B&M Regulatory News (BME)

31 May 2022

B&M European Value Retail S.A.

FY22 Preliminary Results Announcement

Strong execution consolidates sales and profit gains made during FY21

B&M European Value Retail S.A. ("the Group"), the UK's leading variety goods value retailer, today announces its Preliminary Results for the 52 weeks to 26 March 2022 ("FY22"). Due to the exceptional nature of the previous financial year, comparisons are also shown with regards to pre-pandemic levels of FY20 where relevant, to provide a more meaningful measure of performance.

HIGHLIGHTS

· Group revenues decreased by (2.7)% on prior year to £4,673m (or (2.4)% at constant currency1), but increased 22.5% on a two-year basis versus FY20

· B&M UK fascia2 revenue decreased (4.1)% year-on-year, driven by one-year like-for-like3 ("LFL") revenue decline of (9.0)%

o  On a two-year basis versus FY20, LFL revenues were up 13.0% with sales densities significantly higher than pre-pandemic levels due to retention of new customers

· Gross margin increased slightly year-on-year in the core B&M UK business, driven by strong performance across General Merchandise and a high sell-through rate on Seasonal ranges leading to limited markdown activity

· Group adjusted EBITDA4 (pre-IFRS16) of £619m (FY21: £626m) with an adjusted EBITDA4 margin of 13.2% (FY21: 13.0%), both slightly above consensus expectations

o  On a two-year basis versus FY20, Group adjusted EBITDA4 has increased 80.8%

· On a post-IFRS16 basis, Group adjusted EBITDA4 was £828m, representing an adjusted EBITDA4 margin of 17.7%

· Group statutory profit before tax remained flat at £525m with statutory diluted earnings per share 42.1p (FY21: 42.7p)

· 34 gross new B&M UK2 store openings offset by 14 closures and relocations, with new store returns remaining very strong

· Excellent progress in France with all stores now under the B&M banner and an adjusted EBITDA4 of £32m (FY21: £11m), representing a margin of 9.2% (FY21: 3.6%)

· Group cash generated from operations of £598m (FY21: £944m), reflecting the strong EBITDA outturn and investment in working capital to ensure availability of Spring/Summer 2022 seasonal stock

· Year-end net debt5 of £790m, with a net debt5 to adjusted EBITDA4 leverage ratio (pre-IFRS16) of 1.3x (FY21: 0.8x), comfortably within our stated leverage ceiling of 2.25x

· Recommended final dividend6 of 11.5p per share (FY21: 13.0p), bringing the full year ordinary dividend to 16.5p per share (FY21: 17.3p) in addition to the £250m special dividend6 paid in January 2022.

· Alex Russo, currently CFO, announced as successor to Simon Arora as CEO

Simon Arora, Chief Executive, said,

"I am very pleased with the results we have delivered. The strength and resilience of our business model has enabled us to execute our plans well and continue offering compelling value for money to customers. As a result, we have sustained the step up in sales and profit compared to pre-pandemic levels. To all colleagues across the Group who helped make that happen, I extend my sincere thanks.

The retail industry is facing inflationary pressures whilst our customers are having to cope with a significant increase in the cost of living, making spending behaviour in the year ahead difficult to predict. However, we have seen before that during such times customers will increasingly seek out value for money, and B&M is ideally placed to serve those needs. As such, we are well positioned to support the communities in which we trade and continue our long-term growth strategy."

Financial Results

1. Constant currency comparison involves restating the prior year Euro revenues using the same exchange rate as that used to translate the current year Euro revenues.

2. References in this announcement to the B&M UK business includes the B&M fascia stores in the UK except for the 'B&M Express' fascia stores. References in this announcement to the Heron Foods business includes both the Heron Foods fascia and B&M Express fascia convenience stores in the UK. When reporting adjusted EBITDA, B&M UK also includes the corporate segment as referred to in note 2 of the financial statements, and includes an adjusted profit of £1m (FY21: loss of £(2)m).

3. One-year like-for-like revenues relate to the B&M UK estate only (excluding wholesale revenues) and include each store's revenue for that part of the current period that falls at least 14 months after it opened compared with its revenue for the corresponding part of FY21. This 14 month approach has been adopted as it excludes the two month halo period which new stores experience following opening. Two-year like-for-like revenues also relate to the B&M UK estate only, and includes each store's revenue for that part of the current period that falls at least 26 months after it opened compared with its revenue for the corresponding part of FY20.

4. The Directors consider adjusted figures to be more reflective of the underlying business performance of the Group and believe that this measure provides additional useful information for investors on the Group's performance. Further details can be found in note 3 of the financial statements. Adjusted figures exclude the impact of IFRS16.

5. Net debt comprises interest bearing loans and borrowings, overdrafts and cash and cash equivalents. Net debt was £790m at the year end, reflecting £963m as the carrying value of gross debt netted against £173m of cash. See notes 17, 20 and 27 of the financial statements for more details.

6. Dividends are stated as gross amounts before deduction of Luxembourg withholding tax, which is currently 15%.

7. Net capital expenditure includes the purchase of property, plant and equipment, intangible assets and proceeds from the sale of any of those items. These exclude IFRS16 lease liabilities.

Results Presentation

An in-person presentation for analysts in relation to these FY22 Preliminary Results will be held today at 08:30 am (UK) at Bank of America Merrill Lynch, 2 King Edward St, London EC1A 1HQ. Attendance is by invitation only. 

A simultaneous live audio webcast and presentation will be available via the B&M corporate website at www.bandmretail.com/investors/presentations/year/2022

Enquiries:

B&M European Value Retail S.A.

For further information please contact +44 (0) 151 728 5400 Ext 5763

Simon Arora, Chief Executive

Alex Russo, Chief Financial Officer

Jonny Armstrong, Head of Investor Relations

Investor.relations@bandmretail.com

Media

For media please contact +44 (0) 207 379 5151

Sam Cartwright, Maitland

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 701 stores in the UK operating under the "B&M" brand, 311 stores under the "Heron Foods" and "B&M Express" brands, and 107 stores in France also operating under the "B&M" brand as at 26 March 2022. It was admitted to the FTSE 100 index on 21 September 2020.

The B&M Group was founded in 1978 and listed on the London Stock Exchange in June 2014. For more information please visit www.bmstores.co.uk

Chief Executive's Review

Becoming an even better retailer

Over the past two years B&M has, like all businesses, had to adapt to a rapidly changing world. I am very proud of the way in which we have responded to those ongoing challenges and continued delivering against our purpose; to provide customers with great value for money so that they keep returning to our stores. At the same time, we have maintained a very strong financial performance with both sales and profit being significantly ahead of pre-pandemic levels.

Reflecting on a remarkable period of growth for the Group, I am convinced that our experiences have made us an even better retailer than we were prior to the pandemic. In that time the core B&M UK business has acquired, and most importantly retained, a number of new customers, and this provides an exciting platform from which to continue taking market share across a number of product categories. 

In France, the B&M brand has been well received, the financial performance is much improved and the business is unrecognisable to the one we acquired in 2018 in terms of customer proposition. For Heron Foods, what began as a more challenging period in FY22 ended with strong momentum and we continue to regard that business as being a good strategic fit, albeit of relatively modest size in the context of the overall Group.

The strength and resilience of our business model continues to be a key differentiator and has enabled us to continue offering compelling value for money to customers. In particular, our robust supply chains, simple operations and speed of decision making have all helped the Group respond decisively and effectively in FY22. This is perhaps best illustrated by the two-year like-for-like3 sales growth of 13.0% in the core B&M UK business, which was relatively consistent throughout large parts of the year despite changing external conditions and global supply chain disruption.

The 701 B&M UK stores are mostly located in Out of Town retail parks, making them somewhat insulated from the structural footfall decline in town centres and secondary malls. Moreover, given recent successes in key seasonal categories such as Gardening and Christmas, it would appear that our larger B&M Homestores are increasingly regarded as a 'destination' visit for many customers. This is important, since it helps to reinforce customer loyalty and affection towards the B&M brand.

Looking ahead, it remains difficult to accurately predict the net impact a number of different factors could have on the business. These include, but are not limited to, the impact of rising inflation on product cost prices and consumer spending, plus the extent of further normalisation in customer behaviour as we emerge from the pandemic. 

