B&M Regulatory News (BME)

31 May 2023

B&M European Value Retail S.A.

FY23 Preliminary Results Announcement

Strong growth and disciplined delivery in FY23, excellent profitable momentum into FY24

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 25 March 2023 ("FY23"). 

HIGHLIGHTS

Alejandro Russo, Chief Executive, said,

"FY23 has been another year of strong underlying progress for B&M and the long-term future looks very positive. It has also been a year of planned management transition. Simon Arora has stepped down after 19 years of leading this business and we thank him and wish him well for the future.

B&M has many years of profitable growth ahead, to be delivered through our four channels of growth (existing B&M UK stores, new B&M UK stores, France and Heron) and in delivering this growth, B&M will generate cash and compound earnings growth for our shareholders. We are actively responding to the short-term pressure on consumers from the cost-of-living crisis, with a relentless focus on price and value. A strengthened management team and the hard work of our 39,000 employees executing our unchanged strategy will help us deliver in the current financial year. We expect to grow sales and profits in FY24, despite economic uncertainty."

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, an adjusted loss of £1m (FY22: profit of £1m).

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 FY22. This 14-month approach has been adopted as it excludes the two-month halo period which new stores experience following opening. Three-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 38 months after it opened compared with its revenue for the corresponding part of FY20.

4. The Directors believe that our adjusted figures - as described in Note 1 of the financial statements - provide users of the accounts with measures of performance which are 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. See Note 3 of the financial statements for further details. Adjusted figures exclude the impact of IFRS 16.

5. Net debt comprises interest bearing loans and borrowings, and cash and cash equivalents. Net debt was £724m at the year end, reflecting £961m as the value of gross debt netted against £237m 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 IFRS 16 lease liabilities.

8. Trading gross margin is considered to be a meaningful measure of profitability as it refers to the measure of gross margin used by management to commercially run the business. It differs to the statutory definition for B&M, which declined 177 bps from 37.4% to 35.7%, due to technical accounting adjustments in relation to the allocation of gains and losses from derivative accounting, storage costs and commercial income, with the derivative adjustments the main factor. 

9. UK market share is calculated based on the reported revenues of B&M UK and Heron Foods, compared to NIQ Scantrack, Total Store, Total Coverage inc. Discounters, 52 weeks ending 31.12.22.

10. NIQ Homescan, year to March 2023.

Results Presentation

An in-person presentation for analysts in relation to these FY23 Preliminary Results will be held today at 09:30 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/2023

Enquiries:

B&M European Value Retail S.A.

For further information please contact +44 (0) 151 728 5400 Ext 6363

Alejandro Russo, Chief Executive

Mike Schmidt, Chief Financial Officer

Dave McCarthy, Head of Investor Relations

Investor.relations@bandmretail.com

Media

For media please contact

Sam Cartwright, H-advisors, sam.cartwright@h-advisors.global +44 (0) 7827 254 561

Jonathan Cook, H-advisors, jonathan.cook@h-advisors.global +44 (0) 7730 777 865

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.

B&M European Value Retail S.A. is a variety retailer with 707 stores in the UK operating under the "B&M" brand, 319 stores under the "Heron Foods" and "B&M Express" brands, and 114 stores in France also operating under the "B&M" brand as at 25 March 2023. 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.ukChief Executive's Review

The last 12 months have been a year of major transition for B&M.

FY23 has been a good and significant year in the evolution of B&M. There have been planned management changes, there have been major economic headwinds and there has been material cost pressures to deal with. But B&M UK has weathered the difficult environment well and has delivered another excellent year of financial performance with an adjusted EBITDA margin4 of 12.4%. We have delivered strong sales growth and market share gains, an EBITDA margin substantially ahead of pre-pandemic levels, and strong cash generation helped by a clean inventory position. This reduction in inventories helped facilitate an extra £200m (20.0p per share) being returned to shareholders through a special dividend in January this year, on top of an interim dividend of 5.0p and a final ordinary dividend of 9.6p. This is a very pleasing reward for our shareholders and reflects growth of the business, good cost control and strong cash management.

A relentless focus on helping our customers navigate the cost-of-living crisis has been key to our success. Delivering strong results has been made possible through the hard work of our employees, and through a laser like focus on price and value for money. In contrast to some other businesses, we look to keep prices as low as we can, while delivering profitable growth and cash for our shareholders. At the same time, we continue to expand our store estate, upgrade the existing estate and to make improvements in our offer, whether through price investment or through improving store standards. Profitable growth is at the core of our strategic objectives, and to do that we need to put consumer needs at the centre of what we do.

