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25 June 2015
B&M European Value Retail S.A.
Annual Report & Accounts 2015 and Notice of Annual 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 its Annual Report and Financial Statements for the year ended 28 March 2015 ("Annual Report & Accounts 2015") together with the Notice of Annual General Meeting ("AGM").
A copy of the Annual Report & Accounts 2015 and Notice of Annual General Meeting 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 .The AGM will be held at the Sofitel Grand-Ducal, 40 Boulevard d'Avranches, L-1160 Luxembourg at 12:00 noon (CET) on Thursday 30 July 2015.
Disclosure and Transparency Rule 6.3.5R (DTR 6.3.5R)
In accordance with DTR 6.3.5R and the requirements which it imposes on how to make public annual financial reports, the following information in the Appendix to this announcement is extracted from from the Annual Report & Accounts 2015 and should be read in conjunction with the Company's preliminary results annnouncement for the year ended 28 March 2015 issued on 28 May 2015, which contained a management report and a condensed set of the Company's consolidated financial statements. That information, together with the information set out in the Appendix below (each of which are available at www.bandmretail.com/investors/regulatory-news/search-regulatory-news.aspx) constitues the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report & Accounts 2015 in its entirety. Terms used, but not otherwised defined in this announcement, have the meanings given to them in the Annual Report & Accounts 2015.
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
The Maitland Consultancy Limited
Neil Bennett
Tom Eckersley
bmstores-maitland@maitland.co.uk
APPENDIX
1. Principal risks and uncertainties
The principal risks and uncertainties relating to the Company are as set out in the "Principal risks and uncertainties" section of the Annual Report & Accounts 2015, pages 18 and 19.
The following is extracted in full and unedited text from the Annual Report & Accounts 2015 and is repeated here solely for the purpose of complying with DTR 6.3.5R
Principal risks and uncertainties
Risks and uncertainties
The following principal risks and uncertainties could have an impact on our business model and strategy. Mitigating steps aimed at managing and reducing those impacts are being employed by the Group as summarised below. Risks and 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.
Risk Type
| Description
| Risk Mitigations
|
Competition |
The Group operates in a highly competitive retail market both in the UK and Germany and this could materially impact the Group's profitability and limit the 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 |
A reduction in consumer confidence resulting in a fall in customer spending 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 extensive forecasting process that enables actions to be undertaken reflecting the economic conditions.
|
IT Systems and Business Continuity |
The Group is reliant upon key IT systems, and disruption to these would adversely affect the businesses operations. Data protection failure may lead to a potential prosecution and reputational damage to the brand. This risk also encompasses the risk of management over-ride of controls. |
● 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. ● We have a disaster recovery strategy. ● We have an on-going PCI compliance strategy. ● 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.
|
Regulation and Compliance |
The Group is exposed to regulatory and legislative requirements, including those surrounding the import of goods, the Bribery Act, health & safety, employment law, data protection, the environment and the listing rules, which could lead to financial penalties and reputational damage. |
● We have a number of policies and codes across the business 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 also 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 allow colleagues to confidentially report any concerns or inappropriate behaviour within the business. |
Credit Risk and Liquidity |
The Group's level of indebtedness and exposure to interest rate and currency rate volatility could impact the business and its growth plans. |
● A treasury policy is in place to govern foreign exchange, interest rate and surplus cash. ● Regular weekly cash flow forecasts are produced and monitored. ● Forward looking cash flow forecasts and covenants test forecasts are prepared to ensure sufficient liquidity and covenant headroom exists.
|
Commodity Prices/Cost Inflation |
Escalation of costs within the supply chain arising from factors such as increases in raw material and wage costs. Additionally increased fuel and energy costs impacting on distribution and the store and warehouse overhead base.
| ● 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. |
Supply Chain |
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 could lead to reputational damage and a risk that consumers maybe harmed. |
● An experienced sourcing team responsible for maintaining an efficient and effective supply chain. ● A range of alternative supply sources are maintained across the product categories and no single supplier accounts for more than 3% of purchases. ● The combination of individual buyers and supplier employees conduct factory visits.
