B&M European Value Retail S A : Announcement - 2020/21 Preliminary results

3 June 2021

B&M European Value Retail S.A.

FY21 Preliminary Results Announcement

An Exceptional Year

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 27 March 2021 ("FY21").

HIGHLIGHTS

• Group revenues increased by 25.9% to £4,801.4m (FY20: £3,813.4m), 25.7% on a constant currency basis1
• B&M UK fascia2 revenue up 29.9%, including like-for-like3 ("LFL") revenue growth of 23.8% within which H1 was 23.0% and H2 was 24.5%
• Group adjusted EBITDA4 (pre-IFRS16) increased by 83.0% to £626.4m (FY20: £342.3m) with
  an exceptional adjusted EBITDA4 margin of 13.0% (FY20: 9.0%) driven by higher sales densities, an elevated gross margin due to lack of markdown activity and operating leverage in the core B&M UK business
• Group statutory profit before tax, stated post-IFRS16, increased 108.5% to £525.4m (FY20: £252.0m) with statutory diluted earnings per share 42.7p (FY20: 19.5p6)
• 43 gross new B&M UK store openings, weighted towards H2 following initial delays caused by Covid-19 at the start of FY21, offset by 18 closures
• Babou delivered an adjusted EBITDA4 of £11.1m (FY20: £(3.0)m), despite the disruption caused by 10 weeks of lockdown restrictions. FY21 ended with a total French estate of 104 stores, of which 73 now trade as "B&M"
• Cash generated from operations of £944.0m (FY20: £539.5m), reflecting EBITDA growth and tight working capital discipline
• Year-endnet debt5 of £519.8m, with net debt5 to adjusted EBITDA4 leverage ratio (pre-IFRS16) of 0.8x (FY20: 1.0x), comfortably within our stated leverage ceiling of 2.25x
• Rewarded colleagues and invested in the communities we serve through the payment of colleague recognition bonuses in relation to Covid-19 and the creation of over 7,200 new UK jobs
• Recommended final dividend7 increased by 140.7% to 13.0p per share (FY20: 5.4p), bringing
  the full year ordinary dividend to 17.3p per share (FY20: 8.1p), at the top end of our ordinary dividend pay-out policy. This is in addition to £450m of special dividends7 paid in FY21

Simon Arora, Chief Executive, said,

"The last year has been an exceptional one. Our results reflect the speed at which we responded to the challenges presented by Covid-19, and the strength of our execution. The core B&M UK business, as an essential retailer, traded throughout the year and welcomed a number of new shoppers, with colleagues working tirelessly to maintain on-shelf availability and provide a safe shopping environment. We also made strong progress in France, despite many stores being closed for up to ten weeks throughout the year. I express my sincere thanks to colleagues across the Group for all of their efforts and determination.

Looking ahead, there are many uncertainties as society slowly emerges from lockdown and trading patterns are likely to be unpredictable for much of the year. Within our UK business, we will be up

against the strong comparatives from last year but we remain confident that the B&M customer proposition, with its modern network of predominantly Out of Town stores and value-led variety offer, will prove highly relevant to the needs of shoppers. As such, we are well positioned to support the communities in which we trade, retain the loyalty of new customers, and to continue our store roll-out strategy."

Financial Results

	FY21	FY20	Change
Number of Stores
Group	1,091	1,050	+3.9%
B&M UK	681	656	+3.8%
Heron Foods	306	293	+4.4%
Babou	104	101	+3.0%
Total Group revenues	£4,801.4m	£3,813.4m	+25.9%
B&M UK	£4,077.6m	£3,140.1m	+29.9%
Heron Foods	£414.8m	£389.9m	+6.4%
Babou	£309.1m	£283.4m	+9.1%
Group adjusted EBITDA4	£626.4m	£342.3m	+83.0%
B&M UK	£590.7m	£319.8m	+84.7%
Heron Foods	£24.6m	£25.5m	(3.5)%
Babou	£11.1m	£(3.0)m	n/a
Group adjusted EBITDA4 margin %	13.0%	9.0%	+407 bps
Group statutory profit before tax	£525.4m	£252.0m	+108.5%
Group adjusted profit before tax4	£540.1m	£260.0m	+107.7%
Adjusted diluted EPS4	43.4p	20.3p	+113.8%
Statutory diluted EPS	42.7p	19.5p6	+119.0%
Ordinary dividends7	17.3p	8.1p	+113.6%

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, and includes an adjusted loss of £(1.5)m (FY20: £(1.9)m).

1. Like-for-likerevenue relates to the B&M UK estate only and includes 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 adopted as it excludes the two month halo period which new stores experience following opening.
2. 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 notes 3 and 5 of the financial statements. Adjusted figures exclude the impact of IFRS16.
3. Net debt comprises interest bearing loans and borrowings, overdrafts and cash and cash equivalents. Net debt was £519.8m at the year end, reflecting £737.5m as the carrying value of gross debt netted against £217.7m of cash. See notes 18, 21 and 28 of the financial statements for more details.
4. Statutory diluted EPS for FY20 reflects continuing operations only. Including discontinued operations, FY20 statutory diluted EPS was 9.0p.
5. Dividends are stated as gross amounts before deduction of Luxembourg withholding tax, which is currently 15%.
6. 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 IFRS16 lease liabilities.

Analyst & Investor Webcast and Conference Call

An Analyst & Investor only webcast and conference call in relation to these FY21 Preliminary Results will be held on Thursday 3 June 2021 at 09:00 am (UK).

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

UK & International:	[phone]
US:	[phone]
Room number:	596070
Participant PIN:	2969

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

Enquiries:

B&M European Value Retail S.A.

For further information please contact [phone] Ext 5763

Simon Arora, Chief Executive

Alex Russo, Chief Financial Officer

Jonny Armstrong, Head of Investor Relations

[e-mail]

Media

For media please contact [phone] Sam Cartwright, Maitland [e-mail]

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 681 stores in the UK operating under the "B&M" brand, 306 stores under the "Heron Foods" and "B&M Express" brands, and 104 stores in France operating under both the "Babou" and "B&M" brands as at 27 March 2021. 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

Overcoming the challenges of Covid-19 to emerge a stronger business

A year ago, I was writing about how the impacts of the virus on individuals, communities, our industry and the wider economy were unknown but likely to be very significant and potentially long lasting. Such uncertainties remain, despite the positive progress made over recent months in relation to the vaccination rollout and easing of lockdown restrictions in the UK.

While everyone came to terms with the impact of Covid-19 on their daily lives, as a business we too were forced to adapt. Serving customers efficiently and safely during sustained periods of unprecedented demand, managing our supply chain to ensure shelves remained full, and supporting colleagues through the disruption to both work and family life were just some aspects of the new realities which we faced.

I am very proud of the way in which we have overcome these challenges, as the business remained guided by its values of simplicity, trust, fairness and being proud to provide customers with great value for money. Thanking my management team for the strong leadership they have demonstrated throughout the crisis, and all our colleagues for everything they have done on behalf of customers and shareholders, is once again my most important task this year. Awarding front line colleagues 110% of their normal pay in April 2020 during the height of the crisis, and paying them an extra week's wages in January 2021, were both fully deserved.

Special praise should also be given to our French colleagues who, despite the disruption caused by 10 weeks of lockdown restrictions, delivered sales growth of 9.1% for the year; a remarkable achievement and testament to the capability of the management team. I am also delighted by the EBITDA outturn for the year, which was ahead of what my initial expectations following the start of the first lockdown.

The results for FY21 reflect the benefits of remaining open throughout the year in the UK but have nevertheless been hard earned, and reflect the way in which the business has reacted. They speak to the strength and resilience of the B&M model, which at its heart is the fact that we are a value retailer backed by a well invested infrastructure and robust and highly responsive supply chain.

The majority of our products are sourced from overseas and, in particular, Asia. Despite normal lead times of 12-16 weeks on imported everyday products, and up to 9 months on imported Seasonal products, our trading teams were able to meet customer demand and deliver an exceptional like-for- like3 sales growth of 23.8% in the core B&M UK business.

Our combination of value and convenience makes the B&M proposition very relevant to the needs of todays' shoppers. Our 681 B&M UK stores are mostly Out of Town and have demonstrated they are now destinations in their own right for an increasing number of customers, including many new shoppers in FY21. We are relatively insulated from the structural footfall decline in town centres and secondary malls. In addition, Heron Foods serves customers who generally live within walking distance of our convenience stores, meaning they too have played an important role helping communities through the pandemic by providing easy access to essential groceries.

To play our part in the collective response to the pandemic, we took a number of actions. We have delivered a total of £1m in cash donations to Foodbanks nationwide, provided £4.9m in discounts to NHS workers, continued to pay all suppliers and landlords on time and in full, and chose not to take any financial support from the UK government, in particular waiving business rates relief worth c.£80m. We also repaid £3.7m in furlough support which we received in the early weeks of the first lockdown, relating to 49 stores that we temporarily closed due to their locations in town centres or shopping malls.

Having navigated the past 12 months successfully, I believe that the B&M Group has emerged even stronger. The business is well positioned to provide for shoppers needs, especially in the context of potential societal changes caused by the pandemic. In particular, our discounted, value-for-money food and FMCG products appeal to lower income households who may have been disproportionally affected by the economic impacts of the pandemic.

Notwithstanding these core Grocery credentials, our highly affordable Home, DIY and Gardening categories are proving attractive for families who are likely to be spending more time working from home even when restrictions are fully lifted. These three categories account for a significant proportion of our UK sales, with ranges consisting of both leading brands and quality private label products manufactured exclusively for us.

We have clearly demonstrated the relevance of our customer proposition and the ability to win market share. We have also further strengthened our management team to support the rapid growth of the business. All of which means that despite many unknowns persisting, we can look forward to the future

with a sense of optimism.

As a value retailer, the appeal of B&M is strengthened when large sections of the population are worried about their personal finances or are having to live within constrained household budgets. Our ability to provide families with their everyday shopping needs should continue to resonate strongly with consumers whatever the lasting effects of Covid-19 on our business, the retail industry and society in general may be. Should it result in further acceleration of the structural shift towards discount and convenience shopping, then it will only enhance our ability to grow over the longer term.

Financial performance

The core B&M UK business had an exceptional year, with like-for-like3 ("LFL") sales of +23.8% due to a material increase in sales densities. Such performance reflects success across a number of product categories, particularly those related to the pandemic where elevated demand was seen throughout FY21. Whilst the business did benefit from remaining open during periods when "non-essential" retailers were closed, performance remained strong even when no restrictions were in force.

Despite the new store opening programme being disrupted in the first half of the year, the business moved quickly to catch up once the construction industry was able to restart. Performance of the 43 new stores in FY21 was strong, demonstrating once again the ability to deliver profitable organic growth.

B&M UK gross margin saw a significant increase this year, driven by a combination of a mix shift towards higher margin General Merchandise sales and in particular an unprecedented level of sell- through on Seasonal lines due to the elevated demand. Diligent cost control enabled the business to deliver operating leverage and profit margin expansion, all of which resulted in significant profit growth and cash generation.

Heron Foods continued to perform well throughout the year and also benefitted from heightened demand, particularly in neighbourhood locations. Its emphasis on local convenience retailing and value for money on frozen, chilled and ambient food positioned it well to serve shoppers' needs throughout the pandemic.

In France, conditions have been more challenging. The French business was either closed or restricted to selling essential items of ambient food and FMCG (representing only c.15% of sales) for a total of 10 weeks during FY21, disrupting both the Spring and Winter peak trading periods.

Outside of the lockdown periods, when the business was permitted to remain open and sell the full range of products, performance was very pleasing and there was a positive customer response to products sourced from the B&M supplier base in Asia. Given the challenges the management team in France had to overcome, they made strong progress and delivered a profit result for the year ahead of initial expectations.

Current trading and outlook

The B&M UK business experienced very strong sales in the last month of FY21, with the final week being the strongest in the Group's history and a large contributor to the FY21 adjusted EBITDA4 outperformance of £626.4m versus the guidance issued on 5 March 2021.

Overall, year-to-date B&M UK LFL sales over the first 9 weeks of FY22 have been -1% versus FY21. Sales in this period benefitted from a pull-forward of Gardening demand into April usually occurring more evenly throughout the Spring/Summer period.

Trading continues to be volatile at a weekly and product category level, in particular since the recent easing of lockdown restrictions. This is likely to remain the case for the whole of FY22, as the business annualises against the very strong comparatives throughout last year. As such, the B&M UK business expects to see a decline in LFL revenues in FY22 compared to FY21, but is focused on delivering a healthy two year LFL versus FY20.

In France, a further national lockdown began on 3 April 2021 for a total of about 6 weeks. This meant that many of our stores were closed, with those remaining open restricted to selling essential items only. Since restrictions were lifted on 19 May 2021 there has been a pleasing recovery, with sales performance again being driven by the success of product ranges sourced from the B&M supplier base in Asia. Additionally, the business took advantage of the lockdown period to accelerate its conversion programme of the Babou fascia, with 73 of the 104 stores in France now trading as B&M.

Over the past year, the Group has demonstrated it has a resilient business model with a compelling and relevant customer proposition. As a consequence, it has emerged from the coronavirus crisis even stronger than before. Its strong value credentials in Grocery remain, whilst categories such as Home,