unless
otherwise stated, the comparable figures for previous year are for the 52 week period
ended 24 March 2018 rather than the statutory reported 53 week period for that prior year.
Like-for-like revenues relate to the B&M estate only and include each store’s revenue
for that part of the current period that falls at least 14 months after it opened;
compared with its revenue for the corresponding part of the previous period. This 14
month approach has been used as it excludes the two month halo period which new
stores experience following opening.
4 Net capital expenditure includes the purchase of property, plant and equipment,
intangible assets and proceeds of sale of any of those items.
5. Dividends are stated as gross amounts before deduction of Luxembourg withholding
tax which is currently 15%.
6. Net debt comprises interest bearing loans and borrowings, overdrafts, cash/cash
equivalents and finance leases excluding capitalised fees. See notes 18, 20 and 21 for
more details.
B&M European Value Retail S.A. Annual Report and Accounts 2019
23
Page Title at start:Content Section at start:
Key performance indicators
Monitoring performance
The key performance indicators we use to monitor the performance of the
Group and how we performed against them are as follows:
Financial
Total sales growth (%)1
17.1%
2019
2018
2017
Strategic link
£
Net capital expenditure (£m)2&3
Adjusted EBITDA (£m)1
£105.7m
£312.3m
17.1
22.4
19.4
2019
2018
2017
50.4
105.7
114.1
2019
2018
2017
312.3
279.0
234.9
Strategic link
£
Strategic link
£
Description
Our strategy is to grow our business in new
markets in the UK, Germany and France.
This measure, together with the number of new
store openings demonstrates our performance
against that goal.
Performance
The business grew revenues by 17.1% and store
numbers by 17.9% and our strategy remains
on track.
Description
As our growth is mainly derived from investment
in new stores, we monitor capital expenditure to
ensure expenditure on investment in new stores
is not excessive, but sufficient also to maintain our
existing store estate.
Performance
We incurred £74.9m of capital expenditure,
excluding £30.8m of the expenditure on the
development of a new southern distribution
centre and the acquisition of some freehold
stores. The southern distribution centre and the
freehold stores will ultimately be the subject of
sale and lease-back transactions. Our capital
expenditure was within our budget targets.
Description
In addition to growing sales, as we open new
stores we want to ensure that the sales growth is
profitable and we measure adjusted EBITDA.
Performance
The Group’s adjusted EBITDA grew by +11.9%, and
our strategy remains on track.
Adjusted EBITDA (%)1
Adjusted diluted earnings per share1
Cash generated from operations (£m)3
9.0%
2019
2018
2017
Strategic link
£
19.7p
9.0
9.4
9.7
2019
2018
2017
Strategic link
£
£259.4m
19.7
17.8
14.9
2019
2018
2017
259.4
242.0
210.9
Strategic link
£
Description
To ensure we are not diluting our earnings as we
expand our business, in addition to the cash
adjusted EBITDA we also measure this as a
percentage.
Description
It is important to our investors to grow our
earnings per share as well as our adjusted
EBITDA, as it’s a measure after we have taken
account of depreciation, interest and tax charges.
Performance
The Group’s adjusted EBITDA reduced by 42
basis points.
Performance
The adjusted diluted earnings per share grew
by 10.7%.
Description
In addition to monitoring EBITDA growth, we are
committed to continuing to be efficient in
generating cash. We monitor this to ensure that
we are actively managing our working capital
and in particular our stock levels.
Performance
We grew our cash from operations by 7.2% in
the year.
1
The Directors consider adjusted figures to be more reflective of the underlying business performance of the Group and believe that this measure provides additional useful information for
investors on the Group’s performance. EBITDA, Adjusted EBITDA and Adjusted Profit are non-IFRS measures and therefore we provide a reconciliation from the statement of comprehensive
income. See the reconciliation of adjusted measures to statutory measures on page 21 for further details. EBITDA represents profit on ordinary activities before net finance costs, taxation,
depreciation and amortization. Unless otherwise stated the figures presented above have been compared with the 52 week period ended 24 March 2018 in the previous year rather than
the statutory reported 53 week period in that prior year.
2 Net capital expenditure includes the purchase of property, plant and equipment, intangible assets and proceeds of sale of any of those items.
3 Where items relate to 2018 they are for the 53 week statutory reporting period ended 31 March 2018.
4
Like-for-like revenues relates to the B&M estate only and includes each store’s revenue for that part of the current period that falls at least 14 months after it opened; compared with its
revenue for the corresponding part of the previous period. This 14 month approach has been taken as it excludes the two month halo period which new stores experience following opening.
24
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
UK like-for-like sales growth (%)4
Non-financial
Net new stores opened
Colleague Step-Up Programme
70
59
57
202
2019
2018
Strategic link
£
202
194
70
2019
2018
2017
Strategic link
£
+0.7%
2019 0.7
2018
2017
Strategic link
£
4.7
3.1
Description
The main driver of our growth is the new store
opening programme. However at the same
time we want to see sustained profitability from
the existing store estate. The main indicator we
use to ensure that the profitability of the existing
store estate is sustained, is like-for-like sales.
Performance
We grew our UK like-for-like sales by +0.7%.
Description
Our new stores opening programme is the main
driver for growth across the Group.
Performance
We grew our B&M store estate in the UK by 44
stores, our Heron Foods store estate in the UK by
16 stores, and our Jawoll store estate in Germany
by 10 stores in the year under review.
Description
Developing, training and promoting home grown
talent in relation to the management of our stores,
is an important measure of how we seek to
address progression and colleague retention,
and make our business an attractive place to
work for existing colleagues and also new talent
as we continue to open new stores. Our Step-Up
programme includes training over an 8 month
period for existing colleagues on a variety of
aspects of store operational areas.
Performance
In the financial year under review, 202 existing
colleagues were promoted from our Step-Up
programme to Store Manager or Deputy
Store Manager roles in the B&M fascia
business in the UK.
Link to strategic initiatives
Deliver great
value for our
customers
Develop our
international
business
Invest in new
stores
Invest in our
people and
infrastructure
25
Profit before tax (£m)3
£249.4m
UK market share
c.1.0%
249.4
229.3
182.9
2019
2018
2017
c. 1.0
c. 0.9
c. 0.7
2019
2018
2017
Strategic link
£
Description
Our overall profit before tax growth, in addition
to using our EBITDA as a performance indicator,
to monitor our depreciation, amortisation and
interest expenses and charges.
Performance
We grew our profit before tax by 8.8%.
Strategic link
£
Description
Our market share of store based retail sales is
relatively low in all our markets. This means there
are lots of catchments where the public does not
have easy access to stores, which provides us
with opportunities for continued expansion.
Performance
In the UK alone we believe that a store target of
950 B&M fascia stores is achievable. We opened
44 net new B&M fascia stores in the year under
review, giving a total estate of 620 stores for that
fascia. We remain on track with our strategy
under our new store opening programme.
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Principal risks and uncertainties
Risk management approach
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 mitigations 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.
The Internal Audit function of the Group reports on the effectiveness
of internal control procedures to the Audit & Risk Committee as part
of its annual internal audit plan, taking into account current
business risks.
The Group’s framework for managing its consideration of risk appetite
forms part of the annual risk management cycle and is used to drive
and inform actions undertaken in response to the principal risks
identified by the Board. Within this framework, the Group’s appetite
for risk is defined with reference to the expectations of the Board for
both commercial opportunity and internal control and it is used to
inform the Group’s annual internal audit plan.
Category of risk
Strategic
Financial
Operational
Compliance
Tolerance
Medium
Low to medium
Low
Extremely low
Risk management framework
Movement of risks
The responsibility for identifying and evaluating new and
emerging risks and mitigating actions lies with management.
The Audit & Risk Committee, with the support of the Internal
Audit department and the Group’s General Counsel, is
responsible for monitoring risks and mitigating actions and for
reporting matters of concern to the Board.
The Board oversees the risk management of the Group. It
evaluates the recommendations made by the Audit & Risk
Committee and determines the framework of the type of
controls and mitigating steps required to be implemented, in
the context of how those risks could impact the overall
objectives of the business and risk appetite.
The responsibility for implementation of processes and controls
in relation to the management of risk is delegated by the Board
to the executive and operational senior management of the UK
and German businesses.
The Internal Audit department reports on the progress of
implementation by management of recommendations made to
them, to the Audit & Risk Committee at each meeting during the
year, being a continuous cycle of review.
Risk summary
There were no changes in B&M’s principal risks during 2018/19.
There are no new principal risks to note, and no existing
principal risks have been removed. Movements in B&M’s
existing principal risks are detailed in the Principal Risks table
opposite.
High
t
c
a
p
m
I
4
11
13
5
3
6
7
10
8
12
1
2
9
Low
Low
Likelihood
High
See the table on pages 27 to 30 of Principal Risks behaviour for the
corresponding numbered risks
Note: The impact and likelihood of the above risks is shown after the
assessment of our risk mitigations included in the tables on pages 27
to 30.
26
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
Risk change key
Increased risk
No change
Decreased risk
Risk type
Risk NO Description & potential impact
Risk mitigations
Change
Competition
Economic
environment
1
2
Regulation and
compliance
3
The Group operates in highly competitive
retail markets in the UK, Germany and
France and this could materially impact
the Group’s profitability, share price and
limit growth opportunities.
• 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.
A reduction in consumer confidence could
impact upon customer spending and
subsequently revenue and profitability,
as a result of the prevailing macro-
economic conditions in the markets in
which we operate.
The Group is exposed to regulatory and
legislative requirements, including those
relating to the importation of goods, the
Bribery Act, Modern Slavery Act, tax
evasion, health & safety, employment law,
General Data Protection Regulation
(“GDPR”), the environment and the Listing
Rules. The impact of failure to comply with
regulations could lead to financial penalties
and reputational damage.
• We offer a range of products and price points for
consumers which allows them to trade up and
down.
• We maintain a low cost business model that allows
us to maintain our selling prices as low as possible.
• We have an effective forecasting process that
enables actions to be undertaken reflecting the
economic conditions.
• We have a number of policies and codes across the
business, including a code of conduct that
incorporates an anti-bribery & corruption policy,
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 responsible for
liaising with the Group’s General Counsel and
external advisors where required to ensure that we
identify and manage complicance with any new
legislation.
• We have an internal audit function, and a whistle-
blowing procedure and policy which allows
colleagues to confidentially report any concerns or
inappropriate behaviour within the business.
• The Company has a Group-wide GDPR policy. As a
result of the legal requirements of GDPR a number
of key changes were implemented by the Group
previously. They included changes in our privacy
policies, a new process in relation to data subject
rights requests, issuing privacy notices to all
colleagues, updating the privacy notices for users
of our websites and sending new consent requests
to all pre-existing subscribers to our on-line
mailing list.
B&M European Value Retail S.A. Annual Report and Accounts 2019
27
Page Title at start:Content Section at start: Principal risks and uncertainties continued
Risk type
Risk NO Description & potential impact
Risk mitigations
Change
Warehouse
Infrastructure
4
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.
• Forward plans are in place for additional
warehousing capacity to support the new store
opening programme. The Group in the UK has six
separate warehousing locations and conducts
disaster recovery planning. An additional
warehouse is being built which will support
expansion in the South of England. The warehouse
is expected to be operational in January 2020.
International
expansion
5
IT systems,
cyber security
and business
continuity
6
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 which could
impact upon overall Group performance,
growth and profitability. 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 which could impact
upon overall Group performance, growth
and profitability.
The Group is reliant upon key IT systems,
and disruption to these would adversely
affect businesses operations including in
warehouses and in stores. The potential
impact of data protection failure is that it
may lead to a potential prosecution and
reputational damage to the brand. This risk
also encompasses the IT Security risk of
failing to protect the Group’s systems and
data from viruses, cyber threats and
sabotage.
• The Group maintains adequate business
interruption and increased cost of working insurance
in the event of such a loss.
• Significant international experience on the main
Board. There are experienced senior leadership
teams in Germany and France.
• 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 along with access to the Group’s
supply chains.
• Continuing to invest in both the infrastructure and
technology of our international subsidiaries.
• Monitoring and investigating potential new
opportunities for growth in strategically identified
locations.
• 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; IT investments/
budgets are approved at Board level.
• We have a disaster recovery strategy.
• We have an on-going PCI compliance strategy.
•
IT Security is monitored at Board level and includes
penetration testing and up to date security software.
• Significant decisions for the business are made by
the Group or operational boards with segregation of
duties enforced on key business processes, such as
the payables process, and a robust IT control
environment is in place.
Credit risk
and liquidity
7
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 exposure and surplus cash.
• Regular weekly cash flow forecasts are produced
and monitored.
• Forward looking cash flow forecasts and covenant
testing forecasts are prepared to ensure sufficient
liquidity and covenant headroom exists.
28
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Risk type
Risk NO Description & potential impact
Risk mitigations
Change
Commodity
prices/cost
inflation
European
Union Exit
8
9
Key
management
reliance
10
Supply chain
11
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 could
impact upon distribution and the store and
warehouse overhead base.
The UK’s planned exit from the European
Union has several potential impacts in the
areas of economic and regulatory
environment; withholding tax paid on
internal dividends; import of goods due to
currency exchange volatility and increased
import duties; availability & cost of labour;
and several potentially as yet unknown
impacts.
This risk has increased due to (i) the
approaching EU departure date and the
potential short-term impacts resulting from
this on the business, and (ii) in relation to the
continued uncertainty of whether the UK
leaves the EU with a transitional deal or not.
• 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.
• Forecasts and projections produced by the business
include the expected impact of the national living
wage and therefore the Board’s strategic planning
takes account of these effects.
• B&M believes the impact of the UK's decision to
leave the EU on the underlying performance of the
Group will be limited. During the period of consumer
uncertainty and economic downturn in 2008 B&M's
business performed well.
• Short-term exchange rate volatility is mitigated by
our currency forward position. Any continued
volatility will affect the economic inflationary
environment as a whole.
• B&M imports the majority of its general
merchandise stock into the Port of Liverpool, as
apposed to Southern ports which could be more
heavily impacted.
• The Board will continue to monitor developments
and understand the interpretations with respect to
potential risks, and then act accordingly.
• The Board and management will maintain
professional contacts in order to assist with this
process.
The Group is reliant on the high quality and
ethos of the executive team as well as
strong management and operational
teams. There is a risk that a lack of
succession planning for staff leavers will
impact on organisational performance and
delivery.
This risk ranking has increased in risk
number due to the decreasing significance
to the business of the risk relating to stock
management.
• 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.
• The Nomination Committee develops succession
plans for the Board of Directors and key
management positions. It also reviews the wider
senior management needs of the Group with a view
to ensuring the ability of the Group to compete
effectively.
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
may impact upon brand reputation as there
is a risk that consumers may be harmed.
The nature of the risk is significant as the
Group as a whole imports general
merchandise from the B&M Far East supply
chain. It has decreased in ranking (but not
significance) due to the Brexit and key
management reliance risks having
increased in ranking.
• An experienced sourcing team is responsible for
maintaining an efficient and effective supply chain.
• A range of alternative supply sources are
maintained across the product categories and we
are not over-reliant on any single supplier.
• The Group has anti-bribery and corruption and
anti-modern slavery policies in place in relation to its
supply chain.
• A combination of individual buyers and supplier
employees conduct factory visits.
Risk change key
Increased risk
No change
Decreased risk
B&M European Value Retail S.A. Annual Report and Accounts 2019
29
Page Title at start:Content Section at start: Principal risks and uncertainties continued
Risk type
Risk NO Description & potential impact
Risk mitigations
Change
Store
expansion
12
The ability to identify suitably profitable new
store locations is key to delivering our
growth plans. Failure to identify suitable
locations in areas targeted for new stores
could impact upon store expansion plans
and reduce the rate of growth in the
business.
• Our CEO actively monitors the availability of retail
space with the support of internal and external
property acquisition consultants.
• The flexibility of the trading format allows us to take
advantage of a range of store sizes and locations.
• Each new store opening is approved by the CEO
ensuring that property risks are minimised and that
lease lengths are appropriate.
• Where new locations may impact on existing
locations, the cannibalisation effects are estimated
and then monitored and measured to ensure an
overall benefit to the Group is realised.
Stock
management
13
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 cash flows.
This risk ranking has decreased in risk
number due to the lower likelihood of this
risk occurring due to the effectiveness of the
risk mitigations in place.
• 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.
Risk change key
Increased risk
No change
Decreased risk
30
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Viability statement
In accordance with the UK Corporate Governance Code, the Directors
have assessed the viability of the Group. This assessment has been
based upon the Group’s three year strategic plan (the “plan”) and has
taken into account the current position of the Group, the principal risks
and uncertainties as detailed on pages 27 to 30 of the strategic report
and the Group’s prospects.
Each of the above scenario’s exceed the impacts of principal risks
which the Group has encountered in its trading experience to date.
Based on the assessment, stress testing and mitigating actions
referred to above, the Directors confirm they have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the next three years to
30 March 2022.
Going concern statement
As a value retailer, the Group is well placed to withstand volatility
within the economic environment. The Group’s forecasts and
projections, taking into account reasonably possible changes in
trading performance, show that the Group will trade within its current
banking facilities. The Group is intending to enter into a sale and
leaseback of its new Southern Distribution Centre notwithstanding
that, included within these assumptions are the Group’s ability to
extend the loan facility of €100m in relation to the acquisition of Babou
in October 2019 for a further 12 months if required. 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.
We operate in a competitive retail environment and need to be able to
react to changes in retail markets and consumer trends. Accordingly
we set our strategic plan on a three-year cycle, which is also common
in the retail industry.
In making their assessment the Directors considered:
•
the Group’s current balance sheet, its strong track record of
generating operational cash flows and returns to shareholders
and stress testing of the key trading assumptions within the
Group’s plan;
the potential impact of one or more of the principal risks set out on
pages 27 to 30 occurring in the period on the Group’s business
model, future trading expectations and liquidity;
the likely degree and effectiveness of possible mitigating actions
in relation to the principal risks;
the Group’s plan following its acquisition of Babou;
the Group’s longer term distribution infrastructure plan; and
the Group’s debt facilities of £450m in relation to the term loan and
revolving credit facility which mature in August 2021, and the high
yield bond of £250m which matures in February 2022. Based on
discussions with lenders, the Directors have no reason to believe
that the Group would not be able to refinance this debt on
acceptable terms.
•
•
•
•
•
The stress testing undertaken included the flexing of a number of key
assumptions within the three year plan, namely future revenue
growth, including both like-for-like revenues and revenues from the
new store openings, gross margins, operating costs, the impact of
interest rates and working capital management, which may be
impacted by one or more of the principal risks to the Group.
A number of challenging but plausible scenarios which aggregated
these individual assumptions were reviewed by the Board. They
included a review of the impact of the following scenarios:
• a decline of 15% per annum of like-for-like annual sales in the
Group’s main UK trading business, B&M, as a result of competition
or changes in consumer buying patterns;
• a decline of 33 basis points per annum in the gross margin of the
Group’s main UK trading business, B&M, due to higher costs of
imported goods from commodity price increases, increases in
import duties and adverse currency exchange rate movements;
and
• a marked deterioration in working capital creating significant
pressure on liquidity, due to ineffective controls on stock.
The Board considered the mitigating steps which they would take to
protect the Group in the event of any of those scenario’s arising, and
determined that the following measures would be necessary to
protect its cash flow and liquidity:
•
the temporary suspension of interim and final dividend payments,
to use that cash for the on-going trading operations of the Group;
limiting capital expenditure to essential maintenance only, to
assist with liquidity;
•
• suspension of the new store openings programme; and
• seeking additional borrowing facilities in the short term to alleviate
any immediate pressure on liquidity where prudent to do so.
B&M European Value Retail S.A. Annual Report and Accounts 2019
31
Page Title at start:Content Section at start: Corporate social responsibility
Operating our
business responsibly
We want to be a valued part of the local communities we serve, through our
job creation, our value pricing approach, and the fun and exciting shopping
experience which we strive to provide to our customers.
Through our own e-based portal (“Hub”) we
provide engagement for our Regional and Area
Managers with our central operations team.
This gives them instant information updates
through smart tablets distributed by B&M, on a
range of business, operational and workplace
engagement matters. We also provide
information to our stores through the Hub with
an on-line weekly update, the “B&M Digest”, on
operational matters helping them plan for the
week ahead and keeping them up to date with
latest developments, promotions and events at
stores.
Colleague development
We offer our store colleagues the opportunity to
progress and develop their careers with B&M.
The key elements of this approach are:
•
identifying talented colleagues within our
store operations teams and including them
in our store promotion development
programme; and
• giving participating colleagues under our
Step-Up Programme, training over an 8
month period on various aspects of our store
operations, including store standards,
merchandising, productivity and how to
manage store teams effectively.
People
Colleagues
Our policy in relation to our colleagues is to:
• provide equality of opportunity in relation to
recruitment and promotion;
• provide modern, safe and clean working
environments for them at our stores,
distribution centres and in our transport
operations; and
• ensure that our colleagues are treated with
dignity and respect.
See further on page 33 below in relation to
diversity and equality.
We have a number of detailed policies relating
to our terms and conditions of employment and
on workplace matters to provide appropriate
safeguards and practices for the benefit of all
our colleagues in our working environments
and for compliance with legislation.
The outcome and impact of our policies and
activities in the year, in relation to opportunities
for new colleagues to join the Group, how our
colleague base has grown during the year
under review and promotions which we have
made to management positions at our stores,
are set out below.
Our Group now employs over 33,700 people
across our four businesses. The vast majority of
colleagues are based in the UK in our B&M
stores business. We have created over 800 new
jobs alone in B&M in the UK in financial year
under review.
We have a policy of developing our own talent
from within our own business wherever we can
for promotions within our stores. See further
below in relation to the promotions made this
year. We also reward our store management
teams through an annual bonus scheme, and
we also run regular incentive schemes to drive
performance and also to engage with the
teams by rewarding them for high performance.
B&M also has a share incentive plan which is
open to all B&M UK employees after 12 months
service to take up the opportunity to participate
in the future success of B&M.
Number of employees across the Group
over 33,700
Gender diversity
Board of Directors
Male
Female
5
3
62.5%
37.5%
Senior managers
Male
Female
32
25
56.1%
43.9%
All employees
Male
Female
13,920
19,686
41.4%
58.6%
32
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Customer transactions at our
B&M UK stores this year
229.6m
One of the female Board members also
chairs the Remuneration Committee, being
one of the three main Committees of the
Board. Full details of the composition of
B&M’s Board are set out on pages 38 and 39.
In relation to ethnic diversity and the Parker
Review recommendations, the Company
already complies with it in relation to Board
representation.
The first level of senior management directly
below the Board does not currently have any
female representation, but it remains the
Board’s intention within the framework of the
diversity criteria in its policy to see that there
is a greater mix at that level by 2020.
At a senior management level generally
overall across the Group the percentage of
employees who are female was 43.9% in the
year under review.
In relation to all employees of the Group, the
female percentage of colleagues was 58.6%
in the year under review.
In relation to diversity also, our equal
opportunities policies in relation to our
workforce are designed to recognise and
actively encourage the benefit of having a
diverse workforce across our business. We
look to ensure that all colleagues are treated
fairly and with respect, that no employee is
discriminated against on grounds of gender,
race, colour, religion, disability, sexual
orientation. Our overall aim is to ensure
that B&M is recognised as a responsible
employer providing all colleagues with
a great place to work.
See principal risk number 10 on page 29.
In the financial year under review 202
(2018: 194) colleagues were promoted to
either store manager or deputy manager
positions with B&M in the UK. We are proud
of those colleagues and continue to be
pleased with the success of the programme
and all of the work which goes into it
every year.
This provides colleagues with a great
opportunity to grow and flourish. At the same
time our business is enhanced, with our
culture and values being maintained through
the continuity that brings.
Diversity and equality
The Diversity Policy of the Company in relation
to the Board and senior management
positions is:
•
to ensure as an overall objective that the
Company maintains the necessary skills,
experience and independence of
character and judgement of its members,
for the Group to be managed effectively
for its long-term success;
• while making appointments based on
•
merit so the best candidates are
appointed, recognising the value which a
diverse Board brings to the business and
embracing diversity in relation to gender,
race, age, educational and professional
backgrounds;
together with the above criteria
recognising also that, diversity in relation
to international experience (in particular in
relation to the Group’s chosen markets),
recent senior management or
professional experience in retail and/or
supply chain sectors and functional
experiences in relation to membership
and chairmanship of Board committees,
are also relevant factors.
Specifically in relation to gender diversity and
the implementation of the Diversity Policy in
the year under review, at the year end the
Board had 37.5% female representation,
with three out of the eight Board members
being female.
Workforce engagement
The new Corporate Governance Code 2018
will apply to the Company in the financial
year in 2019/20. We have already taken steps
in preparation for it by appointing one of our
Non-Executive Directors, Carolyn Bradley, to
be a Designated Non-Executive Director for
Workforce Engagement.
The main UK business of the Group, B&M,
already has a number of workforce
engagement mechanisms in place including,
Store Manager and Deputy Manager
colleague surveys, Transport and Distribution
Centre manager colleague surveys, and
office retail operations and buying group
meetings which are held throughout the year
led by the senior executive management team.
In response to those activities senior
management evaluate feedback and
questions and devise actions to be undertaken
which in turn are communicated back to the
relevant groups of colleagues.
It is proposed to build further on those
mechanisms in the year ahead. The
colleague engagement surveys with Store
Managers and Deputy Store Managers,
Transport and Distribution Managers and
Head Office colleagues in the business
teams, will also include satisfaction ratings
to provide a more detailed analysis of the
feedback given by colleagues.
These mechanisms will be reviewed along
with other existing mechanisms throughout
the year to create a broader and deeper
process overall. The implementation of these
processes will be supported by the Head of
Learning and Development at B&M and the
Executive Management team.
The Designated Non-Executive Director for
Workforce Engagement will oversee the
effectiveness of our workforce engagement
mechanisms and will report to the Board on
the outputs from the engagement processes
with colleagues, during the course of the year.
B&M European Value Retail S.A. Annual Report and Accounts 2019
33
Page Title at start:Content Section at start:
Corporate social responsibility continued
Social
Social and community engagement
Our policy on social and community
engagement is to:
• continue to make investments in new
stores and jobs in local communities
where we are under-represented or not
represented at all in the UK;
• provide value for money to our customers;
•
and
foster long standing relationships with our
suppliers and promote ethical trading
policies and practices within our supply
chains.
We have formal policies in place in relation to
anti-bribery and corruption, anti-slavery policy
statements on our websites, a workplace
policy which suppliers are required to adhere
to in relation to anti-slavery and respect for
human rights, and whistle-blowing policies in
relation to reporting of any suspected wrong
doing or malpractice.
The approach of our policy on social and
community engagement and the impact of
that in relation to the communities we operate
in and our customers, suppliers and respect for
human rights in our supply chains, is described
in each of the following sections below.
Communities
We are proud to support the communities
where we trade, by providing job
opportunities and enabling household
budgets to go that bit further through our
value pricing business model. This helps us to
build sustainable relationships within
communities where we operate our stores,
and importantly where our customers and
store colleagues live and work.
When we open a new store, we try where we
can to find a local hero as a member of the
local community known for their charitable or
other work in the community, to perform the
ribbon-cutting ceremony on the opening day.
This is one small way in which we can help
promote and support the good work they do
in their local community, and we actively
encourage our store managers to maintain
their local hero relationship going forward.
With our continued store expansion programme
for the year ahead, we will continue to create
jobs in yet more communities where those
new store openings take place. This is against
an environment more generally in the UK
where a number of retailers have down-sized
their store estates or exited the market
altogether. We believe that our store
expansion programme has and will continue
to contribute towards the well-being and
rejuvenation of communities through new job
opportunities and the value we give to
customers at our stores in or close to the
communities where they live.
In relation to jobs at stores, and also in our
Distribution Centres, we have had a
successful initiative over a number of years in
the UK which is focused on helping long-term
unemployed back into work. In the year under
review, another 250 long-term unemployed
people secured a role with B&M (FY18: 175).
Again in this last year at a regional and
national level we were proud sponsors of
Mission Christmas, an initiative run by
Cash4Kids, a children’s charity providing
Christmas presents to underprivileged
children at Christmas time in the UK. We are a
significant headline sponsor and nationally
our B&M stores in participating towns acted
as collection points for the toys and gifts
which were donated for the appeal. The
Mission Christmas appeal distributed overall
more than £15m of gifts and vouchers in
Christmas 2018, and we are proud to have
played a small but committed part in that for
each of the last three years.
We work hard to be a valued part of the local
communities we serve, through our job
creation, our value pricing approach, and the
fun and exciting shopping experience which
we strive to provide to our customers.
Gender pay gap reporting
In accordance with the Equality Act (Gender
Pay Gap Information) Regulations we have
published our data online in relation to B&M
and Heron Foods as at 5 April 2018.
With regard to hourly pay of B&M the mean
hourly rate for females is 7.9% lower than
males and the median hourly rate is the same
for females and males. For Heron Foods the
mean hourly rate for females is 22.1% lower
than males and the median hourly rate for
females is 11.2% lower than males.
In relation to bonuses of B&M, 5.1% of females
and 17.9% of males were paid a bonus. The
mean bonus pay for females was 53.5%
lower than males and the median bonus pay
for females was 62.9% lower than males. For
Heron Foods, 3.6% of females and 26.8% of
males were paid a bonus. The mean bonus
pay for females was 1.4% lower than males
and the median bonus pay for females was
17.8% higher than males.
Full details of the reports are available on
our websites at www.bandmretail.com and
www.heronfoods.com and on gender-pay-
gap.service.gov.uk
Colleagues of the Group in Germany, France
and Luxembourg are not included in this data.
Customers
We help our customers get better value for
money on everyday and other items for their
homes and families, which helps tight
household budgets go further.
We take pride in working hard to provide a
high-quality customer experience for
shoppers across the stores in each of our
businesses in the UK, Germany and France.
We invest in our stores to present them in a
light, clean and tidy format, with new store
fit-outs and refurbishments including
investments in LED lighting and refreshed floor
coverings. This has environmental benefits
and it provides modern, attractive and clean
store environments for customers to enjoy
their shopping experience at our stores.
We also like to provide customers with a fun
and exciting shopping experience, led also by
promotional events at our stores. Throughout
the year we have had a series of focused
promotional events in the UK on categories
such as cleaning and home care, homewares
and pet care products. Each of those events
are aimed at giving even better promotional
value prices to customers while they are
running in our stores.
Our store colleagues are trained to be
focused on taking a helpful and friendly
approach with customers, so that our
customers enjoy coming back to our stores
time and time again.
Our no quibble customer returns policy also
highlights our emphasis on wanting to give
great value for money and good quality
products to our customers to enjoy.
Health and safety
The Board has overall responsibility for
ensuring that we maintain high standards of
health and safety in our business. The Board
and the executive management monitor on a
monthly basis key performance indicators in
relation to trends in the business, including
reports on the number of accidents and those
which are required to be reported to the
Health and Safety Executive.
34
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
We have a dedicated health and safety team
of qualified professionals who are responsible
for ensuring that we comply with current
statutory requirements and that our health
and safety policies are communicated to all
our colleagues.
Our store management teams are trained as
responsible persons under our health and
safety policy for stores. There is a continuous
programme of training new recruits and
refresher training for existing store
management colleagues.
The health and safety policy for our stores is
also supplemented by documented risk
assessments and safe system of working
procedures for colleagues to follow, with
pictograms to make them user friendly and
combat language or learning barriers.
Every store based colleague receives
induction pack training from a member of the
store management team on health and
safety, manual handling, fire safety, how
to mitigate against risks and hazards and
procedures for the safe use of store
equipment. The training is carried out on
the recruitment of each new colleague with
reviews (and refreshers as required) being
carried out at intervals during the next 12
weeks thereafter.
In the financial year 2018/19 for the UK in B&M
there were 112 reported accidents (0.2 per
store) reportable to the Health & Safety
Executive (FY18: 207 reported accidents and
0.4 per store), in the context of 229 million
shopper visits per annum.
Supply chain and ethics
We have many long-standing relationships
with our suppliers. We regard our suppliers
as business partners in terms of our
relationships and dealings with them.
We like to maintain simple, transparent net
prices and to minimise the use of rebates and
retrospective discounts.
We use a standard set of terms and
conditions of purchase. Provided the goods
meet relevant quality and safety standards,
we will pay the supplier within the agreed
payment terms. Our import suppliers are
normally paid in advance of the goods
arriving into the UK.
It is important, both in terms of ensuring our
products are safe and fit for sale and also that
the factories we use comply with local laws
and regulations, that our customers can be
assured of the safety, quality and integrity of
the products they buy from our stores.
We have a zero-tolerance policy on slavery,
forced labour and human trafficking of any
kind in relation to our business and supply
chain. We support the promotion of ethical
business practices and policies to protect
workers from any kind of abuse or
exploitation in relation to our business and
supply chain.
In the last year B&M and Heron Foods have
continued to communicate their Workplace
Policies to existing and new suppliers along
with their standard terms and conditions of
purchase, which make it a condition that
suppliers adhere to the Workplace Policy
standards.
Jawoll has also provided its Workplace Policy
to suppliers, which are set out together in both
English and German language formats.
A copy of B&M’s Anti-Slavery Statement and
Workplace Policy is available on our websites
at www.bmstores.co.uk and www.
bandmretail.com and for Heron Foods at
www.heronfoods.com.
In relation to the Group’s assessment of risk, a
balance is drawn between reasonable
reliance on leading household brand name
suppliers who have their own comprehensive
procedures and policies in place, and, those
where other forms of verification processes
are required by our Group businesses or our
sourcing agent.
Heron Foods convenience food product lines
are sourced from leading brand suppliers. A
small number of foods are sourced direct
from produce suppliers. These are from a
limited number of major suppliers who
operate highly mechanised businesses which
are non-labour intensive.
The vast majority of products which are
imported into the UK by B&M are sourced
from China. These are mainly machine
manufactured goods, as opposed to labour
intensive handmade products.
Where necessary overseas suppliers are
required by B&M or its sourcing agent to
provide social compliance reports, as a check
on compliance with local laws and
regulations including labour practices.
B&M’s main Hong Kong based sourcing
agent and, where practicable, members of
our UK buying team, visit new suppliers also
as part of our verification processes.
A number of Jawoll’s suppliers are European
based suppliers and wholesalers. Where
Jawoll source and import products
themselves directly from China they have
continued increasingly to use the same
suppliers and sourcing agents of B&M, which
is part of an on-going integration and
change-over of Jawoll’s procurement by
sourcing products from B&M’s supply chain.
This provides Jawoll with the benefit of checks
and verification processes of B&M and its
sourcing agent on a Group basis.
