B&M Regulatory News (BME)

11 June 2020

B&M European Value Retail S.A.

Preliminary Results Announcement

Solid growth and robust trading despite the challenges from Covid-19

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 28 March 2020.

HIGHLIGHTS

● Group revenues1 increased by 16.5% to £3,813.4m (FY19: £3,272.6)

● UK B&M3 store fascia revenue1 growth of 12.6%, including Like-for-Like revenue4 growth of 3.3% for the year, including 6.6% in the fourth quarter

● Group profit before tax increased by 3.2% to £252.0m for the 52 week period (FY19: £244.3m), diluted earnings per share 19.5p (FY19:19.5p)

● UK B&M store fascia3 Adjusted EBITDA1&5 growth of 8.7% to £319.8m (FY19: £294.1m)

● Progress made in France with 19 Babou stores out of a total estate of 101 stores, now trading as "B&M" but the controlled testing of the performance of the converted stores was subsequently interrupted by the 8 week Covid-19 closure period from 15 March to 11 May 2020

● Cash generated from operations of £532.6m for the 52 week period (2019: £423.0m), year-end net debt6 of £347.5m before the payment of the £150.1m special dividend in April 2020 following the sale and leaseback of the Bedford Distribution Centre, and with net debt6 to EBITDA of 1.02 x (FY19: 1.91x)

● Recommended final dividend7 increased to 5.4p per share (FY19: 4.9p) to be paid on 28 September 2020, bringing full year ordinary dividend to 8.1p per share being an increase of 6.6%

● 36 net new B&M UK fascia stores opened in the period (51 gross) and a further 30 net new store openings planned for FY21. The rate of new openings for FY21 is impacted by disruption from Covid-19,but our overall long term target of at least 950 B&M stores in the UK remains unchanged

● The trading since the year-end has been strong

● Since the year end, the UK business delivered £1 million in cash donations to Foodbanks and gave £2.9 million of discounts to NHS workers. Store and distribution colleagues received 110% of normal pay to reflect their increased responsibilities and workload

Simon Arora, Chief Executive, said,

"In this last financial year our core B&M UK business delivered solid growth, as did our Heron Foods convenience store business. However, so much about our lives has changed so profoundly and so fast as a result of Covid-19 that a financial year which ended only a short time ago already seems a world away. It is an understatement to say that the progress made during the year has been overtaken by recent events. The challenges posed by the virus have been beyond anything we have experienced before; they have tested every aspect of the way we do business in recent weeks and I'm pleased to say that B&M is coming through the crisis well because of the strength of the B&M proposition and the way our team has responded to those challenges. For that, I express my gratitude to all of my colleagues across the business.

Looking ahead, there are of course many uncertainties for the economy, consumers and not least for the retail industry. We will all be living with the consequences of the virus and the public health responses to it for a long time to come. I am however confident though that B&M with its modern network of mostly out-of-town stores, well-invested infrastructure and value-led variety offer is well positioned to support the communities in which we trade for whatever lies ahead. The health and safety of our colleagues and customers will remain a priority."

Financial Results

1 The figures presented in this announcement are for the 52 week period ended 28 March 2020 for the continuing operations of the Group following the sale of Jawoll prior to the year-end date. The figures for the previous year 52 week period ended 30 March 2019 exclude Jawoll to provide a comparable basis with those for the continuing operations at as 28 March 2020.

2 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.

3 References in this announcement to the B&M 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.

4 Like-for-like revenues relate to the B&M estate only 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 the previous period. This 14 month approach has been used as it excludes the two month halo period which new stores experience following opening.

5 The Directors consider adjusted figures to be more reflective of the underlying business performance of the Group and believe that this measure provides additional useful information for investors on the Group's performance. Further details can be found in note 3. 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, such as this year with the gain on the sale and leaseback of the Bedford warehouse and the direct loss incurred at Babou due to the closure of their stores during the pandemic. The Babou stores closed under the French Covid-19 restrictions from 15 March 2020 until 11 May 2020. Babou incurred an EBITDA loss of £2.946m in the part of the period when they were closed to 28 March 2020. A stock provision of £6.369m has also been made relating to losses we are likely to incur to discount seasonal stock not sold during the closed period to sell it through in the rest of the Spring and Summer season. They have both been included as adjusting items as they arose as a result of the Covid-19 restrictions. 

6 Net Debt comprises interest bearing loans and borrowings, overdrafts, cash/cash equivalents and finance leases excluding capitalised fees. See notes 21, 23 and 24 for more details.

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

8 Net capital expenditure includes the purchase of property, plant and equipment, intangible assets and proceeds of sale of any of those items.

Analyst & Investors Webcast and Conference Call

An Analyst & Investors only webcast and conference call in relation to the final results will be held on Thursday 11 June 2020 at 08:30 am (UK):

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

UK & International: +44 (0) 800 408 7373

US: +1 800 939 0944

Room number: 596070

Participant Pin: 2969 

A simultaneous audio webcast of the presentation slides will be on the B&M corporate website at www.bandmretail.com

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

Steve Webb, Investor Relations Director

Investor.relations@bandmretail.com

Media

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

Maitland

Daniel Yea

bmstores-maitland@maitland.co.uk

This announcement contains statements which are or may be deemed to be 'forward-looking statements'. Forward-looking statements involve risks and uncertainties because they relate to events and depend on events or circumstances that may or may not occur in the future. All forward-looking statements in this announcement reflect the Company's present view with respect to future events as at the date of this announcement. Forward-looking statements are not guarantees of future performance and actual results in future periods may and often do differ materially from those expressed in forward-looking statements. Except where required by law or the Listing Rules of the UK Listing Authority, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect any events or circumstances arising after the date of this announcement.

Notes to editors

B&M European Value Retail S.A. is a variety retailer with 656 stores in the UK operating under the "B&M" brand, 293 stores under the "Heron Foods" and "B&M Express" brands, and 101 stores in France operating under the "Babou" and B&M brand as at 28 March 2020. It was admitted to the FTSE 250 index in June 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

Covid-19

So much has changed and is changing in many aspects of everyone's lives as we come to terms with the impact of Covid-19. It seems strange to be reviewing a period that ended only in March 2020 but which already seems a long time ago. The impacts of the virus on individuals, communities, our industry and the wider economy are today still unknown but clearly very significant and potentially long lasting.

The progress of the business in this last year has inevitably been overtaken by events. While business moves on quickly, the challenges posed by this new threat have been of a whole new order and scale. Much of our focus and effort was switched in the recent period leading up to the year-end to the immediate operational challenges of how we deal with the new realities of serving our customers safely, protecting and supporting our colleagues and on managing our supply chain both in the UK and in China.