The underlying strategy remains unchanged with the focus on simplicity and low costs across our four channels of growth, which are improved sales in existing stores, the expansion of our store estate in the UK, expansion in France and continued growth in Heron, our UK convenience store operation. I will return to these four channels later.

The long-term outlook for B&M remains very positive, with many years of profitable growth ahead. In the UK, B&M has a small market share9 and even less in France. Market share in both countries can be substantially higher and as we execute our strategy, we will deliver compounding earnings growth and cash returns for shareholders.

Competitive Position

To deliver on our long-term aims, we must remain highly competitive in a rapidly developing retail market. We must remain relevant through price, edited range and location, and these requirements drive our strategy. We continue to be relentlessly focused on price and compared to last year, our price advantage over the mainstream supermarkets is as strong as it was through consistency of everyday low prices ("EDLP").

Many consumer trends favour B&M, including trading down, as does the changing structure of grocery retailing. Currently, many consumers are switching to the two German Limited Assortment Discounters ("LADs") which remain heavily focused on own label. Our branded offer is highly complementary to them. Independent research shows that most LADs shoppers also shop elsewhere10, and where we are co-located, our stores tend to trade exceptionally well. This is as true in France as it is in the UK.

In non-grocery our aggressive focus on price is also working, with General Merchandise performing very well. Price comparisons are inevitably harder in this area due to a lack of brands, differences in products and our constantly evolving product mix but our price positioning remains market leading. While improving our price position, over the last several years we have also improved our product quality. Hence our value for money credentials are substantially improved, as evidenced by the increased number of monthly transactions and by our retaining many of the customers who tried us for the first time during lockdowns.

Strategic progress review

The macroeconomic outlook remains uncertain, with the consumer challenged by high inflation, rising interest rates and by declining real incomes. Despite a tough backdrop, we remain focused on delivering through our existing four channels of growth in FY24. 

1: Existing B&M UK stores: A core driver of growth

In FY23 there was a sharp focus on delivering growth through our existing stores. This led to major improvements in store standards and increased product availability, which in turn led to improvements in like-for-like3 ("LFL") sales. In the second half, driven by improvements in store standards, B&M UK delivered 5.1% LFL sales growth. This shows the power of improving the offer in existing stores, while the benefits of operational gearing are evidenced in cash and profits.

Our stores have the capacity to keep growing their sales for many years ahead. Due to operational gearing and no extra capital, such growth should be highly profitable, should deliver incremental returns on investment and should allow further reinvestment back into lower prices to drive further profitable growth.

2: New B&M UK stores: Square footage growth outpaces our growth in net new stores

Total average net sales area (including garden centres) increased by 3.6% in the last financial year. This is greater than the increase in net new stores (6 stores or a 0.9% increase) and is driven by three factors: 1) new stores tend to be bigger than existing store average, 2) new stores are more likely to have a small garden centre than existing stores and 3) replacement stores are usually much larger than the stores they replace.

Previously we have made it clear that the 950 target for store numbers is conservative but even so, it represents c.35% more stores than today, and with newer stores being on average bigger than existing stores and having higher total sales, the sales growth should be even greater than this 35%.

The sales contribution from our gross new store openings continues to be very healthy in 2023 and reinforces the strategy of replacing older, smaller stores at the end of their leases with new stores where there is a catchment opportunity to do so.

We will accelerate our new store openings back towards 40 stores per annum, with c.30 expected in FY24, but focus will always remain on new stores generating a leading return on investment. We will not compromise on our investment targets, and we will not open unprofitable stores just to meet a store opening target. Sustainable profitable growth is at the core of our business.

3: France will provide growth for many years to come

France has undergone a major transformation, with recent results highlighting the long-term potential. All stores have been branded B&M, clothing (which was a major part of the offer when the business was acquired) has been removed and the FMCG range is building. The business was loss making just two years ago but in FY23, France delivered 22.1% sales growth and an adjusted EBITDA4 (pre-IFRS 16) margin of 9.6%. As the business continues to evolve and benefit from the B&M supply chain and infrastructure, there remains the prospect of further growth in EBITDA margin.

