B&M European Value Retail H2 2026 Earnings Report

B&M European Value Retail EPS Results

• Actual EPS: GBX 16.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

B&M European Value Retail Revenue Results

• Actual Revenue: $5.78 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

B&M European Value Retail Announcement Details

• Quarter: H2 2026
• Date: 6/3/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, June 3, 2026
• Conference Call Time: 4:30AM ET

B&M European Value Retail (LON:BME) operates general merchandise and grocery stores. The company operates a chain of stores under the B&M, Heron Foods, and B&M Express in the United Kingdom; and stores under the B&M brand in France. It also provides property management services. The company was founded in 1978 and is based in Munsbach, Luxembourg.

B&M European Value Retail H2 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: B&M reported FY 2026 adjusted EBITDA of GBP 459 million, in line with guidance, but profits were down year over year due to trading margin pressure and cost inflation.
• Positive Sentiment: Cash generation remained strong, with post-tax free cash flow of GBP 321 million and leverage returning to 1.4x, back within the company’s target range.
• Positive Sentiment: The company said its “Back to B&M Basics” program is progressing well, with early signs of improvement in pricing, availability, range rationalization and inventory discipline.
• Positive Sentiment: B&M France remained a standout, delivering 13.4% sales growth, positive like-for-likes in every quarter, and an 11.8% increase in profit to GBP 53 million.
• Neutral Sentiment: Management outlined a more balanced FY 2027 capital approach, targeting 25 to 35 new B&M UK openings while also investing selectively in existing stores, with share buybacks only a potential January 2027 decision.

Presentation

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Well, good morning, everyone, and welcome to this presentation of B&M European Value Retail's 2026 financial year preliminary results. My name is Dave McCarthy, Head of Investor Relations, and joining us today to present the results are Tjeerd Jegen, our Chief Executive Officer, and Peter Waterhouse, our Interim Chief Financial Officer. We'll start as usual with some prepared remarks, and then we'll devote some time at the end of the meeting to your questions. We'll take those both from you assembled in the room and also anyone joining via the webcast can put a question into the chat function, and we relay them into the room by that method. With that, let me hand over to Tjeerd.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Thank you. Thank you very much, Andrew. Let's see if this works. It works. Welcome to everyone to this presentation in the room and online. Before I'm going to hand over to Pete, for the financial review of FY 2026, I would like to share the key highlights of the year set out on slide number three behind me. First of all, I'm pleased to announce profit came in at our midpoints of current guidance, adjusted EBITDA of GBP 459. I'm also pleased that on the back of good work in capital management, leverage came back within our range at 1.4, and I think that's a good foundation for driving future growth and, over time, shareholder returns. Secondly, we're progressing at pace with Back to B&M Basics. Our actions are well advanced and the early indicators are encouraging, but much more to cover later.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We've also started the phase II of our plan, where a lot of initiatives are already underway. If you put it in perspective, phase II is all about balancing new space with investing in existing estate. Finally, I'm really pleased with the performance of our French business, so B&M France, growing like-for-likes, attracting more customers and gaining share in a competitive market. Much more on all of this later. Before that, I would like to hand over to Pete to take us through the financial review of FY 2026. Pete, the floor is yours.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Just remember to pick up the clicker. Thanks for the introduction, Tjeerd. Good morning, everyone. For those of you who've been with us a while, you may recall that I've presented once before for B&M, although that was some time ago. Not very used to speaking on the mics just yet. I'm pleased to be back with you today to take you through the group's financial performance in FY 2026. As I go through it, there's three or four things I'd like to focus on as we go through the financial information. The first is it's been a tough year in relation to profitability with margin cost line pressures. However, we've had robust cash flow, healthy leverage, and that drives investment flexibility for the future. Finally, I'll touch on the continued strong performance of France. Let's look at our key financial indicators.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

As Tjeerd just highlighted, FY 2026 represented a difficult year for the group. Profit was around the midpoint of our current guidance and leverage ended the year in our 1x-1.5x range. Our key indicators include revenue growth of 3.6%, driven by our store expansion program with flat like-for-like sales in B&M UK. Our profits were down. This was a result of trading margin and cost inflation impacts. Our outturn was an adjusted EBITDA of GBP 459 million and profit before tax of GBP 284 million. Whilst at the midpoint of our current guidance, these are significantly down on last year. Despite this, we've had strong cash generation with post-tax free cash flow of GBP 321 million, which is GBP 10 million better than last year. Leverage is also back in our target range.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

This demonstrates that we have the financial flexibility to make the investment choices that we need to make over the coming year. I'll now go into more detail. Our 3.6% revenue growth was driven by a new store opening program in the U.K. where like-for-like sales were flat. They also incorporated another strong performance from B&M France, with 13.4% overall sales growth, delivering an extra GBP 73 million in group revenue. The chart in the top right illustrates the B&M U.K. estate program, which includes disciplined relocations and closures with older, lower contribution stores, often replaced by larger, more productive stores within the same catchments. Like-for-like sales were flat. That's a significant step up from the prior results of -3.1%. Quarter-by-quarter, B&M have shown an improving like-for-like trajectory except for the impact of the unusually warm and dry spring weather in quarter one last year.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

This directional improvement resulted in a positive 0.1% like-for-like in quarter four. B&M France continues to be positive in each quarter. I'll call out their exceptional second quarter this year that benefited from annualizing the impact of introducing their new warehouse management system in FY 2025. That's an investment which keeps them set up for success into the future. It's also worth highlighting that B&M France's positive delivery covers both FMCG and general merchandise categories. Our year was underpinned by two key cost elements, trading margin pressures and cost inflation. In general margin, this includes both bought-in margins and clearance activity, with pressures in both areas easing in FY 2027. We expect recovery here. FMCG margin is a result of our deliberate price investment strategy to sharpen our value proposition on key value lines. This is as we communicated in January at our quarter three trading update.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

This strategy strengthens our competitive position in the market as we move forward. Here we can see the margin impact of the FMCG price investment and clearance activity that has taken place. We'll begin to annualize that investment from August. General merchandise showed encouraging signs of improvement in the second half, we expect to build upon in FY 2027 as we restore our trading margin further. The other key cost element is our increased operating costs. A bridge is provided here. Key points of reference are the impact from statutory changes, National Insurance, National Minimum Wage, and the new Extended Producer Responsibility tax. That represented overall GBP 66 million headwinds that was not sufficiently mitigated in FY 2026. Looking ahead, though, these pressures are materially reduced in FY 2027, through the Back to B&M Basics program, we are taking targeted action to improve our cost control.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

