Last checked at 21 Jun 2018 08:30
21 June 2018
B&M European Value Retail S.A.
Annual Report & Accounts 2018, Notice of Annual General Meeting
and Notice of Extraordinary General Meeting
B&M European Value Retail S.A. (the "Company"), the UK's leading multi-price value retailer, announces that it has posted to shareholders today:
1. The Company's Annual Report and Financial Statements for the year ended 31 March 2018 ("Annual Report & Accounts 2018");
2. Notice of Annual General Meeting of the Company ("AGM"); and
3. Notice of an Extraodinary General Meeting of the Company ("EGM").
Copies of the Annual Report & Accounts 2018, the Notice of AGM and the Notice of the EGM will shortly be available for inspection at www.morningstar.co.uk/uk/nsm , also copies of them are available on the investors section of the Company's website at www.bandmretail.com/investors/agm.aspx
In accordance with Disclosure and Transparency Rule 6.3.5R (DTR 6.3.5R) and the requirements which it imposes on how to make public annual financial reports, the following information in Appendix 1 to this announcement is extracted from the Annual Report & Accounts 2018 and should be read in conjunction with the Company's preliminary results announcement for the year ended 31 March 2018 which was issued on 30 May 2018 and contained the Company's preliminary consolidated financial statements, information on important events that have occurred during the financial year and their impact on the financial statements, details of related party transactions and the statement of directors' responsibilities. That information (a copy of which is available on the Company's website at www.bandmretail.com) together with the information set out in Appendix 1 below, constitutes the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This announcement is not a substitute for reading the Annual Report & Accounts 2018 in its entirety.
Annual General Meeting & Extraordinary General Meeting
The AGM and EGM will be held at the Sofitel Luxembourg Europe, 4, rue du Fort Niedergrünewald, L-2226 Luxembourg on Monday 30 July 2018, with the AGM commencing at 12:00 noon (CET) and the EGM at 1:00 pm (CET).
The purpose of the EGM is to propose that the Company makes certain amendments to its Memorandum and Articles of Association. A summary of the proposed changes is set out in the explanatory notes to the Notice of the EGM and in Appendix 2 to this announcement.
The Notice of EGM and a copy of the Memorandum and Articles of Association which has been marked-up to show the proposed amendments, are available on the Company's website at www.bandmretail.com/investors/egm.aspx
A summary form of the Notice of EGM is set out in Appendix 2 to this announcement.
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
investor.relations@bandmretail.com
Media
For media please contact +44 (0) 207 379 5151
Maitland
Daniel Yea
bmstores-maitland@maitland.co.uk
APPENDIX 1
The principal risks and uncertainties relating to the Company are as set out in pages 26 to 29 inclusive of the "Principal risks and uncertainties" section of the Annual Report & Accounts 2018.
The following is extracted in full and unedited text from the Annual Report & Accounts 2018 and is repeated here solely for the purpose of complying with DTR 6.3.5R.
PRINCIPAL RISKS AND UNCERTAINTIES
Risks management
The following principal risks and uncertainties could have an impact on our business model and strategy. Mitigating steps aimed at managing and reducing those impacts are being employed by the Group as summarised below.
Overall responsibility
Risks and mitigation are reviewed as part of the oversight by the Audit & Risk Committee of the system of internal controls and reported on to the Board which takes overall responsibility for risk management.
The Internal Audit function of the Group reports on the effectiveness of internal control procedures to the Audit & Risk Committee as part of annual internal audit plan, taking into account current business risks.
Risk management
|
Identify and evaluate
The responsibility for identifying and evaluating new and emerging risks and mitigating actions lies with management. The Audit & Risk Committee, with the support of the Internal Audit department and the General Counsel, is responsible for monitoring risks and mitigating actions and for reporting matters of concern to the Board.
Action plan
The Board oversees the risk management of the Group. It evaluates the recommendations made by the Audit & Risk Committee and determines the framework of the type of controls and mitigating steps required to be implemented, in the context of how those risks could impact the overall objectives of the business and risk appetite.
Implementation
The responsibility for implementation of processes and controls in relation to the management of risk is delegated by the Board to the executive and operational senior management of the UK and German businesses.
The Internal Audit department reports on the progress of implementation by management of recommendations made to them, to the Audit & Risk Committee at each meeting during the year, being a continuous cycle of review.
Risk appetite
The Group's framework for managing its consideration of risk appetite forms part of the annual risk management cycle and is used to drive and inform actions undertaken in response to the principal risks identified by the Board. Within this framework, the Group's appetite for risk is defined with reference to the expectations of the Board for both commercial opportunity and internal control and it is used to inform the Group's annual internal audit plan.
Category of risk Strategic Financial Operational Compliance
| Tolerance Medium Low to medium Low Extremely low |
Changes in principal risks
There were no changes in B&M's principal risks during 2017-18. There are no new principal risks to note, and no existing principal risks have been removed.
Movements in B&M's existing principal risks are detailed below.
