TIDMBME
RNS Number : 5992P
B&M European Value Retail S.A.
30 May 2018
30 May 2018
B&M European Value Retail S.A.
Preliminary Results Announcement
Strong Growth from UK's Leading General Merchandise Value
Retailer
B&M European Value Retail S.A. ("the Group"), the UK's
leading multi-price value retailer, today announces its interim
results for the 53 weeks to 31 March 2018.
HIGHLIGHTS
-- Group revenues(1) increased by 22.4% to GBP2,976.3m (2017:
GBP2,430.7m), 22.0% at constant currency(2) for the 52 week
comparable period to the previous year
-- UK B&M store fascia Like-for-Like revenue(4) growth of
4.7% for the year
-- Group profit before tax increased by 25.4% to GBP229.3m for
the 53 week period (2017: GBP182.9m)
-- UK B&M store fascia Adjusted EBITDA(1&3) growth of
17.2% to GBP261.7m (2017: GBP223.2m), with a 29bps increase in
margin to 10.2% of revenue
-- The 53(rd) week added some GBP53.5m and GBP3.2m to Group
revenues and profit before tax respectively
-- Group Adjusted Profit Before Tax(1&3) increased by 16.5%
to GBP221.5m (2017: GBP190.2m), diluted earnings per share 18.6p
(2017: GBP14.3p)
-- Cash generated from operations of GBP242.0m for the 53 week
period (2017: GBP210.9m), Year-end Net Debt of GBP535.3m and net
debt to EBITDA of 1.92x, which equates to 1.72x excluding the
capital expenditure incurred to date on the Southern distribution
centre (2017: 1.71x)
-- Recommended final dividend(5) increased by 23.1% to 4.8p per
share (FY17: 3.9p) to be paid on 6 August 2018, bringing the full
year ordinary dividend to 7.2p per share, being an increase of
24.1%
-- 47 gross new B&M UK stores opened in the period (39 net)
and at least a further 45 net new stores are planned for this
financial year as we benefit from the availabilty of attractive new
store opportunities
-- Heron Foods acquisition integrated and delivered excellent
performance in the 8 months of ownership generating GBP11.7m
Adjusted EBITDA(1&3) and it is proving to be an effective
platform for the introduction of frozen & chilled foods into
B&M, which is now in 72 B&M stores
-- Learning the lessons in Germany with rapid pace of transition
towards the B&M model under the new Jawoll management team.
Jawoll Adjusted EBITDA(1&3) reduced to GBP5.6m; targeting a
return to EBITDA growth by Jawoll in the current financial year
-- Large new, 1m sq ft Southern distribution centre now under
construction in Bedford and when commissioned by Spring 2020 it
will support UK expansion needs for the foreseeable future
-- Pleasing start to Q1 trading across the Group, with 3.1%
Like-for-Like in B&M fascia stores in the UK excluding the
Easter week
(1) Unless otherwise stated figures presented in this
announcement are for the 52 weeks ended 24 March 2018, which is
comparable with the previous year rather than the statutory
reported 53 week period. See the table below in relation to the
statutory 53 week basis figures.
(2) Constant currency comparison involves restating the prior
year Euro revenues using the same exchange rate as used to
translate the current year Euro revenues.
(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. Further details can be found
in note 3.
(4) Like-for-like revenues relate to the B&M estate only and
include each store's revenue for that part of the current period
that falls at least 14 months after it opened; compared with its
revenue for the corresponding part of the previous period. This 14
month approach has been used as it excludes the two month halo
period which new stores experience following opening.
(5) Dividends are stated as gross amounts before deduction of
Luxembourg withholding tax which is currently 15%.
(6) Net capital expenditure includes the purchase of property,
plant and equipment, intangible assets and proceeds of sale of any
of those items.
Simon Arora, Chief Executive, said,
"B&M has delivered another set of strong results by doing
what we do best, which is providing great value week-in, week-out
on the things customers buy regularly for their homes and families.
None of our success could have been achieved without the hard work
and dedication of the thousands of B&M colleagues across the
Group and on behalf of the Board I would like to thank them for all
their efforts.
The B&M model is highly relevant for the current difficult
economic environment, with its strong position in the value and
convenience areas of retailing where physical stores are winning.
The business is well placed for continued profitable, long-term
growth. In a retail sector beset by structural challenges B&M's
unique, disruptive model stands out as a success story."
Financial Results
FY 2018 FY 2017 Change FY2018
(52 weeks) (52 weeks)
Statutory
Total Group Revenues
B&M 2,566.0 2,252.3 13.9% 2,619.5
Heron 210.0 - - 210.0
Jawoll 200.3 178.4 12.3% 200.3
Total 2,976.3 2,430.7 22.4% 3,029.8
------------- ------------- --------- ------------
Number of Stores
Group 927 612 51.5% 927
B&M 576 537 7.3% 576
Heron Foods 265 - - 265
Jawoll 86 75 14.7% 86
------------- ------------- --------- ------------
Adjusted EBITDA(3) 279.0 234.9 18.8% 283.3
B&M 261.7 223.2 17.2% 265.9
Heron Foods 11.7 - - 11.7
Jawoll 5.6 11.7 -51.9% 5.6
------------- ------------- --------- ------------
Adjusted EBITDA %(3) 9.4% 9.7% -29bps 9.4%
------------- ------------- --------- ------------
Profit Before Tax 226.1 182.9 23.6% 229.3
------------- ------------- --------- ------------
EPS 18.3 14.3 28.0% 18.6
------------- ------------- --------- ------------
Adjusted Profit Before Tax(3) 221.5 190.2 16.5% 224.8
------------- ------------- --------- ------------
Adjusted Diluted EPS(3) 17.8 14.9 19.5% 18.0
------------- ------------- --------- ------------
Ordinary Dividends 7.2p 5.8p 24.1% 7.2p
------------- ------------- --------- ------------
Analyst Meeting & Webcast
An Analyst Meeting in relation to the final results will be held
on Wednesday 30 May at 08:00 am (UK) by invitation only at:
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
The meeting can be accessed live via a dial-in facility on:
UK & International: +44 (0) 330 336 9105
US: +1 323 794 2093
Participant Pin Code: 5916871
A simultaneous audio webcast and presentation slides will be
available via the B&M corporate website at
www.bandmretail.com
Enquiries:
B&M European Value Retail S.A.
For further information please contact +44 (0) 151 728 5400
Simon Arora, Chief Executive
Paul McDonald, Chief Financial Officer
Steve Webb, Investor Relations Director
Investor.relations@bandmretail.com
Media
For media please contact +44 (0) 207 379 5151
Maitland
Daniel Yea
bmstores-maitland@maitland.co.uk
This announcement contains statements which are or may be deemed
to be 'forward-looking statements'. Forward-looking statements
involve risks and uncertainties because they relate to events and
depend on events or circumstances that may or may not occur in the
future. All forward-looking statements in this announcement reflect
the Company's present view with respect to future events as at the
date of this announcement. Forward-looking statements are not
guarantees of future performance and actual results in future
periods may and often do differ materially from those expressed in
forward-looking statements. Except where required by law or the
Listing Rules of the UK Listing Authority, the Company undertakes
no obligation to release publicly the results of any revisions to
any forward-looking statements in this announcement that may occur
due to any change in its expectations or to reflect any events or
circumstances arising after the date of this announcement.
Notes to editors
B&M European Value Retail S.A. is a variety retailer with
576 stores in the UK operating under the "B&M" brand and 265
stores under the "Heron Foods" brand, and 86 stores in Germany
primarily operating under the "Jawoll" brand as at 31 March 2018.
It was admitted to the FTSE 250 index in June 2015.
The B&M Group was founded in 1978 and listed on the London
Stock Exchange in June 2014. For more information please visit
www.bmstores.co.uk
Chief Executive's Review
Overview
In a retail industry which is undergoing profound structural
change, B&M continues to prosper. In part, this is because our
model is one of those disruptive changes to the old order which are
fundamentally reshaping the industry. Of the three key trends in
modern retailing; the growing importance of the internet, the rapid
expansion of the value retail sector and the increasingly pervasive
presence of convenience retailing, B&M is participating in two
of these three main trends as customer shopping habits evolve. We
are already the UK's leading general merchandise value retailer
and, with the successful addition of Heron Foods to the Group, we
have also become a participant in the growth of the convenience
sector.
While we keep the option under review, and we are increasing our
investment in digital marketing, we have chosen not to participate
in online retailing principally because we believe it would add
significant costs to our low cost model and also because, in
general, the products and the ways in which our customers buy from
us simply do not lend themselves to transacting online. For more
than a decade now, B&M has been able to grow rapidly alongside
the increasing influence of the internet on the wider retail sector
and I am confident that, given the uniquely competitive nature of
our model, we can continue to do so.
Strategic development
B&M's strategy for driving sustainable growth in revenues,
earnings and free cash flow has four key elements and the business
has made further progress during the year with each of these
priorities:
1. Delivering great value to our customers;
2. Investing in new stores;
3. Developing our international business; and
4. Investing in our people and infrastructure.
Delivering great value to our customers
Our business model is all about delivering great value to
customers week-in, week-out on the things they buy regularly for
their homes and families. Our broad product category coverage means
that they have plenty of reasons to keep coming back regularly to
our stores. We sell a wide but disciplined range of only the
best-selling products, in areas from food to DIY and from homewares
to stationery, at everyday low prices which are consistently and
significantly below those offered by both specialist and general
retailers.
With inflation having returned to the UK retail sector last
year, spurred by the devaluation of Sterling particularly against
the US Dollar in the Summer of 2016, and with shoppers noticing
prices increasing in their usual stores, many new customers have
come to B&M over the last 18 months, either because they enjoy
a bargain or because they need a bargain. B&M has tried hard to
mitigate the impact of the rising cost of imported products on
prices in its stores and, as a result, customers have continued to
reward B&M, either by shopping with us for the first time or by
buying more from us when they visit.
Newness in our ranges is an essential feature of B&M's
customer appeal. Our ranges are constantly changing so that
customers can always find something new and different on our
shelves. We are also an increasingly seasonal retailer and flex a
significant proportion of our in-store space in the course of a
year. For example, some 20% of a typical store's space will be
given to toys and Christmas decorations from October to December
and to garden and outdoor leisure products from March to August. In
these categories, our ranges and prices are seen by customers as
powerful reasons to visit our stores and they have become
destination categories for B&M.
We saw a good performance in the 2017 Spring/Summer garden and
outdoor leisure season. Frustratingly, our 2018 Spring/Summer
ranges have seen a slow start due to the exceptionally cold March
weather. The disappointing fourth quarter held back what would have
otherwise been a very strong second half. The Christmas seasonal
period was particularly strong in the year, and it was particularly
pleasing to see solid like-for-like revenue growth in the third
quarter on top of the outstanding performance achieved in the prior
year. DIY and pet care also saw strong growth during the year
alongside the continued outperformance of our food and grocery
categories.
Investing in new stores
Making our offering accessible to the hundreds of catchments
which do not already have one of our stores remains a top priority
for us. In the UK we opened 47 new B&M fascia stores and, net
of 8 relocations and closures, we finished the 2017/18 financial
year with 576 B&M stores.
Taking advantage of a limited number of opportunities to
relocate older, smaller, lower contribution stores, which are
coming to the end of leases, with larger, modern, high contribution
stores is now a regular part of B&M's expansion programme.
There are still a relatively small number of stores in our
portfolio for which such a relocation would be an attractive
alternative to a lease renewal.
The performance of the latest cohort of new stores continues to
be excellent, reinforcing our confidence in the strong returns
available from the long-term opportunity we see for B&M to
expand to a network of at least 950 B&M fascia stores across
the UK in the years ahead.
With the acquisition of Heron Foods in August 2017, the Group
purchased a second UK format and fascia for expansion. With its
roots in the North of England and with a high returning store
model, Heron Foods has significant scope for expansion outside its
heartland region, just as B&M itself did a few years ago. At
the moment Heron Foods is pursuing an organic expansion programme
of 15 to 20 new stores per annum until the Group's large new
Southern distribution centre in Bedford, which will have
multi-temperature chambers, comes on stream in 2020. This new
capacity will enable an acceleration in Heron Foods' rate of store
expansion across a broader geography in the future, subject of
course to availability of attractive sites.
In Germany, Jawoll is continuing to expand with 12 new stores
opened during the financial year (being 11 net after one
relocation). This was a slower rate of expansion than originally
planned, reflecting the priority of the new management team in
Germany which, for the time being, is focused instead on the
accelerated transition of Jawoll's operating and product sourcing
model to become much closer to that of B&M's in the coming
months.
Developing our international business
From a strategic perspective, we see the long-term opportunity
for the development of a pan-European general merchandise value
retail sector in the years ahead, mirroring the structural shift
that has taken place in North America over the last few decades, as
being very exciting. Multi-country retail formats are beginning to
emerge in Europe and we believe the B&M model can be one of
these.
Our German business, Jawoll, has had a challenging year in which
we saw its Adjusted EBITDA(3) fall by 52% to GBP5.6m (2017:
GBP11.7m). Initially, the poor seasonal weather in the first half
of the financial year heavily impacted the plant and gardening
ranges, which are a key strength and footfall driver of the
business. The end of the year was also challenging following the
snow and cold weather spells in March having a similar negative
effect on the important Easter start to the gardening season. There
has also been some natural disruption arising out of the
transitioning from the previous management team led by the minority
shareholder to a new team which has been appointed by the Group.
The new team is tasked with accelerating the transition from the
previous business model to the B&M model.
We are learning the lessons of not applying sooner in Germany
the twin aspects of the B&M model which allow it to be so
disruptive in the UK, being in particular a limited, highly
disciplined product assortment and a high proportion of general
merchandise sourced direct from factories in Asia. Consequently,
the pace of change picked up in the final quarter of the year
driven by a desire to clear older stock ahead of a substantial
increase in the proportion of Jawoll's product offer being sourced
through B&M's supply chain in the months ahead. These
significant changes will continue to disrupt Jawoll's performance
in the first half of this financial year but we anticipate
improvement beginning to come through as the year progresses. We
are targeting a return to profit growth by Jawoll in the current
financial year, weighted towards the second half of that
period.
Investment in our people and infrastructure
Investing ahead of growth in the capability of our teams and in
the key infrastructure we need to support growth, continue to be
high priorities.
At store level, we recognise that the highly delegated style of
our store ordering makes the development of our store teams a
priority. We pride ourselves on our store learning and development
teams, with a Step-Up Programme to develop talent for the future as
we continue to grow our store network. Across our business, we
recognise the importance of recruiting talented colleagues. We are
helped in this regard by our status as a retailer with strong
growth, and a business therefore where personal development and
career opportunities are fully available. For example, we take
pride in the fact that the strong majority of our Store Managers
and Deputy Managers are internal appointments and promotions.
In terms of infrastructure, we have taken significant strides in
the UK to prepare the business for further expansion. We are
continuing to roll-out our new warehouse management system to our
largest distribution centres, having trialled the system in a
single distribution centre last year. Where we have implemented the
new system it has improved both picking accuracy and productivity
in our supply chain logistics.
We have also now obtained consents for a major new 1m sq ft
distribution centre for the South of the UK, in Bedford. When
complete, this new facility will provide sufficient additional
capacity to support our expanding store network for the foreseeable
future, both for B&M itself and for Heron Foods as it builds up
its own network from its heartland in the North of England. The
costs of running the new centre will be largely funded by the
reduced mileage cost incurred by our lorry fleet which is currently
servicing our stores in the South from our existing facilities in
the North-West. We also ultimately intend, when the facility has
been built and commissioned, to enter into a sale and leaseback
which will release the capital we have invested in it.
Corporate social responsibility
B&M's presence in local towns and communities helps to
create new jobs each time we open a new store and it extends our
reach to more new customers who want or need a bargain on everyday
purchases for their households. This helps limited spending budgets
go further. Our Heron Foods and Jawoll stores similarly serve the
communities in which those stores are located and where new ones
are opened each year. We also recognise the important part we have
to play in relation to other aspects of our operations and their
impacts in relation to colleagues, suppliers, the wider community
socially and the environment. Some of the points I would like to
highlight this year include:
-- the creation of 1,200 new local jobs in the UK and Germany
together, mainly through our store expansion;
-- the development and training of our own talent through our
Step-Up Programme promoting 194 colleagues to B&M Deputy and
Store Manager positions;
-- the adoption of a new diversity policy under which we plan to
bring forward female candidates to build further on our gender mix
on the Board and the executive management committee in the
future;
-- our recycling of high levels of supply chain waste, with
99.4% of the Group's trade packaging waste being recycled; and
-- proudly supporting for a second year the Mission Christmas
charity appeal through sponsorship and our stores in participating
towns being used as collection points for presents donated for
children for the appeal.
Outlook
We look forward to the year ahead and into the longer term with
confidence. We have a winning, high returning business model, a
clear and deliverable strategy for growth and talented, experienced
management and operational teams to put our plans into effect. In
the current challenging and competitive environment there are of
course uncertainties but there are also opportunities; some
retailers are finding it more difficult to keep pace with a rapidly
changing industry and are downsizing and some others are exiting
the market altogether.
These moves provide opportunities for B&M to grow its share
of the market in some key categories. They also encourage a
continued flow of existing store assets onto the market, some of
which offer further scope for us to expand into geographic areas
where B&M is still under-represented. This constant flow of
existing retail space onto the market is also maintaining downward
pressure on retail rents, which is a helpful factor given that we
operate a wholly leasehold store estate.
All our fascias including, importantly, B&M in the UK, have
delivered a pleasing trading performance in the early weeks of the
new financial year. Excluding the Easter week B&M UK
like-for-like revenue grew by 3.1% in the first 8 weeks of the
first quarter. Whilst there are five weeks still to go to the end
of the period, we are confident of a solid outcome for the
quarter.
On behalf of the Board, I would like to thank all our colleagues
in stores, distribution centres and offices across the business for
their hard work this year. Their commitment is at the heart of
B&M's success.
Simon Arora
Chief Executive Officer
30 May 2018
Financial Review
Accounting period
The FY18 accounting period represents the 53 trading weeks to 31
March 2018 and the comparative FY17 period represents trading for
the 52 weeks to 25 March 2017. Throughout the financial review and
unless otherwise stated, the FY18 commentary will refer to the
unaudited 52 week period to 24 March 2018, to better reflect the
underlying performance of the business.
Revenue
The Group revenue in FY18 was GBP2,976.3m (FY17: GBP2,430.7m),
this represents an increase of 22.4% and on a constant currency
basis, a 22.0% increase(2).
In the UK, B&M revenues increased by 13.9% to GBP2,566.0m,
principally driven by the new store opening programme, including
both the annualisation of revenues from the 38 net new store
openings in FY17 and the 39 net new store openings in FY18.
There were 47 gross new store openings in the year, and 8
closures, with 5 of the closures being relocations. The 47 openings
contributed GBP128.4m of revenues in FY18, and the stores continue
to have attractive returns on investment, and where appropriate, we
will continue to take advantage of relocation opportunities that
allow us to open modern, large stores that allow our customers
access to our full product offering.
Sales in the like-for-like store estate(4) grew by 4.7% (FY17:
3.1%) with sales in the first three quarters being particularly
strong. During this period we have benefitted from a more
inflationary environment in the economy, and in particular on
grocery products. One of the features has been the strong
performance of grocery as the UK consumer structurally continues to
seek out value. The like-for-like in the fourth quarter was slower,
with the quarter having been impacted by the winter weather. The
like-for-like continues to benefit from the operational
improvements through the supply chain.
In the UK we also generated GBP210.0m of revenues following the
acquisition of Heron Foods in August 2017. Convenience stores in
the UK have performed well and we have seen a strong like-for-like
performance, with the business benefitting from extended ranges
from the B&M supply chain. Under our period of ownership we
have opened 9 net new stores, taking the store estate to 265 and we
are planning to open at least 15 to 20 stores in FY19.
In our German business Jawoll, revenues grew to GBP200.3m, which
was a 12.3% increase over the GBP178.4m achieved in FY17. In local
currency revenues increased by 6.8% which was driven by the 11 net
new stores opened in the year and the annualisation of the 19
stores opened in FY17.
The statutory Group revenue was GBP3,029.8m which represents an
increase of 24.6% against the prior year.
Gross margin
Our gross margin decreased by 86 basis points to 33.9% (FY17:
34.8%). In the B&M UK business the margin decreased by 69 basis
points, impacted by the strength of the grocery sales and some
additional markdown activity as we adjusted to new rates of sales
on some general merchandise products where retail prices had
increased following the impact of US Dollar inflation. The margin
was additionally impacted by 14 basis points as a result of the
Heron Foods product offer with grocery, chilled and frozen products
having a lower percentage margin. In our German business, margins
reduced by 100 basis points as we accelerated the clearance of
products ahead of the new products arriving from the B&M Far
East supply chain, and following the change of management we are
accelerating this move towards product being supplied from the
B&M Far East supply chain.
Operating costs and adjusted EBITDA(3)
As an everyday low price value retailer we remain committed to
ensuring that our costs are carefully managed but also recognising
that we need to continue to invest strategically to allow us to
continue to grow the business.
In the B&M UK business, operating costs, excluding
depreciation and adjusting costs, grew by 9.4% to GBP608.5m and
while costs as a percentage of revenues decreased by 97 basis
points to 23.7%, with the business benefitting from the operational
leverage on the fixed cost base following the strong like-for-like
performance, efficiencies within logistics and continued control of
store wages. The absolute cash increase in costs was principally
driven by the new store opening programme, from both the new stores
opened in the year and the annualisation of costs from the new
stores opened in FY17 and the variable operating costs required to
service the new stores.
The Group incurred further costs of GBP55.5m excluding
depreciation and adjusting items in relation to Heron Foods for the
8 month period since the acquisition.
In Germany, costs excluding depreciation and adjusting costs
increased by 22.3% to GBP67.1m (FY17: GBP54.9m). This reflected the
increase in costs as a result of the 11 net new stores opened in
the year and the annualisation of the stores opened in FY17.
We report an adjusted EBITDA(3) to allow investors to understand
better the underlying performance of the business. The items that
we have adjusted are detailed in note 3, they totalled GBP4.9m in
FY18 (FY17 GBP3.4m).
In the B&M UK business the adjusted EBITDA(3) increased by
17.2% to GBP261.7m (FY17: GBP223.2m) and in Germany adjusted
EBITDA(3) decreased by 51.9% to GBP5.6m. An additional GBP11.7m, of
adjusted EBITDA was generated from the 8 months of ownership of
Heron Foods. The overall Group adjusted EBITDA(3) increased in the
year by 18.8% to GBP279.0m (FY2017: GBP234.9m) and on an unadjusted
basis EBITDA increased by 18.4% to GBP274.2m (FY2017:
GBP231.5m).
Financing costs
The net interest charge in the year was GBP12.2m (FY17:
GBP22.6m) representing a decrease of 46.0%.
The interest cost can be split between the underlying cost of
GBP21.6m (FY17: GBP18.7m) which was an increase of 15.3% reflecting
the full year impact of the refinancing that was undertaken in
February 2017. The underlying charge can be analysed between bank,
high yield bond, finance lease interest and interest receivable of
GBP20.1m (FY17: GBP17.3m) and amortised fees of GBP1.5m (FY17:
GBP1.4m).
Interest income on an unadjusted basis amounted to GBP9.4m
(FY17: GBP(3.7)m) and comprised a GBP10.1m revaluation in the
put/call option relating to the 20% shareholding in Jawoll that is
not owned by the Group (FY17: GBP0.2m) and a GBP0.7m expense
relating to the accounting for the deferred consideration following
the Heron Foods acquisition. The deferred consideration cost will
be GBP1.2m in a full year.
Additionally, in FY17 there was a GBP3.7m cost which related to
fees associated with the Group's previous bank and debt facilities
which was written off.
Following the acquisition of Heron Foods we kept the existing
Heron Foods loan and overdraft facilities in place in order to
maximise the liquidity within the Group.
Profit before tax
The statutory profit before tax was GBP229.3m, which compares to
GBP182.9m in FY17. We also report an adjusted profit before tax to
allow investors to understand better the operating performance of
the business (see note 3). The adjusted profit before tax(3) was
GBP221.5m (FY17: GBP190.2m) which reflected a 16.5% increase.
Taxation
The tax charge in the year was GBP43.5m (GBP38.9m in FY17) and
the effective rate was 19.7% which was lower than FY17, principally
as a result of the acquisition of Heron Foods and a greater
proportion of the Group's profits being taxed at the UK Corporation
Tax rate. We expect the tax rate going forward to reflect the mix
of the impact of the tax rates in the countries in which we operate
being 19% in the UK and 30% in Germany, with an effective rate of
19.8% in FY19.
As a Group we are committed to paying the right tax in the
territories in which we operate. In the UK the total tax paid was
GBP258.8m. This is mostly those taxes which are ultimately borne by
the company amounting to GBP143.2m which includes corporation tax,
customs duties, business rates, employers national insurance
contributions and stamp duty and land taxes. The balance of
GBP115.6m are taxes we collect from customers and employees on
behalf of the UK Exchequer which includes Value Added Tax, Pay As
You Earn and employee national insurance contributions.
Profit after tax and earnings per share
The profit after tax was GBP185.8m compared to GBP144.0m in FY17
and the fully diluted earnings per share was 18.6p (FY2017: 14.3p),
being an increase of 30.0%.
On an adjusted profit after tax basis(3), which we consider to
be a better measure of performance due to the reasons outlined
above, it was GBP177.7m which was a 18.6% increase over last year
(FY17: GBP149.9m) and the adjusted fully diluted earnings per
share(3) was 17.8p (FY17: 14.9p), being an increase of 19.5%.
Investing activities
There was a net cash outflow of GBP107.5m following the
acquisition of Heron Foods in August 2017 and there is a further
GBP12.8m of deferred consideration due in FY20, which we anticipate
will be payable.
The Group net capital expenditure(6) during the year was
GBP114.1m, and was principally driven by the new store programme
across the three fascias, with a capital expenditure of GBP45.9m,
GBP8.2m and GBP5.0m respectively in B&M, Heron Foods and
Jawoll. There was also capital expenditure by the Group of GBP55.0m
on the Southern distribution centre.
The Group continues to invest in its store estate and an
additional GBP18.0m was incurred on maintenance expenditure, which
includes GBP3.6m on the B&M UK estate rolling out a frozen and
chilled product offer to 60 stores. The overall maintenance
expenditure represented 0.6% of revenues and included other
in-store investments and IT investments. As a result of the Heron
Foods acquisition and the higher capital intensive nature of the
Heron Foods estate, we expect this to increase to 0.7% in FY19.
In the UK, B&M Retail has acquired land at a capital cost of
GBP55.0m for a new UK distribution centre in Bedford in the South
of the UK. The planned opening date for the distribution centre
will be early 2020 and the facility will be capable of servicing
350 stores as well as having frozen and chilled food capability. In
order to maintain its capital light model the Group intends to
enter into a sale and leaseback of the facility.
Net debt and cashflow
As a Group we continue to be strongly cash generative and the
cash flow from operations increased by 14.8% to GBP242.0m (FY17:
GBP210.9m) including GBP15.7m from Heron Foods in the 8 months
following the acquisition.
The cash generation reflects the continued growth in the Group's
EBITDA and the attractive cash paybacks from the new store opening
programme, combined with the Group's working capital control, with
working capital as a percentage of revenues being 8.9%
(FY17:9.2%).
During the year the Group paid GBP63.0m of dividends.
The Group's net debt in the year was increased to GBP535.3m
(FY17: GBP401.9m) and the net debt to adjusted EBITDA(3) has
marginally increased to 1.92 times (FY17: 1.71 times). This remains
comfortably within our 2.25 times leverage target, and excluding
the costs incurred on the new Southern distribution centre, the
leverage would have reduced to 1.72 times.
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.
New Accounting Standards
There are two new accounting standards that will apply to the
Group from the financial year commencing 1 April 2018. IFRS 9
(Financial Instruments) introduces a new impairment model on
expected loss and limited changes to the classification and
measurements of financial assets. IFRS 15 (Revenue from Contracts
with Customers) is in relation to some changes to the recognition
of revenues. We have completed an assessment of both of these new
standards and we do not consider that the adoption of either
standard will have a material impact in relation to the accounting
of the Group.
IFRS 16 which relates to the new lease accounting standard, will
apply to the financial statements of the Group for the financial
year 2019/20. The adoption of this new standard will have a
significant impact on the consolidated Statement of Financial
Position and Income Statement of the Group, given that we have in
excess of 900 property leases of stores and distribution centres in
the UK and Germany.
Dividends
The Group has a dividend policy which targets a pay-out ratio of
between 30 to 40% of net income on a normalised tax basis. The
Group generally pays the interim and final dividends for each
financial year approximately in proportions of one-third and
two-thirds respectively of the total annual dividend.
The Group is strongly cash generative and its capital policy is
to allocate cash surpluses in the following order of priority:
1. the roll-out of new stores with a strong payback profile;
2. ordinary dividend cover to shareholders;
3. mergers & acquisition opportunities; and
4. returns of surplus cash to shareholders.
The above list is a summary of the main items, but it is not an
exhaustive list as other factors may arise from time to time which
require investment to support the long-term growth objectives of
the Group.
The parent company of the Group is an investment holding company
which does not carry on retail commercial trading operations. Its
distributable reserves are derived from intra-group dividends
originating from its subsidiaries. As the parent company is a
Luxembourg registered company the Board is permitted, subject to
using distributable profits first, to have recourse to the
company's share premium account as a distributable reserve. It
remains the Groups policy though generally to have recourse to
distributable profits from within the Group, and accordingly, ahead
of interim dividends, and also ahead of the year end in relation to
final dividends, the Board reviews the levels of dividend cover in
the parent company to maintain sufficient levels of distributable
profits in the parent company for each of those dividends. The
Group's consolidated balance sheet position as at 31 March 2018
includes distributable profit reserves of GBP327.1m. The vast
majority of these reserves have been generated by and are on the
balance sheet of the principal trading subsidiary of the Group in
the UK, B&M Retail Limited. There are intermediate holding
companies in the Group structure between B&M Retail Limited and
the Group's ultimate parent company, but those intermediate holding
companies do not carry on retail trading business operations and
there are no dividend blocks of any material amounts in any year
from expenses which those companies may incur.
The Board is satisfied that as the Group remains strongly cash
generative it is in a very good position to fund and maintain its
dividend policy. The principal risks of the Group and in particular
those relating to competition, economic environment, commodity
prices, supply chain, infrastructure and international expansion
are relevant to the ability of the Group to maintain its dividend
policy in the future. The Group however maintains strategies to
mitigate those risks and the Board believes the Group has a robust
and resilient business model through the combination of having a
value led product assortment which competes across a very broad
section of the retail markets in our chosen locations.
In the last year the Group has continued to invest to support
the growth of the business with particular highlights being the
acquisition by the Group of Heron Foods with an enterprise value of
GBP122.5m and also the acquisition of the site in Bedford for the
development of a 1 million sq ft Southern distribution centre which
will also include further frozen and chilled storage capacity for
the Group.
In 15 months' time when the construction phase of the Southern
distribution centre has been completed, it is intended to release
the cash investment made in that project back to the Group by a
sale and leaseback of the distribution centre.
Notwithstanding those investments the Group has maintained its
dividend this year at the higher end of its dividend policy. An
interim dividend of 2.4p per share was paid in December 2017 and it
is proposed to pay a final dividend of 4.8p per share. Subject to
approval of the dividend by shareholders at the AGM on 30 July
2018, the final dividend of 4.8p per share(5) is to be paid on 6
August 2018 to shareholders on the register of the Company at the
close of business on 29 June 2018. The ex-dividend date will be 28
June 2018.
Paul McDonald
Chief Financial Officer
30 May 2018
Consolidated Statement of Comprehensive Income
53 weeks ended 52 weeks ended
Period ended 31 March 2018 25 March 2017
Note GBP'000 GBP'000
Revenue 2,4 3,029,802 2,430,660
Cost of sales (2,000,927) (1,586,324)
Gross profit 1,028,875 844,336
Administrative expenses (789,072) (639,833)
Operating profit 5 239,803 204,503
Share of profits in associates 13 1,711 1,005
Profit on ordinary activities before
net finance costs and tax 3 241,514 205,508
Finance costs 6 (23,948) (24,110)
Finance income 6 182 241
Gain on revaluation of financial instrument 6,20 11,568 1,279
Profit on ordinary activities before
tax 229,316 182,918
Income tax expense 11 (43,511) (38,885)
Profit for the period 2 185,805 144,033
-------------- --------------
Attributable to non-controlling interests (78) 1,107
Attributable to owners of the parent 185,883 142,926
Other comprehensive income for the period
Items which may be reclassified to profit
and loss:
Exchange differences on retranslation
of subsidiary and associate investments 205 7,479
Fair value movement as recorded in the
hedging reserve (15,659) (1,667)
Items which will not be reclassified
to profit and loss:
Actuarial gain on the defined benefit
pension scheme 21 16
Tax effect of other comprehensive income 11 2,470 324
-------------- --------------
Total comprehensive income for the period 172,842 150,185
-------------- --------------
Attributable to non-controlling interests 29 119 2,082
Attributable to owners of the parent 172,723 148,103
Earnings per share
Basic earnings per share attributable
to ordinary equity holders (pence) 12 18.6 14.3
Diluted earnings per share attributable
to ordinary equity holders (pence) 12 18.6 14.3
-------------- --------------
The accompanying accounting policies and notes form an integral
part of these consolidated financial statements.
Consolidated Statement of Financial Position
31 March 25 March
2018 2017
As at Note GBP'000 GBP'000
Assets
Non-current
Goodwill 14 929,718 841,691
Intangible assets 14 120,962 103,693
Property, plant and equipment 15 308,653 165,748
Investments in associates 13 5,140 5,669
Other receivables 17 3,187 2,413
Deferred tax asset 11 5,654 824
----------- -----------
1,373,314 1,120,038
----------- -----------
Current assets
Cash and cash equivalents 18 90,816 155,551
Inventories 16 558,690 462,119
Trade and other receivables 17 34,042 35,398
Other financial assets 20 - 410
683,548 653,478
----------- -----------
Total assets 2,056,862 1,773,516
----------- -----------
Equity
Share capital 23 (100,056) (100,000)
Share premium (2,474,249) (2,472,482)
Merger reserve 1,979,131 1,979,131
Retained earnings (327,073) (204,077)
Luxembourg legal reserve (10,000) (10,000)
Put/call option reserve 13,855 13,855
Hedging reserve 14,532 1,350
Foreign exchange reserve (7,833) (7,825)
Non-controlling interest (13,692) (13,573)
(925,385) (813,621)
----------- -----------
Non-current liabilities
Interest bearing loans and borrowings 21 (558,426) (543,725)
Finance lease liabilities 25 (7,306) (6,469)
Other financial liabilities 20 (19,209) (17,886)
Other liabilities 19 (87,130) (76,961)
Deferred tax liabilities 11 (24,495) (18,845)
Provisions 22 (379) (922)
----------- -----------
(696,945) (664,808)
----------- -----------
Current liabilities
Interest bearing loans and borrowings 21 (47,212) -
Overdrafts 18 (6,112) -
Trade and other payables 19 (336,072) (267,815)
Finance lease liabilities 25 (1,870) (994)
Other financial liabilities 20 (16,666) (2,070)
Income tax payable (19,677) (19,339)
Provisions 22 (6,923) (4,869)
----------- -----------
(434,532) (295,087)
----------- -----------
Total liabilities (1,131,477) (959,895)
----------- -----------
Total equity and liabilities (2,056,862) (1,773,516)
----------- -----------
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 29 May 2018 and signed on
their behalf by:
Simon Arora, Chief Executive Officer.
Consolidated Statement of Changes in Shareholders' Equity
Total
Foreign Put/call Non- Share-
Share Share Retained Hedging Legal Merger exch. option control. holders'
capital premium earnings reserve reserve reserve reserve reserve interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 26
March 2016 100,000 2,577,668 115,898 - 614 (1,979,131) 1,273 (13,855) 11,883 814,350
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Allocation to
legal reserve - (6,776) (2,610) - 9,386 - - - - -
Dividend
payments to
owners - (98,410) (52,590) - - - - - - (151,000)
Release of
non-controlling
interest - - 224 - - - - - (392) (168)
Effect of share
options - - 254 - - - - - - 254
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Total
transactions
with owners - (98,410) (52,112) - - - - - (392) (150,914)
Profit for the
period - - 142,926 - - - - - 1,107 144,033
Other
comprehensive
income - - (25) (1,350) - - 6,552 - 975 6,152
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Total
comprehensive
income for the
period - - 142,901 (1,350) - - 6,552 - 2,082 150,185
Balance at 25
March 2017 100,000 2,472,482 204,077 (1,350) 10,000 (1,979,131) 7,825 (13,855) 13,573 813,621
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Dividend
payments to
owners - - (63,013) - - - - - - (63,013)
Effect of share
options 56 1,767 112 - - - - - - 1,935
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Total
transactions
with owners 56 1,767 (62,901) - - - - - - (61,078)
Profit for the
period - - 185,883 - - - - - (78) 185,805
Other
comprehensive
income - - 14 (13,182) - - 8 - 197 (12,963)
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
Total
comprehensive
income for the
period - - 185,897 (13,182) - - 8 - 119 172,842
Balance at 31
March 2018 100,056 2,474,249 327,073 (14,532) 10,000 (1,979,131) 7,833 (13,855) 13,692 925,385
------- --------- -------- -------- ------- ----------- ------- -------- -------- ---------
The accompanying accounting policies and notes form an integral
part of these consolidated financial statements.
Consolidated Statement of Cash Flows
53 weeks 52 weeks
ended 31 ended 25
March March
Period ended 2018 2017
Note GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 24 241,993 210,873
Income tax paid (43,996) (31,759)
---------- ----------
Net cash flows from operating activities 197,997 179,114
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment 15 (111,268) (49,160)
Purchase of intangible assets 14 (3,362) (2,796)
Business acquisitions net of cash
acquired 7 (106,436) (2,374)
Sale of shares in Home Focus Group 13 310 -
Proceeds from sale of property, plant
and equipment 554 1,542
Finance income received 182 137
Dividends received from associates 13 1,149 -
---------- ----------
Net cash flows from investing activities (218,871) (52,651)
---------- ----------
Cash flows from financing activities
Repayment of bank loans 21 - (140,000)
Receipt of High Yield Bonds 21 - 250,000
Net receipt of Group revolving bank
loans 45,000 -
Net repayment of Heron revolving bank
loans (9,790) -
Finance costs paid (20,192) (14,983)
Receipt from exercise of employee
share options 1,320 -
Capitalised fees on refinancing (1,647) (5,208)
Acquisition of non-controlling interest
in BestFlora 29 - (175)
Dividends paid to owners of the parent 32 (63,013) (151,000)
Repayment of finance lease (1,651) (694)
----------
Net cash flows from financing activities (49,973) (62,060)
---------- ----------
Net increase in cash and cash equivalents (70,847) 64,403
Cash and cash equivalents at the beginning
of the period 155,551 91,148
---------- ----------
Cash and cash equivalents at the end
of the period 84,704 155,551
---------- ----------
Cash and cash equivalents comprise:
Cash at bank and in hand 18 90,816 155,551
Overdrafts (6,112) -
---------- ----------
84,704 155,551
---------- ----------
The accompanying accounting policies and notes form an integral
part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
1 General information and basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards issued
by the International Accounting Standards Board (IASB) as adopted
by the European Union.
The Group's trade is general retail, with trading taking place
in the UK and Germany. The Group has been listed on the London
Stock Exchange since June 2014.
The 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
(GBP'000), except when otherwise indicated.
The consolidated financial statements cover the 53 week period
from 26 March 2017 to 31 March 2018. This is a different period to
the parent company stand alone accounts (from 1 April 2017 to 31
March 2018), this exception is permitted under article 330 (2) of
the Luxembourg company law of 10 August 1915 as amended as the
management 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.
We note that the year end for B&M Retail Ltd, in any year,
would not be more than six days prior to the parent company year
end.
B&M European Value Retail S.A. (the "Company") is the head
of the Group and there is no consolidation that takes place above
the level of this company.
The principal accounting policies of the Group are set out
below.
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings, together
with the Group's share of the net assets and results of associated
undertakings, for the period from 26 March 2017 to 31 March 2018.
Acquisitions of subsidiaries are dealt with by the acquisition
method of accounting. The results of companies acquired are
included in the consolidated statement of comprehensive income from
the acquisition date.
During the year, on 2 August 2017, the Group acquired Heron Food
Group Limited ("Heron"), a convenience retailer incorporated in the
UK. Heron has been consolidated in the Group accounts from this
date. For more details see note 7.
During the year the Group has incorporated two new entities,
Retail Industry Apprenticeships Limited (incorporated in the UK)
and Bedford DC Investments Limited (incorporated in Jersey). Both
have been consolidated from their incorporation date. See note 26
for a full list of the constituent Group entities.
A Group company, Meltore Limited, was disposed of during the
prior year. Meltore Limited was a dormant entity in the prior year
and the disposal has had no significant effect on the consolidated
financial statements.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee.
Specifically, the Group controls an investee if and only if the
Group has:
-- power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee),
-- exposure, or rights, to variable returns from its involvement with the investee, and,
-- the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- the contractual arrangements with the other vote holders of the investee,
-- rights arising from other contractual arrangements, and,
-- the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the statement of comprehensive income from the date the Group gains
control until the date the Group ceases to control the subsidiary,
excluding the situations as outlined in the basis of
preparation.
Going concern
After consideration of forecasts and budgets covering the next
12 month period, the directors have determined that it is
appropriate to continue to use the going concern basis for
production of these consolidated financial statements.
Note also that viability and going concern statements have been
made in the 'Principal risks and uncertainties' section of this
annual report.
Revenue
Revenue is recognised to the extent that it is probable that
economic benefits will flow to the Group and the revenue can be
reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received
or receivable.
Revenue is the total amount receivable by the Group for goods
supplied, in the ordinary course of business, excluding VAT and
trade discounts, and after deducting returns and relevant vouchers
and offers. Store retail turnover is recognised at the initial
point of sale of goods to customers, when the risks and rewards of
the ownership of the goods have been transferred to the buyer.
Other administrative expenses
Administrative expenses contain all running costs of the
business, except those relating to inventory (which are expensed
through cost of sales), tax, interest and other comprehensive
income. Transport and warehouse costs are included in this
caption.
Elements which are unusual and significant may be separated as a
separate line item, this would include items such as material
restructuring costs.
Goodwill
Goodwill is initially measured at cost, being the excess of the
fair value of consideration transferred over the fair value of the
net identifiable assets acquired and liabilities assumed at the
date of acquisition.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to the relevant cash-generating units
(CGUs) that are expected to benefit from the combination.
Goodwill is tested for impairment at each year end and at any
time where there is any indication that goodwill may be impaired.
Internally generated goodwill is not recognised as an asset.
Segment reporting
Operating segments are reported in a manner consistent with
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the
executive directors of the Group. The executive directors are
responsible for assessing the performance of the business for the
purpose of making decisions about resources to be allocated.
Business combinations
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at the acquisition date
fair value. Acquisition-related costs are expensed depending on
their nature with costs of raising finance amortised over the term
of the relevant element of finance provided and the remainder
expensed when incurred.
Brands
Brands acquired as part of a business combination are initially
recognised at fair value and subsequently reviewed at least
annually for impairment or whenever events or changes in
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly, and
charged to administration expenses.
Unless specifically time limited, 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 a brand is time limited, it is amortised over the period
specified in the corresponding agreement.
Intangible assets
Intangible assets acquired separately, including computer
software, are measured on initial recognition at cost comprising
the purchase price and any directly attributable costs of preparing
the asset for use.
Following initial recognition, assets are carried at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation begins when an asset is available for use and is
calculated on a straight line basis to allocate the cost of the
asset over its estimated useful life as follows:
Computer software acquired - 4 years
Property, plant and equipment
Property, plant and equipment is carried at cost less
accumulated depreciation and accumulated impairment losses.
Cost comprises purchase price and directly attributable costs.
Unless significant or incurred as part of a refit programme,
subsequent expenditure will usually be treated as repairs or
maintenance and expensed to the income statement.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is
derecognised.
Freehold land is not depreciated. For all other property, plant
and equipment, depreciation is calculated on a straight line basis
to allocate cost, less residual value of the assets, over their
estimated useful lives as follows.
Depreciation
Depreciation is provided on all other items of property, plant
and equipment and the effect is to write off the carrying value of
items by equal instalments over their expected useful economic
lives. It is applied at the following rates:
Leasehold buildings - Life of lease (max 50 years)
Freehold buildings - 2-4% straight line
Plant, fixtures and equipment - 10% - 25% straight line
Motor vehicles - 12.5% - 33% straight line
Residual values and useful lives are reviewed annually and
adjusted prospectively, if appropriate.
There has been a minor change to the policy since the prior year
regarding the rates for motor vehicles. This is due to the newly
acquired company, Heron, who operate with a different fleet profile
to the existing members of the Group. This therefore has no effect
on the motor vehicles included in property, plant and equipment at
the prior year end.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the
statement of comprehensive income when the asset is
derecognised.
Investments in associates
Associates are those entities over which the Group has
significant influence but which are neither subsidiaries nor
interests in joint ventures. Investments in associates are
recognised initially at cost and subsequently accounted for using
the equity method. However any goodwill or fair value adjustment
attributable to the Group's share of associates is included in the
amount recognised as investment in associates.
All subsequent changes to the share of interest in the equity of
the associate are recognised in the Group's carrying amount of the
investment. Changes resulting from the profit or loss generated by
the associate are reported in "share of profits of associates" in
the consolidated income statement and therefore affect net results
of the Group. These changes include subsequent depreciation,
amortisation and impairment of the fair value adjustments of assets
and liabilities.
Items that have been recognised directly in the associate's
other comprehensive income are recognised in the consolidated other
comprehensive income of the Group. However, when the Group's share
of losses in an associate equals or exceeds its interest in the
associate the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the
associate. If the associate subsequently reports profits, the
investor resumes recognising its share of those profits only after
its share of the profits equals the share of losses not
recognised.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in
the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Amounts reported in the consolidated financial
statements of associates have been adjusted where necessary to
ensure consistency with the accounting policies adopted by the
Group.
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.
Indications of impairment might include (for goodwill and the
brand assets, for instance) a significant impairment to the like
for like sales of established stores, sustained negative publicity
or a drop off in visits to our website and social media
accounts.
An asset's recoverable amount is the higher of an asset's or
CGU's fair value less costs to sell and its value in use. It is
determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from
other assets or groups of assets. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset or CGU.
The Group bases its impairment calculation on detailed budgets
and forecasts which are prepared separately for each of the Group's
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.
Impairment losses of continuing operations, including impairment
of inventories, are recognised in the income statement in those
expense categories consistent with the function of the impaired
asset.
For assets excluding goodwill and acquired brands with
indefinite lives, an assessment is made at each reporting date as
to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If
such indication exists, the Group estimates the asset's or CGU's
recoverable amount.
A previously recognised impairment loss is reversed only if
there has been a change in the assumptions used to determine the
asset's recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the income
statement, except for impairment of goodwill which is not
reversed.
Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset or assets even
if that right is not explicitly specified in an arrangement.
The economic ownership of a leased asset is transferred to the
lessee if the lessee bears substantially all the risks and rewards
related to the ownership of the leased asset. The related asset is
recognised at the time of inception of the lease at the fair value
of the leased asset, or, if lower, the present value of the minimum
lease payments plus incidental payments, if any, to be borne by the
lessee. A corresponding amount is recognised as a finance leasing
liability.
The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged in the
income statement over the period of the lease.
A leased asset is depreciated over the useful life of the asset.
However, if there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the
asset and the lease term.
All other leases are regarded as operating leases and the
payments made under them are charged to the statement of
comprehensive income on a straight line basis over the lease
term.
Lease premiums and incentives
Lease premiums and lease incentives (as reverse lease premiums)
are required to be spread over the term of the lease (as an element
of the rent charge), with the resulting balance on the statement of
financial position recorded in receivables or payables as
appropriate.
Favourable and unfavourable leases
Upon acquisition of a subsidiary a fair value review is
performed to determine if certain leases held are favourable or
unfavourable to the business when compared to an estimate of the
underlying market rate. To the extent that a lease is determined to
be favourable or unfavourable a balance is recognised in
receivables or payables and then released over the remaining lease
term as part of the rent charge for that lease.
Onerous leases
The Group carries a property provision which is recognised on
specific sites within the Group's leasehold property portfolio
where an exit can be reasonably expected to occur, and a lease is
considered onerous.
A lease is considered onerous when the economic benefits of
occupying the leased properties are less than the obligations
payable under the lease.
The amount held covers any costs expected to accrue before the
end of the contract, netted against any income, as well as a
portion related to any dilapidation expense which may arise.
Inventories
Inventories are valued at the lower of cost and net realisable
value, after making due allowance for obsolete and slow moving
items. Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs to sell. We do not include transport and
distribution costs in our valuation of inventory.
Share options
The Group operates share option schemes, with the first such
scheme commencing in August 2014.
The schemes have been accounted for under the provisions of IFRS
2, and accordingly have been fair valued on their inception date
using appropriate methodology (the Black Scholes and Monte Carlo
models).
A cost is recorded through the income statement in respect of
the number of options outstanding and the fair value of those
options. A corresponding credit is made to the retained earnings
reserve and the effect of this can be seen in the statement of
changes in equity. See note 10 for more details.
Taxation
Current income tax
Current income tax assets and liabilities for the current period
are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Group
operates and generates taxable income. Tax is recognised in the
income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In
this case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.
Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date. Deferred tax liabilities are recognised for all
taxable temporary differences, except:
-- When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss.
-- In respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses
can be utilised, except:
-- When the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
-- In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are recognised only to the extent
that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Financial instruments
The Group uses derivative financial instruments such as forward
currency contracts, fuel swaps and interest rate swaps to reduce
its foreign currency risk, commodity price risk and interest rate
risk.
Derivative financial instruments are recognised at fair value.
The fair value is derived using an internal model and supported by
valuations by third party financial institutions.
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or
liability, or a highly probable forecast transaction, the effective
part of any gain or loss on the derivative financial instrument is
recognised directly in the hedging reserve. Any ineffective portion
of the hedge is recognised immediately in the income statement.
Effectiveness of the derivatives subject to hedge accounting is
assessed at inception of the derivative, when the derivative
matures and at each reporting period end date between.
Where a hedge of a forecast transaction subsequently results in
the recognition of a non-financial asset, such as an item of
inventory, we remove the associated gains and losses recognised in
other comprehensive income and include them in the initial cost of
that asset.
When a hedging instrument expires or is sold, terminated or
exercised, or the entity revokes designation of the hedge
relationship but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss at that point remains in
equity and is recognised in accordance with the above policy when
the transaction occurs. If the hedged transaction is no longer
expected to take place, the cumulative unrealised gain or loss
recognised in equity is recognised in the income statement
immediately.
Financial assets
Initial recognition and measurement
The classification of financial instruments is determined at
initial recognition. The Group has the following types of financial
assets: Trade and other receivables and cash which are classified
within the IAS 39 definition of loans and receivables and
derivative contracts which are classified within the IAS 39
definition of fair value through profit and loss. All financial
assets are recognised when the Group becomes a party to the
contractual provisions of the instrument. All financial assets are
initially recognised at fair value plus transaction costs other
than for financial assets carried at fair value through profit or
loss.
The Group does not have any held-to-maturity or
available-for-sale financial assets.
Subsequent measurement
The subsequent measurement of financial assets depends on their
classification as described below:
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial measurement, such financial assets are
subsequently measured at amortised cost using the effective
interest rate method (EIR), less impairment. Amortised cost is
calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation and the losses arising from impairment are
recognised in profit and loss.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
derivative financial instruments entered into by the Group that are
not designated as hedging instruments in hedge relationships as
defined by IAS 39. Financial assets at fair value through profit or
loss are carried in the statement of financial position at fair
value with changes in fair value recognised in profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised when the rights to receive cash flows from the asset
have expired and the entity has transferred its rights to receive
cash flows from the asset or has assumed an obligation to pay the
received cash flows in full and either (a) the entity has
transferred substantially all the risks and rewards of the asset,
or (b) the entity has neither transferred nor retained
substantially all the risks and rewards of the asset, but has
transferred control of the asset.
Impairment of financial assets
The Group assesses at each reporting date whether there is any
objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial
assets is deemed to be impaired if, there is objective evidence of
impairment as a result of one or more events that has occurred
after the initial recognition of the asset (an incurred 'loss
event') and that loss event has an impact on the estimated future
cash flows of the financial asset or the group of financial assets
that can be reliably estimated.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified
as financial liabilities at fair value through profit or loss or
other financial liabilities. The entity determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair
value.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial derivatives held for trading. Financial
liabilities are classified as held-for-trading if they are acquired
for the purpose of selling in the near term. This category includes
derivative financial instruments entered into by the Group. Gains
or losses on liabilities held-for-trading are recognised in profit
and loss.
Other financial liabilities
After initial recognition, interest bearing loans and
borrowings, trade and other payables and other liabilities are
subsequently measured at amortised cost using the effective
interest rate method. Gains and losses are recognised in the income
statement when the liabilities are derecognised as well as through
the effective interest rate method (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in finance
costs.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
Fair value of financial instruments
The fair value of financial instruments that are traded in
active markets at each reporting date is determined by reference to
mark-to-market valuations obtained from the relevant bank (bid
price for long positions and ask price for short positions),
without any deduction for transaction costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
less bank overdrafts.
Equity
Equity comprises the following:
-- "Share capital" represents the nominal value of equity
shares;
-- "Share premium" represents the excess of the consideration
made for the shares, over and above the nominal valuation of those
shares;
-- "Legal reserve" representing the statutory reserve required
by Luxembourg law as an apportionment of profit within each
Luxembourg company (up to 10% of the standalone share capital);
-- "Hedging reserve" representing the fair value of the
derivatives held by the Group at the period end that are accounted
for under hedge accounting and that represent effective hedges;
-- "Merger reserve" representing the reserve created during the
reorganisation of the Group in 2014;
-- "Retained earnings reserve" represents retained profits;
-- "Put/call option reserve" representing the initial valuation
of the put/call option held by the Group over the non-controlling
interest of J.A. Woll Handels GmbH (Jawoll);
-- "Foreign exchange reserve" represents the cumulative
differences arising in retranslation of the subsidiaries
results;
-- "Non-controlling interest" representing the portion of the
equity which belongs to the non-controlling interest in the Group's
subsidiaries.
Foreign currency translation
These consolidated financial statements are presented in pounds
sterling.
The following Group companies have a functional currency of
pounds sterling;
-- B&M European Value Retail S.A.
-- B&M European Value Retail 1 S.Ã r.l. (Lux Holdco)
-- B&M European Value Retail Holdco 1 Ltd (UK Holdco 1)
-- B&M European Value Retail Holdco 2 Ltd (UK Holdco 2)
-- B&M European Value Retail Holdco 3 Ltd (UK Holdco 3)
-- B&M European Value Retail Holdco 4 Ltd (UK Holdco 4)
-- Bedford DC Investments Limited
-- EV Retail Ltd
-- B&M Retail Ltd
-- Opus Homewares Ltd
-- Retail Industry Apprenticeships Ltd
-- Heron Food Group Ltd
-- Heron Foods Ltd
-- Cooltrader Ltd
-- Heron Properties (Hull) Ltd
The following Group companies have a functional currency of the
Euro;
-- B&M European Value Retail 2 S.Ã r.l. (SBR Europe)
-- B&M European Value Retail Germany GmbH (Germany Holdco)
-- J.A. Woll Handels GmbH (Jawoll)
-- Jawoll Vertriebs GmbH
The Group companies whose functional currency is the Euro have
been consolidated into the Group via retranslation of their
accounts in line with IAS 21 Effects of Changes in Foreign Exchange
Rates. The assets and liabilities are translated into pounds
sterling at the year end exchange rate. The revenues and expenses
are translated into pounds sterling at the average monthly exchange
rate during the period. Any resulting foreign exchange difference
is cumulatively recorded in the foreign exchange reserve with the
annual effect being charged/credited to other comprehensive
income.
Transactions entered into by the company in a currency other
than the currency of the primary economic environment in which it
operates (the "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
balance sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are
recognised immediately in profit or loss.
Pension costs
The Group operates a defined contribution scheme and
contributions are charged to profit or loss in the period in which
they are incurred.
Provisions
Provisions are recognised when a present obligation (legal or
constructive) exists as a result of a past event and where it is
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and the amount can be
reliably estimated. Provisions are discounted where the time value
of money is considered to be material.
Critical judgements and key sources of estimation
uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the financial information was
prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Investments in Associates
Multi-lines International Company Ltd (Multi-lines), which is
50% owned by the Group, has been considered by management as a
judgement 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.
Put/call options on Jawoll non-controlling interest
The purchase agreement for Jawoll included call and put options
over the shares not purchased by the Group, representing 20% of
Jawoll. The options are arranged such that it is considered likely
that either the call or put option will be taken at the exercise
date in 2019.
The exercise price of the options contains an uncertain variable
element and as such the risk and rewards of the options are
considered to remain with the non-controlling interest. The
purchase of the non-controlling interest will be recognised upon
exercise of one of the options (see note 20).
A financial liability has been recognised carried at fair value
to represent the expected exercise price, with the corresponding
debit entry to the put/call option reserve. Management have
estimated the future measurement inputs in arriving at this value,
using knowledge of current performance, expected growth and planned
strategy. Any subsequent movements in the liability will be
recognised in profit or loss.
Standards and Interpretations applied and not yet applied by the
Group
New standards and interpretations
At the date of authorisation of these Consolidated Financial
Statements, the following standards and interpretations, relevant
to the Group, which have not been applied to these financial
statements, were in issue, but not yet effective:
Title Key Issues Effective Date Impact on B&M European
Value Retail S.A.
IFRS 15 Revenue from The new standard is a Periods beginning after 1 Management do not consider
Contracts with Customers single global revenue January 2018, deferred from that this standard will
standard that contains a 1 January 2017. have a material impact on
single model that applies the accounts.
to two approaches, being at
point in time and over
time. For complex
transactions with multiple
components, variable
consideration or extended
periods, application of the
standard can lead
to revenue being
accelerated or deferred in
comparison to current IFRS.
IFRS 9 Financial IFRS 9 was introduced in Periods beginning after 1 Management do not consider
Instruments 2014 as a complete standard January 2018. that this standard will
including the requirements have a material impact on
previously the accounts.
issued and the additional
amendments to introduce a
new expected loss
impairment model and
limited changes to the
classification and
measurement requirements
for financial assets.
IFRS 16 Leases IFRS 16 was issued in Periods beginning after 1 Significant impact on
January 2016 and is January 2019. Statement of Financial
effective from 1 January Position and Income
2019, eliminating the Statement presentation and
classification measurement which is
of leases as operating currently under review,
leases or finance leases more detail follows below.
and setting out a single
lease accounting
model.
At the date of the authorisation of these financial statements,
the following standards and interpretations which have not been
applied in these financial statements were in issue but are either
not yet effective or have not been adopted by the EU:
-- Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions.
-- Amendments to IAS 7 Disclosure Initiative.
-- Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses.
-- Amendments to IFRS 10 and IAS 28 Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture.
-- Annual Improvements 2014-2016 Cycle.
Other than as mentioned in the above, the Group does not
currently expect that adoption of the other standards and
amendments listed will have a significant effect on the
consolidated results or financial position of the Group.
IFRS 16 Leases
IFRS 16 Leases will be applicable for periods starting after 1
January 2019 and will apply to the Group's accounts commencing 31
March 2019. This standard will significantly affect the
presentation of the Group financial statements as we have over 900
active property leases (primarily related to the Group's store
estate) as well as a smaller commitment for other operating
leases.
The Group has considered the implications of IFRS 16 on the
Group's consolidated results and has developed a model to account
for changes required to be made by the new standard.
Whilst the detailed data has not been audited, the overall model
has been reviewed by the Group auditors including the assumptions
and the calculations within the model.
At this stage, and subject to several factors, including the
ongoing tax consultation with HMRC, the accounting definition of
the retrospective application of cash flows and auditor approval,
we expect to use the modified retrospective approach. This will
lead to a significant brought forward retained earnings adjustment
representing the recognition of a liability that exceeds the
recognised asset.
Specifically;
Our Statement of Financial Position will include a liability
equal to the present value of all future lease commitments and a
corresponding right-of-use asset. Due to discounting it is expected
that the liability will be significantly in excess of the asset.
Our current gross operating lease commitment is GBP1,257.8m,
GBP1,239.1m of which is in relation to property leases (see note
25). Our net deferred property liability (currently GBP98.8m) would
be also be derecognised.
Our Statement of Comprehensive Income will have a significantly
reduced rental charge, but increased amortisation and interest
charge related to the unwinding of the lease liability. Overall the
amortisation and interest increase is expected to exceed the
reduction in rent in the first years of application. Our current
rental charge is GBP150.5m, GBP140.9m of which relates to property
leases (see note 25).
There will also be subsequent knock-on effects to the
presentation of the Statement of Cash Flows.
2 Segmental information
IFRS 8 ("Operating segments") requires the Group's segments to
be identified on the basis of internal reports about the components
of the Group that are regularly reviewed by the chief operating
decision maker to assess performance and allocate resources across
each reporting segment.
For management purposes, the Group is organised into three
reportable segments, being the UK B&M segment, the UK Heron
segment and the German retail segment. The UK Heron segment has
been active since the acquisition of Heron Food Group in August
2017, the UK B&M segment was previously reported as the UK
Retail segment.
Items that fall into the corporate category include those
related to the Luxembourg or associate entities, Group financing,
corporate transactions, any tax adjustments and items we consider
to be adjusting (see note 3).
The chief operating decision maker has been identified as the
executive directors who monitor the operating results of the retail
segments for the purpose of making decisions about resource
allocation and performance assessment.
The average euro rate for translation purposes was EUR1.1336/GBP
during the year, with the year end rate being EUR1.1410/GBP (2017:
EUR1.1915/GBP and EUR1.1559/GBP, respectively).