Our discounted food and FMCG products should appeal to lower-income households who are likely to be disproportionally affected by the rising cost of living, and may also benefit from increased demand as a result of new customers switching to B&M as they look for greater value for money.

In General Merchandise, which has seen consecutive years of very strong growth both in terms of sales and margin, we accept that the outlook is more uncertain. That said, the range of categories we offer are at affordable price points and the semi-essential nature of many of these products all provide reasons to believe we will continue to perform well within the overall market.

Given the positioning of the B&M UK business together with the attractive growth prospects in France, we can look to the future with a sense of cautious optimism and a clear focus on providing customers with great value for money and, as a consequence, gain further market share.

Financial performance

Due to the highly elevated sales comparatives due to prolonged periods of lockdown in FY21, the most meaningful measure of performance for the core B&M UK business this year has been the two-year like-for-like3 ("LFL") growth versus the pre-pandemic levels of FY20. On that basis, growth of 13.0% means that store sales densities remain significantly higher than before the pandemic and suggests we have retained the loyalty of many new customers acquired last year. 

Most product categories delivered double-digit LFL growth over that two-year period, with notable strength seen in General Merchandise ranges where the business ensured good stock availability and was able to meet strong customer demand.

Due to this relative out-performance in General Merchandise, B&M UK gross margin benefited from another small step up this year. Strong execution from the buying teams and a limited requirement for markdown activity given the good level of sell-through on Seasonal categories contributed to gross margin expanding 52 bps year-on-year. 

Diligent cost control enabled much of the operating leverage delivered last year to be retained, resulting in a strong adjusted EBITDA4 margin of 14.4% on a pre-IFRS16 basis. Whilst this represented a marginal decrease of (6) bps from the 14.5% delivered last year, it remains significantly above the EBITDA margin from FY20.

In Heron Foods, LFL sales performance steadily improved throughout the year as the comparatives from FY21 eased. As such, the EBITDA result was similar to last year and profit margin was broadly maintained, representing a robust outcome for FY22 as a whole. 

In France, the business exceeded expectations in FY22. The local management team have made considerable progress over the past two years, implementing important strategic changes whilst at the same time navigating various impacts from the pandemic. An outturn of £32m adjusted EBITDA4 at a margin of 9.2% was a very pleasing result and is affirmation that the B&M proposition can be successful in France.

Overall, although Group adjusted EBITDA4 declined very slightly year-on-year, results for FY22 demonstrate a sustained step up in profitability compared to pre-pandemic levels. Alongside this, the Group remained highly cash generative and has continued to use this cash effectively in line with its capital allocation framework.

Current trading and outlook

Given the impact of the pandemic at the start of both FY21 and FY22, assessing current trading is challenging with both the one-year and two-year like-for-like3 comparisons significantly complicated by restrictions in place during both comparative periods. The B&M UK LFL sales performance over the first 8 weeks of FY23 has been (13.2)% and (11.5)% versus FY22 and FY21 respectively.

During this current period we consider a three-year measure to be helpful in gauging the underlying sales performance of the business. Compared to pre-pandemic levels of 2019, the three-year LFL performance since the start of the new financial year was +7.7% in April 2022, with an improvement to +10.9% in the first 3 weeks of May 2022. Trading patterns are expected to remain unpredictable in the year ahead. In particular, the elasticity between volume and price on General Merchandise is difficult to predict, as is the demand at individual category level.

With respect to gross margin, the past two years have seen very limited end of season markdown activity on Seasonal categories, due to the high rate of sell-through. Looking into FY23, some level of markdowns are expected to return and there may be an adverse impact from category mix as customers shift spending away from more discretionary higher margin General Merchandise categories in favour of Food and FMCG products. As a result of this gross margin dilution, B&M UK adjusted EBITDA4 margin is expected to step back between 70 to 130 bps but to remain structurally higher than pre-pandemic levels. 

Elsewhere in the Group there is a positive outlook for Heron Foods, where inflation in food prices and a return to normal footfall levels should be supportive of revenues. In France, further development of the customer proposition as the brand becomes better known should also help deliver continued strong LFL sales growth and further growth in EBITDA following last year's pleasing performance. 

Operating costs remain tightly controlled across the Group with freight costs competitively positioned for the year ahead and a flexible and low-cost store labour model. Fuel and energy costs collectively represented less than 1.0% of FY22 revenues.

In terms of store growth, the Group will remain disciplined when choosing new sites to ensure returns are maximised, with the quality of new locations just as important as quantity. The Group currently expects gross new store openings across each business in FY23 to be approximately 40 for B&M UK, 15 for Heron Foods and 6 in France. 

Given the uncertain macroeconomic outlook, it is difficult to predict the net impact of a number of factors such as customer down-trading, category mix shift and the impact of inflation on sales volumes. However, the Group remains well positioned to continue offering great value-for-money across a wide range of categories. In the core B&M UK business, price competitiveness remains very strong. On a basket of c.550 Food and FMCG items, the Group's latest internal price comparison suggests B&M is about 15% cheaper on average than mainstream supermarket competitors. Furthermore, 93% of all products sold at B&M are less than £20, making it less exposed to any sharp reductions in spending on higher ticket items.

Notwithstanding the many and varied uncertainties and headwinds which are likely to impact on our trading performance during FY23, at this early stage in the year Group adjusted EBITDA4 is expected to be in the range of £550m to £600m, significantly ahead of the FY20 pre-pandemic level of £342m.

Longer-term, the growth prospects both in the UK and in France are highly attractive. The Group is committed to a rollout target of at least 950 B&M UK stores and continued geographic expansion of the Heron Foods convenience store chain. In France, with strong foundations now in place and the ongoing development of operational competencies, the pace of organic growth is expected to step up from FY24 onwards.

Strategic development

The Group executed its plans well throughout FY22. Despite a challenging and unpredictable macroeconomic backdrop, the B&M business model proved very capable of responding to changing conditions and enabled strong progress to be made against its long term strategy.

1. Delivering great value to our customers

B&M's purpose is to deliver great value to customers so that they keep returning to our stores time and time again. This purpose is as compelling now as it has ever been, given the inflationary pressures currently being felt by consumers. 

The B&M price competitiveness is driven by a relentless focus on buying large volumes of a limited assortment of best-selling items, sourcing these products direct from manufacturers and keeping costs low. Not only does this approach allow the business to pass cost savings on to customers, but it also keeps operations simple, agile and responsive. 

Retaining the loyalty of customers who discovered B&M during FY21 was a key objective over the past year. The best way to achieve this was to ensure the business had good availability of the right products at the best possible prices, be that the leading household brand names or our private label ranges across General Merchandise categories.

Given the two-year like-for-like3 sales growth of 13.0% in FY22, it would appear that many new customers from last year have found the B&M proposition compelling and continued to visit stores. This is also validated when looking at the cohorts of new customers previously identified in FY21. Based on Barclaycard transaction analysis from the month of acquisition in FY21 to the end of FY22, 78% of those new shoppers have visited B&M again since their initial visit. Moreover, the demographic profile of customers who have demonstrated the greatest propensity to return is that of a low to middle income family, underpinning the attractiveness of the B&M value for money proposition to a customer type that represents a significant part of the total UK population.

The 'treasure hunt' remains an essential part of the customer appeal, and this is true whether shoppers need a bargain or just enjoy one. It's also likely to be a reason why the B&M brand is increasingly well loved. According to a national survey of over 96,000 consumers published by BrandVue in March 2022, B&M was ranked the UK's 9th most loved retail brand overall, and placed 3rd within the Home category.

It also revealed that affinity was particularly strong amongst younger generations such as 'Gen Z' and 'Millennials', providing reason to be optimistic regarding long term prospects given the potential for these customers to be loyal B&M shoppers for their families for many years to come. Success in categories such as Toys, where B&M was awarded "Multiple Toy Retailer of the Year" at the Toy Industry Awards this year, further illustrates the appeal of a bricks and mortar discounter such as B&M.

At category level, sales performance was relatively broad based throughout FY22. Certain General Merchandise ranges proved particularly popular, with key seasonal ranges such as Gardening and Christmas delivering record performances. Strong sell-through also delivered a gross margin benefit due to end of season markdown activity being limited. These seasonal categories are important for long term customer retention since they reinforce B&Ms position as a destination visit for such items year after year and in a category where our model is at its most disruptive.