Risk change key
↑
|
Increased risk |
____ |
No change |
↓
|
Decreased risk
|
Risk Type
|
Risk No | Description & potential impact
| Risk mitigations
|
Change |
Competition |
1
|
The Group operates in highly competitive retail markets in the UK and Germany and this could materially impact the Group's profitability, share price and limit growth opportunities.
|
• Continuous monitoring of competitor pricing and product offering.
• Development of new product ranges within the product categories to identify new market opportunities to target new customers. |
____ |
Economic environment |
2 |
A reduction in consumer confidence could impact upon customer spending and subsequently revenue and profitability, as a result of the prevailing macro-economic conditions in the markets in which we operate.
|
• We offer a range of products and price points for consumers which allows them to trade up and down.
• We maintain a low cost business model that allows us to maintain our selling prices as low as possible.
• We have an effective forecasting process that enables actions to be undertaken reflecting the economic conditions. |
____
|
Regulation and compliance |
3
|
The Group is exposed to regulatory and legislative requirements, including those relating to the importation of goods, the Bribery Act, Modern Slavery Act, tax evasion, health & safety, employment law, data protection, the environment and the Listing Rules. The impact of this is that it could lead to financial penalties and reputational damage.
This risk has increased due to the General Data Protection Regulation ("GDPR") which will apply in the EU from 25 May 2018. This regulation gives rise to increased data protection compliance requirements backed by potential heavy financial penalties for compliance failures.
|
• We have a number of policies and codes across the business, including a code of conduct that incorporates an anti-bribery & corruption policy, outlining the mandatory requirements within the business. These are communicated to the staff via an employee handbook which is made available to anyone joining the company.
• Operational management are responsible for liaising with the General Counsel and external advisors where required to ensure that we identify and manage any new legislation.
• We have an internal audit function, and a whistle blowing procedure and policy which allows colleagues to confidentially report any concerns or inappropriate behaviour within the business.
• The Company has adopted a Group-wide GDPR policy and appointed a Data Supervisor of the overall Group. As a result of the new legal requirements of GDPR a number of key changes have been implemented by the Group. They include changes in our privacy policies, a new process in relation to data subject rights requests, issuing privacy notices to all colleagues and updating the privacy notices for users of our websites. We have also sent new consent requests to all existing subscribers to our on-line mailing list. |
↑
|
Infrastructure
|
4 |
The Group could suffer the loss of one of its warehousing facilities which would impact short/medium term trading and could materially impact the profitability of the business. Failure to maintain and invest in the warehousing and transport infrastructure as the business continues to grow the store portfolio.
This risk has increased as the B&M Group acquired Heron Foods in the financial year 2017/18 and the Group's warehousing and transport infrastructure has therefore expanded to include storage and transport for frozen food products. Unforeseen delays in the completion of the additional warehouse in the South of England would also potentially impact on medium term growth and expansion of the business.
|
• Forward plans are in place for additional warehousing capacity to support the new store opening programme. The Group in the UK has six separate warehousing locations and conducts disaster recovery planning. An additional warehouse location has been confirmed which will support expansion in the South of England; building will commence in the financial year 2018/19.
• The Group maintains adequate business interruption and increased cost of working insurance in the event of such a loss. |
↑
|
International expansion
|
5 |
The ability to develop into new territories is important to the Group's future growth plans. Expanding into new markets creates additional challenges and risks which could impact upon overall Group performance, growth and profitability.
|
• Significant international experience on the main Board. The senior leadership team in Germany is experienced and incentivised.
• Clear focus on markets in which we operate to ensure they are appropriate for value retailing and the product ranges are developed and selected by local buying teams rather than through the parent company.
• Continuing to invest in both the infrastructure and technology of our international subsidiaries.
• Monitoring and investigating potential new opportunities for growth in strategically identified locations.
|
____ |
IT systems, cyber security and business continuity |
6 |
The Group is reliant upon key IT systems, and disruption to these would adversely affect businesses operations including in warehouses and in stores. The potential impact of data protection failure is that it may lead to a potential prosecution and reputational damage to the brand. This risk also encompasses the IT Security risk of failing to protect the Group's systems and data from viruses, cyber threats and sabotage.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risks relating to regulation & compliance, infrastructure and international expansion. |
• All critical business systems have third party maintenance contracts in place and are industry standard.
• We utilise the services of a third party IT consultancy support to ensure that any investments made in technology are fit for purpose; IT investments/budgets are approved at Board level.
• We have a disaster recovery strategy.
• We have an on-going PCI compliance strategy.
• IT Security is monitored at Board level and includes penetration testing and up to date security software.
• Significant decisions for the business are made by the Group or operational boards with segregation of duties enforced on key business processes, such as the payables process, and a robust IT control environment is in place. |
____ |
Credit risk and liquidity |
7 |
The Group's level of indebtedness and exposure to interest rate and currency rate volatility could impact the business and its growth plans.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risks relating to infrastructure and international expansion.
|
• A treasury policy is in place to govern foreign exchange, interest rate exposure and surplus cash.
• Regular weekly cash flow forecasts are produced and monitored.
