Providing customers with
value and convenience
B&M European Value Retail S.A.
Annual Report & Accounts 2021
Our purpose
Delivering great value to
our customers so that they
keep returning to our
stores time and time again
Our values
y
t
i
c
i
l
p
m
S
i
Simplicity
Proud to keep our business
simple and fun, and work
at B&M speed
Trust
Trust
Proud to trust honesty,
loyalty and hard work
Fairness
Fairness
Proud to act fairly and
responsibly with customers,
colleagues and suppliers
d
u
o
r
P
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
Corporate Governance
Financial Statements
Contents
Strategic Report
Highlights
1
2
4
6
8
10
12
14
18
22
24
33
44
Company overview
Chairman’s statement
Market overview
Business model
Feature: Customers
Long-term strategy
Chief Executive Officer’s review
Financial review
Key performance indicators
Principal risks and uncertainties
Corporate social responsibility
Stakeholders and Section 172
statement
Corporate Governance
Chairman’s introduction
48
50
52
58
Board of Directors
Corporate governance report
Audit & Risk Committee report
64 Nomination Committee report
66
90
95
Directors’ remuneration report
Directors’ report and business review
Statement of Directors’ responsibilities
Financial Statements
96
Independent Auditor’s Report
101
102
103
Consolidated statement of
comprehensive income
Consolidated statement of financial
position
Consolidated statement of changes
in shareholders’ equity
104 Consolidated statement of cash flows
105
Notes to the consolidated financial
statements
151
Independent Auditor’s Report
153 Company profit and loss account
154 Company balance sheet
155 Notes to the annual accounts
165 Corporate directory
Strategic Report
Highlights
An exceptional year
Financial highlights
Cash generated
from operations
Group
revenues
£4,801.4m
+25.9%
Profit
before tax
FY20: £3,813.4m
£944.0m
+75.0%
Diluted earnings
per share
FY20: £539.5m
42.7p
+119.0%
FY20: 19.5p
£525.4m
+108.5%
Adjusted
EBITDA1
FY20: £252.0m
£626.4m
+83.0%
FY20: £342.3m
UK and France store estates
B&M
UK stores
+3.8%
Heron Foods
stores
+4.4%
• 25 net new B&M stores opened
in FY21 despite the disruption
caused by Covid-19, growing
the estate by 3.8% to 681 stores
in the UK.
• 13 net new Heron Foods stores
opened in FY21, growing the
estate by 4.4% to 306
stores in the UK.
• Good pipeline of new stores
• The performance of new
for FY22.
stores, including those where
an existing store is relocated,
continues to be strong and
typically above the company
average. Good pipeline of new
stores for FY22.
French Babou
and B&M stores
+3.0%
• 3 net new stores opened
in France during FY21, taking
the total to 104 with 49 still
branded Babou and 55 under
the B&M fascia at the end of
FY21.
• The immediate priority is the
continued re-branding of
French Babou stores to B&M
and the refinement of the
ranging model and mix in
those stores.
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. 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 ineffective 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 gains or losses arising from unusual circumstances or transactions may also be included if incurred. 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 for FY21 presented in the strategic report are for the 52 weeks ended 27 March 2021, and the
comparable figures for the previous year, FY20, are for the 52 week period ended 28 March 2020.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
1
Strategic Report
Company overview
We are the UK’s leading variety goods value
retailer, providing customers with the best-selling
items across a range of Grocery and General
Merchandise categories at bargain prices
Across all of our B&M, Heron Foods, Babou and B&M stores in France, we provide customers
with a limited assortment of products including the best selling goods in our Grocery and General
Merchandise ranges. They are mainly sourced directly from producers and manufacturers, and
include a number of leading household brands. This simple low cost sourcing approach
allows us to constantly provide customers with great value all year round.
Our brands
Number of
employees1
36,483
Number
of stores
681
Number of
employees
4,666
Number
of stores
306
Revenue by fascia
B&M
£4,077.6m
Heron Foods
£414.8m
Babou
£309.1m
Number of
employees2
278
Number
of stores
104
Adjusted EBITDA3
by fascia
B&M
£590.7m
Heron Foods
£24.6m
Babou
£11.1m
Includes the corporate segment.
1.
2. The majority of colleagues in our French stores are not employees of the Group. They are employed directly by the Manager of each store, regardless of whether they are branded Babou or B&M, and
are therefore excluded from the number above.
3. 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. For further detail, see the footnote on page 1. B&M also includes the corporate segment as referred to in note 2 of the financial statements and includes an adjusted loss
of £(1.5)m in FY21.
4. Group net debt to adjusted EBITDA is stated on a pre-IFRS16 basis.
2
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Well positioned for future growth
1. Favourable
market positioning
2. Disruptive
business model
3. Attractive
financial returns
4. Significant
growth potential
B&M is a fast growing variety
goods value retailer in the UK
with 681 stores, plus a further
306 Heron Foods value
convenience stores.
We have a modest share of the
large UK market overall in relation
to the range of products we sell,
but we have continued to grow
our like-for-like sales in a number
of categories in FY21.
By providing customers with great
value every day, we believe they
will keep returning to our stores.
The continued structural shift
towards value and convenience
retailing in the UK means that the
B&M Group remains well
positioned to grow sustainably in
the long term.
The B&M business model of
limited assortment, direct
sourcing, tight discipline on
maintaining a low cost base and
keeping our operations simple,
allows us to pass on savings to
customers with our value pricing.
We have convenient locations for
stores and we provide a range of
best selling everyday products at
value prices in all of our General
Merchandise and Grocery ranges.
This is a distinctive customer
proposition, which resonates well
with customers who either need or
enjoy a bargain, often leading to
further impulse purchases.
Our focus is on selling only the
most popular products and
maintaining a constant stream of
new items every week, which
gives customers another reason to
keep returning to our stores.
B&M has a strong financial track
record of consistently delivering
like-for-like sales growth, stable
gross margins, strong rates of new
store rollouts and high cash
generation. Over the period since
IPO in June 2014 to March 2021 the
Group has generated a total
shareholder return of over 167.0%.
We have a clear capital allocation
policy, with an ordinary dividend
pay-out ratio of 30-40% of post-tax
earnings and a leverage ceiling of
2.25x4. The exceptional sales
performance over the past year
and the capital light nature of our
ongoing store roll-out programme,
means the business has
continued to be strongly cash
generative in FY21.
New B&M UK store openings
continue to produce strong
returns, with a short capital
investment payback period. Our
target of at least 950 B&M stores
in the UK means that we have a
substantial runway for further
expansion in our core UK
business. This target may also be
conservative in light of recent
performance and the potential
space opportunities in the future
created by other retailers leaving
the market or downsizing their
store estates.
In addition, Heron Foods has given
the Group a platform for growth in
the value convenience sector and
we are continuing to develop the
model for realising the significant
potential which exists in the French
market.
See Market overview on page 6
for more information
See Business model on page 8
for more information
See Financial review on page 18
for more information
See CEO’s review on page 14
for more information
Annual Report & Accounts 2021
B&M European Value Retail S.A.
3
Strategic Report
Chairman’s statement
“An exceptional year”
Peter Bamford
Chairman
Overview
It has been an extraordinary year. Covid-19 has
had a huge impact on the world we live in and
has tested many elements of our business
strategy and operations. B&M has come through
those tests in excellent shape and delivered
outstanding results. Some may attribute B&M’s
performance over that last year to good fortune.
However, strong leadership and excellent
execution of a clear and focused strategy have
been the underlying drivers of success. Whilst we
have had the benefit of being classified as an
essential retailer in the UK, and therefore have
been able to trade throughout the pandemic and
associated lockdowns, there have been huge
challenges which Simon Arora and his
management team have responded to rapidly
and effectively while at all times keeping the
safety of our colleagues and customers as the
highest priority. Our colleagues throughout the
Group have also responded magnificently to the
situation and changing requirements.
milestone in B&M’s development. The trading
performance has also enabled us to refund all
furlough support, waive business rates relief in
full, and return an additional £450m to our
shareholders through special dividend payments.
Strategic progress
We have continued to open new stores in the
year under all fascias. In the UK we opened 43
new stores in total under the B&M fascia. This
was a higher number than we expected at an
early stage in the pandemic when we thought
construction work might be more constrained.
The new stores are typically larger than the
historic average with more than half having
garden centres, bringing the total number of
garden centres to almost 200. Together with our
enhanced ranges of product in the Home
categories, B&M has been well positioned for the
increased expenditure by customers on home
and garden activities over the last year under
lockdown.
It is clear that the B&M customer proposition
remains exceptionally well-positioned in the UK
and there is growing evidence that it can be
highly successful in France. Careful product
design and selection, great value prices and an
effective and efficient supply chain have
delivered consistently well for our customers
throughout the last year with minimal disruption
from Covid-19 and Brexit. There is also evidence
that new customers have discovered B&M during
this period and have found our products and
stores very attractive.
The growth in the scale and value of B&M
resulted in the Company joining the FTSE 100
Index from September 2020. This is an important
Our new distribution centre at Bedford which
was opened in FY20 has now become fully
operational. This huge new facility was brought
on line without material disruption to product
supply, although the operating costs have run
higher than we would like in the transition.
In France, Babou also has had to operate with
more extensive trading restrictions and with
varying numbers of stores having to close at
various times under lockdowns. However, we
have continued to test, develop and refine the
B&M proposition for France and have growing
confidence that we can build a large and
successful business in the future.
While the exceptional nature of the last year will
inevitably mean a reversal on some performance
metrics in FY22, we believe that B&M is
strategically well positioned for the long term.
Board changes and diversity
We have continued to evolve our Board and
senior management team.
Paul McDonald retired from the Board and as the
Group Chief Financial Officer (“CFO”) in November
2020. I would like to thank Paul on behalf of the
Board for his service over a period of 10 years. He
played a major role alongside Simon Arora in
taking B&M from being a small private company
through the IPO and onwards to becoming part
of the FTSE 100 last September. We wish him well
for the future.
I am pleased to welcome Alex Russo as our new
Group CFO, who joined the Board in November
2020. Alex brings with him a great deal of
experience in the retail sector having worked for
a number of leading retailers in the UK and
internationally, including Tesco and Asda.
Importantly he also has discount retailing
experience, having latterly been the CFO of Wilko.
Following the retirement of Kathleen Guion in
January 2020 we have also continued to seek to
improve our gender diversity in relation to the
Board this year. We are planning to appoint a
further female Non-Executive Director and have a
search process is under way which is detailed in
the Nomination Committee report. In addition,
Gilles Petit has decided not to seek re-election at
the AGM this year as he is now intending to focus
on roles supporting start-up businesses. I would
like to thank Gilles for his contribution to the
4
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
As well as looking after our workforce and
ensuring that our customers are served safely in
our stores, we also wanted to give support and
recognition to NHS staff and we therefore
included them in our store discount scheme
nationally during the peak of the pandemic in the
first two months of the last financial year and
also again in January 2021.
We have also delivered a total of £1m in cash
donations to foodbanks across the UK as part of
our response to the Covid-19 pandemic to
support some of the most vulnerable in society.
Our governance in a broader sense has evolved
with the growth and development of the
company and our entry into the FTSE 100. The
Board is conscious of the increasing importance
of environmental, social and governance (“ESG”)
actions and reporting. Our aim is to deliver our
growth strategy as a value retailer in a
sustainable way for the benefit of all our
stakeholders. For B&M we consider ESG from the
perspective of five key stakeholders, namely our
colleagues, customers, communities, suppliers
and the environment. Details of our actions and
outputs in relation to these stakeholders are set
out in our Corporate Social Responsibility report
on page 33 below. We also considered during
our annual strategy day this year what further
developments may be appropriate in relation to
our ESG strategy and reporting going forward
including the setting of appropriate targets, and
preparing to comply with the Task Force on
Climate-related Financial Disclosures
requirements in FY22. Our management team
will be evaluating those for further consideration
by the Board in the coming year.
Finally, I would like to thank our shareholders for
their continued support, and again our
colleagues and customers during this very
challenging year.
Peter Bamford
Chairman
2 June 2021
Board during his period as a director. The
consequence of these changes is that by the
AGM we will have restored female representation
on our Board to at least 33%.
We have also made a number of appointments
to strengthen our broader senior management
team as the business has continued to grow at a
significant rate. Further details of those
appointments have been included in my report
as Chairman of the Nomination Committee on
page 64 below.
Remuneration Policy
The Directors’ Remuneration Report outlines the
review of remuneration which has been carried
out and the proposed changes to the policy
which will be submitted to our Annual General
Meeting in July. This is a significant review
because the business has grown so much and
become significantly more complex since the last
review in 2018. The review concludes that, while
the policy is largely ‘fit for purpose’ and requires
relatively few changes, it is crucial that we make
some changes to the Chief Executive Officer’s
remuneration to reflect how the role has
developed as the business has grown. We have
consulted our shareholders extensively in relation
to the changes and I hope that our shareholders
will support this new policy and the changes to its
implementation at our AGM.
Culture, values and governance
Our response to the pandemic has been guided
by our values and the interests of our
stakeholders and the communities we serve.
Our most important priority has been to ensure
that the safety of our workforce and customers
has been protected through the measures we
have taken in relation to the pandemic. At the
outset of the pandemic we took immediate steps
to ensure that social distancing was in place at all
of our stores and distribution centres. We
deployed face coverings, disposable gloves,
hand sanitiser and social distancing marshalling
across the store network and protective screens
were installed for our checkout colleagues. We
have continued to maintain high standards of
cleanliness throughout our business, from stores
and distribution centres, down to individual
workstations of colleagues which are constantly
cleansed at regular intervals throughout each
working day.
To recognise the increased challenges for
colleagues during the times of peak demand we
increased the pay of our UK store and distribution
colleagues by 10% for the months of April and
May 2020. We also awarded them an extra
weeks pay in January 2021.
Purpose, culture
& values
The vision, purpose and culture
of our business is underpinned
by our values of simplicity, trust,
fairness and taking pride in
everything we do.
y
t
i
c
i
l
p
m
S
i
Simplicity
Proud to keep our business
simple and fun, and work
at B&M speed
Trust
Proud to trust honesty, loyalty
and hard work
Trust
Fairness
Fairness
Proud to act fairly and
responsibly with customers,
colleagues and suppliers
d
u
o
r
P
Proud
Proud to treat every £1 as our
own and provide customers with
great value for money
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 44 to 47 for more information
Annual Report & Accounts 2021
B&M European Value Retail S.A.
5
Strategic Report
Market overview
As a variety goods retailer, the market in which
we operate is diverse and substantial
General trends
The shift in retail demand towards much
more value conscious consumers over
the last decade is now an established
feature of the market for Grocery and
General Merchandise goods in the UK
and France.
We believe this pattern of consumer behaviour
will continue for the foreseeable future, with
increasing social acceptance of discount shopping.
In light of the many consequences the Covid-19
pandemic has had on everyday life, the relevance
of value and convenience has never been greater.
Whether consumers need to save money or just
enjoy a bargain, the B&M model is designed to
meet those requirements through its carefully
selected ranges, value prices and convenient
store locations.
Convenience food store shopping 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.
Market positioning
At B&M, we provide value and convenience
across a wide range of Grocery and General
Merchandise products. As such, we aim to take a
small amount of market share in each of the 15
chosen categories in which we operate. The
attraction for customers visiting our stores is that
we offer the best selling products, and adjust our
ranges to meet the changing demands of our
customers for different types of products and for
seasonal goods. This means customers can buy
what they want, when they want and at the price
they want all year round.
By spanning many different categories,
customers are able to find a broad range of
products in one visit. This serves customers
particularly well with the current trend for
consumers looking to reduce overall shopping
visits during the Covid-19 pandemic.
Customers are typically looking for specific
destination purchases, but they will often also
make impulse purchases as they browse around
a store. The desire for “treasure hunting” is
supported by us constantly introducing new
products in our stores. We average around 100
new products per week, predominately within
our General Merchandise categories. This
provides customers with their everyday
essential needs, while also giving them a
fun and exciting shopping experience.
Territories and store estates
United Kingdom
The UK retail market in which the B&M and Heron
Foods businesses operate is very large, with total
store-based retail sales, covering both Grocery
and General Merchandise, of c.£300 billion in
20171. Even though we have attracted a number
of new customers during FY21, our share of this
market remains small at c.1.5%2, meaning there is
still a significant opportunity for further growth
across our chosen product categories.
We believe that an estate of at least 950 B&M
fascia stores in the UK is achievable, based on
analysis carried out by an external consultancy in
2017. This target appears to us to be increasingly
conservative given the performance and customer
appeal of B&M in FY21. The B&M fascia business
in the UK currently has 681 stores, leaving a long
runway for growth ahead of us.
Heron Foods operates in the convenience
sub-sector of the UK Grocery market, which in total
was worth c.£160 billion in 20171. Heron Foods
provides consumers with easy local access to
everyday chilled, frozen and ambient food items.
It has an attractive value proposition in a market
which has been primarily dominated by the
premium pricing models of other larger retailers.
Our model is to locate stores in communities close
to where people live and provide them with value
prices for frozen, chilled and ambient food.
The Heron Foods chain of 306 convenience stores
has the potential to become multiple times larger
as we continue to roll out new stores both within
and beyond the North of England heartland
where most of its stores are located currently.
B&M UK stores
overall target
950
Heron Foods
revenue growth
+6.4%
B&M UK LFL
revenue growth
+23.8%
Out of Town
revenue represents
c.80%
Babou revenue growth
+9.1%
681 306
+3.8% in FY21
B&M UK stores
+4.4% in FY21
Heron Food stores
See page 16 for more information
1.
Figures are based on management estimates,
having regard to external market research on the
size of the relevant market in 2016/17. Market share
is calculated by reference to UK revenues in FY21.
2. UK market share is calculated based on the
reported revenues of B&M and Heron Foods.
6
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
France
The French retail market is the second largest in
continental Europe, and shares a number of
similar characteristics to that of the UK. The
market has attractive dynamics including the
overall market size, the popularity of the discount
channel and healthy operating margins achieved
by several of the incumbent operators.
There are two immediate priorities for our French
business. The first is to complete the evolution of
the product mix, replicating the direct sourcing
and limited assortment SKU model of B&M in the
UK. In particular, this has and continues to involve
reducing the exposure to Clothing and Apparel,
whilst introducing a modest amount of food and
grocery products and increasing the General
Merchandise ranges within its product mix. A lot
of work in relation to that has now been
completed, but there is still some refining of the
mix and ranges to do while customer reaction is
being carefully monitored. The response we have
received so far from the French consumer to the
new products sourced via the B&M supply chain
has been positive, but it has been difficult to
measure the strength of that demand over a
sustained period of time in view of the French
lockdown restrictions this year.
At the end of FY21, we had a total of 104 stores in
France, with 55 of them branded as “B&M”. Early
indications are that the re-branded stores are
outperforming their Babou counterparts. Subject
to monitoring the on-going performance of the
re-branded stores, our second main priority is to
re-brand the remaining stores as “B&M” by the
end of 2021.
Given both the size of the French market and the
small market share which Babou currently has,
the opportunity exists for the French business to
grow its store footprint multiple times over, which
is our ultimate ambition in relation to that
business.
104
+3.0% in FY21
French stores
Competition
As a variety retailer, B&M competes with a large number of other retailers covering a range
of product categories:
Supermarkets
The mainstream UK grocers offering a
complete selection of Grocery and
FMCG products, with the largest stores
also having a range of General
Merchandise items.
Convenience stores
A sub-sector of the UK Grocery market
aimed at providing mostly food
products to consumers, covering the
full spectrum of price positions from
value up to premium.
Category specialists
A large number of competitors in
categories such as DIY, Gardening,
Furniture, Homewares, Electricals
and Pet.
Variety discounters
Like B&M, retailers who sell a wide
selection of Grocery and General
Merchandise products at value prices.
What differentiates B&M from the competition
B&M’s business model provides a range of products at value-led pricing through our direct
sourcing, limited assortment and simple low cost approach. With an emphasis on
household brands, there is no compromise on quality at our price points. Our customer
proposition is underpinned by the following main pillars of our business model:
Branded Grocery
B&M has a targeted range of Grocery
products from the leading brands,
many of which are sourced directly
from global food and FMCG suppliers
at everyday low prices. Our
customers are then able to benefit
from our value pricing of household
brands within those categories which
their budgets might not have been
able to meet otherwise.
Branded General Merchandise
Within our General Merchandise
ranges, we offer branded products
where those names are an important
customer requirement. We also have
heritage branded products through
relationships with national and
global brands across a number of
different categories of household
products.
Own label General Merchandise
In addition to our wide selection of
branded products, we also carefully
curate ranges of own label products
in specific categories such as
Homewares and Furniture. By
leveraging our relationships direct
with manufacturers in Asia, we are
able to design and bring to market a
wide selection of quality products
quickly and cheaply.
SKU discipline
We maintain a strict approach to our
limited assortment model, only offering
the best-selling products in any given
category. Within our category ranges this
limited SKU discipline means that we are
agile and able to respond quickly to
changes in customer trends. This
ensures that our stores always have on
the shelves what our customers want as
seasons and demand changes.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
7
Strategic Report
Business model
A disruptive, agile and low-cost business model,
with a track record of delivering growth
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.
Business strengths
Convenient store
network
Our network of over 1,000 stores across the UK and France are found in
convenient locations in modern retail parks, popular town centres and
high streets. They are located in places close to where people live,
making them easily accessible for customers.
Well invested
infrastructure
Strong brand
reputation
Skilled colleagues
We have a modern and scalable infrastructure to support the operations
and growth of the business. In January 2020 we opened an additional
Distribution Centre in Bedford in the South of England, providing B&M with
a further 1 million sq ft of warehouse capacity. It currently serves around
one-third of all B&M stores in the UK, but is capable of serving even more
stores as we continue our store rollout programme.
The B&M and Heron Foods names are recognised, established brands in
the markets in which they operate. Those brands have a strong and
growing reputation for delivering consistently great value, great brands,
quality and newness in relation to the products people regularly buy for
their homes and families. With discount shopping having become more
socially accepted there is further opportunity to attract new customers
while also retaining the loyalty of existing customers in the years ahead.
Developing products and ranges to provide great value whilst being fresh
and on-trend takes skill, experience and discipline. We have colleagues with
many years of experience in their respective product markets, many of
whom have worked previously as buyers and merchandisers with category
specialist competitors. By working collaboratively with our buyers,
merchandisers, product designers and sourcing agents in Hong Kong, we
are able to provide what our customers want with quality products at value
prices presented in a compelling way in our stores.
Strong supplier
relationships
Maintaining our competitive value-led price model is also about
developing and retaining strong long-term supplier relationships, who
we regard very much as partners. Many of our suppliers have grown with
us over several years working with our Group businesses. They value our
simple and very efficient way of working directly with them. Our
continued growth creates opportunities to attract and welcome new
brands into our business.
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 Non-Executive 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 as a growth business.
8
B&M European Value Retail S.A. Annual Report & Accounts 2021
Cost
efficiency
Generati
n
g
l
o
n
g
t
e
r
m
Format
flexibility
g
r
o
w
t
h
Seasonal
flex
s
s
e
n
i
s
u
b
r
u
o
f
o
y
t
i
l
i
b
a
a n d sustain
Strategic Report
Corporate Governance
Financial Statements
Stakeholder outputs
Value to
customers
Colleague
progression
Suppliers as
partners
Investing in
communities
Returns for
investors
Providing great value to customers is at the heart of our business. Helping
customers spend less on the things they buy regularly for their homes
and families all year round is what our business model is designed to
constantly deliver. Never has this been more true than during the Covid-19
pandemic, and this year we have welcomed a number of new customers
to B&M.
Our colleagues are crucial to the success of our business, be that our
central support teams, those working in our logistics network, or store
colleagues providing great customer service every day. Our continued
growth provides new job opportunities in the communities where we
trade. There is also plenty of scope for colleagues throughout the
business to build long-term and successful careers through promotion.
In keeping with our values, we take pride in being an innovative and
exciting place for colleagues to work, grow and develop to their full
potential.
The continued growth of B&M also benefits our suppliers. We have
long-standing trading relationships with a number of well-known
household brands across food and FMCG. We also have a number of
established partners 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. We are always interested in
adding well-known brands to our ranges. Our continued growth gives
potential for our suppliers to grow with us which further strengthens
those relationships.
Our store opening programmes are targeted at making investments in
communities where we are under-represented or not represented at all,
using our flexible store formats to suit the relevant locality. This creates
new jobs each time we open a store, plus convenient local access to our
value-for-money products. In doing so, we are proud to contribute to the
revitalisation of local communities where other retailers may have
retrenched.
Creating value for all our stakeholders is an essential underpin to creating
shareholder returns 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.
Generati
n
g
l
o
n
g
t
e
r
m
g
r
o
w
t
h
Targeted
grocery
offering
s
s
e
n
i
s
u
b
Compelling
non-grocery
offer
Disruptive
sourcing
process
r
u
o
f
o
y
t
i
l
i
b
a
a n d sustain
SKU
discipline
Underpinned by
Corporate
social
responsibility
See CSR report on
page 33
for more information
Risk
management
Financial
performance
See Principal risks
on page 24
for more information
See Financial review
on page 18
for more information
Annual Report & Accounts 2021
B&M European Value Retail S.A.
9
Strategic Report
Feature: Customers
The broadening appeal
of the B&M proposition
New customers discovering B&M
The Covid-19 pandemic has had a profound
impact on the daily lives of everyone, not least in
the way consumers have adapted their shopping
habits. B&M has seen a customer preference for
shopping at the more spacious, easily accessible
out-of-town locations, which also enable
customers to satisfy multiple shopping needs in a
single trip. The economic impact of the pandemic
on households means that value-for-money
purchases have become increasingly important
to help ease some of the pressures on limited
spending budgets.
Against that backdrop, the combination of value,
convenience and Grocery and General
Merchandise product ranges offered by B&M all
under one roof has been particularly relevant
over the past 12 months. In order to understand
more about the breadth of our appeal, in the
summer of 2020 we commissioned Barclaycard,
our merchant card services provider, to prepare
an analysis of customer card transactions at our
B&M UK stores. Customer card transactions at
those stores accounted for approximately 80%
of all purchases made at the time of that survey.
The card transaction analysis showed that the
core B&M customer segment is families on a tight
budget. The analysis also showed that in June
2020 some 23% of card transaction customers
had not shopped at B&M during the previous five
months, and the demographic profile
of those customers was very similar to that of our
existing customer base. This suggests to us that
those new customers may well be likely to
continue shopping at B&M in the future as they fit
with the typical profile of our existing customers.
1
Calculated over the nine month period from July 2020 to
March 2021 inclusive.
10
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Like-for-like sales growth in the B&M UK business
remained strong throughout the second half of
the financial year. This was an indication that
both existing and new shoppers were continuing
to find our product offer and price proposition
compelling and relevant.
To test and validate the pattern of new customer
visits and customer loyalty, Barclaycard carried
out a follow-up analysis in April 2021.
Of the new card transaction customers identified
in the survey in June 2020, the analysis showed
that 71% of them shopped with B&M again at
some point over the subsequent 9 months1, with
an average frequency of visit of 4.2x up to the
end of March 2021. That average frequency of
repeat visits suggests we have become a part of
the shopping routine for some of those new
customers to our stores.
We believe that our value prices and quality
product ranges are among the reasons why
people finding B&M for the first time do come
back again and over time become regular
customers. We will continue to monitor this
during the year ahead, given the ongoing
uncertainty and reliability in trading conditions.
Something for everyone
Big brands
Something for everyone
Big savings
The April 2021 analysis also highlighted that
the demographic profile of those customers
most likely to visit repeatedly largely mirrored
that of a typical B&M customer, being low to
middle income family households. It is this
demographic that B&M typically attracts due
to our product mix and value proposition.
New customers were not restricted to
particular areas of the country, with similar
patterns being seen across different regions
in the UK. This highlights to us the rollout
opportunity which exists for B&M stores in the
UK, particularly in the South of England where
we are currently under-represented, and
supports the long term target of at least 950
stores.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
11
Strategic Report
Long-term strategy
Our four strategic pillars aim to deliver
sustainable growth
Strategic Pillars
Progress in FY21
Deliver great
value to our
customers
Our business model of sourcing household
name branded products at everyday low
prices has continued to prove a compelling
proposition for customers. We saw a
number of new customers discover our
B&M fascia business in the UK over the
past 12 months, attracted by the
convenience and value for money we offer
across a wide range of essential items.
The Group delivered an exceptional
like-for-like sales performance in FY21,
particularly in the core B&M UK business
in FY20 where growth was broad based
across a number of our Grocery and
General Merchandise categories.
Due to the impact of Covid-19 on consumer
spending, ranges such as Homewares,
DIY, Gardening and Furniture were areas
of particular strength. This was driven by
increased demand from people spending
more time in their homes. It was also
helped by improved product quality and
the presentation of those ranges
in stores.
Constant newness is also a key component
of our General Merchandise ranges.
Having experienced a year of significantly
elevated sales, this remains particularly
important to retain new customers and
maintain the appeal of B&M as a
destination shopping visit for them going
forward.
See page 16
for more information
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
We continue to invest in our new store
rollout strategy across the Group.
In FY21 the B&M UK business opened 43
gross new stores despite the disruption to
the construction sector caused by Covid-19,
being 25 net of closures and relocations.
The openings were weighted towards the
second half of the year. Whilst we retain a
presence in town centre locations, we
have continued to target lager premises
situated in convenient out of town retail
parks. Those sites enable us to best
showcase our Homestore ranges and
often also have garden centres. We ended
the financial year with a total of 681 B&M
stores in the UK.
The French business did however open 5
new stores, and closed or relocated 2,
taking the total number of stores in the
French estate to 104.
In our Heron Foods business, we opened
17 new convenience stores, 13 net of
closures and relocations, and now have
306 stores.
The French business has been focused on
re-branding a number of existing stores from
the original Babou fascia to the B&M fascia.
See page 16
for more information
B&M acquired Babou in France in October
2018 as a chain of 95 stores at that time.
Before embarking on any significant store
expansion programme, we have been
focused on two priorities for the French
business.
sourced directly through the B&M supply
chain. A lot of this work has already been
completed throughout the store estate,
but we will continue to finesse the mix and
ranges while we track the response of the
French consumer.
The first has been to evolve the product
offering to align it more closely to that of
B&M in the UK. Specifically, this has
involved introducing a limited but targeted
selection of Grocery products, reducing
the proportion of Clothing & Apparel in
stores, and increasing the space
dedicated to General Merchandise
The second priority has been the
re-branding of some of the stores in the
estate from Babou to the B&M banner, and
monitoring the performance and customer
reaction to the rebranded stores. We had a
total of 55 “B&M” branded stores out of the
total portfolio of 104 stores in France at the
end of FY21.
In the UK, we created over 7,200 new jobs
during FY21 across our stores, distribution
and support centre teams. We also
strengthened the Group senior leadership
teams, having welcomed Alex Russo as
Group CFO, Anthony Giron as Managing
Director of our French business and
Richard Kirk as B&M UK Supply Chain
Director.
Having opened a new 1 million sq ft UK
Distribution Centre in Bedford last financial
year, it is currently experiencing a level of
inefficiencies whilst scaling up operations
and training new teams in a socially
distanced environment. Notwithstanding
those challenges it is now already serving
over one-third of the B&M UK store estate.
We have continued with our rolling
programme of investment in upgrading
our existing store estate, with maintenance
capital expenditure of over £22m spent
across the Group in FY21.
The performance of the French business
during those periods when the stores
remained open was strong. This suggests to
us that both the changes to the product mix
and re-branding are having a positive
impact, albeit there has been some
disruption due to the coronavirus restrictions
in France. Subject to the on-going
performance of the re-branded stores we
are aiming to re-brand the remainder of the
estate by the end of 2021.
See page 16
for more information
A new Workforce Management System has
now been rolled out across all stores, having
been delayed during the initial coronavirus
outbreak at the start of the financial year.
Although the benefit seen in FY21 was
minimal as we adopted a phased approach
to training, this will now provide a strong
foundation to drive further efficiencies within
our store operations.
See page 17
for more information
12
B&M European Value Retail S.A. Annual Report & Accounts 2021
See page 18 for more information
from the market by others.
B&M UK like-for-like revenue growth
B&M proposition should remain
See Principal risks numbers 2 and 3 on page 26
assortment of the best-selling
bricks and mortar estates. By
stores.
Group revenue growth
+25.9%
+23.8%
See page 18 for more information
UK gross new store openings
43 B&M UK
17 Heron Foods
See Principal risks numbers 1 and 11
on pages 25 and 30
France revenue growth
+9.1%
B&M branded stores in France
53%
See page 20 for more information
See Principal risks numbers 1, 3 and 6
on pages 25, 26 and 28
New jobs created in the UK
>7,200
B&M stores served by Bedford DC
c.250
See page 34 for more information
See Principal risks numbers 1 and 3
on pages 25 and 26
With Covid-19 continuing to have a
products, including leading brands,
targeting those categories, we see
profound impact on the daily lives of
at bargain prices. This model has a
potential to grow our market share
everyone, value and convenience
track record of resonating well with
further through our value-led
are likely to remain important to
our customers. It also helps limited
model.
customers when deciding where to
household budgets to go that little
shop. We believe therefore that the
bit further.
highly relevant to shoppers as we
We continue to look for
look to continue to grow our
opportunities in General
product design and visual
business in the future.
Merchandise categories where
merchandising. This is to ensure
other specialist category retailers
that we are always selecting the
Competitive pricing is at the heart of
are less price competitive and
right products to appeal to current
our business model and our focus
where we can see opportunity as
trends, and making sure they are
remains on providing a limited
some of them have downsized their
well-presented to customers in our
We are also investing in the skills
and experience we have in our own
trading teams, in areas such as
We expect to open 45 gross new
Longer term, we remain committed
In FY22, our Heron Foods
B&M UK stores in FY22, subject to
to our target of at least 950 B&M
convenience store chain expects to
any disruption caused by changes
stores in the UK. However, this
open a similar number of new
in restrictions related to Covid-19.
rollout potential is looking
stores as seen in FY21, and it is likely
Whilst we plan the new store
increasingly conservative given the
to see a similarly paced rollout in
programme accordingly, we also
performance of the UK business in
future years.
remain vigilant in relation to suitable
FY21, particularly if the new
potential acquisition opportunities
customers we have welcomed to
where there is space availability
our stores in the last year prove to
from downsizing or withdrawal
become loyal.
We continue to refine the customer
Subject to the performance of the
proposition in France through our
stores we have rebranded so far, by
work to evolve the product range
the end of 2021 we would expect the
and re-brand the store fascia.
entire estate to have been be
re-branded as “B&M” in France.
Subject to any further lockdown
restrictions, a settled period of
trading will afford us the opportunity
to fully evaluate the impact of these
actions and also the longer-term
potential in France.
As we continue to open new stores
The Bedford Distribution Centre is
We will continue to invest in refreshing
it has a positive impact on local
now supporting approximately 250
our older stores to maintain the
communities by creating jobs for
stores, but has the capacity to
highest retail standards of modern,
new store colleagues and
service even more. Bringing the
clean, safe and welcoming shopping
extending our value-led offering to
efficiency of operations at this new
environments for customers. This has
even more people who either want
facility in-line with our other
been particularly important during
or need a bargain.
Distribution Centres is important to
the Covid-19 pandemic and we
The ongoing growth of the business
in the south of England, and it is a
hard work in maintaining our high
facilitate our continued expansion
applaud all our colleagues for their
as a whole also provides
key priority for FY22.
store standards during a particularly
challenging time for the public
generally.
development opportunities for
existing colleagues as well as
creating a need to recruit new
expertise to supplement our core
capabilities.
Deliver great
value to our
customers
Our business model of sourcing household
in FY20 where growth was broad based
Constant newness is also a key component
name branded products at everyday low
across a number of our Grocery and
of our General Merchandise ranges.
prices has continued to prove a compelling
General Merchandise categories.
Having experienced a year of significantly
proposition for customers. We saw a
elevated sales, this remains particularly
number of new customers discover our
Due to the impact of Covid-19 on consumer
important to retain new customers and
B&M fascia business in the UK over the
spending, ranges such as Homewares,
maintain the appeal of B&M as a
past 12 months, attracted by the
DIY, Gardening and Furniture were areas
destination shopping visit for them going
convenience and value for money we offer
of particular strength. This was driven by
forward.
across a wide range of essential items.
increased demand from people spending
more time in their homes. It was also
The Group delivered an exceptional
helped by improved product quality and
like-for-like sales performance in FY21,
the presentation of those ranges
particularly in the core B&M UK business
in stores.
See page 16
for more information
Invest in
new stores
Develop our
international
business
Invest in our
people and
infrastructure
We continue to invest in our new store
showcase our Homestore ranges and
The French business did however open 5
rollout strategy across the Group.
often also have garden centres. We ended
new stores, and closed or relocated 2,
the financial year with a total of 681 B&M
taking the total number of stores in the
In FY21 the B&M UK business opened 43
stores in the UK.
French estate to 104.
gross new stores despite the disruption to
the construction sector caused by Covid-19,
In our Heron Foods business, we opened
being 25 net of closures and relocations.
17 new convenience stores, 13 net of
The openings were weighted towards the
closures and relocations, and now have
second half of the year. Whilst we retain a
306 stores.
presence in town centre locations, we
have continued to target lager premises
The French business has been focused on
situated in convenient out of town retail
re-branding a number of existing stores from
parks. Those sites enable us to best
the original Babou fascia to the B&M fascia.
See page 16
for more information
B&M acquired Babou in France in October
sourced directly through the B&M supply
The performance of the French business
2018 as a chain of 95 stores at that time.
chain. A lot of this work has already been
during those periods when the stores
Before embarking on any significant store
completed throughout the store estate,
remained open was strong. This suggests to
expansion programme, we have been
but we will continue to finesse the mix and
us that both the changes to the product mix
focused on two priorities for the French
ranges while we track the response of the
and re-branding are having a positive
business.
French consumer.
impact, albeit there has been some
disruption due to the coronavirus restrictions
The first has been to evolve the product
The second priority has been the
in France. Subject to the on-going
offering to align it more closely to that of
re-branding of some of the stores in the
performance of the re-branded stores we
B&M in the UK. Specifically, this has
estate from Babou to the B&M banner, and
are aiming to re-brand the remainder of the
involved introducing a limited but targeted
monitoring the performance and customer
estate by the end of 2021.
selection of Grocery products, reducing
reaction to the rebranded stores. We had a
the proportion of Clothing & Apparel in
total of 55 “B&M” branded stores out of the
stores, and increasing the space
total portfolio of 104 stores in France at the
dedicated to General Merchandise
end of FY21.
See page 16
for more information
In the UK, we created over 7,200 new jobs
inefficiencies whilst scaling up operations
A new Workforce Management System has
during FY21 across our stores, distribution
and training new teams in a socially
now been rolled out across all stores, having
and support centre teams. We also
distanced environment. Notwithstanding
been delayed during the initial coronavirus
strengthened the Group senior leadership
those challenges it is now already serving
outbreak at the start of the financial year.
teams, having welcomed Alex Russo as
over one-third of the B&M UK store estate.
Although the benefit seen in FY21 was
Group CFO, Anthony Giron as Managing
minimal as we adopted a phased approach
Director of our French business and
We have continued with our rolling
to training, this will now provide a strong
Richard Kirk as B&M UK Supply Chain
programme of investment in upgrading
foundation to drive further efficiencies within
Director.
our existing store estate, with maintenance
our store operations.
Having opened a new 1 million sq ft UK
across the Group in FY21.
Distribution Centre in Bedford last financial
year, it is currently experiencing a level of
capital expenditure of over £22m spent
See page 17
for more information
Strategic Report
Corporate Governance
Financial Statements
Throughout FY21, the wellbeing of colleagues and customers has remained a priority for B&M, in light of the many
challenges that Covid-19 has presented. Whilst working hard to maintain a safe working and shopping environment,
the business continued to execute its long-term strategy for driving sustainable growth in revenues, earnings and
free cashflow.
See pages 14 to 17 for more information
Performance in FY21
Looking ahead
Group revenue growth
+25.9%
B&M UK like-for-like revenue growth
+23.8%
See page 18 for more information
See Principal risks numbers 2 and 3 on page 26
With Covid-19 continuing to have a
profound impact on the daily lives of
everyone, value and convenience
are likely to remain important to
customers when deciding where to
shop. We believe therefore that the
B&M proposition should remain
highly relevant to shoppers as we
look to continue to grow our
business in the future.
Competitive pricing is at the heart of
our business model and our focus
remains on providing a limited
assortment of the best-selling
products, including leading brands,
at bargain prices. This model has a
track record of resonating well with
our customers. It also helps limited
household budgets to go that little
bit further.
We continue to look for
opportunities in General
Merchandise categories where
other specialist category retailers
are less price competitive and
where we can see opportunity as
some of them have downsized their
bricks and mortar estates. By
targeting those categories, we see
potential to grow our market share
further through our value-led
model.
We are also investing in the skills
and experience we have in our own
trading teams, in areas such as
product design and visual
merchandising. This is to ensure
that we are always selecting the
right products to appeal to current
trends, and making sure they are
well-presented to customers in our
stores.
UK gross new store openings
43 B&M UK
17 Heron Foods
See page 18 for more information
See Principal risks numbers 1 and 11
on pages 25 and 30
France revenue growth
+9.1%
B&M branded stores in France
53%
See page 20 for more information
See Principal risks numbers 1, 3 and 6
on pages 25, 26 and 28
New jobs created in the UK
>7,200
B&M stores served by Bedford DC
c.250
See page 34 for more information
See Principal risks numbers 1 and 3
on pages 25 and 26
We expect to open 45 gross new
B&M UK stores in FY22, subject to
any disruption caused by changes
in restrictions related to Covid-19.
Whilst we plan the new store
programme accordingly, we also
remain vigilant in relation to suitable
potential acquisition opportunities
where there is space availability
from downsizing or withdrawal
from the market by others.
Longer term, we remain committed
to our target of at least 950 B&M
stores in the UK. However, this
rollout potential is looking
increasingly conservative given the
performance of the UK business in
FY21, particularly if the new
customers we have welcomed to
our stores in the last year prove to
become loyal.
In FY22, our Heron Foods
convenience store chain expects to
open a similar number of new
stores as seen in FY21, and it is likely
to see a similarly paced rollout in
future years.
We continue to refine the customer
proposition in France through our
work to evolve the product range
and re-brand the store fascia.
Subject to the performance of the
stores we have rebranded so far, by
the end of 2021 we would expect the
entire estate to have been be
re-branded as “B&M” in France.
Subject to any further lockdown
restrictions, a settled period of
trading will afford us the opportunity
to fully evaluate the impact of these
actions and also the longer-term
potential in France.
As we continue to open new stores
it has a positive impact on local
communities by creating jobs for
new store colleagues and
extending our value-led offering to
even more people who either want
or need a bargain.
The ongoing growth of the business
as a whole also provides
development opportunities for
existing colleagues as well as
creating a need to recruit new
expertise to supplement our core
capabilities.
The Bedford Distribution Centre is
now supporting approximately 250
stores, but has the capacity to
service even more. Bringing the
efficiency of operations at this new
facility in-line with our other
Distribution Centres is important to
facilitate our continued expansion
in the south of England, and it is a
key priority for FY22.
We will continue to invest in refreshing
our older stores to maintain the
highest retail standards of modern,
clean, safe and welcoming shopping
environments for customers. This has
been particularly important during
the Covid-19 pandemic and we
applaud all our colleagues for their
hard work in maintaining our high
store standards during a particularly
challenging time for the public
generally.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
13
Strategic Report
Chief Executive Officer’s review
“The exceptional performance this year
was only possible because of the hard
work and determination of all our
colleagues across the Group, for which
I express my gratitude.”
Simon Arora
Chief Executive Officer
Overcoming the challenges of Covid-19 to emerge a
stronger business
A year ago, I was writing about how the impacts of the virus on individuals,
communities, our industry and the wider economy were unknown but likely
to be very significant and potentially long lasting. Such uncertainties
remain, despite the positive progress made over recent months in relation
to the vaccination rollout and easing of lockdown restrictions in the UK.
While everyone came to terms with the impact of Covid-19 on their daily
lives, as a business we too were forced to adapt. Serving customers
efficiently and safely during sustained periods of unprecedented demand,
managing our supply chain to ensure shelves remained full, and
supporting colleagues through the disruption to both work and family life
were just some aspects of the new realities which we faced.
I am very proud of the way in which we have overcome these challenges,
as the business remained guided by its values of simplicity, trust, fairness
and being proud to provide customers with great value for money.
Thanking my management team for the strong leadership they have
demonstrated throughout the crisis, and all our colleagues for everything
they have done on behalf of customers and shareholders, is once again my
most important task this year. Awarding front line colleagues 110% of their
normal pay in April 2020 during the height of the crisis, and paying them an
extra week’s wages in January 2021, were both fully deserved.
Special praise should also be given to our French colleagues who, despite
the disruption caused by 10 weeks of lockdown restrictions, delivered sales
growth of 9.1% for the year; a remarkable achievement and testament to the
capability of the management team. I am also delighted by the EBITDA
outturn for the year, which was ahead of what my initial expectations
following the start of the first lockdown.
The results for FY21 have been hard earned, and reflect the way in which the
business has reacted. They speak to the strength and resilience of the B&M
model, which at its heart is the fact that we are a value retailer backed by a
well invested infrastructure and robust and highly responsive supply chain.
The majority of our products are sourced from overseas and, in particular,
Asia. Despite normal lead times of 12-16 weeks on imported everyday
products, and up to 9 months on imported Seasonal products, our trading
teams were able to meet customer demand and deliver an exceptional
like-for-like1 sales growth of 23.8% in the core B&M UK business.
14
B&M European Value Retail S.A. Annual Report & Accounts 2021
Our combination of value and convenience makes the B&M proposition
very relevant to the needs of todays’ shoppers. Our 681 B&M UK stores are
mostly Out of Town and have demonstrated they are now destinations in
their own right for an increasing number of customers, including many new
shoppers in FY21. We are relatively insulated from the structural footfall
decline in town centres and secondary malls. In addition, Heron Foods
serves customers who generally live within walking distance of our
convenience stores, meaning they too have played an important role
helping communities through the pandemic by providing easy access to
essential groceries.
To play our part in the collective response to the pandemic, we took a
number of actions. We have delivered a total of £1m in cash donations to
Foodbanks nationwide, provided £4.9m in discounts to NHS workers,
continued to pay all suppliers and landlords on time and in full, and chose
not to take any financial support from the UK government, in particular
waiving business rates relief worth c.£80m. We also repaid £3.7m in
furlough support which we received in the early weeks of the first lockdown,
relating to 49 stores that we temporarily closed due to their locations in
town centres or shopping malls.