Success in these Seasonal categories was made possible due to the decisive action taken in response to global supply chain disruption, where the business ensured strong on-shelf availability by taking receipt of stock earlier than normal. This approach has also been adopted in relation to Spring/Summer 2022 Seasonal stock, and is likely to continue until disruption subsides. 

Given the rising cost of living and the extent to which it will likely impact certain demographics more than others, the B&M proposition of making everyday items affordable should continue to resonate strongly with customers.

2. Investing in new stores

In the core B&M UK fascia 34 gross new stores were opened during FY22, of which 2 were relocated stores and a further 12 stores were closed. The closures generally represent early generation stores coming to the end of leases and where a larger, modern store had already been opened in the same catchment in a previous financial year. In total there was a net increase of 20 stores, growing the B&M UK portfolio to 701. 

New store openings continue to be accretive to Group profitability with recent cohorts typically outperforming the company average, and that includes when re-locating an existing store. Importantly, although relocations and closures do not contribute to the net increase in store numbers year-on-year, they do provide an uplift to overall estate profitability both in terms of absolute profit and profit margin.

The B&M UK business expects to open approximately 40 gross new stores in FY23 and the recently lifted moratorium on tenant evictions should support the current pipeline of opportunities. It is possible that incremental opportunities to add space could arise should the retail industry see capacity withdrawal as a consequence of the current cost of living pressures. However, the business remains very selective when appraising a potential new site so as not to risk diluting profit margins, as evidenced by the above-average contribution margin of recent years' cohorts as noted above.

Longer term, there remains a long runway of growth in the UK, with the potential for at least 950 B&M fascia stores in total. Based on the current estate of 701 stores, an estimated 38% of the UK population still live over 3 miles from a B&M store. As such, given the increased sales densities and broadening demographic appeal of B&M over the past two years, this long term target increasingly looks like a conservative estimate.

The discount convenience store business, Heron Foods, opened a total of 16 gross new stores and closed 11 stores during the year, growing the estate to 311 stores. The closures included 5 relocations where there was an opportunity to move to a more attractive site within the same local catchment area. The remaining 6 closures represented stores that previously traded under the 'Cooltrader' brand that were inherited when acquiring the Heron Foods business but were in sub-optimal or unprofitable locations. 

Heron Foods stores are only c.3,000 sq ft on average, serve a very localised customer base and extend over a smaller geographic footprint compared to the B&M fascia. As such, due to the nature of locations required and the practicalities of distributing chilled and frozen food, the rate of growth will always be slower. There should be around 15 gross new store openings again in FY23, with a similarly paced rollout in future years.

In France the focus in FY22 has been on re-branding the existing estate rather than opening new stores, and all stores are now branded B&M. That said, the business was able to open 3 opportunistic new stores, taking the estate to 107 stores as of the year-end.

3. Developing our international business

FY22 has been a year of excellent progress in France, both financially and operationally.

The two-year LFL sales growth was +21% for the full year, demonstrating the success of store layout and product changes made during that time. The adjusted EBITDA4 outturn of £32m and profit margin of 9.2% represents a very strong result, particularly in the context of France being loss-making as recently as FY20. Such performance provides a firm foundation from which to grow organically in FY23 and beyond.

With the fascia re-branding programme complete and Clothing & Footwear representing only c.12% of the sales mix in FY22, these two strategic priorities have been executed well by the French management team. There will be ongoing refinements in FY23 to the product mix, for example, growing the range of FMCG to help drive footfall, but the priority for the year ahead is very much on further improving overall store standards, consistency and operational competencies.

As part of that focus, there will be further trials of a company operated model in France, with any new store openings in FY23 falling under this structure rather than the mandated manager model inherited when acquiring the French business. This will look to replicate the store operating model of B&M in the UK, where all colleagues are employed directly and B&M has complete control over the store's operations. To assist with these changes, experienced members of the UK store operations team are currently on secondment in France.

Such has been the progress this year, there is a strong conviction that the B&M proposition can be successful in France. In particular, the Board now has the confidence to begin a steady rollout of new stores. This will be undertaken slowly initially, with approximately 6 new stores in FY23, but is expected to increase in outer years.

Given both the plans for FY23 outlined above and the long term growth potential in France, no other international geographies are currently being evaluated so as to not risk management distraction.

4. Investing in our people and infrastructure

Developing colleagues remains crucial to the Group's ongoing success and forms an important part of the new ESG strategy approved by the Board this year. The well-established "Step-Up" training programme saw 91 colleagues promoted into store management roles this year, whilst a new "Warehouse to Wheels" initiative aimed at offering training opportunities for warehouse colleagues to become HGV drivers was also developed. 

Through the new store opening programme, over 650 new retail jobs were created in the UK. B&M also supported almost 3,000 colleagues under the Government's "Kickstart" programme which aims to help long-term unemployed people get back into work in their local communities, and a further 144 colleagues were enrolled onto various apprenticeships.

The B&M website has not historically been transactional, instead acting as a footfall driver into stores and a channel through which to engage with an online community of customers. All that remains true. However, at the time of writing an online home delivery service will shortly be launched on a limited range of items. This trial will ultimately extend across c.1,000 SKUs representing in part bulkier or higher ticket General Merchandise items which customers cannot always easily transport home from stores themselves or products that do not require disproportionate mail order packaging. Given the disruptive B&M price position, the business believes this could prove an attractive proposition for customers. However, it remains open minded as to the long term potential of the trial, and a 'test and learn' approach will be adopted over the coming months as customer response is closely monitored.

The existing network of five main B&M UK Distribution Centres remains adequate to service current sales volumes and as such no large-scale capital investment in additional capacity is anticipated in the near term. Over the medium term, the Group's infrastructure requirements will depend on the rate and geographical spread of new store openings alongside ongoing development of the supply chain. The Group does not have plans for capital intensive development projects and prefers to lease any such additional capacity in line with its capital light model.

The transport operation is also operated in-house, remains well invested and scalable. The main area of investment in FY22 was with regards to IT infrastructure and applications, where various projects were carefully selected to underpin the continued growth of the Group.

Environmental, Social & Governance

The Group recognises the growing importance of Environmental, Social & Governance ("ESG") actions and reporting to all stakeholders and has made significant progress in developing its approach over the past 12 months. Following extensive consideration, the Board formally approved its first ESG strategy this year. 

In developing this strategy, the Group has sought to strike a balance between being sufficiently ambitious, reflecting the step change in performance over the past two years, but also ensuring these ambitions are appropriate for a business such as B&M, being a variety goods value retailer focused on long term sustainable growth. 

The strategy has been built around four pillars designed to help make the business stronger and more resilient whilst underpinning the Group's purpose of delivering great value to customers. These pillars, and relevant highlights from FY22, are as follows:

Environment

· Reduced the Groups carbon intensity for Scope 1 and 2 emissions, with the FY22 ratio over 50% lower than 5 years ago;

· Committed to a science-based target of reducing Scope 1 & 2 carbon emissions by 25% by 2030, and a supplier engagement target for Scope 3 carbon emissions.

Colleagues

· Acknowledged the dedication and hard work of over 24,000 colleagues by awarding an extra week's wages in January 2022;

· Continued development of own talent through the "Step-Up" programme, promoting 91 colleagues to B&M Deputy and Store Manager positions.

Communities

· Extended the reach of the B&M value for money proposition to new communities by opening 54 gross new stores across the Group;

· Created over 650 new retail jobs in the UK, in addition to almost 3,000 placements under the governments "Kickstart" scheme and 144 colleagues enrolled on various apprenticeship programmes;

Supply Chain

· Ongoing investment in ethical trading audit procedures, with no instances of non-compliance identified;

· Continued to treat all suppliers fairly, with average payment terms of only 16 days, and worked collaboratively in supporting various sustainability initiatives.

To complement the launch of the ESG strategy, a standalone ESG report will be published for the first time this year and will provide further detail, including relevant metrics, targets and initiatives. In addition, a new Sustainability Manager role was created in FY22, with the role being filled by an internal candidate, clearly aligning with the "Colleague" pillar of the strategy.

The Board is pleased with the progress made with regards to the ESG strategy in FY22, but also acknowledges that it will need to evolve over time. In that regard, progress will be overseen collectively as a full Board rather than by delegating to any sub-committee.