New store growth will also deliver economies of scale and operational gearing benefits. In FY23 we opened 7 new stores in France. In FY24 we plan to open another 10 new stores, with a potential for an acceleration in openings in future years. With just 114 stores currently, in a country with a similar population to the UK, France can sustain a strong opening programme for the long term.

4: Heron Foods offers growth and offers other benefits to the core business

Heron Foods has had an outstanding year, delivering substantial sales growth and a leading EBITDA margin in its area. It currently operates 319 stores, but as a low-priced convenience store operator there remains the scope to open many more. The scale of the opportunity may be judged by the fact that the market leader in the UK operates over 2,000 convenience stores.

Heron Foods has undergone a strategic repositioning over the last 18 months. The number of freezer units in each store has been reduced - but not the Frozen range. Instead, products have been merchandised more intensively freeing up extra space in store. This extra space has allowed the chilled and ambient ranges to be extended and this has driven a step change in sales densities.

As well as being a strong business in its own right, Heron brings other benefits to the Group. It enhances our buying economies, provides other economies of scale and is an invaluable source of learning and knowledge, as is our French operation.

Management Changes 

As stated earlier, this year has seen some major planned changes in the management team. After 19 highly successful years, Simon Arora stepped down as CEO and has now exited the business. We thank Simon for his outstanding contributions to B&M and to the UK economy.

After two years as Chief Financial Officer, I am delighted to have taken the role of Chief Executive Officer. I have strengthened the management team with a number of key appointments, including:

• Mike Schmidt as CFO, with 22 years experience, following 9 years at DFS

• Jon Parry as Supply Chain Director with 26 years experience, following 12 years at Asda

• Philippe Brasleret as Retail Stores Director in France with 18 years experience, following 9 years at Aldi France

• James Kew as Head of Retail Operations for B&M UK with 16 years experience, following 5 years as Head of Productivity and Change at B&M UK

These represent a planned strengthening of our management team and we will strengthen our team further with new appointments in the coming months.

Current trading and outlook

Our business has now normalised to a new, sustainable and higher level of underlying sales and margin compared to the pre-pandemic year of FY20. We remain highly cash generative and in the absence of acquisition opportunities for batches of stores, we will look to return excess cash to shareholders at the appropriate time in line with our capital allocation framework.

Against the ongoing cost-of-living crisis, we will help our customers by remaining highly price competitive and growing our business, through existing and new stores in the UK and France. As well as expecting further LFL growth in existing stores, during FY24 we plan to open c.30 new B&M stores in the UK, c.10 in France and c.20 Heron Foods stores.

The business will maintain a high degree of discipline on EDLP pricing, limited range assortment and a low-cost operating model.

In the first 9 weeks of FY24, B&M UK LFL sales have run at 8.3%, France and Heron continue their trading momentum and we expect full year Group adjusted EBITDA4 (pre-IFRS 16) to be higher than FY23.

Alejandro Russo Chief Executive Officer

30 May 2023

Financial Review

Accounting period

The current accounting period represents the 52 weeks trading to 25 March 2023 ("FY23") and the comparative period represents the 52 weeks to 26 March 2022 ("FY22"). The upcoming accounting period represents 53 weeks trading to 30 March 2024 ("FY24").

The Group financial statements have been prepared in accordance with IFRS and are reported as such. Underlying figures presented before the impact of IFRS 16 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

This is the first year since the outbreak of COVID-19 where trading patterns have normalised. We believe FY23 can be viewed as the Group's new underlying revenue and profit base level from which we grow from - with Group adjusted EBITDA4 (pre-IFRS 16) of £573m. We now have the proven evidence there has been a step change in performance of the Group since the pandemic, where Group adjusted EBITDA4 (pre-IFRS 16) in FY20 was £342m. Trading was exceptional during each of FY21 and FY22, particularly during the periods where non-essential retail was closed, including some of the first quarter of FY22. Our performance relative to pre-pandemic levels evidences that we are retaining the new customers won during the pandemic years. Importantly though, the robust profit margins and cash conversion characteristics of the business remain unchanged. 

Total Group revenue in FY23 was £4,983m (FY22: £4,673m), representing a year-on-year increase of 6.6%. On a constant currency basis1, revenues increased by 6.5%. This has been driven by positive like-for-like3 ("LFL") in all businesses, which includes inflation and mix effects, and by strong trading from new stores.