Having navigated the past 12 months successfully, I believe that the B&M
Group has emerged even stronger. The business is well positioned to
provide for shoppers needs, especially in the context of potential societal
changes caused by the pandemic. In particular, our discounted, value-for-
money food and FMCG products appeal to lower income households who
may have been disproportionally affected by the economic impacts of the
pandemic.
Notwithstanding these core Grocery credentials, our highly affordable
Home, DIY and Gardening categories are proving attractive for families
who are likely to be spending more time working from home even when
restrictions are fully lifted. These three categories account for a significant
proportion of our UK sales, with ranges consisting of both leading brands
and quality private label products manufactured exclusively for us.
We have clearly demonstrated the relevance of our customer proposition
and the ability to win market share. We have also further strengthened our
management team to support the rapid growth of the business. All of
which means that despite many unknowns persisting, we can look forward
to the future with a sense of optimism.
Strategic Report
Corporate Governance
Financial Statements
New jobs created
in the UK
>7,200
B&M UK like-for-like
revenue growth
+23.8%
Repeat visit of June
2020 new customers
Discounts to NHS workers
and foodbank donations
71%
£5.9m
As a value retailer, the appeal of B&M is strengthened when large sections
of the population are worried about their personal finances or are having
to live within constrained household budgets. Our ability to provide families
with their everyday shopping needs should continue to resonate strongly
with consumers whatever the lasting effects of Covid-19 on our business,
the retail industry and society in general may be. Should it result in further
acceleration of the structural shift towards discount and convenience
shopping, then it will only enhance our ability to grow over the longer term.
Financial performance
The core B&M UK business had an exceptional year, with like-for-like1 (“LFL”)
sales of +23.8% due to a material increase in sales densities. Such
performance reflects success across a number of product categories,
particularly those related to the pandemic where elevated demand was
seen throughout FY21. Whilst the business did benefit from remaining open
during periods when “non-essential” retailers were closed, performance
remained strong even when no restrictions were in force.
Despite the new store opening programme being disrupted in the first half
of the year, the business moved quickly to catch up once the construction
industry was able to restart. Performance of the 43 new stores in FY21 was
strong, demonstrating once again the ability to deliver profitable organic
growth.
B&M UK gross margin saw a significant increase this year, driven by a
combination of a mix shift towards higher margin General Merchandise
sales and in particular unprecedented level of sell-through on Seasonal
lines due to the elevated demand. Diligent cost control enabled the
business to deliver operating leverage and profit margin expansion, all of
which resulted in significant profit growth and cash generation.
Heron Foods continued to perform well throughout the year and also
benefitted from heightened demand, particularly in neighbourhood
locations. Its emphasis on local convenience retailing and value for money
on frozen, chilled and ambient food positioned it well to serve shoppers’
needs throughout the pandemic.
In France, conditions have been more challenging. The French business
was either closed or restricted to selling essential items of ambient food
and FMCG (representing only c.15% of sales) for a total of 10 weeks during
FY21, disrupting both the Spring and Winter peak trading periods.
Outside of the lockdown periods, when the business was permitted to
remain open and sell the full range of products, performance was very
pleasing and there was a positive customer response to products sourced
from the B&M supplier base in Asia. Given the challenges the
management team in France had to overcome, they made strong progress
and delivered a profit result for the year ahead of initial expectations.
Current trading and outlook
The B&M UK business experienced very strong sales in the last month of
FY21, with the final week being the strongest in the Group’s history and a
large contributor to the FY21 adjusted EBITDA4 outperformance of £626.4m
versus the guidance issued on 5 March 2021.
Overall, year-to-date B&M UK LFL sales over the first 9 weeks of FY22 have
been -1% versus FY21. Sales in this period benefitted from a pull-forward of
Gardening demand into April usually occurring more evenly throughout the
Spring/Summer period.
Trading continues to be volatile at a weekly and product category level, in
particular since the recent easing of lockdown restrictions. This is likely to
remain the case for the whole of FY22, as the business annualises against
the very strong comparatives throughout last year. As such, the B&M UK
business expects to see a decline in LFL revenues in FY22 compared to FY21,
but is focused on delivering a healthy two year LFL versus FY20.
In France, a further national lockdown began on 3 April 2021 for a total of
about 6 weeks. This meant that many of our stores were closed, with those
remaining open restricted to selling essential items only. Since restrictions
were lifted on 19 May 2021 there has been a pleasing recovery, with sales
performance again being driven by the success of product ranges sourced
from the B&M supplier base in Asia. Additionally, the business took
advantage of the lockdown period to accelerate its conversion programme of
the Babou fascia, with 73 of the 104 stores in France now trading as B&M.
Over the past year, the Group has demonstrated it has a resilient business
model with a compelling and relevant customer proposition. As a
consequence, it has emerged from the coronavirus crisis even stronger
than before. Its strong value credentials in Grocery remain, whilst
categories such as Home, DIY and Gardening are likely to continue their
appeal to both low and middle-income families.
The Group is well positioned to execute its strategic priorities for FY22. It
remains too early to accurately predict the likely revenue and profitability
outcomes with any specificity , due to ongoing uncertainties over any future
restrictions and the annualisation of previous lockdown periods. It is likely that
Group gross margin will revert to more normalised levels this year, with the
return of markdown activity on Seasonal goods expected. The Group is
however focused on customer retention and disciplined cost control across all
fascias to underpin efforts to maintain an adjusted EBITDA2 margin higher
than historical levels, albeit lower than the exceptional 13.0% margin
delivered in FY21.
Long term, the Group’s growth strategy remains unchanged and it is
committed to a rollout target of at least 950 B&M UK stores, with 45 gross
new stores expected in FY22. The geographic expansion of the Heron
Foods convenience store chain will also continue, alongside developing a
compelling proposition in France.
Strategic development
Throughout FY21, the priority of the Group was the wellbeing of colleagues
and customers, having worked hard to maintain a safe working and
shopping environment. At the same time, there has been a clear focus on
delivering value for money, product ranges which appeal to a broader
section of society, and improved in-store execution.
All three Group businesses have demonstrated an ability to respond quickly to
changing circumstances. They coped well with uncertainty and disruption, be
that sustained elevated demand in the UK or multiple periods of store closures
and restrictions in France. In so doing, the Group has continued its strategy for
driving sustainable growth in revenues, earnings and free cashflow. Details of
progress against each pillar of this strategy are summarised below.
1. Delivering great value to our customers
Delivering great value is at the heart of the B&M business model. Across a
variety of product categories, the range of items within each product line is
limited only to the best sellers, with the offer focused on what customers
buy regularly for their homes and families.
The B&M price competitiveness is driven by a 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. B&M’s low operating costs are key to its
ability to deliver low prices. As a result of a constant stream of typically c.100
new lines each week, customers find the ‘treasure hunting’ experience in
store attractive, whether they need a bargain or just enjoy one.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
15
Chief Executive Officer’s review
continued
Quality is also important to customers, and in that regard there is no
compromise. B&M sells leading household brand names across a range of
ambient food, FMCG and General Merchandise categories, whilst private
label ranges within categories such as Homewares and Furniture continue
to benefit from an emphasis on being up-to-date with current design
trends, and are increasingly appealing to middle-income households.
The 681 B&M UK stores are generally large format, with an average sales
area of approximately 20,000 sq. ft, and are mostly in convenient Out of
Town locations with easy access by car, making them well suited to the
needs of customers in the context of the Covid-19 pandemic.
These are just some of the reasons why customers keep coming back to
stores, and indeed why many new customers discovered B&M this past
year. In June 2020, an estimated 23% of store customers who paid by card
had not visited B&M during the preceding five months. Over the subsequent
nine months to the end of March 2021, 71% of that new customer cohort
visited B&M again at least one more time. The average transaction
frequency over that period was 4.2x, despite the wider context of retail
footfall remaining significantly down.
Importantly, the demographic profile of those customers who have
demonstrated the greatest propensity to return most frequently has been
households who are typically on low and middle incomes and who also
have children. It is this same type of customer who has traditionally been
attracted to the B&M proposition. As such, having discovered B&M and
started to embed store visits in to their new shopping routines, there are
promising indicators that a number of the new customers from FY21 could
become loyal B&M shoppers in future years.
New customers are also typically spending more per visit than existing
customers and have been seen across the UK, providing further support for
the long term rollout target of 950 B&M fascia stores.
The majority of product categories across both Grocery and Non-Grocery
saw strong sales growth in FY21, with lockdown-related categories such as
DIY, Homewares and Gardening all performing particularly well. Whilst
general market demand for such products was clearly heightened
throughout the year, recent investment in product design and visual
merchandising capability has enhanced the in-store execution of these
ranges. As such, B&M outperformed many of its competitors, suggesting
there have been genuine market share gains in FY21.
Seasonal categories are a particular strength of B&M’s proposition within
General Merchandise. Around 20% of the space in a typical store is fully
re-merchandised through the seasons, and these are also areas where pricing
can be at its most disruptive. Garden and Outdoor Leisure enjoyed an
exceptionally strong Spring/Summer 2020 season, as a combination of record
breaking Spring weather and the first national lockdown drove unprecedented
demand. Christmas and Toy ranges performed similarly well this year, with a
very strong sell-through also leading to a gross margin benefit.
With consumers likely to have developed new shopping habits over the
course of the pandemic, and its lasting impact on the lives of everyday
people still uncertain, the B&M proposition should continue to resonate
strongly with customers even as society slowly returns to normal.
A total of 43 gross new B&M fascia stores were opened in the UK during
FY21, 34 of which were in the second half of the financial year. Of these, 5
were relocated stores where there was an opportunity to open a larger,
more modern unit capable of providing a better shopping experience for
customers and generating a significantly higher quantum of profit than the
closed store. There were a further 13 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. In total there was a net
increase of 25 stores, taking the B&M UK portfolio to 681.
The business is currently budgeting for a further 45 gross new stores in
FY22. It is possible that the fallout across the retail industry from the impact
of the virus may provide further attractive opportunities not yet factored in to
this number. Longer term, there remains a long growth runway in the UK,
with the potential for at least 950 B&M fascia stores in total. Given the
performance of the business over the past year, and with new store sales
densities and contribution margins remaining very strong, this target
increasingly looks like a conservative estimate.
Heron Foods, the discount convenience store business, opened a total of 17
gross new stores and closed 4 under-performing stores during the year,
bringing the total to 306. It has a smaller store model and existing geographic
footprint, but continues to deliver a strong new store returns profile. It has the
potential to become multiple times larger than its present size, albeit growth
will be slower than the B&M fascia due to the nature of locations required
and the practicalities of distributing chilled and frozen food. FY22 should see a
similar number of new store openings to that in FY21.
In France, at the end of FY21 there were a total of 104 stores with 55 trading
under the B&M banner and the remaining 49 still under the Babou fascia.
The focus has been very much on converting the existing Babou portfolio
rather than opening new stores. In FY22, there will be 3 to 5 net new stores
in France, all of which will be in the second half of the year.
3. Developing our international business
It was a year of significant disruption in the French business, caused by
multiple lockdowns totalling 10 weeks during which stores were either
closed completely or restricted to selling essential items only, including for 6
weeks at the start of FY21 and 4 weeks during November 2020. Despite this,
total sales were up 9.1% year-on-year, reflecting a strong performance in
those periods where the business remained fully open.
The local management team has made pleasing progress against their
two main strategic priorities. Firstly, the business has successfully reduced
its reliance on Clothing & Apparel while increasing its General Merchandise
ranges sourced through the B&M supply chain. Ongoing refinements to the
product mix continue to be made, and the new products have been well
received by the French consumer.
At the same time, the performance of those stores re-branded from ‘Babou’
to ‘B&M’ has been encouraging, having completed 35 such conversions
during the year. When a conversion takes place, in addition to changing the
store fascia, the internal layout and merchandising are also made more
akin to B&M stores in the UK. This helps to complement the ongoing range
optimisation work, as well as improving overall store standards. By the end
of 2021, the entire estate should be branded as B&M.
2. Investing in new stores
The first half of FY21 saw significant disruption to the UK construction
industry and a slowdown in leasing activity by commercial property
landlords, which in turn led to delays in the B&M and Heron Foods new
store opening programmes. However, both businesses worked hard during
the second half of the year to catch up, and achieved a pleasing increase in
store numbers.
Whilst it is difficult to determine how much of the improved performance is
the ‘halo effect’ of a new store opening versus the combined impact of
re-ranging and re-branding, a more settled period of trading in FY22 will
allow the success of these changes to be more fully demonstrated.
From an operational perspective, the supply chain has now successfully
navigated four peak seasonal intakes of stock, involving large volumes of
16
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
containerised inbound product. With a capable and stable management
team now in place, the Group remains cautiously optimistic that its plans for
the French business will prove successful. In the meantime, no other
international geographies are currently being evaluated.
4. Investing in our people and infrastructure
The new c.1 million square feet Southern distribution centre at Bedford was
completed and fitted-out during FY20 and currently serves around 250 stores.
Having the additional logistics capacity in place prior to the elevated demand
this year proved crucial to helping maintain in-store availability. The Bedford site
is expected to provide sufficient capacity for the foreseeable future.
The senior management team continues to broaden and strengthen,
having made a number of appointments during FY21. These included Alex
Russo as Group Chief Financial Officer, Anthony Giron as Managing Director
of Babou, Richard Kirk as Supply Chain Director and Suzie Williams as
Group IT Director. Such appointments reflect the significant growth in the
business, and position it well for future success.
With Covid-19 preventing foreign travel to trade fairs and suppliers, the B&M
trading teams turned a necessity into a competitive strength. By investing in
areas such as product design and development, visual merchandising and
co-ordination across different categories to create a more aspirational set
of product ranges, they have become less dependent on factories for
development of new products. In becoming more self-reliant and capable
of delivering on-trend product ranges, this is one area where the business
has emerged from the pandemic in an even stronger position than before.
In that context, the performance of categories such as Homewares and
Furniture has been particularly rewarding.
At store level, a new digital Workforce Management System was gradually
rolled out, having been paused during the initial coronavirus outbreak. This
new system will enable a more agile approach to store rotas, as well as
creating efficiencies through the reduction of paper-based processes.
Having adopted this new best in class approach to managing store hours,
it will help the business grow sustainably by servicing customer demand in
a cost-efficient way.
Although store colleague learning and development had to be put on hold
at the start of the financial year, the “Step-Up To Managers” programme
was successfully adapted to facilitate e-learning. A total of 124 colleagues
were promoted into management roles this year, as the business continues
to invest in internal colleague development and progression.
Corporate social responsibility
The Group is proud to serve customers in many different communities across
the UK through its B&M and Heron Food stores, providing convenient, local
access to the everyday products they need at value prices. Never has presence
in these communities been more important than during the pandemic.
Through the new store opening programmes, the reach of the B&M value
proposition is extended to new communities and customers, helping to
revitalise areas where other retailers have in many cases retrenched.
Perhaps most importantly, this creates many new local jobs. In FY21, the
Group created over 7,200 new jobs in the UK, in the context of around
67,000 lost jobs in the retail industry in 2020 according to estimates from the
British Retail Consortium.
The Group strives to be a good corporate citizen, delivering its strategy as a
value retailer whilst acting in the interests of all stakeholders. In particular
this year, the Group voluntarily waived c.£80m of business rates relief made
available by the UK government, and repaid £3.7m of furlough money
initially received at the start of the pandemic.
It is conscious of the increasing importance of environmental, social and
governance (“ESG”) actions and reporting, and is committed to developing
appropriate targets during FY22 to support the ongoing success of the
business. The Group considers ESG from the perspective of a number of key
stakeholders, with some of this years’ highlights as follows:
Colleagues
• acknowledged the dedication and hard work of front line colleagues by
paying an additional 10% pay in April 2020 and awarding an extra
weeks wages in January 2021;
• colleague engagement continued to be very strong, with a colleague
satisfaction score of 81% despite the disruption to normal working
routines caused by the pandemic;
• continued development and training of own talent through the Step-Up
programme, promoting 124 colleagues to B&M Deputy and Store
Manager positions.
Communities
• created over 7,200 new jobs in the UK, including 620 placements under
the governments “Kickstart” scheme and welcoming 187 colleagues
onto apprenticeship programmes;
• delivered a total of £1 million to local Foodbanks across the country in
response to the impact of the Covid-19 pandemic on some of the most
vulnerable in society;
• extended a total of £4.9m of discounts to National Health Service
workers to recognise their heroic efforts.
Customers
• maintained an attractive value-for-money proposition across a range of
product categories making everyday essentials affordable;
• opened 38 net new UK stores in FY21, making stores accessible to even
more customers;
• welcomed a number of new customers to B&M this year.
Suppliers
• continued to treat all suppliers, landlords and partners fairly by paying
them on time and in full;
• sales growth across multiple product categories enables both new and
existing suppliers to grow their own businesses, sharing in the success
of B&M;
• enhanced our ethical trading risk management through increased
investment in social compliance audits.
Environment
• greenhouse gas emissions and energy usage from UK operations
decreased in absolute terms, despite opening 38 net new stores in the
year, with a newly created an Energy Manager role to oversee the
installation of technology to decrease energy consumption further;
recycled 99.8% of the Group’s supply chain packaging waste in FY21;
travelled 2.7m fewer like-for-like miles in FY21 due to the annualised
benefit from the Bedford distribution centre opened in FY20.
•
•
Simon Arora
Chief Executive Officer
2 June 2021
1.
2.
Like-for-like revenue relates to the B&M UK 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 adopted as
it excludes the two month halo period which new stores experience following opening.
The Directors consider adjusted figures to be more reflective of the underlying business
performance of the Group and believe that this measure provides additional useful information
for investors on the Group’s performance. Further details can be found in notes 3 and 5 of the
financial statements. Adjusted figures exclude the impact of IFRS16.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
17
Strategic Report
Financial review
“We have delivered a significant
increase in profitability this year, with
strong cash returns for shareholders.”
Alex Russo
Chief Financial Officer
Accounting period
The FY21 accounting period represents the
52 weeks trading to 27 March 2021 and the
comparative period represents the 52 weeks
to 28 March 2020.
The Group financial statements have been
prepared in accordance with IFRS, however
underlying figures presented before the impact
of IFRS16 continue to be reported where they are
relevant to understanding the performance
of the Group.
Financial performance
Group
Total Group revenue in FY21 was £4,801.4m (FY20:
£3,813.4m), representing an increase of 25.9%.
On a constant currency basis1, revenues
increased by 25.7%.
Group adjusted gross margin4 was 36.7% (FY20:
33.8%), an increase of 292 bps on the prior year.
Group adjusted operating costs4, excluding
depreciation and amortisation, grew by 20.1% to
£1,137.1m (FY20: 946.9m). The growth in operating
costs was lower than the growth in revenue due
to the operating leverage delivered by the B&M
UK businesses. Depreciation and amortisation
(excluding the impact of IFRS16 and adjusting
items) was £62.4m (FY20: £57.7m), an increase of
8.2% on the prior year and reflecting the ongoing
investment in new stores across all fascias.
An adjusted EBITDA4 is reported to allow investors
to better understand the underlying performance
of the business. The adjusting items are detailed
in notes 3 and 5 of the financial statements, and
totalled £(3.5)m in FY21 (FY20: £40.7m). Group
adjusted EBITDA4 increased by 83.0% to £626.4m
(FY20: £342.3m), driven by the strong
performance of the core B&M UK business.
A key driver behind the step up in LFL revenue
was the number of new customers that shopped
with B&M in FY21. The LFL performance was
relatively consistent throughout the year, with Q4
representing the strongest quarter. Although
there was an increase in demand across almost
all product categories, General Merchandise
categories such as Homewares, DIY and
Gardening performed particularly well, as people
spent more time in their homes during the
coronavirus pandemic. This also meant that Out
of Town locations, where stores stock the full
range, out-performed Town Centre locations.
Group statutory profit before tax was £525.4m
(FY20: 252.0m), representing an increase of 108.5%.
B&M UK
In the UK, total B&M revenues increased by 29.9%
to £4,077.6m (FY20: £3,140.1m), largely driven by
exceptional like-for-like3 (“LFL”) revenue growth of
23.8% (FY20: 3.3%). The annualisation of revenues
from 36 net new store openings in FY20 and 25
net new store openings in FY21 also contributed a
further £218.7m. In addition, there was £47.4m of
wholesale revenue, an increase of £19.7m on the
prior year.
There were 43 gross new store openings in the
year and 18 closures, with 5 of the closures being
relocations. New store openings continue to
deliver strong returns on investment. The B&M
UK business also continues to take advantage of
relocation opportunities. These are typically
smaller early generation B&M stores that are
replaced by modern, larger stores that provide
customers access to the full product range,
making such opportunities margin accretive.
B&M UK gross margin expanded by 333 bps,
driven by both a mix shift towards higher margin
Non-Grocery categories as noted above, and in
particular an unusually strong sell-through
18
B&M European Value Retail S.A. Annual Report & Accounts 2021
across Seasonal ranges such as Outdoor
Furniture and Christmas leading to minimal
markdown activity than in previous years.
Adjusted operating costs4, excluding depreciation
and amortisation, grew by 24.4% to £913.8m.
These costs represented 22.4% of revenues in the
year (FY20: 23.4%), a reduction of 98 bps due to
operating leverage achieved on the higher
revenues generated and ongoing discipline
around cost control. Included in these operating
costs is approximately £75m of business rates,
having voluntarily waived the relief offered by the
UK government. The business again worked
hard to absorb the impact of the minimum wage
increase through efficiency savings, whilst at the
same time investing in additional store colleague
hours to help service the elevated customer
demand in a safe manner. Rental costs remained
relatively stable, with the existing rent-roll already
being competitively positioned. Elsewhere,
transport and distribution costs remained
broadly flat as a percentage of revenues, where
savings through optimisation of the transport
network were offset by distribution inefficiencies,
particularly at the Bedford distribution centre, as
a consequence of introducing new protocols and
procedures relating to social distancing.
Adjusted EBITDA4 for the B&M UK business
increased by 84.7% to £590.7m (FY20: £319.8m),
and the adjusted EBITDA4 margin increased by
430 bps to 14.5% (FY20: 10.2%) due to the
exceptional LFL performance, increase in gross
margin and disciplined cost control delivering
operational leverage as explained above.
Heron Foods
The discount convenience chain, Heron Foods,
grew revenues by 6.4% to £414.8m (FY20:
£389.9m), with neighbourhood locations
performing particularly well as consumers sought
to shop locally for their everyday essentials. There
were 13 net new stores opened in FY21, which also
contributed to the increase in revenues.
Gross margin in Heron Foods remained broadly
flat, reflecting a stable product mix.
Despite the inflationary pressures on store wages,
operating costs were well controlled, increasing as
a percentage of revenues by only 48 bps to 25.5%
(FY20: 25.0%). Like the B&M UK business, Heron
Foods waived the business rates relief, which was
worth approximately £5m in FY21.
Heron Foods adjusted EBITDA4 decreased by 3.5%
to £24.6m (FY20: £25.5m), and the adjusted EBITDA4
margin declined by 63 bps to 5.9% (FY20: 6.6%).
Babou
In the French business, total revenues increased
by 9.1% to £309.1m (FY20: £283.4m), despite many
stores being closed for up to 10 weeks
throughout the year as a result of the French
government’s response to the pandemic. For
those stores that did remain open, they were
restricted to selling “essential” items only and,
therefore, generated significantly lower revenues
during those weeks.
Strategic Report
Corporate Governance
Financial Statements
Constant currency revenue comparison
£/€’000
Babou in €
Exchange Rate
Babou in £
B&M
Heron
2021
2020
%
2021
2020
%
Constant Currency
346,267
1.1203
309,084
4,077,564
414,777
324,210
1.1441
283,376
3,140,144
389,867
346,267
1.1203
309,084
4,077,564
414,777
324,210
1.1203
289,396
3,140,144
389,867
Total Per Segment
4,801,425 3,813,387 25.9% 4,801,425 3,819,407
25.7%
Group profit before tax
£ millions
Revenue
Adjusted Gross Profit
%
Adjusted Operating Costs
Adjusted EBITDA4
%
Depreciation & Amortisation
Adjusted Interest
Adjusted Profit Before Tax4
Adjusting Items
Adjusting 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
Remove depreciation and amortisation of finance leases
Add back IFRS 16 depreciation and amortisation
EBITDA4
Fair value effect of ineffective derivatives
Foreign exchange on intercompany balances
French stock provision
Foreign exchange on acquisition balances
Gain on sale & leaseback of Bedford
Adjusted EBITDA4
2021
2020
4,801.4
1,763.5
36.7%
(1,137.1)
626.4
13.0%
(62.4)
(23.8)
540.1
(3.5)
(4.7)
(6.6)
525.4
2021
615.0
62.4
(3.7)
156.6
830.5
6.8
3.2
(6.5)
–
–
833.9
3,813.4
1,289.2
33.8%
(946.9)
342.3
9.0%
(57.7)
(24.6)
260.0
40.7
(0.0)
(48.6)
252.0
2020
333.7
57.7
(3.4)
149.1
537.1
(0.6)
(3.7)
9.3
3.3
(16.9)
528.5
For further information and segmental detail of adjusted measures see notes 3 and 5 to the financial statements on pages
118 to 121.
B&M UK like-for-like reconciliation
£’000
2021
2020
%
Like-for-Like Revenue3
New Stores opened after March 28 2020
New Stores opened prior to March 28 2020
Closed Stores
Gross Segment Revenue
Value Added Tax / Commission Income
Wholesale Revenues
Revenues of B&M Retail Segment
4,309,652
142,954
244,648
297
4,697,550
(667,380)
47,394
4,077,565
+23.8%
3,480,435
0
74,862
63,844
3,619,141
(506,793)
27,796
3,140,144
+29.8%
Annual Report & Accounts 2021
B&M European Value Retail S.A.
19
Financial review
continued
During the periods where the French stores were
fully open, performance was strong. This was
driven by a combination of both the continued
range optimisation work and the positive impact
from re-branding 35 stores from Babou to the
B&M banner during FY21, all of which progressed
well despite the disruption caused by multiple
lockdowns.
Gross margin continued to improve, supported
by a reduced exposure to Clothing and Apparel
and a corresponding mix shift to higher margin
other General Merchandise categories.
Operating costs were well controlled throughout
the year, particularly during those periods where
stores were either closed or restricted to selling a
limited range of products.
Adjusted EBITDA4 was £11.1m (FY20: £(3.0)m), with
an adjusted EBITDA4 margin of 3.6%. This
represents encouraging progress in the French
business, especially considering the mitigating
factors outlined above.
Finance expense
Adjusted net finance charges4 for the year were
£23.8m (FY20: £24.6m), representing a decrease
of 3.1%. This included bank and high yield bond
interest of £22.5m (FY20: £22.7m) and amortised
fees of £1.7m (FY20: £2.1m), offset by interest
income of £0.3m (FY20: £0.2m).
There was also a one-off exceptional interest
charge of £4.5m relating to the Group refinancing
that took place in July 2020. This represented
unamortised fees on previous banking facilities
being written off, breakage fees and redemption
interest due to early repayment of the previous
£250m High Yield Bond.
The interest charge relating to lease liabilities
under IFRS16 was £61.4m (FY20: £57.2m).
Profit before tax
Statutory profit before tax was £525.4m
(FY20: £252.0m). An adjusted profit before tax4
is also reported to allow investors to better
understand the operating performance of the
business (see notes 3 and 5 of the financial
statements). Adjusted profit before tax4 for
the year increased by 107.7% to £540.1m
(FY20: £260.0m).
The impact of IFRS16 on the Group financial
statements was to decrease statutory profit
before tax by £6.6m.
Taxation
The tax charge in FY21 was £97.3m
(FY20: £57.2m), representing an effective tax rate
of 18.5%. We expect the tax rate going forward to
reflect the blended rate of taxes in the countries
in which we operate, currently being 19% in the
UK and 28.5% in France.
The strong performance and high cash
generation have enabled the Group to pay
dividends totalling £697m7 in FY21. This included
the £150m7 special dividend relating to the sale
and leaseback of the Bedford facility declared in
FY20, and a further £450m7 of special dividends
declared and paid in FY21.
Net debt5 (on a pre-IFRS16 basis), increased to
£519.8m (FY20: £347.5m). The net debt5 to
adjusted EBITDA4 leverage ratio was 0.8x
(FY20: 1.0x), comfortably within our 2.25x
leverage ceiling.
B&M periodically explores opportunities to repay,
prepay, repurchase, refinance or extend its
existing indebtedness prior to the scheduled
maturity of such indebtedness, and/or amend its
terms with the requisite consent of lenders as
part of B&M’s continuing efforts to manage its
capital structure. B&M and/or its Group may also
incur additional indebtedness to the extent
permitted by the covenants of existing
indebtedness or with the requisite consent of
lenders, including in connection with the Group’s
evaluation of strategic expansion and acquisition
opportunities.
In accordance with this framework, the Group
completed a refinancing of existing banking
facilities in July 2020, extending the maturity on
both the £300m loan facility and £155m Revolving
Credit Facility to April 2025. The refinancing also
included the issue of a new £400m High Yield
Bond, maturing in July 2025, to replace the
existing £250m Bond. This enabled the
repayment of the €92m bi-lateral loan facility
used for the Babou acquisition. Additionally,
Babou utilised the French Government-backed
loan facility scheme made available due to the
disruption caused by Covid-19, resulting in an
initial loan of €51m being drawn, of which half
has since been repaid. See note 21 of the
financial statements for further details.
The Board adopted a long-term capital allocation
policy in 2016 to provide a framework to help
investors understand how the Group will continue
to balance the funding requirements of a growth
business like B&M with the desire to return
surplus capital to shareholders. The Board will
continue to evaluate opportunities to invest and
support the growth of the business along with
the scope for any incremental return of capital to
shareholders in the context of that framework.
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 in FY21 was
£440.1m, including £227.8m relating to those
taxes borne directly by the company such as
corporation tax, customs duties, business rates,
employer’s national insurance contributions and
stamp duty and land taxes. The balance of
£212.3m are taxes we collect from customers and
employees on behalf of the UK Exchequer, which
includes Value Added Tax, Pay As You Earn and
employee national insurance contributions.
Profit after tax and earnings per share
Statutory profit after tax from continuing
operations was £428.1m (FY20: £194.8m) and the
statutory diluted earnings per share from
continuing operations was 42.7p (FY20: 19.5p6).
In the prior year, statutory profit after tax including
the loss from discontinued operations was
£80.9m, with a diluted earnings per share of 9.0p.
Adjusted profit after tax4, which we consider to be
a better measure of performance due to the
reasons outlined above, was £434.5m (FY20:
£203.0m), and the adjusted fully diluted earnings
per share4 was 43.4p (FY20: 20.3p).
Investing activities
Group net capital expenditure8 totalled £81.5m,
lower than the prior year (FY20: £123.0m).
Investment this year included £42.9m spent on 65
gross new stores across the Groups fascia’s
(FY20: £42.4m on 74 stores), £22.2m on
maintenance works to ensure that our existing
store estate and warehouses are appropriately
invested (FY20: £28.6m), and £16.4m on
infrastructure projects and freehold acquisitions
to support the continued growth of the business
(FY20: £52.0m). Infrastructure spend in the prior
year included one-off expenditure of £32.0m
relating to the Bedford distribution centre.
Net debt and cash flow
The Group continues to be strongly cash
generative, with cash generated from operations
increasing by 75.0% to £944.0m (FY20: £539.5m).
Such cash generation reflects the growth in
adjusted EBITDA4 during FY21, attractive paybacks
generated from new stores and a working capital
inflow.
20
B&M European Value Retail S.A. Annual Report & Accounts 2021
Dividends
During the year, the Company declared and paid
an interim ordinary dividend of 4.3p7 per share in
addition to special dividends totalling 45.0p7 per
share. Subject to approval by shareholders at the
AGM on 29 July 2021, a final ordinary dividend of
13.0p7 per share is to be paid on 6 August 2021 to
shareholders on the register of the Company at
the close of business on 2 July 2021. The
ex-dividend date will be 1 July 2021.
The Group has a dividend policy which targets an
ordinary dividend pay-out ratio of between 30 to
40% of net income on a normalised tax basis.
The Group generally aims to pay the interim and
final dividends for each financial year in
proportions of approximately one-third and
two-thirds of the total annual ordinary dividend
respectively.
The Group is strongly cash generative and its
policy is to allocate cash surpluses in the
following order of priority:
1.
the roll-out of new stores with a strong
payback profile;
2. ordinary dividend to shareholders;
3. mergers & acquisition opportunities; and
4. returns of surplus cash to shareholders.
The above list is a summary of the main items,
but is not exhaustive as other factors may arise
from time to time which require investment to
support the long-term growth objectives
of the Group.
The parent company of the Group is an
investment holding company which does not
carry on retail commercial trading operations.
Its distributable reserves are derived from
intra-group dividends originating from its
subsidiaries. The parent company is a
Luxembourg registered company, and as such,
the Board is permitted to have recourse to the
company’s share premium account as a
distributable reserve. It remains the Group’s
policy for dividend purposes to have recourse to
distributable profits from within the Group, and
accordingly, ahead of interim dividends, and also
ahead of the year end in relation to final
dividends, the Board reviews the levels of
dividend cover in the parent company to maintain
sufficient levels of distributable profits in the
parent company for each of those dividends.
There are over £500m of distributable reserves in
the principal trading subsidiary of the Group,
B&M Retail Limited, and there are no dividend
blocks between it and the Company.
Strategic Report
Corporate Governance
Financial Statements
Notwithstanding the current economic
uncertainties, the Group has continued to be
strongly cash generative and is in a strong
position to maintain its ordinary dividend policy.
The principal risks of the Group are set out in its
Annual Report, in particular those relating to
Covid-19, supply chain, competition, economic
environment, commodity prices, infrastructure
and international expansion. These are relevant
to the ability of the Group to maintain its ordinary
dividend policy in the future. The Group however
maintains strategies to mitigate those risks and
the Board believes the Group has a robust and
resilient business model through the combination
of having a value-led product assortment which
to a large extent comprises essential goods and
also competes across a very broad section of the
retail markets in our chosen locations.
Alex Russo
Chief Financial Officer
2 June 2021
1. Constant currency comparison involves restating the prior
year Euro revenues using the same exchange rate as that
used to translate the current year Euro revenues.
2. References in this announcement to the B&M UK business
includes the B&M fascia stores in the UK except for the ‘B&M
Express’ fascia stores. References in this announcement to
the Heron Foods business includes both the Heron Foods
fascia and B&M Express fascia convenience stores in the UK.
When reporting adjusted EBITDA, B&M UK also includes the
corporate segment as referred to in note 2 of the financial
statements, and includes an adjusted loss of £(1.5)m
(FY20: £(1.9)m).
Like-for-like revenue relates to the B&M UK 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 adopted as it
excludes the two month halo period which new stores
experience following opening.
3.
4. The Directors consider adjusted figures to be more reflective
of the underlying business performance of the Group and
believe that this measure provides additional useful
information for investors on the Group’s performance.
Further details can be found in notes 3 and 5 of the financial
statements. Adjusted figures exclude the impact of IFRS16.
5. Net debt comprises interest bearing loans and borrowings,
overdrafts and cash and cash equivalents. Net debt was
£519.8m at the year end, reflecting £737.5m as the carrying
value of gross debt netted against £217.7m of cash. See
notes 18, 21 and 28 of the financial statements for more
details.
6. Statutory diluted EPS for FY20 reflects continuing operations
only. Including discontinued operations, FY20 statutory
diluted EPS was 9.0p.
7. Dividends are stated as gross amounts before deduction of
Luxembourg withholding tax, which is currently 15%.
8. Net capital expenditure includes the purchase of property,
plant and equipment, intangible assets and proceeds from
the sale of any of those items. These exclude IFRS16 lease
liabilities.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
21
Strategic Report
Key performance indicators
A year of significant growth across a
range of performance measures
Financial
Total revenue growth (%)
B&M UK like-for-like revenue growth (%)1
Adjusted EBITDA (£m)2
+23.8%
£626.4m
25.9%
2021
2020
2019
Strategic link
A B C D
16.5
17.1
25.9
2021
23.8
2020 3.3
2019: 0.7
Strategic link
A B C D
Description
We aim to deliver sustainable growth in our chosen
markets of the UK and France. Total revenue growth is
an essential part of achieving that objective, being a
direct output of our new store rollout programme and
the performance of our product ranges.
Performance
Total Group revenue increased by 25.9%, with B&M
UK, Heron Foods and Babou all delivering revenue
growth in FY21 through a combination of positive
like-for-like growth and new store openings.
Performance was particularly strong in the core B&M
UK business, which saw revenues increase 29.9%
year-on-year.
Description
A crucial driver of growth for the business is
sustainable profitability from the existing B&M store
estate in the UK. By focusing on like-for-like revenue
growth, we are able to track the ongoing trading
performance of our stores and respond accordingly.
Performance
We grew our B&M UK like-for-like revenues by +23.8%
in FY21, driven by a broad based performance across
both Grocery and General Merchandise categories.
Recruitment of new customers was also an important
factor, and led to like-for-like revenue growth being
consistently higher than our historical average
throughout the year.
626.4
2021
2020
2019
342.3
319.6
Strategic link
A B C D
Description
In addition to growing sales and opening new stores,
we want to ensure that growth in the business
remains profitable. We measure our profitability by
our adjusted EBITDA performance.
Performance
The Group’s adjusted EBITDA grew by +83.0% to
£626.4m in FY21, representing an exceptional
financial performance. This year-on-year increase
was largely driven by the core B&M UK business.
Profit before tax (£m)
Adjusted diluted earnings per share2
Cash generated from operations (£m)
£525.4m
43.4p
£944.0m
525.4
2021
43.4
2021
944.0
2021
2020
2019
252.0
244.3
Strategic link
A B C D
2020
2019
20.3
20.2
Strategic link
A B C D
Description
In addition to adjusted EBITDA, we recognise the
importance of our statutory profit, including
depreciation, amortisation and interest charges.
As such, we also use profit before tax as a
performance indicator.
Performance
In FY21, our statutory profit before tax grew by 108.5%
to £525.4m.
Description
It is important to investors that we grow our earnings
per share as well as our adjusted EBITDA. This
measure is stated after depreciation, interest and tax
charges.
Performance
Adjusted diluted earnings per share grew by 113.8% in
FY21.
22
B&M European Value Retail S.A. Annual Report & Accounts 2021
2020
2019
539.5
423.0
Strategic link
A B C D
Description
The Group is highly cash generative, capable of
delivering high returns from a relatively low capital
intensity. By monitoring the cash generated from
operations, we are able to actively manage the
working capital needs of the business whilst adhering
to our clear capital allocation policy.
Performance
Cash generated from operations in FY21 was
£944.0m, an increase of 75.0% on the prior year
driven largely by the increase in adjusted EBITDA
as noted above.
Link to strategy key
A
B
C
D
Delivering great value to our customers
Investing in new stores
Developing our international business
Investing in people and infrastructure
Non-financial
Group net new stores opened
Strategic Report
Corporate Governance
Financial Statements
UK market share3
c.1.5%
Adjusted EBITDA (%)2
13.0%
2021
2020
2019
Strategic link
A B C D
41
2021
2020
2019
13.0
9.0
9.8
41
53
2021
2020
2019
70
c.1.5
c.1.2
c.1.0
Strategic link
A B C D
Strategic link
A B C D
Description
To ensure we are not diluting our earnings as we
expand our business, in addition to the overall value
of the adjusted EBITDA we also measure this as a
percentage of total revenues.
Performance
The Group’s adjusted EBITDA margin in FY21 was
13.0%, an increase of 407 bps on the prior year. This
adjusted EBITDA margin expansion was primarily
driven by the B&M UK business, which saw materially
elevated sales densities, a higher gross margin and
delivered operational leverage.
Description
Our new store opening programme remains at the
heart of our growth strategy, complementing growth
in like-for-like store revenues.
Performance
The net growth in our store estate across all fascias in
FY21 was 25 new B&M UK stores, 13 new Heron Foods
convenience stores and 3 new stores in France.
Description
Our market share of store based retail sales in the UK
is relatively low, both in total and in each individual
product category that we sell. This means we have a
considerable opportunity to increase our market
share through continued growth. In particular, we
believe that a B&M UK store target of at least 950
stores is achievable, providing a long runway of future
expansion from our current base of 681 stores.
Performance
In FY21 we opened 25 net new B&M UK stores in
addition to delivering a +23.8% increase in like-for-like
revenues. We have increased our like-for-like sales
across a number of product categories of the B&M UK
business, while both existing and new customers
have found the B&M proposition compelling.
Capital expenditure (£m)
£87.9m
2021
2020
2019
Strategic link
A B C D
Description
Ongoing investment in new stores is one of our
strategic pillars, whilst we also choose to invest in
carefully selected infrastructure projects that we
believe will support the organic growth of the Group.
We therefore monitor capital expenditure to ensure
we are investing appropriately in the needs of the
business, in accordance with our capital allocation
policy.
Performance
We invested a total of £82.7m capital expenditure in
FY21, which was in line with our original plans. This
included £42.9m on new stores across the Group,
£8.4m on infrastructure projects, £8.0m on the
acquisition of freehold stores and £23.4m on
upgrading existing stores.
Colleague Step-Up programme
1.
124
87.9
124.6
106.0
2021
2020
2019
124
125
202
Strategic link
A B C D
Description
Developing and promoting our colleagues is
important for retention and progression. Our in-house
Step-Up programme provides training to store
colleagues over an 8 month period, giving them the
tools for a successful career within the business.
Performance
In FY21, a total of 124 existing colleagues were
promoted to Store Manager or Deputy Store Manager
roles under our Step-Up programme in the B&M UK
business. While the absolute number of promotions
this year was less than in previous years due to social
distancing requirements creating challenges in
delivering the training, we successfully adapted the
programme to facilitate e-learning.
Like-for-like revenues relates to the B&M UK 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
adopted as it excludes the two month halo period which
new stores experience following opening.
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. 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.
3. Market share estimates are based on management
estimates, having regard for external research on the
size of the relevant market in 2016/17. See page 6 for
further details.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
23
Strategic Report
Principal risks and uncertainties
B&M’s risk management framework
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.
The Group’s risks and mitigations are reviewed as part of the oversight of
the system of internal controls by the Audit & Risk Committee. They are
reported on to the Board, which takes overall responsibility for risk
management of the Group.
The Group’s Internal Audit function assesses the on-going business risks of
the Group. It reports on the effectiveness of internal control procedures to
the Audit & Risk Committee. In assessing risk it considers the Group’s risk
mitigating actions and provides recommendations to management to
improve business processes and limit their exposure to risk.
Risk management evaluation
The Group’s executive management are responsible for
identifying and evaluating new and emerging risks and
mitigating actions.
The Audit & Risk Committee, together with the support of the
Group’s Internal Audit department and the Group’s General
Counsel, is responsible for monitoring risks and mitigating
actions and reporting any matters of concern to the Board.
The Board is responsible for overseeing risk management of the
Group. It considers the recommendations made by the Audit &
Risk Committee and determines the framework of the type of
controls and mitigating steps which are to be implemented. That
evaluation of risk and controls is carried out in the context of how
those risks could impact the overall objectives of the Group.
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.
Group Internal Audit reports to the Audit & Risk Committee at
each of its meetings during the year on the progress of
management’s implementation of recommended actions to
mitigate risks.
Principal risks
Covid-19 was added by the Board originally as a new principal
risk in 2019/20 and it continues to remain a principal risk but
the overall impact of it to B&M as a retailer of essential goods
has reduced. The UK’s exit from the EU and credit risk and
liquidity are no longer principal risks of the Group. Otherwise
none of the other principal risks included in the 2019/20
financial year have been removed and no new ones have
been added.
24
B&M European Value Retail S.A. Annual Report & Accounts 2021
The Group’s approach to reviewing risk appetite is part of an annual risk
management cycle, which is used to drive and inform actions in relation to
the principal risks identified by the Board. As part of that process the
Group’s appetite for risk is defined with reference to the expectations of the
Board for both commercial opportunity and internal control. It is then used
for setting the Group’s internal audit plan each year.
Category of risk
Strategic
Financial
Operational
Compliance
Tolerance
Medium
Low to medium
Low
Extremely low
Principal risks heat map
h
g
H
i
t
c
a
p
m
I
w
o
L
Low
7
8
5
3
9
10
2
4
6
1
12
11
Likelihood
High
1
2
3
4
5
6
Covid-19
Supply chain
Competition
Economic environment
Regulation and compliance
International expansion
7 Warehouse infrastructure
8
9
10
11
12
IT systems, cyber security and
business continuity
Commodity prices/cost inflation
Key management reliance
Store expansion
Stock management
Strategic Report
Corporate Governance
Financial Statements
Link to strategy key
Risk change key
A
B
C
D
Delivering great value to our customers
Increased risk
Investing in new stores
No change
Developing our international business
Decreased risk
Investing in people and infrastructure
Assessment of risks
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 view of the likely degree of impact of
each risk after taking into account the risk mitigations referred to in the
principal risks table below.
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 the Group manages each of the risk exposures, and (iii) the linkage
between the business strategy and the relevant risk exposures. The group
also summarises (where relevant) key actions arising in the year in relation to
how the Group has addressed certain aspects of those risks. The Group has
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.
1 Covid-19
Description & potential impact
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.
Strategic Priority
Change
A B C D
Risk Mitigations
• The categories of goods which the B&M UK and Heron
Key Actions in 2020/21
• From the early stages of the coronavirus restrictions taking effect in China,
Foods businesses sell are essential goods within the UK
Government guidelines.
•
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 network and
with suppliers to cope with additional demand in relation
to FMCG items, and (ii) controls of orders of lines where
demand has slowed to protect against over-stocking in
certain categories.
contingency plans were put in place by the B&M UK business in FY20 and which
continued in FY21 in order to protect our supply chain (as referred to below under the
key actions in relation to Supply Chain risk) which protected the business from any
material disruption to supplies, costs or prices, with those risks having been
managed and 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 in the
FY20 and FY21, the B&M UK business also increased the volume of orders of
Grocery and FMCG goods to keep pace with increased demand for those items
during peak periods. The UK business reacted quickly by re-deploying colleagues
in our Distribution Centres to prioritise the picking of those goods to replenish stores
as quickly as possible to meet customer requirements.
• Measures were initially taken to temporarily close 49 B&M UK smaller format town
centre or precinct location stores for a period of 4 weeks only before they were
re-opened as there was no negative overall impact on trading across the B&M UK
business.
• Our French business was required to close all its stores for period from 15 March
2020 to 11 May 2020 under the French Government lockdown restrictions.
There have also been other periods where the stores have been restricted to selling
only limited categories of goods. In November 2020 Babou implemented a click and
collect service from stores to enable customers to continue to access goods by
pre-ordering them on-line.