On a personal note

The Group has today announced Alex Russo as my successor as CEO. While the change will not take place just yet, this is my valedictory Chief Executive annual review, so I apologise for the indulgence of penning a few personal words.

My decision to step down as CEO during the next year evoked similar feelings to when my wife and I became 'empty nesters' when our two daughters recently left home for college or to pursue a career. There is a touch of sadness but the overwhelming emotion is one of pride.

The numbers so easily trip off the tongue. From a purchase price of £525,000 in December 2004 to becoming a constituent of the FTSE100 index in September 2020. From 21 shops in the North of England to now over 1,100 stores across the UK and France. From having 500 colleagues to now a family of 38,000 wonderful people.

However, none of these numbers capture the real essence of it. 

What has made this journey so incredibly rewarding is the hard work, ambition and loyalty of my colleagues who all share a willingness to work hard. This work ethic operates at all levels and we celebrate it. 

We also have ambition. We desperately want to win and our culture of trust allows us to do so. We trust each other to be honest and open. If something goes wrong, we don't hide from it or 'play the blame game'. Instead we learn from that mistake and make sure it isn't repeated.

Finally, we reward loyalty and commitment. We promote from within, it's our home-grown entrepreneurial culture, coupled with an ability to operate 'at B&M speed', that gives us an edge over the competition.

These values didn't come about by me dreaming them up, seated at my desk. They evolved organically, through the actions every day, seven days a week, of the many thousands of loyal colleagues who have built B&M into what it is today. My role has been simply to create the environment in which these wonderfully talented and hard-working retailers could thrive.

I wish Alex every success in preserving and building upon these values when he takes over the role. If we stay true to them, B&M has a prosperous future for many decades to come. Like for my daughters, I view that future with a quiet optimism. I will be working hard in my remaining period as CEO to ensure the transition is smooth and that Alex is successful.

Finally, I would like to thank all our stakeholders for your support and engagement over the wonderful last 17 years. I am very grateful and look forward to thanking as many of you as possible in person over the coming months.

Simon Arora Chief Executive Officer

30 May 2022

Financial Review

Accounting period

The current accounting period represents the 52 weeks trading to 26 March 2022 ("FY22") and the comparative period represents the 52 weeks to 27 March 2021 ("FY21").

The Group financial statements have been prepared in accordance with IFRS and are reported as such. Underlying figures presented before the impact of IFRS16 continue to be reported where they are relevant to understanding the performance of the Group and to aid comparability with previous years.

Financial performance

Group

Total Group revenue in FY22 was £4,673m (FY21: £4,801m), representing a year-on-year decrease of (2.7)%. On a constant currency basis1, revenues decreased by (2.4)%.

Group adjusted gross margin4 was 37.5% (FY21: 36.7%), an increase of 77 bps driven by performance in the core B&M UK business. Group adjusted operating costs4, excluding depreciation and amortisation, remained broadly flat year-on-year at £1,133m (FY21: £1,137m). Depreciation and amortisation (excluding the impact of IFRS16 and adjusting items) increased 5.4% to £66m (FY21: £62m), largely due to ongoing investment in new stores across all fascias.

Group adjusted EBITDA4, stated on a pre-IFRS16 basis, decreased slightly by (1.2)% to £619m (FY21: £626m) reflecting the exceptional nature of the prior year but nonetheless representing a strong outcome for FY22, being 80.8% higher than FY20. Group adjusted EBITDA4 margin increased slightly year-on-year due to the accretive contribution from France, and when compared to pre-pandemic levels of FY20 has expanded 427 bps over that two-year period. 

On a post-IFRS16 basis, Group adjusted EBITDA4 was £828m (FY21: £834m) which represented an adjusted EBITDA4 margin of 17.7% (FY21: 17.4%).

An adjusted EBITDA4 is reported to allow investors to better understand the underlying performance of the business. The adjusting items are detailed in note 3 of the financial statements, and totalled £12m this year (FY21: £(3)m). 

B&M UK

In the UK, total B&M revenues decreased by (4.1)% to £3,909m (FY21: £4,078m), with the annualisation of revenues from the 43 gross new store openings in FY21 and contribution from the 34 gross new store openings this year offsetting some but not all of the one-year like-for-like3 ("LFL") revenue decline of (9.0)%. 

On a two-year basis versus pre-pandemic levels of FY20, which is considered to be a more meaningful measure of performance this year, LFL revenues were 13.0% higher this year. This represents a significant increase in store sales densities, with the business having been successful in retaining the loyalty of many customers who discovered B&M during the prior year. Although the two-year LFL in the final quarter of the financial year was lower than the run rate during the first three quarters, this was expected due to the impact of the panic buying of essential products in March 2020 at the start of the pandemic.

At category level, the two-year LFL performance has been broad based. Demand for essential food and FMCG items has remained steady, whilst certain General Merchandise ranges have performed particularly well and provided a small year-on-year gross margin benefit. The average transaction value remains relatively modest at c.£18 due to the nature of the product ranges sold by B&M. 

There were 34 gross new store openings and 14 closures in FY22, with 2 of those closures being relocations. New store openings continue to deliver strong returns on investment, with no maturity period required and recent cohorts typically delivering a higher store contribution margin than the company average, meaning the rollout programme remains supportive of profit margins. 

In addition to revenue generated in-store, wholesale revenue remained relatively consistent at £45m (FY21: £47m). Most of this represents sales made to the associate Centz Retail Holdings Limited, a chain of 45 variety goods stores in the Republic of Ireland.

B&M UK gross margin expanded slightly by 52 bps to 37.4% (FY21: 36.9%) and was relatively consistent across both H1 and H2, such was the performance of the Spring/Summer and Christmas seasonal ranges respectively. In particular, the gross margin outturn for FY22 reflects the impact of inflation in freight rates from the start of 2022, which has been manageable. The business continues to enjoy a long-standing relationship with its shipping partner used for transporting General Merchandise goods out of Asia, and believes itself to be relatively well positioned versus competitors in this regard.

Adjusted operating costs4, excluding depreciation and amortisation, decreased by (1.6)% to £899m (FY21: £914m). These costs represented 23.0% of revenues (FY21: 22.4%), a small increase of 58 bps due to the LFL revenue decline on a one-year basis. However, when comparing this to FY20 when operating costs were 23.4% of revenues, there has been an improvement of 40 bps over that two-year period driven by the operating leverage achieved on significantly higher sales densities.

In terms of store related costs, colleague wages and salaries as a proportion of sales have remained flat year-on-year at c.9%, while rental costs have also been stable and very competitively positioned. Variable transport and distribution costs increased marginally as a percentage of revenues due to targeted investment in HGV driver wages early in the year. Energy costs related to utilities represent less than 1% of store revenues and continue to be tightly managed, supported by the ongoing rollout of energy reduction initiatives such as LED lighting and a Building Energy Management System.

Adjusted EBITDA4 for the B&M UK business decreased by (4.5)% to £564m (FY21: £591m) and the adjusted EBITDA4 margin decreased slightly by (6) bps to 14.4% (FY21: 14.5%). However, both remain significantly above historical levels.

Heron Foods

In the discount convenience chain, Heron Foods, revenues fell slightly to £411m (FY21: £415m). This reflects the impact of annualising against the highly elevated comparatives from last year when the business benefitted from lockdown induced shopping behaviour, particularly with regards to Frozen food. The revenue contributed by the annualisation of new stores broadly offset a year-on-year LFL decline, although this steadily improved throughout FY22 and was positive in the final quarter.

Gross margin in Heron Foods remained broadly flat versus FY21 despite the supply environment for Frozen and Chilled food proving somewhat challenging over the past 12 months.

Operating costs remained well controlled, increasing marginally as a percentage of revenues to 26.1% (FY21: 25.5%) due to investment in store wages.

Heron Foods adjusted EBITDA4 decreased to £23m (FY21: £25m) and the adjusted EBITDA4 margin declined by (43) bps to 5.5% (FY21: 5.9%), representing a satisfactory result for the year.

France

In the French business, revenues increased by 14.2% to £353m (FY21: £309m), reflecting the strong progress made in FY22. Performance in categories such as Homewares, Indoor Furniture and Giftwares was particularly strong, having been given greater prominence in store due to the re-merchandising which has taken place alongside the fascia re-branding programme.

Gross margin improved again year-on-year, driven by further planned rationalisation of Clothing and an increase in the sales participation from higher margin General Merchandise categories.