More specifically, statutory pressures are easing in FY 2027, while the Middle East conflict poses cost challenges around fuel, energy, and freight, these are not on the same scale as the headwinds that we faced in FY 2026. Nevertheless, initiatives are alive in the business to address these cost pressures and ensure that the operating costs are kept under tight control going forward.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

The result of our challenging year is lower profit delivery. This was signposted during the year with our final outturn around the center of our most recently issued guidance in January. I also call out B&M France's strong performance on this slide, with profitability growth from GBP 48 million to GBP 53 million. That is an increase of 11.8%. While their profit margin dropped slightly, this is due to the planned investment made in their distribution center infrastructure, and that sets them up well to continue their overall growth into the future.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

France is a business that continues to impress. Lower profits did not mean lower cash, however. Our working capital discipline, a feature of our Back to B&M Basics program, enabled us to deliver strong free cash flow, reduce net debt, and finish the year with leverage back inside our one to one and a half times range. We do expect leverage to spike at the start of a golden quarter due to our usual seasonal trends. Over the full year, we expect to at least maintain working capital at this reduced level, and we are targeting further improvements in FY 2027. Our maintenance CapEx remains low at 1.1% of revenue. More than half of our overall FY 2026 CapEx represented new stores or DC infrastructure expansion. That included distribution center improvements at Ellesmere Port and Rugby, representing improvements to our supply chain network, and that will drive future benefits.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Our cash generation and leverage profile gives us the ammunition to make capital investment choices, including disciplined investment in our existing estate as part of our strategic plan.Tjeerd will cover that more in his section. Our strong cash generation gives us clear capital allocation options. Our disciplined approach ensures that we prioritize investment back into the business whilst paying our regular ordinary dividends back to our shareholders. Where appropriate, our robust cash flow leaves space for opportunistic M&A, although this is not a priority at the moment, or additional capital returns with share buybacks now unlocked following the completion of our redomicile process. Consistent with our usual seasonal cash profile, any decision regarding additional returns is likely to take place immediately following our golden quarter in January 2027.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

In reflection, a difficult year driven by margin and cost challenges, areas we've identified clearly and which we are addressing with early evidence of progress. Importantly, cash flow remains strong and leverage within our targeted range. Allows the necessary investment choices to be made to support the business strategy while maintaining our financial discipline. France, meanwhile, remains standout in performance terms, demonstrating how consistently strong execution of the B&M model can drive impressive performance and growth potential for the future. Finally, we're proposing to pay a final dividend of GBP 0.061 per share, giving total ordinary dividend of GBP 0.096 per share for the year. This is in line with our 40%-50% range specified in our capital allocation policy, it's also in line with consensus. On that, pass over to Tjeerd. He'll take you through our strategic approach for FY 2027 and beyond.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Thanks very much, Pete. Let's move on to the next slide, which is slide 18. As a reminder, we're executing our plan at pace and the chart in the top right, you can actually see the three phases. Phase I is Back to B&M Basics. We're in full flight of rollout and execution. Phase II is deepening our foundations, I'm pleased to say we've already started on phase II, phase III is accelerating growth. The focus today is really giving you an update on Back to B&M Basics, but also really give you a view for phase II. On Back to B&M Basics, I would say we're well advanced. Last week, we actually began the FMCG range rationalization rollout. There's many moving parts, but I can say here, the early indicators are really encouraging and I'll provide more detail in the next slides.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Turning to phase II, we've really made good progress against our operating model. We've worked on format optimization. That work is now complete, we're using data-driven insight to trial and refine store formats. We're applying the same test and learn discipline that we've used in range rationalization also for our formats to validate outcomes before committing to rollout. Again, if you put it in perspective, we're adopting, I think, a bit more balanced approach. We're still investing in new stores, we're also enhancing our existing estate in order to drive sales growth. In addition to what Peter already said, France continues to perform strongly. More customers served, good value proposition, gain market share, having solid like-for-like sales growth. I'm really pleased with the Q4 focus on inventory reduction, clearance discipline, mainly in the month of January.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We really saw stock levels drop and stock quality improve, a stronger cash position. Much easier for people in store to execute, but also much easier for the colleagues in the distribution center. As a consequence, net debt reduced and leverage back in target range, which is a good platform for future growth. Moving on to the next slide. I would like to give you more color on the four work streams. I'll start with the first one, which is price. I think what's really good to see is that we've become very disciplined and very consistent in the application of our price policy. I think we were very clear we already had a good index. We now also have a very disciplined execution of a line-by-line comparison.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Against our closest competitor in the U.K., we remain highly competitive, and you can see the development over time. 96% of our lines benchmarked, we were either same or lower price compared to our key competitor. The same number versus key competition in supermarkets, we were 90% equal or lower, and average discount is 15%. You could ask, why is there a 10% or a 4% discrepancy? That's mainly driven by promotions, and they're temporary and not at all structural. We've also focused very much on seasonal competitiveness, so we were very strong with Christmas, but also Easter to make sure that we provide great value for customers. The next phase after having achieved an index is price perception, and that's the focus for this summer. In conjunction with more focused ranges, we will focus hard on building an even better price perception.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Beyond promotions, we are now much more focused on customer moments, really trading the season, using front of store space in a much stronger way. We've really seen our Christmas, Valentine's, Easter garden that really helps us. We've made a decision to double the front of store space in hundreds of our stores over summer, which we think will drive more engagement. The first results have been really positive of having a much more customer focused range at the front of the store. The next four work streams, in slide 20. With range, we initially started with three range pilots. We've added four later in the year, and in total, we have trialed six months of seven pilot categories. Six of the seven categories we've been able to conclude with a positive sales outcome, so lower SKU counts, higher sales.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We feel very confident now we can roll out, and we started to roll out last week, of the SKU reduction across the year. Our first focus is the more normalized categories that have no longer a seasonal impact. That will be concluded in August. Then September, October, there's two categories that have a very strong seasonal character, and we will conclude those by the end of the year. For customers, this actually means a meaningful reduction of items on shelf, 20%-25%, much simpler and easier to shop, but also true benefit for colleagues in store and supply chain with having much less complexity to manage our products across the estate. Availability, I think this was the most embarrassing update I gave you when we shared these numbers.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We've worked hard on making sure customers could find these items on shelf whenever they came to our stores. Of the top 250 best-selling SKUs, we've rolled out nationally a different way of working. I'm pleased to say that we have moved from an 86% availability to about 95% last week, and we aim to go beyond that number later in the year. That's on the top 250 best-selling items. We are extending our support to stores or focusing on better availability across the estate, and we're doing it in a focused way with a store availability alert, where on store specific, measure the top 30 items that are having a stock record in store but no sales are being alerted to the store team so they can have a very targeted focus on improving availability. Also, we take an end-to-end approach.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We do not only focus on the store, we look at supply performance, distribution center, stock levels, in-store execution. It's an end-to-end focus on availability. In summary, I would say Back to B&M Basics progressing really well. We've completed delivery in three work streams, and the fourth one is now in full rollout. Moving on to phase II, slide 21 behind me here. Even though we didn't fully conclude phase I, we've actually started and made progress already in phase II. We outlined in November that we are starting to use customer insights, customer data to flex and evolve our store formats. I think at that stage probably was still a bit more, that's a hypothetical. We've made it really tangible now. We are really focusing on making sure that we optimize the range for customers in the locations where they shop.