Heron Foods sell a limited number of products
imported from China. They are all procured
from the B&M supply chain and therefore
benefit also from checks and verification
processes of B&M and its sourcing agent on a
Group basis.
Our Internal Audit function in the UK carried
out a review and audit of our supply chain
and procurement in the financial year 2015/16,
including checks on social compliance
procedures with suppliers and sourcing agent
and sampling those reports, as part of a due
diligence exercise which they undertook in
Hong Kong on our sourcing agent. A similar
exercise was carried out by our Internal Audit
function in Hong Kong again this financial
year. That process included:
• a review of the vetting and verification
processes of our sourcing agent in
relation to new suppliers in China and
Asia; and
• a review of verification processes in
relation to existing suppliers on an
on-going basis.
Within those processes for both new and
existing suppliers, they are required to
produce their current social compliance audit
reports carried out by external specialists in
the field. Those external specialists are
generally internationally recognised
inspection, verification, testing and
certification companies. On an on-going
basis before the expiration of the term of any
social compliance audit reports, the sourcing
agent timetables and obtains the new audit
reports, as part of its continuing verification
processes of approved suppliers.
B&M European Value Retail S.A. Annual Report and Accounts 2019
35
Page Title at start:Content Section at start: Corporate social responsibility continued
Social continued
As a result of the due diligence carried out by
our Internal Audit function in relation to the
sourcing agent, they were satisfied that
effective processes are in place and continue
to be operated by the sourcing agent to
ensure that the risk of any modern slavery
issues in our supply chain do not arise.
Anti-bribery and corruption
In relation to anti-bribery and corruption, our
policy is also one of zero tolerance. Our
colleagues are aware of the importance of
reporting any offers of inducements by any
third parties, in each of our businesses
immediately up to Director level.
Within the whistle-blowing reports of B&M
and Heron Foods in the UK in relation to the
year under review, no reports have been
made of any instances of actual or suspected
modern slavery or human rights abuses
relating to human trafficking or other kinds of
forced labour in our supply chain.
In the event of any suspected failure by a
supplier to comply with our Workplace Policy,
we will then investigate the circumstances of it
with the supplier. In the event of a breach of
our policy being identified as a result of such
an investigation, we will review what
appropriate remedial action we would require
the supplier to undertake and also determine
on a case by case basis whether our trading
relationship with that supplier should be
monitored, suspended or terminated.
We continue to strive to find effective ways of
improving communication and adherence to
ethical business practices and assessment of
risks and always welcome feedback from all
stakeholders in relation to our business. Our
policies, procedures and approach to
verification processes are geared toward
what we think are balanced and reasonable,
practical and effective.
Each year an annual review is also
undertaken of our buying teams in the UK and
Germany requiring written reports to be
completed of any suspected or actual incident
of bribery or corruption between any third
party and the business, including returns
being required to confirm that no instances
have arisen. That due diligence disclosed no
instances in our businesses for the year under
review of any such activity having taken place
or having been suspected.
From the whistle-blowing procedures and
processes in place at B&M and Heron Foods,
in the year under review no reports were
made of any instances of bribery or corruption
in relation to any employees with any third
parties. Jawoll is in the process of
implementing whistle blowing processes, but
there were no suspected instances of bribery
or corruption in the year under review.
See principal risk numbers 3 and 11
on pages 27 and 29.
Environment
Environmental sustainability
Our Environmental policy is to operate and
maintain a modern, clean and efficient
infrastructure in relation to stores, Distribution
Centres and transport fleet for the benefit of
all of our customers and colleagues in the UK,
Germany and France as part of our
commitment to providing a sustainable
environment in the communities we operate
in and our workplaces. We also look
continuously for opportunities to reduce or
minimise our waste and consumption where
we can, in particular in areas of scale in our
operations where we can make an impact.
For example, we seek to do this with
packaging waste recycling, our continued
programme of introducing LED lighting into
stores and the upgrading of our transport
fleet. The impacts of our policy are set out
below.
Recycling
We have dedicated waste management
facilities at our B&M warehousing locations in
the UK. This allows us to collect waste
cardboard, plastic, metal and wood from our
stores in the UK to take it back to our central
distribution locations for sorting in readiness
for recycling.
The main source of waste comes from
packaging. We seek with our suppliers to
minimise the packaging of products beyond
what is necessary for the safe carriage of
them, where we can.
Packaging waste recycled by the
Group in 2019
99.5%
2018: 99.4%
36
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
Again this year 100% of our packaging waste
in the UK was recycled, through a
combination of waste being sorted through
our own facilities and by specialist third party
contractors. Any residual waste left over is
recycled into energy production.
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 and
gas usage and then using the published
factors.
Overall the total level of packaging waste
recycled by the whole Group in the financial
year 2018/19 was 99.5%.
Babou has not been included in any of the
environmental statistics in this report as they
have only been part of the Group since October
2018. With the reporting protocols which are
being set up by us, Babou will be included in
our report for the next financial year.
Greenhouse gas emissions
In the year around 67% of our carbon
footprint in relation to the UK operations of
B&M is as a result of our electricity and gas
usage from our stores and our warehouse
facilities. Diesel accounts for the remaining
33%. Our store estates across the Group are
continuing to increase at a significant rate
and they are expected to continue to do so in
the foreseeable future also. Consequently our
overall carbon footprint has and will
inevitably continue to increase.
Heron Foods has been included in our data for
the first time in FY19. Heron Foods intensity ratio is
higher than B&M in the UK principally due to its
frozen food operations and freezer equipment.
We express our annual emissions as a
quantifiable factor by reference to our
revenues as the basis for our intensity ratio.
The intensity ratio for the Group overall has
remained at a similar level to the prior year.
This was due to improvements made in B&M
in the UK and Jawoll in Germany, but it was
offset by the inclusion of Heron Foods for the
first time this year.
As we acquired Babou in October 2018, our
UK emissions data does not include Babou in
the financial year ended 30 March 2019, but it
will be included in our reporting in the next
financial year.
See principal risk numbers 3 and 12 on pages 27
and 30.
Carrier bags
We have continued to see an overall reduction of
carrier bag usage across our UK stores following
the 5p carrier bag levy which was introduced in
England and Wales in October 2015.
We donate the proceeds from the levy in
relation to the carrier bags used to a number
of good causes. Colleagues across the UK
business were consulted on appropriate
recipients of charitable grants from the levy
proceeds. In the financial year 2018/19 we have
donated around £430,000 to a range of
charities, including children’s hospitals, air
ambulances and a range of other health
charities in the UK.
Initiatives
We have a number of on-going initiatives to
reduce our carbon footprint:
• we continue to invest in energy efficient
LED lighting in our new stores, and as
part of our existing store estate
maintenance and refresh programmes
we invest in switching to LED lighting
wherever we feasibly can. We now also
have LED lighting installed in three of our
four main B&M distribution centre
locations;
• we continue to upgrade our transport
fleet and we have introduced 60 new
tractor units in FY2019 and we have
ordered a further 60 units for delivery in
the Summer of 2019. The vast majority of
our B&M transport fleet in the UK is less
than 2 years old;
• we have continued to invest in “wedge”
trailers which increase trailer capacity
and therefore maximises transport
utilisation and minimises distribution
mileage travelled. We have acquired 50
of these trailers in FY2019; and
• we have introduced new manual
handling equipment, including lithium
Ion picking and loading trucks, at one of
our main Distribution Centres, which are
more energy efficient that the previous
material handling equipment. We are
planning to roll this new equipment out
across another two of our Distribution
Centres in FY2020.
Greenhouse gas data
FY19 relates to the period from April 2018 to March 2019 and FY18 relates to the period from April 2017 to March 2018:
Main: Tonnes of CO2e
Scope 1
Scope 2
Total
2018/19
B&M (UK)
30,913
62,275
93,188
Jawoll
768
4,300
5,068
Heron
Total
8,971
15,272
40,652
81,847
24,243
122,499
Intensity Ratio: TCo2e/£m Revenue
Intensity
T/£m
B&M (UK)
11.08
22.33
33.41
2018/19
Jawoll
3.60
20.13
23.72
Heron
25.34
43.13
68.47
TOTAL
12.11
24.38
36.49
B&M
25,035
69,878
94,913
B&M (UK)
9.56
26.68
36.24
2017/181
Jawoll
712
7,681
8,393
Heron
Total
n/a
n/a
n/a
25,747
77,559
103,306
2017/181
Jawoll
3.56
38.41
41.96
Heron
n/a
n/a
n/a
TOTAL
9.13
27.51
36.65
1
The 2017/18 figures in the table above have been restated to correct an error in the reporting of the Scope 2 electricity and gas consumption of the Jawoll business in Germany,
which had been overstated last year.
B&M European Value Retail S.A. Annual Report and Accounts 2019
37
Page Title at start:Content Section at start: Corporate Governance
Board of Directors
Corporate governance
Board of Directors
The Board of Directors of B&M European Value Retail S.A.
Peter Bamford
Non-Executive Chairman of
the Board and Chairman of
the Nomination Committee
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
Kathleen Guion
Independent Non-Executive
Director and Chair of the
Remuneration Committee
Ron McMillan
Senior Independent
Non-Executive Director and
Chairman of the Audit & Risk
Committee
Appointment: March 2018
Appointment: Dec 2004
Appointment: May 2011
Appointment: May 2014
Appointment: May 2014
Peter joined the Board of B&M
as Non-Executive Chairman on 1
March 2018. He has extensive
experience, in both executive
and Non-Executive roles, of the
retail sector and high growth
international businesses and
brands. He is also a seasoned
PLC Director and chairman
having served on PLC boards for
over 22 years in a variety of
roles. In his non-executive career
this has included Chairman of
Superdry plc, Deputy Chairman
and Senior Independent Director
of Spire Healthcare plc and
Non-Executive Director at
Rentokil-Initial plc. In his
executive career he was a
Director of Vodafone Group Plc
from 1998 to 2006 where he
held senior executive roles,
including Chief Marketing
Officer and Chief Executive of
Vodafone NEMEA region. Prior
to that he held a number of
board and senior executive
positions with leading retailers
including WH Smith, Tesco and
Kingfisher. Peter is also the
Chairman of the Nomination
Committee of B&M.
Simon has been Chief Executive
Officer of the B&M Group since
1 December 2004. He has a
background in consumer
goods, corporate finance and
consulting having been a
co-founder and Managing
Director of wholesale
homeware business, Orient
Sourcing Services, before
acquiring B&M jointly with his
family and prior to that holding
various positions with McKinsey
& Co., 3i and Barclays Bank.
Simon is also a member of the
Nomination Committee of B&M.
Paul is a chartered certified
accountant and has over 20
years’ experience in value and
discount retailing. He joined the
B&M Group as Chief Financial
Officer on 3 May 2011. He has
held senior financial
management roles at
Littlewoods, Ethel Austin and
TJ Hughes and carries with
him a depth of experience and
skills in financial management
and business operations in
this sector.
Kathleen’s experience in the
retail sector spans more than
40 years, during which time
she has held senior executive
management positions in retail
operations in United States
retail chains involved in
rolling-out large expansion
programmes. 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, 7-Eleven
Corporation, Duke and Long
Distributing and Devon
Partners. Kathleen chairs the
Remuneration Committee and
is a member of the Nomination
Committee of B&M.
External appointments
She is currently a Non-Executive
Director and member of the
Audit Committee and
Remuneration Committee of
FJ Management Inc in the US.
Until 2013 Ron worked in PwC’s
assurance business for 38
years and has deep knowledge
and experience in relation to
auditing, financial reporting,
regulatory issues and
governance. He was the Global
Finance Partner and Northern
Regional Chairman of PwC in
the UK and Deputy Chairman
of PwC in the Middle East and
acted as the audit engagement
leader to a number of major
listed companies. Ron is the
Senior Independent Director of
B&M. He also chairs the Audit &
Risk Committee and is a
member of the Remuneration
and Nomination Committees
of B&M.
External appointments
He is the Senior Independent
Director and Audit Committee
Chairman of N Brown Group
PLC and SCS PLC and Chairman
of the Audit Committee of
HomeServe plc.
Committee membership:
Committee membership:
Committee membership:
Committee membership:
Committee membership:
NOM
NOM
—
REM
NOM
A&R
REM
NOM
38
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
Tiffany Hall
Independent
Non-Executive Director
Carolyn Bradley
Independent
Non-Executive Director
Gilles Petit
Independent
Non-Executive Director
Incoming member
Appointment: September 2018
Appointment: November 2018
Appointment: May 2019
Tiffany’s experience is in
marketing, sales and customer
services. She previously served
as CEO of BUPA Home
Healthcare, Marketing Director
at BUPA, Head of Marketing at
British Airways and also Chair
of Airmiles and BA Holidays.
Prior to that, she held various
other senior positions at British
Airways including Head of UK
Sales and Marketing. She is a
member of the Remuneration
Committee and the Nomination
Committee of B&M.
Carolyn has an experienced
retail and consumer business
background. She worked for
Tesco for over 25 years until
2013. During that time she held
a number of senior positions,
including Chief Operating
Officer of Tesco.com,
Commercial Director for Tesco
Stores, Tesco Marketing
Director (UK) and Group Brand
Director. Carolyn is a member
of the Audit & Risk Committee
and the Nomination Committee
of B&M.
Gilles Petit has many years of
senior management
experience in multinational
retail businesses in Europe. He
previously served as CEO of the
hypermarkets division of
Promodès and then as CEO of
Carrefour in Belgium, Spain
and subsequently France. He
also served as the CEO of Elior
until 2015 and then as CEO of
Maisons du Monde until 2018.
External appointments
He is currently a Non-Executive
Director of Maisons du Monde.
External appointments
She is currently the Senior
Independent Director and Chair
of the Remuneration
Committee of Howden Joinery
Group Plc.
External appointments
She is currently the Senior
Independent Director of
Marston’s PLC and also SSP
Group plc, and a Non-Executive
Director of The Mentoring
Foundation and Majid Al Futtain
Retail LLC, and a Trustee and
Deputy Chair of Cancer
Research UK.
Committee membership:
Committee membership:
Committee membership:
REM
NOM
A&R
NOM
A&R
NOM
Committee membership:
A&R
Audit & Risk
REM
Remuneration
NOM
Nomination
Committee Chair
Outgoing members
Thomas Hübner
Senior Independent
Non-Executive Director
Appointment: May 2014
Retirement: May 2019
Since the time of the IPO of the
Company in June 2014 until his
retirement from the Board in
May 2019, Thomas was the
Senior Independent Non-
Executive Director of B&M. He
was also a member of the Audit
& Risk and Nomination
Committees of B&M during his
time as a member of the Board.
Harry Brouwer
Independent Non-Executive
Director
Appointment: May 2014
Retirement: Nov 2018
Since the time of the IPO of the
Company in June 2014 until his
retirement from the Board in
November 2018, Harry Brouwer
was a Non-Executive Director of
B&M. He was also a member of
the Audit & Risk, Remuneration
and Nomination Committees of
B&M during his time as a
member of the Board.
B&M European Value Retail S.A. Annual Report and Accounts 2019
39
Page Title at start:Content Section at start:Page Title at start:Content Section at start: Corporate governance report
Corporate governance
Corporate governance
report
“Our corporate governance programme
continues to evolve with the growth and
maturity of the company.”
Peter Bamford
Chairman
We have also devoted more time in the year to consider in more
depth how our purpose, values and strategy are aligned with our
culture. We have published for the first time a statement of our values
(see page 7 above) in our Strategic Report. Those values of simplicity,
trust, fairness and being proud of what we offer to our customers, are
derived from the feedback the business received from various
listening groups with colleagues in our broader workforce, to gain a
genuine sense of how those values are seen as being a significant
part of the DNA or culture of our business by the broader workforce.
On page 45 of the report below there is a summary of other
preparations which we have carried out this year.
As your Chairman I will continue to ensure that our corporate
governance structures and processes deliver robust oversight and
effective decision-making by the Board. The Board continues to
maintain a culture of open debate and provides constructive
challenge to the management team to achieve the best outcomes
for the Group, our shareholders, workforce and all of our other
stakeholders.
Peter Bamford
Chairman
22 May 2019
Chairman’s introduction
In last year’s Annual Report I said that I intend to develop the
approach to governance further as the Company continues to grow
and mature and as new themes and objectives in relation to
corporate governance evolve. We have made good progress in the
following key areas in particular this year.
We have continued to evolve the membership Board since the IPO
following the retirements of both Thomas Hübner and Harry Brouwer.
I am delighted to have welcomed Tiffany Hall and Carolyn Bradley to
the Board during the year, and also following the year end Gilles Petit
who was appointed in May this year.
Each of those appointments have added strength and depth to our
Board in relation to retail and consumer-facing executive experience
in leading businesses, and also their public company experience as
Non-Executive Directors.
The appointment of Gilles fulfils the requirement we had for a
Non-Executive Director with senior executive retail experience with
businesses in Europe. That addresses the European experience
succession requirement following the retirements of Thomas
and Harry.
The recent appointments made to the Board have tied-in well with
the development of our diversity policy.
We have attracted high calibre, talented Non-Executive Directors with
relevant high level experience in retail and consumer-facing
backgrounds in relation to the UK and Europe, and at the same time
significantly enhanced our gender balance on the Board.
The revised UK Corporate Governance Code 2018 will apply to the
Company in the next financial year 2019/20. We have already taken
steps to prepare for the new requirements of the new Code, in
particular in relation to Workforce Engagement. I am pleased to
confirm that Carolyn Bradley has been appointed as our Designated
Non-Executive Director for Workforce Engagement, and she will
oversee and report to the Board on the effectiveness and outputs
from Workforce Engagement by the Group. Further details of
developments in this area are set out on page 33 of our Corporate
Social Responsibility Report.
40
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Corporate Governance
Financial Statements
Introduction
This report 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 UK FCA Disclosure and Transparency Rules (“DTR’s”).
Code compliance
The Board is committed to high standards of corporate governance.
Except where otherwise stated below in this report, the Company has
complied throughout the year under review with the provisions of the
UK Corporate Governance Code published in April 2016 (the “Code”)
and the DTRs. A copy of the Code is available on the UK Financial
Reporting Council’s website at www.frc.org.uk.
How we govern
The Board and Committee structure of the Company is as follows:
B&M’s Board
The Board of Directors of B&M as at the date of this report has 8 members comprising the Chairman,
2 Executive Directors & 5 Independent Non-Executive Directors.
Audit & Risk Committee
This committee is made up of 3
Independent Non-Executive Directors
The main responsibilities of the
Committee are:
• reviewing and monitoring the
integrity of the financial statements
and price sensitive financial releases
of the Company;
• monitoring the quality, effectiveness
and independence of the external
auditors and approving their
appointment fees;
• monitoring the independence and
activities of the Internal Audit function;
• assisting the Board with the risk
management strategy, policies and
current risk exposures;
• reviewing the adequacy and
effectiveness of the Group’s internal
financial controls and control and risk
management systems.
See pages 38 to and 39 for more information
Nomination Committee
This committee is made up of the
Chairman, CEO and 5 Independent
Non-Executive Directors
The main responsibilities of the
Committee are:
• 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 approval by the
Board, to fill Board vacancies as and
when they arise;
Remuneration Committee
This committee is made up of 3
Independent Non-Executive Directors
The main responsibilities of the
Committee are:
• setting the policy for the Group on
executive remuneration;
• determining the level of remuneration
of the Chairman, the Executive
Directors of the Company and the first
layer of senior management of the
Group below the Board and the
Group’s General Counsel;
• preparing an annual Directors’
Remuneration Report for approval by
shareholders at the Annual General
Meeting of the Company;
• ensuring, in conjunction with the
• designing share schemes for
Chairman of the Company, that new
Directors receive a full, formal and
tailored induction;
• keeping under review the leadership
and senior management needs of
the Group including executive and
Non-Executive Directors and the
wider senior management team,
with a view to ensuring the continued
ability of the Group to compete
effectively in the marketplace.
approval by the Board for employees
and approving awards to Executive
Directors and certain other senior
management of the Group;
• reviewing pay and conditions across
the Group’s wider workforce.
See pages 48 to 51 for a copy of
the Committee’s report
See pages 45 and 46 for a copy of
the Committee’s report
See pages 52 to 59 for a copy of
the Committee’s report
Terms of Reference of each of the Committees are available on B&M’s website at
www.bandmretail.com
Executive Management
The Executive Directors of the Group and of its four main businesses are responsible for the day to day operational and strategic matters
in relation to each of the businesses of the Group, which includes B&M, Heron Foods, Jawoll and Babou. Members of the broader senior
executive team hold regular monthly meetings led by the CEO to review progress and management activities of the Group.
B&M European Value Retail S.A. Annual Report and Accounts 2019
41
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Board responsibilities
The Board is collectively responsible for the strategy and long-term
success of the Group, and for ensuring there is an effective system
of internal controls within the Group for the assessment and
management of key risks.
The General Counsel of the Group also attends all Board meetings
and is responsible for advising the Board on corporate governance
and compliance.
The Board held 6 Board meetings during the financial year 2018/19.
The Board has delegated certain responsibilities to three main
Committees to assist in discharging its duties and the implementation
of matters approved by it (see the table on page 41). The reports of
each of the Committees for the year under review are set out on
pages 45 and 46, 48 to 51 and 52 to 59.
A detailed presentation of the business, activities and performance
of the Group is provided by the CEO at each Board meeting, together
with comprehensive financial reports and analysis presented by the
CFO. During months falling outside the regular cycle of Board
meetings, the CEO and CFO also provide reports and management
accounts packs updating the Board on the current trading
performance of each of the B&M, Heron Foods, Jawoll and
Babou businesses.
Members of the broader senior management teams of B&M, Heron
Foods, Jawoll and Babou participate at meetings of the Board and
store tours for Board Directors during the course of the year, and
attend the annual strategy day of the Group or strategy sessions
of the Board held during the course of the year on the relevant
business fascias.
Implementation of the Board approved strategy, decisions and
policies are delegated to the Executive Directors of the Company for
implementation through the day to day operational management
of the Group. The Executive Directors are also supported by senior
management teams in each of the B&M, Heron Foods, Jawoll and
Babou businesses of the Group.
Schedule of matters reserved to the Board
The following matters are reserved to the Board for its approval:
• 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;
• approving any major capital projects of the Group;
• ensuring a satisfactory dialogue with shareholders based on the
mutual understanding of objectives;
• approving the structure, size and composition of the Board and
remuneration of the Non-Executive Directors;
• ensuring the 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;
and
• approving and supervising any material litigation, insurance levels
of the Group and the appointment of the Group’s professional
advisers.
Board and Committee meetings and attendance
The Board has a rolling programme of Board and Committee
meetings throughout the year and also an annual strategy day in
addition to the scheduled Board meetings and strategy sessions.
Attendance at Board and Committee meetings was
as follows:
Meetings during 2018/19
Board
6
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
3
4
4
Directors
Attended
Attended
Attended
Attended
Peter Bamford –
Chairman
Simon Arora
Paul McDonald
Ron McMillan
Kathleen Guion1
Thomas Hübner2
Tiffany Hall (appointed
18 September 2018)3
Carolyn Bradley
(appointed 15
November 2018)4
••••••
••••••
••••••
••••••
•••••
•••••
•••
••
–
–
–
•••
–
•••
–
•
••••
••••
–
••••
•••
•••
••
•
–
–
–
••••
•••
–
••
–
Directors who retired from the Board during 2018/19:
Harry Brouwer (retired
14 November 2018)5
••••
••
•••
••
1
2
Kathleen Guion was unable to attend a Board meeting, Nomination Committee and
Remuneration Committee meeting which were all held on the same day in the year,
due to a one-off family event which she had notified to the Chairman in advance.
Since the IPO of the Company in 2014 she has otherwise had a 100% attendance
record every year.
Thomas Hübner retired from the Board following the year end with effect from
1 May 2019.
Tiffany Hall notified the Chairman prior to her appointment on 18 September 2018
that she would be unable to attend one of the Board and Remuneration Committee
meetings which were both held on the same day, due to a clash in relation to a
pre-existing appointment with a Board meeting of another company, which was taken
into account on her appointment being made to B&M. She has otherwise had a full
attendance record with B&M during her term of office in the period under review.
4. During the period from Carolyn Bradley’s appointment on 15 November 2018 to the
3
year ended 31 March 2019 there were 2 Board Meetings, 1 Audit & Risk Committee and
1 Nomination Committee meeting. She attended all of those meetings, being a 100%
attendance record since her appointment for the period under review.
5 During the period of Harry Brouwer’s term of office until his retirement on 14 November
2018, he had a 100% attendance record.
Further meetings of the Board, Audit & Risk Committee, Nomination
Committee and the Remuneration Committee have also been held
since the year end.
The Company held three general meetings of shareholders in the
year under review, being the Annual General Meeting and an
Extraordinary General Meeting both on 30 July 2018, and an Ordinary
General Meeting on 18 September 2018. Each of those meetings were
attended by all the Directors who held office with the Company on
those dates.
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Corporate Governance
Financial Statements
During the year a meeting of the Non-Executive Directors was held
without the Chairman being present and meetings of the Non-
Executive Directors and Chairman have also been held.
The Chairman has also had one-to-one meetings in the year under
review with each of the Independent Non-Executive Directors.
Board composition
During the financial year 2018/19 Tiffany Hall and Carolyn Bradley
were appointed as additional Non-Executive Directors and Harry
Brouwer retired as a Non-Executive Director. Following the year end
Thomas Hübner, who had been the Senior Independent Director,
retired and we also appointed Gilles Petit as a further Non-Executive
Director. Further details of these new appointments are referred to on
page 45 below.
The Board approved the appointment of Ron McMillan, an existing
Independent Non-Executive Director, to be the Senior Independent
Director in succession to Thomas Hübner. It was determined that he
had the requisite skills and experience to fulfil that role, having had
a number of years of experience on a variety of public company
boards as a non-executive director.
The Board comprises the Chairman, 2 Executive Directors, being the
CEO and CFO, and 5 Independent Non-Executive Directors.
The Code recommends that at least half of the Board, excluding the
Chairman, should comprise Independent Non-Executive Directors.
The Company met this requirement during the whole of the year
under review, with each of Thomas Hübner (retired 01 May 2019),
Kathleen Guion, Ron McMillan, Harry Brouwer (retired 14 November
2018), Tiffany Hall (appointed 18 September 2018) and Carolyn Bradley
(appointed 15 November 2018) being Independent Non-Executive
Directors. Following the year end this requirement continues to be met
and also includes Gilles Petit as an Independent Non-Executive
Director who was appointed to the Board on 2 May 2019. Each of the
Independent Non-Executive Directors who served during the year
under review, and also currently serving the Board, are considered
by the Board to be independent in character and judgment and are
free from relationships or circumstances which may affect, or could
appear to affect their judgment as Directors. 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 judgment.
The Board believes that the terms of the Relationship Agreement will
continue to ensure that the Company and other members of the
Group are capable of carrying on their business independently of the
Arora Family and that transactions and relationships between them
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 the terms of them are set out in the Directors’
Remuneration Report on pages 52 to 59.
Division of responsibilities
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.
Chairman’s key responsibilities:
Peter Bamford, as the Chairman of the Board, is responsible for
leading the Board and ensuring its effectiveness, setting its agenda
and high standards of corporate governance. The Chairman
facilitates the contribution of the Non-Executive Directors and
constructive relations between them and the Executive Directors.
Chief Executive key responsibilities:
Simon Arora, as the Group CEO, 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. His role is
supported by the Group CFO and the senior executive management
teams in each of the Group’s businesses.
Diversity policy
The overall objective of the Company’s Diversity Policy is to ensure
that the Company has a well-balanced Board at all times in terms of
the necessary skills, experience and independence of character and
judgement of its members, for the Group to be managed effectively
for its long-term success.
Appointments to the Board are based on merit so that the best
candidates are appointed, but within that the Company recognises
the value which a diverse Board brings to the business and it
embraces diversity in relation to gender, race, age, educational and
professional backgrounds. Along with that criteria, diversity in relation
to international experience (in particular in relation to the Group’s
chosen markets), recent senior management or professional
experience in retail and/or supply chain sectors and functional
experiences in relation to membership and chairmanship of board
committees are also relevant criteria of the Company.
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 which came into effect on
Admission and which continues to remain in force. 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 31 March 2019, SSA Investments (together with Praxis
Nominees Limited as its nominee) held 14.98% of the total issued
shares in the Company.
Details of the Company’s gender diversity in relation to the
management of the Group are included in the Corporate Social
Responsibility Report on pages 32 and 33. By the end of the year
under review the Company had three female Board members.
One of the female Board members also Chair’s one of the three main
standing Committees of the Board. The percentage of female Board
members as at the year end was 37.5%. The first level of senior
management below the Board does not currently have any female
representation, but it is the Board’s intention within the diversity
criteria referred to above to see that there is a greater mix at that
level by 2020.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Conflict of interests
Simon and Bobby Arora own all the shares in SSA Investments S.à.r.l.,
which (together with Praxis Nominees Limited as its nominee) holds
14.98% 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 property lease transactions proposed to be entered into
by related parties of Directors with any entities in the Group, including
the provision of professional advice and consideration of it by a
Related Party Transactions Committee of the Board (which includes
the Chairman of the Board, Chairman of the Audit & Risk Committee
and the General Counsel of the Group) and also by the Company’s
Sponsor in providing its opinion on the application of the Listing Rules
and the applicability and appropriateness of any exemptions in
respect of any transactions in the ordinary course of business.
Each of the transactions are also reported to general meetings of
shareholders’ in accordance with Luxembourg Company Law.
The above processes include:
•
reports by the Property Estates team of B&M on the relevant
subject store’s suitability and location and details of the principal
terms of the proposed lease;
reports from the external Property Consultants of B&M who are
retained to advise on new store acquisitions, store suitability and
location strategy;
reports from external independent Property Consultants on the
principal commercial terms of the proposed lease and site
location of the proposed subject store;
•
•
• each of the Chairman and General Counsel, and also
independently of them, the Company’s Sponsor, discuss where
necessary, the reports of the external independent Property
Consultants with them as part of the process of the review by
the Related Party Transactions Committee of the Board;
the Company’s Sponsor provides a written opinion to the
Company in advance of the Related Party Transactions
Committee’s consideration of the relevant proposed transactions;
•
• copies of all the reports referred to above and the Sponsor’s
Opinion are reviewed by the Related Party Transactions
Committee on behalf of the Board, and, in its updates to the
Board the Committee provide copies of all the above reports
and opinions to the Board; and
the Related Party Transactions Committee of the Board considers
the appropriateness of the relevant transactions independently
of Arora family interests, and the CEO, Simon Arora, does not
participate in those deliberations.
•
In addition to the above processes, the Chairman of the Audit & Risk
Committee monitors on behalf of the Board a rolling report produced
to the Related Party Transactions Committee, the Board and the
Sponsor, which is updated throughout the year, on the number of
related party leases and rents as a proportion of the overall property
estate and rents of the Group.
In the financial year under review the Group adopted a policy, which
has been approved by the Board, for chartering a private jet owned
by Arora family interests for business travel by executives and other
colleagues in instances where commercial operator direct flight
schedules are either not available or timings are not feasible. The
chartering of the plane by the Group is with the third party operator
and CAA licence holder (not with Arora family interests as the owner
of the plane). The Related Party Transactions Committee has oversight
on behalf of the Board of the usage and costs, to ensure it complies
with the Board approved policy for business use only and that costs
do not exceed market rates. These transactions are within the
exemption for small related party transactions under the Listing Rules,
being below 0.25% under the class tests.
See page 64 in relation to details of related party transactions entered
into in the financial year 2018/19 and also as set out in note 28 on
page 111 of the financial statements.
Audit & Risk Committee
The Audit & Risk Committee consists of 3 Independent Non-Executive
Directors and the Chairman of the Committee has recent and relevant
financial experience.
The members of the Committee during the year under review were
Ron McMillan (Chair), Thomas Hübner (retired 1 May 2019), Carolyn
Bradley (appointed 15 November 2018) and Harry Brouwer (retired 14
November 2018). Since the year end Gilles Petit has also been
appointed to the Committee with effect from 2 May 2019. The
Committee as a whole has competence relevant to the retail sector.
See further the biographies of each of the members of the Committee
on pages 38 and 39 above.
The duties of the Committee as delegated by the Board are contained
in the terms of reference available on the Group’s corporate website
(as referred to above) and are also summarised in the table on page
41 above.
All meetings of the Committee are attended by the CFO and the
Group’s General Counsel. The Chairman of the Board and the CEO are
also invited to attend. Also attendance and participation is made at
each meeting by members of the Group’s Internal Audit function and
the Luxembourg and UK audit partners of the Group’s external
auditors.
The Audit & Risk Committee Report on pages 48 to 51 sets out details
of the role and activities of the Committee in the last financial year.
Remuneration Committee
The Remuneration Committee consists of 3 Independent Non-
Executive Directors. The members of the Remuneration Committee
during the year under review were Kathleen Guion (Chair), Ron
McMillan, Harry Brouwer (retired 14 November 2018) and Tiffany Hall
(appointed 18 September 2018).
The terms of reference of the Remuneration Committee are available
on the Group’s corporate website (as referred to above) and are also
summarised in the table on page 41 above.
All meetings of the Committee are attended by the Group’s General
Counsel and also the Chairman of the Board and the CEO regularly
attend meetings of the Committee, in each case at the invitation of the
Chair of the Committee.
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Financial Statements
The Committee also retains FIT Remuneration Consultants LLP as
external advisors who attend and participate at all meetings at the
request of the Chair of the Committee.
The Directors’ Remuneration Report on pages 52 to 59 sets out details
of the role and activities of the Remuneration Committee in the last
financial year.
Nomination Committee
The Nomination Committee consists of 7 Directors, being the
Chairman of the Board (who chairs the Nomination Committee), the
CEO and each of the 5 Independent Non-Executive Directors of the
Company. The members of the Nomination Committee during the
year under review were Peter Bamford (Chairman of the Committee),
Simon Arora (CEO) and Thomas Hübner (retired 01 May 2019) Ron
McMillan, Kathleen Guion, Harry Brouwer (retired 14 November 2018),
Tiffany Hall (appointed 18 September 2018) and Carolyn Bradley
(appointed 15 November 2018). Following the year end Gilles Petit
was also appointed on 2 May 2019 to the Nomination Committee.
All meetings of the Committee are also attended by the Group’s
General Counsel, at the invitation of the Chairman of the Committee.
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) and are also
summarised in the table on page 41 above.
The Committee’s terms of reference provide that it will meet not
less than twice a year, and it has had four meetings in the year
under review.
During the year under review the main activities of the Committee
are as follows:
1. Board succession
The Committee, led by the Chairman, oversaw the process of
identifying and recommending the appointment of the two new
Independent Non-Executive Directors during the year and a third new
Independent Non-Executive Director after the year end, being Tiffany
Hall, Carolyn Bradley and Gilles Petit respectfully as referred to on page
43 above. The searches were carried out by the Committee with the
assistance of Russell Reynolds Associates who are a signatory to the
voluntary code of conduct for executive search firms, and they had no
other connection with the Group. Following the retirements of two other
Independent Non-Executive Directors during the year, as referred to on
page 43 above, that brings our current compliment of Independent
Non-Executive Directors to five following the year end, which continues
to comply with Code requirements as referred to on page 43 above.
The Committee, having regard to the diversity objectives and criteria
approved by the Board last year, have also successfully enhanced the
gender balance on the Board through two of those recruitments, which
currently stands at 37.5% of female members on the Board.
2. Executive team developments
The Committee and the CEO together agreed a plan for the
strengthening of senior management as the business of the Group
continues to grow at a significant rate. The implementation of the plan
has commenced during the year with senior manager recruitments in
European-wide areas of responsibility in the Group for Finance and
FMCG. Other senior recruitments have been made or are planned in
relation to other areas of strategic and operational importance as the
Group continues to grow, including Buying, HR, Distribution and
Supply Chain.
3. New UK Corporate Governance Code
In readiness for the application of the revised UK Corporate
Governance Code 2018 (the “2018 Code”) which will apply to the
Company in the new financial year 2019/20, the Committee has
considered the 2018 Code and what steps in may need to implement
to supplement the processes which it currently has in place.
In particular the Committee recommended the nomination of one
of its Non-Executive Directors, Carolyn Bradley, to be appointed as
a Designated Non-Executive Director for Workforce Engagement.
This role will oversee the effectiveness of our engagement with the
workforce and it will report on the outputs from that to the Board.
A review is being undertaken of the mechanisms which the Group
already has in place and where any enhancement of those may be
beneficial in terms of the effectiveness of those mechanisms and
actions arising from the operation of them.
During the year the Board considered papers and training on the
requirements of the 2018 Code with the Group General Counsel on
the following main areas:
(i)
the key changes and new reporting requirements under the 2018
Code, and the application of those to the Board, its three main
Committees and Directors’ Remuneration Policy reporting from
2019/20;
(ii) workforce engagement oversight and reporting structure,
mechanisms and outputs (as referred to above);
(iii) the culture of the business and the responsibility of the Board for
ensuring the alignment of our purpose, values and strategy with
our culture (see further pages 7 and 40 above); and
(iv) the reflection in Board decision-making of stakeholder interests
and continuing engagement with them, in the context of directors
fiduciary duties generally under Luxembourg Company Law, and
as required by the 2018 Code by all companies subject to the code
in relation to the non-exhaustive list of matters set out in section
172 (1) of the Companies Act 2006 (but while still maintaining our
status as a Luxembourg registered company).
The Board has embraced the requirements of the 2018 Code and will
report in the next financial year 2019/20 on compliance with that
edition of the code.
4. Board and Committees effectiveness review
Board and Committee effectiveness reviews were conducted in the
year under review. As part of that process the Chairman met with
each of the Executive and Non-Executive Directors on a one-to-one
basis to discuss matters relating to the Board, its balance and the
monitoring of the exercise of powers of the Executive Directors. The
Directors also completed confidential questionnaires in relation to the
Board and the Committees, which was co-ordinated by the Group’s
General Counsel who then prepared a report on the feedback from
that process for the Committee which was then considered by the
full Board.
From the above review it was noted in particular that:
(i)
the Board, its Committees and each of their members remain
effective;
(ii) while the Board has a very good balance of skills, it could benefit
from the recruitment of an additional Non-Executive Director with
recent European retail experience;
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4. Board and Committees effectiveness review continued
(iii) a lot of progress had been made during the year having arranged
for more time at Board meetings for sessions devoted to particular
strategic items, together with participation and presentations from
members of the broader senior executive management teams
from each of the Group’s businesses. That programme will
continue also in the year ahead; and
(iv) a more structured discussion on the assessment of risks and risk
appetite each year would be beneficial in addition to the reviews
undertaken and reported on to the Board during the year by the
Audit & Risk Committee.
The requirement under (ii) above has been addressed since the
review, with the recent appointment of Gilles Petit to the Board on
2 May 2019 who has extensive experience in multinational retail
businesses in Europe. See page 39 for further details of his biography.
In relation to item (iv) above, as part of the annual Strategy Day of the
Board going forward time will be allocated for a structured discussion
on strategic risks and a risk appetite assessment.
A manual of documents is available for new Directors containing
information about the Group, Directors duties and liabilities under
Luxembourg Company Law and obligations under the Listing Rules,
DTRs and the Market Abuse Regulation, together with governance
policies and the UK Corporate Governance Code.
The inductions of Tiffany Hall and Carolyn Bradley as the new
Non-Executive Directors took place this year with:
• a series of structured meetings with each of the Executive
Directors, members of the broader senior management team
of B&M and the Group’s General Counsel;
• a Distribution Centre and Store Tour at B&M;
• meetings with senior management of Heron Foods and Jawoll at
each of their headquarters, including Distribution Centre and Store
Tours of Heron Foods and Jawoll;
• meetings with the Group’s brokers and investor relations advisors;
and
• Carolyn Bradley also had a meeting with the Group’s UK Audit
Partner, as part of her induction as a member of the Audit & Risk
Committee.
Following the above evaluations, the Chairman was satisfied that the
current Board and standing Committees have an appropriate
balance of skills and experience to discharge their duties and
continue to be effective.
The induction process provided them with early exposure to each of
the three businesses in the Group and how the business model is
applied and executed by them in relation to each of their retail
operations.
No changes to any of the Committees or their respective Chairs were
recommended by the Nomination Committee following the review
this year, other than the appointment of Gilles Petit following the year
end as a new member of the Audit & Risk Committee and the
Nomination Committee from 2 May 2019.
Ron McMillan, in succession to Thomas Hübner as the Senior
Independent Director, led a review of the Chairman’s performance
during the year. This process was carried out by a meeting of the
Independent Non-Executive Directors without the Chairman being
present, with soundings having been taken separately from the
Executive Directors and a one-to-one meeting of Ron McMillan with
the Chairman. Following that process, the Board remains satisfied that
the Chairman is effective and demonstrates commitment to his role.
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.
The last external Board review was carried out in the financial year
2016/17 and the next external review will be conducted in the financial
year 2019/20.
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 to be held on 26 July 2019.
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
programme and briefing with members of senior management. They
will also be required to meet major shareholders where requested.
In relation to corporate governance they were provided with a
comprehensive manual of documents in relation to all main aspects
of B&M’s governance and compliance as a Luxembourg registered
company and as a UK listed company. They also had meetings with
the Group’s General Counsel in relation to the workings of the Board
and each of its Committees.
A similar induction process is also being carried out with Gilles Petit.
The Directors update their knowledge and familiarity with the
businesses of the Group throughout the year with a mix of central
operations tours and B&M, Heron Foods, Jawoll and Babou stores
along with members of the senior management of each of those
businesses, and also senior management briefings and
presentations in relation to each of the B&M, Heron Foods, Jawoll and
Babou businesses.
The Chairman meets each Non-Executive Director individually at least
once a year and this includes discussion where necessary on any
further training and development needs.
The Nomination Committee also considers training and development
needs of the Executive Directors. The Directors also receive regular
updates at Board and Committee meetings on law, regulatory and
governance matters and future developments from the Group’s
General Counsel.
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.
Re-election of Directors
Following the reviews and Board evaluation exercise carried out
in the financial year 2018/19 as referred to on page 45 above, the
Nomination Committee has recommended that each of the Directors
be re-elected to the Board.
46
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Corporate Governance
Financial Statements
Information on the key risks and uncertainties of the Group are set out
on pages 26 to 30.
Shareholder relations
The Board recognises that good, regular communication is key to
maintaining shareholder relations, and as such we will endeavour to
explain our performance, management actions and financial results,
and also to respond to investor feedback.
Meetings and calls are regularly held 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,
the Senior Independent Director and each of the other Non-Executive
Directors, are available to meet with major shareholders where 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 holds conference calls and one-to-one meetings where
practical in accordance with market practice generally during the
course of each financial year with bondholders.
The Company’s corporate website at www.bandmretail.com is
regularly updated with our releases to the market and other
information and 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) arrangements under which the B&M European Value Retail S.A.
Employee Share Ownership Trust has waived or agreed to waive
dividends or future dividends – page 63;
(b) relationship agreement and independence statement – pages 64
and 65.
Disclosures under DTR 7.2.6R with regard to share capital are set out
in the sections headed “Share capital”, “Shareholders” and “Section
(a) Share capital structure”, in the Directors’ report and business
review on pages 62 to 66 below.
Peter Bamford
Chairman
22 May 2019
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
26 July 2019.
Risk management and internal control
The Board has overall responsibility for ensuring that the Group
maintains a strong system of internal control.
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.
An internal audit function was established by the Group over 4 years
ago, following a review of the monitoring and reporting systems of
the Group by the Audit & Risk Committee.
The Board is satisfied that the key risks to the business and relevant
mitigating actions are acceptable for a business of the type, size and
complexity as that operated by the Group.
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 that 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 at least an 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 reports key risks and mitigating
actions to the Board for monitoring as appropriate;
Monitoring of controls: following the establishment of the Internal
Audit function, the Audit & Risk Committee receive 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 the Group in place in
relation to anti-bribery and corruption, anti-slavery and whistle-
blowing policies in relation to reporting of any suspected wrong
doing or malpractice. Those policies are reviewed and updated by
the Group as required from time to time.
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 31 March 2019 and for the period up to the date of approving
the Annual Report and Financial Statements.
B&M European Value Retail S.A. Annual Report and Accounts 2019
47
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Audit & Risk Committee
report
Corporate governance
Audit & Risk Committee
report
“The Audit & Risk Committee is an important
element of the Group’s governance structure. Our
role is to advise the Board on financial reporting,
viability and going concern, risks and controls, and
whether the Annual Report provides the information
necessary for shareholders to assess the Group’s
performance, business model and strategy.”
Ron McMillan
Chairman of the Audit & Risk Committee
Dear Shareholder,
During the year, the Audit & Risk Committee has continued to carry
out a key role within the Group’s governance framework, supporting
the Board in risk management, internal control and financial
reporting.
The 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 estimates and judgements are
appropriate and obtains from the external auditor an independent
view of the key disclosure issues and risks. In relation to risks and
controls, the Committee ensures that these have been identified and
that appropriate responsibilities and accountabilities have been set.
A key responsibility of the Committee is to review the scope of work
undertaken by the internal and external auditors and to consider their
effectiveness.
The Committee has also considered the narrative in the Strategic
Report and believes that sufficient information has been provided to
give shareholders a fair, balanced and understandable account of
the Group’s business.
During the year, the Committee again oversaw the process used by
the Board to assess the viability of the Group, the stress testing of key
trading assumptions and the preparation of the Viability Statement,
which is set out on page 31, in the principal risks and uncertainties
section of the Strategic Report.
Further information on the Committee’s responsibilities and the
manner in which they have been discharged is set out below.
Going forward, I shall ensure that the Committee continues to
acknowledge and embrace its role of protecting the interests of
shareholders as regards the integrity of published financial
information and the effectiveness of audit.
I am available to speak with shareholders at any time and will also be
available at the Annual General Meeting on 26 July 2019 to answer
any questions you may have on this report. I would like to thank my
colleagues on the Committee for their continued help and support
during the year.
Ron McMillan
Chairman of the Audit & Risk Committee
22 May 2019
48
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Strategic Report
Corporate Governance
Financial Statements
Committee composition
The Committee comprises three members, each of whom is an
independent Non-Executive Director of the Company. Two members
constitutes a quorum. The Committee must include one financially
qualified member with recent and relevant financial experience. The
Committee Chairman fulfils 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. As reflected in the biographical
summaries on pages 38 and 39, all members of the Committee have
significant experience of working in or with companies in the retail
and consumer goods sectors and, as such, the Audit Committee as
a whole has competence relevant to the retail sector.
The members of the Committee during the year were Ron McMillan,
Thomas Hübner (retired 1 May 2019) Carolyn Bradley (appointed 15
November 2018) and Harry Brouwer (retired 14 November 2018). Since
the year end Gilles Petit has been appointed as a member of the
Committee on 2 May 2019. Details of Committee meetings and
attendances are set out on page 42 of the Corporate Governance
report. The timing of Committee meetings is set to accommodate the
dates of release of financial information and the approval of the
scope of and reviews of outputs from work programmes executed by
the internal and external auditors. In addition to scheduled meetings,
the Chairman of the Committee met with the CFO and the internal and
external auditors.
Although not members of the Committee, Paul McDonald as CFO and
Paul Owen as General Counsel of the Group and representatives
from the internal and external auditors attend all meetings. The
Chairman of the Board and the CEO are also invited to attend.
Responsibilities
The responsibilities of the Audit & Risk Committee, as delegated by
the Board, are set out in its terms of reference which are available on
the Group’s corporate website. They include the following:
•
reviewing the integrity of the financial statements, price sensitive
financial releases of the Group and the significant financial
judgements and estimates relating thereto;
• monitoring the scope of work, quality, effectiveness and
independence of the external auditors and approving their
appointment, reappointment and fees;
• monitoring and reviewing the independence and activities of the
internal audit function;
• assisting the Board with the development and execution of a risk
management strategy, risk policies and current risk exposures,
including the 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
• making recommendations to the Board in relation to the
appointment of the external auditor.
Committee activities in 2018/19
In discharging its oversight of the matters referred to in the
introductory letter to this report and as set out below, the Committee
was assisted by management, the Group’s General Counsel and the
internal and external auditors.
The recurring work of the Committee
The Committee considered the following matters during the year:
• consideration of the Annual Report and financial statements
of the Group;
• consideration of the interim results report and non-statutory
financial statements of the Group for the half year;
• consideration of key significant areas of accounting estimation
or judgement;
• consideration of the significant risks included in the Annual Report;
• approval of the external auditors terms of engagement, audit plan
and fees;
• going concern and viability statements; and
• approval of the internal audit plan.
The meetings at which the following matters were considered were
as follows:
May
2018
Nov
2018
Jan
2019
•
•
•
•
•
•
•
•
•
•
Internal Audit (“IA”)
IA annual evaluation
review of IA work plan, reports and updates
External Audit
review of audit report on preliminary results and
annual report FY18
review of audit report on the Group’s interim
results FY19
approval of the external audit plan and strategy
– review of external auditor’s effectiveness/
independence/and quality of audit
– update on the provision of any non-audit
services provided by the external auditor
Accounting matters
review of the methodology applied to value inventory
accounting for put & call option in relation to
Jawoll acquisition
review of acquisition accounting in relation to
Heron Foods
accounting for hedging instruments and policy
accounting in relation to supplier rebates
review of IFRS 9, 15 and 16 and disclosures
acquisition of Babou in relation to FY19 interim
results financial statements
update on IFRS 16 process and preparation for
implementation
Other matters
review of the Group Data Protection Policy and
implementation process
year end final review of related party transactions
(store leases)
whistleblowing policy, processes and reports
review of Babou post acquisition integration plan
consideration of Brexit related disclosures for FY19
preparation and process relating to the viability
statement for FY19
consideration of UK Corporate Governance Code
2018 and disclosure regulations for FY20
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
B&M European Value Retail S.A. Annual Report and Accounts 2019
49
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Accounting matters
The Committee considered the following accounting matters in
particular during the year:
•
impairment testing of Jawoll goodwill and related Annual Report
disclosures;
•
the methodology applied by the Group to value inventory;
• accounting for put and call options in relation to the Jawoll
acquisition;
• accounting relating to the acquisition of Heron Foods including
the treatment of deferred consideration and the valuation of
intangibles, and the acquisition of Babou;
• goodwill impairment in relation to each of the companies in the
Group;
• hedge accounting;
• accounting in relation to the Group’s associates;
•
•
the accounting for supplier rebates; and
the implications for the Group of adopting IFRS 9, 15 and 16.
The Committee reviews and monitors for the Board the overall total
number of related party store leases and rents of the Group with those
related parties during the course of the year, with a view to assessing
any potentially material increases in the proportion of those store
leases or rents compared with the overall store estate and rent roll.
Internal control and risk management
The Board has 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 misstatements, loss or failure.
Equally, no system can guarantee elimination of the risk of failure to
meet the objectives of the business. Against that background, the
Committee has helped the Board develop and maintain an approach
to risk management which incorporates risk appetite, the framework
within which risk is managed and the responsibilities and procedures
pertaining to the application of the policy.
In considering the above accounting matters the Committee had regard
to papers and reports prepared by the Group’s Finance Department
and the external Auditors and the explanations and disclosures made
in the Group’s financial statements. The Committee also considered the
significance of these accounting matters in the context of the Group’s
financial statements and their impact on the Group’s statement of
comprehensive income and the statement of financial position.
In relation to IFRS 16, the Committee was satisfied that the Group has
developed a model to be able to understand the impact on the
financial statements of the new standard, including seeking input
from KPMG, outside of the audit, in respect of the assumptions and
the methodology applied.
IT systems and business continuity
The success of the business relies on the development and operation
of IT systems which are efficient and effective. In addition, the integrity
and security of the IT systems are vital from a commercial standpoint.
During the year, the Board reviewed the Group’s IT systems and
controls and was satisfied that IT controls are effective.
Regulation
The Group operates within a fast moving and increasingly regulated
market place and is challenged by regulatory requirements across
the board, including those controlling bribery and corruption, the
importation of goods, data protection and health and safety. This
creates risk to the organisation as non-compliance can lead to
financial penalties and reputational damage in respect of customers,
employees, suppliers and stakeholders.
The Board reviewed the Group’s compliance procedures and the
application of policies relating to fraud, anti-money laundering and
anti-bribery. The Committee reviewed the whistleblowing procedures
and reports, which will become the responsibility of the Board in the
next financial year under the new UK Corporate Governance Code
2018 which will apply to the Company from 1 April 2019.
GDPR
The Committee reviewed the Group’s Data Protection and GDPR
policy and the actions being taken to comply with the GDPR.
Responsibility for GDPR compliance ultimately rests with the Board.
Related party transactions
There is an established process for the consideration and review of
related party store lease transactions of the Group with Arora Family
Details of that process are set out on page 44 of the Corporate
Governance Report above.
the risks and the impact they may have;
The Group is proactive in ensuring that corporate and operational
risks are identified and managed. A corporate risk register is
maintained which details:
1.
2. actions to mitigate risks;
3. risk scores to highlight the implications of occurrence;
4. ownership of risks; and
5. target dates for actions to mitigate risks.
A description of the principal risks is set out on pages 27 to 30.
The Board has confirmed that it has carried out a robust assessment
of the principal risks facing the Group, including those which threaten
its business model, future performance, solvency or liquidity.
The Board considers that the processes undertaken by the Committee
are appropriately robust and effective and in compliance with the
guidelines issued by the Financial Reporting Council. During the year,
the Board has not been advised by the Committee nor has it identified
itself, any failings, frauds, or weaknesses in internal control which it
has determined to be material in the context of the financial
statements.
The Committee continues to believe that appropriate controls are in
place throughout the Group, that the Group has a well-defined
organisational structure with clear lines of responsibility and a
comprehensive financial reporting system. The Committee also
believes that the Company complies with the FRC guidance on Risk
Management, Internal Control and related Financial Business
Reporting.
Furthermore, the Internal Audit function has carried out a robust
assessment of the effectiveness of actions taken by management
to mitigate significant risks and this has been reviewed by
the Committee.
Reviewing the draft interim and annual reports
The Committee considered in particular the following:
•
the accounting principles, policies and practices adopted and the
adequacy of related disclosures in the reports;
the significant accounting issues, estimates and judgements of
management in relation to financial reporting;
•
• whether any significant adjustments were required as a result of
the audit;
• compliance with statutory tax obligations and the Group’s tax
policy;
• whether the information set out in the Strategic Report was
balanced, comprehensive, clear and concise and covered both
positive and negative aspects of performance; and
• whether the use of “alternative performance measures” obscured
IFRS measures.
50
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Corporate Governance
Financial Statements
Going concern and financial viability
The Committee reviewed the appropriateness of adopting the going
concern basis of accounting in preparing the full year financial
statements and assessed whether the business was viable in
accordance with the UK Corporate Governance Code 2016. The
assessment included a review of the principal risks facing the Group,
their financial impact, how they are managed, the availability of
finance and the appropriate period for assessment. The Committee
also ensured that the assumptions underpinning forecasts were
stress tested. The Group’s viability statement in on page 31.
Fair, balanced and understandable.
The Committee considered whether the 2019 Annual Report is fair,
balanced and understandable and whether it provides the necessary
information to shareholders to assess the Group’s performance,
business model and strategy. The Committee considered
management’s assessment of items included in the financial
statements and the prominence given to them. The Committee and
subsequently the Board were satisfied that, taken as a whole, the
2019 Annual Report and Accounts are fair, balanced and
understandable.
External auditors
KPMG Luxembourg Société Coopérative (KPMG) were re-appointed by
shareholders at the Annual General Meeting on 28 July 2018 as the
Group’s independent external auditors (réviseur d’entreprises agréé)
for the financial year ended 31 March 2019. The partners responsible
for the audit are Thierry Ravasio, a partner in KPMG’s Luxembourg
office and Nicola Quayle, a partner in KPMG’s Manchester office.
Whilst there was no specific FRC review of the Group’s audit this year,
the Committee discussed with KPMG the results of the FRC Audit
Quality Inspection of KPMG UK as a whole and the proposed
improvement plans arising from the mixed findings of the FRC Report.
The Committee will closely monitor progress against these plans.
In relation to the Group’s audit, the Committee has reviewed the
performance of KPMG with input from management, the Group’s
finance and internal audit functions and the General Counsel.
The conclusions reached were that KPMG has continued to perform
the external audit in a very professional and efficient manner and it
is, therefore, the Committee’s recommendation that the reappointment
of KPMG be put to shareholders at the Annual General Meeting on
26 July 2019. Given KPMG’s short tenure of three years, the Board has
no present plans to consider an audit tender process.
The Committee reviewed the reports prepared by KPMG on key audit
findings as well as the recommendations made by KPMG to improve
processes and controls together with management’s responses to
those recommendations. Management has committed to making
appropriate changes in controls in other areas highlighted by KPMG.
Non-audit work
The Board’s policy in relation to the auditors undertaking non-audit
services is that they are normally subject to tender processes with the
allocation of work being done on the basis of competence, cost
effectiveness, regulatory requirements, potential conflicts of interests
and knowledge of the Group’s business.
KPMG were paid £481,500 during the year, £80,500 of which was for
non-audit work with the remaining balance relating to audit services.
The non-audit work of £80,500 mainly related to work associated
with (i) the half year interim report and (ii) the Company model to
prepare for the adoption of IFRS16.
The Committee is mindful of the attitude investors have to the auditors
performing non-audit services. The Committee monitors the
appointment of the auditors for non-audit services with a view to
ensuring that non-audit services do not compromise the objectivity
and independence of the auditors. The Committee will continue to
ensure that fees for non-audit services will not exceed 70% of
aggregate audit fees measured over a three year period.
Internal audit
The Group Internal Audit function has a direct reporting line to the
Committee and they are represented at all Committee meetings in
person. During the year, Internal Audit undertook a programme of
work which was discussed with and agreed by both management
and the Committee and which was designed to address both risk
management and areas of potential financial loss. Internal Audit has
also established procedures within the business to ensure that new
risks are identified, evaluated and managed and that any necessary
changes are made to the risk register.
During the year, the Committee received reports from the Internal
Audit function in relation to:
• Corporate policies and procedures;
• Environmental and social compliance;
• General ledger and basic financial controls in Jawoll;
• Payroll processes in Heron Foods;
• Property leases, related party transactions and store opening
programme;
• Regulatory compliance;
• Rents and rates;
• Risk register and risk mitigations;
• Transport availability;
• Treasury Management; and
• Whistle blowing processes in B&M Retail and Heron Foods.
In relation to each of the above, Internal Audit made
recommendations for improvements, the vast majority of which were
agreed by management and either have been or are being
implemented.
The Committee has evaluated the performance of internal audit and
has concluded that it provides constructive challenge to management
and demonstrates a constructive and commercial view of the
business.
Committee effectiveness
The effectiveness of the Committee during the year was evaluated as
part of a broader Board effectiveness review conducted internally
and led by the Chairman of the Board as described on pages 45 and
46 above. The overall conclusion of the review was that the
Committee remains effective in discharging its functions and
reporting to the Board.
Ron McMillan
Chairman of the Audit & Risk Committee
22 May 2019
B&M European Value Retail S.A. Annual Report and Accounts 2019
51
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report
Corporate governance
Directors’ remuneration report
Annual statement by the
Chair of the Remuneration Committee
“The linkage between executive
remuneration with our business goals,
the achievements of the Group and
shareholder experience, is key to how we
implement our remuneration policy.”
Kathleen Guion
Chair of the Remuneration Committee
Dear Shareholder,
I am pleased to present the Company’s Annual Remuneration Report
for 2018/19, being the fifth report since the IPO of the Company in 2014.
We have come a long way both as a Group and in terms of the
development of our remuneration strategy in that time. I was very
encouraged to see a 98.88% vote in favour of our new three year
forward-looking policy by shareholders who voted at our AGM last year.
Performance and awards for 2018/19
There has been a strong performance by the Group again in 2018/19.
Total Group revenues increased by 15.0%, profit before tax increased
by 8.8%, the Group’s cash flow from operations increased by 7.2%
and there was also a 7.6% increase in the number of B&M UK stores
in the year. The Group also successfully completed the acquisition of
Babou, a general merchandise value retail chain of 95 stores (at the
time of acquisition) in France.
The Annual Incentive Plan (“AIP”) out-turn for the CEO and CFO was
46.0% and 40.3% of their respective maximums, which reflected a
good financial performance and the Committee’s assessment
against objectives set this year for them. Following shareholder
approval last year to the introduction of a deferred share bonus plan,
1/3 of the bonus achieved by the CEO and CFO under the AIP in
2018/19 has been deferred into shares for 3 years.
The LTIP granted to the CFO awarded in 2016 has reached the end of
the relevant performance period. This was subject to two performance
conditions being the adjusted earnings per share and the relative TSR
performance of the Company against FTSE 350 retailers, each being
over a 3 year performance period measured at 30 March 2019. The
TSR performance resulted in a 100% out-turn for this measure. The
adjusted earnings per share was 19.7p being a 58% out-turn under
that measure and giving a 79% overall vesting of that award at the end
of the holding period which will be in August 2021.
The Committee has discretion to reduce the level of vesting. It considered
that the formulaic out-turns under both the AIP and LTIP were appropriate
and approved the outcomes without the exercise of any discretion.
Implementation of remuneration policy for 2019/20
The base salary levels for the two Executive Directors were increased
by 2% in line with the average for UK salaried staff generally. The AIP
and LTIP arrangements remain substantially unchanged from the
previous year.
The Committee has received training on the UK’s new Corporate
Governance Code 2018 and the Committee’s terms of reference have
been updated to ensure that it is directly responsible for approving
the packages of the Group’s most senior management, and that it
has an appropriate overview of remuneration across the wider
Group. It will consider what, if any, additional steps are necessary to
ensure that the Company complies with the code when it comes into
effect in relation to the Company in the 2019/20 financial year.
Format of the report
The report sets out below on pages 53 to 59 the Company’s Annual
Remuneration Report, which details the remuneration paid to the
Directors’ in the 2018/19 financial year, and which is subject to a
shareholder advisory vote at our 2019 AGM.
Following best practice we have set out the remuneration policy table
which was approved last year on pages 60 and 61 below. The full
policy report is available in last year’s Annual Report on our website
at www.bandmretail.com.
We have continued to ensure that the Company’s remuneration
arrangements provide an appropriate balance between the interests of
shareholders and those of the executives. I hope that you agree and that
you will therefore support this year’s vote on the remuneration report.
This report has been prepared under the regulations adopted in the
UK in 2013 (and as amended) for the reporting of executive
remuneration, as was also the case last year. As the Company is a
Luxembourg registered company, it is not subject to that regime,
however, the Committee considers those regulations to be reflective
of best practice and has therefore followed that practice, while
maintaining its status as a Luxembourg registered company.
I welcome any feedback which shareholders may have in relation to
this report in the meantime. I will also be available at the AGM to take
any questions in relation to this report.
Kathleen Guion
Chair of the Remuneration Committee
22 May 2019
52
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Corporate Governance
Financial Statements
Role of the Remuneration Committee
The Committee has responsibility for determining the Company’s
policy on remuneration of the Executive Directors and the Chairman,
the first layer of senior management of the Group below the Board
and the Group’s General Counsel. Its terms of reference have been
updated to ensure it reviews the pay and conditions of the Group’s
wider workforce.
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 of the forward-looking policy
approved by shareholders last year was 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 at www.bandmretail.com
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 consulted with a
number of shareholders and investor bodies, before the forward-
looking policy was approved by shareholders last year.
The Committee welcomes feedback generally at any time which will
be considered as part of its annual review of remuneration policy.
Annual Remuneration Report
Implementation of Remuneration Policy
The Committee has operated the remuneration policy in accordance
with the Directors’ Remuneration Policy (the “Policy”) which was
approved by shareholders at the Company’s AGM on 30 July 2018.
This section of the report sets out how the Policy has been applied in
the financial year 2018/19 and how it will be applied in the financial
year 2019/20.
Where sections of the report have been subject to audit, they are
marked accordingly.
Salary
In accordance with the forward-looking policy approved by
shareholders at last year’s AGM, the Executive Directors received a
5% increase in base salaries with effect from the beginning of the
financial year under review.
The Executive Directors received a 2% increase in their base salaries
with effect from the beginning of the 2019/20 financial year.
The comparator group of retailers used in the benchmarking exercise
in relation to the updated remuneration policy from the beginning of
the 2018/19 financial year at the time of setting the CEO and CFO base
salaries and overall remuneration packages included the following
FTSE 350 retailers (being both the FTSE General Retailers Sector and
the FTSE Food and Drug Retailers Index constituents): Card Factory,
Dignity, Dixons Carphone, Greggs, Halfords, Inchcape, J Sainsbury,
JD Sports Fashion, Marks & Spencer, Morrison Supermarkets, Next,
Ocado, Pets At Home, Sports Direct, SSP, Tesco and WH Smith. In
addition, the Committee reviews pan-sector data of companies with
a comparable market capitalisation to the Company.
Benefits
Benefits are set by the Committee in accordance with the
remuneration policy set out on pages 60 and 61 below. There are no
changes proposed to the overall benefits framework for 2019/20.
Pension
Pension contributions are in line with the remuneration policy. The
amounts paid in the year represent either the amount contributed to
personal pension plans, or the equivalent cash value (adjusted for the
cost of employers’ NICs) as salary supplements.
There are no increases proposed to the rates of the pension benefits
of the Executive Directors for 2019/20, which remain at 20% of base
salary (or cash equivalent less Employers’ NICs) for the CEO and 15%
of base salary (or cash equivalent less Employers’ NICs) for the CFO in
accordance with the remuneration policy. For any new Executive
Directors their pension benefits would be capped at the same
percentage of base salary applied generally to UK employees of the
Group, notwithstanding the higher cap approved by shareholders in
the remuneration policy adopted last year.
Single figure table of total remuneration of Executive Directors – audited
The audited table below shows the aggregate remuneration of the Executive Directors of the Company during the financial year 2018/19.
Executive Directors
Simon Arora (CEO)
Paul McDonald (CFO)
Year1
2017/18
2018/19
2017/18
2018/19
Salaries
£
612,497
631,221
308,911
318,355
Benefits2
£
37,873
27,068
8,273
8,743
Bonus3
£
618,416
435,661
193,408
160,262
Value of
long term
incentives4
£
–
–
299,907
292,212
Pension5
£
107,294
110,226
40,367
41,254
Total
£
1,376,080
1,204,176
850,866
820,826
1. The 2017/18 year is for the 53 weeks ended 31 March 2018 and the 2018/19 year is for the 52 weeks ended 30 March 2019. The figures in the table above also include the impact of an
additional week’s pay in 2017/18. The Executive Directors received a 5% increase to their base salaries in 2018/19 in accordance with the forward-looking policy approved by
shareholders at last year’s AGM.
2. Benefits in 2017/18 and 2018/19 include company car/car allowance cash equivalent as a benefit in kind, fuel and running costs, critical illness insurance, and life assurance for each
Executive Director and, for the CFO only, permanent healthcare insurance.
4.
3. One third of the annual bonuses of the CEO and the CFO for 2018/19 being £145,220 and £53,421 respectively, are payable in shares which are to be deferred for a period of three
years from the date of grant and will be subject to forfeiture if they voluntarily resign or leave due to misconduct in circumstances where the Company is entitled to summarily
dismiss them, prior to the end of that period.
LTIP awards in 2017/18 and 2018/19 were subject to pre-vest performance conditions, so they will be included on the satisfaction of those conditions. The performance targets for the LTIP
are set out on page 56. The 2016/17 grant has been tested and the result of that is explained on page 55 so it has been included in the above figures although it will not vest until the
expiry of the holding period on 18 August 2021. The value of LTIP’s for 2017/18 has been restated to reflect the share price on the third anniversary of grant, being £4.16 on 5 August 2018.
The value of LTIP’s for 2018/19 has been estimated using the actual number of shares due to vest and the three-month average share price to the year-end of £3.39217.
For each of 2017/18 and 2018/19, pensions include auto-enrolment pension employer contributions and a cash equivalent allowance to pension contribution entitlement less
employers’ NICs.
5.
B&M European Value Retail S.A. Annual Report and Accounts 2019
53
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Bonus
Executive Directors received bonus payments in 2018/19 in line with the remuneration policy and the terms of the Annual Incentive Plan (“AIP”),
in the amounts set out in the table on page 53 above, together with 1/3 of the bonus achieved under the AIP in 2018/19 which has been
deferred into shares for 3 years.
The financial targets for 2018/19 were set against Adjusted Group EBITDA performance as follows:
Threshold
Target
Max
Actual
Adjusted Group
EBITDA target*
% maximum overall
Bonus opportunity
£292.50m
£325.00m
£341.25m
£305.5m
18.75%
37.5%
75%
26.2%
*
There is a straight-line vesting between the threshold, target and maximum points achieved.
The other 25% of the AIP related to personal and leadership development objectives. These objectives focused on a number of key
performance indicators ranging from strategic, operational and investor relations matters.
In particular:
CEO
CFO
Personal Objectives
(15% weighting)
Personal
Development
Objectives
(10% weighting)
In relation to the CEO:
In relation to the CFO:
i. a target for product satisfaction and a target of
no material safety recalls of products, both of
which were achieved;
ii.
investor relations outcomes were assessed as
having been achieved by reference to the
continued broadening of the shareholder base
with a committed engagement and dialogue
with investors, notwithstanding macro-
economic and political factors which were
generally difficult to the whole of the general
retail sector in the year under review;
iii. environmental reductions in Like-for-Like
estate power consumption goals were met, as
a result of the continued investment in LED
lighting and consumption efficiencies within
the store estate; and
iv. the development and execution of the M&A
strategy achieved a 50% score, notably in
relation to the planned and successful
execution of the acquisition of Babou in France
but with a longer timeframe necessary for the
successful development of Jawoll.
i. oversight of development of the Internal Audit function and
insightful reporting to management, was assessed at 75%
with the Audit & Risk Committee providing soundings on the
outcomes of this measure generally;
ii. cost control reductions were achieved but they were below
certain targeted measures in relation to the Group;
iii. investor relations outcomes were assessed as having been
achieved by reference to the continued broadening of the
shareholder base with a committed engagement and
dialogue with investors, notwithstanding macro-economic
and political factors which were generally difficult to the whole
of the general retail sector in the year under review; and
iv. on oversight of the development and execution of IT strategy
by the Group a one third score was achieved with the CFO
being more involved on financial as opposed to other
operational IT developments in the year.
Overall 13 out of 15
Overall 8 out of 15
This included:
This included:
i. development of greater degree of participation
by the next tier of senior management with the
Board on key operational and strategic areas,
which was achieved by a rolling programme
of presentations to the Board by them across
each of the business fascia’s in the Group and
with incoming management in relation to the
Babou acquisition;
ii. employee relations and development of career
progression and succession planning was
assessed at 50% with on-going succession
planning to continue to be developed further
across the Group.
i. directing of due diligence on M&A acquisitions, which was
assessed at 100% in relation to the financial due diligence on
the acquisition of Babou and also measured against other
areas for future development;
ii.
integration of finance and reporting functions of acquired
businesses, and recruitment of an International Director of
Finance with oversight of the acquired businesses in the
Group reporting directly to the CFO, was assessed at 50%
having made progress on integration and having recruited the
International Director of Finance in the later part of the year;
iii. execution of funding aspects of M&A, which was assessed at
100% as demonstrated on the successful acquisition of Babou;
and
iv. a cross functional supply chain initiative to achieve cost
savings. No score was given to that measure in FY18/19 as the
implementation of that is not expected until after the Southern
Distribution Centre is operational.
Overall 7 out of 10
Overall 6 out of 10
54
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Corporate Governance
Financial Statements
The Committee reviewed the AIP during the year and remains satisfied that it continues to be appropriate for the Company.
Accordingly, for 2019/20, the maximum bonus opportunity for the CEO and CFO will remain at 150% and 125% of base salary respectively.
Under the awards for 2019/20, 75% of the maximum bonus opportunity is again based on the achievement of an Adjusted EBITDA target,
although the 15% on achievement of individual KPI’s and 10% on other personal leadership and development criteria will be consolidated into
25% linked to more clearly defined strategic priorities which include both aspects. In relation to each award 1/3 of any bonus achieved will be
deferred into shares for 3 years. The awards will also be subject to malus and claw-back provisions.
The Committee does not disclose Adjusted EBITDA 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 again be included in next year’s report retrospectively.
Long term incentives
The award granted on 18 August 2016 to the CFO was based on a combination of EPS and TSR measured to 30 March 2019 and the out-turn of
those targets was that the TSR condition was met to the extent of 100% and the adjusted earnings per share was 19.7p being an out-turn under
that measure of 58%. While the award does not vest until the expiry of the holding period being on 18 August 2021, on the basis that the
performance conditions have been satisfied to the extent of 79% that proportion of the award has been included within the single figure.
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 subject to a further two year holding period applying. The maximum individual limits for awards are capped at 200% of base
salary under the existing remuneration policy and LTIP Plan rules.
Awards were made to the CEO and CFO under the LTIP on 20 August 2018 equal to 200% of base salary and for 175% of base salary
respectively. Details of the award are set out in the table below.
For 2019/20, it is expected that awards will be made shortly following the announcement of the 2018/19 results. Those awards are proposed
for the CEO to be equal to 200% of base salary and for the CFO 175% of base salary, with performance measures unchanged from those
applying to the LTIP grant for 2018/19. The TSR condition will be the same as the LTIP for 2018/19. The EPS range is set out on page 56. There will
be a holding period expiring on the fifth anniversary of the date of the grant.
Remuneration of the Chairman and Non-Executive Directors – audited
The fees of the Chairman are set by the Remuneration Committee. The fees of each 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 2018/19 to the Chairman of the Board and each of the Non-Executive Directors were as follows, and the Non-Executive
Directors fees will be the same as those in 2018/19 for 2019/20:
Director
Peter Bamford1
Thomas Hübner (retired from the Board 1 May 2019)
Kathleen Guion
Ron McMillan
Harry Brouwer (retired from the Board 14 November 2018)
Tiffany Hall (appointed to the Board 18 September 2018)
Carolyn Bradley (appointed to the Board 15 November 2018)
Gilles Petit (appointed to the Board 2 May 2019)
2018/19
Fee £
300,000
74,500
70,000
70,000
40,759
45,645
36,428
–
2017/18
Fee £
34,592
74,500
70,000
70,000
58,000
–
–
–
1
In relation to the fees for 2017/18, Peter Bamford also received fees of £9,592 as a Non-Executive Director of a group subsidiary for January and February 2018 only which are not
on-going fees, prior to his appointment as Chairman of the Company on 1 March 2018.
B&M European Value Retail S.A. Annual Report and Accounts 2019
55
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Scheme interests awarded during the financial year – audited
The audited table shows all share awards held by Directors, together with awards made in 2018/19. Each award takes the form of nil cost
options under the LTIP scheme, with each grant up to 7 August 2017 being equal to 100% of base salary and awards made on 20 August 2018
to the CEO and CFO being equal to 200% and 175% of base salary respectively.
Date
of grant
Share price
at date
of grant
Number of
shares over
which award
was granted
Number
of awards
exercised
in the year
Number
of awards
lapsed
in the year
Number of
awards held
at 30 March
2019
Director
% of face
value that
would vest at
threshold
performance
Face value of
award
Vesting on performance over date
Simon Arora
20.08.18
£4.045
312,099
–
Paul McDonald 01.08.14
£2.715
74,074
74,074
–
–
312,099 £1,262,440.46
05.08.15
£3.570
81,232
18.08.16
£2.726
109,042
07.08.17
£3.733
81,220
20.08.18
£4.045
137,730
–
–
–
–
–
9,139
72,093
22,899
86,143
81,220
–
–
137,730
£557,117.85
–
–
–
–
25% Third anniversary of the date of
grant subject to an additional
two year holding period
100%
Third anniversary of the date
of grant
25% Third anniversary of the date of
grant subject to an additional
two year holding period
25% Third anniversary of the date of
grant subject to an additional
two year holding period
25% Third anniversary of the date of
grant subject to an additional
two year holding period
25% Third anniversary of the date of
grant subject to an additional
two year holding period
Performance targets for outstanding LTIP awards
The performance conditions for each of the LTIP awards made on 18 August 2016, 7 August 2017 and 20 August 2018 (and the award due to be
made in 2019) are as follows:
a. 50% of the relevant award shares will 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 financial year in which the relevant award was granted (the “Performance Period”) as derived by comparing the one
month prior to the start and end of the relevant Performance Period. The amount due to vest is determined at the end of the performance
period although awards only vest at the end of the subsequent holding period. This determination occurs on achievement (as a threshold
level) of a median relative TSR performance ranking being attained at the end of the relevant Performance Period, with 25% of that portion
of the relevant award shares then becoming exercisable. On attaining an upper quartile relative TSR performance ranking at the end of the
relevant Performance Period, 100% of that portion of the relevant award shares would become exercisable at the expiry of the relevant
holding period explained below, with a straight-line proportion vesting between median and upper quartile ranking being achieved; and
b. 50% of the relevant award shares will vest based on growth in adjusted EPS of the Company over the Performance Period. The amount due
to vest is determined at the end of the performance period although awards only vest at the end of the subsequent holding period. This
determination occurs on achievement of the following EPS ranges (with straight-line interpolation between those targets):
August 2016 award
August 2017 award
August 2018 award
2019 awards (proposed for the CEO and CFO)
Financial year
assessed
Threshold
(25% of that
part vesting)
Stretch (100%
of that part
vesting)
2018/19
2019/20
2020/21
2021/22
17.5p
19p
23p
27p
22.5p
24p
28p
33p
All of these targets have been set before considering the impact of IFRS16 and the targets will be assessed on this basis.
Consistent with best practice guidelines, the Committee has discretion to adjust these targets if, in its view, the reported out-turn is unduly
impacted by share buy-backs (or equivalent unanticipated transactions) to ensure that participants do not receive an unintended benefit from
such transactions.
All of the above awards have a holding period expiring on the fifth anniversary of the date of the grant of the relevant award as will the
proposed 2019 awards.
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 30 March 2019.
56
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Corporate Governance
Financial Statements
Directors’ shareholding and share interests – audited
Under the remuneration policy, the shareholding guideline for Executive Directors is for a shareholding to be built up and maintained by them
of 200% of base salary. Where an Executive Director does not meet the shareholding guideline, they are expected to retain all shares which
vest under the LTIP (or any other share plans in the future) after allowing for tax. They will be required to retain shares following their departure
from the Group through the retention of LTIP awards subject to any holding period and, depending on the circumstances of departure, any
deferred bonuses or other LTIP awards.
The Committee reviews share ownership levels annually. The shareholding guideline requirement is exceeded by the CEO in relation to the
interests as referred to in the table below. The CFO was not a shareholder in the Group prior to or on the IPO of the Company in June 2014. The
CFO has had one LTIP award granted on 1 August 2014 which vested and was exercised during the period under review. He has retained those
shares (except for those allowing for tax on the whole award) toward the guideline requirement. The CFO also has unvested LTIP awards
granted on 5 August 2015 and 18 August 2016, and also other unvested LTIP awards which subject to performance conditions being achieved
during the course of 2019/20 and following years, will in that event then count toward the guideline requirement on a net of tax basis.
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 2018/19.
Director
Peter Bamford
Simon Arora
Paul McDonald
Thomas Hübner (retired from the Board 1 May 2019)3
Kathleen Guion
Ron McMillan
Harry Brouwer (retired from the Board 14 November 2018)
Tiffany Hall (appointed to the Board 18 September 2018)
Carolyn Bradley (appointed to the Board 15 November 2018)
Gilles Petit (appointed to the Board 2 May 2019)
Shares held
beneficially1
5,000
149,880,828
39,171
–
11,111
37,037
18,518
3,050
12,192
–
Unvested
options with
performance
conditions2
Unvested
options not
subject to
performance
Vested but
unexercised
awards
–
312,099
218,950
–
–
–
–
–
–
–
–
–
86,143
–
–
–
–
–
–
–
–
–
72,093
–
–
–
–
–
–
–
1
2 Nil cost options.
3
Includes any shares held by connected persons or related parties.
Following the year end Thomas Hübner no longer holds any shares.
There have been no changes in the Directors’ interests in shares in the Company between the end of the 2018/19 financial year and the date of
this report.
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) of which the Company is a constituent, from 12 June 2014 (the date on which the Company’s shares were first
conditionally traded).
Total Shareholder Return (Rebased)
Source: Datastream (Thomson Reuters)
B&M European Value Retail
FTSE 250 (Ex IT)
170
160
150
140
130
120
110
100
90
4
1
0
2
e
n
u
J
2
1
n
o
e
d
a
m
t
n
e
m
t
s
e
v
n
i
t
i
n
u
0
0
1
a
f
l
o
e
u
a
V
-
R
S
T
12 June 2014
28 March 2015
26 March 2016
25 March 2017
31 March 2018
30 March 2019
This graph shows the value by 30 March 2019 of £100 invested in B&M from 12 June 2014 (the date on which the Company’s shares were first
conditionally traded) compared with the value of £100 invested in the FTSE 250 Index (excluding investment trusts).
B&M European Value Retail S.A. Annual Report and Accounts 2019
57
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Directors’ remuneration report continued
Remuneration of the CEO
The table below shows the remuneration of the CEO for each of the last five financial years.
2014/15
2015/16
2016/17
2017/18
2018/19
Single Figure
£166,606
£601,638
£1,403,731
£1,376,080
£1,204,176
Bonus as a
% of max
LTIP as a
% of max
N/A
0%
76.77%
68.58%
46.01%
N/A
N/A
N/A
N/A
N/A
Change in remuneration of the Chief Executive
The table below shows the percentage changes in the CEO’s remuneration between the financial years ended 31 March 2018 and 30 March
2019 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
1
This includes salaried UK employees.
Salary
increase/
(decrease)
Annual bonus
increase/
(decrease)
5%
3.77%
-29.55%
8.43%
Taxable
benefits
increase/
(decrease)
-28.53%
10.93%
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 for the financial years
ended 31 March 2018 and 30 March 2019.
£’000
Total pay for employees
Distributions to shareholders1
2017/18
2018/19
% change
365,396
63,013
414,651
75,042
13.5%
19.1%
1
There have not been any buy-backs of shares so this element has been excluded from the above table.
Service contracts and payments for loss of office
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. Each of their service contracts allow for early termination with payment in lieu of notice. There are no
enhanced provisions on a change of control under the Executive Directors’ service contracts. The service contracts of the Executive Directors
are available for inspection at the registered office of the Company. The service contracts are dated 29 May 2014 in relation to the CEO and
2 July 2015 in relation to the CFO.
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 31 March 2019.
Chairman and Non-Executive Directors
The rates of the fees for the Chairman and Non-Executive Directors were the same in 2018/19 as those set in the 2017/18 financial year.
The rates are in line with the median range compared with FTSE 350 companies generally, but without any premium for the extra time
commitment of staying and travelling to Board and Committee meetings which are all held outside the UK. The structure of the fees remains
the same as they were set by the Board at the time of the IPO, which take account of Chairmanships of Board Committees and the role of the
Senior Independent Director.
All fees are subject to the aggregate fee cap for Directors in the Articles of Association of the Company, which is currently at £1,000,000
per annum.
The Committee has responsibility for determining fees paid to the Chairman of the Board.
Details of the fees which were paid to Non-Executive Directors in 2018/19 and for the prior year are set out in the table on page 55 above.
The Chairman and the Non-Executive Directors are entitled to reimbursement of all expenses reasonably incurred by them in the performance
of their duties. The Chairman and the Non-Executive Directors do not participate in any bonus or share plans of the Company.
All the Non-Executive Directors of the Company have letters of appointment with the Company for three years subject to three 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 appointment letters of each of Ron McMillan and Kathleen Guion are
dated 24 May 2017. Each of Tiffany Hall and Carolyn Bradley’s appointment letters are dated 30 July 2018 and Gilles Petit’s is dated 17 April
2019. The Chairman’s appointment letter is dated 13 November 2017.
58
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Corporate Governance
Financial Statements
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 except in relation to any fraud or dishonesty.
Remuneration Committee
The members of the Committee during the year were the following independent Non-Executive Directors being, Kathleen Guion (Committee
Chair), Ron McMillan, Harry Brouwer (retired 14 November 2018) and Tiffany Hall (appointed 18 September 2018).
The responsibilities of the Committee are set out in the Corporate Governance section of the Annual Report on page 41.
The Committee is assisted by Paul Owen as General Counsel of the Group, who is invited to attend Committee meetings. The Committee
invites Peter Bamford as the Chairman of the Board and Simon Arora as the CEO, as and when the Committee considers it appropriate, to
attend meetings and assist the Committee in its deliberations. No person is present during any deliberations relating to their own
remuneration or is involved in determining their own remuneration.
The attendance of members of the Committee at meetings of it was as follows:
Director
Kathleen Guion1
Harry Brouwer2
Ron McMillan
Tiffany Hall3
Role
Meetings attended
Committee Chair
Committee Member
Committee Member
Committee Member
3 out of 4
2 out of 2
4 out of 4
2 out of 2
1
Kathleen Guion was unable to attend one of the 4 meetings in the year due to a one-off family event, but she ensured that her views were shared with and that there was a
dialogue between her and the other members of the Committee in advance of that meeting. Since the IPO of the Company in 2014 she has otherwise had a 100% attendance record
every year as the Chair of the Committee.
2 Harry Brouwer retired as a Director and member of the Committee on 14 November 2018. He had a 100% attendance record during his period as a member of the Committee in
3
FY2018/19.
Tiffany Hall was appointed as a Director and member of the Committee on 18 September 2018. She had a 100% attendance record since her appointment as a member of the
Committee in FY2018/19.
The effectiveness of the Committee during the year was evaluated as part of a broader board effectiveness review conducted internally and
led by the Chairman of the Board, details of which are set out on pages 45 and 46. The overall conclusion of the review was that the
Committee remains effective in discharging its functions and reporting to the Board.
Shareholder voting
The resolutions to approve the Directors’ remuneration policy and the remuneration report at the 2018 AGM were passed as follows:
Resolution
To approve the remuneration policy (2018)
To approve the remuneration report (2018)
Votes for
766,109,391
769,586,333
% for
98.88
99.35
Votes
against
8,714,552
4,996,568
% against
Total votes cast
1.12 774,823,943
0.65 774,582,901
% of shares
on register
77.44
77.41
Votes
withheld
0
241,043
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 some other members of 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 subscribe to its Code of Conduct which requires that its advice must be
objective and impartial. For the financial year 2018/19 FIT’s total fees were £39,132.74 excluding vat and expenses.
This report has been approved by the Board of Directors of the Company and signed on behalf of the Board by:
Kathleen Guion
Chair of the Remuneration Committee
22 May 2019
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Policy Table (from the Directors’ Remuneration Policy approved by shareholders at the AGM in 2018)
The table below describes the elements of remuneration paid to the Executive Directors:
Element and purpose
Policy and opportunity
Operation and performance conditions
Base salary is typically paid 4 weekly in cash.
Base salaries are reviewed annually with changes
usually taking effect from 1 April. Salaries will increase
by 5% from 1 April 2018 and it is envisaged that
subsequent increases during the currency of this policy
will not normally exceed the average increase awarded
to other salaried staff.
Base salary
This is the basic pay and
reflects the individual’s role,
responsibility and
contribution
to the Group.
Base salaries are reviewed annually. Changes
typically take effect from the beginning of the
relevant financial year.
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 £750,000
increasing in line with UK RPI from the date of the
2018 AGM. In practice though the Committee would
normally expect to keep it below this level.
Benefits
Provide market competitive benefits.
To provide benefits which are
valued by the individual and
assist them in carrying out
their duties.
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 for a limited period and/or tax
equalisation payments may be paid.
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.
Pension
To provide an appropriate
level of contribution to
retirement planning.
Provide a market competitive pension contribution
(or equivalent cash allowance) of a total maximum
value up to 20% of base salary for the current CEO
and 15% (or equivalent cash allowance) for other
Executive Directors (including any new CEO).
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.
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Financial Statements
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”).
The proposed annual bonus potential for the CEO
is 150% of base salary and 125% 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 up to two-thirds in cash and at
least one-third in shares with the share element
normally contingent on employment for a further
three years. Such deferred shares, will be credited on
vesting with dividends paid during the vesting period.
The policy is to make awards to Executive Directors
of shares with a face value on grant of up to 200%
of base salary each year under the LTIP. In practice,
it is envisaged that the CEO may receive a grant of
up to 200% and other Executive Directors up to 175%.
For grants from 2018 onwards, the LTIP will permit
participants to be credited, on the vesting of any
awards, with dividends paid during the
performance period and any holding 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.
Shareholding guidelines
To encourage share
ownership and create
alignment of interests of
Executive Directors and
shareholders.
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 B&M in the UK.
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 B&M UK
employees which was
adopted prior to Admission.
The performance measures are reviewed annually by
the Committee in line with the Company’s strategy.
The performance measures applied may be financial
(with at least a 75% weighting on such measures) 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.
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.
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.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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business review
Corporate 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 30 and 31 March 2019 respectively 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 Report
and Directors’ Remuneration Report on pages 1 to 37, 38 to 51 and 52
to 59 respectively form part of this report.
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 Group’s current position.
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,
Germany and France. The Company has a corporate office in
Luxembourg.
Business review
This report together with the Strategic Report on pages 1 to 37, sets
out the review of the Group’s business during the financial year
ended 30 March 2019, 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.
Results and dividend
The Group’s profit after tax for the financial year ended 30 March 2019
of GBP £202.71m is reported in the consolidated statement of
comprehensive income on page 71.
The Board is recommending a final dividend of 4.9p per ordinary
share, which together with the interim dividend of 2.7p per ordinary
share paid in December 2018 is a total dividend for the year of 7.6p,
which reflects the upper end of the dividend policy of paying 30-40%
of normalised post-IPO earnings¹.
1
Dividends are stated as gross amounts before deduction of Luxembourg withholding
tax which is currently 15%.
Corporate social responsibility
Our CSR activity is set out in the Corporate Social Responsibility Report
on pages 32 to 37.
Greenhouse gas emissions
Details of the Group’s greenhouse gas emissions are contained in the
Corporate Social Responsibility Report on page 37 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, 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 2019 and their interests
in shares and share awards made to them under share incentive
schemes in the Company are shown on pages 56 and 57. There have
been no changes to the Board of the Company between 31 March
2019 and the date of this report, except for the retirement of Thomas
Hübner from the Board with effect from 1 May 2019 and the
appointment of Gilles Petit on 2 May 2019.
In accordance with the Articles of Association of the Company, all the
Directors will retire at the Annual General Meeting (“AGM”) on 26 July
2019. All the retiring Directors, being eligible, will stand for re-election
as Directors at that meeting.
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.
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Financial Statements
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 27 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 65 below and in note 23 to the consolidated
financial statements on page 105 which forms 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 limits and conditions as
permitted under the Articles of Association of the Company. The
Directors intend to comply with the Pre-Emption Group’s Statement of
Principles, in relation to any issue of shares of the Company to the
extent practical as a Luxembourg registered company.
The Board intends to seek an authorisation of shareholders at the
AGM on 26 July 2019 that the Company, 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 repurchased and no contract to repurchase shares 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, all decisions by an annual or
ordinary 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 AGM specifies
deadlines for exercising voting rights and appointing a proxy to vote.
Shareholders
As at 22 May 2019, the following shareholders have notified the
Company of their interest in 5% or more of the Company’s issued
ordinary shares:
Shareholder
SSA Investments S.à r.l.*
No of ordinary
shares
149,880,828
% share
Capital
14.98
*
Includes 8,055,494 shares held by Praxis Nominees Limited on its account.
Amendment to the Articles of Association
The Articles of Association of the Company may only be amended at
an extraordinary general meeting of shareholders 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 proportion of the
issued share capital represented at that meeting) and when adopted
by a resolution passed by at least two-thirds of the votes cast.
Change of control
The Company has a senior facilities agreement (the “SFA”) in relation
to a £300m term loan (which has been drawn in full) and a £150m
revolving credit facility. The Group also has an acquisition loan facility
(the “ALF”) of €100m (of which €93m has been drawn down). The SFA
and the ALF provide that on a change of control of the Company, each
lender has the right to require early repayment of their loans and to
cancel all their commitments under the SFA and the ALF on not less
than 10 Business Days’ notice to the Company.
The Company has £250m 4.125% senior secured notes due 2022, of
which all £250m remain outstanding. On a change of control of the
Company, each bondholder has the option to require the Company to
repurchase all or part of the notes of such holder at a purchase price
of 101% of the principal amount plus accrued interest up to the date of
repurchase.
Holders of ordinary shares may receive a dividend and on liquidation
may share in the assets of the Company.
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.
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 transfers
relating to the Company’s ordinary shares, as well as the powers
of the Directors, are set out in the Articles of Association.
The Company is not aware of any agreements between shareholders
that restrict the transfer of shares or voting rights attached to the shares.
Employee share ownership trust
The Company established the B&M European Value Retail S.A.
Employee Share Ownership Trust with Link Trustees (Jersey) Limited
(formerly 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 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 year under
review no shares were used from the ESOT to satisfy vested awards
made under a share scheme of the Company. As at 31 March 2019
and since that date up to the date of this report, the ESOT did not hold
any shares in the Company.
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
Notices convening the Company’s fifth Annual General Meeting
(“AGM”) to be held on 26 July 2019, will be issued to shareholders.
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 of the AGM.
Corporate governance
The compliance by the Company with the UK Corporate Governance
Code and the requirements of article 68ter of the Luxembourg Law on
the Trade and Companies Register and Annual Accounts of
companies of 19 December 2002, as subsequently amended, are set
out in the Principal Risks and Uncertainties on pages 26 to 31, the
Corporate Governance report on pages 38 to 51 and the Directors’
Remuneration Report on pages 52 to 59, 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 67, which forms part of this report.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Independent auditor
KPMG Luxembourg, Société Cooperative is the independent auditor
(“réviseur d’entreprises agréé”) of the Company. Their reappointment
as the Company’s auditor, together with the authority for the Directors
to fix the auditor’s remuneration, will be proposed at the AGM on
26 July 2019 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.
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
Simon Arora, Bobby Arora, Robin Arora and SSA Investments S.à r.l.
(“SSA Holdco”) (the “Arora Family”) entered into a relationship
agreement with the Company at the time of and with effect from the
admission of the Company to trading on the London Stock Exchange
in June 2014 (“Admission”) and which continues to remain in force,
which regulates the ongoing relationship between the Company and
the Arora Family, following Admission (the “Relationship Agreement”).
The principal purpose of the Relationship Agreement is to ensure that
the Company and its subsidiaries are capable of carrying on their
business independently of the Arora Family (and their associates),
and that transactions and relationships between the Group and the
Arora Family (and their 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 Agreement contains undertakings that the Arora
Family and together with their 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 Agreement will continue for so long as the Arora
Family together with their associates hold 5% or more of the issued
ordinary shares of the Company.
In the financial year 2018/19 the following transactions were entered
into by the Group with Arora Family related parties (including their
associates):
• 3 leases of new stores were entered into by the Group in the UK
with Arora Family related parties as landlords of those new stores,
representing 5.6% of the total number of 54 gross B&M new store
openings of the Group in the UK in that period; and
• 1 agreement for lease was conditionally exchanged by the Group
with Arora Family related parties as landlords, which has been
completed as a new store opening following the financial year
end; and
• also during the year under review there were 5 renewals of leases
of existing stores between the Group and Arora Family related
party landlords which were made ahead of the expiry of the
existing lease terms.
The total number of leases of UK stores and rents of the Group with
Arora Family related parties as at the end of the period under review
were 78 store leases, representing 12.6% of a total number of 620 UK
B&M stores of the Group with all landlords, and 13.9% of the overall
rent roll of all UK B&M stores as at the year end.
The Group’s joint venture sourcing company, Multi-lines International
Company Ltd, agreed terms during the financial year 2017/18 for the
entry into a lease with Arora Family related party landlords of an
additional floor in the high rise building which Multi-lines presently
occupies in Kowloon Bay Hong Kong, for further office and
operational use. That lease was completed in June 2018.
In the financial year under review the Board approved a block of up to
a maximum of 25 hours per annum of flights for business travel by
executives and colleagues, with the third party operator of the private
jet owned by Arora family interests. In the year a total of 8.4 hours
were used out of a block of 12.5 hours purchased by the Company.
The unused 4.1 hours have been carried forward to the financial year
2019/20.
A summary of the corporate governance and Listing Rules processes
and assessments undertaken by the Group and the Board together
with reports of advisors and the opinion of the Sponsor, in relation to
related party leases, is included on page 44 of the Corporate
Governance Report.
Further details of related party transactions are included also in note
28 of the Financial Statements on page 111.
The Board confirms that during the financial year 2018/19:
i.
the Company has complied with the Independence Provisions
included in the Relationship Agreement;
ii. so far as the Company is aware, the Independence Provisions
included in the Relationship Agreement have been complied with
by the controlling shareholder and its associates;
iii. so far as the Company is aware, the procurement obligations in
the Relationship Agreement have been complied with by the
controlling shareholder and its associates;
and that the Company has acted independently of the Arora Family
(and their associates).
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Financial Statements
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 2019 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 in which they may have directly or
indirectly had an interest) entered into in the financial year 2018/19
referred to above and in note 28 of the Financial Statements on page
111, together with any other such transactions entered into after the
financial year end on 31 March 2019 up to the date of the AGM,
similarly to all other previous AGM’s of the Company.
Article 11 report
The following disclosures are made in accordance with Article 11 of
the Luxembourg Law on Takeovers of 19 May 2006, as subsequently
amended, 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 only,
being ordinary shares which are 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 31 March 2019 amounts to GBP £100,056,122.20
represented by 1,000,561,222 shares with a nominal value of GBP
£0.10 each. B&M European Value Retail S.A. has a total unissued
authorised share capital of GBP £297,166,100. 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.
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 of Association of the Company.
Section (c) – Major shareholdings
Details of shareholders holding more than 5% of the issued share
capital of B&M European Value Retail S.A. notified to B&M European
Value Retail S.A. in accordance with the Luxembourg law on
transparency obligations of securities issuers dated 11 January 2008
as amended are set out on page 63.
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, as subsequently amended, save where referred to in
section (d) above.
Section (f) – Voting rights
Each share issued and outstanding in B&M European Value Retail
S.A. represents one vote. The Articles of Association of the Company
do not provide for any voting restrictions. In accordance with the
Articles of Association shareholders may be represented and proxies
shall be received by the Company at a certain time before the date of
the relevant meeting. In accordance with the Articles of Association,
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 of Association, the right of a
shareholder to participate in 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
as amended (“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.
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.
Section (h) – Appointment of Board members, amendment
of Articles of Association
The appointment and replacement of Board members and the
amendment of the Articles of Association of the Company are
governed by Luxembourg Law and the Articles of Association (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.
The Articles of Association of the Company 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.
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, as subsequently amended, and by the Articles
of Association.
B&M European Value Retail S.A. Annual Report and Accounts 2019
65
Page Title at start:Content Section at start:Page Title at start:Content Section at start: Directors’ report and business review continued
Section (i) – Powers of the Board of Directors continued
In common with other Luxembourg public companies, the authority of
the Board to issue ordinary shares on a non-pre-emptive basis is set
out in the Articles of Association of the Company. The Articles of
Association authorise the Directors to dis-apply pre-emption rights (a)
for the issue for cash of shares representing up to a maximum of 5%
(five per cent) of the issued ordinary share capital of the Company per
year; (b) to deal with fractional entitlements on otherwise pre-emptive
issues of shares; (c) in connection with employee share options, and,
also (d) for the issue for cash of shares representing up to an
additional 5% (five per cent) of the issued ordinary share capital per
year which can be used only for the purposes of financing (or
refinancing, if the authority is to be used within six (6) months of the
original transaction) an acquisition or other capital investment of a
kind contemplated by the Statement of Principles on Disapplying
Pre-emption Rights most recently published by the Pre-emption
Group of the Financial Reporting Council. The Board intends to follow
the Statement of Principles to the extent practical as a Luxembourg
company. The present five (5) year authority in Article 5.2 of the
Articles of Association will expire on 29 July 2023.
The Board was authorised by the AGM of shareholders held on 30
July 2018, in the name and on behalf of the Company, to purchase,
acquire or receive B&M European Value Retail S.A.’s own shares
representing up to 10% (ten percent) 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. No shares were
purchased pursuant to this authority in the year under review or since
then up to the date of this report.
The Board intends to seek a renewal of this authority for the Company
to purchase its shares, at the AGM of the shareholders on 26 July
2019. This resolution will usually be requested at each AGM.
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 other than: (a) the Company has a senior
facilities agreement (the “SFA”) in relation to a £300m term loan (which
has been drawn in full) and a £150m revolving credit facility. The
Group also has an acquisition loan facility (the “ALF”) of €100m (of
which €93m has been drawn down). The SFA and the ALF provide that
on a change of control of the Company, each lender has the right to
require early repayment of their loans and to cancel all their
commitments under the SFA and the ALF on not less than 10 Business
Days’ notice to the Company; (b) the Company has £250m 4.125%
senior secured notes due 2022, of which all £250m remain
outstanding. On a change of control of the Company, each
bondholder has the option to require the Company to repurchase all
or part of the notes of such holder at a purchase price of 101% of the
principal amount plus accrued interest up to the date of repurchase;
(c) the Group has credit and loan facilities with its banks and fleet
finance agreements for HGV’s, which contain customary cancellation
and repayment provisions upon a change of control and (d) Employee
share incentive schemes in relation to shares in the Company, 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 58.
Approved by order of the Board
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
22 May 2019
66
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:Page Title at start:Content Section at start:
Statement of Directors’
responsibilities
Strategic Report
Corporate Governance
Financial Statements
Statement of Directors’
responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. Under that law they are
required to prepare the Group financial statements in accordance
with International Financial Reporting Standards (“IFRSs”) as adopted
by the EU and applicable law and have prepared the Company
financial statements in accordance with 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 judgments and estimates that are reasonable and prudent;
• present the financial statements and policies in a manner that
provides relevant, reliable, comparable and understandable
information;
• state whether they have been prepared in accordance with IFRSs
•
as adopted by the EU;
• 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 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.
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 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.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
22 May 2019
B&M European Value Retail S.A. Annual Report and Accounts 2019
67
Page Title at start:Content Section at start:Page Title at start:Content Section at start:
Financial Statements
Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
Report of the Réviseur d’Entreprises agréé
Report on the audit of the consolidated financial statements
Opinion
We have audited the 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 30 March 2019, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the 52-week period then ended, and the notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the
Group as at 30 March 2019, and of its consolidated financial performance and its consolidated cash flows for the 52-week period then ended
in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 on the audit profession (the “Law of 23 July
2016”) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the “Commission de Surveillance du Secteur
Financier” (the “CSSF”). Our responsibilities under those Regulation, Law and standards are further described in the Responsibilities of
“Réviseur d’Entreprises agréé” for the audit of the consolidated financial statements section of our report. We are also independent of the
Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA
Code”) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated
financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Existence, accuracy and valuation of inventory
Why the matter was considered to be one of the most significant in our audit of
the annual accounts of the current period
How the matter was addressed in our audit
The Group has significant levels of inventory due to its retail operations. As per the
Consolidated Statement of Financial Position the balance is £665.7 million at year
end.
Our procedures over the existence and accuracy of inventory included, but were
not limited to:
• Assessing the design and implementation of the count procedures
Given the high volume and broad range of inventory held, there is a risk that
quantities of warehouse and retail store inventories could be incorrectly included.
Controls over stock counts in both warehouses and retail stores are themselves
manual in nature.
We focused on the existence and accuracy of inventory because of the significant
number of movements in and out of stock at both warehouses and retail stores
and the manual nature of controls
Per the Inventory accounting policy in note 1, inventories are valued at the lower of
cost or net realisable value. Changing customer preferences, spending patterns
and the seasonality of sales all impact the level of inventory held and the rate of
inventory turnover.
We focused on the valuation of inventory because of the significant judgements
and estimates required by management when assessing the level of the provision
required. These relate primarily to shrinkage and net realisable value provisions.
The significance of the inventory balance in relation to the Consolidated Statement
of Financial Position, coupled with the significant judgments required by
management, has caused us to identify inventory existence, accuracy and
valuation as a key audit matter.
through attendance at a sample of inventory counts;
• Reconciling the quantity per the inventory counts attended to the year end
inventory balance for a sample of inventory lines at both warehouse and
retail stores;
• Selecting a sample of stock lines to assess whether the counted quantities
agree to quantities in the stock system.
Our procedures over the valuation of inventory included, but were not limited to:
• Obtaining a detailed understanding and evaluating the design and
implementation of key controls that the Group has surrounding inventory
valuation.
• Evaluating the appropriateness of management’s judgements and
assumptions applied in arriving at the value of inventory by:
– Assessing the value of a sample of inventory lines to confirm whether
it is held at lower of cost or net realisable value, through comparison
to sales receipts and latest purchase invoice;
– On a sample basis of inventory lines, recalculating the weighted
average cost to test whether the cost has been updated correctly
based on the latest sale and purchase movement.
–
– Understanding the inventory provisioning policy with specific
consideration to net realisable value and slow moving stock;
Testing the accuracy of the net realisable value and shrinkage
provisions by performing a recalculation of and testing a sample of
the underlying inputs of the provision calculation to supporting
documentation;
– Analysing the year-end stock value against total sales during the year
on a line by line basis to assess whether there are any indicators that
items may be overstocked and using this as a basis to consider the
adequacy of the slow moving stock provision.
68
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Why the matter was considered to be one of the most significant in our audit of
the annual accounts of the current period
How the matter was addressed in our audit
Acquisition accounting: Babou
In 2018 the Group acquired 100% of the share capital of Paminvest SAS trading
under “Babou” in France for a total consideration of €90.1 million. The details of the
transaction are disclosed in note 7 Business combination.
The acquisition method of accounting for business combinations is a complex and
judgemental exercise, requiring the Group to determine the fair value of assets
acquired and liabilities assumed and consideration transferred.
Due to the size of the transaction and the significant judgement and complexities
involved in determining the fair value of assets acquired and liabilities assumed,
we considered the acquisition accounting as a key audit matter.
•
Our procedures over the acquisition of Babou included, but were not limited to:
• Analysing the share purchase agreement to confirm the total
consideration payable;
• Agreeing the payments made to bank statements;
•
Reviewing the work undertaken by specialists engaged by the Group and
involving our own valuation specialists in challenging the judgements
made by management over the key assumptions applied in the valuation
of intangible assets acquired in the Babou acquisition;
Tracing a sample of rental amounts payable to lease agreements for the
favourable and unfavourable leases identified.
Fraud risk over Revenue recognition
The Group’s Revenue amounts to £3.5 billion as per the Consolidated Statement of
Comprehensive Income and is mainly derived from the sale of goods to customers.
Retail revenue is recognised at the initial point of sale of goods to customers.
Although Revenue recognition is considered to be relatively straight forward on a
transactional level, the high volume of transactions makes it more susceptible to
fraud and error.
Revenue is a key performance indicator of the Group and is, therefore, subject to
an inherent risk of manipulation by management to meet targets or expectations.
This, together with the significance of the balance relative to other captions in the
Consolidated Statement of Comprehensive Income, has lead us to identify it as a
key audit matter.
Our procedures over Revenue recognition included, but were not limited to:
•
•
•
•
•
•
Obtaining a detailed understanding and evaluating the design and
implementation of key controls that the Group has surrounding Revenue
recognition;
Reconciling cash and credit card receipts related to revenue from sales
made in stores and investigating outliers identified in this process;
Assessing revenue trends throughout the year and investigating any
unusual variances;
Analysing sales by store for the days pre- and post-year-end to assess
whether sales were recorded in the correct period;
Analysing post year-end returns and credit notes to agree that sales have
been recognised in the correct period and to determine if a returns’
provision is required;
Journal entry testing focused on manual journal entries as well as entries
with an unexpected contra-account.
Hedge accounting
The Group’s hedging reserve amounts to £1.9 million and reported a net change of
fair value of £16.5 million per the Consolidated statement of changes in
shareholders’ equity.
Per the Financial Instruments policy in note 1, the Group adopts hedge accounting
for a high proportion of its foreign currency inventory purchases. The amount of
fair value movement recorded through other comprehensive income rather than
income statement is determined by effectiveness testing.
Hedge accounting is inherently complex and requires a degree of judgement in
determining highly probable forecast cash flows.
IFRS 9 “Financial Instruments” is mandatory for the first time in 2019. The first year of
adoption inherently carries a risk of error.
This, together with the judgement involvement in assessing effective testing has
lead us to identify hedge accounting as a key audit matter
Our procedures over Hedge accounting included, but were not limited to:
•
•
•
•
Reviewing and corroborating the Group’s hedging strategy, and reviewing
the documentation in place for derivatives, including assessing whether it
is in accordance with IFRS9;
Involving treasury specialists to assist us in our assessment as to whether
hedge accounting can be applied, and using valuation specialists to
value the open forward contracts at year end;
Reviewing management’s calculations to adjust the valuation of
inventories based on hedged effectiveness;
Reviewing retrospective effectiveness testing, challenging management
on their conclusion that they can forecast transactions to meet the “highly
probable” criteria in IFRS 9 and reviewing management’s prospective
effectiveness testing.
Other information
The Board of Directors is responsible for the other information. The
other information comprises the information stated in the
consolidated annual report including the management report and the
Corporate Governance Statement but does not include the
consolidated financial statements and our report of “Réviseur
d’Entreprises agréé” thereon.
Our opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements,
our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information we are required to report this
fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors for the
consolidated financial statements
The Board of Directors is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with IFRSs 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.
In preparing the consolidated financial statements, the Board of
Directors is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting
unless the Board of Directors either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for assessing the
Group’s financial reporting process.
B&M European Value Retail S.A. Annual Report and Accounts 2019
69
Page Title at start:Content Section at start: Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
continued
Responsibilities of the Réviseur d’Entreprises agréé for the
audit of the consolidated financial statements
The objectives of our audit are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to
issue a report of “Réviseur d’Entreprises agréé” that includes our
opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the
EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as
adopted for Luxembourg by the CSSF will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with the EU Regulation N° 537/2014,
the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by
the CSSF, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
•
identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control;
• obtain an understanding of internal control relevant to the audit 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 Group’s internal control;
• evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the Board of Directors;
• conclude on the appropriateness of Board of Directors’ use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in
our report of “Réviseur d’Entreprises agréé” to the related
disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the
date of report of “Réviseur d’Entreprises agréé”. However, future
events or conditions may cause the Group to cease to continue as
a going concern;
• evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves
fair presentation;
• obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of
the current period and are therefore the key audit matters. We
describe these matters in our report unless law or regulation
precludes public disclosure about the matter.
Report on other legal and regulatory requirements
We have been appointed as “Réviseur d’Entreprises agréé” by the
General Meeting of the Shareholders on 30 July 2018 and the duration
of our uninterrupted engagement, including previous renewals and
reappointments, is 3 years.
The management report on pages 62 to 66 is consistent with the
consolidated financial statements and has been prepared in
accordance with applicable legal requirements.
The accompanying Corporate Governance Statement is presented on
pages 40 to 47. The information required by Article 68ter paragraph (1)
letters c) and d) of the law of 19 December 2002 on the commercial
and companies register and on the accounting records and annual
accounts of undertakings, as amended, is consistent with the
consolidated financial statements and has been prepared in
accordance with applicable legal requirements.
We confirm that the audit opinion is consistent with the additional
report to the audit committee or equivalent.
We confirm that the prohibited non-audit services referred to in
the EU Regulation No 537/2014, on the audit profession were not
provided and that we remain independent of the Group in
conducting the audit.
Other matter
The Corporate Governance Statement includes information required
by Article 68ter paragraph (1) points a), b), e), f) and g) of the law of
19 December 2002 on the commercial and companies register and
on the accounting records and annual accounts of undertakings,
as amended.
Luxembourg, 22 May 2019
KPMG Luxembourg
Société coopérative
Cabinet de révision agréé
Thierry Ravasio
70
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Consolidated statement of comprehensive income
Period ended
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Share of profits in associates
Profit on ordinary activities before net finance costs and tax
Finance costs
Finance income
Gain on revaluation of financial instruments
Profit on ordinary activities before tax
Income tax expense
Profit 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 investments
Fair value movement as recorded in the hedging reserve
Items which will not be reclassified to profit and loss:
Actuarial gain on the defined benefit pension scheme
Tax effect of other comprehensive income
Total comprehensive income for the period
Attributable to non-controlling interests
Attributable to owners of the parent
Earnings per share
Basic earnings per share attributable to ordinary equity holders (pence)
Diluted earnings per share attributable to ordinary equity holders (pence)
Consolidated statement
of comprehensive income
52 weeks
ended
30 March 2019
£’000
Note
53 weeks
ended
31 March 2018
£'000
2,4
3,486,295
3,029,802
(2,296,861)
(2,000,927)
1,189,434
1,028,875
(925,058)
(789,072)
264,376
239,803
775
1,711
265,151
241,514
(25,951)
369
9,857
(23,948)
182
11,568
249,426
229,316
(46,717)
(43,511)
202,709
(2,445)
205,154
185,805
(78)
185,883
(2,285)
19,996
205
(15,659)
5
(3,481)
216,944
(2,805)
219,749
21
2,470
172,842
119
172,723
20.5
20.5
18.6
18.6
5
13
3
6
6
6,20
11
2
11
29
12
12
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
B&M European Value Retail S.A. Annual Report and Accounts 2019
71
Page Title at start:Content Section at start: Consolidated statement of financial position
As at
Assets
Non-current
Goodwill
Intangible assets
Property, plant and equipment
Investments in associates
Other receivables
Deferred tax asset
Current assets
Cash at bank and in hand
Inventories
Trade and other receivables
Other financial assets
Income tax receivable
Total assets
Equity
Share capital
Share premium
Retained earnings
Hedging reserve
Legal reserve
Merger reserve
Foreign exchange reserve
Put/call option 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
Interest bearing loans and borrowings
Overdrafts
Trade and other payables
Finance lease liabilities
Other financial liabilities
Income tax payable
Provisions
Total liabilities
Total equity and liabilities
Consolidated statement
of financial position
30 March
2019
£’000
31 March
2018
£’000
Note
14
14
15
13
17
11
18
16
17
20
23
21
25
20
19
11
22
21
18
19
25
20
22
949,606
126,559
389,952
6,920
10,989
9,195
929,718
120,962
308,653
5,140
3,187
5,654
1,493,221
1,373,314
86,202
670,721
71,640
6,294
3,781
90,816
558,690
34,042
–
–
838,638
683,548
2,331,859
2,056,862
(100,056)
(2,474,249)
(458,132)
(1,984)
(10,010)
1,979,131
(5,909)
13,855
(10,887)
(100,056)
(2,474,249)
(327,073)
14,532
(10,000)
1,979,131
(7,833)
13,855
(13,692)
(1,068,241)
(925,385)
(562,941)
(7,104)
–
(92,891)
(27,148)
(374)
(558,426)
(7,306)
(19,209)
(87,130)
(24,495)
(379)
(690,458)
(696,945)
(124,272)
(5,646)
(395,966)
(3,630)
(13,731)
(23,197)
(6,718)
(47,212)
(6,112)
(336,072)
(1,870)
(16,666)
(19,677)
(6,923)
(573,160)
(434,532)
(1,263,618)
(1,131,477)
(2,331,859)
(2,056,862)
The accompanying accounting policies and notes form an integral part of these consolidated financial statements. This consolidated
statement of financial position was approved by the Board of Directors and authorised for issue on 22 May 2019 and signed on their behalf by:
Simon Arora,
Chief Executive Officer
72
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Consolidated statement of
changes
in shareholders’ equity
Strategic Report
Corporate Governance
Financial Statements
Consolidated statement of changes in shareholders’ equity
Share
capital
£'000
Share
premium
£’000
Retained
earnings
£'000
Hedging
reserve
£’000
Legal
reserve
£’000
Merger
reserve
£’000
Foreign
exch.
reserve
£'000
Put/call
option
reserve
£’000
Non-
control.
interest
£’000
Total
Share-
holders’
equity
£'000
Balance at 25 March 2017
100,000
2,472,482
204,077
(1,350)
10,000 (1,979,131)
7,825
(13,855)
13,573
813,621
Dividend payments to owners
Effect of share options
Total transactions with owners
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income
for the period
–
56
56
–
–
–
–
1,767
1,767
(63,013)
112
(62,901)
–
–
–
–
–
–
185,883
14
–
(13,182)
185,897
(13,182)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
8
–
–
–
–
–
–
–
–
–
(63,013)
1,935
(61,078)
(78)
197
185,805
(12,963)
119
172,842
Balance at 31 March 2018
100,056 2,474,249 327,073
(14,532)
10,000 (1,979,131)
7,833
(13,855)
13,692
925,385
Allocation to legal reserve
Dividend payments
to owners
Effect of share options
Total transactions with
owners
Profit/(loss) for the period
Other comprehensive
income
Total comprehensive income
for the period
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10)
(75,042)
954
(74,088)
205,154
–
–
–
–
–
3
16,516
205,157
16,516
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,924)
(1,924)
–
–
–
–
–
–
–
–
–
–
–
–
(75,042)
954
(74,088)
(2,445) 202,709
(360)
14,235
(2,805)
216,944
Balance at 30 March 2019
100,056 2,474,249
458,132
1,984
10,010 (1,979,131)
5,909
(13,855)
10,887 1,068,241
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
B&M European Value Retail S.A. Annual Report and Accounts 2019
73
Page Title at start:Content Section at start: Consolidated statement of cash flows
Period ended
Cash flows from operating activities
Cash generated from operations
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Business acquisitions net of cash acquired
Acquisition of shares in associates
Sale of shares in associates
Proceeds from sale of property, plant and equipment
Finance income received
Dividends received from associates
Net cash flows from investing activities
Cash flows from financing activities
Receipt of bank loans
Net receipt of Group revolving bank loans
Net repayment of Heron facilities
Net repayment of Babou facilities
Finance costs paid
Receipt from exercise of employee share options
Capitalised fees on refinancing
Dividends paid to owners of the parent
Repayment of finance lease
Net cash flows from financing activities
Net 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
Overdrafts
Consolidated statement of
cash flows
Note
24
15
14
7
13
13
13
21
33
18
52 weeks
ended
30 March
2019
£’000
259,446
(47,271)
212,175
(103,652)
(2,654)
(75,879)
(1,200)
–
563
369
570
53 weeks
ended
31 March
2018
£'000
241,993
(43,996)
197,997
(111,268)
(3,362)
(106,436)
–
310
554
182
1,149
(181,883)
(218,871)
78,984
(5,000)
(2,298)
(5,742)
(21,476)
–
(935)
(75,042)
(2,931)
(34,440)
(4,148)
84,704
80,556
86,202
(5,646)
80,556
–
45,000
(9,790)
–
(20,192)
1,320
(1,647)
(63,013)
(1,651)
(49,973)
(70,847)
155,551
84,704
90,816
(6,112)
84,704
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
74
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Notes to the consolidated
financial statements
Strategic Report
Corporate Governance
Financial Statements
Notes to the consolidated financial statements
1 General information and basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union.
The Group’s trade is general retail, with trading taking place in the UK, France and Germany. The Group has been listed on the London Stock
Exchange since June 2014.
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of financial
assets and financial liabilities at fair value through profit or loss. The measurement basis and principal accounting policies of the Group are set
out below and have been applied consistently throughout the consolidated financial statements.
The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000), except
when otherwise indicated.
The consolidated financial statements cover the 52 week period from 1 April 2018 to 30 March 2019 which is a different period to the parent
company stand alone accounts (from 1 April 2018 to 31 March 2019). This exception is permitted under article 330 (2) of the Luxembourg
company law of 10 August 1915 as amended as the Directors believe that;
•
the consolidated financial statements are more informative when they cover the same period as used by the main operating entity,
B&M Retail Ltd; and
that it would be unduly onerous to rephase the year end in this subsidiary to match that of the parent company.
•
The year end for B&M Retail Ltd, in any year, would not be more than six days prior to the parent company year end.
B&M European Value Retail S.A. (the “Company”) is the head of the Group and there is no consolidation that takes place above the level of
this company.
The principal accounting policies of the Group are set out below.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings, together with the
Group's share of the net assets and results of associated undertakings, for the period from 1 April 2018 to 30 March 2019. 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.
During the year, on 19 October 2018, the Group acquired Paminvest SAS, a discount general merchandise retailer group operating under the
trading name Babou in France (“Babou”). Babou has been consolidated in the Group accounts from this date. For more details see note 7.
During the prior year, on 2 August 2017, the Group acquired Heron Food Group Limited (“Heron”), a convenience retailer incorporated in the UK. Heron
has been consolidated in the Group accounts from this date. For more details see note 7.
During the prior year the Group incorporated two new entities, Retail Industry Apprenticeships Limited (incorporated in the UK) and Bedford DC
Investments Limited (incorporated in Jersey). Both have been consolidated from their incorporation date. See note 26 for a full list of the
constituent Group entities.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee),
• exposure, or rights, to variable returns from its involvement with the investee, and,
•
the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances
in assessing whether it has power over an investee, including:
•
•
•
the contractual arrangements with the other vote holders of the investee,
rights arising from other contractual arrangements, and,
the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the
three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are
included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the
subsidiary, excluding the situations as outlined in the basis of preparation.
B&M European Value Retail S.A. Annual Report and Accounts 2019
75
Page Title at start:Content Section at start: Notes to the consolidated financial statements continued
1 General information and basis of preparation continued
Going concern
As a value retailer, the Group is well placed to withstand volatility within the economic environment. The Group’s forecasts and projections,
taking into account reasonably possible changes in trading performance show that the Group will trade within its current banking facilities for
the next twelve months.
Included within these forecasts is the proposed sale & leaseback of the new Southern warehouse. If this does not occur, then the Group also
has the unconditional ability to extend the Babou acquisition loan facility when it is due for repayment in October 2019, for a further 12 months.
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 these financial statements.
Note also that viability and going concern statements have been made in the “Principal risks and uncertainties” section of this annual report.
Revenue
Under IFRS 15 Revenue is recognised when all the following criteria are met;
•
•
•
•
•
the parties to the contract have approved the contract;
the Group can identify each parties rights regarding the goods to be transferred;
the Group can identify the payment terms;
the contract has commercial substance;
it is probable that the Group will collect the consideration we are entitled to in respect to the goods to be transferred.
In the vast majority of cases the Group’s sales are made through stores and the control of goods is immediately transferred at the same time
as the consideration received via our tills. Therefore revenue is recognised at this point.
The Group does not actively sell vouchers to use in the future or operate discount schemes and, therefore, no deferred revenue is recognised.
The Group operates a small wholesale function which recognises revenue when goods are delivered and the invoice is raised. The revenue is
considered collectable as the Group’s wholesale customers are usually related parties to the Group (such as our associates) or are subject to
credit checks before trade takes place.
Revenue is the total amount receivable by the Group for goods supplied, in the ordinary course of business, excluding VAT and trade discounts,
and after deducting returns and relevant vouchers and offers.
Other administrative expenses
Administrative expenses include all running costs of the business, except those relating to inventory (which are expensed through cost of
sales), tax, interest and other comprehensive income. Transport and warehouse costs are included in this caption.
Elements which are unusual and significant, such as material restructuring costs, may be separated as a line item.
Goodwill
Goodwill is initially measured at cost, being the excess of the fair value of consideration transferred over the fair value of the net identifiable
assets acquired and liabilities assumed at the date of acquisition.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to the relevant cash-generating units (CGUs) that are
expected to benefit from the combination.
Goodwill is tested for impairment at each year end and at any time where there is any indication that it may be impaired. Internally generated
goodwill is not recognised as an asset.
Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the executive directors of the Group. The executive directors are responsible for assessing
the performance of the business for the purpose of making decisions about resources to be allocated.
Alternative performance measures
The Group reports a selection of alternative performance measures as detailed below and in note 3, as the Directors believe that these
measures provide additional information that is useful to the users of our accounts.
The alternative performance measures we report in these accounts are:
• Earnings before interest, tax, depreciation and amortisation (EBITDA)
• Adjusted EBITDA
• Adjusted Profit
• Adjusted Earnings per share
Interest, tax, depreciation and amortisation are as defined statutorily whilst the items we adjust for are those we consider not to be reflective of
the underlying performance of the business as detailed in note 3. These adjustments relate to the effect of ineffective derivatives and foreign
exchange on intercompany balances, which do not relate to underlying trading, and costs incurred in relation to acquisitions, which are
non-recurring and do not relate to underlying trading.
76
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
The alternative performance measures used are not measures of performance or liquidity under IFRS and should not be considered in
isolation or as a substitute for measures of profit, or as an indicator of the Group’s operating performance or cash flows from operating
activities as determined in accordance with IFRS.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at the acquisition date fair value. 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.
Brands
Brands acquired by the business are amortised if the corresponding agreement is specifically time limited, or if the fair valuation exercise
(carried out for brands acquired via business combinations) identifies a fair lifespan for the brand. This amortisation is charged to
administrative expenses.
Otherwise, brands are considered to have an indefinite life on the basis that they form part of the cash generating units within the Group
which will continue in operation indefinitely, with no foreseeable limit to the period over which they are expected to generate net cash inflows.
Where brands are considered to have an indefinite life they are reviewed at least annually for impairment or whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is
written down accordingly with the write down charged to administration expenses.
Intangible assets
Intangible assets acquired separately, including computer software, are measured on initial recognition at cost comprising the purchase price
and any directly attributable costs of preparing the asset for use.
Following initial recognition, assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation
begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life
as follows:
Computer software acquired
3 or 4 years
–
Previously the Group amortised computer software over a period of four years. There has been a change in this policy during the year
following the acquisition of Babou and given the common practice of amortising computer related items over 3 years in France. This has not
affected the rest of the Group as management believes the range 3-4 years to be reasonable.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.
Cost comprises purchase price and directly attributable costs. Unless significant or incurred as part of a refit programme, subsequent
expenditure will usually be treated as repairs or maintenance and expensed to the income statement.
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.
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 –
–
Motor vehicles
Life of lease (max 50 years)
2-4% straight line
10% – 33% straight line
12.5% – 33% straight line
Residual values and useful lives are reviewed annually and adjusted prospectively, if appropriate.
There has been a minor change to the policy since the prior year regarding the rates for computer equipment (within the Plant, fixtures and
equipment category). In line with common practice in France the Group now allows items of computer equipment to be depreciated at 3-4
years (previously 4 years). This does not affect the existing items in the remainder of the Group.
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. However, any goodwill or
fair value adjustment attributable to the Group’s share of associates is included in the amount recognised as investment in associates.
B&M European Value Retail S.A. Annual Report and Accounts 2019
77
Page Title at start:Content Section at start:
Notes to the consolidated financial statements continued
1 General information and basis of preparation continued
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
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate
subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of
losses not recognised.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported
in the consolidated financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
During the year the Group has acquired a new associate, Centz Retail Holdings Limited, based in Ireland. See note 13 for more details.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when
annual impairment testing for an asset is required (for goodwill or indefinite life assets), the Group estimates the asset’s recoverable amount.
The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group’s cash
generating units (CGU’s) to which the individual assets are allocated. These budgets and forecast calculations cover 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.
Indications of impairment might include (for goodwill and the brand assets, for instance) a significant impairment to the like for like sales of
established stores, sustained negative publicity or a drop off in visits to our website and social media accounts.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. It is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or CGU.
Impairment losses of continuing operations, including impairment of 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.
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.
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 in the income
statement 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.
78
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Lease premiums and incentives
Lease premiums and lease incentives (as reverse lease premiums) are required to be spread over the term of the lease (as an element of the
rent charge), with the resulting balance on the statement of financial position recorded in receivables or payables as appropriate.
Favourable and unfavourable leases
Upon acquisition of a subsidiary a fair value review is performed to determine if certain leases held are favourable or unfavourable to the
business when compared to an estimate of the underlying market rate. To the extent that a lease is determined to be favourable or
unfavourable a balance is recognised in receivables or payables and then released over the remaining lease term as part of the rent charge
for that lease.
Also see note 31 for a note on the implementation of IFRS 16 from 31 March 2019.
Onerous leases
The Group carries a property provision which relates to leasehold property where an exit can be reasonably expected to occur, and the
relevant lease is considered to be 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.
Stock purchased in foreign currency is booked in at the hedge rate applicable to that stock (if effectively hedged) or the underlying foreign
currency rate on the date that the item is brought into stock.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. Transport, warehouse and
distribution costs are not included in the valuation of inventory.
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 the income statement in respect of the number of options outstanding and the fair value of those options.
A corresponding credit is made to the retained earnings reserve and the effect of this can be seen in the statement of changes in equity.
See note 10 for more details.
Taxation
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the
reporting date, in the countries where the Group operates and generates taxable income. Tax is recognised in the 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.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary
differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
•
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when
the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the
extent that it is 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.
B&M European Value Retail S.A. Annual Report and Accounts 2019
79
Page Title at start:Content Section at start: Notes to the consolidated financial statements continued
1 General information and basis of preparation continued
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Financial instruments
The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign
currency risk, commodity price risk and interest rate risk. Derivative financial instruments are recognised at fair value. The fair value is derived
using an internal model and supported by valuations by third party financial institutions.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in the hedging
reserve. Any ineffective portion of the hedge is recognised immediately in the income statement. Effectiveness of the derivatives subject to
hedge accounting is assessed prospectively at inception of the derivative, and at each reporting period end date prior to maturity.
Where a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, such as an item of inventory, the
associated gains and losses are recognised in the initial cost of that asset.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the
hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in
accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative
unrealised gain or loss recognised in equity is recognised in the income statement immediately.
Financial assets
IFRS 9 has replaced IAS 39 during the year, and as such the Group’s policy has been restated as follows. The new policy has had no impact on
the statements of comprehensive income or financial position for the year.
IFRS 9 eliminates the previous IAS 39 category for financial assets of loans and receivables. Under IFRS 9, on initial recognition, a financial
asset is classified as measured at amortised cost, fair value through profit or loss or fair value though other comprehensive income.
A financial asset is measured at amortised cost if it meets both of the following conditions: it is held within a business model whose objective
is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding. Under IFRS 9 trade receivables, without a significant financing component, are
classified and held at amortised cost, being initially measured at the transaction price and subsequently measured at amortised cost less any
impairment loss.
IFRS 9 introduces an “expected loss” model (“ECL") for recognising impairment of financial assets held at amortised cost. The Group has elected
to measure loss allowances for trade receivables at an amount equal to lifetime ECLs. Credit losses are measured as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group
expects to receive).
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating
expected credit losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit
assessment and including forward-looking information. The Group performs the calculation of expected credit losses separately for each
customer group.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include derivative financial instruments entered into by the Group that are not designated as
hedging instruments in hedge relationships as defined by IFRS 9. Financial assets at fair value through profit or loss are carried in the
statement of financial position at fair value with changes in fair value recognised in profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights
to receive cash flows from the asset have expired and the entity has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full and either (a) the entity has transferred substantially all the risks and rewards of the asset,
or (b) the entity has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
The Group assesses at each reporting date 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
The implementation of IFRS 9 has not significantly impacted the Group’s financial liabilities policy.
Initial recognition and measurement
Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss or other financial liabilities.
The entity determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value.
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Financial Statements
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial derivatives held for trading. Financial liabilities are classified as
held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered
into by the Group. Gains or losses on liabilities held-for-trading are recognised in profit and loss.
Other financial liabilities
After initial recognition, interest bearing loans and borrowings, trade and other payables and other liabilities are subsequently measured at
amortised cost using the effective interest rate method. Gains and losses are recognised in the 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.
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;
“Legal reserve” representing the statutory reserve required by Luxembourg law as an apportionment of profit within each Luxembourg
company (up to 10% of the standalone share capital);
“Hedging reserve” representing the fair value of the derivatives held by the Group at the period end that are accounted for under hedge
accounting and that represent effective hedges;
"Merger reserve" representing the reserve created during the reorganisation of the Group in 2014;
"Retained earnings reserve" represents retained profits;
"Put/call option reserve" representing the initial valuation of the put/call option held by the Group over the non-controlling interest of
J.A. Woll Handels GmbH (Jawoll);
"Foreign exchange reserve” represents the cumulative differences arising in retranslation of the subsidiaries 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
These consolidated financial statements are presented in pounds sterling.
The following Group companies have a functional currency of pounds sterling;
• B&M European Value Retail S.A.
• B&M European Value Retail 1 S.à r.l. (Lux Holdco)
• B&M European Value Retail Holdco 1 Ltd (UK Holdco 1)
• B&M European Value Retail Holdco 2 Ltd (UK Holdco 2)
• B&M European Value Retail Holdco 3 Ltd (UK Holdco 3)
• B&M European Value Retail Holdco 4 Ltd (UK Holdco 4)
• Bedford DC Investments Limited
• EV Retail Ltd
• B&M Retail Ltd
• Opus Homewares Ltd
• Retail Industry Apprenticeships Ltd
• Heron Food Group Ltd
• Heron Foods Ltd
• Cooltrader Ltd
• Heron Properties (Hull) Ltd
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
• Paminvest SAS
• SAS Babou
• Babou Relationship Partners – BRP SAS
B&M European Value Retail S.A. Annual Report and Accounts 2019
81
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1 General information and basis of preparation continued
The Group companies whose functional currency is the Euro have been consolidated into the Group via retranslation of their results in line with
IAS 21 Effects of Changes in Foreign Exchange Rates. The assets and liabilities are translated into pounds sterling at the 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.
Critical judgements
Investments in Associates
Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the Group, has been judged by management to be an associate
rather than a subsidiary or a joint venture.
Under IFRS 10 control is determined by:
• Power over the investee.
• Exposure, or rights, to variable returns from its involvement with the investee.
• The ability to use its power over the investee to affect the amount of the investor’s returns.
Although 50% owned, B&M Group does not have voting rights or substantive rights. Therefore the level of power over the business is
considered to be more in keeping with that of an associate than a joint-venture, and hence it has been treated as such within these
consolidated financial statements.
Hedge accounting
The Group hedge accounts for stock purchases made in US Dollars.
There is significant management judgment involved in forecasting the level of dollar purchases to be made within the period that the forward
hedge has been bought for.
Management takes a prudent view that no more than 80% of the operational hedging in place can be subject to hedge accounting due to
forecast uncertainties, and assesses every forward hedge taken out, on inception, if that figure should be reduced further by considering
general purchasing trends, and discussion of specific purchasing decisions.
Fair values on acquisition
When the Group acquires a business it recognises the assets and liabilities acquired in the consolidated statement of financial position at
fair value.
There is both significant management judgment and estimation uncertainty required in relation to this process, and specifically over key areas
such as significant fixed assets, inventory, brand, the lease estate and the underlying basis for recording any goodwill.
In order to aid management in their decision making process, third parties are engaged to value significant items, and, as allowed by IFRS 3
(“Business Combinations”), a period of up to 12 months after acquisition is allowed for any additional information to be sourced that may affect
the judgments made.
See note 7 for the outcome of this process in relation to recent acquisitions.
Inventory Valuation
Under IAS 2 (“Inventories”) inventory is required to be recognised at the lower of cost and net realisable value.
Management has exercised significant judgment in relation to the net realisable value of inventory acquired through the Babou acquisition.
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In order to make this judgment, management considered the age, quality and sell through of these items of inventory immediately prior to
acquisition as reflected in due diligence performed. Based on this, management judged that certain stock had to be written down on the basis
that it would not realistically achieve the carrying value when sold through the existing Babou store network and irrespective of any future
strategic decisions made, or to be made on or post acquisition.
Estimation uncertainty
Goodwill impairment
The Group’s calculation for goodwill impairment includes several assumptions that are based upon managerial judgment.
As well as those discussed in note 14 around the inputs, they include the basis of the calculation itself i.e. which cash flows should be included,
whether allowance should be made for growth of the store estate and, related to this, the level of capital expenditure to be included and on
which timescale.
Management believes that the key element in determining whether an impairment is required is the value in use of the cash generating units
themselves, which can be summarised as the return made by those cash generating units when considering the costs directly attributable to
making those sales
Standards and Interpretations applied and not yet applied by the Group
See note 31 for a detailed note on the implementation of IFRS 16, which the Group will apply from 31 March 2019.
Adoption of New and Revised Standards
The following amendments to accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have
been adopted for the first time by the Group in the period with no significant impact on its consolidated results or financial position:
• Annual Improvements to IFRSs 2014-2016 Cycle
•
• Amendments to IAS 40 Investment Property
•
•
IFRS 9 “Financial Instruments”
IFRS 15 “Revenue from Contracts with Customers”
IFRIC 22 “Foreign Currency Transactions and Advance Consideration”
IFRS 9 “Financial Instruments”
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial
items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on
or after 1 January 2018 and simplifies the classification of financial assets for measurement purposes.
The Group has applied IFRS 9 from 1 April 2018. There is no impact on the income statement or financial position from the adoption of IFRS 9.
IFRS 15 “Revenue from Contracts with Customers”
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18
Revenue and related interpretations.
The Group has applied IFRS 15 from 1 April 2018 using the cumulative effective method (without practical expedients), with the effect of
initially applying this standard being recognised at the date of initial application (1 April 2018). Comparative information has, therefore, not
been restated.
Under IAS 18 revenue was recognised either over time where there was continuing service provided to the customer or at the point in time
when the risks and rewards of ownership transferred to the customer. Under IFRS 15 revenue is recognised when performance obligations
are satisfied. For the Group the transfer of control under IFRS 15 and satisfaction of performance obligations remains consistent with the
transfer of risks and rewards to the customer under IAS18. Consequently, there were no profit or loss impacting adjustments required on
application of IFRS 15.
Revenue is measured at the fair value of the consideration received or receivable and is recognised at the initial point of sale goods to the
customers, when the risks and rewards of the ownership of the goods has passed to the buyer. Revenue is stated net of discounts, rebates,
refunds and value-added tax.
Revenue principally represents the amounts receivable from customers for goods supplied. The vast majority of goods are supplied
immediately at the point of sale in a retail store environment, and, therefore, performance obligations are considered to have been met at the
point of sale.
Other
The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed and require adoption
by the Group in future reporting periods. The Group does not consider that any other standards, amendments or interpretations issued by the
IASB, but not yet applicable, will have a significant impact on the financial statements.
B&M European Value Retail S.A. Annual Report and Accounts 2019
83
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2 Segmental information
IFRS 8 (“Operating segments”) requires the Group’s segments to be identified on the basis of internal reports about the components of the
Group that are regularly reviewed by the chief operating decision maker to assess performance and allocate resources across each
reporting segment.
The chief operating decision maker has been identified as the executive directors who monitor the operating results of the retail segments for
the purpose of making decisions about resource allocation and performance assessment.
For management purposes, the Group is organised into four operating segments, UK B&M, UK Heron, France Babou and Germany Jawoll
segments. The France Babou segment has been active since the acquisition of Babou in October 2018. The UK Heron segment has been active
since the acquisition of Heron Food Group in August 2017.
Items that fall into the corporate category include those related to the Luxembourg or associate entities, Group financing, corporate
transactions, any tax adjustments and items we consider to be adjusting (see note 3).
The average euro rate for translation purposes was €1.1341/£ during the year, with the year-end rate being €1.1648/£ (2018:€1.1336/£ and
€1.1410/£, respectively).
52 week period to 30 March 2019
Revenue
EBITDA (note 3)
Depreciation and amortisation
Net finance income/(costs)
Income tax expense
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
53 week period to 31 March 2018
Revenue
EBITDA (note 3)
Depreciation and amortisation
Net finance income/(costs)
Income tax expense
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
*
includes capital expenditure on intangible assets.
UK
B&M
£’000
2,789,431
296,398
(30,579)
136
(50,531)
215,424
1,760,772
(342,511)
(63,394)
UK
B&M
£’000
2,619,488
266,269
(26,485)
109
(45,580)
194,313
1,718,328
(361,834)
(45,986)
UK
Heron
£’000
354,057
19,923
(9,950)
(765)
(1,750)
7,458
215,529
(52,830)
(15,432)
UK
Heron
£’000
210,008
11,746
(6,001)
(481)
(1,000)
4,264
204,162
(56,909)
(8,610)
Germany
Jawoll
£’000
213,663
(10,223)
(4,677)
(525)
4,782
(10,643)
156,130
(32,977)
(4,927)
Germany
Jawoll
£’000
200,306
5,621
(4,392)
(370)
(258)
601
127,078
(27,287)
(4,987)
France
Babou
£’000
129,144
5,596
(4,466)
(62)
(352)
716
Corporate
£’000
–
3,131
(2)
(14,509)
1,134
(10,246)
Total
£’000
3,486,295
314,825
(49,674)
(15,725)
(46,717)
202,709
172,700
(80,251)
(2,963)
26,728
(755,049)
(19,590)
2,331,859
(1,263,618)
(106,306)
France
Babou
£’000
–
–
–
–
–
–
–
–
–
Corporate
£’000
–
(5,240)
(4)
(11,456)
3,327
(13,373)
Total
£’000
3,029,802
278,396
(36,882)
(12,198)
(43,511)
185,805
7,294
(685,447)
(55,047)
2,056,862
(1,131,477)
(114,630)
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Financial Statements
3 Reconciliation of non-IFRS measures from the statement of comprehensive income
EBITDA, Adjusted EBITDA and Adjusted Profit are non-IFRS measures and therefore reconciliations from the statement of comprehensive
income are set out below.
Period to
Profit on ordinary activities before interest and tax
Add back depreciation and amortisation
EBITDA
Reverse the effect of derivatives recorded within cost of sales
Reverse the effect of derivatives recorded within administrative expenses
Foreign exchange on intercompany balances
Remove costs associated with the acquisition of Babou
Remove costs associated with the acquisition of Heron
Adjusted EBITDA
Depreciation and amortisation
Net adjusted finance costs (see note 6)
Adjusted profit before tax
Adjusted tax
Adjusted profit for the period
Attributable to non-controlling interests
Attributable to owners of the parent
52 weeks
ended
30 March
2019
£’000
265,151
49,674
314,825
(61)
(5,646)
2,799
425
–
312,342
(49,674)
(22,899)
239,769
(45,182)
194,587
(2,445)
197,032
53 weeks
ended
31 March
2018
£’000
241,514
36,882
278,396
(509)
4,334
–
–
1,049
283,270
(36,882)
(21,596)
224,792
(44,437)
180,355
(78)
180,433
The adjusting items are the effects of derivatives, one off refinancing fees, foreign exchange on the translation of intercompany balances
and the effects of revaluing or unwinding balances related to the acquisition of subsidiaries, such as the call/put option held over the
non-controlling interest of our German operation. Significant project costs may also be included if incurred, as they have been in both years in
relation to acquisitions (see note 7). Adjusted tax represents the tax charge per the statement of comprehensive income as adjusted only for
the effects of the other adjusting items detailed above.
The segmental split in EBITDA and Adjusted EBITDA reconciles as follows;
52 week period to 30 March 2019
Profit before interest and tax
Add back depreciation and amortisation
EBITDA
Adjusting items detailed above
Adjusted EBITDA
53 week period to 31 March 2018
Profit before interest and tax
Add back depreciation and amortisation
EBITDA
Adjusting items detailed above
Adjusted EBITDA
UK
B&M
£’000
265,819
30,579
296,398
–
296,398
UK
B&M
£’000
239,784
26,485
266,269
–
266,269
UK
Heron
£’000
9,973
9,950
19,923
–
19,923
UK
Heron
£’000
5,745
6,001
11,746
–
11,746
Germany
Jawoll
£’000
(14,900)
4,677
(10,223)
–
(10,223)
Germany
Jawoll
£’000
1,229
4,392
5,621
–
5,621
France
Babou
£’000
1,130
4,466
5,596
–
5,596
France
Babou
£’000
–
–
–
–
–
Corporate
£’000
3,128
2
3,131
(2,483)
Total
£’000
265,151
49,674
314,825
(2,483)
648
312,342
Corporate
£’000
(5,244)
4
(5,240)
4,874
Total
£’000
241,514
36,882
278,396
4,874
(366)
283,270
Adjusted EBITDA and related measures are not measures of performance or liquidity under IFRS and should not be considered in isolation or
as a substitute for measures of profit, or as an indicator of the Group’s operating performance or cash flows from operating activities as
determined in accordance with IFRS.
B&M European Value Retail S.A. Annual Report and Accounts 2019
85
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4 Reconciliation of the 52-week results from the 53-week adjusted results
As in the prior year, in the commentary accompanying these accounts management consider that presenting an adjusted 52-week result for
the prior year is helpful to the users of this annual report in order to directly compare like for like periods.
Therefore, a reconciliation to an adjusted 52-week statement of comprehensive income derived from the adjusted 53-week statement of
comprehensive income by removing the final week of the financial year, is set out below.
Revenue and gross margin were directly taken from the specific week 53 figures and other costs were apportioned accordingly by considering
the final accounting month of the year.
The adjusting items are those detailed in note 3.
Adjusted
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit before net finance costs and tax
Add back depreciation and amortisation
EBITDA
Depreciation and amortisation
Net finance costs
Profit before tax
Tax
Profit after tax
Attributable to non-controlling interests
Attributable to owners of the parent
52 weeks to
30 March 2019
£’000
52 weeks to
24 March 2018
£’000
Week 53
£’000
53-weeks to
31 March 2018
£’000
3,486,295
(2,302,711)
1,183,584
(920,916)
2,976,274
(1,966,071)
1,010,203
(767,309)
53,528
(35,366)
18,162
(14,668)
3,029,802
(2,001,437)
1,028,365
(781,977)
262,668
49,674
312,342
(49,674)
(22,899)
239,769
(45,182)
194,587
(2,445)
197,032
242,894
36,155
279,049
(36,155)
(21,350)
221,544
(43,804)
177,740
(78)
177,818
3,494
727
4,221
(727)
(246)
3,248
(633)
2,615
–
2,615
246,388
36,882
283,270
(36,882)
(21,596)
224,792
(44,437)
180,355
(78)
180,433
The 53rd week only affects the UK B&M segment as the European retail segments report annual figures. Therefore we also present a
reconciliation of the 52 week profit and loss UK retail segment figures as follows:
UK B&M segment
Revenue
EBITDA
Depreciation and amortisation
Net finance income
Income tax expense
Segment profit
52-weeks to
30 March 2019
£’000
52 weeks to
24 March 2018
£’000
2,789,431
296,398
(30,579)
136
(50,531)
215,424
2,565,960
262,048
(25,758)
107
(44,916)
191,481
Week 53
£’000
53,528
4,221
(727)
2
(664)
2,832
53-weeks to
31 March 2018
£’000
2,619,488
266,269
(26,485)
109
(45,580)
194,313
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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:
Taxation advisory services
Other assurance services
Other professional 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
New store pre-opening costs
Loss on sale of property, plant and equipment
(Gain)/loss on foreign exchange
52 weeks
ended
30 March
2019
£’000
440
–
82
–
53 weeks
ended
31 March
2018
£'000
354
–
78
21
2,296,861
2,000,927
44,969
2,547
2,158
178,168
6,742
644
(8,572)
34,234
997
1,652
149,469
4,956
277
2,201
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:
Period ended
Interest on debt and borrowings
Ongoing amortisation of finance fees
Finance charges payable under finance leases and hire purchase contracts
Total adjusted finance expense
Unwinding of deferred acquisition costs for subsidiaries
Total finance costs
Period ended
Interest income on loans and bank accounts
Total adjusted finance income
Gain on revaluing call/put option held over the minority interest of Jawoll
Gain on revaluing deferred consideration in respect of Heron
Total finance income
Total net adjusted finance costs are therefore;
Period ended
Total adjusted finance expense
Total adjusted finance income
Total net adjusted finance costs
52 weeks to
30 March
2019
£’000
(20,999)
(1,862)
(407)
(23,268)
(2,683)
53 weeks to
31 March
2018
£'000
(19,960)
(1,491)
(327)
(21,778)
(2,170)
(25,951)
(23,948)
52 weeks to
30 March
2019
£’000
53 weeks to
31 March
2018
£'000
369
369
9,141
716
10,226
182
182
11,568
–
11,750
52 weeks to
30 March
2019
£’000
(23,268)
369
(22,899)
53 weeks to
31 March
2018
£'000
(21,778)
182
(21,596)
B&M European Value Retail S.A. Annual Report and Accounts 2019
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7 Business combination
On 19 October 2018 the Group acquired Paminvest SAS a discount general merchandise retailer group operating under the trading name
Babou in France (“Babou”). As part of the same transaction the Group acquired the third party distribution service provider to Babou and these
operations were immediately brought into the Paminvest group.
The transaction has been accounted for via the acquisition method of accounting. The Group purchased 100% of the share capital for a fair
value of €90.1m (£79.4m at the acquisition date exchange rate of 1.1346 €/£) which was made in cash funded by the drawdown of a new loan
facility (see note 21).
The fair values of the identifiable assets and liabilities of Babou, which are provisional and can be updated up to 12 months after acquisition
under IFRS 3, on the date of the acquisition were:
Assets
Babou brand asset (10 year life)
Favourable lease contracts
Other intangible assets
Property, plant and equipment
Inventories
Corporation and deferred tax
Receivables and other assets
Cash
Total assets
Liabilities
Unfavourable lease contracts
Creditors and accruals
Finance leases
Bank loans
Total liabilities
Net assets acquired
Fair value of consideration
Goodwill recognised on acquisition
€’000
4,690
1,946
1,402
32,049
83,280
2,671
24,629
4,038
154,705
(6,016)
(64,947)
(5,114)
(12,488)
(88,565)
66,140
90,130
23,990
None of the receivables recognised were considered irrecoverable at the acquisition date.
Fees of £0.4m were incurred during the acquisition all of which have been expensed through the P&L, and which are treated as adjusting for
the purposes of note 3.
The goodwill (which translates to £21.1m on the acquisition date) largely relates to the growth potential of the business, the current location of
the stores and the existing workforce. 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 consolidated income statement can be seen in the segment note (note 2). Had the company been
bought at the start of the year it would have contributed an estimated extra €162.3m to revenue and €2.8m to operating profit under their local
accounting policies (French GAAP, on the basis that it was not practical to translate to IFRS). These translate to £143.1m and £2.5m at the
exchange rate used for the Group consolidated income statement.
The balance on the consolidated statement of cash flows reconciles as follows:
Initial cash consideration
Cash acquired
Net cash for acquisitions
€’000
£’000
90,130
(4,038)
86,092
79,438
(3,559)
75,879
In the prior year, on 2 August 2017 the Group acquired Heron Food Group Limited (“Heron”), a discount convenience retailer incorporated in
the UK.
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Corporate Governance
Financial Statements
The transaction was accounted for via the acquisition method of accounting. The Group purchased 100% of the share capital, for a fair value of
£122.5m, which breaks down as follows:
Initial cash consideration
Fair value of deferred consideration
Total
£’000
112,123
10,422
122,545
The deferred consideration represented a cash amount of £12.8m payable in 2019 based upon certain conditions. As this is now payable
imminently it has been fully unwound to an expected final value of £12.1m (see note 20).
The fair values of the identifiable assets and liabilities of Heron on the date of the acquisition were:
Assets
Heron brand asset
Favourable lease contracts
Other intangible assets
Property, plant and equipment
Inventories
Receivables and other assets
Cash
Total assets
Liabilities
Unfavourable lease contracts
Creditors and accruals
Provisions
Corporation and deferred tax
Finance leases
Overdraft
Bank loans
Total liabilities
Net assets acquired
Fair value of consideration
Goodwill recognised on acquisition
£’000
14,178
1,385
1,305
67,299
13,835
8,081
8,315
114,398
(9,984)
(32,395)
(1,538)
(4,107)
(3,199)
(2,628)
(25,582)
(79,433)
34,965
122,545
87,580
None of the receivables recognised were considered irrecoverable at the acquisition date.
Fees of £1.0m were incurred during the acquisition all of which have been expensed through the P&L, and which are treated as adjusting for
the purposes of note 3.
The goodwill largely related to the growth potential of the business, the current location of the stores and the existing workforce. None of the
elements which make up goodwill could, or were not material enough to be recognised as a separate intangible asset.
The effect the acquisition has had on the consolidated income statement can be seen in the segment note (note 2) for both the prior and
current year. Had the company been bought at the start of the prior year it would have contributed an estimated extra £108.6m to revenue and
£3.4m to operating profit, under their local accounting policies (FRS 102 compliant, on the basis that it was not practical to translate to IFRS), to
our prior year results.
The balance on the consolidated statement of cash flows reconciles as follows:
Initial cash consideration
Cash acquired
Overdraft acquired
Net cash for acquisitions
£’000
112,123
(8,315)
2,628
106,436
B&M European Value Retail S.A. Annual Report and Accounts 2019
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8 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
30 March
2019
£’000
391,708
20,290
3,312
53 weeks to
31 March
2018
£'000
347,027
16,945
1,424
415,309
365,396
There are £116k of defined contribution pension liabilities owed by the Group at the period end (2018: £221k).
The Group has one employee who is a member of a defined benefit scheme (2018: one employee). The liability held on the balance sheet at
the year end was £245k (2018: £250k).
The scheme is considered immaterial to the Group and the effect of the year end actuarial valuation can be seen within other
comprehensive income.
Babou operates a scheme where they must provide a certain amount per employee to pay upon their retirement date. The accrual on this
scheme was £1,174k at year end.
The average monthly number of persons employed by the Group during the period was:
Period ended
Sales staff
Administration
9 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
Key management expense (includes Directors’ remuneration):
Short term employee benefits
Benefits accrued under the share option scheme
Pension
Amounts in respect of the highest paid director emoluments:
Short term employee benefits
Benefits accrued under the share option scheme
52 weeks to
30 March
2019
53 weeks to
31 March
2018
32,768
1,035
33,803
30,758
1,284
32,042
52 weeks to
30 March
2019
£’000
53 weeks to
31 March
2018
£'000
2,204
219
2,423
5,278
328
40
5,647
1,212
84
1,296
3,067
226
3,293
7,103
280
4
7,387
2,049
–
2,049
The emoluments disclosed above are of the directors and key management personnel who have served as a director within any of the
Group companies.
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Corporate Governance
Financial Statements
10 Share Options
The Group operates two share option schemes, both of which split down to various tranches. Details of these schemes follow.
1) The Company Share Option Plan (CSOP) scheme
The CSOP scheme was adopted by the Group as a Schedule 4 CSOP Scheme on 29 March 2014. No grant under this scheme can be made
more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for the CSOP and the awards are made at the discretion of the
remuneration committee.
Limits & Pricing
A fixed number of options offered to each participant, with the pricing set as the close price on the grant date. The options offered to each
individual cannot exceed a total value of £30,000 measured as the option price multiplied by the number of options awarded, with the whole
scheme limited to 10% of the share capital in issue.
Vesting & Exercise
The awards vest on the third anniversary of grant, subject to the following condition:
In order for an option to be eligible for vesting, the underlying UK EBITDA in the last financial year that ended prior to the third anniversary of
the grant should not be less than 130% of the underlying UK EBITDA in the last financial year that ended before the grant was made.
Once vested the award can be exercised up until the tenth anniversary of the grant.
Tranches
To the end of March 2019 there have been four tranches of the CSOP, details are as follows:
Date of grant
Option price
Options granted
Fair value of each option at date of grant
Options outstanding at 25 March 2017
Granted
Forfeited
Exercised
Options outstanding at 31 March 2018
Granted
Forfeited
Lapsed
Exercised
Options outstanding at 30 March 2019
Tranche 1
Tranche 2
Tranche 3
Tranche 4
1 Aug 2014
271.5p
596,646
83p
11 Aug 2014
267.0p
104,860
81p
17 Dec 2015 19 Aug 2016
276.8p
21,676
50p
286.0p
10,489
79p
460,375
–
(22,098)
(427,228)
11,049
–
–
–
–
11,049
59,920
–
–
(59,920)
–
–
–
–
–
–
10,489
–
–
–
10,489
–
–
(10,489)
–
–
21,676
–
–
–
21,676
–
–
–
–
21,676
2) Long-Term Incentive Plan (LTIP) Awards
The LTIP was adopted by the board on 29 May 2014. No grant under this scheme can be made more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for the LTIP and the awards are made at the discretion of the
remuneration committee.
Limits & Pricing
A fixed number of options offered to each participant, with the pricing set at £nil. The options offered to each individual cannot exceed a total
value of 100% (200% under exceptional circumstances) of the participants base salary where the value is measured as the market value of the
shares on grant multiplied by the number of options awarded, with the whole scheme limited to 10% of the share capital in issue.
Dividend Credits
All participants in any new LTIP awards granted after 1 April 2018 are entitled to a dividend credit where the notional dividend they would have
received on the maximum number of shares available under their award is converted into new share options and added to the award based
upon the share price on the date of the dividend. These additional awards have been reflected in the tables below.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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10 Share Options continued
Vesting & Exercise
The share options vest on the third anniversary of the grant date, subject to a set of conditions as follows:
LTIP 2014:
• The Total Shareholders Return (TSR) must exceed 15%, where the TSR is a measure of the change in share price and dividends paid in the
vesting period.
• The underlying UK EBITDA in the Financial Year ended March 2017 is at least 130% greater than the underlying UK EBITDA in the Financial
Year ended March 2014.
LTIP 2015, 2016, 2017A, 2018A:
• 50% of the awards are subject to a TSR performance condition, where the Group’s TSR over the vesting period is compared with a
comparator group. The awards vest on a sliding scale where the full 50% is awarded if the Group falls in the upper quartile, 12.5% vests if
the Group falls exactly at the median, and 0% below that.
• 50% of the awards are subject to an EPS performance target. The awards vest on a sliding scale based upon the Earnings per share
as follows:
Award
LTIP 2015
LTIP 2016
LTIP 2017A
LTIP 2018A
EPS as at
50% paid at
12.5% paid at
March-18
March-19
March-20
March-21
19.0p
22.5p
24.0p
28.0p
15.0p
17.5p
19.0p
23.0p
Below the 12.5% boundary, no options vest.
LTIP 2017/B1, 2017/B2, 2018/B1, 2018/B2.
• Group EBITDA must be positive in each year of the LTIP.
• The awards also have an employee performance condition attached.
Vested awards can be exercised up to the tenth anniversary of grant.
Tranches
To the end of March 2019 there have been nine awards of the LTIP, with the details as follows.
Note that the LTIP 2015, LTIP 2016, LTIP 2017A and LTIP 2018A have been split into the element subject to the TSR (50%) and the element subject to
the EPS (50%) since these were valued separately.
Date of grant
Nil price options granted
Fair value of each option at date of grant
Options outstanding at 25 March 2017
Granted
Forfeited
Exercised
Options outstanding at 31 March 2018
Granted
Forfeited
Exercised
Options outstanding at 30 March 2019
Core Valuation Assumptions
Risk Free Rate
Expected Life (Years)
Volatility
Dividend Yield
*
These share options have vested but are in a holding period.
2014
2015-TSR
2015-EPS
2016-TSR
2016-EPS
1 Aug 2014
200,000
134p
5 Aug 2015
40,616
210p
5 Aug 2015 18 Aug 2016 18 Aug 2016
122,385.5
122,385.5
254p
164p
40,616
341p
74,074
–
–
(74,074)
–
–
–
–
–
1.39%
3
25%
0%
40,616
–
–
–
40,616
–
–
–
40,616*
0.92%
5
24%
0.95%
40,616
–
–
–
40,616
–
(9,139)
–
31,477*
0.92%
5
24%
0.95%
122,385.5
–
–
–
122,385.5
–
–
–
122,385.5
122,385.5
–
–
–
122,385.5
–
–
–
122,385.5
0.09%
5
26%
1.73%
0.09%
5
26%
1.73%
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Corporate Governance
Financial Statements
Date of grant
Nil price options granted
Fair value of each option at date of grant
Options outstanding at 25 March 2017
Granted
Forfeited
Exercised
Options outstanding at 31 March 2018
Granted
Forfeited
Exercised
Options outstanding at 30 March 2019
Core Valuation Assumptions
Risk Free Rate
Expected Life (Years)
Volatility
Dividend Yield
Date of grant
Nil price options granted
Fair value of each option at date of grant
Options outstanding at 31 March 2018
Granted
Granted via dividend credit
Forfeited
Exercised
Options outstanding at 30 March 2019
Core Valuation Assumptions
Risk Free Rate
Expected Life (Years)
Volatility
Dividend Yield
2017A-TSR
2017A-EPS
2017/B1
2017/B2
2018/B1
7 Aug 2017
40,610
272p
7 Aug 2017
40,610
351p
7 Aug 2017
287,963
361p
14 Aug 2017
101,654
360p
23 Jan 2018
19,264
400p
–
40,610
–
–
40,610
–
–
–
40,610
0.52%
5
32%
1.4%
–
40,610
–
–
40,610
–
–
–
40,610
0.52%
5
32%
1.4%
–
287,963
(16,072)
–
271,891
–
(8,036)
–
263,855
0.25%
3
32%
1.4%
–
101,654
–
–
101,654
–
(8,025)
–
93,629
0.25%
3
32%
1.4%
–
19,264
–
–
19,264
–
(2,408)
–
16,856
0.25%
3
32%
1.4%
2018A–TSR
2018A-EPS
2018/B2
22 Aug 2018 22 Aug 2018 20 Aug 2018
236,697
406p
224,914.5
240p
224,914.5
409p
–
224,914.5
1,758
–
–
226,672.5
–
224,914.5
1,758
–
–
226,672.5
0.97%
5
29%
0%
0.97%
5
29%
0%
30 March
2019
843,246
691,839
(49,287)
–
1,485,798
1,402,656
72,093
11,049
–
236,697
1,797
(11,190)
–
227,304
0.25%
3
30%
0%
31 March
2018
952,537
490,101
(38,170)
(561,222)
843,246
832,197
–
11,049
No LTIP options have lapsed in either period. The summary year end position is as follows;
Period ended
Share options outstanding at the start of the year
Share options granted during the year (including via dividend credit)
Share options forfeited or lapsed during the year
Share options exercised in the year
Share options outstanding at the end of the year
Of which;
Share options that are not vested
Share options that are vested, but are not eligible for exercise (in holding)
Share options that are vested and eligible for exercise
All exercised options are satisfied by the issue of new share capital.
In the year, £954k has been charged to the income statement in respect to the share option schemes (2018: £615k). At the end of the year the
outstanding share options had a carrying value of £1,733k (2018: £788k).
B&M European Value Retail S.A. Annual Report and Accounts 2019
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11 Taxation
The relationship between the expected tax expense based on the standard rate of corporation tax in the UK of 19% (2018: 19%) and the tax
expense actually recognised in the statement of comprehensive income can be reconciled as follows:
Period ended
Current tax expense
Deferred tax credit
Total tax expense recorded in profit and loss
Current tax charge/(credit) in other comprehensive income
Deferred tax charge/(credit) in other comprehensive income
Total tax charge/(credit) recorded in other comprehensive income
Result for the year before tax
Expected tax charge at the standard tax rate
Effect of:
Expenses not deductible for tax purposes
Income not taxable
Foreign operations taxed at local rates
Changes in the rate of corporation tax
Adjustment in respect of prior years
Other
Actual tax expense
Deferred taxation
Statement of financial position
Accelerated tax depreciation
Relating to intangible brand assets
Fair valuing of assets and liabilities (asset)
Fair valuing of assets and liabilities (liability)
Movement in provision
Relating to share options
Held over gains on fixed assets
Losses carried forward
Other temporary differences (asset)
Other temporary differences (liability)
Net deferred tax liability
Analysed as:
Deferred tax asset
Deferred tax liability
52 weeks to
30 March
2019
£’000
50,732
(4,015)
46,717
2
3,479
3,481
53 weeks to
31 March
2018
£'000
44,039
(528)
43,511
(54)
(2,416)
(2,470)
249,426
229,316
47,391
43,570
3,804
(3,723)
(758)
(58)
(114)
175
46,717
30 March
2019
£’000
(3,250)
(20,955)
2,942
(2,427)
1,308
360
(450)
4,501
84
(67)
(17,953)
9,195
(27,148)
2,440
(2,709)
790
55
(485)
(150)
43,511
31 March
2018
£'000
(4,671)
(18,339)
5,030
(1,035)
11
206
(450)
–
407
–
(18,841)
5,654
(24,495)
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Corporate Governance
Financial Statements
Statement of comprehensive income
Accelerated tax depreciation
Relating to intangible brand assets
Fair valuing of assets and liabilities
Movement in provision
Relating to share options
Held over gains on fixed assets
Losses carried forward
Other temporary differences
Effect of foreign exchange
Net deferred tax credit
Analysed as:
Total deferred tax in profit or loss
Total deferred tax in other comprehensive income
52 weeks to
30 March
2019
£’000
53 weeks to
31 March
2018
£'000
1,411
(1,530)
(4,278)
326
153
–
4,501
(39)
(8)
536
4,015
(3,479)
129
107
2,278
(75)
108
21
–
376
–
2,944
528
2,416
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.
12 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit or loss for the financial period attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding at each period end.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during each year plus the weighted average number of ordinary shares that would
be issued on conversion of any dilutive potential ordinary shares into ordinary shares.
Adjusted (and adjusted 52 week) basic and diluted earnings per share are calculated in the same way as above, except using adjusted\
adjusted 52-week profit attributable to ordinary equity holders of the parent, as defined in notes 3 and 4.
There are share option schemes in place (see note 10) which have a dilutive effect on both periods presented. The following reflects the income
and share data used in the earnings per share computations:
Period ended
Profit for the period attributable to owners of the parent
Adjusted profit for the period attributable to owners of the parent
Adjusted 52 week profit for the period attributable to owners of the parent
Weighted average number of ordinary shares for basic earnings per share
Dilutive employee share options
Weighted average number of ordinary shares adjusted for the effect of dilution
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Adjusted 52 week basic earnings per share
Adjusted 52 week diluted earnings per share
30 March
2019
£’000
205,154
197,032
197,032
31 March
2018
£'000
185,833
180,433
177,818
Thousands
Thousands
1,000,561
1,000,353
453
298
1,001,014
1,000,651
Pence
20.5
20.5
19.7
19.7
19.7
19.7
Pence
18.6
18.6
18.0
18.0
17.8
17.8
B&M European Value Retail S.A. Annual Report and Accounts 2019
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13 Investments in associates
Period ended
Net book value
Carrying value at the start of the period
Acquisition of holding in Centz Retail Holdings
Dividends received
Share of profits in associates since the prior year valuation exercise
Impairment of holding in Home Focus Group
Sale of 20% holding in Home Focus Group
Effect of foreign exchange on translation
Carrying value at the end of the period
30 March
2019
£’000
31 March
2018
£'000
5,140
1,200
(570)
775
–
–
375
6,920
5,669
–
(1,149)
1,919
(208)
(310)
(781)
5,140
On 19 November 2018, the Group acquired a 22.5% holding in Centz Retail Holdings Limited, a company incorporated in Ireland, for
€1,350,000. The principal activity of the company is retail sales and their registered address is 5 Old Dublin Road, Stillorgan, Co. Dublin.
The Group has a 50% (2018: 50%) interest in Multi-lines International Company Ltd, a company incorporated in Hong Kong. The principal
activity of the company is the purchase and sale of goods and their registered address is 8/F, Hope Sea Industrial Centre, No. 26 Lam Hing
Street, Kowloon Bay, Hong Kong.
The Group also holds 20% (2018: 20%) of the ordinary share capital of Home Focus Group Ltd, a company incorporated in Republic of Ireland
and whose principal activity is retail sales and their registered address is Boole House, Beech Hill Office Campus, Beech Hill Road,
Clonskeagh, Dublin 4.
During the prior year the Group sold 20% of the holding in Home Focus Group for €350k. The remaining 20% holding is also subject to a
contract of sale in December 2020 for the same amount, therefore the remaining stake was revalued to €350k with a resulting impairment
which has been recognised in profit and loss. The holding in Home Focus is considered immaterial for further disclosure.
None of the entities have discontinued operations or other comprehensive income, except that on consolidation all 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
30 March
2019
£’000
30 March
2018
£'000
2,344
50,045
–
(39,577)
12,812
1,106
36,004
–
(25,555)
11,555
160,903
1,562
169,244
3,805
The figures for Multi-lines show 12 months to December 2018 (2018: 12 months to December 2017), being the period used in the valuation of
the associate.
Centz Retail Holdings Limited report to a year end of December. Given the limited period of ownership of six weeks until that date, no profit or
loss has been recognised related to this entity at this year end and it is therefore considered immaterial for further disclosure.
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Corporate Governance
Financial Statements
14 Intangible assets
Cost or valuation
At 25 March 2017
Additions due to purchase of Heron
Additions
Disposals
Effect of retranslation
At 31 March 2018
Additions due to purchase of Babou
Additions
Disposals
Effect of retranslation
At 30 March 2019
Accumulated amortisation/impairment
At 25 March 2017
Charge for the year
Disposals
Effect of retranslation
At 31 March 2018
Charge for the year
Disposals
Effect of retranslation
At 30 March 2019
Net book value at 30 March 2019
Net book value at 31 March 2018
Goodwill
£'000
Software
£'000
Brands
£'000
100,047
14,178
1,750
–
68
116,043
4,134
250
–
(214)
120,213
–
13
–
–
13
227
–
(5)
235
841,691
87,580
–
–
447
929,718
21,144
–
–
(1,256)
949,606
–
–
–
–
–
–
–
–
–
949,606
929,718
4,620
1,305
1,612
(289)
3
7,251
139
2,404
(51)
(28)
9,715
1,425
1,436
(289)
3
2,575
1,854
(41)
(11)
4,377
5,338
4,676
Other
£’000
1,494
–
–
–
20
1,514
1,096
–
–
(59)
Total
£'000
947,852
103,063
3,362
(289)
538
1,054,526
26,513
2,654
(51)
(1,557)
2,551
1,082,085
1,043
203
–
12
1,258
77
–
(27)
1,308
2,468
1,652
(289)
15
3,846
2,158
(41)
(43)
5,920
119,978
116,030
1,243
1,076,165
256
1,050,680
Impairment review of intangible assets held with indefinite life
The Group holds the following assets with indefinite life:
Segment
UK B&M
UK Heron
Germany Jawoll
France Babou
30 March
2019
Goodwill
£’000
807,496
87,580
33,934
20,596
30 March
2019
Brand
£’000
95,900
14,178
5,108
–
31 March
2018
Goodwill
£’000
807,496
87,580
34,642
–
31 March
2018
Brand
£’000
95,650
14,178
5,215
–
Not all items in the brand classification have an indefinite life as some are time limited. The brand intangible assets that have been identified
as having an indefinite life are designated as such as management believe that these assets will hold their value for an indefinite period
of time.
In each case the goodwill and brand assets have been allocated to one group of CGUs, being the store estate within the specific segment to
which those assets relate. The Babou assets are a new addition in the year and the Heron assets were a new addition in the prior year, see
note 7 for more details.
The Group performs impairment tests at each period end. The impairment test involves assessing the net present value (NPV) of the expected
cash flows in relation to the stores within each CGU according to a number of assumptions to calculate the value in use (VIU) for the group of
CGUs.
The Jawoll and Babou balances are held in Euros, with underlying balances of €39.5m and €24.0 for Goodwill respectively and €6.0m for the
Jawoll brand (2018: Jawoll unchanged, Babou N/A). Since the cashflows that support the carrying values are also primarily in Euros, the
impairment test for these assets have been carried out in that currency.
B&M European Value Retail S.A. Annual Report and Accounts 2019
97
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14 Intangible assets continued
Impairment review of intangible assets held with indefinite life continued
After a review, the impairment tests calculations were altered to include additional costs, such as those related to transport and distribution of
stock, and the results below for the prior year have been restated to reflect this. There was no material impact on the result of the impairment
test with no impairment required.
In each case, the results of the impairment tests identified that the VIU was in excess of the carrying value of assets within the group of CGUs
at the period end dates.
The Jawoll business suffered a loss in the year (see note 2) but management believe that this was due to exceptional circumstances that will
not be repeated. Looking ahead, Jawoll’s results, and specifically the margin which was affected by the level of mark downs on old stock in the
year, are expected to improve. As such the Jawoll gross margin has been added as a key assumption in this year’s calculation. No other
indicators of impairment were noted.
The key assumptions used were
(i) The Group’s discount rate, calculated via an internal model.
(ii) The inflation rate for expenses, which has been based upon the consumer price index for the relevant country.
(iii) The like for like sales growth, an estimate made by management.
(iv) Gross margin for Jawoll, an estimate made by management.
(v) A terminal growth rate, an estimate made by management based upon the expected position of the business at the end of the five year
forecast period.
The assumptions were as follows:
As at
Discount rate (B&M)
Discount rate (Heron)
Discount rate (Jawoll)
Discount rate (Babou)
Inflation rate for costs (B&M & Heron)
Inflation rate for costs (Jawoll)
Inflation rate for costs (Babou)
Like for like sales growth (B&M)
Like for like sales growth (Heron)
Like for like sales growth (Jawoll)
Like for like sales growth (Babou)
Gross margin (Jawoll)
Terminal growth rate (B&M)
Terminal growth rate (Heron)
Terminal growth rate (Jawoll)
Terminal growth rate (Babou)
30 March
2019
31 March
2018
10.4%
10.7%
12.4%
12.4%
2.4%
1.3%
1.6%
2.0%
2.0%
5.0%
0.0%
38.0%
0.5%
3.0%
3.0%
3.0%
10.7%
11.5%
13.2%
N/A
3.6%
1.7%
N/A
2.0%
3.0%
2.0%
N/A
N/A
0.5%
3.0%
3.0%
3.0%
These assumptions are reflected for five years in the CGU forecasts and beyond this a perpetuity calculation is performed using the
assumptions made regarding terminal growth rates.
The sensitivity of the assumptions is set out below together with the levels at which an impairment would be triggered in relation to each of the
key assumptions as set out above.
Discount rate
Inflation rate for expenses
Like for like sales
Terminal growth rate
Discount rate
Inflation rate for expenses
Like for like sales
Gross margin
Terminal growth rate
* calculation is not sensitive to this input for this segment
B&M
Heron
30 March
2019
35.8%
11.3%
(4.2)%
N/A*
Jawoll
30 March
2019
34.3%
8.1%
(0.3)%
31.3%
N/A*
31 March
2018
27.7%
9.5%
(2.1)%
N/A*
31 March
2018
29.6%
7.2%
(2.0)%
N/A
(73.1)%
30 March
2019
22.4%
8.5%
(2.5)%
(26.8)%
Babou
30 March
2019
80.0%
8.9%
(4.7)%
N/A
N/A*
31 March
2018
17.1%
6.6%
0.8%
(6.9)%
31 March
2018
N/A
N/A
N/A
N/A
N/A
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B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
15 Property, plant & equipment
Cost or valuation
At 25 March 2017
Acquisition of Heron
Additions
Disposals
Effect of retranslation
At 31 March 2018
Acquisition of Babou
Additions
Disposals
Effect of retranslation
At 30 March 2019
Accumulated depreciation
At 25 March 2017
Charge for the period
Disposals
Effect of retranslation
At 31 March 2018
Charge for the period
Disposals
Effect of retranslation
At 30 March 2019
Net book value at 30 March 2019
Net book value at 31 March 2018
Land and
buildings
£'000
Motor vehicles
£'000
46,250
31,388
58,097
(506)
306
135,535
153
34,960
(174)
(492)
3,485
5,787
4,493
(1,313)
5
12,457
63
5,628
(1,231)
(11)
Plant,
fixtures and
equipment
£'000
183,910
30,124
48,678
(4,180)
164
258,696
28,030
63,064
(1,991)
(1,266)
Total
£'000
233,645
67,299
111,268
(5,999)
475
406,688
28,246
103,652
(3,396)
(1,769)
169,982
16,906
346,533
533,421
12,685
4,607
(181)
41
17,152
5,028
(13)
(144)
22,023
147,959
118,383
1,796
1,559
(1,106)
2
2,251
2,671
(686)
(4)
4,232
12,674
10,206
53,416
29,065
(3,880)
31
78,632
39,817
(935)
(300)
67,897
35,231
(5,167)
74
98,035
47,516
(1,634)
(448)
117,214
143,469
229,319
389,952
180,064
308,653
The carrying value of assets held under finance lease and hire purchase contracts at 30 March 2019 was £10.8m (2018: £7.5m) and total
depreciation charged on these assets during the period was £2.5m (2018: £1.0m). 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 and notes facilities in place at 30 March 2019, fixed and floating charges were held over £130.8m of the net book
value of land and buildings, £12.3m of the net book value of motor vehicles and £190.4m of the net book value of the plant, fixtures and
equipment. (2018: £99.6m, £9.7m, £167.5m respectively).
A significant addition was made to the land & buildings category in relation to the southern warehouse. At the year end the balance in relation
to this stood at £72.2m (2018: £55.0m). The warehouse is undergoing a fit out phase and has not yet been brought into use and is therefore not
yet depreciated. The intention is that the asset will undergo a sale & leaseback process near to or at completion. A further £1.0m of assets in
the land & buildings category relates to other assets under construction (2018: £0.5m).
Included within land and buildings is land with a cost of £62.8m (2018: £62.6m) which is not depreciated.
16 Inventories
As at
Goods for resale
30 March
2019
£'000
31 March
2018
£’000
670,721
558,690
Included in the amount above was a net credit of £3.5m related to inventory provisions (2018: £1.3m net charge). In the period to 30 March 2019
£2,297m (2018: £2,001m) was recognised as an expense for inventories.
B&M European Value Retail S.A. Annual Report and Accounts 2019
99
Page Title at start:Content Section at start: Notes to the consolidated financial statements continued
17 Trade and other receivables
Non-current
Lease premiums
Favourable leases
Other receivables
Current
Trade receivables
Deposits on account
Provision for impairment
Net trade receivables to non-related parties
Prepayments
Related party receivables
Lease premiums
Favourable leases
Other tax
Other receivables
30 March
2019
£’000
31 March
2018
£’000
1,786
1,967
7,236
10,989
4,866
5,507
(247)
10,126
39,190
13,079
251
555
3,213
5,226
71,640
2,150
1,037
–
3,187
3,221
1,575
(160)
4,636
27,165
410
324
183
–
1,324
34,042
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:
Period ended
Provision for impairment at the start of the period
Impairment during the period
Utilised/released during the period
Balance at the period end
30 March
2019
£’000
31 March
2018
£’000
(160)
(247)
160
247
(18)
(145)
3
(160)
Trade receivables are non-interest bearing and are generally on terms of 30 days or less.
Aside from the related party balances (see note 28) there were no significant balances within debtors at either March 2019 or March 2018 and
as such there is no specific concentration of credit risk.
The following table sets out a maturity analysis of trade 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
30 March
2019
£’000
1,901
2,387
66
513
4,867
31 March
2018
£’000
2,086
651
230
254
3,221
100
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
18 Cash and cash equivalents
As at
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
As at the year end the Group had available £93.4m of undrawn committed borrowing facilities (2018: £89.0m).
19 Trade and other payables
As at
Non-current
Accruals
Reverse lease premium
Unfavourable leases
Other payables
Current
Trade payables
Other tax and social security payments
Accruals and deferred income
Reverse lease premium
Unfavourable leases
Related party trade payables
Other payables
30 March
2019
£’000
86,202
(5,646)
80,556
31 March
2018
£'000
90,816
(6,112)
84,704
30 March
2019
£’000
503
82,299
9,810
279
92,891
306,902
14,933
45,430
15,849
2,234
3,248
7,370
395,966
31 March
2018
£’000
250
78,859
8,021
–
87,130
264,224
7,845
28,251
14,446
1,165
12,345
7,796
336,072
Trade payables are generally on 30 day terms and are not interest bearing. The carrying value of trade payables approximates to their fair
value. For further details on the related party trade payables, see note 28.
20 Other financial assets and liabilities
Other financial assets
As at
Current financial assets at fair value through profit and loss:
Foreign exchange forward contracts
Fuel swap contracts
Current financial assets at fair value through other comprehensive income:
Foreign exchange forward contracts
Total current other financial assets
Total other financial assets
30 March
2019
£’000
31 March
2018
£'000
2,383
127
3,784
6,294
6,294
–
–
–
–
–
Financial assets through profit or loss reflect the fair value of those derivatives that are not designated as hedge relationships but are
nevertheless intended to reduce the level of risk for expected sales and purchases.
B&M European Value Retail S.A. Annual Report and Accounts 2019
101
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20 Other financial assets and liabilities continued
Other financial liabilities
As at
Non-current financial liabilities at fair value through profit and loss:
Put/call options over the non-controlling interest of Jawoll
Deferred consideration in relation to the purchase of Heron
Total non–current other financial liabilities
Current financial liabilities at fair value through profit and loss:
Deferred consideration in relation to the purchase of Heron
Foreign exchange forward contracts
Current financial liabilities at fair value through other comprehensive income:
Foreign exchange forward contracts
Total current other financial liabilities
Total other financial liabilities
30 March
2019
£’000
–
–
–
12,084
535
1,112
13,731
13,731
31 March
2018
£'000
8,076
11,133
19,209
–
923
15,743
16,666
35,875
The put/call options over the non-controlling interest in Jawoll arose as part of the acquisition of the entity. The valuation at year end reflects
management’s latest projections for the final amount to be exchanged at the year end foreign exchange rate. The option matures later in 2019.
The deferred consideration relates to the acquisition of Heron. The valuation at year end reflects management’s calculation of the amount
expected to be payable later in 2019.
The other financial liabilities through profit or loss reflect the fair value of those foreign exchange forward contracts that are not designated as
hedge relationships but are nevertheless intended to reduce the level of risk for expected sales and purchases.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly.
• Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
As at the reporting dates, the Group held the following financial instruments carried at fair value on the balance sheet:
30 March 2019
Foreign exchange contracts
Fuel swap contract
Deferred consideration in relation to Heron
31 March 2018
Foreign exchange contracts
Put/call options on Jawoll non-controlling interest
Deferred consideration in relation to Heron
Total
£’000
Level 1
£’000
4,520
127
(12,084)
(16,666)
(8,076)
(11,133)
–
–
–
–
–
–
Level 2
£’000
4,520
127
–
Level 3
£’000
–
–
(12,084)
(16,666)
–
–
–
(8,076)
(11,133)
The put/call option and deferred consideration were valued with reference to the sale and purchase agreements underpinning the relevant
acquisition. The key variable in determining the fair value of these balances is the forecast EBITDA, respectively of Jawoll and Heron, as
prepared by management.
102
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Corporate Governance
Financial Statements
The movement in the valuation of the call/put option reconciles as follows:
Period ended
Opening value
Unwinding of the call/put option valuation
Adjustment to the valuation of the call/put option
Effect of foreign exchange
Closing value
52 weeks to
30 March
2019
£’000
53 weeks to
31 March
2018
£'000
8,076
1,016
(9,141)
49
–
17,886
1,459
(11,568)
299
8,076
The valuation is based upon this years achieved EBITDA and is therefore no longer considered sensitive to this variable. Previously a 5%
change in EBITDA would have resulted in a 5% change to the valuation. It is also not considered sensitive to the discount rate because if a
liability were to arise it would be expected to be within the next 12 months.
The movement in the valuation of deferred consideration reconciles as follows:
Period ended
Opening value
Recognised on acquisition of Heron
Unwinding of the deferred consideration balance
Revaluation of the deferred consideration
Closing value
52 weeks to
30 March
2019
£’000
53 weeks to
31 March
2018
£'000
11,133
–
1,667
(716)
12,084
–
10,422
711
–
11,133
The balance is based upon the EBITDA over the preceding two years and is therefore no longer considered sensitive to this input. The balance
is also not considered sensitive to the discount rate as it is expected to be due imminently and has therefore not been discounted.
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.
21 Financial liabilities – borrowings
As at
Current
Revolving facility bank loan
Acquisition facility
Babou loan facilities
Heron loan facilities
Non-current
High yield bond notes
Term facility bank loan
Babou loan facilities
Heron loan facilities
30 March
2019
£’000
40,000
78,461
3,599
2,212
124,272
248,194
298,102
5,362
11,283
562,941
31 March
2018
£'000
45,000
–
–
2,212
47,212
247,558
297,288
–
13,580
558,426
The acquisition facility of €92.0m was drawn down by the Group on 19 October 2018 to facilitate the purchase of Babou. It has an initial maturity
date of October 2019, but can be extended at the sole discretion of the Group for up to one additional year. It is held at amortised cost with
£0.9m of fees initially attributed to it. The gross amount and other details can be seen in the maturity table below.
The term facility bank loan and high yield bond notes are held at amortised cost and were initially capitalised in February 2017 with £3.2m and
£3.3m (respectively) of fees attributed to them.
The Babou and Heron loan facilities were brought into the Group as part of the acquired balance sheets on 19 October 2018 and 2 August 2017
respectively, all are carried at their gross cash amount. The Babou loan facilities are held with various counterparties and at various margins
and maturities, further details are included in the maturity table below.
B&M European Value Retail S.A. Annual Report and Accounts 2019
103
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21 Financial liabilities – borrowings continued
The maturities of the loan facilities and finance leases (also see note 25) are as follows.
Finance leases
Revolving facility loan
Term facility bank loan A
High yield bond notes
Acquisition facility
Heron loan facilities – Melton
Heron loan facilities – Offset
Heron loan facilities – Term
Babou – BNP Paribas (1)
Babou – BNP Paribas (2)
Babou – Caisse d'Épargne (1)
Babou – Caisse d'Épargne (2)
Babou – Caisse d'Épargne (3)
Babou – Caisse d'Épargne (4)
Babou – CIC (1)
Babou – CIC (2)
Babou – CIC (3)
Babou – Crédit Agricole (1)
Babou – Crédit Agricole (2)
Babou – Crédit Lyonnais
Babou – Société Générale (1)
Babou – Société Générale (2)
Interest rate
%
1.0-6.0%
2.00% + LIBOR
2.00% + LIBOR
4.125%
1.075% (see note)
2.25% + LIBOR
2.45% + LIBOR
2.50% + LIBOR
1.96% + EURIBOR
0.76%
1.50% + EURIBOR
1.45% + EURIBOR
1.50% + EURIBOR
1.51%
2.18%
1.45%
1.20%
2.07%
0.515%
1.15% + EURIBOR
1.15% + EURIBOR
0.63%
Maturity
2019-37
Apr-19/18
Jul-21
Feb-22
Oct-19
Jul-25
Sep-22
Dec-21
Jan-20
Jan-23
Feb-22
Feb-23
Feb-22
Feb-24
Jan-21
Apr-20
May-22
Jan-20
Jan-23
Apr-20
Apr-20
Dec-22
30 March
2019
£’000
10,734
40,000
300,000
250,000
78,984
5,159
3,967
4,370
393
661
478
1,503
660
612
594
191
1,099
218
660
266
332
1,293
702,174
31 March
2018
£’000
9,176
45,000
300,000
250,000
–
6,050
4,572
5,170
–
–
–
–
–
–
–
–
–
–
–
–
–
–
619,968
The acquisition facility, term loan A and the high yield bond notes have carrying values which include transaction fees allocated on inception.
The acquisition facility interest rate varies over the course of the year. The rate shown in the table is the effective rate. The P&L charge is based
upon the effective rate.
The acquisition facility, all Babou facilities and an element of the finance leases have gross values in euros, and the values above have been
translated at the period end rates of €1.1648/£ (2018: €1.141/£).
22 Provisions
At 25 March 2017
Brought in on acquisition of Heron
Provided in the period
Utilised during the period
Released during the period
Effect of retranslation
At 31 March 2018
Provided in the period
Utilised during the period
Released during the period
At 30 March 2019
Current liabilities 2019
Non-current liabilities 2019
Current liabilities 2018
Non-current liabilities 2018
Property
provisions
£’000
1,756
1,538
1,280
(1,198)
(538)
3
2,841
506
(846)
(374)
2,127
1,753
374
2,462
379
Other
£’000
4,035
–
2,264
(1,807)
(31)
–
4,461
2,361
(1,857)
–
4,965
4,965
–
4,461
–
Total
£’000
5,791
1,538
3,544
(3,005)
(569)
3
7,302
2,867
(2,703)
(374)
7,092
6,718
374
6,923
379
The property provision relates to the expected future costs on specific leasehold properties. This is inclusive of onerous leases and
dilapidations on these properties. The timing in relation to utilisation is dependent upon the individual lease terms.
The other provisions principally relate to disputes concerning insured liability claims. A prudent amount has been set aside for each claim as
per legal advice received by the Group. These claims are individually non-significant and average £9.4k per claim (£8.4k in 2018).
104
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Corporate Governance
Financial Statements
23 Share capital
As at
Allotted, called up and fully paid
B&M European Value Retail S.A.
1,000,561,222 ordinary shares of 10p each
30 March
2019
£’000
31 March
2018
£'000
100,056
100,056
100,056
100,056
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 2,971,661,000 ordinary shares.
B&M European Value Retail S.A. released 561,222 shares during the prior period in relation to exercised employee and director share options,
see note 10.
24 Cash generated from operations
Period ended
Profit before tax
Adjustments for:
Net interest expense
Depreciation
Amortisation of intangible assets
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
Loss resulting from fair value of financial derivatives
52 weeks
ended
30 March
2019
£'000
53 weeks
ended
31 March
2018
£'000
249,426
229,316
15,725
47,516
2,158
644
954
(40,947)
(26,847)
15,728
(210)
(775)
1,781
(5,707)
12,198
35,231
1,652
277
615
(79,099)
(1,168)
39,377
1,511
(1,711)
(31)
3,825
Cash generated from operations
259,446
241,993
B&M European Value Retail S.A. Annual Report and Accounts 2019
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25 Commitments
From 31 March 2019 the Group will apply IFRS 16, please see note 31 for more details.
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 (2018: >95%) 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 non-trivial 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.
As at
Not later than one year
Later than one year and not later than five years
Later than five years
The lease and sublease payments recognised as an expense in the periods were as follows:
As at
Lease payments
Sublease receipts
30 March
2019
£’000
194,334
669,634
658,614
31 March
2018
£'000
154,508
554,293
548,974
1,522,582
1,257,775
30 March
2019
£’000
179,297
(1,129)
178,168
31 March
2018
£'000
150,512
(1,043)
149,469
Finance leases
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
30 March 2019
31 March 2018
Minimum
payments
£'000
PV of minimum
payments
£'000
Minimum
payments
£'000
PV of minimum
payments
£'000
3,769
7,699
230
11,698
3,630
6,875
229
10,734
2,121
6,507
1,260
9,888
1,870
6,047
1,259
9,176
Capital commitments
There were £30.2m of contractual capital commitments not provided within the Group financial statements as at 30 March 2019 (2018: £44.1m).
The figures include an estimated £26.3m in relation to the build and fit out of the southern warehouse which, whilst the majority is not yet
committed, is considered very likely to be incurred (2018: £40.7m). The southern warehouse is expected to undergo a sale & leaseback around
the date of completion.
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Financial Statements
26 Group information and ultimate parent undertaking
The financial results of the Group include the following entities.
Company name
B&M European Value Retail S.A.
B&M European Value Retail 1 S.à r.l.
Bedford DC Investment Ltd
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
B&M European Value Retail 2 S.à r.l.
EV Retail Limited
B&M Retail Limited
Opus Homewares Limited
Retail Industry Apprenticeships Ltd
Heron Food Group Ltd
Heron Foods Ltd
Cooltrader Ltd
Heron Properties (Hull) Ltd
B&M European Value Retail Germany GmbH
J.A. Woll Handels GmbH
Jawoll Vertriebs GmbH I
Paminvest SAS
SAS Babou
Babou Relationship Partners – BRP SAS
Country
Date of incorporation
Jersey
Luxembourg
May 2014
Luxembourg November 2012
June 2017
UK December 2012
UK December 2012
UK November 2012
UK November 2012
Luxembourg September 2012
UK September 1996
March 1978
UK
April 2003
UK
UK
June 2017
August 2002
UK
UK
October 1978
UK September 2012
February 2003
UK
Germany November 2013
Germany November 1987
Germany September 2007
France
July 2010
France November 1977
France December 2012
Percent held
within the Group
Principal activity
Holding company
Parent
100%
Holding company
100% Property development
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
General retail
100%
100%
Dormant
Employment services
100%
Holding company
100%
Convenience retail
100%
Dormant
100%
100%
Dormant
Holding company
100%
General retail
80%
General retail
80%
Holding company
100%
100%
General retail
100% Administrative services
Registered Offices
• The Luxembourg entities are all registered at 9 allée Scheffer, L-2520, Luxembourg.
• The UK entities are all registered at The Vault, Dakota Drive, Estuary Commerce Park, Speke, Liverpool, L24 8RJ.
• The German entities are all registered at Am Hornberg 6, 29614, Soltau.
• Babou and Paminvest are registered at 8 rue du Bois Joli, 63800 Cournon d’Auvergne.
• BRP SAS are registered at 7 rue Biscornet, 75012 Paris.
Changes during the year
The Group acquired the French retailing group headed by Paminvest SAS. Initially this comprised six entities, but it has since been rationalised
into the three entities given above. See note 7 for further details on the transaction.
Changes during the prior year
The Group acquired four businesses comprising the Heron Food Group as detailed in note 7. Retail Industry Apprenticeships Ltd and Bedford
DC Investment Ltd were incorporated and are fully owned by the Group. BestFlora was fully incorporated into the other Germany entities and
disposed of.
Associates
The Group has a 50% interest in Multi-lines International Company Limited, a company incorporated in Hong Kong, a 20% (40% prior to
December 2017) interest in Home Focus Group Limited, a company incorporated in the Republic of Ireland, and a 22.5% (acquired in November
2018) interest in Centz Retail Holdings Limited, also incorporated in the Republic of Ireland. The share of profit/loss from the associates is
included in the statement of comprehensive income, see note 13.
Ultimate parent undertaking
The directors of the Group consider the parent and the ultimate controlling related party of this Group to be B&M European Value Retail SA,
registered in Luxembourg.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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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.
Market risk
Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and commodity price risk. Commodity price risk is
not considered material to the business as the Group is able to pass on pricing changes to its customers.
Despite the impact of price risk not being considered material, the Group has engaged in swap contracts 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
+5%
-5%
30 March
2019
£’000
159
(159)
31 March
2018
£’000
–
–
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.
All of the Group's sales are to customers in the UK, France and Germany and there is no currency exposure in this respect. A proportion of the
Group's purchases are priced in US Dollars and the Group generally uses forward currency contracts to minimise the risk associated with
that exposure.
Approach to hedge accounting
As part of the Group’s response to currency risk the currency forwards taken out are intended to prudently cover the majority of our stock
purchases forecast for that period. However, the Group only hedge accounts for the part of the forward that we are reasonably certain will be
spent in the forecast period, allowing for potential volatility. Therefore management always consider the likely volatility for a period and assign
a percentage to each tranche of forwards purchased, usually in the range 60-80%
Effectiveness of the hedged forward is then assessed against the Group hedge ratio, which has been set by management at 80% as a
reasonable guide to the certainty level we expect the hedged portions of our forwards to at least achieve. If they fail, or are expected to fail, to
meet this ratio of effectiveness then they are treated as non-hedged items, and immediately expensed through Profit and Loss.
Ineffectiveness can be caused by exceptional volatility in the market, by the timing of product availability, or the desire to manage short term
company cash flows, for instance, when a large amount of cash is required at relatively short notice.
If the Group did not hedge account then the difference is that the gain or loss in other comprehensive income would be presented in profit or
loss and the assets and liabilities presented under the classification fair value through profit or loss would be at fair value through other
comprehensive income.
The difference to the consolidated income statement if none of our forwards been hedge accounted during the year would have been a loss of
£2.3m and a loss in other comprehensive income of £2.7m.
The net effective hedging gains transferred to the cost of inventories in the year was £2.8m (2018: net loss of £21.1m).
At the year end the amount of outstanding US Dollar contracts covered by hedge accounting was £696m (2018:£689m).
108
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Corporate Governance
Financial Statements
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in US Dollar period end exchange rates with all other
variables held constant.
The impact on the Group’s profit before tax and other comprehensive income (net of tax) is largely due to changes in the fair value of our
foreign exchange derivatives and revaluation of creditors and deposits held on account with our US Dollar suppliers.
As at
Effect on profit before tax
Effect on other comprehensive income
Change in
USD rate
+2.5%
-2.5%
+2.5%
-2.5%
30 March
2019
£’000
(4,648)
4,886
(7,976)
8,385
31 March
2018
£’000
(588)
618
(10,150)
10,671
The following table demonstrates the sensitivity (net of tax) to a reasonably possible change in the Euro period end exchange rates with all
other variables held constant. The effect on other comprehensive income is due to the foreign exchange reserve on retranslation of the
Group’s subsidiaries that have the Euro as a functional currency.
As at
Effect on profit before tax
Effect on other comprehensive income
Change in
Euro rate
+2.5%
-2.5%
+2.5%
-2.5%
30 March
2019
£’000
(418)
440
(2,969)
3,121
31 March
2018
£’000
18
(19)
(2,012)
2,115
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 the Group’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 has in the past used
interest rate swaps to minimise the impact.
If LIBOR interest rates had been 50 basis points higher/lower throughout the year with all other variables held constant, the effect upon
calculated pre-tax profit for the year would have been:
As at
Effect on profit before tax
Basis point
increase/decrease
+50
-50
30 March
2019
£’000
(1,754)
1,754
31 March
2018
£’000
(1,716)
1,716
This sensitivity has been calculated by changing the interest rate for each interest payment and accrual made by the Group over the period, by
the amount specified in the table above, and then calculating the difference that would have been required.
The Group also has a very limited exposure to EURIBOR via the loans held by Babou, see note 21, however this is considered immaterial
for disclosure.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial
loss. The Group’s principal financial assets are cash, derivatives and trade receivables. The credit risks associated with cash and derivatives
are limited as the main counterparties are banks with high credit ratings (A long term and A-1 short term (standard & poor) or better,
(2018: A-, A-1 (or better) respectively). The principal credit risk arises therefore from the Group’s trade receivables.
Credit risk is further limited by the fact that the vast majority of sales transactions are made through the store registers, direct from the
customer at the point of purchase, leading to a low trade receivables balance.
In order to manage credit risk, the directors set limits for customers based on a combination of payment history and third party credit
references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing and collection history.
Provisions against bad debts are made where appropriate.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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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 Group has had significant headroom to date with no
anticipated issues based upon forecasts made. Short term flexibility is achieved via the Group’s rolling credit facility. The following table shows
the liquidity risk maturity of financial liabilities grouping based on their remaining period at the balance sheet date. The amounts disclosed are
the contractual undiscounted cash flows:
30 March 2019
Interest bearing loans
Forward foreign exchange contracts
Trade payables
Deferred consideration (Heron)
31 March 2018
Interest bearing loans
Forward foreign exchange contracts
Trade payables
Call/put option (Jawoll)
Deferred consideration (Heron)
Within 1 year
£’000
Between 1 and
2 years
£’000
Between 2 and
5 years
£’000
More than
5 years
£’000
149,759
1,647
310,150
12,084
66,273
16,666
276,569
–
–
23,715
–
–
–
21,109
–
–
9,637
12,800
576,083
–
–
–
587,778
–
–
–
–
1,243
–
–
–
2,099
–
–
–
–
Total
£’000
750,800
1,647
310,150
12,084
677,259
16,666
276,569
9,637
12,800
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.
As at
Financial assets
Fair value through profit and loss
Forward foreign exchange contracts
Fuel price swap
Fair value through other comprehensive income
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
Put/call options over the non-controlling interest of Jawoll
Deferred consideration in relation to the purchase of Heron
Fair value through other comprehensive income
Forward foreign exchange contracts
Amortised cost
Overdraft
Interest-bearing loans and borrowings
Trade payables
Other payables
30 March
2019
£’000
31 March
2018
£’000
2,383
127
3,784
86,202
23,205
5,226
–
–
–
90,816
5,046
1,324
535
–
12,084
923
8,076
11,133
1,112
15,743
5,646
687,213
310,150
7,370
6,112
603,426
276,569
7,796
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Corporate Governance
Financial Statements
28 Related party transactions
The Group has transacted with the following related parties over the periods:
Multi-lines International Company Limited, a supplier, and Home Focus Group and Centz Retail Holdings, both customers, are associates of
the Group.
Ropley Properties Ltd, Triple Jersey Ltd, TJL UK Ltd, Rani Investments and Multi Lines International (Properties) Ltd, all landlords of properties
occupied by the Group, and SSA Investments the beneficial owners of equipment hired to the Group are directly or indirectly owned by director
Simon Arora, his family, or his family trusts (together, the Arora related parties).
David Heuck, a director of Heron is the landlord of a property occupied by the Group (Comprising the Heron related parties).
Jawoll Immobilien GmbH, Stern Grundstück Entwicklungs GmbH, DS Grundstücks GmbH and Silke Stern are all landlords of properties
occupied by the Group and are related by virtue of connection to a shareholder of J.A.Woll-Handels GmbH (together, the German related
parties). These were considered a related party as the shareholder was also a member of key management. However they left the business in
the prior year and as such these entities are no longer considered related parties of the Group.
The following table sets out the total amount of trading transactions with related parties included in the statement of comprehensive income,
including the P&L impact of any finance leases;
Period ended
Sales to associates of the Group
Centz Retail Holdings Limited
Home Focus Group Limited
Total sales to related parties
Purchases from associates of the Group
Multi-lines International Company Ltd
Purchases from parties related to key management personnel
Multi-Lines International (Properties) Ltd
David Heuck
DS Grundstücks GmbH
Jawoll Immobilien GmbH
Rani Investments
Ropley Properties Ltd
Silke Stern
Stern Grundstück Entwicklungs
SSA Investments
TJL UK Ltd
Triple Jersey Ltd
Total purchases from related parties
30 March
2019
£’000
8,858
2,180
11,038
31 March
2018
£'000
–
2,408
2,408
141,015
146,360
410
43
–
–
129
2,996
–
–
44
823
13,083
158,543
151
28
794
550
194
2,976
157
620
–
675
12,666
165,171
Included in the current year figures above are four new leases (three stores) and five renewals of existing stores, entered into by Group
companies during the current period with the Arora related parties (2018: six new stores and two renewals). The total expense on these leases
in the period was £1,412k (2017: £1,778k). There was also one conditionally exchanged lease with Arora related parties in the current period
with a long stop completion date (2018: four), and no expense is incurred on this lease until it is completed.
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Notes to the consolidated financial statements continued
28 Related party transactions continued
The following table sets out the total amount of trading balances with related parties outstanding at the period end.
As at
Trade receivables from associates of the Group
Centz Retail Holdings Ltd
Home Focus Group Ltd
Multi-lines International Company Ltd
Total related party trade receivables
Trade payables to associates of the Group
Multi-lines International Company Ltd
Trade payables to companies owned by key management personnel
Rani Investments
Ropley Properties Ltd
TJL UK Ltd
Triple Jersey Ltd
Total related party trade payables
30 March
2019
£’000
2,045
143
10,891
13,079
31 March
2018
£’000
–
316
94
410
1,933
9,680
26
655
–
623
40
643
3
1,979
3,237
12,345
Outstanding trade balances at the balance sheet dates are unsecured and interest free and settlement occurs in cash. There have been no
guarantees provided or received for any related party trade receivables or payables.
The business has not recorded any impairment of trade receivables relating to amounts owed by related parties at 30 March 2019 (2018: no
impairment). This assessment is undertaken each year through examining the financial position of the related party and the market in which
the related party operates.
The future operating lease commitments on the Arora related party properties are;
As at
Not later than one year
Later than one year and not later than five years
Later than five years
30 March
2019
£’000
17,568
67,666
79,648
164,882
31 March
2018
£'000
16,308
65,565
85,934
167,807
The future operating lease commitments on the German related party properties were (note these are no longer considered to be related
parties);
As at
Not later than one year
Later than one year and not later than five years
Later than five years
The future operating lease commitments on the Heron related party properties are;
As at
Not later than one year
Later than one year and not later than five years
Later than five years
30 March
2019
£’000
–
–
–
–
31 March
2018
£'000
877
2,438
–
3,315
30 March
2019
£’000
31 March
2018
£'000
43
170
354
567
43
170
397
610
112
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial Statements
The balances remaining on the finance lease asset and liabilities at each year end is as follows (note that none of these entities are
considered to be related parties at the 2019 year end)
As at
Finance lease assets from parties related to key management personnel
DS Grundstücks GmbH
Jawoll Immobilien GmbH
Silke Stern
Stern Grundstück Entwicklungs
Total assets held under finance lease from related parties
Finance lease liabilities with parties related to key management personnel
DS Grundstücks GmbH
Jawoll Immobilien GmbH
Silke Stern
Stern Grundstück Entwicklungs
Total finance lease liabilities held with related parties
30 March
2019
£’000
31 March
2018
£'000
–
–
–
–
–
–
–
–
–
–
2,084
1,020
497
2,213
5,814
2,262
1,170
577
2,410
6,419
The Group disposed of part of the holding in Home Focus Group during the prior year, and received dividends from Multi-Lines International
Company Limited. See note 13 for further information on the Group’s associates.
For further details on the transactions with key management personnel, see note 9 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 comprehensive income/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 Germany GmbH, which was created on
purchase of that company in April 2014. The percentage has not changed over the period of ownership.
In the 52 weeks to 30 March 2019 a loss of £2,805k was recorded in the non-controlling interest of Jawoll (52 weeks 2018: £119k gain), and no
dividends have been paid (2018: no dividends).
The summarised financial information of the subsidiary is as follows:
Revenue
EBITDA
Profit after tax
Net cashflows
As at
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Period ended
30 March
2019
£’000
Period ended
31 March
2018
£’000
213,663
(10,223)
(10,643)
(3,099)
30 March
2019
£’000
42,802
85,332
(6,450)
(31,289)
90,395
200,306
5,621
859
4,240
31 March
2018
£’000
38,756
54,961
(7,357)
(20,310)
66,050
B&M European Value Retail S.A. Annual Report and Accounts 2019
113
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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, and includes finance leases.
As at
Interest bearing loans and borrowings
Less: Cash and short term deposits – overdrafts
Net debt
30 March
2019
£’000
702,174
(80,556)
31 March
2018
£'000
619,968
(84,704)
621,618
535,264
31 Effects of applying the new lease standard (IFRS 16)
The new leasing standard, IFRS 16, is applicable to the Group from 31 March 2019 and will be applied to the financial statements for all future
periods. This will have a significant effect on the presentation of the statement of comprehensive income, the statement of financial position
and some effect on the statement of cashflows.
The Group has undertaken an extensive exercise to prepare for the introduction of the new standard, including production of a model, and the
figures stated below are subject to a full substantive audit of the inputs of the model.
In adopting IFRS 16, the Group has chosen to implement it using the fully retrospective approach which means that we will restate our prior
year accounts to include adoption of the standard and the tables below show the effect as currently calculated on this year’s accounts.
Although the impact of IFRS 16 on the statement of comprehensive income is large, IFRS 16 is essentially presentational and does not impact on
the underlying cash generation of the business nor how we commercially operate and manage the business and the store portfolio.
The figures below are indicative and are subject to final refinement of the key assumptions below and full substantive audit of the inputs to the
model, the model itself and the judgments made by management over areas such as the appropriate lease term and selection of discount
rates.
The figures have currently been produced based upon a lease term that is equivalent to the lease term used in our lease commitment
disclosure (note 25) and discount rates based upon the external rate of borrowing available to the Group with adjustments made for inputs
such as lease term, type of store, operating segment and regionality. The weighted average discount rate in the following is 5.2%.
The following indicative figures exclude the effect of:
• Finance Leases
– For which the net effect is expected to be minor and for which the current interest, depreciation and net book value can be seen in notes
5, 6 and 15.
• Favourable and unfavourable leases
– The effect of which is expected to be directly additive to the right of use asset and liabilities recognised, with no change to the P&L effect.
The balances on these can be seen in notes 17 and 19.
• Leases which are out of contract, including those from which the Group continues to trade, and leases which are out of scope.
– No assumption has currently been made regarding lease renewal other than where there is a contractual obligation to renew.
• Tax
– A large deferred tax asset is expected to arise originating from the brought forward debit in the profit and loss reserves. This is
realisable as contracts unwind since the final contractual position is net nil once expired.
– In terms of tax cash flow, B&M Retail’s initial brought forward debit will unwind over the average length of lease to which it relates,
whilst it is tax neutral elsewhere as no other local accounts will adopt it.
114
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Effect on the financial statements
Under the current assumptions and with the caveats outlined above, the Group’s estimated right of use assets would be in the region of
£1.0bn and our lease liability in the region of £1.1bn as at 30 March 2019.
The rental charge going through operational costs at present will be excluded and replaced by the amortisation of the right of use asset and
an interest charge on the unwinding of the lease liability.
This means that profit before interest and tax will be higher than currently reported, as will EBITDA (see note 3). Profit before tax could either
increase or decrease, although with a typically young lease estate the overall effect will be to reduce profit, as reflected below.
Recognised Balances
Amortisation on right-of-use lease assets
Interest charge on lease liabilities
Derecognised Balances
Rental charge
Net effects
Net credit to Profit before interest and taxation
Net debit to Profit before tax
Net credit to EBITDA (see note 3)
52 weeks to
30 March
2019
£’m
126
55
181
167
41
14
167
Over the full life of each individual lease the full profit or loss impact is the same under both the old and new accounting standards.
Cash flow in relation to rent is no longer considered to be an operational cash flow, and the relevant cash flows will be reclassified to financing
activities and split between capital and interest.
Sensitivity of the discount rate
Where a leased asset does not have a known implicit rate of interest (as in most cases) the discount rate is a calculated using the marginal
rate of borrowing available to the company for a similar asset over a similar timescale.
This is a calculation based on several inputs, including the start date, the underlying cost of borrowing of the company, length of the lease, the
type of location in which a store is located and geography.
Whilst these inputs are not judgmental in themselves, how they impact on the discount rate selected is a matter of significant management
judgment, and as such the calculation is sensitive to this process.
The below table shows the effects based upon a 50bps movement to the discount rate across the estate of assets which do not have an
known implicit rate;
Debits shown as positive
Amortisation charge
Interest charge
Right-of-use asset
Lease liability
+50bps
£’m
-50bps
£’m
(3)
4
(24)
23
3
(4)
30
(28)
B&M European Value Retail S.A. Annual Report and Accounts 2019
115
Page Title at start:Content Section at start: Notes to the consolidated financial statements continued
32 Post balance sheet events
There have been no material events between the balance sheet date and the date of issue of these accounts.
33 Dividends
An interim dividend of 2.7 pence per share (£27.0m) was paid in December 2018
A final dividend of 4.9 pence per share (£49.0m), giving a full year dividend of 7.6 pence per share (£76.0m), is proposed
Relating to the prior year:
An interim dividend of 2.4 pence per share (£24.0m) was paid in December 2017.
A final dividend of 4.8 pence per share (£48.0m), giving a full year dividend of 7.2 pence per share (£72.0m), was paid in August 2018.
34 Contingent liabilities and guarantees
As at 31 March 2019 and 30 March 2018, B&M European Value Retail S.A., B&M European Value Retail 1 S.à r.l., B&M European Value
Retail 2 S.à r.l., B&M European Value Retail Holdco 1 Ltd, B&M European Value Retail Holdco 2 Ltd, B&M European Value Retail Holdco 3 Ltd,
B&M European Value Retail Holdco 4 Ltd, EV Retail Ltd and B&M Retail Ltd are all guarantors to both the loan and notes agreements which are
formally held within B&M European Value Retail SA. The amounts outstanding as at the period end were £419m for the loans (2018: £345m),
with the balance held in B&M European Value Retail Holdco 4 Ltd, and £250m (2018: £250m) for the notes, with the balance held in B&M
European Value Retail S.A.
As at 31 March 2018 and 30 March 2019, Heron Food Group Limited and Heron Foods Ltd are guarantors to the loans which are formally held
within Heron Foods Ltd. The amount outstanding at the year end was £13m (2018: £16m) with the balance held in Heron Foods Ltd.
35 Directors
The directors that served during the period were:
Name
Peter Bamford
S Arora (CEO)
P McDonald (CFO)
T Hübner (see note below)
R McMillan
K Guion
H Brouwer (retired 14 November 2018)
T Hall (appointed 18 September 2018)
C Bradley (appointed 15 November 2018)
All directors served for the whole period except where indicated above.
As announced on 7 February 2019, Thomas Hübner retired from the board on 1 May 2019.
116
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Independent auditor’s report
Strategic Report
Corporate Governance
Financial Statements
Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
Report of the Réviseur d’Entreprises agréé
Report on the audit of the annual accounts
Opinion
We have audited the annual accounts of B&M European Value Retail
S.A. (the “Company”), which comprise the balance sheet as at
31 March 2019, and the profit and loss account for the year then
ended, and the notes to the annual accounts, including a summary
of significant accounting policies.
Other information
The Board of Directors is responsible for the other information. The
other information comprises the information stated in the annual
report including the management report and the Corporate
Governance Statement but does not include the annual accounts
and our report of “Réviseur d’Entreprises agréé” thereon.
In our opinion, the accompanying annual accounts give a true and
fair view of the financial position of the Company as at 31 March 2019,
and of the results of its operations for the year then ended in
accordance with Luxembourg legal and regulatory requirements
relating to the preparation and presentation of the annual accounts.
Basis for Opinion
We conducted our audit in accordance with the EU Regulation N°
537/2014, the Law of 23 July 2016 on the audit profession (“Law of
23 July 2016”) and with International Standards on Auditing (“ISAs”) as
adopted for Luxembourg by the “Commission de Surveillance du
Secteur Financier” (“CSSF”). Our responsibilities under those
Regulation, Law and standards are further described in the
Responsibilities of the Réviseur d’Entreprises agréé for the audit of the
annual accounts section of our report. We are also independent of the
Company in accordance with the International Ethics Standards Board
for Accountants’ Code of Ethics for Professional Accountants (“IESBA
Code”) as adopted for Luxembourg by the CSSF together with the
ethical requirements that are relevant to our audit of the annual
accounts, and have fulfilled our other ethical responsibilities under
those ethical requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the annual
accounts of the current period. These matters were addressed in the
context of the audit of the annual accounts as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
We have determined that there are no key audit matters to
communicate in our report.
Our opinion on the annual accounts does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the annual accounts, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the annual accounts
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information we are required to report this fact. We have nothing to
report in this regard.
Responsibilities of the Board of Directors for the
annual accounts
The Board of Directors is responsible for the preparation and fair
presentation of the annual accounts in accordance with Luxembourg
legal and regulatory requirements relating to the preparation and
presentation 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.
In preparing the annual accounts, the Board of Directors is
responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Board of Directors either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for assessing the
Company’s financial reporting process.
B&M European Value Retail S.A. Annual Report and Accounts 2019
117
Page Title at start:Content Section at start: Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
continued
Responsibilities of the Réviseur d’Entreprises agréé for the
audit of the annual accounts
The objectives of our audit are to obtain reasonable assurance about
whether the annual accounts as a whole are free from material
misstatement, whether due to fraud or error, and to issue a report of
“Réviseur d’Entreprises agréé” that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the EU Regulation N° 537/2014,
the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by
the CSSF will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these annual accounts.
As part of an audit in accordance with the EU Regulation N° 537/2014,
the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by
the CSSF, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
identify and assess the risks of material misstatement of the
annual accounts, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control;
• obtain an understanding of internal control relevant to the audit 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 Company’s internal control;
• evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the Board of Directors;
• conclude on the appropriateness of Board of Directors’ use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw
attention in our report of “Réviseur d’Entreprises agréé” to the
related disclosures in the annual accounts or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our report of
“Réviseur d’Entreprises agréé”. However, future events or
conditions may cause the Company to cease to continue as a
going concern;
• evaluate the overall presentation, structure and content of the
annual accounts, including the disclosures, and whether the
annual accounts represent the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the annual accounts of the current period
and are therefore the key audit matters. We describe these matters in
our report unless law or regulation precludes public disclosure about
the matter.
Report on other legal and regulatory requirements
We have been appointed as “Réviseur d’Entreprises agréé” by the
General Meeting of the Shareholders on 30 July 2018 and the duration
of our uninterrupted engagement, including previous renewals and
reappointments, is 3 years.
The management report on pages 62 to 66 of the Annual Report is
consistent with the annual accounts and has been prepared in
accordance with applicable legal requirements.
The accompanying Corporate Governance Statement is presented on
pages 40 to 47 of the Annual Report. The information required by
Article 68ter paragraph (1) letters c) and d) of the law of 19 December
2002 on the commercial and companies register and on the
accounting records and annual accounts of undertakings, as
amended, is consistent with the annual accounts and has been
prepared in accordance with applicable legal requirements.
We confirm that the audit opinion is consistent with the additional
report to the audit committee or equivalent.
We confirm that the prohibited non-audit services referred to in the
EU Regulation No 537/2014, on the audit profession were not provided
and that we remain independent of the Company in conducting
the audit.
Other matter
The Corporate Governance Statement includes information required
by Article 68ter paragraph (1) points a), b), e), f) and g) of the law of
19 December 2002 on the commercial and companies register and
on the accounting records and annual accounts of undertakings, as
amended.
Luxembourg, 22 May 2019
KPMG Luxembourg
Société coopérative
Cabinet de révision agréé
Thierry Ravasio
118
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Company balance sheet
As at 31 March 2019
ASSETS
FIXED ASSETS
Tangible assets
Other fixtures and fittings, tools and equipment
Financial assets
Shares in affiliated undertakings
CURRENT ASSETS
Debtors
Amounts owed by affiliated undertakings
becoming due and payable within one year
Other debtors
becoming due and payable within one year
Cash at bank and in hand
TOTAL ASSETS
CAPITAL, RESERVES AND LIABILITIES
CAPITAL AND RESERVES
Subscribed capital
Share premium account
Reserves
Legal reserve
Profit or loss for the financial year
Profit or loss brought forward
Interim dividends
Total capital and reserves
CREDITORS
Debenture loans
Non-convertible loans
becoming due and payable within one year
becoming due and payable after more than one year
Trade creditors
becoming due and payable within one year
Amounts owed to affiliated undertakings
becoming due and payable within one year
Other creditors
Tax authorities
Social security authorities
Other creditors
becoming due and payable within one year
TOTAL CAPITAL, RESERVES AND LIABILITIES
The accompanying notes form an integral part of these annual accounts.
Company balance sheet
Notes
31 March 2019
GBP
31 March 2018
GBP
3
4
5
6
7
–
8,262
2,624,999,999
2,624,999,999
2,624,999,999
2,625,008,261
301,620,884
302,080,659
334,909
199,330
301,955,794
302,279,989
41,301
42,647
2,926,997,095
2,927,330,897
31 March 2019
GBP
31 March 2018
GBP
100,056,122
2,473,745,635
100,056,122
2,473,745,635
10,010,000
74,156,816
42,401,722
(27,015,153)
10,000,000
76,538,619
37,913,334
(24,013,293)
2,673,355,142
2,674,240,417
1,718,750
250,000,000
1,718,750
250,000,000
251,718,750
251,718,750
143,299
120,869
1,706,997
1,163,957
20,176
–
25,929
–
52,730
60,975
1,923,202
1,371,730
2,926,997,095
2,927,330,897
B&M European Value Retail S.A. Annual Report and Accounts 2019
119
Page Title at start:Content Section at start:
Company profit and loss
account
Notes
8
9
10
11
12
13
14
14
31 March 2019
GBP
31 March 2018
GBP
(1,179,071)
(1,001,579)
(347,082)
(226,304)
(21,546)
(12,482)
(2,951)
(732,424)
(16,769)
(9,810)
(3,541)
(551,327)
76,000,000
78,000,000
10,725,046
94,792
10,829,043
33,106
(10,363,335)
–
74,160,948
(4,133)
(10,382,568)
(7,305)
76,662,946
(124,327)
74,156,816
76,538,619
Company profit and loss account
for the financial year ended 31 March 2019
Raw materials and consumables and other external expenses
Other external expenses
Staff costs
Wages and salaries
Social security costs
relating to pensions
other social security costs
Value adjustments
In respect of formation expenses and of tangible and intangible assets
Other operating expenses
Income from participating interests
Derived from affiliated undertakings
Other interest receivable and similar income
Derived from affiliated undertakings
Other interest and similar income
Interest payable and similar expenses
Other interest and similar expenses
Tax on profit or loss
Profit or loss after taxation
Other taxes not included in the previous caption
Profit or loss for the financial year
The accompanying notes form an integral part of these annual accounts.
120
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Notes to the annual accounts
Strategic Report
Corporate Governance
Financial Statements
Notes to the annual accounts
for the financial year ended 31 March 2019
Note 1 – General information
B&M European Value Retail S.A., hereinafter the “Company”, was incorporated on 19 May 2014 as a “société anonyme” for an unlimited period.
The Company is organised under the laws of Luxembourg, in particular the law of 10 August 1915 on commercial companies, as amended. An
Extraordinary General Meeting of Shareholders was held on 30 July 2018 to update the “Articles of Association” (the “Articles”) further to the
changes brought to the law of 10 August 1915 on commercial companies by the law of 10 August 2016 on the modernisation on the law of
commercial companies.
The registered office of the Company is established in Luxembourg City and is registered with the Luxembourg Trade and Companies register
in Luxembourg under number B 187 275.
The financial year starts on 1 April 2018 and ends on 31 March 2019.
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 acquire (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 also prepares consolidated financial statements, which are published according to the provisions of the law.
The Company is registered with the Luxembourg Stock Exchange and as such subject to the supervision of the CSSF (Commission de
Surveillance du Secteur Financier) and its shares are listed on the premium listing segment of the London Stock Exchange under the
symbol “BME”.
Note 2 – Summary of significant accounting policies and valuation methods
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 19 December 2002, as subsequently
amended (the “Law”), determined and applied by the directors of the Company (the “Board of Directors”).
These accounts have been prepared on a going concern basis.
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 and valuation methods
The main accounting policies and valuation rules applied by the Company are the following:
Tangible assets
Tangible assets are valued at purchase price including the expenses incidental thereto. Tangible assets are depreciated over their estimated
useful economic lives.
The depreciation rates and methods applied are as follows:
Company vehicle
Rate of
depreciation
Depreciation
method
20.00% Straight line
Where the Company considers that a tangible asset has suffered a durable depreciation in value, an additional write-down is recorded in
order to reflect this loss. These value adjustments are not continued if the reasons for which they were made have ceased to apply.
B&M European Value Retail S.A. Annual Report and Accounts 2019
121
Page Title at start:Content Section at start: Notes to the annual accounts continued
for the financial year ended 31 March 2019
Financial assets
Shares in affiliated undertaking 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 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 they 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.
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.
Other assets and liabilities are translated separately respectively at the lower or at the higher of the value converted at the historical
exchange rate or the value determined on the basis of the exchange rates effective at the balance sheet date. The realised and unrealised
exchange losses are recorded in the profit and loss account. The exchange gains are recorded in the profit and loss account at the moment of
their realisation.
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.
Provision for taxation
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 authorities”. The advance payments are shown in the assets of the balance sheet under the
caption “Other debtors”, if applicable.
Creditors
Creditors are stated as their reimbursement 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.
Issuance costs
Issuance costs are expensed through the profit and loss account at the time that they are incurred. This is considered to be the date on which
the relevant issuance is legally performed.
Note 3 – Financial assets
The undertaking in which the Company holds interests in its share capital is as follows:
Undertaking's name
B&M EVR 1*
Registered office
Luxembourg
*
B&M EVR 1 refers to B&M European Value Retail 1 S.à.r.l.
Net equity
as at
Net result for the
financial year ended
Percentage of
holding
31 March 2019
GBP
31 March 2019
GBP
Net book value
as at
31 March 2019
GBP
100%
646,871,429
76,033,355
2,624,999,999
As at the balance sheet date, the Board of Directors assessed the valuation of the underlying operations and concluded that no value
adjustment is deemed necessary on the investment.
The B&M EVR 1 accounts have yet to be approved by their Directors.
In March 2019 an interim dividend of 76m GBP was declared by B&M EVR 1 (booked as dividend receivable as at 31 March 2019,
see also note 4).
122
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start:
Strategic Report
Corporate Governance
Financial 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 Holdco 4")
B&M European Value Retail 2 S.à.r.l. ("B&M EVR 2")
B&M EVR 1 – Dividend receivable (Note 11)
Total
March 2019
GBP
March 2018
GBP
225,620,884
–
76,000,000
247,080,641
18
55,000,000
301,620,884
302,080,659
The amounts owed by B&M Holdco 4 are interest bearing (Note 12) and payable on demand. The amounts owed by B&M EVR 1 & 2 are
non-interest bearing and payable on demand. Where interest is calculated it has been done on an arm’s length basis.
Note 5 – Other debtors
becoming due and payable within one year:
Prepaid VAT
Prepaid income and net wealth taxes
Other advances
Total
March 2019
GBP
March 2018
GBP
282,500
3,195
49,214
334,909
158,998
–
40,332
199,330
Note 6 – Capital and reserves
Subscribed capital and share premium account
As 31 March 2019, the share capital is set at GBP 100,056,122.20 divided into 1,000,561,222 ordinary shares with a nominal value of GBP 0.10
each and the un-issued but authorised share capital is set at GBP 297,222,222.20. The Company’s share capital is represented by only one
class of (ordinary) shares.
During the prior financial year, share options reported under the annual accounts as at 31 March 2017 as off balance sheet commitments have
been exercised and the Board of Directors acting on the basis of article 5.2 of the Articles and within the frame of the authorised share capital
clause, issued in aggregate, 561,222 new ordinary shares of 10 pence each in relation to share options exercised by employees and directors
of the Group. The Articles have been updated accordingly. No share options have been exercised during the current financial year.
Movements for the period on the reserves and profit/loss captions are as follows:
Share premium and
similar premiums
GBP
Legal
reserve
GBP
Profit or loss
brought
forward
GBP
Profit for the
financial
period
GBP
Interim
dividends
GBP
Total
GBP
As at the beginning of the financial
year
Allocation of prior period's result
Allocation of legal reserve
Proceeds rec. from share options
Allocation of dividends
Final dividend
Interim dividends
Profit for the financial year
2,473,745,635
–
–
–
–
–
–
–
10,000,000
–
10,000
–
–
–
–
–
37,913,334
76,538,619
(10,000)
–
(24,013,293)
(48,026,939)
–
–
76,538,619
(76,538,619)
–
–
–
–
–
74,156,816
(24,013,293)
–
–
–
24,013,293
–
(27,015,153)
–
2,574,184,295
–
–
–
–
(48,026,939)
(27,015,153)
74,156,816
As at the end of the financial year
2,473,745,635
10,010,000
42,401,722
74,156,816
(27,015,153)
2,573,299,019
On 12 November 2018 the Board of Directors unanimously approved the distribution of an interim dividend of 2.7p per ordinary share, being a
total aggregate distribution of GBP 27,015,153 paid by the company in December 2018.
Legal reserve
In accordance with article 710-23 of the Luxembourg company law dated 10 August 1915, as amended, the Company is 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.
B&M European Value Retail S.A. Annual Report and Accounts 2019
123
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for the financial year ended 31 March 2019
Note 7 – Creditors
Amounts due and payable for the accounts shown under “Debenture loans” are as follows:
Debenture Loans
Non convertible loans – Bonds interest
Non convertible loans – Bonds principal
Within
one year
GBP
After one year and
within five years
GBP
After more than
five years
GBP
March 2019
GBP
March 2018
GBP
1,718,750
–
–
250,000,000
1,718,750
250,000,000
–
–
–
1,718,750
250,000,000
1,718,750
250,000,000
251,718,750
251,718,750
On 2 February 2017, the Company issued GBP 250,000,000 4.125% Senior Secured Notes (herein after referred to as the “Bonds”) which are due
on 1 February 2022. Interest on the Notes is paid semi-annually in arrears on 1 February and 1 August of each year, commencing on 1 August
2017. The Bonds are listed for trading on the Euro MTF market of the Luxembourg Stock Exchange. The Euro MTF Market of the Luxembourg Stock
Exchange is not a regulated market pursuant to the provisions of Directive 2004/39/EC on markets in financial instruments. The Euro MTF
Market falls within the scope of Regulation (EC) 596/2014 on market abuse and the related Directive 2014/57/EU on criminal sanctions for
market abuse.
The Company may redeem the Bonds in whole or in part at any time on or after 1 February 2019, in each case, at the redemption prices set out
in the Offering Circular.
Additionally, the Company may redeem the Bonds in whole, but not in part, at a price equal to their principal amount plus accrued and unpaid
interest and additional amounts, if any, upon the occurrence of certain changes in applicable tax law. Upon the occurrence of certain events
constituting a change of control, the Company may be required to repurchase all or any portion of the Bonds at 101% of the principal amount
thereof, plus accrued and unpaid interest and additional amounts, if any, to the date of such repurchase.
The Bonds are senior obligations of the Company, guaranteed on a senior basis by its various affiliated companies.
Other amounts due and payable for the accounts shown under “Creditors” are as follows:
Within
one year
GBP
After one year
within five years
GBP
After more than
five years
GBP
March 2019
GBP
March 2018
GBP
Trade creditors
Suppliers
Suppliers – Invoices not yet received (Note 7.1)
Amounts owed to affiliated undertakings
B&M EVR 2
Other creditors
Tax authorities
Corporate income tax
Net wealth tax
Other taxes
Other creditors
Total
57,986
85,314
143,299
1,706,997
2,541
8,353
9,283
52,730
72,906
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,986
85,314
143,299
62,475
58,394
120,869
1,706,997
1,163,957
2,541
8,353
9,283
52,730
72,906
2,541
4,220
19,168
60,975
86,904
1,923,202
1,371,730
Note 7.1 – Suppliers-invoices not yet received balance during the financial year ended 31 March 2019 relates mostly to audit fees accrued.
124
B&M European Value Retail S.A. Annual Report and Accounts 2019
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Strategic Report
Corporate Governance
Financial Statements
Note 8 – Raw materials and consumables and other external expenses
Other external expenses
Transaction costs for bond issuance (Note 7)
Advisory and consultancy fees
Marketing, communication and travel expenses
Staff recruitment expenses
Accounting and administrative fees
Audit fees
Government regulatory fees
Stock exchange fees
Rentals
Repairs and maintenance
Others
Total
March 2019
GBP
–
94,467
265,744
137,829
196,452
111,041
79,448
119,647
49,177
10,973
114,293
March 2018
GBP
(189,680)
27,952
213,826
71,356
235,631
82,172
87,719
95,855
49,310
14,536
312,902
1,179,071
1,001,579
Note 9 – Staff costs
As at 31 March 2019, the Company employed one part time employee and two full time employees. (2018: one part time and three full time)
Note 10 – Other operating expenses
Director fees
Non-deductible VAT
Others
Total
Note 11 – Income from participating interests
Derived from affiliated undertakings:
Dividend income (Note 11.1)
Total
Note 11.1 – Dividend income relates to dividends distributed by B&M EVR 1.
Note 12 – Other interest receivable and similar income
Derived from affiliated undertakings (Note 12.1)
Interest recharge
Other interest and similar income
Realised foreign exchange gain
Other income
March 2019
GBP
590,025
141,867
532
732,424
March 2018
GBP
296,356
254,472
499
551,327
March 2019
GBP
March 2018
GBP
76,000,000
78,000,000
76,000,000
78,000,000
March 2019
GBP
March 2018
GBP
10,725,046
10,829,043
10,725,046
10,829,043
94,792
–
94,792
24,439
8,667
33,106
10,819,838
10,862,149
Note 12.1 – The Company and its UK and Luxembourg affiliates have entered into a Management Services Agreement (“MSA 1”). Included in
the provisions of this agreement was the right for the Company to charge or be charged interest on any intercompany balances held with
affiliates outside of Luxembourg (an “Interest recharge”). The basis for the interest recharge is the outstanding balance per management
accounts at the start and end of each month, and the marginal external rate of borrowing available to the Group as reviewed by management
on an at least six monthly basis.
B&M European Value Retail S.A. Annual Report and Accounts 2019
125
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Notes to the annual accounts continued
for the financial year ended 31 March 2019
Note 13 – Interest payable and similar expenses
Other interest and similar expenses:
Interest expense on bonds payable (Note 7)
Realised foreign exchange loss
Others
Total
March 2019
GBP
March 2018
GBP
10,312,500
49,596
1,239
10,283,850
98,718
–
10,363,335
10,382,568
Note 14 – Taxation
The Company is subject to the general tax regulation applicable to all Luxembourg commercial companies.
Note 15 – Off balance sheet commitments and contingencies
As at the balance sheet date, the Company has financial commitments relating to: i) share option plans; and ii) pledge agreements. The nature
and the commercial objective of the operations not disclosed on the balance sheet can be described as follows:
Note 15.1 – Share option plans
The Company operates the following 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 (CSOPs), starting (i) 1/8/14
(ii) 17/12/15 (iii) 19/8/16
(2) The B&M European Value Retail S.A. Long Term Incentive Plan 2015 (LTIP 2015).
(3) The B&M European Value Retail S.A. Long Term Incentive Plan 2016 (LTIP 2016).
(4) The B&M European Value Retail S.A. Long Term Incentive Plan 2017, split into four; (i) LTIP 2017A (ii) LTIP 2017B1 (iii) LTIP 2017B2 (iv) LTIP2018B1
(5) The B&M European Value Retail S.A. Long Term Incentive Plan 2018, split into two; (i) LTIP 2018A (ii) LTIP 2018B2
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 or based upon the consensus position of the B&M share price for the smaller awards.
Scheme
CSOP (1/8/14)
CSOP (17/12/15)
CSOP (19/8/16)
Date of Grant
Date of Vesting
Exercise Price
1 Aug 2017
1 Aug 2014
17 Dec 2015
17 Dec 2018
19 Aug 2016 19 Aug 2019
271.5p
286.0p
276.8p
Number of
options
outstanding at
31 March 2018
Number of
options granted/
(forfeited or
lapsed) in the
year
11,049
10,489
21,676
0
(10,489)
0
Fair value
of Option
GBP
0.83
0.79
0.50
Number of
options
exercised
in the year
Number of
options
outstanding at
31 March 2019
0
0
0
11,049
0
21,676
CSOP (1/18/14) has fully vested. CSOP (17/12/15) vested but was subsequently lapsed and has now completed.
LTIPs
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.
LTIP 2015, LTIP 2016, LTIP 2017A and LTIP 2018A have been separated into two tranches based upon the conditions required for vesting, as the
two tranches were calculated to have separately identifiable and different fair values. The tranches are labelled “TSR” and “EPS” as the relevant
key performance conditions are based upon total shareholder return and earnings per share. These LTIP schemes also have a holding period
of two years after the shares have vested. The other LTIP schemes do not have this feature.
The LTIP 2018 schemes and all subsequent LTIP schemes awarded, except LTIP 2018B1 have additional options granted to holders for each
dividend paid by the company whilst the options are held. These dividend grants are equivalent to the amount of new shares they could have
bought with the dividend that would have been due to them had they held the actual shares.
126
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Strategic Report
Corporate Governance
Financial Statements
LTIPs continued
The options were valued using a monte carlo method.
Date of Grant
Date of
Vesting
Exercise
Price
Fair value of
Option
GBP
Number of
options
outstanding at
31 March 2018
5 Aug 2018
5 Aug 2015
5 Aug 2015
5 Aug 2018
18 Aug 2016 18 Aug 2019
18 Aug 2016 18 Aug 2019
7 Aug 2020
7 Aug 2017
7 Aug 2020
7 Aug 2017
22 Aug 2018 22 Aug 2021
22 Aug 2018 22 Aug 2021
7 Aug 2017
7 Aug 2020
14 Aug 2017 14 Aug 2020
23 Jan 2018
23 Jan 2021
20 Aug 2018 20 Aug 2021
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
3.41
2.10
2.54
1.64
3.51
2.72
4.09
2.40
3.61
3.60
4.00
4.06
40,616
40,616
122,386
122,386
40,610
40,610
0
0
271,891
101,654
19,264
0
Number of
options
Granted/
(forfeited or
lapsed) in the
year
(9,139)
0
0
0
0
0
226,673
226,673
(8,036)
(8,025)
(2,408)
227,304
Number of
options
exercised in the
year
Number of
options
outstanding at
31 March 2019
0
0
0
0
0
0
0
0
0
0
0
0
31,477
40,616
122,386
122,386
40,610
40,610
226,673
226,673
263,855
93,629
16,856
227,304
Scheme/Tranche
LTIP 2015/EPS
LTIP 2015/TSR
LTIP 2016/EPS
LTIP 2016/TSR
LTIP 2017A/EPS
LTIP 2017A/TSR
LTIP 2018A/EPS
LTIP 2018A/TSR
LTIP 2017B1
LTIP 2017B2
LTIP 2018B1
LTIP 2018B2
The LTIP 2015 awards have vested and are in a holding period.
Assumptions
The fair valuing exercise uses several assumptions, including those given in the table below.
Scheme/Tranche
CSOP (1/8/14)
CSOP (17/12/15)
CSOP (19/8/16)
LTIP 2015/EPS
LTIP 2015/TSR
LTIP 2016/EPS
LTIP 2016/TSR
LTIP 2017A/EPS
LTIP 2017A/TSR
LTIP 2018A/EPS
LTIP 2018A/TSR
LTIP 2017B1
LTIP 2017B2
LTIP2018B1
LTIP2018B2
Risk-free
rate
Expected Life
(years)
Volatility Dividend Yield
Consensus
(pence)
2.23%
N/A
N/A
0.92%
0.92%
0.09%
0.09%
0.52%
0.52%
0.97%
0.97%
0.25%
0.25%
0.25%
0.25%
6.5
3
3
5
5
5
5
5
5
5
5
3
3
3
3
N/A
N/A
N/A
24%
24%
26%
26%
32%
32%
29%
29%
32%
32%
32%
30%
0%
N/A
N/A
1%
1%
2%
2%
1%
1%
0%
0%
1%
1%
1%
0%
N/A
362.1
326.8
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
In accordance with Luxembourg GAAP, as long as the option holders have not exercised their rights, the related amounts are reported as off
balance sheet commitments.
Note 15.2 – Pledge agreements
Pursuant to a share pledge agreement dated (and effective as of) 02 February 2017, all shares and related assets owned from time to time in
B&M EVR 1 by the Company and, in particular, the 198,916,673 shares owned as of 31 March 2019 and including any shares acquired by the
Company in the future and related assets, have been pledged in favour of Deutsche Bank AG, London Branch, as security agent, acting for
itself and as security agent for and on behalf of the Secured Parties, in relation of the issuance of the Bonds (Note 7).
B&M European Value Retail S.A. Annual Report and Accounts 2019
127
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for the financial year ended 31 March 2019
Note 16 – Directors’ Emoluments
Director fees payable to the Independent Non-Executive Directors of the Company are paid in GBP on a quarterly basis (by reference to the civil
year) and subject to withholding tax in Luxembourg at the rate of 20%.
The contractual emoluments granted to the members of the administrative managerial and supervisory bodies in that capacity are as follows:
Director fees paid to the non-executive directors’ of the Group
March 2019
GBP
March 2018
GBP
534,432
297,500
534,432
297,500
There were no obligations arising or entered into in respect of retirement pensions for former members of those bodies for the financial year.
There were no advances or loans granted during the financial year to the members of those bodies.
There are no pension obligations to members of those bodies.
There are no guarantees or direct substitutes granted or given of the members of those bodies
Note that the executive directors are remunerated through other Group companies.
Note 17 – 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 22 May 2019 and signed on its behalf by:
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
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Strategic Report
Corporate Governance
Financial Statements
General information
Registered Office & Company Number
B&M European Value Retail S.A.
9, Allée Scheffer
L-2520 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
Tel: +352 246 130 207
www.bandmretail.com
Share Registrar
(Shareholders)
Link Corporate Services S.A.
9, Allée Scheffer
L-2520 Luxembourg
Grand-Duchy of Luxembourg
Tel: +352 440 929
Email: enquiries@linkgroup.co.uk
www.linkassetservices.com
Depositary Interests Registrar
(Depositary Interest holders)
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
Email: custodymgt@linkgroup.co.uk
Listing
Ordinary shares of B&M European Value Retail S.A. are listed with a
premium listing on the London Stock Exchange.
Auditor
KPMG Luxembourg Société Coopérative
39, Avenue John F. Kennedy
L-1855 Luxembourg
Tel: +352 22 51 51 1
www.kpmg.com/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
B&M European Value Retail S.A. Annual Report and Accounts 2019
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130
B&M European Value Retail S.A. Annual Report and Accounts 2019
Page Title at start:Content Section at start: Strategic Report
Corporate Governance
Financial Statements
Notes
B&M European Value Retail S.A. Annual Report and Accounts 2019
131
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132
B&M European Value Retail S.A. Annual Report and Accounts 2019
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©2019. All rights reserved. B&M and
the B&M logo are registered
trademarks
B&M European Value Retail S.A.
9, Allée Scheffer
L-2520 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
www.bandmretail.com