• Forward looking cash flow forecasts and covenant test forecasts are prepared to ensure sufficient liquidity and covenant headroom exists. |
____ |
Commodity prices/cost inflation |
8 |
Escalation of costs within the supply chain arising from factors such as increases in raw material and wage costs. Additionally, increased fuel and energy costs could impact upon distribution and the store and warehouse overhead base.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risks relating to infrastructure and international expansion.
|
• Freight rates, energy and currency are bought forward to mitigate volatility and allow the business to plan and maintain margins.
• Wage increases are offset where possible by productivity improvements.
• Forecasts and projections produced by the business include the expected impact of the national living wage and therefore the Board's strategic planning takes account of these effects. |
____ |
Supply chain |
9 |
The lead times in the supply chain could lead to a greater risk in buying decisions and potential loss of margins through higher markdowns. Disruption to the supply chain arising from civil unrest, natural disasters, ethical or quality standards failure may impact upon brand reputation as there is a risk that consumers may be harmed.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risks relating to infrastructure and international expansion.
|
• An experienced sourcing team is responsible for maintaining an efficient and effective supply chain.
• A range of alternative supply sources are maintained across the product categories and we are not over reliant on any single supplier.
• A combination of individual buyers and supplier employees conduct factory visits.
|
____ |
Stock management |
10 |
Ineffective controls over the management of stock could impact on the achievement of our gross margin objectives. Lack of product availability could impact on working capital and cashflows.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risks relating to infrastructure and international expansion.
|
• Highly disciplined SKU count by season and effective and regular markdown action on slow moving product lines.
• Initial stock orders do not exceed c. 14 weeks of forecast sales and action is undertaken after c. 4 weeks of trading to either repeat the order, refresh the product design or delete the product line.
• Consistent levels of stock cover by product category are maintained through regular reviews of open to buy, supported by the disciplined SKU count. |
____ |
Key management reliance
|
11 |
The Group is reliant on the high quality and ethos of the executive team as well as strong management and operational teams. There is a risk that a lack of succession planning for staff leavers will impact on organisational performance and delivery.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risk relating to international expansion.
|
• The key senior and operational management are appropriately incentivised through bonus and share arrangements such that talent is retained.
• The composition of the executive team is kept under constant review to ensure that it is appropriate to the delivery of the Group's plans. |
____ |
Store expansion |
12 |
The ability to identify suitably profitable new store locations is key to delivering our growth plans. Failure to identify suitable locations in areas targeted for new stores could impact upon store expansion plans and reduce the rate of growth in the business.
This risk ranking has decreased in risk number due to the increasing significance to the business of the risk relating to international expansion.
|
• Our Chief Executive Officer actively monitors the availability of retail space with the support of internal and external property acquisition consultants.
• The flexibility of the trading format allows us to take advantage of a range store sizes and locations.
• Each new store opening is approved by the CEO ensuring that property risks are minimised and ensuring that lease lengths are appropriate.
• Where new locations may impact on existing locations, the cannibalisation effects are estimated and then monitored and measured to ensure an overall benefit to the Group is realised. |
____ |
UK exit from the European Union |
13 |
The UK's planned exit from the European Union has several potential impacts in the areas of economic & regulatory environment; withholding tax paid on internal dividends; import of goods due to currency exchange volatility & increased import duties; availability & cost of labour; and several potentially as yet unknown impacts.
We do not consider this risk to have increased as the majority of imported goods from the Far East are made directly into the UK or German business where they are to be sold (as opposed to any material amount of goods being supplied between the UK and German businesses to each other). The amount of goods imported between the UK and Europe is not material.
|
• Short-term exchange rate volatility has been mitigated by our currency forward position. Any continued volatility will affect the economic inflationary environment as a whole.
• Regarding the more fundamental changes, the level of risk is currently unknown due to significant uncertainty regarding the outcome of the exit negotiations and British leadership's position on these.
• The Board will continue to monitor developments and understand the interpretations with respect to potential risks, and then act accordingly.
• The Board and management will maintain professional contacts in order to assist with this process. |
____ |
APPENDIX 2
B&M European Value Retail S.A.
Société Anonyme
Registered office: 9, Allée Scheffer, L-2520 Luxembourg
Grand-Duchy of Luxembourg
R.C.S. Luxembourg: B 187275
Notice of the Extraordinary General Meeting of B&M European Value Retail S.A. to be held at 1:00 pm (CET) on Monday 30 July 2018 at the Sofitel Luxembourg Europe, 4, rue du Fort Niedergrünewald, L-2226 Luxembourg before a Luxembourg notary.
AGENDA
Extraordinary resolution
Each of the following resolutions are proposed to amend the Articles of Association of the Company (the "Articles") without amending the corporate object of the Company.
1. To update the Articles by referring to the Luxembourg law on commercial companies of 10 August 1915 as having been amended by the Luxembourg law of 10 August 2016 on the modernisation of company law, by replacing Article 1.1 with the following text:
"1.1 The present articles of association (the "Articles") are those of a Luxembourg public limited liability company (société anonyme) (the "Company") governed by the laws of the Grand-Duchy of Luxembourg (and in particular, the law dated 10 August 1915 on commercial
companies as amended from time to time including without limitation as amended by the law of 10 August 2016 (with references in these Articles to the "1915 Law" meaning the law as so amended)) and by the present Articles."
2. To update the Articles to include the power for the Board to transfer the address of the registered office of the Company to any other municipality in Luxembourg, by replacing the present Articles 2.2 and 2.3 with the following text to be numbered Article 2.2:
"2.2 The Board of Directors (as defined below) of the Company is authorised to change the address of the registered office of the Company within the same municipality of the Company's registered office from time to time. The registered office may be transferred to any other municipality in the Grand-Duchy of Luxembourg by the Board of Directors and they shall have the power to amend the present article of the Articles accordingly, or, by a resolution of an extraordinary shareholders meeting passed in the manner provided for amendments to be made to these Articles.";
and,
by renumbering each of the existing Articles 2.4, 2.5 and 2.6 respectively as Articles 2.3, 2.4 and 2.5.
3. To provide for the text of any amendments to the Articles and the resulting draft coordinated Articles to be available for inspection at the registered office of the Company for fifteen (15) days before the general meeting of shareholders called to consider those amendments instead
of eight (8) days under Article II (48) of the law of 10 August 2016, by inserting the following additional paragraph at the end of Article 24.6.3:
"Fifteen (15) days before the extraordinary general meeting of shareholders called to deliberate upon amendments to the Articles, any shareholder may inspect at the registered office of the Company the draft of the proposed amendments and the draft of the resulting consolidated Articles."
4. To amend the Articles to authorise the Board of Directors to allocate existing or newly issued shares of the Company for free to employees and officers of the Company's Group and to be paid up out of available reserves, by making the following amendments to Article 5.2:
(a) in the first sentence of the second paragraph of Article 5.2, by inserting immediately after the words "(including in favor of new shareholders)" the following additional words "or free of charge (as permitted below by this article 5.2) paid up out of available reserves";
(b) by replacing the whole of the sub-paragraph numbered (3) in the fourth paragraph of Article 5.2, with the following text:
"(3) in connection with employee share options or similar awards including also allocations of existing shares of the Company without consideration, or, the issue of new shares free of charge paid up out of available reserves.";
(c) by adding the following additional paragraph in Article 5.2 immediately after the paragraph which starts with the words "For the avoidance of doubt,…" as a separate paragraph as follows:
"Within the limits of the authorised share capital, the Board of Directors is authorised to allocate existing shares of the Company without consideration, or, to issue new shares free of charge paid up out of available reserves, in each case, to employees and corporate officers (including directors) of the Company and of companies of which at least ten per cent (10%) of the issued share capital or of the total voting rights of its shareholders are directly or indirectly held by the Company. The Board of Directors shall determine the terms and conditions of such allocation and issue of shares."
5. To update the amount of the unissued but authorised share capital as recorded in the Articles following the issue by the Board, acting in accordance with Article 5.2 of the Articles, of 561,222 new shares in aggregate to employees and directors of the Group who have exercised share options during the financial year 2017/18, by amending the first paragraph of Article 5.2 of the Articles by replacing the reference to "two hundred ninety-seven million two hundred twenty-two thousand two hundred twenty-two Pounds Sterling and twenty pence (GBP 297,222,222.20), to be divided into two billion nine hundred seventy-two million two hundred twenty-two thousand two hundred twenty-two (2,972,222,222) shares" with "two hundred and ninety-seven million one hundred and sixty-six thousand and one hundred Pounds Sterling (GBP 297,166,100), represented by two billion nine hundred and seventy-one million six hundred and sixty-one thousand (2,971,661,000) shares".
6. To renew the authority of the Board of Directors to increase the issued share capital up to the amount of the authorised and unissued share capital of the Company (as set out in resolution number 5) for a period of five years (having acknowledged the report of the Board of Directors pursuant to article 420-26(5) of the Luxembourg law on commercial companies) by replacing the whole of the paragraph of Article 5.2 which begins with the words "The authorisation will expire on the fifth anniversary…" with the following new paragraph in place of it:
"The Board of Directors is authorised to increase the issued share capital on one or more occasions up to the maximum amount of the authorised share capital, for a period of five (5) years from the date of the extraordinary general meeting of shareholders held on 30 July 2018, without prejudice to any renewal, amendment or revocation made in accordance with applicable law."
7. To update Article 10 following CD&R European Value Retail Investment S.à r.l. having sold their shareholding in the Company and generally also as follows:
(a) in the first paragraph of Article 10.1 by deleting the words in parenthesis "proposed for appointment by the CD&R Shareholder and one Director" and immediately after the words in parenthesis "Arora Family" by inserting the words "where they satisfy the shareholding condition set out below";
(b) in the second paragraph of Article 10.1 by deleting each of the following text from that paragraph:
"- as long as the CD&R Shareholder, and together with its associates, in the aggregate, hold ten per cent (10%) or more of the Company's share capital, two (2) Directors shall be appointed from candidates put forward by the CD&R Shareholder (save that this requirement shall be reduced to one (1) Director for so long as Sir Terence Leahy is a Director).";
"- as long as the CD&R Shareholder, and together with its associates, in the aggregate, hold five per cent (5%) or more (but less than 10%) of the Company's share capital, one (1) Director shall be appointed from candidates put forward by the CD&R Shareholder.";
and,
"- "CD&R Shareholder" means CD&R European Value Retail Investment S.à r.l., a private limited liability companies (société à responsabilité limitée) incorporated in Luxembourg having its registered office at 5, rue Guillaume Kroll, L-1882 Luxembourg and registered with the Luxembourg trade registry under number B 187.072.";
(c) in the second paragraph of Article 10.1 where the words "- any other Director appointed by the shareholders" are set out, by replacing the word "Director" with "Directors" in that sentence;
(d) in the second paragraph of Article 10.1 immediately after the words "SSA Investments S.à r.l.," by inserting the words "a private limited liability company (société à responsabilité limitée) incorporated in Luxembourg and registered with the Trade and Companies Register under number B 187.251.";
(e) in Article 10.4 by deleting the words "(i) in the event of vacancy of a CD&R Director, the other Directors shall appoint a person from candidates proposed by the CD&R Shareholder to fill such vacancy and (ii)".
8. To include in the Articles the right for shareholders together holding ten percent (10%) or more of the share capital of the Company to ask written questions of the Board of Directors relating to acts concerning the management of the Company's group, by inserting a new article
after the end of Article 25 to be numbered Article 26 with the following text:
"26. Rights to ask questions.
One or more shareholders together holding at least ten percent (10%) of the share capital or the voting rights of all shares or securities in the Company may ask written questions of the Board of Directors relating to acts of management in connection with the Company or companies controlled by the Company, provided that in the latter case, the questions shall be assessed in relation to the corporate interests of the companies in the group. Copies of the answers to the questions shall also be provided to the statutory auditor or the independent auditor (réviseur(s) d'entreprises agréé(s)).
In the absence of answers being provided within one month, those shareholder(s) may apply to the judge presiding at the chamber of the Tribunal d'Arrondissement dealing with commercial matters, and sitting as an urgent matter, to appoint one or more experts to prepare a report on the acts of management to which the relevant written questions relate.";
and,
to renumber each of the existing Articles 26, 27, 27.1, 27.2, 28, 28.1 to 28.8 (inclusive), 29, 29.1, 29.2, 30, 31, 31.1 to 31.4 (inclusive), 32, 32.1 to 32.5 (inclusive) and 33, respectively as, Articles 27, 28, 28.1, 28.2, 29, 29.1 to 29.8 (inclusive), 30, 30.1, 30.2, 31, 32, 32.1 to 32.4 (inclusive), 33, 33.1 to 33.5 (inclusive) and 34.
9. To increase the aggregate cap per annum on directors fees in Article 11.1(a) by replacing the figure "£800,000" in that article with "£1,000,000".
10. To amend the Articles to remove the requirement for the consent of bondholders to certain matters and the right for bondholders to attend and speak at general meetings of shareholders of the Company, reflecting the changes in the Law of 10 August 2016 as follows:
(a) by inserting a new article after the end of Article 24.6.5 to be numbered Article 24.6.6, as follows:
"24.6.6 The nationality of the Company may be changed by a resolution of the general meeting of shareholders adopted in the manner required for the amendment of these Articles.";
(b) by replacing the existing Article 24.6.6 as follows and renumbering it as Article 24.6.7:
"24.6.7 The commitments of the shareholders of the Company may be increased only with the unanimous consent of all the shareholders.";
(c) by deleting the existing Article 24.6.7;
(d) by inserting the following additional paragraph at the end of Article 24.8:
"Holders of bonds issued by the Company do not have the right to attend and speak at general meetings of shareholders of the Company."; and
(e) by deleting the existing Article 24.18.
11. To update the Articles to refer to the new shareholding threshold required for shareholders to require the adjournment of general meetings of shareholders, by replacing the words "one-fifth" with the words "one-tenth" in Article 24.9.
12. To amend the Articles in relation to the requirements for the place and date of the annual general meeting of shareholders in Luxembourg, by replacing Article 25 with the following text:
"25. Annual shareholders' meeting.
At least one shareholders' meeting shall be held each year in the Grand-Duchy of Luxembourg within six (6) months of the end of the financial year of the Company on a date and at a place determined by the Board of Directors and specified in the notice convening the meeting."
13. To amend the Articles to reflect the requirements of the Law of 10 August 2016 in relation to capital impairment rules by replacing the existing Article 31.4 (to be numbered Article 32.4 pursuant to resolution 8 above) with the following text:
"32.4. Capital impairment rules
If as a result of losses, the net assets of the Company fall below half the share capital, the Board of Directors shall convene a shareholders' meeting so that it is held within a period not exceeding two months from the time at which the loss was or should have been ascertained by them and such meeting shall resolve in accordance with the conditions provided in article 24.6 on the possible dissolution of the Company.
The Board of Directors shall set out the causes of that situation and the reasons justifying its proposals in a special report which must be made available at the registered office of the Company to shareholders fifteen (15) days before the general meeting referred to above. If it is proposed to continue the business of the Company, the report shall set out the measures intended to be taken to remedy the financial situation of the Company. Copies of the report shall be sent to the registered shareholders at the same time as sending the notice of the general meeting.
Failure to draw up the report shall invalidate the decision of the general meeting, unless all the shareholders of the Company have waived the requirement for the report to be provided.
The same rules shall be observed if as a result of losses the net assets of the Company fall below one quarter of the share capital of the Company, provided that in such case, dissolution shall take place if approved by one-fourth of the votes cast at the shareholders' meeting.
In the event of any infringement of the foregoing provisions, the directors, may be declared personally and jointly and severally liable vis-à-vis the Company for all or part of the increase of the loss."
14. To update the Articles in relation to the following changes of a typographical, clarifying or technical nature:
(a) to update references in the Articles to each of the official registries and official publications whose names have changed, as follows:
i. in Article 2.6 (to be re-numbered 2.5), Article 7.2.3 and Article 24.3.1 (a) by replacing all references to "Mémorial Recueil des Sociétés et Associations", "Mémorial" and "Mémorial C, Recueil des Sociétés et Associations" with the words in each case "Recueil Electronique des
Sociétés et Associations"; and
ii. in Article 24.3.1 (a), the last paragraph of Article 24.3.1, and Article 24.6.3 by replacing all references to "Official Gazette" with the words "Journal des publications" in each case;
(b) in the first and third paragraphs of Article 5.1, the second paragraph of Article 5.2, Article 5.3 (b) and in Article 5.3 (c) immediately before each reference to "capital" (except where it is already preceded by the word "share") by inserting the word "share";
(c) in Article 5.2 by deleting the whole of the paragraph which begins with the words "Notwithstanding the above, the Board of Directors…" and which ends with "…in the second paragraph of this article."
(d) in the last paragraph of Article 5.1 and in Article 5.3 (c) by replacing the word "articles" with the word "Articles";
(e) in the first paragraph of Article 5.5 by replacing the reference to "article 49-8" of the law with "article 430-22";
(f) in Article 7.2.7:
i. by replacing the reference to "article 72-1" of the law with "article 461-2"; and
ii. by replacing the cross reference to "article 28.4" of the Articles therein with a cross reference to "article 29.4";
(g) in the title of Article 13 by replacing the words "board of directors" with "Board of Directors";
(h) in Article 23 by deleting the words "at the time of its incorporation or when" and inserting in place of them the word "where";
(i) in Article 24.6.4 by deleting the word "the" where it appears immediately before the words "this article with respect to each class";
(j) in the first paragraph of Article 24.9 by replacing the reference to "article 67-1" of the law with "article 450-3";
(k) in sub-paragraph (v) of Article 24.11 by removing the repetition of the comma after the word "resolutions";
(l) in Article 24.17 by inserting the words "the total issued share" immediately before the word "capital";
(m) in the existing Article 27.2 (to be renumbered 28.2 pursuant to resolution 8 above):
i. by inserting after the expression "statutory auditors" in that article, the words "or the independent auditors (réviseur(s) d'entreprises agrée(s))";
ii. in sub-paragraph (i) of that article, by replacing all the words appearing after the expression "statutory auditors" with the words "or the independent auditors (réviseur(s) d'entreprises agréé(s));";
iii. in the paragraph immediately following sub-paragraph (v) of that article, by inserting immediately after the words "statutory auditors or of the" the words "independent auditors", and also in that paragraph deleting the word "supervisory";
(n) in Articles 28.3 (d) (to be renumbered 29.3 (d) pursuant to resolution 8 above) immediately after the words "statutory auditors or the" insert the words "independent auditors";
(o) in sub-paragraph (i) of Article 28.4 (to be renumbered 29.4 pursuant to resolution 8 above) by replacing the cross reference to "article 28.4" therein with a cross reference to "article 29.4";
(p) in sub-paragraph (i) of Article 29.2 (to be renumbered 30.2 pursuant to resolution 8 above) by:
i. deleting the words "in Luxembourg";
ii. deleting the words "48 hours after it was put in the post if pre paid second class post," and inserting in place of them the words "48 hours after it was put in the post if first class pre paid post was not used";
(q) in sub-paragraph (iii) of Article 29.2 (to be renumbered 30.2 pursuant to resolution 8 above) by replacing the cross reference to "article 29.2" therein with a cross reference to "article 30.2";
(r) in Article 32.2 (to be renumbered 33.2 pursuant to resolution 8 above) by replacing the cross reference to "article 32.1" therein with a cross reference to "article 33.1";
(s) in Article 32.4 (to be renumbered 33.4 pursuant to resolution 8 above) by replacing the cross reference to "article 32.1" therein with a cross reference to "article 33.1"; and
(t) in Article 32.5 (to be renumbered 33.5 pursuant to resolution 8 above) by replacing the cross reference to "article 32.4" therein with a cross reference to "article 33.4".
Explanation of Business to be considered at the Extraordinary General Meeting
Extraordinary Resolution 1
The Company is subject to the Luxembourg Law of 10 August 1915 on Commercial Companies (as amended from time to time). This law was amended by the Luxembourg Law of 10 August 2016 (the "Law of 10 August 2016") to modernise Luxembourg company law. A transitional period was set under the Law of 10 August 2016 for Luxemburg companies to make any necessary amendments to their articles of association by 23 August 2018 to bring them up to date with those changes in the law.
Article 1.1 of the Articles is proposed to be replaced by a new Article following the modernisation of the Luxembourg Law of 10 August 1915 on Commercial Companies (the "1915 Law"), by specifically referring to the Law of 10 August 2016 which has amended the 1915 Law.
Extraordinary Resolution 2
In accordance with the Law of 10 August 2016 it is proposed to replace Articles 2.2 and 2.3 of the Articles with a new provision to permit the Board to change the registered office of the Company within the Grand-Duchy of Luxembourg from one municipality to another, as well as shareholders having that power. It is also proposed to renumber certain provisions of Article 2 by resolution number 2 in consequence of this change.
Extraordinary Resolution 3
Under the Law of 10 August 2016 eight (8) days before any general meeting of shareholders which is called to amend the articles of association of a company, copies of the proposed resolutions and the draft amended articles of association must be available at the registered office of the Company for inspection by shareholders. It is proposed to extend that period to fifteen (15) days before any such general meeting for those documents to be available for shareholders to inspect, by inserting a new additional paragraph at the end of Article 24.6.3 to that effect.
Extraordinary Resolution 4
As permitted under Luxembourg company law it is proposed to provide the Board with power, inter alia, to issue new shares in the Company to employees and officers (including directors) of the Company and members of its Group on them exercising any nil cost share options granted to them without being required to pay the nominal subscription price for those shares. Instead the nominal subscription price for any such shares will be paid-up out of available reserves of the Company. The amendments to Article 5.2, as set out in resolution number 4, are proposed to include this power in the Articles.
Extraordinary Resolution 5
This resolution is proposed to update the first paragraph of Article 5.2 of the Articles to refer to the current amount of the unissued authorised share capital following the exercise of share options in the Company since the Articles were first adopted.
Extraordinary Resolution 6
In common with articles of association of other Luxembourg public limited liability companies, the Articles of the Company include the power for the Board of Directors to issue ordinary shares within the framework of the Company's authorised share capital. This power which is contained in Article 5.2 of the Articles is limited both in time, being for 5 years, and, in amount, being for the issue of shares up to the maximum amount of the authorised and unissued share capital of the Company but limited in any one year to not more than two-thirds of the issued share capital of the Company.
The authority for the Board to issue shares under Article 5.2 will expire in August 2019. It is therefore convenient at this EGM to propose the renewal of that authority to avoid the need to call another EGM next year for this purpose.
The renewed authority needs to be included in the Articles for the Board to be able to validly approve the issue of new shares by the Company under Luxembourg law. Without that power being contained in the Articles it would otherwise be necessary to convene extraordinary general meetings of shareholders each and every time shares are required to be issued, for example in relation to the exercise of employee share options, which is not workable or practical.
Resolution number 6 is therefore proposed to renew the authority contained in Article 5.2 for another 5 years in accordance with Luxembourg law up to the maximum amount of the authorised and unissued share capital of the Company of £297,166,100 (as set out in resolution number 5), but limited in any one year to not more than two-thirds of the issued share capital of the Company.
The latest institutional guidance (being the Share Capital Management Guidelines issued by the Investment Association) on issues of shares confirms that shareholders will regard as routine an authority to allot up to two-thirds of the existing share capital and with any amount in excess of one-third being made on a fully pre-emptive basis. This is reflected in Article 5.2 with the maximum amount which may be issued in any one year being up to one-third of the issued share capital of the Company plus a further one-third on a fully pre-emptive basis. Where any shares within either of those limits are issued for cash they are subject to pre-emption rights in favour of existing shareholders under Luxembourg law except where the Articles expressly provide authority to the Board to cancel those rights, which Article 5.2 does in relation to the following circumstances only:
(a) the issue of ordinary shares for cash representing up to a maximum of 5% (five per cent) of the issued ordinary share capital of the Company per year;
(b) the issue of ordinary shares for cash representing an additional 5% (five per cent) of the issued ordinary share capital of the Company per year provided it is used for financing (or refinancing within six months thereafter) an acquisition or other capital investment;
(c) the issue of ordinary shares to deal with fractional entitlements on otherwise pre-emptive issues of shares; and
(d) the issue of ordinary shares in connection with employee share options or similar awards.
These amounts are in line with the revised guidelines of the Pre-Emption Group on Dis-applying Pre-Emption Rights issued in March 2015 and as updated in March 2016 (the "Statement of Principles"), and in accordance with the Statement of Principles, at the AGM of the Company this year (to be held on the same date as this EGM) two resolutions are also being proposed to confirm each of the authorities of the Board referred to in (a) and (b) above separately, and also to acknowledge that no more than 7.5% of the Company's total issued ordinary share capital (excluding treasury shares) would be issued on a non-pre-emptive basis over a rolling 3 year period without prior consultation with shareholders, except where it is in connection with an acquisition or specified capital investment as referred to above.
Where the renewal of the authority for the issue of shares includes a right to issue any shares on a non-pre-emptive basis, under Luxembourg law a report of the Board of Directors is required to be included in the convening notice of the EGM approving that authority pursuant to article 420-26 (5) (formerly article 32-3 (5)) of the Luxembourg Law on Commercial Companies and also under Article 5.3 (c) of the Articles. A copy of this report is attached as Appendix 1 of this notice on pages 14 and 15 below. The report gives details of the conditions under which the Board may increase the issued share capital of the Company and limit or cancel preferential rights of shareholders in certain circumstances.
The Board has no present intention to exercise its power under its renewed authority (subject to the approval of resolution number 6) under Article 5.2 of the Articles to issue shares for cash on a non-pre-emptive basis, except (i) as may be required to satisfy options under the Company's share option schemes; and (ii) to ensure that the Company maintains the flexibility which the exceptions referred to under (a) to (d) above generally provide (as contained within Article 5.2), which the Board considers to be appropriate and in the best interests of the Company.
Extraordinary Resolution 7
Following the sale in 2018 by CD&R Investment S.à r.l. ("CD&R") of its remaining shares in the Company, the provisions in the Articles relating to CD&R's rights to appoint and remove certain directors of the Company are obsolete. Resolution number 7 is proposed to remove each of those rights from the provisions of Article 10 and to make some other minor drafting tidy-up changes to that Article as set out in the resolution.
Extraordinary Resolution 8
Under the Law of 10 August 2016 a new right has been created for shareholder(s) holding at least ten per cent (10%) of the issued share capital of the Company to ask written questions of the Board relating to acts of management in relation to the Company and/or members of its Group. It is proposed to insert a new additional article immediately after Article 25 to be numbered Article 26 recording that right under the law and for the proceeding Articles to be renumbered accordingly as set out in resolution number 8.
Extraordinary Resolution 9
It is proposed to increase the maximum amount of Director fees payable per annum from £800,000 to £1,000,000 to provide sufficient headroom in the future.
Extraordinary Resolution 10
Under the changes by the Law of 10 August 2016 the consent of bondholders is no longer required, inter alia, to change the nationality of a company, its corporate objects or to increase the commitments of shareholders in relation to the Company. Also bondholders no longer have to be given the right to attend and speak at general meetings of shareholders of the Company. As the rights of bondholders in the Company are enshrined in the Indenture relating to the bond issue of the Company in February 2017 and the rights in relation to meetings of bondholders are included in the Indenture, it is proposed to amend the provisions of Article 24 of the Articles to remove bondholder consents to each of the above matters from the Articles and to provide that they will not have the right to attend and speak at general meetings of shareholders of the Company.
Extraordinary Resolution 11
Following the changes under the Law of 10 August 2016 the shareholding threshold for shareholders to require a company to adjourn a general meeting of its shareholders has been reduced from not less than twenty per cent (20%) to not less than ten percent (10%) of the share capital of the Company. Article 24.9 of the Articles is proposed to be amended to reflect that change.
Extraordinary Resolution 12
The Law of 10 August 2016 has relaxed the previous requirements to fix the date and time of annual general meetings of a company in its articles of association. It is proposed to amend Article 25 of the Articles accordingly.
Extraordinary Resolution 13
The capital impairment rules have been more explicitly set out by the Law of 10 August 2016 and further procedural requirements have also been added. The provisions of Article 31.4 of the existing Articles (to be renumbered Article 32.4) are accordingly being proposed to be amended to reflect the changes to those provisions in the law which are set out in resolution number 13.
Extraordinary Resolution 14
The changes to certain provisions of the Articles, as set out in resolution 14, are to make various changes of a typographical, clarifying or technical nature including, inter alia, (i) changing the names of certain Luxembourg Official Registries referred to in the Articles which have been renamed, (ii) removing any redundant or obsolete provisions from the Articles, (iii) updating references to the numbers of articles of the law where they have now been altered under the Luxembourg law of 15 December 2017 whereupon all the provisions of the 1915 Law (as amended) have been renumbered, (iv) the correction of some minor typographical errors in the existing Articles and (v) the updating of various cross references within the Articles where the numbering of certain provisions of the Articles are to be changed pursuant to these resolutions.
Notes
Quorum and voting
The quorum for the EGM is shareholder(s) represented in person or by proxy at the meeting who hold at least one half of the issued share capital of the Company.
If this quorum condition is not satisfied a second meeting may be convened, following notices being given of that second meeting under the Articles of Association of the Company. At any second meeting the quorum requirement of the original meeting does not apply, and the quorum is at least one shareholder present in person or represented by proxy.
In accordance with Article 24.6 of the Articles of Association of the Company, all decisions taken at the EGM will be passed by at least two thirds of the votes cast at the meeting on each resolution.
Each holder of ordinary shares has one vote in respect of each ordinary share held.
Total voting rights
As at 20 June 2018 (being the last business day prior to the publication of this notice) the Company's issued ordinary share capital consists of 1,000,561,222 (one billion five hundred and sixty-one thousand two hundred and twenty two) ordinary shares, carrying one vote each. The Company holds no treasury shares, therefore the total voting rights in the Company as at 20 June 2018 is 1,000,561,222 (one billion five hundred and sixty-one thousand two hundred and twenty two).
Poll
All items in the Notice of the EGM will be decided by a poll of shareholders.