[Tjeerd Jegen, CEO at B&M European Value Retail]

It's really hard to tailor to 800 different locations. We've grouped them in six clusters, and these six clusters have a very similar homogeneous customer mission, very similar frequency type of shop, similar environment. Interestingly, only two of the six are more traditional, the B&M stores that we would be focusing on, and four clusters actually are quite new for us and have evolved from the start of the B&M model. We've got an opportunity to serve those customers much better, to optimize range and the proposition at cluster level. That's exactly what we're doing. Similar to the range rationalization, we're trialing stuff. We're now investing in the estate, and we really want to invest in the estate to maximize the match between range in that store and the customer mission.

[Tjeerd Jegen, CEO at B&M European Value Retail]

There's three work streams in play here to make sure we take the right decision later in the year. First of all, it's relaying space. This is really about optimizing offer, optimizing range for that customer mission, that cluster in the existing store space. No investments in the store fabric. There are six stores currently in flight where we're trialing, and see if there's a sales uplift, which we expect on the back of this work. Also taking the learnings, what happens with tweaking various category ranges, changes per format. The second one is probably a more conventional way of looking at investing in your estate, that we call refits. The same work, so we're optimizing range, and in addition, we're targeting some improvements in the store, in layout, in lighting, flooring, customer areas, but also in colleague areas.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We have now 10 stores have been refreshed across the country from the north to the south. That's also now a focus area for us to see if we can drive benefits in terms of sales. Finally, the third one is a bit more far out. We call this Store 2.0. It's a completely new store concept, actually very much inspired by a French store concept. More engaging, more intuitive, easier to shop. We used a lot of customer and colleague feedback to improve the store concept. The first store of that generation will open at the end of Q2 this year. The goal of all of these three work streams are very similar. It's ultimately driving like-for-like sales, it's improving sales densities, and as a consequence, of course, margin expansion.

[Tjeerd Jegen, CEO at B&M European Value Retail]

The good thing also, given our leverage, given our net debt, we can self-fund this, through cost and working capital efficiencies. I think that the rollout of new space is now a bit more balanced. We target 25 to 35 new gross B&M UK stores in 2027, which is in line with our organic growth rates. If the trials are successful, we will then also supplement that with investments in existing estate. Moving to France, slide 23. Well-performing business, positive like-for-like sales last year, every single quarter. We've become a bit more mature business, so we're now subscribing to market share data, and we also see that we're gaining share in the market. Top line is growing, of course, strongly also on the back of openings.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Talking about openings, we have achieved 150th store in the country, so we're becoming a sizable business. Talking about sizable businesses, the French market in terms of inhabitants, total size of market is not dissimilar to the U.K. Obviously with 150 stores, there's a good runway for expansion in that country. In terms of current trading, we saw a good start to the first quarter to the financial year with both higher footfall and continued market share gains. Good start in France in FY 2027. Then Heron Foods. Yeah, in January, we announced that we would conduct a strategic review of its customer proposition. We've taken the learnings and the outcomes of that, and the conclusion is we actually see significant opportunities to improve its customer proposition.

[Tjeerd Jegen, CEO at B&M European Value Retail]

If you would scan the U.K. convenience retail market, you would be able to see and observe that many elements that are now quite mainstream in convenience stores, we haven't captured yet. A stronger food for now offer like coffee on the go and better meal deal, but also elements that in forecourt and convenience stores across the country are quite normal, are not, let's say, part of our offering yet. We will incorporate these over time. The team has been focused very much on winning clearance parcels. They've done a good job because actually we see a good start to the year, positive like-for-like also for Heron. We will also continue to invest in team and talent in Heron to support future growth.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Putting things in a bit more strategic perspective, back to our business model, but now let's say aligning business model with our plans. I think this slide really illustrates how we are aligning execution of our priorities with the strengths of our business model. It starts with driving top line growth through Back to B&M Basics. Pete already alluded to it. We are rebuilding gross margins, especially in non-food this year. We are embarking on a much more measured and a much more disciplined, focused approach on cost control. Of course, that's being helped by simplification and range. Also we would like to invest more in supporting our teams with more digital tools. I think continuing our selective and effective growth in space is ultimately creating this virtuous cycle, supporting margin improvement and cash generation.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Cash generation, we even to outperform last year, the year before actually on a lower profitability level. I think we've all demonstrated our ability to do so. Just a reminder, why we are here for shareholders. This is our shareholder return algorithm. Ultimately, we are growth focused. It starts with restoring like-for-like, and Back to B&M Basics is the main driver. It is supplemented by new store growth in U.K. and France. Also we would like, as we shared today, supplement new store growth, new space growth with investing in Core Estate and to boost customer engagement and sales. It is all about restoring trading margin, focusing on cost out and in order ultimately to go back to a low double-digit EBITDA margin for B&M U.K. in the medium term as an outcome, not as a financial input.

