TIDMBME
RNS Number : 1164H
B&M European Value Retail S.A.
13 November 2018
13 November 2018
B&M European Value Retail S.A.
Interim Results Announcement
Solid first half and start to H2
B&M European Value Retail S.A. ("the Group"), the UK's
leading variety goods value retailer, today announces its interim
results for the 26 weeks to 29 September 2018.
HIGHLIGHTS
-- Group revenues increased by +16.1% to GBP1,563.0m, +16.0% at constant currency(1)
-- B&M(2) UK revenues were up +7.1%, which includes
like-for-like revenues(3) of +0.9% on an underlying basis(4)
excluding the non-comparable Easter trading week which fell in week
53 of FY18. Like-for-like revenues were flat if no adjustment is
made for the non-comparable Easter trading week
-- At the start of Q3 like-for-like sales growth so far in
B&M fascia stores in the UK has been similar to H1, and the
business is well placed for the "golden quarter" trading
-- Group adjusted EBITDA(5) increased by 13.5% to GBP131.8m
(FY18: GBP116.1m) and the B&M UK adjusted EBITDA(5) increased
by +12.1%
-- Profit before tax increased by 32.5% to GBP115.0m (FY18: GBP86.8m)
-- Earnings per share 9.3p, an increase of 36.8% (FY18: 6.8p).
Adjusted Diluted earnings per share(5) 8.0p, up 14.3% (FY18:
7.0p)
-- Cash flow from operations GBP67.0m (FY18: GBP44.2m),
reflecting EBITDA(5) growth and working capital discipline
-- Interim dividend(6) increased by 12.5% to 2.7p per share
(FY18: 2.4p per share) to be paid on 21 December 2018
-- 22 gross new B&M UK store openings of which 5 are
relocations (net 15 after 2 closures) and on track to open at least
58 gross new B&M stores this financial year
-- German business, Jawoll, opened 2 new stores in the period,
and on track to open 10 new stores this financial year
-- Jawoll's revenue growth was +4.1%, although margin was
impacted as expected by clearance activity on old stock lines as
Jawoll introduces more B&M sourced products
-- Heron Foods has continued to trade well and opened 9 gross
new stores, net 4 and on track to open at least 20 gross new stores
this financial year
-- Babou, a value retailer in France, acquired in October 2018
with 95 stores, providing a platform for future growth in a large
and attractive market
Simon Arora, Chief Executive, said,
"B&M has delivered a good first half performance. The core
B&M fascia stores made good progress and we have made a solid
start in the second half of the financial year. Heron Foods has
grown strongly in the UK, and in Jawoll the new management team is
now utilising the B&M supply chain, with clear early signs that
customers are responding positively to the new products.
I'm delighted that having completed our recent purchase of Babou
in France, we are now positioned to expand B&M's disruptive,
value-led model in Europe's three largest consumer markets.
With the core B&M UK business having had a record half year
performance, we are well placed to prosper in a difficult and
uncertain retail environment."
Financial Results (unaudited)
H1 FY 2019(7) H1 FY 2018(7) Change
Total Group revenues GBP1,563.0m GBP1,346.4m +16.1%(8)
B&M GBP1,276.7m GBP1,192.0m +7.1%
Jawoll GBP111.2m GBP106.8m +4.1%
Heron(8) GBP175.1m GBP47.5m +268.4%
Total Group revenues at - - +16.0%
constant currency(1)
---------------- ---------------- ------------
Number of stores
Group 948 893 +6.2%
B&M 591 552 +7.1%
Jawoll 88 82 +7.3%
Heron 269 259 +3.9%
---------------- ---------------- ------------
Adjusted EBITDA(5) GBP131.8m GBP116.1m +13.5%
B&M GBP120.8m GBP107.8m +12.1%
Jawoll GBP1.1m GBP5.9m -80.8%
GBP2.4m
Heron(8) GBP9.9m +311.6%
---------------- ---------------- ------------
Adjusted EBITDA(5) margin
% 8.4% 8.6% (19)bps
---------------- ---------------- ------------
Profit before tax GBP115.0m GBP86.8m +32.5%
---------------- ---------------- ------------
Adjusted profit before
tax(5) GBP98.8m GBP89.7m +10.2%
---------------- ---------------- ------------
Adjusted diluted EPS(5) 8.0p 7.0p +14.3%
---------------- ---------------- ------------
EPS 9.3p 6.8p +36.8%
---------------- ---------------- ------------
Ordinary dividends(6) 2.7p 2.4p 12.5%
---------------- ---------------- ------------
(1) Constant currency comparison involves restating the prior
year Euro revenues using the same exchange rate as used to
translate the current year Euro revenues.
(2) References in this announcement to the B&M business,
includes the B&M fascia stores in the UK except for the
'B&M Express' fascia stores. References in this announcement to
the Heron Foods business, includes both the Heron Foods fascia and
B&M Express fascia convenience stores in the UK.
(3) Like-for-like revenues relates to the B&M estate only
and includes each store's revenue for that part of the current
period that falls at least 14 months after it opened; compared with
its revenue for the corresponding part of the previous period. This
14 month approach has been taken as it excludes the two month halo
period which new stores experience following opening.
(4) The underlying like-for-like calculation excludes the Good
Friday Easter week's trading from the previous financial year, as
there was no Good Friday Easter week in the current financial
year.
(5) The Directors consider adjusted figures to be more
reflective of the underlying business performance of the Group and
believe that this measure provides additional useful information
for investors on the Group's performance. Further details can be
found in notes 3 and 5.
(6) Dividends are stated as gross amounts before deduction of
Luxembourg withholding tax which is currently 15%.
(7) The H1 FY 2019 figures represent the 26 week performance to
29 September 2018 and the H1 FY2018 figures represent the 26 week
performance to 23 September 2017.
(8) For the prior period in FY 2018, Heron Foods was only part
of the Group for 8 weeks out of the whole 26 week period. Total
Group revenues in the 26 week period to 29 September 2018 excluding
Heron Foods were GBP1,387.9m, being an increase of 6.9% compared
with the 26 week period to 23 September 2017. The operating costs
of the Group for Heron Foods in the 26 week period to 29 September
2018 were GBP45.4m excluding depreciation.
(9) Net capital expenditure includes the purchase of property,
plant and equipment, intangible assets and proceeds of sale of any
of those items.
(10) Net debt was GBP588.4m at the period end. This can be
reconciled as GBP637.6m of gross debt (note 10) and GBP8.4m of
finance leases, GBP6.9m of overdraft netted against GBP64.5m of
cash.
Analyst Meeting & Webcast
An Analyst Meeting in relation to the Interim Results will be
held today at 8.30 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: 3218596
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
598 stores in the UK operating under the "B&M" brand, 274
stores under the "Heron Foods" and "B&M Express" brands, 90
stores in Germany primarily operating under the "Jawoll" brand, and
95 stores in France operating under the "Babou" brand as at 3
November 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
OVERVIEW
The business has made solid progress, both financially and
strategically, in the first half of the year. B&M and Heron
Foods have carried on rolling out new stores and built a strong
future new store pipeline, whilst delivering solid progress in
revenues and profits. Work on our large new distribution centre in
Bedford is also on track. In Germany the early work by the new
management team on improving the Jawoll product offer, aligning it
more closely with B&M's, has been received well by customers.