Given the focus on improving operational consistency across the French estate this year, there was an improvement of 190 bps in operating costs as a percentage of sales to 36.1% (FY21: 38.0%).

Adjusted EBITDA4 increased significantly to £32m (FY21: £11m), with an adjusted EBITDA4 margin of 9.2% (FY21: 3.6%). This represents a considerable turnaround for the business and should provide a strong platform for future growth in France.

Depreciation and amortisation

Depreciation and amortisation expenses, excluding the impact of IFRS16, grew by 5.4% to £66m (FY21: £62m), representing only 1.4% of sales (FY21: 1.3%). The increase was largely due to continued investment in new stores across all fascias, with the Group growing the store estate by 2.6% in the year.

The additional depreciation and amortisation charge relating to lease liabilities under IFRS16 was £161m (FY21: £153m).

Finance expense

Adjusted net finance charges4 for the year, excluding IFRS16, were £29m (FY21: £24m). This included bank and high yield bond interest of £27m (FY21: £22m) and amortised fees of £2m (FY21: £2m). The higher interest charge relates to the issue of a new £250m High Yield Bond in November 2021.

The interest charge relating to lease liabilities under IFRS16 was £59m (FY21: £61m).

Profit before tax

Statutory profit before tax was £525m (FY21: £525m). An adjusted profit before tax4 is also reported to allow investors to better understand the operating performance of the business (see note 3 of the financial statements). Adjusted profit before tax4 for the year decreased slightly to £524m (FY21: £540m).

The impact of IFRS16 on the Group financial statements was to decrease statutory profit before tax by £11m.

Taxation

The tax charge in FY22 was £103m (FY21: £97m), representing an effective tax rate of 19.6%. We expect the tax rate going forward to reflect the blended rate of taxes in the countries in which we operate. This is currently 19% in the UK and 27.5% in France, although the UK Corporation Tax rate is scheduled to increase to 25% from FY24 onwards.

As a Group, we are committed to paying the right tax in the territories in which we operate. The B&M UK business paid taxes totalling £517m in FY22, including £245m relating to those taxes borne directly by the company such as corporation tax, customs duties, business rates, employer's national insurance contributions and stamp duty and land taxes. The balance of £272m are taxes we collect from customers and employees on behalf of the UK Exchequer, which includes Value Added Tax, Pay As You Earn and employee national insurance contributions.

Profit after tax and earnings per share

Statutory profit after tax was £422m (FY21: £428m) and the statutory diluted earnings per share was 42.1p (FY21: 42.7p). 

Adjusted profit after tax4, which we consider to be a better measure of performance for the reasons outlined above, was £417m (FY21: £435m), and the adjusted fully diluted earnings per share4 was 41.6p (FY21: 43.4p).

Investing activities

Group net capital expenditure7 totalled £85m this year (FY21: £81m). Investment included £34m spent on 54 gross new stores across the Groups fascia's (FY21: £43m on 65 stores) and £8m on infrastructure projects to support the continued growth of the business (FY21: £8m). There was also investment of £42m on maintenance works to ensure that our existing store estate and warehouses are appropriately invested (FY21: £22m), with the year-on-year increase largely driven by the fascia re-branding programme in France. There was also a net expenditure of £1m relating to a small number of freehold acquisitions and disposals (FY21: net expenditure of £8m).

Net debt and cash flow

The Group continues to be highly cash generative, with cash generated from operations of £598m (FY21: £944m). This is lower than the prior year, largely due to investment in working capital with regards to Spring/Summer seasonal stock. Such stock has been deliberately receipted earlier than normal to ensure strong availability. It is also being sold through more evenly across the season compared to the highly elevated demand seen in March and April 2021, which impacted the normal working capital cycle and created an inflow at the FY21 year-end.

The strong performance and cash generation have enabled the Group to pay dividends totalling £430m6 in FY22. This includes a £250m6 special dividend paid in January 2022.

Net debt5 (on a pre-IFRS16 basis), increased to £790m (FY21: £519m). The net debt5 to adjusted EBITDA4 leverage ratio was 1.3x (FY21: 0.8x), comfortably within our 2.25x leverage ceiling.

B&M periodically explores opportunities to repay, prepay, repurchase, refinance or extend its existing indebtedness prior to the scheduled maturity of such indebtedness, and/or amend its terms with the requisite consent of lenders as part of B&M's continuing efforts to manage its capital structure. B&M and/or its Group may also incur additional indebtedness to the extent permitted by the covenants of existing indebtedness or with the requisite consent of lenders, including in connection with the Group's evaluation of strategic expansion and acquisition opportunities. 

In accordance with this framework, the Group issued an additional £250m High Yield Bond in November 2021 which matures in November 2028. The French business also repaid the remaining balance of €25m relating to the French Government-backed loan facility scheme that was initially made available in FY21 due to the disruption caused by Covid-19. See note 20 of the financial statements for further details.

The Board adopted a long-term capital allocation policy in 2016 to provide a framework to help investors understand how the Group will continue to balance the funding requirements of a growth business like B&M with the desire to return surplus capital to shareholders. The Board will continue to evaluate opportunities to invest and support the growth of the business along with the scope for any incremental return of capital to shareholders in the context of that framework.

Dividends

During the year, the Company declared and paid an interim ordinary dividend of 5.0p6 per share in addition to a special dividend of 25.0p6 per share. Subject to approval by shareholders at the AGM on 28 July 2022, a final ordinary dividend of 11.5p6 per share is to be paid on 5 August 2022 to shareholders on the register of the Company at the close of business on 1 July 2022. The ex-dividend date will be 30 June 2022.

The Group has a dividend policy which targets an ordinary dividend pay-out ratio of between 30 to 40% of net income on a normalised tax basis. The Group generally aims to pay the interim and final dividends for each financial year in proportions of approximately one-third and two-thirds of the total annual ordinary dividend respectively.

The Group is strongly cash generative and its policy is to allocate cash surpluses in the following order of priority:

1. the roll-out of new stores with a strong payback profile;

2. ordinary dividend to shareholders;

3. mergers & acquisition opportunities; and

4. returns of surplus cash to shareholders.

The above list is a summary of the main items, but is not exhaustive as other factors may arise from time to time which require investment to support the long-term growth objectives of the Group.

The parent company of the Group is an investment holding company which does not carry on retail commercial trading operations. Its distributable reserves are derived from intra-group dividends originating from its subsidiaries. The parent company is a Luxembourg registered company, and as such, the Board is permitted to have recourse to the company's share premium account as a distributable reserve. It remains the Group's policy for dividend purposes to have recourse to distributable profits from within the Group, and accordingly, ahead of interim dividends, and also ahead of the year-end in relation to final dividends, the Board reviews the levels of dividend cover in the parent company to maintain sufficient levels of distributable profits in the parent company for each of those dividends. There are over £500m of distributable reserves in the principal trading subsidiary of the Group, B&M Retail Limited, and there are no dividend blocks between it and the Company.

Notwithstanding the current macroeconomic uncertainties, the Group has continued to be highly cash generative and is in a strong position to maintain its ordinary dividend policy. The principal risks of the Group are set out in its Annual Report, in particular those relating to Covid-19, supply chain, competition, economic environment, commodity prices, infrastructure and international expansion. These are relevant to the ability of the Group to maintain its ordinary dividend policy in the future. The Group however maintains strategies to mitigate those risks and the Board believes the Group has a robust and resilient business model through the combination of having a value-led product assortment which to a large extent comprises essential goods and also competes across a very broad section of the retail markets in our chosen locations.

Alex Russo

Chief Financial Officer

30 May 2022

Consolidated Statement of Comprehensive Income

* Other comprehensive income has been restated in 2021 to remove the effect of the hedging gains and losses transferred to inventories. These are recorded directly in the consolidated statement of changes in equity. See note 1.

All profit and other comprehensive income is attributable to the owners of the parent.

The accompanying accounting policies and notes form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

The accompanying accounting policies and notes form an integral part of these consolidated financial statements. This consolidated statement of financial position was approved by the Board of Directors and authorised for issue on 30 May 2022 and signed on their behalf by:

Simon Arora, Chief Executive Officer.

