B&M European Value Retail S A : Annual financial and audit reports

31 May 2023

B&M European Value Retail S.A.

FY23 Preliminary Results Announcement

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

B&M European Value Retail S.A. ("the Group"), the UK's leading variety goods value retailer, today announces its Preliminary Results for the 52 weeks to 25 March 2023 ("FY23").

HIGHLIGHTS

• Group revenues of £4,983m were 30.7% ahead of pre-pandemic FY20 levels on a constant currency1 basis
• Group adjusted EBITDA4 (pre-IFRS 16) of £573m normalising from COVID boosted FY22 of £619m; in line with guidance and significantly ahead of pre-pandemic FY20 levels of £342m
• Group adjusted EBITDA4 (pre-IFRS 16) margin of 11.5% has stepped up compared to the 9.0% achieved in FY20. Group adjusted EBITDA4 (post-IFRS 16) was £796m (FY22: £828m)
• Group cash generated from operations was £866m (FY22: £598m), year-on-year ("YoY") growth of 44.8% reflecting planned stock reductions of £99m YoY and inventory discipline
• Group statutory profit before tax of £436m (FY22: £525m) with statutory diluted earnings per
  share 34.7p (FY22: 42.1p)
• B&M UK LFL customer transaction numbers increased every month since June - demonstrating underlying growth and widening of appeal
• B&M UK fascia2 revenue increased by 4.0% YoY, driven by one-yearlike-for-like3 ("LFL") revenue increase of 0.7% and the increase in space through new store openings. Q4 LFL run rate of 3.2%, exiting the year with momentum
• B&M UK fascia adjusted EBITDA4 % (pre-IFRS 16) normalised to 12.4% (FY22: 14.4%), with a full year trading trading gross margin8 % reduction of 148 bps. Trading gross margins significantly improved into the second half versus the first, with a 92 bps reduction versus last year
• 707 B&M stores in the UK with 21 gross new store openings offset by 15 closures and relocations. Total average selling area increased by 3.6% with relocated stores providing typically 3x greater sales square footage helping drive total sales growth from relocations
• Sales in France increased by 22.1% YoY with adjusted EBITDA4 (pre-IFRS 16) of £41m (FY22: £32m), representing a margin of 9.6% (FY22: 9.2%) further evidences the continued strategic and operational progress as product ranging is evolved
• Sales in Heron Foods increased by 18.1% YoY with adjusted EBITDA4 (pre-IFRS 16) of £30m (FY22: £23m), representing a margin of 6.1% (FY22: 5.5%) which underlines the attraction of our convenience discount offering to customers
• In the first 9 weeks of FY24, B&M UK LFL sales have run at 8.3%, France and Heron continue their trading momentum and we expect full year Group adjusted EBITDA4 (pre-IFRS 16) to be higher than FY23

• Year-endnet debt5 of £724m, with net debt5 to adjusted EBITDA4 leverage ratio (pre-IFRS 16) of 1.3x (FY22: 1.3x)
• Recommended final dividend6 of 9.6p per share (FY22: 11.5p), bringing the full year ordinary
  dividend to 14.6p per share (FY22: 16.5p) in addition to the 20.0p special dividend6 paid in
  January 2023 (FY22: 25.0p)

Alejandro Russo, Chief Executive, said,

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

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

Financial Results

	FY23	FY22	Change
Total Group revenues	£4,983m	£4,673m	6.6%
Group adjusted EBITDA4 (pre-IFRS 16)	£573m	£619m	(7.4)%
Group adjusted EBITDA4 (pre-IFRS 16)	11.5%	13.2%	(174) bps
margin %
Group cash generated from operations	£866m	£598m	44.8%
Group adjusted profit before tax4	£459m	£524m	(12.6)%
Group statutory profit before tax	£436m	£525m	(17.0)%
Adjusted diluted EPS4	36.5p	41.6p	(12.3)%
Statutory diluted EPS	34.7p	42.1p	(17.6)%
Ordinary dividends6	14.6p	16.5p	(11.5)%

1. Constant currency comparison involves restating the prior year Euro revenues using the same exchange rate as that used to translate the current year Euro revenues.
2. References in this announcement to the B&M UK business includes the B&M fascia stores in the UK except for the 'B&M Express' fascia stores. References in this announcement to the Heron Foods business includes both the Heron Foods fascia and B&M Express fascia convenience stores in the UK. When reporting adjusted EBITDA, B&M UK also includes the corporate segment as referred to in Note 2 of the financial statements, an adjusted loss of £1m (FY22: profit of £1m).
3. One-yearlike-for-like revenues relate to the B&M UK estate only (excluding wholesale revenues) and include each store's revenue for that part of the current period that falls at least 14 months after it opened compared with its revenue for the corresponding part of FY22. This 14-month approach has been adopted as it excludes the two-month halo period which new stores experience following opening. Three-yearlike-for-like revenues also relate to the B&M UK estate only, and includes each store's revenue for that part of the current period that falls at least 38 months after it opened compared with its revenue for the corresponding part of FY20.
4. The Directors believe that our adjusted figures - as described in Note 1 of the financial statements - provide users of the accounts with measures of performance which are appropriate to the retail industry and presented by peers and competitors. Adjusted values are considered to be appropriate to exclude unusual, non-trading and/or non-recurring impacts on performance which therefore provides the user of the accounts with an additional metric to compare periods of account. See Note 3 of the financial statements for further details. Adjusted figures exclude the impact of IFRS 16.
5. Net debt comprises interest bearing loans and borrowings, and cash and cash equivalents. Net debt was £724m at the year end, reflecting £961m as the value of gross debt netted against £237m of cash. See Notes 17, 20 and 27 of the financial statements for more details.
6. Dividends are stated as gross amounts before deduction of Luxembourg withholding tax, which is currently 15%.
7. Net capital expenditure includes the purchase of property, plant and equipment, intangible assets and proceeds from the sale of any of those items. These exclude IFRS 16 lease liabilities.
8. Trading gross margin is considered to be a meaningful measure of profitability as it refers to the measure of gross margin used by management to commercially run the business. It differs to the statutory definition for B&M, which declined 177 bps from 37.4% to 35.7%, due to technical accounting adjustments in relation to the allocation of gains and losses from derivative accounting, storage costs and commercial income, with the derivative adjustments the main factor.
9. UK market share is calculated based on the reported revenues of B&M UK and Heron Foods, compared to NIQ Scantrack, Total Store, Total Coverage inc. Discounters, 52 weeks ending 31.12.22.
10. NIQ Homescan, year to March 2023.

Results Presentation

An in-person presentation for analysts in relation to these FY23 Preliminary Results will be held today at 09:30 am (UK) at Bank of America Merrill Lynch, 2 King Edward St, London EC1A 1HQ. Attendance is by invitation only.

A simultaneous live audio webcast and presentation will be available via the B&M corporate website at www.bandmretail.com/investors/presentations/year/2023

Enquiries:

B&M European Value Retail S.A.

For further information please contact [phone] Ext 6363

Alejandro Russo, Chief Executive

Mike Schmidt, Chief Financial Officer

Dave McCarthy, Head of Investor Relations

[e-mail]

Media

For media please contact

Sam Cartwright, H-advisors,[e-mail] [phone] Jonathan Cook, H-advisors,[e-mail] [phone]

This announcement contains statements which are or may be deemed to be 'forward-looking statements'. Forward-looking statements involve risks and uncertainties because they relate to events and depend on events or circumstances that may or may not occur in the future. All forward-looking statements in this announcement reflect the Company's present view with respect to future events as at the date of this announcement. Forward- looking statements are not guarantees of future performance and actual results in future periods may and often do differ materially from those expressed in forward-looking statements. Except where required by law or the Listing Rules of the UK Listing Authority, the Company undertakes

no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect any events or circumstances arising after the date of this announcement.

B&M European Value Retail S.A. is a variety retailer with 707 stores in the UK operating under the "B&M" brand, 319 stores under the "Heron Foods" and "B&M Express" brands, and 114 stores in France also operating under the "B&M" brand as at 25 March 2023. It was admitted to the FTSE 100 index on 21 September 2020.

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

Chief Executive's Review

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

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

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

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

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

Competitive Position

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

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

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