B&M Regulatory News (BME)

28 May 2015

B&M European Value Retail S.A.

Preliminary Results for the 52 weeks to 28 March 2015

Strong Trading in Line with Expectations

B&M European Value Retail S.A. ("the Group"), the UK's leading multi-price value retailer, today announces its preliminary results for the 52 weeks to 28 March 2015.

HIGHLIGHTS

● Group revenues increased by +29.5% to £1,646.8m (2014: £1,272.0m);

● UK like-for-like sales +4.4% (2014: +6.5%)

● Group adjusted EBITDA increased by 33.6% to £174.2m (2014: £130.4m)

● Group EBITDA increased by 33.3% to £150.2m (2014: £112.7m)

● Adjusted profit before tax increased by 55.7% to £135.0m (2014: £86.7m)

● Adjusted diluted earnings per share 10.3p (2014: 6.9p)

● Diluted earnings per share 3.4p (2014: -1.9p)

● 52 net new stores opened in the UK in the period

● Strong pipeline of further new stores, and revised guidance of 60 net new openings expected for the 2016 financial year

● Integration of Jawoll proceeding to plan with increased direct sourcing and one new format pilot store opened in the period

● Operating cashflow £152.9m (2014: £114.7m)

● Net debt reduced to £381m from £432.8m in 2014

● Recommended final dividend of 2.5p per share to be paid on 7 August 2015 (pro rata total dividend for the year 3.4p)

Sir Terry Leahy, Chairman, said,

"It is pleasing to report to shareholders that in B&M's first year as a public company it has delivered strong increases in sales, profits and cash generation whilst pushing on with rapid store rollout and investing in new infrastructure to support continued growth."

Simon Arora, Chief Executive, said,

"For many shoppers across the UK, B&M is now an established part of their regular shopping habits and, in tandem with our strong roll-out programme, this has enabled us to become one of the leaders in the rapid growth of value-led retailing in the UK. I am proud of the hard work and teamwork of our 19,000 colleagues in delivering such a strong performance in our maiden year as a listed company."

Financial Results

¹ The FY 2014 figures represent the 52 week performance to 29 March 2014 except for EBITDA and Diluted EPS which represent the 55 week performance to 29 March 2014.

² Jawoll figures represent 11 months of performance for the period of its ownership by the Group.

³ Adjusted items are those that the Directors consider to be exceptional and non-trading items. The Directors consider the adjusted figures to be more reflective of the underlying business performance of the Group and we believe that this measure provides additional useful information for investors on the Group's performance, as well as being consistent with how business performance is monitored internally. Further details can be found in notes 3 and 4.

⁴ Dividends are stated as gross amounts before deduction of Luxembourg withholding tax which is currently 15%.

Analyst Meeting & Webcast

An Analyst Meeting in relation to the final results will be held on Thursday 28 May at 08:30 am (UK) at:

Bank of America Merrill Lynch

2 King Edward Street

London

EC1A 1HQ

The meeting can be accessed live via a dial-in facility on:

UK & International: + 44 (0)20 3450 9987

US: + 1 646 254 3388

Participant Pin Code: 3286391 

A simultaneous audio webcast and presentation slides will be available via the B&M corporate website at www.bandmretail.com 

A trading update for the first quarter trading will be provided on 31 July 2015.

Enquiries

B&M European Value Retail S.A.

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

Simon Arora, Chief Executive

Paul McDonald, Chief Financial Officer

investor.relations@bandmretail.com 

Media

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

Maitland

Neil Bennett

Tom Eckersley

bmstores-maitland@maitland.co.uk 

Notes to editors

B&M European Value Retail S.A. is a variety retailer with 425 stores in the UK operating under the "B&M" brand and 50 stores in Germany primarily operating under the "Jawoll" brand as at 28 March 2015.

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

Chief Executive's Review

Overview

Nearly one year has passed since the IPO of B&M and I am delighted with our maiden set of results. In 2004 we identified strong consumer demand in the UK for attractively-priced, well-designed and presented homewares, household textiles, toys and seasonal goods. In the decade that followed, we set about re-designing the B&M model and its customer proposition around meeting those needs, ultimately leading to our successful IPO in June 2014.