We have also taken an important step into another major European
market with the acquisition of the Babou chain of 95 stores in
France last month.
Financial Performance
Group revenues for the 26 weeks ended 29 September 2018 grew by
+16.1% to GBP1,563.0m and by +16.0% on a constant currency basis(1)
.
B&M UK
In the B&M store estate in the UK, revenues grew by +7.1% to
GBP1,276.7m, (FY18 H1: GBP1,192.0m) with that growth being driven
by the continued successful execution of our new store opening
programme, with 15 net new stores opened in the first half of the
financial year and the annualisation of the net 39 new stores
opened in FY2018.
Like-for-like ("LFL") sales in the first half of the year were
+0.9% on an underlying basis(4) , excluding the non-comparable
Easter week in the prior year. They were flat if no adjustment is
made for the non-comparable Easter trading week. The underlying LFL
performance of +3.6% in the first quarter was pleasing, but we saw
a slowdown in July and August LFL having sold through much of our
Gardening and Outdoor product categories earlier than we normally
would. Our August end of season sale was much less significant than
last year due to limited Gardening and Outdoor product left in
stores. LFL sales returned to growth in September as the new
Autumn/Winter product ranges were delivered into stores.
There were a total of 22 new store openings and 7 store closures
in the first half of FY19. The 7 store closures included 5
relocations as we have continued to take advantage of opportunities
presented by the current retail property market to relocate stores
to larger and more modern premises, with higher levels of store
contribution. As previously indicated, the new store opening
programme is weighted to the second half of FY19 and we expect to
open at least 58 gross new stores of which 5 will be relocations in
the full year. The UK new store performance and returns continue to
remain attractive.
Gross margins improved by 53bps relative to last year in the
period, with the margin benefitting from reduced levels of
clearance activity on Gardening and Outdoor products as a result of
the strong sell through in the first quarter following the hot
summer that the UK enjoyed. We are however still continuing to see
a shift in the sales mix towards the lower margin grocery and FMCG
products as the consumer continues to seek value. We expect that
this will remain a factor in the second half of the year, as will
achieving a satisfactory sell-through of seasonal Winter
products.
Operating costs excluding depreciation and amortisation
increased by 7.6% to GBP316.1m, (FY18: GBP293.8m) and costs as a
percentage of revenues increased by 11bps to 24.8%, and we continue
to pro-actively manage our cost base. We have seen some operating
leverage in the store cost base with the impact of the National
Living Wage having been mitigated by productivity improvements.
However, our transport and distribution costs as a percentage of
sales have worsened by 25bps as a result of inflationary cost
increases in both fuel and staff expenses.
In the B&M business(2) , the adjusted EBITDA(5) increased by
12.1% to GBP120.8m (FY18: GBP107.8m) and the adjusted EBITDA(5)
margin increased by 42bps to 9.5%.
Jawoll
In our German business Jawoll, revenues grew to GBP111.2m, which
was a +4.1% increase over the GBP106.8m achieved in FY18 (+3.5% in
local currency). The increase in sales has been driven by a modest
improvement in the like-for-like sales performance and the
annualisation of the FY18 new store openings. While awaiting the
benefit of greater sourcing from the B&M supply chain, we have
only opened 2 new stores in FY19 and both were towards the end of
the period.
The first half of the year has been a period of change at Jawoll
with the new management team accelerating the changes in the
product offer to products sourced from the B&M supply chain on
general merchandise lines whilst also clearing old slow-moving
stocks to allow the new products to be displayed in store.
The gross margin percentage at Jawoll was impacted by the
clearance activity and was 292bps lower than last year at 33.8%, in
line with planned levels. The clearance activity has been
successful and although there is still some further stock to clear,
we would expect to see some margin progression during the second
half of the year as the increased mix of B&M sourced products
has a positive impact on performance.
The move to increased direct sourcing in Germany has also led to
some short term increases in warehousing costs and this, combined
with the clearance activity, has resulted in a decrease in the
adjusted EBITDA(5) of 80.8% to GBP1.1m (FY18: GBP5.9m).
Heron Foods
Our discount convenience chain, Heron Foods(2) , generated
revenues of GBP175.1m, compared to the GBP47.5m achieved in the two
months of ownership in FY18(8) . The business continues to perform
well and has maintained good like-for-like sales momentum, with the
ambient food ranges in particular performing strongly. There have
been 4 new store openings this year, increasing the number of
stores to 269 at the end of the first half and we expect to have
opened at least 20 stores in the full year.
The adjusted EBITDA(5) was GBP9.9m, which compares to the
GBP2.4m in the part period of ownership in FY18 and the EBITDA
margin improved by 59bps to 5.6%.
Group
The operating costs of the Group in the first half of FY19,
excluding depreciation and amortisation, grew by 17.1% to
GBP397.9m, including new store pre-opening costs. Depreciation and
amortisation expenses grew by 36.9% to GBP21.8m, reflecting the
investment in new stores and the additional depreciation on the
non-comparable period relating to Heron Foods.
Overall Group adjusted EBITDA(5) increased by 13.5% to
GBP131.8m. In the B&M business, the adjusted EBITDA(5)
increased by 12.1% to GBP120.8m (FY18: GBP107.8m). In Germany the
adjusted EBITDA decreased by 80.8% to GBP1.1m and an additional
adjusted EBITDA(5) of GBP7.5m was contributed by Heron Foods.
The net interest charges were GBP11.2m, which compares to
GBP10.5m in the same period in FY18, reflecting the increase in UK
LIBOR rates on the Group's loan and revolving credit facilities as
well as the additional interest charge on the loan facilities that
remained in place following the acquisition of Heron Foods in
August 2017.
The Group's net capital expenditure was GBP40.3m(9) which was
principally driven by the Group's new store opening programme,
having opened 28 stores, including relocations across the Group. An
additional GBP8.1m has been incurred on freehold store properties
in order to secure specific sites, with the intention of entering
into sale and lease backs of these properties in early 2019 in
keeping with the Group's capital light property strategy. A further
GBP1.7m has been incurred on the new Southern warehouse as building
works on the site have now commenced.
The cash flow from operations was GBP67.0m, which was an
increase of 51.5% from the comparable period last year, with the
Group benefitting from the improvement in the EBITDA performance
and tight working capital disciplines.
The business continues to de-lever and net debt(10) to adjusted
annualised EBITDA was 2.0 times at the end of September 2018, which
compares to 2.2 times at the end of September 2017, (this included
a pro forma adjustment following the Heron Foods acquisition). This
de-leveraging profile is despite the GBP64.8m that has been
incurred on freehold stores and the expenditure on the Southern
Distribution Centre land and buildings in the last 12 months.
The Group acquired Paminvest SAS in October 2018, which trades
under the name of Babou Stores and operates in France, together
with its third party distribution services provider, for a combined
acquisition price of EUR94.1m and with an EBITDA of EUR24.7m for
the year ending January 2018. The acquisition was financed by an
additional loan facility secured by the Group with an additional
annual interest charge of GBP1.5m. We would expect that the Group
would continue to remain below its 2.25 times net debt to adjusted
annualised EBITDA leverage target.
Dividend
An interim dividend of 2.7p per Ordinary Share will be paid on
21 December 2018 to shareholders on the register at 23 November
2018 which is an increase of 12.5% on the prior year (FY18: 2.4p).
The dividend payment will be subject to a Luxembourg withholding
tax of 15%.
Shareholders and Depository Interest holders can obtain further
information on the methods of receiving their dividends on our
website www.bandmretail.com or by visiting the website of our
Registrar, Capita Asset Services at www.capitashareportal.com
Strategic Development
We are excited about the opportunities for B&M to be one of
the winners in the structural shift towards value retail which we
also see taking place across Europe. Successful, profitable general
merchandise discount formats are emerging in major markets as
economic pressures and profound changes in retailing provide
fertile conditions in which they can grow. In the UK we are already
one of the leading value retailers. We now also have a
strengthening platform in Germany, as we apply more fully the
B&M sourced general merchandise to our Jawoll business there.
The recent acquisition of Babou in France provides us with a solid
base from which to build out a strong position in another large
European consumer market, whilst allowing buying synergies between
our German and French retail operations.
1. Deliver great value to our shoppers
B&M's unique sourcing model and low operating costs are
vital elements of our competitiveness. We can offer great value to
our customers week-in, week-out because of our disciplined approach
to keeping our running costs low, buying in large volumes direct
from factories and stocking only a limited assortment of the
best-selling products at any one time. The B&M model is a
profitable one only because of the rigour we apply to keeping costs
and therefore prices down. Over the last two years we have worked
hard to minimise the impact on our customers of the return of
inflation to UK retailing, and they have rewarded us by returning
regularly to our stores at a time when many other retailers are
experiencing sharp reductions in footfall.
2. Investing in new stores
Whilst our UK store network continues to expand both in our
heartland areas and in towns and cities where we are not
represented, there remain many areas where we see profitable
opportunities for future expansion ahead of us into the long term.
Whether we open for the first time in a town or in an area where we
are well-established, the customer response remains the same; they
will visit and buy regularly from us. That is why our model is
profitable and high-returning, and it is also why we see the
potential for at least 950 B&M stores (excluding Heron Foods
and B&M Express) across the UK from our current base of
591.
We are expanding at a rapid but controlled pace, focused on
maintaining the high quality of our stores and sites, which has
underpinned our success to date. We opened 22 new stores in the
first half of the financial year and the customer response to those
stores has been pleasing. This year's new store programme was
planned to be more heavily weighted towards the second half of the
financial year because of the growing proportion of purpose-built
units and we are on track to exceed our initial forecast of 50 new
stores (before relocations and closures). We now expect to open at
least 58 new stores, offset by the 5 relocations (typically where a
lease expiry means we can move to a larger, more profitable unit
nearby) and the 2 closures already completed in the first half of
the year. Our forward pipeline of new stores also remains
strong.
It is now a little over a year since we acquired Heron Foods,
which is a complementary brand and format to B&M, because it
operates in neighbourhood locations with small catchment sizes and
customers who typically walk less than a mile to a store. Heron
Foods has continued to perform well and it has fully confirmed our
confidence in its ability to expand as it broadens its geographic
footprint, as well as providing the infrastructure for B&M
stores to broaden its offer successfully into the frozen and
chilled food categories. Heron Foods opened 4 new stores in the
first half of the financial year and is on track to open a total of
20 in the year as a whole.
In Germany, Jawoll opened just 2 new stores. Given the need for
the new management team to focus on the priority of improving the
product range, the new store programme has temporarily been slowed
down. As the proportion of the range direct-sourced through the
B&M supply chain rises, as planned, in the months ahead and as
old inventory is cleared from stores and the distribution centre, a
modest programme of new store openings will resume. A further 8 new
stores are planned in the remainder of the year. Also a strong
pipeline of new sites has been secured and the new stores programme
can be accelerated from next year when the changes to the ranges
are nearing completion.
3. Develop our international business
We have made important progress with our ambition to develop a
substantial international business. In Germany, the new management
team under Christian Müller has now been in place for several
months and they have made significant progress in improving the
Jawoll product offer. Inevitably, the need to discontinue slow
selling old stock in the business has disrupted trade in the short
term. This has reduced profitability in the first half of the
financial year, but the early signs are that customers are buying
the new products. As the weighting of the new ranges in the mix
grows quickly in the months ahead, our confidence is growing that
the reshaped offer will resonate well with German consumers.
The acquisition of the 95-strong Babou store chain in France
last month gives us a platform to build a business in a third large
European consumer market, in which a number of privately-owned but
profitable and growing general merchandise discount participants
are already doing well. Importantly, we are applying the lessons
learned in Germany from the start by having recruited an
experienced new CEO, Cedric Mahieu, who has been working already
with the B&M team for several months developing a full
understanding of our model as well as preparing a comprehensive
integration plan for the acquired business. The store base and
infrastructure of Babou fits well with our requirements and
although some changes will be made to the offer for customers as we
apply the B&M approach, the costs associated with these changes
have been built into our plans from the outset.
4. Investment in our people and infrastructure
We are now well into the construction phase of the c.1 million
square feet Southern Distribution Centre in Bedford which we have
invested in to ensure we have sufficient long-term supply chain
capacity ahead of us for. The works on new additional facility are
on track for opening in May 2019.
We are investing in a digital technology work management system,
which will be trialled in our B&M stores initially in the New
Year. This enable store managers to plan work schedules for
colleagues more efficiently using digital technologies and apps. It
is expected to bring productivity gains in FY2020.
We have continued to invest in senior management positions
across our business as it continues to grow, with senior Retail
Operations and Buying team appointments in B&M in the UK. We
have recruited a new CEO for the French business and have a number
of senior recruitments taking place in its management teams
currently.
Outlook
Trading conditions across the retail sector remain challenging,
driven by a combination of sluggish economic growth in our core UK
market, profound structural change in the retail industry and the
uncertainty around Brexit. In that context though, B&M remains
a clear winner and is well-positioned to extend its strong 13 year
track record of profitable growth as consumers seek out value.
Much remains to be done in our German business before we can
realise the significant potential we see in the German market with
Jawoll. We see promising signs that the new management team are
making the necessary changes to the product offering successfully.
The second half of this financial year will give us an accurate
basis to gauge Jawoll's progress, but the early indications, in
particular the performance of new B&M-sourced ranges, are
encouraging.
I am delighted that after a lengthy period of study, dialogue
and negotiation, we have been able to establish a good foothold in
a new, large market for the Group with the acquisition of Babou.
France offers exciting potential for growth with a profitable
existing value retail sector performing well, in which we expect to
develop in the years ahead. Babou is a good platform from which
B&M can participate in that growth and can pursue further its
international ambitions.
In recent months we have met the challenge of trading against
last year's exceptionally strong performance, and the effects of a
long warm summer which has partly disrupted the normal pattern of
trade. While the important Christmas trading period lies ahead, we
are well placed to prosper in a difficult and uncertain retail
environment.
Principal Risks and Uncertainties
There are a number of risks and uncertainties which could have a
material negative impact on the Group's performance over the
remainder of the current financial year. These could cause our
actual results to materially differ from historical or expected
results. The Board does not believe that these risks and
uncertainties are materially different to those published in the
annual report for the year ended 31 March 2018.