Group adjusted EBITDA4 (pre-IFRS 16) decreased to £573m (FY22: £619m) as we completed a full year of undisturbed post-pandemic trading. The continued Group revenue growth in the year was moderated by the reduction in the trading gross margin in B&M UK as described below, that led to a £49m or 2.7% growth in gross margin. Operating costs also increased by £94m or 8.3%, reflecting the cost of serving our increased revenues, opening new stores and also cost inflation, including the effects of the 6.6% increase to the UK national living wage. On a statutory basis, profit before tax declined to £436m from £525m, again reflecting the normalisation of trading to a post-pandemic period.

Group adjusted EBITDA4 (pre-IFRS 16) margin is now 11.5%, which is 253 bps higher than pre-pandemic levels (FY20: 9.0%). This reflects the structural change in our margin which the business has undergone in the last three years, with an evolution of our product range, greater economies of scale, the benefits of operational gearing from higher sales densities and other operational learnings.

On a post-IFRS 16 basis, Group adjusted EBITDA4 was £796m (FY22: £828m) which represented an adjusted EBITDA4 margin of 16.0% (FY22: 17.7%).

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 £19m this year (FY22: £(12)m). 

We closed the year with an unchanged leverage with a pre-IFRS 16 net debt5 to adjusted EBITDA4 leverage ratio of 1.3x (FY22: 1.3x), following the payment of £347m of ordinary and special dividends in the year. This reflects the Group continuing its strong track record for operating cash generation and capital expenditure efficiency. Significantly, operational efficiency in our stores and logistics and our discipline in implementing markdowns in garden categories contributed to a £99m stock reduction, that underpinned the total cash generated from operations across the year of £866m (FY22: £598m).

B&M UK

In the UK, total B&M fascia2 revenue increased by 4.0% to £4,067m (FY22: £3,909m), with one-year LFL revenue increasing by 0.7%. There was a strong run rate in the second half of the year with LFL sales growth of 5.1%, compared to a first half LFL of (3.9)% and the business has likewise entered the current year with strong momentum. Our LFL customer transaction numbers increased every month since June. 

On a three-year basis, total revenue is 29.5% higher than in FY20, with LFL revenue3 13.3% higher. This reflects the underlying growth of the business during the pandemic and during lockdowns and is indicative that many customers won during lockdown have become regular customers. 

At category level, we believe the one-year LFL performance has now broadly normalised against the peak of the pandemic. Demand for essential food and FMCG items has remained high, with many customers seeking out leading branded goods at the lowest possible price during this cost-of-living crisis. General Merchandise demand has also been resilient and performing in line with our plans, with seasonal categories such as Halloween, Christmas, Easter and most recently the Coronation all having a strong sell-through. 

B&M's trading gross margin8 reduced by 148 bps across the full financial year, driven by the reintroduction of usual markdown activity including the previously disclosed markdowns in the gardening category in H1. Consistent with this, a marked improvement in the year-on-year trend was seen in H2 relative to H1 (H2 trading gross margin down 92 bps versus FY22), due to strong sell through with only planned markdown activity in general merchandise categories, coupled with a significant reduction in freight rates.

There were 21 gross new openings of which 5 were replacements for smaller legacy stores and a further two relocations of FY23 closures will occur early in FY24.  The replacement stores typically have 3x the total sales space of the stores they replaced and deliver a higher store contribution than the stores they replaced.

New stores, including replacements, are cash generative in year one and typically deliver a higher store contribution than the Group's average.

In addition to revenue generated in-store, wholesale revenue decreased to £37m (FY22: £45m). Most of this represents sales made to the associate Centz Retail Holdings Limited, a chain of 54 variety goods stores in the Republic of Ireland.

Operating costs, excluding depreciation and amortisation, increased by 5.7% to £950m (FY22: £899m) which represented 23.4% of revenues (FY22: 23.0%). This was primarily because of an increase in store costs driven by a strategic decision to focus on store standards to drive LFL sales, partially offset against foreign exchange gains made due to our strong hedging position against the underlying spot rate.

Adjusted EBITDA4 (pre-IFRS 16) for the B&M UK business decreased by (10.9)% to £502m (FY22: £564m) and the adjusted EBITDA4 margin decreased by (207) bps to 12.4% (FY22: 14.4%). However, both remain significantly above historical levels. Statutory operating profit for the year was £479m (FY22: £569m).