I am very proud of the way the whole B&M team has risen to those challenges. Normally in my annual updates, I express my thanks to our colleagues at the end with gratitude for another year in which their hard work was again decisive in our continued success. The team once again delivered in FY20, but this year is different because of the experience of recent weeks. Thanking my team and all our colleagues for everything they have done on behalf of customers and shareholders is my most important task this year. Covid-19 is different from anything any of us has encountered before, and as a retailer of essential goods, during the crisis keeping our shelves continually re-stocked and serving customers efficiently and safely during periods of high demand were critically important. The whole team deserves our thanks and praise for their efforts.

The crisis and how we have reacted to it also speaks to the strength and resilience of the B&M model. At its heart is the fact we are a variety goods retailer, backed by a fully invested infrastructure and robust supply chain. The unique breadth of our product range delivers balance and resilience to overall financial performance from year to year and allows us to absorb downturns in any one specific product category. The business also has been able to respond quickly to the changing needs of our customers, particularly during the restrictions imposed by the pandemic crisis in our store and supply chain operations. Our 656 B&M UK stores are conveniently located, easy to shop safely and they have demonstrated they are now destinations in their own right. They are increasingly in high quality locations and are not dependent on shopping malls or anchor department stores to generate footfall. When the strain of meeting high and fluctuating demand, particularly for everyday essentials was at its most intense, B&M was well-positioned and able to react quickly. At our warehouses we re-deployed labour and re-prioritised the picking of products experiencing the highest demand at stores to keep them replenished and serving customers daily with what they needed.

Our business quickly implemented social distancing measures across its stores and distribution centres. We deployed masks, disposable gloves, hand sanitiser and social distancing marshalling across the network. Our store, warehouse and transport colleagues faced increased workloads and responsibilities with the implementation of social distancing, whilst the business was experiencing high levels of absence due to sickness or self-isolating. To recognise this additional burden, we increased the pay of store and distribution colleagues by 10% over the peak of the crisis.

To play our part in the collective national effort to respond to the pandemic, we quickly implemented two successful initiatives. We made a total £1 million cash donation at speed to Foodbanks across the UK using our store network. We granted priority access to NHS workers for the first hour of each trading day and we have provided £2.9 million in discounts to NHS workers in a 2 month period.

We should also not forget that as a discounter, our appeal is strengthened when large sections of the population are worried about their personal finances or are having to live within constrained household budgets.

This is important, not just because we were able to do our bit in the crisis, but because I believe it demonstrates the flexibility of our model to adapt very quickly to meet the evolving needs of customers. The lasting effects of Covid-19 on our industry may result in the further acceleration of the already profound structural changes affecting retailing. Positioning the business to address two of the most powerful strategic trends in retail, being discount and convenience shopping, will, in my view, continue to deliver plenty of growth opportunity for B&M into the long term.

Financial Performance

The core B&M UK business had a good year, tempered in part by the weak performance of our Christmas and Toy categories during the third quarter which was also impacted by disappointing footfall affecting most UK retailers at the time of election and Brexit uncertainty. We have taken steps to learn from the year's Christmas trading period as we plan our space allocation and sales budgets for the 2020 Golden Quarter. Our final quarter saw a strong return in trading performance with pleasing like-for-like ("LFL") sales of 6.6%, attributable to a surge in grocery sales in late March.

The performance of new stores exceeded our expectations and demonstrated our continued ability to deliver profitable organic growth. A robust gross margin, combined with diligent control of costs, resulted in a good overall outcome in terms of profit growth and cash generation.

Heron Foods continued to perform well throughout the year and also benefitted from the exceptionally high demand in March. Its emphasis on local convenience retailing and value for money put it in good stead to serve shoppers' needs throughout the coronavirus crisis.

Until the disruption caused by Covid-19, our repositioning of Babou and the development of B&M in France was making good progress. A large proportion of Babou's product range had moved to the Group's supply chain in China. The business had successfully reduced its reliance on Clothing while increasing its ambient grocery and FMCG ranges to drive frequency of visit and average transaction values. In the final quarter of FY20, we rebranded 13 stores from Babou to B&M and were encouraged by initial customer reaction. We ended the financial year with 19 stores in France trading as B&M out of the store estate of 101 stores. However, the lockdown imposed on the business from 15 March 2020, which was lifted on 11 May 2020, has delayed our ability to continue the development of the B&M proposition.

Our Babou stores are focused on short term trading priorities and the delivery of social distancing measures for the remainder of the Summer 2020. It would not be sensible for us to disrupt 2020 Golden Quarter trading with store remodelling and rebranding to B&M. We expect to resume the rebranding of Babou to the B&M brand in France in early 2021, subject to the controlled testing of the performance of the pilot group of 19 stores converted to B&M format stores so far.

Recent and Current Trading

Our priority since the year-end in our UK businesses has been the safety of our colleagues and customers. The teams have worked quickly and tirelessly to deliver social distancing guidelines at our stores, which were permitted to stay open due to the majority of our sales falling within the Government's essential categories of Food, Drink, Personal & Household Care, Petcare as well as DIY and Hardware. 

Our ability to react quickly and implement new ways of working safely have underpinned our unusually strong trading performance in the period since the year-end. This has been boosted by the very favourable hot weather and the acceleration of demand in DIY, much of which will be a pull-forward of trade from later in the season. All our stores are currently trading and we do not have any employees on furlough under the Government's scheme, other than colleagues in receipt of the "shielding letter" for those extremely vulnerable to the virus. We have not taken any loans under the UK Government's lending schemes, nor are we currently paying VAT or any other taxes on a delayed basis. However, the pandemic has brought significant increases in cost of working both at a store level and in distribution. Due to the general uncertainty over future consumer behaviour and the duration of restrictions, it is currently particularly difficult to predict what the remainder of the year may be like.

We have seen very strong early LFL sales in the UK businesses since the year-end of 22.7% to 23 May 2020. Excluding Gardening and DIY categories, the LFL sales performance for that period was 10.3%. We have also incurred increased costs of trading (excluding the benefit of the business rates holiday) from the social distancing measures implemented in our stores and warehouses since the onset of the Covid-19 crisis. Together with closure period losses in Babou, these costs partially offset the additional revenue from the recent surge in Gardening and DIY sales.

In France we had to temporarily close all of our 101 stores under the French Government restrictions for a period of 8 weeks from 15 March 2020. Since the stores re-opened on 11 May 2020 we have seen an initial strong sales performance with LFL sales of 81.8% in the period to 23 May 2020, with the French consumer having been able to access stores for the first time since the 8 week closure period.

Strategic Development

Although maintaining a strong focus on dealing with the challenges posed by Covid-19 has been vitally important, we have not lost sight of the need to drive our strategy for growth forward, both before and since the crisis. From a strategic standpoint the execution of our UK expansion strategy has continued to go well. Inevitably there are also consequences of the Covid-19 crisis and its aftermath for the implementation our UK strategy in the near term. For example, the slowdown in the construction sectors in the UK will result in some delay in our new store opening programme. We have not taken a decision to deliberately slow that programme but it will take some months for building and shop-fitting contractors to catch up time lost during lockdown periods. This applies not only to our own shop-fitting works but also further upstream where works are required to be carried out by the property owner prior to handover to us. In France the transformation of the Babou business we acquired in 2018 to a model similar to B&M and testing of a pilot group of 19 stores converted to the B&M format is underway, although progress has been delayed due to the disruption from Covid-19.

The completion of the sale of our Jawoll business in Germany just before the financial year end, to a private equity led buyer consortium, was the culmination of a the strategic review process which began in late 2019. The comprehensive review we undertook included an evaluation of the likely potential for the Group to create value from the business in Germany going forward under our ownership and weighing that against the continued disappointing performance of the business driven by persistent recruitment, trading and operational issues. The carrying value of the brand, goodwill and of property, plant and equipment on under-performing stores, had already been impaired by us at the half year-end of the Group in September 2019. The Group also cancelled and wrote-off €36.1m of loans and intra-group debt owed to it by the German business as part of the terms of the sale. The review concluded that the path to restoring profitability, the creation of a business model capable of delivering acceptable financial returns and the potential for long term growth was likely to entail further substantial investment with an uncertain outcome. As a result, the decision was taken to find a buyer for the business where it could be repositioned back to a clearance outlet model under other ownership. This was in the best interests of the Group and the other stakeholders of the Jawoll business, notably its colleagues. Clearly the experience in Germany was beset with difficulties, but the lessons learned have informed our approach in France so that the execution of our strategy avoids the issues we encountered in Germany.

The B&M Group's strategy for driving sustainable growth in revenues, earnings and free cash flow has the following four key elements. Details of our progress in relation to those during the year were as follows:

1. Delivering great value to our customers

B&M is all about delivering great value across a variety of product categories, with the range of items within each product line being limited to best sellers. The offer is focused on the things customers buy regularly for their homes and families. There is always something a household needs that can be bought quickly, cheaply and conveniently at B&M, whether it is a light bulb, a new kettle, a jar of coffee or a tube of toothpaste. Combined with a constant stream of typically c.100 new lines each week, this is why our customers (which averaged about4.8m a week) choose to keep coming back to our stores so regularly. With 656 stores across the UK B&M has become a routine part of customers' shopping habits wherever we trade. In the week immediately prior to the Covid-19 lockdown crisis our stores served6.6m customers, with some of them also likely being new to B&M. Our stores are generally in locations with easy access by car or other independent means of travel, as opposed to being dependant on city public transport links with the social distancing risks associated with those networks.

Our competitiveness and our profitability are driven by relentless discipline around keeping costs low, buying large volumes per product line directly from factories rather than through intermediaries, and stocking only a limited assortment of the best-selling items. Low costs help us deliver low prices but B&M is not just about seeking cheap products. Our focus is on selling quality products, including many leading brands at discounted prices. Some people need a bargain but many people also enjoy one, and that's why B&M's appeal continues to broaden.

The majority of our product categories saw strong overall total sales growth this year helped by the new store programme, resulting in continued market share gains. On a comparable basis, it was a similarly strong picture. Our Homewares categories saw excellent year on year growth, in part rebounding from a weaker performance in the prior year. Following a complete range review and reset in the prior year all stores have been fully re-merchandised in Homewares and we have been delighted with the improved design, ranging, co-ordination and presentation of these ranges. This includes areas across home textiles, bedding and home adornment. The customer response to these changes has been excellent, and as a result we have extended some of the themed styles to this year's outdoor leisure and furniture ranges. Homewares remains an opportunity area for the business and we will be allocating more space to those products when the disruptive impact of Covid-19 subsides.

Seasonal goods are a significant element of B&M's appeal in general merchandise. Around 20% of the space in a typical store is fully re-merchandised through the seasons. These are also areas where our pricing can be at its most disruptive. Garden and Outdoor Leisure enjoyed a pleasing 2019 season, despite very demanding comparables from the prior year's heatwaves. By contrast, the Christmas selling season was disappointing, partly driven by the weakness in the toy market but we believe also by the unhelpful timing of the UK's General Election in early December and the intense media coverage of potential Brexit impacts to the economy. Although margins remained robust through the season, like-for-like sales in the Autumn/Winter seasonal categories were lower than expected.

Grocery categories achieved strong growth. For most of the year their outperformance of the business as a whole was modest, but sales accelerated during the final weeks of the year driven by customer anxiety over the potential impact of Covid-19. Customers buying tinned and packaged food, cleaning and laundry products, soft drinks, paper goods and pet care products drove very strong growth in the last few weeks of the year. Because of the long life nature of what we sell, as well as our low prices and high levels of buffer stock, B&M proved to be a very efficient way for many customers, including those new to B&M, to stock-up and at consistently great value prices.

2. Investing in new stores

We have a long growth runway in the UK, with the potential to open at least 950 B&M facia stores across the country from our current base of 656, both in heartland areas and in areas where we have few or even no stores. This excludes Heron Foods, our discount convenience business which, with its smaller existing geographic footprint, strong returns profile and small store model, has the potential itself to become multiple times larger than its present 293 store count. With B&M new store performance continuing to be very strong and the flow of attractive profitable opportunities looking healthy, the target of at least 950 B&M stores in the UK is increasingly looking like a conservative estimate.

We opened 51 new B&M fascia stores during the year, with 8 of those being replacement stores where larger and more profitable store opportunities have become available to move our business elsewhere in a town. There were a further 7 closures, largely the consequence of older, early generation stores coming to the end of leases and where the locations were not attractive enough to renew or in fact a larger replacement store had been opened in prior years. In the year there were therefore 36 net new B&M store openings. The current year's opening programme is, or would have been, equally strong had the unhelpful impact of Covid-19 on the construction industry not intervened. Currently, we expect a reduced programme to that in FY20, with 30 net new openings in FY21 and being more heavily weighted to the second half of the financial year. The forward pipeline for FY22 is similarly impacted but it is possible that the fallout across the retail industry from the impact of the virus may provide further attractive opportunities that we have not yet factored into our budgets.

Heron Foods had another strong year, benefitting from its appealing positioning as a value convenience retailer. Profit performance was particularly pleasing, helped by improvements to labour scheduling and also distribution efficiencies. Like our B&M main facia stores, Heron Foods performed strongly during the final few weeks of the financial year, as customers altered their shopping habits towards stocking-up. Heron Foods' neighbourhood locations and predominantly frozen and packaged food offer was, and is, very appropriate to its customers' needs. Heron Foods opened at total of 18 new stores during the year, bringing the total to 293. We are expecting to open about 15 new Heron Foods stores in FY21, but that is subject to any impacts of disruption to building fit-out works from Covid-19. As with the B&M UK fascia the openings will be weighted to the second half of FY21.

In France, we opened 5 new stores, most of them having been committed to prior to our ownership of the business. All of them were opened under the B&M fascia and with layouts and merchandising akin to our UK stores, albeit with a category emphasis reflecting the differing needs of the Babou customer. Babou operated a total of 101 Babou and B&M fascia stores at the year end.

3. Developing our international business

Until the imposition of the lockdown period in France linked to Covid-19, which kept the stores fully closed for 8 weeks, the business was making good progress moving towards the B&M model with the re-setting and re-formatting of a number of pilot stores in the estate. Most of the category changes we envisaged, including switching to products sourced from the B&M supply chain, were also well advanced. We had made progress in reducing Babou's exposure to the Clothing category and we had begun to introduce more Food, Grocery and FMCG products. Babou's supply chain had proven itself up to the task of managing large volumes of containerised inbound product, having navigated the peak stock intake last Autumn smoothly and successfully. We now have 19 B&M pilot re-formatted stores trading in France, most of them converted in early 2020 from existing Babou stores, combined with the 5 new stores openings. In the early weeks of trading prior to the Covid-19 closure restrictions coming into force, the B&M stores were trading encouragingly above their trading levels as Babou, but it is as yet unclear how much of this improved performance was not just the 'halo effect' of a new store opening.

Inevitably, a lengthy period of store closure during the lockdown period in France has been unhelpful and has set back our plans for the business to some extent. Our priority since the lifting of the lockdown has been to trade the stores and sell through inventory. Before the further development of the B&M fascia, we need a more settled period of time first to test the results of the 19 stores converted as a pilot group so far.

4. Investing in our people and infrastructure

Our new c.1 million square feet Southern distribution centre at Bedford was completed and fitted-out during the financial year. It is our largest single distribution centre building. Commissioning of the facility was successfully achieved before and during the Covid-19 crisis and it is now supplying almost one-third of the B&M store estate. Having the additional logistics capacity in place during the Covid-19 surge in demand for particular categories was particularly useful, but it is fair to say that the lockdown restrictions are imposing higher costs and inefficiencies across our network. We expect the new centre to provide sufficient capacity for our expansion plans for the foreseeable future including enough to meet our 950 UK store target.

At store level, we had planned by the time of this report going to print to have rolled-out our digital technology Workforce Management System. That was unfortunately delayed by the on-set of Covid-19 in view of the priority rightly given to the implementation of new safety measures rather than the roll-out of training on a new system. We have successfully piloted it and the technology is ready to go live across the estate as soon as it's practical to do so.

During the financial year we recruited Allison Green as the Group People Director. Allison is re-joining the business after having been with B&M previously until 2016 and then having worked in the hospitality sector. We are delighted that she has re-joined the management team at B&M, having made a significant contribution during her previous tenure with the business.

In France we welcomed Gilles de Frémicourt who we appointed during the year as the Distribution Director to the Babou business, with the distribution function having been fully integrated into the Babou business in place of the separately managed distribution workforce service arrangement that was in place prior to the acquisition. We also appointed Anthony Giron as President of Babou on 11 May 2020, in order to strengthen the senior management team in line with our high ambitions for the business. Anthony has previously launched and rolled out the Hema retail business in France, and his experience is a good fit with the opportunities ahead of us to grow B&M in France.

Corporate Social Responsibility

We are very proud as a Group to serve customers across the UK in many different communities and localities through our B&M and Heron Food stores. Our presence in communities gives customers access locally to the everyday products they need and at bargain prices. Our new store opening programmes extend the reach of our value proposition to new communities and customers, create new local jobs and help in our own way to revitalise areas where other retailers have in many cases retrenched. We strive in all the areas where we operate to be a good corporate citizen and to make a difference, whether that's through the great prices we offer in stores to our customers or through career opportunities and development paths for our colleagues. Some of the points I would like to highlight this year are:

● the creation by the Group this year of over 2,200 new jobs in the UK, mainly through our store expansion programmes;

● the development and training of our own talent through our Step-Up Programme promoting 125 colleagues to B&M Deputy and Store Manager positions;

● our recycling of high levels of supply chain waste, with 99.8% of the Group's trade packaging waste being recycled;

● proudly supporting for the fourth year the "Mission Christmas" charity appeal through sponsorship, with stores participating as collection points for presents donated for underprivileged or poorly children for the appeal;

● in response to the Covid-19 virus and the impacts to some of the most vulnerable in society, we donated £1,500 per B&M store to local Foodbanks totalling £1m nationally; and

● extending £2.9 million of discounts to all National Health Service workers during the peak of the crisis.

Outlook

For many retailers the outlook in the Covid-19 world is more about survival than it is about the shape of the year ahead and beyond. B&M has significant advantages. The 'variety retailing' model with its core strength in everyday essentials, a well-invested infrastructure, strong value credentials, a modern and convenient store network with continuing growth opportunities in the UK and France, mean that the business is better positioned and more resilient than most to deal with the new realities.

We welcome the UK Government's business rates holiday which we see as essential to support the viability of the UK retail industry and the incremental operating costs of serving customers in the present circumstances. We hope this will be a precursor to the much needed reform of the UK business rates system. The benefit of the business rates holiday for B&M will fall in our financial year ending March 2021 and is likely to be fully offset by Covid-19 related costs, dependent on the progression of the virus and, in particular, the nature and duration of social distancing requirements.

Our strong trading performance in the B&M UK stores in the initial 8 weeks of the new financial year was boosted in particular by our Gardening and DIY categories as announced on 29 May. Much of that outperformance is likely to have been a pull-forward of sales which would ordinarily be achieved later in the first half of the financial year. LFL customer count was -28.9% whilst LFL Average Transaction Value was +72.5% over the initial 8 weeks. Whilst trading has continued to be strong in more recent weeks, the growth rate is unlikely to be sustained as Gardening ranges have sold through and stock in some other categories is now lower than normal for this time of year.

The pandemic has delayed construction work on new stores and consequently there has been a slowdown to our store opening programme for this financial year. For FY21 we now expect to have 30 net new B&M UK store openings and the programme could be reduced to a similar number in FY22 dependent on the progress of the virus and social distancing requirements. Our overall long term target of at least 950 B&M stores in the UK remains unchanged. 

There are greater than usual uncertainties during the remainder of the year. The economic environment and its impact on customers is difficult to predict. In addition to the impact of social distancing on operating costs, should this continue during the winter months, it is likely to reduce footfall due to the reluctance of customers to queue outside during less pleasant weather, and detract from our ability to serve customers in their usual numbers during the peak trading season.

Against this uncertain backdrop B&M, as noted above, is in a strong position to continue to grow profitably in the UK, and work continues to develop and prove the proposition in France.

Simon Arora

Chief Executive Officer

11 June 2020

Financial Review

Accounting period

The FY20 accounting period represents the 52 weeks trading to 28 March 2020 and the comparative financial period represents the 52 week period for the B&M UK segment to 30 March 2019. This is the first time that the Financial Statements have therefore been prepared following the introduction of IFRS16. The comparative figures in this report have been restated for IFRS16 as we have adopted the fully retrospective approach. Additional details in relation to this can be found in notes 17 and 18. We have continued to report underlying figures where we believe they are relevant to understanding the performance of the Group and these underlying figures referred to are presented pre the impact of IFRS16.

As a result of the disposal of our German business, Jawoll, in March 2020, the results of Jawoll are treated under IFRS5 as a discontinued operation within the statement of consolidated income and the comparative figures have also been restated to reflect this.

Financial performance

Group

The Group revenue in FY20 was £3,813.4m (FY19: £3,272.6m), this represents an increase of 16.5% and on a constant currency basis, a 16.6% increase2.

The overall adjusted gross margin5 was 33.8% (FY19: 34.1%).The adjusted operating costs5 of the Group, excluding depreciation and amortisation, grew by 18.3% to £946.9m (including new store pre-opening costs) and depreciation and amortisation expenses (excluding adjusting items) grew by 28.2% to £57.7m, reflecting the increased number of stores as a result of the new store opening programme and the additional costs relating to the non-comparable period of Babou following the acquisition in October 2018.

We report an adjusted EBITDA5 to allow investors to understand better the underlying performance of the business. The items that we have adjusted are detailed in note 4, they totalled £(40.7)m in FY20 (FY19: £(5.5)m).

Overall Group adjusted EBITDA2 increased by 7.1% to £342.3m.

B&M UK

In the UK, B&M revenues increased by 12.6% to £3,140.1m, driven by an increase in like-for-like revenues of 3.3% and the new store opening programme, including both the annualisation of revenues from the 44 net new store openings in FY19 and the 36 net new store openings in FY20, and an additional £16.3m from wholesale revenue.

There were 51 gross new store openings in the year and 15 closures with 8 of the closures being relocations. We have continued to see attractive returns on investment on the FY20 new store openings and they delivered £157.9m of revenues in the year. We have also continued to take advantage of relocation opportunities. These are typically small first generation B&M stores that are replaced by modern, larger stores that allow customers access to the full product range, and these opportunities continue to be earnings enhancing.

Revenues in the like-for-like store estate grew by 3.3% (FY19:0.7%). The like-for-like performance was enhanced by a two week period of exceptional demand in March 2020 as the UK consumer purchased essential products ahead of the Coronavirus lockdown in the UK. Excluding these two weeks, the like-for-like would have been 1.7%. During the year we have seen a continuation of the strong performance on grocery/FMCG ranges as consumers structurally continue to seek out value and we have also seen an improved performance on our homeware ranges following the changes that were made to the ranges, against the backdrop of a disappointing performance in FY19.

In the B&M UK business the margin reduced by 63 basis points, this comprises 12 basis points as a result of the levels of demand in March 2020 on the lower margin grocery and FMCG sales and the increase in the wholesale revenues.

In the B&M UK business, operating costs, excluding depreciation and adjusting costs, grew by 11.3% to £734.4m, while costs as a percentage of revenues decreased by 27 basis points to 23.4%. Within the year the business has managed to largely absorb the impact of the living wage through efficiency savings, although there have been inflationary cost pressures on transport and distribution costs, as well as the additional operating costs arising from the opening of our new warehouse in Bedford.

In the B&M UK business, adjusted EBITDA5increased by 8.7% to £319.8m (FY19: £294.1m) and the adjusted EBITDA5margin decreased by 36bps to 10.2%.

Heron Foods

Revenues at our convenience food store business, Heron Foods grew to £389.9m (FY19: £354.1m). The business has continued to deliver a strong sales performance following the strong like-for-like performance that was delivered in FY19. The business also benefited from an exceptional level of demand in March 2020 ahead of the Coronavirus lockdown.

The business has continued to manage its cost base despite the headwinds of inflationary cost increases on store wages and operating costs as a percentage of revenues decreased by 82bps to 25.0% (FY19: 25.9%).The EBITDA5 was £25.5m, which compares to £19.9m for FY19 and the EBITDA margin improved by 93bps to 6.6%.

Babou

Babou's revenues grew to €324.2m, (FY19: €146.5m), an increase of 121.3%, of which €162.2m related to the non-comparable period of ownership. Within the year the business opened 5 new stores. Trading in the business was impacted by the lockdown in France with all stores closed from 11 March 2020, as a result of the French government's response to the Coronavirus outbreak.

The business had been progressing with its transformation and moving the product offer to that of the B&M UK stores. However, the store closures following the lockdown period in France resulted in a negative EBITDA of £3.0m during the lockdown period and an additional net realisable value provision of £6.4m has been made on stock, mainly clothing that will require additional markdowns to be sold, both of these items have been excluded from the adjusted EBITDA.

The adjusted EBITDA was £(3.0)m and this compares to £5.6m in FY19.

Jawoll

Following the disposal of the Group's entire 80% shareholding in Jawoll to a private equity-led consortium in March 2020, the results of Jawoll are shown with discontinued operations.

The Group received an initial consideration of €2.5m and there is a further €10.0m to be received no later than December 2020.This element of the consideration is subject to the on-going trading of Jawoll. This was in consideration for a €5.6m intragroup trading account and a €43.0m loan provided by the Group. The loss from discounted operations was £113.9m, reflecting a loss on writing-off loan balances, trading losses in the year and impairment of assets.

Financing

The net interest charge in the year was £81.7m (FY19: £75.2m) representing an increase of 8.6%

The interest charge includes £57.2m for the finance costs relating to the lease liabilities under the IFRS16 accounting treatment following the introduction of the new standard lease interest, (FY19: £52.0m). Bank, high yield bond and interest receivable was £22.7m (FY19: £20.3m) and amortised fees of £2.1m (FY19: £1.9m).

The increase in the cash interest charge largely reflected the additional funding required for the build of the new warehouse at Bedford prior to the sale and leaseback transaction which was completed on 6 March 2020.

Profit before tax

The statutory profit before tax was £252.0m, which compares to £244.3m in FY19. We also report an adjusted profit before tax to allow investors to understand better the operating performance of the business (see note 4). The adjusted profit before tax5 was £260.0m (FY19: £252.4m) which reflected a 3.0% increase.

Taxation

The tax charge in the year was £57.2m (£49.2m in FY19) and we expect the tax rate going forward to reflect the mix of the impact of the tax rates in the countries in which we operate being 19% in the UK and 30% in France, with an effective rate of 19.5% in FY21.

As a Group we are committed to paying the right tax in the territories in which we operate. In the UK the total tax paid was £275.6m. This is mostly those taxes which are ultimately borne by the company amounting to £182.8m which includes corporation tax, customs duties, business rates, employer's national insurance contributions and stamp duty and land taxes. The balance of £92.8m 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

The profit after tax was £80.9m compared to £191.1m in FY19 and the fully diluted earnings per share was 9.0p (FY19: 19.5p).

On an adjusted profit after tax basis5, which we consider to be a better measure of performance due to the reasons outlined above, it was £203.0m which was a 0.2% increase over last year (FY19: £202.7m) and the adjusted fully diluted earnings per share5 was 20.3p (FY19: 20.2p).

Investing activities

The Group incurred £124.6m on the purchase of property, plant, equipment and intangible assets, including £32.0m on the build and fit out of our new warehouse in Bedford with a further £42.5m being incurred on the 74 gross new stores opening programme across the Groups fascia's and an additional £50.1m on the Groups infrastructure and ensuring that our existing store estate and warehouses are appropriately invested and maintained. The Group will continue to invest in its existing store estate and IT infrastructure across the Group in the year to March 2021 and we would expect the level of maintenance expenditure to be 0.8% of revenues.

The deferred consideration that was outstanding relating to the acquisition of Heron in August 2017 that was due was agreed with the vendors and £12.0m was paid in the year.

There were £160.5m of proceeds received from the sale of property, plant and equipment in the year, the majority of this related to the proceeds from the sale and leaseback of our warehouse in Bedford, £149.5m in March 2020 and there was a further £6.6m relating to the sale of freehold properties. In addition there were also receipts of £2.4m from the disposal of our shareholding in Jawoll and £2.6m in dividends received from associates.

Net debt and cash flow

As a Group we continue to be strongly cash generative and the cash flow from operations increased by 25.9% to £532.6m (FY19: £423.0m).

The cash generation reflects the continued growth in the Group's EBITDA5, and the continuation of the attractive cash paybacks from the new store opening programme. Within the year we have also seen a working capital inflow as a result of both the accelerated demand for essential products in March 2020 ahead of the lockdown and also lower levels of imported stock following some delays to the timing of merchandise being shipped from the Far East following the Covid-19 outbreak in China. The working capital benefit is likely to reverse in FY21 if normal trading conditions are experienced.

The strong cash flows have enabled the Group to pay £76.0m of dividends in the year and also to declare a dividend of £150.1m that was paid to shareholders in April 2020.

The Group's net debt6 in the year has reduced to £347.5m (FY19: £610.9m) and the net debt6 to adjusted EBITDA5 has reduced to 1.02 times (FY19: 1.91 times). Adjusting the net debt for the £150.1m special dividend that was paid on 17 April 2020, the underlying net debt would have increased to £497.6m and the net debt to adjusted EBITDA would have been 1.45 times. This remains comfortably within our 2.25 times leverage target.

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

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

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

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

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

2. ordinary dividend cover 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 it is not an exhaustive list 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. As the parent company is a Luxembourg registered company the Board is permitted to have recourse to the company's share premium account as a distributable reserve. It remains the Group's policy though generally 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. The Group's consolidated balance sheet position as at 28 March 2020 includes distributable profit reserves of £245m. The vast majority of these reserves have been generated by and are on the balance sheet of the principal trading subsidiary of the Group in the UK, B&M Retail Limited. There are intermediate holding companies in the Group structure between B&M Retail Limited and the Group's ultimate parent company, but those intermediate holding companies do not carry on retail trading business operations and there are no dividend blocks of any material amounts in any year in relation to expenses which those companies may incur.

The Group has continued to be strongly cash generative and is in a very good position to fund and maintain its dividend policy notwithstanding the current economic situation general. The principal risks of the Group and in particular those relating to Covid-19, supply chain, competition, economic environment, commodity prices, infrastructure and international expansion are relevant to the ability of the Group to maintain its 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.

During the year the Company paid an interim dividend of 2.7p per share and also declared a special dividend of 15.0p per share following the sale and leaseback of the Bedford Distribution Centre which was paid in April 2020. Subject to approval of the dividend by shareholders at the AGM on 18 September 2020, a final dividend of 5.4p per share is to be paid on 28 September 2020 to shareholders on the register of the Company at the close of business on 21 August 2020. The ex-dividend date will be 20 August 2020.

Paul McDonald

Chief Financial Officer

11 June 2020

Consolidated Statement of Comprehensive Income

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

* This statement has been restated in respect of the Group's first time application of IFRS 16 (see notes 1, 2, 17 and 18), for the reclassification of the Germany Jawoll segment as a discontinued operation (see notes 1 and 7) and for the results of the final purchase price allocation exercise for Babou (see notes 1 and 8).

Consolidated Statement of Financial Position

* These statements have been restated in respect of the Group's first time application of IFRS 16 (see notes 1, 17 and 18) and for the results of the final purchase price allocation exercise for Babou (see note 8).

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 10 June 2020 and signed on their behalf by:

Simon Arora, 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.

* This statement has been restated in respect of the Group's first time application of IFRS 16 (see notes 1, 17 and 18), and to represent foreign exchange movement in line with the current year presentation (see note 1).

Notes to the Consolidated Financial Statements

1 General information and basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

The Group's trade is general retail, with continuing trading taking place in the UK and France and discontinued operations in Germany. 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 thousand (£'000), except when otherwise indicated.

The consolidated financial statements cover the 52 week period from 31 March 2019 to 28 March 2020 which is a different period to the parent company stand alone accounts (from 1 April 2019 to 31 March 2020). This exception is permitted under article 1712-12 of the Luxembourg company law of 10 August 1915 as amended as 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

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

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

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

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

Restatement due to the Group's adoption of IFRS 16 'Leases'

The new leasing standard, IFRS 16, was adopted by the Group on 31 March 2019, the start of the current financial year. The Group has adopted the fully retrospective approach and therefore has applied the standard to all leases from the acquisition date of each lease, with the consequence that the prior year financial statements have been restated.

The impact on our financial statements is significant, see notes 17 and 18 for more details.

The Group has taken advantage of the practical expedient allowed on transition to IFRS 16 to not re-assess which contracts contain or are a lease and which are not. Therefore the Group has applied the standard to those contracts previously identified as leases only, as well as contracts entered into after 31 March 2019.

Our new accounting policies for Leases are as follows:

Leases

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

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

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

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

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

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

On a significant event, such as the lease reaching its expiry date or the likely exercise of a previously unrecognised break clause, the lease term is re-assessed by management as to how long we can be 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.

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.

Disposal of Jawoll

On 27 March 2020 the Group announced the disposal of their 80% shareholding in the subsidiary J.A. Woll-Handels GmbH, and the results of the entity have ceased to be consolidated from this date.

This subsidiary was previously consolidated as the Germany Jawoll segment, and as such the prior year statement of comprehensive income has been restated to include the results of the Germany Jawoll segment within the discontinued operations categorisation.

All current year results have been presented within the loss from discontinued operations caption, including the loss on disposal and impairment as reported in the September 2019 half year accounts.

Our policy on assets held for sale and disposal groups is as follows:

The Group reclassifies an asset or a disposal group as held for sale if the carrying amount is to be recovered principally through a sale transaction rather than through continuing use. Their carrying value on reclassification is measured at the lower of the carrying amount and fair value less costs to sell with any gain or loss included in gain or loss on discontinued operations (for a disposal group) or administrative costs (for an asset held for sale), and no depreciation is charged on this balance.

Any assets classified as held for sale are separately presented on the statement of financial position, with any results separately presented in the statement of comprehensive income (as discontinued operations for a disposal group). Any prior year statements of comprehensive income that are presented are also restated to aide comparability.

Further disclosures have been made in note 7.

Acquisition of Babou

A final review of the identifiable assets and liabilities was carried out within the year with the result that, due to information available after the prior year end which reflected circumstances at the acquisition date, an additional €6m goodwill was recognised in relation to a write-down of inventory. As such the prior year cost of sales has also been restated for this amount, which translates to £5.3m.

Cash flow foreign exchange

A presentational restatement has been made to the consolidated statement of cash flows such that the effects of exchange rate changes on cash and cash equivalents has been shown separately from cash flows in line with IAS 7. In prior years this separation was not made on grounds of materiality, and as such the prior year has been represented to align with the current year presentation. This has resulted in a reduction of net cash flows from operating activities of £1,781k and an increase in net cash flows from financing activities of £2,439k.

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 31 March 2019 to 28 March 2020. 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.

During the year, on 27 March 2020, the Group disposed of J.A.Woll Handels GmbH ("Jawoll"). Jawoll has only been consolidated until this date, as a discontinued operation. See note 7 for more details.

During the year, on 6 March 2020, and as part of a sale and leaseback transaction involving the new warehouse at Bedford, the Group disposed of Bedford DC Investment Ltd ("Bedford Ltd"). Bedford Ltd has only been consolidated until this date, see note 17 for more details.

During the prior year, on 19 October 2018, the Group acquired Paminvest SAS, a discount general merchandise retailer group operating under the trading name Babou in France ("Babou"). Babou has been consolidated in the Group accounts from this date. For more details see note 8.

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, the Directors are confident that the Group has adequate resources to continue its successful growth. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

The Covid-19 pandemic has not had a material impact on this assessment, as the majority of the Group's stores have continued to operate profitably. The French Babou stores were closed at the year end date, and whilst losses were incurred in this segment, they have received support in the form of loans that are 90% guaranteed by the French government (see note 33).

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 received via our tills. Therefore revenue is recognised at this point.

The Group does not actively sell vouchers to use in the future or operate discount schemes and, therefore, no deferred revenue is recognised.

The Group operates a small wholesale function which recognises revenue when goods are delivered and the 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.

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.

Other administrative expenses

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

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

Goodwill

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

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

Goodwill is tested for impairment at each year end and 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 as detailed below and in note 4, as the Directors believe that these measures provide additional information that is useful to the users of our accounts.

The alternative performance measures we report in these accounts are:

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

· Adjusted EBITDA

· Adjusted Profit

· Adjusted Earnings per share

Both IFRS 16 and non-IFRS 16 versions of these alternative performance measures have been calculated and presented in order to aide comparability with the non-IFRS 16 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 4. These adjustments include the effect of ineffective derivatives and foreign exchange on intercompany balances, which do not relate to underlying trading, and costs incurred in relation to acquisitions, which are non-recurring and do not relate to underlying trading.

The directors believe that 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 an additional metric to compare periods of account.

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

Business combinations

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

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

Brands

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

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

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

Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly with the write down 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.

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.

Depreciation

Depreciation is provided on all other items of property, plant and equipment and the effect is to write off the carrying value of items by equal instalments over their expected useful economic lives. It is applied at the following rates:

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.

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. 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 cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

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.

Onerous leases

The Group carries a property provision which relates to leasehold property where an exit can be reasonably expected to occur, and the relevant lease is considered to be onerous.

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.

The property provision also contains expected dilapidation costs on any lease considered onerous, as well as any relating to stores recently or planned to be closed.

Inventories

Inventories are valued 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 the valuation of inventory.

Share options

The Group operates equity settled share option schemes, with the first such scheme commencing in August 2014.

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 11 for more details.

Taxation

Current income tax

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

Deferred tax

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

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

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

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

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

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

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

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

Financial instruments

The Group uses derivative financial instruments such as forward currency contracts, fuel swaps and interest rate swaps to reduce its foreign currency risk, commodity price risk and interest rate risk.

Derivative financial instruments are recognised at fair value. The fair value is derived using an internal model and supported by valuations by third party financial institutions.

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

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

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

Financial assets

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

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

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

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

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 whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Financial liabilities

Initial recognition and measurement

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

Financial liabilities at fair value through profit or loss

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

Other financial liabilities

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

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

Derecognition

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

Fair value of financial instruments

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

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, less bank overdrafts.

Equity

Equity comprises the following:

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

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

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

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

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

§ "Retained earnings reserve" represents retained profits;

§ "Put/call option reserve" representing the initial valuation of the put/call option held by the Group over the non-controlling interest of J.A. Woll Handels GmbH (Jawoll);

§ "Foreign exchange reserve'' represents the cumulative differences arising in retranslation of the subsidiaries results;

§ "Non-controlling interest" representing the portion of the equity which belongs to the non-controlling interest in the Group's subsidiaries.

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)

· Bedford DC Investments Limited (Disposed March 2020)

· EV Retail Ltd

· B&M Retail Ltd

· Opus Homewares Ltd

· Retail Industry Apprenticeships Ltd

· Heron Food Group Ltd

· Heron Foods Ltd

· Cooltrader Ltd

· Heron Properties (Hull) Ltd

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

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

· SAS Babou

· Babou Relationship Partners - BRP SAS

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

The following former Group companies had a functional currency of the Euro;

· J.A. Woll Handels GmbH (Jawoll)

· Jawoll Vertriebs GmbH

· Paminvest SAS

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 year 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.

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.

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 hence it has been treated as such within these consolidated financial statements.

Hedge accounting

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

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

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

Deferred Consideration

During the year the Group disposed of the German trading subsidiaries, see note 7. The transaction entitled the Group to receive €12.5m, with €10m of this deferred until no later than December 2020, payable if the business does not become insolvent.

A key management judgment has been made that this amount is fully recoverable, based upon an analysis which included consideration of prudent forecasts, the proposed business plan put forward by the new owners (and their experience in this marketplace), the likely timescales and the ability to overcome prior issues within the businesses.

The analysis was further sensitised to the impact of Covid-19 on the retail market in Germany, ultimately without impacting the judgment made that the full amount should be considered recoverable.

Sale & Leaseback of Bedford

The Group performed a major sale and leaseback in the year in respect to the new warehouse at Bedford.

The warehouse was built by the Group for a cost of £103.7m over the past two years, and sold for £153.8m in March 2020 to a third party who subsequently leased back the warehouse to the Group for our use. The profit recognised by the company was £16.9m with a further £32.1m gain rolled into the asset value (as required by the IFRS 16 leasing standard) and which will therefore be realised on a straight line basis over the 20 year term of the lease as a reduction in depreciation. See note 17 for further details.

A key judgment was made by management to recognise the sale.

Under the provisions of IFRS 15 the key requirement over which judgment is applied for a sale to be recognised is that the control of the asset, as defined by the ability to direct the use of and obtain substantially all of the benefits from the asset, has transferred from the Group to the third party. If this is not the case, the transaction should be recognised as financing on the property.

Following consideration of the provisions within the lease (including the extension clause and lack of reversionary rights), and the rights and ability of the third party to extract value from the asset they acquired, management believe that the appropriate treatment is to recognise the transaction as a sale, and therefore the whole transaction as a sale and leaseback.

Estimation uncertainty

Goodwill impairment

The Group's calculation for goodwill impairment includes several assumptions that are based upon managerial judgment.

As well as those discussed in note 15 around the inputs, they include the basis of the calculation itself i.e. which cash flows should be included, whether allowance should be made for growth of the store estate and, related to this, the level of capital expenditure to be included and on which timescale.

Management believes that the key element in determining whether an impairment is required is the value in use of the cash generating units themselves, which can be summarised as the return made by those cash generating units when considering the costs directly attributable to making those sales.

Inventory Valuation

Under IAS 2 ("Inventories") inventory is required to be recognised at the lower of cost and net realisable value.

Management has exercised significant judgment in relation to the net realisable value of inventory held at Babou during the period of closure enforced by the Covid-19 pandemic.

Following the closure of the Babou stores on 15th March 2020 and the stores re opening on 11th May 2020 the business has lost nine weeks of revenues and following the re-opening there is also uncertainty as to the level of consumer confidence and therefore revenues over the reminder of the Spring Summer season. The business purchases and carries stocks that are specific to the Spring Summer selling season and hence given the lost revenues during the closure period and the potential impact on consumer confidence a judgement has been made with regards to the net realisable value of specific merchandise in this category that has resulted in an additional provision of €7.3m.

Lease discount rates

Where a rate implicit to the lease is not available, the selection of a discount rate for a lease is based upon the marginal cost of borrowing to the business in relation to the funding for a similar asset.

Management calculates appropriate discount rates based upon the marginal cost of borrowing currently available to the business as adjusted for several factors including, the term of the lease, the location and type of asset and how often payments are made.

Management consider that these are the key details in determining the appropriate marginal cost of borrowing for each of these assets.

Lease term

The lease term is a key input into calculating the initial lease liability under IFRS 16.

Management consider it appropriate, unless there is a good reason to act otherwise, to initially set a lease term equal to the longest possible contractual term of that lease, reflecting our intention to operate profitable locations on acquisition without requiring break clauses, but taking extension clauses where available.

Upon termination of a lease, where there does not exist a new agreement for the property but we remain in occupation, a new 'Holding over' lease is created with a term based upon management's expectations of how long the group is reasonably certain to stay in that property based upon recent trading patterns and the pipeline of existing or potential new opportunities.

Management consider that this is appropriate as it more fairly reflects the Group's intention to continue to occupy and trade from these properties.

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 2020

IASB effective for annual periods beginning on or after 1 January 2021

2 Statement of profit and loss without the effects of IFRS 16

As referred to in Note 1, the Group has applied IFRS 16 for the first time in these set of results. In order to aid the comparability of our results with those previously issued, we provide the profit and loss statement without the effects of IFRS 16.

* This statement has been restated for the reclassification of the Germany Jawoll segment as a discontinued operation.

The overall effect on continuing profit before tax of the IFRS 16 adjustments was a loss of £48,634k, £32,052k of which was due to the difference in the gain recognised on the Bedford warehouse sale & leaseback (March 2019: overall £12,397k) see notes 17 and 18 for further details.

3 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, UK B&M, UK Heron and France Babou segments comprising the three separately operated business units within the Group. Previously the Group consolidated the Germany Jawoll segment, until disposal in March 2020, see note 7. The France Babou segment has been active since the acquisition of Babou in October 2018.

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 4).

The average euro rate for translation purposes was €1.1441/£ during the year, with the year end rate being €1.1176/£ (2019: €1.1341/£ and €1.1648/£ respectively).

The prior year statement, below, has been restated to include the effects of adopting IFRS 16, and to exclude the Germany Jawoll segment as it is a discontinued operation. Note that some expenses, such as the revaluation of the call/put option in relation to Germany, were previously classified as corporate but as they were not part of the result for the continuing operations they have also been excluded.

* includes capital expenditure on intangible assets. The reconciling figure between the total and the figure given in the statement of cash flows is the capital expenditure at Jawoll in the year, see note 7.

Revenue is disaggregated geographically as follows;

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

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

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

The foreign exchange difference on our acquisition facility loan has been included for the first time as an adjusting item in these accounts. This is because the loan has been specifically drawn to cover costs associated with a Group project. Our March 2019 adjusted EBITDA has been restated to reflect this.

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

Adjusting items are the effects of derivatives, one off refinancing fees, foreign exchange on the translation of intercompany balances and the effects of revaluing or unwinding balances related to the acquisition of subsidiaries. Significant project costs or gains or losses arising from unusual circumstances or transactions may also be included if incurred, such as this year with the gain on the sale and leaseback of the Bedford warehouse and the direct loss incurred at Babou due to the closure of their stores during the pandemic. 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 (IFRS 16) and Adjusted EBITDA (IFRS 16) reconciles as follows;

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

5 Operating profit

The following items have been charged in arriving at operating profit from continuing operations;

The prior year figures have been restated in respect of the Group's first time application of IFRS 16, for the reclassification of the Germany Jawoll segment as a discontinued operation and for the results of the final purchase price allocation exercise for Babou.

6 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:

The finance expense reconciles to the statement of cash flows as follows;

Total net adjusted finance costs are therefore;

The prior year figures have been restated in respect of the Group's first time application of IFRS 16 and for the reclassification of the Germany Jawoll segment as a discontinued operation.

7 Business disposal

On 27 March 2020 the Group announced the disposal of J.A. Woll-Handels GmbH and their subsidiaries ("Jawoll"), therefore forming a disposal group, for a consideration of €12,501k, comprising €12,500k to repay intercompany balances and £1k for the enterprise value of the business. Jawoll has therefore not been consolidated since this date.

As such their results have been reclassified in the statement of comprehensive income as discontinued operations under the definition given in IFRS 5. The prior year results have therefore also been restated to reflect this new classification.

The consideration receivable breaks down as follows;