These risks comprise high levels of competition, the broader
economic environment and market conditions, failure to comply with
laws and regulations, failure to maintain and invest in key
infrastructure, inherent risks in international expansion,
disruption to key IT systems, cyber security and business
continuity, credit risk and liquidity, fluctuations in commodity
prices and cost inflation, disruption in supply chain, failure of
stock management controls key management reliance, availability of
suitable new stores, and regulatory, tax and customs effects
generally on the UK's exit from the EU.
Whilst the uncertainties around Brexit are well documented
elsewhere, we are relatively better placed than others as our
supply chains do not materially depend on trade flows between the
UK and continental Europe. We also have currency hedging policies
in place to withstand short-term volatility in the value of
Sterling against the US Dollar being the principal currency in
which we procure goods from the Far East.
Detailed explanations of these risks are set out on pages 26 to
29 of the Annual Report 2018 which is available at
www.bandmretail.com
Simon Arora
Chief Executive
13 November 2018
Consolidated statement of Comprehensive Income
26 weeks 53 weeks
26 weeks ended ended ended
29 September 23 September 31 March
2018 2017 2018
Note GBP'000 GBP'000 GBP'000
Revenue 2 1,562,960 1,346,372 3,029,802
Cost of sales (1,033,275) (890,471) (2,000,927)
Gross profit 529,685 455,901 1,028,875
Administrative expenses (403,253) (357,693) (789,072)
Operating profit 126,432 98,208 239,803
Share of profits of investments in associates 879 - 1,711
Profit on ordinary activities before interest
and tax 127,311 98,208 241,514
Finance costs (12,333) (11,411) (23,948)
Finance income 53 32 182
Gain on revaluation of financial instrument - - 11,568
Profit on ordinary activities before tax 115,031 86,829 229,316
Income tax expense (22,087) (18,490) (43,511)
Profit for the period 92,944 68,339 185,805
-------------- ------------- -----------
Attributable to non-controlling interests (282) 435 (78)
Attributable to owners of the parent 93,226 67,904 185,883
Other comprehensive income for the period
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on retranslation of
subsidiary and associate accounts 1,989 1,636 205
Fair value movements recorded in the hedging
reserve 17,925 (17,004) (15,659)
Items that will not be subsequently reclassified
to profit or loss:
Actuarial gain on the defined benefit pension
scheme - - 21
Tax effect of other comprehensive income (2,907) 3,231 2,470
Total comprehensive income for the period 109,951 56,202 172,842
-------------- ------------- -----------
Attributable to non-controlling interests 13 759 119
Attributable to owners of the parent 109,938 55,443 172,723
Earnings per share
Basic earnings attributable to ordinary
equity holders (pence) 5 9.3 6.8 18.6
Diluted earnings attributable to ordinary
equity holders (pence) 5 9.3 6.8 18.6
All operations are classified as continuing. The accompanying
accounting policies and notes form an integral part of these
financial statements.
Consolidated statement of Financial Position
29 September 23 September 31 March
2018 2017 2018
Note GBP'000 GBP'000 GBP'000
Assets
Non-current
Goodwill 7 930,279 929,476 929,718
Intangible assets 7 121,378 121,009 120,962
Property, plant and equipment 8 326,981 242,844 308,653
Investments accounted for using
the equity method 6,498 4,520 5,140
Other receivables 2,362 3,434 3,187
Deferred tax asset 2,360 6,011 5,654
------------ ------------ -----------
1,389,858 1,307,294 1,373,314
------------ ------------ -----------
Current
Cash and cash equivalents 64,523 65,606 90,816
Inventories 601,741 539,260 558,690
Trade and other receivables 50,575 67,137 34,042
Other current financial assets 16,466 1,508 -
Income tax receivable 2,528 - -
735,833 673,511 683,548
------------ ------------ -----------
Total assets 2,125,691 1,980,805 2,056,862
------------ ------------ -----------
Equity
Share capital 9 (100,056) (100,048) (100,056)
Share premium (2,474,249) (2,474,131) (2,474,249)
Merger reserve 1,979,131 1,979,131 1,979,131
Retained earnings (372,677) (232,794) (327,073)
Legal reserve (10,010) (10,000) (10,000)
Put/call option reserve 13,855 13,855 13,855
Hedging reserve (486) 15,123 14,532
Foreign exchange reserve (9,527) (9,137) (7,833)
Non-controlling interest (13,705) (14,332) (13,692)
(987,724) (832,333) (925,385)
------------ ------------ -----------
Non-current liabilities
Interest-bearing loans and borrowings 10 (557,960) (559,891) (558,426)
Finance lease liabilities (6,456) (8,293) (7,306)
Other financial liabilities - (29,569) (19,209)
Other liabilities (88,388) (85,794) (87,130)
Deferred tax liabilities (25,077) (23,231) (24,495)
Provisions (480) (1,571) (379)
(678,361) (709,349) (696,945)
------------ ------------ -----------
Current liabilities
Interest-bearing loans and borrowings 10 (75,212) (71,432) (47,212)
Overdrafts (6,934) (7,941) (6,112)
Trade and other payables (327,069) (315,991) (336,072)
Finance lease liabilities (1,909) (1,923) (1,870)
Other financial liabilities (20,980) (20,135) (16,666)
Income tax payable (21,768) (15,864) (19,677)
Provisions (5,734) (5,837) (6,923)
------------ ------------ -----------
(459,606) (439,123) (434,532)
------------ ------------ -----------
Total liabilities (1,137,967) (1,148,472) (1,131,477)
------------ ------------ -----------
Total equity and liabilities (2,125,691) (1,980,805) (2,056,862)
------------ ------------ -----------
The accompanying accounting policies and notes form an integral
part of this financial information. The condensed financial
statements were approved by the Board of Directors on 9 November
2018 and signed on their behalf by:
S. Arora, Chief Executive Officer.
Consolidated statement of Changes in Shareholders' Equity
Non- Total
Foreign Put/call control. Share-
Share Share Retained Hedging Legal Merger exchange option . 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 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 - - (39,000) - - - - - - (39,000)
Effect of
share options 48 1,649 (187) - - - - - - 1,510
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total for
transactions
with owners 48 1,649 (39,187) - - - - - - (37,490)
Profit for the
period - - 67,904 - - - - - 435 68,339
Other
comprehensive
income - - - (13,773) - - 1,312 - 324 (12,137)
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total
comprehensive
income for
the period - - 67,904 (13,773) - - 1,312 - 759 56,202
Balance at 23
September
2017 100,048 2,474,131 232,794 (15,123) 10,000 (1,979,131) 9,137 (13,855) 14,332 832,333
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Dividend
payments to
owners - - (24,013) - - - - - - (24,013)
Effect of
share options 8 118 299 - - - - - - 425
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total for
transactions
with owners 8 118 (23,714) - - - - - - (23,588)
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Profit for the
period - - 117,979 - - - - - (513) 117,466
Other
comprehensive
income - - 14 591 - - (1,304) - (127) (826)
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total
comprehensive
income for
the period - - 117,993 591 - - (1,304) - (640) 116,640
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
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
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Dividend
payments to
owners - - (48,027) - - - - - - (48,027)
Effect of
share options - - 415 - - - - - - 415
Transfer to
legal reserve - - (10) - 10 - - - - -
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total for
transactions
with owners - - (47,622) - 10 - - - - (47,612)
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Profit for the
period - - 93,226 - - - - - (282) 92,944
Other
comprehensive
income - - - 15,018 - - 1,694 - 295 17,007
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Total
comprehensive
income for
the period - - 93,226 15,018 - - 1,694 - 13 109,951
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Balance at 29
September
2018 100,056 2,474,249 372,677 486 10,010 (1,979,131) 9,527 (13,855) 13,705 987,724
-------- --------- -------- -------- -------- ----------- -------- -------- -------- --------
Consolidated statement of Cash Flows
26 weeks 53 weeks
26 weeks ended ended ended
29 September 23 September 31 March
2018 2017 2018
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 11 66,981 44,208 241,993
Income tax paid (21,548) (22,174) (43,996)
---------------- -------------- ----------
Net cash flows from operating activities 45,433 22,034 197,997
---------------- -------------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (39,104) (24,648) (111,268)
Purchase of intangible assets (1,220) (2,461) (3,362)
Business acquisitions net of cash acquired - (106,436) (106,436)
Sale of shares in Home Focus Group - - 310
Proceeds from the sale of property, plant
and equipment 210 129 554
Finance income received 2 32 182
Dividends received from associates - 1,149 1,149
---------------- -------------- ----------
Net cash flows from investing activities (40,112) (132,235) (218,871)
---------------- -------------- ----------
Cash flows from financing activities
Net receipt of Group revolving bank loans 28,000 70,000 45,000
Net repayment of Heron revolving bank loans (1,191) (8,354) (9,790)
Finance costs paid (10,257) (9,881) (20,192)
Receipt from exercise of employee share
options - 1,300 1,320
Capitalised fees on refinancing - (1,137) (1,647)
Dividends paid to owners of the parent (48,027) (39,000) (63,013)
Repayment of finance lease (960) (613) (1,651)
---------------- -------------- ----------
Net cash flows from financing activities (32,435) 12,315 (49,973)
---------------- -------------- ----------
Net decrease in cash and cash equivalents (27,114) (97,886) (70,847)
Cash and cash equivalents at the beginning
of the period 84,704 155,551 155,551
---------------- -------------- ----------
Cash and cash equivalents at the end of
the period 57,589 57,665 84,704
---------------- -------------- ----------
Cash and cash equivalents comprise:
Cash at bank and in hand 64,523 65,606 90,816
Overdrafts (6,934) (7,941) (6,112)
---------------- -------------- ----------
57,589 57,665 84,704
---------------- -------------- ----------
Notes to the financial information
1 General information and basis of preparation
The results for the first half of the financial year have not
been audited and are prepared on the basis of the accounting
policies set out in the Group's last set of consolidated accounts
released by the ultimate controlling party, B&M European Value
Retail S.A. (the "company"), a company listed on the London Stock
Exchange and incorporated in Luxembourg.
The financial information has been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority (DTR) and with International Accounting Standard (IAS) 34
- "Interim Financial Reporting" as endorsed by the European
Union.
The Group's trade is general retail, with trading taking place
in the UK and Germany.
The principal accounting policies have remained unchanged from
the prior financial information for the Group for the period to 31
March 2018, except that at the start of the financial year the
Group adopted IFRS 15 ' Revenue from contracts with customers' and
IFRS 9 'Financial Instruments', neither of which has had any impact
on the comparative information.
The financial statements for B&M European Value Retail S.A.
for the period to 31 March 2018 have been reported on by the Group
auditor and delivered to the Luxembourg Registrar of Companies. The
audit report was unqualified.
The financial information is presented in pounds sterling and
all values are rounded to the nearest thousand (GBP'000), except
when otherwise indicated.
This consolidated financial information does not constitute
statutory financial statements.
Basis of consolidation
This Group financial information consolidates the financial
information of the company and its subsidiary undertakings together
with the Group's share of the net assets and results of associated
undertakings for the period from 1 April 2018 to 29 September 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.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee.
Specifically, the Group controls an investee if and only if the
Group has:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee)
-- Exposure, or rights, to variable returns from its involvement with the investee, and
-- The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee
-- Rights arising from other contractual arrangements
-- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the statement of comprehensive income from the date the Group gains
control until the date the Group ceases to control the subsidiary,
excluding the situations as outlined in the basis of
preparation.
Going concern
The directors report that, having reviewed current performance
and forecasts, they are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future,
being for a period of not less than 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in preparing the condensed financial statements.
Critical judgments and key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the financial information was
prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash
generating unit exceeds its recoverable amount, which is the higher
of its fair value less costs to sell and its value in use.
The value in use calculation is based on a discounted cash flow
model. The cash flows are derived from the budget for the next five
years and do not include restructuring activities that the Group is
not yet committed to or significant future investments that will
enhance the performance of the CGU being tested.
The recoverable amount is most sensitive to the discount rate
used for the discounted cash flow model as well as the expected
future cash inflows and the growth rate used for extrapolation
purposes. The key assumptions used to determine the recoverable
amount for the different CGUs, including a sensitivity analysis,
have been disclosed in the company's annual report.
Investments in Associates
Multi-lines International Company Ltd (Multi-lines), which is
50% owned by the Group, has been considered by management to be an
associate rather than a subsidiary or a joint venture. Under IFRS
10 control is determined by:
-- Power over the investee.
-- Exposure, or rights, to variable returns from its involvement with the investee.
-- The ability to use its power over the investee to affect the
amount of the investor's returns.
Although 50% owned, 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 in April 2014 included call
and put options over the shares not purchased by the Group,
representing 20% of Jawoll. The options are arranged such that it
is considered likely that either the call or put option will be
taken at the exercise date in 2019.
The exercise price of the options contain a variable element and
as such the risk and rewards of the options are considered to
remain with the non-controlling interest. The purchase of the
non-controlling interest will be recognised upon exercise of one of
the options.
A financial liability has been recognised carried at amortised
cost to represent the expected exercise price, with the
corresponding debit entry to the put/call option reserve.
Management have estimated the future measurement inputs in arriving
at this value, using knowledge of current performance, expected
growth and planned strategy. Any subsequent movements in the
liability will be recognised in profit or loss.
Standards and interpretations applied and not yet applied by the
Group
IFRS 9 'Financial instruments'
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items. This standard replaces IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 is
effective for annual periods beginning on or after 1 January 2018
and simplifies the classification of financial assets for
measurement purposes.
The Group has applied IFRS 9 from 1 April 2018. There is no
impact on the income statement or balance sheet from the adoption
of IFRS 9.
Accounting policy for Financial Instruments
IFRS 9 eliminates the previous IAS 39 category for financial
assets of loans and receivables. Under IFRS 9, on initial
recognition, a financial asset is classified as measured at:
amortised cost, fair value through profit or loss or fair value
though other comprehensive income.
A financial asset is measured at amortised cost if it meets both
of the following conditions: it is held within a business model
whose objective is to hold assets to collect contractual cash
flows; and its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and interest on
the principal amount outstanding. Under IFRS 9 trade receivables,
without a significant financing component, are classified and held
at amortised cost, being initially measured at the transaction
price and subsequently measured at amortised cost less any
impairment loss.
IFRS 9 introduces an 'expected loss' model ('ECL') for
recognising impairment of financial assets held at amortised cost.
The Group has elected to measure loss allowances for trade
receivables at an amount equal to lifetime ECLs. Credit losses are
measured as the present value of all cash shortfalls (i.e. the
difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Group expects to
receive).
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating expected credit losses, the Group considers reasonable
and supportable information that is relevant and available without
undue cost or effort. This includes both quantitative and
qualitative information and analysis based on the Group's
historical experience and informed credit assessment and including
forward-looking information. The Group performs the calculation of
expected credit losses separately for each customer group.
The Group assesses whether a financial asset is in default on a
case by case basis when it becomes probable that the customer is
unlikely to pay its credit obligations.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced IAS
18 Revenue and related interpretations.
The Group has applied IFRS 15 from 1 April 2018 using the
cumulative effective method (without practical expedients), with
the effect of initially applying this standard being recognised at
the date of initial application (1 April 2018). Comparative
information has therefore not been restated.
Under IAS 18 revenue was recognised either over time where there
was continuing service provided to the customer or at the point in
time when the risks and rewards of ownership transferred to the
customer. Under IFRS 15 revenue is recognised when performance
obligations are satisfied. For the Group the transfer of control
under IFRS 15 and satisfaction of performance obligations remains
consistent with the transfer of risks and rewards to the customer
under IAS18. Consequently, there were no profit or loss impacting
adjustments required on application of IFRS 15.
Accounting policy for Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and is recognised at the initial point of
sale goods to the customers, when the risks and rewards of the
ownership of the goods has passed to the buyer. Revenue is stated
net of discounts, rebates, refunds and value-added tax.
Revenue principally represents the amounts receivable from
customers for goods supplied. The vast majority of goods are
supplied immediately at the point of sale in a retail store
environment, and therefore performance obligations are considered
to have been met at the point of sale.
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
accounting definition of the retrospective application of cash
flows, the impact of the Group's past restructuring, the
finalisation of specific discount rates and auditor approval, we
expect to use either the full retrospective or modified
retrospective approach.
Both methods 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 gross operating lease commitment as at March 2018 was
GBP1,257.8m, GBP1,239.1m of which is in relation to property
leases. Our net deferred property liability (GBP98.8m at March
2018) would 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 rental
charge for 2017/18 was GBP150.5m, GBP140.9m of which relates to
property leases.
Whilst cash flows themselves are not affected, 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.
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 EUR1.1310
during the period, with the period end rate being EUR1.1228 (March
2018: EUR1.1336/GBP and EUR1.1410; September 2017: EUR1.1377/GBP
and EUR1.1332/GBP respectively).
26 week period to 29 September UK UK Germany
2018 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,276,697 175,062 111,201 - 1,562,960
EBITDA 122,303 9,894 1,119 15,794 149,110
Depreciation and amortisation (14,629) (4,866) (2,302) (2) (21,799)
Net finance imcome/(costs) 31 (365) (129) (11,817) (12,280)
Income tax (expense)/credit (20,464) (886) 394 (1,131) (22,087)
Segment profit/(loss) 87,241 3,777 (918) 2,844 92,944
Total assets 1,696,640 215,974 134,781 78,286 2,125,691
Total liabilities (345,722) (59,761) (35,397) (697,087) (1,137,967)
Capital expenditure (including
intangible) (31,713) (5,357) (1,535) (1,719) (40,324)
26 week period to 23 September UK UK Germany
2017 B&M Heron Retail Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,192,617 47,521 106,836 (602) 1,346,372
EBITDA 108,221 2,395 5,909 (2,390) 114,135
Depreciation and amortisation (12,344) (1,387) (2,193) (3) (15,927)
Net finance income/(costs) 11 (122) (176) (11,092) (11,379)
Income tax (expense)/credit (18,219) (168) (1,062) 959 (18,490)
Segment profit/(loss) 77,669 718 2,478 (12,526) 68,339
Total assets 1,635,070 200,597 132,713 12,425 1,980,805
Total liabilities (340,996) (55,681) (27,266) (724,529) (1,148,472)
Capital expenditure (including
intangible) (22,970) (1,716) (2,423) - (27,109)
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 266,269 11,746 5,621 (5,240) 278,396
Depreciation and amortisation (26,485) (6,001) (4,392) (4) (36,882)
Net finance 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)
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 to the statement
of comprehensive income below.
26 weeks ended 26 weeks ended 53 weeks ended
29 September 23 September 31 March
Period to 2018 2017 2018
GBP'000 GBP'000 GBP'000
Profit on ordinary activities before
interest and tax 127,311 98,208 241,514
Add back depreciation and amortisation 21,799 15,927 36,882
-------------- -------------- --------------
EBITDA 149,110 114,135 278,396
Reverse the effect of ineffective derivatives (17,322) 928 3,825
Remove costs associated with the acquisition
of Heron - 1,000 1,049
Adjusted EBITDA 131,788 116,063 283,270
Depreciation and amortisation (21,799) (15,927) (36,882)
Net finance costs (12,280) (11,379) (12,198)
Reverse the effects of revaluing the
call/put option - - (11,568)
Reverse the effect of unwinding of
deferred acquisition costs 1,073 900 2,170
Adjusted profit before tax 98,782 89,657 224,792
Adjusted tax (18,902) (18,856) (44,437)
-------------- -------------- --------------
Adjusted profit for the period 79,880 70,801 180,355
-------------- -------------- --------------
Attributable to non-controlling interests (282) 435 (78)
Attributable to owners of the parent 80,162 70,366 180,433
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 were in the prior year in relation to the
purchase of Heron. 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.
All adjusting items relate to the Corporate segment.
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 Business combinations
In the prior year, on 2 August 2017, the Group acquired Heron
Food Group Limited ("Heron"), a discount convenience retailer
incorporated in the UK. The transaction was 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. 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 effect of the acquisition on the Group can be seen in the
segment note (note 2). Further details, including the fair values
of the identifiable assets and liabilities of Heron, have been
disclosed in the Group's 2018 Annual Report.
5 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit 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 basic and diluted earnings per share are calculated on
the same basis except using the adjusted profit or loss
attributable to the equity holders of the parent, as defined in
note 3.
There are share option schemes in place which have a dilutive
effect on all periods presented.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Period to 29 September 24 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Profit for the period attributable to
ordinary equity holders of the Group 93,226 67,904 185,833
Adjusted profit for the period attributable
to ordinary equity holders of the Group 80,162 70,366 180,433
------------- ------------- ----------
Thousands Thousands Thousands
Weighted average number of ordinary
shares for basic loss per share 1,000,561 1,000,120 1,000,353
Effect of dilution:
Employee share options 401 219 298
----------
Weighted average number of ordinary
shares adjusted for the effect of dilution 1,000,962 1,000,339 1,000,651
------------- ------------- ----------
Pence Pence Pence
Basic earnings per share 9.3 6.8 18.6
Diluted earnings per share 9.3 6.8 18.6
Adjusted basic earnings per share 8.0 7.0 18.0
Adjusted diluted earnings per share 8.0 7.0 18.0
------------- ------------- ----------
6 Taxation
The taxation charge for the interim period has been calculated
on the basis of the corporation tax rate for the full year of 19%
(UK) and 30% (Germany) and then adjusted for allowances and
non-deductibles in line with the prior year.
7 Intangible assets
Goodwill Software Brands Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 25 March 2017 841,691 4,620 100,047 1,494 947,852
Additions - 711 1,750 - 2,461
Additions due to Heron acquisition 87,101 1,305 14,178 - 102,584
Effect of retranslation 684 7 104 30 825
At 23 September 2017 929,476 6,643 116,079 1,524 1,053,722
Additions - 901 - - 901
Adjustment to Heron acquisition 479 - - - 479
Disposals - (289) - - (289)
Effect of retranslation (237) (4) (36) (10) (287)
-------- -------- ------- ------- ---------
At 31 March 2018 929,718 7,251 116,043 1,514 1,054,526
Additions - 969 250 1 1,220
Disposals - (12) - - (12)
Effect of retranslation 561 9 84 24 678
-------- -------- ------- ------- ---------
At 29 September 2018 930,279 8,217 116,377 1,539 1,056,412
-------- -------- ------- ------- ---------
Accumulated amortisation / impairment
At 25 March 2017 - 1,425 - 1,043 2,468
Charge for the period - 627 3 113 743
Effect of retranslation - 5 - 21 26
At 23 September 2017 - 2,057 3 1,177 3,237
Charge for the period - 809 10 90 909
Disposals - (289) - - (289)
Effect of retranslation - (2) - (9) (11)
-------- -------- ------- ------- ---------
At 31 March 2018 - 2,575 13 1,258 3,846
Charge for the period - 823 10 52 885
Disposals - (2) - - (2)
Effect of retranslation - 5 - 21 26
-------- -------- ------- ------- ---------
At 29 September 2018 - 3,401 23 1,331 4,755
-------- -------- ------- ------- ---------
Net book value at 29 September 2018 930,279 4,816 116,354 208 1,051,657
-------- -------- ------- ------- ---------
Net book value at 31 March 2018 929,718 4,676 116,030 256 1,050,680
-------- -------- ------- ------- ---------
Net book value at 23 September 2017 929,476 4,586 116,076 347 1,050,485
-------- -------- ------- ------- ---------
An impairment review was carried out over the Goodwill and Brand
assets with indefinite life at 31 March 2018. Details of these
reviews are included in the Group statutory accounts. A full review
will also take place at the next year end date of 30 March
2019.
8 Property, plant and equipment
Plant,
Land and buildings Motor Vehicles fixtures and equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 25 March 2017 46,250 3,485 183,910 233,645
Additions 6,878 407 17,363 24,648
Additions due to Heron acquisition 31,388 5,787 30,124 67,299
Disposals (64) (821) (156) (1,041)
Effect of retranslation 471 8 297 776
At 23 September 2017 84,923 8,866 231,538 325,327
Additions 51,219 4,086 31,315 86,620
Disposals (442) (492) (4,024) (4,958)
Effect of retranslation (165) (3) (133) (301)
At 31 March 2018 135,535 12,457 258,696 406,688
Additions 11,506 2,653 24,945 39,104
Disposals (112) (669) (828) (1,609)
Effect of retranslation 389 9 310 708
------------------ -------------- ----------------------- -------
29 September 2018 147,318 14,450 283,123 444,891
------------------ -------------- ----------------------- -------
Accumulated depreciation
At 25 March 2017 12,685 1,796 53,416 67,897
Charge for the period 2,178 481 12,525 15,184
Disposals (1) (722) (32) (755)
Effect of retranslation 77 3 77 157
------------------ -------------- ----------------------- -------
At 23 September 2017 14,939 1,558 65,986 82,483
Charge for the period 2,429 1,078 16,540 20,047
Disposals (180) (384) (3,848) (4,412)
Effect of retranslation (36) (1) (46) (83)
At 31 March 2018 17,152 2,251 78,632 98,035
Charge for the period 2,469 1,265 17,180 20,914
Disposals (103) (524) (608) (1,235)
Effect of retranslation 89 2 105 196
------------------ -------------- ----------------------- -------
At 29 September 2018 19,607 2,994 95,309 117,910
------------------ -------------- ----------------------- -------
Net book value at 29 September 2018 127,711 11,456 187,814 326,981
------------------ -------------- ----------------------- -------
Net book value at 31 March 2018 118,383 10,206 180,064 308,653
------------------ -------------- ----------------------- -------
Net book value at 23 September 2017 69,984 7,308 165,552 242,844
------------------ -------------- ----------------------- -------
9 Share capital
Nominal Number of
value shares
Allotted, called up and fully paid GBP'000
B&M European Value Retail S.A. Ordinary
shares of 10p each;
As at 25 March 2017 100,000 1,000,000,000
Exercise of employee share options 48 479,782
------- -------------
As at 23 September 2017 100,048 1,000,479,782
Exercise of employee share options 8 81,440
------- -------------
As at 31 March 2018 and 29 September
2018 100,056 1,000,561,222
------- -------------
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.
The outstanding share options can be summarised as follows;
29 September 23 September 31 March
2018 2017 2018
Vested, available to exercise 11,049 92,489 11,049
Vested, not available to exercise (in
holding period) 72,093 - -
Awarded, not vested (subject to conditions) 1,430,597 829,006 832,197
------------ ------------ --------
Total outstanding share options 1,513,739 921,495 843,246
------------ ------------ --------
For the dilutive effect of these, see note 5.
10 Financial liabilities - borrowings
29 September 23 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Current
Revolving facility bank loan 73,000 70,000 45,000
Heron loan facilities - Melton 807 807 807
Heron loan facilities - Offset 605 625 605
Heron loan facilities - Term 800 - 800
------------ ------------ --------
75,212 71,432 47,212
------------ ------------ --------
Non-current
UK Holdco term loan A 297,695 296,866 297,288
High yield bond notes 247,876 247,228 247,558
Heron loan facilities - Melton 4,755 5,647 5,243
Heron loan facilities - Offset 3,664 4,250 3,967
Heron loan facilities - Term 3,970 5,900 4,370
------------ ------------ --------
557,960 559,891 558,426
------------ ------------ --------
All borrowings are held in Sterling.
The term facility bank loans and high yield bonds 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 above loan facilities are as follows:
Interest 29 September 23 September 31 March
Rate Maturity 2018 2017 2018
% GBP'000 GBP'000 GBP'000
Revolving facility bank
loans 2.00% + LIBOR Oct-2018 73,000 70,000 45,000
UK Holdco term loan
A 2.00% + LIBOR Jul-2021 300,000 300,000 300,000
High yield bond notes 4.125% Feb-2022 250,000 250,000 250,000
Heron loan facilities
- Melton 2.25% + LIBOR Jul-2025 5,562 6,453 6,050
Heron loan facilities
- Offset 2.45% + LIBOR Sep-2022 4,269 4,875 4,572
Heron loan facilities
- Term 2.50% + LIBOR Dec-2021 4,770 5,900 5,170
------------ ------------ --------
637,601 637,228 610,792
------------ ------------ --------
11 Reconciliation of profit before tax to cash generated from operations
26 weeks ended 26 weeks ended 23 September 2017 53 weeks ended 31 March
29 September 2018 2018
GBP'000 GBP'000 GBP'000
Profit before tax 115,031 86,829 229,316
Adjustments for:
Interest expense 12,280 11,379 12,198
Depreciation 20,914 15,184 35,231
Amortisation of intangible assets 885 743 1,652
Loss on disposal of property, plant and
equipment 172 156 277
Charge on share options 415 210 615
Change in inventories (42,471) (207,885) (79,099)
Change in trade and other receivables (12,475) 14,360 (1,168)
Change in trade and other payables (8,525) 122,225 39,377
Change in provisions (1,088) 86 1,511
Share of profit from associates (879) - (1,711)
Non-cash foreign exchange effect from
retranslation of subsidiary cash flows 44 (6) (31)
(Profit)/loss resulting from fair value
of financial derivatives (17,322) 927 3,825
------------------ -------------------------------- -----------------------
Cash generated from operations 66,981 44,208 241,993
------------------ -------------------------------- -----------------------
12 Financial instruments
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.
29 September 23 September 31 March
As at 2018 2017 2018
Financial assets: GBP'000 GBP'000 GBP'000
Fair value through profit and loss
Fuel price swap - 43 -
Forward foreign exchange contracts 15,583 - -
Fair value through other comprehensive income
Forward foreign exchange contracts 883 1,465 -
Loans and receivables
Cash and cash equivalents 64,523 65,606 90,816
Trade receivables 8,274 26,348 5,046
Other receivables 3,291 1,150 1,324
------------ ------------ --------
Financial liabilities:
Fair value through profit and loss
Forward foreign exchange contracts 280 - 923
Put/call options over the non-controlling interest of Jawoll 8,720 18,974 8,076
Deferred consideration relating to Heron purchase 11,697 10,595 11,133
Fair value through other comprehensive income
Forward foreign exchange contracts 283 20,135 15,743
Amortised cost
Overdrafts 6,934 7,941 6,112
Interest-bearing loans and borrowings 633,172 631,323 603,426
Trade payables 254,161 243,936 276,569
Other payables 11,849 9,720 7,796
------------ ------------ --------
Financial Instruments at fair value through profit and loss
The put/call options over the non-controlling interest in Jawoll
arose as part of the acquisition of the entity in April 2014. The
valuation here reflects the final estimated valuation unwound to
the period end date, and exchanged at the period end foreign
exchange rate, as the options are priced in Euros. The options
mature 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 assets and liabilities through profit or
loss reflect the fair value of those foreign exchange forward
contracts, interest rate swaps and fuel swaps that are 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
29 September 2018
Foreign exchange contracts 15,903 - 15,903 -
Put/call options on Jawoll non-controlling interest (8,720) - - (8,720)
Deferred consideration relating to Heron purchase (11,697) - - (11,697)
23 September 2017
Foreign exchange contracts (18,670) - (18,670) -
Fuel swap contract 43 - 43 -
Put/call options on Jawoll non-controlling interest (18,974) - - (18,974)
Deferred consideration relating to Heron purchase (10,595) - - (10,595)
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)
The put/call option (relating to Jawoll) and the deferred
consideration (relating to Heron) are valued with reference to the
respective Sale and Purchase Agreements underpinning the
acquisitions, and the key variable in determining the fair values
is the forecast EBITDA of those entities as prepared by management.
The calculation is subsequently discounted to present value.
The other instruments have been valued by the issuing bank,
using a mark to market method. The bank has used various inputs to
compute the valuations and these include inter alia the relevant
maturity date and strike rates, the current exchange rate, fuel
prices and LIBOR levels.
The Group's financial instruments are either carried at fair
value or have a carrying value which is considered a reasonable
approximation of fair value.
13 Related party transactions
There have been no changes in the related-party transactions
described in the last annual report of B&M European Value
Retail S.A. that have had a material effect on the financial
position or performance of the Group in the six months ended 29
September 2018.
The Group has entered into material related party transactions
over the current 26-week period with the following party,
Multi-lines International Company Ltd (Multi-lines), a supplier,
which is an associate of the Group.
26 weeks ended 26 weeks ended 53 weeks ended
29 September 23 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Purchases from associates
Multi-lines 56,495 46,486 146,360
The following table sets out the total amount of net trading
balances with Multi-lines outstanding at the period end.
29 September 23 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
Net trade receivables/(payables)
from associates
Multi-lines 1,389 10,206 (9,586)
------------ ------------ --------
Outstanding trade balances at the balance sheet date are
unsecured and interest free and settlement occurs in cash. There
have been no guarantees provided or received for any related party
trade receivables or payables.
14 Commitments
At the half year date a significant capital commitment exists in
terms of the build of the new southern warehouse, with the building
expected to be handed over in May 2019, at which point work upon
the internal fit out will commence
15 Post balance sheet events
An interim dividend of 2.7 pence per share (GBP27.0m) has been
proposed.
As announced on 19 October 2018 the Group, via the subsidiary
company EV Retail Limited, acquired the entire issued share capital
of Paminvest SAS, a discount general merchandise retailer group
operating with a chain of 95 stores under the trading name Babou in
France, together with its third party distribution service
provider, for a total enterprise value of EUR94.1m.
The transaction was entirely debt financed, resulting in a new
EUR100m loan facility held within the Group company B&M
European Value Retail 4 Ltd. The loan facility has a maximum term
of two years.
Under French GAAP, for the year ended 31 January 2018, the Babou
Stores group had net assets of EUR158.8m, delivered revenues of
EUR347.1m and profit before tax of EUR0.1m. The business will be
fully consolidated into the Group from the date of acquisition, and
further disclosures will be made in our next annual report.
There have been no other material events between the balance
sheet date and the date of issue of these accounts.
16 Directors
The directors that served during the period were:
Name
P Bamford (Chairman)
S Arora (CEO)
P McDonald (CFO)
T Hübner
R McMillan
K Guion
H Brouwer (Retiring 14 November 2018)
T Hall (Appointed 18 September 2018)
Unless otherwise stated, the directors each served for the whole
period.
Carolyn Bradley is to be appointed as a non-executive director
with effect from 15 November 2018.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
--the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
--the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
By order of the Board
Simon Arora Paul McDonald
Chief Executive Chief Financial Officer
13 November 2018
Report of the Réviseur d'Entreprises agréé
on the review of condensed consolidated interim financial
information
Introduction
We have reviewed the accompanying condensed consolidated
statement of financial position of B&M European Value Retail
S.A. as at 29 September 2018, the related condensed consolidated
statements of comprehensive income, changes in equity and cash
flows for the 26 week period then ended, and notes to the interim
financial information ("the condensed consolidated interim
financial information"). The Board of Directors is responsible for
the preparation and presentation of these condensed consolidated
interim financial information in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union. Our
responsibility is to express a conclusion on these condensed
consolidated interim financial information based on our review.
Scope of Review
We conducted our review in accordance with the International
Standard on Review
Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" as adopted, for
Luxembourg, by the Institut des Réviseurs d'Entreprises.
A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying condensed consolidated
interim financial information as at 29 September 2018 is not
prepared, in all material respects, in accordance with IAS 34
"Interim Financial Reporting" as adopted by the European Union.
Luxembourg, November 13, 2018 KPMG Luxembourg Société
coopérative
Cabinet de révision agréé
Thierry Ravasio
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
IR GGGRGGUPRGRP
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