[Tjeerd Jegen, CEO at B&M European Value Retail]

As you know, our business is very strong in terms of cash generation. We believe together this is an attractive total shareholder return. Finalizing my updates, to conclude where updates were, we're really executing B&M Back to Basics at good pace. I believe we're making the right progress. Our trading margins are improving, supporting the model, but at the same time, our pricing has never been as competitive as it is today. Our leverage is back within target range. We're taking, in my view, a much more balanced approach to investments in new space. In terms of current trading, B&M UK, we've seen a bit of a slower start to seasonal trading. I think most of you know that we have close to 300 garden centers, so this quarter is quite, let's say, weather and external impacts dependent.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Especially April last year was phenomenal. We had double-digit like-for-like growth, so difficult month to cycle this year. We've seen improvements in recent weeks. As you could have seen outside, the weather has turned positively, so we've all seen a recovery in our seasonal categories. France and Heron, they've both started the year very positively. While attention may soon turn to the World Cup, I think there's still plenty to play for this season, both on the pitch and in our stores. With that, I would like to hand over to questions. Thank you very much.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Thank you, Tjeerd. Thank you, Pete. Yes, let's turn the floor over to your questions. Jonathan, why don't we start with you? We'll bring the mic around to you.

[Jonathan Pritchard, Analyst at Peel Hunt]

Thanks. Good morning. Jonathan from Peel Hunt. On perception, two sort of an A and a B really. Obviously, perception follows reality, better to have the reality in the right place. What's the next step in terms of getting that price perception shifted? I think you mentioned that. How do you actually do that? Obviously, as I say, the reality's in a good place. How do you shift the perception? Back on with current trading, excuse me. A tricky April, a better May. Have you actually ended up pretty much where you thought you would be if those two sort of played a draw where you were touch behind or where you thought you'd be? Obviously a much more data approach being used on existing space. Have you started to apply that to new space now?

[Jonathan Pritchard, Analyst at Peel Hunt]

Is that educating new store opening decisions?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah. Good questions. I count three questions. First of all, on price perception, it doesn't really help drive price perception that your best-selling item and the item that we invest most in price is on one facing. Naturally when we have pruned our ranges and the key items have got space to breathe, this will give a natural boost to the way customers evaluate our pricing. That said, if you walk into our stores today, especially on, let's say end caps or let's say feature ends, I think we're not strong enough in terms of price messaging, so we're embarking on a much stronger, let's say, in-store price communication focus over summer. Basically, we've waited until the range rationalization was completed, and that's the natural next phase. I'm 100% with you. The index is just a starting point. It's driving perceptions ultimately the true success here.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Is current trading in line with our expectations? We never expected April to be positive this year because last year was just exceptional. We would look at the season in totality, and the season is not over yet. There's still a lot to play for, and obviously the last couple of weeks we're probably better than our expectations, but overall we haven't concluded the season, and in July, I'll be delighted to share with you the Q1 results. Finally, a good point. We are indeed using a much more rigorous approach in terms of analyzing the opportunity for a new store. It is quality over quantity is very much the focus.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We want to make sure we have very good paybacks, good accretive store contribution margins, and indeed, we are now also applying the learnings from the existing estate to optimizing the best possible location for a new site. In a way that we want to invest prudently and ultimately have the right return for shareholders. That's also what we're doing there. Yep.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Thank you. Next question, Warwick from BNP.

[Warwick Okines, Analyst at BNP]

Good morning. I've got two questions, please. One on FMCG, one on general merchandise. On FMCG, as you've rationalized the top selling lines, are you seeing any better terms from your suppliers as you've sort of trimmed the range?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Warwick Okines, Analyst at BNP]

Is that perhaps to come? Secondly, on general merchandise, could you just talk about any changes you might be making to ranges under your new buying director?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah. Clearly any discussion on terms is a commercial discussion between two parties that probably is not very helpful to share in public. Obviously if you would think about what's in it for our supply partners with less range comes ultimately more volume per item, so a much more efficient supply chain. Ultimately, when we have realized and analyzed very high substitution levels across brands, which we can actually demonstrate with consumer data, obviously then the brand that wants to invest most in B&M probably will be able to work with us in a stronger way. I think that's what I would like to say. On general merchandise, actually, the insight for us is France.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We've seen in the U.K., and I think we said it before, a very strong push, about 18 months ago, on mainly focusing our general merchandise ranges on entry level, entry price to reducing, what I would say was already great value to even better value. The problem only is that it's very hard to compare prices in general merchandise. You don't really get credit from customers for doing that. Secondly, I'm not sure how many, Warwick, ironing boards covers you buy annually, but probably not much, not very frequent. We actually did decrease those items quite a bit. I think the insights for us is in our own company. In a market where probably customer confidence is as depressed as the U.K. is, we're gaining share, we're growing like-for-like, and we've got a range which is much more good, better, best tiering.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We have a great value item at the top benchmarked at a very strong French retailer, but great value at B&M. We've got a good mid-tier and a good entry price, targeting another retailer that's quite well-known in France, making sure we have great value at entry price. That strategy works really well in France, because you tailor to customers that actually have a limited budget, so you're there for entry. Customers who have a bit more money to spend but don't want to spend the same amount of cash at another retailer can find a similar item for a much better value at B&M. I think that's the insight we're going to apply also at B&M UK.

[Tjeerd Jegen, CEO at B&M European Value Retail]

The journey for us in general merchandise in our core ranges is much more about good, better, best tiering, much more coordination of design, and less of a focus of only playing in price entry.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Richard from RBC, let's take your question.

[Richard Chamberlain, Analyst at RBC]

Thank you. Richard Chamberlain from RBC. Three from me, if I may. First of all, Tjeerd, just wondered if you're already seeing a sort of direct correlation between availability improvements and like-for-like? I think you called out 86% to 95% in the presentation. Is that already leading to some like-for-like benefit? Second one is, we're starting to see some higher priced items coming through in the store assortment, thinking things like garden furniture, sort of GBP 400 type garden furniture sets.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Still amazing value. Right. Yeah.