In the period under review we opened 52 net new stores, bringing the total to 425 limited assortment general merchandise discount stores trading as B&M Bargains and the larger B&M Homestores that we operate across the country today, employing over 19,000 staff and serving over 2.9 million customers a week.

The B&M customer offer is a simple one. We sell a wide but disciplined range of products at everyday best prices which are consistently and significantly below those offered by both specialist and general retailers. We offer a range of categories from soft drinks to DIY and from pet care to stationery, but in each we focus on just the best-selling products.

This approach to ranging is integral to the efficiency of our business model and supports B&M's highly competitive pricing position.

 We try to source direct, including major brands from the large multi-national FMCG companies, as well as our own exclusive ranges through long-established supplier relationships in the Far East. Our supplier base has been very stable and supportive to B&M over the years. Our growth is part of their success as well and we appreciate their efforts on our behalf. Our low cost, uncomplicated but disruptive model means that we can pass on big savings to our customers.

Our range is constantly changing so that customers can always find something new in store. We also flex a big portion of our store space from season to season, for example, emphasising toys in the period up to Christmas and gardening in the Spring and Summer months.

For many shoppers across the UK, B&M is now an established part of their regular shopping habits and, in tandem with our store roll-out programme, this has enabled us to become one of the leaders in the rapid growth of value-led retailing in the UK. This structural shift to value is re-shaping the retail industry and has underpinned B&M's track record of consistent, strong and profitable growth.

In the Spring of 2014 we also took a significant further step towards establishing an international business with the acquisition of Jawoll, a profitable, family-owned variety retailer based in North-West Germany. The acquisition added 49 general merchandise discount stores with a similar market positioning to B&M's and, in time, we see this business providing a good platform for growth in Europe's largest consumer market.

2014 was an important milestone in the development of B&M because we became a public company with the success of our IPO, which valued the business at £2.7 billion. We understand that our IPO marked the largest ever flotation of a retail business on the London Stock Exchange. It is particularly important therefore to be able to report a record year, strong trading and a pleasing set of results in our first year as a listed company, which demonstrates to our new shareholders the momentum in B&M and its excellent prospects for further growth in the UK and Europe.

Results

Performance was strong in the year. On a comparable 52 week basis group revenue grew by 29.5% to over £1.6bn, and by 20.0%, excluding Jawoll. UK like-for-like revenue growth of 4.4% was pleasing, particularly against the very strong growth in consecutive prior years.

In addition to the strong performance of existing stores, our new stores also performed well. These elements, combined with B&M's embedded cost discipline and robust gross margins, supported by unusually low markdown activity on seasonal goods, delivered very strong profit growth. Adjusted EBITDA increased by 33.6% to £174.2m on a comparable basis - and by 25.4% excluding Jawoll. Underlying pre-tax profit rose 55.7% on a comparable 52 week basis.

Expansion

We opened 52 stores in the UK in the year and acquired a further 49 though our acquisition of a majority stake in Jawoll, an established and profitable general merchandise discount business in Germany with a similar market positioning to B&M's.

We believe our total store base in the UK can be doubled in size during the years ahead and we continue to see a good flow of attractive new site opportunities, including a steady stream of suitable stores coming from the larger-spaced retailers as they downsize their portfolios in response to shifts in consumer demand in their markets. We were able to exceed our original expectations for new store openings in the year because conditions in the retail property market remain particularly helpful. Our strong reputation in the UK property industry meant we were awarded "Occupier of The Year" at this year's Property Week Annual Awards.

We are pleased with Jawoll's progress. It is still early days but the business has performed well and we are starting to see the benefits of it accessing our sourcing model. This year Jawoll also successfully invested in new electronic point-of-sale systems and trialled a new size format. We have plenty of work to do to understand and refine the Jawoll model but we are excited by the potential of the German market where general merchandise discounting is underdeveloped and highly fragmented.

Corporate social responsibility

B&M is about doing what we can to help our customers spend less on everyday things for their homes and for their families, helping tight household budgets go further. But whilst this is our key purpose we also fully recognise that as a responsible business we also have obligations to other key stakeholders, particularly our colleagues and our suppliers, as well as to the wider community and the environment. 

We have made good progress this year on our broader corporate responsibility agenda. To highlight a few areas, we have:

- created 3,500 new local jobs through our expansion programme

- maintained our record of long-term supplier relationships

- maintained prompt supplier payment, with UK suppliers paid on average 24 days after delivery

- reduced supply chain waste, with 99% of trade packaging now recycled

- put in place management reporting protocols to bring particular focus to other key areas such as greenhouse gas emissions, health & safety , employee diversity and charitable giving and related activities.

Outlook

We look forward to the year ahead and the longer term with confidence. We have a strong, high returning business model, a clear and deliverable strategy for growth and an excellent, experienced team. B&M is right at the centre of one of the most appealing sweet spots in retailing today; a winning, value-led, low cost, focussed assortment aimed at customers who enjoy or who need a bargain.

We have an excellent pipeline of new stores and now expect that our opening programme in the UK will be 60 net new stores in this new financial year. We continue to invest in the infrastructure, technology and skills we need to manage our growth in the future and will incur modest additional warehouse costs in support of the accelerated roll-out programme in the year ahead.

The retail industry remains competitive and a cold May has led to a slow start for Outdoor ranges. Despite this, we remain confident for the year ahead. We believe that our disruptive business model and the value for money which we offer to our customers will continue to deliver strong, profitable, cash-generative growth into the long-term as we roll out the B&M offer to more shoppers across our chosen markets.

Simon Arora

Chief Executive Officer

28 May 2015

Chief Financial Officer's Review

Accounting period

The accounting period represents the 52 trading weeks to 28 March 2015 and the comparative period represents trading for the 55 weeks to 29 March 2014 although in order to provide constant period comparisons the profit and loss account for the 52 weeks trading ending 29 March 2014 has also been included.

Revenue

The group revenue for FY2015 was £1,646.8m (FY2014: £1,351.2) an increase of 21.9% and against the 52 week comparison there was an increase of 29.5%. In the UK on the 52 week comparison basis revenues increased by 20.0% to £1,526.2m driven by the growth in the like-for-like store estate of 4.4%. This growth was against a strong like-for-like comparable of 6.5% in 2014, and a contribution from net new store openings of 15.6%, including both the annualisation of revenues from the 42 net new store openings in FY2014 and the 52 net new store openings in FY2015. A further £120.6m of revenues arose from Jawoll in Germany for the 11 months of its ownership by the group.

Gross Margin

Our gross margin improved by 59 basis points to 34.6% (FY2014: 34.0%). This improvement was driven in the UK by the strong sell through on both the Spring/Summer and Autumn/Winter seasonal ranges and increased buying power, with UK margins increasing 41 basis points to 34.4%. The overall Group gross margin also benefited from the modest beneficial effect of our Jawoll subsidiary. Adverse currency movements, principally in the US Dollar:Sterling exchange rate, are likely to be a modest headwind for gross margins during the new financial year.

Operating Costs and Adjusted EBITDA

Costs continue to be carefully controlled whilst allowing for strategic investment in our head office functions in anticipation of future growth. Overall operating costs including depreciation grew by 22.6% to £411.3m and by 32.1% on the comparable 52 week basis. In the UK operating costs were £374.7m (FY2014: £311.4m), an increase of 20.3% on a 52 week basis, this was principally driven by the rise in store numbers and investments made in the central infrastructure, including the full year impact of the new warehouse facility in Liverpool and costs associated with being a listed company.

The business continues to maintain rigorous discipline over its key operating metrics and store rent as a percentage of sales was 4.1% which was consistent with FY2014, and store wages at 8.9% were also in line with FY2014. Operating costs including depreciation in the Jawoll business were £36.6m.

We report an adjusted EBITDA to allow the board and investors to better understand the underlying performance of the business and the items that we have adjusted are detailed in notes 3 and 4 of the financial statements. These adjustments were costs totalling £24.1m in FY2015 (FY2014: £17.7m), the majority of which totalling £19.7m related to the IPO and the related group restructuring.

The adjusted EBITDA increased in the year by 33.6% on a 52 week basis to £174.2 m (FY2014: £130.4m), with the UK business increasing by 25.4% to £163.4m and the Jawoll business contributing a further £10.8m of adjusted EBITDA.

Financing Costs

Following the capital restructuring of the group prior to the IPO and subsequent refinancing, the results for the year reflect a very different capital structure and as such the financing cost comparisons versus the prior year are not meaningful. However, we have analysed the finance costs such that the underlying finance costs can be understood.

Finance costs were £72.8m, comprising £28.8m of previously unamortised fees that were written-off in the year relating to the March 2013 refinancing, £16.2m of non-cash interest on the preferred equity certificates that were subsequently converted to equity, £2.2m mark to market value of interest rate hedges, £2.0m relating to the non-cash charge on the Jawoll put/call option, with the remaining £23.6m relating to bank and finance lease interest and FRS4 fees and this reflects the underlying finance costs of the group. The corresponding interest charge in FY2014 was £33.9m.

Profit before Tax

The statutory profit before tax was £61.7m and the 52 week figure for 2014 was £3.6m, although as previously described the headline profit before tax is distorted by both the exceptional costs and also the previous financing structure. The comparable profit before tax excluding these items was £135.0m (FY2014: £86.7m) which rose 55.7% on the 52 week comparison basis.

Taxation

The tax charge for the year was £21.9m of profit before tax compared with £5.1 m in FY2014. The underlying charge was 22.9% (FY2014: 20.4%) after allowing for financing costs associated with the pre-IPO capital structure and the disallowable IPO costs. We expect the tax charge going forward to reflect the mix impact of the tax rates in the countries in which we operate, 21% UK and 30% Germany, with the effective rate 70 basis points higher reflecting non-qualifying expenditure.

Profit After Tax and Adjusted Earnings per Share

The adjusted profit after tax was £104.1m which was a 50.6% increase compared to the 52 week figure for the previous year.

The basic and fully diluted adjusted earnings per share for the year ended 28 March 2015 was 10.3p; (FY2014: 6.9p), an increase of 49.3%.

Investing Activities

The Group's net capital expenditure during the year was £33.2m, which was principally driven by our new store opening programme, £21.7m and in the UK we ended the year with 425 stores (FY2014: 373 stores). We opened one new store in Germany, bringing the total there to 50 stores. We have also continued to invest in refitting the existing portfolio as well upgrading our IT infrastructure, including the investment in a new electronic point of sale system in the Jawoll business.

The Group also invested a further £54.5m (net of cash acquired) in acquiring our German subsidiary, Jawoll in April 2014.

Net Debt and Cashflow

The group continues to be strongly cash generative and during the year the cash flow from operations increased by 33.3% to £152.9m (FY2014:£114.7m). This reflects both the strong trading performance of the Group, the maintenance of a tight control over working capital and rapid payback from recently opened new stores.

The Groups net debt in the year has reduced to £381.0m (FY2014: £432.8m) and the net debt to adjusted EBITDA has fallen to 2.2 times from 3.3 times at the end of FY2014.

Dividend

An interim dividend of 0.9p was paid in January 2015 and it is proposed to pay a final dividend of 2.5p per share. The total dividend of 3.4p reflects the upper end of the dividend policy, which was announced at IPO of paying 30-40% of normalised post IPO earnings.¹

¹ Dividends are stated as gross amounts before deduction of Luxembourg withholding tax which is currently 15%

Paul McDonald

Chief Financial Officer

28 May 2015

Consolidated statement of Comprehensive Income

All operations are classified as continuing and new acquisitions as disclosed above. The accompanying accounting policies and notes form an integral part of these financial statements.

Consolidated statement of Financial Position

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

Consolidated statement of Changes in Shareholders' Equity

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

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

Notes to the consolidated financial information

1 General Information and Basis of Preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) as adopted by the European Union.

The information presented within this document does not constitute statutory financial accounts for the Group. The statutory financial accounts to which the presented information relates to has not yet been filed with the registrar of companies but will be issued and filed in due course. The auditor has expressed his intention to issue an unmodified audit opinion.

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

The financial information has been prepared under the historical cost convention. The measurement basis and principal accounting policies of the Group are set out below and have been applied consistently throughout the financial statements.

The financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£'000), except when otherwise indicated.

The consolidated accounts represent the results for the Group for the 52 week period ended 28 March 2015, B&M European Value Retail S.A. is the head of the Group and there is no consolidation that takes place above the level of this company. The auditors have made a report on the Group's consolidated financial statements for the year ended 28 March 2015 under Luxembourg company law of 10 August 1915 which is unqualified.

The results of the Group were previously reported as B&M European Value Retail Holdco 1 Limited (UK Holdco 1) for the 55 week period ended 29 March 2014, however, due to a reorganisation (see note 11, and below) the Group is now headed by B&M European Value Retail S.A.

The principal accounting policies of the Group will be set out in the Annual Report which will be released in June 2015.

Reconstruction, refinancing and listing of the Group

On 19 May 2014, B&M European Value Retail S.A. (the "Company") was incorporated. On 17 June 2014 the Company acquired the entire issued share capital of B&M European Value Retail 1 S.à r.l. Group (the "Business") via a share for share exchange with the shareholders of the Business. Following the share for share exchange, the Company became the ultimate legal parent of the Group. B&M European Value Retail 1 S.à r.l. is the parent company of UK Holdco 1 referred to above.

The share for share transaction is deemed outside the scope of IFRS 3 (revised 2008) and as such is not considered a business combination as prior to the transaction the Company was not considered a business under the definition of IFRS 3 Appendix A and the application guidance in IFRS 3 B7-B12 due to the Company being essentially a shell company that had no processes or capability for outputs (IFRS 3 B7).

The share for share transaction has been accounted for as a group reconstruction (following the principles of merger accounting). As such comparative information has been presented on a pro-forma basis as though the Group had been in existence throughout the current and prior periods.

Accordingly;

· The assets and liabilities of the Business and its subsidiaries are recognised in the financial information at the pre-combination carrying amounts, without restatement to fair value.

· The retained losses and other equity balances recognised in the financial information reflect the retained losses and other equity balances of the business recorded before the share for share exchange.

· The equity structure, however, reflects the equity structure of the Company, including those balances which arose due to the equity instruments issued under the share for share exchange.

· The resulting difference has been recognised as a component of equity, being the merger accounting reserve.

· Because, immediately prior to the reconstruction, the equity balances in the Business were held as debt, this debt has remained within the restated balance sheet as a liability and has been reclassed upon redemption which occurred as part of the share for share exchange. The net effect of this is a decrease in the Merger reserve on the date of the reconstruction.

Immediately after the reconstruction, on the same date, the Group listed on the London Stock Exchange via an IPO which valued the company at £2.7bn and raised £75.0m cash less £19.7m of fees (which were expense to profit and loss in the period) for the Group itself.

As part of this process a refinancing also took place, with terms agreed on new banking facilities until June 2019 and June 2020. The refinancing incurred £7.3m of fees, which are being amortised over the length of the term. £28.8m of previously unamortised fees, relating to the refinancing that took place in March 2013, were written off to profit and loss.

Overall the key steps in the processes were:

1. B&M European Value Retail S.A. was incorporated with 972.2 million ordinary shares of 10p each.

2. These were exchanged for the preferred equity certificates, preference shares and ordinary share capital of B&M European Value Retail 1 S.a.r.l. - the previous Group parent.

3. The Group reconstruction resulted in the group's share capital, preferred equity certificates of £556.1m, with accrued interest of £87.8m, and preference share balances being replaced by the £97.2m share capital, and £2,527.8m of share premium - being the technical valuation of the contribution in kind made by the prior owners via their instruments held in B&M EVR 1 S.a.r.l.

4. This resulted in the recognition of a merger reserve of £1,979.1m.

5. No cash was exchanged as part of the above steps.

6. A further 27.8million ordinary shares of 10p each were released as part of the IPO. These were sold at £2.70 each, leading to the receipt of £75million and the recognition of £72.2m of share premium.

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 30 March 2014 to 28 March 2015. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting. The results of companies acquired are included in the consolidated statement of comprehensive income from the acquisition date.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:

· Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

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

· The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement with the other vote holders of the investee

· Rights arising from other contractual arrangements

· The Group's voting rights and potential voting rights

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

A separate statement of comprehensive income for the parent company is not presented with the Group financial statements as permitted by Section 408 of the Companies Act 2006.

Going concern

The group has in place significant financing facilities which are due for renewal in 2019 and 2020, and operations which are cash generative. The directors have considered this and the company's current forecasts, and determined that it is appropriate to continue to use the going concern basis for production of these financial statements.

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. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use.

The fair value less costs to sell calculation is based on available data from binding sales transactions, conducted at arm's length for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the CGU being tested.

The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, will be disclosed in the full annual report.

Investments in Associates

Multi-lines International Company Ltd (Multi-lines), which is 50% owned by the Group, has been considered by management to be an associate rather than a subsidiary or a joint venture. Under IFRS 10 control is determined by :

· Power over the investee.

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

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

Although 50% owned, Multi-Lines have their own independent management who operate without direct oversight of Group management on a day to day basis. Therefore the level of power over the business is considered to be more in keeping with that of an associate than a joint-venture, and hence it has been treated as such within these consolidated accounts.

Recognition of intangible assets on acquisition

On acquisition of SBR Group in March 2013, a brand intangible asset was identified with indefinite life.

On acquisition of Jawoll (through Germany Holdco) in April 2014, brand intangible assets were indentified with indefinite lives.

These was the only identifiable assets recognised on these acquisitions that were considered to be likely to have a value above a set materiality threshold.

The indefinite life was considered appropriate because of several factors, chief amongst which was that the growth potential of the B&M and Jawoll businesses, which are considered by management to be long-term phenomenon.

Transaction and IPO costs

Transaction costs have been expensed in full through the P&L.

Put/call options on Jawoll non-controlling interest

The purchase agreement for Jawoll included call and put options over the shares not purchased by the Group, representing 20% of Jawoll. The options are arranged such that it is considered likely that either the call or put option will be taken at the exercise date in 2019.

The exercise price of the options contain a variable element and as such the risk and rewards of the options are considered to remain with the non-controlling interest. The purchase of the non-controlling interest will be recognised upon exercise of one of the options.

A financial liability has been recognised carried at amortised cost to represent the expected exercise price, with the corresponding debit entry to the put/call option reserve. Management have estimated the future measurement inputs in arriving at this value, using knowledge of current performance, expected growth and planned strategy. Any subsequent movements in the liability will be recognised in profit or loss.

Standards and Interpretations not yet applied by the Group

A detailed list will appear in the full annual report.

2 Segmental information 

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

For management purposes, the Group is organised into two reportable segments, being the UK retail segment and the German retail segment (since acquisition of Jawoll on April 30 2014).

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

The Group's financing (including finance costs and finance income) and income taxes are managed on a group basis, though the standard rate of tax has been applied to the segmental results to aid comparison. 

3 Adjusted profit and loss statement

4 Adjusting Items

Adjusting items are exceptional and non-trading items considered by the directors to not be incurred in the usual underlying running of the trade of the Group. The directors consider the adjusted figures to be a more accurate reflection of the underlying business performance of the Group and believe that this measure provides additional useful information for investors on the Group's performance, as well as being consistent with how business performance is monitored internally.

Adjusting items include expenses relating to new acquisitions, special projects and restructuring expenses (such as IPO, refinancing, maintaining ownership structures), pre-opening new store costs, provisions for onerous leases, regulatory investigations or fines, dilapidation provisions, compulsory purchase order income, foreign exchange gains/(losses), fair value gains/(losses) on derivatives, other comprehensive income items, unwinding interest on items not directly related to the trade of the business, impairment on non-financial assets, profit/(loss) on fixed assets disposal, the expired management LTIP bonus scheme, and the estimated tax effect of these items.

Adjusted EBITDA and related measures are not a measurement 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.

5 Taxation

The relationship between the expected tax expense based on the standard rate of corporation tax in the UK of 21% (2014 : 23%) and the tax expense actually recognised in the statement of comprehensive income can be reconciled as follows:

6 Earnings/(loss) per share

Basic earnings/(loss) per share amounts are calculated by dividing the net profit or loss for the financial period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding at each period end.

As the group undertook a Group reconstruction in June 2014, the number of shares in the prior periods has been adjusted to match the post-restructuring position such that the figures remain comparable.

Diluted earnings/(loss) per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during each year plus the weighted average number of ordinary shares that would be issued on conversion of any dilutive potential ordinary shares into ordinary shares.

Adjusted basic and diluted earnings/(loss) per share are calculated on the same basis except using the 52-week adjusted profit or loss attributable to the equity holders of the parent.

There are no dilutive potential ordinary shares for the period ended 29 March 2014. There was a share option scheme put in place in August 2014 which has a dilutive effect on the 28 March 2015 figures.

The following reflects the income and share data used in the basic and diluted earnings/(loss) per share computations:

7 Business combinations

On 30 April 2014 the Group completed the acquisition of J.A. Woll Handels GmbH (Jawoll) through B&M European Value Retail Germany GmbH (Germany Holdco). Jawoll is a discount retailer incorporated within Germany.

The acquisition has been accounted for via the acquisition method of accounting.

The Group purchased 80% of the share capital for a cash consideration of €80,182k, funded by the Group's existing banking facilities.

The purchase agreement also included call and put options over the remaining 20% exercisable in 2019. Per the discussion in note 1, the risks and rewards of the exercise price remain with the non-controlling interest, and therefore the non-controlling interest is recognised below. The put/call options have then been recognised on acquisition as a liability based upon the discounted estimated price of the options, with the corresponding debit recognised in the put/call option reserve.

The valuation of the put/call option on the purchase date was £13,855k.

The fair values of the identifiable assets and liabilities of Jawoll on the date of the acquisition were valued via a PPA exercise with each material area addressed independently. The non-controlling interest was calculated at 20% of the fair value of assets to which the non-controlling interest was held.

The fair values held by Jawoll on the date of acquisition were as follows:

None of the receivables recognised were considered irrecoverable at the acquisition date.

Fees of £827k were incurred during the acquisition. These have been expensed through the profit and loss in the period.

Included in the creditors balance is a liability of £5.7m relating to a profit & loss transfer agreement ("PLTA"). As part of the acquisition Jawoll group performed a necessary reorganisation in order to separate the businesses to be acquired and those not to be acquired. This resulted in a profit & loss transfer agreement claim which Jawoll agreed to meet on behalf of those subsidiaries to which it applied.

This was therefore expensed on the pre-acquisition profit & loss account, but at the date of the acquisition the liability had not been settled. This resulted in the liability being present on the acquisition balance sheet, as well as a higher than usual cash balance.

The liability was settled shortly after acquisition, and appears on the cashflow statement at a different value due to being translated at the period average rate instead of the acquisition date rate at which it is included above.

The goodwill largely relates to the growth potential of the business with smaller elements representing the workforce and current location of the stores. None of the elements which make up goodwill can, or are not material enough to, be recognised as a separate intangible asset.

The effect the acquisition has had on the P&L can be seen in the segmental note (note 2) as the Germany Retail segment comprises the whole of Jawoll. Had the company been bought at the start of the year it would have contributed an estimated extra £14.4m to revenue and £2.1m to operating profit (figures under German GAAP).

8 Intangible assets

An impairment review has been carried out over the Goodwill and Brand assets as at the year end date. No requirement for impairment was recognised and full details will be issued within our annual report.

9 Property, plant & equipment

On the acquisition of the SBR Europe group on 6 March 2013, the fixed assets were restated such that their net book value equalled their cost. At the prior year end an estimation technique was used to perform this task due to the number of assets on the fixed asset register. At this year end the values have been calculated on an asset by asset basis leading to some adjustments between cost and depreciation as shown in the table above. This has no impact on net book value.

10 Financial liabilities - borrowings

The term facility bank loans are held at amortised cost and were initially capitalised in June 2014 with £7.3m of fees attributed to them (2014; in March 2013 with £33.1m of fees). See note 12 for further details of the refinancing that took place in June 2014.

11 Cash generated from operations