• The Group introduced flexible working arrangements in its businesses during the
year to support colleagues in relation to working hours and homeworking
arrangements.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
25
Principal risks and uncertainties
continued
2 Supply chain
Description & potential impact
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.
Strategic Priority
Change
A
Key Actions in 2020/21
• As referred to above in relation to the Covid-19 risk above, when the coronavirus
impacted factories and ports in China contingency plans were put in place initially
to source supplies of products from other countries and regions were that to have
become necessary. As we had a stock cover in the B&M UK business of c.10 weeks
on general merchandise imported goods, there was a very limited impact arising
and limited recourse only was made to our contingency plans.
Risk Mitigations
• The Group has 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 & corruption and modern
slavery & human trafficking policies in place in relation to
its supply chain.
• A combination of individual buyers and sourcing agent
employees conduct supplier factory visits.
3 Competition
Description & potential impact
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.
Strategic Priority
Change
A C D
Risk Mitigations
• 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 2020/21
• The Group has continued to maintain its strict SKU count discipline within product
ranges, which enables it to react quickly to ever changing consumer tastes, trends
and buying habits.
• The Group commissioned a customer insight survey to measure our strengths and
weaknesses against our competitors, to provide management with indicators of
where the Group 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 the Group can track progress against each of the indicators
and outputs from those surveys.
• As an essential retailer, the business has continued to operate throughout the
pandemic and prioritise the stocking and replenishment of goods at stores which
have been in the highest demand at peak times during spikes in the pandemic to
ensure that we have kept customers supplied with goods they most want. We have
ensured that our stock picking at warehouses and stock ordering from suppliers was
carefully planned to facilitate this through our supply chain throughout the year.
4 Economic environment
Description & potential impact
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.
Strategic Priority
Change
A B C D
Risk Mitigations
• 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 2020/21
•
In light of the initial uncertainty in relation to consumer confidence following Brexit
and the impacts of the pandemic, the Group has continued to ensure that we
remain focused on only stocking the top best-selling lines across our ranges. We
have continued to work hard to ensure our stores have all of our top 100 best-selling
products ready on the shelves on a daily basis.
26
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Link to strategy key
Risk change key
A
B
C
D
Delivering great value to our customers
Increased risk
Investing in new stores
No change
Developing our international business
Decreased risk
Investing in people and infrastructure
5 Regulation and compliance
Description & potential impact
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.
Strategic Priority
Change
C D
Key Actions in 2020/21
• The B&M UK business has created and launched an e-learning portal for GDPR
training for colleagues to make it easier refresh their training during each year. It is
intended to roll-out the e-learning platform to other areas of mandatory training
over time once colleagues are familiar with using the portal. This will reduce the
amount of paper based process required and created a more flexible way for
colleagues to carry out some of their training needs.
• Our Groceries Code Compliance Officer and Internal Audit team have actively
engaged during the year with the Groceries Code Adjudicator (“GCA”) in conference
call discussions during the year. 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 our action plans and follow-up
work during the year.
•
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.234 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 distribution centre in the later
part of FY20 for deliveries in the South of the UK, has begun to lead to significant
reductions in miles travelled for deliveries to our stores in the South of England.
Risk Mitigations
• The Group has 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 whistle-blowing 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 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 Grocery 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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
27
Principal risks and uncertainties
continued
6 International expansion
Description & potential impact
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.
Strategic Priority
Change
C
Risk Mitigations
• The Group has 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.
• The Group assesses markets in which the business
operates in 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 2020/21
• We continued to strengthen the senior management team of our French business,
Babou, during the year and appointed a new CEO in May 2021. This has enabled
us to restructure the senior leadership team to focus those resources on the key
operational functions of the business. In particular this has allowed the Trading
Director of Babou to devote his time exclusively on leading the buying operations
of the business going forward, with other areas which had previously been covered
by him being transferred to the CEO of that business.
• The Group is monitoring the Babou stores which have been converted B&M fascia
and format to track their performance and make any necessary adjustments to
product ranges as we evolve and refine the ranges in response to the demand and
tastes of French customers.
• Babou has implemented a new click and collect service in FY21 across the majority
of its stores. This has been particularly helpful for customers during the pandemic in
relation to remote shopping.
7 Warehouse infrastructure
Description & potential impact
The loss of one of our distribution centres 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.
Strategic Priority
Change
B D
Risk Mitigations
• Forward plans have been implemented for additional
warehousing capacity to support our new store opening
programme. The Group in the UK has six separate
distribution centres (having added Fort this year and
closed an older distribution centre in Blackpool). The
additional distribution centre in Fort, which serves as a
hub to support our expansion in the South of England,
is now in full operation.
• The Group maintains adequate business interruption and
increased cost of working insurance in the event of a loss
of a distribution centre(s).
Key Actions in 2020/21
• The JDA Warehouse Management System is now live and rolled-out within all our
main UK Distribution Centres and an upgrade to the existing generation of the
software is due to be implemented in FY22.
• The vast majority of product SKU’s now have a dual locations with our UK
Distribution Centre estate, so in the short term if a Distribution Centre was out of
operation our stores can continue to be serviced with the full range of product SKU’s
by the rest of the Distribution Centres without significant replenishment delays.
• B&M’s UK business have access to container storage yards in the north and the
South of England, allowing greater flexibility for re-routing stock to other Distribution
Centres at short notice if a Distribution Centre was carrying a surplus or was out of
operation.
28
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Link to strategy key
Risk change key
A
B
C
D
Delivering great value to our customers
Increased risk
Investing in new stores
No change
Developing our international business
Decreased risk
Investing in people and infrastructure
8 IT systems, cyber security and business continuity
Description & potential impact
The Group is reliant upon key IT systems, and disruption to those would adversely affect business
operations including those at the distribution centres 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.
Strategic Priority
Change
D
Key Actions in 2020/21
• The Group completed the roll-out of its card payment encryption system with
Worldpay across all the B&M UK fascia stores by the end of June 2020. This
enhances the IT cyber security and PCI controls in relation to processing card
transactions. The roll-out has been extended across the Heron Foods stores in
FY21 also.
• The B&M fascia business has also implemented a Cloud Security Platform and
Advanced Malware Protection to improve email and web cyber security.
• A phased programme of improvements and upgrades to IT systems and
infrastructure over the next 3 years from FY22 has been approved by the Board with
the Group’s IT Director to bring enhancements to our core systems as we continue to
grow at a significant rate.
Risk Mitigations
• All critical business systems have third party maintenance
contracts in place and those systems are industry
standard retail business systems.
•
IT investments and budgets are reviewed and approved
at Board level.
• The Group has a disaster recovery strategy and plan in
place for all of our key systems.
• The Group has 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.
9 Commodity prices/cost inflation
Description & potential impact
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.
Strategic Priority
Change
A
Risk Mitigations
• Freight rates, energy and currency are forward purchased
to mitigate against volatility and to allow the business to
plan and maintain margins.
Key Actions in 2020/21
• The Group has freight rate agreements in place with freight forwarders for 2021 with
set prices for several months ahead.
• Energy purchases have also been agreed through an energy broker until
• Wage increases are offset where possible by productivity
September 2022.
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.
• The business has created an Energy Manager position who is responsible for
driving energy improvements and efficiencies in the B&M UK business store estate.
The Energy Manager has trialled a Building Energy Management System to control
energy consumption at stores more effectively, which we are now looking to extend
to new store openings in FY22.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
29
Principal risks and uncertainties
continued
10 Key management reliance
Description & potential impact
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.
Strategic Priority
Change
D
Risk Mitigations
• 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.
11 Store expansion
Key Actions in 2020/21
• The Group has continued to strengthen the senior management teams of its
businesses. This has included (i) the appointment of an Group IT Director reporting
directly to the CFO (ii) the appointment of a Head of Investor Relations reporting
directly to the CFO (iii) the appointment of a Head of Internal Audit reporting directly
to the Chair of the Audit Committee, (iv) the appointment of a new Group CFO
following the retirement of the previous CFO early this year, (v) appointment of a
Supply Chain Director in the B&M UK business following a retirement earlier this
year, and (vi) the appointment of a new CEO in the French business strengthening
the management team locally in that business.
Description & potential impact
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.
Strategic Priority
Change
B
Key Actions in 2020/21
• The B&M UK business has continued to take 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.
Risk Mitigations
• 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.
30
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Link to strategy key
Risk change key
A
B
C
D
Delivering great value to our customers
Increased risk
Investing in new stores
No change
Developing our international business
Decreased risk
Investing in people and infrastructure
12 Stock management
Description & potential impact
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.
Strategic Priority
Change
A
Risk Mitigations
• The Group has a highly disciplined limited SKU count
throughout our product ranges and effective regular
markdowns on slow moving product lines.
Key Actions in 2020/21
• The Group has carried out a review of its stock cover requirements in advance of
FY22 in light of the strong demand in FY21 to ensure that sufficient ordering is in
place to build stock levels to the normal levels of cover previously.
• Our non-seasonal initial stock orders do not exceed circa
14 weeks of forecast sales and action is undertaken after
circa 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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
31
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 24 to 31 of the
strategic report and the Group’s prospects.
B&M operates in a competitive retail environment
and need to be able to react to changes in retail
markets and consumer trends. Accordingly, B&M
set out a 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; and
the Group’s debt facilities of £455m in relation
to the term loan and revolving credit facility
which matures in April 2025, and the high
yield bond of £400m which matures in
July 2025.
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 Group did not think there
was a case for testing the impact of store
closures as a result of future lockdown measures,
due to the sale of essential goods which resulted
in B&M and Heron Foods remaining open
throughout the FY21 lockdown periods, and with
the impact of Babou closures being immaterial
on a Group level.
A number of other severe but plausible scenarios
were considered by the Board. They included:
• a decline of circa 17% like-for-like sales in
FY22 followed by modest increases of 2%
respectively in FY23 and FY24 in the Group’s
main UK trading business, B&M, as a result of
competition increasing when non-essential
retailers reopened in April 2021 after the third
national lockdown ends;
• a significant decline 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
• a range of other severe scenarios which could
have a material impact on the Group’s main
UK trading business, including for example, a
major fire at one of its distribution centres.
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 scenarios exceed the impacts
of principal risks which the Group has
encountered in its trading experience to date.
Based on the assessment, stress testing and
mitigating actions referred to above, the Directors
confirm they have a reasonable expectation that
the Group will be able to continue in operation
and meet its liabilities as they fall due over the
next three years to 30 March 2024.
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,
including preparing cash flow forecasts for at
least 12 months from the date of approval of
these financial statements, the Directors are
confident that the Group has adequate resources
to continue its successful growth. Accordingly,
they continue to adopt the going concern basis in
preparing the financial statements.
32
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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
Strategic Report
Corporate social responsibility
Reflecting the B&M values in
the way we deliver growth
Environmental, Social
and Governance (“ESG”)
Proud to treat
every £1 as
our own and
provide
customers
with great
value for
money
P
r
o
u
d
Our approach to ESG is to:
• deliver our growth strategy for
the benefit of all our stakeholders;
• build our business in a
sustainable way in the
communities we invest in; and
• apply our values of simplicity,
trust, fairness and being proud, in
the way we operate our business
in relation to people, communities
and the environment.
B&M is committed to delivering its growth strategy
and ensuring that all its stakeholders benefit from
that growth. How we do that is important from an
environmental, social and governance (“ESG”)
perspective to ensure that we continue to build our
business in a sustainable and environmentally
friendly way over the long term.
A key part of our approach to ESG is therefore to
ensure that as we grow we continue to apply our
values of simplicity, trust, fairness and being proud, in
the way we operate our business. We believe those
values underpin the continued success of our business.
For B&M, we consider ESG from the perspective of our
colleagues, customers, communities, suppliers and the
environment. We are reviewing what targets may be
appropriate for these areas moving forward to support
the ongoing success of the Group for all stakeholders.
Alongside our approach to ESG, we have policies
with regards to our dealings with people, our social
responsibilities and also in relation to our
environmental outputs.
Below, we set out these policies, how we have applied
them in relation to our business in the year under
review and the outputs from them. In relation to our
governance and decision making with regard to our
stakeholders’ interests, see also the Stakeholders and
Section 172 report on page 44.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
33
Corporate social responsibility
continued
People
Our policy and commitment 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 36 for more information on
diversity and equality
As well as our overall policy in relation to our
colleagues (see above) we also have a number of
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 colleagues throughout our
different working environments, and to ensure
compliance with legislation.
Through the policies and standards we have in
place we are able to support the growth of our
business and attract and retain new colleagues
as our operations expand in all areas of our
business, particularly at our stores and
distribution centres. The Group now employs over
41,000 people across our three businesses. In
FY21 we created over 7,200 new jobs in the UK
alone, at a time when some other store-based
retailers have been taking steps to rationalise
their workforce have or closed entirely.
Colleague progression
Our commitment to developing our own talent
through our Step-Up career development
programme has continued. This programme gives
store colleagues a real opportunity to demonstrate
their talent and grow within the business to the
next level. In FY21 124 existing colleagues were
promoted to either store manager or deputy
manager positions at B&M UK stores (FY20: 125).
We are very pleased that we maintained the
programme this year notwithstanding the
challenges posed by the restrictions associated
with Covid-19. We successfully migrated the
training for the programme on-line, restructured it
over a shorter timeframe to make it easier for
colleagues to participate in and achieved a result
which we are proud of for those who came
through it this year. As part of our values of
fairness and trust, any colleagues who enter but
do not succeed the first time can enter the
programme again in future years whenever
they want to.
By having a focus on home gown talent
opportunities for colleagues wherever possible,
career development and retention, the business
benefits over the longer term as our culture and
values are maintained and reinforced through
the continuity of our ‘B&M people’ growing with
our business.
Colleague 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 initiatives, and reports to the Board
on the outputs from them during the course of
the financial year.
There is a standing agenda item at two Board
meetings each year, for the Board to consider
reports from the Workforce Engagement Director.
This enables the Board to monitor progress,
consider feedback and discuss outputs and
actions with the executive management team.
This is also supplemented by reports provided
each year on colleague engagement and pay,
by the Group People Director to the
Remuneration Committee.
Our annual colleague engagement survey
included over 2,100 UK respondents this year,
which included colleagues from stores,
distribution and support centres of both the B&M
UK and Heron Food businesses.
We had an 80% response rate to the survey and
an overall satisfaction score of 81%, which was
very similar to the previous year. We regard this
as an excellent result given the circumstances
and challenges of the past 12 months. The results
were particularly strong in areas including:
colleagues feeling they are valued by the
business, being encouraged to work to their
potential, and having a clear understanding of
what their responsibilities are.
One of our aims is very much geared to
promoting and retaining home grown talent.
These ratings are therefore particularly important,
as they are a strong indicator of the type of
culture which exists across our business. This has
been a particularly pleasing result this year, with
our colleagues having been instrumental in how
we have overcome the operational challenges
posed by the pandemic to the business.
34
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Colleague satisfaction rating
“Step Up” promotions
81%
124
As part of the colleague engagement survey, we
also invited feedback on areas where we could
make improvements for colleagues. The main
themes from that included improving
communication with colleagues, enhancements
to some of our IT systems and further employee
benefits. As a direct result of that feedback, the
following outputs have already been
implemented by the senior management team:
• a project has started to improve the
functionality, speed and user experience of
the Hub portal which is used by the head
office retail team as an information platform
to support regional, area and store managers
on a range of operational items;
•
•
•
•
the retail operations and buying teams are
working closely together with a clearer
shared focus on the preparation of the store
activity planner each week, to help store
teams to deliver the best possible customer
experience;
the newly appointed Group IT Director has
performed an in-depth assessment of our
existing infrastructure and set out a plan for
a number of systems upgrades which have
been approved for rolling out in the next
12 months;
in response to the need for home-working
due to the Covid-19 pandemic, the business
invested in new technology and IT equipment
for a range of colleagues across departments
in the central operations teams; and
the colleague benefits portal, which provides
a number of discounts on purchases with a
variety of retail and leisure outlets, has been
extended to include further promotions and
outlets for when the Covid-19 restrictions
hopefully begin to allow for more social
activities.
The senior management team of the B&M UK
business also have a number of other
established workforce engagement
mechanisms. They are designed to keep
colleagues informed of the trading performance
and factors affecting the business on a quarterly
basis, whilst also enabling colleagues to ask
questions directly of senior management in
relation to the business and its strategic plans.
This has out of necessity been restricted to
electronic communications in the last year, but
when restrictions allow for town hall meetings to
resume again they will be reinstated.
Considering the constraints that all colleague
engagement processes had to operate within
during FY21, the overall results have been
extremely encouraging, and provide a strong
platform from which to build on during the
year ahead.
Rewards
We reward our store managers and supervisors
through an annual bonus scheme. This scheme
is kept simple and transparent, with just 4 metrics
designed to be stretching and motivating for the
store teams. These metrics are fully aligned to
ensuring our stores deliver the best possible
shopping experience to our customers. In
addition, we also run regular incentive schemes
at the store level to drive and reward high
performance.
We also have an annual bonus scheme for our
distribution managers who run our distribution
centres and head up various warehouse and
transport teams.
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.
Restricted Stock share option awards have also
been made to a number of management
personnel over the last four years on an annual
basis. This is a broad based pool of
management and includes a number of heads of
departmental functions across the central
support teams.
The performance of the business in FY21 is
testament to the resilience and determination of
all our colleagues in navigating the challenges
which Covid-19 has posed. In recognition of the
hard work and commitment shown by store and
distribution colleagues in our UK businesses
throughout the year, we were proud to pay them
110% of normal pay in April and May 2020. We
also followed that up by awarding an extra
week’s pay to our B&M UK stores and distribution
workforce in January 2021. Any central support
colleagues who were not members of annual
bonus schemes were also given a bonus award
at the end of FY21. All of these bonuses were one
way the business was able to give a big thank
you to the wider workforce for all of their hard
work and commitment to the business and our
customers in the last year.
The business has also committed that it will
award workforce bonuses each year going
forward, where the Group achieves certain
internal levels of growth performance.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
35
Corporate social responsibility
continued
People continued
Our 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; and
• 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.
Diversity and equality
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.
Full details of the composition of B&M’s Board are
set out on pages 50 and 51. The Company has
commenced a search process with an external
consultancy, with the intention of appointing an
additional female Non-Executive Director to the
Board. See page 65 below for further details in
relation to that process. In addition, Gilles Petit is
not standing for re-election to the Board at the
AGM on 29 July 2021, as referred to on page 4
above. In consequence of these changes, by the
time of the AGM, the Board will have at least 33%
female representation.
The Company already complies with the Parker
Review recommendations in respect of ethnic
diversity and Board representation.
The percentage of female representation across
the senior management of the Group reporting
either directly to the Board or the Executive
Committee was 42.3% at the end of FY21
(FY20: 45.5%).
In relation to all employees of the Group, the
percentage of female colleagues was 58.2%
(FY20: 58.4%).
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 which is inclusive
of all types of diversity as well as gender. 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 pay gap reporting
In accordance with the Equality Act (Gender Pay
Gap Information) Regulations, we have published
our data online in relation to each of our B&M UK
and Heron Foods businesses as at 5 April 2020.
The hourly pay of B&M UK colleagues mean
hourly rate for females is 7.5% lower than males.
The median hourly rate is the same for females
and males. For Heron Foods, the mean hourly
rate for females is 20.3% lower than males and
the median hourly rate for females is 4.8% lower
than males.
In relation to bonuses of B&M UK colleagues,
4.8% of females and 13.3% of males were paid a
bonus. The mean bonus pay for females was
19.3% lower than males, but the median bonus
pay for females was 34.4% higher than males.
For Heron Foods, 2.0% of females and 24.8% of
males were paid a bonus. The mean bonus pay
for females was 7.7% lower than males and the
median bonus pay for females was 16.1% lower
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.
This data is stated for the year before the
bonuses which were paid in FY21 to colleagues
which are referred to on page 35 above.
36
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Social
Our policy in relation to social and
community engagement is to:
• continue to make investments in
new stores and new jobs in local
communities where we are
under-represented or not
represented at all;
• provide value for money to our
customers;
• build long standing relationships
with our suppliers; and
• promote ethical trading policies
and practices within our supply
chains.
Communities
In the communities we serve we provide
shoppers with great prices, create local jobs each
time we open a new store, and help to sustain
those areas where people live and work. In doing
so, we have an important role to play as a
positive presence in local areas, towns and
neighbourhoods by serving people with the
goods they need and at prices which help limited
spending budgets go that bit further.
Quality, convenience & value
Both the B&M and Heron Foods brands are
known by their customers for providing them with
quality products at bargain prices. Value led
shopping opportunities have become particularly
important for many customers during the
pandemic. We expect this to continue to be the
case as communities emerge from the social and
economic impacts of coronavirus and need to
manage household budgets accordingly for
some time to come.
We are proud to be a part of supporting the
communities where we trade by bringing our
value for money proposition to as many
customers as we can. By providing Grocery,
FMCG and General Merchandise goods all under
one roof at our B&M stores, we are able to
provide customers with a one- stop- shop to
serve a whole range of shopping requirements
for daily essentials and their homes. At our Heron
Foods stores we include a range of frozen, chilled
and ambient food and a targeted range of FMCG
goods to enable customers to do one-stop food
and other essentials shopping very conveniently.
Investment in communities and creating
new jobs
In FY21, despite the challenges posed by the
Covid-19 pandemic, we have continued to invest
in new stores where we are under-represented
or not represented at all by opening a total of 60
gross new stores in the UK.
When we open a new store, we try to find a hero
from the local community known for their
charitable work to perform the ribbon-cutting
ceremony on the opening day. This is one small
way in which we can help to give some publicity
with the local media for them to promote and
support the good work that they do for their
communities. We actively encourage our store
managers to maintain those relationships with
the local hero going forward and give continued
to support to the social good they are doing for
local people.
We expect our store expansion programme to
continue in the years ahead, as we remain
committed to our rollout target of at least 950
B&M stores in the UK. This will continue to create
jobs in yet more communities where new store
openings take place, contributing to their
revitalisation. Every new store we open
represents a long term commitment to
communities we serve. We are also delighted to
welcome new colleagues to take up new jobs we
offer every time we open a new store. This is a
positive investment in communities often in
locations where job opportunities may otherwise
be limited.
We are proud to contribute to the revitalization
and sustainability of those areas by the
considerable investment and long term
commitment we are making to them with our
new and existing stores throughout the UK. There
are still many areas in the UK where we have not
penetrated local markets, particularly in the
South of England. Every time we open a new
store we know by our track record that it will be a
success. The only constraint on new store
openings is finding available real estate of the
size and convenient locations we require to give
the best offering we can to customers.
In relation to jobs at our B&M stores and
Distribution Centres in the UK, we are also proud
to continue to help long-term unemployed
people back into work in their local communities
through the government’s “kickstart” scheme. In
FY21, another 620 long-term unemployed people
secured a role with B&M (FY20: 320).
Annual Report & Accounts 2021
B&M European Value Retail S.A.
37
Corporate social responsibility
continued
Social continued
By supporting this scheme we are able to help
people get back into work by providing local job
opportunities to them.
within constrained household budgets. We are
committed to serving those needs through the
stores we operate in our chosen markets in the
UK and France.
Charitable initiatives and pandemic support
We were proud again this year to be a headline
partner for the “Mission Christmas” appeal,
which is an initiative run by the Cash4Kids
children’s charity. It provided £12.7m of gifts and
vouchers to some 254,000 under-privileged or
poorly children in the UK at Christmas 2020. Most
of our stores acted as collection points for the
initiative, in what was our fifth consecutive year of
participation on a national level.
At our Heron Foods business, we have
contributed to the local community by donating
old thermal uniforms to homeless people in Hull,
and providing a chiller unit to a local charity that
supports the community with food parcels.
As part of our response to help the wider
community since the on-set of coronavirus in the
UK, we delivered £1m in cash donations to
Foodbanks across the UK, and used our Heron
Foods delivery vans to help deliver food parcels
amongst the local community.
In recognition of the heroic efforts of our NHS
workers, we were proud to offer them our B&M
colleague discount at stores during the initial
outbreak of the pandemic. We also extended this
again throughout the month of January 2021
when there was another surge in the virus in the
UK. In total, we awarded £4.9m of discounts to
NHS workers in FY21.
Customers
Helping household budgets go further
Our purpose is to deliver great value to
customers so that they keep returning to our
stores time and time again. We believe that by
making everyday essentials affordable, we are
able to help families by making limited
household budgets go that little bit further.
The combination of value, convenience and
Grocery and General Merchandise goods all
under one roof has been particularly important
during the Covid-19 pandemic. This is likely to
remain the case for the foreseeable future with
large sections of the population being concerned
about their personal finances or having to live
Customer offering
We believe that by providing customers with a
limited assortment of the best selling products
across a range of product categories, all at value
prices, we are able to give customers what they
want all year round. By doing that well we are
able to retain the loyalty of existing customers
who keep returning to our stores and also attract
new customers. Shopping at B&M also does not
require any compromise on quality since we sell
many of the household brand names which our
customers want, and they are able to enjoy the
opportunity to purchase them at bargain prices
at our stores.
In addition, our range discipline is such that we
constantly refresh our product offer, introducing
up to 100 new products a week throughout the
year, predominantly in our General Merchandise
ranges. This encourages customers to visit the
store again and again to see what is new. We
also provide customers with a fun and exciting
shopping experience through promotional events
in stores, often involving seasonal products. Each
of those events are aimed at giving even better
promotional value-prices to our customers.
We take pride in providing the high-quality
customer experience shoppers expect from any
retailer. We invest in our stores to present them in
a clean and tidy format, with new store fit-outs
and refurbishments including investments in LED
lighting and refreshed floor coverings. This also
has environmental sustainability benefits and
provides modern, clean environments for
customers and our colleagues. This is something
that has become even more important as an
assurance to those visiting our stores during the
pandemic.
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. This includes
our no-quibble customer returns policy,
highlighting our emphasis on providing great
value for money and quality products.
New customers discovering B&M for the
first time
Whilst we have an established base of existing
loyal customers, the B&M proposition is
increasingly resonating with new ones. This has
been seen throughout FY21, where a number of
customers have discovered us for the first time.
Early in the pandemic, in the month of June 2020,
we saw that 23% of all card transaction shoppers
had not shopped with B&M during the previous
five months. When we followed-up this analysis
in March 2021, we found that 71% of those
customers had continued to shop with us over
the subsequent nine months, with an average
visit frequency of 4.2x during that period.
This average frequency of repeat visits suggests
we may have become a part of the shopping
routines for some of these new customers.
See page 10 for further information regarding
new customers in FY21.
Health and safety
The Board has overall responsibility for ensuring
that the Group maintains high standards of
health and safety in our businesses. The Board
and the executive management team monitor
key performance indicators in relation to health
and safety trends in the business on a bi-monthly
basis, 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.
In light of the Covid-19 pandemic, our
commitment to the safety and wellbeing of
colleagues and customers has never been more
important. We have worked hard throughout the
year to maintain safe socially distanced working
and shopping environments, including:
• providing PPE for all store, distribution and
support centre colleagues;
•
installing protective screens at store
check-outs and workstations;
38
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
New jobs created in the UK
Discounts granted to NHS workers
>7,200
£4.9m
In FY21 there were 125 reported accidents (0.2 per
store) reportable to the Health & Safety Executive
relating to the B&M business in the UK (FY20: 102
reported accidents and 0.2 per store). This is in
the context of 233 million shopper visits over the
course of the year.
Suppliers
We aim to foster long standing relationships with
our suppliers, who we regard as business
partners in terms of our relationships and
dealings with them. Many of our suppliers have
worked with B&M for a number of years, and
have therefore been able to share in our growth
and success.
They value the simple, transparent pricing model
that we adopt, minimising the use of rebates and
retrospective discounts. We work collaboratively
with all our suppliers to ensure we are always
bringing the best products at the best prices to
our customers.
We use a standard set of terms and conditions
when making purchases from suppliers.
Provided the goods meet relevant quality and
safety standards, we will pay the supplier within
the agreed payment terms. Our import suppliers
are generally paid in advance of the goods
arriving into the UK.
These minimum terms and standards of dealings
with our suppliers are important in terms of
ensuring our products are safe and fit for
purpose for our customers, and also that the
factories of our suppliers comply with local laws
and regulations and our policy standards
referred to further below. This ensures that our
customers can be assured of the safety, quality
and integrity of the products they buy from us at
our stores.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
39
• clearly marking two meter gaps in the busiest
aisles in store, to help customers with social
distancing;
•
•
implementing enhanced cleaning regimes
across the business; and
introducing flexible home working
arrangements for a large number of our
support centre team colleagues.
We recognise that having essential retailer status
has carried with it a great responsibility to help
colleagues and customers through the crisis, and
to do so in a safe manner. In that context, we are
proud that we have been able to continue
operating whilst only recording a very modest
number of confirmed coronavirus cases
throughout FY21. This is testament to the diligence
and rigour of the enhanced measures we have
put in place.
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 a system of working procedures for
colleagues to follow, with pictograms to make
them user friendly and help overcome 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 for each new colleague
with reviews (and refreshers as required) also
taking place during the next 12 weeks thereafter.
We are developing our e-learning portal to include
health and safety training for some colleagues to
make it more flexible and user friendly to those
preferring to complete it on-line.
Corporate social responsibility
continued
Social continued
Ethical trading and our supply chain
We regard our supply chain as a key
differentiator, with our disruptive sourcing
process an essential feature of the B&M business
model. However we are equally driven by the
need to ensure our supply chain partners remain
transparent, fair in their business dealings and
robust in their welfare policies for their
colleagues.
We have a number of formal policies in place in
relation to our business and our dealing with
suppliers including:
• anti-bribery and corruption;
• supplier workplaces, covering anti-slavery
and respect for human rights, which all
suppliers are required to adhere to; and
• whistle-blowing, in relation to reporting of any
suspected wrong doing or malpractice.
Our policies and procedures are geared toward
what we think are balanced, reasonable and
effective processes. We strive to find effective
ways of improving the communication of and
adherence to our ethical business practices.
Anti-bribery and corruption
In relation to anti-bribery and corruption, our
policy is one of zero tolerance. Colleagues in
each of our businesses are aware of the
importance of reporting any offers of
inducements by third parties immediately up to
director level.
Each year an annual review is undertaken of our
buying teams in the UK and France. This requires
written reports to be completed of any suspected
or actual incident of bribery or corruption
between any third party and the business. For
the year under review, this due diligence process
disclosed no instances of any such activity having
taken place or having been suspected in our
business.
B&M UK, Heron Foods and Babou all have clearly
communicated whistle-blowing procedures and
processes in place. In the year under review, no
reports were made in any of our three
businesses of any instances of suspected bribery
or corruption in relation to employees with any
suppliers or other third parties.
Anti-modern Slavery
We have a zero-tolerance policy on slavery,
forced labour and human trafficking of any kind
in relation to our business and our supply chains.
We support the promotion of ethical business
practices and policies to protect workers from
any kind of abuse or exploitation.
In the last year, B&M UK, Heron Foods and Babou
have continued to communicate our Workplace
Policy on the welfare rights of workers to their
existing and new suppliers. The standard terms
and conditions of purchase used with all
suppliers make it a condition that they adhere to
those Workplace Policy standards.
In the event of any suspected failure by a supplier
to comply with our Workplace Policy, we would
investigate the circumstances of it with the
supplier. If, as a result of such an investigation,
we identified a breach of our policy 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.
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.
A copy of our 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, for
leading household brand name suppliers, the
Group operates on the basis of reasonable
reliance being placed on those who have their
own comprehensive procedures and policies in
place. For all other suppliers, in particular those
supplying general merchandise goods from
overseas, other forms of checks and verification
process are in place by the Group and its
sourcing agent, as set out below.
The vast majority of general merchandise products
which are imported into the UK and France by B&M
and Babou are sourced from China. They are
mainly machine manufactured goods as opposed
to being labour intensive handmade goods. Heron
Foods also sell a limited number of products
imported from China. They are all procured from the
B&M supply chain and benefit from the checks and
verification process of B&M’s sourcing agent.
Overseas suppliers of general merchandise
goods are required to provide social compliance
reports, as a check on compliance with local laws
and regulations, including labour practices. The
Group outsources the vetting and reviewing of
those reports to a specialist team at our product
sourcing agent in Hong Kong. They carry out this
service for our Group in relation to suppliers
sourced by them and also suppliers which are
sourced directly by the Group. This ensures that
there is a consistent and robust review and social
compliance auditing standard applied to all our
suppliers regardless of the origin of their
relationship with us. It is also carried out
independently from our buying teams, as a
further safeguard and check on the robustness
and integrity of the processes which we have
in place.
In addition to the above checks, members of our
UK buying team, where practical, visit new
suppliers also as part of our verification processes.
Our Heron Foods convenience food product lines
are sourced from leading brand suppliers. A small
number of foods are sourced direct from produce
suppliers. They are from a limited number of major
suppliers who operate highly mechanised
businesses which are non-labour intensive.
Internal Auditing
Our Internal Audit function in the UK carried out a
review and audit of our supply chain and
procurement in FY16 and again in FY19. That due
diligence included a review of the social
compliance vetting and verification processes of
our sourcing agent in Hong Kong in relation to
both new and existing suppliers in China and
Asia on an on-going basis.
40
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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.
Enhancements to our risk management and
due diligence
Our policies, procedures and approach to
verification processes are geared toward what
we think are balanced and reasonable, practical
and effective. We continue to strive to find
effective ways of improving the communication of
and adherence to our ethical business practices.
The outsourcing of social compliance audit
checking for direct suppliers (as well as those
sourced on our behalf) to our sourcing agent in
Hong Kong this year, as opposed to B&M’s
in-house teams carrying out those processes, is
an added enhancement to the way we ensure
that our supply chains are operating to our
required standards of ethical trading practices.
Quality assurance
In relation to general merchandise products
which are manufactured for the Group, we have
a well established and developed process of pre
and post-production sample testing and
approvals. This is supported by our quality
assurance team and external testing houses of
our own or suppliers, being global certification
providers. It is also supplemented by our own
programme of quality control inspections
performed by colleagues of our sourcing agent
at factory premises prior to shipment.
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 goods 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.
In relation to the second annual compliance report of B&M
and Heron Foods for the year to 31 March 2021, there were
no formal disputes under the Groceries Code. There were
also no Groceries Code related issues raised by suppliers
with B&M or Heron Foods of any potential non-compliance
with the Groceries Code. The report was submitted to our
Audit & Risk Committee members in June 2021 and it was
approved by them for submitting to the Competition and
Markets Authority and the Grocery Code Adjudicator.
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.
Following the retirement of Paul McDonald as the Group
CFO in November 2020, his successor Alex Russo was
appointed as our Group’s Code Compliance Officer.
See principal risk number 2 and 5 on pages 26 and 27
for more information
Annual Report & Accounts 2021
B&M European Value Retail S.A.
41
Corporate social responsibility
continued
Environment
Our Environmental policy is to:
• grow our business and operate
sustainably in the communities
we serve;
• 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;
and
• continuously look for opportunities
to reduce or minimise our
environmental footprint where we
can, in particular in areas of scale
in our operations where we can
make an impact.
Packaging waste recycled
by the Group in FY21
99.8%
FY20: 99.8%
Environmental sustainability
The nature of our business model, being the
sourcing and retailing of a limited assortment of
products, does not in itself involve significant
environmental risks to the sustainability of our
business or our model. There are however
environmental impacts from our business
operations which, as opposed to being risks, are
outputs which we are very conscious of
managing responsibly.
We constantly strive to seek to either reduce the
intensity levels of our consumption, or find better
or new ways of operating in a more
environmentally sustainable way.
The impacts of our policy, and how we have
applied it during this year, are as set out below.
Transport & Distribution
The opening of our 1 million sq ft distribution
centre in Bedford in January 2020 represented an
important investment, not only in terms of
facilitating further store expansion but also with
regard to doing so in a more efficient and
environmentally friendly way.
Being the first distribution centre outside of the
North West of England, the Bedford facility has
begun to significantly reduce the number of miles
travelled to service stores in the South of England.
The reduction in miles travelled has also
therefore reduced overall fuel consumption and
emissions from our HGV transport fleet in real
terms compared with miles travelled previously to
serve the stores in the South. The annual benefit
of the Bedford facility is currently estimated to
provide a reduction of approximately 2.7 million
delivery miles travelled, which would equate to
over 3,700 tonnes less CO2 emissions. After a
further 12 months operating at normal capacity
we will then be able to measure the actual
impact.
We have a total of 231 tractor units, with the entire
transport fleet in the UK less than 5 years old and
fitted with Euro 6 engines, which have the lowest
emission rate possible.
We have also continued to invest in double
decker “wedge” trailers, which increase trailer
capacity and therefore maximise transport
volumes whilst minimising distribution mileage
travelled. We now have a total of 173 of these
trailers, resulting in a saving of approximately 5
million miles a year compared to using a
standard trailer type, and resulting in a 6,500
tonne reduction in CO2 emissions per year.
We also have an increased focus on driver
performance monitoring across our B&M and
Heron Foods transport colleagues, rewarding fuel
efficient driving and thus reducing diesel emissions.
Other sustainability initiatives at our distribution
centres include using lithium Ion picking and
loading trucks, which are more energy efficient
than the previous generation of pallet handling
equipment. At our Heron Foods distribution
centre we have introduced electric charge points
for fridges and freezers, eliminating the need
to run diesel engines and also reducing
noise pollution.
Waste & recycling
The main source of waste in our operations
results from packaging. Where possible we
collaborate with our suppliers to minimise
product packaging only to what is necessary for
their safe carriage. This reduces costs, weight
and wastage of excess packaging.
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 and backhaul it
(being another efficient use of our transport fleet)
to our distribution centres for sorting in readiness
for recycling.
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 was recycled into energy
production.
Overall, the total level of packaging waste
recycled by the Group in FY21 was 99.8%.
42
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Sustainability and efficiency at a
glance:
• significant reductions in miles travelled and
associated emissions by new servicing
c.250 of our stores in the South of England
from our new Bedford distribution centre;
• our entire B&M UK transport fleet is now
fitted with Euro 6 engines which have the
lowest emission rate;
•
the total packaging waste recycled by the
Group in FY21 was 99.8%;
• over 480 stores now using chemical-free
floor cleaning systems;
• all new stores opened with energy efficient
LED lighting and an ongoing programme of
LED lighting being retrofitted at existing
stores;
•
reduction in absolute emissions and energy
usage from UK operations in FY21; and
• preparing to comply with TCFD reporting
requirements in FY22.
In addition to the packaging and recycling
initiatives above, we also recycle all batteries in
store and have started recycling small domestic
appliances following the introduction of new UK
legislation this year. Store cleaning regimes have
also been improved this year, with over 480 stores
now using chemical-free floor cleaning systems.
Greenhouse gas (“GHG”) emissions
In FY21 around 62% of our carbon footprint in
relation to the UK operations of B&M was as a
result of electricity and gas usage from our stores
and warehouse facilities. Diesel used by our
transport fleet accounts for the remaining 38%.
With regards to waste water, some of our larger
stores now feature waterless urinals, and this is
something we are looking to rollout further in the
year ahead.
Energy consumption
All new stores are now opened with energy
efficient LED lighting. In addition, wherever it’s
practical we invest in retrofitting LED lighting into
existing stores when carrying out store
refurbishments. We also have LED and motion-
activated lighting installed in all four main B&M
distribution centre locations, as well as our Heron
Foods distribution centre, to reduce unnecessary
electricity usage.
This year we launched a new “controllable cost
wheel” to all B&M UK stores. This initiative aims to
give stores better visibility of their water and
electricity consumption, as part of a general energy
awareness campaign including in-store posters,
colleague briefings, and trialling of centrally
managed energy settings in several stores. This will
be supported by further projects planned next year
to help reduce store energy consumption.
We created a new Energy Manger role in FY21.
He is responsible for driving further energy
improvements and efficiencies across our UK
businesses. We have already trialled a Building
Energy Management System in a number of
existing stores to control their energy
consumption better. This is now planned to be
extended to all new store openings in FY22.
Store numbers across the Group continue to
increase, particularly in the UK where the
number of stores increased by 38 in FY21. Despite
this growth in store numbers, the absolute value
of GHG emissions and energy usage from UK
operations decreased in FY21.
We express our annual emission intensity ration
by reference to our revenues. Scope 1 GHG
emissions and energy use have been calculated
based upon the quantities of fuel purchased for
our transport fleet, and Scope 2 GHG emissions
and energy use are calculated from electricity
and gas usage applied to published factors.
The intensity ratio for emissions is measured in
tonnes of CO2e per £1m of turnover. The intensity
ratio has improved in the last year for the UK
businesses. This was partly due to lower
emissions from electricity purchased from the
grid generally. It also reflects the high throughput
of sales from our existing store estate in the year.
Carrier bags
We have continued to see an overall reduction of
carrier bag usage following the 5p carrier bag
levy which was introduced in England and Wales
in October 2015.
We donate the proceeds from the carry bag levy to
a number of good causes. In FY21, we donated a
total of around £870,000 to UK charities, of which
approximately £725,000 was distributed at grass
roots level to local foodbanks across the country as
part of our response to the Covid-19 pandemic to
support some of the most vulnerable in society.
Greenhouse gas and energy usage data
FY21
B&M
Heron
UK Subtotal
Babou
Group Total
FY20
B&M
Heron
UK Subtotal
Babou
Group Total
Scope 1
TCO2e
34,725
8,101
42,826
110
42,936
Scope 1
TCO2e
29,874
8,928
38,802
129
38,931
Emissions
Energy usage
Scope 2
TCO2e
56,175
11,013
67,188
7,341
74,529
Emissions
Scope 2
TCO2e
61,835
12,121
73,956
9,820
83,776
Total
TCO2e
90,900
19,114
110,014
7,451
117,465
Total
TCO2e
91,709
21,049
112,758
9,949
122,707
Intensity
Ratio
22.29
46.08
24.49
24.11
24.46
Intensity
Ratio
29.21
53.99
31.94
35.11
32.18
Scope 1
MwH
129,152
30,048
159,200
404
159,604
Scope 1
MwH
122,119
35,918
158,037
472
158,509
Scope 2
MwH
240,951
47,237
288,188
31,486
319,674
Energy usage
Scope 2
MwH
250,522
47,423
297,945
38,420
336,365
Total
MwH
370,103
77,285
447,388
31,890
479,278
Total
MwH
372,641
83,341
455,982
38,892
494,874
Note: FY21 relates to the period from April 2020 to March 2021 and FY20 relates to the period from April 2019 to March 2020.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
43
Strategic Report
Stakeholders and
Section 172 statement
Our stakeholders’ interests
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.
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
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.
Stakeholders
Achieving our vision and fulfilling our purpose (as
set out opposite) means that evaluating and
considering the interests of our stakeholders in
our decision making are key to the Group’s
success. The Group’s key stakeholders include its
customers, colleagues, suppliers, the people and
communities where it trades and its investors.
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 34.
Why we engage
How we engage, measure and monitor
Examples of actions in 2021
Examples of outcomes in 2021
Links and more information
Customers
Providing great value to our customers is our
core purpose as a business. We monitor and
respond to our customers preferences and
needs to ensure we maintain a compelling
product offering and price proposition at our
stores.
Monitoring our like-for-like (“LFL”) sales trends.
Commissioning third party customer exit data and card provider
customer transaction analysis to monitor customer demand,
preferences and requirements.
Holding in-store promotional themed events to measure customer
response and reaction to extra value propositions in different product
areas.
Colleagues
Engagement with our colleagues is key to
understanding how the business can support
them in carrying out their roles effectively, make
improvements in our business and recognise
and reward exceptional performance.
Regular engagement programmes including colleague listening groups,
apprentice listening groups, new store and distribution centre colleague
surveys and bi-annual business updates from management.
Annual colleague survey for Retail, Distribution and Central Support
colleagues.
Development days and structured career progression programmes
including promotion paths to Store Manager and Area Manager roles.
Twice yearly updates to the Board on colleague engagement by Carolyn
Bradley, one of our Non-Executive Directors, as the Designated Director
for Workforce Engagement.
44
B&M European Value Retail S.A. Annual Report & Accounts 2021
The Board reviews LFL sales data every month in the
During the early part of the pandemic when shoppers were
Group’s management account reports. This is analysed
stockpiling goods, by tracking what lines of Grocery and FMCG
across each business fascia, the Grocery and General
products were selling through very quickly we were able to
Merchandise product split and for each main product line
respond to the situation very rapidly. Our buying teams
See the
Customer
Feature on
pages 10 to 11.
within those categories.
reprioritised orders with suppliers and we reorganised labour and
picking in our distribution centres to make sure our stores were
The Group commissioned a study by Barclaycard in June
replenished with those stocks which were in high demand
2020 and again in April 2021 in relation to customer
regularly to keep serving the needs of our customers.
transactions at our B&M UK stores. The results of that in
June 2020 were that 23% of card transaction customers
As a result of the Barclaycard study we believe that the value
had not shopped with B&M during the previous five
led pricing which we offer and our range coverage are
months. In addition, 71% of those new card transaction
significant factors in attracting new customers.
customers shopped with B&M again during the
subsequent nine months, with an average visit frequency of
4.2x during that period.
While town hall meetings with management and colleagues
From our feedback with colleagues through our various
have not been possible during the pandemic, the business
engagement processes we identify key themes of “What You Said”
has managed to continue with listening groups in its Retail,
by colleagues and responses to those by the business in relation
Distribution and Central Support operations. It has also kept
to “What We Did”. Examples of outcomes from that process this
on track career progression training for colleagues looking to
year included:
apply for Store Manager and Area Manager roles.
• a plan to improve the user experience in relation to the Hub
See the
Colleagues
section in the
Corporate Social
Responsibility
report on pages
34 and 35
The Annual Employee Survey “Your Say” was completed this
communications with colleagues. That plan includes both
year by our B&M and Heron Foods colleagues across all the
technology and data improvements to make it more efficient
main operating functions of those businesses. We continued
for colleagues to find what current information they need more
to see in excess of 80% colleague satisfaction ratings
easily; and
which is our e-portal for sharing daily operational
measured against five key questions to gauging colleague
response to how well they are kept informed about the
business, what is expected of them, career development
discussions, line manager support and leadership and how
valued they feel they are by the business.
• a laptop roll-out programme to enable office based colleagues
to work efficiently while working remotely with up to date
secure access while off-site to the main operating systems.
To recognise the challenges which colleagues faced during the
pandemic this year, with very high levels of demand for goods at
stores and the need to react quickly in our distribution functions the
B&M UK business gave store and distribution colleagues a further
10% on top of their normal pay for the first 9 weeks of the financial
year. In January they were also awarded ones weeks extra pay.
Also any members of the Central Support function who were not
members of our colleague bonus schemes received one-off
bonuses in March 2021.