|
Stock Management |
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. |
● 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.
|
Infrastructure |
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. |
● Plans are in place for additional warehousing capacity to support the new store opening programme. ● The Group has 4 separate warehousing locations and conducts disaster recovery planning. ● The Group maintains adequate business interruption and increased cost of working insurance in the event of such a loss.
|
Key Management Reliance |
The Group is reliant on the high quality and ethos of the executive team as well as strong management and operational teams. |
● 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 |
The ability to identify suitably profitable new store locations is key to delivering our growth plans. |
● Our property acquisition managers actively monitor the availability of retail space with the support of 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.
|
International Expansion |
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. |
● Increased 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 the acquired company. |
Warehouse Management |
The failure to implement the new warehouse management system effectively. |
● A project management team has been set up and this is being headed by an experienced project leader ● External experts will provide support for the duration of the project. |
All of these risks have an owner on the Group's Board, or on the operational board of B&M Retail Limited, the main UK trading entity.
2. Directors' responsibility statement
The following statement relates to and is extracted from page 51 of the Annual Report & Accounts 2015. It is repeated here solely for the purpose of complying with DTR 6.3.5R. This is the statement of responsibility for the Annual Report & Accounts 2015 and not the extracted information presented in this announcement or in the Company's preliminary results announcement published on 28 May 2015.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU and applicable law and have prepared the Company financial statements in accordance with Luxembourg legal and regulatory requirements regarding the preparation of annual accounts ("Lux GAAP").
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for that period. In preparing each of the Group and Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• present the financial statements and policies in a manner that provides relevant, reliable, comparable and understandable information;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• provide additional disclosures when compliance with the specific requirements in IFRSs or in accordance with Lux GAAP are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Company Law. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for preparing the Annual Report in accordance with applicable laws and regulations. Having taken advice from the Audit & Risk Committee the Directors consider the Annual Report and the financial statements taken as a whole, provides the information necessary to assess the Group's performance, business model and strategy and is fair balanced and understandable.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The financial statements are published on the Company's website.
Legislation in Luxembourg governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the consolidated financial statements of B&M European Value Retail S.A. ("Company") presented in this Annual Report and established in conformity with International Financial Reporting Standards as adopted in the European Union give a true and fair view of the assets, liabilities, financial position, cash flows and profits of the Company and the undertakings included within the consolidation taken as a whole;
• the annual accounts of the Company presented in this Annual Report and established in conformity with the Luxembourg legal and regulatory requirements relating to the preparation of annual accounts give a true and fair view of the assets, liabilities, financial position and profits of the Company;
• the Strategic Report includes a fair review of the development and performance of the business and position of the Company and the undertakings included within the consolidation taken as a whole, together with a description of the principal risks and uncertainties it faces; and
• this Annual Report (including the financial statements), taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Approved by order of the Board
Simon Arora
Chief Executive Officer
Paul McDonald
Chief Financial Officer
27 May 2015
3. Related party transactions
The following statements regarding related party transactions are set out on pages 89 and 90 of the Annual Report & Accounts 2015. Also the following statement on key management remuneration which is cross referred to on page 90 as note 8, is set out on page 71 of the Annual Report & Accounts 2015.
Each of these statements now following are extracted in full and unedited text from the Annual Report & Accounts 2015 and are repeated here solely for the purpose of complying with DTR 6.3.5R.
Related party transactions
The Group has transacted with the following related parties over the period:
Multi-lines International Company Limited, a supplier, and Home Focus Group, a customer, have been associates of the Group since the purchase of SBR Europe on March 6, 2013.
Ropley Properties Ltd, Triple Jersey Ltd, Rani Investments, Multi-lines International (Properties) Ltd and Speke Point Ltd, all landlords of properties occupied by the group, are directly or indirectly owned by director Simon Arora, his family, or his family trusts.