[Richard Chamberlain, Analyst at RBC]

Sure they are. Is that changing your thinking in terms of how you're thinking about price architecture here as well, or scope for more of those items? The third one is just on capital allocation. I'm wondering if you can just give an update on what you're looking for in terms of optimal leverage and, when we might or you could consider share buybacks, I guess.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Richard Chamberlain, Analyst at RBC]

Thanks.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Pete on my right side will answer the third question, because he also has a role to play today. Then the first two, I will take. It's really hard to isolate the impact of availability with total store performance. What we did see, so we are trialing now availability alerts, because the problem is with the first batch of stores that we rolled out were nationwide now. That you can no longer have a control group measuring the isolated impact. We did see with the availability alerts, the moment stores started adjusting and correcting stock records, we did see in those stores quite a decent uplift in sales on the items they corrected. Over time, it's natural that it ultimately will support driving like-for-like sales on the back of availability. Of course, there's more elements at play. We do see a correlation emerging.

[Tjeerd Jegen, CEO at B&M European Value Retail]

On the higher priced items, it's exactly what I explained in our core ranges, good, better, best. It's seasonal. We are able to actually move a bit faster, because the buys are, let's say, one-offs, so you're able to change your range a bit easier than updating an existing structure. I think we started already just before I came, we started indeed adding higher priced items to the range, still great value, and we've seen good customer uplifts. If anything, especially we had a GBP 40 large oversized mirror earlier in the year, and that sold tremendously well. Actually we see better value items, but on a higher priced point, actually do really well at B&M, and I think on capital allocation, I think good to give an update where our heads are at.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

I think the first question was where do we want leverage to be, and so in terms of where we want leverage to be, our target range remains at one to one and a half times. We measure that on a full-year basis. We believe and accept that it will drift outside of that range, for instance, at the start of the golden quarter when we need to have higher stock levels, and then it will reduce as we go through the golden quarter and sell that stock. That leads to a natural point in the year when we will usually make our capital return decisions or allocation decisions, which is always in January, just after the golden quarter closes. That's traditionally when we've made this decision in the past, and our seasonal trends won't change.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

We do expect to be in a position to make that decision in January 2027.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Okay, great. Thank you.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Let's take a question online before returning to the room. One here from Wayne Brown at Liberum. In fact, two, I think for you, Tjeerd, both on the store estate. First, given the confidence, why no upward step change the rate of openings this year in the U.K.? Also any view on net closures in the year ahead and specifically, what's the hurdle rate in terms of triggering a decision to close a store?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yes. I think we were very transparent last update that the underlying growth rate of new space on organic pipeline is about 25 to 35 new sites. We have enjoyed the last two years distressed opportunities, mainly the Wilko estate and Homebase. That's why we were able to open over 40 shops a year. The distressed opportunity pipeline, I would say, currently is drying up and many of the founding sites that have become available were not really fitting our requirements. That's the natural evolution, but I also would like to stress that it's quality over quantity, so we're not chasing a number here. We're going for really quality sites.

[Tjeerd Jegen, CEO at B&M European Value Retail]

I would say, if you believe, and I do believe, there's upside in investing in our existing estate, then probably from a total capital perspective, having a bit of a slower pace of store openings, but using capital, as you would say, the new space to invest in existing space, probably not a bad idea if it drives good returns. I think on closures, we did have an elevated number of closures last year. Again, if a store doesn't work, it's better to close it. Given the network that we have, in most cases, quite a big part of that sales will flow through the adjacent stores and we can actually reemploy colleagues in the stores around us. We normally don't guide on store closures, but I expect the level to be probably similar level as last year.

[Tjeerd Jegen, CEO at B&M European Value Retail]

In terms of our hurdle rate, we're looking at a vast range of metrics, but the most important one is store contribution. If the store contribution drops below a minimum level, there's not a sufficient, in my view, economic reason for a store to actually stand on its own feet. As a consequence then, if we don't believe there's opportunities to drive better performance, we then close the store.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Great. Let's take a question from Kate Calvert at Investec.

[Kate Calvert, Analyst at Investec]

Thank you. Morning. Just two questions from me. As you move into phase II and invest in your store estate, what proportion of your portfolio do you think you will just relay versus refit? I assume that B&M 2 comes in a couple of years time. My second question is just on the stock coming into the business now. Are you happy with the quality of that stock coming in, or is there potential for more clearance in the first half?

[Tjeerd Jegen, CEO at B&M European Value Retail]

I'll cover the first one. It's really about test and learn. I think ultimately it's probably both. Relaying clearly doesn't require CapEx. If it's demonstrating positive sales results, probably the opportunity is to go quite broad across the estate. Again, we need to test and learn. The second one, the refits ultimately will come with an investment. Clearly, we can fund this ourselves. We're self-funding in a way, but there's a capacity constraint that the store teams are able to, and the store development teams are able to execute, and there's also a focus element. There's a natural ceiling to how many stores you could do in a year. Clearly, we've got our views, but let's first make sure that the results come through as we would like them to come through.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We expect positive sales, good like-for-like growth on the back of this, and then we'll take the decision to roll out. That's where currently our thinking is. In terms of stock quality and further clearance, you might give some perspective, Pete?

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Yeah. The stock quality coming into the business at the moment, we're happy with it. We believe that we'll be able to trade it and merchandise it as we need to. The clearance is really a legacy item, which we've had to address the stock that we've got in the storerooms of the business that we need to get out on the floor and make space within the business to bring in the new lines. Essentially, a lot of that clearance activity has taken place, and we don't expect to have material issue with the stock coming in going forwards because we will be operating a clearing-as-you-go type regime over the new stock that comes in, which will leave our stock in a high-quality position overall.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Great. Thanks.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Thank you.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Let's stay in the room. Should we go to Peel Hunt just there on the right, Kate?

[Analyst]

Morning. If it's okay, do you mind if we sort of dwell in the past a bit on specifically Q4? I'm a little bit confused in the sense that December was a strong underlying like-for-like number plus three, and I think the narrative back then was that there hadn't really been a boost to the top line from clearance at that point. We came into Q4, and it seemed like it's been flatter so far. I think it started well, clearly, there was a lot of clearance in there. What's happened here? Has the clearance benefited the top line at all in that period, or was it the case that actually the existing or the underlying performance weakened across that specific period?

[Analyst]

The second question is, I think you mentioned back in Q3 that some of the supermarkets had stepped up the promotional activity, particularly Tesco around loyalty. There's a nod to sort of potentially improving the trading margin in general merchandise I notice. Do you feel that you're at the end of the journey in terms of price investment for FMCG, or do you still feel there's still quite a bit more to do there, potentially?

[Tjeerd Jegen, CEO at B&M European Value Retail]

No, good question. Thank you. I think the 3% like-for-like in December was actually really showcasing the strength of B&M's seasonal offering, but wasn't reflecting the outcomes of our plan Back to B&M Basics. I wasn't surprised that after the seasonal peak of Christmas where we did extremely well, we went back to a more normalized trading pattern. We did see in January, indeed, positive like-for-likes, partially clearance, but partially just the momentum going out of Christmas. February was probably flattish. In March, we had the benefit of Easter a bit earlier, so FMCG was strong in March. Unfortunately, March last year, actually, the garden season started quite early. We saw already in March a double-digit negative sales number on garden and seasonal. I would say that's the composition of the quarter. We're still pleased with a slightly positive like-for-like number.

[Tjeerd Jegen, CEO at B&M European Value Retail]

I wasn't expecting the 3% in December to continue throughout the year because ultimately the hard yards were not done yet, so we still have to work hard in making sure that all of the elements of driving like-for-likes are fully implemented. It was pleasing to see. It showcases the strength of B&M in the seasonal periods, but we also have to be strong outside of seasonal periods, and that's what we're working on. In terms of pricing, the reset or the delta that we did was really large in August to September. We've been very competitive ever since. Every single week, I can see the impact on our margins. It's quite stable. I think at the moment, our FMCG margin rate is the lowest in seven, eight years, I guess?

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Yeah, it's a long time, I think.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Yeah.

[Tjeerd Jegen, CEO at B&M European Value Retail]

It was a meaningful investment. If you would look at our margins in September, it's actually more or less at a similar level. It's very interesting to see because I know quite some detail how the bigger supermarkets are operating in the U.K., and the pattern is not always very consistent, but our index is very consistent, which is 15% cheaper than all three of them versus their offerings. That's where we are. I don't foresee at this stage further investments in FMCG pricing.

[Analyst]

If I may, just one more. Heron, obviously quite a drop-off in profitability there.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Analyst]

Obviously, you're sticking with it. Do you feel there's some low-hanging fruit that's going to get you back quite quickly?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah

[Analyst]

In the short term, or is it going to be a drain?

[Tjeerd Jegen, CEO at B&M European Value Retail]

No. I would say it's interesting. The 3% or 2.9% EBITDA margin we reported last year actually is not dissimilar to what probably the industry normally has in terms of convenience in the U.K. Probably we were outperforming the industry quite a bit in the past, but 3% is not, I would say, a business that's failing. It's probably a good metric for most convenience retailers. We're not happy with it. We would like to see improvements, and I think I already outlined that if you would walk the convenience space in the U.K., you look at more entrepreneurial convenience operators, they would have a much broader playbook of offerings for customers that we haven't really utilized, which we are going to implement.

[Tjeerd Jegen, CEO at B&M European Value Retail]

In addition, what we didn't do well last year, which we're improving to do, is be more assertive and aggressive on getting clearance parcels. As a consequence, we stepped up our game quite a bit this year, and that's why trading is positive from a clearance perspective, but also from an underlying perspective. There's more opportunities to go for, and indeed, we believe it's better to have Heron as part of B&M because we believe there's good upsides for the future in improving the business.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Thank you, Tjeerd. Let's go back online. We have a question here from Vandita Sood at Citi, and I think this is one for you, Tjeerd. It's with regards to cost initiatives in the year ahead. Given our confidence that we can offset energy-related costs, could you give some examples of those initiatives?

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

How lean do you see the cost base this year compared with previous years?

[Tjeerd Jegen, CEO at B&M European Value Retail]

That's a good point. On the Iran conflict, clearly nobody has a crystal ball. I can only comment to what we've seen to date. We've extrapolated to date cost levels to the remainder of the year to make an assessment of the impact on our business. That's how we went about doing it. I would like to unpick it in three elements. First of all, it's electricity costs, energy costs in our stores. The second one is diesel for our trucks. The third one is freight costs for our products coming out of Asia. We actually have invested quite a bit in new stores, equipping them with building energy management system or BEMS.

[Tjeerd Jegen, CEO at B&M European Value Retail]

As a consequence, even though we've opened 100 more stores in the last four years, our energy consumption total company hasn't gone up, so we are still at the same level of total energy usage as four years ago. By chance, two weeks before the conflict started in February, we took a decision to now implement the system across the whole of the estate, also in the older stores. We actually feel quite good about being able to mitigate the rising energy costs in stores by having a lot of energy-saving measures. The residual impact actually will be limited, at least on today's pricing. On diesel, we update our fleet quite a bit. We've got our own trucks, we see diesel costs, of course, rising, but that's actually not a very material number.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Also that one we believe we can absorb, and we implemented a route scheduling system last year, so we're much more efficient in our delivery schedules to stores. On shipping, we have a dedicated partnership with a very large shipping line. We believe we got great value out of the cost of freight. We locked in a contract for the next 12 months. We do have a surcharge, but if you would look at the total number of the surcharge, the overall freight cost, it's actually not very high. Overall, to date, we believe all three elements, components of the Iran conflict in terms of cost increase on our business we can absorb, and we don't have to pass on to customers with higher pricing. It doesn't have a, in our view, a material impact on our bottom line.

[Tjeerd Jegen, CEO at B&M European Value Retail]

I think overall cost for the year, obviously last year, there was quite a significant statutory cost increase with, as Pete said, National Minimum Wage, National Insurance, and the EPR, the packaging. That growth rate, of course, will slow down this year. There will still be a growing cost element, but not at the same rate as last year. We just shared that we are approaching this year with a much more cost-out focus. It's early days, I wouldn't want to commit to any numbers, obviously, we are going to work hard to simplify our business, take cost out so we can keep prices low for customers. Directly linked to the Iran conflict, we don't see an impact, let's say, a large impact on our business.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Thank you. I think that's Andrew Wade from Jefferies at the back. Let's take your question, Andy.

[Andrew Wade, Analyst at Jefferies]

Thanks very much. Three actually from me. First one, digging a bit more into what Ben was asking around the clearance side of things. FY 2027 benefit working capital was GBP 90 million. You've talked about that being almost all sort of stock benefit, and actually you'd have expected to be more than that coming out from clearance because you would have expected to be growing the stock base given the bigger store count, and you probably didn't sell it at cost or NRV. Yeah, we're probably talking GBP 100-GBP 150 million revenue benefit in H2. Maybe my math is all out there, but that looks like sort of 5% boost to revenue in the second half. Is that?

[Andrew Wade, Analyst at Jefferies]

GBP 100 million on GBP 2.3 billion of UK revenue in H2?

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

I think part of the equation there is that some of that working capital benefit was unwinding our general E&O stock position in prior years. Whereas clearance is a part of that working capital benefit, there are other working capital benefits we've got flowing through that line. It's not just the clearance impact.

[Andrew Wade, Analyst at Jefferies]

How much of that GBP 90 million is down to just clearance activity? Remember, it's more than GBP 90 as well because it would've been growing otherwise.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

It's a difficult number to take out of our accounts the exact amount that relates to the clearance.

[Andrew Wade, Analyst at Jefferies]

Even if we said GBP 50 million, right, and you're selling it at more than cost or NRV, you're talking about 2%, 3%, 4% benefit to sales.

[Tjeerd Jegen, CEO at B&M European Value Retail]

It's a much smaller number. I think this business was traditionally run on, in my view, quite high stock levels with significant cover. I think we should be able, we've demonstrated to run this business on lower stock levels, and that's the majority of the working capital release. The smaller part is the clearance impact, but being more efficient with stock is the larger part.

[Andrew Wade, Analyst at Jefferies]

Okay. All right. Thanks very much. Second one, you talked about a couple of times, you mentioned about gaining share. Just interested as to what benchmark are you using that because obviously supermarkets ONS non-food and Home Bargains as examples.

[Tjeerd Jegen, CEO at B&M European Value Retail]

There was France. It's a panel company, I think it's called Circana. We also subscribe, of course, to the U.K. Kantar Worldpanel, for example. There, B&M UK, we've hold our market share in the market. We've held it at similar levels. In France, we're growing.

[Andrew Wade, Analyst at Jefferies]

Which category would that be in the U.K.? Is that discounters specifically or is that-

[Tjeerd Jegen, CEO at B&M European Value Retail]

That's Worldpanel Kantar data. Yeah.

[Andrew Wade, Analyst at Jefferies]

That's within total food and non-food universe.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Andrew Wade, Analyst at Jefferies]

All right. Okay. Thanks very much. Then the final one, pretty encouraging impact from those range rationalization pieces you talked to there. 20% less SKUs, 3%-4% like-for-like uplift. I think what we'd sort of hoped would happen.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Andrew Wade, Analyst at Jefferies]

Just interested as to whether those two categories are outliers as in they're the best two or pretty similar across the board.

[Tjeerd Jegen, CEO at B&M European Value Retail]

No, it's a good question. Six categories were positive and on average between 1% and 3% more or less. At least the ones we show were probably representative. The seventh was negative and, of course, your question's going to be Why? Why didn't you fix it?

[Andrew Wade, Analyst at Jefferies]

I think you said before with the crisps as well.

[Tjeerd Jegen, CEO at B&M European Value Retail]

The seventh was a very high churn category. It's very interesting. If you trial a lot, you can actually see a lot and learn a lot. The six categories that were positive were probably more predictable, routine categories with a more static range. The seventh was actually crisps and snacks, where we had negative sales. The main learning is that we just overtrade, and we use secondary, tertiary space in the store to merchandise crisps and snacks across the shop because it's an impulse product. We have a lot of when it's gone, it's gone product in our stores. If you then have a test and learn laboratory trial setting, you actually limit the stores to trade because you want to measure properly.

[Tjeerd Jegen, CEO at B&M European Value Retail]

We actually measured store not merchandising crisps and snacks across the estate, but just in its home bay. Obviously, then you got a negative outcome. We've learned that that's a very high, let's say, churn category where you need to merchandise much, much harder. The numbers we focused on in the presentation are representative of the seven categories.

[Andrew Wade, Analyst at Jefferies]

It's from a similar sort of space or maybe even less space, slightly. I don't know.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah. From a space perspective, we outlined that we're going to increase the front of store space in about 300 stores, double the manager special area, and that's basically because we don't need as much space anymore for food because we've got condensed, let's say, ranges. Yeah.

[Andrew Wade, Analyst at Jefferies]

Cool. Thanks.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yep.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Let's stay in the room. Richard from Bernstein, Richard Chamberlain.

[Richard Chamberlain, Analyst at Bernstein]

Hello, Richard Chamberlain from Bernstein. Three quick ones from me. The U.K. consumer may be coming under more pressure. How do you expect that to impact B&M's customers and their behavior? Secondly, a bit of a counterpoint there. In France, we hear elsewhere that the consumer there is under even more pressure, and yet it's a bright spark for B&M. What is B&M getting right in France?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Yeah.

[Richard Chamberlain, Analyst at Bernstein]

Finally, have you considered a larger role for private label, in food and FMCG categories?

[Tjeerd Jegen, CEO at B&M European Value Retail]

Good questions. I think U.K. consumer, it's a bit hard to read at the moment, given the very strong influence of seasonal categories in our Q1. If you would analyze categories that are not very seasonal, we actually do see good momentum in some categories. Categories where you would expect customers to be more, let's say, disciplined in their spend, actually we do quite well. One of the biggest surprises to me this year is that we see very strong sales of home decoration categories that are, let's say, capsules that we drop. For example, we dropped Island Life, so to decorate your house in like a Sicilian, Sardinian type of style. We've dropped, harvest last year, Halloween ranges, but also decorate for your house. The trend we are seeing is that customers are treating their home like fashion.

[Tjeerd Jegen, CEO at B&M European Value Retail]

They're buying vintage, their own clothes, but they're decorating the house with the season. You see, and it's interesting because you would expect if you're tight in cash, that's not the area you would spend money on. Actually we see in our numbers so far no indication that customers are making different decisions. Actually, we could actually see the normal behavior in a more, say, depressed consumer confidence climate, that people go to value retail for, either necessity or because they like to save money and spend it somewhere else. I think in France, I think, A, we didn't have execution issues. The French team has been consistently implementing its strategy without any hiccups like the ones we've had in the U.K. I think that's one. I think, two, I think we are faced in France with a very different competitive pressure.

[Tjeerd Jegen, CEO at B&M European Value Retail]

I think we all know that the competitor there is so strong in France. I think we've been able to play to our strength and not to their strength. What we did is we took about 400 lines across our store that we replicated one-to-one with the pricing of that competitor, which meant that for customers, you could always see that the price of that item similar to the level they would be used to in the other store. Then we've used the space increment that we have because our stores are about two and a half times larger than that retailer to actually showcase much more breadth and depth of range in a good, better, best ranging in, I would say, probably a bit of a nicer shopping environment.

[Tjeerd Jegen, CEO at B&M European Value Retail]

You still get value, you get more choice, shopping environment's a bit nicer, and we've aligned our promotional sequencing in such a way that every single week when you walk into a B&M France store, there's something new for customers, very similar to what the other retailer is doing. We've replicated their, let's say, elements as a defense, and we've added, let's say, the strength of B&M France to it, and we didn't have any execution issues. Finally, yeah, private label is indeed on our roadmap. It's the third phase. I've made a comment before that Aldi and Lidl have shifted the value expectations in some categories quite significantly when the branded suppliers were not, in my view, having great value for customers. It's something, of course, we look into.

[Tjeerd Jegen, CEO at B&M European Value Retail]

If you would think about our business, 90% of our non-food or general merchandise is private brand, with a lot of licensed products, but we actually source the item and we have a deal with the license owner. The capability to actually start doing the same thing in food and near food is not very complicated for us to start working on. The focus now is really finishing Back to B&M Basics, working on the estates, and this is a phase III opportunity. It's very much on our roadmap to look into.

[Richard Chamberlain, Analyst at Bernstein]

Thanks very much.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

We have time for two more questions. Matt, I know you have one. I'm just going to take one online first. We've got a couple of questions on non-cash impairments. Could you comment on that? Specifically, is it tied to any actions on the Back to B&M Basics? Therefore, should we expect that kind of impairment to continue in terms of magnitude and regularity? Probably one for you, Pete.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

Yeah, I'll take this one. I'll take the second part first, if that's all right. It's not related to the B&M Basics program. This is a technical calculation we have to carry out each year to analyze the assets at our stores. Effectively, it is driven by the profitability of the stores. It is natural that when profitability falls, more of our stores are dragged into the impairment calculation. In a normal year, as our profitability was growing, we would be impairing a run rate of between GBP 3 million and GBP 5 million per annum. When we've stepped back in profit this year, that means that we've got a bit of a catch-up going on, and that's what's driven the GBP 35 million of impairment. You can't impair the same asset twice, so we don't expect those sorts of levels of impairment to continue.

[Peter Waterhouse, Interim CFO at B&M European Value Retail]

As profitability grows going forwards, we should revert back to our usual run rate level of about GBP 3-GBP 5 million per annum.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Very clear. Matt, thank you for your patience. Let's finish with your question, Matt, from Barclays.

[Matthew Collins, Analyst at Barclays]

Sure. Thank you. Matt Collins from Barclays. Two questions if I can. One, B&M UK implications of the Employment Rights Act over the next two years, how that changes your management labor force. The second one on Heron, going back to the earlier question. It felt like a kind of existential observation you made last year about the kind of clearance model, and reduced surplus levels in the industry. What's been the key change since that observation? Thank you.

[Tjeerd Jegen, CEO at B&M European Value Retail]

On the Employment Rights Act, I think a consultation started this week on the next phase of the rights. We, as B&M, but also as a member of the BRC, are very clear. We would like to keep the flexibility and the agility with employment in our stores. We want to do the right thing for our people. Employing people should be an opportunity for both employee and employer and shouldn't be a liability. We are very clear with government that we would like to see the Employment Rights Act finally drafted and implemented in a way that doesn't stop labor growth in retail. If anything, most people in my company, including myself, started their careers at entry-level roles in retail, and then you can actually grow your career quite strongly.

[Tjeerd Jegen, CEO at B&M European Value Retail]

I think it will be a tragic mistake if the Employment Act would lead to retailers being much more stringent and much more hesitant in employing new people on the back of it. Again, we are, as members of the BRC, trying to influence government to do the right thing this time. Obviously, clearly, if the legislation would come out, its effective life, it will be a level playing field for retailers, and we have just to accept and work with it. At the moment, we try to influence that it's pro business and ultimately pro-employment. On Heron Foods, we actually said in January we are going to do a strategic customer review. We did say that clearance was challenging for us.

[Tjeerd Jegen, CEO at B&M European Value Retail]

The good thing is, as I outlined today, we actually see quite some opportunities in terms of customer offering that we don't have a part of the playbook of Heron Foods. Food to Go, lottery, coffee, sandwiches, much better meal deal. There's quite some more elements, but that's probably commercially sensitive. We feel actually that further investing in the offering of Heron Foods is the best use of the investment in Heron. We will make sure that the right capability of people are working there with supporting the Heron Foods business, but we feel that there's opportunity still to go for at Heron Foods. Yeah.

[Dave McCarthy, Head of Investor Relations at B&M European Value Retail]

Thank you, Tjeerd. Thank you, Pete. Thank you for those of you attending and your questions and for those of your questions online. We look forward to returning mid-July with our Q1 trading statement, the date for which we will confirm shortly. That concludes the meeting. Thank you.

[Tjeerd Jegen, CEO at B&M European Value Retail]

Thank you very much.

Participants

Executives

• Dave McCarthy, Head of Investor Relations
• Peter Waterhouse, Interim CFO
• Tjeerd Jegen, CEO

Analysts

• Andrew Wade, Analyst at Jefferies
• Jonathan Pritchard, Analyst at Peel Hunt
• Kate Calvert, Analyst at Investec
• Matthew Collins, Analyst at Barclays
• Richard Chamberlain, Analyst at Bernstein
• Richard Chamberlain, Analyst at RBC
• Warwick Okines, Analyst at BNP
• Analyst