Strategic Report
Corporate Governance
Financial Statements
Our vision, purpose and values
Our vision
Our purpose
Our values
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.
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.
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 we can for the
best-selling products which
our customers need or 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.
Why we engage
How we engage, measure and monitor
Examples of actions in 2021
Examples of outcomes in 2021
Links and more information
Customers
Providing great value to our customers is our
Monitoring our like-for-like (“LFL”) sales trends.
core purpose as a business. We monitor and
respond to our customers preferences and
Commissioning third party customer exit data and card provider
needs to ensure we maintain a compelling
customer transaction analysis to monitor customer demand,
product offering and price proposition at our
preferences and requirements.
stores.
Holding in-store promotional themed events to measure customer
response and reaction to extra value propositions in different product
areas.
Colleagues
Engagement with our colleagues is key to
Regular engagement programmes including colleague listening groups,
understanding how the business can support
apprentice listening groups, new store and distribution centre colleague
them in carrying out their roles effectively, make
surveys and bi-annual business updates from management.
improvements in our business and recognise
and reward exceptional performance.
Annual colleague survey for Retail, Distribution and Central Support
colleagues.
Development days and structured career progression programmes
including promotion paths to Store Manager and Area Manager roles.
Twice yearly updates to the Board on colleague engagement by Carolyn
Bradley, one of our Non-Executive Directors, as the Designated Director
for Workforce Engagement.
The Board reviews LFL sales data every month in the
Group’s management account reports. This is analysed
across each business fascia, the Grocery and General
Merchandise product split and for each main product line
within those categories.
The Group commissioned a study by Barclaycard in June
2020 and again in April 2021 in relation to customer
transactions at our B&M UK stores. The results of that in
June 2020 were that 23% of card transaction customers
had not shopped with B&M during the previous five
months. In addition, 71% of those new card transaction
customers shopped with B&M again during the
subsequent nine months, with an average visit frequency of
4.2x during that period.
See the
Customer
Feature on
pages 10 to 11.
During the early part of the pandemic when shoppers were
stockpiling goods, by tracking what lines of Grocery and FMCG
products were selling through very quickly we were able to
respond to the situation very rapidly. Our buying teams
reprioritised orders with suppliers and we reorganised labour and
picking in our distribution centres to make sure our stores were
replenished with those stocks which were in high demand
regularly to keep serving the needs of our customers.
As a result of the Barclaycard study we believe that the value
led pricing which we offer and our range coverage are
significant factors in attracting new customers.
While town hall meetings with management and colleagues
have not been possible during the pandemic, the business
has managed to continue with listening groups in its Retail,
Distribution and Central Support operations. It has also kept
on track career progression training for colleagues looking to
apply for Store Manager and Area Manager roles.
From our feedback with colleagues through our various
engagement processes we identify key themes of “What You Said”
by colleagues and responses to those by the business in relation
to “What We Did”. Examples of outcomes from that process this
year included:
• a plan to improve the user experience in relation to the Hub
See the
Colleagues
section in the
Corporate Social
Responsibility
report on pages
34 and 35
The Annual Employee Survey “Your Say” was completed this
year by our B&M and Heron Foods colleagues across all the
main operating functions of those businesses. We continued
to see in excess of 80% colleague satisfaction ratings
measured against five key questions to gauging colleague
response to how well they are kept informed about the
business, what is expected of them, career development
discussions, line manager support and leadership and how
valued they feel they are by the business.
which is our e-portal for sharing daily operational
communications with colleagues. That plan includes both
technology and data improvements to make it more efficient
for colleagues to find what current information they need more
easily; and
• a laptop roll-out programme to enable office based colleagues
to work efficiently while working remotely with up to date
secure access while off-site to the main operating systems.
To recognise the challenges which colleagues faced during the
pandemic this year, with very high levels of demand for goods at
stores and the need to react quickly in our distribution functions the
B&M UK business gave store and distribution colleagues a further
10% on top of their normal pay for the first 9 weeks of the financial
year. In January they were also awarded ones weeks extra pay.
Also any members of the Central Support function who were not
members of our colleague bonus schemes received one-off
bonuses in March 2021.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
45
Stakeholders and Section 172 statement
continued
Why we engage
How we engage, measure and monitor
Examples of actions in 2021
Examples of outcomes in 2021
Links and more information
Communities
The relationships we have with the
communities where we operate our stores and
distribution centres are key to the sustainable
development and growth of our business. We
want to serve customers locally with what they
want and at bargain prices. We also want to
support the communities where we operate by
providing jobs and career opportunities locally.
Evaluating real estate opportunities for opening new stores in
catchments where we are either under-represented or not represented
at all. This provides jobs and access to our value-led proposition to more
communities every time we open new stores.
Providing support for the community at local and national levels where
we can contribute to society more generally. Each time we open a new
store in the UK we try to find a local hero to perform the ribbon-cutting
ceremony to promote the good work they do in the community. We also
encourage our store managers to maintain those relationships in the
future and give continued support to those activities.
Suppliers
We regard our suppliers as key business
partners. Many of them have worked with us
for a number of years. We like to build long
term relationships with suppliers to support our
business. Our continued growth gives our
suppliers the potential to grow with us, which
also further strengthens those relationships.
There is regular engagement with the Group’s suppliers led by the
Group’s Trading Director, Grocery Controller, senior members of the
Group’s buying and merchandising teams and our Hong Kong based
sourcing agents. 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. During the pandemic the
ability to hold physical meetings has been curtailed and in place of that
virtual meetings and conference calls have taken place instead.
Investors
Our investors include shareholders,
bondholders and banks. They have a direct
financial interest in the performance of our
business and our continued success.
The management team have roadshow presentations and one-to-one
meetings with investor groups each year on the announcements of our
half-year and full-year results. Presentations and conference calls with
question and answer sessions are also held on the announcement of
the Q1 and Q3 trading updates announcements.
One-to-one conference calls and meetings are also held during the year
with both existing and potential new institutional investors.
The pandemic has prevented management from holding physical
meetings with investors, but in place of that webcasts, virtual meetings
and conference calls have been held during the year.
The Board reviews investor relations reports and market updates as a
standing agenda item at each of its meetings throughout the year. It also
has an investor relations agenda item with its corporate brokers at its
strategy day meetings each year.
46
B&M European Value Retail S.A. Annual Report & Accounts 2021
The Board continued to support the new store openings
We opened 43 new B&M stores and 17 new Heron Foods stores
programme of its B&M and Heron Foods businesses in
(including relocations and closures) in the financial year under
the UK. That also includes the relocation of stores in
review, notwithstanding the challenges to the construction and
existing areas where better real estate opportunities exist,
contracting sector during the pandemic.
and capital and maintenance expenditure on stores
ear-marked for refurbishment within the existing estate.
In the UK this year we created over 7,200 new jobs in our
B&M business.
The opening of new stores and relocations of stores (often
to larger premises) create new jobs and promotion
In response to the pandemic, B&M has delivered a total of £1m in
opportunities at those stores and also in our distribution
cash donations to foodbanks across the UK. We also temporarily
centres, while our business continues to grow.
extended our colleague discount scheme to all National Health
As the UK businesses were able to continue to trade and
crisis, giving £4.9m of discounts in total to those key workers.
provide essential goods during the pandemic, the Board
B&M also re-introduced the discount for all NHS workers
considered that it was in the best interests of the Group
throughout January 2021 when the pandemic spiked again.
Service workers at our B&M UK stores during the peak of the
and its stakeholders to waive the UK business rates relief
in the year under review.
See the
Social and
Communities
section in the
Corporate Social
Responsibility
Report on pages
37 and 38
The Group has repaid in full the furlough scheme assistance
in the UK which was originally provided at the onset of the
pandemic when the Group initially temporarily closed a
small number of stores. Also the B&M UK and Heron Foods
businesses decided to forego the business rates relief granted
by the UK Government which amounts to approximately £80m
in the financial year under review.
There has been a continuous rolling programme of
During the year as well as using our main Hong Kong sourcing
ensuring suppliers meet appropriate levels of external
agent (“MTL”) to carry out social compliance audit checks on those
audit social compliance checks. This is important to the
suppliers which they introduce to B&M, the Board supported
welfare of the employees of our suppliers, and the
management’s decision to outsource the audit checking
maintenance of their on-going trading relationships with
processes to MTL in relation to the Group’s own direct/non-MTL
our Group.
sourced suppliers. This has enabled the Group to apply a
consistent and established methodology and utilise MTL’s
As referred above, the B&M and Heron Foods UK
expertise and connections across Asia on B&M’s behalf. This
businesses have continued with their new store openings
has been more efficient as a central channel for carrying out this
and existing store refurbishment programmes during the
process for all suppliers rather than it being executed and spread
year. This is important to our main building services
across each of the individual in-house buying teams at B&M.
contractors, many of whom have worked on stores with
us for several years.
See the
Suppliers
section of the
Corporate Social
Responsibility
Report on pages
39 and 40
The B&M UK business has continued to use its main store fit-out
contractors where available to carry out new store opening
and existing store estate refurbishment works during the year.
That has provided them with a level of on-going work-streams
where the sector in which those contractors operate has been
severely impacted by the downturn in building investment
activity generally in the UK during the pandemic.
The Board reviewed its financing structure during the year
The Group successfully refinanced its senior bank debt facilities
to with regard to the maturity timelines for its senior bank
and bond in July 2020, which will now mature again in 2025.
debt facilities which were due to mature in August 2021
The bond was refinanced with a coupon of 3.625%, compared
and bonds in February 2022.
with a coupon of 4.125% on the previous bond.
The B&M UK business generated strong cash flow
The company declared a special dividend of 25p per share in
reserves in the financial year under review. The Board
November 2020 and also a further special dividend of 20p per
considered within the context of its capital allocation policy
share in January 2021, which were both within the Groups
and its debt leverage ceiling policy, the opportunity to
stated leverage ceiling of 2.25x net debt to adjusted EBITDA.
make further returns to shareholders in addition to its
ordinary dividend policy.
See the Viability
Statement
on page 32
and also the
Financial review
on page 18.
Why we engage
How we engage, measure and monitor
Examples of actions in 2021
Examples of outcomes in 2021
Links and more information
Strategic Report
Corporate Governance
Financial Statements
Communities
The relationships we have with the
Evaluating real estate opportunities for opening new stores in
communities where we operate our stores and
catchments where we are either under-represented or not represented
distribution centres are key to the sustainable
at all. This provides jobs and access to our value-led proposition to more
development and growth of our business. We
communities every time we open new stores.
want to serve customers locally with what they
want and at bargain prices. We also want to
Providing support for the community at local and national levels where
support the communities where we operate by
we can contribute to society more generally. Each time we open a new
providing jobs and career opportunities locally.
store in the UK we try to find a local hero to perform the ribbon-cutting
ceremony to promote the good work they do in the community. We also
encourage our store managers to maintain those relationships in the
future and give continued support to those activities.
Suppliers
We regard our suppliers as key business
There is regular engagement with the Group’s suppliers led by the
partners. Many of them have worked with us
Group’s Trading Director, Grocery Controller, senior members of the
for a number of years. We like to build long
Group’s buying and merchandising teams and our Hong Kong based
term relationships with suppliers to support our
sourcing agents. This includes a range of supplier visits, meetings and
business. Our continued growth gives our
presentations, factory visits and trade fair meetings in China, the UK and
suppliers the potential to grow with us, which
the EU with both existing and new suppliers. During the pandemic the
also further strengthens those relationships.
ability to hold physical meetings has been curtailed and in place of that
virtual meetings and conference calls have taken place instead.
The Board continued to support the new store openings
programme of its B&M and Heron Foods businesses in
the UK. 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.
The opening of new stores and relocations of stores (often
to larger premises) create new jobs and promotion
opportunities at those stores and also in our distribution
centres, while our business continues to grow.
As the UK businesses were able to continue to trade and
provide essential goods during the pandemic, the Board
considered that it was in the best interests of the Group
and its stakeholders to waive the UK business rates relief
in the year under review.
There has been a continuous rolling programme of
ensuring suppliers meet appropriate levels of external
audit social compliance checks. This is important to the
welfare of the employees of our suppliers, and the
maintenance of their on-going trading relationships with
our Group.
As referred above, the B&M and Heron Foods UK
businesses have continued with their new store openings
and existing store refurbishment programmes during the
year. This is important to our main building services
contractors, many of whom have worked on stores with
us for several years.
Investors
Our investors include shareholders,
The management team have roadshow presentations and one-to-one
bondholders and banks. They have a direct
meetings with investor groups each year on the announcements of our
financial interest in the performance of our
half-year and full-year results. Presentations and conference calls with
business and our continued success.
question and answer sessions are also held on the announcement of
The Board reviewed its financing structure during the year
to with regard to the maturity timelines for its senior bank
debt facilities which were due to mature in August 2021
and bonds in February 2022.
The Group successfully refinanced its senior bank debt facilities
and bond in July 2020, which will now mature again in 2025.
The bond was refinanced with a coupon of 3.625%, compared
with a coupon of 4.125% on the previous bond.
the Q1 and Q3 trading updates announcements.
One-to-one conference calls and meetings are also held during the year
with both existing and potential new institutional investors.
The pandemic has prevented management from holding physical
meetings with investors, but in place of that webcasts, virtual meetings
and conference calls have been held during the year.
The Board reviews investor relations reports and market updates as a
standing agenda item at each of its meetings throughout the year. It also
has an investor relations agenda item with its corporate brokers at its
strategy day meetings each year.
The B&M UK business generated strong cash flow
reserves in the financial year under review. The Board
considered within the context of its capital allocation policy
and its debt leverage ceiling policy, the opportunity to
make further returns to shareholders in addition to its
ordinary dividend policy.
The company declared a special dividend of 25p per share in
November 2020 and also a further special dividend of 20p per
share in January 2021, which were both within the Groups
stated leverage ceiling of 2.25x net debt to adjusted EBITDA.
We opened 43 new B&M stores and 17 new Heron Foods stores
(including relocations and closures) in the financial year under
review, notwithstanding the challenges to the construction and
contracting sector during the pandemic.
In the UK this year we created over 7,200 new jobs in our
B&M business.
See the
Social and
Communities
section in the
Corporate Social
Responsibility
Report on pages
37 and 38
In response to the pandemic, B&M has delivered a total of £1m in
cash donations to foodbanks across the UK. We also temporarily
extended our colleague discount scheme to all National Health
Service workers at our B&M UK stores during the peak of the
crisis, giving £4.9m of discounts in total to those key workers.
B&M also re-introduced the discount for all NHS workers
throughout January 2021 when the pandemic spiked again.
The Group has repaid in full the furlough scheme assistance
in the UK which was originally provided at the onset of the
pandemic when the Group initially temporarily closed a
small number of stores. Also the B&M UK and Heron Foods
businesses decided to forego the business rates relief granted
by the UK Government which amounts to approximately £80m
in the financial year under review.
During the year as well as using our main Hong Kong sourcing
agent (“MTL”) to carry out social compliance audit checks on those
suppliers which they introduce to B&M, the Board supported
management’s decision to outsource the audit checking
processes to MTL in relation to the Group’s own direct/non-MTL
sourced suppliers. This has enabled the Group to apply a
consistent and established methodology and utilise MTL’s
expertise and connections across Asia on B&M’s behalf. This
has been more efficient as a central channel for carrying out this
process for all suppliers rather than it being executed and spread
across each of the individual in-house buying teams at B&M.
The B&M UK business has continued to use its main store fit-out
contractors where available to carry out new store opening
and existing store estate refurbishment works during the year.
That has provided them with a level of on-going work-streams
where the sector in which those contractors operate has been
severely impacted by the downturn in building investment
activity generally in the UK during the pandemic.
See the
Suppliers
section of the
Corporate Social
Responsibility
Report on pages
39 and 40
See the Viability
Statement
on page 32
and also the
Financial review
on page 18.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
47
Corporate Governance
Chairman’s introduction
Dear Shareholder,
We have continued to evolve our approach to
corporate governance in line with the growth
and development of our Group in this last year
and our admission to the FTSE 100 Index in
September 2020. We have applied our values in
our Board decision making and considered the
interests of our stakeholders. We have also
recognised the continued growing importance
of environmental, social and governance (“ESG”)
issues, the need for greater gender diversity
within our Board and Executive Committee, and
the constantly developing framework of
reporting requirements. Covid-19 and Brexit have
also brought a series of governance challenges
which we have responded to. Some key points
are summarised below.
Board changes
We have continued to evolve the membership of
the Board and our succession plans during the
year.
In particular we appointed a new Chief Financial
Officer to Board in the year. Further details of
that appointment process are set out in the
Nomination Committee report on page 64
below.
The Board has continued to progress its planning
in relation to its gender diversity balance
following the retirement of one of its female
members in January 2020. Details of that
process are also included in the Nomination
Committee report.
As referred to on page 4 above, Gilles Petit has
notified the Company that he will not be
standing for re-election as a Non-Executive
Director of the Board at the AGM on 29 July 2021
as he wishes to pursue opportunities supporting
start-up businesses.
Directors’ remuneration policy
The Directors’ Remuneration Policy is due for
renewal this year. A revised three year policy is
being proposed for shareholder approval at our
AGM on 29 July 2021. We intend to maintain the
same overall structure to that of the existing
policy, which has worked well and been popular
with shareholders as reflected in their voting
each year.
Details of the proposed policy are set out in our
Directors’ Remuneration Policy report on pages
66 to 89 below. We hope that shareholders will
support the new policy which aims to retain,
incentivise and attract talent in relation to our
senior executive management team.
ESG
As a Board we continue to maintain high
standards of corporate governance to support
the delivery of our overall vision and purpose as
a business and our values (see page 45) which
underpin our culture of being proud of
everything we do.
We recognise that ESG is of increasing
importance to our stakeholders. In relation to
environmental outputs our focus is on how
efficiently we can do things while we continue to
grow our business at a significant rate. At the
same time we are providing communities with
increased access to our bargain priced goods
and creating new jobs from our store opening
programmes. Managing our businesses well to
consistently produce returns for our investors is
also a central part of the good governance of our
Group. More details of our ESG activities and
outputs are contained in our Corporate Social
Responsibility report on pages 33 to 43 above.
We remain committed to the continued
development of our strategy and disclosures in
relation to ESG, while we determine as a Board
(along with the management team), what the
right standards and targets are for us to
benchmark ourselves against in both the short
and longer term as a value retailer and high
growth business.
We intend to develop our ESG strategy further in
FY22, including the setting of appropriate targets
and preparing to comply with the Task Force on
Climate-related Financial Disclosures reporting
requirements.
Peter Bamford
Chairman
We have continued
to evolve our
approach to
corporate
governance
48
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Covid-19 and our stakeholders
I have referred to the way the business has
addressed the challenges of Covid-19 in relation
to trading in the Chairman’s Statement on page
4 of the Strategic Report.
The risks posed by Covid-19 to our business and
stakeholders have been mitigated very
effectively by the key actions taken in FY20 in
relation to our supply chain before the pandemic
came to the UK and those in FY21. The actions
taken in FY21 are described in the CEO’s review
on page 14 and in Principal Risks section of the
Strategic Report on page 24.
Our main aim throughout the pandemic has
been to ensure that the welfare of our
colleagues and customers is protected, while
helping customers to access essential goods
from our stores. True to one of our key values,
our colleagues have made everyone at B&M
very proud of the way they have done that
during a very challenging time.
Brexit
In December 2020 we held an EGM for the
adoption of resolutions to address changes to
the regulatory regime applicable to B&M as
a Luxembourg registered company as a
consequence of the UK’s exit from the EU.
The two main aspects of that in relation to the
dematerialisation of our shares and the
framework in relation to the regulation of
takeovers were approved by shareholders and
implemented ahead of the end of the
transitional period of the UK’s exit from the EU
on 31 December 2020.
Board Effectiveness
We carried out an internal Board evaluation
process this year. Details of the process and
feedback from that review, along with actions
arising from it are set out on page 56 below.
Peter Bamford
Chairman
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
49
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
Alex Russo
Chief Financial Officer
Ron McMillan
Senior Independent Non-Executive
Director and Chairman of the
Audit & Risk Committee
Appointment: March 2018
Appointment: December 2004
Appointment: November 2020
Appointment: May 2014
Peter joined the Board of B&M as
Non-Executive Chairman on 1 March
2018. He has extensive experience,
in both Executive and Non-Executive
roles, of the retail sector and high
growth international businesses and
brands. He is also a seasoned PLC
Director and Chairman having served
on PLC boards for over 24 years in a
variety of roles. In his non-executive
career this has included Chairman of
Superdry plc, Deputy Chairman and
Senior Independent Director of Spire
Healthcare plc and Non-Executive
Director at Rentokil-Initial plc. In his
executive career he was a Director of
Vodafone Group Plc from 1998 to 2006
where he held senior executive roles,
including Chief Marketing Officer and
Chief Executive of Vodafone NEMEA
region. Prior to that he held a number
of board and senior executive positions
with leading retailers including WH
Smith, Tesco and Kingfisher. Peter is
also the Chairman of the Nomination
Committee of B&M.
Simon has been Chief Executive Officer
of the B&M Group since 1 December
2004. He has a background in
consumer goods, corporate finance
and consulting having been a
co-founder and Managing Director of
wholesale homeware business, Orient
Sourcing Services, before acquiring
B&M jointly with his family and prior to
that holding various positions with
McKinsey & Co., 3i and Barclays Bank.
Simon is also a member of the
Nomination Committee of B&M.
Alex joined the B&M Group on
5 October 2020 and the Board as the
Group’s Chief Financial Officer on
16 November 2020. He has previously
had a number of senior executive
board positions with leading UK and
International retailers including Asda,
Tesco, Kingfisher and Wilko. He served
as Chief Financial Officer at Walmart’s
Asda business between 2014 and 2018.
His retail career covers the UK, Europe
and Asia.
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 Chairman of N Brown Group
PLC, the Senior Independent Director
and Audit Committee Chairman of
SCS PLC and Chairman of the Audit
Committee of HomeServe plc.
Committee membership:
Committee membership:
Committee membership:
Committee membership:
NOM
NOM
–
A&R
REM
NOM
50
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Committee membership key
A&R Audit & Risk
REM Remuneration
NOM Nomination
Committee Chair
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.
External appointments
She is a Non-Executive Director of The
Hut Group plc, The British Standards
Institution and Symington Family
Estates.
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 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.
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 a Non-Executive Director of
Lagardère SCA.
Outgoing members
Paul McDonald
Chief Financial Officer
Retirement: November 2020
Paul served as the Group’s Chief
Financial Officer from May 2011,
prior to B&M’s flotation in 2014, and
continued in that role until November
2020. He retired from the Board on
15 November 2020.
Committee membership:
Committee membership:
Committee membership:
REM
NOM
A&R
REM
NOM
A&R
NOM
Carolyn is also the Designated
Non-Executive Director for
Workforce Engagement.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
51
Corporate Governance
Corporate governance report
Background
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 referred to on page 77, 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 50 and 51 for more information
Audit & Risk
Committee
This committee is made up of 3
Independent Non-Executive Directors
The main responsibilities of the
Committee are:
–
reviewing and monitoring the
integrity of the financial statements
and price sensitive financial
releases of the Company;
– monitoring the quality,
–
effectiveness and independence of
the external auditors and
approving their appointment fees;
– monitoring the independence and
activities of the Internal Audit
function;
assisting the Board with the risk
management strategy, policies
and current risk exposures;
reviewing the adequacy and
effectiveness of the Group’s
internal financial controls and
control and risk management
systems; and
–
– maintaining effective oversight of
compliance by our UK businesses
with the Groceries Supply Code of
Practice.
See page 58 for a copy
of the Committee’s report
Nomination
Committee
This committee is made up of the
Chairman, CEO and 4 Independent
Non-Executive Directors
Remuneration
Committee
This committee is made up of 3
Independent Non-Executive Directors
Workforce Engagement
NED
Carolyn Bradley is the Designated
Non-Executive Director for Workforce
Engagement
The main responsibilities of the
Committee are:
–
–
–
–
–
reviewing the structure, size and
composition of the Board, including
the balance of Executive and
Non-Executive Directors;
putting in place plans for the
orderly succession of appointments
to the Board and to senior
management;
identifying and nominating
candidates, for approval by the
Board, to fill Board vacancies as
and when they arise;
ensuring, in conjunction with the
Chairman of the Company, that
new Directors receive a full, formal
and tailored induction; and
keeping under review the
leadership and senior
management needs of the Group
including executive and
Non-Executive Directors and the
wider senior management team,
with a view to ensuring the
continued ability of the Group to
compete effectively in the
marketplace.
See page 64 for a copy
of the Committee’s report
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; and
reviewing pay and conditions
across the Group’s wider
workforce.
See page 66 for a copy
of the Committee’s report
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.
–
–
–
–
Terms of Reference of each of the Committees are available on B&M’s website at
www.bandmretail.com
See page 34 on
Workforce Engagement
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.
52
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Members of the broader senior management
teams of B&M, Heron Foods and Babou
participate at meetings of the Board and store
tours with the Board during the course of the year,
and attend the annual strategy day of the Group
and strategy sessions of the Board held during the
course of the year on the relevant business fascias.
During the pandemic there have only been a few
opportunities for physical meetings and store tours
due to restrictions on travel and social distancing.
However the Board intends to resume its usual
programme of meetings and store tours as soon
the lifting of restrictions allow for it and normal
travel can be resumed.
The implementation of the Board approved
strategy, policies and decisions are delegated to
the Executive Directors of the Company to adopt
them in relation to the day to day operational
management of the Group’s main businesses.
The Executive Directors are also supported by
senior management teams in each of the B&M,
Heron Foods and Babou businesses of the
Group. The leadership teams of those businesses
regularly have business update and trading
review meetings with the Group CEO and CFO.
Management responsibilities
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 52). The reports of each
of the Committees for the year under review are set
out on pages 58, 64 and 66.
A detailed presentation of each of the B&M,
Heron Foods and Babou businesses and their up
to date trading performance is provided by the
CEO at each Board meeting, together with
comprehensive financial reports and analyses
presented by the CFO. During those months that
fall 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 Group’s businesses.
Schedule of matters reserved to the Board
The following matters are reserved to the Board
for its approval:
Approve
• approving the long-term strategy and
objectives of the Group and reviewing the
Group’s performance and management
controls;
• approving any changes to the capital
structure of the Group;
• approving the financial reporting, budgets,
dividend policy and any significant changes
in accounting policies and practices of the
Group;
• approving any major capital projects of the
Group;
• 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;
Ensure
• ensuring a satisfactory dialogue with
shareholders based on the mutual
understanding of objectives;
• ensuring the maintenance of a sound system
of internal controls and risk management;
and
Review
•
reviewing the Company’s overall corporate
governance and approving the division of
responsibilities of members of the Board.
Board and Committee attendance at scheduled video conferences and meetings during FY21:
Directors
Peter Bamford – Chairman
Simon Arora
Alex Russo (appointed 16 November 2020)1
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit
Directors who retired from the Board during FY21
Paul McDonald (retired 15 November 2020)2
Board
6
Attended
Audit & Risk
Committee
3
Attended
Nomination
Committee
3
Attended
Remuneration
Committee
5
Attended
6
6
2
6
6
6
6
4
–
–
–
3
–
3
3
–
3
3
–
3
3
3
3
–
–
–
–
5
5
5
–
–
1. Alex Russo has a full attendance record during the period from his appointment to the Board on 16 November 2020 for the year under review.
2. Paul McDonald had a full attendance record up to his retirement from the Board on 15 November 2020 for the year under review.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
53
Corporate governance report
continued
A number of additional ad hoc video conferences
were also held on particular matters between the
regular scheduled programme above.
In addition to the regular scheduled video
conference discussions, the Board and
Committees have passed a series of written
resolutions during the year in relation to the
formal decisions taken by them.
Also during the year video conference
discussions between the Non-Executive Directors
and Chairman have taken place and also
between the Non-Executive Directors without
the Chairman being present.
The Chairman has also had one-to-one
discussions with each of the Independent
Non-Executive Directors.
The Company held two general meetings of
shareholders in the year under review, being the
Annual General Meeting on 18 September 2020
and an Extraordinary General Meeting on
3 December 2020.
Board composition
In November 2020, Alex Russo was appointed as
an Executive Director and Group CFO and Paul
McDonald retired as an Executive Director and
Group CFO.
The Board comprises the Chairman, 2 Executive
Directors, being the CEO and CFO, and 4
Independent Non-Executive Directors.
The Code recommends that at least half of the
Board, excluding the Chairman, should comprise
Independent Non-Executive Directors. The
Company met this requirement during the whole
of the year under review, with each of Ron
McMillan, Tiffany Hall, Carolyn Bradley and Gilles
Petit being Independent Non-Executive Directors.
Following the year end this requirement
continued to be met and it will also continue to be
met notwithstanding that Gilles Petit will not be
seeking re-election to the Board at the AGM on
29 July 2021.
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 (the “Relationship
Agreement”) which came into effect on the
admission of the Company’s shares to trading on
the London Stock Exchange in June 2014 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
2021, SSA Investments (together with Praxis
Nominees Limited as its nominee) held 10.98% of
the total issued shares in the Company.
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 66 to 89.
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 33. During 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
54
B&M European Value Retail S.A. Annual Report & Accounts 2021
Board composition
Chairman
Executive
Directors
Independent
Non-Executive
Directors
1
2
4
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.
members as at the year-end was 28.6%. The
Company is also planning to appoint another
female Non-Executive Director to the Board. It is
currently undertaking a search and selection
process and expects to have concluded that
appointment before the end of the calendar year.
In addition, Gilles Petit is not standing for
re-election to the Board at the AGM on 29 July
2021, as referred to on page 4 above. In
consequence of these changes, the Board will
have at least 33% female representation by the
time of the 2021 AGM.
The Executive Committee of the first level of senior
management below the Board has one female
member out of a total of six members, being the
Group People Director. Prior to February 2020 the
Executive Committee did not have any female
members.
Strategic Report
Corporate Governance
Financial Statements
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
10.98% of the ordinary share capital and voting
rights in the Company either directly or indirectly
as the beneficial owner.
• 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
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.
•
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.
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.
The same process above applies to the purchase
of freehold store premises by the Group from
those related parties.
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;
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 92 and 93 in relation to details of
related party transactions entered into in the
financial year 2020/21 and also as set out in note
27 on pages 147 and 148 of the financial
statements.
Audit & Risk Committee
The Audit & Risk Committee consists of 3
Independent Non-Executive Directors and the
Chairman of the Committee has recent and
relevant financial experience.
The members of the Committee during the year
under review were Ron McMillan (Chair), Carolyn
Bradley and Gilles Petit. 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 50 and 51 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 52 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 58
to 63 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 Tiffany Hall (Chair),
Ron McMillan and Carolyn Bradley.
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 52 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 retained FIT Remuneration
Consultants LLP until November 2020 and thereafter
PricewaterhouseCoopers LLP as external advisors
who attended and participated at all meetings
during the periods of their appointment at the
request of the Chair of the Committee.
The Directors’ Remuneration Report on pages
66 to 89 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), Ron McMillan,
Tiffany Hall, Carolyn Bradley and Gilles Petit.
All meetings of the Committee are also attended
by the Group’s General Counsel, at the invitation
of the Chairman of the Committee.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
55
Corporate governance report
continued
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 52 above.
The Nomination Committee Report on pages 64
to 65 sets out details of the role and activities of
the Committee in the last financial year.
Board and Committees
effectiveness review
Board and Committee effectiveness reviews
were conducted in the year under review. As part
of that process the chairman had discussions
with Executive Directors on a one-to-one basis,
the Non-Executive Directors on a one-to-one and
together as a group to discuss matters relating to
the Board, its balance and monitoring of the
exercise of powers of the Executive Directors.
The Directors completed confidential
questionnaires in relation to the Board and each
of its three main standing Committees. The
process was co-ordinated by the Group’s General
Counsel and he prepared a report on the
feedback provided by the Directors which was
then presented to the Board who discussed the
main themes and points arising from it.
The review was very positive overall. The key
themes identified from the review were gender
diversity, executive team development, retention
and succession, international strategy including
the on-going development of the model of the
business in France, continuation of the rolling
programme of deep dive discussions on key
strategic matters and moving ahead with the
next stage of development of the Group’s ESG
strategy in FY22.
In relation to those areas so far the following
steps have been taken:
• as set out on page 65 the Company is actively
seeking to appoint a further female
Non-Executive to the Board by the time of the
forthcoming AGM or as soon as reasonably
practical thereafter;
• over the last few years there has been a
strengthening of the broader management
team in the UK and France. See page 30
above. The Group People Director has also
developed a succession plan in relation to a
number of the key roles in those teams. There
is still some work to be done in relation to that
and it remains a continuing programme of
action for the Nomination Committee and the
management team;
• at the Board’s annual strategy day in March
2021 a rolling programme of deep dive
subjects was agreed to be scheduled for the
year ahead. That also included a deep dive in
relation to the French business following the
work which has been carried out in the last
year in relation to the refinement of product
mix and the re-branding and new layouts of a
number of the stores in the French business to
the B&M fascia and format; and
•
the Board discussed the development of its
ESG strategy for FY22 at its annual strategy
day in March 2021 and identified a number of
potential avenues for further evaluation by the
management team including what type of
reporting standards and metrics might be
appropriate to B&M as a value retailer.
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.
Appointments, induction and development
Where any new Director is appointed by the
Board, the Nomination Committee lead the
process, evaluate the balance of skills, experience,
independence, and knowledge and diversity on
the Board. In light of that process it approves a
description of the role and capabilities required
and identifies candidates for the Board to consider
using external search consultants.
All new Directors receive a full, formal and
tailored induction programme and briefing with
members of senior management. They are also
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 EU and UK
Market Abuse Regulations, together with
governance policies and the UK Corporate
Governance Code.
The induction of Alex Russo as a new Executive
Director and Group CFO took place this year with:
• a series of structured meetings with the CEO,
Group Trading Director, Group People
Director, the Group’s General Counsel and
members of the broader senior management
team of B&M;
• meetings with the CEO and Finance Director
of Heron Foods and tour of their head office
and distribution centre; and
• virtual meetings with senior management
of Babou.
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 Directors update their knowledge and
familiarity with the businesses of the Group
throughout each year with a mix of central
operations and store tours of 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. There have
only been a few opportunities for physical
meetings and one store tour during the last year
due to restrictions on travel and social distancing
during the pandemic. The Board intends to
resume its usual programme of meetings and
store tours as soon the lifting of restrictions allow
for it and normal travel can be resumed.
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.
Re-election of Directors
Following the Board review and evaluation
exercise carried out in the financial year 2020/21
as referred to above, the Nomination Committee
has recommended that each of the Directors be
re-elected to the Board. This is except for Gilles
Petit who has notified the Company that he will
not be seeking re-election to the Board at the
AGM on 29 July 2021.
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 appointments,
responsibilities and duties. Accordingly, each of
the Directors seek re-election at the Company’s
Annual General Meeting on 29 July 2021, with the
exception only of Gilles Petit as referred to above.
56
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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 5 years ago, following a review of the
monitoring and reporting systems of the Group
by the Audit & Risk Committee.
The Board carried out a review of the key risks to
the Group’s businesses at its annual strategy day
conference in the year under review. The Board is
satisfied that those risks and relevant mitigating
actions are acceptable for a business of the type,
size and complexity as that operated by
the Group.
The key elements of the Group’s system of
internal controls are as follows:
Financial reporting: monthly management
accounts are provided to the members of the
Board that contain current financial and
operational reports. Reporting includes an
analysis of actual versus budgeted performance
and overviews of reasons for significant
differences in outcomes. The annual budget is
reviewed and approved by the Board. The
Company reports half yearly and publishes
trading updates in line with market practice;
Risk management: the creation and
maintenance of a risk register, which is
continuously updated and monitored, with full
reviews occurring on at least an annual basis,
facilitated by the Internal Audit function of the
Group. Each risk identified on the risk register is
allocated an owner, at least at the level of a
senior manager within the business, and the
action required, or acceptance of the risk is also
recorded. The risk registers are provided to the
Audit & Risk Committee and the Committee
reports key risks and mitigating actions to the
Board for monitoring as appropriate;
Monitoring of controls: following the
establishment of the Internal Audit function, the
Audit & Risk Committee receive regular reports
from the Internal Audit function as well as those
from the external auditors. There are formal
policies and procedures in place to ensure the
integrity and accuracy of the accounting records
of the Group and to safeguard its assets;
Staff policies: there are formal policies in the
Group in place in relation to anti-bribery and
corruption, anti-slavery and whistle-blowing
policies in relation to reporting of any suspected
wrongdoing or malpractice. Those policies are
reviewed and updated by the Group as required
from time to time.
The Board and the Audit & Risk Committee have
carried out a review of the effectiveness of the
system of internal controls during the year ended
31 March 2021 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 32.
Regulatory framework and Brexit
In December 2020 an EGM was held for the
adoption of resolutions to address certain
changes to the regulatory regime applicable
to the Company as a Luxembourg registered
company, as a consequence of the UK’s exit
from the EU.
One of the main legal changes included the
shares in the Company being dematerialised
and held through an EU member state central
securities depositary. This was to ensure that
following with the expiry of the transitional period
of the UK’s exit from the EU on 31 December 2020
(“Exit Day”), the Company’s shares would
continue to be settled in the London market
without any disruption to trading in them.
The other main consequence of Exit Day was that
the UK City Code on Takeovers and Mergers (the
“City Code”) and the Luxembourg law of 19 May
2006 on takeovers would have then ceased to
apply to the Company. Resolutions were
therefore proposed at the EGM to amend the
Articles of Association of the Company to adopt
provisions requiring continued adherence to the
City Code and squeeze-out and sell-out rights of
minority shareholders based on the framework
under Luxembourg takeover law. This was to
reflect the position which had applied to the
Company prior to the Exit Day in our Articles
of Association.
All the resolutions in relation to the above matters
were passed at the EGM with 99.99% of the votes
cast being in favour.
Shareholder relations
All the resolutions in relation to the above matters
were passed at the EGM with 99.99% of the votes
cast being in favour.
Meetings and calls are regularly held with
institutional investors and analysts in order to
provide the best quality information to the
market. Due to the pandemic that has been
restricted to virtual meetings and calls this year,
but we have maintained a regular dialogue
through those means throughout the year with
our investors.
The formal reporting of our full year results will be
a combination of webcasts, presentations,
one-to-one virtual meetings and conference
calls. 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 an account of the progress of
our businesses over the past year will be given
with the opportunity for shareholders to raise
any questions.
The Company holds conference calls and
one-to-one virtual 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 91;
(b) relationship agreement and independence
statement – pages 92 and 93.
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 90 to 94 below.
Peter Bamford
Chairman
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
57
Corporate Governance
Audit & Risk Committee report
Further information on the Committee’s
responsibilities and the manner in which they
have been discharged is set out below.
Going forward, I shall ensure that the Committee
continues to acknowledge and embrace its role
of protecting the interests of shareholders as
regards the integrity of published financial
information and the effectiveness of audit.
The outcome of the consultations on the
Government’s proposals to restore trust in audit
and corporate governance has recently been
published and the Committee will monitor the
progress of the proposals over the coming
months and years.
I am available to speak with shareholders at any
time and will also be available at the Annual
General Meeting on 29 July 2021 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
2 June 2021
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. Towards the end of the previous
year, the Head of Internal Audit resigned and
temporary resources were put in place to ensure
that the planned programme of internal audits
for the year under review was completed.
Following a facilitated search, a new Head of
Internal Audit was appointed in July 2020 and
resources were strengthened.
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.
Ron McMillan
Chairman of the Audit & Risk Committee
The Committee has
oversight of the
external financial
reporting of the
Group, risk
management and
mitigation, the
internal control
framework and the
effectiveness of
internal and
external audit.
58
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Committee composition
The Committee comprises three members, each
of whom is an independent Non-Executive
Director of the Company. Two members
constitutes a quorum. The Committee must
include one financially qualified member with
recent and relevant financial experience. The
Committee Chairman fulfils that requirement. All
members are expected to have an
understanding of financial reporting, the Group’s
internal control environment, relevant corporate
legislation, the roles and functions of internal and
external audit and the regulatory framework of
the business. As reflected in the biographical
summaries on pages 50 and 51, 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, Carolyn Bradley and Gilles
Petit. Details of Committee video conferences
and attendances are set out on page 53 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
Committee video conferences, the Chairman of
the Committee has had many discussions with
the CFO and the internal and external auditors
during the course of the year.
Although not members of the Committee, Alex
Russo, CFO and Paul Owen, Group General
Counsel, and representatives from the internal
and external auditors attended Committee video
conference discussions during the year. The
Chairman of the Board and the CEO are also
invited to attend.
Responsibilities
The responsibilities of the Audit & Risk
Committee, as delegated by the Board, are set
out in its terms of reference which are available
on the Group’s corporate website. They include
the following:
•
reviewing the integrity of the financial
statements, price sensitive financial releases
of the Group and the significant financial
judgements and estimates relating thereto;
• monitoring the scope of work, quality,
effectiveness and independence of the
external auditors and approving their
appointment, reappointment and fees;
• monitoring and reviewing the independence
and activities of the internal audit function;
• assisting the Board with the development and
execution of a risk management strategy, risk
policies and current risk exposures, including
the maintenance of the Group’s risk register;
• keeping under review the adequacy and
effectiveness of the Group’s internal financial
controls and internal control and risk
management systems;
• 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”).
Committee activities in 2020/21
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 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;
•
review of the 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 regulatory bodies.
Accounting matters
The Committee considered the following
accounting matters during the year:
•
the methodology and assumptions applied
by the Group to value inventory;
• accounting practice in relation to property
dilapidations liabilities;
• goodwill impairment in relation to each of the
companies in the Group;
• hedge accounting;
•
•
the accounting for supplier rebates; and
the continued application of IFRS16.
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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
59
Audit & Risk Committee report
continued
The video conferences at which the following matters were considered are set out below:
Jun
2020
Nov
2020
Jan
2021
1
May
2021
Internal Audit (“IA”)
IA annual evaluation
IA work plans, reports and updates
External Audit
Audit reports on preliminary results and annual report FY20
Audit reports on preliminary results and annual report FY21
Audit report on the Group’s interim results FY21
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 deferred consideration on the disposal of Jawoll
Adopting accounting for hedging instruments and policy
Accounting in relation to supplier rebates
Adoption of IFRS 16
Accounting in relation to Covid-19 business rates relief
Review of goodwill impairment testing in relation to Babou
Other matters
Review of the Corporate Risk Register and risks included in the Annual Report
Review of related party transactions (store leases and flights)
Quarterly reviews of related party transactions (associated companies)
Year-end final review of related party transactions (store leases)
Consideration of post-Brexit implications for financial reporting
IT systems, security and business continuity
Review of Groceries Code compliance and complaints
Review of going concern and viability for FY20 and FY21
Review of Social Compliance audit processes relating to suppliers
Review of Heron Foods’ financial controls
Review of Babou’s financial controls
Review of Babou’s stock management
Review of store rental payment processes
IT cyber security
Post-Brexit export processes
Review of B&M staff expenses policy
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Review of controls in relation to refunds processes at stores
Review of e-learning staff training platform
Review of GDPR
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Review of the annual revenue cycles, recording and controls
Review of direct imports quality controls
Review of corporate policy compliance in B&M UK and Heron Foods
B&M UK stock take attendances
Review of compliance with Corporate Criminal Offence legislation
Review of product recalls
Transport availability
Store repair and maintenance programmes
Recruitment procedures
Goods not for resale in Heron Foods
Review of Babou corporate policies and financial controls
Social responsibility checks of direct import suppliers
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This was held after the FY21 year end but prior to the publication of this report.
60
B&M European Value Retail S.A. Annual Report & Accounts 2021
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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.
IT systems, cyber security and business
continuity are acknowledged as being significant
risks and the risk mitigations and key actions in
FY21 are set out in the principal risk section of this
Annual Report on page 24.
During the year, Internal Audit carried out a review
of the Group’s IT systems from a security and
business continuity perspective and concluded
that appropriate controls are in place and that
they are adequate and operating effectively.
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.
Related party transactions
There is an established process for the
consideration and review of related party store
lease and freehold acquisition transactions of
the Group with Arora Family. Details of that
process are set out on page 55 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.
Strategic Report
Corporate Governance
Financial Statements
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.
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
the risks and the impact they may have;
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 32.
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 an 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 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.
Going concern has in the past year again been
an area of particular focus for management and
the auditors and the Audit Committee has
discussed and challenged the assumptions
implicit in the Group’s budgets and forecasts.
B&M’s UK business is deemed to be an essential
retailer and it has been table to trade throughout
the lockdown periods. Notwithstanding, the
Committee is satisfied that KPMG has applied an
appropriate degree of scepticism in reviewing
the Group’s budgets and forecasts.
The Group’s viability statement in on page 32.
Fair, balanced and understandable.
The Committee considered whether the 2021
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 2021 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 18 September 2020
as the Group’s independent external auditors
(réviseur d’entreprises agréé) for the financial
year ended 27 March 2021. 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.
Audit independence
The Committee sought and was provided with
assurance from the Audit Engagement partners
that they and all members of KPMG’s staff
engaged in the audit had confirmed that they
and their dependents were independent and
that KPMG as a firm was independent.
Audit quality
The Committee assessed the quality of KPMG’s
audit in a number of ways:
1.
the Committee met with the senior members
of the KPMG audit team on three occasions
during the year and discussed the planning,
execution and reporting of audit work and
findings. All senior members of the KPMG
team contributed to these meetings;
2. in conjunction with the CFO and senior
members of the finance team, the Audit
Committee discussed and assessed KPMG’s
approach to execution of and reporting of
their audit and related findings; and
3. the Committee considered the matters set
out in KPMG’s 2020 Transparency Report,
dealing with audit quality monitoring and
remediation. It considered the results of
internal and external engagement reviews
and the steps being taken by KPMG to
address findings. Within KPMG, audit quality
is monitored at a global level and at an
engagement level with all engagement
partners being reviewed at least once in a
three year cycle.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
61
Audit & Risk Committee report
continued
In reviewing KPMG’s 2020 Transparency Report,
the Committee noted the firm’s commitment to
quality and risk management. The Committee
also discussed with KPMG the results of the FRC
Audit Quality Inspection of the UK firm, which
were published in July 2020.
The Committee noted that KPMG had taken steps
to address the key findings of the 2019 FRC report
by continuing with and extending the initiatives
within its three year Audit Quality Transformation
Plan. Whilst there has been considerable focus
on audit quality, the FRC concluded that there
remains some areas where improvements need
to be made.