Consolidated Statement of Changes in Shareholders' Equity

* Other comprehensive income, total comprehensive income and hedging gains & losses reclassified as inventory have been restated in 2021 to remove the effect of the hedging gains and losses transferred to inventories. These are recorded directly in the consolidated statement of changes in equity. See note 1.

The accompanying accounting policies and notes form an integral part of these consolidated financial statements. Consolidated Statement of Cash Flows

The accompanying accounting policies and notes form an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

1 General information and basis of preparation

The consolidated financial statements have been prepared in accordance with EU IFRS.

The Group's trade is general retail, with continuing trading taking place in the UK and France. The Group has been listed on the London Stock Exchange since June 2014.

The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. The measurement basis and principal accounting policies of the Group are set out below and have been applied consistently throughout the consolidated financial statements.

The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest million (£'m), except when otherwise indicated. This is the first period where the Group has rounded to the nearest million (previously rounding to the nearest thousand). In transitioning the prior year accounts, usual rounding practices have been adhered to.

The consolidated financial statements cover the 52 week period from 27 March 2021 to 26 March 2022 which is a different period to the parent company standalone accounts (from 1 April 2021 to 31 March 2022). This exception is permitted under article 1712-12 of the Luxembourg company law of 10 August 1915, as amended, because the Directors believe that;

· the consolidated financial statements are more informative when they cover the same period as used by the main operating entity, B&M Retail Ltd; and

· it would be unduly onerous to rephase the year end in that subsidiary to match that of the parent company.

The year end for B&M Retail Ltd, in any year, will not be more than six days prior to the parent company year end.

B&M European Value Retail S.A. (the "Company") is at the head of the Group and there is no consolidation that takes place above the level of this company.

The principal accounting policies of the Group are set out below.

Restatement of other comprehensive income

The Group has restated the other comprehensive income caption of 'fair value movement as recorded in the hedging reserve' to exclude the amount moved to inventories on the maturation of effective hedges as required by IFRS 9 'Financial Instruments'.

This has resulted in a decrease of £5m in other and total comprehensive income for the prior year. The corresponding credit to the hedging reserve is presented in the consolidated statement of changes in equity.

There was no effect on the profit for the period, earnings per share, consolidated statement of financial position or consolidated statement of cash flows.

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings, together with the Group's share of the net assets and results of associated undertakings, for the period from 28 March 2021 to 26 March 2022. 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 arrangements with the other vote holders of the investee,

· rights arising from other contractual arrangements, and,

· the Group's voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary, excluding the situations as outlined in the basis of preparation.

Going concern

As a value retailer, the Group is well placed to withstand volatility within the economic environment. The Group's forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group will trade within its current banking facilities.

After making enquiries, including preparing cash flow forecasts for at least 12 months from the date of approval of these financial statements, the Directors are confident that the Group has adequate resources to continue its successful growth.

This assessment considered various scenarios including an extreme reduction in like for like sales, gross margin deterioration, disruption to our distribution network and cyber threats. The Group also has recourse to several mitigations to improve liquidity, including our £155m revolving credit facility, which had £142m available at the year end date.

There have been no post balance sheet changes to liquidity and the current inflationary pressures do not have a material impact on this assessment as the Group is well placed to absorb or pass on these costs given our position as a low cost retailer.

Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Note also that viability and going concern statements have been made in the 'Principal risks and uncertainties' section of this annual report.

Revenue

Under IFRS 15 Revenue is recognised when all the following criteria are met;

· the parties to the contract have approved the contract;

· the Group can identify each parties rights regarding the goods to be transferred;

· the Group can identify the payment terms;

· the contract has commercial substance;

· it is probable that the Group will collect the consideration we are entitled to in respect to the goods to be transferred.

In the vast majority of cases the Group's sales are made through stores and the control of goods is immediately transferred at the same time as the consideration is received via our tills. Therefore, revenue is recognised at this point.

The Group sells a small quantity of gift vouchers for use in the future and, as such, a small amount of deferred revenue is recognised. At the period end the value held on the balance sheet was £0.5m (2021: £0.3m).

The Group operates a small wholesale function which recognises revenue when goods are delivered and an invoice is raised. The revenue is considered collectable as the Group's wholesale customers are usually related parties to the Group (such as our associates) or are subject to credit checks before trade takes place. See note 2 for the split of wholesale sales to store sales.

Revenue is the total amount receivable by the Group for goods supplied, in the ordinary course of business, excluding VAT and trade discounts, and after deducting returns and relevant vouchers and offers.

Administrative expenses

Administrative expenses include all running costs of the business, except those relating to inventory (which are expensed through cost of sales), tax, interest and other comprehensive income. Transport and warehouse costs are included in this caption.

Elements which are unusual and significant, such as material restructuring costs, may be separated as a line item.

Goodwill

Goodwill is initially measured at cost, being the excess of the fair value of consideration transferred over the fair value of the net identifiable assets acquired and liabilities assumed at the date of acquisition.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the relevant cash-generating units (CGUs) that are expected to benefit from the combination. The cash-generating units are individual stores and the groups of cash-generating units are the store portfolios in each operational segment.

Goodwill is tested for impairment at least once per year and specifically at any time where there is any indication that it may be impaired. Internally generated goodwill is not recognised as an asset.

Segment reporting

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the executive directors of the Group. The executive directors are responsible for assessing the performance of the business for the purpose of making decisions about resources to be allocated.

Alternative performance measures

The Group reports a selection of alternative performance measures (APM's) as detailed below and in note 3, as the Directors believe that these measures provide additional information that is useful to the users of our accounts.

The alternative performance measures we report in these accounts are:

· Earnings before interest, tax, depreciation and amortisation (EBITDA)

· Adjusted EBITDA

· Adjusted Profit

· Adjusted Earnings per share

Both IFRS 16 and non-IFRS 16 versions of these alternative performance measures have been calculated and presented in order to aide comparability with the figures presented in previous years.

Interest, tax, depreciation and amortisation are as defined statutorily whilst the items we adjust for are those we consider not to be reflective of the underlying performance of the business as detailed in note 3. These adjustments include the effect of ineffective derivatives and foreign exchange on intercompany balances, which do not relate to underlying trading, and costs incurred in relation to acquisitions, which are non-recurring and do not relate to underlying trading.

Underlying performance has been determined so as to align with how the Group financial performance is monitored on an ongoing basis by management. In particular, this reflects certain adjustments being made to consider an adjusted EBITDA measure of performance

Adjusted finance costs reflect the ongoing charges associated with our debt structure and exclude one off effects of refinancing,

The directors believe that our adjusted APMs, and specifically, EBITDA provides users of the account with a measure of performance which is appropriate to the retail industry and presented by peers and competitors. Adjusted values are considered to be appropriate to exclude unusual, non-trading and/or non-recurring impacts on performance which therefore provides the user of the accounts with an additional metric to compare periods of account.

The alternative performance measures used are not measures of performance or liquidity under IFRS and should not be considered in isolation or as a substitute for measures of profit, or as an indicator of the Group's operating performance or cash flows from operating activities as determined in accordance with IFRS.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value, which may include contingent consideration at net present value. Acquisition-related costs are expensed depending on their nature with costs of raising finance amortised over the term of the relevant element of finance provided and the remainder expensed when incurred.

Assets and liabilities are recognised at their acquisition date fair value, with the difference between the consideration and the net assets recognised as goodwill on the statement of financial position or as a gain in administrative expenses.

Brands

Brands acquired by the business are amortised if the corresponding agreement is specifically time limited, or if the fair valuation exercise (carried out for brands acquired via business combinations) identifies a fair lifespan for the brand. This amortisation is charged to administrative expenses.

Otherwise, brands are considered to have an indefinite life on the basis that they form part of the cash generating units within the Group which will continue in operation indefinitely, with no foreseeable limit to the period over which they are expected to generate net cash inflows.

Where brands are considered to have an indefinite life they are reviewed at least annually for impairment or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. 

Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is impaired accordingly with the impairment charged to administration expenses.

Intangible assets

Intangible assets acquired separately, including computer software, are measured on initial recognition at cost comprising the purchase price and any directly attributable costs of preparing the asset for use.

Following initial recognition, assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of the asset over its estimated useful life as follows:

Computer software acquired - 3 or 4 years

Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Property, plant and equipment

Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.

Cost comprises purchase price and directly attributable costs. Unless significant or incurred as part of a refit programme, subsequent expenditure will usually be treated as repairs or maintenance and expensed to the statement of comprehensive income.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised.