53 week period to 31 March UK UK Germany
2018 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2,619,488 210,008 200,306 - 3,029,802
EBITDA (note 3) 266,269 11,746 5,621 (5,240) 278,396
Depreciation and amortisation (26,485) (6,001) (4,392) (4) (36,882)
Net finance income/(costs) 109 (481) (370) (11,456) (12,198)
Income tax expense (45,580) (1,000) (258) 3,327 (43,511)
Segment profit/(loss) 194,313 4,264 601 (13,373) 185,805
Total assets 1,718,328 204,162 127,078 7,294 2,056,862
Total liabilities (361,834) (56,909) (27,287) (685,447) (1,131,477)
Capital expenditure (including
intangible) (45,986) (8,610) (4,987) (55,047) (114,630)
52 week period to 25 March UK UK Germany
2017 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2,252,265 - 178,395 - 2,430,660
EBITDA (note 3) 223,722 - 11,677 (3,876) 231,523
Depreciation and amortisation (22,277) - (3,734) (4) (26,015)
Net finance income/(costs) 107 - (280) (22,417) (22,590)
Income tax expense (40,310) - (2,406) 3,831 (38,885)
Segment profit/(loss) 161,241 - 5,257 (22,465) 144,033
Total assets 1,640,398 - 126,040 7,078 1,773,516
Total liabilities (325,372) - (27,399) (607,124) (959,895)
Capital expenditure (including
intangible) (44,492) - (7,464) - (51,956)
3 Reconciliation of non-IFRS measures from the statement of comprehensive income
EBITDA, adjusted EBITDA and Adjusted Profit are non-IFRS
measures and therefore we provide a reconciliation from the
statement of comprehensive income below.
53 weeks ended 52 weeks ended
31 March 25 March
Period to 2018 2017
GBP'000 GBP'000
Profit on ordinary activities before interest
and tax 241,514 205,508
Add back depreciation and amortisation 36,882 26,015
-------------- --------------
EBITDA 278,396 231,523
Reverse the effect of derivatives recorded
within cost of sales (509) 1,479
Reverse the effect of derivatives recorded
within administrative expenses 4,334 1,890
Remove costs associated with the acquisition
of Heron 1,049 -
Adjusted EBITDA 283,270 234,892
Depreciation and amortisation (36,882) (26,015)
Net adjusted finance costs (see note 6) (21,596) (18,726)
-------------- --------------
Adjusted profit before tax 224,792 190,151
Adjusted tax (44,437) (40,273)
-------------- --------------
Adjusted profit for the period 180,355 149,878
-------------- --------------
Attributable to non-controlling interests (78) 1,095
Attributable to owners of the parent 180,433 148,783
The adjusting items are the effects of derivatives, one off
refinancing fees and the effects of revaluing or unwinding balances
related to the acquisition of subsidiaries, such as the call/put
option held over the non-controlling interest of our German
operation. Significant project costs may also be included if
incurred, as they have been this year in relation to the
acquisition of Heron (see note 7). Adjusted tax represents the tax
charge per the statement of comprehensive income as adjusted only
for the effects of the other adjusting items detailed above.
The segmental split in EBITDA and Adjusted EBITDA reconciles as
follows;
53 week period to 31 March UK UK Germany
2018 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit before interest and
tax 239,784 5,745 1,229 (5,244) 241,514
Add back depreciation and
amortisation 26,485 6,001 4,392 4 36,882
-------- -------- -------- ---------- --------
EBITDA 266,269 11,746 5,621 (5,240) 278,396
Reverse the effects of derivatives - - - 3,825 3,825
Reverse fees expensed on
acquisition - - - 1,049 1,049
-------- -------- -------- ---------- --------
Adjusted EBITDA 266,269 11,746 5,621 (366) 283,270
-------- -------- -------- ---------- --------
52 week period to 25 March UK UK Germany
2017 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit before interest and
tax 201,445 - 7,943 (3,880) 205,508
Add back depreciation and
amortisation 22,277 - 3,734 4 26,015
-------- -------- -------- ---------- --------
EBITDA 223,722 - 11,677 (3,876) 231,523
Reverse the effects of derivatives - - - 3,369 3,369
-------- -------- -------- ---------- --------
Adjusted EBITDA 223,722 - 11,677 (507) 234,892
-------- -------- -------- ---------- --------
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 Reconciliation of the 52-week results from the 53-week adjusted results
In the commentary accompanying these accounts management
consider that presenting an adjusted 52-week result is helpful to
the users of this annual report in order to directly compare like
for like periods.
Therefore we present a reconciliation to an adjusted 52-week
statement of comprehensive income derived from the adjusted 53-week
statement of comprehensive income by removing the final week of the
financial year.
The sales and gross margin were directly taken from the specific
week 53 figures and other costs were apportioned accordingly by
considering the final accounting month of the year.
The adjusting items are those detailed in note 3.
53-weeks 52 weeks to
to 25 March 2017
31 March 52 weeks to GBP'000
2018 Week 53 24 March 2018
GBP'000 GBP'000 GBP'000
Adjusted
Revenue 3,029,802 53,528 2,976,274 2,430,660
Cost of sales (2,001,437) (35,366) (1,966,071) (1,584,845)
----------- ----------- -------------- --------------
Gross Profit 1,028,365 18,162 1,010,203 845,815
Administrative expenses (781,977) (14,668) (767,309) (636,938)
----------- ----------- -------------- --------------
Profit before net finance
costs and tax 246,388 3,494 242,894 208,877
Add back depreciation
and amortisation 36,882 727 36,155 26,015
----------- ----------- -------------- --------------
EBITDA 283,270 4,221 279,049 234,892
Depreciation and amortisation (36,882) (727) (36,155) (26,015)
Net finance costs (21,596) (246) (21,350) (18,726)
----------- ----------- -------------- --------------
Profit before tax 224,792 3,248 221,544 190,151
Tax (44,437) (633) (43,804) (40,273)
----------- ----------- -------------- --------------
Profit after tax 180,355 2,615 177,740 149,878
----------- ----------- -------------- --------------
Attributable to non-controlling
interests (78) - (78) 1,095
Attributable to owners
of the parent 180,433 2,615 177,818 148,783
The 53(rd) week only materially affects the UK B&M segment.
The Germany retail segment reports annual figures and the UK Heron
segment reports on a 52 week basis and the results only include the
post acquisition period from August 2017. Therefore we also present
a reconciliation of the 52 week profit and loss UK B&M segment
figures as follows:
53-weeks 52 weeks to
to 25 March 2017
31 March 52 weeks to GBP'000
2018 Week 53 24 March 2018
GBP'000 GBP'000 GBP'000
UK B&M segment
Revenue 2,619,488 53,528 2,565,960 2,252,265
EBITDA 266,269 4,221 262,048 223,722
Depreciation and amortisation (26,485) (727) (25,758) (22,277)
Net finance income/(costs) 109 2 107 107
Income tax expense (45,580) (664) (44,916) (40,310)
Segment profit 194,313 2,832 191,481 161,242
5 Operating profit
The following items have been charged in arriving at operating
profit:
53 weeks ended 52 weeks ended
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Auditor's remuneration 354 330
Payments to auditors in respect of non-audit
services:
Taxation advisory services - -
Other assurance services 78 88
Other professional services 21 -
Inventories:
Cost of inventories recognised as an expense
(included in cost of sales) 2,030,958 1,595,471
Depreciation of property, plant and equipment:
Owned assets 34,234 24,305
Leased assets 997 916
Amortisation (included within administration
costs) 1,652 794
Operating lease rentals 149,469 126,798
New store pre-opening costs 4,956 6,285
Loss/(profit) on sale of property, plant
and equipment 277 (405)
Loss/(gain) on foreign exchange 2,201 (214)
6 Finance costs and finance income
Finance costs include all interest related income and expenses.
The following amounts have been included in the statement of
comprehensive income line for each reporting period presented:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Interest on debt and borrowings (19,960) (17,446)
Ongoing amortisation of finance fees (1,491) (1,381)
Finance charges payable under finance leases
and hire purchase contracts (327) (23)
----------- -----------
Total adjusted finance expense (21,778) (18,850)
One-off costs incurred on raising debt finance - (3,687)
Unwinding of deferred acquisition costs for
subsidiaries (2,170) (1,573)
----------- -----------
Total finance costs (23,948) (24,110)
----------- -----------
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Interest income on loans and bank accounts 182 124
----------- -----------
Total adjusted finance income 182 124
Gain on financial instruments at fair value
through profit or loss - 117
Gain on revaluing call/put option held over
the minority interest of Jawoll 11,568 1,279
----------- -----------
Total finance income 11,750 1,520
----------- -----------
Total net adjusted finance costs are therefore;
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Total adjusted finance expense (21,778) (18,850)
Total adjusted finance income 182 124
----------- -----------
Total net adjusted finance costs (21,596) (18,726)
----------- -----------
7 Business Combination
On 2 August 2017 the Group acquired Heron Food Group Limited
("Heron"), a discount convenience retailer incorporated in the
UK.
The transaction has been accounted for via the acquisition
method of accounting. The Group purchased 100% of the share
capital, for a fair value of GBP122.5m, which breaks down as
follows:
GBP'000
Initial cash consideration 112,123
Fair value of deferred consideration 10,422
-------
Total 122,545
-------
The deferred consideration represents a cash amount of GBP12.8m
payable in 2019 based upon certain conditions that management do
not consider the final amount to be reasonably sensitive to (see
note 20). An exercise carried out by the business has fair valued
this at the acquisition date at GBP10.4m and this will be unwound
through the P&L to the full value of GBP12.8m by August
2019.
The fair values of the identifiable assets and liabilities of
Heron on the date of the acquisition were:
Assets GBP'000
Heron brand asset 14,178
Favourable lease contracts 1,385
Other intangible assets 1,305
Property, plant and equipment 67,299
Inventories 13,835
Receivables and other assets 8,081
Cash 8,315
--------
Total assets 114,398
--------
Liabilities
Unfavourable lease contracts (9,984)
Creditors and accruals (32,395)
Provisions (1,538)
Corporation and deferred tax (4,107)
Finance leases (3,199)
Overdraft (2,628)
Bank loans (25,582)
--------
Total liabilities (79,433)
--------
Net assets acquired 34,965
Fair value of consideration 122,545
Goodwill recognised on acquisition 87,580
None of the receivables recognised were considered irrecoverable
at the acquisition date.
Fees of GBP1.0m were incurred during the acquisition all of
which have been expensed through the P&L, and which are treated
as adjusting for the purposes of note 3.
The goodwill largely relates to the growth potential of the
business, the current location of the stores and the existing
workforce. None of the elements which make up goodwill can, or are
not material enough to be recognised as a separate intangible
asset.
The effect the acquisition has had on the P&L can be seen in
the segment note (note 2). Had the company been bought at the start
of the year it would have contributed an estimated extra GBP108.6m
to revenue and GBP3.4m to operating profit under their local
accounting policies (FRS 102 compliant).
The balance on the consolidated statement of cash flows
reconciles as follows:
GBP'000
Initial cash consideration 112,123
Cash acquired (8,315)
Overdraft acquired 2,628
-------
Net cash for acquisitions 106,436
-------
On 1 August 2016 the business acquired the trade and assets of a
small chain of German stores (Knüller).
The details of the assets acquired are as follows:
EUR'000
Property, plant & equipment 50
Cash (floats) 50
Inventory 1,204
-------
Total assets acquired 1,304
Purchase price paid 2,879
Goodwill recognised 1,575
-------
The goodwill recognised represents the stores location and
customer base and it was not possible to separate this out further
into material separately identifiable and recognisable intangible
assets. It has been considered for impairment as part of the
overall impairment test carried out annually by the Group (see note
11).
The purchase price paid net of the cash acquired was EUR2,829k
and this translates to GBP2,374k as shown on the consolidated
statement of cash flows.
The business was incorporated directly into the German entities,
with the stores reopening as rebranded Jawoll stores.
The Group considers that the transaction is immaterial for
further disclosure
8 Employee remuneration
Expense recognised for employee benefits is analysed below:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Wages and salaries 347,027 277,054
Social security costs 16,945 12,907
Pensions - defined contribution plans 1,424 1,022
----------- -----------
365,396 290,983
----------- -----------
There are GBP221k of defined contribution pension liabilities
owed by the Group at the period end (2017: GBP73k).
The Group has one employee who is a member of a defined benefit
scheme (2017: one employee). The liability held on the balance
sheet at the year end was GBP250k (2017: GBP267k).
The scheme is considered immaterial to the Group and the effect
of the year end actuarial valuation can be seen within other
comprehensive income.
The average monthly number of persons employed by the Group
during the period was:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
Sales staff 30,758 25,418
Administration 1,284 639
----------- -----------
32,042 26,057
----------- -----------
9 Key management remuneration
Key management personnel and Directors' remuneration includes
the following:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Directors' remuneration:
Short term employee benefits 3,067 2,177
Benefits accrued under the share option scheme 226 124
----------- -----------
3,293 2,301
----------- -----------
Key management expense (includes Directors'
remuneration):
Short term employee benefits 7,103 4,648
Benefits accrued under the share option scheme 280 124
Pension 4 -
----------- -----------
7,387 4,772
----------- -----------
Amounts in respect of the highest paid director
emoluments:
Short term employee benefits 2,049 1,393
Benefits accrued under the share option scheme - -
----------- -----------
2,049 1,393
----------- -----------
The emoluments disclosed above are of the directors and key
management personnel who have served as a director within any of
the Group companies.
10 Share Options
As of 31 March 2018, the Group operates two share option
schemes, both of which split down to various tranches. Details of
these schemes follow.
1) The Company Share Option Plan (CSOP) scheme
The CSOP scheme was adopted by the Group as a Schedule 4 CSOP
Scheme on 29 March 2014. No grant under this scheme can be made
more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for
the CSOP and the awards are made at the discretion of the
remuneration committee.
Limits & Pricing
A fixed number of options offered to each participant, with the
pricing set as the close price on the grant date. The options
offered to each individual cannot exceed a total value of GBP30,000
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 2018 there have been four tranches of the
CSOP, details are as follows:
Tranche 1 Tranche 2 Tranche 3 Tranche 4
Date of grant 1 Aug 2014 11 Aug 2014 17 Dec 2015 19 Aug 2016
Option price 271.5p 267.0p 286.0p 276.8p
Options granted 596,646 104,860 10,489 21,676
Fair value of each option
at date of grant 83p 81p 79p 50p
Options outstanding at
26 March 2016 504,571 67,410 10,489 -
Granted - - - 21,676
Forfeited (44,196) (7,490) - -
Exercised - - - -
Options outstanding at
25 March 2017 460,375 59,920 10,489 21,676
Granted - - - -
Forfeited (22,098) - - -
Exercised (427,228) (59,920) - -
Options outstanding at
31 March 2018 11,049 - 10,489 21,676
No options have lapsed in either period.
2) Long-Term Incentive Plan (LTIP) Awards
The LTIP was adopted by the board on 29 May 2014. No grant under
this scheme can be made more than 10 years after this date.
Eligibility
Employees and executive directors of the Group are eligible for
the LTIP and the awards are made at the discretion of the
remuneration committee.
Limits & Pricing
A fixed number of options offered to each participant, with the
pricing set at GBPnil. 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.
Vesting & Exercise
The share options vest on the third anniversary of the grant
date, subject to a set of conditions as follows:
LTIP 2014:
-- The Total Shareholders Return (TSR) must exceed 15%, where
the TSR is a measure of the change in share price and dividends
paid in the vesting period.
-- The underlying UK EBITDA in the Financial Year ended March
2017 is at least 130% greater than the underlying UK EBITDA in the
Financial Year ended March 2014.
LTIP 2015, 2016, 2017A:
-- 50% of the awards are subject to a TSR performance condition,
where the Group's TSR over the vesting period is compared with a
comparator group. The awards vest on a sliding scale where the full
50% is awarded if the Group falls in the upper quartile, 12.5%
vests if the Group falls exactly at the median, and 0% below
that.
-- 50% of the awards are subject to an EPS performance target.
The awards vest on a sliding scale based upon the Earnings per
share as follows:
Award 50% paid 12.5% paid
EPS as at at at
LTIP 2015 March-18 19.0p 15.0p
LTIP 2016 March-19 22.5p 17.5p
LTIP 2017A March-20 24.0p 19.0p
Below the 12.5% boundary, no options vest.
LTIP 2017/B1, 2017/B2, 2018/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 2018 there have been seven awards of the
LTIP, with the details as follows.
Note that the LTIP 2015, LTIP 2016 and LTIP 2017A have been
split into the element subject to the TSR (50%) and the element
subject to the EPS (50%) since these were valued separately.
2014 2015-TSR 2015-EPS 2016-TSR 2016-EPS
Date of grant 1 Aug 2014 5 Aug 2015 5 Aug 2015 18 Aug 2016 18 Aug 2016
Nil price options granted 200,000 40,616 40,616 122,385.5 122,385.5
Fair value of each option
at date of grant 134p 210p 341p 164p 254p
Options outstanding at
26 March 2016 112,963 40,616 40,616 - -
Granted - - - 122,385.5 122,385.5
Forfeited (38,889) - - - -
Exercised - - - - -
Options outstanding at
25 March 2017 74,074 40,616 40,616 122,385.5 122,385.5
Granted - - - - -
Forfeited - - - - -
Exercised (74,074) - - - -
Options outstanding at
31 March 2018 - 40,616 40,616 122,385.5 122,385.5
Core Valuation Assumptions
Risk Free Rate 1.39% 0.92% 0.92% 0.09% 0.09%
Expected Life (Years) 3 5 5 5 5
Volatility 25% 24% 24% 26% 26%
Dividend Yield 0% 0.95% 0.95% 1.73% 1.73%
2017A-TSR 2017A-EPS 2017/B1 2017/B2 2018/B1
Date of grant 7 Aug 2017 7 Aug 2017 7 Aug 2017 14 Aug 2017 23 Jan 2018
Nil price options granted 40,610 40,610 287,963 101,654 19,264
Fair value of each option
at date of grant 272p 351p 361p 360p 400p
Options outstanding at
25 March 2017 - - - - -
Granted 40,610 40,610 287,963 101,654 19,264
Forfeited - - (16,072) - -
Exercised - - - - -
Options outstanding at
31 March 2018 40,610 40,610 271,891 101,654 19,264
Core Valuation Assumptions
Risk Free Rate 0.52% 0.52% 0.25% 0.25% 0.25%
Expected Life (Years) 5 5 3 3 3
Volatility 32% 32% 32% 32% 32%
Dividend Yield 1.4% 1.4% 1.4% 1.4% 1.4%
No options have lapsed in either period.
A total of 561,222 options have been exercised in the year, a
further 11,049 options have vested and are eligible to be
exercised. (2017: both nil). The options have been satisfied by the
issue of new share capital.
In the year, GBP615k has been charged to profit & loss in
respect to the share option schemes (2017: GBP254k). At the end of
the year the outstanding share options were valued at GBP788k
(2017: GBP675k).
11 Taxation
The relationship between the expected tax expense based on the
standard rate of corporation tax in the UK of 19% (2017: 20%) and
the tax expense actually recognised in the statement of
comprehensive income can be reconciled as follows:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Current tax expense 44,039 40,186
Deferred tax credit (528) (1,301)
----------- -----------
Total tax expense recorded in profit and
loss 43,511 38,885
----------- -----------
Current tax credit in other comprehensive
income (54) -
Deferred tax (credit)/expense in other comprehensive
income (2,416) (324)
----------- -----------
Total tax (credit)/expense recorded in other
comprehensive income (2,470) (324)
----------- -----------
Result for the year before tax 229,316 182,918
Expected tax charge at the standard tax rate 43,570 36,584
Effect of :
Expenses not deductible for tax purposes 2,440 2,615
Income not taxable (2,709) (734)
Foreign operations taxed at local rates 790 985
Changes in the rate of corporation tax 55 (1,027)
Adjustment in respect of prior years (485) 382
Other (150) 80
----------- -----------
Actual tax expense 43,511 38,885
----------- -----------
Deferred taxation
31 March 25 March
Statement of financial position 2018 2017
GBP'000 GBP'000
Accelerated tax depreciation (4,671) (819)
Relating to intangible brand assets (18,339) (17,473)
Fair valuing of assets and liabilities (asset) 5,030 607
Fair valuing of assets and liabilities (liability) (1,035) (82)
Movement in provision 11 85
Relating to share options 206 98
Held over gains on fixed assets (450) (471)
Other temporary differences (asset) 407 34
Other temporary differences (liability) - -
-------- --------
Net deferred tax liability (18,841) (18,021)
Deferred tax asset 5,654 824
Deferred tax liability (24,495) (18,845)
53 weeks to 52 weeks to
31 March 25 March
Statement of comprehensive income 2018 2017
GBP'000 GBP'000
Accelerated tax depreciation 129 (267)
Relating to intangible brand assets 107 802
Fair valuing of assets and liabilities 2,278 1,054
Movement in provision (75) 3
Relating to share options 108 58
Held over gains on fixed assets 21 (68)
Other temporary differences 376 43
Net deferred tax credit 2,944 1,625
Total deferred tax in profit or loss 528 1,301
Total deferred tax in other comprehensive
income 2,416 324
The Group offsets tax assets and liabilities if and only if it
has a legally enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by the same tax
authority.
12 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit or loss for the financial period attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding at each period end.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during each year plus the weighted average number of
ordinary shares that would be issued on conversion of any dilutive
potential ordinary shares into ordinary shares.
Adjusted (and adjusted 52 week) basic and diluted earnings per
share are calculated in the same way as above, except using
adjusted adjusted 52-week profit attributable to ordinary equity
holders of the parent, as defined in notes 3 and 4.
There are share option schemes in place (see note 10) which have
a dilutive effect on both periods presented.
The following reflects the income and share data used in the
earnings per share computations:
Period ended 31 March 25 March
2018 2017
GBP'000 GBP'000
Profit for the period attributable to owners
of the parent 185,833 142,926
Adjusted profit for the period attributable
to owners of the parent 180,433 148,783
Adjusted 52 week profit for the period attributable
to owners of the parent 177,818 148,783
Thousands Thousands
Weighted average number of ordinary shares
for basic earnings per share 1,000,353 1,000,000
Effect of dilution:
Employee share options 298 148
----------
Weighted average number of ordinary shares
adjusted for the effect of dilution 1,000,651 1,000,148
---------- ----------
Pence Pence
Basic earnings per share 18.6 14.3
Diluted earnings per share 18.6 14.3
Adjusted basic earnings per share 18.0 14.9
Adjusted diluted earnings per share 18.0 14.9
Adjusted 52 week basic earnings per share 17.8 14.9
Adjusted 52 week basic earnings per share 17.8 14.9
13 Investments in associates
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Net book value
Carrying value at the start of the period 5,669 3,995
Dividends received (1,149) -
Share of profits in associates since the
prior year valuation exercise 1,919 1,005
Impairment of holding in Home Focus Group (208) -
Sale of 20% holding in Home Focus Group (310) -
Effect of foreign exchange on translation (781) 669
-------- ---------
Carrying value at the end of the period 5,140 5,669
-------- ---------
The Group has a 50% (2017: 50%) interest in Multi-lines
International Company Ltd, a company incorporated in Hong Kong. The
principal activity of the company is the purchase and sale of
goods. The Group also holds 20% (2017: 40%) of the ordinary share
capital of Home Focus Group Ltd, a company incorporated in Republic
of Ireland and whose principal activity is retail sales.
Neither entity has discontinued operations or other
comprehensive income, except that on consolidation both entities
have a foreign exchange translation difference.
During the year the Group sold 20% of the holding in Home Focus
Group for EUR350k. The remaining 20% holding is also subject to a
contract of sale in December 2020 for the same amount, therefore
the remaining stake was revalued to EUR350k with a resulting
impairment which has been recognised in profit and loss. Home Focus
is considered immaterial for further disclosure.
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Multi-lines
Non-current assets 1,106 1,409
Current assets 36,004 36,109
Non-current liabilities - -
Current liabilities (25,555) (26,010)
-------- ---------
Net assets 11,555 11,508
-------- ---------
Revenue 169,244 128,976
Profit 3,805 2,767
-------- ---------
The figures for Multi-lines show 12 months to December 2017
(2017: 12 months to December 2016), being the period used in the
valuation of the associate.
14 Intangible assets
Goodwill Software Brands Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 27 March 2016 837,450 3,123 98,396 1,363 940,332
Additions due to purchase of Knüller 1,322 - - - 1,322
Additions - 1,596 1,200 - 2,796
Disposals - (132) - - (132)
Effect of retranslation 2,919 33 451 131 3,534
-------- -------- ------- ------- ---------
At 25 March 2017 841,691 4,620 100,047 1,494 947,852
Additions due to purchase of Heron 87,580 1,305 14,178 - 103,063
Additions - 1,612 1,750 - 3,362
Disposals - (289) - - (289)
Effect of retranslation 447 3 68 20 538
-------- -------- ------- ------- ---------
At 31 March 2018 929,718 7,251 116,043 1,514 1,054,526
Accumulated amortisation / impairment
At 27 March 2016 - 963 - 745 1,708
Charge for the year - 574 - 220 794
Disposals - (132) - - (132)
Effect of retranslation - 20 - 78 98
-------- -------- ------- ------- ---------
At 25 March 2017 - 1,425 - 1,043 2,468
Charge for the year - 1,436 13 203 1,652
Disposals - (289) - - (289)
Effect of retranslation - 3 - 12 15
-------- -------- ------- ------- ---------
At 31 March 2018 - 2,575 13 1,258 3,846
Net book value at 31 March 2018 929,718 4,676 116,030 256 1,050,680
-------- -------- ------- ------- ---------
Net book value at 25 March 2017 841,691 3,195 100,047 451 945,384
-------- -------- ------- ------- ---------
Impairment review of intangible assets held with indefinite
life
The Group holds the following assets with indefinite life:
31 March 31 March 25 March 25 March
Segment 2018 2018 2017 2017
Goodwill Brand Goodwill Brand
GBP'000 GBP'000 GBP'000 GBP'000
UK B&M 807,496 95,650 807,496 94,900
UK Heron 87,533 14,178 - -
Germany retail 34,642 5,215 34,195 5,147
Not all items in the brand classification have indefinite life
as some are time limited. The brand intangible assets that have
been identified as having indefinite life are designated as such as
management believe that these assets will hold their value for an
indefinite period of time.
In each case the goodwill and brand assets have been allocated
to one group of CGUs, being the store estate within the specific
segment to which those assets relate. The UK Heron assets are a new
addition in the year (2017: Germany acquired assets of a small
chain of stores, increasing their goodwill balance) see note 7 for
more details.
The Group performs impairment tests at each period end. The
impairment test involves assessing the net present value (NPV) of
the expected cash flows in relation to the stores within each CGU
according to a number of assumptions to calculate the value in use
(VIU) for the group of CGUs.
The German balances are held in Euros, the underlying balances
being EUR39.5m for Goodwill and EUR6.0m for the brands (2017:
same). Since the cashflows that support the carrying values are
also primarily in Euros, the impairment test for the German retail
segment has been carried out in that currency.
In each case, the results of the impairment tests identified
that the VIU was significantly in excess of the carrying value of
assets within the group of CGUs at the period end dates. No
indicators of impairment were noted.
The key assumptions used were
(i) The Group's discount rate, calculated via an internal model.
(ii) The inflation rate for expenses, which has been based upon
the consumer price index for the relevant country.
(iii) The like for like sales growth, a prudent estimate made by
management.
The values for the assumptions were:
31 March 25 March
As at 2018 2017
Discount rate (B&M) 10.7% 8.0%
Discount rate (Heron) 11.5% N/A
Discount rate (Germany) 13.2% 8.0%
Inflation rate for expenses (UK) 3.6% 2.3%
Inflation rate for expenses (Germany) 1.7% 1.6%
Like for like sales growth (B&M) 2.0% 3.0%
Like for like sales growth (Heron) 3.0% N/A
Like for like sales growth (Germany) 2.0% 2.5%
These assumptions are held for five years in the forecast and
then a perpetuity is performed over the year five figures,
effectively assuming no further like for like growth, or inflation
after that point.
In order to demonstrate the sensitivity of the assumptions, it
was calculated that the Group would first be required to recognise
an impairment at (all other assumptions being held equal);
UK B&M UK Heron Germany
31 March 25 March 31 March 25 March 31 March 25 March
2018 2017 2018 2017 2018 2017
Discount rate 46.1% 45.6% 34.5% N/A 88.8% >100%
Inflation rate for
expenses 17.6% 19.8% 14.1% N/A 18.8% 22.8%
Like for like sales (6.8)% (8.5)% (4.3)% N/A (9.5)% (11.9)%
15 Property, plant & equipment
Plant,
Land and buildings Motor vehicles fixtures and equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 27 March 2016 34,750 3,525 142,982 181,257
Acquisition of Knüller - - 42 42
Additions 7,971 681 40,508 49,160
Remeasurement of finance leases 2,539 - - 2,539
Disposals (847) (758) (547) (2,152)
Effect of retranslation 1,837 37 925 2,799
At 25 March 2017 46,250 3,485 183,910 233,645
Acquisition of Heron 31,388 5,787 30,124 67,299
Additions 58,097 4,493 48,678 111,268
Disposals (506) (1,313) (4,180) (5,999)
Effect of retranslation 306 5 164 475
------------------ -------------- ----------------------- -------
At 31 March 2018 135,535 12,457 258,696 406,688
Accumulated depreciation
At 27 March 2016 8,523 1,550 33,134 43,207
Charge for the period 3,941 694 20,586 25,221
Disposals (26) (457) (531) (1,014)
Effect of retranslation 247 9 227 483
At 25 March 2017 12,685 1,796 53,416 67,897
Charge for the period 4,607 1,559 29,065 35,231
Disposals (181) (1,106) (3,880) (5,167)
Effect of retranslation 41 2 31 74
At 31 March 2018 17,152 2,251 78,632 98,035
Net book value at 31 March 2018 118,383 10,206 180,064 308,653
------------------ -------------- ----------------------- -------
Net book value at 25 March 2017 33,565 1,689 130,494 165,748
------------------ -------------- ----------------------- -------
The carrying value of assets held under finance lease and hire
purchase contracts at 31 March 2018 was GBP7.5m (2017: GBP6.7m) and
total depreciation charged on these assets during the period was
GBP1.0m (2017: GBP0.9m). The assets held under hire purchase
contracts are pledged as security for the related finance lease and
hire purchase liabilities.
Under the terms of the loan and notes facilities in place at 31
March 2018, fixed and floating charges were held over GBP99.6m of
the net book value of land and buildings, GBP9.7m of the net book
value of motor vehicles and GBP167.5m of the net book value of the
plant, fixtures and equipment. (2017: GBP13.8m, GBP1.4m, GBP119.7m
respectively).
A significant addition was made to the land & buildings
category in relation to the southern warehouse. At the year end the
balance in relation to this stood at GBP55.0m (2017: GBPnil). The
warehouse is undergoing a building phase and has not yet been
brought into use and is therefore not yet depreciated. The
intention is that the asset will undergo a sale & leaseback
process near to or at completion. A further GBP0.5m of assets in
the Land & Buildings category relates to other assets under
construction (2017: GBPnil).
Included within land and buildings is land with a cost of
GBP62.6m (2017: GBP2.3m) which is not depreciated.
16 Inventories
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Goods for resale 558,690 462,119
-------- --------
Included in the amount above was a net charge of GBP1.3m related
to inventory provisions (2017: GBP3.5m net charge). In the period
to 31 March 2018 GBP2,031m (2017: GBP1,595m) was recognised as an
expense for inventories.
17 Trade and other receivables
31 March 25 March
2018 2017
GBP'000 GBP'000
Non-current
Lease premiums 2,150 2,413
Favourable leases 1,037 -
-------- --------
3,187 2,413
-------- --------
Current
Trade receivables 3,221 3,447
Deposits on account 1,575 6,451
Provision for impairment (160) (18)
-------- --------
Net trade receivables to non-related parties 4,636 9,880
Prepayments 27,165 23,525
Related party receivables 410 1,335
Lease premiums 324 567
Favourable leases 183 -
Other receivables 1,324 91
-------- --------
34,042 35,398
-------- --------
Trade receivables are stated initially at their fair value and
then at amortised cost as reduced by appropriate allowances for
estimated irrecoverable amounts. The carrying amount is determined
by the directors to be a reasonable approximation of fair
value.
The following table sets out an analysis of provisions for
impairment of trade and other receivables:
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Provision for impairment at the start of
the period (18) (51)
Impairment during the period (145) (17)
Utilised/released during the period 3 50
-------- --------
Balance at the period end (160) (18)
-------- --------
Trade receivables are non-interest bearing and are generally on
terms of 30 days or less.
There were no significant balances within debtors at either
March 2018 or March 2017 and as such there is no specific
concentration of credit risk.
The following table sets out a maturity analysis of trade
receivables, including those which are past due but not
impaired:
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Neither past due nor impaired 2,086 2,873
Past due less than one month 651 452
Past due between one and three months 230 93
Past due for longer than three months 254 29
-------- --------
Balance at the period end 3,221 3,447
-------- --------
18 Cash and cash equivalents
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Cash at bank and in hand 90,816 155,551
Overdrafts (6,112) -
-------- --------
Cash and cash equivalents 84,704 155,551
-------- --------
As at 31 March 2018 the Group had available GBP89.0m of undrawn
committed borrowing facilities (2017: GBP128.7m).
19 Trade and other payables
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Non-current
Accruals 250 897
Reverse lease premium 78,859 76,064
Unfavourable leases 8,021 -
-------- --------
87,130 76,961
-------- --------
Current
Trade payables 264,224 199,901
Other tax and social security payments 7,845 1,869
Accruals and deferred income 28,251 39,832
Reverse lease premium 14,446 10,791
Unfavourable leases 1,165 -
Related party trade payables 12,345 6,472
Other payables 7,796 8,950
-------- --------
336,072 267,815
-------- --------
Trade payables are generally on 30 day terms and are not
interest bearing. The carrying value of trade payables approximates
to their fair value. For further details on the related party trade
payables, see note 28.
20 Other financial assets and liabilities
Other financial assets
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Current financial assets at fair value through
profit and loss:
Foreign exchange forward contracts - 61
Fuel swap contracts - 232
Current financial assets at fair value through
other comprehensive income:
Foreign exchange forward contracts - 117
Total current other financial assets - 410
-------- --------
Total other financial assets - 410
-------- --------
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
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Non-current financial liabilities at fair value
through profit and loss:
Put/call options over the non-controlling interest
of Jawoll 8,076 17,886
Deferred consideration in relation to the purchase
of Heron 11,133 -
Total non-current other financial liabilities 19,209 17,886
-------- --------
Current financial liabilities at fair value through
profit and loss:
Foreign exchange forward contracts 923 287
Current financial liabilities at fair value through
other comprehensive income:
Foreign exchange forward contracts 15,743 1,783
Total current other financial liabilities 16,666 2,070
-------- --------
Total other financial liabilities 35,875 19,956
-------- --------
The put/call options over the non-controlling interest in Jawoll
arose as part of the acquisition of the entity. The valuation at
year end reflects management's latest projections for the final
amount to be exchanged at the year end foreign exchange rate. The
option matures in 2019 and the carrying value has been discounted
to present value.
The deferred consideration relates to the acquisition of Heron.
The valuation at year end reflects management's expectation that
the full amount of GBP12.8m will be payable in 2019. The carrying
value has been discounted to present value.
The other financial liabilities through profit or loss reflect
the fair value of those foreign exchange forward contracts that are
not designated as hedge relationships but are nevertheless intended
to reduce the level of risk for expected sales and purchases.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
-- Level 3: techniques which use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data.
As at the reporting dates, the Group held the following
financial instruments carried at fair value on the balance
sheet:
Total Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000
31 March 2018
Foreign exchange contracts (16,666) - (16,666) -
Put/call options on Jawoll non-controlling interest (8,076) - - (8,076)
Deferred Consideration in relation to Heron (11,133) - - (11,133)
25 March 2017
Foreign exchange contracts (1,892) - (1,892) -
Fuel swap contract 232 - 232 -
Put/call options on Jawoll non-controlling interest (17,886) - - (17,886)
The put/call option and deferred consideration were valued with
reference to the sale and purchase agreements underpinning the
relevant acquisition. The key variable in determining the fair
value of these balances is the forecast EBITDA, respectively of
Jawoll and Heron, as prepared by management.
The movement in the valuation of the call/put option reconciles
as follows:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Opening value 17,886 16,041
Unwinding of the call/put option valuation 1,459 1,573
Adjustment to the valuation of the call/put
option (11,568) (1,279)
Effect of foreign exchange 299 1,551
----------- -----------
Closing value 8,076 17,886
As the valuation is a multiple of German EBITDA, it is sensitive
to the movement in the projection of this value and a 5% movement
in EBITDA would therefore effect a 5% change in the valuation.
The valuation is also sensitive to the Group discount rate. As
an indication the sensitivities (all other inputs being held equal)
to a change in the year end discount rates are as follows:
31 March 25 March
As at 2018 2017
Change in GBP'000
discount
rate GBP'000
Effect on profit before tax +50bps 61 160
-50bps (62) (162)
The movement in the valuation of deferred consideration
reconciles as follows:
53 weeks to 52 weeks to
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Opening value - -
Recognised on acquisition of Heron 10,422 -
Unwinding of the deferred consideration balance 711 -
Closing value 11,133 -
The balance is not considered sensitive to the main valuation
input of Heron's EBITDA, since a 5% increase or decrease in
management's estimate would not change the value recognised. The
discount rate used is that considered to be fair at the acquisition
date. If it were it to move by 0.5% the effects would be:
31 March 25 March
As at 2018 2017
Change in GBP'000
discount
rate GBP'000
Effect on profit before tax +50bps 78 -
-50bps (65) -
The other instruments have been valued by the issuing bank,
using a mark to market method. The bank has used various inputs to
compute the valuations and these include inter alia the relevant
maturity date and strike rates, the current exchange rate, fuel
prices and LIBOR levels.
21 Financial liabilities - borrowings
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Current
Revolving facility bank loan 45,000 -
Heron loan facilities - Melton 807 -
Heron loan facilities - Offset 605
Heron loan facilities - Term 800 -
-------- --------
47,212 -
-------- --------
Non-current
High yield bond notes 247,558 246,815
Term facility bank loans 297,288 296,910
Heron loan facilities - Melton 5,243 -
Heron loan facilities - Offset 3,967 -
Heron loan facilities - Term 4,370 -
558,426 543,725
-------- --------
The Group refinanced during the prior year, repaying the
previous loan facilities, totalling GBP440.0m, and replacing them
with a new loan facility of GBP300.0m and high yield bond notes
released by the parent entity of GBP250.0m. Details of maturities
and interest rates are included in the table below.
The term facility bank loans and high yield bond notes are held
at amortised cost and were initially capitalised in February 2017
with GBP3.2m and GBP3.3m (respectively) of fees attributed to
them.
The Heron loan facilities were brought into the Group as part of
the acquired balance sheet on 2 August 2017. All are held with
Handelsbanken and are carried at their gross cash amount. Further
details are in the maturity table below.
The maturities of the loan facilities and finance leases (also
see note 25) are as follows.
31 March 25 March
Interest rate Maturity 2018 2017
% GBP'000 GBP'000
Finance leases 1.2-7.0% 2018-37 9,176 7,463
Revolving facility
loan 2.00% + LIBOR Apr-18 45,000 -
Term facility bank
loan A 2.25% + LIBOR Jul-21 - 300,000
Term facility bank
loan A 2.00% + LIBOR Jul-21 300,000 -
High yield bond notes 4.125% Feb-22 250,000 250,000
Heron loan facilities
- Melton 2.25% + LIBOR Jul-25 6,050 -
Heron loan facilities
- Offset 2.45% + LIBOR Sep-22 4,572 -
Heron loan facilities
- Term 2.50% + LIBOR Dec-21 5,170 -
-------- --------
619,968 557,463
-------- --------
Term loan A and the high yield bond notes have carrying values
which include transaction fees allocated on inception.
22 Provisions
Property provisions Other Total
GBP'000 GBP'000 GBP'000
At 27 March 2016 2,602 4,214 6,816
Provided in the period 1,367 2,770 4,137
Utilised during the period (374) (1,857) (2,231)
Released during the period (1,855) (1,092) (2,947)
Effect of retranslation 16 - 16
------------------- ----------- --------
At 25 March 2017 1,756 4,035 5,791
Brought in on acquisition of Heron 1,538 - 1,538
Provided in the period 1,280 2,264 3,544
Utilised during the period (1,198) (1,807) (3,005)
Released during the period (538) (31) (569)
Effect of retranslation 3 - 3
------------------- ----------- --------
At 31 March 2018 2,841 4,461 7,302
Current liabilities 2018 2,462 4,461 6,923
Non-current liabilities 2018 379 - 379
Current liabilities 2017 834 4,035 4,869
Non-current liabilities 2017 922 - 922
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
insurance liability claims. A prudent amount has been set aside for
each claim as per legal advice received by the Group. These claims
are individually non-significant and average GBP8.4k per claim
(GBP8.3k in 2017).
23 Share capital
31 March 25 March
As at 2018 2017
Allotted, called up and fully paid GBP'000 GBP'000
B&M European Value Retail S.A.
1,000,561,222 ordinary shares of 10p each
(2017: 1,000,000,000) 100,056 100,000
100,056 100,000
Ordinary shares
Each ordinary share ranks pari passu with each other ordinary
share and each share carries one vote. The Group parent is
authorised to release up to a maximum of 2,971,661,000 (2017:
2,972,222,222) ordinary shares.
B&M European Value Retail S.A. has released 561,222 shares
during the period in relation to exercised employee and director
share options, see note 10.
24 Cash generated from operations
53 weeks ended 52 weeks ended
31 March 25 March
Period ended 2018 2017
GBP'000 GBP'000
Profit before tax 229,316 182,918
Adjustments for:
Net interest expense 12,198 22,590
Depreciation 35,231 25,221
Amortisation of intangible assets 1,652 794
Profit on remeasurement of finance leases - (317)
Loss / (profit) on disposal of property, plant and equipment 277 (405)
Loss on share options 615 254
Change in inventories (79,099) (99,662)
Change in trade and other receivables (1,168) (6,666)
Change in trade and other payables 39,377 84,575
Change in provisions 1,511 (1,042)
Share of profit from associates (1,711) (1,005)
Non-cash foreign exchange effect from retranslation of subsidiary cashflows (31) 249
Loss resulting from fair value of financial derivatives 3,825 3,369
-------------- --------------
Cash generated from operations 241,993 210,873
-------------- --------------
25 Commitments
Operating leases
The vast majority of the Group's operating lease commitments
relate to the property comprising its store network. At the
year-end over 95% of these leases expire in the next 15 years
(2017: >95%) The leases are separately negotiated and no
subgroup is considered to be individually significant nor to
contain individually significant terms. The Group was not subject
to non-trivial contingent rent agreements at the year end date. The
following table sets out the total future minimum lease payments
under non-cancellable operating leases, taking account of lease
premiums.
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Not later than one year 154,508 133,696
Later than one year and not later than five years 554,293 484,814
Later than five years 548,974 494,478
--------- ---------
1,257,775 1,112,988
--------- ---------
The lease and sublease payments recognised as an expense in the
periods were as follows:
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Lease payments 150,512 127,369
Sublease receipts (1,043) (571)
-------- --------
149,469 126,798
-------- --------
Finance leases
All of the Group's finance leases related to buildings used in
the operation of the German and UK Heron businesses. Future minimum
lease payments under finance leases and hire purchase contracts
together with the present value of the net minimum lease payments
are as follows:
As at 31 March 2018 25 March 2017
Minimum payments PV of minimum payments Minimum payments PV of minimum payments
GBP'000 GBP'000 GBP'000 GBP'000
Not later than one year 2,121 1,870 1,227 994
Later than one year and not later
than five years 6,507 6,047 4,791 4,227
Later than five years 1,260 1,259 2,295 2,242
---------------- ---------------------- ---------------- ----------------------
9,888 9,176 8,313 7,463
---------------- ---------------------- ---------------- ----------------------
Capital commitments
There were GBP44.1m of contractual capital commitments not
provided within the Group financial statements as at 31 March 2018
(2017: GBP3.5m). This figure includes an estimated GBP40.7m in
relation to the build and fit out of the southern warehouse which,
whilst the majority is not yet committed, is considered very likely
to be incurred. The southern warehouse is expected to undergo a
sale & leaseback around the date of completion.
26 Group information and ultimate parent undertaking
The financial results of the Group include the following
entities.
Percent held
Company name Country Date of incorporation within the Group Principal activity
B&M European Value Retail
S.A. Luxembourg May 2014 Parent Holding company
B&M European Value Retail
1 S.Ã r.l. Luxembourg November 2012 100% Holding company
Bedford DC Investment Ltd Jersey June 2017 100% Property development
B&M European Value Retail
Holdco 1 Ltd UK December 2012 100% Holding company
B&M European Value Retail
Holdco 2 Ltd UK December 2012 100% Holding company
B&M European Value Retail
Holdco 3 Ltd UK November 2012 100% Holding company
B&M European Value Retail
Holdco 4 Ltd UK November 2012 100% Holding company
B&M European Value Retail September
2 S.Ã r.l. Luxembourg 2012 100% Holding company
September
EV Retail Limited UK 1996 100% Holding company
B&M Retail Limited UK March 1978 100% General retail
Opus Homewares Limited UK April 2003 100% Dormant
Retail Industry Apprenticeships
Ltd UK June 2017 100% Employment services
Heron Food Group Ltd UK August 2002 100% Holding company
Heron Foods Ltd UK October 1978 100% Convenience retail
September
Cooltrader Ltd UK 2012 100% Dormant
Heron Properties (Hull) Ltd UK February 2003 100% Dormant
B&M European Value Retail
Germany GmbH Germany November 2013 100% Holding company
J.A. Woll Handels GmbH Germany November 1987 80% General retail
September
Jawoll Vertriebs GmbH I Germany 2007 80% General retail
Changes during the year
The Group acquired four businesses comprising the Heron Food
Group as detailed in note 7. Retail Industry Apprenticeships Ltd
and Bedford DC Investment Ltd were incorporated and are fully owned
by the Group. BestFlora was fully incorporated into the other
Germany entities and disposed of. Also see the associates section
below.
Changes during the prior year
Meltore Limited, previously a dormant 100% owned subsidiary of
EV Retail Limited, has been disposed of and is no longer a member
of the Group. Jawoll acquired the non-controlling interest in
BestFlora GmbH, and now owns 100% (previously 75%) of that entity
(the percent held within the group increased from 60% to 80%).
Neither of these transactions has had nor will have significant
accounting effects for the Group.
Associates
The Group has a 50% interest in Multi-lines International
Company Limited, a company incorporated in Hong Kong and a 20% (40%
prior to December 2017) interest in Home Focus Group Limited, a
company incorporated in the Republic of Ireland following the
acquisition of SBR Europe on 6 March 2013. The share of profit/loss
from the associates is included in the statement of comprehensive
income, see note 13.
Ultimate parent undertaking
The directors of the Group consider the parent and the ultimate
controlling related party of this Group to be B&M European
Value Retail SA, registered in Luxembourg.
27 Financial risk management
The Group uses various financial instruments, including bank
loans, related party loans, finance company loans, cash, equity
investment, derivatives and various items, such as trade
receivables and trade payables that arise directly from its
operations.
The main risks arising from the Group's financial instruments
are market risk, currency risk, cash flow interest rate risk,
credit risk and liquidity risk. The directors review and agree
policies for managing each of these risks and they are summarised
below.
The existence of these financial instruments exposes the Group
to a number of financial risks, which are described in more detail
below. In order to manage the Group's exposure to those risks, in
particular the Group's exposure to currency risk, the Group enters
into forward foreign currency contracts. No transactions in
derivatives are undertaken of a speculative nature.
Market risk
Market risk encompasses three types of risk, being currency
risk, fair value interest rate risk and commodity price risk.
Commodity price risk is not considered material to the business as
the Group is able to pass on pricing changes to its customers.
Despite the impact of price risk not being considered material,
the Group has previously engaged in swap contracts over the cost of
fuel in order to minimise the impact of any volatility.
The sensitivity to these contracts for a reasonable change in
the year end fuel price is as follows
31 March 25 March
As at 2018 2017
Change in GBP'000
fuel price GBP'000
Effect on profit before tax +5% - 159
-5% - (151)
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 Germany
and there is no currency exposure in this respect. A proportion of
the Group's purchases are priced in US Dollars and the Group
generally uses forward currency contracts to minimise the risk
associated with that exposure.
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.
31 March 25 March
As at 2018 2017
Change in GBP'000
USD rate GBP'000
Effect on profit before tax +2.5% (588) (885)
-2.5% 618 931
Effect on other comprehensive
income +2.5% (10,150) (9,403)
-2.5% 10,671 7,919
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.
31 March 25 March
As at 2018 2017
Change in GBP'000
Euro rate GBP'000
Effect on profit before tax +2.5% 18 (4)
-2.5% (19) 9
Effect on other comprehensive
income +2.5% (2,012) (1,997)
-2.5% 2,115 2,101
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:
31 March 25 March
As at 2018 2017
Basis point GBP'000
increase
/ decrease GBP'000
Effect on profit before tax +50 (1,716) (1,891)
-50 1,716 1,891
This sensitivity has been calculated by changing the interest
rate for each interest payment and accrual made by the Group over
the period, by the amount specified in the table above, and then
calculating the difference that would have been required.
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group's principal financial assets
are cash and trade receivables. The credit risk associated with
cash is limited as the main counterparty is a UK clearing bank with
a high credit rating (A- long term and A-1 short term (standard
& poor), (2017: A, A-2 respectively). The principal credit risk
arises therefore from the Group's trade receivables.
Credit risk is further limited by the fact that the vast
majority of sales transactions are made through the store
registers, direct from the customer at the point of purchase,
leading to a low trade receivables balance.
In order to manage credit risk, the directors set limits for
customers based on a combination of payment history and third party
credit references. Credit limits are reviewed by the credit
controller on a regular basis in conjunction with debt ageing and
collection history. Provisions against bad debts are made where
appropriate.
Liquidity risk
Any impact on available cash and therefore the liquidity of the
Group could have a material effect on the business as a result.
The Group's borrowings are subject to 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:
Within 1 year Between 1 and 2 years Between 2 and 5 years More than 5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
31 March 2018
Interest bearing loans 66,273 21,109 587,778 2,099 677,259
Forward foreign exchange
contracts 16,666 - - - 16,666
Trade Payables 276,570 - - - 276,570
Call/put option (Jawoll) - 9,637 - - 9,637
Deferred consideration
(Heron) - 12,800 - - 12,800
25 March 2017
Interest bearing loans 19,433 19,433 603,738 - 642,603
Forward foreign exchange
contracts 2,070 - - - 2,070
Trade payables 206,373 - - - 206,373
Call/put option (Jawoll) - 20,862 - - 20,862
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.
31 March 25 March
As at 2018 2017
Financial assets GBP'000 GBP'000
Fair value through profit and loss
Forward foreign exchange contracts - 61
Fuel price swap - 232
Fair value through other comprehensive income
Forward foreign exchange contracts - 117
Loans and receivables
Cash and cash equivalents 90,816 155,551
Trade receivables 5,046 11,215
Other receivables 1,324 91
-------- --------
Financial liabilities
Fair value through profit and loss
Forward foreign exchange contracts 923 287
Put/call options over the non-controlling interest of Jawoll 8,076 17,886
Deferred consideration in relation to the purchase of Heron 11,133 -
Fair value through other comprehensive income
Forward foreign exchange contracts 15,743 1,783
Amortised cost
Overdraft 6,112 -
Interest-bearing loans and borrowings 603,426 543,725
Trade payables 276,569 206,373
Other payables 7,796 8,950
-------- --------
28 Related party transactions
The Group has transacted with the following related parties over
the periods:
Multi-lines International Company Limited, a supplier, and Home
Focus Group, a customer, have been associates of the Group since
March 2013.
Ropley Properties Ltd, Triple Jersey Ltd, TJL UK Ltd, Rani
Investments and Multi Lines International (Properties) Ltd, all
landlords of properties occupied by the group, are directly or
indirectly owned by director Simon Arora, his family, or his family
trusts (together, the Arora related parties).
David Heuck, a director of Heron is the landlord of a property
occupied by the Group (Comprising the Heron related parties).
Jawoll Immobilien GmbH, Stern Grundstück Entwicklungs GmbH, DS
Grundstücks GmbH and Silke Stern are all landlords of properties
occupied by the Group and are related by virtue of connection to a
shareholder of J.A.Woll-Handels GmbH (together, the German related
parties). Some of these are held under finance lease, as detailed
below.
The following table sets out the total amount of trading
transactions with related parties included in the statement of
comprehensive income, including the P&L impact of any finance
leases;
31 March 25 March
2018 2017
Period ended GBP'000 GBP'000
Sales to associates of the Group
Home Focus Group Limited 2,408 2,503
-------- --------
Total sales to related parties 2,408 2,503
-------- --------
Purchases from associates of the Group
Multi-lines International Company Ltd 146,360 121,351
Purchases from parties related to key management
personnel
Multi-Lines International (Properties) Ltd 151 154
David Heuck 28 -
DS Grundstücks GmbH 794 759
Jawoll Immobilien GmbH 550 524
Rani Investments 194 192
Ropley Properties Ltd 2,976 2,811
Silke Stern 157 148
Stern Grundstück Entwicklungs 620 591
TJL UK Ltd 675 42
Triple Jersey Ltd 12,666 10,250
-------- --------
Total purchases from related parties 165,171 136,822
-------- --------
Included in the current year figures above are 6 leases of new
stores and 2 renewals of existing stores, entered into by Group
companies during the current period with the Arora related parties
(2017: 6 new, or extensions to existing, leases and no renewals).
The total expense on these leases in the period was GBP1,778k
(2017: GBP763k). There were also 4 conditionally exchanged leases
with Arora related parties in the current period with long stop
completion dates (2017: 2), and no expense is incurred under them
until they are completed.
The following table sets out the total amount of trading
balances with related parties outstanding at the period end. Note
that the receivables balance held with Multi-lines International is
with our German operation (a deposit on account) and the payables
balance is with our UK operation.
31 March 25 March
2018 2017
As at GBP'000 GBP'000
Trade receivables from associates of the Group
Home Focus Group Ltd 316 706
Multi-lines International Company Ltd 94 629
Total related party trade receivables 410 1,335
-------- --------
Trade payables to associates of the Group
Multi-lines International Company Ltd 9,680 3,385
Trade payables to companies owned by key management
personnel
Rani Investments 40 -
Ropley Properties Ltd 643 850
TJL UK Ltd 3 85
Triple Jersey Ltd 1,979 2,152
-------- --------
Total related party trade payables 12,345 6,472
-------- --------
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 31 March
2018 (2017: no impairment). This assessment is undertaken each year
through examining the financial position of the related party and
the market in which the related party operates.
The future operating lease commitments on the Arora related
party properties are;
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Not later than one year 16,308 14,544
Later than one year and not later than five years 65,565 57,704
Later than five years 85,934 76,341
-------- --------
167,807 148,589
-------- --------
The future operating lease commitments on the German related
party properties are;
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Not later than one year 877 578
Later than one year and not later than five years 2,438 561
Later than five years - -
-------- --------
3,315 1,139
-------- --------
The future operating lease commitments on the Heron related
party properties are;
31 March 25 March
As at 2018 2017
GBP'000 GBP'000
Not later than one year 43 -
Later than one year and not later than five years 170 -
Later than five years 397 -
-------- --------
610 -
-------- --------
The balances remaining on the finance lease asset and
liabilities at each year end is as follows:
31 March 25 March
2018 2017
As at GBP'000 GBP'000
Finance lease assets from parties related
to key management personnel
DS Grundstücks GmbH 2,084 2,386
Jawoll Immobilien GmbH 1,020 1,161
Silke Stern 497 632
Stern Grundstück Entwicklungs 2,213 2,520
-------- --------
Total assets held under finance lease from
related parties 5,814 6,699
-------- --------
Finance lease liabilities with parties related
to key management personnel
DS Grundstücks GmbH 2,262 2,531
Jawoll Immobilien GmbH 1,170 1,332
Silke Stern 577 733
Stern Grundstück Entwicklungs 2,410 2,707
-------- --------
Total finance lease liabilities held with
related parties 6,419 7,303
-------- --------
All related party finance leases are on properties occupied by
the German business. During the prior year six of these properties
were extended, resulting in a profit of GBP317k on
remeasurement.
The Group disposed of part of the holding in Home Focus Group
during the year, and received dividends from Multi-Lines
International Company Limited. See note 13 for further information
on the Group's associates.
For further details on the transactions with key management
personnel, see note 9 and the remuneration report.
29 Non-controlling interest
Non-controlling interest balances are valued on acquisition as a
proportion of the fair value of net assets to which the
non-controlling interest relates. Post acquisition the
non-controlling interest is valued as the original value plus/minus
the comprehensive income/loss owed to the non-controlling interest
and minus any dividend paid to the non-controlling interest.
There exists a non-controlling interest in Jawoll, an 80%
subsidiary of B&M European Value Retail Germany GmbH, which was
created on purchase of that company in April 2014. The percentage
has not changed over the period of ownership.
In the 53 weeks to 31 March 2018, GBP119k has been accrued to
the non-controlling interest in Jawoll (52 weeks 2017: GBP2,082k),
and no dividends have been paid (2017: no dividends).
The summarised financial information of the subsidiary is as
follows:
Period ended Period ended
31 March 25 March
2018 2017
GBP'000 GBP'000
Revenue 200,306 178,395
EBITDA 5,621 11,677
Profit after tax 859 5,908
Net cashflow 4,240 (3,586)
31 March 25 March
2018 2017
As at GBP'000 GBP'000
Non-current assets 38,756 38,062
Current assets 54,961 55,334
Non-current liabilities (7,357) (9,248)
Current liabilities (20,310) (19,026)
------------ ------------
Net assets 66,050 65,122
------------ ------------
There previously existed an additional non-controlling interest
in BestFlora GmbH, which was a 75% subsidiary of Jawoll at the
start of the prior year. This company was incorporated into the
group in April 2014. In December 2016 Jawoll purchased the
remaining 25% share and therefore this additional non-controlling
interest no longer exists. During the prior year GBPnil was accrued
to this non-controlling interest and GBPnil was paid out in
dividends.
Jawoll bought out the non-controlling interest for EUR210k, when
it had a book value on the Group accounts of EUR476k. There was
therefore a profit recognised in reserves of EUR266k, which has
translated to GBP224k for these accounts. The effects of this
transaction can be seen in the Statement of Changes in Equity.
BestFlora is considered immaterial for further disclosure.
30 Capital management
For the purpose of the Group's capital management, capital
includes issued capital and all other equity reserves attributable
to the equity holders of the parent. The primary objective of the
Group's capital management is to maximise the shareholder
value.
In order to achieve this overall objective, the Group's capital
management, amongst other things, aims to ensure that it meets
financial covenants attached to the interest-bearing loans and
borrowings that define capital structure requirements. Breaches in
meeting the financial covenants would permit the bank to
immediately call loans and borrowings. There have been no breaches
in the financial covenants of any interest-bearing loans and
borrowing in the current or prior period.
The Group manages its capital structure and makes adjustments in
light of changes in economic conditions and the requirements of the
financial covenants.
To maintain or adjust the capital structure, the Group may
adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares.
The Group uses the following definition of net debt:
External interest bearing loans and borrowings less cash and
short-term deposits.
The interest bearing loans figure used is the gross amount of
cash borrowed at that time, as opposed to the carrying value under
the amortised cost method, and includes finance leases.
31 March 25 March
2018 2017
As at GBP'000 GBP'000
Interest bearing loans and borrowings 619,968 557,463
Less: Cash and short term deposits - overdrafts (84,704) (155,551)
Net debt 535,264 401,912
-------- ---------
31 Post balance sheet events
There have been no material events between the balance sheet
date and the date of issue of these accounts.
32 Dividends
An interim dividend of 2.4 pence per share (GBP24.0m) was paid
in December 2017.
A final dividend of 4.8 pence per share (GBP48.0m), giving a
full year dividend of 7.2 pence per share (GBP72.0m), is
proposed.
Relating to the prior year:
A special dividend of 10.0 pence per share (GBP100.0m) was paid
in July 2016.
An interim dividend of 1.9 pence per share (GBP19.0m) was paid
in December 2016.
A final dividend of 3.9 pence per share (GBP39.0m), giving a
full year (non-special) dividend of 5.8 pence per share (GBP58.0m),
was paid in August 2017.
33 Contingent liabilities and guarantees
As at 31 March 2018 and 25 March 2017, B&M European Value
Retail S.A., B&M European Value Retail 1 S.Ã r.l., B&M
European Value Retail 2 S.Ã 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 GBP345.0m for the loans
(2017: GBP300m), with the balance held in B&M European Value
Retail Holdco 4 Ltd, and GBP250.0m for the notes, with the balance
held in B&M European Value Retail S.A.
As at 31 March 2018, 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
GBP15.8m, with the balance held in Heron Foods Ltd.
34 Directors
The directors that served during the period were:
Name
Peter Bamford - (appointed as Chairman on 1 March 2018)
Sir T Leahy - (retired from the Board on 1 March 2018)
S Arora (CEO)
P McDonald (CFO)
T Hübner
R McMillan
K Guion
H Brouwer
D Novak - (retired from the Board 18 January 2018)
All directors served for the whole period except where indicated
above.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Group and Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. Under that law they
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by the EU and applicable law and have prepared
the Company financial statements in accordance with Luxemburg legal
and regulatory requirements regarding the preparation of annual
accounts ("Lux GAAP").
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of their
profit or loss
for that period. In preparing each of the Group and Company
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgments and estimates that are reasonable and
prudent;
-- present the financial statements and policies in a manner
that provides relevant, reliable, comparable and understandable
information;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs or in accordance with Lux GAAP are
insufficient to enable users to understand the impact of particular
transactions, other
events and conditions on the entity's financial position and
financial performance; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with company law. They have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Group and to prevent and detect
fraud and other irregularities.
The Directors are responsible for preparing the Annual Report in
accordance with applicable laws and regulations. Having taken
advice from the Audit & Risk Committee the Directors consider
the Annual Report and the financial statements taken as a whole,
provides the information necessary to assess the Group's
performance, business model and strategy and is fair, balanced and
understandable.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. The financial statements are published on the
Company's website.
Legislation in Luxembourg governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
We confirm that to the best of our knowledge:
-- the consolidated financial statements of B&M European
Value Retail S.A. ("Company") presented in this Annual Report and
established in conformity with International Financial Reporting
Standards as adopted
in the European Union give a true and fair view of the assets,
liabilities, financial position, cash flows and profits of the
Company and the undertakings included within the consolidation
taken as a whole;
-- the annual accounts of the Company presented in this Annual
Report and established in conformity with the Luxembourg legal and
regulatory requirements relating to the preparation of annual
accounts give a true and fair view of the assets, liabilities,
financial position and profits of the Company;
-- the Strategic Report includes a fair review of the
development and performance of the business and position of the
Company and the undertakings included within the consolidation
taken as a whole,
together with a description of the principal risks and
uncertainties it faces; and
-- this Annual Report (including the financial statements),
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy.
Approved by order of the Board.
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
30 May 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UKRKRWNAVUAR
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