On an annual basis, the Audit Quality Review
(“AQR”) team of the FRC carries out reviews of the
audits of FT350 companies. In the year to July
2020, across the seven largest accounting firms,
33% of audits reviewed were considered to need
more than limited improvement. The individual
results of firms were similar. The main areas of
concern to the AQR continue to be impairments of
goodwill and intangibles, revenue and contracts
and provisions, including loan loss provisions.
KPMG are taking steps to improve the results of
the 2020 AQRs undertaken and the Committee
will monitor the progress it is making.
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
29 July 2021. Given KPMG’s short tenure of five
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.
The Committee considered in detail KPMG’s audit
planning documentation and satisfied itself that
he audit work to be carried out by KPMG covered
all significant aspects of the Annual Report and
Accounts. There were no areas which the Audit
Committee asked KPMG to look at specifically.
KPMG’s report to the Audit Committee at the
conclusion of the audit confirmed that the audit
had been carried out as set out in the planning
documentation and the Audit Committee
considered the findings of KPMG as reflected in
their audit opinion and their year-end report to
the Board. KPMG’s audit opinion sets out the key
matters that, in their professional judgment, were
of most significance in their audit. These are
consistent with the key matters considered and
agreed with the Audit Committee when the audit
was planned. KPMG’s opinion describes how
these matters were addressed in the audit and
the scope and nature of their work reflects the
thoroughness of their approach and the degree
of scepticism applied.
Non-audit work
The Board’s policy in relation to the auditors
undertaking non-audit services is that they are
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. Fees for new audit work
must be approved by the Committee in advance.
KPMG were paid £791,798 during the year in
relation to audit work and £98,100 in relation to
work associated with the half year interim report.
Fees for other services provided by KPMG were
£92,057 which principally related to their work as
reporting accountants on the refinancing of the
Group in FY21.
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.
Critical Judgments
Critical judgments and key sources of estimation
uncertainty are set out on pages 113 to 115 of the
Annual Report. These relate to investments in
associates, hedge accounting, carried forward
tax losses, goodwill impairment, inventory
valuation, lease discount rates and lease terms.
Investments in associates
Multilines International Ltd is 50% owned by the
Group but is treated as an associate because of
the level of influence exercised by the Group,
which is considered to be more in keeping with
that of an associate than a joint-venture.
Hedge accounting
Significant judgment is involved in forecasting the
level of US dollar purchases to be made within
the period that a forward hedge has been
bought for. The Group takes a prudent view that
no more than 80% of the operational hedging in
place can be subject to hedge accounting.
Carried forward tax losses
The French entity, Babou, had carried forward a
significant historical tax loss in prior years which
the Group has not recognised as a deferred tax
asset due to the uncertainty around whether it
would be able to utilise the tax loss against future
profits. However, prudent budgets and forecasts
made by management show that the tax loss is
highly likely to be realisable in the foreseeable
future. A judgment has therefore been made that
the tax loss should be recognised and as such a
€7.4m deferred tax credit has been recognised.
This assessment has not been affected by the
closure of the French stores due to the Covid-19
pandemic.
Estimation Uncertainty
Goodwill impairment
The Group’s calculation of goodwill impairment
includes assumptions about the cash flows,
growth and capital expenditure. The key element
is the return made by cash generating units and
the costs directly attributable to making sales.
Inventory valuation
Inventory is recognised at the lower of cost and
net realisable value. Management have
exercised significant judgment in relation to the
net realisable value of stock affected by the
Covid-19 pandemic. An additional provision has
been made by Babou of €4.5m in relation to
seasonal stock which may be specifically
impacted by the uncertainty over the phasing of
the reopening of the store estate. This compares
to a €7.3m provision made at the prior year end.
Management considers that a smaller provision
is appropriate this year due to the outturn of the
prior year provision where the majority was
released through profit and loss as the stock was
sold through once the stores reopened.
Lease discount rates
Where a rate implicit to a lease is not available,
management calculates appropriate discount
rates based on the adjusted marginal cost of
borrowing available to the business. Unless there
is good reason to act otherwise, management
set the longest possible contractual term for that
lease on the basis that the Group will continue to
occupy that property.
62
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Committee performance
The performance of the Committee during the
year was evaluated as part of a broader Board
performance review conducted internally and led
by the Chairman of the Board as described on
page 56 above. The overall conclusion of the
review was that the Audit & Risk Committee
remains effective in discharging its functions and
reporting to the Board.
Ron McMillan
Chairman of the Audit & Risk Committee
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
63
Lease terms
A lease term is a key input into calculating the
initial lease liability under IFRS 16. As referred to
above, unless there is a good reason to act
otherwise, management set the longest possible
contractual term of that lease. Upon termination
of a lease, where a new lease agreement for the
property is not in place but the Group remains in
occupation, a ‘holding over’ lease applies and
management set the term of it based on their
expectations of how long the Group is
reasonably certain to stay in the property taking
account of recent trading patterns and the
pipeline of new store opportunities.
The Committee discussed the above critical
judgments and areas of estimation uncertainty
with management and the auditors and was
satisfied that they were appropriate and properly
managed and that the auditors had applied an
appropriate degree of scepticism in undertaking
their work.
Internal audit
The Group Internal Audit function has a direct
reporting line to the Committee and they were
represented at all Committee video conference
discussions throughout the year. 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
joined the Group in July 2020. During the year,
the Group Internal Audit team 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. The Group Internal Audit function
also has established procedures within the
business to ensure that new risks are identified,
evaluated and managed and that any necessary
changes are made to the risk register.
During the year, the Committee received reports
from the Internal Audit function as set out on
pages 60 and 61.
In relation to each of the areas covered, 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.
Corporate Governance
Nomination Committee report
Dear Shareholder,
The Nomination Committee’s report for the year
ended 27 March 2021 is set out below
Committee composition, responsibilities
and effectiveness
The members of the Committee during the year
were Peter Bamford (Chairman of the
Committee), Simon Arora (CEO) and each of the
four Non-Executive Directors being Ron
McMillan, Tiffany Hall, Carolyn Bradley and Gilles
Petit. Although not members of the Committee,
Allison Green, the Group People Director and
Paul Owen, the Group’s General Counsel,
attended each of the Committee’s video
conference discussions during the year. Details
of Committee video conferences and
attendances are set out on page 53 of the
Corporate Governance Report.
The Committee has responsibility for reviewing
the structure, size and composition of the Board,
including the skills, knowledge, experience and
diversity of the Board. Further details of the other
main responsibilities of the Committee are set
out on page 52 of the Corporate Governance
Report. The Committee’s terms of reference are
also available on the Company’s website at
www.bandmretail.com
The effectiveness of the Committee during the
year was evaluated as part of a broader Board
performance review conducted internally and
led by the Chairman of the Board as described
on page 56 above. The overall conclusion of the
review was that the Committee remains effective
in discharging its functions and reporting to
the Board.
Committee activities
During the year under review the main activities
of the Committee included succession, diversity,
wider executive team development and conflicts
of interest, each of which are now described in
further detail below.
Board succession
As reported last year the Committee, led by the
Chairman, oversaw the process of identifying
and recommending the appointment of Alex
Russo as an Executive Director and the Group
Chief Financial Officer (“CFO”) following the
retirement of Paul McDonald. He joined the
Board on 16 November 2020. The search was
carried out by the Committee with the assistance
of Sam Allen Associates (“SAA”) who are a
signatory to the voluntary code of conduct for
executive search firms, and they had no other
connection with the Group. His appointment was
made following an orderly handover process
with the previous CFO, Paul McDonald, after
the announcement of the half year results
of the Group.
Alex Russo has held a number of UK and
international senior executive roles with retailers
including Asda, Tesco, Kingfisher, and latterly as
CFO of Wilko. He brings him valuable experience
from those roles.
It was important in making the appointment of
the new CFO that the Company identified the
right candidate who understood and embraced
the Group’s vision, purpose and values as a
value retailer. There was an extensive search
process which originally began in FY20. The
Committee prepared a detailed specification for
the role which was approved by the Board, held
interviews with candidates and took references
on the final candidate. Having found a candidate
with an impressive background with leading
retailers, the Company was pleased to have
identified someone who had both discount retail
and international experience. Those credentials
were particularly important to ensure the Board
got the best fit in terms of the culture of the
Group and its business.
The Committee ensures that a comprehensive
induction process is carried out with new
Directors on their appointment to the Board. The
details of the induction process carried with the
new CFO are set out on page 56 above.
As referred to on page 4 above, Gilles Petit will
not be standing for re-election as a Non-
Executive Director of the Board at the AGM on
29 July 2021 as he wishes to pursue
opportunities supporting start-up businesses.
Peter Bamford
Chairman of the Nomination Committee
The Nomination
Committee has
responsibility for
regularly reviewing
the structure, size and
composition, and
diversity of the Board.
It also reviews the
leadership and senior
management needs of
the Group, with a view
to ensuring the
continued ability of
the Group to compete
effectively in the
marketplace.
64
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Board diversity
The Committee has continued to review the
Group’s diversity in relation to the Board and at
other levels of senior management in the
business. As referred to on page 36, the Group’s
appointment processes and diversity policy
recognise the value which a diverse Board
brings to its business.
A recruitment process was commenced during
the year, with the assistance of Russell Reynolds
Associates, to appoint a further female
Non-Executive Director, and the Company
expects to have made that appointment by the
end of the calendar year. In addition, Gilles Petit
has decided not to seek re-election to the Board
at the AGM. In consequence of these changes,
the Company will reach the Hampton Alexander
target of at least 33% female representation on
its Board by the AGM on 29 July 2021.
The Board complies with the Parker Review
ethnic diversity target of having at least one
director with an ethnic minority background,
in relation to the CEO on the Board.
Further details of the Group’s gender diversity
policy are set out on page 36 above. The
percentage of female representation across the
senior management of the Group reporting
either directly to the Board or the Executive
Committee was 42.3% at the end of FY21.
Wider executive team developments
One of the main responsibilities of the
Committee under its terms of reference is, to
keep under review the leadership and senior
management needs of the Group, including
executive and non-executive directors and the
wider senior management team, with a view to
ensuring the continued ability of the Group to
compete effectively in the marketplace.
In relation to its role in reviewing the leadership
and senior management requirements of the
Group, the Committee and the CEO agreed a
plan originally 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.
The Committee is pleased to report on the
progress made in relation to some of the key
appointments made during the last two financial
years in particular. This also included the
implementation of a number of succession
appointments made in relation to retirements
which were coming up in the broader executive
team. Key appointments were as follows:
• February 2020 – Allison Green was
appointed as the Group People Director.
She was also appointed to the Executive
Committee of the Group;
• May 2020 – Anthony Giron was appointed as
President and CEO of Babou (as reported
last year);
• October 2020 – Richard Kirk was appointed
as the Supply Chain Director of the B&M UK
business on the retirement of Andy Monk.
Richard Kirk was appointed to the Executive
Committee of the Group; and
• November 2020 – Alex Russo was appointed
as an Executive Director of the Company and
the Group CFO (as referred to above).
The Committee agreed the specification of the
roles for each of the above positions, reviewed
the candidate profiles for the short listed
candidates and participated in the interview
processes along with the CEO. The above
appointments have added important skill sets
and experience to the Group to support its
on-going growth, without detracting from the
business model and values of the Group of
keeping things simple and tightly managed by a
core team with complimentary attributes.
In addition, new appointments were made to the
leadership roles in Internal Audit, IT, Investor
Relations, Digital, and Grocery Trading.
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 Committee receives reports from the CEO
and Group People Director in relation to progress
with planned recruitments to the broader
executive team as a regular agenda item of the
Committee’s business.
Conflict of interests
The Committee requires any proposed
appointee to the Board to disclose any other
business interests that may result in a conflict
of interest and be required to report any future
business interests that could result in a conflict
of interest.
The Committee carried out that process in
relation to the appointment of Alex Russo.
It also did so on behalf of the Board in
considering any conflicts of interest of Non-
Executive Directors where they disclosed their
intention to take up other additional external
appointments during the year. The Committee is
assisted by the Group’s General Counsel who
maintains a register of external appointments
of the Company’s Board members and sectors
within which companies they are appointed
to operate.
Peter Bamford
Chairman of the Nomination Committee
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
65
Corporate Governance
Directors’ remuneration report
Annual statement by the
Chair of the Remuneration Committee
Tiffany Hall
Chair of the Remuneration Committee
We aim to
incentivise superior
performance and
align remuneration
outcomes for
Executive Directors
with success in the
delivery of the
Board’s strategy
and long term
shareholder value.
Dear Shareholder,
I am pleased to present the Company’s
Remuneration Report for 2020/21. This report
contains:
• The Company’s forward-looking Directors’
Remuneration Policy on pages 69 to 77, which
will apply for 2021/22 onwards, and which is
subject to a shareholder advisory vote at the
2021 AGM.
• The Company’s Annual Report on
Remuneration on pages 78 to 89, which
details the remuneration paid to the Directors
in the 2020/21 financial year, and which is
subject to a shareholder advisory vote at our
2021 AGM.
Performance and incentive outcomes for
2020/21
The Group’s performance was very strong in
2020/21 in a challenging year. Total Group
revenues increased by 25.9%, adjusted EBITDA
increased by 83.0% and the Group’s cash flow
from operations increased by 75.0%. As well as
successfully integrating Alex Russo into the role of
CFO, Simon Arora and his management team
demonstrated excellent leadership during the
pandemic, managing our supply chain, logistics
and store operations effectively to ensure
sufficient quantities of essential goods were on
the shelves to cater for the exceptionally high
demand from our customers.
The Annual Incentive Plan (“AIP”) out-turn was
98.75% for Simon Arora, 83.13% for Paul
McDonald and 87.50% for Alex Russo of their
respective maximums, which reflected the
outstanding financial results and the Committee’s
assessment against objectives set this year for
them. One-third of the bonus achieved under the
AIP in 2020/21 will be deferred into shares for
3 years.
The 2018 LTIP has reached the end of the relevant
three year performance period. This was subject
to two equally-weighted 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 to 27 March 2021. The TSR
performance resulted in a 79.0% out-turn for that
measure. The adjusted earnings per share was
43.4p relative to a maximum target of 28p, which
gave a 100% vesting level under that measure
and an overall vesting level of 89.5% of the
award. The award is due to vest on 20 August
2023 following a two year holding period. Simon
Arora and Paul McDonald both participated in
the 2018 LTIP scheme.
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 due to the excellent leadership and
successful execution of the strategy of the
business over the periods to which those awards
relate. The outcomes have therefore been
approved without the exercise of any discretion.
The Committee notes that the total single figure
of remuneration for the CEO has increased
significantly since the previous year. This is the
first year that the CEO’s figures include an LTIP
award, as prior to 2018, he did not receive an LTIP
award. In addition, the CEO has managed the
challenges the business has faced in the last 12
months extremely well, responding very quickly
and effectively to Covid-19 ensuring the safety of
our colleagues and meeting the elevated
customer demand for essential goods at value
prices. This has resulted in very strong growth in
earnings and high returns to shareholders.
Our colleagues across the business also
responded extremely well to the challenges
of Covid-19.
During April and May 2020 we gave our B&M UK
and Heron Foods workforce an additional 10% to
their pay, to recognise their considerable efforts
made across the business to adapt to the
changing requirements at the onset of the
pandemic.
In January 2021 we also gave our B&M UK
colleagues an extra week’s pay as a bonus for
their hard work and commitment during the year.
Going forward, our workforce will have the
opportunity to share in the Company’s success
with cash bonuses being paid where internal
targets for the business are met or exceeded.
It is worth noting that while we temporarily closed
a number of our stores and made use of the
Coronavirus Job Retention Scheme, we
subsequently paid back all the support received
from the Government (c.£3.7m). We also waived
the Government’s business rates relief during the
pandemic (c.£80m).
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Changes to Directors
Paul McDonald stepped down from the Board and his position as CFO on
15 November 2020. He was entitled to salary, pension and benefits for the
remainder of his notice period to 8 January 2021. Given Paul had worked
for the company for over ten years and that it was mutually agreed he
should retire from the Board, the Committee deemed it appropriate to treat
him as a good leaver and therefore the following treatments apply to his
variable remuneration:
• Entitlement to a pro-rata bonus for the proportion of the year worked,
with partial deferral into shares;
• All outstanding LTIP awards continue to vest at their normal dates, with
pro-rating to reflect time served as an Executive Director and subject to
performance assessment;
• All other share awards, including deferred bonus shares and LTIP
awards that have met their performance conditions but remaining
subject to a holding period, are retained and vest at their normal dates.
No other payments were made to Paul.
Alex Russo joined the Board as CFO on 16 November 2020. His package
comprises a base salary of £475,000 plus the same terms as the previous
CFO except that his pension has been set at the lower rate of 3% of base
salary to align with the workforce. In addition, he was eligible for
transitional travel and accommodation allowances and relocation benefits,
as detailed in this report.
As reported in last year’s Remuneration Report, it was agreed that Alex
would be eligible for a payment of up to £450,000 as compensation for the
loss of bonuses and long-term incentive awards forfeited on leaving his
previous employer.
Under the terms of the buyout, payments of £150,000 each may be made
in three instalments subject to satisfactory personal performance in the
period to 28 February 2021, 30 April 2022 and 30 April 2023. The first
instalment is subject to clawback in the event of ceasing employment for
any reason prior to 31 March 2022 and the second and third instalments
are subject to continued employment to the date of payment.
In assessing the appropriate terms of the buyout, the Committee has taken
account of the cash form and timing of payout of the awards being
forfeited. The Committee received satisfactory evidence that the value of
the awards being forfeited was in excess of the buyout provided, taking
into account performance to date against the targets of the awards being
forfeited.
Remuneration Policy review
The current remuneration policy is due for renewal this year in line with the
usual three year timescales for UK listed companies and the Committee
has undertaken a full review. The review has taken into account
developments in corporate governance and market practice the growth of
the business since IPO to a constituent of the FTSE 100 index, and
remuneration benchmarking of the senior team including the Executive
Directors.
B&M has seen a step change in size, scale and complexity since IPO in
2014 including a tripling of store numbers and sales, a doubling of the
number of employees and a fivefold increase in EBITDA. During this period,
B&M has delivered strong shareholder returns of 167% compared to 34%
for the FTSE All Share.
Following the formulation of a set of initial proposals, we conducted an
extensive consultation exercise with shareholders engaging with 22
shareholders representing around 50% of the share capital. The feedback
we gathered was invaluable in shaping our plans and amendments were
made to the proposed policy to take into account the feedback we
received, namely removing a planned increase to LTIP quantum and
aligning the CEO’s pension with that of the workforce immediately rather
than at the end of 2022.
In summary, we are not proposing any change to the core remuneration
structure, which we believe remains fit for purpose and aligned with the
strategy to grow earnings and deliver superior shareholder returns.
However, we are introducing a number of features into the policy to bring it
fully in line with the requirements of the 2018 UK Corporate Governance
Code and to align it with current best practice. The remuneration of our CEO
has been largely unchanged since IPO, and we are also proposing a
correction to his package (as summarised in the implementation of
remuneration table for 2021/22 below) to reflect the growth of the business
during this time and the additional complexity of his role.
The Committee considers that the adjustments to the CEO’s package below
are appropriate to bring his remuneration into line with (but slightly below)
the median for other FTSE retailers and companies of similar market
capitalisation. The CEO has played a pivotal role in driving the growth of the
business to date and it is important he remains motivated in the future to
continue driving superior performance for the business by a fair
remuneration package.
Further details of the review process, the resulting changes to the policy
and their rationale is provided in the Directors’ Remuneration Policy section
of this report.
Implementation of remuneration policy for 2021/22
The Committee intends to operate the policy in the following way for
2021/22, incorporating the changes as a result of the proposed policy:
Element
Implementation for 2021/22
Base
salary
AIP
• CEO: £810,000 (currently £656,722)
• CFO: £475,000 (no change)
• Maximum opportunity of 200% of salary for CEO (currently
150% of salary) and 125% of salary for CFO (no change)
• 75% based on Adjusted EBITDA and 25% based on
personal objectives
• 50% of any bonus earned will be deferred in shares for
three years (currently 33% deferral)
LTIP
• Award of 200% of salary for CEO (no change) and 175% of
salary for CFO (no change)
• 50% based on Adjusted EPS and 50% based on Relative TSR
vs FTSE 350 retailers
Pension
• CEO: 3% of salary less Employer’s NIC (currently 20% of
salary)
• CFO: 3% of salary less Employer’s NIC (no change)
It should be noted that setting the AIP and LTIP targets this year has been
very challenging given the exceptional growth in 2020/21 and the difficulty
in predicting the impact of the easing of lockdown restrictions on trading
patterns. The LTIP targets have been set taking into account the
management 3 year plan and analysts’ consensus forecasts at the time of
setting the targets. The range has been stretched given the high degree of
uncertainty currently faced by the business with a performance
significantly above plan required to achieve maximum payout.
Conclusion
I hope that you can support the decisions we have made this year in
relation to the implementation of our remuneration policy for 2020/21 and
how we intend to operate our proposed policy for 2021/22. As a Committee
we believe the proposed policy changes provide a balance between a
policy that motivates our executives and CEO in particular, whilst
maintaining our strong ethos around corporate governance.
We remain committed to an open and transparent dialogue with our
shareholders and welcome any feedback which shareholders may have in
relation to this report. I will also be available at the AGM to take any
questions in relation to this report.
Tiffany Hall
Chair of the Remuneration Committee
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
67
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 reviewed during the year and a number
of minor amendments and clarifications were made.
The Committee does not consult directly with employees when reviewing levels of Executive Directors’ remuneration but it takes account of pay policies for
the broader salaried workforce when undertaking annual salary reviews for the Executive Directors, as well as reviewing policy and practices for
employees when determining remuneration policy for 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 policy being
put forward for shareholder approval in this report has been structured to adhere to relevant Luxembourg and UK regulations, the principles of good
corporate governance and has 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
Corporate Governance Code
The Committee is conscious of the Code’s references to remuneration arrangements being clear, simple, predictable, proportionate and to take adequate
account of risk while being aligned to culture. These factors have been considered and are felt to be satisfied through:
• Clarity – the Company’s remuneration policy and implementation of policy 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 – 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 – the overall policy offers reward at 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 policy set out in this report includes 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 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 – the variable pay plans are consistent with our focus on performance and incentivisation down to store and deputy store
manager levels.
Luxembourg law
The Luxembourg Law of 24 May 2011 on certain rights of shareholders at general meetings of listed companies (as amended by the law of 1 August 2019)
which adopts the EU Shareholders’ Directive 2017/828 on directors’ remuneration 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, that practice will continue to be followed, which will comply with the recent changes
in the Luxembourg Law.
The Annual Remuneration Report has been prepared to comply with the reporting requirements of the Luxembourg law on directors’ remuneration
referred to above. 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.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Directors’ Remuneration policy
The Remuneration Committee presents the Directors’ Remuneration Policy which will be put to an advisory vote at the Annual General Meeting on
29 July 2021. The revised policy, if approved by shareholders, will take effect from the 2021 AGM and is expected to remain in force until the conclusion of
the 2024 AGM.
The Committee has undertaken a thorough review of the Directors’ Remuneration Policy, with input from external advisers and management (with no
Director being present when decisions relating to their own remuneration were being made) entailing:
• A market practice review, including consideration of current best practice, emerging trends and a total remuneration benchmarking exercise for the
senior management team;
• A review of the current structure and incentive metrics in the context of alignment with the business strategy.
Business context to review of Directors’ Remuneration policy
Since the IPO:
•
the Company’s share price has increased from £2.70 at IPO to £5.39 (being a 100% increase) as at the end of the 2020/21 financial year. In addition,
each shareholder has received dividends of 111.2p in respect of this period generating a total shareholder return of 167% compared to the FTSE All Share
at 34%;
•
revenue has increased in the period FY14 to FY21 by 277%1;
• Adjusted EBITDA2 has increased in the period from FY14 to FY21 by 380%1;
•
•
1
2
the number of stores in the period FY14 to FY21 has increased by 192% (both organically and following the acquisition of Heron Foods and Babou); and
the balance sheet remains strong with net debt to Adjusted EBITDA1 of 0.8 times being well within the Group’s 2.25 times ceiling.
For FY14 this is for the 52 week period ended 29 March 2014 which is comparable with the FY21 52 week period to 27 March 2021.
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.
As well as the significant rate of growth of the business, since the IPO it has also become a more complex business. Product design and development is
more sophisticated with extensive in-house development across general merchandise ranges and development of our direct to retail brand licensing
model. There is also increased operational complexity with the acquisition of Heron Foods in 2017 and Babou in 2018. A more matrix structure has been
introduced to drive synergies across fascias and borders and a broader senior management team has been introduced to support the future growth of
the business.
These results have been achieved through the strong leadership of the senior team, and in particular the Chief Executive Officer who has been, and
continues to be, instrumental to the success of the business in terms of his experience and knowledge of the sector.
Proposed changes to remuneration
The Committee’s conclusion from the review is that the overall structure of remuneration for Executive Directors continues to be appropriate for driving the
short and long term performance of the business to realise its growth ambitions over the coming years. Therefore, the core elements of the policy are
unchanged being salary, pension and benefits, annual bonus with deferral into shares and performance share plan with a holding period.
Although the structure is proposed to be unchanged, the Committee has determined that the following changes are required:
• Adjustments to the fixed and variable elements of the CEO’s remuneration package (as set below and in the tables on pages 71 to 73), to reflect the
responsibilities of the role, the step change in the size, scale and complexity of the business and the performance of the business and the CEO;
• Amendments to more closely reflect emerging good practice and the provisions of the UK Corporate Governance Code.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
69
Directors’ remuneration report
continued
The changes to the policy and the rationale for those changes are set out below:
Element of policy
Changes to policy
Rationale
Base salary
• Removal of specific wording in relation to paying at a
• Reflects the national market for executive level talent
discount to reflect North west location and to paying at
market median or below and the cap
Pension
• Reduction in incumbent CEO’s pension to 3% with effect
from 1 April 2021, in line with the average workforce level
• Recognises market pressures and provides additional
flexibility for the Committee to position salary appropriately
aligned with typical market practice
• Aligned with requirement of UK Corporate Governance
Code
• Fairness with broader employee base
• Reduction for 2021/22 aligns pension to workforce levels
Bonus quantum
Bonus deferral
Post-vesting
holding period
In-employment
shareholding
requirement
Post-employment
shareholding
requirement
Joiner
arrangements
Termination
arrangements
•
•
•
Increase maximum bonus for CEO from 150% to 200% of
salary and for CFO from 125% to 150% of salary
• Reflects role, responsibility and contribution of Directors
• Reflects growth of business to date and incentivisation of
Increase maximum bonus opportunity under the policy for
CFO from 125% to 150% of salary, although the maximum
bonus for 2021/22 will remain at 125% of salary
further short and long growth
• Aligned with practice in similarly sized retailers
Increase bonus deferral in shares from one third to at least
half of the bonus earned
•
Increases alignment of Executives’ remuneration with long
term shareholder value
•
In line with leading market practice
• Formalisation of the two year post vesting holding period
• Aligned with requirements of the UK Corporate Governance
for LTIP awards
Code
• Allow half of deferred shares and LTIP awards to be sold
while building up the in-employment shareholding
requirement or 200% of salary (previously all deferred
shares and LTIP awards had to be retained)
•
•
Introduction of a post-employment shareholding
requirement equal to the lesser of the shareholding on
cessation and 200% of salary (the in-employment
requirement), to be held for two years
Introduction of the ability to grant a one-off LTIP award with
performance conditions of up to 200% of salary in addition
to normal policy LTIP award in exceptional recruitment
circumstances
• No current intention to use this discretion
• Further aligns Executives with shareholders over the longer
term
• More closely aligned with normal market practice
• Allows Executives to realise some (but not all of) the value
from awards that have been earned
• Aligned with UK Corporate Governance Code requirements
• Requirement is aligned with best practice
• Provides flexibility to give recruits an early stake in the
Company
• Facilitates recruitment of an exceptional candidate
• Revision of policy in relation to leavers, including
• Brings policy into line with investor expectations
confirmation that any bonuses for good leavers will be
subject to time pro-rating and LTIP awards for good leavers
will be subject to time pro-rating and performance
assessment
• Reinforces pay for performance philosophy
Benchmarking context
The review of our remuneration policy has been informed by examining benchmarking data for a comparable group of FTSE retailers with B&M sitting
broadly in the middle when ranked by market capitalisation.
The comparator companies considered were as follows:
• Dunelm
• Howden Joinery
• Kingfisher
• Next
• Ocado
• Pets at Home
• Marks and Spencer
• Sainsbury
• Morrisons
• Tesco
In addition, a cross check against a broader group of comparators of similar sized companies by reference to their market capitalisation (excluding those
in the financial services and oil and gas sectors) was also undertaken.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
How the views of shareholders are taken into account
The Committee recognises that developing a dialogue with shareholders is important, constructive and informative in developing and applying the
remuneration policy. The Committee undertook extensive consultation with shareholders in developing the Directors’ Remuneration Policy. This
consultation exercise included 24 shareholders representing around 50% of the total issued share capital of the Company.
The Committee made a number of changes to the original proposals as a result of the feedback from this consultation exercise, including removal of an
originally proposed LTIP increase for the CEO from 200% to 250% of salary and the immediate acceleration of the reduction of the CEO’s pension to align
with that of the wider workforce to 2021/22 (previously planned to take effect from 1 January 2023) to form the Directors’ Remuneration Policy presented in
this report.
The Committee also welcomes feedback generally at any time which will be considered as part of its continued assessment of remuneration policy and
practices.
Policy Table
The table below describes the elements of remuneration paid to the Executive Directors:
Element and purpose
Policy and opportunity
Operation and performance conditions
Base 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 targeted at market levels, with reference
to companies with a comparable market capitalisation.
Annual salary increases will not exceed the general level
of increase awarded to other salaried staff, save for a
change in the roles or responsibilities of an Executive
Director or when there are changes to the size and
complexity of the business.
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.
Base salary is typically paid 4 weekly in cash.
Base salaries are reviewed annually with changes usually
taking effect from 1 April.
Executives are entitled to a car allowance or a company
car, car insurance and other running costs and fuel for
business use, death in service life assurance, permanent
disability and critical illness insurance and any other
Group wide benefits including a 10% B&M stores discount
card.
The cost of benefits paid to an Executive in any one year is
capped at £75,000, but this may be exceeded in
exceptional circumstances if the cost of a benefit were to
increase significantly.
Business travel and associated hospitality are provided in
the normal course of business and authorised by the
Committee on a standing basis.
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.
Pension
To provide an appropriate
level of contribution to
retirement planning.
Current CEO and CFO: 3% of salary
New recruits: 3% of salary
The pension contributions for the existing Executive
Directors are 3% of salary, aligned with the wider
workforce contribution rate.
Executives may take pension benefits as contributions to
defined contribution personal pension plans, or elect to
receive cash in lieu of all or part of that benefit (this is not
taken into account as salary for calculating bonus, LTIP or
other benefit awards).
If the individual elects to receive any part of their pension
contribution benefit as a cash allowance instead,
employers’ NICs are deducted from that element.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
71
Directors’ remuneration report
continued
Policy Table continued
Element and purpose
Policy and opportunity
Operation and performance conditions
Annual bonus
To incentivise and reward
individuals for the delivery of
annual performance targets.
The maximum annual bonus is 200% of base salary for
the CEO and 150% of base salary for other Executive
Directors.
The performance measures are reviewed annually by the
Committee in line with the Company’s strategy.
It is proposed that the maximum bonus for Executive
Directors other than the CEO will be 125% of salary for the
first year of operation of the policy.
The threshold bonus will be no higher than 25% of the
maximum. The target bonus is 50% of maximum.
Bonuses are paid up to one-half in cash and at least
one-half 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.
Long-term incentives
To incentivise the delivery of
strategic objectives over the
longer term, the Group
operates the Long-Term
Incentive Plan (“LTIP”).
Awards of shares with maximum face value on grant for
the CEO of 200% of base salary and for other Executive
Directors of 175% of base salary each year under the LTIP,
save for exceptional circumstances such as recruitment
where the grant may be in excess of this.
Clawback and malus provisions apply to awards made
under the LTIP.
LTIP awards from the date of the 2021 AGM onward will be
subject to a two-year holding period post the end of the
performance period.
Participants’ awards attract dividend rights from grant to
the end of the holding period.
In-employment
shareholding
requirement
To encourage share
ownership and create
alignment of interests of
Executive Directors and
shareholders.
Executive Directors are expected to retain at least 50% of
all shares which vest under the deferred bonus and 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.
72
B&M European Value Retail S.A. Annual Report & Accounts 2021
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.
The Committee has discretion to make adjustments to
performance targets during any performance period to
reflect any events arising which were unforeseen when
the performance conditions were originally set by the
Committee.
The Committee has discretion to adjust the outcomes of
the annual bonus upwards or downwards (including to
nil) to reflect any fact or circumstance which the
Committee considers to be relevant. Any adjustments will
be disclosed in the relevant Annual Report on
Remuneration.
Clawback provisions apply to the cash element of bonus
under the annual bonus plan for a period of 3 years post
payment and to the deferred share element for a period
of 3 years post vesting.
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.
The Committee has discretion to make adjustments to
targets 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.
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.
Strategic Report
Corporate Governance
Financial Statements
Element and purpose
Policy and opportunity
Operation and performance conditions
Post-employment
shareholding
requirement
Shares must be held for two years post-employment at
100% of the in-employment shareholding requirement (or
actual shareholding on departure if lower).
Shares completing their performance period during this
two year period will remain subject to the two year
holding period.
Only shares relating to awards which are granted after
the date of the 2021 AGM will be included for the
purposes of this requirement. Shares purchased by the
Executive Director (including those from all employee
share plans), will not be included.
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.
Shares counting towards this requirement will not be
released during the period in which the post-employment
shareholding requirement applies, to support
enforceability.
Acceptance of the post-employment shareholding
requirement will be a condition of participation in all share
awards granted after the 2020 AGM and will be included
in the grant documentation for awards.
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.
Existing awards
The Company will honour any annual bonus and long term incentive commitments already entered into with Executive Directors and/or any other
pre-existing annual bonus and long term incentive commitments on any person joining the Board.
Operation of variable pay
Annual Incentive Plan
The Committee will set the performance targets annually under the annual incentive plan to take account of the Company’s 3 year management plan and
consensus. The metrics adopted by the Committee and the weighting of them may vary in relation to the Company’s strategy each year.
The performance conditions in the first year of the operation of the policy are as follows:
• 75% EBITDA, which is a primary measure of the Company’s growth and indicator of potential returns for shareholders; and
• 25% linked to personal measures (which may be financial in nature), which incentivise management to achieve results aligned to the broader business
strategy.
The Committee has retained discretion to reduce the out-turn under any non-financial elements if it does not consider the assessment to be reflective of
the overall performance of the business.
Long Term Incentive Plan
The Committee sets the performance targets in relation to the LTIP to take account of the Company’s strategic plan. In the first year of operation of the
policy, the measures are as follows:
• 50% relative TSR, which measures the Company’s ability to generate value in excess of that created by similar businesses; and
• 50% adjusted EPS growth, which measures the Company’s ability to grow earnings which are an indicator of returns for shareholders.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
73
Directors’ remuneration report
continued
Malus and clawback
The rules of the Company’s share plans include the following malus and clawback provisions:
• The Annual Incentive Plan rules include provision for clawback within a three year period following payment;
• The deferred share plan rules include provision for malus prior to exercise and clawback within a three year period following vesting; and
• The LTIP rules include provision for malus between grant and the expiration of the holding period and clawback within a three year period following
determination of the extent to which the performance conditions have been met.
The trigger events for malus and clawback are as follows:
• A 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.
Illustrations of potential remuneration
The graphs below show an indication of the potential total remuneration of the Executive Directors’ remuneration packages under the policy for the
2021/22 financial year.
’
s
0
0
0
£
n
o
i
t
a
r
e
n
u
m
e
R
5,000
4,000
3,000
2,000
1,000
0
£4,929
49%
£4,119
39%
Fixed
Annual Variable
PSP Variable
£2,094
19%
39%
42%
39%
33%
22%
18%
£879
100%
Minimum
On-target
Maximum
Maximum
(with 50%
share price
appreciation)
£1,069
19%
28%
53%
£564
100%
Minimum
On-target
£2,405
52%
25%
23%
£1,989
42%
30%
28%
Maximum Maximum
(with 50%
share price
appreciation)
Assumptions:
Scenario
Minimum
On-target
Simon Arora
Assumptions
Alex Russo
• Fixed remuneration only i.e. base salary, pension and benefits
• Fixed remuneration
• On-target bonus, being 50% of maximum for 2021/22 (i.e. 100% of salary for the CEO and 62.5% of salary
for the CFO)
• Threshold LTIP, being 25% of maximum (i.e. 50% of salary for CEO and 43.75% of salary for CFO)
Maximum
• Fixed remuneration
Maximum + 50% share price growth
• As per maximum scenario with 50% share price appreciation for the LTIP (equivalent to 1.5x the face value)
• Maximum bonus for 2021/22 (i.e. 200% of salary for the CEO and 125% of salary for the CFO)
• Maximum LTIP (i.e. 200% of salary for CEO and 175% of salary for CFO)
74
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Recruitment and promotions
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s remuneration policy at the time of
the appointment.
Additionally, on the appointment of any new Executive Director (whether by external recruitment or internal promotion) the following applies:
•
if a new executive’s salary is set on appointment below the appropriate market rates, phased increases (as a percentage of salary) above those
granted generally to other employees may be awarded subject to the individual’s performance and development;
•
•
the Company may compensate a new Executive Director for amounts foregone from the individual’s former employer (as permitted under the Listing
Rules) taking account of the amount forfeited, the extent of any performance conditions, the nature of the award and the time period to vesting. Such
awards would normally be granted in the form of shares rather than cash;
the annual incentive plan would operate with maximum award equal to 200% of salary in accordance with its terms, pro-rated for the period of
employment and, dependent on the appointment and timing, different performance targets might be set as the Committee considers appropriate;
• a long term incentive award over shares of face value up to a maximum of 200% of salary in accordance with the policy table above;
• on an internal appointment, any variable pay element awarded in respect of the individual’s former role would be allowed to pay out according to its
terms, with any relevant adjustment to take account of the appointment. Any other ongoing remuneration obligations existing prior to the appointment
would also continue;
• on an external appointment, the Committee may consider it necessary to make a grant of additional shares under the LTIP, of up to 200% of salary, in
order to secure an exceptional candidate and provide early alignment with the shareholders of the Company. For the avoidance of doubt, the
Committee has no current intentions to use this provision and any award would be in addition to the normal maximum set out in the policy table; and
• on any appointments, the Committee may agree that the Company will meet appropriate relocation expenses.
Service contracts and payments for loss of office
The service contract for the CEO is terminable by either the Company or the CEO on twelve months’ notice and the service contract for the CFO by either
party on six months’ notice. The service contracts are dated 29 May 2014 in relation to the CEO and 3 March 2020 in relation to the CFO. Both contracts are
rolling contracts with no fixed termination date.
An Executive Director’s contract can also be terminated without notice or payment of compensation except for pay accrued up to the termination date on
the occurrence of certain events such as gross misconduct.
Payment in lieu of notice equal to base salary only for the unexpired period of notice can be paid under the CEO’s service contract. The payment in lieu of
notice would be paid on termination.
Payment in lieu of notice equal to base salary, pension and benefits for the unexpired period of notice can be paid under the CFO’s service contract. The
payment in lieu of notice would be paid in monthly instalments, subject to mitigation in the event that the departing CFO becomes engaged in other
employment.
There are no enhanced provisions on a change of control under the Executive Directors’ service contracts.
Any new contracts will be on similar terms to the CFO’s contract.
The service contracts of the Executive Directors are available for inspection at the registered office of the Company.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
75
Directors’ remuneration report
continued
Treatment of incentives on termination and change of control
The Committee’s treatment of incentives on termination is set out in the following table. The Committee will seek to minimise the cost to the Company, and
will have due regard for the circumstances when applying discretion in relation to termination payments.
Termination circumstances
Annual bonus treatment
Deferred bonus treatment
Unvested LTIP treatment
Good leavers: Including such
circumstances as death,
retirement, ill-health, disability
and any other reason
determined by the Committee
Subject to Committee discretion, a
pro-rata bonus may be paid subject
to full or part year performance.
Bonus will be paid at the normal
payment date, unless in exceptional
circumstances the Committee
determines it should be paid on
cessation.
For all leavers except those leaving
due to resignation or dismissal for
cause, Awards will vest at the usual
vesting date, unless the Committee
applies discretion to permit the
awards to vest on cessation.
Awards will vest at the usual vesting
date, unless the Committee applies
discretion to permit the awards to
vest on cessation, for example in the
case of death.
Awards will be subject to
performance and time pro-rating.
The post-vesting holding period will
normally apply, unless in exceptional
circumstances apply e.g. in the case
of death.
All other leavers including
resignation and dismissal for
cause
Change of control
No eligibility for bonus.
Awards will be forfeited.
Awards will be forfeited.
Normally good leaver treatment
applies.
Performance can be tested sooner
and payment made sooner.
Awards vest on a change of control.
Good leaver treatment applies.
Performance can be tested sooner
and payment made sooner.
Awards which have vested before giving or receiving notice of termination of employment remain exercisable for a period of twelve months after leaving
or (if later) the expiry of any holding period which the award was subject to.
Chairman and Non-Executive Directors
The table below describes the elements of remuneration paid to the Chairman and the Non-Executive Directors:
Element and purpose
Operation
Fees
Paid to reflect the time
commitment and level of
responsibility of each of the
roles.
The fee levels and structure of the Non-Executive Directors was set by the Board from Admission. The fees of the
Non-Executive Directors are set by the Board (excluding the Non-Executive Directors). The Committee has
responsibility for determining fees paid to the Chairman of the Board.
The fees are paid in cash.
All fees are subject to the aggregate fee cap of £1,000,000 per annum, effective from 30 July 2018, for Directors in the
Articles of Association of the Company.
In addition, expenses may be reimbursed.
Letters of appointment
All the Non-Executive Directors of the Company have letters of appointment dated 1 June 2021 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.
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.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Consideration of employment conditions elsewhere in the Company when setting Directors’ pay
The Committee does not consult directly with employees when reviewing Executive Directors’ remuneration. However, in forming the Directors’
Remuneration Policy, the Committee has taken account of:
• The pay and conditions of the broader workforce pay and conditions, including base salaries, the general increase in salaries for employees and the
appropriateness and fairness of the policy in this context; and
• The remuneration arrangements for the rest of the senior management team over which the Committee has responsibility for, including salary,
pensions, benefits and incentive arrangements.
Broader workforce
As part of the Committee’s extended remit under the UK Corporate Governance Code, the Committee will continue to review the pay policies for the wider
employee population to ensure that they are appropriate, reflect the Company’s remuneration principles and support the strategic objectives of the
business.
The remuneration policy for senior executives is more weighted toward variable pay than for other employees. However, there are a number of ways in
which employees are rewarded in addition to base salary, pension and benefits:
•
the Company is committed to widespread share ownership. The Company operates an All-employee UK Share Incentive Plan (“SIP”). Under the SIP,
Executive Directors are eligible to participate on a consistent basis to all other employees;
• our workforce in the B&M UK business will also have the opportunity going forward to share in the Company’s success on an annual basis with cash
bonuses being paid where internal targets for the business are met or exceeded;
•
•
•
in retail operations, annual cash bonuses are paid in the B&M UK business based on individual performance from Deputy Store Managers and
upwards;
in our distribution operations, annual cash bonuses are paid in the B&M UK business based on individual performance from Team and Shift
Managers upwards; and
in our central business support teams including central operations, buying, finance, IT, HR and Payroll, annual cash bonuses are paid in the B&M UK
business based on individual performance from manager level colleagues upwards.
The Committee reviewed the latest available gender pay gap data as well as the ratio of CEO to employee remuneration. It was satisfied that the structure
and quantum of the Executive Directors’ remuneration within this policy was appropriate, taking into account their contribution to the business and typical
market practices within the retail sector. As referred to on pages 67 and 69 above the Committee also undertook a remuneration benchmarking exercise
examining pay in retail comparators as well as the broader market as part of the policy review process, and took this into account as an external measure
of the competitiveness of the packages for the Executive Directors.
Senior management team
As part of the review of the remuneration policy, the review of the Executive Directors’ remuneration also included a review of the remuneration of other
members of the executive committee of the Group which included a benchmarking exercise of their pay against FTSE retailers and the broader market.
Their base salaries have also been reviewed with effect from 1 April 2021.
As well as the Executive Directors, other members of the executive committee of the Group also participate in the performance based Annual Incentive
Plan. Around 70 colleagues including members of the executive committee of the Group and a group of managers and other senior staff have also
participated in restricted stock awards on an annual basis since 2017, in the form of shares which vest after three years without performance conditions.
Advice on Directors’ Remuneration Policy
The Committee has taken advice from PwC, its independent remuneration consultants, on the benchmarking and structure of remuneration packages for
Executive Directors and other members of the senior management team. PwC is a member of the Remuneration Consultants Group and a signatory to its
Code of Conduct. In addition, the Committee has satisfied itself that the advice it receives is objective and independent as PwC has confirmed there are no
conflicts of interest.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
77
Directors’ remuneration report
continued
Annual Report on Remuneration
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 2020/21 and how the new policy proposed for shareholder
approval at the 2021 AGM will be applied in the financial year 2021/22.
Where sections of the report have been subject to audit, they are marked accordingly.
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 2020/21.
Executive Directors
Simon Arora (CEO)
Paul McDonald (Ex-CFO7)
Alex Russo (CFO8)
Year1
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
Salary
£
643,845
654,741
324,722
209,196
–
173,558
Benefits2
£
44,733
45,095
8,647
4,628
–
28,227
Pension3
£
113,313
115,227
42,961
27,751
–
4,575
Bonus4
£
Long term
incentives5,6
£
411,303
972,770
–
1,834,986
221,798
604,377
114,011
217,807
–
186,462
Other
£
Total
£
–
–
–
–
1,213,194
3,622,819
712,139
1,063,759
–
–
–
150,000
–
542,822
Total
fixed pay
£
Total
variable pay
£
801,891
815,063
376,330
241,575
–
206,360
411,303
2,807,756
335,809
822,184
–
336,462
The 2019/20 year is for the 52 weeks ended 28 March 2020 and the 2020/21 year is for the 52 weeks ended 27 March 2021.
1.
2. Benefits 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 Paul
McDonald and Alex Russo only, permanent healthcare insurance. Alex Russo also received £14,937 in respect of assistance with travel and living costs given he travels from home to his place of work
on a weekly basis.
3. Pensions include auto-enrolment pension employer contributions and a cash equivalent allowance to pension contribution entitlement less employers’ NICs.
4. One third of the annual bonuses of the Executive Directors for 2020/21 being £324,257 for Simon Arora, £72,602 for Paul McDonald and £82,081 for Alex Russo, are payable in shares which are to be
deferred for a period of three years from the date of grant.
5. The 2018/19 LTIP has completed its performance period and is included in the 2020/21 LTIP figure. It will vest on the expiry of the holding period on 20 August 2023. The value is estimated based on a
vesting of 89.5%, the three-month average share price to the year end of £5.423 and the accrued dividends to the year end. Share price appreciation accounts for £380,725 of the value for Simon
Arora and £125,398 for Paul McDonald. Paul McDonald’s award has been pro-rated to reflect the proportion of the vesting period completed to the point of stepping down from the Board.
6. The value of Paul McDonald’s 2017/18 LTIP whose performance period ended in 2019/20 has been restated to reflect the share price on the third anniversary of grant at which point it was no longer
subject to continued service, being £4.861 on 7 August 2020. The amount derived from share price appreciation is £50,282.
7. Paul McDonald stepped down from the Board on 15 November 2020.
8. Alex Russo was appointed to the Board and to the position of Chief Financial Officer on 16 November 2020.
9.
The remuneration of the Executive Directors is paid by B&M Retail Limited, other than their long-term incentives. The reported figures include all such amounts.
Base salaries
The Executive Directors received a 2% increase in their base salaries with effect from 25 May 2020, being the same percentage rate of increase given to
the B&M UK salaried staff.
Pension
The pension amounts paid in the year represent amounts contributed to pension plans and cash supplements, adjusted for the cost of employers’ NICs to
the extent that provision is made as a cash supplement.
The pension benefits of the Executive Directors for 2020/21 were paid as salary supplements as follows:
• 20% of base salary (less Employer’s NICs) for Simon Arora;
• 15% of base salary for Paul McDonald (less Employer’s NICs), until the date he stepped down from the Board; and
• 3% of base salary for Alex Russo (less Employer’s NICs), which is in line with the pension provision for UK salaried employees of the Group.
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.
In order to align pensions provision for Executive Directors with the pensions for the workforce, it has been agreed that Simon Arora’s pension will be
reduced from 20% to 3% of salary for 2021/22 which is the rate available to the UK salaried employees of the Group.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Bonus outcomes
Executive Directors bonus payments for 2020/21 are in line with the remuneration policy and the terms of the Annual Incentive Plan (“AIP”). The Committee
reviewed the AIP during the year and remains satisfied that it continues to be appropriate for the Company.
75% of the maximum AIP opportunity related to the achievement of financial targets for 2020/21. The targets were based on adjusted Group EBITDA
performance as follows:
Threshold
Target
Max
Actual
Adjusted
Group
EBITDA target*
£335.0m
£372.2m
£390.8m
£626.4m
% maximum
overall
Bonus
opportunity
18.75%
37.5%
75%
75%
*
There is a straight-line payout for achievement between threshold, target and maximum levels.
The remaining 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.
Simon Arora
Objectives
Performance
Building a high performance
leadership team with enhanced
breadth and depth
This was achieved with the recruitments in the year of the new CFO of the Group, the B&M UK
Supply Chain Director (following retirements) the new CEO in France and appointments in other
leadership rules in IT, Internal Audit, IR, Digital and Grocery Buying.
Delivering strategic and
operational progress in France
This was achieved with recruitment of a new CEO, leasing a further warehouse facility and progress
on the two strategic priorities of refining the product mix and the rebranding and reformatting of
c.50% of the stores during the year.
Like-for-like (“LFL”) sales
performance
This was achieved with the very strong LFL performance for the year, particularly the B&M UK
business at +23.8%.
Overall outcome
23.75 out of 25
Delivery of improvements to
distribution and logistics
including uptick in stores
serviced by Bedford
Investor Relations
Paul McDonald
Objectives
Bond and debt refinancing
This was partly met. Significant progress has been achieved with Bedford now servicing c.250
stores out of the B&M UK store estate, but further cost efficiencies remain to be achieved.
This was achieved, having maintained a diverse and balanced investor base and ensured that
communication expectations of investors and analysts were maintained notwithstanding the
challenges in relation to Covid-19.
Performance
This was achieved with the Bond issuance and bank debt refinancing being successfully executed
in the year.
Overall outcome
8.125 out of 25
Cost control reductions
This was not met against targeted levels.
Strategic developments in
relation to IT and European
integration
Some progress was achieved in relation to reporting across the Group’s fascias, but no score was
given in relation to IT strategic initiatives.
Reductions in insurance costs
and outlays
This was partially achieved against targets set in relation to certain overheads with a 25% score
being achieved.
Team development and
succession
Investor Relations
This was not met during the year.
This was achieved, having maintained a diverse and balanced investor base and ensured that
communication expectations of investors and analysts were maintained notwithstanding the
challenges in relation to Covid-19.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
79
Directors’ remuneration report
continued
Bonus outcomes continued
Alex Russo
Objectives
Performance
Overall outcome
Strategic initiatives
Progress was made in relation to developments in strategy and growth initiatives of the Group.
12.50 out of 25
European integration
Significant improvements have been made in relation to reporting across the Group’s fascias.
IT strategy
IT strategy development was commenced during the second half of the year.
Operational controls, process
enhancements, loss prevention
and compliance
Team development and
succession
Progress was made with the delivery of enhancements in controls in collaboration with the Internal
Audit function in a number of areas.
This was partially achieved with plans being developed in the year.
The table below sets out the resulting bonuses earned, including the amounts deferred into shares for a three year period:
Executive Director
Simon Arora
Paul McDonald
Alex Russo
Bonus maximum as
% salary
Bonus earned as %
maximum
Bonus earned1
Of which paid in
cash (two-thirds)
Of which deferred in
shares (one-third)
150%
125%
125%
98.75%
83.13%
87.50%
972,770
217,807
186,462
648,513
145,205
124,308
324,257
72,602
62,154
1.
The bonuses earned by Paul McDonald and Alex Russo have been pro-rated to reflect the proportion of the year served as an Executive Director.
The Committee considered that overall performance had been very strong during 2020/21 and that the AIP outcomes appropriately reflected individual
and business outcomes. No discretion was used in assessing the outcomes as set out above.
Long term incentive outcome
The LTIP award granted on 20 August 2018 had a combination of EPS and Relative TSR conditions with equal weighting. The performance period ended on
27 March 2021 and the outcomes are provided below.
Performance condition
Adjusted EPS
Weighting
50%
Performance for
threshold vesting
(25%)
Performance for
maximum vesting Actual performance
23p
28p
Relative TSR vs FTSE 350 retailers
50%
Median Upper quartile
43.4p
Between 6th
and 7th rank
within 17
comparators
Vesting
100%
79.0%
89.5%
Total
The resulting awards due to vest are as follows:
Executive Director
Simon Arora
Paul McDonald
Number of awards
due to vest due to
meeting
performance
conditions1
Dividend shares
earned to year end
Number of awards
granted
312,099
137,730
279,328
92,001
59,043
19,446
Total shares
due to vest
338,371
111,447
Total value £2
1,834,986
604,377
1. As a good leaver, Paul McDonald’s award has been pro-rated to reflect time served as an Executive Director.
2. Based on average share price of £5.423 during the three month period to 27 March 2021.
The awards are due to vest following the expiry of the holding period being on 20 August 2023.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
LTIP awards granted during the financial year – audited
LTIP awards in the form of nil-cost options were granted to Simon Arora on 30 July 2020 as follows:
Executive Director
Simon Arora
Award size
200%
Number of awards
granted 1
Face value of
awards £
283,436
1,313,442
1.
The number of awards granted was based on a share price of £4.634, being the share price prior to the date of grant.
Awards vest after five years from grant following the expiry of a two year holding period. Dividends accrue in respect of the awards over the period from
grant to vesting.
The performance conditions are measured over the three year period to the end of 2023/24, and the targets were determined in the following way:
• The Adjusted EPS targets were set by the Committee in July 2021 when the LTIP awards were granted, based on the management 3 year plan. The
range was set around the 3 year plan, with achievement of the plan resulting in below 50% vesting. There had been a slight softening of the growth in
EPS to FY20 and with Covid-19 expected to have an overall negative impact on the business at the time of setting the targets, it was deemed
appropriate to set a target range that was slightly lower than the range for the 2019 award.
• The relative TSR condition follows a market-standard approach, with no vesting below median performance and with maximum vesting for upper
quartile performance or above. This approach is consistent with the approach used for previous awards.
The resulting performance conditions and targets are as follows:
Performance condition
Adjusted EPS
Relative TSR vs FTSE 350 retailers1
Performance for
threshold vesting
(25%)
Performance for
maximum vesting
25p
30p
Median Upper quartile
Weighting
50%
50%
1. Comparator group is Dixons Carphone, Dunelm, Greggs, Howden Joinery, JD Sports Fashion, Kingfisher, Marks & Spencer, Morrison (WM), Next, Ocado, Pets At Home, Sainsbury J, Tesco and
WH Smith.
A one month average applies prior to the beginning and at the end of the performance period for the TSR condition.
Straight line vesting occurs between threshold and maximum levels of performance.
Deferred bonus awards granted during the financial year – audited
A proportion of bonus earned by Executive Directors in respect of performance during 2019/20 was deferred into shares for a period of three years on
17 June 2020 as follows:
Executive Director
Simon Arora
Paul McDonald
Value of deferred
bonus
Number of awards
granted1
137,101
38,004
35,768
9,914
1.
The number of awards granted was based on a share price of £3.833, being the share price prior to the date of grant.
The awards are subject to continued service only. As a good leaver, Paul McDonald was permitted by the Committee to retain deferred bonus awards.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
81
Directors’ remuneration report
continued
Loss of office payments – audited
Paul McDonald stepped down from the Board and his position as CFO on 15 November 2020. He was entitled to salary, pension and benefits for the
remainder of his notice period to 8 January 2021 as follows:
Salary: £50,956
Pension: £6,741
Benefits: £994
In addition, he was entitled to a payment in respect of accrued but unpaid holiday pay at his basic rate of salary of £25,478 and a payment of £500 in
respect of confidentiality and restrictive covenants.
Given Paul McDonald had worked for the company for over ten years and that he was retiring from the Board, the Committee deemed it appropriate to
treat him as a good leaver and therefore the following treatments apply to his variable remuneration:
• Entitlement to a pro-rata bonus for the proportion of the year worked (£217,807), with one-third of this being deferred into shares for three years (with
value £72,602), as described in the Bonus outcomes section;
• All outstanding LTIP awards continue to vest at their normal dates, with pro-rating to reflect time served as an Executive Director and subject to
performance assessment; and
• All other share awards, including deferred bonus shares and LTIP awards that have met their performance conditions but remain subject to a holding
period, are retained and vest at their normal dates.
The resulting share awards remaining outstanding are as follows:
Award
2016 LTIP
2017 LTIP
2018 LTIP1
2019 LTIP2
Deferred shares in respect of 2018/19 bonus
Deferred shares in respect of 2019/20 bonus
Date of grant
18 August 2016
7 August 2017
20 August 2018
2 August 2019
4 June 2019
17 June 2020
Awards outstanding
at date of stepping
down from Board
Pro-rated
number of
awards
Vesting date
86,143
45,628
137,730
156,546
15,198
9,914
86,143 18 August 2021
7 August 2022
45,628
92,001 20 August 2023
2 August 2024
67,275
4 June 2022
15,198
17 June 2023
9,914
1. Award due to vest at 89.5% of maximum as a result of achievement against performance conditions to the end of 2020/21. An additional 18,033 dividend shares had been earned as at the end of
2020/21.
2. Award remains subject to performance conditions to the end of 2021/22.
No other payments were made to Paul McDonald.
Payments to past Directors – audited
There were no payments to past Directors during the year.
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 Committees and the time and responsibility of the roles of each of them.
The fees paid for 2020/21 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 on 2 May 2019)
2020/21
Fee £
300,000
90,671
74,171
68,840
59,668
2020/21
Benefits £1
14,041
–
–
–
–
2020/21
Total £
314,041
90,671
74,171
68,840
59,668
2019/20
Fee £
300,000
85,155
61,000
58,000
53,114
2019/20
Benefits £1
34,971
–
–
–
–
2019/20
Total £
334,971
85,155
61,000
58,000
53,144
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. The figures in the 2019/10 column 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. The figure for 2020/21 is an estimate and will be restated in next year’s Remuneration Report to the extent that the actual levy differs.
2. The Non-Executive Directors are not eligible to receive any variable pay and therefore the totals provided above reflect total fixed remuneration.
82
B&M European Value Retail S.A. Annual Report & Accounts 2021
The annual rates of fees paid during the year with effect from 1 June 2020 were as follows:
Role
Chairman of the Board
Non-Executive Director base fee
Additional fee for chairing Audit Committee
Additional fee for chairing Remuneration Committee
Additional fee for Senior Independent Director
Additional fee for Director responsible for Workforce Engagement
Strategic Report
Corporate Governance
Financial Statements
Fee £
300,000
60,000
15,000
15,000
16,500
5,000
Directors’ shareholding and share interests – audited
Under the remuneration policy which operated during the year, the shareholding guideline for Executive Directors is for a shareholding to be built up and
maintained of 200% of base salary. Where an Executive Director does not meet the shareholding guideline, they were expected to retain all shares which
vest under the LTIP (or any other share plans in the future) after allowing for tax. They are 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 Simon Arora, while Alex Russo joined
the Board during the year and is therefore working towards his shareholding requirement.
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 2020/21 (or the date of their retirement from the Board if earlier).
Director
Peter Bamford
Simon Arora
Paul McDonald3
Alex Russo
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit
Shares held
beneficially1
5,000
109,880,828
39,171
–
37,037
3,050
12,192
2,440
Unvested
options with
performance
conditions2
–
950,270
294,276
–
–
–
–
–
Unvested
options not
subject to
performance
–
77,082
156,883
–
–
–
–
–
Vested but
unexercised
awards
–
–
72,093
–
–
–
–
–
Includes any shares held by connected persons or related parties.
1.
2. Nil cost options.
3. Stepped down from the Board on 15 November 2020.
There have been no changes in the Directors’ interests in shares in the Company between the end of the 2020/21 financial year and the date of this report.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
83
Directors’ remuneration report
continued
Performance graph and pay table
The chart below illustrates the Company’s Total Shareholder Return (“TSR”) performance against the performance of the FTSE 350 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)
t
a
e
d
a
m
t
n
e
m
t
s
e
v
n
i
t
i
n
u
0
0
1
a
f
l
o
e
u
a
V
–
R
S
T
4
1
0
2
e
n
u
J
2
1
280
260
240
220
200
180
160
140
120
100
80
12 June
2014
28 March
2015
26 March
2016
25 March
2017
31 March
2018
30 March
2019
28 March
2020
27 March
2021
Remuneration of the CEO
The table below shows the remuneration of the CEO for each of the last seven financial years.
B&M European Value Retail
FTSE 350 excluding Investment Trusts
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
Total
remuneration
Bonus as a
% of max
166,606
601,638
1,403,731
1,376,482
1,204,983
1,213,194
3,622,819
N/A
0%
76.8%
68.6%
46.0%
42.6%
98.8%
LTIP as a
% of max
N/A
N/A
N/A
N/A
N/A
N/A
89.5%
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 3 in 2020/21.
The relevant data, as determined under the provisions of the Luxembourg remuneration reporting law, are as follows:
Total Shareholder Return (year-on-year)
3-year Total Shareholder Return ranking4
19.0%
7th out of 17
33.0%
4th out of 17
-2.6%
4th out of 17
-20.3%
9th out of 17
123.7%
7th out of 15
Total shareholder return performance
FY17
FY18
FY19
FY20
FY21
84
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Company only (excluding all of the other Group subsidiaries in the
UK and France) on full-time equivalent basis (average)
9.42%
26.90%
15.49%
-16.38%2
-8.44%3
Percentage change in total remuneration in the year stated compared with the prior financial year1
FY17
FY18
FY19
FY20
FY21
Executive Directors:
Simon Arora (CEO)
Paul McDonald (Ex-CFO)
Alex Russo (CFO)
Non-Executive
Directors:
Peter Bamford
Ron McMillan
Tiffany Hall
Carolyn Bradley
Gilles Petit
133.32%5
135.24%6
n/a
n/a
nil
n/a
n/a
n/a
-1.94%
8.87%
n/a
n/a
6.06%
n/a
n/a
n/a
-12.55%
-3.26%
n/a
nil
nil
n/a
n/a
n/a
0.68%
-20.85%
n/a
11.66%8
21.65%9
5.17%10
nil
n/a
198.62%
49.38%
n/a7
-6.25%11
6.48%12
5.17%13
10.07%14
2.88%15
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. Excluding leavers and joiners, base salaries of the employees increased in the year on average by 0.62%.
4. The TSR figures are based on (i) a spot to spot absolute measurement for the Company over the financial year and (ii) a relative spot to spot measurement over three years 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). For the 2020/21 figures the companies used are Dixons
Carphone, Dunelm, Greggs, Howden Joinery, JD Sports Fashion, Kingfisher, Marks & Spencer, Morrison (WM), Next, Ocado, Pets At Home, Sainsbury J, Tesco and WH Smith. The available TSR data
from IPO in June 2014 to March 2017 has been used for 2017 (i.e. not a full three years).
5. 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.
6. 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.
7. Alex Russo was appointed to the Board and to the position of Chief Financial Officer on 15 November 2020, and therefore received no remuneration in 2019/20.
8. 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.
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.
9.
10. 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.
11. The reduction is due to the 2019/20 fees including two years’ worth of reimbursement of the social security levy on his fees in Luxembourg. The base fee has remained at £300,000 in both years.
12.
Increase is a result of an increase to the fee level with effect from June 2020 as detailed on page 86 and as a result of 12 months’ of the additional fee for the role of Senior Independent Director being
paid in 2020/21 relative to 11 months in the prior year.
Increase is a result of an increase to the fee level with effect from June 2020 as detailed on page 86 and as a result of 12 months’ of the additional fee for the role of Chair of the Remuneration
Committee being paid in 2020/21 relative to 3 months in the prior year.
Increase is a result of an increase to the fee level with effect from June 2020 as detailed on page 86 and as a result of 12 months’ of the additional fee for the role of Director responsible for Workforce
Engagement, being payable from 2020/21 onwards only.
Increase is a result of an increase to the fee level with effect from June 2020 as detailed on page 86.
13.
14.
15.
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
28 March 2020 and 27 March 2021.
£’000
Total pay for employees
Distributions to shareholders1
1.
There have not been any buy-backs of shares during either year.
2019/20
421,644
76,042
2020/21
% change
552,213
697,484
31.0%
817.2%
CEO Pay ratio
In line with new UK reporting requirements which the Company has adopted on a voluntary basis, set out below are ratios which compare the total
remuneration of the CEO (as included in the single total figure of remuneration table) 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
2020/21
Method
Option A
Option A
25th percentile
pay ratio
72:1
191:1
50th percentile
(median)
pay ratio
72:1
196:1
75th percentile
pay ratio
69:1
207:1
We have used Option A as this is the statistically most accurate method and the preferred approach of most institutional shareholders.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
85
Directors’ remuneration report
continued
CEO Pay ratio continued
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
18,138
18,951
50th percentile
(median)
17,684
18,490
75th percentile
16,853
17,514
The ratios disclosed above are affected by the following factors of our UK workforce. Over 98% of this population work in our retail stores and warehouses
where, in line with the retail sector more generally, rates of pay are lower than those for 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. In addition, while warehouse and retail sales colleagues are eligible to participate in Group-wide share plans and
annual opportunities to share in success and recognise outperformance, the CEO’s higher bonus and LTIP opportunities are comparable with those which
reflect the nature and complexity of his role as well as the remuneration levels in retail businesses of similar size. In this context, the Committee is satisfied
that the ratios are appropriate and fair.
There has been an increase in the ratios for 2020/21, which is driven primarily by the inclusion of the first LTIP granted to the CEO in 2018, as well as
particularly strong performance during 2020/21. It is to be expected that the ratio will vary from year to year, primarily as the CEO’s package consists of a
much higher level of variable pay that is dependent on performance, whereas the warehouse and retail sales colleagues’ remuneration is predominantly
fixed in nature, which is normal practice for these roles.
The Company has taken the following actions for the workforce during the year to recognise their additional work during 2020/21 and going forward:
• during April and May 2020 in recognition of the considerable efforts of the workforce dealing with the challenge of keep essential goods flowing from
our warehouses to our stores during the onset of the pandemic, we gave our B&M UK and Heron Foods workforce an additional 10% to their pay;
•
in January 2021 we gave our B&M colleagues an extra week’s pay as a bonus for their hard work and commitment during the year; and
• our workforce in the B&M UK business will also have the opportunity going forward to share in the Company’s success on an annual basis with cash
bonuses being paid where internal targets for the business are met or exceeded.
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.
Fees for Chairman and Non-Executive Directors in 2021/22
The rates of the fees for the Chairman and Non-Executive Directors were reviewed during the year, with reference to market data for fees within
companies of a similar size and complexity.
While 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, adjustments to fee levels were agreed. While the majority of the fees are subject to modest
increases, the Chairman’s current fee is deemed to be below the appropriate level, taking into account the increased complexity of the business (as
detailed on page 69), and the additional time commitment and responsibilities of the role, and therefore a larger adjustment was approved by the
Remuneration Committee. The resulting annual fees are as follows:
Role
Chairman of the Board
Non-Executive Director base fee
Additional fee for chairing Audit Committee
Additional fee for chairing Remuneration Committee
Additional fee for Senior Independent Director
Additional fee for Director responsible for Workforce Engagement
Fee from
29 March 2020
£
300,000
58,000
12,000
12,000
16,500
N/A
Fee from
1 June 2020
£
300,000
60,000
15,000
15,000
16,500
5,000
Fee from
1 April 2021
£
380,000
63,000
17,500
17,500
18,500
5,000
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.
86
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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. Peter Bamford’s appointment letter is dated 13 November 2017.
Executive Directors remuneration for 2021/22
Base salary
As described in the Chair’s statement, the base salaries for the Executive Directors were reviewed during the year. The resulting rates of salary are
as follows:
Executive Director
Simon Arora
Alex Russo1
1. Alex Russo’s salary is effective from 16 November 2020, the date on which he joined the Board as CFO.
Benefits and pension
There are no planned changes to the provision of benefits for 2021/22.
Base salary from
29 March 2020
£
Base salary as at
1 June 2020
£
Base salary from
1 April 2021
£
643,845
N/A
656,722
475,000
810,000
475,000
Simon Arora’s pension provision will be reduced from 20% to 3% of salary, less Employer’s NIC (to the extent that it is paid as a salary supplement), in line
with the rate available to UK salaried employees of the Group.
Alex Russo will continue to receive pension provision equal to 3% of salary, less Employer’s NIC (to the extent that it is paid as a salary supplement).
Annual bonus
As set out in the Directors’ Remuneration Policy in this report, the maximum bonus opportunity for Simon Arora will increase to 200% from 150% of salary.
The maximum bonus opportunity for Alex Russo will remain at 125% of base salary for 2021/22.
Under the awards for 2021/22, 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, one-half of any bonus achieved (increased from one-third) 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 or personal targets in advance as they are commercially sensitive. Suitable disclosure of the targets
together with details of achievement against them will again be included in next year’s remuneration report.
LTIP
The Committee proposes that LTIP awards will again be made to Executive Directors during 2021/22, subject to stretching financial performance conditions
over a three year period, with vesting after the completion of a further two year holding period.
As set out in the policy, the 2021/22 award for Simon Arora will be 200% of salary while an award of 175% of salary will be granted to Alex Russo.
• We have set this year’s Adjusted EPS targets taking into account the Management 3 Year Plan and the latest analysts’ consensus forecasts at the time
of setting targets. The range has been stretched given the high degree of uncertainty currently faced by the business with significant performance
above plan required to achieve maximum payout.
• The relative TSR condition follows a market-standard approach, with no vesting below median performance and with maximum vesting for upper
quartile performance or above. This approach is consistent with the approach used for previous awards.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
87
Directors’ remuneration report
continued
LTIP continued
The resulting performance conditions and the targets for the awards are as follows:
Performance condition
Adjusted EPS
Relative TSR vs FTSE 350 retailers1
Performance for
threshold vesting
(25%)
Performance for
maximum vesting
37p
45p
Median Upper quartile
Weighting
50%
50%
1. Consists of the constituents of the FTSE General Retailers Index and the FTSE Food and Drug Retailers Index. A one month average applies prior to the beginning and at the end of the performance
period for the TSR condition.
Remuneration Committee composition and meetings in 2020/21
The members of the Committee during the year consisted solely of independent Non-Executive Directors being Tiffany Hall (Committee Chair), Ron
McMillan, and Carolyn Bradley.
The responsibilities of the Committee are set out in the Corporate Governance section of the Annual Report on page 52.
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.
Details of Committee video conferences and attendances during the year were as follows:
Director
Tiffany Hall
Ron McMillan
Carolyn Bradley
Video conferences
attended
Role
Committee Chair
Committee Member
Committee Member
5 out of 5
5 out of 5
5 out of 5
The effectiveness of the Committee during the year was evaluated as part of a broader board effectiveness review, conducted internally and led by the
Chairman of the Board, details of which are set out on page 56. The overall conclusion of the review was that the Committee remains effective in
discharging its functions and reporting to the Board.
Shareholder voting
The resolutions to approve the Directors’ Remuneration Policy at the 2018 AGM and the Annual Report on Remuneration at the 2020 AGM were passed as
follows:
Resolution
Votes for
% for
Votes
against
% against
Total votes cast
% of shares
on register
Votes
withheld
To approve the Directors’
Remuneration Policy (2018)
To approve the Annual Report
766,109,391
98.88
8,714,552
1.12
774,823,943
77.44
0
on Remuneration (2020)
754,659,735
99.58
3,148,072
0.42
757,807,807
75.73
2,126,359
88
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Advisors to the Committee
The adviser to the Committee during the year was FIT Remuneration Consultants LLP (“FIT”) until the appointment of PricewaterhouseCoopers LLP (“PwC”) in
November 2020 following a tender process carried out during the year. PwC was chosen due to their experience of advising business of similar size and
complexity.
FIT did not provide any other services to the Group during their tenure as advisers. From time to time the Group engages PwC to provide valuation, taxation
and related advice on specific matters. The Committee will continue to monitor such engagements in order to be satisfied that they do not affect PwC’s
independence as an adviser to the Committee.
Both FIT and PwC are members 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 2020/21 FIT’s total fees were £43,020 excluding VAT and PwC’s total fees in respect of advice to the Remuneration Committee were
£42,063 excluding VAT.
Fees were determined partially under a fixed fee agreement to provide a core set of services, with additional items being determined on a time and
materials basis.
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
2 June 2021
Annual Report & Accounts 2021
B&M European Value Retail S.A.
89
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 27 and 31 March 2021
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 47, 48 to 65 and 66 to 89 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 12 to 17;
• workforce engagement – pages 34, 44 and 45;
• viability statement – page 32;
• energy and carbon reporting – page 43;
• directors’ service contracts and appointment letters – pages 75 to 76;
• directors’ share interests – page 83;
• conflicts of interest – page 55; and
• stakeholders and section 172 statement – pages 44 to 47.
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 47, sets out the
review of the Group’s business during the financial year ended 27 March
2021, 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 27 March 2021 of
GBP £428.1m is reported in the consolidated statement of comprehensive
income on page 101.
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 43.
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, conference calls, company newsletters and
notice boards and CEO email bulletins. They include information on the
financial and trading performance of the Group. Further details of workforce
engagement, feedback and actions during the year are also set out on
pages 34, 44 and 45 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 which 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
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 2021 and their interests in
shares and share awards made to them under share incentive schemes in
the Company are shown on pages 82 to 83. There have been no changes
to the Board of the Company between 31 March 2021 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 29 July 2021.
All the retiring Directors, being eligible, will stand for re-election as Directors
at that meeting, except for Gilles Petit who is not standing for re-election to
the Board.
The Board is recommending a final dividend of 13.0p per ordinary share,
which together with the interim dividend of 4.3p per ordinary share paid in
November 2020 (but not including the special dividends of 25.0p and 20.0p
per share paid in November and December 2020 respectively) is a total
ordinary dividend for the year of 17.3p which reflects the upper end of the
dividend policy of paying 30-40% of normalised post-IPO earnings¹.
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.
1. Dividends are stated as gross amounts before deduction of Luxembourg withholding tax which
is currently 15%.
Political donations
No political donations were made in the financial year.
90
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Shareholders
As at 2 June 2021, 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):
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 26 to the
consolidated financial accounts on pages 144 to 146 which forms parts of
this report.
Share capital
The Company’s share capital and changes to it in the financial year, are set
out on page 93 below and in note 23 to the consolidated financial
statements on page 142 which forms part of this report.
Shareholder
SSA Investments S.à.r.l.*
The Capital Group Companies Inc.
Wellington Management Company LLP
No of ordinary
shares
109,880,828
50,796,789
50,437,064
% share
Capital
10.98
5.08
5.04
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
29 July 2021 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 2021 and
since that date up to the date of this report, the ESOT did not hold any
shares in the Company. Also with effect from 22 April 2021 the Company
and the trustees have now terminated the ESOT trust.
*
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 £155m revolving
credit facility. The SFA provides 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 on not less than 10 Business
Days’ notice to the Company.
The Company has £400m 3.625% senior secured notes due 2025, of which
all £400m 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 29 July 2021, 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 32, the Corporate Governance
report on pages 48 to 65 and the Directors’ Remuneration Report on pages
66 to 89, each of which form part of this report.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
91
Directors’ report and business review
continued
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 95, which forms part of this report.
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.
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 29 July 2021 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.
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”).
In the financial year 2020/21, two 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 4.7% of the total
number of 43 gross B&M new store openings of the Group in the UK in that
period. Both of these leases had been conditionally exchanged in the
financial year 2017/18, as referred to in the Group’s Annual Report in 2018.
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 9.8% of a total number of 681 UK B&M stores of
the Group with all landlords, and 11.0% of the overall rent roll of all UK B&M
stores as at the year end.
In the financial year 2020/21 the Group also acquired two freehold store
premises from Arora Family related parties. Both of those store premises
are currently occupied by other retailers. As B&M carries on a trading
business, it will be entitled to exercise rights under the law as the landlord
to take possession of those premises for its own use when the existing
leases with the current tenants expire in approximately five years’ time (or
earlier if the tenants agree to vacate sooner), without the current tenants
being entitled to apply to court for new leases. In the meantime B&M as the
landlord of those stores receives the benefit of the commercial rents being
paid under the existing leases from the tenants.
During the financial year 2020/21 the Group’s joint venture sourcing
company, Multi-lines International Company Ltd (“Multi-lines”), surrendered
its leases of offices and product showroom premises in Kowloon Bay Hong
Kong back to the Arora Family related party landlords. Those leases were of
a mixed industrial and office use premises which was built in the 1970s. At
the same time, Multi-lines entered into new leases of office and showroom
premises with Arora Family related party landlords in a more suitable
modern tower block location close to the main MTR commuter sub-way
access to the Kowloon Bay district. Multi-lines business has grown
significantly over the last few years alongside the growth of B&M’s
business. That had driven the need for Multi-lines to upgrade to a better
quality premises and working environment near the waterfront where
commuters come in and out of the district, to ensure it can continue to
attract and retain experienced colleagues while its business continues
to grow.
In the financial year under review, no new blocks of 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. 10.8 unused hours were carried forward from the last block
purchased in the 2019/20 financial year. Out of that 3.4 hours were used in
July 2020, leaving a balance of 7.4 unused hours which have been carried
forward to the 2021/22 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 55 of the Corporate Governance Report.
Further details of related party transactions are included also in
note 27 of the Financial Statements on pages 147 and 148.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
The Board confirms that during the financial year 2020/21:
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
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.
in the Relationship Agreement have been complied with
by the controlling shareholder and its associates; and
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 27 to the consolidated financial accounts on
pages 147 and 148 which forms part of this report.
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.
In accordance with Article 13.10 of the Articles of Association of the
Company a report will be made at the 2021 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 2020/21 referred to above and
in note 27 of the Financial Statements on pages 147 and 148, together with
any other such transactions entered into after the financial year end on
31 March 2021 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 relation to Article 11 of the
Luxembourg Law on Takeovers of 19 May 2006 (“the Luxembourg Takeover
Law”), as subsequently amended, and form part of this Directors’ Report.
Following the UK's exit from the EU, the Luxembourg Takeover Law no
longer applies to the Company as its shares are listed solely on the London
Stock Exchange which is no longer a Member State regulated market of the
EU. However, as a Luxembourg incorporated company these disclosures
are made voluntarily, which the Company considers to be best practice to
continue to provide to shareholders.
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 2021 amounts to GBP £100,081,968.80 represented by
1,000,819,688 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 £297,140,253.40. 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 (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 Article 8 of the Articles of Association of the Company
which adopts the provisions of the Luxembourg law on transparency
obligations of securities issuers dated 11 January 2008 as amended (“the
Luxembourg Transparency Law”) are set out on page 91.
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 Takeover Law, 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 24.6.11 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
Transparency Law, which is adopted by the Company under Article 8.1.5 of
its Articles of Association, 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 under Article 8 of the Company’s Articles of
Association in relation to the Luxembourg Transparency Law.
Section (g) – Shareholders’ agreements with transfer restrictions
B&M European Value Retail S.A. has no information about any agreements
between shareholders which may result in restrictions on the transfer of
securities or voting rights.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
93
Directors’ report and business review
continued
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
24.6.3). 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.
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 £155m revolving credit facility. The SFA provides 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 on not less than 10 Business Days’ notice to the Company; (b) the
Company has £400m 3.625% senior secured notes due 2025, of which all
£400m 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 66 to 89.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
2 June 2021
Alex Russo
Chief Financial Officer
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
18 September 2020, 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 29 July 2021.
This resolution will usually be requested at each AGM.
94
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
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.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
The financial statements are published on the Company’s website.
Legislation in Luxembourg governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
•
the consolidated financial statements of B&M European Value Retail S.A.
(“Company”) presented in this Annual Report and established in
conformity with International Financial Reporting Standards as adopted
in the European Union give a true and fair view of the assets, liabilities,
financial position, cash flows and profits of the Company and the
undertakings included within the consolidation taken as a whole;
•
•
the annual accounts of the Company presented in this Annual Report
and established in conformity with the Luxembourg legal and regulatory
requirements relating to the preparation of annual accounts give a true
and fair view of the assets, liabilities, financial position and profits of the
Company; and
the Strategic Report includes a fair review of the development and
performance of the business and position of the Company and the
undertakings included within the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
it faces.
We consider this Annual Report (including the financial statements), taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position,
performance, business model and strategy.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
2 June 2021
Alex Russo
Chief Financial Officer
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. Under that law they are
required to prepare the Group financial statements in accordance with
International Financial Reporting Standards (“IFRSs”) as adopted by the EU
and applicable law and have prepared the Company financial statements
in accordance with Luxembourg legal and regulatory requirements
regarding the preparation of annual accounts (“Lux GAAP”). In addition the
Group financial statements are required under the UK Disclosure Guidance
and Transparency Rules to be prepared in accordance with International
Financial Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union (“IFRSs as adopted by the
EU”).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of their profit or loss for
that period. In preparing each of the Group and Company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• present the financial statements and policies in a manner that provides
relevant, reliable, comparable and understandable information;
• state whether they have been prepared in accordance with IFRSs as
adopted by the EU;
• assess the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern;
and
• use the going concern basis of accounting unless they either intend to
liquidate the Group or the parent Company or to cease operation, or
have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the parent Company’s transactions and
disclose with reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial statements
comply with company law. They are responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law
and those regulations.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
95
Financial Statements
Independent Auditor’s Report
To the Shareholders of B&M European Value Retail S.A.
68-70, Boulevard de la Pétrusse L-2320 Luxembourg
Report of the Réviseur d’Entreprises agréé
Report on the audit of the consolidated financial
statements
Opinion
We have audited the consolidated financial statements of B&M European
Value Retail S.A. and its subsidiaries (the “Group”), which comprise the
consolidated statement of financial position as at 27 March 2021, and the
consolidated statement of comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows for the 52
week period then ended, and 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
27 March 2021 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 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
Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF 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
Code of Ethics for Professional Accountants, including International
Independence Standards, issued by the International Ethics Standards
Board for 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.
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.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Risk of error in 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 £4.8 billion as per the
Consolidated Statement of Comprehensive Income and note 2
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 error.
As a result of this large volume of transactions, 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 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 receipts from the legacy credit card provider which are
related to revenue from sales made in stores and investigating outliers
identified in this process;
• Performing a substantive analytical procedure over receipts from the new
credit card provider which are related to revenue from sales made in stores;
• 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; and
• Journal entry testing focused on revenue entries with an unexpected
contra-account.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
97
Independent Auditor’s Report
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
The Group has significant levels of inventory due to its retail
operations. As per the Consolidated Statement of Financial
Position and note 16, the balance is £605 million at the year 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.
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 due to the restrictions on
trading imposed by the French Government during the year.
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.
How the matter was addressed in our audit
Our procedures over the valuation of inventory included, but were not limited to:
• Obtaining a detailed understanding and evaluating the design and
implementation of key controls that the Group has surrounding inventory
valuation 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:
– 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;
– Understanding the inventory provisioning policy with specific
consideration to net realisable value and slow-moving stock;
– 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;
– 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 stock provision;
– Evaluating the adequacy of the additional NRV provision established to
cater for the increased risk presented by COVID-19 and local lockdown
restrictions on trading implemented around the year end. Testing was
focused on the seasonal categories most likely to be affected;
– Inspecting and corroborating the Group’s hedging strategy, and reviewing
the documentation in place for derivatives, including assessing whether it
is in accordance with IFRS9; and
– Reviewing management’s calculations to adjust the valuation of
inventories based on hedged effectiveness in order to assess whether the
valuation has been appropriately adjusted.
98
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Valuation 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
As per note 13, the Goodwill balance held in relation to Babou is
£25.7m.
There has been uncertainty around how Babou’s trade will be
impacted by COVID-19. All stores were closed in the Spring and
Autumn of 2020 for a total of 10 weeks. Trading restrictions have
continued into 2021 for all stores, therefore the impairment risk has
remained significant to reflect the risk of further store closures and
any potential impairment required.
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 COVID-19,
we have identified the carrying value of the goodwill as a key
audit matter.
How the matter was addressed in our audit
Our procedures over the carrying value of the Babou goodwill included, but were
not limited to:
• 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 methodology applied;
• Forming an expectation of the Babou’s WACC using market observable data
of risk-free rates and cost of equity for comparable companies; and
• Reviewing management disclosures on estimates and judgements in the
consolidated financial statements in relation to the requirements of IAS36.
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 consolidated management report but does not include the
consolidated financial statements and our report of the “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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
99
Independent Auditor’s Report
continued
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, actions taken to eliminate threats or safeguards applied.
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
The consolidated management report on pages 90 to 95 of the annual
report is consistent with the consolidated financial statements and has
been prepared in accordance with applicable legal requirements.
Luxembourg, 2 June 2021
KPMG Luxembourg
Société coopérative
Cabinet de révision agréé
Thierry Ravasio
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 the “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 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 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 the 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 the “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 our report of the “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.
100
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Financial Statements
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 – other
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
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
27 March 2021
£’000
52 weeks ended
28 March 2020
£'000
Note
2
15
4
12
5
5
5
5
10
2
6
10
11
11
11
11
4,801,425
(3,031,455)
1,769,970
–
(1,156,556)
3,813,387
(2,530,579)
1,282,808
16,932
(966,928)
613,414
1,795
615,209
(61,411)
(28,654)
295
–
525,439
(97,335)
428,104
428,104
–
428,104
–
428,104
(1,222)
(20,393)
4,509
410,998
–
410,998
42.8
42.7
42.8
42.7
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
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
101
Financial Statements
Consolidated statement
of financial position
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
Total assets
Equity
Share capital
Share premium
Retained earnings
Hedging reserve
Legal reserve
Merger reserve
Foreign exchange reserve
Non-current liabilities
Interest bearing loans and borrowings
Lease 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
27 March
2021
£’000
28 March
2020
£’000
Note
13
13
14
15
12
17
10
18
16
17
20
23
21
15
19
10
22
21
18
19
15
20
30
22
920,729
118,240
336,364
1,070,581
4,479
7,084
32,242
921,911
119,696
312,198
1,086,618
5,700
7,517
22,988
2,489,719
2,476,628
217,682
605,126
42,160
3,767
868,735
3,358,454
(100,082)
(2,475,108)
(127,585)
7,499
(10,010)
1,979,131
(6,813)
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)
(732,968)
(867,399)
(723,736)
(1,138,634)
–
(27,476)
(4,511)
(561,418)
(1,146,233)
(171)
(29,008)
(766)
(1,894,357)
(1,737,596)
(6,875)
–
(524,260)
(162,735)
(16,141)
(12,511)
–
(8,607)
(731,129)
(211,062)
(928)
(419,999)
(149,011)
(1,847)
(26,115)
(150,087)
(6,079)
(965,128)
(2,625,486)
(2,702,724)
(3,358,454)
(3,570,123)
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 2 June 2021 and signed on their behalf by:
Simon Arora
Chief Executive Officer
102
B&M European Value Retail S.A. Annual Report & Accounts 2021
Financial Statements
Consolidated statement of changes
in shareholders’ equity
Strategic Report
Corporate Governance
Financial Statements
Balance at 31 March 2019
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
Share
capital
£'000
Share
premium
£’000
Retained
earnings
£'000
100,056 2,474,249
–
–
69
–
–
2
393,375
(76,042)
(150,087)
1,411
2
–
–
–
–
–
69
(224,718)
–
–
–
–
–
194,777
(104,750)
–
90,027
(13,855)
Balance at 28 March 2020
100,058 2,474,318
244,829
Ordinary dividends declared
Special dividends declared
Effect of share options
Total transactions with owners
Profit for the period relating to
continuing operations
Other comprehensive income
Total comprehensive income for
the period
–
–
24
24
–
–
–
–
(97,067)
– (450,330)
1,154
790
790 (546,243)
–
–
428,104
895
–
(16,779)
– 428,999
(16,779)
Hedging
reserve
£’000
1,984
–
–
–
–
–
–
7,296
7,296
–
9,280
–
–
–
–
Legal
reserve
£’000
Merger
reserve
£’000
10,010 (1,979,131)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,010 (1,979,131)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Foreign
exch.
reserve
£'000
5,793
–
–
–
–
–
–
2,242
2,242
–
8,035
–
–
–
–
–
(1,222)
(1,222)
Put/call
option
reserve
£’000
(13,855)
–
–
–
–
–
–
–
Non-
control.
interest
£’000
Total
Share-
holders’
equity
£'000
9,753 1,002,234
(76,042)
(150,087)
1,482
–
–
–
–
–
(224,647)
194,777
(9,172)
(581)
(113,922)
8,957
–
13,855
(9,753)
–
89,812
–
–
–
–
-
–
–
–
–
–
–
867,399
–
(97,067)
– (450,330)
1,968
-
– (545,429)
–
–
–
–
428,104
(17,106)
410,998
732,968
Balance at 27 March 2021
100,082 2,475,108 127,585
(7,499)
10,010 (1,979,131)
6,813
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
103
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
Deferred consideration in respect of business acquisitions
Business disposal net of cash disposed
Disposal of interest in associate company
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 newly issued corporate bonds
Repayment of previously issued corporate bonds
Receipt of term loan facilities
Repayment of term loan facilities
Repayment of acquisition loan facility
Net (repayment)/receipt of Group revolving bank loans
Net repayment of Heron facilities
Net receipt of government backed loan in France
Net (repayment)/receipt of other French facilities
Repayment of the principal in relation to lease liabilities
Payment of interest in relation to lease liabilities
Fees on refinancing
Other 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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Cash and cash equivalents comprise:
Cash at bank and in hand
Overdrafts
Note
24
14
13
6
12
12
21
21
21
21
21
21
21
21
21
21
9
30
18
52 weeks ended
27 March
2021
£’000
Restated*
52 weeks ended
28 March
2020
£'000
944,048
–
(117,422)
826,626
(86,606)
(1,312)
–
9,074
316
6,448
295
2,186
(69,599)
400,000
(250,000)
300,000
(300,000)
(82,121)
(120,000)
(5,150)
22,762
(1,164)
(140,790)
(61,411)
(10,797)
(23,186)
30
(697,485)
539,483
68,036
(57,924)
549,595
(123,270)
(1,361)
(11,950)
2,964
–
160,518
214
2,580
29,695
–
–
–
–
–
80,000
(2,030)
–
1,587
(149,491)
(63,790)
(119)
(23,957)
60
(76,042)
(969,312)
(233,782)
2,690
1,213
(209,595)
427,277
217,682
217,682
–
217,682
346,721
80,556
427,277
428,205
(928)
427,277
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
* This statement has been restated in respect of reclassifying a non-cash movement (see notes 1, 24).
104
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Financial Statements
Notes to the consolidated
financial statements
1 General information and basis of preparation
The consolidated financial statements have been prepared in accordance with EU IFRS.
The Group’s trade is general retail, with continuing trading taking place in the UK and France. The Group has been listed on the London Stock Exchange
since June 2014.
The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and
financial liabilities at fair value through profit or loss. The measurement basis and principal accounting policies of the Group are set out below and
have been applied consistently throughout the consolidated financial statements.
The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000), except when
otherwise indicated.
The consolidated financial statements cover the 52 week period from 29 March 2020 to 27 March 2021 which is a different period to the parent
company stand alone accounts (from 1 April 2020 to 31 March 2021). 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 of the consolidated statement of cashflows
A presentational restatement has been made to the prior year consolidated statement of cashflows and note 24 such that the non-cash movement
related to the impairment of right of use assets (note 15) has been included as a reconciling figure in calculating the cash flows from operating activities
as required by IAS 1.
Previously this had netted against the cash outflow recorded in the caption ‘Repayment of the principal in relation to lease liabilities’. The restatement
has resulted in an increase in the cash flows from operating activities in the prior year of £6.8m with the corresponding decrease recorded in cash
flows from financing activities.
There is no impact in the consolidated statement of comprehensive income or consolidated statement of financial position due to the restatement.
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 29 March 2020 to 27 March 2021. 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 prior 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 6 for more details.
During the prior year, on 6 March 2020, and as part of a sale and leaseback transaction involving the warehouse at Bedford, the Group disposed of
Bedford DC Investment Ltd (“Bedford Ltd”). Bedford Ltd has only been consolidated until this date, see note 6 for more details.
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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
105
Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
•
the contractual arrangements with the other vote holders of the investee,
•
•
rights arising from other contractual arrangements; and
the Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary, excluding the situations as
outlined in the basis of preparation.
