B&m European Value Retail Plc · LSE:BME
B&m European Value Retail — FY2018 Earnings Presentation
30 slides from B&m European Value Retail's earnings presentation, May 2018
Slide 1: Preliminary Results Presentation 53 weeks to 31st March 2018
B&M European Value Retail SA Preliminary Results Presentation 53 weeks to 31st March 2018
Slide 2: FY18 Group Highlights
FY18 Group Highlights • Group revenues increased by 22.4% to £2,976.3m B&M UK LFL revenues +4.7% 47 gross new B&M store openings in the UK 12 gross new store openings in Germany Acquired Heron C-store chain which opened a net 9 new stores • Group adjusted EBITDA increased by 18.8% to £279.0m
Slide 3: Paul McDonald, Chief Financial Officer
Paul McDonald Chief Financial Officer Ref: 750493 3
Slide 4: Summary Profit and Loss
Summary Profit and Loss £ millions, March year end FY17A FY18A % FY18A (53 Weeks) £ millions, Group Stores 612 927 51.5% 927 Revenues 2,430.7 2,976.3 22.4% 3,029.8 Gross Profit 845.8 1,010.2 19.4% 1,028.4 % 34.8% 33.9% (86)bps 33.9% Operating Costs (610.9) (731.2) 19.7% (745.1) Adjusted EBITDA 234.9
Slide 5: Group Revenue Bridge
Group Revenue Bridge £ millions, REVENUE FY17A-FY18A • +22.4% revenue growth for 52 week period 53 3,030 210 2,976 • B&M UK growth + 13.9% • Annualisation of FY17 new store openings Net New Stores £207m 22 • 47 new stores opened in the UK including 5 107 relocations. Closed 3 stores. 18 • UK LFL +4.
Slide 6: Continued EBITDA Growth
Continued EBITDA Growth £ millions, ADJUSTED EBITDA BRIDGE FY17A-FY18A Group Margin % 9.7% 9.4% B&M Fascia 9.9% 10.2% +29bps Margin % Net New Stores 283 4 17 12 279 12 3 (4) (6) 10 (0) 235 2017A FY17 New FY18 New Net Closed LFL Central Germany Heron 2018A Wk53 2018A Relocations Costs Note: 1. Centra
Slide 7: B&M Fascia LFL Sales
B&M Fascia LFL Sales FY18A COMMENTARY H1 H2 +7.5% +2.4% • Full year LFL growth of +4.7% at the core B&M fascia • Q4 was flat as a result of the snow and weather in March. January and February LFL was +3.3% 7.6% • The growth is coming from both increases in customer 7.3% 7.2% numbers and average tran
Slide 8: Gross Margin Outturn
Gross Margin Outturn GROSS MARGIN (%) KEY HIGHLIGHTS • B&M margins were 69bps lower 34.8% • Continued shift in the mix towards grocery/FMCG 33.9% ranges, 35bps, as consumers drawn to value and rein back on discretionary • Rates of sale on some general merchandise • Impact of March 2018 snow, 5bps po
Slide 9: Operating Costs
Operating Costs £ millions, KEY HIGHLIGHTS FY17A FY18A Store Costs 424.2 465.3 • B&M costs 97bps lower than last year as a % of sales Transport and Distribution 86.4 94.2 Central Costs 40.9 45.4 • Impact of Living Wage cost pressure largely mitigated New Store Pre-Opening 4.6 3.6 Total B&M 556.0 608
Slide 10: Interest Expenses
Interest Expenses £ millions, KEY HIGHLIGHTS FY17A FY18A • Interest and amortised fees relating to the bank debt Interest 17.3 20.1 • On-going interest charge of c. £22m including fee Amortised Fees 1.4 1.5 amortisation Total 18.7 21.6 • A net £10.1m non-cash credit relating to the revaluation of Pu
Slide 11: Strong Cash Flow Conversion
Strong Cash Flow Conversion £ millions, OPERATING CASH FLOW CASH FLOW STATEMENT 86% Conversion £m FY17A FY18A 46% 243 Adjusted EBITDA 234.9 283.3 Conversion 211 Change in Working Capital (23.9) (40.2) 161 New Store Capex (32.5) (33.7) 129 Infrastructure Capex (3.5) (62.4) Maintenance Capex (14.4) (1
Slide 12: Simon Arora, Chief Executive Officer
Simon Arora Chief Executive Officer Ref: 750493 12
Slide 13: UK Consumers are still finding it tough
UK Consumers are still finding it tough Year On Year change in Asda Weekly Income Tracker, March 2018 Wide Variance across Regions Gross Income Growth, Q1 2018 Asda Income Tracker £30 8.0% £25 6.0% £20 4.0% £15 2.0% £10 0.0% £5 -2.0% £- -4.0% -£5 -£10 -£15 Wide Variance across Household Income Group
Slide 14: Last Reported % Revenue Increase
UK Revenue Growth Last Reported % Revenue Increase Note: 1. Latest annual accounts or full year announcements, up to May 2018. Revenues exclude VAT Note 2. B&M figures include Heron Foods and are stated on a 52 week basis. Ref: 750493 Note 3. Lidl do not separately disclose UK revenues 14
Slide 15: B&M has Further Room For Growth
B&M has Further Room For Growth UK Revenues £’ billions “Aldi had set a target to reach 1,000 stores by 2022 but the CEO told the Grocer magazine the total could be 1,300 by that date” The Guardian, 12 May 2017 “Lidl plans to open at least one new store every week for the next 5-10 years” The Grocer
Slide 16: Broad based LFL Performance
Broad based LFL Performance FULL YEAR CATEGORY LFL COMMENTARY Category A 12% • Currency-led Inflation theoretically affected all Category B 13% categories but is clearly not the sole driver. Category C 7% • YE 30/3/17 Food LFL was +6%, growth started pre-Brexit Category D -6% Category D -2% Market C
Slide 17: Product Initiatives - Frozen & Chilled Update
Product Initiatives - Frozen & Chilled Update COMMENTARY • At 14/05/18, we had Frozen & Chilled Departments deployed at 70 B&M stores. • On average, these stores have seen a +5% improvement to LFL’s • These stores are serviced by Heron DC in Hull. We will pause at 80 B&M stores until our Bedford DC
Slide 18: Product Initiatives - Other
Product Initiatives - Other MORE ‘DIRECT TO RETAIL’ LICENCING EXCLUSIVE TO B&M LEADING TOY BRANDS Ref: 750493 18
Slide 19: Expansion in both Infill and New Regions
Expansion in both Infill and New Regions FY18 OPENINGS 576 STORES AS AT MARCH 2018 • 47 gross openings (net 39 stores due to 5 relocations and 3 store closures) • Consistent high store returns • Many counties still under- penetrated FY18 New Stores Relocations STORES PER 100,000 POPULATION 1.5 to 2.
Slide 20: We re-affirm our 950 UK Store Target
We re-affirm our 950 UK Store Target 4,379 RETAIL COMMENTARY CATCHMENTS SCREENED • Our stores generally draw on only a 10 minute catchment, versus Big Ticket category specialists who need to draw from 30-40 minutes away. Proximity to Existing B&M Store • Our store target does not include a material
Slide 21: B&M stores do not need a wide catchment
B&M stores do not need a wide catchment CASE STUDY: NOTTINGHAM’S 6 STORES COMMENTARY • B&M competes in a very large addressable market of £130bn General Merchandise and £160bn Grocery sector in the UK • Our broad range of categories, everything from Food to Gardening to DIY, but selling just the bes
Slide 22: Success in the South East
Success in the South East COMMENTARY • At IPO, only 19 stores in the South East • At March 2018, we have 69 stores in the South East • FY18 revenues in the South East, £326m • South East up from 6% of estate to now 12% of B&M estate’s revenues • Average store contribution in South East is £826k vs £
Slide 23: Digital Marketing Update
Digital Marketing Update WEBSITE FACEBOOK +32% +14% NOT RELIANT ON T.V. ADVERTISING May-18: 1,067k users p.w. Likes May-18: 1,280k May-17: 807k users p.w. Likes May-17: 1,127k T.V. Advertising Spend: Q3: £1.5m (FY17 £3.0m) INSTAGRAM NEWSLETTER Q4: £0.0m (FY17 £0.8m) +81% Followers May-18: 185k Follo
Slide 24: Heron Foods Update
Heron Foods Update HIGHLIGHTS • Heron acquisition proving to be successful • We are delighted by the calibre of management and store colleagues, as well as the I.T. and Distribution capabilities • We opened 9 new stores and plan to open 15-20 stores per annum • Heron stores average 2,750 ft2 sales a
Slide 25: New Warehouse Investment in the UK
New Warehouse Investment in the UK IMPRESSION OF PROPOSED NEW DC FOR THE SOUTH KEY HIGHLIGHTS • Acquired land for 1,000,000 sq ft warehouse in Bedford at a cost of £44m • Build and fit out costs over the next 18 months is expected to be c. £65m • We propose to ‘Sale and Leaseback’ the facility immed
Slide 26: International Expansion - Germany
International Expansion - Germany SUMMARY CURRENT FOOTPRINT – GERMANY • Delivered revenue growth of 12.3% • The worst gardening and plant season in years. The disruption from the change of management has also contributed to a disappointing reduction 12+3 in EBITDA 1 • 12 new stores opening including
Slide 27: Germany: An Established Category with National Champions likely to Emerge
Germany: An Established Category with National Champions likely to Emerge Store Numbers Company Revenues (€m) Creation date * 250 500 1987 90 250 1987 216 550 2009 – in Germany 82 70 1987 118 110 1990 33 34 1968 56 100 1985 40 70 1982 * 1,300 500 2003 * 300 330 1879 206 116 1981 181 95 1991 170 66 1
Slide 28: The UK experience suggests there is room for multiple formats
The UK experience suggests there is room for multiple formats UK Revenues £’ billions 841 Stores # of Stores on reporting date 448 Stores 387 Stores 850 Stores 144 Stores 355 385 Stores Stores Note: 1. Latest annual accounts or full year announcements, up to May 2018. Revenues exclude VAT Ref: 75049
Slide 29: Capital Structure
Capital Structure DE-LEVERAGING PROFILE CAPITAL ALLOCATION FRAMEWORK STORE ROLLOUT 1 3.10 1.72x exc. Warehouse Investment 2.19 1.84 1.92 ORDINARY DIVIDEND 1.71 M&A OPPORTUNITY FY14A FY15A FY16A FY17A FY18A Adjusting for the capex spend on the new Southern warehouse the pro- RETURN SURPLUS CASH TO SH
Slide 30: Outlook for FY19
Outlook for FY19 • UK consumers increasingly attracted to discount formats and B&M’s format resonating strongly • Continued market share gain through continued store roll out and industry leading LFL’s • Healthy pipeline of 50 gross openings for FY19 at B&M, 15-20 at Heron and 10 at Jawoll • Pleasin
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