Rani 1 Life Interest Trust and Rani 2 Life Interest Trust, directly or indirectly owned by director Simon Arora, his family, or his family trusts, were reimbursed for management and financial consulting services provided to the Group. These services ceased upon listing.
Clayton, Dubilier & Rice, the part-owners of the previous ultimate parent undertaking, and current shareholders, provided management and financial consulting services to the Group. These services ceased upon listing.
The following table sets out the total amount of trading transactions with related parties included in the statement of comprehensive income:
Period ended | 28 March 2015 £'000 | 29 March 2014 £'000 |
Sales to associates of the Group | ||
Home Focus Group Limited | 737 | 267 |
Total sales to related parties | 737 | 267 |
Purchases from associates of the Group | ||
Multi-lines International Company Ltd | 67,216 | 50,558 |
Purchases from owners of the business | ||
Clayton, Dubilier & Rice | 17,608 | 9,995 |
Purchases from companies owned by key management personnel | ||
Multi-lines International (Properties) Ltd | 120 | 81 |
Rani Investments | 191 | 208 |
Rani 1 Life Interest Trust | 36 | 221 |
Rani 2 Life Interest Trust | 36 | 221 |
Ropley Properties Ltd | 2,632 | 2,817 |
Speke Point Ltd | 2,125 | 1,116 |
Triple Jersey Ltd | 2,925 | 1,608 |
Total purchases from related parties | 92,889 | 66,825 |
Included in the current year figures above are 4 leases on new stores, or extensions to existing stores, entered into by Group companies since the IPO date. The total expense on these leases in the period was £188k.
The following table sets out the total amount of trading balances with related parties outstanding at the period end. Note that the debtors balance held by Multi-lines International is a deposit on account and includes a GRNI balance of £2.9m (2014: £28.3m)
As at | 28 March 2015 £'000 | 29 March 2014 £'000 |
Trade receivables from associates of the group | ||
Home Focus Group Ltd | 79 | 29 |
Multi-lines International Company Ltd | 18,784 | 23,323 |
Total related party trade receivables | 18,863 | 23,352 |
Trade payables to companies owned by key management personnel | ||
Rani Investments | 39 | 57 |
Ropley Properties Ltd | 727 | 530 |
Triple Jersey Ltd | 566 | 271 |
Total related party trade payables | 1,332 | 858 |
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.
The business has not recorded any impairment of trade receivables relating to amounts owed by related parties at 28 March 2015 (2014: no impairment). This assessment is undertaken each year through examining the financial position of the related party and the market in which the related party operates.
The following table sets out information relating to financing activities with the owners of the business, all of which ceased in June 2014 immediately prior to the Group's listing.
As at | 28 March 2015 £'000 | 29 March 2014 £'000 |
Preferred equity certificates held by owners | - | 556,050 |
Compounded interest on preferred equity certificates held by owners | - | 66,725 |
Interest bearing ordinary and preference shares held by owners | - | 2,006 |
Compounded interest on ordinary and preference shares | - | 210 |
For further details on the transactions with key management personnel, see note 8 and the remuneration report.
Key Management Remuneration
Key management personnel and Directors' remuneration includes the following:
52 weeks to 28 March 2015 | 55 weeks to 29 March 2014 | |
Period ended | £'000 | £'000 |
Directors' remuneration | ||
Short term employee benefits | 833 | 1,084 |
Benefits accrued under the share option scheme Long term incentive | 22 - | - 750 |
855 | 1,834 | |
Key management expense (includes Directors' remuneration) Short term employee benefits |
2,122 |
2,649 |
Benefits accrued under the share option scheme Long term incentive | 22 - | - 1,707 |
2,144 | 4,356 | |
Amounts in respect of the highest paid director emoluments | ||
Short term employee benefits | 376 | 174 |
Benefits accrued under the share option scheme Long term incentive plan | 22 - | - 750 |
398 | 924 |
The emoluments disclosed above are of the directors and key management personnel who have served as a director within any of the Group companies.