B&M European Value Retail S A : Annual Financial Report (2024)

B&M European Value Retail S.A.

B&M European Value Retail S.A. (the 'Company'), the UK's leading variety goods value retailer, announces that it has posted to shareholders today the Company's Annual Report and Financial Statements for the year ended March 2020 and the Notice of Annual General Meeting of the Company. The Annual General Meeting will be held at 9, Allée Scheffer, L-2520 Luxembourg, Luxembourg, Grand-Duchy of Luxembourg on Friday 18 September 2020 at 12:00 noon (CET).

In accordance with Listing Rule 9.6.1R, copies of the following documents have been submitted to the National Storage Mechanism and will be available shortly for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanismand copies of them are also available on the Company's website in the investors section on the following page www.bandmretail.com/investors/agm.aspx

• Form of Direction.

In accordance with Disclosure and Transparency Rule 6.3.5R (DTR 6.3.5R) and the requirements which it imposes on how to make public annual financial reports, the following information in Appendix 1 to this announcement is extracted from the Annual Report & Accounts 2020 and should be read in conjunction with the Company's preliminary results announcement for the year ended 28 March 2020 which was issued on 11 June 2020 and contained the Company's preliminary consolidated financial statements, information on important events that have occurred during the financial year and their impact on the financial statements,details of related party transactions and the statement of directors' responsibilities. That information (a copy of which is available on the Company's website atwww.bandmretail.com) together with the information set out in Appendix 1 below, constitutes the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This announcement is not a substitute for reading the Annual Report & Accounts 2020 in its entirety. Page references in the text below refer to page numbers in the Annual Report & Accounts 2020.

B&M European Value Retail S.A.

The principal risks and uncertainties relating to the Company are as set out in pages 24 to 31 inclusive of the 'Principal risks and uncertainties' section of the Annual Report & Accounts 2020.

The following is extracted in full and unedited text from the Annual Report & Accounts 2020 and is repeated here solely for the purpose of complying with DTR 6.3.5R.

The following principal risks and uncertainties could have an impact on our business model and strategy. Mitigating steps aimed at managing and reducing those impacts are being employed by the Group as summarised below.

Risks and mitigations are reviewed as part of the oversight of the system of internal controls by the Audit & Risk Committee and reported on to the Board which takes overall responsibility for risk management.

The Internal Audit function of the Group considers current business risks and reports on the effectiveness of internal control procedures to the Audit & Risk Committee as part of its annual internal audit plan.

The Group's framework for managing its consideration of risk appetite forms part of the annual risk management cycle and is used to drive and inform actions undertaken in response to the principal risks identified by the Board. Within this framework, the Group's appetite for risk is defined with reference to the expectations of the Board for both commercial opportunity and internal control and it is used to inform the Group's annual internal audit plan.

Responsibility for identifying and evaluating new and emerging risks and mitigating actions lies with management. The Audit & Risk Committee, with the support of the Internal Audit department and the Group's General Counsel, is responsible for monitoring risks and mitigating actions and for reporting matters of concern to the Board.

The Board oversees the risk management of the Group. It evaluates the recommendations made by the Audit & Risk Committee and determines the framework of the type of controls and mitigating steps required to be implemented, in the context of how those risks could impact the overall objectives of the business.

Responsibility for the implementation of processes and controls in relation to the management of risk is delegated by the Board to the executive and operational senior management of the UK and French businesses.

The Internal Audit department reports to the Audit & Risk Committee at each meeting during the year on the progress of implementation by management of actions to mitigate risks.

Covid-19 was added as a new principal risk by the Board in 2019/20 in addition to those set out below. None of the principal risks included in the 2018/19 financial year have been removed.

An assessment is made by the Board of the likelihood or probability of a risk occurring and the impact of the risk after taking account of mitigating factors and controls. The assessment of that is set out in the heat map opposite.

The heat map indicates the Board's opinion of the likely degree of impact of each risk after taking into account the risk mitigations referred to in the principal risks table on pages 25 to 31.

The table below describes (i) the main risk exposures identified by the Board in relation to our Group businesses, (ii) the mitigating factors which relate to how we manage each of the risk exposures, and (iii) the linkage between our business strategy and the relevant risk exposures. We also summarise (where relevant) key actions arising in the year in relation to how we have addressed certain aspects of those risks. We have also indicated where there were any changes in the profile of any of the risks, which reflects the Board's view of the current trend in relation those risks.

The risks set out in the table are not an exhaustive list. They represent the main risks to the Group in relation to the period under review and also currently, in the opinion of the Board




& potential impact



Risk mitigations




(New risk)

Prolonged social restrictions due to the coronavirus or any reoccurrence of it in the UK, France or China could impact consumer demand, supply chains, the ability of colleagues to work and our stores continuing to operate at expected levels of profitability. It could also affect the timing of new store openings in relation to completion of works by contractors.





The categories of goods which the B&M UK and Heron Foods businesses sell are essential goods within the UKGovernment guidelines except for a limited range of items (such as toys).

Implementation of social distancing steps in accordance with UKGovernment guidance and other measures for colleagues and customers at stores and in our supply chain.

Maintaining sufficient liquidity for our on-going operations.

Maintaining (i) flexibility in our distribution function and with suppliers to cope with additional demand in relation to food and FMCG items, and (ii) controls of orders of lines where demand has slowed to protect against over-stocking in certain categories.

Key Actions in 2019/20:

From the early stages of the coronavirus restrictions taking effect in China, contingency plans were put in place by the B&M UK business to protect our supply chain (as referred to above under the key actions in relation to the Supply chain risk) without resulting in any material disruption to supplies, costs or prices, having mainly been offset by stock cover held in our UK distribution centres of c.12 weeks cover for general merchandise goods.

From the early stages of the coronavirus restrictions taking effect in the UK, the B&M UKbusiness increased the volume of orders of food and FMCG goods to keep pace with the initial spike in demand for those items in particular. We re-deployed colleagues in our warehouse estate to prioritise the picking of those goods to replenish stores as quickly as possible to meet customer requirements.

Measures were taken to temporarily close 49 B&M UK smaller format town centre or precinct location stores and furlough colleagues, under the Government's Coronavirus Job Retention Scheme to protect jobs. Those stores represented c.3% and c.2% of revenue and store contribution EBITDA respectively in the financial year under review. We have since now re-opened these stores as the overall impacts on trading have begun to moderate.

As our French business was required to close all of its 101 stores on 15 March 2020, we furloughed staff under the scheme in France in relation to stores, the warehouse and business support operations. The business has been operational again since 11 May 2020, and all the stores have now re-opened.

We have introduced flexible working arrangements for business support colleagues in relation to working hours and homeworking arrangements in our UK businesses.



Supply chain

Imported goods from China represent a significant proportion of the Group's general merchandise products. Lead time delays in the supply chain could result in lower sales and potential loss of margin through higher markdowns. Disruption to the supply chain arising from civil unrest, natural disasters, diseases and pandemics, ethical trading issues or quality standards failures could impact our trading performance and brand reputation.


We have an experienced sourcing team which is responsible for maintaining an efficient and effective supply chain.

A range of alternative supply sources are maintained across the product categories and we are not over-reliant on any one single supplier.

The Group has anti-bribery and corruption and anti-modern slavery policies in place in relation to its supply chain.

A combination of individual buyers and sourcing agent employees conduct supplier factory visits.

Key Actions in 2019/20:

We have taken steps in relation to Brexit risks, impact assessments and actions (as referred to above in relation to that particular risk) to address impacts in particular on procurement and port clearance of goods.

During the period that the coronavirus had the main impact on factories and ports in China, contingency plans were put in place to source supplies of products from other countries and regions had that become necessary. This might impact on the price of products and logistics costs to an extent, but to offset impacts on prices and logistics costs we also sourced some UK branded general merchandise stock. Our stock cover of c.12 weeks on general merchandise imported goods resulted overall in very limited impacts arising and limited recourse only to our contingency plans.



The Group operates in highly competitive retail markets in the UK and France which could materially impact the Group's profitability, share price and limit growth opportunities.




Continuous monitoring of competitor pricing and product offering.

Development of new product ranges within the product categories to identify new market opportunities and target new customers.

Key Actions in 2019/20:

We have continued to maintain our strict SKU count discipline within our ranges, enabling us to react quickly to ever changing consumer tastes, trends and buying habits.

We commissioned a customer insight survey to measure our strengths and weaknesses against our competitors, to provide management with indicators of where we can improve our competitive edge relative to our peer group and other discount retailers. It is our intention to repeat that exercise or conduct similar testing each year so we can track progress against each of the indicators and outputs from those surveys.


Economic environment

A reduction in consumer confidence could impact upon customer spending and subsequently revenue and profitability, as a result of the prevailing macroeconomic conditions in the markets in which we operate.





We offer a range of products and price points for consumers which allows them to trade up and down.

We maintain a low cost business model that allows us to maintain our selling prices as low as possible.

We have an effective forecasting process that enables actions to be undertaken reflecting economic conditions.

Key Actions in 2019/20:

In light of the uncertainty in relation to consumer confidence following Brexit, we have continued to ensure that we remain focused on only stocking the top best-selling lines across our ranges, and we have redoubled our efforts to ensure that our stores have all of our top 100 best-selling products ready on the shelves on a daily basis.


Regulation and


The Group is subject to a range of regulatory and legislative requirements, including those relating the importation ofgoods, anti-bribery and corruption, anti-modern slavery, anti-tax avoidance & evasion, health & safety, employment law, General Data Protection Regulation ('GDPR'), control of pollution and contamination to the environment, the Listing Rules, Transparency laws and regulations and the Groceries Supply Code of Practice (the 'Groceries Code'). The impact of failure to comply with laws and regulations could lead to financial penalties and significant reputational damage.



We have a number of policies and codes, including a code of conduct which incorporates an anti-bribery & corruption policy, which outlines the mandatory requirements we apply to our business. Our codes and policies are communicated to staff along with our employee handbook which is made available to everyone joining the business.

Management are responsible for liaising with the Group's General Counsel (and external advisors where required) to ensure that we identify and manage compliance with all applicable new legislation and regulations which apply to us in Luxembourg, the UK and France. Changes in legal and regulatory matters (including those arising from Brexit) are monitored closely on a regular basis by the Group's General Counsel, who provides reports on new regulatory developments directly to the Board as well as its Committees and Executive Management. The Internal Audit function of the Group includes assurance testing and auditing of the Group's implementation of new areas of regulatory compliance.

We have a whistleblowing procedure and policy which allows colleagues to confidentially report any concerns or inappropriate behaviour within our business.

In relation to anti-modern slavery and other standards relating to human rights within our supply chain, the Buying teams in our business are charged with ensuring that every supplier is required to adhere to our Workplace Policy standards.

The Company has a Group-wide GDPR policy. Our privacy policies, processes in relation to data subject rights requests, privacy notices given to all our colleagues, and privacy notices for users of our websites and subscribers to our on-line mailing lists are reviewed to ensure they are GDPR compliant.

Our Groceries Code compliance programme includes guidance and training for colleagues, monitoring of compliance, reporting of potential non- compliance issues, dispute resolution procedures and a Code Compliance Officer who oversees compliance and the resolution of code related issues with suppliers in the event of escalation being necessary or required by a supplier. Oversight of our compliance with the Groceries Code is carried out by management and reviewed by the Audit & Risk Committee as a standing agenda item at each of the meetings of that committee throughout each year.

Key Actions in 2019/20:

We have refreshed our GDPR policies and training across our store network to reinforce the importance of the essentials principles to be followed in relation to GDPR (including CCTV matters) in relation to our shop floor colleagues.

Our Groceries Code Compliance Officer, Group General Counsel, Internal Audit function and Chairman of our Audit & risk Committee have actively engaged during the year with the Groceries Code Adjudicator ('GCA') at individual meetings and also fairs and events held by the GCA with other retailers and suppliers. This has helped to develop a close and constructive working relationship and dialogue with the GCA as the oversight body in relation to compliance with the Groceries Code.

In relation to the environment, emissions and sustainability our UK business has continued to invest in initiatives to reduce its carbon footprint with (i) continuing to invest in our c.215 Heavy Goods Vehicles which are all Euro VI emissions standard engine trucks, being the highest standard of fuel efficient engines for managing levels of emissions, and (ii) the addition of our Bedford warehouse for deliveries in the South of the UK, which will lead to significant reductions in miles travelled for deliveries to our stores in the South of England.


EuropeanUnion exit

The UK's planned exit from the European Union has several potential impacts in the areas of economic and regulatory environment, withholding tax paid on internal dividends, import of goods due to currency exchange volatility and increased import duties, availability & cost of labour, and potentially other unknown impacts. Labour restrictions in the UK could affect our ability to recruit Distribution Centres Operatives and HGV Drivers at budgeted rates.


We have a Brexit planning strategy which will continue to be monitored during the official transitional period. Our planning included the assessment of Brexit risks, impact assessments and mitigations in relation to trade & tariffs, port disruption, labour shortages and hedging arrangements.

There are a limited amount of products purchased by our UKbusinesses directly from the EU. Those products could also be sourced elsewhere, de-listed or in a worst case scenario the cost price may increase for certain limited items as a result of tariffs being imposed.

We have continued to keep in close contact with our FMCG suppliers, and our household name branded FMCG goods suppliers have confirmed they have Brexit plans in place to maintain continuity of supply.

The B&M UKbusiness is an Authorised Economic Operator which affords it preferential treatment on the importation of goods, and facilitates efficient clearance at the ports. Our B&M UKbusiness imports the majority of its general merchandise stock into the Port of Liverpool, as opposed to Southern ports which are considered to be more at a greater risk of being more heavily impacted.

Short-term exchange rate volatility is mitigated by our forward currency position. Any continued volatility beyond that would affect the economic inflationary environment in the UK as a whole.

Key Actions in 2019/20:

The Audit & Risk Committee of the Board have continued to monitor Brexit impacts and mitigations with management. An Internal Audit assurance review was undertaken of the Brexit planning key assumptions and mitigations of management, which was reviewed by the Audit & Risk Committee and reported on to the Board. The results of that review indicated that management have a comprehensive set of mitigations in place to ensure the least disruption is incurred by the UKbusiness from Brexit in relation to its supply chain, product availability import clearances and labour.

In relation to the above risk mitigations, testing and assessments carried out in the year we do not consider the impacts of this risk to have materially changed in the period under review. We have not been significantly affected in relation to the availability of labour operatives for our distribution centres, or experienced any significant issues in relation to our supply chains.


International expansion

Developing our businesses in our new market territories is important to the Group's strategic plans. Expanding into new markets creates additional challenges and risks which could impact the overall performance of the Group, its growth and profitability.


We have significant international retail experience on our main Board.

The Group will continue to support the development of the experienced senior leadership teams in France in key operational areas.

We assess markets in which we may wish to operate or expand into, to ensure they are appropriate for value retailing and that product ranges are developed and selected by local buying teams along with access to leverage from the Group's supply chain.

Continuing to invest in both the infrastructure and technology of our French business.

Key Actions in 2019/20:

A strategic review was undertaken in relation to our loss making Germany subsidiary, Jawoll. That was initiated in response to lower than expected sales and gross margin performance in the year, in addition to significant increases in warehouse and transport costs. As a result of the review the Group has sold the German business. While that has had some immediate financial impacts with write-off's of loan funding support which the Group had provided to Jawoll, as the business had proved to be unsuccessful under our ownership, it was in the best interests of the Group and all our stakeholders (including the colleagues working in that business) to have achieved a sale of the business as a going concern.

A Distribution Director has been recruited to our French business, Babou. This will enable us to manage the succession from the pre-acquisition legacy management of the warehousing function, which had previously been run on an outsourced basis, to a directly managed warehouse function in Babou.



The loss of one of our warehousing facilities or failure to maintain and invest in our warehousing and transport infrastructure as the business continues to grow its store portfolio, could materially impact short/medium term trading and the profitability of the business.



Forward plans have been implemented for additional warehousing capacity to support our new store opening programme. The Group in the UK has six separate warehousing locations (having added Bedford this year and closed an older warehouse in Blackpool). The additional warehouse in Bedford, which mainly serves as a hub to support our expansion in the South of England, is now in the initial stages of operation.

The Group maintains adequate business interruption and increased cost of working insurance in the event of a loss of warehouse facilities.

Key Actions in 2019/20:

Three of the major benefits of the BedfordDistribution Centre are:

(i) increasing capacity in the South of England to service store expansion; (ii) enabling us to close a smaller older legacy warehouse in Blackpool with the main modern warehouses in Liverpool taking up that capacity; and (iii) over time leading to significant net reductions in miles travelled by our HGV fleet servicing deliveries to our stores in the South of the UK.

Our state of the art Warehouse Management System is now live and rolled-out within all our main UKDistribution Centres.


IT systems, cyber securityand businesscontinuityThe Group is reliant upon key IT systems, and disruption to those would adversely affect business operations including those at our warehouses and stores. The potential impact of a failure to protect and maintain our data and systems could lead to significant business disruption, potential prosecution and also reputational damage. This also applies to any failure to protect the Group's IT systems and data from viruses, cyber invasive threats, corruption or sabotage.


All critical business systems have third party maintenance contracts in place and those systems are industry standard retail business systems.

IT investments and budgets are reviewed and approved at Board level.

We have a disaster recovery strategy and plan in place for all of our key systems.

We have an on-going Payment Card Industry compliance strategy.

IT security is monitored at Board level and includes penetration testing and up-to-date security software.

Significant decisions for the business are made by the Group or operational boards with segregation of duties enforced on key business processes, such as the payables process, and a robust IT control environment is in place.

Key Actions in 2019/20:

We have commenced the roll-out of a card payment encryption system with Worldpay which is expected to be fully implemented across all the B&M UK fascia stores by the end of June 2020. This will enhance our IT cyber security and PCI controls in relation to processing card transactions.

We monitor cyber security and have continued to update our software with leading providers which screen, detect and block viruses, malware and phishing. This has included the addition of Mimecast software to guard against suspicious emails and email viruses being imported into our systems.


Credit risk andliquidity

The Group's level of indebtedness and interest rate and currency rate volatility could impact the business and its growth plans.


A treasury policy is in place to govern foreign exchange, interest rate exposure and surplus cash.

Regular weekly cash flow forecasts are produced and monitored.

Forward looking cash flow forecasts and covenant testing forecasts are prepared to ensure sufficient liquidity and covenant headroom exists.

Key Actions in 2019/20:

Hedging of foreign currency rate exposures with instruments in place to cover forward exchange movements have been maintained throughout the year in line with our treasury policy.



Escalation of costs within the supply chain arising from factors such as increases in raw material and wage costs. Additionally, increased fuel and energy costs could impact upon distribution, logistics and store overheads.


Freight rates, energy and currency are forward purchased to mitigate against volatility and to allow the business to plan and maintain margins.

Wage increases are offset where possible by productivity improvements.

Forecasts and projections produced by the business include the expected impact of the national living wage and therefore the Board's strategic planning takes account of that.

Key Actions in 2019/20:

We have freight rate agreements in place with freight forwarders for 2020 with set prices for several months ahead.

Energy purchases have also been agreed through an energy broker until September 2022.

Productivity savings, including reducing the time spent by colleagues on administrative tasks in stores, have been achieved by the investment and roll-out of a digital technology based Workforce Management System.


Key management reliance

The Group is reliant on the high quality and ethos of the executive team as well as strong management and operational teams. There is a risk that a lack of succession planning for senior colleagues could impact on the performance overall of the business.


Key senior and operational management are appropriately incentivised through bonus and share option arrangements to retain talent.

The composition of the executive team is kept under constant review to ensure that it has the necessary resources and skills to deliver the Group's plans.

The Nomination Committee develops succession plans for the Board of Directors and key senior operational management resourcing positions. It also reviews the wider senior management resourcing needs of the Group.

Key Actions in 2019/20:

The Group has continued to strengthen the senior management teams of its businesses. This has included (i) the appointment of an International Finance Manager reporting directly to the CFO, to support our French business, (ii) the appointment of a HR Director reporting directly to the CEO, with strategic human resources responsibility in relation to each of our Group businesses.


Store expansion

The ability to identify suitably profitable new store locations is key to delivering our growth plans. Failure to identify suitable locations in areas targeted for new stores could impact upon store expansion plans and reduce the rate of growth in the business.


Our CEO actively monitors the availability of retail space with the support of internal and external property acquisition consultants.

The flexibility of the trading format allows us to take advantage of a range of store sizes and locations.

Each new store opening is approved by the CEO ensuring that property risks are minimised and that lease lengths are appropriate.

Where new locations may impact on existing locations, the cannibalisation effects are estimated and then monitored and measured to ensure that there is an overall benefit to the Group.

Key Actions in 2019/20:

The B&M UKbusiness has taken steps, where new store opening opportunities exist in current store locations, to replace older generation stores with better quality sites and premises. That mitigates the potential effects of cannibalisation and also improves the quality and performance of the estate in addition to new store openings in brand new locations for the business.


Stock management

Ineffective controls over the management of stock could impact on the achievement of our gross margin objectives. Lack of product availability or over-stocking could impact on working capital and cash flows.


We have a highly disciplined limited SKU count throughout our product ranges and effective regular markdowns on slow moving product lines.

Our non-seasonal initial stock orders do not exceed c. 14 weeks of forecast sales and action is undertaken after c. 4 weeks of trading to either repeat the order, refresh the product design or discontinue the product line.

Consistent levels of stock cover by product category are maintained through regular reviews of open-to-buy process, supported by the disciplined SKU count.

Key Actions in 2019/20:

We have implemented further controls on open-to-buy processes in our French business with weekly stock cover procurement reporting and controls.

As a seasoned expert in business analysis and financial reporting, I can confidently dissect the information provided in the article related to B&M European Value Retail S.A. Here's a breakdown of the key concepts and components mentioned:

  1. B&M European Value Retail S.A.: B&M European Value Retail S.A. is identified as the UK's leading variety goods value retailer. The article revolves around the disclosure of the company's Annual Report and Financial Statements for the year ended March 2020.

  2. Annual General Meeting (AGM): The AGM is scheduled to be held at 9, Allée Scheffer, L-2520 Luxembourg, Luxembourg, Grand-Duchy of Luxembourg, on Friday 18 September 2020 at 12:00 noon (CET). The purpose of the AGM is to discuss and address various matters, including the approval of financial statements.

  3. Listing Rule 9.6.1R and National Storage Mechanism: The company has complied with Listing Rule 9.6.1R by submitting relevant documents to the National Storage Mechanism. These documents will be available for inspection on the provided website.

  4. Principal Risks and Uncertainties: The article outlines the principal risks and uncertainties faced by the company, as detailed in pages 24 to 31 of the Annual Report & Accounts 2020. Mitigating steps and strategies to manage these risks are discussed.

  5. Covid-19 Impact: Covid-19 is highlighted as a new principal risk added in the 2019/20 financial year. The potential impacts on consumer demand, supply chains, colleague availability, store operations, and new store openings are discussed. Mitigating actions include adherence to government guidelines, social distancing measures, and maintaining sufficient liquidity.

  6. Risk Management Framework: The company's risk management framework involves oversight by the Audit & Risk Committee, internal audit functions, and the Board. It includes evaluating new and emerging risks, setting risk appetite, and implementing processes and controls.

  7. Risk Heat Map: A risk heat map is presented, indicating the Board's opinion on the likely degree of impact for each risk, considering mitigations. The assessment of likelihood and impact is detailed in the heat map.

  8. Specific Risks and Mitigations: The article discusses specific risks such as supply chain disruptions, competition, economic environment, regulation and compliance, Brexit, international expansion, warehouse infrastructure, IT systems, credit risk, commodity prices/cost inflation, key management reliance, store expansion, and stock management. For each risk, corresponding mitigations and key actions taken in the 2019/20 period are outlined.

As an expert, I understand the depth of these concepts, the strategic considerations involved, and the importance of risk management in the context of B&M European Value Retail S.A.

B&M European Value Retail S A :  Annual Financial Report (2024)
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