Going concern
As a value retailer, the Group is well placed to withstand volatility within the economic environment. The Group’s forecasts and projections, taking into
account reasonably possible changes in trading performance, show that the Group will trade within its current banking facilities.
After making enquiries, including preparing cash flow forecasts for at least 12 months from the date of approval of these financial statements, the
Directors are confident that the Group has adequate resources to continue its successful growth. 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, with our UK stores remaining open and able to continue to trade profitably.
Whilst the French stores have had to close due to national and regional lockdowns, when open they have traded successfully and that segment, which
is also supported in the form of loans guaranteed by the French government (see note 21), has returned a positive result for the year and is expected to
continue to grow successfully. The French stores do not make up a significant proportion of the Group (see note 2).
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; and
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 sells a small quantity of gift vouchers for use in the future and, as such, a small amount of deferred revenue is recognised. At year end the
value held on the balance sheet was £0.3m (2020: £nil).
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. See note 2 for the split of wholesale sales to store sales.
Revenue is the total amount receivable by the Group for goods supplied, in the ordinary course of business, excluding VAT and trade discounts, and
after deducting returns and relevant vouchers and offers.
Other administrative expenses
Administrative expenses include all running costs of the business, except those relating to inventory (which are expensed through cost of sales), tax,
interest and other comprehensive income. Transport and warehouse costs are included in this caption.
Elements which are unusual and significant, such as material restructuring costs, may be separated as a line item.
Goodwill
Goodwill is initially measured at cost, being the excess of the fair value of consideration transferred over the fair value of the net identifiable assets
acquired and liabilities assumed at the date of acquisition.
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After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to the relevant cash-generating units (CGUs) that are expected to benefit
from the combination. The cash-generating units are individual stores and the groups of cash-generating units are the store portfolios in each
operational segment.
Goodwill is tested for impairment at least once per year end specifically at any time where there is any indication that it may be impaired. Internally
generated goodwill is not recognised as an asset.
Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating
decision maker has been identified as the executive directors of the Group. The executive directors are responsible for assessing the performance of
the business for the purpose of making decisions about resources to be allocated.
Alternative performance measures
The Group reports a selection of alternative performance measures as detailed below and in note 3, as the Directors believe that these measures
provide additional information that is useful to the users of our accounts.
The alternative performance measures we report in these accounts are:
• Earnings before interest, tax, depreciation and amortisation (EBITDA)
• Adjusted EBITDA
• Adjusted Profit
• Adjusted Earnings per share
Both IFRS 16 and non-IFRS 16 versions of these alternative performance measures have been calculated and presented in order to aide comparability
with the 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 3. These adjustments include the effect of ineffective derivatives and foreign exchange on
intercompany balances, which do not relate to underlying trading, and costs incurred in relation to acquisitions, which are non-recurring and do not
relate to underlying trading.
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
impaired accordingly with the impairment charged to administration expenses.
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Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
Intangible assets
Intangible assets acquired separately, including computer software, are measured on initial recognition at cost comprising the purchase price and any
directly attributable costs of preparing the asset for use.
Following initial recognition, assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when
an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows:
Computer software acquired
–
3 or 4 years
Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.
Cost comprises purchase price and directly attributable costs. Unless significant or incurred as part of a refit programme, subsequent expenditure will
usually be treated as repairs or maintenance and expensed to the statement of comprehensive income.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised.
Depreciation
Freehold land is not depreciated. For all other property, plant and equipment, depreciation is calculated on a straight line basis to allocate cost, less
residual value of the assets, over their estimated useful lives as follows:
Leasehold buildings
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.
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.
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The discount rate used is individual to each lease. Where a lease contract includes an implicit interest rate, that rate is used. In the majority of leases
this is not the case and the discount rate is taken to be the incremental borrowing rate as related to that specific asset. This is a calculation based upon
the external market rate of borrowing for the Group, as well as several factors specific to the asset to be discounted.
The Group separates lease payments between lease and non-lease components (such as service charges on property) at the point at which the lease
is recognised. Non-lease components are charged through administrative expenses.
Sale and leaseback transactions
The Group recognises a sale and leaseback transaction when the Group sells an asset that has been previously recognised in property, plant and
equipment, and subsequently leases it back as part of the same or a linked transaction.
Management use the provisions of IFRS 15 to assess if a sale has taken place, and the provisions of IFRS 16 to recognise the resulting lease, with the
liability and discount rate calculated in line with our lease policy and the asset subject to an adjustment based upon the net book value of the
disposed asset, the opening lease liability, the consideration received and the fair value of the asset on the date it was sold.
Resulting gains or losses are recognised in administrative expenses.
Onerous leases
A lease is considered onerous when the economic benefits of occupying the leased properties are less than the obligations payable under the lease.
When a lease is classified as onerous, the right-of-use asset associated with the lease is impaired to £nil value and non-rental costs that are likely to
accrue before the end of the contract are provided against.
Investments in associates
Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor interests in joint ventures.
Investments in associates are recognised initially at cost and subsequently accounted for using the equity method. However, any goodwill or fair value
adjustment attributable to the Group’s share of associates is included in the amount recognised as investment in associates.
All subsequent changes to the share of interest in the equity of the associate are recognised in the Group’s carrying amount of the investment,
including a reduction in the carrying amount equal to any dividend received. Changes resulting from the profit or loss generated by the associate are
reported in “share of profits of associates” in the consolidated statement of comprehensive income and therefore affect net results of the Group. These
changes include subsequent depreciation, amortisation and impairment of the fair value adjustments of assets and liabilities.
Items that have been recognised directly in the associate’s other comprehensive income are recognised in the consolidated other comprehensive
income of the Group. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits,
the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the
consolidated financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by
the Group.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required (for goodwill or indefinite life assets), the Group estimates the asset’s recoverable amount.
The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group’s cash generating
units (CGU’s) to which the individual assets are allocated. These budgets and forecast calculations 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.
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B&M European Value Retail S.A.
109
Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
Impairment of non-financial assets continued
Impairment losses of continuing operations, are recognised in the statement of comprehensive income in those expense categories consistent with
the function of the impaired asset.
For assets excluding goodwill and acquired brands with indefinite lives, an assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the
asset’s or CGU’s recoverable amount.
A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the statement of comprehensive income, except for impairment of goodwill which is not reversed.
Inventories
Inventories are 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 several equity settled share option schemes.
The schemes have been accounted for under the provisions of IFRS 2, and accordingly have been fair valued on their inception date using appropriate
methodology (the Black Scholes and Monte Carlo models).
A cost is recorded through the statement of comprehensive income in respect of the number of options outstanding and the fair value of those options.
A corresponding credit is made to the retained earnings reserve and the effect of this can be seen in the statement of changes in equity. See note 9 for
more details.
Taxation
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the
countries where the Group operates and generates taxable income. Tax is recognised in the statement of comprehensive income, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable
future.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent
that it is highly probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax
assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit
will be available against which the temporary differences can be utilised.
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The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Financial instruments
The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign currency
risk, commodity price risk and interest rate risk. Derivative financial instruments are recognised at fair value. The fair value is derived using an internal
model and supported by valuations by third party financial institutions.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable
forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in other comprehensive income
and accumulated in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the statement of comprehensive income.
Effectiveness of the derivatives subject to hedge accounting is assessed prospectively at inception of the derivative, and at each reporting period end
date prior to maturity.
Where a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, such as an item of inventory, the associated
gains and losses are recognised in the initial cost of that asset.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged
forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss
recognised in equity is reclassified in the statement of other comprehensive income immediately.
Financial assets
Under IFRS 9, on initial recognition, a financial asset is classified as measured at amortised cost, fair value through profit or loss or fair value though
other comprehensive income.
A financial asset is measured at amortised cost using the effective interest rate if it meets both of the following conditions: it is held within a business
model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding. Under IFRS 9 trade receivables, without a significant financing
component, are classified and held at amortised cost, being initially measured at the transaction price and subsequently measured at amortised cost
less any impairment loss.
IFRS 9 includes an ‘expected loss’ model (‘ECL’) for recognising impairment of financial assets held at amortised cost. The Group has elected to
measure loss allowances for trade receivables at an amount equal to lifetime ECLs. Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects
to receive).
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit
losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment and including
forward-looking information. The Group performs the calculation of expected credit losses separately for each customer group.
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.
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Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
Financial assets continued
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.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to mark-to-market valuations
obtained from the relevant bank (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, less bank overdrafts to the extent the group has the right to offset and settle these
balances net.
Equity
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares;
• “Share premium” represents the excess of the consideration made for the shares, over and above the nominal valuation of those shares;
• “Legal reserve” representing the statutory reserve required by Luxembourg law as an apportionment of profit within each Luxembourg company
(up to 10% of the standalone share capital);
• “Hedging reserve” representing the fair value of the derivatives held by the Group at the period end that are accounted for under hedge accounting
and that represent effective hedges;
• “Merger reserve” representing the reserve created during the reorganisation of the Group in 2014; and
• “Retained earnings reserve” represents retained profits.
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Foreign currency translation
These consolidated financial statements are presented in pounds sterling.
The following Group companies have a functional currency of pounds sterling:
• B&M European Value Retail S.A.
• B&M European Value Retail 1 S.à r.l. (Lux Holdco)
• B&M European Value Retail Holdco 1 Ltd (UK Holdco 1)
• B&M European Value Retail Holdco 2 Ltd (UK Holdco 2)
• B&M European Value Retail Holdco 3 Ltd (UK Holdco 3)
• B&M European Value Retail Holdco 4 Ltd (UK Holdco 4)
• EV Retail Ltd
• B&M Retail Ltd
• Opus Homewares Ltd
• Retail Industry Apprenticeships Ltd
• Heron Food Group Ltd
• Heron Foods Ltd
• Cooltrader Ltd
• Heron Properties (Hull) Ltd
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)
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.
The property provision also contains expected dilapidation costs. Following a review carried out in the current year this provision covers expected
dilapidation costs for any lease considered onerous, any related to stores recently closed, any stores which are planned or at risk of closure and those
stores occupied but not under contract. We also provide against the terminal dilapidation expense on our major warehouses, which is built up over the
term of the leases that we hold over those warehouses.
Critical judgements and key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its
assumptions and estimates on parameters available when the financial information was prepared. 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.
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Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
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.
Carried forward tax loss
Our French entity carried forward a significant historical tax loss in prior years which the Group had not recognised as a deferred tax asset due to the
uncertainty that we would be able to utilise the tax loss against future profits.
However, prudent budgets and forecasts made by management reflect that the tax loss is highly likely be realisable in the foreseeable future. Management
have therefore made the judgment that these tax losses should be recognised and as such a €7.4m deferred tax credit has been recognised.
This assessment has not been affected by the closure of the French stores due to the Covid-19 pandemic.
Management will continue to monitor forecasts and budgets prepared on a regular basis to ensure that this assessment remains correct in their
judgement until the deferred tax asset has been utilised in full.
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 13 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 in current stores is 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.
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Financial Statements
Inventory valuation
Under IAS 2 (“Inventories”) inventory is required to be recognised at the lower of cost and net realisable value.
Management have exercised significant judgment in relation to the net realisable value of stock affected by the Covid-19 pandemic within both
presented periods.
Specifically, in France an additional provision has been made of €4.5m in respect to seasonal stock which may be specifically impacted by the
uncertainty over the phasing of the reopening of the store estate. This compares to a €7.3m provision made at the prior year end. The gross stock
balance in France at the year end was €95.1m (2020: €103.5).
Whilst great uncertainty exists in the region, management considers that a smaller provision is appropriate due to the outturn of the prior year
provision where the majority was released through profit and loss as the stock was sold through once the stores reopened.
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.
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:
Annual Report & Accounts 2021
B&M European Value Retail S.A.
115
Notes to the consolidated financial statements
continued
1 General information and basis of preparation continued
IASB effective for annual periods beginning on or after 1 June 2020
Standard
Summary of changes
EU Endorsement status
UK Endorsement status
Amendment to
IFRS 16 Leases
Amendments to IFRS 16 Leases to add a practical expedient
which would allow lessees to not account for rent concessions
as lease modifications if they arise as a direct consequence of
Covid-19. Instead a one-off reduction in rent could be treated as
a variable lease payment and be recognised in profit or loss.
Endorsed (9th October 2020).
EU effective date 1 June 2020.
Given these amendments were
endorsed by the EU before
31 December 2020 they are part
of the EU-IFRS as it stands at
31 December 2020 and therefore
are UK endorsed. UK effective
date 1 June 2020.
IASB effective for annual periods beginning on or after 1 January 2021
Standard
Summary of changes
EU Endorsement status
UK Endorsement status
Amendments to
IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS
16 Interest Rate
Benchmark
Reform – Phase 2
Phase two of the amendments introduce a practical expedient
in IFRS 9 to update the effective interest rate instead of
recognising a gain or loss when a modification of a financial
contract occurs as a result of the IBOR reform, a similar
practical expedient will apply for IFRS 16, and for companies
applying IAS 39. The amendments to IFRS 7 requires additional
disclosures about the nature and exposure to risks from the
interest rate benchmark reform, how they manage such risks
and the progress to transition to alternative benchmark rates.
Endorsed (14th January 2021).
EU effective date
1 January 2021.
Endorsed (5th January 2021).
UK effective date
1 January 2021
IASB effective for annual periods beginning on or after 1 January 2022
Standard
Summary of changes
EU Endorsement status
UK Endorsement status
Amendments to
IFRS 3 Business
combinations
The amendments updated a reference in IFRS 3 to the
Conceptual Framework for Financial Reporting without
changing the requirements for a business combination
accounting.
Not yet endorsed.
Not yet endorsed
Amendments to
IAS 37 Provisions,
Contingent
Liabilities and
Contingent
Assets
Annual
improvements
– cycle 2018-2020
The amendments specify which costs an entity includes in
determining the cost of fulfilling a contract for the purpose of
assessing whether the contract is onerous.
Not yet endorsed
Not yet endorsed
Not yet endorsed
Not yet endorsed
This cycle of improvements contains amendments to the
following standards:
• IFRS 1 First-time adoption of International Financial Reporting
Standards: where a subsidiary adopts IFRS later than its
parent and elects to apply para D16(a) of IFRS 1, the
subsidiary can elect to measure cumulative translation
differences using the amounts reported in the consolidated
accounts of the parent, based on the parent’s date of
transition to IFRS.
• IFRS 9 Financial Instruments: clarifies the fees to be included
in the ’10 per cent’ test for derecognition of financial
liabilities.
• Illustrative Examples accompanying IFRS 16 Leases: to
remove the illustration of payments from the lessor relating
to leasehold improvements.
• IAS 41 Agriculture: to remove the requirement for entities to
exclude cash flows for taxation when measuring fair value.
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Financial Statements
2 Segmental information
IFRS 8 (“Operating segments”) requires the Group’s segments to be identified on the basis of internal reports about the components of the Group that
are regularly reviewed by the chief operating decision maker to assess performance and allocate resources across each reporting segment.
The chief operating decision maker has been identified as the executive directors who monitor the operating results of the retail segments for the
purpose of making decisions about resource allocation and performance assessment.
For management purposes, the Group is organised into three operating segments, 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.
Items that fall into the corporate category, which is not a separate segment but is presented to reconcile the balances to those presented in the main
statements, include those related to the Luxembourg or associate entities, Group financing, corporate transactions, any tax adjustments and items we
consider to be adjusting (see note 3).
The average Euro rate for translation purposes was €1.1203 /£ during the year, with the year end rate being €1.1691 /£ (2020: €1.1441/£ and €1.1176/£
respectively).
52 week period to 27 March 2021
Revenue
EBITDA (note 3)
EBITDA (IFRS 16) (note 3)
Depreciation and amortisation
Net finance expense
Income tax (expense)/credit
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
52 week period to 28 March 2020
Revenue
EBITDA (note 3)
EBITDA (IFRS 16) (note 3)
Depreciation and amortisation
Net finance expense
Income tax (expense)/credit
Segment profit/(loss)
Total assets
Total liabilities
Capital expenditure*
UK
B&M
£’000
4,077,564
592,186
758,082
(160,710)
(48,411)
(106,896)
442,065
2,687,274
(1,476,745)
(65,203)
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
414,777
24,567
35,014
(20,386)
(2,527)
(1,890)
10,211
282,204
(117,425)
(13,174)
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
309,084
11,111
42,314
(34,151)
(12,668)
1,239
(3,266)
347,927
(239,863)
(9,541)
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
–
(4,954)
(4,954)
–
(26,164)
10,212
(20,906)
Total
£’000
4,801,425
622,910
830,456
(215,247)
(89,770)
(97,335)
428,104
41,049
(791,453)
–
3,358,454
(2,625,486)
(87,918)
Corporate
£’000
–
38,839
6,787
(7)
(25,599)
(11,510)
(30,329)
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)
*
Capital expenditure includes both tangible and intangible capital. The reconciling figure between the total and the figure given in the statement of cash flows in respect of the prior year is the
capital expenditure at Jawoll. See note 6.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
117
Notes to the consolidated financial statements
continued
2 Segmental information continued
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
27 March 2021
£’000
52 weeks ended
28 March 2020
£’000
4,492,341
309,084
4,801,425
3,530,011
283,376
3,813,387
52 weeks ended
27 March 2021
£’000
52 weeks ended
28 March 2020
£’000
4,754,031
47,394
4,801,425
3,777,238
36,149
3,813,387
3 Reconciliation of non-IFRS measures from the statement of comprehensive income
The Group reports as election of alternative performance measures as detailed below. The Directors believe that these measures provide additional
information that is useful to the users of the accounts.
EBITDA, Adjusted EBITDA and Adjusted Profit are non-IFRS measures and therefore reconciliations from the statement of comprehensive income are set
out below.
52 weeks ended
27 March 2021
£’000
52 weeks ended
28 March 2020
£'000
615,209
215,247
830,456
(207,546)
622,910
6,775
3,219
–
–
(6,505)
626,399
(62,413)
(23,841)
540,145
(105,644)
434,501
434,501
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
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
(Release)/recognition of exceptional French stock provision
Adjusted EBITDA
Pre-IFRS 16 depreciation and amortisation
Net adjusted finance costs (see note 5)
Adjusted profit before tax
Adjusted tax
Adjusted profit for the period
Attributable to owners of the parent
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Financial Statements
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 lease liabilities (note 5)
Net adjusted other finance costs
Adjusted profit before tax (IFRS 16)
Adjusted tax
Adjusted profit for the period (IFRS 16)
52 weeks ended
27 March 2021
£’000
52 weeks ended
28 March 2020
£'000
626,399
207,546
–
833,945
(215,247)
(61,411)
(23,841)
533,446
(106,617)
426,829
342,307
154,133
32,052
528,492
(203,419)
(57,206)
(24,596)
243,271
(56,372)
186,899
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 in the prior
year with the gain on the sale and leaseback of the Bedford warehouse.
The exceptional French stock provision was recognised in the prior year when the first French lockdown was put into place, resulting in the closure of
the French store estate, and there was significant uncertainty regarding when stores would be able to reopen. In the prior year the balance also
included the additional specific losses made by the French segment in those early weeks of the pandemic. Ultimately the stock provision was largely
released during the current year, as the stock was sold through once the stores were reopened and this release has been treated as adjusting to
match the prior year treatment when recognising the provision. No new adjusting items have been recognised in respect of the pandemic in the
current year.
Adjusted gross profit reconciles as follows:
Period to
Continuing operations
Statutory gross profit
Impact on cost of sales of exceptional French stock provision
Adjusted gross profit
52 weeks ended
27 March
2021
£’000
52 weeks ended
28 March
2020
£’000
1,769,970
(6,505)
1,763,465
1,282,808
6,369
1,289,177
Adjusted tax represents the tax charge per the statement of comprehensive income as adjusted only for the effects of the adjusting items detailed
above and the one off deferred tax gain on recognition of the deferred tax asset in France.
The segmental split in EBITDA (IFRS 16) and Adjusted EBITDA (IFRS 16) reconciles as follows:
52 week period to 27 March 2021
Continuing operations
Profit/(loss) before interest and tax
Add back depreciation and amortisation
EBITDA (IFRS 16)
Adjusting items detailed above
Adjusted EBITDA
UK
B&M
£’000
597,372
160,710
758,082
–
758,082
UK
Heron
£’000
14,628
20,386
35,014
–
35,014
France
Babou
£’000
8,163
34,151
42,314
–
42,314
Corporate
£’000
Total
£’000
(4,954)
–
(4,954)
3,489
(1,465)
615,209
215,247
830,456
3,489
833,945
Annual Report & Accounts 2021
B&M European Value Retail S.A.
119
Notes to the consolidated financial statements
continued
3 Reconciliation of non-IFRS measures from the statement of comprehensive income continued
52 week period to 28 March 2020
Continuing operations
Profit/(loss) before interest and tax
Add back depreciation and amortisation
EBITDA
Adjusting items detailed above
IFRS 16 adjustment to gain at Bedford
Adjusted EBITDA
UK
B&M
£’000
318,209
148,946
467,155
–
–
467,155
UK
Heron
£’000
15,847
19,109
34,956
–
–
34,956
France
Babou
£’000
(7,145)
35,357
28,212
–
–
28,212
Corporate
£’000
6,780
7
6,787
(40,670)
32,052
(1,831)
Total
£’000
333,691
203,419
537,110
(40,670)
32,052
528,492
Adjusted EBITDA and related measures are not measures of performance or liquidity under IFRS and should not be considered in isolation or as a
substitute for measures of profit, or as an indicator of the Group’s operating performance or cash flows from operating activities as determined in
accordance with IFRS.
4 Operating profit
The following items have been charged in arriving at operating profit 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
Impairment of right of use assets
Operating lease rentals
Loss/(gain) on sale of property, plant and equipment
Loss/(gain) on sale and leaseback
Loss on foreign exchange
52 weeks ended
27 March
2021
£’000
52 weeks ended
28 March
2020
£'000
792
722
–
220
–
3,031,455
57,157
2,571
155,519
5,142
(488)
571
142
8,988
–
10
–
2,530,579
52,366
2,433
148,620
6,838
4,479
(163)
(16,928)
660
5 Finance costs and finance income
Finance costs include all interest related income and expenses. The following amounts have been included in the continuing profit line for each
reporting period presented:
Period ended
Continuing operations
Interest on debt and borrowings
Ongoing amortisation of finance fees
Total adjusted finance expense
Non capitalised fees incurred on refinancing
Release of remaining unamortised fees on previous facilities
Total other finance expense
Finance costs on lease liabilities
Total finance expense
120
B&M European Value Retail S.A. Annual Report & Accounts 2021
52 weeks to
27 March
2021
£’000
52 weeks to
28 March
2020
£'000
(22,470)
(1,666)
(24,136)
(2,625)
(1,893)
(28,654)
(61,411)
(90,065)
(22,732)
(2,077)
(24,809)
–
–
(24,809)
(57,206)
(82,015)
Strategic Report
Corporate Governance
Financial Statements
52 weeks to
27 March
2021
£’000
52 weeks to
28 March
2020
£'000
23,186
61,411
10,787
95,384
–
–
95,384
(826)
(8,052)
1,893
1,666
90,065
23,957
63,790
–
87,747
(1,350)
(6,584)
79,813
125
–
–
2,077
82,015
52 weeks to
27 March
2021
£’000
52 weeks to
28 March
2020
£'000
295
295
–
295
213
213
134
347
52 weeks to
27 March
2021
£’000
(24,136)
295
(23,841)
52 weeks to
28 March
2020
£'000
(24,809)
213
(24,596)
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 lease liabilities
Fees paid in relation to refinancing
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
Capitalisation of amortised fees in relation to the new facilities
Release of capitalised fees held in relation to previous facilities
Ongoing amortisation of finance fees
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
Annual Report & Accounts 2021
B&M European Value Retail S.A.
121
Notes to the consolidated financial statements
continued
6 Business disposal
In the prior year 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 prior year’s statement of comprehensive income as discontinued operations under the definition
given in IFRS 5.
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 in the prior year statement of cash flows
The €10m deferred receivable, less €24k of fees, was received in September 2020 (translated to £9.1m on the date of receipt).
The loss on discontinued operations disclosed in the prior year statement of comprehensive income comprised the following:
Period ended
Revenue
Impairment expense recognised in September 2019
Other expenses
Loss before tax
Income tax expense
Loss from discontinued operations before disposal
Loss on disposal
Loss from discontinued operations
Attributable to non-controlling interests
Attributable to owners of the parent
£’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
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)
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)
Specifically, Jawoll spent £3,029k on capital additions in the prior year and this is therefore the balancing number between the segment analysis cash
flow in note 2, 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.
122
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Strategic Report
Corporate Governance
Financial Statements
In the prior year, 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 15.
In the current year, the Group disposed of an investment in the associate Home Focus Ltd, see note 12.
7 Employee remuneration
Expense recognised for employee benefits is analysed below:
Period ended
Continuing operations
Wages and salaries
Social security costs
Pensions – defined contribution plans
52 weeks to
27 March
2021
£’000
515,536
30,078
6,599
552,213
52 weeks to
28 March
2020
£'000
394,894
21,390
5,359
421,643
There are £591k of defined contribution pension liabilities owed by the Group at the period end (2020: £526k).
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 £1,658k (2020: £1,226k) 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
8 Key management remuneration
Key management personnel and Directors’ remuneration includes the following:
Period ended
Directors’ remuneration:
Short term employee benefits
Benefits accrued under the share option scheme
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
27 March
2021
£’000
37,981
854
38,835
52 weeks to
28 March
2020
£'000
33,437
769
34,206
52 weeks to
27 March
2021
£’000
52 weeks to
28 March
2020
£'000
3,518
799
4,317
8,046
1,164
41
9,251
1,783
588
2,371
2,040
298
2,338
4,678
524
38
5,240
1,069
181
1,250
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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
123
Notes to the consolidated financial statements
continued
9 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 2021 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 30 March 2019
Exercised
Options outstanding at 28 March 2020
Exercised
Options outstanding at 27 March 2021
Tranche 1
Tranche 4
1 Aug 2014
271.5p
596,646
83p
11,049
–
11,049
(11,049)
–
19 Aug 2016
276.8p
21,676
50p
21,676
(21,676)
–
–
–
No options remained on Tranche 2 and 3 as at 30 March 2019.
2) Long-Term Incentive Plan (LTIP) Awards
The LTIP was adopted by the board on 29 May 2014. No grant under this scheme can be made more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for the LTIP and the awards are made at the discretion of the remuneration committee.
Limits & Pricing
A fixed number of options are offered to each participant, with the pricing set at £nil. The options offered to each individual cannot exceed a total value
of 100% (200% under exceptional circumstances) of the participants base salary where the value is measured as the market value of the shares on
grant multiplied by the number of options awarded, with the whole scheme limited to 10% of the share capital in issue.
Dividend Credits
All participants in any LTIP awards granted after 1 April 2018 are entitled to a dividend credit where the notional dividend they would have received on
the maximum number of shares available under their award is converted into new share options and added to the award based upon the share price
on the date of the dividend. These additional awards have been reflected in the tables below.
124
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Vesting & Exercise
The share options are subject to a set of conditions measured over a three year performance period as follows:
LTIP 2015, 2016, 2017A, 2018A, 2019A, 2020A:
• 50% of the awards are subject to a TSR performance condition, where the Group’s TSR over the performance period is compared with a comparator
group. The awards vest on a sliding scale where the full 50% is awarded if the Group falls in the upper quartile, 12.5% vests if the Group falls exactly
at the median, and 0% below that.
• 50% of the awards are subject to a Diluted EPS performance target. The awards vest on a sliding scale based upon the Earnings per share as
follows:
Award
LTIP 2015
LTIP 2016
LTIP 2017A
LTIP 2018A
LTIP 2019A
LTIP 2020A
EPS as at
50% paid at
12.5% paid at
March-18
March-19
March-20
March-21
March-22
March-23
19.0p
22.5p
24.0p
28.0p
33.0p
30.0p
15.0p
17.5p
19.0p
23.0p
27.0p
25.0p
Below the 12.5% boundary, no options vest. Diluted EPS is considered to be on frozen GAAP and so does not include the effects of IFRS 16.
• The performance period is the three years ending the year end specified in the EPS table above.
• Once the performance period concludes, the calculated number of share options remaining are then subject to a two year holding period. The
share options vest at the conclusion of the holding period.
LTIP 2017/B1, 2017/B2, 2018/B1, 2018/B2, 2019/B1, 2019/B2, 2020/B1
• 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 2021 there have been several awards of the LTIP, with the details as follows.
Note that the LTIP 2015, LTIP 2016, LTIP 2017A, LTIP 2018A, LTIP 2019A and LTIP 2020A have been split into the element subject to the TSR (50%) and the
element subject to the EPS (50%) since these were valued separately.
The 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
2020A-TSR
2020A-EPS
2017/B1
2017/B2
2018/B1
2018/B2
2019/B1
2019/B2
2020/B1
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
30 Jul 20
30 Jul 20
7 Aug 17
14 Aug 17
23 Jan 18
20 Aug 18
20 Aug 19
18 Sep 19
30 Jul 20
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
141,718
141,718
287,963
101,654
19,264
236,697
369,061
2,678
303,092
210p
341p
164p
254p
272p
351p
240p
409p
251p
361p
409p
464p
361p
360p
400p
406p
348p
373p
463p
0.92%
0.92%
0.09%
0.09%
0.52%
0.52%
0.97%
0.97%
0.37%
0.37%
-0.11%
-0.11%
0.25%
0.25%
0.25%
0.25%
0.47%
0.47%
-0.12%
5
5
5
5
5
5
5
5
5
5
5
5
3
3
3
3
3
3
3
24%
24%
26%
26%
32%
32%
29%
29%
31%
31%
48%
48%
32%
32%
32%
30%
30%
30%
39%
Annual Report & Accounts 2021
B&M European Value Retail S.A.
125
Notes to the consolidated financial statements
continued
9 Share Options continued
2) Long-Term Incentive Plan (LTIP) Award continued
Scheme
2015-TSR
2015-EPS
2016-TSR
2016-EPS
2017A-TSR
2017A-EPS
2018A-TSR
2018A-EPS
2019A-TSR
2019A-EPS
2020A-TSR
2020A-EPS
2017/B1
2017/B2
2018/B1
2018/B2
2019/B1
2019/B2
2020/B1
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
Options at
29 March
2020
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 March
2019
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
–
–
Granted
Dividend credit
Forfeited
Exercised
–
–
–
–
–
–
–
–
–
–
141,718
141,718
–
–
–
–
–
–
303,092
–
–
–
–
–
–
27,333.5
27,333.5
28,588.5
28,588.5
15,720.5
15,720.5
–
–
–
25,167
40,805
316
32,366
Granted
Dividend credit
–
–
–
–
–
–
–
–
255,640.5
255,640.5
–
–
–
–
369,061
2,678
–
–
–
–
–
–
18,046
18,046
16,282
16,282
–
–
–
18,093
23,460
169
–
–
–
–
(13,053)
(22,539)
(10,040)
(10,040)
(40,878)
(40,878)
–
–
(115,188)
(16,050)
(2,408)
(35,805)
(37,871)
–
(34,734)
Forfeited
–
–
–
(51,403)
–
–
–
–
–
–
–
–
–
–
–
–
(40,616)
(31,477)
–
–
–
–
–
–
–
–
–
–
(75,000)
(64,200)
(14,448)
–
–
–
–
Exercised
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Options at
27 March
2021
–
–
122,385.5*
70,982.5*
27,557*
18,071*
262,012
262,012
259,633
259,633
157,438.5
157,438.5
73,667
13,379
–
234,759
395,455
3,163
300,724
Options at
28 March
2020
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
*
These share options have vested and are in a two year holding period.
3) Deferred Bonus Share Plan (DBSP) Awards
The Deferred Bonus Share Plan differs from the other awards in that there are no vesting conditions.
The scheme has been set up in order to allocate 1/3rd of the executive director’s annual bonus into nil price share options which are then placed in
holding for three years.
As there are no vesting conditions, these awards have been valued at the amount of the bonus to be converted into share options under the scheme.
There have been two awards under the scheme. The 2021 award will be made after this set of statutory accounts has been published, and will
therefore be reported in the next annual report.
126
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Scheme
2019 Bonus allocation
2020 Bonus allocation
Scheme
2019 Bonus allocation
Options at
28 March
2020
61,008
–
Options at
30 March
2019
Granted
Dividend credit
Forfeited
Exercised
–
45,682
6,912
5,066
–
–
–
–
Granted
Dividend Credit
Forfeited
Exercised
–
56,521
4,496
–
–
Options at
27 March
2021
67,920
50,748
Options at
28 March
2020
61,008
The 2020 scheme has a total fair value of £175k (2019 scheme: £217k).
The summary year end position is as follows:
Period ended
Share options outstanding at the start of the year
Share options granted during the year (including via dividend credit)
Share options forfeited or lapsed during the year
Share options exercised in the year
Share options outstanding at the end of the year
Of which:
Share options that are not vested
Share options that are vested, but are not eligible for exercise (in holding)
Share options that are vested and eligible for exercise
All exercised options are satisfied by the issue of new share capital.
27 March
2021
2,467,125
886,127
(379,484)
(236,790)
28 March
2020
1,485,798
1,054,406
(51,403)
(21,676)
2,736,978
2,467,125
2,292,268
357,664
87,046
2,129,607
326,469
11,049
In the year, £1,937k has been charged to the consolidated statement of comprehensive income in respect to the share option schemes (2020: £1,422k).
At the end of the year the outstanding share options had a carrying value of £3,866k (2020: £3,155k).
10 Taxation
The relationship between the expected tax expense based on the standard rate of corporation tax in the UK of 19% (2020: 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 (credit)/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
27 March
2021
£’000
52 weeks to
28 March
2020
£'000
103,981
(6,646)
97,335
(4,509)
(4,509)
60,889
(3,643)
57,246
1,383
1,383
525,439
252,023
99,834
47,885
4,977
(1,587)
340
108
1,137
(7,469)
560
(565)
11,559
(1,925)
873
(2,495)
386
322
430
211
97,335
57,246
Annual Report & Accounts 2021
B&M European Value Retail S.A.
127
Notes to the consolidated financial statements
continued
10 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)
Temporary differences relating to the tax accounting for leases
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 asset/(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
Temporary differences relating to the tax accounting for leases
Movement in provision
Relating to share options
Held over gains on fixed assets
Brought forward losses
Other temporary differences
Net deferred tax credit
Analysed as:
Total deferred tax credit in profit or loss due to continuing operations
Total deferred tax credit/(charge) in other comprehensive income
27 March
2021
£’000
(1,846)
(22,284)
3,122
(1,854)
19,387
1,556
1,741
(1,492)
6,310
126
–
4,766
32,242
(27,476)
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)
52 weeks to
27 March
2021
£’000
52 weeks to
28 March
2020
£’000
1,182
(737)
4,717
(1,537)
277
1,220
(659)
6,585
107
11,155
6,646
4,509
220
(2,057)
(3,061)
7,386
(6)
161
(384)
–
1
2,260
3,643
(1,383)
In March 2021 the UK government announced a planned change in the future corporation tax rate to 25% from April 2023. When granted royal assent
this change in rate is expected to impact our deferred tax held in the UK, and specifically the deferred tax liability held on our brand assets and the
deferred tax asset held over our IFRS 16 balances. The net impact on these two items, had the rate already been enacted, would have been a £1.9m
charge to profit or loss.
During the period the Group has recognised €7.4m of brought forward losses as a deferred tax asset due to making the assessment that these losses
are realisable against future profits of the French business, see note 1. There were therefore no unrecognised deferred tax assets in relation to losses
carried forward within the Group at the period end (2020: £9.6m). In the above tax reconciliation the recognition of these losses is included in the
caption ‘Adjustment in respect of prior years’.
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.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
11 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit or loss for the financial period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding at each period end.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during each year plus the weighted average number of ordinary shares that would be issued on
conversion of any dilutive potential ordinary shares into ordinary shares.
Adjusted (and adjusted (IFRS 16)) basic and diluted earnings per share are calculated in the same way as above, except using adjusted profit
attributable to ordinary equity holders of the parent, as defined in note 3.
There are share option schemes in place (see note 9) 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 effect of 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
27 March
2021
£’000
428,104
434,501
426,829
28 March
2020
£’000
194,777
202,979
186,899
–
(104,750)
428,104
90,027
Thousands
Thousands
1,000,695
1,382
1,002,077
1,000,570
698
1,001,268
Pence
Pence
42.8
42.7
43.4
43.4
42.7
42.6
19.5
19.5
20.3
20.3
18.7
18.7
Pence
Pence
0.0
0.0
(10.5)
(10.5)
Pence
Pence
42.8
42.7
9.0
9.0
Annual Report & Accounts 2021
B&M European Value Retail S.A.
129
Notes to the consolidated financial statements
continued
12 Investments in associates
Period ended
Net book value
Carrying value at the start of the period
Disposal of holding in Home Focus Group Ltd
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
27 March
2021
£’000
28 March
2020
£’000
5,700
(316)
(2,186)
1,795
(514)
4,479
6,920
–
(2,580)
879
481
5,700
The Group has a 22.5% holding in Centz Retail Holdings Limited, “Centz”, a company incorporated in Ireland. The principal activity of the company is
retail sales and their registered address is 5 Old Dublin Road, Stillorgan, Co. Dublin.
The Group has a 50% interest in Multi-lines International Company Ltd, “Multi-Lines”, a company incorporated in Hong Kong. The principal activity of
the company is the purchase and sale of goods and their registered address is 8/F, Hope Sea Industrial Centre, No. 26 Lam Hing Street, Kowloon Bay,
Hong Kong.
The Group previously held 20% of the ordinary share capital of Home Focus Group Ltd, a company incorporated in Republic of Ireland and whose
principal activity is retail sales and their registered address is Boole House, Beech Hill Office Campus, Beech Hill Road, Clonskeagh, Dublin 4. This
holding was sold in December 2020 for €350k, which was equal to the carrying value at the prior year end. Home Focus Group is 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
Centz
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Revenue
Profit
27 March
2021
£’000
4,964
73,814
–
(72,207)
6,571
240,379
2,404
10,893
24,589
(10,210)
(18,623)
6,649
61,184
3,144
28 March
2020
£’000
2,417
74,702
–
(67,688)
9,431
221,145
969
9,941
12,447
(8,834)
(9,225)
4,329
30,305
1,719
The figures for both associates show 12 months to December 2020 (prior year: 12 months to December 2019), being the period used in the valuation of
the associate.
130
B&M European Value Retail S.A. Annual Report & Accounts 2021
13 Intangible assets
Cost or valuation
At 30 March 2019
Additions
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Additions
Disposals
Effect of retranslation
At 27 March 2021
Accumulated amortisation / impairment
At 30 March 2019
Charge for the year
Impairment of Jawoll
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Charge for the year
Disposals
Effect of retranslation
At 27 March 2021
Net book value at 27 March 2021
Net book value at 28 March 2020
Goodwill
£’000
Software
£’000
Brands
£’000
954,757
–
(35,367)
–
2,521
921,911
–
–
(1,182)
920,729
–
–
35,112
(35,367)
–
255
–
–
–
–
–
920,729
921,911
9,715
1,361
(1,108)
(12)
54
10,010
1,312
–
(12)
11,310
4,377
2,187
611
(1,095)
(12)
27
6,095
2,170
–
(8)
8,257
3,053
3,915
120,213
–
(5,324)
–
385
115,274
–
–
(184)
115,090
235
355
5,286
(5,324)
–
54
606
401
–
(40)
967
114,123
114,668
At the year end £0.7m of software was being developed and not yet in use.
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 6.
Impairment review of intangible assets held with indefinite life
The Group holds the following assets with indefinite life:
Segment
UK B&M
UK Heron
France Babou
27 March
2021
Goodwill
£’000
807,496
87,580
25,653
27 March
2021
Brand
£’000
95,900
14,178
–
Strategic Report
Corporate Governance
Financial Statements
Other
£’000
2,551
–
(1,545)
–
107
1,113
–
–
(49)
Total
£’000
1,087,236
1,361
(43,344)
(12)
3,067
1,048,308
1,312
–
(1,427)
1,064
1,048,193
1,308
26
154
(1,545)
–
57
–
–
–
–
–
5,920
2,568
41,163
(43,331)
(12)
393
6,701
2,571
–
(48)
9,224
1,064
1,113
1,038,969
1,041,607
27 March
2021
£’000
2,571
–
2,571
28 March
2020
Goodwill
£’000
807,496
87,580
26,834
28 March
2020
£’000
2,433
135
2,568
28 March
2020
Brand
£’000
95,900
14,178
–
Not all items in the brand classification have an indefinite life as some are time limited. The brand intangible assets that have been identified as having
an indefinite life are designated as such as management believe that these assets will hold their value for an indefinite period of time. Specifically the
B&M and Heron brands represent leading brands in their sectors with significant histories and growth prospects.
The Babou goodwill is held in Euros, with an underlying balance of €30.0m (2020: €30.0m).
Annual Report & Accounts 2021
B&M European Value Retail S.A.
131
Notes to the consolidated financial statements
continued
13 Intangible assets continued
In each case the goodwill and brand assets have been allocated to one group of CGUs, being the store estate within the specific segment to which
those assets relate.
The Group performs impairment tests at each period end. The impairment test involves assessing the net present value (NPV) of the expected cash
flows in relation to the stores within each CGU according to a number of assumptions to calculate the value in use (VIU) for the group of CGUs.
The key assumptions in assessing the value in use as at 27th March 2021 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.
Due to a minor change in policy by the Group, terminal growth rates as used in impairment tests are to be capped in line with the growth of the macro
economy to which each segment belongs, when non-negative. This change has been effected prospectively as it has an immaterial impact on the
prior year figures.
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)
27 March
2021
28 March
2020
11.9%
12.3%
11.4%
1.2%
0.0%
2.0%
2.0%
2.0%
0.5%
1.2%
0.0%
11.7%
12.4%
13.0%
2.6%
1.5%
2.6%
2.6%
2.4%
0.5%
2.6%
1.5%
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.
For the UK entities, the first year like for likes (LFL’s) have been adjusted to reflect the impact of Covid-19 on the current year, with assumptions used of
-6.9% for B&M and -0.3% for Heron.
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 £3,442m, Heron £142m and Babou €169m
(2020: £2,071m, £143m and €23m respectively).
No indicators of impairment were noted in the segments and the impairment test was sensitised with reference to the key assumptions for reasonable
possible scenarios.
These scenarios specifically included:
• A drop off in sales or gross margin, modelling flat long term like for likes and terminal growth rates.
• Sales prices failing to keep pace with inflation such that the local inflation rates exceed like for like sales by 2 percentage points.
• A deterioration of the credit environment, leading to a significantly increased cost of capital of 15%.
Further scenarios were also considered as part of our viability testing, including the potential for further lockdowns, the loss of a warehouse due to a
fire and any impact on our supply chain with respect to international relations.
None of the sensitised or viability scenarios indicated that an impairment would result in any of our segments.
132
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Corporate Governance
Financial Statements
To further quantify the sensitivity, the below tables demonstrate the point at which each impairment test would first fail for changes in each of the key
assumptions assuming each other key assumption is held level:
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
14 Property, plant and equipment
Cost or valuation
At 30 March 2019
Additions
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Additions
Disposals
Effect of retranslation
At 27 March 2021
Accumulated depreciation and impairment charges
At 30 March 2019
Charge for the period
Impairments
Disposal of Jawoll
Other disposals
Effect of retranslation
At 28 March 2020
Charge for the period
Disposals
Effect of retranslation
At 27 March 2021
Net book value at 27 March 2021
Net book value at 28 March 2020
27 March
2021
28 March
2020
62.6%
14.1%
(9.3)%
Not sensitive
29.3%
10.5%
(2.9)%
Not sensitive
39.0%
20.5%
(28.2)%
Not sensitive
22.9%
5.6%
(2.0)%
(27.0)%
Plant,
fixtures and
equipment
£’000
341,721
81,654
(24,406)
(20,762)
2,225
380,432
64,300
(6,002)
(1,869)
436,861
116,010
46,939
12,757
(21,973)
(9,103)
752
145,382
49,234
(5,421)
(736)
188,459
248,402
235,050
15.9%
3.9%
(1.5)%
(2.4)%
22.5%
6.6%
(0.3)%
(22.0)%
Total
£’000
517,931
123,270
(42,661)
(119,526)
3,121
482,135
86,606
(10,822)
(1,869)
556,050
139,350
54,255
13,982
(28,360)
(10,412)
1,122
169,937
57,157
(6,672)
(736)
219,686
336,364
312,198
Land and buildings
£’000
Motor vehicles
£’000
163,267
37,041
(17,777)
(97,602)
874
85,803
17,709
(3,733)
–
99,779
20,037
4,546
1,193
(6,220)
(449)
363
19,470
4,173
(442)
–
23,201
76,578
66,333
12,943
4,575
(478)
(1,162)
22
15,900
4,597
(1,087)
–
19,410
3,303
2,770
32
(167)
(860)
7
5,085
3,750
(809)
–
8,026
11,384
10,815
Annual Report & Accounts 2021
B&M European Value Retail S.A.
133
Notes to the consolidated financial statements
continued
14 Property, plant and equipment continued
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 note 6.
27 March
2021
£’000
57,157
–
57,157
28 March
2020
£’000
52,366
1,889
54,255
Under the terms of the loan and notes facilities in place at 27 March 2021, fixed and floating charges were held over £76.6m of the net book value of
land and buildings, £11.9m of the net book value of motor vehicles and £223.2m of the net book value of the plant, fixtures and equipment. (2020:
£66.3m, £10.8m, £210.7m respectively).
A significant sale and leaseback took place in the prior year in relation to the Bedford warehouse, which was carried at £103.7m on the date of the
transaction. See note 15 for more details.
At the year end £0.2m of assets were under construction (2020: £nil).
Included within land and buildings is land with a cost of £5.8m (2020: £5.8 m) which is not depreciated.
Capital commitments
There were £12.1m of contractual capital commitments not provided within the Group financial statements as at 27 March 2021 (2020: £3.3m).
15 Right of use assets
Net book value
As at 30 March 2019
Additions
Modifications
Disposal of Jawoll
Other disposals
Impairment
Depreciation
Foreign exchange
As at 28 March 2020
Additions
Modifications
Disposals
Impairment
Depreciation
Foreign exchange
As at 27 March 2021
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
1,010,733
312,880
4,202
(82,459)
(41,099)
(6,838)
(146,236)
10,090
1,061,273
152,685
6,679
(12,801)
(5,142)
(145,787)
(7,400)
1,049,507
20,096
5,390
21
(560)
(129)
–
(6,985)
33
17,866
2,763
2
(55)
–
(6,134)
(12)
14,430
Plant,
fixtures and
equipment
£’000
6,044
5,402
3
(237)
(235)
–
(3,577)
79
7,479
3,027
–
(109)
–
(3,598)
(155)
6,644
27 March
2021
£’000
155,519
–
155,519
Total
£’000
1,036,873
323,672
4,226
(83,256)
(41,463)
(6,838)
(156,798)
10,202
1,086,618
158,475
6,681
(12,965)
(5,142)
(155,519)
(7,567)
1,070,581
28 March
2020
£’000
148,620
8,178
156,798
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.
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Corporate Governance
Financial Statements
The Group recognises a lease term appropriate to the business expectation of the term of use for the asset which usually assumes that all extension
clauses are taken, and break clauses are not, unless the business considers there is a good reason to recognise otherwise.
At the 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, in March 2020, the extension period liability had a net present value of £30.2m
There are no material covenants imposed by our right-of-use leases.
In the year the Group expensed £2.1m (2020: £1.8m) in relation to low value leases and £0.1m (2020: £0.3m) in relation to short term leases for which
the Group applied the practical expedient under IFRS 16.
The Group has expensed £0.4m (2020: <£0.1m) in relation to variable lease payments. The agreements are on-going and future payments are
expected to be in-line with those expensed recently.
The Group received £3.3m (2020: £2.2m) in relation to subletting right-of-use assets.
The impairments noted in the table above are recorded when the carrying value of a right of use asset exceeds the value in use of that asset. These
arise when we exit a store before the related lease has come to an end, or as the outcome of our annual store impairment review. All impairments are
in relation to store leases. No impairments have been reversed in the presented periods.
The segmental splits of the impairments were B&M £3.6m, Heron £1.2m, Babou £0.4m (2020: B&M £2.5m, Jawoll £4.3m).
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
* This table has been restated in respect of reclassifying a non-cash movement (see notes 1, 24).
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)
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
27 March
2021
£’000
202,201
213,152
205,262
519,517
672,844
Restated*
28 March
2020
£’000
213,281
197,842
203,272
513,295
712,227
1,610,775
1,626,636
27 March
2021
£’000
28 March
2020
£’000
1,295,244
1,206,922
(140,790)
(61,411)
61,411
–
–
155,084
(8,169)
(202,201)
208,326
6,125
1,301,369
162,735
1,138,634
(142,653)
(63,790)
57,206
6,584
(93,732)
313,727
10,980
(206,443)
294,765
88,322
1,295,244
149,011
1,146,233
Annual Report & Accounts 2021
B&M European Value Retail S.A.
135
Notes to the consolidated financial statements
continued
15 Right of use assets continued
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 one sale and leaseback (2020: two).
27 March
2021
28 March
2020
4.72%
3.31%
4.70%
5.08%
3.31%
5.06%
£’000
£’000
6,416
110
6,526
6,211
127
6,338
In the prior year, a significant sale and leaseback took place in regards to the warehouse at Bedford. The consideration for this transaction was
£153.8m and a profit was recognised of £16.9m.
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
(Loss)/Profit recognised in the statement of comprehensive income
Initial right of use asset recognised
Initial lease liability recognised
27 March 2021
£’000
28 March 2020
£’000
6,080
(3,209)
–
2,871
(3,013)
(142)
3,368
(6,381)
158,710
(106,614)
(1,070)
51,026
(34,098)
16,928
69,310
(103,408)
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.
16 Inventories
As at
Goods for resale
27 March
2021
£’000
605,126
28 March
2020
£’000
588,000
Included in the amount above was a net charge of £4.2m related to inventory provisions (2020: £6.7m net charge). In the period to 27 March 2021
£3,031m (2020: £2,531m) was recognised as an expense for inventories.
136
B&M European Value Retail S.A. Annual Report & Accounts 2021
17 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
Strategic Report
Corporate Governance
Financial Statements
27 March
2021
£’000
7,084
7,084
3,611
2,533
(410)
5,734
14,145
7,564
8,341
6,376
42,160
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
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.
In the prior year there were significant balances of £8.9m (€10m) in relation to the consideration receivable for Jawoll and £4.7m in relation to the final
part of the consideration receivable in respect of the Bedford transaction. These balances were both held within the current other receivables caption
above and both of which were subsequently realised during the year. There are no individually non-related significant balances held at the current
year end. See note 27 in respect of balances held with related parties.
The following table sets out an analysis of provisions for impairment of trade and other receivables:
Period ended
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:
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
18 Cash and cash equivalents
As at
Cash at bank and in hand
Overdrafts
Cash and cash equivalents
27 March
2021
£’000
(252)
(201)
32
11
(410)
27 March
2021
£’000
2,100
381
358
772
3,611
27 March
2021
£’000
217,682
–
217,682
28 March
2020
£’000
(247)
(52)
56
(9)
(252)
28 March
2020
£’000
5,073
499
15
981
6,568
28 March
2020
£’000
428,205
(928)
427,277
As at the year end the Group had available £141.5m of undrawn committed borrowing facilities (2020: £21.5m).
Annual Report & Accounts 2021
B&M European Value Retail S.A.
137
Notes to the consolidated financial statements
continued
19 Trade and other payables
As at
Non-current
Accruals
Current
Trade payables
Other tax and social security payments
Accruals and deferred income
Related party trade payables
Other payables
27 March
2021
£’000
–
–
343,831
65,701
99,927
8,876
5,925
524,260
28 March
2020
£’000
171
171
315,146
43,715
45,505
11,432
4,201
419,999
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 27.
20 Other financial assets and liabilities
Other financial assets
As at
Current financial assets at fair value through profit and loss:
Foreign exchange forward contracts
Current financial assets at fair value through other comprehensive income:
Foreign exchange forward contracts
Total current other financial assets
Total other financial assets
27 March
2021
£’000
2,416
1,351
3,767
3,767
28 March
2020
£’000
5,351
11,351
16,702
16,702
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:
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
27 March
2021
£’000
5,748
–
10,393
16,141
16,141
28 March
2020
£’000
–
1,847
–
1,847
1,847
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.
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B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Fair value hierarchy continued
As at the reporting dates, the Group held the following financial instruments carried at fair value on the balance sheet:
27 March 2021
Foreign exchange contracts
28 March 2020
Foreign exchange contracts
Fuel swap contract
Total
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
(12,374)
16,702
(1,847)
–
–
–
(12,374)
16,702
(1,847)
–
–
–
The financial instruments have been valued by the issuing bank, using a mark to market method. The bank has used various inputs to compute the
valuations and these include inter alia the relevant maturity date and strike rates, the current exchange rate, fuel prices and LIBOR levels.
21 Financial liabilities – borrowings
As at
Current
Revolving facility bank loan
Acquisition facility
Babou loan facilities
Heron loan facilities
Non-current
High yield bond notes
Term facility bank loan
Babou government backed facilities
Other Babou loan facilities
Heron loan facilities
27 March
2021
£’000
–
–
3,298
3,577
6,875
396,860
296,257
21,810
6,071
2,738
723,736
28 March
2020
£’000
120,000
82,304
3,608
5,150
211,062
248,830
298,916
–
7,357
6,315
561,418
Refinancing
On 13 July 2020 the Group refinanced their main facilities by repaying the previously existing £250m high yield bond notes, the £300m term loan and
the €92m acquisition facility, and drawing down a new main facility of £300m and issuing £400m of high yield bonds. The maturity dates on the new
facilities are April 2025 and July 2025 respectively.
The previously held £150m revolving loan facility has also been replaced by a £155m revolving loan facility which was not drawn on the date of the
refinancing.
£100m of the high yield bonds issued were purchased by a related party. See note 27 for further details.
The carrying values given above include fees incurred on the refinancing which are to be amortised over the terms of those facilities. More details of
these are given below.
The following fees were expensed through other finance costs in relation to the loans and bonds which have been repaid.
Remaining unamortised fees associated with the repaid term loan
Remaining unamortised fees associated with the repaid acquisition loan
Remaining unamortised fees associated with the repaid high yield bonds
Early repayment charge associated with the corporate bonds
Breakage fees
Total fees expensed through other finance costs
£’000
845
65
983
2,578
47
4,518
Annual Report & Accounts 2021
B&M European Value Retail S.A.
139
Notes to the consolidated financial statements
continued
21 Financial liabilities – borrowings continued
The following fees were incurred on refinancing and have been capitalised within the debt balance, to be amortised over the term of the debt to which
it relates.
Capitalised fees relating to the term loan facility
Capitalised fees relating to the high yield bonds
Total fees capitalised within the debt balances
£’000
4,398
3,654
8,052
The figure on the cashflow of £10.8m includes the above £8.1m capitalised fees, £2.6m early repayment/breakage charges and £0.1m of fees
associated with an earlier extension of the acquisition facility.
French government backed loan
In April 2020 the French government mandated that our Babou stores were required to close as part of their response to the Covid-19 pandemic. As a
mitigation they introduced government backed loans to assist the company’s affected by this measure. As a precaution and due to the uncertainty
over the progression of the virus and the impact on trade, the Group’s French entity took a €51m loan under this scheme.
The loan had an initial maturity of 1 year, which is interest free but attracts a guarantor’s fee of 0.5%.
The loan was refinanced in February 2021 such that €25.5m was repaid with the remainder retained in order to cover continuing uncertainty over
further measures in relation to the pandemic.
The retained element has a maturity of April 2022, attracts a guarantor’s fee of 1.0% with an additional average interest rate margin of 0.2%. The
balances are held with a range of banks.
The loan is only for use in the French business, in respect to their working capital cash flows, and as such the cash balance remains in that entity and
did not impact the Group refinancing decisions taken in the period.
Other loans
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 (old)
Term facility bank loan A (new)
High yield bond notes (old)
High yield bond notes (new)
Acquisition facility
Heron loan facilities – Melton
Heron loan facilities – Offset
Heron loan facilities – Term
Babou – Government Guaranteed
Babou – BNP Paribas
Babou – Caisse d’Épargne
Babou – CIC
Babou – Crédit Agricole
Babou – Crédit Lyonnais
Babou – Société Générale
Interest rate
%
Maturity
2.00% + LIBOR
2.00% + LIBOR
2.00% + LIBOR
4.125%
3.625%
3.45% (see note)
2.25% + LIBOR
2.45% + LIBOR
2.50% + LIBOR
1.1%-1.34%
N/A
N/A
Apr-25
N/A
Jul-25
N/A
Jul-22
N/A
Dec-21
Apr-22
0.75%-0.76% Jul 23–Sep 24
0.75%-1.51% Feb 22-Oct 24
0.71%-2.18%
Jul 21-Jun 25
0.39-0.81% Aug 23-Jan 28
0.68%-0.74% Nov 24-Apr 25
Jun 23
0.63%
27 March
2021
£’000
–
–
300,000
–
400,000
–
3,545
–
2,770
21,810
1,312
2,470
1,921
1,952
939
777
737,496
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
The acquisition facility, term loans A and the high yield bond notes have carrying values which include transaction fees allocated on inception.
The acquisition facility interest rate varied over the term. The rate shown in the table was the prevailing rate on the date of the refinancing.
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
€1.1691/£ (2020: €1.1176/£).
140
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
27 March
2021
£’000
772,480
(120,000)
(300,000)
(250,000)
300,000
400,000
(82,121)
(5,150)
22,762
(1,164)
(10,797)
(1,583)
2,625
1,666
1,893
(46,470)
4,601
(41,869)
730,611
6,875
723,736
Other
£’000
4,965
2,872
(1,869)
(1,105)
4,863
3,398
(2,509)
(1,556)
4,196
4,196
–
4,863
–
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
Total
£’000
6,160
4,375
(2,320)
(1,370)
6,845
11,628
(3,685)
(1,670)
13,118
8,607
4,511
6,079
766
Property provisions
£’000
1,195
1,503
(451)
(265)
1,982
8,230
(1,176)
(114)
8,922
4,411
4,511
1,216
766
The movement in the loan liabilities during the year breaks down as follows:
As at
Borrowings brought forward
Cash
(Payment)/receipt of revolving loan facilities
Repayment of term facility
Repayment of corporate bonds
Draw down of new term facility
Issue of new corporate bonds
Repayment of acquisition facility
Repayment of Heron loan facilities
Receipt of Babou loan guaranteed by the French government
Repayment/(receipt) of other Babou loan facilities
Capitalised fees on refinancing
Non-cash
Foreign exchange on loan balances
Refinancing fees directly expensed
Ongoing amortisation of fees capitalised on refinancing
One-off fee amortisation 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
22 Provisions
At 30 March 2019
Provided in the period
Utilised during the period
Released during the period
At 28 March 2020
Provided in the period
Utilised during the period
Released during the period
At 27 March 2021
Current liabilities 2021
Non-current liabilities 2021
Current liabilities 2020
Non-current liabilities 2020
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 £10.9k per claim (£10.7k in 2020).
Annual Report & Accounts 2021
B&M European Value Retail S.A.
141
Notes to the consolidated financial statements
continued
23 Share capital
Allotted, called up and fully paid
B&M European Value Retail S.A. ordinary shares of 10p each
As at 30 March 2019
Release of shares related to employee share options
As at 28 March 2020
Release of shares related to employee share options
As at 27 March 2021
Shares
£’000
1,000,561,222
21,676
1,000,582,898
236,790
1,000,819,688
100,056
2
100,058
24
100,082
Ordinary shares
Each ordinary share ranks pari passu with each other ordinary share and each share carries one vote. The Group parent is authorised to issue up to
an additional 2,971,402,534 ordinary shares.
24 Cash generated from operations
Period ended
Net profit
Tax charge on continuing operations
Tax charge on discontinued operations (note 6)
Profit before tax
Adjustments for:
Net interest expense
Depreciation on property, plant and equipment
Depreciation on right of use assets
Impairment of right of use assets
Amortisation of intangible assets
Loss/(gain) on sale and leaseback
Loss/(profit) 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
27 March
2021
£’000
Restated*
52 weeks ended
28 March
2020
£’000
428,104
97,335
–
525,439
89,770
57,157
155,519
5,142
2,571
142
571
1,937
(20,350)
8,985
105,898
6,287
(1,795)
6,775
80,855
57,246
1,721
139,822
88,588
54,255
156,798
6,838
2,568
(16,928)
(163)
1,422
29,348
693
77,076
686
(879)
(641)
944,048
539,483
* This statement has been restated in respect of reclassifying a non-cash movement (see note 1).
The prior year cash flows above include the discontinued operations. The amortisation and depreciation figures have been reconciled in notes 13, 14
and 15. The interest expense reconciles as follows:
As at
Net interest charge in continuing operations
Net interest charge in discontinued operations
Net interest charge
27 March
2021
£’000
89,770
–
89,770
28 March
2020
£’000
81,668
6,920
88,588
142
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
25 Group information and ultimate parent undertaking
The financial results of the Group include the following entities.
Company name
Country
Date of incorporation
Percent held within the Group
Principal activity
B&M European Value Retail S.A.
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
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
Parent
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
General retail
Dormant
Employment services
Holding company
Convenience retail
Dormant
Dormant
Ex-holding company
General retail
Administrative services
Registered Offices
• The Luxembourg entities are all registered at 68-70, Boulevard de la Pétrusse, L-2320, Luxembourg since May 2021, previously these entities were
registered at 9 alleé 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.
Associates
The Group has a 50% interest in Multi-lines International Company Limited, a company incorporated in Hong Kong, and a 22.5% interest in Centz Retail
Holdings Limited, a company incorporated in the Republic of Ireland. The share of profit/loss from the associates is included in the statement of
comprehensive income, see note 12.
The Group previously held a 20% interest in Home Focus Group Limited, a company incorporated in the Republic of Ireland. This interest was disposed
of in full in December 2020 for €350k.
Changes during the prior 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 6 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 15.
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.
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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
143
Notes to the consolidated financial statements
continued
26 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. None of these contracts were outstanding at the year end date.
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%
27 March
2021
£’000
–
–
28 March
2020
£’000
154
(154)
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 and France and there is no currency exposure in this respect. A proportion of the Group’s purchases
are priced in US Dollars and the Group generally uses forward currency contracts to minimise the risk associated with that exposure.
Approach to hedge accounting
As part of the Group’s response to currency risk the currency forwards taken out are intended to prudently cover the majority of our stock purchases
forecast for that period. However, the Group only hedge accounts for 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 loss of £22.2m (2020: £12.4m
gain) and a pre-tax gain in other comprehensive income of £20.4m (2020: £8.7m loss).
The net effective hedging loss transferred to the cost of inventories in the year was £4.7m (2020: net gain of £16.1m). At the year end the amount of
outstanding US Dollar contracts covered by hedge accounting was $474m (2020: $334m).
144
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in US Dollar period end exchange rates with all other variables held
constant.
The impact on the Group’s profit before tax and other comprehensive income (net of tax) is largely due to changes in the fair value of our foreign
exchange derivatives and revaluation of creditors and deposits held on account with our US Dollar suppliers.
As at
Effect on profit before tax
Effect on other comprehensive income
Change in USD rate
+2.5%
-2.5%
+2.5%
-2.5%
27 March
2021
£’000
(5,261)
5,531
(8,471)
8,905
28 March
2020
£’000
(3,791)
3,823
(6,595)
6,934
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%
27 March
2021
£’000
131
42
490
(514)
28 March
2020
£’000
1,008
(979)
330
(346)
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
27 March
2021
£’000
(1,270)
1,270
28 March
2020
£’000
(1,737)
1,737
This sensitivity has been calculated by changing the interest rate for each interest payment and accrual made by the Group over the period, by the
amount specified in the table above, and then calculating the difference that would have been required.
The Group also has a very limited exposure to EURIBOR via the loans held by Babou, see note 21, however this is considered immaterial for disclosure.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The
Group’s principal financial assets are cash, derivatives and trade receivables. The credit risks associated with cash and derivatives are limited as the
main counterparties are banks with high credit ratings (A long term and A-1 short term (Standard & Poor) or better, (2020: 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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
145
Notes to the consolidated financial statements
continued
26 Financial risk management continued
Credit risk 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:
27 March 2021
Interest bearing loans
Lease liabilities
Trade payables
28 March 2020
Interest bearing loans
Lease liabilities
Trade payables
Within 1 year
£’000
28,044
213,152
352,707
231,801
197,842
326,578
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
More than
5 years
£’000
Total
£’000
48,267
205,262
–
571,525
203,272
–
753,413
519,517
–
6,958
513,295
–
226
672,844
–
829,950
1,610,775
352,707
–
712,227
–
810,284
1,626,636
326,578
Fair value
The fair value of the financial assets and liabilities of the group are not materially different from their carrying value. Refer to the table below. These all
represent financial assets and liabilities measured at amortised cost except where stated as measured at fair value through the profit and loss or fair
value through other comprehensive income.
As at
Financial assets
Fair value through profit and loss
Forward foreign exchange contracts
Fair value through other comprehensive income
Forward foreign exchange contracts
Loans and receivables
Cash and cash equivalents
Trade receivables
Other receivables
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
Amortised cost
Overdraft
Lease liabilities
Interest-bearing loans and borrowings
Trade payables
Other payables
146
B&M European Value Retail S.A. Annual Report & Accounts 2021
27 March
2021
£’000
2,416
1,351
217,682
13,298
6,376
27 March
2021
£’000
5,748
–
10,393
–
1,301,369
730,611
352,707
5,925
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
Strategic Report
Corporate Governance
Financial Statements
27 Related party transactions
The Group has transacted with the following related parties over the periods:
Multi-lines International Company Limited, a supplier, and Home Focus Group and Centz Retail Holdings, both customers, are or were associates of
the Group.
Ropley Properties Ltd, Triple Jersey Ltd, TJL UK Ltd, Rani Investments, Fulland Investments Limited, Golden Honest International Investments Limited, Hammond
Investments Limited, Joint Sino Investments Limited, Ocean Sense Investments Limited and Multi Lines International (Properties) Ltd, all landlords of properties
occupied by the Group, and Rani 1 Holdings Limited, Rani 2 Holdings Limited and SSA Investments, bondholders and beneficial owners of equipment hired to
the Group, are directly or indirectly owned by director Simon Arora, his family, or his family trusts (together, the Arora related parties).
As announced in July 2020, there was a significant new related party transaction in the period as SSA Investments participated in the Corporate Bonds
issued by the Group by purchasing £100m of these 3.625% bonds with a five year maturity. In December 2020 and February 2021, the bonds
transferred to Rani 2 Holdings Limited (£50m) and Rani 1 Holdings Limited (£50m), respectively. £2,588k of interest expense has been incurred on
these bonds in the period, with £755k accrued at the year end. Further details on these bonds and the refinancing are given in note 21.
The following table sets out the total amount of trading transactions with related parties included in the statement of comprehensive income, including
the P&L impact of any leases:
Period ended
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
Fulland Investments Limited
Golden Honest International Investments Limited
Hammond Investments Limited
Joint Sino Investments Limited
Multi-Lines International (Properties) Ltd
Ocean Sense Investments Limited
SSA Investments
Total purchases from related parties
27 March
2021
£’000
28 March
2020
£’000
44,938
1,050
45,988
27 March
2021
£’000
25,327
1,944
27,271
28 March
2020
£’000
230,472
180,721
107
44
102
102
364
107
150
–
–
–
–
479
–
97
231,448
181,297
The IFRS 16 Lease figures in relation to these related parties, which are all related to key management personnel, are as follows:
Period ended 27 March 2021
Rani Investments
Ropley Properties
TJL UK Limited
Triple Jersey Limited
Period ended 28 March 2020
Rani Investments
Ropley Properties
TJL UK Limited
Triple Jersey Limited
Depreciation
charge
£’000
86
1,635
870
8,823
11,414
Depreciation
charge
£’000
76
1,827
741
9,362
12,006
Interest
charge
£’000
61
903
485
4,026
5,475
Interest
charge
£’000
61
1,078
432
4,914
6,485
Total charge
£’000
147
2,538
1,355
12,849
16,889
Total charge
£’000
137
2,905
1,173
14,276
18,491
Right of use
asset
£’000
610
9,714
12,243
63,909
86,476
Right of use
asset
£’000
604
12,518
9,235
72,121
94,478
Lease liability
£’000
(742)
(13,219)
(13,975)
(77,573)
(105,509)
Lease liability
£’000
(734)
(14,825)
(10,656)
(86,039)
(112,254)
Annual Report & Accounts 2021
B&M European Value Retail S.A.
Net
liability
£’000
(132)
(3,505)
(1,732)
(13,664)
(19,033)
Net
liability
£’000
(130)
(2,307)
(1,421)
(13,918)
(17,776)
147
Notes to the consolidated financial statements
continued
27 Related party transactions continued
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 (2020: two new and no renewals). The total expense on these leases in the period was £404k (2020: £680k). There were no conditionally
exchanged leases with Arora related parties in the current period with a long stop completion date (2020: none).
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
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
Triple Jersey Ltd
Total related party trade payables
27 March
2021
£’000
7,564
–
7,564
27 March
2021
£’000
7,439
–
371
1,066
8,876
28 March
2020
£’000
5,687
85
5,772
28 March
2020
£’000
9,588
26
380
1,438
11,432
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 27 March 2021 (2020: 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
See note 12 for further information on the Group’s associates.
For further details on the transactions with key management personnel, see note 8 and the remuneration report.
27 March
2021
£’000
16,444
15,796
39,730
59,264
131,234
28 March
2020
£’000
16,496
16,604
42,280
66,743
142,123
148
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
28 Capital management
For the purpose of the Group’s capital management, capital includes issued capital and all other equity reserves attributable to the equity holders of
the parent. The primary objective of the Group’s capital management is to maximise the shareholder value.
In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial covenants
attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would
permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and
borrowing in the current or prior period.
The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the
financial covenants.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue
new shares.
The Group uses the following definition of net debt:
External interest bearing loans and borrowings less cash and short-term deposits.
The interest bearing loans figure used is the gross amount of cash borrowed at that time, as opposed to the carrying value under the amortised
cost method.
As at
Interest bearing loans and borrowings (note 21)
Less: Cash and short term deposits – overdrafts (note 18)
Net debt
27 March
2021
£’000
737,496
(217,682)
519,814
28 March
2020
£’000
774,749
(427,277)
347,472
29 Post balance sheet events
France imposed a new national lockdown on 3 April 2021, following a period of regional lockdowns. This has had a significant impact on our French
store estate, with stores either closed or restricted as to which items they are permitted to sell. Whilst the impact on local sales is significant, the
announcement was expected and the business was well prepared, maintaining healthy cash and stock positions with no additional funding required
since year end.
The lockdown was lifted on 19 May 2021, and trading has been positive since this date.
The remainder of the business, representing more than 90% of our stores, is based in the UK and was unaffected by the lockdown. The overall impact
to Group profit is therefore immaterial.
30 Dividends
Special dividends of 20.0 pence per share (£200.1m), 25.0 pence per share (£250.2m) and 15.0 pence per share (£150.1m) were declared in January
2021, November 2020 and March 2020 respectively. All were paid in the current year.
An interim dividend of 4.3 pence per share (£43.0m) was declared in November 2020 and has been paid.
A final dividend of 13.0 pence per share (£130.1m), giving a full year dividend of 17.3 pence per share (£173.1m), is proposed.
Relating to the prior year:
An interim dividend of 2.7 pence per share (£27.0m) was paid in December 2019 and a final dividend of 5.4 pence per share (£54.0m), giving a full year
dividend of 8.1 pence per share (£81.0m), was paid in September 2020.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
149
Notes to the consolidated financial statements
continued
31 Contingent liabilities and guarantees
As at 28 March 2020 and 27 March 2021, B&M European Value Retail S.A., B&M European Value Retail 1 S.à r.l., B&M European Value Retail 2 S.à r.l.,
B&M European Value Retail Holdco 1 Ltd, B&M European Value Retail Holdco 2 Ltd, B&M European Value Retail Holdco 3 Ltd, B&M European Value Retail
Holdco 4 Ltd, EV Retail Ltd and B&M Retail Ltd are all guarantors to both the loan and notes agreements which are formally held within B&M European
Value Retail SA. The amounts outstanding as at the period end were £300m for the loans (2020: £502m), with the balance held in B&M European
Value Retail Holdco 4 Ltd, and £400m (2020: £250m) for the notes, with the balance held in B&M European Value Retail S.A.
As at 28 March 2020 and 27 March 2021, 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 £6m (2020: £11m) with the balance held in Heron Foods Ltd.
32 Directors
The directors that served during the period were:
Peter Bamford (Chairman)
S Arora (CEO)
A Russo (CFO) (appointed on 16 November 2020)
R McMillan
T Hall
C Bradley
G Petit
P McDonald (CFO) (retired 15 November 2020)
All directors served for the whole period except where indicated above.
150
B&M European Value Retail S.A. Annual Report & Accounts 2021
Financial Statements
Independent Auditor’s Report
Strategic Report
Corporate Governance
Financial Statements
To the Shareholders of B&M European Value Retail S.A.
68-70, Boulevard de la Pétrusse L-2320 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 2021,
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 2021 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 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
Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are
further described in the « Responsibilities of “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 Code
of Ethics for Professional Accountants, including International
Independence Standards, issued by the International Ethics Standards
Board for 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 but does not include the annual
accounts and our report of the “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
assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Board of Directors either
intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Company’s financial reporting process.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
151
Independent Auditor’s Report
continued
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, actions taken to eliminate threats or safeguards
applied.
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 18 September 2020 and the duration of our
uninterrupted engagement, including previous renewals and
reappointments, is five years.
The management report on pages 90 to 95 of the Annual Report is
consistent with the annual accounts and has been prepared in
accordance with applicable legal requirements.
Luxembourg, 2 June 2021
KPMG Luxembourg
Société cooperative
Cabinet de révision agréé
Thierry Ravasio
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 the
“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 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 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.
• Conclude on the appropriateness of the 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
the “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 the “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.
152
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Financial Statements
Company profit and loss account
for the financial year ended 31 March 2021
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
Notes
31 March 2021
£
31 March 2020
£
8
9
10
11
12
13
14
14
(4,852,505)
(2,126,681)
(248,586)
(285,286)
(12,812)
(8,042)
(16,434)
(10,231)
–
(1,470,968)
(7,309)
(1,157,579)
633,300,000
212,145,459
17,596,604
1,300,441
10,795,788
63,618
(16,847,735)
–
(10,526,476)
–
628,756,396
(2,134)
208,874,868
(4,268)
628,754,262
208,870,600
Annual Report & Accounts 2021
B&M European Value Retail S.A.
153
Financial Statements
Company balance sheet
as at 31 March, 2021
Fixed assets
Financial assets
Shares in affiliated undertakings
Other loans
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
Equity
Subscribed capital
Share premium account
Reserves
Legal reserve
Profit or loss for the financial year
Profit or loss brought forward
Interim dividends
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 equity and liabilities
The accompanying notes form an integral part of these annual accounts
154
B&M European Value Retail S.A. Annual Report & Accounts 2021
Notes
31 March 2021
£
31 March 2020
£
3
4
5
6
7
2,624,999,999
5,467
2,624,999,999
–
2,625,005,467
2,624,999,999
521,637,888
433,588,268
325,200
4,892,539
521,963,089
438,480,807
140,585
60,098
3,147,109,140
3,063,540,904
100,081,969
2,473,832,360
100,058,290
2,473,803,467
10,010,000
628,754,262
18,225,651
(493,361,441)
10,010,000
208,870,600
40,515,885
(177,102,880)
2,737,542,801
2,656,155,361
3,020,833
400,000,000
1,718,750
250,000,000
92,602
1,075,965
6,266,338
4,407,949
9,284
17,599
–
150,087,435
177,282
77,845
409,566,339
407,385,543
3,147,109,140
3,063,540,904
Financial Statements
Notes to the annual accounts
Strategic Report
Corporate Governance
Financial Statements
for the financial year ended 31 March 2021
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 the Grand-Duchy of Luxembourg, in particular the law of 10 August 1915 on commercial companies,
as amended.
An extraordinary general meeting of the shareholders of the Company was held on 3 December 2020 to amend the articles of association of the
Company (the “Articles”) and provide for the compulsory conversion all the ordinary registered shares representing the share capital of the Company
into dematerialised shares. The board of directors of the Company (the “Board of Directors”), acting on the basis of article 7 of the law of 6 April 1993
on dematerialised securities has appointed LuxCSD 42 avenue JF Kennedy, L-1855 Luxembourg as settlement organisation with effect as from
10 December 2020 and all the dematerialised shares are held in a single issuance account held with LuxCSD with interests in those shares ultimately
being credited to Euroclear UK & Ireland Limited (or its nominee) as the depository for the benefit of the holders of Crest Depository Interests in respect
of those shares.
The Company’s shares being listed on the premium listing segment of the London Stock Exchange, the Articles were also amended in order to
maintain, as far as practicable, the regulatory and legal provisions applicable to the Company in relation to Takeover Rules and Transparency
Disclosures Requirements after Brexit.
The Articles of association of the Company were further 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 and
former Chief Financial Officer of the Group in the frame of the Company’s Restricted Stock Awards Plan and Long Term Incentive Plan.
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 each year and ends on 31 March the following year. The Company also prepares consolidated
financial statements.
The Company’s purpose is to acquire and hold interests, directly or indirectly, in any form whatsoever, in other Luxembourg or foreign entities, by way
of, among others, subscription or acquisition of (i) any securities and rights through participation, contribution, underwriting, firm purchase or option,
negotiation or in any other way, or of (ii) 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. The Company may also enter into any guarantee, pledge or any other form of security agreement.
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 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.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
155
Notes to the annual accounts
continued
for the financial year ended 31 March 2021
2 Summary of significant accounting policies and valuation methods continued
Significant accounting policies and valuation methods
The main accounting policies and valuation rules applied by the Company are the following.
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 as 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 Great Britain 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 (the “historical
exchange rate”).
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 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 relevant financial 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 at 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
Bond 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.
156
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
3 Financial assets
The undertaking in which the Company holds interests 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
31 March 2021
£
Net result for the
financial year
ended
31 March 2021
£
Net book value
as at
31 March 2021
£
Percentage of
holding
100%
646,878,136
633,301,104 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 annual accounts of B&M EVR 1 have yet to be closed by its Managers and as such the amounts are unaudited.
On 10 November 2020 an interim dividend of GBP 293 million was declared and distributed by B&M EVR 1 to the Company.
On 6 January 2021 an interim dividend of GBP 200 million was declared and distributed by B&M EVR 1 to the Company.
On 21 March 2021 an interim dividend of GBP 140 million was declared and distributed by B&M EVR 1 to the Company.
4 Amount 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
Accrued income in relation to intercompany loan agreements (interest receivable)
Total
March 2021
£
March 2020
£
518,464,555
–
3,173,333
256,769,518
175,000,000
1,818,750
521,637,888
433,588,269
The amounts owed by B&M Holdco 4 are interest bearing (Note 12) and payable on demand. Where interest is calculated it has been done on an arm’s
length basis.
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 2021
£
March 2020
£
–
38,250
1,057
285,893
325,200
4,673,860
–
11,848
206,831
4,892,539
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. The final amount received was £4,645,070 in June 2020.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
157
Notes to the annual accounts
continued
for the financial year ended 31 March 2021
6 Capital and reserves
Subscribed capital and share premium account
As at 31 March 2021, the issued share capital of the Company is set at GBP 100,081,968.80 divided into 1,000,819,688 ordinary shares with a nominal
value of GBP 0.10 each and the unissued but authorised share capital is set at GBP 297,140,253.40. 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 in previous years 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, 236,790 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
Allocation of legal reserve
Proceeds from share options
Allocation of dividends
Final dividend
Interim dividend (November 2020)
Special dividend (January 2021)
Profit for the financial year
Share premium and
similar premiums
£
2,473,803,467
–
–
28,893
–
–
–
–
–
Legal reserve
£
10,010,000
–
–
–
–
–
–
–
–
Profit or loss
brought forward
£
40,515,885
208,870,600
–
(22,574)
(177,102,880)
(54,035,379)
–
–
–
Profit for the
financial period
£
208,870,600
(208,870,600)
–
–
–
–
–
–
628,754,262
Interim dividends
£
(177,102,880)
–
–
–
177,102,880
–
(293,214,812)
(200,146,629)
–
Total
£
2,556,097,071
–
–
6,319
–
(54,035,379)
(293,214,812)
(200,146,629)
628,754,262
As at the end of the financial year
2,473,832,360
10,010,000
18,225,651
628,754,262
(493,361,441)
2,637,460,832
On 11 November 2020 the Board of Directors unanimously approved the distribution of an interim dividend of 29.3 pence per ordinary share, being a
total aggregate distribution of GBP 293,214,812.07 paid by the Company on 4 December 2020.
On 6 January 2021 the Board of Directors unanimously approved the distribution of a special dividend of 20.0 pence per ordinary share, being a total
aggregate distribution of GBP 200,146,629.40 paid by the Company on 29 January 2021.
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.
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 2021
GBP
March 2020
GBP
3,020,833
–
–
400,000,000
3,020,833
400,000,000
–
–
–
3,020,833
400,000,000
1,718,750
250,000,000
403,020,833
251,718,750
On 13 July 2020, the Company issued GBP 400,000,000 3.625% Senior Secured Notes ( the “Notes”) which are due on 15 July 2025. Interest on the Notes
is paid semi-annually in arrears on 15 January and 15 July each year, commencing on 15 January 2021. The Notes 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 2014/65/EU on markets in financial instruments. The Euro MTF Market falls within the scope of Regulation (EU) 596/2014 on
market abuse and the related Directive 2014/57/EU on criminal sanctions for market abuse.
The Company may redeem the Notes in whole or in part at any time on or after 15 July 2022, in each case, at the redemption prices set out in the
Offering Circular.
158
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Prior to 15 July 2022, the Issuer will be entitled to redeem, at its option, all or a portion of the Notes at a redemption price equal to 100% of the principal
amount of the Notes, plus accrued and unpaid interest and additional amounts, if any, to the redemption date, plus a “make-whole” premium, as
described in this Offering Circular.
Prior to 15 July 2022, the Issuer may, at its option, and on one or more occasions, also redeem up to 40% of the original aggregate principal amount of
the Notes with the net proceeds from certain equity offerings. Additionally, the Issuer may redeem the Notes 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 Issuer may be required to repurchase all or any portion of the Notes at
101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, to the date of such repurchase.
The Notes are senior obligations of the Company, guaranteed on a senior basis by its various affiliated companies.
On 13 July 2020, the Company redeemed the previously issued GBP 250,000,000 4.125% Senior Secured Notes (the “Former Notes”) which were due on
1 February 2022. An early redemption fee of £2,577,500 was incurred and paid at that date.
Other amounts due and payable for the accounts shown under “Creditors” are as follows:
Within
one year
GBP
After one year
within five
GBP
After more than
five years
March 2021
GBP
March 2020
GBP
Trade creditors
Suppliers
Suppliers – Invoices not yet received (Note 7.1)
13,808
78,794
92,602
Amounts owed to affiliated undertakings B&M EVR 2 (Note 7.2)
6,266,338
Other creditors
Tax authorities
Corporate income tax
Net wealth tax
Other taxes
Dividend payable
Other creditors
Total
2,541
4,103
2,640
9,284
–
177,282
6,545,506
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,808
78,794
92,602
6,266,338
121,286
954,679
1,075,965
4,407,949
2,541
4,103
2,640
9,284
–
177,282
2,541
12,621
2,437
17,599
150,087,435
77,845
6,545,506
155,666,793
Note 7.1 The balance of suppliers’ invoices not yet received during the financial year ended 31 March 2021 relates mostly to audit fees (31 March 2020:
were related to the sale of Bedford and audit fees accrued.)
Note 7.2 Dividend payments in GBP received by the Company on behalf of B&M EVR 2.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
159
Notes to the annual accounts
continued
for the financial year ended 31 March 2021
8 Other external expenses
Advisory and consultancy fees
Fees relating to the sale of Bedford
Fees relating to refinancing of Bond debt
Marketing, communication and travel expenses
Staff recruitment expenses
Accounting and administrative fees
Audit fees
Government regulatory fees
Stock exchange fees
Rentals
Repairs and maintenance
Others
Total
March 2021
£
254,522
–
3,502,988
115,975
19,983
181,006
92,173
112,581
164,003
46,978
8,520
353,775
March 2020
£
211,718
650,000
–
261,069
42,777
167,474
73,000
103,509
134,153
45,787
8,385
428,809
4,852,505
2,126,681
9 Staff costs
As at 31 March 2021, the Company employed one part time employee and one full time employee. (2020: one part time and 2 full time)
10 Other operating expenses
Director fees
Non-deductible VAT
Others
Total
11 Income from participating interests
Derived from affiliated undertakings:
Dividend income (Note 11.1)
Sale of Bedford warehouse
Total
Note 11.1 Dividend income relates to dividends distributed by B&M EVR 1.
March 2021
£
612,508
825,501
32,959
1,470,968
March 2020
£
652,097
505,093
389
1,157,579
March 2021
£
March 2020
£
633,300,000
–
175,000,000
37,145,459
633,300,000
212,145,459
160
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
March 2021
£
March 2020
£
14,090,771
3,505,833
10,795,788
–
17,596,604
10,795,788
1,300,441
–
1,300,441
43,594
20,024
63,618
18,897,045
10,859,406
12 Other interest receivable and similar income
Derived from affiliated undertakings (Note 12.1)
Interest recharge
Other income
Other interest and similar income
Realised foreign exchange gain
Other income
Total
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 (“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 quarterly basis.
13 Interest payable and similar expenses
Other interest and similar expenses:
Interest expense on bonds payable (Note 7)
Realised foreign exchange loss
Others
Total
March 2021
£
March 2020
£
13,301,910
968,325
2,577,500
10,312,500
205,887
8,089
16,847,735
10,526,476
14 Taxation
The Company is subject to the general tax regulation applicable to all Luxembourg commercial companies.
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 Plan (CSOP)
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)
8. The B&M European Value Retail S.A. Long Term Incentive Plan 2020, split into two; (i) LTIP 2020A (ii) LTIP 2020B1
Annual Report & Accounts 2021
B&M European Value Retail S.A.
161
Notes to the annual accounts
continued
for the financial year ended 31 March 2021
15 Off balance sheet commitments and contingencies continued
CSOP
The CSOP scheme includes 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.
Scheme
CSOP
Date of
grant
Date of
vesting
1 Aug 2014
1 Aug 2017
All CSOP schemes have fully vested.
Exercise
price
pence
271.5
Fair value
of option
£
Number of options
outstanding at
31 March 2020
Number of options
granted/
(forfeited or lapsed)
in the year
Number of options
exercised
in the year
Number of options
outstanding at
31 March 2021
0.83
11,049
–
(11,049)
–
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, LTIP 2019A and LTIP 2020A 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.
The options were valued using a Monte Carlo method.
All LTIP options have a nil exercise price.
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 2020A / EPS
LTIP 2020A / TSR
LTIP 2017B1
LTIP 2017B2
LTIP 2018B1
LTIP 2018B2
LTIP 2019B1
LTIP 2019B2
LTIP 2020B1
Date of
grant
Date of
vesting
Fair value
of option
£
Number of options
outstanding at
31 March 2020
Number of options
granted/(forfeited
or lapsed)
in the year
Number of options
exercised
in the year
Number of
options
outstanding at
31 March 2021
5 Aug 2015
5 Aug 2015
18 Aug 2016
18 Aug 2016
7 Aug 2017
7 Aug 2017
22 Aug 2018
22 Aug 2018
2 Aug 2019
2 Aug 2019
30 Jul 20
30 Jul 20
7 Aug 2017
14 Aug 2017
23 Jan 2018
23 Jan 2018
2 Aug 2019
18 Sept 2019
30 Jul 20
5 Aug 2018
5 Aug 2018
18 Aug 2019
18 Aug 2019
7 Aug 2020
7 Aug 2020
22 Aug 2021
22 Aug 2021
2 Aug 2022
2 Aug 2022
30 Jul 2020
30 Jul 2020
7 Aug 2020
14 Aug 2020
23 Jan 2021
23 Jan 2021
2 Aug 2022
18 Sept 2022
30 Jul 2020
3.41
2.10
2.54
1.64
3.51
2.72
4.09
2.40
3.61
2.51
4.64
4.09
3.61
3.60
4.00
4.06
3.48
3.73
4.63
31,477
40,616
70,982.5
122,385.5
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
–
–
–
–
–
(22,539)
(13,053)
17,293.5
17,293.5
(12,289.5)
(12,289.5)
157,438.5
157,438.5
(115,188)
(16,050)
(2,408)
(10,638)
2,934
316
300,724
(31,477)
(40,616)
–
–
–
–
–
–
–
–
–
–
(75,000)
(64,200)
(14,448)
–
–
–
–
–
–
70,982.5
122,385.5
18,071
27,577
262,012
262,012
259,633
259,633
157,438.5
157,438.5
73,667
13,379
–
234,759
395,455
3,163
300,724
LTIP 2015/EPS, LTIP 2015/TSR and LTIP 2018B1 have been fully exercised.
LTIP 2016 and LTIP 2017A have vested and are in a two year holding period.
LTIP 2017B1 and 2017B2 have vested and are available to exercise.
162
B&M European Value Retail S.A. Annual Report & Accounts 2021
Strategic Report
Corporate Governance
Financial Statements
Assumptions
The fair valuing exercise uses several assumptions, including those given in the table below.
Scheme/Tranche
CSOP (1/8/14)
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 2020A / EPS
LTIP 2020A / TSR
LTIP 2017B1
LTIP 2017B2
LTIP2018B1
LTIP2018B
LTIP2019B1
LTIP2019B2
LTIP2020B1
Risk-free
rate
2.23%
0.92%
0.92%
0.09%
0.09%
0.52%
0.52%
0.97%
0.97%
0.37%
0.37%
-0.11%
-0.11%
0.25%
0.25%
0.25%
0.25%
0.47%
0.47%
-0.12%
Expected life
(years)
Volatility
Dividend
yield
6.5
5
5
5
5
5
5
5
5
5
5
5
5
3
3
3
3
3
3
3
N/A
24%
24%
26%
26%
32%
32%
29%
29%
31%
31%
48%
48%
32%
32%
32%
30%
30%
30%
39%
0%
1%
1%
2%
2%
1%
1%
0%
0%
0%
0%
0%
0%
1%
1%
1%
0%
0%
0%
0%
DBSP
The Defined Benefit Share Plan (DBSP) is a holding scheme where a portion of the executive directors annual bonus is deferred into 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.
All DBSP options have a nil exercise price.
Scheme/Tranche
DBSP 2019
DBSP 2020
Date of
grant
Date of
vesting
Fair value
of option
£
Number of options
outstanding at
31 March 2020
Number of options
granted/(forfeited or
lapsed) in the year
Number of options
exercised
in the year
Number of options
outstanding at
31 March 2021
4 Jun 2019
30 Jun 2020
4 Jun 2022
30 Jun 2023
N/A
N/A
61,008
–
6,912
50,748
–
–
67,920
50,748
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) 14 July 2020, 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 2021 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).
Annual Report & Accounts 2021
B&M European Value Retail S.A.
163
Notes to the annual accounts
continued
for the financial year ended 31 March 2021
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 2021
£
602,392
602,392
March 2020
£
507,293
507,293
There were no obligations arising or entered into in respect of retirement pensions for former members of those bodies for the financial year.
There were no advances or loans granted during the financial year to the members of those bodies.
There are no pension obligations to members of those bodies.
There are no guarantees or direct substitutes granted or given of the members of those bodies
The executive directors are remunerated through other Group companies.
17 Subsequent events
As per a resolution taken on 2 June 2021, the Board of Directors decided to change the registered address of the Company from 9, Allée Scheffer,
L-2520, Luxembourg to 68-70 Boulevard de la Pétrusse, L-2320, Luxembourg with effect as from 31 May 2021.
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 2 June 2021 and signed on its behalf by:
Simon Arora
Chief Executive Officer
Alejandro Russo
Chief Financial Officer
164
B&M European Value Retail S.A. Annual Report & Accounts 2021
Other Information
Other Information
Corporate directory
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.
68-70, Boulevard de la Pétrusse
L-2320 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
Tel: +352 246 130 208
www.bandmretail.com
Registrars
Banque Internationale à Luxembourg S.A.
69, Route d’Esch
L-2953 Luxembourg
Tel: +352 4590 5000
www.bil.com
Central Securities Depositary
LuxCSD S.A.
42, Avenue J-F Kennedy
L-1855 Luxembourg
Grand-Duché de Luxembourg
www.luxcsd.com
Listing
The ordinary shares of B&M European Value
Retail S.A. are listed with a premium
listing on the London Stock Exchange.
Annual Report & Accounts 2021
B&M European Value Retail S.A.
165
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B&M logo are registered trademarks.
Big brands
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B&M European Value Retail S.A.
68-70, Boulevard de la Pétrusse
L-2320 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
www.bandmretail.com