Depreciation

Freehold land is not depreciated. For all other property, plant and equipment, depreciation is calculated on a straight line basis to allocate cost, less residual value of the assets, over their estimated useful lives as follows:

Leasehold buildings - Life of lease (max 50 years)

Freehold buildings - 2% - 4% straight line Plant, fixtures and equipment - 10% - 33% straight line

Motor vehicles - 12.5% - 33% straight line

Residual values and useful lives are reviewed annually and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognised.

Leases

The Group applies the leasing standard, IFRS 16, to all contracts identified as leases at their inception, unless they are considered a short-term lease (with a term less than a year) or where the asset is of a low underlying value (under £5k). Assets which may fall into this categorisations include printers, vending machines and security cameras, and the lease expense is within administrative expenses.

The Group has lease contracts in relation to property, equipment, fixtures & fittings and vehicles. A contract is classified as a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

When a lease contract is recognised, the business assesses the term for which we are reasonably certain to hold that lease, and the minimum lease payments over that term are discounted to give the initial lease liability. The initial right-of-use asset is then recognised at the same value, adjusted for incentives or payments made on the day that the lease was acquired. Any variable lease costs are expensed to administrative costs when incurred.

The date that the lease is brought into the accounts is the date from which the lease has been effectively agreed by both parties as evidenced by the Group's ability to use that property.

The right-of-use asset is subsequently depreciated on a straight-line basis over the term of that lease, or useful life (whichever is shorter) with the charge being made to administrative costs. The lease liability attracts interest which is charged to finance costs, and is measured at amortised cost using the effective interest method.

Right-of-use assets may be impaired if, for instance, a lease becomes onerous. Impairment costs are charged to administrative costs.

Lease modifications are recorded where there is a change in the expected cashflows associated with a lease, such as through a rent review. When a lease modification occurs the lease liability is recalculated and an equivalent adjustment is made to the right of use asset, unless that asset would be reduced below zero, in which case the excess is expensed in administrative costs. The recalculation is carried out with an unchanged discount unless the change has affected management's assessment of the term of the lease.

If there is a significant event, such as the lease reaching its expiry date, the likely exercise of a previously unrecognised break clause, or the signing of an extension lease, the lease term is re-assessed by management as to how long we can reasonably certain to stay in that property, and a new lease agreement or modification (if the change is made before the expiry date) is recognised for the re-assessed term, with a recalculated discount rate.

Lease modifications are also recorded where there is a change in the expected cashflows associated with the lease, such as through a rent review. Unless the change affects the term, the discount rate is not recalculated. A lease modification results in a recalculation of the lease liability with a corresponding adjustment made to the right of use asset.

The discount rate used is individual to each lease. Where a lease contract includes an implicit interest rate, that rate is used. In the majority of leases this is not the case and the discount rate is taken to be the incremental borrowing rate as related to that specific asset. This is a calculation based upon the external market rate of borrowing for the Group, as well as several factors specific to the asset to be discounted.

The Group separates lease payments between lease and non-lease components (such as service charges on property) at the point at which the lease is recognised. Non-lease components are charged through administrative expenses.

Sale and leaseback transactions

The Group recognises a sale and leaseback transaction when the Group sells an asset that has been previously recognised in property, plant and equipment, and subsequently leases it back as part of the same or a linked transaction.

Management use the provisions of IFRS 15 to assess if a sale has taken place, and the provisions of IFRS 16 to recognise the resulting lease, with the liability and discount rate calculated in line with our lease policy and the asset subject to an adjustment based upon the net book value of the disposed asset, the opening lease liability, the consideration received and the fair value of the asset on the date it was sold.

Resulting gains or losses are recognised in administrative expenses.

Onerous leases

A lease is considered onerous when the economic benefits of occupying the leased properties are less than the obligations payable under the lease.

When a lease is classified as onerous, the right-of-use asset associated with the lease is impaired to £nil value and non-rental costs that are likely to accrue before the end of the contract are provided against.

Investments in associates

Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor interests in joint ventures. Investments in associates are recognised initially at cost and subsequently accounted for using the equity method. However, any goodwill or fair value adjustment attributable to the Group's share of associates is included in the amount recognised as investment in associates.

All subsequent changes to the share of interest in the equity of the associate are recognised in the Group's carrying amount of the investment, including a reduction in the carrying amount equal to any dividend received. Changes resulting from the profit or loss generated by the associate are reported in "share of profits of associates" in the consolidated statement of comprehensive income and therefore affect net results of the Group. These changes include subsequent depreciation, amortisation and impairment of the fair value adjustments of assets and liabilities.

Items that have been recognised directly in the associate's other comprehensive income are recognised in the consolidated other comprehensive income of the Group. However, when the Group's share of losses in an associate equals or exceeds its interest in the associate the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the consolidated financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required (for goodwill or indefinite life assets), the Group estimates the asset's recoverable amount.

The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group's cash generating units (CGU's) to which the individual assets are allocated. These budgets and forecast calculations are prepared in December and usually cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to the projected future cash flows after the fifth year. The Group's three year plan is usually approved in March. If due to the passage of time there are significant differences in the key assumptions between the forecast and plan, or if management consider that the forecast has a more sensitive level of headroom, then the impairment test will be additionally sensitised to the plan assumptions.

Indications of impairment might include (for goodwill and the brand assets, for instance) a significant decrease in the like for like sales of established stores, sustained negative publicity or a drop off in visits to our website and social media accounts.

An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

Impairment losses of continuing operations, are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill and acquired brands with indefinite lives, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount.

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income, except for impairment of goodwill which is not reversed.

Inventories

Inventories are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items, using the weighted average method.

Stock purchased in foreign currency is booked in at the hedge rate applicable to that stock (if effectively hedged) or the underlying foreign currency rate on the date that the item is brought into stock.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. Transport, warehouse and distribution costs are not included in inventory.

The Group receives supplier rebates which are included in the cost of inventory balance (and which therefore ultimately flow through to cost of sales). These rebates are recognised on an accruals basis according to actual sales levels achieved at the end of each period.

Share options

The Group operates several equity settled share option schemes.

The schemes have been accounted for under the provisions of IFRS 2 and, accordingly, have been fair valued on their inception date using appropriate methodology (the Black Scholes and Monte Carlo models).

A cost is recorded through the statement of comprehensive income in respect of the number of options outstanding and the fair value of those options. A corresponding credit is made to the retained earnings reserve and the effect of this can be seen in the statement of changes in equity. See note 8 for more details.

Taxation

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Group operates and generates taxable income. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:

• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is highly probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Financial instruments

The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign currency risk, commodity price risk and interest rate risk. Derivative financial instruments are recognised at fair value. The fair value is derived using an internal model and supported by valuations by third party financial institutions.

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the statement of comprehensive income. Effectiveness of the derivatives subject to hedge accounting is assessed prospectively at inception of the derivative, and at each reporting period end date prior to maturity.

Where a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, such as an item of inventory, the associated gains and losses are recognised in the initial cost of that asset.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is reclassified in the statement of other comprehensive income immediately.

Financial assets

Under IFRS 9, on initial recognition, a financial asset is classified as measured at amortised cost, fair value through profit or loss or fair value though other comprehensive income.

A financial asset is measured at amortised cost using the effective interest rate if it meets both of the following conditions: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Under IFRS 9 trade receivables, without a significant financing component, are classified and held at amortised cost, being initially measured at the transaction price and subsequently measured at amortised cost less any impairment loss.

IFRS 9 includes an 'expected loss' model ('ECL') for recognising impairment of financial assets held at amortised cost. The Group has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group's historical experience and informed credit assessment and including forward-looking information. The Group performs the calculation of expected credit losses separately for each customer group. The balances involved are immaterial for further disclosure.

Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income comprise derivative financial instruments entered into by the Group that are designated as hedging instruments in hedge relationships as defined by IFRS 9. Financial assets at fair value through other comprehensive income are carried in the statement of financial position at fair value with changes in fair value recognised in other comprehensive income.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognised in profit and loss.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the asset have expired and the entity has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full and either (a) the entity has transferred substantially all the risks and rewards of the asset, or (b) the entity has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

The Group assesses at each reporting date, on a forward looking basis the ECLs associated with our financial assets carried at amortised cost.

Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss or other financial liabilities. The entity determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial derivatives held for trading. Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group. Gains or losses on liabilities held-for-trading are recognised in profit and loss.

Other financial liabilities

After initial recognition, interest bearing loans and borrowings, trade and other payables and other liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to mark-to-market valuations obtained from the relevant bank (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, less bank overdrafts to the extent the group has the right to offset and settle these balances net.

Equity

Equity comprises the following:

§  "Share capital" represents the nominal value of equity shares;

§  "Share premium" represents the excess of the consideration made for the shares, over and above the nominal valuation of those shares;

§  "Legal reserve" representing the statutory reserve required by Luxembourg law as an apportionment of profit within each Luxembourg company (up to 10% of the standalone share capital);

§  "Hedging reserve" representing the fair value of the derivatives held by the Group at the period end that are accounted for under hedge accounting and that represent effective hedges;

§  "Merger reserve" representing the reserve created during the reorganisation of the Group in 2014;

§  "Retained earnings reserve" represents retained profits;

§  "Foreign exchange reserve" represents the cumulative differences arising in retranslation of the subsidiaries and associates results.

Foreign currency translation

These consolidated financial statements are presented in pounds sterling.

The following Group companies have a functional currency of pounds sterling:

· B&M European Value Retail S.A.

· B&M European Value Retail 1 S.à r.l. (Lux Holdco)

· B&M European Value Retail Holdco 1 Ltd (UK Holdco 1)

· B&M European Value Retail Holdco 2 Ltd (UK Holdco 2)

· B&M European Value Retail Holdco 3 Ltd (UK Holdco 3)

· B&M European Value Retail Holdco 4 Ltd (UK Holdco 4)

· EV Retail Ltd

· B&M Retail Ltd

· Opus Homewares Ltd

· Retail Industry Apprenticeships Ltd

· Heron Food Group Ltd

· Heron Foods Ltd

· Cooltrader Ltd

· Heron Properties (Hull) Ltd

· Centz N.I. Limited

The following Group companies have a functional currency of the Euro:

· B&M European Value Retail 2 S.à r.l. (SBR Europe)

· B&M France SAS

· B&M European Value Retail Germany GmbH (Germany Holdco)

The Group companies whose functional currency is the Euro have been consolidated into the Group via retranslation of their results in line with IAS 21 Effects of Changes in Foreign Exchange Rates. The assets and liabilities are translated into pounds sterling at the period end exchange rate. The revenues and expenses are translated into pounds sterling at the average monthly exchange rate during the period. Any resulting foreign exchange difference is cumulatively recorded in the foreign exchange reserve with the annual effect being charged/credited to other comprehensive income.

Transactions entered into by the company in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.

Pension costs

The Group operates a defined contribution scheme and contributions are charged to profit or loss in the period in which they are incurred.

Provisions

Provisions are recognised when a present obligation (legal or constructive) exists as a result of a past event and where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount can be reliably estimated. Provisions are discounted where the time value of money is considered to be material.

The property provision also contains expected dilapidation costs, which covers expected dilapidation costs for any lease considered onerous, any related to stores recently closed, any stores which are planned or at risk of closure and those stores occupied but not under contract. At the period end 99 stores were provided against (2021: 87).

We do not provide against stores which are under contract and not considered at risk of closure (comprising the majority of the estate) as management consider that such a provision would be minimal as a result of regular store maintenance and limited fixed fit out costs.

We also provide against the terminal dilapidation expense on our major warehouses, which is built up over the term of the leases held over those warehouses.

Critical judgements and key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial information was prepared. However, existing circumstances and assumptions about future developments 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.

Critical judgments

Investments in associates

Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the Group, has been judged by management to be an associate rather than a subsidiary or a joint venture.

Under IFRS 10 control is determined by:

· Power over the investee.

· Exposure, or rights, to variable returns from its involvement with the investee.

· The ability to use its power over the investee to affect the amount of the investor's returns.

Although 50% owned, B&M Group does not have voting rights or substantive rights. Therefore, the level of power over the business is considered to be more in keeping with that of an associate than a joint-venture and, therefore, it has been treated as such within these consolidated financial statements.

Hedge accounting

The Group hedge accounts for stock purchases made in US Dollars.

There is significant management judgment involved in forecasting the level of dollar purchases to be made within the period that the forward hedge has been bought for.

Management takes a prudent view that no more than 80% of the operational hedging in place can be subject to hedge accounting, due to forecast uncertainties, and assesses every forward hedge taken out, on inception, if that figure should be reduced further by considering general purchasing trends, and discussion of specific purchasing decisions.

Estimation uncertainty

There are no areas of estimation uncertainty where management consider that there is a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Standards and Interpretations not yet applied by the Group

The following amendments to accounting standards and interpretations, issued by the International Accounting Standards Board (IASB), have not yet been applied by the Group in the period. None of these are expected to have a significant impact on the Group's consolidated results or financial position:

IASB effective for annual periods beginning on or after 1 January 2022

IASB effective for annual periods beginning on or after 1 January 2023

2 Segmental information

IFRS 8 ("Operating segments") requires the Group's segments to be identified on the basis of internal reports about the components of the Group that are regularly reviewed by the chief operating decision maker to assess performance and allocate resources across each reporting segment.

The chief operating decision maker has been identified as the executive directors who monitor the operating results of the retail segments for the purpose of making decisions about resource allocation and performance assessment.

For management purposes, the Group is organised into three operating segments, comprising the three separately operated businesses within the Group; UK B&M, UK Heron and France B&M.

Items that fall into the corporate category, which is not a separate segment but is presented to reconcile the balances to those presented in the main statements, include those related to the Luxembourg or associate entities, Group financing, corporate transactions, any tax adjustments and items we consider to be adjusting (see note 3).

The average Euro rate for translation purposes was €1.1756 /£ during the year, with the period end rate being €1.2009 /£ (2021: €1.1203/£ and €1.1691/£ respectively).

*Capital expenditure includes both tangible and intangible capital.

Revenue is disaggregated geographically as follows:

Non-current assets (excluding deferred tax and financial instruments) are disaggregated geographically as follows:

The Group operates a small wholesale operation, with the relevant disaggregation of revenue as follows:

3 Reconciliation of non-IFRS measures from the statement of comprehensive income

The Group reports a selection of alternative performance measures as detailed below. The Directors believe that these measures provide additional information that is useful to the users of the accounts.

EBITDA, Adjusted EBITDA and Adjusted Profit are non-IFRS measures and therefore reconciliations from the statement of comprehensive income are set out below.

The effects of IFRS 16 on administrative costs caption reflects the difference between IAS 17 and IFRS 16 accounting and largely consists of the additional rent expense the Group would have incurred under the IAS 17 standard.

Adjusted EBITDA (IFRS 16) and Adjusted Profit (IFRS 16) are calculated as follows. These are the statements of adjusted profit that includes the effects of IFRS 16.

Adjusting items are the effects of derivatives, one off refinancing fees, foreign exchange on the translation of intercompany balances and the effects of revaluing or unwinding balances related to the acquisition of subsidiaries.

Significant project costs or gains or losses arising from unusual circumstances or transactions may also be included if incurred.

The exceptional French stock provision was recognised in 2019/20 when the first French lockdown was put into place resulting in the closure of the French store estate with significant uncertainty regarding when stores would be able to reopen. Ultimately the stock provision was largely released during 2020/21, as the stock was sold through once the stores were reopened and this release was treated as adjusting to match the treatment when recognising the provision. No new adjusting items have been recognised in respect of the pandemic in either of the presented years.

The following table reconciles the statutory figures to the adjusted (IFRS 16) and adjusted figures in the statutory P&L format on a line by line basis.

Adjusted tax represents the tax charge per the statement of comprehensive income as adjusted only for the effects of the adjusting items detailed above and the one off deferred tax gain on recognition of the deferred tax asset in France in the prior year.

The segmental split in EBITDA (IFRS 16) and Adjusted EBITDA (IFRS 16) reconciles as follows:

Adjusted EBITDA and related measures are not measures of performance or liquidity under IFRS and should not be considered in isolation or as a substitute for measures of profit, or as an indicator of the Group's operating performance or cash flows from operating activities as determined in accordance with IFRS.

4 Operating profit

The following items have been charged in arriving at operating profit: