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BIG BRANDS, BIG SAVINGS
Great products
and great value
all year round
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Our purpose
Delivering great value to our
customers so that they keep
returning to our stores
time and time again
Our values
Simplicity
Proud to keep our
business simple
and fun, and work
at B&M speed
Trust
Proud to trust honesty,
loyalty and hard work
Fairness
Proud to act fairly and
responsibly with
customers, colleagues
and suppliers
Proud
Proud to treat every £1
as our own and provide
customers with great
value for money
See page 5 for more information
Strategic Report
Contents
Strategic Report
Highlights
Company overview
Chairman’s statement
Market overview
Business model
Long-term strategy
Chief Executive Officer’s review
Feature: Garden Centres
Financial review
Key performance indicators
Principal risks and uncertainties
Corporate social responsibility
Section 172 statement and stakeholders
Corporate Governance
Board of Directors
Corporate governance report
Audit & Risk Committee report
Directors’ remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
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 profit and loss account
Company balance sheet
Notes to the annual accounts
Corporate directory
1
2
4
6
8
10
12
16
18
22
24
33
42
46
48
57
62
75
80
81
86
87
88
89
90
139
141
142
143
152
Highlights
Financial highlights1
Group revenues
Cash generated from operations
£3,813.4m
+16.5%
2019: £3,272.6m
£532.6m
+25.9%
2019: £423.0m
Diluted earnings per share from
continuing operations
19.5p
+0.0%
2019: 19.5p
Profit before tax
£252.0m
+3.2%
2019: £244.3m
Adjusted EBITDA2
£342.3m
+7.1%
2019: £319.6m
UK and France store estates
B&M stores
Heron Food stores
+5.8%
• 36 net new B&M stores opened in FY20,
growing the estate by 5.8% to 656 stores
in the UK.
+4.3%
• 12 net new Heron Foods stores opened
in FY20, growing the estate by 4.3% to
293 stores in the UK.
• Good pipeline of new stores and on
track to achieve about 30 net new
UK store openings in FY21. Most of the
openings will be in the second half
of FY21.
• Good pipeline of new stores and on
track to achieve about 15 net new UK
store openings in FY21. Most of the
openings will be in the second half
of FY21.
Babou stores
+5.2%
• 5 net new Babou stores opened in
FY20. Total stores in France 101.
Notes
1.
Each of the figures included in the financial highlights are for the continuing operations of the Group as at the end of financial year on 28 March 2020, following the sale of
Jawoll having been completed prior to the year-end. The figures for the prior year ended 30 March 2019 exclude Jawoll, to provide a comparable basis with those for the
continuing operations as at 28 March 2020.
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. Adjusted EBITDA is a non-IFRS measure and therefore we provide a reconciliation from the statement of comprehensive
income. Adjusting items are the effects of derivatives, one off refinancing fees, foreign exchange on the translation of inter-company balances and the effects of revaluing or
unwinding balances related to the acquisition of subsidiaries. Significant project costs or gains or losses arising from unusual circumstances or transactions may also be
included if incurred, such as this year with the gain on the sale and leaseback of the Bedford warehouse and the direct loss incurred at Babou due to the closure of their stores
during the pandemic. The Babou stores closed under the French Covid-19 restrictions from 15 March 2020 until 11 May 2020. Babou incurred an EBITDA loss of £2.946m in the
part of the period when they were closed to 28 March 2020. A stock provision of £6.369m has also been made relating to losses we are likely to incur on discount seasonal
stock not sold during the closed period to sell it through in the rest of the Spring and Summer season. They have both been included as adjusting items as they arose as
a result of the Covid-19 restrictions. See the reconciliation of adjusted measures to statutory measures on page 19 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 28 March 2020, and
the comparable figures for the previous year are for the 52 week period ended 30 March 2019.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
1
FSGOV Strategic Report
Company overview
At our value retail stores we
sell a limited assortment of
the best-selling products in
food, grocery and general
merchandise ranges at
compelling prices.
We have a variety of store formats including:
• B&M Bargain Stores both in and out of town centres;
• B&M Homestores in retail parks, many of
which also have B&M garden centres;
• Heron Foods Convenience Stores on local
shopping parades and precincts;
• Babou Stores in retail parks and towns.
Our direct sourcing and simple low cost approach means that
we can constantly provide our customers with great bargains
throughout our grocery and general merchandise ranges all
year round. Our limited assortment model means that within
each of our product categories we can continually refresh and
regularly introduce new products, and seasonally adjust our
lines to suit changes in demand and the tastes of our
customers.
2
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Revenue by fascia
£3,813.4m
B&M
Heron Foods
Babou
£3,140.1m
£389.9m
£283.4m
Adjusted EBITDA1
£342.3m
B&M
Heron Foods
Babou
£319.8m
£25.5m
£(3.0)m
Notes
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.
Our brands
In our B&M, Heron Foods and Babou stores we
provide customers with a limited assortment within
each of our product ranges so they can access
best-selling items at value retail prices. Our products
are mainly sourced direct from manufacturers and
leading brand household names.
Number of employees2
Number of employees
28,998
4,915
Number of stores
Number of stores
656
293
Number of employees3
194
Number of stores
101
Notes
2. B&M includes the corporate segment.
3. Babou’s store colleagues are not
employees of Babou. They are direct
employees of the Manager of each store.
Strategic Report
Why invest in B&M
1
2
3
4
5
Market position
B&M is the fastest growing general merchandise
value retailer in a structurally growing sector in
the UK with 656 stores. We are growing our
value convenience stores since our acquisition
of Heron Foods in 2017, which now has 293
convenience stores.
See page 6 for more information
Business model
B&M has a unique, disruptive business model
with its limited assortment, direct sourcing and
simple low cost approach. This is a distinctive
retail proposition which resonates well with
customers by providing them with bargains on
everyday household general merchandise and
leading brand grocery products at our stores.
See page 8 for more information
Financial returns
B&M has a strong financial track record with
rapid growth, high returns, and being strongly
cash generative. Over the period since IPO in
June 2014 to 31 March 2020 our Group has
generated a total shareholder return of
over 22.7%.
See page 18 for more information
Growth opportunity
Each new B&M store we open continues to
produce excellent returns and, with a target of at
least 950 stores in the UK, there is substantial
scope for further expansion in our core business.
Heron Foods has given the Group a platform for
growth in the value convenience sector and we
are developing the model for realising the
significant potential which exists in the French
market in the longer term.
See page 14 for more information
Well-invested infrastructure
This year we have added a new purpose built
1 million square foot Distribution Centre in
Bedford to B&M’s UK warehouse estate, which
is fully operational. This provides significant
extra capacity for serving our store roll-out
programmes in the Midlands and Southern
regions of the UK for several years ahead of us,
in addition to the substantial warehouse estate
which we operate from in the North West of
the UK.
See page 10 for more information
B&M European Value Retail S.A.
Annual Report and Accounts 2020
3
FSGOV Strategic Report
Chairman’s statement
It has been a year of solid
progress in the UK, challenges
in Germany, and development
of our proposition in France.
Peter Bamford
Chairman
The external events of the last few months have
been unprecedented and the ramifications of the
coronavirus for society, commercial activity and
many other aspects of life are likely to be felt for
some time. My annual update for shareholders is
a review of a year which finished as those events
were only just emerging. Clearly, the markets in
which we operate have changed as a result of
COVID-19 and will continue to be both uncertain
and changing in the coming year.
B&M in its own modest way has tried its best to do its bit in the present
circumstances. Many thousands of our B&M colleagues across the UK
in hundreds of stores, our distribution centres and support offices have
worked tirelessly to keep our customers supplied with the things they
need, particularly during the lockdown period. Their hard work and
desire to keep supplies moving to stores and our shelves filled for
customers, was a remarkable and inspiring effort. On behalf of the Board
I would like to express the Board’s sincere thanks and appreciation.
Overall, the last financial year was one of continued progress for B&M
as a Group, though not without its challenges.
In the UK, B&M and Heron Foods continued to grow in line with our
plans and made solid progress, driven in part by the success of the new
store programmes and the strength of their customer propositions. This
was in spite of a slow December trading period, with some retailers
appearing to have seen customers starting their main Christmas
shopping later last year.
In France a pilot group of stores were brought closer to the B&M model
in early 2020 through re-branding, re-formatting and changes to their
product mix. However the results of that pilot test group of stores have
unfortunately been interrupted by the closure of all the stores during
the Covid-19 lockdown period in France. Our French business still has a
much smaller exposure to essential goods such as food, groceries and
cleaning products than B&M in the UK. There is still much work that
remains to be done in France to develop and refine the model before
it will be ready to be rolled-out across the rest of the store estate. While
the progress made so far in France is welcome, it is still early days.
During the year we conducted a comprehensive strategic review of the
German business and concluded that there was no realistic prospect
in the short term of a turnaround of its performance. We were able to
secure a sale of our interest in the business before the year-end to a
private equity-led buyer consortium. It was not without cost though with
the Group ultimately waiving a significant portion of debt owed by Jawoll
to it, in order to achieve a sale of the business. It was however clearly
in the best interest of our stakeholders for us to have found a way that
released us from the prospect of yet further heavy losses, and at the
same time, preserving as much of that business as possible as a going
concern for the benefit of its employees and other stakeholders. The exit
from Jawoll will now allow both the executive team and the Board to
focus more of our energies on France in seeking to progress our
international ambitions.
4
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
We are proud
The vision, purpose and culture of
our business is underpinned by our
values of simplicity, trust, fairness
and taking pride in everything we do.
Proud to treat
every £1 as
our own and
provide
customers
with great
value for
money
P
r
o
u
d
Proud to keep our
business simple
and fun, and work
at B&M speed
i m plicity
S
PROUD
T
r
u
s
t
Proud to
trust honesty,
loyalty and
hard work
Fairn e s
s
Proud to act fairly and
responsibly with
customers, colleagues
and suppliers
Those values are also reflected in how we strive to do
the best we can for the benefit of all our customers,
colleagues, suppliers and investors, and the
communities we operate in.
See pages 33 to 41 for more information
B&M European Value Retail S.A.
Annual Report and Accounts 2020
5
The success of B&M’s form of retailing in the UK has been based as
much on our culture and values (see opposite) as on our business
model. Our vision is to grow our business in the UK to at least 950
stores, and to successfully deploy our direct sourcing limited
assortment business model in France to then grow that business.
Looking ahead, maintaining our culture and values will remain just as
important to our success in achieving our long term strategic goals,
which are explored in more detail on pages 10 and 11 of this report.
Along with our strategic progress we have also continued to develop
our corporate governance policies and practice in line with the
changes under the revised UK Corporate Governance Code 2018.
Details of the progress we have made during the year are contained in
my report on pages 48 to 56 below. Our report on pages 42 to 45 also
sets out details of our stakeholders and how we have considered their
interests in key decisions taken by the Board during the year.
The Board has also continued to evolve and develop. Following the
Non-Executive Director changes last year, Gilles Petit was appointed
to the Board as a Non-Executive Director with significant European
retailing credentials. In addition, we have made progress during the
year in the search for a Chief Financial Officer in succession to Paul
McDonald who is to retire in 2021. Alex Russo has agreed to take on
that role, with a start date of no later than June 2021. Alex has held UK
and International senior executive roles with retailers including Asda,
Tesco and Kingfisher. He is currently the Group Finance Director of
Wilko. Kathleen Guion who had been a Non-Executive Director and
Chair of the Remuneration Committee since May 2014 retired from
the Board in January 2020. I would like to thank her for the huge
contribution she made in helping steer B&M through the process of
becoming a large public company following the IPO.
Finally, I would like to thank our shareholders for their continuing
support and, once again, everyone in B&M for their hard work over
the whole year as well as their exceptional efforts in recent months.
The year ahead will no doubt pose many challenges but also
opportunities. We will do our utmost to give our customers what they
both want and need as the trading environment continues to evolve.
Peter Bamford
Chairman
10 June 2020
FSGOV
Strategic Report
Market overview
Our overall market share is small compared with specialist merchandise and
grocery retailers, which means we have opportunities for continued growth
ahead of us in each of the store fascia businesses in our Group.
General trends
The shift in UK retailing towards serving much more value conscious consumers over
the last decade is now an established part of the market for grocery and general
merchandise goods in the UK and France.
This pattern of consumer behaviour is both relevant to non-discretionary and discretionary spending.
We believe the flight to value will continue for the foreseeable future, with consumers either needing or wanting to save money.
B&M’s value-retailing model is designed to meet those requirements throughout its offering of grocery and general merchandise
consumer goods.
Convenience store shopping, which provides consumers with easy local access to everyday items is also an important part of the
UK market. Through our convenience store chain, Heron Foods, we are also able to take advantage of this opportunity.
Territories and store estates
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 approximately 1%. We believe that a store target of 950 B&M fascia
stores overall in the UK is achievable.
France
The French retail market is the second largest in continental Europe.
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.
B&M currently has 656 stores, which leaves a long runway for growth
ahead of us for the B&M stores fascia in the UK against our store target of
at least 950 stores. We consider that target to be achievable based on
updated analysis of external consultancy research carried out in 2017.
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.
The Heron Foods chain of 293 convenience stores has the capacity
to become multiple times larger as we continue to roll it out both within
and beyond the North of England heartland where most of its stores
are located.
Babou is in the process of adopting the direct product sourcing and
limited assortment sku discipline model of B&M. It has also begun to
introduce a modest amount of food and grocery products into its
product mix and it is 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 101 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
which Babou currently has, the opportunity exists for Babou to grow its
store footprint when it has integrated the B&M model and refined it for
the French market.
1.
Figures are based on management estimates having regard to external market
research on the size of the relevant market in 2016/17.
656
B&M UK fascia stores
overall target of at least 950
See page 11 for more information
6
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Competition
In a customer insight survey externally
commissioned by B&M in 2019, B&M
scored highly in a benchmarking against
three other leading variety goods store
chains on prices, product offerings and
locations.
85% of customers from a pool of over 2,000 who were
surveyed recognised the general price gap which exists
between value retailers and the leading supermarkets
across a wide range of food, FMCG and homeware goods.
Prices remain the key differentiator notwithstanding the
price wars in recent years of supermarket chains.
The low cost business model of B&M enables us to maintain
our ability to offer the lowest prices we can to customers in
a market which includes a broad range of retailers and
competition for customers.
In relation to category specialist products, the customers
who were surveyed were continuing to focus their shopping
habits on discount retailers, and in particular hunting out
bargains in areas including Home Adornment, Kitchen and
Bathroom wares, DIY, Gardening, Pet food and Pet products,
Toys, games and stationery.
Compared with three main competitor discount retail chains
in the UK, B&M came out on top or equal first with customers
in the survey in relation to prices, offerings of well known
brands, treasure hunt buys, convenient locations and well
laid-out stores.
Brands
B&M’s business model is to provide leading
branded products at low prices 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 sourced directly from
global FMCG suppliers. Our customers are then able to benefit
from our value pricing of household brand name products
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 national and global brands.
We have continued to actively expand our offering of branded
products, for example this year in our DIY ranges, where
specialist retailers have downsized their store estates creating
more opportunities for variety goods retailers such as ourselves
to take up demand for those goods.
We will continue in a targeted way as market opportunities
continue to open-up over time to add more branded ranges in
categories where they are important to our customers.
Customer appeal
From the customer insight survey externally
commissioned in 2019 by B&M with a sample
of over 2,000 customers in the UK of B&M and
three other general merchandise discount
retail store chains, B&M’s customer repeat
shopping visits came out highest with 82%
of our customers either being regular or
occasional shoppers at our stores.
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 gives us the
opportunity to increase the
basket size of sales to customers.
Impulse buying or treasure
hunting is supported by
constantly introducing new
products in our stores.
The number of new products
introduced gives customers a
good reason to visit our stores
frequently to see what’s new.
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 all the time.
We average around 100 new
products per week predominately
within our general merchandise
categories, whilst still maintaining
the discipline of our limited
assortment model.
Last year we averaged 4.8 million
customer transactions a week
across the B&M UK store estate.
Customer repeat shopping visits
82%
B&M European Value Retail S.A.
Annual Report and Accounts 2020
7
FSGOV Strategic Report
Business model
We offer the best selling products at value prices through the application of our
limited assortment direct sourcing business model.
Business strengths
Modern store network
Our network of over 1,000
well-located and well-invested
stores in the UK and France are in
convenient locations in modern
retail parks, popular town centres
and high streets. They are located
in places close to where people
live, so it makes it easy for
customers to shop conveniently
at our stores.
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 have
recently opened an additional
Distribution Centre in Bedford in
the South of England. This provides
B&M with a further 1 million sq ft of
warehouse capacity, which became
operational in January 2020.
Strong brand reputation
The B&M and Heron Foods names
are recognised established
brands in the markets in which
we operate. Those brands have a
strong and growing reputation for
delivering consistently great value,
innovation and newness in relation
to the products people regularly
buy for their homes and families.
This keeps customers coming back
to our stores week-in and 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 over many years with
our Group businesses.
Established governance
processes & 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 team, so that the best
outcomes are achieved for all our
stakeholders in how we operate our
businesses, provide value and
manage risk appropriately.
Our business model is to source and provide customers
with a targeted food and grocery offering of leading
brand products at the best prices we can, and to directly
source the best-selling lines of general
merchandise products enabling us to
sell them at value prices.
Cost
efficiency
Format
flexibility
G
e
n
e
r
a
t
i
n
g
l
o
n
Seasonal
flex
g
ter
m growth
Underpinned by
Corporate social responsibility
Risk management
See page 33 for more information
See page 24 for more information
8
B&M European Value Retail S.A.
Annual Report and Accounts 2020
s
s
e
n
i
s
u
b
r
u
s t a in a bility of o
u
a n d s
Strategic Report
Stakeholder outputs
Service to our 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 from our product
offering all year round.
Colleague progression
Our colleagues are vital to the
delivery of our products throughout
our logistics network and helping
customers at our stores. 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. We take pride in our
businesses being innovative and
exciting places for colleagues to
work, grow and develop to their
full potential.
Suppliers as our partners
Our growth is also beneficial to our
suppliers. Many of them have
established relationships with us
over a number of years. We have
long-standing trading relationships
with a number of well-known
household name brands for food,
grocery and FMCG. We also have
a number of partners with
established supplier relationships
in relation to 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 and success of our
respective businesses.
Investing in communities
Our store opening programmes are
targeted 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 local
access to our 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.
Value and returns for Investors
Creating value for all our
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 bricks and mortar retailing.
These characteristics feed into the
sustainability of our business model
which enhances our ability to
provide continued growth and
returns to investors.
Our limited product assortment of best selling
products enables us to constantly introduce new
products and react quickly to what’s on
trend and changes in demand.
Targeted
grocery
offering
SKU
discipline
m growth
u
a n d s
G
e
n
e
r
a
t
i
n
g
l
o
n
g
ter
s
s
e
n
i
s
u
b
r
u
Compelling
non-grocery
offer
Disruptive
sourcing
process
s t a in a bility of o
Financial performance
See page 18 for more information
B&M European Value Retail S.A.
Annual Report and Accounts 2020
9
FSGOV
Strategic Report
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
% off
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
Our business model of sourcing household name branded products at everyday low prices,
has continued to demonstrate that it provides a compelling proposition to our customers.
We have continued to grow our Like-For-Like sales year on year with our food and grocery
product offering to customers (before accounting for increased demand following the on-set of
the coronavirus pandemic in the UK).
In our general merchandise ranges, by focusing on the best sellers in each category, we
compete favourably with specialist category retailers. A key area of strong growth performance
over the last year in our B&M UK business has been our Homeware ranges, following
significant improvements made in the product range in that category. Constant newness within
our ranges is also a key component of our successful performance in our general merchandise
categories overall.
There are opportunities in a number of general merchandise categories where some other
bricks and mortar retailers have downsized their store estates or exited the market altogether,
for example in Home Adornment and DIY. We have continued to target those categories, where
we see potential for further growth under our value-led model.
See page 14 for more information
In the B&M UK fascia business we opened 51 new stores in FY20, (36 net of closures and
relocations), including both existing properties and new build stores.
In our convenience store chain, Heron Foods, we opened 18 new stores, (12 net of closures and
relocations) in FY20.
Some B&M UK fascia and Heron Foods new store openings were deferred beyond the year-end
due to Covid-19 restrictions impacting property works.
In France we have opened 5 new stores. These stores were committed to before we acquired the
Babou business in October 2018.
See page 14 for more information
B&M acquired Babou in France in October 2018 with a chain of 95 stores at that time. Before
embarking on any significant store expansion programme, we have been focused on testing
the B&M model in a number of pilot stores in order to develop and refine it for the French market
before rolling it out across the rest of the store estate. We have also introduced some directly
sourced stock through the B&M supply chain and expanded the Grocery/FMCG offering of the
Babou stores. Planned reductions in clothing and textiles have also been made. The initial
results of those changes up until the onset of Covid-19 had been pleasing. The business was
however disrupted since the second week of March 2020 as a result of the stores having to be
closed until 11 May 2020 under the coronavirus restrictions in France.
See page 15 for more information
In the UK we created over 2,200 new jobs.
We successfully completed the construction phase and opening of our new 1 million sq ft UK
warehouse in Bedford, which has capacity to service at least 300 stores.
We have continued to invest in upgrading our existing store estate with expenditure of £31.3m
across the Group in maintenance capital expenditure as part of a rolling programme of
continuous investment in the Group’s store estate in FY20.
We invested in FY19 a digital Workforce Management System. We had planned to roll it out to
stores by the time of this report going to print. The roll-out was unfortunately delayed by the
on-set of Covid-19 in view of the one-to-one training required with store colleagues. We have
however successfully piloted it and the technology is ready to go live as soon as it’s safe to
implement it in relation to social distancing.
10
B&M European Value Retail S.A.
Annual Report and Accounts 2020
See page 15 for more information
UK revenue growth
+12.6%
UK like-for-like sales
growth (B&M UK)1
+3.3%
See page 18 for more information
See principal risk number 3
on page 26
UK gross new store openings
51 B&M UK
18 Heron Foods
See page 20 for more information
See principal risk numbers 1 and 13
on pages 25 and 31
France revenue growth1
+119.4%
See page 20 for more information
See principal risk numbers 1, 3 and 7
on pages 25, 26 and 29
New colleagues in the UK
+7.1%
See page 33 for more information
See principal risk numbers 1 and 3
on pages 25 and 26
Our focus remains on providing the best-selling products, including leading brands
and also heritage branded products at our stores. This has a proven track record of
strong customer appeal.
We are continuing to look to exploit opportunities in general merchandise categories
where other specialist category retailers are less price competitive and have
downsized, creating more opportunity to grow our market share.
Constant investment in refurbishing and refreshing our older stores is important to
maintain our high standards of modern, pleasant and safe shopping environments for
customers to enjoy when visiting our stores.
We expect to open 30 net new B&M UK stores in FY21 and a similar number in FY22.
Most of the FY21 new store openings will also be in the second half of that year. While
the rate of new store openings is impacted by disruption from Covid-19, our overall long
term target of at least 950 B&M stores in the UK remains unchanged.
Our Heron Foods convenience store chain expects to open 15 new stores in FY21,
subject to any impacts of disruption to building fit-out works from Covid-19.
The Covid-19 restrictions were lifted in France on 11 May 2020 and we were able to
re-open stores. The pilot stores are set-up to test the re-branding, changes to the
format and product mix in stores, to refine the model and customer proposition before
rolling it out across the whole of the store estate. The disruption caused by the
pandemic may delay that roll-out by a year.
Following completion of the construction and fit-out of our UK Southern Distribution
Centre in January 2020, we have successfully delivered the opening of the warehouse
which is now already supporting approximately 200 stores, with the capacity to service
at least a further 100 stores.
We continue to invest to ensure that we have appropriate training and processes to
attract, retain and incentivise colleagues. We have invested in strengthening the
management team and the central head office functions of each of the businesses in
the Group. During the year we successfully recruited a Group People Director in the UK
and a Distribution Director in France, and since the year-end have made or planned
other senior recruitments which are referred to on page 54 below.
Deliver great
value to our
customers
% off
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
Our business model of sourcing household name branded products at everyday low prices,
has continued to demonstrate that it provides a compelling proposition to our customers.
We have continued to grow our Like-For-Like sales year on year with our food and grocery
product offering to customers (before accounting for increased demand following the on-set of
the coronavirus pandemic in the UK).
In our general merchandise ranges, by focusing on the best sellers in each category, we
compete favourably with specialist category retailers. A key area of strong growth performance
over the last year in our B&M UK business has been our Homeware ranges, following
significant improvements made in the product range in that category. Constant newness within
our ranges is also a key component of our successful performance in our general merchandise
categories overall.
There are opportunities in a number of general merchandise categories where some other
bricks and mortar retailers have downsized their store estates or exited the market altogether,
for example in Home Adornment and DIY. We have continued to target those categories, where
we see potential for further growth under our value-led model.
See page 14 for more information
In the B&M UK fascia business we opened 51 new stores in FY20, (36 net of closures and
relocations), including both existing properties and new build stores.
In our convenience store chain, Heron Foods, we opened 18 new stores, (12 net of closures and
relocations) in FY20.
Some B&M UK fascia and Heron Foods new store openings were deferred beyond the year-end
due to Covid-19 restrictions impacting property works.
In France we have opened 5 new stores. These stores were committed to before we acquired the
Babou business in October 2018.
See page 14 for more information
B&M acquired Babou in France in October 2018 with a chain of 95 stores at that time. Before
embarking on any significant store expansion programme, we have been focused on testing
the B&M model in a number of pilot stores in order to develop and refine it for the French market
before rolling it out across the rest of the store estate. We have also introduced some directly
sourced stock through the B&M supply chain and expanded the Grocery/FMCG offering of the
Babou stores. Planned reductions in clothing and textiles have also been made. The initial
results of those changes up until the onset of Covid-19 had been pleasing. The business was
however disrupted since the second week of March 2020 as a result of the stores having to be
closed until 11 May 2020 under the coronavirus restrictions in France.
See page 15 for more information
In the UK we created over 2,200 new jobs.
We successfully completed the construction phase and opening of our new 1 million sq ft UK
warehouse in Bedford, which has capacity to service at least 300 stores.
We have continued to invest in upgrading our existing store estate with expenditure of £31.3m
across the Group in maintenance capital expenditure as part of a rolling programme of
continuous investment in the Group’s store estate in FY20.
We invested in FY19 a digital Workforce Management System. We had planned to roll it out to
stores by the time of this report going to print. The roll-out was unfortunately delayed by the
on-set of Covid-19 in view of the one-to-one training required with store colleagues. We have
however successfully piloted it and the technology is ready to go live as soon as it’s safe to
implement it in relation to social distancing.
See page 15 for more information
Strategic Report
Performance
UK revenue growth
+12.6%
UK like-for-like sales
growth (B&M UK)1
+3.3%
See page 18 for more information
See principal risk number 3
on page 26
UK gross new store openings
51 B&M UK
18 Heron Foods
See page 20 for more information
See principal risk numbers 1 and 13
on pages 25 and 31
France revenue growth1
+119.4%
See page 20 for more information
See principal risk numbers 1, 3 and 7
on pages 25, 26 and 29
New colleagues in the UK
+7.1%
See page 33 for more information
See principal risk numbers 1 and 3
on pages 25 and 26
Looking ahead
Our focus remains on providing the best-selling products, including leading brands
and also heritage branded products at our stores. This has a proven track record of
strong customer appeal.
We are continuing to look to exploit opportunities in general merchandise categories
where other specialist category retailers are less price competitive and have
downsized, creating more opportunity to grow our market share.
Constant investment in refurbishing and refreshing our older stores is important to
maintain our high standards of modern, pleasant and safe shopping environments for
customers to enjoy when visiting our stores.
We expect to open 30 net new B&M UK stores in FY21 and a similar number in FY22.
Most of the FY21 new store openings will also be in the second half of that year. While
the rate of new store openings is impacted by disruption from Covid-19, our overall long
term target of at least 950 B&M stores in the UK remains unchanged.
Our Heron Foods convenience store chain expects to open 15 new stores in FY21,
subject to any impacts of disruption to building fit-out works from Covid-19.
The Covid-19 restrictions were lifted in France on 11 May 2020 and we were able to
re-open stores. The pilot stores are set-up to test the re-branding, changes to the
format and product mix in stores, to refine the model and customer proposition before
rolling it out across the whole of the store estate. The disruption caused by the
pandemic may delay that roll-out by a year.
Following completion of the construction and fit-out of our UK Southern Distribution
Centre in January 2020, we have successfully delivered the opening of the warehouse
which is now already supporting approximately 200 stores, with the capacity to service
at least a further 100 stores.
We continue to invest to ensure that we have appropriate training and processes to
attract, retain and incentivise colleagues. We have invested in strengthening the
management team and the central head office functions of each of the businesses in
the Group. During the year we successfully recruited a Group People Director in the UK
and a Distribution Director in France, and since the year-end have made or planned
other senior recruitments which are referred to on page 54 below.
1.
For part of the period in the prior year in FY19 Babou was not
part of the Group. It was acquired by the Group in October 2018.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
11
FSGOV Strategic Report
Chief Executive Officer’s review
Thanking my team and all our
colleagues for everything they
have done on behalf of
customers and shareholders
is my most important task
this year.
Simon Arora
Chief Executive Officer
Covid-19
So much has changed and is changing in many aspects of everyone’s
lives as we come to terms with the impact of Covid-19. It seems strange
to be reviewing a period that ended only in March 2020 but which
already seems a long time ago. The impacts of the virus on individuals,
communities, our industry and the wider economy are today still
unknown but clearly very significant and potentially long lasting.
The progress of the business in this last year has inevitably been
overtaken by events. While business moves on quickly, the challenges
posed by this new threat have been of a whole new order and scale.
Much of our focus and effort was switched in the recent period leading
up to the year-end to the immediate operational challenges of how we
deal with the new realities of serving our customers safely, protecting
and supporting our colleagues and on managing our supply chain
both in the UK and in China.
I am very proud of the way the whole B&M team has risen to those
challenges. Normally in my annual updates, I express my thanks to our
colleagues at the end of my report with gratitude for another year in
which their hard work was again decisive in our continued success.
The team once again delivered in FY20, but this year is different
because of the experience of recent weeks. Thanking my team and all
our colleagues for everything they have done on behalf of customers
and shareholders is my most important task this year. Covid-19 is
different from anything any of us has encountered before, and as
a retailer of essential goods, during the crisis keeping our shelves
continually re-stocked and serving customers efficiently and safely
during periods of high demand were critically important. The whole
team deserves our thanks and praise for their efforts.
The crisis and how we have reacted to it also speaks to the strength
and resilience of the B&M model. At its heart is the fact we are a
variety goods retailer backed by a fully invested infrastructure and
robust supply chain. The unique breadth of our product range delivers
balance and resilience to overall financial performance from year to
year and allows us to absorb downturns in any one specific product
category. The business also has been able to respond quickly to the
changing needs of our customers, particularly during the restrictions
imposed by the pandemic crisis in our store and supply chain
operations. Our 656 B&M UK stores are conveniently located, easy to
shop safely and they have demonstrated they are now destinations in
their own right. They are increasingly in high quality locations and are
not dependent on shopping malls or anchor department stores to
generate footfall. When the strain of meeting high and fluctuating
demand, particularly for everyday essentials was at its most intense,
B&M was well-positioned and able to react quickly. At our warehouses
we re-deployed labour and re-prioritised the picking of products
experiencing the highest demand at stores to keep them replenished
and serving customers daily with what they needed.
Our business quickly implemented social distancing measures across
its stores and distribution centres. We deployed masks, disposable
gloves, hand sanitiser and social distancing marshalling across
the network. Our store, warehouse and transport colleagues faced
increased workloads and responsibilities with the implementation of
social distancing, whilst the business was experiencing high levels of
absence due to sickness or self-isolating. To recognise this additional
burden, we increased the pay of store and distribution colleagues by
10% over the peak of the crisis.
12
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
To play our part in the collective national effort to respond to the
pandemic, we quickly implemented two successful initiatives. We
made a total £1 million cash donation at speed to Foodbanks across
the UK using our store network. We granted priority access to NHS
workers for the first hour of each trading day and we have provided
£2.9 million in discounts to NHS workers in a 2 month period.
We should also not forget that as a discounter, our appeal is
strengthened when large sections of the population are worried
about their personal finances or are having to live within constrained
household budgets.
This is important, not just because we were able to do our bit in the crisis,
but because I believe it demonstrates the flexibility of our model to adapt
very quickly to meet the evolving needs of customers. The lasting effects
of Covid-19 on our industry may result in the further acceleration of the
already profound structural changes affecting retailing. Positioning the
business to address two of the most powerful strategic trends in retail,
being discount and convenience shopping, will, in my view, continue to
deliver plenty of growth opportunity for B&M into the long term.
Financial performance
The core B&M UK business had a good year, tempered in part by
the weak performance of our Christmas and Toy categories during
the third quarter which was also impacted by disappointing footfall
affecting most UK retailers at the time of the election and Brexit
uncertainty. We have taken steps to learn from the year’s Christmas
trading period as we plan our space allocation and sales budgets for
the 2020 Golden Quarter. Our final quarter saw a strong return in
trading performance, with pleasing like-for-like (“LFL") sales of 6.6%,
attributable to a surge in grocery sales in late March.
The performance of new stores exceeded our expectations and
demonstrated our continued ability to deliver profitable organic
growth. A robust gross margin, combined with diligent control of costs,
resulted in a good overall outcome in terms of profit growth and cash
generation.
Heron Foods continued to perform well throughout the year and also
benefitted from the exceptionally high demand in March. Its emphasis
on local convenience retailing and value for money put it in good stead
to serve shoppers’ needs throughout the coronavirus crisis.
Until the disruption caused by Covid-19, our repositioning of Babou and
the development of B&M in France was making good progress. A large
proportion of Babou’s product range had moved to the Group’s supply
chain in China. The business had successfully reduced its reliance on
Clothing while increasing its ambient grocery and FMCG ranges to
drive frequency of visit and average transaction values. In the final
quarter of FY20, we rebranded 13 stores from Babou to B&M and
were encouraged by initial customer reaction. We ended the financial
year with 19 stores in France trading as B&M out of the store estate
of 101 stores. However, the lockdown imposed on the business from
15 March 2020, which was lifted on 11 May 2020, has delayed our
ability to continue the development of the B&M proposition.
Our Babou stores are focused on short term trading priorities and
the delivery of social distancing measures for the remainder of the
Summer 2020. It would not be sensible for us to disrupt 2020 Golden
Quarter trading with store remodelling and rebranding to B&M. We
expect to resume the rebranding of Babou to the B&M brand in France
in early 2021, subject to the controlled testing of the performance of the
pilot group of 19 stores converted to B&M format stores so far.
Recent and current trading
Our priority since the year-end in our UK businesses has been the safety
of our colleagues and customers. The teams have worked quickly and
tirelessly to deliver social distancing guidelines at our stores, which
were permitted to stay open due to the majority of our sales falling
within the Government’s essential categories of Food, Drink, Personal
& Household Care, Petcare as well as DIY and Hardware.
Our ability to react quickly and implement new ways of working safely
have underpinned our unusually strong trading performance in
the period since the year-end. This has been boosted by the very
favourable hot weather and the acceleration of demand in DIY, much
of which will be a pull-forward of trade from later in the season. All our
stores are currently trading and we do not have any employees on
furlough under the Government’s scheme, other than colleagues in
receipt of the “shielding letter” for those extremely vulnerable to the
virus. We have not taken any loans under the UK Government’s lending
schemes, nor are we currently paying VAT or any other taxes on a
delayed basis. However, the pandemic has brought significant
increases in cost of working both at a store level and in distribution.
Due to the general uncertainty over future consumer behaviour and
the duration of restrictions, it is currently particularly difficult to predict
what the remainder of the year may be like.
We have seen very strong early LFL sales in the UK businesses since
the year-end of 22.7% to 23 May 2020. Excluding Gardening and DIY
categories the LFL sales performance for that period was 10.3%.
We have also incurred increased costs of trading (excluding the benefit
of the business rates holiday) from the social distancing measures
implemented in our stores and warehouses since the onset of the
Covid-19 crisis. Together with closure period losses in Babou, these
costs partially offset the additional revenue from the recent surge in
Gardening and DIY sales.
In France we had to temporarily close all of our 101 stores under the
French Government restrictions for a period of 8 weeks from 15 March
2020. Since those stores re-opened on 11 May 2020 we have seen an
initial strong sales performance with LFL sales of 81.8% in the period to
23 May 2020, with the French consumer having been able to access
stores for the first time since the 8 week closure period.
Strategic development
Although maintaining a strong focus on dealing with the challenges
posed by Covid-19 has been vitally important, we have not lost sight
of the need to drive our strategy for growth forward, both before and
since the crisis. From a strategic standpoint the execution of our UK
expansion strategy has continued to go well. Inevitably there are
also consequences of the Covid-19 crisis and its aftermath for the
implementation our UK strategy in the near term. For example, the
slowdown in the construction sectors in the UK will result in some
delay in our new store opening programme. We have not taken a
decision to deliberately slow that programme but it will take some
months for building and shop-fitting contractors to catch up time lost
during lockdown periods. This applies not only to our own shop-fitting
works but also further upstream where works are required to be
carried out by the property owner prior to handover to us. In France the
transformation of the Babou business we acquired in 2018 to a model
similar to B&M and the testing of a pilot group of stores converted to
the B&M format is underway, although progress has been delayed
due to the disruption from Covid-19.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
13
FSGOV Strategic Report
Chief Executive Officer’s review continued
The completion of the sale of our Jawoll business in Germany just before
the financial year end, to a private equity led buyer consortium, was the
culmination of a strategic review process in relation to that business,
which began in late 2019. The comprehensive review we undertook
included an evaluation of the likely potential for the Group to create
value from the business in Germany going forward under our ownership
and weighing that against the continued disappointing performance of
the business driven by persistent recruitment, trading and operational
issues. The carrying value of the brand, goodwill and of property, plant
and equipment on under-performing stores, had already been impaired
by us at the half year-end of the Group in September 2019. The Group also
cancelled and wrote-off €36.1m of loans and intra-group debt owed to it
by the German business as part of the terms of the sale. The review
concluded that the path to restoring profitability, the creation of a business
model capable of delivering acceptable financial returns and the potential
for long term growth was likely to entail further substantial investment
with an uncertain outcome. As a result, the decision was taken to find a
buyer for the business where it could be repositioned back to a clearance
outlet model under other ownership. This was in the best interests of the
Group and the other stakeholders of the Jawoll business, notably its
colleagues. Clearly the experience in Germany was beset with difficulties,
but the lessons learned have informed our approach in France so that the
execution of our strategy avoids the issues we encountered in Germany.
The B&M Group’s strategy for driving sustainable growth in revenues,
earnings and free cash flow has the following four key elements. Details
of our progress in relation to those during the year were as follows:
1. Delivering great value to our customers
B&M is all about delivering great value across a variety of product
categories, with the range of items within each product line being
limited to best sellers. The offer is focused on the things customers
buy regularly for their homes and families. There is always something
a household needs that can be bought quickly, cheaply and
conveniently at B&M, whether it is a light bulb, a new kettle, a jar of
coffee or a tube of toothpaste. Combined with a constant stream of
typically c.100 new lines each week, this is why our customers (which
averaged about 4.8m a week) choose to keep coming back to our
stores so regularly. With 656 stores across the UK B&M has become
a routine part of customers’ shopping habits wherever we trade.
In the week immediately prior to the Covid-19 lockdown crisis our
stores served 6.6m customers, with some of them also likely being
new to B&M. Our stores are generally in locations with easy access
by car or other independent means of travel, as opposed to being
dependant on city public transport links with the social distancing
risks associated with those networks.
Our competitiveness and our profitability are driven by relentless
discipline around keeping costs low, buying large volumes per
product line directly from factories rather than through
intermediaries, and stocking only a limited assortment of the
best-selling items. Low costs help us deliver low prices but B&M is
not just about seeking cheap products. Our focus is on selling
quality products, including many leading brands at discounted
prices. Some people need a bargain but many people also enjoy
one, and that’s why B&M’s appeal continues to broaden.
The majority of our product categories saw strong overall total sales
growth this year helped by the new store programme, resulting in
continued market share gains. On a comparable basis, it was a
similarly strong picture. Our Homewares categories saw excellent
year on year growth, in part rebounding in a weaker performance in
the prior year. Following a complete range review and reset in the
prior year all stores have been fully re-merchandised in Homewares
and we have been delighted with the improved design, ranging,
co-ordination and presentation of these ranges. This includes areas
across home textiles, bedding and home adornment. The customer
response to these changes has been excellent, and as a result we
have extended some of the themed styles to this year’s outdoor
leisure and furniture ranges. Homewares remains an opportunity
area for the business and we will be allocating more space to those
products when the disruptive impact of Covid-19 subsides.
14
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Seasonal goods are a significant element of B&M’s appeal in general
merchandise. Around 20% of the space in a typical store is fully
re-merchandised through the seasons. These are also areas where
our pricing can be at its most disruptive. Garden and Outdoor
Leisure enjoyed a pleasing 2019 season, despite very demanding
comparables from the prior year’s heatwaves. By contrast, the
Christmas selling season was disappointing, partly driven by the
weakness in the toy market but we believe also by the unhelpful
timing of the UK’s General Election in early December and the intense
media coverage of potential Brexit impacts to the economy. Although
margins remained robust through the season, like-for-like sales in
the Autumn/Winter seasonal categories were lower than expected.
Grocery categories achieved strong growth. For most of the year their
outperformance of the business as a whole was modest, but sales
accelerated during the final weeks of the year driven by customer
anxiety over the potential impact of Covid-19. Customers buying
tinned and packaged food, cleaning and laundry products, soft
drinks, paper goods and pet care products drove very strong growth
in the last few weeks of the year. Because of the long life nature of
what we sell, as well as our low prices and high levels of buffer stock,
B&M proved to be a very efficient way for many customers, including
those new to B&M, to stock-up and at consistently great value prices.
2. Investing in new stores
We have a long growth runway in the UK, with the potential to open
at least 950 B&M facia stores across the country from our current
base of 656, both in heartland areas and in areas where we have
few or even no stores. This excludes Heron Foods, our discount
convenience business which, with its smaller existing geographic
footprint, strong returns profile and small store model, has the
potential itself to become multiple times larger than its present 293
store count. With B&M new store performance continuing to be very
strong and the flow of attractive profitable opportunities looking
healthy, the target of at least 950 B&M stores in the UK is
increasingly looking like a conservative estimate.
We opened 51 new B&M fascia stores during the year, with 8 of those
being replacement stores, where larger and more profitable store
opportunities have become available to move our business elsewhere
in a town. There were a further 7 closures, largely the consequence of
older, early generation stores coming to the end of leases and where
the locations were not attractive enough to renew or in fact a larger
replacement store had been opened in prior years. In the year there
were therefore 36 net new B&M store openings. The current year’s
opening programme is, or would have been, equally strong had
the unhelpful impact of Covid-19 on the construction industry not
intervened. Currently, we expect a reduced programme to that in FY20,
with 30 net new openings in FY21 and being more heavily weighted to
the second half of the financial year. The forward pipeline for FY22 is
similarly impacted but it is possible that the fallout across the retail
industry from the impact of the virus may provide further attractive
opportunities that we have not yet factored in to our budgets.
Heron Foods had another strong year, benefitting from its appealing
positioning as a value convenience retailer. Profit performance was
particularly pleasing, helped by improvements to labour scheduling
and also distribution efficiencies. Like our B&M main facia stores, Heron
Foods performed strongly during the final few weeks of the financial
year, as customers altered their shopping habits towards stocking-up.
Heron Foods’ neighbourhood locations and predominantly frozen and
packaged food offer was, and is, very appropriate to its customers’
needs. Heron Foods opened a total of 18 new stores during the year,
bringing the total to 293. We are expecting to open about 15 new Heron
Foods stores in FY21, but that is subject to any impacts of disruption to
building fit-out works from Covid-19. As with the B&M UK fascia the
openings will be weighted to the second half of FY21.
In France, we opened 5 new stores, most of them having been
committed to prior to our ownership of the business. All of them were
opened under the B&M fascia and with layouts and merchandising
akin to our UK stores, albeit with a category emphasis reflecting the
differing needs of the Babou customer. Babou operated a total of 101
Babou and B&M fascia stores at the year end.
Strategic Report
3. Developing our international business
Until the imposition of the lockdown period in France linked to Covid-19,
which kept the stores fully closed for 8 weeks, the business was making
good progress moving towards the B&M model with the re-setting
and re-formatting of a number of pilot stores in the estate. Most of the
category changes we envisaged, including switching to products
sourced from the B&M supply chain, were also well advanced. We had
made progress in reducing Babou’s exposure to the Clothing category
and we had begun to introduce more Food, Grocery and FMCG
products. Babou’s supply chain had proven itself up to the task of
managing large volumes of containerised inbound product, having
navigated the peak stock intake last Autumn smoothly and successfully.
We now have 19 B&M pilot re-formatted stores trading in France, most
of them converted in early 2020 from existing Babou stores, combined
with the 5 new stores openings. In the early weeks of trading prior to
the Covid-19 closure restrictions coming into force, the B&M stores
were trading encouragingly above their trading levels as Babou, but it
is as yet unclear how much of this improved performance was not just
the ‘halo effect’ of a new store opening.
Inevitably, a lengthy period of store closure during the lockdown
period in France has been unhelpful and has set back our plans for
the business to some extent. Our priority since the lifting of the
lockdown has been to trade the stores and sell through inventory.
Before the further development of the B&M fascia we need a more
settled period of time first to test the results of the 19 stores
converted as a pilot group so far.
4. Investing in our people and infrastructure
Our new c.1 million square feet Southern distribution centre at Bedford
was completed and fitted-out during the financial year. It is our largest
single distribution centre building. Commissioning of the facility was
successfully achieved before and during the Covid-19 crisis and it is
now supplying almost one-third of the B&M store estate. Having the
additional logistics capacity in place during the Covid-19 surge in
demand for particular categories was particularly useful, but it is
fair to say that the lockdown restrictions are imposing higher costs
and inefficiencies across our network. We expect the new centre
to provide sufficient capacity for our expansion plans for the
foreseeable future including enough to meet our 950 UK store target.
At store level, we had planned by the time of this report going to
print to have rolled-out our digital technology Workforce
Management System. That was unfortunately delayed by the on-set
of Covid-19 in view of the priority rightly given to the implementation
of new safety measures rather than the roll-out of training on a new
system. We have successfully piloted it and the technology is ready
to go live across the estate as soon as it’s practical to do so.
During the financial year we recruited Allison Green as the Group
People Director. Allison is re-joining the business after having been
with B&M previously until 2016 and then having worked in the
hospitality sector. We are delighted that she has re-joined the
management team at B&M, having made a significant contribution
during her previous tenure with the business.
In France we welcomed Gilles de Frémicourt who we appointed during
the year as the Distribution Director to the Babou business, with the
distribution function having been fully integrated into the Babou
business in place of the separately managed distribution workforce
service arrangement that was in place prior to the acquisition. We also
appointed Anthony Giron as President of Babou on 11 May 2020, in
order to strengthen the senior management team in line with our high
ambitions for the business. Anthony has previously launched and
rolled out the Hema retail business in France, and his experience is a
good fit with the opportunities ahead of us to grow B&M in France.
Corporate social responsibility
We are very proud as a Group to serve customers across the UK in
many different communities and localities through our B&M and Heron
Food stores. Our presence in communities gives customers access
locally to the everyday products they need and at bargain prices.
Our new store opening programmes extend the reach of our value
proposition to new communities and customers, create new local jobs
and help in our own way to revitalise areas where other retailers have
in many cases retrenched. We strive in all the areas where we operate
to be a good corporate citizen and to make a difference, whether that’s
through the great prices we offer in stores to our customers or through
career opportunities and development paths for our colleagues. Some
of the points I would like to highlight this year are:
•
the creation by the Group this year of over 2,200 new jobs in the UK,
mainly through our store expansion programmes;
the development and training of our own talent through our Step-Up
Programme promoting 125 colleagues to B&M Deputy and Store
Manager positions;
•
• our recycling of high levels of supply chain waste, with 99.8% of the
Group’s trade packaging waste being recycled;
• proudly supporting for the fourth year the “Mission Christmas” charity
appeal through sponsorship, with stores participating as collection
points for presents donated for underprivileged or poorly children for
the appeal;
in response to the Covid-19 virus and the impacts to some of the most
vulnerable in society, we donated £1,500 per B&M store to local
Foodbanks totalling £1m nationally; and
•
• extending £2.9 million of discounts to all National Health Service
workers during the peak of the crisis.
Outlook
For many retailers the outlook in the Covid-19 world is more about survival
than it is about the shape of the year ahead and beyond. B&M has
significant advantages. The ‘variety retailing’ model with its core strength in
everyday essentials, a well-invested infrastructure, strong value credentials,
a modern and convenient store network with continuing growth
opportunities in the UK and France, mean that the business is better
positioned and more resilient than most to deal with the new realities.
We welcome the UK Government’s business rates holiday which we see as
essential to support the viability of the UK retail industry and the incremental
operating costs of serving customers in the present circumstances. We
hope this will be a precursor to the much needed reform of the UK business
rates system. The benefit of the business rates holiday for B&M will fall
in our financial year ending March 2021 and is likely to be fully offset by
Covid-19 related costs, dependent on the progression of the virus and,
in particular, the nature and duration of social distancing requirements.
Our strong trading performance in the B&M UK stores in the initial 8
weeks of the new financial year was boosted in particular by our
Gardening and DIY categories as announced on 29 May. Much of that
outperformance is likely to have been a pull-forward of sales which
would ordinarily be achieved later in the first half of the financial year.
LFL customer count was -28.9% whilst LFL Average Transaction Value was
+72.5% over the initial 8 weeks. Whilst trading has continued to be strong
in more recent weeks, the growth rate is unlikely to be sustained as
Gardening ranges have sold through and stock in some other categories
is now lower than normal for this time of year.
The pandemic has delayed construction work on new stores and
consequently there has been a slowdown to our store opening
programme for this financial year. For FY21 we now expect to have 30 net
new B&M UK store openings and the programme could be reduced to a
similar number in FY22 dependent on the progress of the virus and social
distancing requirements. Our overall long term target of at least 950 B&M
stores in the UK remains unchanged.
There are greater than usual uncertainties during the remainder of the
year. The economic environment and its impact on customers is difficult
to predict. In addition to the impact of social distancing on operating
costs, should this continue during the winter months, it is likely to reduce
footfall due to the reluctance of customers to queue outside during less
pleasant weather, and detract from our ability to serve customers in their
usual numbers during the peak trading season.
Against this uncertain backdrop B&M, as noted above, is in a strong
position to continue to grow profitably in the UK, and work continues to
develop and prove the proposition in France.
Simon Arora
Chief Executive Officer
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
15
FSGOV
Strategic Report
Feature: Garden Centres
Everything you
need for the
garden and patio
16
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
164Garden centres
in the UK
apply that model to the rest of our product
categories. This ensures that throughout each
season we can flex our product offering with
relative ease and refresh it with new products,
to keep pace with customer buying habits and
trends.
In our Garden Centres you can find decorative
paving stones, coloured gravel, fencing
and sheds, sacks of compost or bark,
plants, flowers and seeds. Those lines
are also supplemented by a gardening and
outdoor living department inside our stores.
In those aisles you can find a range of garden
tools, implements, decorative garden
accessories, and also all you need for the
barbeque including whole barbeque sets,
picnicware and charcoal.
Our Garden Centres also feature a range of
attractive wooden outdoor furniture sets and
benches for the patio or lawn. We also have
arbours, gazebos and arches, which are
popular with our customers. For those looking
for a lighter more versatile product on the
other hand, we have some great deck chairs
and recliners in attractive and fun colours
and patterns to brighten up any garden or
patio. Most importantly, we deploy our low
cost discount model to this category, in which
we are unaware of any other discounter with a
similar national footprint.
B&M now has 164 stores in the UK which have
a Garden Centre. That number continues
to rise whenever we see the opportunity to
create a Garden Centre at our new stores.
The typical size of our Garden Centres is
c.8,000 sq ft. Together with the racking and
shelving around the perimeter, this enables
us to hold a substantial range of garden
building, fencing and aggregates products.
That leaves plenty of space to display our
decorative garden products and plants, for
customers to enjoy browsing and buying as
they walk around the Garden Centres.
Our Garden Centres have all the main
categories of products that you expect
to find in any garden centre. But within
those categories we maintain our limited
assortment discipline in the same way we
B&M European Value Retail S.A.
Annual Report and Accounts 2020
17
FSGOV Strategic Report
Financial review
We have continued to see
attractive returns on
investment on the FY20 new
store openings and they
delivered £157.9m of revenues
in the year.
Paul McDonald
Chief Financial Officer
Accounting period
The FY20 accounting period represents the 52 weeks trading to
28 March 2020 and the comparative financial period represents the
52 week period for the B&M UK segment to 30 March 2019. This is the
first time that the Financial Statements have therefore been prepared
following the introduction of IFRS16. The comparative figures in this
report have been restated for IFRS16 as we have adopted the fully
retrospective approach. Additional details in relation to this can be
found in notes 17 and 18. We have continued to report underlying
figures where we believe they are relevant to understanding the
performance of the Group and these underlying figures referred to
are presented pre the impact of IFRS16.
As a result of the disposal of our German business, Jawoll, in March
2020, the results of Jawoll are treated under IFRS5 as a discontinued
operation within the statement of consolidated income and the
comparative figures have also been restated to reflect this.
Financial performance
Group
The Group revenue in FY20 was £3,813.4m (FY19: £3,272.6m), this
represents an increase of 16.5% and on a constant currency basis,
a 16.6% increase1.
The overall adjusted gross margin2 was 33.8% (FY19: 34.1%).
The adjusted operating costs2 of the Group, excluding depreciation
and amortisation, grew by 18.3% to £946.9m (including new store
pre-opening costs) and depreciation and amortisation expenses
(excluding adjusting items) grew by 28.2% to £57.7m, reflecting the
increased number of stores as a result of the new store opening
programme and the additional costs relating to the non-comparable
period of Babou following the acquisition in October 2018.
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 4 on page 104, they totalled £(40.7)m in
FY20 (FY19: £(5.5)m).
Overall Group adjusted EBITDA2 increased by 7.1% to £342.3m.
18
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Summary operating profit
£ millions
2020
2019
Revenue
Adjusted Gross Profit
%
Adjusted Operating Costs
Adjusted EBITDA
%
Depreciation & Amortisation
Interest
Adjusted Profit before tax
Adjusting items
Adjusted Interest
Impact of IFRS 16
Profit before tax
Reconciliation of adjusted items
£ millions
Profit on ordinary activities before interest and tax
Add back depreciation and amortisation
Add back depreciation on right-of-use assets
Exclude effects of IFRS 16 on administrative costs
EBITDA2
Fair value effect of ineffective derivatives
Foreign exchange on intercompany balances
Foreign exchange on acquisition facility
Gain on sale and leaseback of the Bedford
warehouse
Cost effect of the closure of the French stores
due to Covid-19*
Gross profit effect of the closure of the French
stores due to Covid-19
Costs associated with the acquisition of Heron
Adjusted EBITDA2
3,813.4
1,289.2
33.8%
(946.9)
342.3
9.0%
(57.7)
(24.6)
260.0
40.7
0.1
(48.8)
252.0
2020
333.7
57.7
148.6
(154.1)
383.0
(0.6)
(3.7)
3.3
(49.0)
2.9
6.4
0.0
342.3
3,272.6
1,120.2
34.2%
(800.6)
319.6
9.8%
(45.0)
(22.2)
252.4
5.5
(1.0)
(12.6)
244.3
2019
319.5
45.0
174.9
(162.6)
325.0
(5.7)
2.8
(3.0)
0.0
0.0
0.0
0.4
319.6
*
The Babou stores closed under the French Covid-19 restrictions from 15 March
2020 until 11 May 2020. Babou incurred an EBITDA loss of £2.946m in the part of
the period when they were closed to 28 March 2020. A stock provision of £6.396m
was also made relating to losses we are likely to incur on discount seasonal stock
not sold during the closed period to sell it through in the rest of the Spring and
Summer season. They have both been included as adjusting items as they arose
as a result of the Covid-19 restrictions.
For further information and segmental detail of adjusted measures see notes 3 and 4
to the financial statements on pages 102 to 105.
Constant currency revenue comparison
£/€’000
2020
2019
%
2020
2019
%
Constant Currency
Babou in € 324,210
Exchange
Rate
1.1441
Babou in £ 283,376
B&M
3,140,144
Heron
389,867
146,462
324,210
146,462
1.1341
129,144
2,789,431
354,057
1.1441
283,376
3,140,144
389,867
1.1441
128,016
2,789,431
354,057
Total Per
Segment 3,813,387 3,272,632 16.5% 3,813,387
3,271,504 16.6%
Like-for-like reconciliation – B&M Fascia
Like-for-Like Revenue3
New Stores opened after March 30
2019
New Stores opened prior to March 30
2019
Closed Stores
Gross Segment Revenue
Value Added Tax / Commission
Income
Wholesale Revenues
2020
2019
%
3,242,488
3,139,087
3.3%
180,706
0
195,515
432
58,543
33,241
3,619,141
3,230,871
(506,793)
27,796
(452,959)
11,519
Revenues of B&M Retail Segment
3,140,144
2,789,431
12.6%
B&M European Value Retail S.A.
Annual Report and Accounts 2020
19
B&M UK
In the UK, B&M revenues increased by 12.6% to £3,140.1m, driven by an
increase in like-for-like3 revenues of 3.3% and the new store opening
programme, including both the annualisation of revenues from the 44
net new store openings in FY19 and the 36 net new store openings in
FY20, and an additional £16.3m from wholesale revenue.
There were 51 gross new store openings in the year and 15 closures
with 8 of the closures being relocations. We have continued to see
attractive returns on investment on the FY20 new store openings and
they delivered £157.9m of revenues in the year. We have also continued
to take advantage of relocation opportunities. These are typically small
first generation B&M stores that are replaced by modern, larger stores
that allow customers access to the full product range, and these
opportunities continue to be earnings enhancing.
Revenues in the like-for-like store estate grew by 3.3% (FY19: 0.7%).
The like-for-like performance was enhanced by a two week period of
exceptional demand in March 2020 as the UK consumer purchased
essential products ahead of the Coronavirus lockdown in the UK.
Excluding these two weeks, the like-for-like would have been 1.7%.
During the year we have seen a continuation of the strong
performance on grocery/FMCG ranges as consumers structurally
continue to seek out value and we have also seen an improved
performance on our homeware ranges following the changes that
were made to the ranges, against the backdrop of a disappointing
performance in FY19.
In the B&M UK business the margin reduced by 63 basis points,
this comprises 12 basis points as a result of the levels of demand in
March 2020 on the lower margin grocery and FMCG sales and the
increase in the wholesale revenues.
In the B&M UK business, operating costs, excluding depreciation and
adjusting costs, grew by 11.3% to £734.4m, while costs as a percentage
of revenues decreased by 27 basis points to 23.4%. 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, as well as the additional
operating costs arising from the opening of our new warehouse
in Bedford.
In the B&M UK business, adjusted EBITDA2 increased by 8.7% to
£319.8m (FY19: £294.1m) and the adjusted EBITDA2 margin decreased
by 36bps to 10.2%.
FSGOV Strategic Report
Financial review continued
Heron Foods
Revenues at our convenience food store business, Heron Foods
grew to £389.9m (FY19: £354.1m). The business has continued to
deliver a strong sales performance following the strong like-for-like
performance that was delivered in FY19. The business also benefited
from an exceptional level of demand in March 2020 ahead of the
Coronavirus lockdown.
The business has continued to manage its cost base despite the
headwinds of inflationary cost increases on store wages and
operating costs as a percentage of revenues decreased by 82bps to
25.0% (FY19: 25.9%). The EBITDA2 was £25.5m, which compares to
£19.9m for FY19 and the EBITDA margin improved by 93bps to 6.6%.
Babou
Babou’s revenues grew to €324.2m, (FY19: €146.5m), an increase of
121.3%, of which €162.2m related to the non-comparable period of
ownership. Within the year the business opened 5 new stores. Trading
in the business was impacted by the lockdown in France with all stores
closed from 11 March 2020, as a result of the French government’s
response to the Coronavirus outbreak.
The business had been progressing with its transformation and moving
the product offer to that of the B&M UK stores. However, the store
closures following the lockdown period in France resulted in a negative
EBITDA of £3.0m during the lockdown period and an additional net
realisable value provision of £6.4m has been made on stock, mainly
clothing that will require additional markdowns to be sold, both of
these items have been excluded from the adjusted EBITDA.
The adjusted EBITDA was £(3.0)m and this compares to £5.6m in FY19.
Jawoll
Following the disposal of the Group’s entire 80% shareholding in Jawoll
to a private equity-led consortium in March 2020, the results of Jawoll
are shown with discontinued operations.
The Group received an initial consideration of €2.5m and there is a
further €10.0m to be received no later than December 2020, this
element of the consideration is subject to the on-going trading of
Jawoll. This was in consideration for a €5.6m intra-group trading
account and a €43.0m loan provided by the Group. The loss
from discounted operations was £113.9m, reflecting a loss on
writing-off loan balances, trading losses in the year and the
impairment of assets.
Financing
The net interest charge in the year was £81.7m (FY19: £75.2m)
representing an increase of 8.6%.
The interest charge includes £57.2m for the finance costs relating to
the lease liabilities under the IFRS16 accounting treatment following the
introduction of the new standard lease interest, (FY19: £52.0m). Bank,
high yield bond and interest receivable was £22.7m (FY19: £20.3m)
and amortised fees of £2.1m (FY19: £1.9m).
The increase in the cash interest charge largely reflected the additional
funding required for the build of the new warehouse at Bedford prior
to the sale and leaseback transaction which was completed on
6 March 2020.
Profit before tax
The statutory profit before tax was £252.0m, which compares to
£244.3m in FY19. We also report an adjusted profit before tax to allow
investors to understand better the operating performance of the
business (see note 4). The adjusted profit before tax2 was £260.0m
(FY19: £252.4m) which reflected a 3.0% increase.
20
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Taxation
The tax charge in the year was £57.2m (£49.2m in FY19 ) and 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 and
30% in France, with an effective rate of 19.5% in FY21.
As a Group we are committed to paying the right tax in the territories
in which we operate. In the B&M UK business the total tax paid was
£275.6m. This is mostly those taxes which are ultimately borne by
the company amounting to £182.8m which includes corporation tax,
customs duties, business rates, employer’s national insurance
contributions and stamp duty and land taxes. The balance of £92.8m
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 £80.9m compared to £191.1m in FY19 and the
fully diluted earnings per share was 9.0p (FY19: 19.5p).
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
£203.0m which was a 0.2% increase over last year (FY19: £202.7m) and
the adjusted fully diluted earnings per share2 was 20.3p (FY19: 20.2p).
Investing activities
The Group incurred £124.6m on the purchase of property, plant,
equipment and intangible assets, including £32.0m on the build and
fit out of our new warehouse in Bedford with a further £42.5m being
incurred on the 74 gross new stores opening programme across the
Groups fascia’s and an additional £50.1m on the Groups infrastructure
and ensuring that our existing store estate and warehouses are
appropriately invested and maintained. The Group will continue to
invest in its existing store estate and IT infrastructure across the Group
in the year to March 2021 and we would expect the level of
maintenance expenditure to be 0.8% of revenues.
The deferred consideration that was outstanding relating to the
acquisition of Heron in August 2017 that was due was agreed with the
vendors and £12.0m was paid in the year.
There were £160.5m of proceeds received from the sale of property,
plant and equipment in the year, the majority of this related to the
proceeds from the sale and leaseback of our warehouse in Bedford,
£149.5m in March 2020 and there was a further £6.6m relating to the
sale of freehold properties. In addition there were also receipts of
£2.4m from the disposal of our shareholding in Jawoll and £2.6m in
dividends received from associates.
Net debt and cash flow
As a Group we continue to be strongly cash generative and the cash
flow from operations increased by 25.9% to £532.6m (FY19: £423.0m).
The cash generation reflects the continued growth in the Group’s
EBITDA2, and the continuation of the attractive cash paybacks from the
new store opening programme. Within the year we have also seen a
working capital inflow as a result of both the accelerated demand for
essential products in March 2020 ahead of the lockdown and also
lower levels of imported stock following some delays to the timing of
merchandise being shipped from the Far East following the Covid-19
outbreak in China. The working capital benefit is likely to reverse in
FY21 if normal trading conditions are experienced.
The strong cash flows have enabled the Group to pay £76.0m of
dividends in the year and also to declare a dividend of £150.1m that
was paid to shareholders in April 2020.
The Group’s net debt6 in the year has reduced to £347.5m
(FY19: £610.9m) and the net debt6 to adjusted EBITDA2 has reduced
to 1.02 times (FY19: 1.91 times). Adjusting the net debt for the £150.1m
special dividend that was paid on 17 April 2020, the underlying net
debt would have increased to £497.6m and the net debt to adjusted
EBITDA would have been 1.45 times. This remains comfortably within
our 2.25 times leverage target.
B&M periodically explores opportunities to repay, prepay, repurchase,
refinance or extend its existing indebtedness prior to the scheduled
maturity of such indebtedness, and/or amend its terms with the
requisite consent of lenders as part of B&M’s continuing efforts to
manage its capital structure. B&M and/or its Group may also incur
additional indebtedness to the extent permitted by the covenants of
existing indebtedness or with the requisite consent of lenders,
including in connection with the Group’s evaluation of strategic
expansion and acquisition opportunities.
The Board adopted a long-term capital allocation policy in 2016 to
provide a framework to help investors understand how the Group will
continue to balance the funding requirements of a growth business
like B&M with the desire to return surplus capital to shareholders. The
Board will continue to evaluate opportunities to invest and support the
growth of the business along with the scope for any incremental return
of capital to shareholders in the context of that framework.
Dividends
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 roll-out of new stores with a strong payback profile;
The Group is strongly cash generative and its capital policy is to
allocate cash surpluses in the following order of priority:
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 to have
recourse to the company’s share premium account as a distributable
reserve. It remains the Group’s 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 28 March 2020 includes
distributable profit reserves of £245m. 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,
Strategic Report
but those intermediate holding companies do not carry on retail
trading business operations and there are no dividend blocks of any
material amounts in any year in relation to expenses which those
companies may incur.
The Group has continued to be strongly cash generative and is
in a very good position to fund and maintain its dividend policy
notwithstanding the current economic situation generally. The principal
risks of the Group and in particular those relating to Covid-19, supply
chain, competition, economic environment, commodity prices,
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 to a
large extent comprises essential goods and also competes across a
very broad section of the retail markets in our chosen locations.
During the year the Company paid an interim dividend of 2.7p per
share and also declared a special dividend of 15.0p per share
following the sale and leaseback of the Bedford Distribution Centre
which was paid in April 2020. Subject to approval of the dividend by
shareholders at the AGM on 18 September 2020, a final dividend of
5.4p per share is to be paid on 28 September 2020 to shareholders on
the register of the Company at the close of business on 21 August
20205. The ex-dividend date will be 20 August 2020.
Paul McDonald
Chief Financial Officer
10 June 2020
1 Constant currency comparison involves restating the prior year Euro revenues
2
3
using the same exchange rate as used to translate the current year Euro revenues.
The comparison is a measure generally used by businesses which trade with
multiple currencies, to allow a comparison to prior year revenue without it being
distorted by changes in the exchange rate year on year.
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 19 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 28 March 2020, and the comparable figures for
previous year are for the 52 week period ended 30 March 2019.
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. Like-for-Like revenues is a
measure generally used by retail businesses to provide a better understanding of
how the comparable stores in the business have performed year on year, as it
does not include the impact on revenues from new store openings and store
closures.
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 21, 23 and 24
for more details.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
21
FSGOV Strategic Report
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
Capital expenditure (£m)2
16.5%
2020
2019
2018
£124.6m
Adjusted EBITDA (£m)1
£342.3m
16.5
17.1
2020
2019
2018
22.4
124.6
106.0
114.6
2020
20194
2018
342.3
319.6
279.0
Strategic link
Strategic link
Strategic link
A
B
C
D
A
B
C
D
A
B
C
D
Description
Our strategy is to grow our business in our chosen
markets in the UK and France. This measure,
together with the number of new store openings
demonstrates our performance against that goal.
Performance
The business grew revenues by 16.5% and B&M UK
store numbers by 5.8% and our strategy remains on
track.
Description
As our growth is mainly derived from investment in
new stores, we monitor capital expenditure to
ensure the expenditure on investment in new and
existing stores is not excessive but sufficient to grow
and maintain our existing store estate.
Performance
We incurred £92.6m of capital expenditure,
excluding £32.0m of the expenditure on the
development of a new southern distribution centre
and the acquisition of some freehold stores. The
freehold stores will ultimately be the subject of sale
and lease-back transactions. Our capital
expenditure was within our budgeted targets.
Description
In addition to growing sales, as we open new stores
we want to ensure that the sales growth is profitable.
We measure our profitability by our adjusted EBITDA
performance.
Performance
The Group’s adjusted EBITDA grew by +7.1%, and our
strategy remains on track.
Adjusted EBITDA (%)1
Adjusted diluted earnings per share1
Cash generated from operations (£m)
9.0%
2020
20194
2018
20.3p
£532.6m
9.0
9.8
9.4
2020
20194
2018
20.3
20.2
17.8
2020
20194
2018
242.0
532.6
423.0
Strategic link
Strategic link
Strategic link
A
B
C
D
A
B
C
D
A
B
C
D
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 that we grow our
earnings per share as well as our adjusted EBITDA.
This measure is after we have taken account of
depreciation, interest and tax charges.
Performance
The Group’s adjusted EBITDA was 9.0%.
Performance
The adjusted diluted earnings per share grew
by 0.5%.
Description
In addition to monitoring adjusted 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 25.9% 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 19 for further
details. EBITDA represents profit on ordinary activities before net finance costs,
taxation, depreciation and amortisation.
2. Capital expenditure includes the purchase of property, plant and equipment,
intangible assets.
22
B&M European Value Retail S.A.
Annual Report and Accounts 2020
3. 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.
4. The figures for the financial year ended 30 March 2019 have been restated to
exclude Jawoll, to provide a comparable basis with those for the continuing
operations as at 28 March 2020.
Strategic Report
Non-financial
UK like-for-like sales growth (%)3
Net new stores opened
Colleague Step-Up Programme
+3.3%
2020
2019
0.7
2018
53
2020
2019
2018
3.3
4.7
125
2020
2019
2018
53
70
59
125
202
194
Strategic link
Strategic link
A
B
C
D
A
B
C
D
Strategic link
A
B
C
D
Description
The main driver of our growth is the new store
opening programme. However at the same time
we want to see sustainable 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 +3.3%.
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 36
stores, our Heron Foods store estate in the UK by 12
stores, and our Babou store estate in France by 5
stores in the year under review.
Description
Developing, training and promoting home grown
talent in relation to the management of our stores,
is important in relation to colleague retention and
progression. Our Step-Up programme includes
training over an 8 month period for existing
colleagues in relation to a variety of store
operational areas.
Performance
In the financial year under review, 125 existing
colleagues were promoted under our Step-Up
programme to Store Manager or Deputy Store
Manager roles in the B&M fascia business in the UK.
While the absolute number of promotions this year
was less than the two previous years, the total
number of vacancies in Store Manager and Deputy
Store Manager positions during the year was 26%
less than the previous year.
Profit before tax (£m)
£252.0m
2020
20194
2018
UK market share
c.1.2%
252.0
244.3
2020
2019
229.3
2018
c 0.9
Strategic link
Strategic link
A
B
C
D
A
B
C
D
c.1.2
Link to strategy key
c 1.0
A
B
C
D
Delivering great value to our customers
Investing in new stores
Developing our international business
Investing in people and infrastructure
Description
Our overall profit before tax growth, in addition to
using our adjusted EBITDA as a performance
indicator, to monitor our depreciation,
amortisation and interest expenses and charges.
Performance
We grew our profit before tax by 3.1%.
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 at
least 950 B&M fascia stores is achievable. We
opened 36 net new B&M fascia stores in the year
under review, giving a total estate of 656 stores for
that fascia. We will continue to review our current
store opening programme for FY21 while the
general economic situation stabilises following the
Covid-19 pandemic.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
23
FSGOV Strategic Report
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 of the
system of internal controls by the Audit & Risk Committee and reported
on to the Board which takes overall responsibility for risk management.
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.
The Internal Audit function of the Group considers current business
risks and reports on the effectiveness of internal control procedures to
the Audit & Risk Committee as part of its annual internal audit plan.
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
Category of risk
Strategic
Financial
Operational
Compliance
Tolerance
Medium
Low to medium
Low
Extremely low
Risk management framework
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.
Responsibility for the implementation of processes and
controls in relation to the management of risk is delegated
by the Board to the executive and operational senior
management of the UK and French businesses.
Principal risks heat map
h
g
H
i
t
c
a
p
m
I
8
9
5
2
7
3
1
4
14
12
10 11
13
6
The Internal Audit department reports to the Audit & Risk
Committee at each meeting during the year on the
progress of implementation by management of actions to
mitigate risks.
w
o
L
Low
Likelihood
High
Principal risks
Covid-19 was added as a new principal risk by the Board
in 2019/20 in addition to those set out below. None of the
principal risks included in the 2018/19 financial year have
been removed.
An assessment is made by the Board of the likelihood or
probability of a risk occurring and the impact of the risk
after taking account of mitigating factors and controls. The
assessment of that is set out in the heat map opposite.
The heat map indicates the Board’s opinion of the likely
degree of impact of each risk after taking into account the
risk mitigations referred to in the principal risks table on
pages 25 to 31.
1
2
3
4
5
6
7
Covid-19
8 Warehouse infrastructure
Supply chain
9
IT systems, cyber security and
business continuity
Competition
10 Credit risk and liquidity
Economic environment
11
Commodity prices/cost inflation
Regulation and
compliance
12
Key management reliance
European Union exit
13
Store expansion
International expansion
14 Stock management
24
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Principal risks table
The table below describes (i) the main risk exposures identified by the
Board in relation to our Group businesses, (ii) the mitigating factors which
relate to how we manage each of the risk exposures, and (iii) the linkage
between our business strategy and the relevant risk exposures. We also
summarise (where relevant) key actions arising in the year in relation to
how we have addressed certain aspects of those risks. We have also
indicated where there were any changes in the profile of any of the risks,
which reflects the Board’s view of the current trend in relation those risks.
The risks set out in the table are not an exhaustive list. They represent the
main risks to the Group in relation to the period under review and also
currently, in the opinion of the Board.
Risk number
1
Covid-19
(New risk)
Change
n/a
Description
& potential impact
Strategic
Priority
Risk mitigations
Prolonged social
restrictions due to the
coronavirus or any
reoccurrence of it in the
UK, France or China could
impact consumer demand,
supply chains, the ability
of colleagues to work and
our stores continuing to
operate at expected levels
of profitability. It could
also affect the timing of
new store openings in
relation to completion of
works by contractors.
A
B
C
D
• The categories of goods which the B&M UK and Heron Foods businesses sell
are essential goods within the UK Government guidelines except for a limited
range of items (such as toys).
•
Implementation of social distancing steps in accordance with UK
Government guidance and other measures for colleagues and customers at
stores and in our supply chain.
• Maintaining sufficient liquidity for our on-going operations.
• Maintaining (i) flexibility in our distribution function and with suppliers to
cope with additional demand in relation to food and FMCG items, and (ii)
controls of orders of lines where demand has slowed to protect against
over-stocking in certain categories.
Key Actions in 2019/20:
• From the early stages of the coronavirus restrictions taking effect in China,
contingency plans were put in place by the B&M UK business to protect our
supply chain (as referred to above under the key actions in relation to the
Supply chain risk) without resulting in any material disruption to supplies,
costs or prices, having mainly been offset by stock cover held in our UK
distribution centres of c.12 weeks cover for general merchandise goods.
• From the early stages of the coronavirus restrictions taking effect in the UK,
the B&M UK business increased the volume of orders of food and FMCG
goods to keep pace with the initial spike in demand for those items in
particular. We re-deployed colleagues in our warehouse estate to prioritise
the picking of those goods to replenish stores as quickly as possible to meet
customer requirements.
• Measures were taken to temporarily close 49 B&M UK smaller format town
centre or precinct location stores and furlough colleagues, under the
Government’s Coronavirus Job Retention Scheme to protect jobs. Those stores
represented c.3% and c.2% of revenue and store contribution EBITDA respectively
in the financial year under review. We have since now re-opened these stores
as the overall impacts on trading have begun to moderate.
• As our French business was required to close all of its 101 stores on 15 March
2020, we furloughed staff under the scheme in France in relation to stores,
the warehouse and business support operations. The business has been
operational again since 11 May 2020, and all the stores have now re-opened.
• We have introduced flexible working arrangements for business support
colleagues in relation to working hours and homeworking arrangements in
our UK businesses.
Link to strategy key
A
B
Delivering great value to our customers
Investing in new stores
C
D
Developing our international business
Investing in people and infrastructure
Risk change key
Increased risk
No change
Decreased risk
B&M European Value Retail S.A.
Annual Report and Accounts 2020
25
FSGOV Strategic Report
Principal risks and uncertainties continued
Risk number
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
2
Supply chain
3
Competition
Imported goods from
China represent a
significant proportion of
the Group’s general
merchandise products.
Lead time delays in the
supply chain could result
in lower sales and
potential loss of margin
through higher
markdowns. Disruption to
the supply chain arising
from civil unrest, natural
disasters, diseases and
pandemics, ethical
trading issues or quality
standards failures could
impact our trading
performance and brand
reputation.
The Group operates in
highly competitive retail
markets in the UK and
France which could
materially impact the
Group’s profitability, share
price and limit growth
opportunities.
4
Economic
environment
A reduction in consumer
confidence could impact
upon customer spending
and subsequently
revenue and profitability,
as a result of the
prevailing macroeconomic
conditions in the markets
in which we operate.
A
A
C
D
A
B
C
D
• We have an experienced sourcing team which is responsible for maintaining
an efficient and effective supply chain.
• A range of alternative supply sources are maintained across the product
categories and we are not over-reliant on any one single supplier.
• The Group has anti-bribery and corruption and anti-modern slavery policies
in place in relation to its supply chain.
• A combination of individual buyers and sourcing agent employees conduct
supplier factory visits.
Key Actions in 2019/20:
• We have taken steps in relation to Brexit risks, impact assessments and
actions (as referred to above in relation to that particular risk) to address
impacts in particular on procurement and port clearance of goods.
• During the period that the coronavirus had the main impact on factories and
ports in China, contingency plans were put in place to source supplies of
products from other countries and regions had that become necessary. This
might impact on the price of products and logistics costs to an extent, but to
offset impacts on prices and logistics costs we also sourced some UK
branded general merchandise stock. Our stock cover of c.12 weeks on
general merchandise imported goods resulted overall in very limited impacts
arising and limited recourse only to our contingency plans.
• Continuous monitoring of competitor pricing and product offering.
• Development of new product ranges within the product categories to identify
new market opportunities and target new customers.
Key Actions in 2019/20:
• We have continued to maintain our strict SKU count discipline within our
ranges, enabling us to react quickly to ever changing consumer tastes,
trends and buying habits.
• We commissioned a customer insight survey to measure our strengths and
weaknesses against our competitors, to provide management with
indicators of where we can improve our competitive edge relative to our peer
group and other discount retailers. It is our intention to repeat that exercise or
conduct similar testing each year so we can track progress against each of
the indicators and outputs from those surveys.
• We offer a range of products and price points for consumers which allows
them to trade up and down.
• We maintain a low cost business model that allows us to maintain our selling
prices as low as possible.
• We have an effective forecasting process that enables actions to be
undertaken reflecting economic conditions.
Key Actions in 2019/20:
•
In light of the uncertainty in relation to consumer confidence following Brexit,
we have continued to ensure that we remain focused on only stocking the
top best-selling lines across our ranges, and we have redoubled our efforts
to ensure that our stores have all of our top 100 best-selling products ready
on the shelves on a daily basis.
Link to strategy key
A
B
Delivering great value to our customers
Investing in new stores
C
D
Developing our international business
Investing in people and infrastructure
Risk change key
Increased risk
No change
Decreased risk
26
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Risk number
5
Regulation
and
compliance
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
The Group is subject to a
range of regulatory and
legislative requirements,
including those relating to
the importation of goods,
anti-bribery and
corruption, anti-modern
slavery, anti-tax
avoidance & evasion,
health & safety,
employment law, General
Data Protection
Regulation (“GDPR”),
control of pollution and
contamination to the
environment, the Listing
Rules, Transparency laws
and regulations and the
Groceries Supply Code of
Practice (the “Groceries
Code”). The impact of
failure to comply with
laws and regulations
could lead to financial
penalties and significant
reputational damage.
C
D
• We have a number of policies and codes, including a code of conduct which
incorporates an anti-bribery & corruption policy, which outlines the
mandatory requirements we apply to our business. Our codes and policies
are communicated to staff along with our employee handbook which is
made available to everyone joining the business.
• Management are responsible for liaising with the Group’s General Counsel
(and external advisors where required) to ensure that we identify and
manage compliance with all applicable new legislation and regulations
which apply to us in Luxembourg, the UK and France. Changes in legal and
regulatory matters (including those arising from Brexit) are monitored closely
on a regular basis by the Group’s General Counsel, who provides reports on
new regulatory developments directly to the Board as well as its Committees
and Executive Management. The Internal Audit function of the Group includes
assurance testing and auditing of the Group’s implementation of new areas
of regulatory compliance.
• We have a whistleblowing procedure and policy which allows colleagues to
confidentially report any concerns or inappropriate behaviour within
our business.
•
In relation to anti-modern slavery and other standards relating to human
rights within our supply chain, the Buying teams in our business are charged
with ensuring that every supplier is required to adhere to our Workplace
Policy standards.
• The Company has a Group-wide GDPR policy. Our privacy policies, processes
in relation to data subject rights requests, privacy notices given to all our
colleagues, and privacy notices for users of our websites and subscribers to
our on-line mailing lists are reviewed to ensure they are GDPR compliant.
• Our Groceries Code compliance programme includes guidance and training
for colleagues, monitoring of compliance, reporting of potential non-
compliance issues, dispute resolution procedures and a Code Compliance
Officer who oversees compliance and the resolution of code related issues
with suppliers in the event of escalation being necessary or required by a
supplier. Oversight of our compliance with the Groceries Code is carried out
by management and reviewed by the Audit & Risk Committee as a standing
agenda item at each of the meetings of that committee throughout each
year.
Key Actions in 2019/20:
• We have refreshed our GDPR policies and training across our store network
to reinforce the importance of the essentials principles to be followed in
relation to GDPR (including CCTV matters) in relation to our shop floor
colleagues.
• Our Groceries Code Compliance Officer, Group General Counsel, Internal
Audit function and Chairman of our Audit & risk Committee have actively
engaged during the year with the Groceries Code Adjudicator (“GCA”) at
individual meetings and also fairs and events held by the GCA with other
retailers and suppliers. This has helped to develop a close and constructive
working relationship and dialogue with the GCA as the oversight body in
relation to compliance with the Groceries Code.
•
In relation to the environment, emissions and sustainability our UK business
has continued to invest in initiatives to reduce its carbon footprint with:
(i) continuing to invest in our c.215 Heavy Goods Vehicles which are all Euro VI
emissions standard engine trucks, being the highest standard of fuel efficient
engines for managing levels of emissions, and (ii) the addition of our Bedford
warehouse for deliveries in the South of the UK, which will lead to significant
reductions in miles travelled for deliveries to our stores in the South of England.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
27
FSGOV Strategic Report
Principal risks and uncertainties continued
Risk number
6
European
Union exit
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
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 potentially
other unknown impacts.
Labour restrictions in the
UK could affect our ability
to recruit Distribution
Centres Operatives and
HGV Drivers at budgeted
rates.
A
• We have a Brexit planning strategy which will continue to be monitored
during the official transitional period. Our planning included the assessment
of Brexit risks, impact assessments and mitigations in relation to trade &
tariffs, port disruption, labour shortages and hedging arrangements.
• There are a limited amount of products purchased by our UK businesses
directly from the EU. Those products could also be sourced elsewhere,
de-listed or in a worst case scenario the cost price may increase for certain
limited items as a result of tariffs being imposed.
• We have continued to keep in close contact with our FMCG suppliers, and
our household name branded FMCG goods suppliers have confirmed they
have Brexit plans in place to maintain continuity of supply.
• The B&M UK business is an Authorised Economic Operator which affords it
preferential treatment on the importation of goods, and facilitates efficient
clearance at the ports.
• Our B&M UK business imports the majority of its general merchandise stock
into the Port of Liverpool, as opposed to Southern ports which are considered
to be more at a greater risk of being more heavily impacted.
• Short-term exchange rate volatility is mitigated by our forward currency
position. Any continued volatility beyond that would affect the economic
inflationary environment in the UK as a whole.
Key Actions in 2019/20:
• The Audit & Risk Committee of the Board have continued to monitor Brexit
impacts and mitigations with management. An Internal Audit assurance
review was undertaken of the Brexit planning key assumptions and
mitigations of management, which was reviewed by the Audit & Risk
Committee and reported on to the Board. The results of that review indicated
that management have a comprehensive set of mitigations in place to
ensure the least disruption is incurred by the UK business from Brexit in
relation to its supply chain, product availability import clearances and labour.
•
In relation to the above risk mitigations, testing and assessments carried out
in the year we do not consider the impacts of this risk to have materially
changed in the period under review. We have not been significantly affected
in relation to the availability of labour operatives for our distribution centres,
or experienced any significant issues in relation to our supply chains.
Link to strategy key
A
B
Delivering great value to our customers
Investing in new stores
C
D
Developing our international business
Investing in people and infrastructure
Risk change key
Increased risk
No change
Decreased risk
28
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Risk number
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
7
International
expansion
Developing our
businesses in our new
market territories is
important to the Group’s
strategic plans. Expanding
into new markets creates
additional challenges and
risks which could impact
the overall performance
of the Group, its growth
and profitability.
C
• We have significant international retail experience on our main Board.
• The Group will continue to support the development of the experienced
senior leadership teams in France in key operational areas.
• We assess markets in which we may wish to operate or expand into, to
ensure they are appropriate for value retailing and that product ranges are
developed and selected by local buying teams along with access to leverage
from the Group’s supply chain.
• Continuing to invest in both the infrastructure and technology of our French
business.
Key Actions in 2019/20:
• A strategic review was undertaken in relation to our loss making Germany
subsidiary, Jawoll. That was initiated in response to lower than expected sales
and gross margin performance in the year, in addition to significant increases
in warehouse and transport costs. As a result of the review the Group has sold
the German business. While that has had some immediate financial impacts
with write-off’s of loan funding support which the Group had provided to
Jawoll, as the business had proved to be unsuccessful under our ownership, it
was in the best interests of the Group and all our stakeholders (including the
colleagues working in that business) to have achieved a sale of the business
as a going concern.
• A Distribution Director has been recruited to our French business, Babou. This
will enable us to manage the succession from the pre-acquisition legacy
management of the warehousing function, which had previously been run
on an outsourced basis, to a directly managed warehouse function in Babou.
B
D
• Forward plans have been implemented for additional warehousing capacity
to support our new store opening programme. The Group in the UK has six
separate warehousing locations (having added Bedford this year and closed
an older warehouse in Blackpool). The additional warehouse in Bedford,
which mainly serves as a hub to support our expansion in the South of
England, is now in the initial stages of operation.
• The Group maintains adequate business interruption and increased cost of
working insurance in the event of a loss of warehouse facilities.
Key Actions in 2019/20:
• Three of the major benefits of the Bedford Distribution Centre are:
(i) increasing capacity in the South of England to service store expansion; (ii)
enabling us to close a smaller older legacy warehouse in Blackpool with the
main modern warehouses in Liverpool taking up that capacity; and (iii) over
time leading to significant net reductions in miles travelled by our HGV fleet
servicing deliveries to our stores in the South of the UK.
• Our state of the art Warehouse Management System is now live and
rolled-out within all our main UK Distribution Centres.
8
Warehouse
infrastructure
The loss of one of our
warehousing facilities or
failure to maintain and
invest in our warehousing
and transport
infrastructure as the
business continues to
grow its store portfolio,
could materially impact
short/medium term
trading and the
profitability of the
business.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
29
FSGOV Strategic Report
Principal risks and uncertainties continued
Risk number
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
D
• All critical business systems have third party maintenance contracts in place
and those systems are industry standard retail business systems.
9
IT systems,
cyber security
and business
continuity
The Group is reliant upon
key IT systems, and
disruption to those would
adversely affect business
operations including
those at our warehouses
and stores. The potential
impact of a failure to
protect and maintain our
data and systems could
lead to significant
business disruption,
potential prosecution and
also reputational
damage. This also applies
to any failure to protect
the Group’s IT systems
and data from viruses,
cyber invasive threats,
corruption or sabotage.
A
A
10
Credit risk and
liquidity
The Group’s level of
indebtedness and
exposure to interest rate
and currency rate volatility
could impact the business
and its growth plans.
11
Commodity
prices/cost
inflation
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, logistics and
store overheads.
•
IT investments and budgets are reviewed and approved at Board level.
• We have a disaster recovery strategy and plan in place for all of our key
systems.
• We have an on-going Payment Card Industry compliance strategy.
•
IT security is monitored at Board level and includes penetration testing and
up-to-date security software.
• Significant decisions for the business are made by the Group or operational
boards with segregation of duties enforced on key business processes, such
as the payables process, and a robust IT control environment is in place.
Key Actions in 2019/20:
• We have commenced the roll-out of a card payment encryption system with
Worldpay which is expected to be fully implemented across all the B&M UK
fascia stores by the end of June 2020. This will enhance our IT cyber security
and PCI controls in relation to processing card transactions.
• We monitor cyber security and have continued to update our software with
leading providers which screen, detect and block viruses, malware and
phishing. This has included the addition of Mimecast software to guard against
suspicious emails and email viruses being imported into our systems.
• 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.
Key Actions in 2019/20:
• Hedging of foreign currency rate exposures with instruments in place to
cover forward exchange movements have been maintained throughout the
year in line with our treasury policy.
• Freight rates, energy and currency are forward purchased to mitigate against
volatility and to allow the business to plan and maintain margins.
• Wage increases are offset where possible by productivity improvements.
• Forecasts and projections produced by the business include the expected
impact of the national living wage and therefore the Board’s strategic
planning takes account of that.
Key Actions in 2019/20:
• We have freight rate agreements in place with freight forwarders for 2020
with set prices for several months ahead.
• Energy purchases have also been agreed through an energy broker until
September 2022.
• Productivity savings, including reducing the time spent by colleagues on
administrative tasks in stores, have been achieved by the investment and
roll-out of a digital technology based Workforce Management System.
Link to strategy key
A
B
Delivering great value to our customers
Investing in new stores
C
D
Developing our international business
Investing in people and infrastructure
Risk change key
Increased risk
No change
Decreased risk
30
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Risk number
Description
& potential impact
Strategic
Priority
Risk mitigations
Change
12
Key
management
reliance
The Group is reliant on the
high quality and ethos of
the executive team as well
as strong management
and operational teams.
There is a risk that a lack
of succession planning
for senior colleagues
could impact on the
performance overall of
the business.
13
Store
expansion
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.
14
Stock
management
Ineffective controls over
the management of stock
could impact on the
achievement of our gross
margin objectives. Lack of
product availability or
over-stocking could
impact on working capital
and cash flows.
D
• Key senior and operational management are appropriately incentivised
through bonus and share option arrangements to retain talent.
• The composition of the executive team is kept under constant review to
ensure that it has the necessary resources and skills to deliver the Group’s
plans.
• The Nomination Committee develops succession plans for the Board of
Directors and key senior operational management resourcing positions.
It also reviews the wider senior management resourcing needs of the Group.
Key Actions in 2019/20:
• The Group has continued to strengthen the senior management teams of its
businesses. This has included (i) the appointment of an International Finance
Manager reporting directly to the CFO, to support our French business, (ii) the
appointment of a HR Director reporting directly to the CEO, with strategic
human resources responsibility in relation to each of our Group businesses.
B
• Our CEO actively monitors the availability of retail space with the support of
internal and external property acquisition consultants.
• The flexibility of the trading format allows us to take advantage of a range of
store sizes and locations.
• Each new store opening is approved by the CEO ensuring that property risks
are minimised and that lease lengths are appropriate.
• Where new locations may impact on existing locations, the cannibalisation
effects are estimated and then monitored and measured to ensure that there
is an overall benefit to the Group.
Key Actions in 2019/20:
• The B&M UK business has taken steps, where new store opening
opportunities exist in current store locations, to replace older generation
stores with better quality sites and premises. That mitigates the potential
effects of cannibalisation and also improves the quality and performance of
the estate in addition to new store openings in brand new locations for the
business.
A
• We have a highly disciplined limited SKU count throughout our product
ranges and effective regular markdowns on slow moving product lines.
• Our non-seasonal initial stock orders do not exceed 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 discontinue the product line.
• Consistent levels of stock cover by product category are maintained through
regular reviews of open-to-buy process, supported by the disciplined SKU
count.
Key Actions in 2019/20:
• We have implemented further controls on open-to-buy processes in our
French business with weekly stock cover procurement reporting and controls.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
31
FSGOV Strategic Report
Principal risks and uncertainties continued
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 25 to 31 of the strategic report
and the Group’s prospects.
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 common
practice in the retail sector.
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 on the Group’s business model, future trading
expectations and liquidity of one or more of the principal risks set
out on pages 25 to 31 occurring in the period;
the likely degree and effectiveness of possible mitigating actions in
relation to the principal risks;
the implementation of the Group’s plan following its acquisition of
Babou in October 2018;
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 acquisition facility in relation to the purchase
of Babou of which €93m has been drawn down is repayable in
October 2020, and it has been assumed that it is repaid in full by then.
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. The majority of the
categories of products sold in the Group’s UK businesses are classified
as essential goods under the UK Government’s recent lockdown
measures. The Group did not therefore think there was a case for
testing the impact of a total closure of the business.
A number of other severe but plausible scenarios were considered by
the Board. They included:
• a decline of c.13% per annum of like-for-like annual sales in the
Group’s main UK trading business, B&M, as a result of competition,
changes in consumer buying patterns or potential on-going
disruption following the coronavirus outbreak;
• a decline of 33 basis points per annum in the gross margin of the
Group’s main UK trading business due to higher costs of imported
goods arising from commodity price increases, increases in import
duties and adverse currency exchange rate movements;
• a marked deterioration in working capital creating significant
pressure on liquidity, due to ineffective controls on stock; and
• potential additional costs of working arising in the event of a
continuation or reoccurrence of the coronavirus outbreak resulting
in a permanent increase in the costs of servicing stores and
customers.
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 dividend payments;
limiting capital expenditure to essential maintenance only; and
• suspension of the new store opening programmes.
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
25 March 2023.
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. 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.
32
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Strategic Report
Corporate social responsibility
Investing in people and communities
In the communities we serve we provide shoppers with great prices,
create new local jobs each time we open a new store, and help to sustain areas
where people live and work.
People
Colleagues and progression
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 at our
stores, distribution centres and in our transport operations; and
• ensure that all colleagues are treated with dignity and respect.
See page 34 for more information on diversity and equality
In addition to our overall policy for our
workforce (see box above), we have a
number of other detailed policies relating to
our terms and conditions of employment
and workplace matters. These policies are
designed to ensure that we provide
appropriate safeguards and practices for
the benefit of all our colleagues throughout
all of our different working environments,
and to ensure compliance with legislation.
We reward our store management teams
through an annual bonus scheme, and
we also run regular incentive schemes
to drive and reward high performance.
B&M also has a share incentive plan which
is open to all B&M UK employees after
12 months service, to provide them with the
opportunity to participate in the future
success of B&M as a shareholder.
The outcome and impact of our policies in
the year, in relation to opportunities for new
colleagues and promotions at our stores,
are as follows:
Through our e-based portal (the “Hub”)
we maintain daily engagement with
our Regional and Area Managers in our
central operations team.
• our Group now employs over 34,000
people across our three businesses.
The vast majority of those colleagues
are based in the UK in our B&M stores
business;
• we have created over 1,600 new jobs
alone in B&M in the UK in financial year
under review; and
•
from our policy of developing our
own talent, in the financial year under
review 125 (2019: 202) colleagues
were promoted under our Step-Up
programme to either store manager or
deputy manager positions at B&M UK
stores. There were 26% less vacancies
available under the Step-Up programme
this year, so the 125 promotions made
under it was still a pleasing result.
The programme gives colleagues a great
opportunity to demonstrate their talent and
hard work, and to grow to the next level.
Our business also benefits with our culture,
values and service being maintained through
the continuity which comes with the promotion
and retention of existing colleagues.
This gives them instant information updates,
through smart tablets distributed by B&M,
on a range of business, operational and
workforce engagement matters.
We also provide information to our stores
through the Hub with an online weekly
update on operational matters. This helps
them to plan for the week ahead and keeps
them up to date with latest developments,
product promotions and events at stores.
We carried out a colleague engagement
survey this year with over 2,000 UK
colleagues. This was our biggest ever
survey so far, having extended to include
a number of different areas of our business
for the first time.
We had a 94.9% response rate to that
engagement process. On questions
regarding how well we communicate with
colleagues on matters affecting them, their
job function and how much they feel valued
by the business, we scored on average over
80% on satisfaction ratings on those areas.
Those ratings are a strong indicator of the
culture which exists in our business from the
shop floor, in our distribution centres and
our business and administration functions,
with colleagues from all those areas having
participated in the process.
We also invited general feedback to
questions where we could make
improvements for colleagues. Some of the
main themes from that feedback related to
holidays and other benefits. As a result the
following outputs were agreed by the
senior executive management team at
B&M and have been implemented:
• a colleague reward scheme has been
put in place, which carries an additional
one day’s holiday for each year of
service up to a maximum of five extra
days holiday overall;
• a new flexible holiday exchange policy
for colleagues has been put in place,
where colleagues can take up to one
extra week of holiday a year through a
salary sacrifice scheme. This also has a
tax benefit to colleagues in relation to
extra holidays purchased under the
salary sacrifice scheme; and
• a colleague benefits portal has been
rolled-out which has a number of
schemes that provide discounts on
purchases which colleagues make with a
variety of different retail and leisure
outlets. The platform also has daily offer
and price drop discounts. Colleagues can
also book holidays, cinema tickets and
restaurants with discount offers, vouchers
or loyalty cards through the portal.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
33
FSGOV
Strategic Report
Corporate social responsibility continued
People continued
Diversity and equality
The Company’s Diversity Policy in relation to the Board and
senior management is:
• to ensure as an overall objective that the Company maintains the
necessary skills, experience and independence of character and
judgement of its Board members and senior management team,
for the Group to be managed effectively for its long-term success;
• while making appointments based on merit so the best candidates
are appointed, the Company recognises the value which a diverse
Board and senior management team brings to the business and it
embraces diversity in relation to gender, race, age, educational and
professional backgrounds;
• together with the above criteria, the Company also recognises 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 experience in relation to membership and chairmanship of
Board committees are also relevant factors.
In relation to gender diversity, at the year-end
the Board had 28.6% female representation,
with two out of the seven Board members
being female. That percentage is stated after
the retirement of a third female member of
the Board in January 2020. Full details of the
composition of B&M’s Board are set out on
pages 46 and 47.
In relation to ethnic diversity and the Parker
Review recommendations, the Company
already complies with those in relation to
Board representation.
In line with the Board’s intention to see that
there is a greater mix of diversity by 2020
within the first level of senior management
directly below the Board, there is now one
female member (FY19: none), being the
Group People Director.
At a senior management level generally
across the Group, the percentage of
employees who are female was 45.5% (FY19:
43.9%) at the end of the year under review.
In relation to all the employees of the Group,
the percentage of female colleagues was
58.4% (FY19: 58.6%) at the end of the year
under review.
Our equal opportunities policies in relation to
our workforce are also 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, and that no employee
is discriminated against on grounds of
gender, race, colour, religion, disability or
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.
Gender diversity
Board of Directors
Male
Female
5
2
71.4%
28.6%
Senior managers
Male
Female
30
25
54.5%
45.5%
All employees
See principal risk number 5
on page 27
Male
Female
14,204
19,906
41.6%
58.4%
Number of employees
across the Group
34,110
34
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Workforce engagement
One of our Non-Executive Directors, Carolyn
Bradley, is the Group’s Designated Non-
Executive Director for Workforce Engagement.
Carolyn oversees the effectiveness of our
workforce engagement mechanisms, and
reports to the Board on outputs from those
engagement processes during the course of
the financial year.
This reporting process includes a standing
agenda item at two Board meetings during
each financial year, for the Board to consider
the reports of the Workforce Engagement
Director. This enables the Board to monitor
progress, consider feedback from the
workforce and discuss outputs and actions
with management.
As a result of the reports over the last financial
year it was agreed by the Board with
management that the following main actions
would be carried out:
(i) the annual colleague engagement survey
be broadened out to include a number of
other functions across the B&M UK
business;
(ii) that survey to include satisfaction ratings
which could then be measured over time;
and
(iii) more interactive sessions be held
throughout the year by senior
management with colleagues.
Each of the matters were implemented by
management. The results and feedback from
them were then considered by the Board. The
outputs which were then carried out in
response to them are also noted below.
The colleague engagement survey was the
biggest ever carried out by the B&M UK
business (see page 33 above). The results of it
will enable the Board to monitor progress and
changes each year going forward in relation to
the colleague satisfaction ratings. Those
indicators will also enable the Board to monitor
the culture of the business more closely and see
how effective the business is at responding to
and maintaining its high levels of colleague
satisfaction.
The colleague engagement survey also gave a
reading of the high levels of satisfaction in
relation to:
(i) communication with colleagues; and
(ii) how they are encouraged in relation to
their current roles and to consider
opportunities for progression.
Carolyn has attended listening group sessions
with colleagues during the year, and also one
of the ‘golden quarter’ launch programmes
with the retail operations teams and store
managers. The Chairman and other Non-
Executive Directors also attended golden
quarter launch events this year.
Our culture is very much geared to promoting
and retaining home grown talent, and so
those ratings are particularly important
indicators of a healthy culture overall in
the business.
The senior management team of the B&M UK
business have also established a number of
other engagement mechanisms. They are
designed to keep colleagues aware of the
trading performance and economic conditions
affecting the business, on a quarterly basis.
This is intended to be informative for
colleagues on areas where we have
performed well and also those where the
business could improve. It also enables
colleagues to ask questions directly of senior
management in relation to the business and
its strategic plans.
The above mechanisms also include a range
of general business updates and also
departmental level updates. These two-way
sessions have helped management to identify
with colleagues where they have important
requirements to address ranging from the
provision of resources, support technical
assistance and training.
In response to those outputs a number of
training needs in particular have been
addressed. They range from refresher training
for new recruits in the business support
functions, training in relation to technology
and software and also the provision of
specialist external training in some areas. One
of the main areas of the training which was
externally facilitated this year was for the
Buying team in relation to the practical aspects
of how we apply and follow the requirements
of the Groceries Code in our dealings with
grocery suppliers.
In relation to the colleague Step-Up
programme (see on page 33 above) this year,
members of the senior executive team have
also attended sessions with colleagues to give
them an opportunity to engage directly, and to
provide them with experienced help and
guidance on how to progress within the
business to the next level.
The progress we have made this year has been
very encouraging, in terms of the effectiveness
of the engagement processes in place, the high
degree of colleague satisfaction ratings and
outputs which have been addressed. We will
continue to build on those in the year ahead.
Colleague engagement survey
2,212
Participants
Average satisfaction rating
82%
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
UK and Heron Foods as at 5 April 2019.
With regard to hourly pay of B&M the mean
hourly rate for females is 7.1% 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 19.3% lower
than males and the median hourly rate for
females is 14.1% lower than males.
In relation to bonuses of B&M, 5.1% of females
and 18.2% of males were paid a bonus. The
mean bonus pay for females was 12.9% lower
than males but the median bonus pay for
females was 64.4% higher than males. For
Heron Foods, 2.7% of females and 28.6% of
males were paid a bonus. The mean bonus
pay for females was 12.4% lower than males
and the median bonus pay for females was
27.2% 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 France and
Luxembourg are not included in this data.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
35
FSGOV
Strategic Report
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;
• foster long standing relationships with our suppliers; and
• promote ethical trading policies and practices within our
supply chains.
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
chain, is described in each of the following
sections below.
Local 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
the communities where we operate our
stores, and importantly where our
customers and 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 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. We also actively encourage our
store managers to maintain their local hero
relationships going forward.
With our continued store expansion
programme for the year ahead, we will
continue to create jobs in yet more
communities where new store openings
take place. This is against an environment
more generally in the UK where a number
of retailers have downsized 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
revitalisation of communities through the
new job opportunities and the value we
give to customers at our stores in or close to
the communities where they live. This is
likely to be even more important than
before when communities begin to emerge
from the social and economic impacts of
the coronavirus.
Covid-19
As part of our response to help the wider
community since the on-set of the
coronavirus in the UK, we launched the
following community programmes.
Each of our B&M UK stores are providing
local Food Banks with a £1,500 donation
per store to help people and families
who are the hardest hit economically at
this time.
The B&M UK business also temporarily
extended its B&M staff discount scheme to
NHS workers, giving them the benefit of the
10% discount on all goods purchased by
them at our stores.
In relation to our B&M UK store and
distribution colleagues working across the
business during this particularly difficult
and challenging time, to reward their
remarkable effort and dedication in
helping customers through our stores
and supply chain operations, the B&M
UK business has paid them a 10%
enhancement to their pay rates to
reflect the additional workload and
responsibilities which the current
restrictions and guidelines impose.
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 320
long-term unemployed people secured a
role with B&M (FY19: 250).
Again in the last year at a regional and
national level we were proud sponsors of
Mission Christmas, an initiative run by the
Cash4Kids children’s charity which provides
Christmas presents to underprivileged
children at Christmas time in the UK.
We are a significant headline sponsor.
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 charity
appeal distributed overall more than £14m
of gifts and vouchers in Christmas 2019.
We are proud to have played a committed
part in that for each of the last four years.
36
B&M European Value Retail S.A.
Annual Report and Accounts 2020
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 on a
bi-monthly basis monitor key performance
indicators in relation to health and safety
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.
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 2019/20 for the UK in
B&M there were 102 reported accidents
(0.2 per store) reportable to the Health &
Safety Executive (FY19: 112 reported accidents
and 0.2 per store), in the context of 251 million
shopper visits per annum.
Customers
We aim to 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 our stores in each of our
businesses in the UK 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 sustainability benefits and
provides modern, attractive and clean
environments for customers when they come
to shop with us.
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 pet care products. Each
of these events are aimed at giving even
better promotional value-prices to customers.
Our store colleagues are trained to focus on
taking a helpful and friendly approach with
customers, so that 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.
We carried out a customer exit survey this year
which was externally facilitated by a market
research consultancy. The survey included
over 2,000 members of the public who shop
at a number of value and discount retail stores
in the UK (excluding supermarket chains).
The survey benchmarked B&M against those
other retailers.
In relation to the participants surveyed, 82%
said they either regularly or occasionally shop
at B&M, which made B&M the most popular
general merchandise value retailer in the
survey. B&M was also rated at the top of the
survey for best prices overall, having more of
the brands customers want, having better
category ranges than expected by customers,
and the convenient locations of our stores.
The survey results also showed that customer
wins by B&M tend to come from shoppers
diverting spending away from supermarket
chains, which is an indicator of bargain
hunting continuing to be the direction of travel
for many shoppers.
Strategic Report
Ethical trading and
our supply chain
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.
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 we 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.
This 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. Our customers can then be
assured of the safety, quality and integrity of
the products they buy from us at 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
chains. We support the promotion of ethical
business practices and policies to protect
workers from any kind of abuse or exploitation
in relation to our supply chains.
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.
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 to be provided to our Group
businesses or our sourcing agent.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
37
FSGOV Strategic Report
Corporate social responsibility continued
Our policies, procedures and approach to
verification processes are geared toward what
we think are balanced and reasonable,
practical and effective.
Corruption and anti-bribery
In relation to corruption and anti-bribery,
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.
Each year an annual review is undertaken of
our buying teams in the UK requiring written
reports to be completed of any suspected or
actual incident of bribery or corruption
between any third party and the business,
including written returns being required to
confirm whether or not any suspected
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. Also no such instances have been
reported to Babou.
See principal risk numbers 2 and 5
on pages 26 and 27
new suppliers in China and Asia, and a review
of the 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 social compliance audit reports
prepared by external specialists. Those
external specialists would generally be
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 new audit reports, as part of its
continuing verification processes of approved
suppliers.
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 effectively by the sourcing
agent to ensure that the risk of any modern
slavery issues in our supply chain do not arise.
In relation to the year under review, no reports
have been made to the Group 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 would 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 would 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 the communication of and
adherence to our ethical business practices.
Our 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 Babou’s suppliers are European
based suppliers and wholesalers. Where
Babou source and import products themselves
directly from China they increasingly use the
same suppliers and sourcing agent as B&M,
which is part of an on-going integration and
change-over of Babou’s import’s procurement.
This provides Babou 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 and
again in 2018/19, including checks on social
compliance procedures with suppliers and our
sourcing agent. Sampling of those reports, as
part of a due diligence exercise in Hong Kong,
was undertaken by them in relation to our
sourcing agent’s processes. This also included
a review of the vetting and verification
processes of our sourcing agent in relation to
38
B&M European Value Retail S.A.
Annual Report and Accounts 2020
The Groceries Supply Code of Practice (the
“Groceries Code”) and The Groceries (Supply
Chain Practices) Market Investigation Order
2009 (the “Order”)
The Groceries Code and the Order regulate certain aspects
of the relationships of B&M and Heron Foods in the UK with
their grocery suppliers. Under the Groceries Code retailers
are required to deal with their suppliers fairly and lawfully at
all times.
In the UK, B&M and Heron Foods have established
compliance procedures under the Groceries Code. Those
businesses have materially complied with the Groceries
Code throughout the year under review.
B&M and Heron Foods became designated retailers under
the Order, and thereby subject to the Groceries Code, on
01 November 2018. That designation commenced part way
through the previous financial year 2018/19 and applied for
5 months of that period only. A deferral was agreed with the
Competition and Markets Authority (the “CMA”) for B&M and
Heron Foods to file their first annual compliance report with
the CMA and Groceries Code Adjudicator for the period
from the designation on 1 November 2018 to 31 March 2020.
In relation to that report, there were no formal disputes
under the Groceries Code. There were two Groceries Code
related issues raised by suppliers with B&M and none with
Heron Foods of potential non-compliance with the Groceries
Code. Each of those issues were fully resolved with those
suppliers and none of them remain outstanding.
The report was submitted to our Audit & Risk Committee
members in May 2020 and it was approved by them for
submitting to the CMA and GCA.
In the year under review B&M and Heron Foods have
carried out training and guidance programmes with
colleagues on the Groceries Code. Training has been
provided by external consultants to existing staff. There is
a new joiner guidance document and also external training
packs for new colleagues joining the buying teams in each
of those Group businesses. During the year under review
buying colleagues who deal with grocery suppliers have
also completed declarations confirming their compliance
with the Groceries Code, and, that all instances of any
complaints received under the Groceries Code have been
reported to either the Buying Office Manager or Code
Compliance Officer.
See principal risk number 2 and 5
on page 26 and 27
Strategic Report
B&M European Value Retail S.A.
Annual Report and Accounts 2020
39
FSGOV Strategic Report
Corporate social responsibility continued
Environment
Packaging waste recycled
by the Group in 2020
99.8%
2019: 99.5%
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 and France, as part of our commitment to
providing a sustainable environment in the communities we operate
in and our workplaces. We also continuously look 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.
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. Where we can we seek with
our suppliers to minimise the packaging
products only to what is necessary for the
safe carriage of them.
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.
Overall the total level of packaging waste
recycled by the whole Group in the
financial year 2019/20 (excluding
discontinued operations) was 99.8%.
The nature of our business sourcing and
retailing grocery and general merchandise
products in itself does not involve
significant environmental risks to the
sustainability of our business or its model.
There are however environmental impacts
from our business operations which (as
opposed to being risks) are outputs which
we are conscious of managing to either
reduce the intensity levels of our
consumption of resources while continuing
to grow, or find better or new ways of
contributing in a more sustainable way to
the environment in relation to how we carry
out those operations.
In relation to the latter, one significant
development this year has been the
opening of our new 1m sq ft Distribution
Centre in Bedford. It will service stores
throughout the South of the UK, which
means that over time it will lead to a
significant decrease in miles travelled from
our Distribution Centres to stores in the
South, as traditionally those stores have
been serviced from our North West based
Distribution Centres. The reduction in miles
travelled will reduce overall fuel
consumption and emissions in real terms
from our HGV transport fleet, compared
with miles travelled previously to service
existing stores in the South and new ones
under our new store opening programme.
The other impacts of our policy and how
we have applied it during this year are as
set out below.
40
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Greenhouse gas emissions
In the year around 68% 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
32%. 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 in absolute terms
has and will inevitably continue to increase.
We express our annual emissions as a
quantifiable factor by reference to our
revenues as the basis for our intensity ratio.
Scope 1 GHG emissions and energy use have
been calculated based upon the quantities
of fuel purchased for our commercial fleet,
and Scope 2 GHG emissions and energy use
are calculated from electricity and gas usage
and then using the published factors.
The intensity ratio for emissions is measured
in tonnes of C02e per £1m of turnover. It has
improved in the last year in relation to the UK
businesses of the Group, due to the supply
chain for electricity generally coming from
lower carbon sources, and, with improvements
in B&M’s fleet management distribution
efficiency. For the Group overall (excluding
discontinued operations) it has remained at
a similar level to the prior year. This was due
to improvements made in B&M in the UK.
See principal risk numbers 5 and 13
on pages 27 and 31
Greenhouse gas and energy usage data
FY20 relates to the period from April 2019 to March 2020 and FY19 relates to the period from April 2018 to March 2019:
Greenhouse gas and energy usage data
2019/20
B&M
Heron
UK Subtotal
Babou
Group Total
2018/19
B&M
Heron
Group Total
Scope 1
TCo2e
29,874
8,928
38,802
129
38,931
Scope 1
TCo2e
30,913
8,971
39,884
Emissions
Scope 2
TCo2e
61,835
12,121
73,956
9,820
83,776
Emissions
Scope 2
TCo2e
62,275
15,272
77,547
Total
TCo2e
Intensity
Ratio
91,709
21,049
112,758
9,949
122,707
Total
TCo2e
93,188
24,243
117,431
29.21
53.99
31.94
35.11
32.18
Intensity
Ratio
29.68
62.18
33.27
Scope 1
MwH
122,119
35,918
158,037
472
158,509
Scope 1
MwH
124,545
35,486
160,031
Energy usage
Scope 2
MwH
250,522
47,423
297,945
38,420
336,365
Energy usage
Scope 2
MwH
231,026
49,713
280,739
Total
MwH
372,641
83,341
455,982
38,892
494,874
Total
MwH
355,571
85,199
440,770
Note: The tables above are for the continuing operations of the Group as at the end of the financial year on 28 March 2020 following the sale of Jawoll having been
completed prior to the year-end. The FY2018/19 table does not include Babou as the Group acquired it in October 2019.
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 B&M
UK business were consulted on appropriate
recipients of charitable grants from the
levy proceeds.
In the financial year 2019/20 we have
donated around £714,000 to a range of
charities, including children’s hospitals, air
ambulances and a range of other health
charities in the UK.
Sustainability and efficiency 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 FY20. We have also ordered a further 30 units for
delivery in the Summer of 2020. 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 volumes utilisation and
minimises distribution mileage travelled. We have acquired 130 of these
trailers in FY20; and
• Following the introduction in FY19 at one of our main Distribution Centres
of new manual handling equipment, including lithium Ion picking and
loading trucks, which are more energy efficient than the previous
material handling equipment, we have also rolled-out that new
equipment this year to another two of our Distribution Centres.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
41
FSGOV Strategic Report
Section 172 statement and stakeholders
Our commitment to Section 172
This report describes how the Directors have
had regard to the interests of stakeholders
and other matters referred to in section 172(1)
(a) to (f) of the Companies Act 2006 in
relation to their decision making.
Stakeholders
The Board recognises that to achieve its vision and purpose
(see the box opposite) evaluating and considering the interests
of its stakeholders are key to the Group’s success. The key
stakeholder groups of the business are our customers,
colleagues, suppliers, the communities where we trade and
our investors.
The Company is a Luxembourg registered company and is not
subject to the Companies Act 2006 or to the Companies
(Miscellaneous Reporting) Regulations 2018 (the “Regulations”).
It is however subject to the UK Corporate Governance Code
2018 (the “Code”). The Board also considers the Regulations to
be reflective of best practice. Accordingly, it has followed that
practice where practical, while maintaining its status as a
Luxembourg registered company.
The Board uses a number of mechanisms through which it is
able to determine and appraise the interests of stakeholders
to inform discussion by the Board and its decision-making.
This includes a range of activities from regular management
reports through to other forms of direct engagement by
members of the Board.
We describe below how we have engaged with the particular
key stakeholder groups and considered their interests in the last
year. We have also provided further details of our engagement
with colleagues in our Corporate Social Responsibility Report in
the section on Workforce Engagement on page 35.
Stakeholder engagement
Board decision making and stakeholder interests
Customers
A key element of our purpose is to deliver great value to our customers. One of the key measures and monitors of that
for the Board is like-for-like sales performance. The Board reviews that performance by fascia and by product category
in each of its monthly management reporting packs. Those results have been evaluated and discussed at each of our
regular Board meetings throughout the year.
The Board has reaffirmed the strategy to continue with the programme of new store openings within each of its B&M and Heron Foods
businesses. That also includes the relocation of stores in existing areas where better real estate opportunities exist, and capital and
maintenance expenditure on stores ear-marked for refurbishment within the existing estate. Those investment activities are also set to continue
throughout the new financial year, albeit taking account of interruption to the pace of those programmes due to the coronavirus impacts
The Board have also carried out store visits, as a group and also individually, throughout the year in the UK,
France and Germany. Those store visits enable Board members to observe and receive feedback from customers
directly, as well as receiving feedback from store colleagues and management with respect to customers’ views,
trends and behaviour.
In order to gauge in more depth what our customers think about B&M’s stores and their overall experience relative to
other value and discount competitors in the UK, a customer insight survey was carried out in the year of over 2,000
customers of B&M and those competitors. Details of the results of the survey are set out on page 37 of our Corporate
Social Responsibility Report. One of the key results of the survey showed that customer wins by B&M tended to come
from shoppers diverting spending otherwise from supermarket chains. This is an indicator that the seeking out of
bargain prices by shoppers, who either need or want to enjoy value prices, continues to be the direction of travel for
customer demand in relation to store based retailing in the UK.
Colleagues
There are a number of workforce engagement mechanisms which are in place in the Group, including listening
groups and business updates with colleagues. In 2018/19, ahead of the new Code coming into effect, the Board
appointed Carolyn Bradley, one of its Non-Executive Directors, as the Designated Director for Workforce Engagement.
The Board has established a programme of two main reports being given to it each year by Carolyn. Those reports are
to provide the Board with an overview of the various on-going engagement activities of the Group and the feedback
received from colleagues. This has enabled the Board to review the effectiveness of its engagement mechanisms,
consider what themes are important to the workforce and how they might be addressed by Management.
The Chairman and some of the Non-Executive Members of the Board have also attended a selection of colleague
meetings during the year, including Listening Group sessions, Step-Up promotion training sessions and golden
quarter launch programmes with retail and store management teams.
A strategic review of its German business was carried out during the year, as referred to in more detail on page 14
of the Chief Executive Officer’s Review. The Board was conscious of finding a way forward to preserve the German
business as a going concern and thereby protect as many of the jobs in that business as possible. The Board
ultimately concluded that there was no realistic prospect in the short term of a turnaround of the performance of the
German business while it remained under the Group’s ownership.
42
B&M European Value Retail S.A.
Annual Report and Accounts 2020
generally.
general merchandise offering.
Investing in new stores and increasing our representation in areas throughout the UK means that we can provide access to even more
customers who either need or want a bargain on everyday goods from our food and FMCG ranges, and for their homes and gardens from our
In our French business, the Board took the decision during the year to establish a number of pilot stores within the existing store estate (and also
including some of those from other store openings which had been committed to prior to the acquisition of that business by the Group). The pilot
stores are to test customer reaction to the re-branding and changes to the format and product mix, in order for us to refine the development of
the model and customer proposition before rolling it out across the whole estate.
The Board decided this year that the colleague engagement survey should be extended to a broader range of functions across the B&M UK
business and to a greater number of participants. It also determined that the survey would include satisfaction rates which could then be
measured against the outputs in future years. Each of those recommendations were implemented by the management in carrying out this year’s
survey.
The results of the survey were reviewed by the Board and details of the outputs and actions following that review are included on page 33 of the
Corporate Social Responsibility Report. The level of response to the survey was very high and the satisfaction ratings also were very encouraging.
The satisfaction ratings have provided the Board with a useful number of benchmarks which it is able to test going forward. This will assist the
Board in monitoring the culture of the business and inform its decision-making in relation to the interests of the workforce.
The Board’s decision to continue with the programme of new store openings, and relocations of stores often to larger premises, will create
further new job opportunities and also openings for store based promotions within the expanded estate.
The Board then took the decision to complete a sale of the German business to a private equity led consortium, which also included the
managing director of the business. That decision was made in the best interests of the Group for its stakeholders, and also in the interests of
the workforce of the German business whose jobs were at risk.
Strategic Report
Our vision and purpose
Our vision is to grow our B&M UK business
to at least 950 stores, and to successfully
deploy our direct sourcing limited assortment
business model in France so that we can
maximise the potential of that business.
Our purpose is to deliver great value to our
customers, so that they keep returning to
our stores time and time again, in order
to generate growth in our like-for-like sales,
profits and cash and long term value to
our investors.
Our values of simplicity, trust, fairness and
being proud of what we offer to customers
are at the heart of our business as we strive
all year round to deliver the lowest prices for
the best-selling products which our
customers want.
We are proud to operate in many different
communities and areas, providing access to
our variety goods offering locally, helping
household budgets go that little bit further
and creating new jobs every time we open
a new store.
Stakeholder engagement
Board decision making and stakeholder interests
Customers
A key element of our purpose is to deliver great value to our customers. One of the key measures and monitors of that
for the Board is like-for-like sales performance. The Board reviews that performance by fascia and by product category
in each of its monthly management reporting packs. Those results have been evaluated and discussed at each of our
regular Board meetings throughout the year.
The Board have also carried out store visits, as a group and also individually, throughout the year in the UK,
France and Germany. Those store visits enable Board members to observe and receive feedback from customers
directly, as well as receiving feedback from store colleagues and management with respect to customers’ views,
trends and behaviour.
In order to gauge in more depth what our customers think about B&M’s stores and their overall experience relative to
other value and discount competitors in the UK, a customer insight survey was carried out in the year of over 2,000
customers of B&M and those competitors. Details of the results of the survey are set out on page 37 of our Corporate
Social Responsibility Report. One of the key results of the survey showed that customer wins by B&M tended to come
from shoppers diverting spending otherwise from supermarket chains. This is an indicator that the seeking out of
bargain prices by shoppers, who either need or want to enjoy value prices, continues to be the direction of travel for
customer demand in relation to store based retailing in the UK.
Colleagues
There are a number of workforce engagement mechanisms which are in place in the Group, including listening
groups and business updates with colleagues. In 2018/19, ahead of the new Code coming into effect, the Board
appointed Carolyn Bradley, one of its Non-Executive Directors, as the Designated Director for Workforce Engagement.
The Board has established a programme of two main reports being given to it each year by Carolyn. Those reports are
to provide the Board with an overview of the various on-going engagement activities of the Group and the feedback
received from colleagues. This has enabled the Board to review the effectiveness of its engagement mechanisms,
consider what themes are important to the workforce and how they might be addressed by Management.
The Chairman and some of the Non-Executive Members of the Board have also attended a selection of colleague
meetings during the year, including Listening Group sessions, Step-Up promotion training sessions and golden
quarter launch programmes with retail and store management teams.
A strategic review of its German business was carried out during the year, as referred to in more detail on page 14
of the Chief Executive Officer’s Review. The Board was conscious of finding a way forward to preserve the German
business as a going concern and thereby protect as many of the jobs in that business as possible. The Board
ultimately concluded that there was no realistic prospect in the short term of a turnaround of the performance of the
German business while it remained under the Group’s ownership.
The Board has reaffirmed the strategy to continue with the programme of new store openings within each of its B&M and Heron Foods
businesses. That also includes the relocation of stores in existing areas where better real estate opportunities exist, and capital and
maintenance expenditure on stores ear-marked for refurbishment within the existing estate. Those investment activities are also set to continue
throughout the new financial year, albeit taking account of interruption to the pace of those programmes due to the coronavirus impacts
generally.
Investing in new stores and increasing our representation in areas throughout the UK means that we can provide access to even more
customers who either need or want a bargain on everyday goods from our food and FMCG ranges, and for their homes and gardens from our
general merchandise offering.
In our French business, the Board took the decision during the year to establish a number of pilot stores within the existing store estate (and also
including some of those from other store openings which had been committed to prior to the acquisition of that business by the Group). The pilot
stores are to test customer reaction to the re-branding and changes to the format and product mix, in order for us to refine the development of
the model and customer proposition before rolling it out across the whole estate.
The Board decided this year that the colleague engagement survey should be extended to a broader range of functions across the B&M UK
business and to a greater number of participants. It also determined that the survey would include satisfaction rates which could then be
measured against the outputs in future years. Each of those recommendations were implemented by the management in carrying out this year’s
survey.
The results of the survey were reviewed by the Board and details of the outputs and actions following that review are included on page 33 of the
Corporate Social Responsibility Report. The level of response to the survey was very high and the satisfaction ratings also were very encouraging.
The satisfaction ratings have provided the Board with a useful number of benchmarks which it is able to test going forward. This will assist the
Board in monitoring the culture of the business and inform its decision-making in relation to the interests of the workforce.
The Board’s decision to continue with the programme of new store openings, and relocations of stores often to larger premises, will create
further new job opportunities and also openings for store based promotions within the expanded estate.
The Board then took the decision to complete a sale of the German business to a private equity led consortium, which also included the
managing director of the business. That decision was made in the best interests of the Group for its stakeholders, and also in the interests of
the workforce of the German business whose jobs were at risk.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
43
FSGOV Strategic Report
Section 172 statement and stakeholders continued
Stakeholder engagement
Suppliers
There is a continuing engagement with suppliers led by the Group’s Trading Director, along with key members of the
buying and merchandising teams. This includes a range of supplier visits, meetings and presentations, factory visits
and trade fair meetings in China, the UK and the EU with both existing and new suppliers.
The Board has considered reports and updates from the Audit & Risk Committee during the year in relation to
suppliers and the internal auditing of ethical business processes. Further details of those processes are set out on
pages 37 and 38 of the Corporate Social Responsibility Report.
The Group’s trading relationship with its Hong Kong sourcing agent is important to the procurement of general
merchandise products imported from China. It is critical to the Group that the sourcing agent maintains appropriate
external audit assurance checks on suppliers, to ensure that suppliers continue to meet our minimum standards of
ethical business compliance.
B&M and Heron Foods implemented compliance procedures and training programmes in relation to the requirement
to ensure they maintain standards of fair dealing with suppliers under the Groceries Supply Code of Practice (the
“Groceries Code”). Any complaints under the Groceries Code are reviewed by the Audit & Risk Committee at each of
its meetings throughout the year and reported to the Board. This also provides the Board with an effective reporting
mechanism on a substantial part of our Food and Grocery supplier trading relationships, which represented over
£2bn of our turnover in the year under review.
As well as suppliers of stock for the Group’s retail stores, we have a number of specialist contractor suppliers in
relation to our new and existing store fit-out and refurbishment programmes. The majority of those suppliers have
established relationships with B&M.
The Board carried out a review during the year to ensure that the Group’s internal audit team were satisfied that the Group’s sourcing agent
had effective checking systems in place to ensure that only suppliers complying with the requisite standards are used or recommended by the
sourcing agent to the Group. This ensures that suppliers know exactly what the on-going requisite standards are from our sourcing agent, in
order for them to be able to ensure they can meet and continue to maintain those standards for the benefit of their own businesses in relation
to their on-going trading relationships with us.
The Board has considered updates from the Audit & Risk Committee in relation to the responsibilities which the Group owes to suppliers under
the Groceries Code. Having noted that there had been no material non-compliance issues under the Groceries Code, the Board was satisfied
that effective compliance procedures have been maintained by B&M and Heron Foods with our Food and Grocery suppliers.
The relationships with our store fit-out contractors are monitored by the CEO on behalf of the Board to ensure the smooth running of the store
opening programmes and the continuity of those supplier relationships. In return for continuing to meet certain benchmark quality standards for
their work, they are awarded repeat projects on new store openings. They have continued to receive significant work-streams from B&M
throughout the year under review and benefit directly from the Board’s decision to continue with its store opening programmes.
Communities
Our businesses in the UK operate across a wide range of different locations and areas, both in relation to our stores
and warehouse operations. That can range from retail parks on the edge of towns for some of our B&M Homestores,
through to local community shopping parades for some of our Heron Food stores. The Group’s strategy is to reach out
to as many customers as we can where we are not represented at all or are significantly under-represented.
Under the Board approved plan of investment in new store opening programmes in the year under review, we opened a total of 69 new stores
in the UK (including relocations and closures) and created in total another 2,245 new jobs in the UK. Our store opening programmes are set to
continue as part of our growth programme going forward. This provides access to more communities all the time to our value-led customer
proposition, local jobs and investment in the sustainability of the areas where we operate.
The Board recognises that there are also environmental impacts, particularly from the expansion of our operations.
The Board has also continued to support investments this year in a range of other environmental initiatives, including the continued roll-out of
The opening this year of our Bedford Distribution Centre to service stores in the South of England will lead over time
to a reduction in the number of distribution miles travelled, as those stores had been serviced previously by our
North-West Distribution Centres. This is one aspect of how we have invested in doing things in a more efficient way,
which will also produce positive environmental outcomes.
In response to the impacts of the coronavirus on communities the Board asked the management team to look at how
we could try and help vulnerable people and those working in the front line to help others.
Investors
Our investors include shareholders, bondholders and banks. There are a variety of mechanisms which the Board has
in place to enable it to understand their interests and consider them in its decision-making.
The management team hold organised roadshow presentations and one-to-one meetings with investor groups each
year on the announcements of our half-year and full-year results. They also hold meetings during the year with both
existing and potential new institutional investors.
The Board has received investor relations reports and market updates from its Investor Relations Director and its
corporate brokers at Board meetings during the year. They also form a regular agenda at its strategy day meetings
each year.
LED lighting programmes at stores, upgrades to our HGV transport fleet, investments in wedge trailers to increase capacity per mile, and
investment in energy efficient lithium powered manual handling equipment in two more of our warehouses. Details of those initiatives are set
out on page 41 of the Corporate Social Responsibility Report.
We have donated £1,500 per B&M store in the UK to local foodbanks totalling £1m nationally. We also temporarily extended our store discount
scheme to all National Health Service workers during the peak of the crisis.
One of the main decisions during the year in relation to capital allocation, was the Board’s decision to sell and leaseback the new 1 million sq ft
Bedford Distribution Centre. The Group had invested in the land and development of the warehouse, but was in a position to release the capital
in it by marketing it for sale and leasing it back. As announced to shareholders in November 2019 that would allow for up to £150m surplus cash
to be returned to shareholders. That transaction was subsequently completed during the year, and a special dividend of 15.0 pence per share
was paid to shareholders in April 2020 in accordance with the capital allocation policy of the Company. The details of our capital allocation policy
are set out on page 21 of the Financial Review.
44
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Strategic Report
Board decision making and stakeholder interests
The Board carried out a review during the year to ensure that the Group’s internal audit team were satisfied that the Group’s sourcing agent
had effective checking systems in place to ensure that only suppliers complying with the requisite standards are used or recommended by the
sourcing agent to the Group. This ensures that suppliers know exactly what the on-going requisite standards are from our sourcing agent, in
order for them to be able to ensure they can meet and continue to maintain those standards for the benefit of their own businesses in relation
to their on-going trading relationships with us.
The Board has considered updates from the Audit & Risk Committee in relation to the responsibilities which the Group owes to suppliers under
the Groceries Code. Having noted that there had been no material non-compliance issues under the Groceries Code, the Board was satisfied
that effective compliance procedures have been maintained by B&M and Heron Foods with our Food and Grocery suppliers.
The relationships with our store fit-out contractors are monitored by the CEO on behalf of the Board to ensure the smooth running of the store
opening programmes and the continuity of those supplier relationships. In return for continuing to meet certain benchmark quality standards for
their work, they are awarded repeat projects on new store openings. They have continued to receive significant work-streams from B&M
throughout the year under review and benefit directly from the Board’s decision to continue with its store opening programmes.
Communities
Our businesses in the UK operate across a wide range of different locations and areas, both in relation to our stores
and warehouse operations. That can range from retail parks on the edge of towns for some of our B&M Homestores,
through to local community shopping parades for some of our Heron Food stores. The Group’s strategy is to reach out
to as many customers as we can where we are not represented at all or are significantly under-represented.
Under the Board approved plan of investment in new store opening programmes in the year under review, we opened a total of 69 new stores
in the UK (including relocations and closures) and created in total another 2,245 new jobs in the UK. Our store opening programmes are set to
continue as part of our growth programme going forward. This provides access to more communities all the time to our value-led customer
proposition, local jobs and investment in the sustainability of the areas where we operate.
The Board has also continued to support investments this year in a range of other environmental initiatives, including the continued roll-out of
LED lighting programmes at stores, upgrades to our HGV transport fleet, investments in wedge trailers to increase capacity per mile, and
investment in energy efficient lithium powered manual handling equipment in two more of our warehouses. Details of those initiatives are set
out on page 41 of the Corporate Social Responsibility Report.
We have donated £1,500 per B&M store in the UK to local foodbanks totalling £1m nationally. We also temporarily extended our store discount
scheme to all National Health Service workers during the peak of the crisis.
One of the main decisions during the year in relation to capital allocation, was the Board’s decision to sell and leaseback the new 1 million sq ft
Bedford Distribution Centre. The Group had invested in the land and development of the warehouse, but was in a position to release the capital
in it by marketing it for sale and leasing it back. As announced to shareholders in November 2019 that would allow for up to £150m surplus cash
to be returned to shareholders. That transaction was subsequently completed during the year, and a special dividend of 15.0 pence per share
was paid to shareholders in April 2020 in accordance with the capital allocation policy of the Company. The details of our capital allocation policy
are set out on page 21 of the Financial Review.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
45
Suppliers
There is a continuing engagement with suppliers led by the Group’s Trading Director, along with key members of the
buying and merchandising teams. This includes a range of supplier visits, meetings and presentations, factory visits
and trade fair meetings in China, the UK and the EU with both existing and new suppliers.
The Board has considered reports and updates from the Audit & Risk Committee during the year in relation to
suppliers and the internal auditing of ethical business processes. Further details of those processes are set out on
pages 37 and 38 of the Corporate Social Responsibility Report.
The Group’s trading relationship with its Hong Kong sourcing agent is important to the procurement of general
merchandise products imported from China. It is critical to the Group that the sourcing agent maintains appropriate
external audit assurance checks on suppliers, to ensure that suppliers continue to meet our minimum standards of
ethical business compliance.
B&M and Heron Foods implemented compliance procedures and training programmes in relation to the requirement
to ensure they maintain standards of fair dealing with suppliers under the Groceries Supply Code of Practice (the
“Groceries Code”). Any complaints under the Groceries Code are reviewed by the Audit & Risk Committee at each of
its meetings throughout the year and reported to the Board. This also provides the Board with an effective reporting
mechanism on a substantial part of our Food and Grocery supplier trading relationships, which represented over
£2bn of our turnover in the year under review.
As well as suppliers of stock for the Group’s retail stores, we have a number of specialist contractor suppliers in
relation to our new and existing store fit-out and refurbishment programmes. The majority of those suppliers have
established relationships with B&M.
The Board recognises that there are also environmental impacts, particularly from the expansion of our operations.
The opening this year of our Bedford Distribution Centre to service stores in the South of England will lead over time
to a reduction in the number of distribution miles travelled, as those stores had been serviced previously by our
North-West Distribution Centres. This is one aspect of how we have invested in doing things in a more efficient way,
which will also produce positive environmental outcomes.
In response to the impacts of the coronavirus on communities the Board asked the management team to look at how
we could try and help vulnerable people and those working in the front line to help others.
Investors
Our investors include shareholders, bondholders and banks. There are a variety of mechanisms which the Board has
in place to enable it to understand their interests and consider them in its decision-making.
The management team hold organised roadshow presentations and one-to-one meetings with investor groups each
year on the announcements of our half-year and full-year results. They also hold meetings during the year with both
existing and potential new institutional investors.
The Board has received investor relations reports and market updates from its Investor Relations Director and its
corporate brokers at Board meetings during the year. They also form a regular agenda at its strategy day meetings
each year.
FSGOV 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
Ron McMillan
Senior Independent Non-Executive
Director and Chairman of the
Audit & Risk Committee
Appointment: March 2018
Appointment: December 2004
Appointment: May 2011
Appointment: May 2014
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.
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.
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 23 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.
Committee membership:
NOM
NOM
—
A&R
REM
NOM
A&R
Audit & Risk
REM
Remuneration
NOM
Nomination
Committee Chair
46
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
Tiffany Hall
Independent
Non-Executive Director and Chair
of the Remuneration Committee
Carolyn Bradley
Independent
Non-Executive Director
Gilles Petit
Independent
Non-Executive Director
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. Tiffany is the Chair of
the Remuneration Committee and a
member of 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. Gilles is a member of
the Audit & Risk and Nomination
Committees of B&M.
External appointments
He is currently a Non-Executive
Director of Maisons du Monde and
Lagardère SCA.
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,
Remuneration and Nomination
Committees of B&M.
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.
Carolyn is also the Designated
Non-Executive Director for Workforce
Engagement.
Outgoing members
Kathleen Guion
Non-Executive Director
Retirement: January 2020
Since the time of the IPO of the
Company in June 2014 until her
retirement from the Board in January
2020, Kathleen was the Chair of the
Remuneration Committee and also a
member of the Nomination Committee
of B&M.
Thomas Hübner
Senior Independent
Non-Executive Director
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.
Committee membership:
REM
NOM
A&R
REM
NOM
A&R
NOM
B&M European Value Retail S.A.
Annual Report and Accounts 2020
47
FSSR Corporate Governance
Corporate governance report
We have continued to develop
our governance in line with the
recent changes under the new
UK Corporate Governance
Code.
Peter Bamford
Chairman
Chairman’s introduction
We have continued this year to embrace the recent developments
under the revised UK Corporate Governance Code 2018 (the “Code”)
and other UK regulations in relation to corporate governance
objectives and practices, within our own governance framework and
Board agenda programme. The main elements arising from this
during the year, and also other important corporate governance
developments of the Group are summarised below.
Stakeholder engagement
One of the main themes of the recent corporate governance changes
relates to the engagement of the business with its stakeholders, how
the Board has discharged its duties to promote the success of the
Company, and in doing so how it has had regard to the interests of its
stakeholders in its decision making processes.
As part of our Board meeting programme and activities during the
year we have received reports from the wider management team on
areas in particular relating to customer insights and colleague
engagement which I refer to further below. We have also had two
main colleague engagement update reports during the year from
Carolyn Bradley, who we appointed as our Designated Non-Executive
Workforce Engagement Director in the 2018/19 financial year.
The interests of our various stakeholder groups have also featured in
our deliberations in relation to our contingency plans relating to the
operation of our UK stores during the coronavirus restrictions. In
particular our priority has been to ensure that the welfare of our
colleagues and customers visiting our stores is protected, while
helping customers to continue to access essential goods from our
stores during a very challenging time.
Details of the stakeholder interests which we have considered in our
normal business operations during the year and in the period from
the on-set of the coronavirus are set out in our section 172 statement
and stakeholder report on pages 42 to 45, our Principal Risks Report
on pages 24 to 31 and also in our Corporate Social Responsibility on
pages 33 to 41.
Culture and values
During the year we have considered how our values of simplicity,
trust, fairness and being proud of what we offer to customers are
reflected in how we operate culturally as a business. This ties-in with
the engagement processes with our stakeholders and outputs from
those.
The monitors we used in relation to our culture as a business, in
particular, included discussions with management, a much broader
based colleague feedback survey this year involving over 2,000
colleagues from a range of different functional areas of our business,
and an independently commissioned customer insight survey. More
details of each of those surveys and the outcomes and actions
arising from them can be found on pages 33 and 37 above.
The results of both those surveys were encouraging indicators of how
we remain focused on our main purpose as a business, which is to:
• deliver great value to our customers so they keep returning to our
stores time and time again; and
• generate growth in our like-for-like sales, profits and cash and
long term value to our investors.
I am pleased and proud to say that in relation to our colleague survey
we had a very high response rate, and also a strong satisfaction
rating in relation to how colleagues feel they are valued by the
business. Both of those results are gratifying but we remain
conscious of the need to build on that in the years ahead within
all of our businesses as a Group as we continue to grow.
Another measure of who we are and how we operate as an
organisation, is reflected in the continued store opening programme
we have had in the UK. The continued investment in that programme
provides more communities with access to our value pricing
proposition, helping household budgets and creating new local jobs
in areas in some cases where other retailers have retrenched. Our
popularity in those communities with customers is reflected in our
continued sales growth and success in relation to the new stores we
open each year.
48
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
Looking ahead we will continue to develop and refine our
engagement mechanisms with stakeholders in relation to each of
our Group businesses. Those mechanisms provide us with useful
objective tests of how well we are performing culturally as a business
and where we can make improvements in the future.
Board changes
We have continued to evolve the membership of the Board since the
IPO during this last year again.
We appointed Gilles Petit to the Board on 02 May 2019 as an
Independent Non-Executive Director to address our requirement for
an appointee with a senior executive background in European
retailing.
There were also the retirements of Thomas Hübner (now sadly
deceased) and Kathleen Guion during the year who both made
significant contributions to the Board as Non-Executive Directors
since the IPO of the Company in 2014.
Tiffany Hall has succeeded Kathleen to the role of Remuneration
Committee Chair during the year, and other Committee changes are
referred to on page 54 below of the Nomination Committee report.
During the year we have also carried out a search for a new
Chief Financial Officer (“CFO”), to be appointed in succession to
Paul McDonald who is to retire from B&M in 2021. Further details
of that process are set out in the Nomination Committee report on
page 54 below.
Diversity
The diversity policy in relation to the Board and senior management
remains the same as when we published it for the first time last year.
Details of it are set out on page 53 below. In relation to Non-Executive
Directors, we lost one female member of our Board due to retirement
this year. However two of the three appointments made to the Board
in the last two years have been female, as we have consciously
taken account of gender balance under our policy in relation to our
Board succession processes. We also now have a female member of
the next level of senior management immediately below the Board,
having recruited Allison Green as the Group People Director this year.
Board Effectiveness
As part of the normal three year cycle under the Code, we carried out
an externally facilitated Board Evaluation process this year. Details of
the feedback from that review and the programme of actions relating
to key items from it are set out on page 55 below. The overall results of
that review were that the Board, its Committee’s and each of the
Directors remain effective in and continue to demonstrate
commitment to their roles.
Peter Bamford
Chairman
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
49
FSSR Corporate Governance
Corporate governance report continued
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 July 2018 (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 7 members comprising the Chairman,
2 Executive Directors & 4 Independent Non-Executive Directors.
See pages 46 and 47 for more information
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
Workforce
Engagement
NED
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 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.
1. 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;
2. Nomination Committee
This committee is made up of the
Chairman, CEO and 4 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;
– monitoring the independence and
– identifying and nominating
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; and
candidates, for approval by the
Board, to fill Board vacancies as and
when they arise;
– ensuring, in conjunction with the
Chairman of the Company, that new
Directors receive a full, formal and
tailored induction;
– keeping under review the leadership
– maintaining effective oversight of
compliance by our UK businesses
with the Groceries Supply Code of
Practice.
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.
3. 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;
– designing share schemes for
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.
4. Workforce Engagement NED
Carolyn Bradley is the Designated
Non-Executive Director for Workforce
Engagement
The main responsibilities of this role are
the governance and oversight of the
following matters:
– to consider with the Board the
mechanisms required from time to time
by the Group in relation to Workforce
Engagement to enable the Board to be
appropriately appraised on colleague
engagement;
– to co-ordinate such direct
engagement between the Non-
Executive Directors and the workforce
as is considered appropriate;
– to ensure the Workforce Engagement
mechanisms which are approved by
the Board are put in place and are
effective;
– to report on the outputs from those
mechanisms to the Board at least
twice a year, and make any
recommendations arising from those
reports to the Board; and
– the holder of this office is also
supported by members of the senior
executive team of the Group who
are responsible for the day to day
implementation of the Workforce
Engagement mechanisms by the Group.
See pages 57 to 61 for a copy
of the Committee’s report
See pages 54 and 55 for a copy
of the Committee’s report
See pages 62 to 72 for a copy
of the Committee’s report
See pages 35, 42 and 43
on Workforce Engagement
50
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Executive Management
The Executive Directors of the Group and of its three 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 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.
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 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 50). The reports of
each of the Committees for the year under review are set out on pages
54 and 55, 57 to 61 and 62 to 72.
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 and Babou businesses.
Members of the broader senior management teams of B&M, Heron
Foods 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 putting
in place in relation to 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 and Babou
businesses of the Group.
Corporate Governance
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;
Approve
• 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;
• approving the structure, size and composition of the
Board and remuneration of the Non-Executive
Directors;
• approving and supervising any material litigation,
insurance levels of the Group and the appointment of
the Group’s professional advisers;
• ensuring a satisfactory dialogue with shareholders
based on the mutual understanding of objectives;
Ensure
• ensuring the maintenance of a sound system of
internal controls and risk management; and
•
reviewing the Company’s overall corporate governance
and approving the division of responsibilities of
members of the Board.
Review
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.
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 5 Board meetings during the financial year 2019/20.
A sixth Board and other committee meetings were scheduled for March
2020 along with the Group strategy day, each of which had to be
cancelled due to the coronavirus travel restrictions. Consequently,
groups of directors and members of the broader senior management
team have had regular updates by conference calls in the meantime.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
51
FSSR Corporate Governance
Corporate governance report continued
Attendance at Board and Committee meetings
was as follows:
Meetings during 2019/20
Board
5
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
4
5
4
Directors
Attended
Attended
Attended
Attended
Peter Bamford –
Chairman
Simon Arora
Paul McDonald
Ron McMillan
Tiffany Hall
Carolyn Bradley1
Gilles Petit2
(appointed 02 May 2019)
5
5
5
5
5
3
4
–
–
–
4
–
4
4
Directors who retired from the Board during 2019/20:
Kathleen Guion (retired
4
–
01 January 2020)3
5
5
–
5
5
3
4
4
–
–
–
4
4
1
–
3
1 Carolyn Bradley notified the Chairman prior to her appointment to the Board on
15 November 2018 that she would she would be unable to attend one of the Board
and Nomination 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 was also unable to attend another Board and Nomination Committee
meeting which were both held on the same day, due to extreme weather
conditions resulting in flights being suspended from London to Luxembourg. She
had a full attendance record of Audit & Risk Committee meetings throughout the
year, and also of Remuneration Committee meetings held since being appointed
to that committee on 16 January 2020.
2 Gilles Petit notified the Chairman prior to his appointment to the Board on 2 May 2019
that he would be unable to attend one of the Board and Nomination Committee
meetings which were both held on the same day, due to prior personal
commitments which was taken into account on his appointment being made to
B&M. He otherwise had a full attendance record during the year under review.
3 Kathleen Guion retired from the Board on 01 January 2020. She had a full
attendance record of all Board and Committee meetings during the term of her
office in the year under review.
4 Thomas Hübner (deceased) was a member of the Board until 01 May 2019 and
retired on that date. Sadly he died later in 2019. As there were no Board or
Committee meetings after the previous financial year-ended 31 March 2019 up to
the date of his retirement on 01 May 2019, there are no meetings to report his
attendance on in this report.
The Company held one general meeting of shareholders in the year
under review, being the Annual General Meeting on 26 July 2019.
During the year meetings of the Non-Executive Directors and Chairman
have been held. A meeting of the Non-Executive Directors without the
Chairman being present was due to be held but was cancelled due to
the coronavirus restrictions.
One-to-one meetings of the Chairman with each of the Independent
Non-Executive Directors were also cancelled due to the coronavirus
restrictions.
52
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Board composition
During the financial year 2019/20 Gilles Petit was appointed as an
additional Non-Executive Director. Kathleen Guion and Thomas Hübner
retired as Non-Executive Directors.
The Board comprises the Chairman, 2 Executive Directors, being the
CEO and CFO, and 4 Independent Non-Executive Directors.
Chairman
Executive Directors
Independent
Non-Executive Directors
1
2
4
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 Ron McMillan, Tiffany Hall, Carolyn Bradley, Gilles Petit
(appointed 2 May 2019), Thomas Hübner (retired 1 May 2019) and Kathleen
Guion (retired 01 January 2020) being Independent Non-Executive
Directors. Following the year end this requirement continues to be met.
Each of the Independent Non-Executive Directors who served during the
year under review was and continues to be 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.
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 2020, SSA Investments
(together with Praxis Nominees Limited as its nominee) held 14.98% of the
total issued shares in the Company.
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 other Board decisions. His role is
supported by the Group CFO and the senior executive management
teams in each of the Group’s businesses.
Corporate Governance
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 62 to 72.
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.
Details of the Company’s gender diversity in relation to the management of
the Group are included in the Corporate Social Responsibility Report on
page 34. By the end of the year under review the Company had two female
Board members. One of the female Board members also chairs one of the
three main standing Committees of the Board. The percentage of female
Board members as at the year-end was 28.6%. It has reduced from the
year-end position last year of 37.5%, as a result of the retirement of
Kathleen Guion who had been with the Board since the IPO of the
Company in 2014. The current 28.6% female membership of the Board
is however a significant improvement on the position prior to the
recruitments of Tiffany Hall and Carolyn Bradley in the 2018/19 financial
year, with the Board having had only one female member prior to that
since the IPO in 2014.
As reported last year the first level of senior management below the Board
did not have any female representation. However, in line with the Board’s
intention to see that there is a greater mix of diversity by 2020 within the
first level of senior management directly below the Board, there is now a
female member at that level. She was recruited in February this year to the
role of Group People Director.
Conflict of interests
Simon, Bobby and Robin 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 new 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 provides
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.
There is a Board approved policy in relation to the use and chartering by
the Group of 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 pages 77 and 78 in relation to details of related party transactions
entered into in the financial year 2019/20 and also as set out in note 30
on pages 135 and 136 of the financial statements.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
53
FSSR Corporate Governance
Corporate governance report continued
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 Committee’s terms of reference provide that it will meet not less than
twice a year, and it has had five meetings in the year under review.
During the year under review the main activities of the Committee were
as follows:
1. Board succession
As reported last year the Committee, led by the Chairman, oversaw the
process of identifying and recommending the appointment of Gilles Petit
as a new Independent Non-Executive Director who joined the Board on
02 May 2019. The search was 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.
The Committee also carried out a search for a new Chief Financial
Officer (“CFO”) to be appointed in succession to Paul McDonald,
following his decision to retire from the business in 2021 after more than
10 years in that role. Sam Allen Associates (“SAA”) were retained in
relation to that search process. As a result of that process Alex Russo is
to be appointed as an Executive Director and CFO of the Company, on a
start date to be mutually agreed by no later than June 2021. Alex Russo
is currently the Group Finance Director of UK retailer Wilko, and
previously spent five years as an Executive Director and CFO at Asda.
SAA are a signatory to the voluntary code of conduct for executive
search firms, and they have had no other connection with the Group.
In the year under review, following the retirements of Thomas Hübner on
1 May 2019 as the Senior Independent Director and Kathleen Guion as an
Independent Non-Executive Director, the compliment of Independent
Non-Executive Directors was four. This complies with Code requirements
as referred to on page 52 above.
Having regard to the diversity objectives and criteria approved by the
Board last year, it currently has two female Board members out of seven
being 28.6% being female members (see further on page 53).
2. Wider executive team developments
The Committee and the CEO continued with the plan agreed in FY18/19
for the strengthening of the senior management team, as the business
of the Group continues to grow at a significant rate.
In FY19/20 the Group appointed Allison Green as the Group
People Director.
In France a Distribution Director was recruited this year, with the
distribution function having being fully integrated into the business
of Babou in place of the out-sourced structure that was in place prior to
the acquisition. Following the year-end Anthony Giron was appointed as
President and CEO of Babou on 11 May 2020. He has senior executive
strategic and operational experience in the development of retail
businesses and brands in France (including HEMA) and international
expansion. Russell Reynolds Associates were also retained in relation
to that search process.
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 in the UK and France.
The members of the Committee during the year under review were Ron
McMillan (Chair), Thomas Hübner (retired 01 May 2019), Carolyn Bradley
and Gilles Petit (appointed 02 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 46 and 47 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 50 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. The Group’s Internal Audit function and the
Luxembourg and UK audit partners of the Group’s external auditors
also attend.
The Audit & Risk Committee Report on pages 57 to 61 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 until retirement on 01 January
2020), Tiffany Hall (Chair from 01 January 2020), Ron McMillan and
Carolyn Bradley (appointed to the Committee on 16 January 2020).
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 50 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.
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 62 to 72 sets out details
of the role and activities of the Remuneration Committee in the last
financial year.
Nomination Committee
The Nomination Committee consists of 6 Directors, being the Chairman of
the Board (who chairs the Nomination Committee), the CEO and each of
the 4 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), Thomas Hübner
(retired 01 May 2019), Ron McMillan, Kathleen Guion (retired 01 January
2020), Tiffany Hall, Carolyn Bradley and Gilles Petit (appointed on 02 May
2019). 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 50 above.
54
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
3. Committee and other appointments
During the year the Committee recommended:
•
•
•
•
the appointment of Ron McMillan, who has been on the Board since
the IPO, to be the Senior Independent Director in succession to
Thomas Hübner;
the appointment of Tiffany Hall as Chair of the Remuneration
Committee with effect from 01 January 2020 in succession to
Kathleen Guion who retired from the Board on that date;
the appointment of Carolyn Bradley to be a member of the
Remuneration Committee; and
the appointment of Gilles Petit as a member of the Audit & Risk and
Nomination Committees.
Each of the above recommendations were confirmed and approved by
the Board.
Board and Committees effectiveness review
External effectiveness reviews were conducted of the Board, Chairman
and Board Committee’s with Lintstock Limited (“Lintstock”) in the year
under review who were retained as specialist board review consultants.
Lintstock had no other commercial relationship with the Group. The last
external Board review was carried out in the financial year 2016/17.
The review process included the completion of confidential
questionnaires by all of the Directors and the General Counsel.
Kathleen Guion also participated in the process as she had been a
Board member for the first three quarters of the financial year under
review. Reports on the findings from the reviews were produced by
Lintstock for the Board and considered by the Directors.
The key areas of focus identified for the future were culture and values,
succession planning, and international strategy including the resolution
of the future of the business in Germany and the development of the
model of the business in France. In relation to those areas so far the
following steps have been taken:
• continued progress in the succession planning programme in
In relation to other Code matters regarding the effectiveness of the
Board and its members, where Directors have external appointments,
the Committee and the Board are satisfied that they do not impact on
the time the Director needs to devote to the Company.
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 18 September 2020.
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.
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 induction of Gilles Petit as the new Non-Executive Director 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 of the B&M UK fascia stores and
Heron Foods stores;
• meetings with senior management of Babou at their headquarters
in France, including Distribution Centre and Store Tours.
relation to Executive and Non-Executive succession to the Board, and
in relation to the wider B&M UK executive management team and
the French business as referred to above. There is still a significant
amount of work to be done in developing succession plans and
strengthening the senior management team. This is a continuing
programme of action for the Committee and the management team;
In relation to corporate governance he was 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. He also had meetings with the
Group’s General Counsel in relation to the workings of the Board and
each of its Committees.
•
the sale of our interest in the German business was completed on
27 March 2020 (as referred to further on page 14 above); and
• a pilot group of stores from within the existing store estate in France
have been converted to the B&M format to test the implementation
and development of the model in that business. While those stores
are ready, the period for testing the performance of those stores has
been interrupted by the coronavirus restrictions in France, with all of
our French stores having been closed since early March until the
lifting of those restrictions on 11 May 2020.
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 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 and Babou businesses.
The Nomination Committee 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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
55
FSSR Corporate Governance
Corporate governance report continued
Re-election of Directors
Following the external review and evaluation exercises of the Board
carried out in the financial year 2019/20 as referred to above, the
Nomination Committee has recommended that each of the Directors be
re-elected to the Board.
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 18 September 2020.
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;
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 2020 and for the period up to the date of approving the
Annual Report and Financial Statements.
Information on the key risks and uncertainties of the Group are set out
on pages 24 to 31.
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 76;
(b) relationship agreement and independence statement – pages 77
and 78.
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 75 to 79 below.
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;
Peter Bamford
Chairman
10 June 2020
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 wrongdoing or malpractice.
Those policies are reviewed and updated by the Group as required
from time to time.
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Corporate Governance
Corporate Governance
Audit & Risk Committee report
The Audit & Risk Committee
monitors risks and risk
mitigation. It advises the Board
on financial reporting, viability
and going concern and whether
the Annual Report provides
stakeholders with the
information necessary to assess
the Group’s performance.
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 financial
statement 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. During the year the Head of Internal Audit
resigned. An externally facilitated search is underway to recruit a
replacement. An interim appointee was used during part of the year
to ensure that the planned programme of internal audits for the year
under review was completed.
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 32, in the principal risks and uncertainties
section of the Strategic Report.
The Committee has continued to monitor related party transactions
and has monitored the Group’s compliance with the Grocery Code.
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 18 September 2020 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
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
57
FSSR Corporate Governance
Audit & Risk Committee report continued
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 46 and 47, 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 and Gilles Petit
(appointed 02 May 2019). Details of Committee meetings and
attendances are set out on page 52 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 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, CFO and Paul
Owen, Group General Counsel, 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:
Committee activities in 2019/20
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;
• approval of the internal audit plan; and
•
reports of the UK businesses of the Group regarding compliance
with the Groceries Code and the annual compliance report to be
filed with the regulatory bodies.
Accounting matters
The Committee considered the following accounting matters during
the year:
•
impairment testing of Jawoll goodwill in the Interim Financial
Statements for FY20;
•
the methodology applied by the Group to value inventory;
• accounting for put and call options in relation to Jawoll;
•
reviewing the integrity of the financial statements, price sensitive
financial releases of the Group and the significant financial
judgements and estimates relating thereto;
• accounting relating treatment of earn-out consideration in
relation to the acquisition of Heron Foods and the acquisition
accounting relating to Babou;
• 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;
• making recommendations to the Board in relation to the
appointment of the external auditor; and
• maintaining effective oversight of compliance by our UK businesses
with the Groceries Supply Chain Code of Practice (the “Groceries
Code”).
• goodwill impairment in relation to each of the companies in
the Group;
• hedge accounting;
•
•
the accounting for supplier rebates; and
the implementation of IFRS 16.
In considering the accounting matters referred to above 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 with the model the
Group had developed for implementing the new standard in the
year under review.
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Corporate Governance
The meetings at which the following matters were considered are
set out below:
May
2019
Sep
2019
Nov
2019
Jan
2020
Internal Audit (“IA”)
IA annual evaluation
IA work plan, reports and updates
External Audit
Audit reports on preliminary results and
annual report FY19
Audit report on the Group’s interim results
FY20
External audit plan and strategy
External auditor’s effectiveness/
independence/and quality of audit
Non-audit services provided by the external
auditor
Accounting matters
The methodology applied to inventory
valuation
Accounting for put & call option in relation
to Jawoll
Accounting in relation to Heron Foods
acquisition earn-out
Acquisition accounting in relation to Babou
Adopting accounting for hedging instruments
and policy
Accounting in relation to supplier rebates
Adoption of IFRS 16
Review of goodwill impairment testing in
relation to Jawoll
Other matters
Review of related party transaction due
diligence processes (associated companies)
Quarterly reviews of related party
transactions (associated companies)
Year-end final review of related party
transactions (store leases)
Consideration of Brexit risks, mitigations and
disclosures
IT internal controls and cyber security
Review of Groceries Code compliance and
complaints
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Review of going concern and viability for FY19
•
Review of process relating to going concern
and viability testing for FY20
Review of GDPR
•
•
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.
As a standing agenda item at each of its meetings the Committee
considered and reviewed B&M and Heron Foods’ compliance with the
Groceries Code. After the year-end the Committee also reviewed the
annual compliance report of B&M and Heron Foods in relation to the
Groceries Code and approved it for submission to the regulatory bodies
in accordance with The Groceries (Supply Chain Practices) Market
Investigation Order 2009.
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 53 of the Corporate
Governance Report above.
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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
59
FSSR Corporate Governance
Audit & Risk Committee report continued
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 24 to 31.
The Board has confirmed that it has carried out a robust assessment of the
principal risks facing the Group, including emerging risks and 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.
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 2018. The
assessment included a review of the principal risks including emerging
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 is on
page 32.
Fair, balanced and understandable.
The Committee considered whether the 2020 Annual Report is fair,
balanced and understandable and whether it provides the necessary
information to shareholders to assess the Group’s position,
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 2020
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 26 July 2019 as the
Group’s independent external auditors (réviseur d’entreprises agréé) for
the financial year ended 28 March 2020. The partners responsible for
the audit are Thierry Ravasio, a partner in KPMG’s Luxembourg office
and Tony Sykes, a partner in KPMG’s London office who has been the
UK based partner responsible for the Group’s 2020 audit. Tony Sykes
replaced Nicola Quayle, who was the UK based partner responsible for
the Group’s 2019 audit.
The Committee reviewed KPMG’s UK Transparency Report for the year
ended 30 September 2019 and noted the significant progress the firm has
made in relation to Audit Quality Indicators, particularly in FT350 audits.
The Committee also discussed with KPMG the results of the FRC Audit
Quality Inspection of KPMG as a whole and noted that the firm
acknowledges that further improvements are required. The Committee
will continue to monitor progress against an array of improvement 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
18 September 2020. Given KPMG’s short tenure of four 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 the areas highlighted by KPMG.
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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 £732,200 during the year, £109,900 of which was for
non-audit work with the remaining balance relating to audit services.
The non-audit work of £109,900 mainly related to work associated with
the half year interim report.
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. In September 2019 the Head of Internal Audit resigned, and for
a period of the year, the Internal Audit function was challenged in
delivering the agreed work programme. External temporary resources
were engaged and a new Head of Internal Audit is expected to join the
Group in the summer. 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.
Corporate Governance
During the year, the Committee received reports
from the Internal Audit function in relation to:
• corporate policies and compliance;
• corporate risk register and risk mitigations;
• procurement (merchandise);
• procurement (non-merchandise);
• general ledgers;
• warehouse infrastructure;
• shop audits & shrinkage;
• warehouse stock takes;
• commodity prices, cost inflation and freight and energy rates;
•
fixed assets;
• payroll;
• cyber security;
•
financial controls;
• GDPR;
• stock management;
• general ledger;
• supply chain;
•
related party transactions with associated companies; and
• Brexit risks and mitigations.
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 performance
The performance of the Committee during the year was evaluated as
part of a broader Board performance review conducted externally as
described on page 55 above. The overall conclusion of the review was
that the Audit & Risk Committee is rated highly overall.
Ron McMillan
Chairman of the Audit & Risk Committee
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
61
FSSR Corporate Governance
Directors’ remuneration report
Annual statement by the Chair of the Remuneration Committee
We aim to encourage superior
performance and only reward
sustained success in the
delivery of the Board’s strategy
and long term objectives.
Tiffany Hall
Chair of the Remuneration Committee
Dear Shareholder,
I am pleased to present the Company’s Annual Remuneration Report
for 2019/20. In January this year I became the Chair of the
Remuneration Committee in succession to Kathleen Guion who
retired from the Board at that time. I intend to continue to build on the
hard work of Kathleen and the Committee on the future development
of our remuneration strategy.
Performance and awards for 2019/20
The Group’s performance in 2019/20 was solid overall. Total Group
revenues increased by 16.5%, profit before tax increased by 3.2%, the
Group’s cash flow from operations increased by 25.9%, and there
was a 5.9% increase in the number of B&M UK stores in the year. This
was in the context of a generally good performance in the UK but
less so in continental Europe, ultimately leading to the strategic
decision to sell Jawoll which was completed on 27 March 2020.
The Annual Incentive Plan (“AIP”) out-turn for the CEO and CFO was
42.6% and 28.1% of their respective maximums, which reflected a
solid financial performance and the Committee’s assessment
against objectives set this year for them. One-third of the bonus
achieved by the CEO and CFO under the AIP in 2019/20 will be
deferred into shares for 3 years.
The LTIP granted to the CFO awarded in 2017 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
28 March 2020. The TSR performance resulted in a 67.9% out-turn for
that measure. The adjusted earnings per share was 20.3p being a
44.5% out-turn under that measure and giving a 56.2% overall
vesting of that award at the end of the holding period which will be
in August 2022.
The Committee has discretion to adjust 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 2020/21
The Committee agreed an increase in base salary levels for the two
Executive Directors of 2% in line with the average for UK salaried staff
generally with effect from June 2020. The AIP and LTIP arrangements
remain substantially unchanged from the previous year. Our practice
is to make the LTIP grants in August each year. The Committee will
consider both the grant level and the appropriate performance
conditions for the 2020 LTIP grant at that time.
Policy renewal
Our remuneration policy will be due for its triennial shareholder vote
at our 2021 AGM. The Committee will shortly commence its planned
review and will consult with its leading shareholders and their
proxy advisors on any proposed changes to the policy in due
course. As part of its regular activities, the Committee is advised
of developments on institutional guidance and market practice.
In particular, it has noted developments relating to the operation
of post-cessation share ownership guidelines, and on the alignment
of pension provision with that available to employees generally.
Consistent with its normal approach, it will consider such
developments as part of the policy review process and will develop
a plan to align pension rates for the current Executive Directors with
those available to the majority of UK salaried employees of the
Group by the end of 2022. It has already committed that any new
appointment would be on such terms.
Corporate Governance Code
The Committee already complied in 2018/19 with the various aspects
of the 2018 Corporate Governance Code (the “Code”) and revised its
terms to provide for its oversight of wider workforce pay. In this
regard it now directly approves packages for a wider group of
leaders in the Group and it received reports on pay and conditions
across the Group’s UK businesses in 2019/20.
The Committee is conscious of the Code’s references to remuneration
arrangements being clear, simple, predictable, proportionate and to
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B&M European Value Retail S.A.
Annual Report and Accounts 2020
take adequate account of risk while being aligned to culture. These
factors have been considered and are felt to be satisfied through:
• Clarity – remuneration arrangements should be transparent and
promote effective engagement with shareholders and the
workforce: the Company’s remuneration policy and arrangements
are clearly disclosed each year in this report. The Committee
proactively engages with shareholders and their representative
bodies as part of the triennial policy renewal process and is
available to discuss matters at any other time;
• Simplicity – remuneration structures should avoid complexity and
their rationale and operation should be easy to understand: the
Company operates a simple pay model which typically pays at no
more than median while encouraging superior performance, and
only rewarding sustained success achieved in a manner consistent
with the Board’s overall objectives to deliver superior returns for our
shareholders. This is set by the operation of a mix of absolute profit
targets and relative total shareholder return assessed alongside
stretching personal objectives which recognise delivery against
defined goals;
• Risk – remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks that
can arise from target-based incentive plans, are identified and
mitigated: the overall policy offers reward at typically no more than
a median level and is subject to the operation of suitably stretching
targets, which is consistent with our business model as a value
retailer. Payments of variable pay are subject to the Committee
being satisfied that the outcome is appropriate and all our variable
pay plans include the ability to operate malus and clawback where
necessary;
• Predictability – the range of possible reward values to individual
directors and any other limits or discretions should be identified and
explained at the time of approving the policy: the policy set out in
the 2018 Annual Report included a scenario chart showing potential
pay levels on various assumptions and all awards are subject to
maximum grant levels as set out in the policy;
• Proportionality – the link between individual awards, the delivery of
strategy and the long-term performance of the company should be
clear. Outcomes should not reward poor performance: the out-turn
in respect of variable pay is clearly set out in this report and
payments are contingent on the strategic pillars of EBITDA, EPS,
relative total shareholder return and personal objectives pre-set by
the Board. As indicated under Risk above, the out-turn can be
reduced as appropriate; and
• Alignment to culture – incentive schemes should drive behaviours
consistent with company purpose, values and strategy: the variable
pay plans are clearly aligned to the delivery of shareholder value
through a focus on growth in profits and shareholder returns.
Corporate Governance
Luxembourg law
The Law of 1 August 2019 in relation to remuneration policies and
reporting was adopted in Luxembourg (the “Luxembourg Law of
1 August 2019”) and came into effect on 1 October 2019, which applies
to the Company. The law amends the Luxembourg Law of 24 May 2011
to adopt and implement the provisions of the EU Shareholder Rights
Directive 2017/828 in Luxembourg on directors’ remuneration. The
Company has reviewed the existing shareholder approved policy and
it is satisfied that it complies with the requirements of the Luxembourg
Law of 1 August 2019. Accordingly no amendments to the existing policy
are required to be proposed at this years’ AGM.
The Luxembourg Law of 1 August 2019 requires that the remuneration
policy of the Company be put to shareholders to vote at least once
every four years. However in accordance with the Company’s voluntary
policy since the IPO of putting the remuneration policy to shareholders
for voting on every 3 years (as explained below), that practice will
continue to be followed, which will comply with the recent changes in
Luxembourg law.
The Annual Remuneration Report has been prepared to comply with
the reporting requirements of the Luxembourg Law of 1 August 2019.
The Company, as a Luxembourg registered company, is not subject to
the regulations adopted in the UK in 2013 (and as amended) for the
reporting of executive remuneration. However, in addition to the
Luxembourg law reporting requirements, the Committee considers
the UK regulations to also be reflective of best practice and helpful to
shareholders to maintain consistency with the Company’s reporting
in previous years while also complying with the requirements of the
Luxembourg law. The report has therefore been prepared by the
Company to follow the practice (as in the case in previous years) of
also voluntarily adopting the UK reporting regime where practical
and while maintaining the Company’s status as a Luxembourg
registered company.
Format of the report
The report sets out below on pages 64 to 72 the Company’s Annual
Remuneration Report, which details the remuneration paid to the
Directors’ in the 2019/20 financial year, and which is subject to a
shareholder advisory vote at our 2020 AGM.
Following best practice we have set out the remuneration policy table
which was approved by shareholders in 2018, on pages 73 and 74 below.
The full policy report is available in the 2018 Annual Report on our website
at www.bandmretail.com.
We aim to achieve an appropriate balance between shareholders’
interests and those of the executives in relation to the implementation of
the Company’s remuneration arrangements. I hope that you agree with
the decisions we have made this year and will be able to support this
year’s vote on the remuneration report.
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.
Tiffany Hall
Chair of the Remuneration Committee
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
63
FSSR Corporate Governance
Directors’ remuneration report continued
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 were updated last year to ensure it
reviews the pay and conditions of the Group’s wider workforce. The Committee does not consult directly with employees when reviewing Executive
Directors remuneration but it takes account of the general annual rate of the basic salary increase for the broader salaried workforce when
undertaking annual salary reviews for the Executive Directors.
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 in 2018 was structured to adhere to the principles of
good corporate governance and having regard to pay across the wider workforce and 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 current forward-looking policy
was approved by shareholders in 2018.
The Committee welcomes feedback generally at any time which will be considered as part of its triennial review of the remuneration policy or,
if appropriate, earlier.
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 2019/20 and how it will be applied in the financial year
2020/21.
Where sections of the report have been subject to audit, they are marked accordingly.
Salary
As referred to last year, the Executive Directors received a 2% increase in their base salaries with effect from the beginning of the 2019/20
financial year.
The Executive Directors received a 2% increase in their base salaries with effect from June 2020 (which was not back-dated to the beginning of the
2020/21 financial year), being the same percentage rate of increase given to the B&M UK salaried staff.
The next planned salary review for the Executive Directors will be from the beginning of the 2021/22 financial year, being the financial year when
the remuneration policy for Directors will be due next for consideration and voting on by shareholders.
Benefits
Benefits are set by the Committee in accordance with the remuneration policy set out on pages 73 and 74 below. There are no changes proposed
to the overall benefits framework for 2020/21.
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 changes proposed to the rates of the pension benefits of the Executive Directors for 2020/21, 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 salaried employees of the Group, notwithstanding the higher cap approved by shareholders in the remuneration policy adopted in
2018, and (as indicated below) the new CFO’s rate is aligned with that. In addition, as part of the triennial review, the Committee plans to align
pension rates for the current Executive Directors with those available to the majority of UK salaried employees of the Group by the end of 2022.
64
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
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 2019/20.
Executive Directors
Simon Arora (CEO)
Paul McDonald (CFO)
Year1
2018/19
2019/20
2018/19
2019/20
Salaries
£
631,221
643,845
318,355
324,722
Benefits2
£
27,068
44,733
8,743
8,647
Pension3
£
111,033
113,313
42,060
42,961
Total
fixed pay
£
769,322
801,891
369,158
376,330
Bonus4
£
435,661
411,303
160,262
114,011
Value of
long term
incentives5,6
£
–
–
292,800
160,474
Total
variable pay
£
Total
£
435,661
411,303
453,062
274,485
1,204,983
1,213,194
822,220
650,815
The 2018/19 year is for the 52 weeks ended 30 March 2019 and the 2019/20 year is for the 52 weeks ended 28 March 2020.
1.
2. Benefits in 2018/19 and 2019/20 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.
3. 2019/20 pensions include auto-enrolment pension employer contributions and a cash equivalent allowance to pension contribution entitlement less employers’ NICs. 2018/19
has been re-stated to also include auto-enrolment pension employer contributions.
4. One third of the annual bonuses of the CEO and the CFO for 2019/20 being £137,101 and £38,004 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.
5. LTIP awards in 2018/19 and 2019/20 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 68. The 2017/18 grant has been tested and the result of that is explained on page 66 so it has been included in the above figures although it will
not vest until the expiry of the holding period on 07 August 2022. The value of LTIP’s for 2018/19 has been restated to reflect the share price on the third anniversary of grant,
being £3.517 on 18 August 2019. The value of LTIP’s for 2019/20 has been estimated using the actual number of shares due to vest and the three-month average share price to
the year-end of £3.517.
6. No element of the figure for 6 August 2017 LTIP grant to the CFO reflects share price appreciation.
7. The remuneration of the two Executive Directors is paid by B&M Retail Limited, other than their long-term incentives. The reported figures include all such amounts.
Change in Executive Directors
As announced on 3 March 2020, Alex Russo will be joining the Group as CFO. The longstop date for him joining is June 2021. His package
comprises a base salary of £475,000 plus the same terms as the current CFO except that his pension has been set at the lower rate of 3% of base
salary. In addition, he may receive a payment of up to £450,000 as compensation for the loss of bonuses and long-term incentive awards forfeited
on leaving his current employer, together with transitional travel and accommodation allowances and relocation benefits. While his starting salary
is higher than that of the current CFO, it is not considered excessive against external benchmarks and does not represent a premium to his current
role. The buy-out award is performance based, contingent on employment (up to April 2023 to receive the full amount) and represents a discount
to what is forfeited as a result of his agreeing to join the Company.
The current CFO is subject to a service contract with 6 months’ notice and has agreed to stay with the Group both while we await Alex Russo joining
us and for a transitional period afterwards to help with the handover. No special exit terms have been agreed and his arrangements will be fully
disclosed in due course.
Bonus
Executive Directors bonus payments for 2019/20 are in line with the remuneration policy and the terms of the Annual Incentive Plan (“AIP”), in the
amounts set out in the table above, together with 1/3 of the bonus achieved under the AIP in 2019/20 which has been deferred into shares for 3
years.
75% of the maximum AIP opportunity related to the achievement of financial targets for 2019/20. The targets were based on adjusted Group EBITDA
performance as follows:
Threshold
Target
Max
Actual
*
There is a straight-line vesting between the threshold, target and maximum points achieved.
Adjusted Group
EBITDA target*
% maximum overall
Bonus opportunity
£316.26m
£351.40m
£368.97m
£323.5m
18.75%
37.5%
75%
22.6%
B&M European Value Retail S.A.
Annual Report and Accounts 2020
65
FSSR Corporate Governance
Directors’ remuneration report continued
The other 25% of the AIP related to personal objectives. These objectives focused on a number of key performance indicators ranging from
strategic, operational and investor relations matters. The Committee assessed each objective against those criteria as explained below.
In particular:
CEO
Objectives
In relation to the CEO:
CFO
In relation to the CFO:
i. cost control reductions in relation to certain overheads were
not achieved at targeted levels;
ii. contribution to strategic growth initiatives were limited with
the CFO being more involved in other areas including the
financial impacts of the strategic review of the Jawoll
business;
iii. integration of financial reporting was assessed at 35% with
the CFO having made significant progress in relation to the
Heron Foods business, but not as strongly in relation to the
European fascia businesses;
iv. reductions in overall insurance costs and outlays was
assessed with a 50% score being achieved based on
targeted outcomes; and
v.
investor relations outcomes were assessed as having been
achieved by the continued performance of the Group,
notwithstanding the impacts in China of the coronavirus on
supply chains which were averted by the Group.
i. building a high performing leadership team with
enhanced breadth and depth was assessed as
achieved, evidenced by securing high calibre new
recruits including a new CFO and Group People
Director in the UK, together with a Distribution Director
in the French business;
ii. delivering strategic and operational progress in
France and Germany was assessed at 40% only
with progress having been made in relation to the
integration of the French business, but Jawoll having
underperformed and ultimately having been sold by
the Group;
iii. like-for-like category sales performance
improvements in the Home and Toy department were
assessed at 75% having exceeded the target of LFL
sales growth for Home (being the significantly larger
of the two categories);
iv. distribution and logistics objectives were achieved
with both bringing on stream the Bedford Distribution
Centre and delivering significant shareholder value
through the sale and leaseback of the Bedford
Distribution Centre SPV; and
v.
investor relations outcomes were assessed as having
been achieved by the continued performance of the
Group, notwithstanding the impacts in China of the
coronavirus on supply chains which were averted by
the Group.
Overall 20 out of 25
Overall 6 out of 25
The Committee reviewed the AIP during the year and remains satisfied that it continues to be appropriate for the Company.
Accordingly, for 2020/21, the maximum bonus opportunity for the CEO and CFO will remain at 150% and 125% of base salary respectively. Under the
awards for 2020/21, 75% of the maximum bonus opportunity is again based on the achievement of an Adjusted EBITDA target and 25% on
achievement of personal objectives. 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 together with an explanation of any personal assessment will again be included in next year’s
report retrospectively.
Long term incentives
The award granted on 07 August 2017 to the CFO was based on a combination of EPS and TSR measured to 28 March 2020 and the out-turn of
those targets was that the TSR condition was met to the extent of 67.9% and the adjusted earnings per share was 20.3p being an out-turn under
that measure of 44.5%. While the award does not vest until the expiry of the holding period being on 07 August 2022, on the basis that the
performance conditions have been satisfied to the extent of 56.2% 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 02 August 2019 equal to 200% of base salary and for 175% of base salary respectively.
Details of the award are set out in the table on page 67 below.
66
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
For 2020/21, it is expected that awards will be made in accordance with past practice in August 2020. The Committee will consider both the grant
level and the appropriate performance conditions of the LTIP grant at that time.
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 2019/20. The TSR condition will be the same as the LTIP for 2019/20 (with the precise comparator
group being determined at the time of the grant). The EPS range will be determined at the time of grant. 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 2019/20 to the Chairman of the Board and each of the Non-Executive Directors were as follows:
Director
Peter Bamford
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit (appointed to the Board 2 May 2019)
Kathleen Guion (retired from the Board 1 January 2020)
Thomas Hübner (retired from the Board 1 May 2019)
2019/20
Fee £
300,000
85,155
61,000
58,000
53,114
52,500
12,349
Benefits1
34,971
–
–
–
–
–
–
2018/19
Fee £
300,000
70,000
45,645
36,428
–
70,000
74,500
1.
The benefits for the Chairman relate to reimbursement of an additional social security fund levy payable on his fees in Luxembourg (grossed-up) for which credit cannot be
claimed against UK income tax. They represent the amount payable from his original appointment on 1 March 2018 to the end of the 2019/20 financial year, broadly
representing 2 years’ worth of reimbursement.
For 2020/21, the Board agreed with effect from June 2020 to increase the base fees from £58,000 to £60,000 and fees for chairmanship of the audit
and remuneration committees from £12,000 to £15,000. No increase was made to the SID fee (which remains at £16,500). A new fee of £5,000 for
the director responsible for workforce engagement was also introduced.
Scheme interests awarded during the financial year – audited
The audited tables show all share awards held by Directors, together with awards made in 2019/20.
Each award in the following table 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 from 20 August 2018 onward 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 28 March
2020
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
02.08.19
£3.630
354,735
Paul McDonald 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
02.08.19
£3.630
156,546
–
–
–
–
–
–
–
–
–
312,099 £1,262,440.46
354,735 £1,287,688.05
9,139
72,093
22,899
86,143
35,592
45,628
–
–
–
–
–
137,730
£557,117.85
156,546
£568,261.98
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
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
B&M European Value Retail S.A.
Annual Report and Accounts 2020
67
FSSR Corporate Governance
Directors’ remuneration report continued
Each award in the following table takes the form of nil cost deferred shares awarded in relation to one third of AIP bonus payment outturns for the
periods below.
Director
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
28 March 2020
Share price at
date of grant
Face value of
award
Vesting
Simon Arora
04.06.19
Paul McDonald
04.06.19
£3.515
£3.515
41,314
15,198
–
–
–
–
41,314
£145,218.71
Third anniversary of the date of grant
15,198
£53,420.97
Third anniversary of the date of grant
The deferred share awards reflect deferral of one-third of the previous year’s annual bonus and are therefore not subject to further pre-vest
performance conditions.
Performance targets for outstanding LTIP awards
The performance conditions for each of the LTIP awards made on 7 August 2017, 20 August 2018 and 02 August 2019 (and the award due to be
made in 2020) 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 2017 award
August 2018 award
August 2019 award
Financial year assessed
Threshold
(25% of that
part vesting)
Stretch (100%
of that part
vesting)
2019/20
2020/21
2021/22
19p
23p
27p
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. Our practice is to make the
grants in August each year and the Committee will consider the appropriateness of the targets (and grant levels) prior to the actual grant.
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
2020 awards.
For grants from 2018 onwards, consistent with market practice, the awards may benefit from the value of dividends paid over the period from grant
to vesting.
Payments to past Directors and loss of office payments – audited
There were no payments to past Directors or for loss of office in the year ended 28 March 2020.
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 which vested that has been exercised. He has retained those shares (except for those allowing for tax on the whole award) toward the guideline
requirement. The 2015, 2016 and 2017 grants have met the performance conditions but are subject to holding periods and therefore are included in the
table below as vested but unexercised. In relation to those awards and deferred shares (net of tax) he has now met an equivalent of over one times
salary. The CFO also has unvested LTIP awards granted on 20 August 2018 and 02 August 2019 which, subject to performance conditions being
achieved during the course of 2020/21 and following years, will in that event then count toward the guideline requirement on a net of tax basis.
68
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
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 2019/20 (or the date of their retirement from the Board if earlier).
Director
Peter Bamford
Simon Arora
Paul McDonald
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit (appointed to the Board 02 May 2019)
Kathleen Guion (retired from the Board 01 January 2020)
Thomas Hübner (retired from the Board 01 May 2019)
Includes any shares held by connected persons or related parties.
1
2 Nil cost options.
Shares held
beneficially1
5,000
149,880,828
39,171
37,037
3,050
12,192
2,440
11,111
–
Unvested
options with
performance
conditions2
Unvested
options not
subject to
performance
Vested but
unexercised
awards
–
666,834
294,276
–
–
–
–
–
–
–
41,314
219,062
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
There have been no changes in the Directors’ interests in shares in the Company between the end of the 2019/20 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
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
4
1
0
2
e
n
u
J
2
1
n
o
e
d
a
m
12 June 2014
28 March 2015
26 March 2016
25 March 2017
31 March 2018
30 March 2019
28 March 2020
This graph shows the value by 28 March 2020 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).
Remuneration of the CEO
The table below shows the remuneration of the CEO for each of the last six financial years.
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
Single Figure
£166,606
£601,638
£1,403,731
£1,376,482
£1,204,983
£1,213,194
Bonus as a
% of max
LTIP as a
% of max
N/A
0%
76.77%
68.58%
46.01%
42.6%
N/A
N/A
N/A
N/A
N/A
N/A
B&M European Value Retail S.A.
Annual Report and Accounts 2020
69
FSSR
Corporate Governance
Directors’ remuneration report continued
Change in remuneration of the Chief Executive
The table below shows the percentage changes in the CEO’s remuneration between the financial years ended 30 March 2019 and 28 March 2020
compared to the amounts for UK full time employees of the Group for each of the following elements of pay:
CEO
UK full time employees (average)1
Salary
increase/
(decrease)
Annual bonus
increase/
(decrease)
2.0%
0.9%
-5.6%
-26.2%
Taxable
benefits
increase/
(decrease)
65.2%
41.0%
1
This includes salaried UK employees. The UK regulations do not provide for the UK full time employee averages to be calculated on a matched sample basis. On a matched
sample basis the annual increase in salary was at least 2%. The reported figure is depressed because of the impact of joiners and leavers.
Change in Remuneration of the Directors
Luxembourg law imposes an obligation relating to the reporting of changes in total remuneration of the Company’s employees (but not its
subsidiaries), the total shareholder return (“TSR”) and total remuneration of each of the individual directors of the Company. As the law only refers to
the Company’s employees and not those in other companies in the Group, consequently the changes reported for employees are restricted to a
nominal number of staff, being just 4 in 2019/20, when compared with a total workforce in the UK and French subsidiaries of the Group overall of
more than 34,000 staff in total.
The relevant percentage changes, as determined under the provisions of the Luxembourg remuneration reporting law, are as follows:
Company only (excluding all of the other Group subsidiaries in
the UK and France) full-time employees (average)
Total Shareholder Return (year-on-year)
3-year Total Shareholder Return ranking3
6.04%
-14.0%
11th out of 17
9.42%
19.0%
7th out of 17
26.90%
33.0%
4th out of 17
15.49%
-2.6%
4th out of 17
-16.38%2
-20.3%
9th out of 17
Percentage change in total remuneration in the year stated
compared with the prior financial year1
FY16
FY17
FY18
FY19
FY20
Executive Directors:
Simon Arora (CEO)
Paul McDonald (CFO)
Non-Executive
Directors:
Peter Bamford
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit
Kathleen Guion
Thomas Hübner
261.11%4
-25.28%
133.32%4
135.24%5
-1.94%
8.87%
-12.55%
-3.26%
0.68%
-20.85%
n/a
nil
n/a
n/a
n/a
nil
nil
n/a
nil
n/a
n/a
n/a
nil
nil
n/a
6.06%
n/a
n/a
n/a
6.06%
4.20%
nil
nil
n/a
n/a
n/a
nil
nil
11.66%6
21.65%7
5.17%8
nil
n/a
nil
nil
1
The pay of each director has been calculated using the single figure totals. The average pay of staff is calculated on a full-time equivalent basis for each year (excluding overtime
hours) and compares the average for each year with that for the prior year. Joining and departing employees and directors have been grossed-up to a 12-month equivalent.
2. Excluding leavers and joiners, base salaries of the employees increased in the year on average by 3.40%.
3. The Annual TSR ranking is based on (i) a spot measurement and (ii) compared with the current TSR comparator group (FTSE 350 retail sector and food retailers and wholesalers
subsector as at the beginning of the financial year 2020), namely Dixons Carphone, Dunelm, Frasers, Greggs, Howden Joinery, Inchcape, JD Sports Fashion, Kingfisher, Marks
& Spencer, Morrison, Next, Ocado, Pets At Home, Sainsbury J, Tesco, WH Smith and for 2020 only Vivo Energy. The TSR from IPO in June 2014 to March 2016 and March 2017 has
been used as a proxy for the 3-year TSR shown for 2016 and 2017 respectively (i.e. not a full three years). Three-year TSR is based on those companies (other than Vivo Energy as
three-year data is not available for that company).
4. This principally reflects the increase in base salary and annual bonus package awards from 2015/16 and 2016/17 respectively, from the pre-IPO levels to median market level.
5. This principally reflects the increase in base salary and annual bonus package awards from 2016/17 from the pre-IPO levels to median market level.
6. The increase in the year represents approximately two years’ worth of reimbursement, since his original appointment on 1 March 2018, of an additional social security fund levy
payable on his base fees in Luxembourg (grossed-up) for which credit cannot be claimed against UK income tax.
7. The increase represents the director being appointed on 2 May 2019 as the Senior Independent Director (“SID”) and receiving the SID supplement to his base fees from that date.
8. The increase represents the director being appointed on 2 January 2020 as the Chair of the Remuneration Committee and receiving the Committee Chair supplement to her
base fees from that date.
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B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
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
30 March 2019 and 28 March 2020.
£’000
Total pay for employees
Distributions to shareholders1
2018/19
2019/20
% change
373,955
75,042
421,644
76,042
12.8%
1.3%
1.
There have not been any buy-backs of shares so this element has been excluded from the table above.
CEO Pay ratio
In line with new UK reporting requirements which the Company has adopted on a voluntary basis (as noted on page 63 above), set out below are
ratios which compare the total remuneration of the CEO (as included in the single total figure of remuneration table on page 65) to the remuneration of
the 25th, 50th and 75th percentile of the Group’s UK employees. The disclosure will build up over time to cover a rolling 10-year period.
Year
2019/20
Method
Option A
25th percentile
pay ratio
50th percentile (median)
pay ratio
72:1
72:1
75th percentile
pay ratio
69:1
We have used Option A as this is the preferred approach of most institutional shareholders.
The base salary and total remuneration received during the financial year by the indicative employees on a full-time equivalent basis used in the
above analysis are set out below:
Base salary
Total remuneration
25th percentile
50th percentile (median)
75th percentile
16,595
16,950
16,650
16,962
17,258
17,589
The ratios disclosed above are affected by the following factors of our UK workforce of 33,913. Over 98% work in our retail stores and warehouses
where, in line with the retail sector more generally, rates of pay will not be as high as management grades and those employees based at our head
offices in more technical roles. The three employees used in the calculations are warehouse and retail sales colleagues and consequently the ratios
for each are not significantly different. It should be noted that the CEO did not receive LTIP awards before August 2018 so next year’s ratio will
potentially be higher as it could include an LTIP vesting.
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.
Malus and Clawback
The Annual Incentive Plan and LTIP rules include provision for clawback (and malus during any holding period under the LTIP) within a three year
period following payment or vesting if the Committee concludes that there has been material misstatement of financial results, or there are
circumstances which would have warranted summary dismissal of the participant, or there are circumstances having an impact on the reputation
of the Company or the Group which justify clawback being operated, or where the Committee discovers information from which it concludes that a
bonus or award was paid or vested to a greater extent than it should have been.
In addition, all variable pay plans include discretion to reduce the indicative formulaic out-turn in appropriate cases.
External appointments
Subject to Board approval, Executive Directors are permitted to take on Non-Executive positions with other companies and to retain their fees in
respect of such positions. Simon Arora is a Non-Executive Director of Anglesource Limited. No fees were received by him for that external
appointment during the year ended 28 March 2020.
Chairman and Non-Executive Directors
The rates of the fees for the Chairman and Non-Executive Directors were the same in 2019/20 as those set in the 2018/19 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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
71
FSSR Corporate Governance
Directors’ remuneration report continued
Details of the fees which were paid to Non-Executive Directors in 2019/20 and for the prior year are set out in the table on page 67 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 letter of Ron McMillan is 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.
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, Tiffany Hall (Committee Chair)
Kathleen Guion (retired 01 January 2020), Ron McMillan, and Carolyn Bradley (appointed 16 January 2020).
The responsibilities of the Committee are set out in the Corporate Governance section of the Annual Report on page 50.
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
Tiffany Hall
Ron McMillan
Carolyn Bradley1
Kathleen Guion2
Role
Meetings attended
Committee Chair
Committee Member
Committee Member
Former Committee Chair until 01.01.20
4 out of 4
4 out of 4
1 out of 1
3 out of 3
1 Carolyn Bradley was appointed as a member of the Committee on 17 January 2020. She had a 100% attendance record since her appointment as a member of the Committee
in FY2019/20.
2 Kathleen Guion retired as a Director and as the Chair of the Committee on 01 January 2020. She had a 100% attendance record during her period as a member of the
Committee in FY2019/20.
The effectiveness of the Committee during the year was evaluated as part of a broader externally facilitated board effectiveness review, details of
which are set out on page 55. The overall conclusion of the review was that the Committee overall was highly effective in discharging its functions
and reporting to the Board.
Shareholder voting
The resolutions to approve the Directors’ remuneration policy at the 2018 AGM and the remuneration report at the 2019 AGM were passed as follows:
Resolution
To approve the remuneration policy (2018)
To approve the remuneration report (2019)
Votes for
766,109,391
753,060,803
% for
98.88
99.95
Votes
against
8,714,552
383,856
% against
Total votes cast
% of shares
on register
Votes
withheld
1.12 774,823,943
0.05 753,444,659
77.44
75.30
0
1,154,570
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 2019/20 FIT’s total fees were £46,050.11 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:
Tiffany Hall
Chair of the Remuneration Committee
10 June 2020
72
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
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
This is the basic pay and
reflects the individual’s
role, responsibility and
contribution to the Group.
Benefits
To provide benefits which
are valued by the
individual and assist them
in carrying out their
duties.
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.
Provide market competitive benefits.
The Group may periodically review benefits available to
employees. Executives will generally be eligible to receive
those benefits on similar terms to other senior employees.
The cost of benefits paid to an Executive in any one year
are capped at £75,000, but this may be exceeded in
exceptional circumstances if the cost of a benefit were to
increase significantly.
In addition, where the Committee considers it appropriate
to do so, additional relocation expenses for a limited
period and/or tax equalisation payments may be paid.
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.
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).
Annual bonus
To incentivise and reward
individuals for the delivery
of annual performance
targets
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.
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.
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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
73
FSSR Corporate Governance
Directors’ remuneration report continued
Element and purpose
Policy and opportunity
Operation and performance conditions
Long-term incentives
To incentivise the delivery
of strategic objectives
over the longer term, the
Group operates the
Long-Term Incentive Plan
(“LTIP”).
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.
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.
74
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Corporate Governance
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 28 and 31 March 2020 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 45, 46 to 61 and 62 to 72
respectively form part of this report and are incorporated into this
Directors’ report by reference. Also, the following information in
particular within those reports can be found as follows:
•
future developments in the business – pages 13 to 15;
• workforce engagement – pages 35, 42 and 43;
• viability statement – page 32;
• energy and carbon reporting – page 41;
• directors’ service contracts and appointment letters – pages 71 to 72;
• directors’ share interests – page 69;
• conflicts of interest – page 53;
• Section 172 statement and stakeholders – pages 42 to 45.
Company status
B&M European Value Retail S.A. (the “Company”) is the holding
company of the Group. It was incorporated on 19 May 2014 as a public
limited liability company (Société Anonyme) under the laws of the
Grand-Duchy of Luxembourg and it is domiciled in Luxembourg.
The Company has a premium listing on the London Stock Exchange.
Branches
The Group had no registered external branches during the reporting period.
Principal activity
The principal activity of the Group is variety retailing in the UK and
France. The Company has a corporate office in Luxembourg.
Business review
This report together with the Strategic Report on pages 1 to 45, sets out
the review of the Group’s business during the financial year ended
28 March 2020, 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 28 March 2020
of GBP £80.9m is reported in the consolidated statement of
comprehensive income on page 86.
The Board is recommending a final dividend of 5.4p per ordinary share,
which together with the interim dividend of 2.7p per ordinary share paid
in December 2019 (but not including the special dividend of 15.0p per
share paid in April 2020) is a total ordinary dividend for the year of 8.1p
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%.
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.
Corporate social responsibility
Our CSR activity is set out in the Corporate Social Responsibility Report
on pages 33 to 41.
Employee engagement and involvement
The Group is committed to employee involvement, consultation and
participation. At key points throughout the year colleagues are kept
informed about the performance and strategy of the Group through
internal business update meetings, company newsletters and notice
boards and CEO email bulletins. These include the financial and
economic performance of the Group. Further details of workforce
engagement, feedback and actions during the year are also set out on
pages 35, 42 and 43 above, which is incorporated in this report by
reference.
B&M has a share incentive plan which is open to all B&M UK employees
after 12 months service. Certain employees in the Group are also
eligible to participate in other share incentive schemes of the Company.
Equal opportunities
The Group is an equal opportunity employer. It is the Group’s policy not
to discriminate on the basis of gender, race, colour, religion, disability or
sexual orientation, in its recruitment, training and promotion programmes.
Disabled persons
The Group seeks to ensure that disabled people, whether applying for
a vacancy or already in employment, receive equal opportunities in
respect of job vacancies that they are able to fulfil. They are not
discriminated against on the grounds of their disability and are given
full and fair consideration of applications, continuing training while
employed and are given equal opportunity for career development and
promotion. Where an existing colleague suffers a disability it is our
policy to retain them in the workforce where that is practicable.
Directors
The Directors of the Company as at 31 March 2020 and their interests in
shares and share awards made to them under share incentive
schemes in the Company are shown on pages 67 to 69. There have
been no changes to the Board of the Company between 31 March 2020
and the date of this report.
In accordance with the Articles of Association of the Company, all the
Directors will retire at the Annual General Meeting (“AGM”) on
18 September 2020. 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.
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 29 to the consolidated financial accounts on pages 132 to 134
which forms parts of this report.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
75
FSSR Corporate Governance
Directors’ report and business review continued
Share capital
The Company’s share capital and changes to it in the financial year, are
set out on page 78 below and in note 26 to the consolidated financial
statements on page 130 which forms part of this report.
Shareholders
As at 10 June 2020, the following shareholders have notified the Company
of their interest in 5% or more of the Company’s issued ordinary shares
(including interests in shares held through financial instruments):
In common with other Luxembourg registered companies, the Directors
have authority to allot ordinary shares in the Company and to disapply
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 18 September 2020 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.
Holders of ordinary shares may receive a dividend and on liquidation
may share in the assets of the Company.
Subject to meeting certain thresholds, holders of ordinary shares may
requisition a general meeting of the Company or the proposal of
resolutions at general meetings. The rights (including full details
relating to voting), obligations and any restrictions on 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 2020 and since that date up to the date of
this report, the ESOT did not hold any shares in the Company.
76
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Shareholder
SSA Investments S.à.r.l.*
FMR LLC
Maverick Capital Ltd
No of ordinary
shares
149,880,828
50,619,120
50,209,084
% share
Capital
14.98
5.05
5.02
*
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.
The Group’s credit and loan facilities with its banks and fleet finance
agreements for HGV’s contain customary cancellation and repayment
provisions upon a change of control.
Employee share incentive schemes also have customary change of
control provisions triggering vesting and exercise on performance
conditions being met or (in the discretion of the Company) being waived.
Annual General Meeting
Notices convening the Company’s sixth Annual General Meeting
(“AGM”) to be held on 18 September 2020, 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 24 to 31, the Corporate
Governance report on pages 46 to 61 and the Directors’ Remuneration
Report on pages 62 to 72, 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 80, which forms part of this report.
Corporate Governance
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
18 September 2020 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 2019/20, 2 leases of new stores were entered into
by the Group in the UK with Arora Family related parties including their
associates as landlords of those new stores, representing 3.9% of the
total number of 51 gross B&M new store openings of the Group in the
UK in that period.
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 67 store leases, representing 10.2% of a total number of 656 UK
B&M stores of the Group with all landlords, and 12.4% of the overall rent
roll of all UK B&M stores as at the year end.
In the financial year under review, blocks of 26.1 hours of flights for
business travel by executives and colleagues were purchased by the
Group from the third party operator of the private jet owned by Arora
family interests, and 4.1 unused hours had also been carried forward
from the financial year 2018/19. Out of that total of 30.2 hours, 19.4 hours
were used in the year, leaving a balance of 10.8 unused hours which
have been carried forward to the 2020/21 financial year.
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 53 of the Corporate
Governance Report.
Further details of related party transactions are included also in
note 30 of the Financial Statements on pages 135 and 136.
The Board confirms that during the financial year 2019/20:
(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).
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.
Details of other related party transactions with associated companies
of the Group are set out in note 30 to the consolidated financial
accounts on pages 135 and 136 which forms part of this report.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
77
FSSR Corporate Governance
Directors’ report and business review continued
Those transactions relate to the following matters:
(i) product sourcing and supplies to the Group from Multi-lines
International Company Limited (“Multi-lines”);
(ii) wholesale supplies of products by the Group to each of Home Focus
Group Limited and Centz Retail Holdings Limited; and
(iii) lease rental payments made by Multi-lines for its office, product
testing and showroom premises in Hong Kong with Arora Family
related party landlords.
The Group disposed of its 80% shareholding interest in (“the Shares”) J.A.
Woll-Handels GmbH (“Jawoll”) during the year under review to a private
equity led purchaser consortium (“the Transaction”). One of the
purchaser’s consortium, STIWEC GmbH (“STIWEC”), was an existing
shareholder of Jawoll and owned 13% of the shares of Jawoll. Another
member of the purchaser’s consortium, Jalogy Beteiligungs GmbH
(“Jalogy”), was an investment company owned by Ralf Hartwich the
Managing Director of Jawoll and its subsidiary Jawoll Vertriebs GmbH.
Mr Hartwich was also an existing shareholder of Jawoll owning 7% of
its issued shares. The Transaction came within the exemption in Listing
Rule 11 Annex 1 Paragraph 9 for transactions to which the related party
transaction rules do not apply, as it related to shares in an insignificant
subsidiary undertaking of B&M’s Group. The Transaction did however
constitute a related party transaction under the Luxembourg Law of
24 May 2011 (as amended on 1 August 2019) and accordingly details of
the related party transaction were included in the announcement made
by the Company on 11 March 2020. The terms of the Transaction with
the purchaser consortium, included the sale by the Group of 11% of the
total issued shares in Jawoll to STIWEC and 8.45% of the total issued
shares in Jawoll to Jalogy. The total consideration payable by the
purchaser consortium to the Group for the sale transaction comprised
€2,500,000 as a part repayment of an intra-group trading account
balance of €5,600,000 owed by Jawoll to the Group with the remaining
balance having been waived, €10,000,000 (which is payable on
31 December 2020 conditional on the on-going trading of Jawoll) being
a part repayment of loans made by the Group to Jawoll of €42,980,000
(including interest) with the balance of those loans having been waived,
and a nominal sum of €1,000 for the Shares. The overall consideration
reflected the significant loss making position of Jawoll and its
subsidiary. STIWEC and Jalogy had no other material relationships with
B&M ’s Group.
In accordance with Article 13.10 of the Articles of Association of the
Company a report will be made at the 2020 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) and all other related party transactions (including those with
associated companies) entered into in the financial year 2019/20
referred to above and in note 30 of the Financial Statements on pages
135 and 136, together with any other such transactions entered into
after the financial year end on 31 March 2020 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 2020 amounts to GBP £100,058,289.80 represented
by 1,000,582,898 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 £297,163,932.40. 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 76.
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.
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Annual Report and Accounts 2020
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 proportion of 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.
In common with other Luxembourg public companies, the authority of
the Board to issue ordinary shares on a non-preemptive basis is set out
in the Articles of Association of the Company. The Articles of Association
authorise the Directors to disapply 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 26 July
2019, 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 18 September 2020
This resolution will usually be requested at each AGM.
Corporate Governance
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 pages 71 and 72.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
10 June 2020
B&M European Value Retail S.A.
Annual Report and Accounts 2020
79
FSSR
Corporate Governance
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. Under that law they are
required to prepare the Group financial statements in accordance with
International Financial Reporting Standards (“IFRSs”) as adopted by the
EU and applicable law and have prepared the Company financial
statements in accordance with Luxembourg legal and regulatory
requirements regarding the preparation of annual accounts (“Lux GAAP”).
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;
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
position, performance, business model and strategy.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
10 June 2020
• provide additional disclosures when compliance with the specific
requirements in IFRSs or in accordance with Lux GAAP are
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial
position and financial performance; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that its financial statements
comply with 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 position, performance,
business model and strategy and is fair, balanced and understandable.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
The financial statements are published on the Company’s website.
Legislation in Luxembourg governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
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Annual Report and Accounts 2020
Financial Statements
Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
Financial Statements
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 28 March 2020, and the consolidated statement of comprehensive income, consolidated
statement of changes in shareholders’ equity and consolidated statement of cash flows for the 52-week period then ended, and 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 28 March 2020, 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 (“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 the EU Regulation N° 537/2014, the Law of 23 July 2016 and ISAs 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 (“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.
Emphasis of matter – comparative information
We draw attention to Note 1 to the consolidated financial statements, which describes that the Group has updated their accounting policy for
leases in line with the adoption of IFRS 16 Leases and made retrospective adjustments to the comparative information in the accompanying
consolidated financial statements. Consequently, the comparative information in the accompanying consolidated financial statements has been
restated. Our opinion is not modified in respect of this matter.
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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
81
GOVSR Independent Auditor’s Report continued
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg continued
Valuation of Inventory
Why the matter was considered to be one of the most
significant in our audit of the consolidated financial
statements 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 and note 19, the balance is £588 million at the period end.
Per the Inventory accounting policy in Note 1, inventories are
valued at the lower of cost or net realisable value. Changing
consumer preferences, spending patterns and the seasonality
of sales all impact the level of inventory held and the rate of
inventory turnover.
Our procedures over the existence 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 by inquiries with the relevant process owners and performing a
walkthrough of the process which includes observing the control and
inspecting supporting evidence for the various controls;
• Evaluating the appropriateness of management’s judgements and
assumptions applied in arriving at the value of inventory by:
The risk that net realisable value may be lower than cost for some
categories of inventory is increased in the current period due to
COVID 19. This relates mainly to Babou whose stores have been
closed since mid-March.
Per the Financial Instruments policy in note 1, the Group adopts
hedge accounting for a high proportion of its foreign currency
inventory purchases. In order to apply hedge accounting it is
necessary to demonstrate hedge effectiveness which requires,
amongst other things, matching the hedging instrument to the
hedged item and ensuring that the appropriate exchange rate is
applied to each hedged item included in the inventory balance.
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 in relation to
the net realisable value inventory provision, and the risk of error
inherent in the process of adjusting inventory to the appropriate
hedged rate.
– Assessing the value of a sample of inventory lines to confirm whether
it is measured 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 inventory by
analysing the last sold date of inventory items and the last received
date of inventory items in order to identify slow moving inventory lines
and analysing the period-end stock value against total sales during the
period 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 inventory provision;
– Testing the accuracy of the net realisable value inventory provision by
performing a recalculation of and testing a sample of the underlying
inputs of the provision calculation to supporting documentation;
– Evaluating the adequacy of the additional NRV provision established
for Babou to cater for the increased risk presented by COVID-19 with
reference to the seasonal categories most likely to be affected and a
range of potential mark downs that might be necessary to sell through
these items.
– Inspecting and corroborating the Group’s hedging strategy, and the
documentation in place for derivatives, including assessing whether
it is in accordance with IFRS9;
– Assessed management’s calculations to adjust the valuation of
inventories based on hedged effectiveness in order to assess whether
the valuation has been appropriately adjusted.
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Financial Statements Financial Statements
Fraud risk over Revenue recognition
Why the matter was considered to be one of the most
significant in our audit of the consolidated financial
statements of the current period
The Group’s Revenue amounts to £3.8 billion as per the
Consolidated Statement of Comprehensive Income and note 3
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
straightforward on a transactional level, the high volume of
transactions makes it more susceptible to fraud.
Revenue is a key performance indicator for 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 led us to
identify it as a key audit matter.
How the matter was addressed in our audit
Our procedures to address the fraud risk 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 by inquiries with the relevant process owners and performing
a walkthrough of the process which includes observing the control and
inspecting supporting evidence for the various controls;
• 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 period and investigating any
unusual variances;
• Analysing sales by store for the days pre- and post-period-end to assess
whether sales were recorded in the correct period;
• Analysing post period-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.
Carrying value of Babou goodwill
Why the matter was considered to be one of the most
significant in our audit of the consolidated financial
statements of the current period
How the matter was addressed in our audit
The carrying value of Babou goodwill is £26.8 million as per note
15 and relates to the acquisition of Babou in the prior year.
Our procedures over the carrying value of the Babou goodwill included,
but were not limited to:
Per the Goodwill accounting policy in note 1, goodwill is initially
measured at cost and is subsequently tested for impairment at
each period end, or at any time where there is an indication that
impairment may exist.
Babou has not been trading since mid-March 2020 when the
lock down was imposed in France due to COVID 19. There are
uncertainties linked to how quickly trading will return to the levels
experienced prior to the pandemic.
Given there is inherent uncertainty involved in forecasting and
discounting future cash flows which are the basis of the
assessment of the recoverable amount of the cash generating
unit, together with the circumstances created by Covid19, we have
identified the carrying value of the goodwill as a key audit matter.
• Obtaining the value in use model used for the impairment review and
checking it for mathematical accuracy;
• Assessing management’s forecasting accuracy by comparing actual
results for the period to those that had been forecast;
• Assessing the reasonableness of future cashflow forecasts with reference
to historic performance;
• Challenging the assumptions applied in the value in use model, including
the like for like sales increases, margin and discount rate;
• Performing sensitivity testing over the key assumptions applied by
management;
• Engaging our Corporate Finance specialists to perform a review of the
discount rate, with regard to market observable data of risk-free rates and
cost of equity for comparable companies.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
83
GOVSR
Independent Auditor’s Report continued
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg continued
Adoption of IFRS 16 Leases
Why the matter was considered to be one of the most
significant in our audit of the consolidated financial
statements of the current period
How the matter was addressed in our audit
IFRS 16 is a new accounting standard applicable for the first time
this period. Complex accounting requirements underlie the
determination of quantitative amounts of the standard, and
complex judgements are required in relation to aspects such as
discount rates and leases in holdover. Additionally, the adoption
of IFRS 16 has had a material impact on the consolidated financial
statements. As can be seen on the Consolidated Statement of
Financial position and note 18, £1.1 billion was recognised as
Right of use assets and £1.3 billion as Lease liabilities.
Our procedures over IFRS 16 included, but were not limited to:
• Evaluating assumed lease terms with reference to contracts and legal
rights, as well as our understanding of the facts and circumstances
surrounding the shop’s trade;
• Comparing assumed lease terms with actual terms of leases which have
expired or have been renewed during the period;
• Corroborating the Group’s credit risk assumption with reference to
correspondence with bankers;
New processes, data and controls will be relied upon that have
not been subject to testing previously.
Two sale and leaseback transactions occurred in the second half
of the period, accounting for these transactions in accordance
with IFRS 16 is complex.
• Benchmarking assumptions: comparing the discount rates to market
information including gilts and corporate bonds;
• Assessing the adequacy of the group’s disclosures about the sensitivity of
the valuation of lease liabilities to changes in key assumptions.
In respect of the sale and leaseback transactions our procedures included
but were not limited to:
• Validating the accounting treatment applied by management against the
requirements of IFRS 16 and IFRS 15;
• Assessing the rationale of the fair value of the transactions used by
management;
• Recalculating the accounting entries using the sale and leaseback
methodology outlined in IFRS 16;
• Traced the accounting entries posted through to the financial statements.
Other information
The Board of Directors is responsible for the other information. The
other information comprises the information stated in the consolidated
report including the consolidated 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 and those
charged with Governance 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 overseeing the
Group’s financial reporting process.
84
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements 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
skepticism 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.
Financial Statements
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
Shareholders on 26 July 2019 and the duration of our uninterrupted
engagement, including previous renewals and reappointments,
is 4 years.
The consolidated management report on pages 75 to 79 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 48 to 56. 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 were not provided and that we remained
independent of the Group in conducting the audit.
Luxembourg, 10 June 2020
KPMG Luxembourg
Société coopérative
Cabinet de révision agréé
Thierry Ravasio
B&M European Value Retail S.A.
Annual Report and Accounts 2020
85
GOVSR Consolidated statement of comprehensive income
Period ended
Continuing operations
Revenue
Cost of sales
Gross profit
Gain on sale and leaseback of the Bedford warehouse
Administrative expenses
Operating profit
Share of profits in associates
Profit on ordinary activities before net finance costs and tax
Finance costs on lease liabilities
Other finance costs
Finance income
Gain on revaluation of financial instruments
Profit on ordinary activities before tax
Income tax expense
Profit for the period from continuing operations
Attributable to owners of the parent
Discontinued operations
Loss from discontinued operations
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 from continuing operations
Basic earnings per share attributable to ordinary equity holders (pence)
Diluted earnings per share attributable to ordinary equity holders (pence)
Earnings per share from all operations
Basic earnings per share attributable to ordinary equity holders (pence)
Diluted earnings per share attributable to ordinary equity holders (pence)
52 weeks ended
28 March 2020
£’000
Note
Restated*
52 weeks ended
30 March 2019
£'000
3
17
5
14
3
6
6
6
6, 23
12
3
7
9
12
13
13
13
13
3,813,387
(2,530,579)
1,282,808
16,932
(966,928)
3,272,632
(2,152,403)
1,120,229
–
(801,492)
332,812
879
333,691
(57,206)
(24,809)
213
134
252,023
(57,246)
194,777
194,777
(113,922)
80,855
(9,172)
90,027
1,661
8,679
–
(1,383)
89,812
(9,753)
99,565
19.5
19.5
9.0
9.0
318,737
775
319,512
(52,040)
(24,228)
369
716
244,329
(49,220)
195,109
195,109
(3,975)
191,134
(2,717)
193,851
(2,125)
19,996
5
(3,481)
205,529
(3,051)
208,580
19.5
19.5
19.4
19.4
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
*
This statement has been restated in respect of the Group’s first time application of IFRS 16 (see notes 1, 2, 17 and 18), for the reclassification of the Germany Jawoll segment as a
discontinued operation (see notes 1 and 7) and for the results of the final purchase price allocation exercise for Babou (see notes 1 and 8).
86
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Consolidated statement of financial position
Financial Statements
Restated*
30 March
2019
£’000
954,757
126,559
378,581
1,036,873
6,920
7,237
23,751
Restated*
1 April
2018
£’000
929,718
120,962
298,581
872,686
5,140
–
17,923
28 March
2020
£’000
Note
921,911
119,696
312,198
1,086,618
5,700
7,517
22,988
2,476,628
2,534,678
2,245,010
428,205
588,000
60,588
16,702
–
1,093,495
3,570,123
(100,058)
(2,474,318)
(244,829)
(9,280)
(10,010)
1,979,131
(8,035)
–
–
86,202
665,570
52,400
6,294
3,781
814,247
90,816
558,690
16,438
–
–
665,944
3,348,925
2,910,954
(100,056)
(2,474,249)
(393,375)
(1,984)
(10,010)
1,979,131
(5,793)
13,855
(9,753)
(100,056)
(2,474,249)
(273,619)
14,532
(10,000)
1,979,131
(7,583)
13,855
(12,804)
(867,399)
(1,002,234)
(870,793)
(561,418)
(1,146,233)
–
(171)
(29,008)
(766)
(562,941)
(1,056,759)
–
(578)
(26,522)
(184)
(558,426)
(913,268)
(19,209)
(419)
(24,281)
(151)
(1,737,596)
(1,646,984)
(1,515,754)
(211,062)
(928)
(419,999)
(149,011)
(1,847)
(26,115)
(150,087)
(6,079)
(965,128)
(124,272)
(5,646)
(376,722)
(150,163)
(13,731)
(23,197)
–
(5,976)
(699,707)
(47,212)
(6,112)
(320,058)
(108,754)
(16,666)
(19,677)
–
(5,928)
(524,407)
(2,702,724)
(2,346,691)
(2,040,161)
(3,570,123)
(3,348,925)
(2,910,954)
15
15
16
17
14
20
12
21
19
20
23
26
24
17
23
22
12
25
24
21
22
17
23
34
25
As at
Assets
Non-current
Goodwill
Intangible assets
Property, plant and equipment
Right of use assets
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
Lease liabilities
Other financial liabilities
Other liabilities
Deferred tax liabilities
Provisions
Current liabilities
Interest bearing loans and borrowings
Overdrafts
Trade and other payables
Lease liabilities
Other financial liabilities
Income tax payable
Dividends payable
Provisions
Total liabilities
Total equity and liabilities
*
These statements have been restated in respect of the Group’s first time application of IFRS 16 (see notes 1, 17 and 18) and for the results of the final purchase price allocation
exercise for Babou (see note 8).
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 10 June 2020 and signed on their behalf by:
Simon Arora
Chief Executive Officer
B&M European Value Retail S.A.
Annual Report and Accounts 2020
87
GOVSR 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 1 April 2018
Restatements due to the adoption of
100,056 2,474,249
327,073
(14,532)
10,000 (1,979,131)
7,833
(13,855)
13,692
925,385
IFRS 16
–
–
(53,454)
–
–
–
(250)
–
(888)
(54,592)
Restated balance as at 1 April 2018
Allocation to legal reserve
100,056 2,474,249
–
–
273,619
(10)
(14,532)
–
10,000 (1,979,131)
–
10
7,583
–
(13,855)
–
12,804
–
870,793
–
Ordinary dividends declared
Effect of share options
Total transactions with owners
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the
period
–
–
–
–
–
–
–
–
–
–
–
–
(75,042)
954
(74,088)
–
–
–
193,851
3
–
16,516
193,854
16,516
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,790)
(1,790)
–
–
–
–
–
–
–
–
–
(75,042)
954
(74,088)
(2,717)
(334)
191,134
14,395
(3,051) 205,529
Balance at 30 March 2019
100,056 2,474,249
393,375
1,984
10,010 (1,979,131)
5,793
(13,855)
9,753 1,002,234
Ordinary dividends declared
Special dividends declared
Effect of share options
Total transactions with owners
Profit for the period relating to
continuing operations
Loss for the period relating to
discontinued operations
Other comprehensive income
Total comprehensive income for
the period
Disposal of Jawoll
–
–
2
2
–
–
–
–
–
–
(76,042)
– (150,087)
1,411
69
69 (224,718)
–
194,777
–
–
–
–
–
– (104,750)
–
–
–
7,296
–
–
90,027
7,296
(13,855)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,242
2,242
–
–
–
–
–
–
–
–
–
13,855
Balance at 28 March 2020
100,058 2,474,318 244,829
9,280
10,010 (1,979,131)
8,035
–
–
(76,042)
– (150,087)
1,482
–
– (224,647)
–
194,777
(9,172)
(581)
(113,922)
8,957
(9,753)
89,812
–
–
– 867,399
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
88
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Consolidated statement of cash flows
Period ended
Cash flows from operating activities
Cash generated from operations
Non cash write off from discontinued 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
Deferred consideration in respect of business acquisitions
Business disposal net of cash disposed
Acquisition 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 receipt/(repayment) of Babou facilities
Repayment of the principal in relation to right of use assets
Payment of interest in relation to right of use assets
Capitalised fees on refinancing
Finance costs paid
Receipt from exercise of employee share options
Dividends paid to owners of the parent
Net cash flows from financing activities
Effects of exchange rate changes on cash and cash equivalents
Net increase/(decrease) 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
Financial Statements
Note
27
16
15
8
23
7
14
14
24
24
24
24
11
34
21
52 weeks ended
28 March
2020
£’000
Restated*
52 weeks ended
30 March
2019
£'000
532,645
68,036
(57,924)
542,757
(123,270)
(1,361)
–
(11,950)
2,964
–
160,518
214
2,580
29,695
–
80,000
(2,030)
1,587
(142,653)
(63,790)
(119)
(23,957)
60
(76,042)
(226,944)
422,996
–
(47,271)
375,725
(103,315)
(2,654)
(75,879)
–
–
(1,200)
563
369
570
(181,546)
81,086
(5,000)
(2,297)
(5,489)
(109,972)
(58,544)
(935)
(21,476)
–
(75,042)
(197,669)
1,213
(658)
346,721
80,556
427,277
428,205
(928)
427,277
(4,148)
84,704
80,556
86,202
(5,646)
80,556
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
*
This statement has been restated in respect of the Group’s first time application of IFRS 16 (see notes 1, 17 and 18), and to represent foreign exchange movement in line with the
current year presentation (see note 1).
B&M European Value Retail S.A.
Annual Report and Accounts 2020
89
GOVSR 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 continuing trading taking place in the UK and France and discontinued operations in 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 31 March 2019 to 28 March 2020 which is a different period to the parent
company stand alone accounts (from 1 April 2019 to 31 March 2020). This exception is permitted under article 1712-12 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.
Restatement due to the Group’s adoption of IFRS 16 ‘Leases’
The new leasing standard, IFRS 16, was adopted by the Group on 31 March 2019, the start of the current financial year. The Group has adopted the
fully retrospective approach and therefore has applied the standard to all leases from the acquisition date of each lease, with the consequence
that the prior year financial statements have been restated.
The impact on our financial statements is significant, see notes 17 and 18 for more details.
The Group has taken advantage of the practical expedient allowed on transition to IFRS 16 to not re-assess which contracts contain or are a lease
and which are not. Therefore the Group has applied the standard to those contracts previously identified as leases only, as well as contracts
entered into after 31 March 2019.
Our new accounting policies for Leases are as follows:
Leases
The Group applies the leasing standard, IFRS 16, to all contracts identified as leases at their inception, unless they are considered a short-term
lease (with a term less than a year) or where the asset is of a low underlying value (under £5k). Assets which may fall into this categorisations
include printers, vending machines and security cameras, and the lease expense is within administrative expenses.
The Group has lease contracts in relation to property, equipment, fixtures & fittings and vehicles. A contract is classified as a lease if it conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.
When a lease contract is recognised, the business assesses the term for which we are reasonably certain to hold that lease, and the minimum lease
payments over that term are discounted to give the initial lease liability. The initial right-of-use asset is then recognised at the same value, adjusted for
incentives or payments made on the day that the lease was acquired. Any variable lease costs are expensed to administrative costs when incurred.
The date that the lease is brought into the accounts is the date from which the lease has been effectively agreed by both parties as evidenced by
the Group’s ability to use that property.
The right-of-use asset is subsequently depreciated on a straight-line basis over the term of that lease, or useful life (whichever is shorter) with the
charge being made to administrative costs. The lease liability attracts interest which is charged to finance costs, and is measured at amortised cost
using the effective interest method.
Right-of-use assets may be impaired if, for instance, a lease becomes onerous. Impairment costs are charged to administrative costs.
On a significant event, such as the lease reaching its expiry date or the likely exercise of a previously unrecognised break clause, the lease term is
re-assessed by management as to how long we can be reasonably certain to stay in that property, and a new lease agreement or modification (if
the change is made before the expiry date) is recognised for the re-assessed term.
90
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
The discount rate used is individual to each lease. Where a lease contract includes an implicit interest rate, that rate is used. In the majority of
leases this is not the case and the discount rate is taken to be the incremental borrowing rate as related to that specific asset. This is a calculation
based upon the external market rate of borrowing for the Group, as well as several factors specific to the asset to be discounted.
The Group separates lease payments between lease and non-lease components (such as service charges on property) at the point at which the
lease is recognised. Non-lease components are charged through administrative expenses.
Sale and leaseback transactions
The Group recognises a sale and leaseback transaction when the Group sells an asset that has been previously recognised in property, plant and
equipment, and subsequently leases it back as part of the same or a linked transaction.
Management use the provisions of IFRS 15 to assess if a sale has taken place, and the provisions of IFRS 16 to recognise the resulting lease, with the
liability and discount rate calculated in line with our lease policy and the asset subject to an adjustment based upon the net book value of the
disposed asset, the opening lease liability, the consideration received and the fair value of the asset on the date it was sold.
Resulting gains or losses are recognised in administrative expenses.
Disposal of Jawoll
On 27 March 2020 the Group announced the disposal of their 80% shareholding in the subsidiary J.A. Woll-Handels GmbH, and the results of the
entity have ceased to be consolidated from this date.
This subsidiary was previously consolidated as the Germany Jawoll segment, and as such the prior year statement of comprehensive income has
been restated to include the results of the Germany Jawoll segment within the discontinued operations categorisation.
All current year results have been presented within the loss from discontinued operations caption, including the loss on disposal and impairment
as reported in the September 2019 half year accounts.
Our policy on assets held for sale and disposal groups is as follows:
The Group reclassifies an asset or a disposal group as held for sale if the carrying amount is to be recovered principally through a sale transaction
rather than through continuing use. Their carrying value on reclassification is measured at the lower of the carrying amount and fair value less
costs to sell with any gain or loss included in gain or loss on discontinued operations (for a disposal group) or administrative costs (for an asset
held for sale), and no depreciation is charged on this balance.
Any assets classified as held for sale are separately presented on the statement of financial position, with any results separately presented in the
statement of comprehensive income (as discontinued operations for a disposal group). Any prior year statements of comprehensive income that
are presented are also restated to aide comparability.
Further disclosures have been made in note 7.
Acquisition of Babou
A final review of the identifiable assets and liabilities was carried out within the year with the result that, due to information available after the prior
year end which reflected circumstances at the acquisition date, an additional €6m goodwill was recognised in relation to a write-down of inventory.
As such the prior year cost of sales has also been restated for this amount, which translates to £5.3m.
Cash flow foreign exchange
A presentational restatement has been made to the consolidated statement of cash flows such that the effects of exchange rate changes on cash
and cash equivalents has been shown separately from cash flows in line with IAS 7. In prior years this separation was not made on grounds of
materiality, and as such the prior year has been represented to align with the current year presentation. This has resulted in a reduction of net cash
flows from operating activities of £1,781k and an increase in net cash flows from financing activities of £2,439k.
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 31 March 2019 to 28 March 2020. 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 27 March 2020, the Group disposed of J.A.Woll Handels GmbH (“Jawoll”). Jawoll has only been consolidated until this date, as a
discontinued operation. See note 7 for more details.
During the year, on 6 March 2020, and as part of a sale and leaseback transaction involving the new warehouse at Bedford, the Group disposed of
Bedford DC Investment Ltd (“Bedford Ltd”). Bedford Ltd has only been consolidated until this date, see note 17 for more details.
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Basis of consolidation continued
During the prior 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 8.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee),
• exposure, or rights, to variable returns from its involvement with the investee, and,
•
the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
•
•
•
the contractual arrangements with the other vote holders of the investee,
rights arising from other contractual arrangements, and,
the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary, excluding the
situations as outlined in the basis of preparation.
Going concern
As a value retailer, the Group is well placed to withstand volatility within the economic environment. The Group’s forecasts and projections, taking
into account reasonably possible changes in trading performance, show that the Group will trade within its current banking facilities.
After making enquiries, 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.
The Covid-19 pandemic has not had a material impact on this assessment, as the majority of the Group’s stores have continued to operate profitably.
The French Babou stores were closed at the year end date, and whilst losses were incurred in this segment, they have received support in the form
of loans that are 90% guaranteed by the French government (see note 33).
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.
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Financial Statements Financial Statements
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 4, as the Directors believe that these measures
provide additional information that is useful to the users of our accounts.
The alternative performance measures we report in these accounts are:
• Earnings before interest, tax, depreciation and amortisation (EBITDA)
• Adjusted EBITDA
• Adjusted Profit
• Adjusted Earnings per share
Both IFRS 16 and non-IFRS 16 versions of these alternative performance measures have been calculated and presented in order to aide
comparability with the non-IFRS 16 figures presented in previous years.
Interest, tax, depreciation and amortisation are as defined statutorily whilst the items we adjust for are those we consider not to be reflective of the
underlying performance of the business as detailed in note 4. These adjustments include the effect of ineffective derivatives and foreign exchange
on intercompany balances, which do not relate to underlying trading, and costs incurred in relation to acquisitions, which are non-recurring and do
not relate to underlying trading.
The directors believe that EBITDA provides users of the account with a measure of performance which is appropriate to the retail industry and
presented by peers and competitors. Adjusted values are considered to be appropriate to exclude unusual, non-trading and/or non-recurring
impacts on performance which therefore provides the user of the accounts an additional metric to compare periods of account.
The alternative performance measures used are not measures of performance or liquidity under IFRS and should not be considered in isolation or
as a substitute for measures of profit, or as an indicator of the Group’s operating performance or cash flows from operating activities as
determined in accordance with IFRS.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at the acquisition date fair value, which may include contingent consideration at net present value.
Acquisition-related costs are expensed depending on their nature with costs of raising finance amortised over the term of the relevant element of
finance provided and the remainder expensed when incurred.
Assets and liabilities are recognised at their acquisition date fair value, with the difference between the consideration and the net assets
recognised as goodwill on the statement of financial position or as a gain in administrative expenses.
Brands
Brands acquired by the business are amortised if the corresponding agreement is specifically time limited, or if the fair valuation exercise (carried
out for brands acquired via business combinations) identifies a fair lifespan for the brand. This amortisation is charged to administrative expenses.
Otherwise, brands are considered to have an indefinite life on the basis that they form part of the cash generating units within the Group which will
continue in operation indefinitely, with no foreseeable limit to the period over which they are expected to generate net cash inflows.
Where brands are considered to have an indefinite life they are reviewed at least annually for impairment or whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is
written down accordingly with the write down charged to administration expenses.
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Intangible assets
Intangible assets acquired separately, including computer software, are measured on initial recognition at cost comprising the purchase price and
any directly attributable costs of preparing the asset for use.
Following initial recognition, assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins
when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows:
Computer software acquired
–
3 or 4 years
Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.
Cost comprises purchase price and directly attributable costs. Unless significant or incurred as part of a refit programme, subsequent expenditure
will usually be treated as repairs or maintenance and expensed to the statement of comprehensive income.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of
the replaced part is derecognised.
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.
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.
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 statement of
comprehensive income and therefore affect net results of the Group. These changes include subsequent depreciation, amortisation and
impairment of the fair value adjustments of assets and liabilities.
Items that have been recognised directly in the associate’s other comprehensive income are recognised in the consolidated other comprehensive
income of the Group. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports
profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the
consolidated financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted
by the Group.
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Financial Statements
Financial Statements
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 decrease in the like for like sales of
established stores, sustained negative publicity or a drop off in visits to our website and social media accounts.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. It is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or CGU.
Impairment losses of continuing operations, are recognised in the statement of comprehensive income in those expense categories consistent with
the function of the impaired asset.
For assets excluding goodwill and acquired brands with indefinite lives, an assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates
the asset’s or CGU’s recoverable amount.
A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the statement of comprehensive income, except for impairment of goodwill which is not reversed.
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.
When a lease is classified as onerous, the right-of-use asset associated with the lease is impaired to £nil value and non-rental costs that are likely
to accrue before the end of the contract are provided against.
The property provision also contains expected dilapidation costs on any lease considered onerous, as well as any relating to stores recently or
planned to be closed.
Inventories
Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items, using the
weighted average method.
Stock purchased in foreign currency is booked in at the hedge rate applicable to that stock (if effectively hedged) or the underlying foreign currency
rate on the date that the item is brought into stock.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. Transport, warehouse and
distribution costs are not included in the valuation of inventory.
Share options
The Group operates equity settled 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 statement of comprehensive income in respect of the number of options outstanding and the fair value of those
options. A corresponding credit is made to the retained earnings reserve and the effect of this can be seen in the statement of changes in equity.
See note 11 for more details.
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Taxation
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in
the countries where the Group operates and generates taxable income. Tax is recognised in the statement of comprehensive income, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the
extent that it is highly probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred
tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at
each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Financial instruments
The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign
currency risk, commodity price risk and interest rate risk.
Derivative financial instruments are recognised at fair value. The fair value is derived using an internal model and supported by valuations by third
party financial institutions.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in other
comprehensive income and accumulated in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the statement
of comprehensive income. Effectiveness of the derivatives subject to hedge accounting is assessed prospectively at inception of the derivative, and
at each reporting period end date prior to maturity.
Where a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, such as an item of inventory, the
associated gains and losses are recognised in the initial cost of that asset.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss
recognised in equity is reclassified in the statement of other comprehensive income immediately.
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Financial assets
Under IFRS 9, on initial recognition, a financial asset is classified as measured at amortised cost, fair value through profit or loss or fair value though
other comprehensive income.
A financial asset is measured at amortised cost using the effective interest rate if it meets both of the following conditions: it is held within a
business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding. Under IFRS 9 trade receivables, without a significant
financing component, are classified and held at amortised cost, being initially measured at the transaction price and subsequently measured at
amortised cost less any impairment loss.
IFRS 9 includes an ‘expected loss’ model (‘ECL’) for recognising impairment of financial assets held at amortised cost. The Group has elected to
measure loss allowances for trade receivables at an amount equal to lifetime ECLs. Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to
receive).
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected
credit losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment and
including forward-looking information. The Group performs the calculation of expected credit losses separately for each customer group.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income comprise derivative financial instruments entered into by the Group that are
designated as hedging instruments in hedge relationships as defined by IFRS 9. Financial assets at fair value through other comprehensive income
are carried in the statement of financial position at fair value with changes in fair value recognised in other comprehensive income.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include derivative financial instruments entered into by the Group that are not designated as
hedging instruments in hedge relationships as defined by IFRS 9. Financial assets at fair value through profit or loss are carried in the statement of
financial position at fair value with changes in fair value recognised in profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to
receive cash flows from the asset have expired and the entity has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full and either (a) the entity has transferred substantially all the risks and rewards of the asset, or (b) the
entity has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
A financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future
cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss or other financial liabilities. The
entity determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial derivatives held for trading. Financial liabilities are classified as held-for-
trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the
Group. Gains or losses on liabilities held-for-trading are recognised in profit and loss.
Other financial liabilities
After initial recognition, interest bearing loans and borrowings, trade and other payables and other liabilities are subsequently measured at
amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income when the
liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The
EIR amortisation is included in finance costs.
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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 (Disposed March 2020)
• 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)
• SAS Babou
• Babou Relationship Partners – BRP SAS
• B&M European Value Retail Germany GmbH (Germany Holdco)
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The following former Group companies had a functional currency of the Euro;
• J.A. Woll Handels GmbH (Jawoll)
• Jawoll Vertriebs GmbH
• Paminvest SAS
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 judgments
Investments in Associates
Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the Group, has been judged by management to be an associate rather
than a subsidiary or a joint venture.
Under IFRS 10 control is determined by:
• Power over the investee.
• Exposure, or rights, to variable returns from its involvement with the investee.
• The ability to use its power over the investee to affect the amount of the investor’s returns.
Although 50% owned, B&M Group does not have voting rights or substantive rights. Therefore, the level of power over the business is considered to be
more in keeping with that of an associate than a joint-venture, and 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.
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Deferred Consideration
During the year the Group disposed of the German trading subsidiaries, see note 7. The transaction entitled the Group to receive €12.5m, with €10m
of this deferred until no later than December 2020, payable if the business does not become insolvent.
A key management judgment has been made that this amount is fully recoverable, based upon an analysis which included consideration of
prudent forecasts, the proposed business plan put forward by the new owners (and their experience in this marketplace), the likely timescales and
the ability to overcome prior issues within the businesses.
The analysis was further sensitised to the impact of Covid-19 on the retail market in Germany, ultimately without impacting the judgment made that
the full amount should be considered recoverable.
Sale & Leaseback of Bedford
The Group performed a major sale and leaseback in the year in respect to the new warehouse at Bedford.
The warehouse was built by the Group for a cost of £103.7m over the past two years, and sold for £153.8m in March 2020 to a third party who
subsequently leased back the warehouse to the Group for our use. The profit recognised by the company was £16.9m with a further £32.1m gain
rolled into the asset value (as required by the IFRS 16 leasing standard) and which will therefore be realised on a straight line basis over the 20 year
term of the lease as a reduction in depreciation. See note 17 for further details.
A key judgment was made by management to recognise the sale.
Under the provisions of IFRS 15 the key requirement over which judgment is applied for a sale to be recognised is that the control of the asset, as
defined by the ability to direct the use of and obtain substantially all of the benefits from the asset, has transferred from the Group to the third party.
If this is not the case, the transaction should be recognised as financing on the property.
Following consideration of the provisions within the lease (including the extension clause and lack of reversionary rights), and the rights and ability
of the third party to extract value from the asset they acquired, management believe that the appropriate treatment is to recognise the transaction
as a sale, and therefore the whole transaction as a sale and leaseback.
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 15 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.
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 held at Babou during the period of closure
enforced by the Covid-19 pandemic.
Following the closure of the Babou stores on 15 March 2020 and the stores re-opening on 11 May 2020 the business has lost nine weeks of
revenues and following the re-opening there is also uncertainty as to the level of consumer confidence and therefore revenues over the reminder of
the Spring/Summer season. The business purchases and carries stocks that are specific to the Spring/Summer selling season and hence given the
lost revenues during the closure period and the potential impact on consumer confidence a judgement has been made with regards to the net
realisable value of specific merchandise in this category that has resulted in an additional provision of €7.3m.
Lease discount rates
Where a rate implicit to the lease is not available, the selection of a discount rate for a lease is based upon the marginal cost of borrowing to the
business in relation to the funding for a similar asset.
Management calculates appropriate discount rates based upon the marginal cost of borrowing currently available to the business as adjusted for
several factors including, the term of the lease, the location and type of asset and how often payments are made.
Management consider that these are the key details in determining the appropriate marginal cost of borrowing for each of these assets.
100
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Annual Report and Accounts 2020
Financial Statements Financial Statements
Lease term
The lease term is a key input into calculating the initial lease liability under IFRS 16.
Management consider it appropriate, unless there is a good reason to act otherwise, to initially set a lease term equal to the longest possible
contractual term of that lease, reflecting our intention to operate profitable locations on acquisition without requiring break clauses, but taking
extension clauses where available.
Upon termination of a lease, where there does not exist a new agreement for the property but we remain in occupation, a new ‘Holding over’ lease
is created with a term based upon management’s expectations of how long the group is reasonably certain to stay in that property based upon
recent trading patterns and the pipeline of existing or potential new opportunities.
Management consider that this is appropriate as it more fairly reflects the Group’s intention to continue to occupy and trade from these properties.
Standards and Interpretations not yet applied by the Group
The following amendments to accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have not
yet been applied by the Group in the period. None of these are expected to have a significant impact on the Group’s consolidated results or
financial position:
IASB effective for annual periods beginning on or after 1 January 2020
Standard
Summary of changes
EU Endorsement status
Amendments to References to the Conceptual
Framework in IFRS Standards
Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14,
IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12,
IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32 to update
those pronouncements with regard to the
revised Conceptual Framework.
Endorsed (29 November 2019). EU effective
date 1 January 2020.
Amendment to IFRS 3 Business Combinations
Amendment to IFRS 3 to clarify the definition of
business.
Endorsed (21 April 2020). EU effective date
1 January 2020.
Amendments to IAS 1 and IAS 8
Amendments to IAS 1 and IAS 8 to update the
definition of material.
Endorsed (29 November 2019). EU effective
date 1 January 2020.
Amendments to IFRS 7, IFRS 9 and IAS 39
Amendments to IFRS 7, IFRS 9 and IAS 39
addressing issues affecting financial reporting
in the period leading up to LIBOR reform.
Endorsed (15 January 2020). EU effective date
1 January 2020.
IASB effective for annual periods beginning on or after 1 January 2021
Standard
Summary of changes
IFRS 17 Insurance contracts
IFRS 17 establishes the principles for the
recognition, measurement, presentation and
disclosure of insurance contracts within the
scope of the standard. The objective of IFRS 17 is
to ensure that an entity provides relevant
information that faithfully represents those
contracts. It will apply to all entities that issue
insurance and reinsurance contracts, and to all
entities that hold reinsurance contracts.
EU Endorsement status
Not yet endorsed.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
101
GOVSR Notes to the consolidated financial statements continued
2 Statement of profit and loss without the effects of IFRS 16
As referred to in Note 1, the Group has applied IFRS 16 for the first time in these set of results. In order to aid the comparability of our results with
those previously issued, we provide the profit and loss statement without the effects of IFRS 16.
Period ended
Continuing operations
Revenue
Cost of sales
Gross profit
Gain on sale and leaseback of the Bedford warehouse
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 from continuing operations
Attributable to owners of the parent
Discontinued operations
Loss from discontinued operations
Profit for the period
Attributable to non-controlling interests
Attributable to owners of the parent
52 weeks ended
28 March 2020
£’000
Restated*
52 weeks ended
30 March 2019
£'000
3,813,387
(2,530,579)
1,282,808
48,984
(1,007,378)
3,272,632
(2,152,403)
1,120,229
–
(840,953)
324,414
879
325,293
(24,983)
213
134
300,657
(64,012)
236,645
236,645
(119,444)
117,201
(10,306)
127,507
279,276
775
280,051
(24,410)
369
716
256,726
(51,402)
205,324
205,324
(2,615)
202,709
(2,445)
205,154
*
This statement has been restated for the reclassification of the Germany Jawoll segment as a discontinued operation.
The overall effect on continuing profit before tax of the IFRS 16 adjustments was a loss of £48,634k, £32,052k of which was due to the difference in
the gain recognised on the Bedford warehouse sale & leaseback (March 2019: overall £12,397k) see notes 17 and 18 for further details.
3 Segmental information
IFRS 8 (“Operating segments”) requires the Group’s segments to be identified on the basis of internal reports about the components of the Group
that are regularly reviewed by the chief operating decision maker to assess performance and allocate resources across each reporting segment.
The chief operating decision maker has been identified as the executive directors who monitor the operating results of the retail segments for the
purpose of making decisions about resource allocation and performance assessment.
For management purposes, the Group is organised into three operating segments, UK B&M, UK Heron and France Babou segments comprising
the three separately operated business units within the Group. Previously the Group consolidated the Germany Jawoll segment, until disposal in
March 2020, see note 7. The France Babou segment has been active since the acquisition of Babou in October 2018.
Items that fall into the corporate category, which is not a separate segment but is presented to reconcile the balances to those presented in the
main statements, include those related to the Luxembourg or associate entities, Group financing, corporate transactions, any tax adjustments and
items we consider to be adjusting (see note 4).
102
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Annual Report and Accounts 2020
Financial Statements Financial Statements
The average euro rate for translation purposes was €1.1441/£ during the year, with the year end rate being €1.1176/£ (2019: €1.1341/£ and
€1.1648/£ respectively).
52 week period to 28 March 2020
Revenue
EBITDA (note 4)
EBITDA (IFRS 16) (note 4)
Depreciation and amortisation
Net finance expense
Income tax (expense)/credit
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
UK
B&M
£’000
3,140,144
321,590
467,155
(148,946)
(42,722)
(48,921)
226,566
2,874,747
(1,342,935)
(69,908)
UK
Heron
£’000
389,867
25,551
34,956
(19,109)
(2,809)
(2,444)
10,594
290,742
(127,191)
(13,220)
France
Babou
£’000
283,376
(3,003)
28,212
(35,357)
(10,538)
5,629
(12,054)
345,222
(249,816)
(8,198)
Corporate
£’000
–
38,839
6,787
(7)
(25,599)
(11,510)
(30,329)
Continuing
Total
£’000
3,813,387
382,977
537,110
(203,419)
(81,668)
(57,246)
194,777
59,412
(982,782)
(30,276)
3,570,123
(2,702,724)
(121,602)
The prior year statement, below, has been restated to include the effects of adopting IFRS 16, and to exclude the Germany Jawoll segment as it is a
discontinued operation. Note that some expenses, such as the revaluation of the call/put option in relation to Germany, were previously classified
as corporate but as they were not part of the result for the continuing operations they have also been excluded.
52 week period to 30 March 2019
Revenue
EBITDA (note 4)
EBITDA (IFRS 16) (note 4)
Depreciation and amortisation
Net finance expense
Income tax (expense)/credit
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
UK
B&M
£’000
2,789,431
296,398
436,263
(133,647)
(46,501)
(48,959)
207,156
2,487,954
(1,139,225)
(63,394)
UK
Heron
£’000
354,057
19,923
29,450
(18,497)
(2,614)
(1,602)
6,737
275,161
(114,373)
(15,432)
France
Babou
£’000
129,144
5,596
18,843
(16,029)
(3,434)
110
(510)
304,192
(213,387)
(2,626)
Corporate
£’000
–
3,131
3,131
(2)
(22,634)
1,231
(18,274)
41,284
(754,424)
(19,590)
Continuing
Total
£’000
3,272,632
325,048
487,687
(168,175)
(75,183)
(49,220)
195,109
3,108,591
(2,221,409)
(101,042)
*
includes capital expenditure on intangible assets. The reconciling figure between the total and the figure given in the statement of cash flows is the capital expenditure at
Jawoll in the year, see note 7.
Revenue is disaggregated geographically as follows;
Period to
Continuing operations
Revenue due to UK operations
Revenue due to French operations
Overall revenue
The Group operates a small wholesale operation, with the relevant disaggregation of revenue as follows;
Period to
Continuing operations
Revenue due to sales made in stores
Revenue due to wholesale activities
Overall revenue
52 weeks ended
28 March 2020
£’000
52 weeks ended
30 March 2019
£’000
3,530,011
283,376
3,143,488
129,144
3,813,387
3,272,632
52 weeks ended
28 March 2020
£’000
52 weeks ended
30 March 2019
£’000
3,777,238
36,149
3,249,049
23,583
3,813,387
3,272,632
B&M European Value Retail S.A.
Annual Report and Accounts 2020
103
GOVSR Notes to the consolidated financial statements continued
4 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.
The foreign exchange difference on our acquisition facility loan has been included for the first time as an adjusting item in these accounts. This is
because the loan has been specifically drawn to cover costs associated with a Group project. Our March 2019 adjusted EBITDA has been restated to
reflect this.
Period to
Continuing operations
Profit on ordinary activities before interest and tax
Add back depreciation and amortisation
EBITDA (IFRS 16)
Exclude effects of IFRS 16 on administrative costs
EBITDA
Reverse the fair value effect of ineffective derivatives
Foreign exchange on intercompany balances
Foreign exchange on acquisition facility
Gain on sale and leaseback of the Bedford warehouse
Direct effects of the closure of the French stores due to Covid-19
Remove costs associated with the acquisition of Heron
Adjusted EBITDA
Pre-IFRS 16 depreciation and amortisation
Net adjusted finance costs (see note 6)
Adjusted profit before tax
Adjusted tax
Adjusted profit for the period
Attributable to owners of the parent
52 weeks ended
28 March
2020
£’000
Restated
52 weeks ended
30 March
2019
£’000
333,691
203,419
537,110
(154,133)
382,977
(641)
(3,694)
3,334
(48,984)
9,315
–
342,307
(57,684)
(24,596)
260,027
(57,048)
202,979
202,979
319,512
168,175
487,687
(162,639)
325,048
(5,707)
2,799
(2,978)
–
–
425
319,587
(44,997)
(22,192)
252,398
(49,739)
202,659
202,659
Adjusted EBITDA (IFRS 16) and Adjusted Profit (IFRS 16) are calculated as follows. These are the statements of adjusted profit that includes the effects
of IFRS 16.
Period to
Continuing operations
Adjusted EBITDA (above)
Include other effects of IFRS 16 on EBITDA
Exclude the effect of IFRS 16 on the gain on the Bedford transaction
Adjusted EBITDA (IFRS 16)
Depreciation and amortisation
Interest costs related to right-of-use assets (note 6)
Net adjusted other finance costs
Adjusted profit before tax (IFRS 16)
Adjusted tax
Adjusted profit for the period (IFRS 16)
52 weeks ended
28 March
2020
£’000
Restated
52 weeks ended
30 March
2019
£’000
342,307
154,133
32,052
528,492
(203,419)
(57,206)
(24,596)
243,271
(56,372)
186,899
319,587
162,639
–
482,226
(168,175)
(52,040)
(22,192)
239,819
(51,921)
187,898
Adjusting items are the effects of derivatives, one off refinancing fees, foreign exchange on the translation of intercompany balances and the
effects of revaluing or unwinding balances related to the acquisition of subsidiaries. Significant project costs or gains or losses arising from unusual
circumstances or transactions may also be included if incurred, such as this year with the gain on the sale and leaseback of the Bedford
warehouse and the direct loss incurred at Babou due to the closure of their stores during the pandemic. Adjusted tax represents the tax charge per
the statement of comprehensive income as adjusted only for the effects of the adjusting items detailed above.
104
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Annual Report and Accounts 2020
Financial Statements Financial Statements
The segmental split in EBITDA (IFRS 16) and Adjusted EBITDA (IFRS 16) reconciles as follows;
52 week period to 28 March 2020
Continuing operations
Profit/(loss) before interest and tax
Add back depreciation and amortisation
EBITDA (IFRS 16)
Adjusting items detailed above
IFRS 16 adjustment to gain at Bedford
Adjusted EBITDA
52 week period to 30 March 2019
Continuing operations
Profit before interest and tax
Add back depreciation and amortisation
EBITDA
Adjusting items detailed above
Adjusted EBITDA
UK
B&M
£’000
318,209
148,946
467,155
–
–
467,155
UK
B&M
£’000
302,616
133,647
436,263
–
436,263
UK
Heron
£’000
15,847
19,109
34,956
–
–
34,956
UK
Heron
£’000
10,953
18,497
29,450
–
29,450
France
Babou
£’000
(7,145)
35,357
28,212
–
–
28,212
France
Babou
£’000
2,814
16,029
18,843
–
18,843
Corporate
£’000
6,780
7
6,787
(40,670)
32,052
Total
£’000
333,691
203,419
537,110
(40,670)
32,052
(1,831)
528,492
Corporate
£’000
Total
£’000
3,129
2
3,131
(5,461)
(2,330)
319,512
168,175
487,687
(5,461)
482,226
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.
5 Operating profit
The following items have been charged in arriving at operating profit from continuing operations;
Period ended
Auditor's remuneration
Payments to auditors in respect of non-audit services:
Taxation advisory services
Other assurance services
Other professional services
Cost of inventories recognised as an expense (included in cost of sales)
Depreciation of owned property, plant and equipment:
Amortisation (included within administration costs)
Depreciation of right of use assets
Operating lease rentals
(Gain)/loss on sale of property, plant and equipment
Gain on sale and leaseback
Loss/(gain) on foreign exchange
52 weeks ended
28 March
2020
£’000
52 weeks ended
30 March
2019
£'000
722
348
–
10
–
2,530,579
52,366
2,433
148,620
4,479
(163)
(16,928)
660
–
7
–
2,152,403
41,294
1,976
124,905
4,839
568
–
(7,986)
The prior year figures have been restated in respect of the Group’s first time application of IFRS 16, for the reclassification of the Germany Jawoll
segment as a discontinued operation and for the results of the final purchase price allocation exercise for Babou.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
105
GOVSR Notes to the consolidated financial statements continued
6 Finance costs and finance income
Finance costs include all interest related income and expenses. The following amounts have been included in the continuing profit line for each
reporting period presented:
Period ended
Continuing operations
Interest on debt and borrowings
Ongoing amortisation of finance fees
Total adjusted finance expense
Unwinding of deferred acquisition costs for subsidiaries
Total other finance expense
Finance costs on lease liabilities
Total finance expense
The finance expense reconciles to the statement of cash flows as follows;
Period ended
Cash
Finance costs paid in relation to debt and borrowings
Finance costs paid in relation to right of use assets
Finance costs paid
Finance costs paid for debt and borrowings within discontinued operations
Finance costs paid for right of use assets within discontinued operations
Finance costs paid for within continuing operations
Non cash
Movement of accruals in relation to debt and borrowings
Amortisation of finance fees
Unwinding of deferred acquisition costs for subsidiaries
Total finance expense within continuing operations
Period ended
Interest income on loans and bank accounts
Total adjusted finance income
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
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
(22,732)
(2,077)
(24,809)
–
(24,809)
(57,206)
(82,015)
(20,699)
(1,862)
(22,561)
(1,667)
(24,228)
(52,040)
(76,268)
52 weeks to
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
23,957
63,790
87,747
(1,350)
(6,584)
79,813
125
2,077
–
82,015
52 weeks to
28 March
2020
£’000
213
213
134
347
52 weeks to
28 March
2020
£’000
(24,809)
213
(24,596)
21,476
58,544
80,020
(302)
(6,504)
73,214
(475)
1,862
1,667
76,268
52 weeks to
30 March
2019
£'000
369
369
716
1,085
52 weeks to
30 March
2019
£'000
(22,561)
369
(22,192)
The prior year figures have been restated in respect of the Group’s first time application of IFRS 16 and for the reclassification of the Germany Jawoll
segment as a discontinued operation.
106
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Annual Report and Accounts 2020
Financial Statements Financial Statements
7 Business disposal
On 27 March 2020 the Group announced the disposal of J.A. Woll-Handels GmbH and their subsidiaries (“Jawoll”), therefore forming a disposal
group, for a consideration of €12,501k, comprising €12,500k to repay intercompany balances and £1k for the enterprise value of the business. Jawoll
has therefore not been consolidated since this date.
As such their results have been reclassified in the statement of comprehensive income as discontinued operations under the definition given in
IFRS 5. The prior year results have therefore also been restated to reflect this new classification.
The consideration receivable breaks down as follows;
Deferred receivable against the intercompany loan balance
Receivable immediately against the intercompany trade receivable balance
Receivable against the transfer of the share capital
Total
Deferred consideration
Overdraft released on disposal
Amount related to the disposal as disclosed on the statement of cash flows
£’000
8,948
2,237
1
11,186
(8,948)
726
2,964
€'000
10,000
2,500
1
12,501
(10,000)
811
3,312
The €10m deferred receivable is due in December 2020 or earlier, and is contingent against Jawoll remaining a going concern as at that date.
Management consider that this is highly probable and have therefore recognised the full €10m, see note 1.
The loss on discontinued operations disclosed in the statement of comprehensive income comprised the following;
Period ended
Revenue
Impairment expense recognised in September 2019
Other expenses
Loss before tax
Income tax (expense)/credit
Loss from discontinued operations before disposal
Loss on disposal
Tax charge on disposal
Loss from discontinued operations
Attributable to non-controlling interests
Attributable to owners of the parent
52 weeks to
28 March
2020
£’000
210,662
(59,533)
(240,224)
(89,095)
(1,721)
(90,816)
(23,106)
–
(113,922)
(9,172)
(104,750)
52 weeks to
30 March
2019
£'000
213,663
–
(222,906)
(9,243)
5,268
(3,975)
–
–
(3,975)
(2,717)
(1,258)
At the half year the Group carried out an impairment review in respect to Jawoll with the result that the above £59.5m impairment was recognised.
A further £23.1m loss has been recognised on disposal.
Jawoll had no other comprehensive income in the period other than to recognise the change in the foreign exchange reserve which was the
release of the full amount relating to Jawoll, a charge of £3,053k.
The net cash flows of the disposed entity break down as follows;
Period ended
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Net decrease in cash and cash equivalents
52 weeks to
28 March
2020
£’000
3,015
(3,033)
(2,487)
(2,505)
52 weeks to
30 March
2019
£'000
(22,259)
(4,910)
24,070
(3,099)
Specifically, Jawoll spent £3,029k on capital additions in the year (2019: £4,927k) and this is therefore the balancing number between the segment
analysis cash flow in note 3, and that given on the statement of cash flows.
The equity balances held in non-controlling interests and the call/put reserve were entirely related to the Jawoll entities and have therefore been
derecognised on the date of this transaction. The remaining balances have been recycled through to the retained earnings reserve, see the
statement of changes in equity.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
107
GOVSR Notes to the consolidated financial statements continued
7 Business disposal continued
On 6 March 2020 the business Bedford DC Investments Ltd was disposed by the Group as part of a sale and leaseback transaction. The entity had
no significant profit or loss items except those that related directly to the sale & leaseback transaction and therefore no further disclosures have
been made related to the discontinued operation. Further disclosures relating to the sale and leaseback transaction are included in note 17.
8 Business acquisition
In the prior 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”). 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 exchange rate on the acquisition date was 1.1346€/£.
A final review of the fair values of the identifiable assets and liabilities has been carried out within the year, with the result that, due to information
available after the prior year end which reflected circumstances at the acquisition date, an additional €6m goodwill has been recognised in
relation to a write-down of inventory.
Whilst all other fair values remain unchanged from the provisional figures given in the 2019 Annual Report, we have restated acquisition assets and
liabilities to incorporate IFRS 16. This change includes reclassifying the previously recognised favourable, unfavourable and finance lease balances
and recognising a right-of-use asset balance and related lease liabilities. The IFRS 16 restatement is net assets neutral overall and therefore this
has had no overall impact on the net assets figure and goodwill acquired.
The fair values of the identifiable assets and liabilities acquired have therefore been finalised as:
Assets
Babou brand asset (10 year life)
Other intangible assets
Property, plant and equipment
Right of use assets
Inventories
Corporation and deferred tax
Receivables and other assets
Cash
Total assets
Liabilities
Creditors and accruals
Lease liabilities
Bank loans
Total liabilities
Net assets acquired
Fair value of consideration
Goodwill recognised on acquisition
€’000
4,690
1,402
27,591
166,353
77,280
2,671
18,087
4,038
302,112
(64,947)
(164,537)
(12,488)
(241,972)
60,140
90,130
29,990
This is an increase from the estimated goodwill of €24.0m recognised at the 2019 year end.
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 4.
The goodwill (which translates to £26.4m 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 statement of comprehensive income can be seen in the segment note (note 3). Had the
company been bought at the start of the prior year it would have contributed an estimated extra €162.3m to the prior year revenue and €2.8m to
the prior year 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 statement of comprehensive income.
The balance on the consolidated statement of cash flows reconciles as follows:
Initial cash consideration
Cash acquired
Net cash for acquisitions
108
B&M European Value Retail S.A.
Annual Report and Accounts 2020
€’000
90,130
(4,038)
86,092
£’000
79,438
(3,559)
75,879
Financial Statements 9 Employee remuneration
Expense recognised for employee benefits is analysed below:
Period ended
Continuing operations
Wages and salaries
Social security costs
Pensions – defined contribution plans
Financial Statements
52 weeks to
28 March
2020
£’000
394,894
21,390
5,359
421,643
52 weeks to
30 March
2019
£'000
352,291
18,356
3,308
373,955
There are £526k of defined contribution pension liabilities owed by the Group at the period end (2019: £116k).
As at 30 March 2019, the Group had one employee who is a member of a defined benefit scheme with the liability held on the balance sheet at £245k.
This scheme was run by the discontinued operation and as such there are no defined benefit schemes within the Group as at 28 March 2020.
The scheme was considered immaterial to the Group and the effect of the prior 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 £1,226k (2019: £1,174k) at the year end.
The average monthly number of persons employed by the Group’s continuing operations during the period was:
Period ended
Continuing operations
Sales staff
Administration
10 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
28 March
2020
52 weeks to
30 March
2019
33,437
769
34,206
31,086
683
31,769
52 weeks to
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
2,040
298
2,338
4,678
524
38
5,240
1,069
181
1,250
2,204
219
2,423
4,440
328
36
4,804
1,212
84
1,296
The emoluments disclosed above are of the directors and key management personnel who have served as a director within any of the continuing
Group companies and the prior year figures have been restated to exclude the key management associated with the discontinued operation.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
109
GOVSR
Notes to the consolidated financial statements continued
11 Share Options
The Group operates three equity settled share option schemes which split down to various tranches. Details of these schemes follow.
1) The Company Share Option Plan (CSOP) scheme
The CSOP scheme was adopted by the Group as a Schedule 4 CSOP Scheme on 29 March 2014. No grant under this scheme can be made more
than 10 years after this date.
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 are 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 2020 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 31 March 2018
Lapsed
Options outstanding at 30 March 2019
Exercised
Options outstanding at 28 March 2020
Tranche 1
Tranche 3
Tranche 4
1 Aug 2014
271.5p
596,646
83p
17 Dec 2015
286.0p
10,489
79p
19 Aug 2016
276.8p
21,676
50p
11,049
–
11,049
–
11,049
10,489
(10,489)
–
–
–
21,676
–
21,676
(21,676)
–
No options remained on Tranche 2 as at 31 March 2018.
2) Long-Term Incentive Plan (LTIP) Awards
The LTIP was adopted by the board on 29 May 2014. No grant under this scheme can be made more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for the LTIP and the awards are made at the discretion of the remuneration committee.
Limits & Pricing
A fixed number of options are offered to each participant, with the pricing set at £nil. The options offered to each individual cannot exceed a total
value of 100% (200% under exceptional circumstances) of the participants base salary where the value is measured as the market value of the
shares on grant multiplied by the number of options awarded, with the whole scheme limited to 10% of the share capital in issue.
110
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
Dividend Credits
All participants in any LTIP awards granted after 1 April 2018 are entitled to a dividend credit where the notional dividend they would have received
on the maximum number of shares available under their award is converted into new share options and added to the award based upon the
share price on the date of the dividend. These additional awards have been reflected in the tables below.
Vesting & Exercise
The share options vest on the third anniversary of the grant date, subject to a set of conditions as follows:
LTIP 2015, 2016, 2017A, 2018A, 2019A:
• 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 a Diluted 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
LTIP 2019A
EPS as at
50% paid at
12.5% paid at
March-18
March-19
March-20
March-21
March-22
19.0p
22.5p
24.0p
28.0p
33.0p
15.0p
17.5p
19.0p
23.0p
27.0p
Below the 12.5% boundary, no options vest. Diluted EPS is considered to be on frozen GAAP and so does not include the effects of IFRS 16.
After these schemes have vested they are subject to a two year holding period before they can be exercised.
LTIP 2017/B1, 2017/B2, 2018/B1, 2018/B2, 2019/B1, 2019/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 2020 there have been several 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.
LTIP 2014 had no outstanding options as at 31 March 2018.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
111
GOVSR Notes to the consolidated financial statements continued
11 Share Options continued
The key information used in the valuation of these tranches is as follows;
Scheme
2015-TSR
2015-EPS
2016-TSR
2016-EPS
2017A-TSR
2017A-EPS
2018A-TSR
2018A-EPS
2019A-TSR
2019A-EPS
2017/B1
2017/B2
2018/B1
2018/B2
2019/B1
2019/B2
Scheme
2015-TSR
2015-EPS
2016-TSR
2016-EPS
2017A-TSR
2017A-EPS
2018A-TSR
2018A-EPS
2019A-TSR
2019A-EPS
2017/B1
2017/B2
2018/B1
2018/B2
2019/B1
2019/B2
Scheme
2015-TSR
2015-EPS
2016-TSR
2016-EPS
2017A-TSR
2017A-EPS
2018A-TSR
2018A-EPS
2017/B1
2017/B2
2018/B1
2018/B2
Date of Grant
5 Aug 15
5 Aug 15
18 Aug 16
18 Aug 16
7 Aug 17
7 Aug 17
22 Aug 18
22 Aug 18
22 Aug 19
22 Aug 19
7 Aug 17
14 Aug 17
23 Jan 18
20 Aug 18
20 Aug 19
18 Sep 19
Options at
30 Mar 19
40,616*
31,477*
122,385.5
122,385.5
40,610
40,610
226,672.5
226,672.5
–
–
263,855
93,629
16,856
227,304
–
–
Options at
31 Mar 18
40,616
40,616
122,385.5
122,385.5
40,610
40,610
–
–
271,891
101,654
19,264
–
Original Options
Granted
Fair Value of each
option
Risk Free Rate
Expected Life
(years)
Volatility
40,616
40,616
122,385.5
122,385.5
40,610
40,610
226,672.5
226,672.5
275,640.5
275,640.5
287,963
101,654
19,264
236,697
369,061
2,678
210p
341p
164p
254p
272p
351p
240p
409p
251p
361p
361p
360p
400p
406p
348p
373p
0.92%
0.92%
0.09%
0.09%
0.52%
0.52%
0.97%
0.97%
0.37%
0.37%
0.25%
0.25%
0.25%
0.25%
0.47%
0.47%
5
5
5
5
5
5
5
5
5
5
3
3
3
3
3
3
Granted
Dividend Credit
Forfeited
Exercised
–
–
–
–
–
–
–
–
255,640.5
255,640.5
–
–
–
–
369,061
2,678
–
–
–
–
–
–
18,046
18,046
16,282
16,282
–
–
–
18,093
23,460
169
–
–
–
(51,403)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Granted
Dividend Credit
Forfeited
Exercised
–
–
–
–
–
–
224,914.5
224,914.5
–
–
–
236,697
–
–
–
–
–
–
1,758
1,758
–
–
–
1,797
–
(9,139)
–
–
–
–
–
–
(8,036)
(8,025)
(2,408)
(11,190)
–
–
–
–
–
–
–
–
–
–
–
–
24%
24%
26%
26%
32%
32%
29%
29%
31%
31%
32%
32%
32%
30%
30%
30%
Options at
28 Mar 20
40,616*
31,477*
122,385.5*
70,982.5*
40,610
40,610
244,718.5
244,718.5
271,922.5
271,922.5
263,855
93,629
16,856
245,397
392,521
2,847
Options at
30 Mar 19
40,616*
31,477*
122,385.5
122,385.5
40,610
40,610
226,672.5
226,672.5
263,855
93,629
16,856
227,304
*
These share options have vested and are in a two year holding period.
112
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
3) Deferred Bonus Share Plan (DBSP) Awards
The Deferred Bonus Share Plan differs from the other awards in that there are no vesting conditions.
The scheme has been set up in order to allocate 1/3rd of the executive directors annual bonus into nil price share options which are then placed in
holding for three years.
As there are no vesting conditions, these awards have been valued at the amount of the bonus to be converted into share options under the scheme.
The total fair value of the 2019 scheme was £217k to be released over the three year holding period.
There has been one award under the scheme. The 2020 award will be made after this set of statutory accounts has been published, and will
therefore be reported in the next annual report.
Scheme
2019 Bonus allocation
The summary year end position is as follows;
Options at
30 March 19
–
Granted
56,512
Dividend
Credit
4,496
Forfeited
Exercised
Options at
28 March 20
–
–
61,008
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.
28 March
2020
1,485,798
1,054,406
(51,403)
(21,676)
2,467,125
2,129,607
326,469
11,049
30 March
2019
843,246
691,839
(49,287)
–
1,485,798
1,402,656
72,093
11,049
In the year, £1,422k has been charged to the consolidated statement of comprehensive income in respect to the share option schemes
(2019: £954k). At the end of the year the outstanding share options had a carrying value of £3,155k (2019: £1,733k).
12 Taxation
A UK corporation tax rate of 19% was substantively enacted on 17 March 2020, reversing the previously enacted reduction in the rate from 19% to 17%.
This will increase the company’s future current tax charge accordingly. The deferred tax balances at the period end have been calculated at 19%.
The relationship between the expected tax expense based on the standard rate of corporation tax in the UK of 19% (2019: 19%) and the tax expense
actually recognised in the statement of comprehensive income can be reconciled as follows:
Period ended
Continuing operations
Current tax expense
Deferred tax credit
Total tax expense recorded in continuing operations profit and loss
Deferred tax charge in other comprehensive income
Total tax charge recorded in other comprehensive income
Result for the year before tax due to continuing operations
Expected tax charge at the standard tax rate
Effect of :
Expenses not deductible for tax purposes
Income not taxable
Lease accounting
Foreign operations taxed at local rates
Changes in the rate of corporation tax
Adjustment in respect of prior years
Hold over gains on fixed assets
Other
Actual tax expense
52 weeks to
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
60,889
(3,643)
57,246
1,383
1,383
252,023
47,885
11,559
(1,925)
873
(2,495)
386
322
430
211
50,897
(1,677)
49,220
3,479
3,479
244,329
46,423
3,632
(1,163)
410
(81)
(58)
(108)
–
165
57,246
49,220
B&M European Value Retail S.A.
Annual Report and Accounts 2020
113
GOVSR Notes to the consolidated financial statements continued
12 Taxation continued
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)
Effects of lease accounting
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
Statement of comprehensive income
Accelerated tax depreciation
Relating to intangible brand assets
Fair valuing of assets and liabilities
Lease accounting
Movement in provision
Relating to share options
Held over gains on fixed assets
Other temporary differences
Effect of foreign exchange
Net deferred tax credit/(charge)
Analysed as;
Total deferred tax credit in profit or loss due to continuing operations
Total deferred tax charge in other comprehensive income
28 March
2020
£’000
(3,029)
(21,589)
12
(3,474)
21,008
1,349
521
(834)
–
98
(82)
(6,020)
22,988
(29,008)
30 March
2019
£'000
(3,250)
(20,955)
272
(1,801)
17,226
1,308
360
(450)
4,501
84
(66)
(2,771)
23,751
(26,522)
52 weeks to
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
220
(2,057)
(3,061)
7,386
(6)
161
(384)
1
–
2,260
3,643
(1,383)
(26)
(62)
(4,635)
2,583
328
153
–
(40)
(103)
(1,802)
1,677
(3,479)
The prior year schedules have been restated due to the impact of the first time application of IFRS 16 and the reclassification of the Germany Jawoll
results to discontinued operations.
There were £9.6m of unrecognised deferred tax assets in relation to losses carried forward within the Group at the period end (2019: £nil).
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.
114
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
13 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit or loss for the financial period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares outstanding at each period end.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during each year plus the weighted average number of ordinary shares that would be issued on
conversion of any dilutive potential ordinary shares into ordinary shares.
Adjusted (and adjusted (IFRS 16)) basic and diluted earnings per share are calculated in the same way as above, except using adjusted profit
attributable to ordinary equity holders of the parent, as defined in note 4.
The prior year figures have been restated in regards to the first time inclusion of IFRS 16 and the reclassification of Jawoll as a discontinued operation.
There are share option schemes in place (see note 11) 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
Continuing operations
Profit for the period attributable to owners of the parent
Adjusted profit for the period attributable to owners of the parent
Adjusted (IFRS 16) profit for the period attributable to owners of the parent
Discontinued operations
Loss for the period attributable to owners of the parent
All operations
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
Continuing operations
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Adjusted IFRS 16 basic earnings per share
Adjusted IFRS 16 diluted earnings per share
Discontinued operations
Basic loss per share
Diluted loss per share
All operations
Basic earnings per share
Diluted earnings per share
28 March
2020
£’000
194,777
202,979
186,899
30 March
2019
£'000
195,109
202,659
187,898
(104,750)
(1,258)
90,027
193,851
Thousands
Thousands
1,000,570
698
1,001,268
1,000,561
453
1,001,014
Pence
19.5
19.5
20.3
20.3
18.7
18.7
Pence
(10.5)
(10.5)
Pence
9.0
9.0
Pence
19.5
19.5
20.2
20.2
18.8
18.8
Pence
(0.1)
(0.1)
Pence
19.4
19.4
B&M European Value Retail S.A.
Annual Report and Accounts 2020
115
GOVSR Notes to the consolidated financial statements continued
14 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
Effect of foreign exchange on translation
Carrying value at the end of the period
28 March
2020
£’000
6,920
–
(2,580)
879
481
5,700
30 March
2019
£'000
5,140
1,200
(570)
775
375
6,920
In the prior year, on 19 November 2018, the Group acquired a 22.5% holding in Centz Retail Holdings Limited, “Centz”, 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% interest in Multi-lines International Company Ltd, “Multi-Lines”, a company incorporated in Hong Kong. The principal activity
of the company is the purchase and sale of goods and their registered address is 8/F, Hope Sea Industrial Centre, No. 26 Lam Hing Street, Kowloon
Bay, Hong Kong.
The Group also holds 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.
There have been no changes in the percentage ownership over the presented years. The 20% holding in Home Focus Group Ltd is contracted to be
sold in December 2020 for €350k. Home Focus Group is therefore 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
Period ended
Centz
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Revenue
Profit
28 March
2020
£’000
2,417
74,702
–
(67,688)
9,431
221,145
969
28 March
2020
£’000
9,941
12,447
(8,834)
(9,225)
4,329
30,305
1,719
30 March
2019
£'000
2,344
50,045
–
(39,577)
12,812
160,903
1,562
30 March
2019
£'000
5,281
5,743
(3,968)
(4,570)
2,486
–
–
The figures for Multi-lines show 12 months to December 2019 (2019: 12 months to December 2018), being the period used in the valuation of the
associate.
The figures for Centz also show 12 months to December 2019, although there are no prior year profit and loss figures for Centz Retail Holdings
Limited as this is the first full year of ownership.
116
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements 15 Intangible assets
Cost or valuation
At 31 March 2018
Additions due to purchase of Babou
Additions
Disposals
Effect of retranslation
At 30 March 2019
Recalculation of acquired goodwill (note 8)
At 30 March 2019
Additions
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Accumulated amortisation/impairment
At 31 March 2018
Charge for the year
Disposals
Effect of retranslation
At 30 March 2019
Charge for the year
Impairment of Jawoll
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Goodwill
£'000
Software
£'000
Brands
£'000
929,718
21,281
–
–
(1,393)
949,606
5,151
954,757
–
(35,367)
–
2,521
921,911
–
–
–
–
–
–
35,112
(35,367)
–
255
–
921,911
954,757
7,251
139
2,404
(51)
(28)
9,715
–
9,715
1,361
(1,108)
(12)
54
10,010
2,575
1,854
(41)
(11)
4,377
2,187
611
(1,095)
(12)
27
6,095
3,915
5,338
116,043
4,134
250
–
(214)
120,213
–
120,213
–
(5,324)
–
385
115,274
13
227
–
(5)
235
355
5,286
(5,324)
–
54
606
114,668
119,978
Prior year goodwill has been restated as a result of the finalisation of the purchase price allocation exercise for Babou, see note 8.
Amortisation breaks down as follows:
As at
Amortisation of intangible assets in continuing operations
Amortisation of intangible assets in discontinued operations
Amortisation of intangible assets
For more information in respect of the disposal of Jawoll, see note 7.
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
28 March
2020
£’000
2,433
135
2,568
30 March
2019
Goodwill
£’000
807,496
87,580
33,934
25,747
28 March
2020
Goodwill
£’000
807,496
87,580
–
26,834
28 March
2020
Brand
£’000
95,900
14,178
–
–
Financial Statements
Other
£’000
1,514
1,096
–
–
(59)
2,551
–
2,551
–
(1,545)
–
107
Total
£'000
1,054,526
26,650
2,654
(51)
(1,694)
1,082,085
5,151
1,087,236
1,361
(43,344)
(12)
3,067
1,113
1,048,308
1,258
77
–
(27)
1,308
26
154
(1,545)
–
57
–
1,113
1,243
3,846
2,158
(41)
(43)
5,920
2,568
41,163
(43,331)
(12)
393
6,701
1,041,607
1,081,316
30 March
2019
£’000
1,976
182
2,158
30 March
2019
Brand
£’000
95,650
14,178
5,108
–
B&M European Value Retail S.A.
Annual Report and Accounts 2020
117
GOVSR Notes to the consolidated financial statements continued
15 Intangible assets continued
Not all items in the brand classification have an indefinite life as some are time limited. The brand intangible assets that have been identified as
having an indefinite life are designated as such as management believe that these assets will hold their value for an indefinite period of time.
Specifically the B&M and Heron brands represent leading brands in their sectors with significant histories and growth prospects.
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 were a new addition in the prior year and the Jawoll assets have been disposed during the year, see notes 7
and 8.
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 Babou goodwill is held in Euros, with an underlying balance of €30.0m (2019 restated: €30.0m).
The Jawoll balances were also held in euros with values at March 2019 of €39.5m for goodwill and €6.0m for the brand. The balances were
subsequently fully impaired in the year and disposed in March 2020. The disclosures below for Jawoll in this financial year relate to the impairment
test undertaken in September 2019 in relation to this entity.
The Jawoll Goodwill and Brand were impaired at the half year, further details are included in a separate section below.
Due to the inclusion of IFRS 16 balances for the first time in the continuing entities, a full review of the calculation and assumptions was carried out
by management and the model updated to include additional allocated central costs and central assets as well as working capital and appropriate
limits on like for like and terminal growth assumptions.
From this year we will also report the headroom in respect of each segments impairment calculation, and as such this has been included below.
The prior year figures have been restated to be on a comparable basis.
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) 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 for the continuing entities were as follows:
As at
Discount rate (B&M)
Discount rate (Heron)
Discount rate (Babou)
Inflation rate for costs (B&M & Heron)
Inflation rate for costs (Babou)
Like for like sales growth (B&M)
Like for like sales growth (Heron)
Like for like sales growth (Babou)
Terminal growth rate (B&M)
Terminal growth rate (Heron)
Terminal growth rate (Babou)
28 March
2020
30 March
2019
11.7%
12.4%
13.0%
2.6%
1.5%
2.6%
2.6%
2.4%
0.5%
2.6%
1.5%
10.4%
10.7%
12.4%
2.4%
1.6%
2.4%
2.4%
1.6%
0.5%
2.4%
1.3%
These assumptions are reflected for five years in the CGU forecasts and beyond this a perpetuity calculation is performed using the assumptions
made regarding terminal growth rates.
In each case, the results of the impairment tests on the continuing operations identified that the VIU was in excess of the carrying value of assets
within each group of CGUs at the period end dates. The headroom with the base case assumptions in B&M was £2,071m, Heron £143m and Babou
€23m (2019: £2,027m, £115m and €59m respectively).
118
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
The Babou stores were closed at the year-end date following the French government’s lockdown measures in relation to the Covid-19 pandemic,
prior to reopening on 11 May 2020. As such they suffered significant losses during this closure period and are expected to incur further losses
resulting from the need to clear Spring/Summer stock lines and therefore this is an indication of potential impairment.
In the assumptions regarding the Babou impairment test, the impact of Covid-19 has been included, but the underlying medium and long term
health of the business is not expected to be materially impacted. Therefore the like for like and terminal growth rate reflect management’s belief in
the continued growth of the company after recovery from the provisions necessary during the pandemic.
Given the calculated sensitivities shown below, there are plausible scenarios where an impairment may be required to be made to the Goodwill
at Babou in future periods, such as lower than planned like-for-like sales. However, these are considered unlikely by management and can be
balanced against for example the likelihood of planned new store openings (which are not permitted to be included as part of the goodwill
calculation). Therefore management believe that it is correct to record no impairment at the year end date.
Since the re-opening of stores, the sales performance of the business has been promising and we will continue to monitor the performance with
an update planned for the half year review.
No indicators of impairment were noted in the other continuing entities and the sensitivity of the assumptions is set out below with the figures given
representing the point at which an impairment will first be recognised for that key assumption, with all other key assumptions held equal.
The 2019 figures have been restated to reflect the new calculation basis as outlined above.
B&M
Discount rate
Inflation rate for expenses
Like for like sales
Terminal growth rate
Babou
Discount rate
Inflation rate for expenses
Like for like sales
Terminal growth rate
Heron
Discount rate
Inflation rate for expenses
Like-for-like sales
Terminal growth rate
28 March
2020
30 March
2019
29.3%
10.5%
(2.9)%
Not sensitive
15.9%
3.9%
1.5%
(2.4)%
22.5%
6.6%
(0.3)%
(22.0)%
27.5%
10.0%
(2.9)%
(87.0)%
21.5%
3.3%
0.4%
(20.4)%
17.1%
5.2%
0.3%
(9.3)%
Jawoll Impairment (September 2019)
Our German business Jawoll continued to underperform against management expectations and had not yet delivered the improvement that was
previously expected. As such, it became necessary to carry out a further impairment review at the half year end date in September 2019.
The review considered the projected future performance of the business based on a range of inputs, and was carried out in the segments base
currency of the Euro. The key assumptions were as stated in the table below and also there was a key assumption in regards to the abnormal level
of logistics costs with some mitigation expected over the period of the projections, but without the logistics costs returning to the original lower level
previously experienced by the business.
The assumptions used were as stated below with the usual Group key assumptions used, in addition to the gross margin which was an estimate
provided by management based upon the expected rate of recovery of the margin in the business.
As at
Discount rate (Jawoll)
Inflation rate for costs (Jawoll)
Like for like sales growth (Jawoll)
Gross margin (Jawoll)
Terminal growth rate (Jawoll)
September 2019
12.4%
1.4%
1.0%
37.5%
1.4%
The results of the impairment exercise were considered by the Board which concluded that all of the Goodwill and Brand assets should be
impaired, as well as other assets within the underperforming stores excluding the assets based at the warehouse which management considered
separately supportable.
Associated deferred tax assets and liabilities have been derecognised, and the deferred tax asset carried in relation to the use of future profits has
also been derecognised. The right of use assets, previously classified as finance leases, were also provided against.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
119
GOVSR Notes to the consolidated financial statements continued
15 Intangible assets continued
The total impairment reflects the following adjustments, with the GBP values presented at the rate used to translate the items for the purposes of
profit and loss (1.1257€/£, the rate for the statement of financial position was 1.1274€/£), being the prevailing rates for the half year.
Goodwill
Brands
Software and other intangible assets
Land & buildings (including £4,940k right of use assets)
Other fixed assets
Impairment recognised in administrative costs
Deferred tax asset
Deferred tax liability
Impairment recognised in income tax expense
Total impairment
€’000
39,526
5,950
861
6,282
14,398
67,017
12,717
(1,710)
11,007
78,024
£’000
35,112
5,286
765
5,581
12,789
59,533
11,297
(1,519)
9,778
69,311
The impairment is included in loss from discontinued operations as Jawoll was subsequently disposed in March 2020. See note 7 for more details
on the disposal.
16 Property, plant and equipment
Cost or valuation
At 31 March 2018
Acquisition of Babou
Additions
Disposals
Effect of retranslation
At 30 March 2019
Additions
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Accumulated depreciation and impairment charges
At 31 March 2018
Charge for the period
Disposals
Effect of retranslation
At 30 March 2019
Charge for the period
Impairments
Disposal of Jawoll
Disposals
Effect of retranslation
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Land and buildings
£'000
Motor vehicles
£'000
128,680
153
34,960
(174)
(352)
163,267
37,041
(17,777)
(97,602)
874
85,803
16,110
4,037
(13)
(97)
20,037
4,546
1,193
(6,220)
(449)
363
19,470
66,333
143,230
8,403
63
5,628
(1,140)
(11)
12,943
4,575
(478)
(1,162)
22
15,900
1,876
2,099
(668)
(4)
3,303
2,770
32
(167)
(860)
7
5,085
10,815
9,640
Plant,
fixtures and
equipment
£'000
258,039
24,101
62,727
(1,991)
(1,155)
341,721
81,654
(24,406)
(20,762)
2,225
380,432
78,555
38,662
(935)
(272)
116,010
46,939
12,757
(21,973)
(9,103)
752
145,382
235,050
225,711
Total
£'000
395,122
24,317
103,315
(3,305)
(1,518)
517,931
123,270
(42,661)
(119,526)
3,121
482,135
96,541
44,798
(1,616)
(373)
139,350
54,255
13,982
(28,360)
(10,412)
1,122
169,937
312,198
378,581
This note has been restated to reflect the transfer of assets held under finance lease into the new category of right-of-use assets, due to the first
time adoption of IFRS 16, see note 17.
120
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
28 March
2020
£’000
52,366
1,889
54,255
30 March
2019
£’000
41,294
3,504
44,798
Depreciation breaks down as follows:
As at
Depreciation of property, plant and equipment in continuing operations
Depreciation of property, plant and equipment in discontinued operations
Depreciation of property, plant and equipment
For more details regarding the impairment and disposal of Jawoll, see notes 7 and 15.
Under the terms of the loan and notes facilities in place at 28 March 2020, fixed and floating charges were held over £66.3m of the net book value
of land and buildings, £10.8m of the net book value of motor vehicles and £210.7m of the net book value of the plant, fixtures and equipment.
(2019: £130.8m, £9.6m, £190.4m respectively).
A significant sale and leaseback took place in relation to the Bedford warehouse, which was carried at £103.7m on the date of the transaction.
See note 17 for more details.
At the year end no assets were under construction (2019: £73.2m within the land and buildings category).
Included within land and buildings is land with a cost of £5.8m (2019: £62.8m) which is not depreciated.
Capital commitments
There were £3.3m of contractual capital commitments not provided within the Group financial statements as at 28 March 2020 (2019: £30.2m).
The prior year figures included an estimated £26.3m in relation to the build and fit out of the southern warehouse.
17 Right of use assets
Net book value
As at 31 March 2018
Acquisition of Babou
Additions
Modifications
Disposals
Impairment
Depreciation
Foreign exchange
As at 30 March 2019
Additions
Modifications
Disposal of Jawoll
Other disposals
Impairment
Depreciation
Foreign exchange
As at 28 March 2020
Depreciation breaks down as follows:
As at
Right of use asset depreciation in continuing operations
Right of use asset depreciation in discontinued operations
Right of use asset depreciation
Land and buildings
£'000
Motor vehicles
£'000
850,535
142,689
148,711
13,014
(14,346)
(131)
(124,340)
(5,399)
1,010,733
312,880
4,202
(82,459)
(41,099)
(6,838)
(146,236)
10,090
1,061,273
19,970
34
6,518
–
(128)
–
(6,280)
(18)
20,096
5,390
21
(560)
(129)
–
(6,985)
33
17,866
Plant,
fixtures and
equipment
£'000
2,181
4,301
1,891
45
(129)
–
(2,151)
(94)
6,044
5,402
3
(237)
(235)
–
(3,577)
79
7,479
28 March
2020
£’000
148,620
8,178
156,798
Total
£'000
872,686
147,024
157,120
13,059
(14,603)
(131)
(132,771)
(5,511)
1,036,873
323,672
4,226
(83,256)
(41,463)
(6,838)
(156,798)
10,202
1,086,618
30 March
2019
£’000
124,905
7,866
132,771
The vast majority of the Group’s leases are in relation to the property comprising the store and warehouse network for the business. The other
leases recognised are trucks, trailers, company cars, manual handling equipment and various fixtures and fittings. The leases are separately
negotiated and no subgroup is considered to be individually significant nor to contain individually significant terms.
The Group recognises a lease term appropriate to the business expectation of the term of use for the asset which usually assumes that all
extension clauses are taken, and break clauses are not, unless the business considers there is a good reason to recognise otherwise.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
121
GOVSR Notes to the consolidated financial statements continued
17 Right of use assets continued
At the year end there was one property with a significant unrecognised extension clause for which the Group has full autonomy over exercising in
2040. On the date of recognition of the relevant right of use asset the extension period liability had a net present value of £30.2m. There were no
significant unrecognised extension clauses in 2019.
There are no material covenants imposed by our right-of-use leases.
In the year the Group expensed £1.8m (2019: £1.9m) in relation to low value leases and £0.3m (2019: £nil) in relation to short term leases for which
the Group applied the practical expedient under IFRS 16.
The Group has expensed £22k (2019: £32k) in relation to variable lease payments. The agreements are on-going and future payments are
expected to be in-line with those expensed recently.
The Group received £2,226k (2019: £1,129k) in relation to subletting right-of-use assets.
The current and future cashflows for the right-of-use assets are;
This year
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Total
The change in lease liability reconciles to the figures presented in the consolidated statement of cashflows as follows;
Lease liabilities brought forward
Cash
Repayment of the principal in relation to right of use assets
Payment of interest in relation to right of use assets
Non-cash
Interest charge (continuing operations)
Interest charge (discontinued operations)
Acquisition of Babou
Disposal of Jawoll
Effects on lease liability relating to lease additions, modifications and disposals
Effects of foreign exchange
Total cash movement in the year
Total non-cash movement in the year
Movement in the year
Lease liabilities carried forward
Of which current
Of which non-current
122
B&M European Value Retail S.A.
Annual Report and Accounts 2020
28 March
2020
£’000
206,443
197,842
203,272
513,295
712,227
30 March
2019
£’000
168,516
203,850
197,275
495,552
681,351
1,626,636
1,578,028
52 weeks to
28 March
2020
£’000
52 weeks to
30 March
2019
£'000
1,206,922
1,022,022
(142,653)
(63,790)
57,206
6,584
–
(93,732)
313,727
10,980
(206,443)
294,765
88,322
(109,972)
(58,544)
52,040
6,504
145,018
–
155,698
(5,843)
(168,516)
353,416
184,900
1,295,244
149,011
1,146,233
1,206,922
150,163
1,056,759
Financial Statements Financial Statements
Discount rates
Where, as in most cases, a discount rate implicit to the lease is not available, discount rates are calculated for each lease with reference to the
underlying cost of borrowing available to the business and several other factors specific to the asset.
The selection of discount rates is therefore a management judgement, see note 1. As this is a significant management judgement we have
calculated the weighted average discount rates and sensitivity to a 50bps change in the discount rate to the interest charge as follows;
Weighted average discount rate
Property
Equipment
All right of use assets
Effect on finance costs with a change of 50bps to the discount rate
Property
Equipment
All right of use assets
Sale and Leaseback
During the year the business has undertaken two sale and leasebacks (2019: none).
28 March
2020
30 March
2019
5.08%
3.31%
5.06%
5.25%
3.57%
5.22%
£’000
£’000
6,211
127
6,338
5,468
131
5,599
One was in regards to the new warehouse at Bedford which is to be used by our UK segments, this has been separated in the table below due to
the individual significance of this transaction. The other was in regards to a store occupied by B&M Retail.
The details of the transactions were as follows;
Consideration received
Net book value of the asset disposed
Costs of sale when specifically recognised
Profit per pre-IFRS 16 accounting standards
Opening adjustment to the right of use asset
Profit/(loss) recognised in the statement of comprehensive income
Initial right of use asset recognised
Initial lease liability recognised
Bedford
£’000
153,800
(103,746)
(1,070)
48,984
(32,052)
16,932
66,435
(98,487)
Others
£’000
4,910
(2,868)
–
2,042
(2,046)
(4)
2,875
(4,921)
The pre-IFRS 16 profit is higher because the provisions of IFRS 16 require that a portion of the profit relating to the sale and leaseback is instead
recognised as a reduction in the opening right of use asset, and therefore the benefit is released over the term of the contract.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
123
GOVSR Notes to the consolidated financial statements continued
18 First time adoption of IFRS 16
The new lease standard, IFRS 16, applied to the Group from the start of this financial year, 31 March 2019.
The Group has chosen to implement the new standard by adopting the fully retrospective approach, which means that we have fully restated our
prior year accounts and treated the right-of-use leases from the date they were taken on by the Group, with a discount rate selected appropriate to
that point in time. This is in accordance with the transitional provisions within the standard.
Although the impact of IFRS 16 on the primary statements is significant, 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 store portfolio.
A full statement of our new policy is included in note 1. A statement of profit and loss based upon the previously applicable standards has been
provided in note 2 to aide comparability.
The previously held rent prepayments, lease premiums, reverse lease premiums, favourable and unfavourable lease balances and the portion of
the onerous lease balance that related to rent have all been superseded by the new standard and are therefore incorporated into the
IFRS 16 balances.
All assets previously held under finance leases have been transferred to this new categorisation.
The difference in retained earnings brought forward as at the start of the earliest period presented here (1 April 2018) was £53.5m.
The schedule of adjustments to the main statements here presented are as follows:
52 weeks ended
28 March 2020
£’000
52 weeks ended
30 March 2019
£'000
188,802
(34,098)
(571)
154,133
2,885
(148,620)
8,398
(57,206)
174
(48,634)
6,766
(41,868)
(41,868)
5,522
(36,346)
1,134
(37,480)
51
(36,295)
1,134
(37,429)
(4.2)
(4.2)
161,493
–
1,146
162,639
1,727
(124,905)
39,461
(52,040)
182
(12,397)
2,182
(10,215)
(10,215)
(1,360)
(11,575)
(272)
(11,303)
160
(11,415)
(246)
(11,169)
(1.1)
(1.1)
Statement of Comprehensive Income
Continuing operations
Rental Expense
Reduced gain on sale & leaseback transactions (note 17)
Net (loss)/gain in relation to the termination of leases
Effect on EBITDA (IFRS 16) (note 4)
Depreciation expense on property plant and equipment
Depreciation on right of use Assets
Effect on continuing administrative costs
Finance costs on IFRS 16 lease liabilities
Finance costs on IAS 17 finance leases
Effect on continuing profit before tax
tax expense
Effect on net profit from continuing operations
Attributable to owners of the parent
Effect on the loss due to discontinued operations
Effect on net profit
Attributable to non-controlling interests
Attributable to owners of the parent
Other comprehensive Income
Exchange differences on retranslation of subsidiary and associate investments
Total comprehensive income for the period
Attributable to non-controlling interests
Attributable to owners of the parent
Earnings per share from continuing operations
Basic earnings per share attributable to ordinary equity holders (pence)
Diluted earnings per share attributable to ordinary equity holders (pence)
124
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
28 March
2020
£’000
30 March
2019
£’000
(6,310)
1,086,618
(2,739)
19,044
(11,371)
1,036,873
(3,752)
14,556
(18,927)
(19,240)
1,077,686
1,017,066
102,237
65
–
102,302
(1,144,122)
90,860
508
–
18,874
(146,562)
454
64,757
116
1,134
66,007
(1,049,655)
92,313
626
190
19,244
(146,533)
742
1 April
2018
£’000
(10,072)
872,686
(3,187)
12,269
(17,604)
854,092
53,454
250
888
54,592
(905,962)
86,711
214
228
16,014
(106,884)
995
(1,179,988)
(1,083,073)
(908,684)
28 March
2020
£'000
588,000
30 March
2019
£’000
665,570
Statement of financial position
Assets
Non-current
Property, plant and equipment
Right of use assets
Other receivables
Deferred tax asset
Current
Trade and other receivables
Total assets
Equity
Retained earnings
Foreign exchange reserve
Non-controlling interest
Total Equity
Liabilities
Non-current
Lease liabilities
Other liabilities
Deferred tax liabilities
Provisions
Current
Trade and other payables
Lease liabilities
Provisions
Total Liabilities
19 Inventories
As at
Goods for resale
The balance sheet balance for 2019 was restated due to the finalisation of the purchase price allocation exercise on the acquisition of Babou,
see note 8.
Included in the amount above was a net charge of £6.7m related to inventory provisions (2019: £3.5m net charge). In the period to 28 March 2020
£2,531m (2019: £2,297m) was recognised as an expense for inventories.
20 Trade and other receivables
Non-current
Other receivables
Current
Trade receivables
Deposits on account
Provision for impairment
Net trade receivables to non-related parties
Prepayments
Related party receivables
Other tax
Other receivables
28 March
2020
£’000
7,517
7,517
6,568
1,478
(252)
7,794
19,775
5,772
2,329
24,918
60,588
30 March
2019
£’000
7,237
7,237
4,866
5,507
(247)
10,126
20,810
13,079
3,213
5,172
52,400
B&M European Value Retail S.A.
Annual Report and Accounts 2020
125
GOVSR Notes to the consolidated financial statements continued
20 Trade and other receivables continued
This schedule has been restated for the prior year due to the first time adoption of IFRS 16. The balances which previously related to leases,
including deferred lease premiums, favourable lease assets and prepayments, are now recognised as part of the IFRS 16 balances directly.
Trade receivables are stated initially at their fair value and then at amortised cost as reduced by appropriate allowances for estimated
irrecoverable amounts. The carrying amount is determined by the directors to be a reasonable approximation of fair value.
There are significant balances of £8.9m (€10m) in relation to the consideration receivable for Jawoll in December 2020 (see note 7), and of £4.7m in
relation to the final part of the consideration receivable in respect of the Bedford transaction (see note 17). These balances are both held within the
current other receivables caption above. There were no individually non-related significant balances held at the prior year end. See note 30 in
respect of balances held with related parties.
The following table sets out an analysis of provisions for impairment of trade and other receivables:
28 March
2020
£’000
30 March
2019
£’000
Period ended
Provision for impairment at the start of the period
Impairment during the period
Utilised/released during the period
Effect of foreign exchange
Balance at the period end
Trade receivables are non-interest bearing and are generally on terms of 30 days or less.
The following table sets out a maturity analysis of trade receivables, including those which are past due but not impaired:
(247)
(52)
56
(9)
(252)
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
21 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 £21.5m of undrawn committed borrowing facilities (2019: £93.4m).
28 March
2020
£’000
5,073
499
15
981
6,568
28 March
2020
£’000
428,205
(928)
427,277
(160)
(247)
160
–
(247)
30 March
2019
£’000
1,900
2,387
66
513
4,866
30 March
2019
£'000
86,202
(5,646)
80,556
22 Trade and other payables
As at
Non-current
Accruals
Other payables
Current
Trade payables
Other tax and social security payments
Accruals and deferred income
Related party trade payables
Other payables
126
B&M European Value Retail S.A.
Annual Report and Accounts 2020
28 March
2020
£’000
30 March
2019
£’000
171
–
171
315,146
43,715
45,505
11,432
4,201
419,999
299
279
578
306,902
14,933
44,269
3,248
7,370
376,722
Financial Statements
Financial Statements
This schedule has been restated to reflect the first time adoption of IFRS 16. The main difference is that the unfavourable lease and reverse lease
premium balances are now directly recognised as part of the IFRS 16 lease balances.
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 30.
23 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
28 March
2020
£’000
5,351
–
11,351
16,702
16,702
30 March
2019
£'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.
Other financial liabilities
As at
Current financial liabilities at fair value through profit and loss:
Deferred consideration in relation to the purchase of Heron
Foreign exchange forward contracts
Fuel swap contracts
Current financial liabilities at fair value through other comprehensive income:
Foreign exchange forward contracts
Total current other financial liabilities
Total other financial liabilities
28 March
2020
£’000
–
–
1,847
–
1,847
1,847
30 March
2019
£'000
12,084
535
–
1,112
13,731
13,731
The deferred consideration related to the acquisition of Heron. The valuation at the prior year end reflected management’s calculation of the
amount expected to be payable in 2019. The final amount paid was £11,950k.
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:
28 March 2020
Foreign exchange contracts
Fuel swap contract
30 March 2019
Foreign exchange contracts
Fuel swap contract
Deferred consideration in relation to Heron
Total
£’000
Level 1
£’000
16,702
(1,847)
4,520
127
(12,084)
–
–
–
–
–
Level 2
£’000
16,702
(1,847)
4,520
127
–
Level 3
£’000
–
–
–
–
(12,084)
B&M European Value Retail S.A.
Annual Report and Accounts 2020
127
GOVSR Notes to the consolidated financial statements continued
23 Other financial assets and liabilities continued
The deferred consideration was valued with reference to the sale and purchase agreement underpinning the relevant acquisition. The key variable
in determining the fair value of the balance was the forecast EBITDA, of Heron, as prepared by management.
The movement in the valuation of deferred consideration reconciles as follows:
Period ended
Opening value
Unwinding of the deferred consideration balance
Revaluation of the deferred consideration
Payment of the deferred consideration
Closing value
52 weeks to
28 March
2020
£’000
12,084
–
(134)
(11,950)
52 weeks to
30 March
2019
£'000
11,133
1,667
(716)
–
–
12,084
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.
24 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
28 March
2020
£’000
120,000
82,304
3,608
5,150
211,062
248,830
298,916
7,357
6,315
561,418
30 March
2019
£'000
40,000
78,461
3,599
2,212
124,272
248,194
298,102
5,362
11,283
562,941
The acquisition facility of €92.0m was drawn down by the Group on 19 October 2018 to facilitate the purchase of Babou. It had an initial maturity
date of October 2019 which has been extended to October 2020. It is held at amortised cost. 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 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.
The maturities of the loan facilities are as follows.
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
Babou – Caisse d'Épargne
Babou – CIC
Babou – Crédit Agricole
Babou – Crédit Lyonnais
Babou – Société Générale
128
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Interest rate
%
Maturity
2.00% + LIBOR
2.00% + LIBOR
4.125%
3.17% (see note)
2.25% + LIBOR
2.45% + LIBOR
2.50% + LIBOR
Jun-20
Jul-21
Feb-22
Oct-20
Jul-22
Sep-20
Dec-21
0.75%-0.76% Jan 23–Mar 24
0.75%-1.50% Feb 22-Apr 24
0.71%-2.18% Apr 20-Mar 25
0.39%-0.52% Jan 23-Mar 25
0.68%-1.28% Apr 20-Oct 24
0.63%-1.15% + EURIBOR Apr-20-Dec-22
28 March
2020
£’000
120,000
300,000
250,000
82,319
4,352
3,543
3,570
1,588
3,228
2,652
1,334
1,145
1,018
774,749
30 March
2019
£’000
40,000
300,000
250,000
78,984
5,159
3,967
4,370
1,054
3,253
1,884
878
266
1,625
691,440
Financial Statements Financial Statements
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 weighted average rate for the remaining
period until maturity.
The acquisition facility and all Babou facilities have gross values in euros, and the values above have been translated at the period end rates of
€1.1176/£ (2019: €1.1648/£).
The movement in the loan liabilities during the year breaks down as follows;
As at
Borrowings brought forward
Cash
Receipt of acquisition facility
Receipt/(payment) of revolving loan facilities
Repayment of Heron facilities
Receipt/(repayment) of Babou facilities
Capitalised fees on refinancing
Non-cash
Debt recognised on acquisition of subsidiary
Foreign exchange on loan balances
Non-cash amortisation of fees capitalised on refinancing
Total cash movement in the year
Total non-cash movement in the year
Movement in the year
Borrowings carried forward
Of which current
Of which non-current
28 March
2020
£’000
687,213
–
80,000
(2,030)
1,587
(119)
–
3,752
2,077
79,438
5,829
85,267
772,480
211,062
561,418
30 March
2019
£'000
605,638
81,086
(5,000)
(2.297)
(1,792)
(935)
11,007
(2,356)
1,862
71,062
10,513
81,575
687,213
124,272
562,941
The reconciling figure in relation to the prior year Babou loan cash flow figure was a creditor repaid to the former owners which was classified on
the acquisition balance sheet as a creditor, but was treated locally as a loan.
25 Provisions
At 31 March 2018
Provided in the period
Utilised during the period
Released during the period
At 30 March 2019
Provided in the period
Utilised during the period
Released during the period
At 28 March 2020
Current liabilities 2020
Non-current liabilities 2020
Current liabilities 2019
Non-current liabilities 2019
Property provisions
£’000
1,618
218
(406)
(235)
1,195
1,503
(451)
(265)
1,982
1,216
766
1,011
184
Other
£’000
4,461
2,361
(1,857)
–
4,965
2,872
(1,869)
(1,105)
4,863
4,863
–
4,965
–
Total
£’000
6,079
2,579
(2,263)
(235)
6,160
4,375
(2,320)
(1,370)
6,845
6,079
766
5,976
184
The property provision has been restated due to the reclassification of rent within onerous leases which is now included in the IFRS 16 balance
sheet balances.
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 £10.7k per claim (£9.4k in 2019).
B&M European Value Retail S.A.
Annual Report and Accounts 2020
129
GOVSR Notes to the consolidated financial statements continued
26 Share capital
Allotted, called up and fully paid
B&M European Value Retail S.A. ordinary shares of 10p each
As at 31 March 2018 and 30 March 2019
Exercise of employee share options
As at 28 March 2020
Shares
£'000
1,000,561,222
21,676
1,000,582,898
100,056
2
100,058
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.
27 Cash generated from operations
Period ended
Net profit
Tax charge on continuing operations
Tax charge/(credit) on discontinued operations (note 7)
Profit before tax
Adjustments for:
Net interest expense
Depreciation on property, plant and equipment
Depreciation on right of use assets
Amortisation of intangible assets
Gain on sale and leaseback
(Profit)/loss on disposal of property, plant and equipment
Loss on share options
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Change in provisions
Share of profit from associates
Loss resulting from fair value of financial derivatives
Cash generated from operations
52 weeks ended
28 March
2020
£'000
52 weeks ended
30 March
2019
£'000
80,855
57,246
1,721
139,822
88,588
54,255
156,798
2,568
(16,928)
(163)
1,422
29,348
693
77,076
686
(879)
(641)
191,134
49,220
(5,268)
235,086
73,862
44,798
132,771
2,158
–
644
954
(40,947)
(32,127)
12,198
81
(775)
(5,707)
532,645
422,996
This statement has been restated due to the first time adoption of IFRS 16.
The cash flows above include the discontinued operations. The amortisation and depreciation figures have been reconciled in notes 15, 16 and 17.
The interest expense reconciles as follows:
As at
Net interest charge in continuing operations
Net interest charge/(credit) in discontinued operations
Net interest charge
Jawoll’s prior year net credit was due to the revaluation of the call/put option.
28 March
2020
£’000
81,668
6,920
88,588
30 March
2019
£’000
75,183
(1,321)
73,862
130
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
28 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.
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
SAS Babou
Babou Relationship Partners – BRP SAS
Country
Date of incorporation
Percent held within
the Group
Principal activity
Luxembourg
Luxembourg
UK
UK
UK
UK
Luxembourg
UK
UK
UK
UK
UK
UK
UK
UK
Germany
France
France
May 2014
November 2012
December 2012
December 2012
November 2012
November 2012
September 2012
September 1996
March 1978
April 2003
June 2017
August 2002
October 1978
September 2012
February 2003
November 2013
November 1977
December 2012
Holding company
Parent
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
Holding company
100%
General retail
100%
Dormant
100%
Employment services
100%
Holding company
100%
Convenience retail
100%
Dormant
100%
Dormant
100%
Ex-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.
• B&M European Value Retail Germany GmbH is registered at Am Hornberg 6, 29614, Soltau.
• SAS Babou 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 disposed of the trading entities within the German retailing group, J.A.Woll Handels GmbH and Jawoll Vertriebs GmbH I, see note 7 for
further details.
The entity Bedford DC Investment Limited was disposed in relation to the sale and leaseback carried out on the Bedford Warehouse, see note 17.
The French entities have restructured such that the former French holding company Paminvest SAS has been directly incorporated into the main
training entity, SAS Babou, resulting in the disposal of the former.
Changes during the prior 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 8 for further details on the transaction.
Associates
The Group has a 50% interest in Multi-lines International Company Limited, a company incorporated in Hong Kong, a 20% 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 14.
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 2020
131
GOVSR Notes to the consolidated financial statements continued
29 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%
28 March
2020
£’000
154
(154)
30 March
2019
£’000
159
(159)
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 50-80%, and never more than 80%.
Effectiveness of the hedged forward is then assessed against the Group hedge ratio, which has been set by management at 80% as a reasonable
guide to the certainty level we expect the hedged portions of our forwards to at least achieve. If they fail, or are expected to fail, to meet this ratio of
effectiveness then they are treated as non-hedged items, and immediately expensed through Profit and Loss.
Ineffectiveness can be caused by exceptional volatility in the market, by the timing of product availability, or the desire to manage short term
company cash flows, for instance, when a large amount of cash is required at relatively short notice.
If the Group did not hedge account then the difference is that the gain or loss in other comprehensive income would be presented in profit or loss
and the assets and liabilities presented under the classification fair value through other comprehensive income would be at fair value through
profit or loss.
The difference to profit before tax if none of our forwards had been hedge accounted during the year would have been a gain of £12.4m (2019:
£18.8m gain) and a pre-tax loss in other comprehensive income of £8.7m (2019: £18.4m loss).
132
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
The net effective hedging gains transferred to the cost of inventories in the year was £16.1m (2019: net gain of £2.8m). At the year end the amount of
outstanding US Dollar contracts covered by hedge accounting was $334m (2019: $428m).
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%
28 March
2020
£’000
(3,791)
3,823
(6,595)
6,934
30 March
2019
£’000
(4,648)
4,886
(7,976)
8,385
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%
28 March
2020
£’000
1,008
(979)
330
(346)
30 March
2019
£’000
(418)
440
(2,969)
3,121
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
28 March
2020
£’000
(1,737)
1,737
30 March
2019
£’000
(1,754)
1,754
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 24, 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, (2019: 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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
133
GOVSR Notes to the consolidated financial statements continued
29 Financial risk management continued
In order to manage credit risk, the directors set limits for customers based on a combination of payment history and third party credit references.
Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing and collection history. Provisions against bad
debts are made where appropriate.
Liquidity risk
Any impact on available cash and therefore the liquidity of the Group could have a material effect on the business as a result.
The Group’s borrowings are subject to quarterly banking covenants against which the Group has had significant headroom to date with no
anticipated issues based upon forecasts made. Short term flexibility is achieved via the Group’s rolling credit facility. The following table shows the
liquidity risk maturity of financial liabilities grouping based on their remaining period at the balance sheet date. The amounts disclosed are the
contractual undiscounted cash flows:
28 March 2020
Interest bearing loans
Lease liabilities
Trade payables
30 March 2019
Interest bearing loans
Lease liabilities
Forward foreign exchange contracts
Trade payables
Deferred consideration (Heron)
Within
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
231,801
197,842
326,578
571,525
203,272
–
149,759
203,850
1,647
310,150
12,084
23,715
197,275
–
–
–
6,958
513,295
–
576,083
495,552
–
–
–
More than
5 years
£’000
–
712,227
–
1,243
681,351
–
–
–
Total
£’000
810,284
1,626,636
326,578
750,800
1,578,028
1,647
310,150
12,084
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
As at
Financial liabilities
Fair value through profit and loss
Forward foreign exchange contracts
Fuel price swap
Deferred consideration in relation to the purchase of Heron
Fair value through other comprehensive income
Forward foreign exchange contracts
Amortised cost
Overdraft
Lease liabilities
Interest-bearing loans and borrowings
Trade payables
Other payables
134
B&M European Value Retail S.A.
Annual Report and Accounts 2020
28 March
2020
£’000
5,351
–
11,351
428,205
13,566
24,918
28 March
2020
£’000
–
1,847
–
–
928
1,295,244
772,480
326,578
4,201
30 March
2019
£’000
2,383
127
3,784
86,202
23,205
5,172
30 March
2019
£’000
535
–
12,084
1,112
5,646
1,206,922
687,213
310,150
7,370
Financial Statements Financial Statements
30 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 was the landlord of a property occupied by the Group in the prior year (Comprising the Heron related parties), but
is no longer a related party 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
Period ended
Purchases from associates of the Group
Multi-lines International Company Ltd
Purchases from parties related to key management personnel
Multi-Lines International (Properties) Ltd
SSA Investments
Total purchases from related parties
28 March
2020
£’000
25,327
1,944
27,271
28 March
2020
£’000
30 March
2019
£'000
8,858
2,180
11,038
30 March
2019
£'000
180,721
141,015
479
97
410
44
181,297
141,469
Purchases from parties related to key management personnel has been restated to reflect that the majority of these related party transactions
comprise leases that are now recognised under the provisions of IFRS 16.
The IFRS 16 Lease figures in relation to these related parties, which are all related to key management personnel, are as follows;
Period ended 28 March 2020
Rani Investments
Ropley Properties
TJL UK Limited
Triple Jersey Limited
Period ended 30 March 2019
David Hueck
Rani Investments
Ropley Properties
TJL UK Limited
Triple Jersey Limited
Depreciation
Charge
£’000
76
1,827
741
9,362
12,006
35
76
1,989
633
9,410
12,143
Interest
Charge
£’000
61
1,078
432
4,914
6,485
14
66
1,102
381
5,403
6,966
Total Charge
£’000
Right of use
Asset
£’000
Lease Liability
£’000
137
2,905
1,173
14,276
18,491
49
142
3,091
1,014
14,813
19,109
604
12,518
9,235
72,121
94,478
463
680
16,790
9,975
85,793
113,701
(734)
(14,825)
(10,656)
(86,039)
(112,254)
(473)
(802)
(19,064)
(11,111)
(101,882)
(133,332)
Net
Liability
£’000
(130)
(2,307)
(1,421)
(13,918)
(17,776)
(10)
(122)
(2,274)
(1,136)
(16,089)
(19,631)
Included in the current year figures above are two new leases entered into by Group companies during the current period with the Arora related
parties (2019: four new and five renewals). The total expense on these leases in the period was £680k (2019: £1,571k (restated due to impact of IFRS
16)). There were no conditionally exchanged leases with Arora related parties in the current period with a long stop completion date (2019: one).
B&M European Value Retail S.A.
Annual Report and Accounts 2020
135
GOVSR Notes to the consolidated financial statements continued
30 Related party transactions
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
As at
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
28 March
2020
£’000
5,687
85
–
5,772
28 March
2020
£’000
9,588
26
380
–
1,438
11,432
30 March
2019
£’000
2,045
143
10,891
13,079
30 March
2019
£’000
1,933
26
655
–
623
3,237
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 28 March 2020 (2019: no
impairment). This assessment is undertaken each year through examining the financial position of the related party and the market in which the
related party operates.
The future lease commitments on the Arora related party properties are;
As at
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
28 March
2020
£’000
16,496
16,604
42,280
66,743
142,123
30 March
2019
£'000
18,134
18,439
51,792
84,564
172,929
The Heron related party properties are no longer considered to be related to the Group. The future lease commitments as stated in the prior year
were as follows:
As at
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
See note 14 for further information on the Group’s associates.
For further details on the transactions with key management personnel, see note 10 and the remuneration report.
30 March
2019
£'000
43
43
128
354
568
136
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements
Financial Statements
31 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 previously existed a non-controlling interest in Jawoll, until its disposal in the current financial year (see note 7). Until the disposal date the
non-controlling interest was 20% of the subsidiary and this had not changed over the period of ownership, which started in April 2014.
As the non-controlling interest was disposed of during the year, there has been no profit or loss recorded in continuing operations for either period
presented. There was a £9.2m loss (2019: £4.0m) recorded in discontinued operations. The prior year figure has been restated to include the effects
of the new lease accounting standard.
The assets and liabilities of the subsidiary, which have been restated to reflect the impact of IFRS 16, were as follows:
As at
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
30 March
2019
£'000
129,465
85,423
(92,972)
(37,162)
84,754
Further disclosures in respect to the results, cash flows and disposal of this company are included in note 7.
32 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. The prior year figure has been re-stated to exclude finance leases in line with the adoption of IFRS 16.
As at
Interest bearing loans and borrowings (note 24)
Less: Cash and short term deposits – overdrafts (note 21)
Net debt
28 March
2020
£’000
774,749
(427,277)
347,472
30 March
2019
£'000
691,440
(80,556)
610,884
B&M European Value Retail S.A.
Annual Report and Accounts 2020
137
GOVSR Notes to the consolidated financial statements continued
33 Post balance sheet events
As part of the support measures that were made available by the French government to aide businesses that have been impacted by the
coronavirus lockdown measures in France, Babou has received €51.0m of state backed loans in April 2020. These loans are 90% guaranteed by the
French government and are available for a period of up to 6 years with the option to repay at the end of each year.
There are no interest payments in the first year followed by a 0.16% interest margin applicable to years 2 to 6. In addition there is a 0.5% guarantee
fee that is charged by the French government, this increases to 1.0% in years 2 and 3 and 2.0% in years 4 to 6.
Following the lockdown measures implemented as a result of the Covid-19 in the UK, both the B&M and Heron fascia stores have continued to
trade, except seven stores that are within shopping malls which are currently closed. Health and safety measures have been put in place for
colleagues and customers to ensure we comply with the appropriate legislation and the businesses have seen no material adverse impact on their
trading performance.
Following the closure of stores in our French business Babou, the stores were all re-opened on 11 May 2020 and the trading to date since the
re-opening has been positive.
34 Dividends
An interim dividend of 2.7 pence per share (£27.0m) was paid in December 2019.
A special dividend of 15.0 pence per share (£150.1m) has been declared and was paid in April 2020.
A final dividend of 5.4 pence per share (£54.0m), giving a full year dividend of 8.1 pence per share (£81.0m), is proposed.
Relating to the prior year;
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), was paid in August 2019.
35 Contingent liabilities and guarantees
As at 30 March 2019 and 28 March 2020, 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 £502m for the loans (2019: £419m), with the balance held in B&M
European Value Retail Holdco 4 Ltd, and £250m (2019: £250m) for the notes, with the balance held in B&M European Value Retail S.A.
As at 30 March 2019 and 28 March 2020, 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 £11m (2019: £13m) with the balance held in Heron Foods Ltd.
36 Directors
The directors that served during the period were:
Peter Bamford (Chairman)
S Arora (CEO)
P McDonald (CFO) (see note below)
R McMillan
T Hall
C Bradley
G Petit (Appointed 2 May 2019)
T Hübner (retired 1 May 2019)
K Guion (retired 1 January 2020)
All directors served for the whole period except where indicated above.
As announced on 3 March 2020, Paul McDonald will retire in 2021.
138
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements
Independent auditor’s report
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 2020,
and the profit and loss account for the year then ended, and notes to the
annual accounts, including a summary of significant accounting policies.
In our opinion, the accompanying annual accounts give a true and fair
view of the financial position of the Company as at 31 March 2020, 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 the EU Regulation
N° 537/2014, the Law of 23 July 2016 and ISAs 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.
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.
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 and those
charged with governance 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 overseeing 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.
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 judgment and maintain professional
skepticism 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;
B&M European Value Retail S.A.
Annual Report and Accounts 2020
139
GOVSR Independent Auditor’s Report continued
To the Shareholders of B&M European Value Retail S.A. 9, allée Scheffer L-2520 Luxembourg
The accompanying Corporate Governance Statement is presented on
pages 48 to 56 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, were not provided and that we remained
independent of the Company in conducting the audit.
Luxembourg, 10 June 2020
KPMG Luxembourg
Société coopérative
Cabinet de révision agréé
Thierry Ravasio
• 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
Shareholders on 26 July 2019 and the duration of our uninterrupted
engagement, including previous renewals and reappointments,
is 4 years.
The management report on pages 75 to 79 of the Annual Report is
consistent with the annual accounts and has been prepared in
accordance with applicable legal requirements.
140
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Consolidated statement
of comprehensive income
Financial Statements
Notes
31 March 2020
GBP
31 March 2019
GBP
8
9
10
11
12
13
14
14
(2,126,681)
(1,179,071)
(285,286)
(347,082)
(16,434)
(10,231)
(7,309)
(1,157,579)
(21,546)
(12,482)
(2,951)
(732,424)
212,145,459
76,000,000
10,795,788
63,618
10,725,046
94,792
(10,526,476)
–
(10,363,335)
–
208,874,868
(4,268)
74,160,948
(4,133)
208,870,600
74,156,816
Company profit and loss account
for the financial year ended 31 March 2020
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
B&M European Value Retail S.A.
Annual Report and Accounts 2020
141
GOVSR
Financial Statements
Company balance sheet
as at 31 March, 2020
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
Dividend payable
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
142
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Notes
31 March 2020
GBP
31 March 2019
GBP
–
–
2,624,999,999
2,624,999,999
2,624,999,999
2,624,999,999
433,588,268
301,620,884
4,892,539
334,909
438,480,807
301,955,794
60,098
41,301
3,063,540,904
2,926,997,094
31 March 2020
GBP
31 March 2019
GBP
100,058,290
2,473,803,467
100,056,122
2,473,745,635
10,010,000
208,870,600
40,515,885
(177,102,880)
10,010,000
74,156,816
42,401,722
(27,015,153)
2,656,155,361
2,673,355,142
3
4
5
6
7
1,718,750
250,000,000
1,718,750
250,000,000
251,718,750
251,718,750
1,075,965
143,299
4,407,949
1,706,997
17,599
20,176
150,087,435
–
77,845
52,730
155,666,793
1,923,202
3,063,540,904
2,926,997,094
Financial Statements
Financial Statements
Notes to the annual accounts
for the financial year ended 31 March 2020
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 of the law of
commercial companies.
The Articles of Association of the Company were also amended during the financial year under review further to the issue of new shares by the
Board of Directors, acting on the basis of Article 5.2 of the Articles setting an authorised share capital. The new shares were issued to employees of
the Group in the frame of the Company Share Option Scheme.
The Company is registered with the Luxembourg Trade and Companies Register under number B 187.275 and its registered office is established in
Luxembourg city. The financial year starts on 1 April 2019 and ends on 31 March 2020.
The Company’s object is to acquire and hold interests, directly or indirectly, in any form whatsoever, in other Luxembourg or foreign entities, by way
of, among others, the subscription or the acquisition of any securities and rights through participation, contribution, underwriting, firm purchase or
option, negotiation or in any other way, or of debt instruments in any form whatsoever, and to administrate, develop and manage such holding
of interests.
The Company may in particular enter into transactions to borrow money in any form or to obtain any form of credit and raise funds through,
including, but not limited to, the issue of shares, bonds, notes, promissory notes, certificates and other debt instruments or debt securities,
convertible or not, or the use of financial derivatives or otherwise, to enter into any guarantee, pledge or any other form of security, to enter into any
kind of agreements like partnership, marketing, management etc.
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 2020
143
GOVSR Notes to the annual accounts continued
for the financial year ended 31 March 2020
Note 2 – Summary of significant accounting policies and valuation methods continued
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.
144
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
Note 3 – Financial assets
The undertaking in which the Company holds interests in its share capital is as follows:
Undertaking’s name
Registered office
B&M EVR 1*
Luxembourg
*
B&M EVR 1 refers to B&M European Value Retail 1 S.à.r.l.
Net equity
as at
Percentage of
holding
31 March 2020
GBP
Net result for the
financial year
ended
31 March 2020
GBP
Net book value
as at
31 March 2020
GBP
100%
646,877,032
175,005,603 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 and the above figures were taken from the unaudited accounts as at
31 March 2020.
On 6 March 2020 the Company announced the sale of the entire share capital of Bedford DC Investment Limited, which owned the freehold of a
warehouse that was subsequently leased back by the Group company B&M Retail Limited, to WestInvest Gesellschaft für Investmentfonds mbH.
The Company previously held 100% of the share capital at an investment value of GBP 2.
In March 2020, an interim dividend of GBP 175m was declared by B&M EVR 1 (booked as dividend receivable as at 31 March 2020, see also Note 4).
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 1 S.à.r.l. (“B&M EVR 1”) – Dividend receivable (Note 11)
Accrued income in relation to intercompany loan agreements (Interest receivable)
Total
March 2020
GBP
March 2019
GBP
256,769,518
175,000,000
225,620,884
76,000,000
1,818,750
–
433,588,268
301,620,884
The amounts owed by B&M Holdco 4 are interest bearing (Note 12) and payable on demand. The amount owed by B&M EVR 1 relates to the
dividend declared by them on 6 March 2020 and was still receivable as at year end. 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:
Deferred consideration in respect of the sale of Bedford DC Investment Ltd (Note 5.1)
Prepaid VAT
Prepaid income and net wealth taxes
Other advances
Total
March 2020
GBP
March 2019
GBP
4,673,860
–
11,848
206,831
4,892,539
–
282,500
3,195
49,214
334,909
Note 5.1 On 6 March 2020 as part of the transaction comprising the sale of the subsidiary Bedford DC Investment Ltd, the Company recognised a
deferred consideration in respect of a VAT receivable previously recognised in that company and for which the purchaser has agreed to pass
through to the company on receipt. Also see Note 3 in relation to this sale.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
145
GOVSR Notes to the annual accounts continued
for the financial year ended 31 March 2020
Note 6 – Capital and reserves
Subscribed capital and share premium account
As at 31 March 2020, the share capital is set at GBP 100,058,289.80 divided into 1,000,582,898 ordinary shares with a nominal value of GBP 0.10
each and the unissued but authorised share capital is set at GBP 297,163,932.40. The Company’s share capital is represented by only one class of
(ordinary) shares.
During the financial year, share options reported under the annual accounts as at 31 March 2017, 31 March 2018 and 31 March 2019 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, 21,676 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.
Movements for the period on the reserves and profit/loss captions are as follows:
As at the beginning of the financial year
Allocation of prior period’s result
Proceeds from share options
Allocation of dividends
Final dividend
Interim dividend (November 2019)
Special dividend (March 2020)
Profit for the financial year
Share premium and
similar premiums
GBP
2,473,745,635
–
57,832
–
–
–
–
–
Legal reserve
GBP
10,010,000
–
–
–
–
–
–
–
Profit or loss
brought forward
GBP
42,401,722
74,156,816
–
(27,015,153)
(49,027,500)
–
–
–
Profit for the
financial period
GBP
74,156,816
(74,156,816)
–
–
–
–
–
208,870,600
Interim dividends
GBP
Total
GBP
(27,015,153) 2,573,299,020
–
57,832
–
(49,027,500)
(27,015,446)
(150,087,435)
208,870,600
–
–
27,015,153
–
(27,015,446)
(150,087,435)
–
As at the end of the financial year
2,473,803,467
10,010,000
40,515,885
208,870,600
(177,102,880)
2,556,097,071
On 8 November 2019 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 27,015,445.67 paid by the Company in December 2019.
On 6 March 2020 the Board of Directors unanimously approved the distribution of a special dividend of 15.0p per ordinary share, being a total
aggregate distribution of GBP 150,087,434.70 paid by the Company in April 2020.
Legal reserve
In accordance with article 710-23 of the Luxembourg law on commercial companies 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.
146
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
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 2020
GBP
March 2019
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:
Trade creditors
Suppliers
Suppliers – Invoices not yet received (Note 7.1)
Amounts owed to affiliated undertakings
B&M EVR 2 (Note 7.2)
Other creditors
Tax authorities
Corporate income tax
Net wealth tax
Other taxes
Dividend Payable (Note 6)
Other creditors
Total
Within
one year
GBP
After one year
within five
GBP
After more than
five years
March 2020
GBP
March 2019
GBP
121,286
954,679
1,075,965
4,407,949
2,541
12,621
2,437
17,599
150,087,435
77,845
155,666,793
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121,286
954,679
1,075,965
57,986
85,314
143,299
4,407,949
1,706,997
2,541
12,621
2,437
17,599
150,087,435
77,845
2,541
8,353
9,283
20,176
–
52,730
155,666,793
1,923,202
Note 7.1 Suppliers invoices not yet received balance during the financial year ended 31 March 2020 relates mostly to costs related to the sale of
Bedford (Note 3) and audit fees accrued.
Note 7.2 Dividend payments in GBP received by the Company on behalf of B&M EVR 2.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
147
GOVSR Notes to the annual accounts continued
for the financial year ended 31 March 2020
Note 8 – Raw materials and consumables and other external expenses
Other external expenses
Advisory and consultancy fees
Fees relating to the sale of Bedford (Note 3)
Marketing, communication and travel expenses
Staff recruitment expenses
Accounting and administrative fees
Audit fees
Government regulatory fees
Stock exchange fees
Rentals
Repairs and maintenance
Miscellaneous other expenses
Total
March 2020
GBP
March 2019
GBP
211,718
650,000
261,069
42,777
167,474
73,000
103,509
134,153
45,787
8,385
428,809
94,467
–
265,744
137,829
196,452
111,041
79,448
119,647
49,177
10,973
114,293
2,126,681
1,179,071
Note 9 – Staff costs
As at 31 March 2020, the Company employed one part time employee and two full time employees. (2019: one part time and two 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)
Sale of Bedford (Note 3)
Total
Note 11.1 Dividend income relates to dividend 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 2020
GBP
652,097
505,093
389
1,157,579
March 2019
GBP
590,025
141,867
532
732,424
March 2020
GBP
March 2019
GBP
175,000,000
37,145,459
76,000,000
–
212,145,459
76,000,000
March 2020
GBP
March 2019
GBP
10,795,788
10,725,046
10,795,788
10,725,046
43,594
20,024
63,618
94,792
–
94,792
10,859,406
10,819,838
Note 12.1 The Company and its UK and Luxembourg affiliates have entered into a Management Services Agreement (“MSA”). Included in the provisions
of this MSA was the right for the Company to charge or be charged with 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 a half yearly basis.
148
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements
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
Financial Statements
March 2020
GBP
March 2019
GBP
10,312,500
205,887
8,089
10,312,500
49,596
1,239
10,526,476
10,363,335
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 open 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) 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 2018B
(6) The B&M European Value Retail S.A. Long Term Incentive Plan 2019, split into three; (i) LTIP 2019A (ii) LTIP 2019B1 (iii) LTIP2019B2
(7) The B&M European Value Retail S.A. Deferred Benefit Share Plan 2019 (DBSP19).
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 (19/8/16)
Date of
grant
Date of
vesting
1 Aug 2014
19 Aug 2016
1 Aug 2017
19 Aug 2019
Exercise
price
271.5p
276.8p
CSOP (1/18/14) has fully vested.
Number of
options
outstanding at
31 March 2019
Number of
options granted/
(forfeited or
lapsed)
in the year
Number of
options
exercised
in the year
Number of
options
outstanding at
31 March 2020
11,049
21,676
0
0
0
(21,676)
11,049
0
Fair value
of option
GBP
0.83
0.50
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, LTIP 2018A and LTIP 2019A 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 all 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 schemes awarded 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.
B&M European Value Retail S.A.
Annual Report and Accounts 2020
149
GOVSR
Notes to the annual accounts continued
for the financial year ended 31 March 2020
The options were valued using a monte carlo method.
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 2019A/EPS
LTIP 2019A/TSR
LTIP 2017B1
LTIP 2017B2
LTIP 2018B1
LTIP 2018B
LTIP 2019B1
LTIP 2019B2
Date of
grant
Date of
vesting
Exercise
price
Number of
options
outstanding at
31 March 2019
Number of
options granted/
(forfeited or
lapsed)
in the year
Fair value
of option
GBP
Number of
options
exercised
in the year
Number of
options
outstanding at
31 March 2020
5 Aug 2018
5 Aug 2015
5 Aug 2018
5 Aug 2015
18 Aug 2019
18 Aug 2016
18 Aug 2019
18 Aug 2016
7 Aug 2020
7 Aug 2017
7 Aug 2020
7 Aug 2017
22 Aug 2021
22 Aug 2018
22 Aug 2021
22 Aug 2018
2 Aug 2022
2 Aug 2019
2 Aug 2022
2 Aug 2019
7 Aug 2020
7 Aug 2017
14 Aug 2020
14 Aug 2017
23 Jan 2021
23 Jan 2018
23 Jan 2021
23 Jan 2018
2 Aug 2019
2 Aug 2022
18 Sept 2019 18 Sept 2022
nil
nil
nil
nil
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
2.51
3.61
3.60
4.00
4.06
3.48
3.73
31,477
40,616
122,386
122,386
40,610
40,610
226,673
226,673
0
0
263,855
93,629
16,856
227,304
0
0
0
0
(51,404)
0
0
0
18,046
18,046
271,923
271,923
0
0
0
18,093
392,521
2,847
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
31,477
40,616
70,982
122,386
40,610
40,610
244,719
244,719
271,923
271,923
263,855
93,629
16,856
245,397
392,521
2,847
The LTIP 2015 and LTIP 2016 awards have vested and are in a 2 year holding period.
Assumptions
The fair valuing exercise uses several assumptions, including those given in the table below.
Risk-free
rate
Expected life
(years)
Volatility
Dividend yield
Consensus
(pence)
2.23%
N/A
0.92%
0.92%
0.09%
0.09%
0.52%
0.52%
0.97%
0.97%
0.37%
0.37%
0.25%
0.25%
0.25%
0.25%
0.47%
0.47%
6.5
3
5
5
5
5
5
5
5
5
5
5
3
3
3
3
3
3
N/A
N/A
24%
24%
26%
26%
32%
32%
29%
29%
31%
31%
32%
32%
32%
30%
30%
30%
0%
N/A
1%
1%
2%
2%
1%
1%
0%
0%
0%
0%
1%
1%
1%
0%
0%
0%
N/A
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
N/A
N/A
N/A
N/A
Scheme/Tranche
CSOP (1/8/14)
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 2019A/EPS
LTIP 2019A/TSR
LTIP 2017B1
LTIP 2017B2
LTIP2018B1
LTIP2018B
LTIP2019B1
LTIP2019B2
150
B&M European Value Retail S.A.
Annual Report and Accounts 2020
Financial Statements Financial Statements
Note 15 – Off balance sheet commitments and contingencies continued
DBSP
The Deferred Bonus Share Plan (DBSP) is a holding scheme where a portion of the executive directors annual bonus is deferred in to a share option
holding scheme where the options are held for three years before they can be exercised.
As such these are valued at the portion of the bonus which has been deferred. This scheme also attracts the additional dividend related grants as
detailed above for the post 2018 LTIP schemes.
Scheme/Tranche
DBSP 2019
Date of
grant
Date of
vesting
4 Jun 2019
4 Jun 2022
Exercise
price
nil
Number of
options
outstanding at
31 March 2019
Number of
options granted/
(forfeited or
lapsed)
in the year
Number of
options
exercised
in the year
Number of
options
outstanding at
31 March 2020
0
61,008
0
61,008
Fair value
of option
GBP
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 2020 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).
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 2020
GBP
507,293
507,293
March 2019
GBP
534,432
534,432
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 to the members of those bodies.
Note that the executive directors are remunerated through other Group companies.
Note 17 – Subsequent events
The outlook for the coming year is uncertain due to the current Covid-19 crisis. The appearance of Covid-19 harbours special risks that are difficult to
predict in terms of their impact on the global economy, and which the Company is currently affected by. However the Company is supported by the
activities of the Group which are expected to largely continue profitably over the period of the crisis and therefore the impact on the Company is
expected to be limited.
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 10 June 2020 and signed on its behalf by:
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
B&M European Value Retail S.A.
Annual Report and Accounts 2020
151
GOVSR
Other Information
Corporate directory
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
BofA Securities
2 King Edward Street
London EC1A 1HQ
Tel: +44(0)20 7628 1000
www.baml.com
Numis Securities
10 Paternoster Square
London EC4M 7LT
Tel: +44(0)270 7260 1000
www.numis.com
Principal Bankers
Barclays Bank PLC
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: +352 246 130 208
www.bandmretail.com
Share Registrar
(Shareholders)
Link Asset Services
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.
152
B&M European Value Retail S.A.
Annual Report and Accounts 2020
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©2020. 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