France

In France, revenues increased by 22.1% to £431m (FY22: £353m), reflecting strong LFL performance and new store openings delivering well. There were 7 new stores opened in FY23 increasing the average sales area of the total store estate by 4.7% to 3.1m sq. ft. (FY22: 3.0m sq. ft.).

Adjusted EBITDA4 (pre-IFRS 16) increased by £9m to £41m (FY22: £32m), with an adjusted EBITDA4 margin of 9.6% (FY22: 9.2%). The French business continues to build a sustainable underlying profit base and is primed to carry on delivering against the strategic and financial objectives set. Statutory operating profit for the year was £19m (FY22: £11m).

Gross margin remained broadly stable with far less emphasis placed on textiles and further steps taken towards aligning its product mix to that seen in B&M UK.

Operational consistency remained throughout the year. Operating costs as a percentage of sales improved by 1.2% to 34.9% (FY22: 36.1%).

Heron Foods

In the discount convenience chain, Heron Foods, revenues increased by 18.1% to £485m (FY22: £411m), reflecting a successful year and continued growth.

There were 14 gross new stores openings and 6 closures in FY23, with 3 of those closures being relocations. As with the B&M business, the store estate is carefully monitored and if an opportunity arises to open a new higher quality store in a new or existing area, the business will look to capitalise. Total average sales area of the store estate increased by 5.0% to 970k sq. ft. (FY22: 920k sq. ft.).

Heron Foods adjusted EBITDA4 (pre-IFRS 16) increased to £30m (FY22: £23m), with an adjusted EBITDA4 margin of 6.1% of sales (FY22: 5.5%), representing a successful result for the year. Statutory operating profit for the year was £38m (FY22: £30m).

Gross margin in Heron Foods remained resilient against FY22 with a strong performance across all categories - Chilled, Ambient and Frozen - with the latter being a growth driver later in the financial year as our customers look to avoid food wastage during the cost-of-living crisis.

Operating costs remained well-controlled, remaining broadly flat as a percentage of revenues.

Depreciation and amortisation

Depreciation and amortisation expenses, excluding the impact of IFRS 16, grew by 16.3% to £76m (FY22: £66m), representing only 1.5% of sales (FY22: 1.4%). The increase was largely due to continued investment in new stores across all fascias, with the Group growing the store numbers by 1.9% in the year.

The additional depreciation and amortisation charge relating to lease liabilities under IFRS 16 was £166m (FY22: £161m).

Finance expense

Net finance charges for the year, excluding IFRS 16, were £38m (FY22: £29m). This included bank and high yield bond interest of £38m (FY22: £27m) and amortised fees of £2m (FY22: £2m). 

The interest charge relating to lease liabilities under IFRS 16 was £61m (FY22: £59m).

Profit before tax

Statutory profit before tax was £436m (FY22: £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 (pre-IFRS 16) for the year decreased to £459m (FY22: £524m).

The impact of IFRS 16 on the Group financial statements was to decrease statutory profit before tax by £4m.

Taxation

The tax charge in FY23 was £88m (FY22: £103m), representing an effective tax rate of 20.1%. 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 25% in France, although the UK Corporation Tax rate has now increased 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 £527m in FY23, including £210m 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 £317m 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 £348m (FY22: £422m) and the statutory diluted earnings per share was 34.7p (FY22: 42.1p). 

Adjusted profit after tax4, which we consider to be a better measure of performance for the reasons outlined above, was £366m (FY22: £417m), and the adjusted fully diluted earnings per share4 was 36.5p (FY22: 41.6p).

Investing activities

Group net capital expenditure7 totalled £89m this year (FY22: £85m). Investment included £33m spent on 42 gross new stores across the Group's fascias (FY22: £34m on 54 stores) and £16m on infrastructure projects to support the continued growth of the business (FY22: £9m). There was also investment of £40m on maintenance works to ensure that our existing store estate and warehouses are appropriately maintained (FY22: £42m). There was also a net expenditure of £(1)m relating to a small number of freehold acquisitions and disposals (FY22: net expenditure of £1m).

Net debt and cash flow

The Group continues to be highly cash generative, with cash generated from operations of £866m (FY22: £598m), helped by the planned stock reduction of £99m.

The strong performance and cash generation have enabled the Group to pay dividends totalling £347m6 in FY23. This includes a £200m6 special dividend paid in February 2023.

Net debt5 (on a pre-IFRS 16 basis), decreased to £724m (FY22: £790m). The net debt5 to adjusted EBITDA4 leverage ratio was 1.3x (FY22: 1.3x), the fourth year that we maintained it below 1.5x and comfortably within our published 2.25x leverage ceiling.

In March 2023, we entered into a new five-year senior facilities agreement, with two one-year extension options for a £225m senior term loan facility and a £225m senior revolving credit facility with a banking syndicate made up of seven banks. This facility gives us significant additional maturity, can be upscaled by up to £350m if required to support future growth, and provides a streamlined bank group that we look forward to working with in the future. 

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 20.0p6 per share. Subject to approval by shareholders at the AGM on 25 July 2023, a final ordinary dividend of 9.6p6 per share is to be paid on 4 August 2023 to shareholders on the register of the Company at the close of business on 30 June 2023. The ex-dividend date will be 29 June 2023.

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 rollout 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 supply chain, competition, economic environment, warehouse 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.

Mike Schmidt

Chief Financial Officer

30 May 2023

Consolidated Statement of Comprehensive Income

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 2023 and signed on their behalf by:

Alejandro Russo, Chief Executive Officer.

Consolidated Statement of Changes in Shareholders' Equity

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.

The consolidated financial statements cover the 52 week period from 27 March 2022 to 25 March 2023 which is a different period to the parent company standalone accounts (from 1 April 2022 to 31 March 2023). 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. The next accounting period for the Group will be a 53 week period, from 26 March 2023 to 30 March 2024.

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.

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 27 March 2022 to 25 March 2023. 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 levels of trading including a severe but plausible downside like for like scenario and the Group also has recourse to several mitigations to improve liquidity. In March 2023, the Group committed to fully re-financing its existing term loan and RCF facilities, totalling £455m, for a new £225m term loan and a £225m RCF maturing in March 2028, with two one-year extension options. On 3 April 2023, the Group completed the funds flow in relation to this extension of its term facility bank loan. The Group has also maintained its £400m bond maturing in July 2025 and its £250m bond maturing in November 2028.

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

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 (CGU's) 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 (EPS)

Both IFRS 16 and pre-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 fair value impact of derivatives yet to mature, that have not been designated as part of a hedge accounting relationship, and foreign exchange on intercompany balances, which do not relate to underlying trading, and costs incurred in relation to significant projects, 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 (pre-IFRS 16) 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.

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 (

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 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.

Refinancing

Where bank borrowings are refinanced, the Group assesses whether the transaction results in new facilities or a modification of the previous facilities.

Where the transaction results in a modification of the facilities, the Group assesses whether that modification is substantial by reference both to whether the present value of the cash flows of the new facilities is more than 10% different to the present value of the cash flows of the previous facilities and by reference to any qualitative differences between the old and new agreements.

Where a modification is substantial, the Group derecognises the original liability and recognises a new liability for the modified facilities with any transaction costs expensed to the income statement. Where the modification is non-substantial, the Group amends the carrying amount of the liability to reflect the updated cash flows and amends the effective interest rate from the modification date.

Cash and cash equivalents

Cash and cash equivalents comprise of cash at bank and in hand, less bank overdrafts to the extent the Group have 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;

§  "Retained earnings reserve" represents retained profits;

§  "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;

§  "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);

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

§  "Foreign exchange reserve" represents the cumulative differences arising in retranslation of the subsidiaries and associate's 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 - (Dissolved on 17 January 2023)

· 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, 105 stores were provided against (2022: 99).

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 distribution centres (DC's), which is built up over the term of the leases held over those DC's.

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 cautious 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 2023

IASB effective for annual periods beginning on or after 1 January 2024

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 €1.1581 /£ during the year, with the period end rate being €1.1360 /£ (2022: €1.1756/£ and €1.2009/£ 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 all non-IFRS measures and therefore a reconciliation from the statement of comprehensive income is set out below.

Adjusted EBITDA (pre-IFRS 16) and adjusted profit (pre-IFRS 16) are also non-IFRS measures and are reconciled as follows:

The effects of IFRS 16 on EBITDA 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.

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, as they have been in the current year, recognising the loss incurred from the online trading trial, which had ceased by the year end date.

The following table reconciles the statutory figures to the adjusted and adjusted (pre-IFRS 16) 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.

The segmental split in EBITDA and Adjusted EBITDA 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:

5 Finance costs and finance income

Finance costs include all interest related income and expenses. The following amounts have been included in the continuing profit line for each reporting period presented: