Good morning, everyone, and welcome to this presentation of B&M European Value Retail's 2026 financial year preliminary results. My name is Andrew Orchard, 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'll relay them into the room by that method.

With that, let me hand over to Tjeerd.

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 FY26, I would like to share the key highlights of the year, set out on slide number 3 behind me. I'm pleased to announce profit came in at our midpoints of current guidance, adjusted EBITDA of 459.

I'm also pleased that on the back of good working 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. We've also started the phase two of our plan, where a lot of initiatives already underway.

If you put it in perspective, phase two is all about balancing new space with investing in existing estate. Finally, I'm really pleased with the performance of our French business, B&M France, growing like-for-likes, attracting more customers, and gaining share in a competitive market, but much more on this later.

Before that, I would like to hand over to Pete to take us through the financial review of FY26. Pete, the floor is yours.

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 FY26.

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. As Tjeerd just highlighted, FY26 represented a difficult year for the group.

Profit was around the midpoint of our current guidance, and leverage ended the year in our 1 to 1.5 times 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 £459 million and profit before tax of £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 £321 million, which is £10 million better than last year. Leverage is also back in our target range.

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 UK, where like-for-like sales were flat. We also incorporated another strong performance from B&M France with 13.4% overall sales growth delivering an extra £73 million in group revenue.

The chart in the top right illustrates the B&M UK 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 result of -3.1%. Quarter by quarter, B&M has shown an improving like-for-like trajectory, except for the impact of the unusually warm and dry spring weather in quarter one last year.

This directional improvement resulted in a positive 0.1% like-for-like in quarter four. 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 FY25. That's an investment which keeps them set up for success into the future.

It's also worth highlighting that 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 FY27. 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.

This strategy strengthens our competitive position in the market as we move forwards. 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, but we expect to build on in FY27 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 a £66 million headwind that was not sufficiently mitigated in FY26.

Looking ahead, though, these pressures are materially reduced in FY27, and through the Back to B&M Basics program, we are taking targeted action to improve our cost control. More specifically, statutory pressures are easing in FY27, and whilst 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 FY26.

Nevertheless, initiatives are live in the business to address these cost pressures and ensure that the operating costs are kept under tight control going forwards. 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'd also call out France's strong performance on this slide, with profitability growth from £48 million to £53 million.

That's an increase of 11.8%. Whilst 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.

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 1 to 1.5 times range. We do expect leverage to spike at the start of the golden quarter due to our usual seasonal trends, but over the full year, we expect to at least maintain working capital at this reduced level, and we are targeting further improvements in FY27.

Our maintenance capex remains low at 1.1% of revenue. More than half of our overall FY26 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. 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. 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. That allows the necessary investment choices to be made to support the business strategy whilst maintaining our financial discipline.

France, meanwhile, remains standout in performance terms, demonstrating consistent strong execution of the B&M model and driving impressive performance and growth potential for the future. Finally, we're proposing to pay a final dividend of 6.1 pence per share, giving total ordinary dividend of 9.6 pence per share for the year.

This is in line with our 40% to 50% range specified in our capital allocation policy, and it's also in line with consensus. I'll now pass over to Tjeerd.

He'll take you through our strategic approach for FY27 and beyond.

Thanks very much, Pete, and let's move on to the next slide, which is slide 18. As a reminder, we're executing our plan at pace, and in the chart in the top right, you can actually see the three phases.

Phase one is Back to B&M Basics. We're in full flight of rollout and execution.

Phase two is deepening our foundations, and I'm pleased to say the rollout is started on phase two, and phase three is accelerating growth. The focus today is really giving you an update on Back to B&M Basics, but also already give you a fuel for phase two.

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. Turning to phase two, we've really made good progress against our operating model.

We've worked on format optimization, that work is now complete, and we're using data-driven insights 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 roll out.

Again, if you would put it in perspective, we're adopting, I think, a bit more balanced approach. We're still investing in new stores, but 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, gained market share, and having solid like-for-like sales growth. Then I'm really pleased with the Q4 focus on inventory reduction, clearance discipline, mainly in the month of January.

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, and 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, but we now also have a very disciplined execution of a line-by-line comparison. Against our closest competitor in the UK, we remain highly competitive, and you can see the development over time.

96%, 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 4% discrepancy? That's mainly driven by promotions and they are temporary and not at all structural.

We've also focused very much on seasonal competitiveness, 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 focus ranges.

We will focus hard on building an even better price perception. 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 over Christmas, Valentine's, Easter, garden, that really helps us. We've made the decision to double the front of store space in hundreds of our stores over summer, which we think will drive more engagement, and the first results have been really positive of having a much more customer-focused ranges at the front of the store.

To the next four work streams on slide 20, with range, we initially started with three range pilots. We've added four later in the year, and in total, we've trialed six months of seven pilot categories.

Six of the seven categories, we've been able to conclude with a positive sales outcome, lower SKU counts, higher sales. We feel very confident now we can roll out, and we've started the rollout last week of the SKU reduction across the year.

Our first focus is the more normalized categories that have no longer 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% to 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. We've worked hard on making sure customers could find these items on shelf whenever they came to our stores.

On the top 250 best-selling SKUs, we've rolled out nationally a different way of working, and I'm pleased to say that we have moved from an 86% availability to about 95% last week. 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 of focusing on better availability across the estate, and we're doing it in a focused way with a store availability alerts, 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. We do not only focus on the store, we look at supplier 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. Then moving on to phase two, slide 21 behind me here.

Even though we didn't fully conclude phase one, we've actually started and made progress already in phase two. 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, let's say, hypothetical. We've made it really tangible now, and we are really focusing on making sure that we optimize the range for customers in the locations where they shop.

It's really hard to tailor to 800 different locations, we've grouped them in six clusters. 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, which means we've got an opportunity to serve as customers much better, to optimize range and the proposition at cluster level. That's exactly what we're doing.

Similar to the range rationalization, where we're trialing stuff, we're now investing in the estate, and we really want to invest in estate to maximize the match between range in that store and the customer mission. There's three work streams in play here to make sure we take the right decision later in the year.

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, and 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, and 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 as refits. The same work, 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.

We have now 10 stores have been refreshed across the country from the North to the South, and that's also now a focus area for us to see if we can drive benefits in terms of sales. Then finally, the third one is a bit more far out.

We call this B&M 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 use a lot of customer and colleague feedback to improve that store concept, and 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. The good thing also, given our leverage, given our net debt, we can self-fund this through cost and working capital efficiencies.

Also, 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 '27, 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, 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.

Talking about openings, we have achieved 150th store in the country, we're becoming a sizeable business. Talking about sizeable businesses, the French market in terms of inhabitants, total, let's say, size of market is not dissimilar to the UK.

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 FY27. Then Heron Foods.

In January, we announced that we would conduct a strategic review of its customer proposition, and we've taken the learnings and the outcomes of that, and the conclusion is we actually see significant opportunities to improve its customer proposition. If you would scan the UK 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 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 and they've done a good job because actually we see a good start to the year, positive like-for-likes also for Heron, and we will also continue to invest in team and talent in Heron to support future growth. Then 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, and of course, that's being helped by simplification in 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.

Cash generation, we've even to outperform last year, the year before, actually on a lower profitability level, I think we will demonstrate 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-likes. Back to B&M Basics is the main driver.

It's supplemented by new store growth in UK 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's 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 UK in the medium term as an outcome, not as a financial input. As our business is very strong in terms of cash generation, and we believe together this is an attractive total shareholder return.

Then finalizing my update, to conclude, we're really executing B&M Back to Basics at good pace, and 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, and 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, this quarter is quite, let's say, weather and external impacts dependent. Especially April last year was phenomenal, we had double-digit like-for-like growth, difficult month to cycle this year.

We've seen improvements in recent weeks, as you could have seen outside, the weather has turned positively, we've all seen 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.

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.

Thanks. Morning.

Jonathan Pritchard at Peel Hunt. Just on perception, two sort of an A and a B really.

Firstly, obviously, better that perception follows reality, better to have the reality in the right place, but what's the next step in terms of getting that price perception shifted? Because I think you mentioned that.

How do you actually do that? Obviously, as I say, the reality is in a good place.

How do you shift the perception? Just back on current trading, excuse me, a tricky April, a better May.

Have you actually ended up pretty much where you thought you would be of those two sort of played a draw? Are you a touch behind or are you where you thought you'd be?

Then, obviously, a much more data approach been used on existing space. Have you started to apply that to new space now, and is that educating new store opening decisions?

Yeah. Good questions.

I count three questions. 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 will 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.

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 perception is ultimately the true success here.

Is current trading in line with our expectations? We never expected April to be positive this year because last year was just exceptional, and we would look at a season in totality, and the season is not over yet.

Still a lot to play for, and obviously, last couple of weeks, we were probably better than our expectations, but overall, we haven't concluded the season, and in July, I'm probably delighted to share with you the Q1 results. Then 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. 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, but in a way that we want to invest prudently and ultimately have the right return per shareholders.

That's also what we're doing there. Yeah.

Thank you. A next question, Warwick from 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,

or

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

Yeah. Clearly, any discussion on terms is a commercial discussion between two parties that probably is not very helpful to share here 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, 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.

We've seen in the UK, and I think we've said it before, a very strong push about 18 months ago on mainly focusing our general merchandise ranges on entry price, 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 board covers you buy, but probably not much.

Not very frequent, and we actually did decrease those items quite a bit. I think the insight for us is in our own company.

In a market where probably customer confidence is as depressed as the UK is, we're gaining share, we're growing like-for-likes, and we've got a range which is much more good-better-best tiering. We have a great value item at 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'd tailor to customers that actually have a limited budget, you're there for entry, but 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 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. 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.

Richard from RBC, let's take your question.

Thank you. Richard Chamberlain from RBC.

Three for me, if I may. Tjeerd, just wondered, are you 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 benefits?

Second one is, we're starting to see some higher-priced items coming through in the store. Thinking things like garden furniture, £400 type garden furniture sets.

Still great value. Right, yeah.

Sure they are. Is that changing your thinking in terms of how you think about price architecture and sort of opening the scope for more of those items?

Then the third one is just on capital allocation. Wondering if you can just give an update on what you're looking for in terms of optimal leverage and when you could consider share buybacks, I guess.

Thanks.

Pete, am I right that you 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, we are trialing now availability alerts because the problem is with the first batch of stores that we rolled out, we're nationwide now, you can no longer have a control group measuring 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 to play, but we do see a correlation emerging. On the higher-priced items, it's exactly what I explained in our core ranges, a good-better-best.

In seasonal, we are able to actually move a bit faster because the buys are, let's say, one-offs, 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've 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 £40 large oversized mirror earlier in the year and that sold tremendously well. Actually, we see better-value items, but on a higher price point, actually do really well at B&M.

I think on capital allocation, I think good to give an update where our heads is at, yeah?

I think the first question was where do we want leverage to be, in terms of where we want leverage to be, our target range remains at 1 to 1.5 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, we do expect to be in a position to make that decision in January 2027.

Okay. Great.

Thanks.

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 to the rate of openings this year in the UK? 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?

I think we were very transparent last update that the underlying growth rate of new space on an organic pipeline is about 25 to 35 new sites. We have enjoyed last 2 years the 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'd say, currently is drying up, and many of the Poundland sites that have become available were not really fitting our requirements.

That's the natural, let's say, evolution, but I also would like to stress that it's quality over quantity, we're not chasing a number here. We want really quality sites.

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 the store doesn't work, it's better to close it, and given a network as we have, in most cases, quite a big part of that sales will flow through the adjacent stores, and we can actually redeploy 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.

In terms of our hurdle rate, we're looking at a vast range of metrics, but the most important one is store contribution, and 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, and as a consequence, then if we don't believe there's opportunities to drive better performance, we then close the store.

Great. Let's take a question from Kate.

Kate Calvert at Investec.

Thank you. Morning.

Just two questions for me. As you move in to phase two and invest in your store estate, what proportion of your portfolio do you think you will just relay versus refit?

I assume the 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?

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, and if it's demonstrating positive sales results, probably the opportunity is to go quite broad across the estate, but 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 store teams are able to and 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.

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?

Yeah. Stock quality coming into the store at 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 we've got in the business in the sort of in the storerooms of the business that we need to get out on the floor and 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 a material issue with the stock coming in going forwards because we will be operating in a clearing as-you-go type regime over over the new stock that comes in, which will leave our stock in a high-quality position overall.

Brilliant. Thanks.

Thank you.

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

Morning. If it's okay, do you mind if we sort of dwell on the past a bit, on specifically Q4?

Because I'm a little bit confused in the sense that December was a strong underlying like-for-like number, +3%, 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. Then we came into Q4 and it seemed like it's been a flatter profile.

I think it started well, but 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? Then the second question is, I think you mentioned back in Q3 that some of the supermarkets had stepped up the promotional activity, particularly Tesco and loyalty.

As a nod to sort of potentially improving the trading margin in general merchandise in the '80s, 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? Yeah.

No, good question. Thank you.

I think the 3% like-for-like in December was actually really showcasing the strength of B&M 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 phenomenally 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 momentum going out of Christmas. February was probably flattish, and in March, we had the benefit of Easter a bit earlier, 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'll say that's the composition of the quarter.

We're still pleased with a slightly positive like-for-like number. I wasn't expecting the 3% in December to continue throughout the year because ultimately, the hard yards were not done yet, we still have to work hard in making sure that all of the elements of driving like-for-likes are fully implemented, and it was pleasing to see, it showcases the strength of B&M in a seasonal period, 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 7, 8 years, I guess.

As long as I remember. Yeah.

It was a meaningful investment, but if you would look at our margins since September, it's actually more or less at a similar level. It's very interesting to see because I know quite in detail how the bigger supermarkets are operating in the UK, 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, but I don't foresee at this stage further investments in FMCG pricing.

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

Obviously, you're sticking with it. Do you feel there's some low-hanging fruit that's going to get you back quite quickly in a short order or is it going to be a drain?

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 UK. 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 UK, 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.

In addition, what we didn't do well last year, which we're proving to do, is be more assertive and aggressive on getting clearance parcels, and as a consequence, we've 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. It'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.

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, and how lean do you see the cost base this year compared with previous years? Yeah.

That's good point. On the Iran conflict, clearly, nobody has a crystal ball.

I can only comment to what we've seen to date, and we've extrapolated to date's 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. It's electricity costs, energy costs in our stores.

The second one is diesel for our trucks, and the third one is then 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, and 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, we are still at the same level of total energy usage as four years ago.

By chance, 2 weeks before the conflict started in February, we took a decision to now implement this system across the whole of the estate, also the older stores. We actually feel quite good about being able to mitigate the rising energy costs in stores by, I think, 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, and we see diesel costs, of course, rising, but that's actually not a very material number, also that one we believe we can absorb, and we implemented a route scheduling system last year, 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 in the overall freight costs, 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, and it doesn't have, in our view, a material impact on our bottom line. I think overall costs for the year, obviously, last year, there was a quite a significant statutory cost increase with, as Pete said, 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 to the same rate as last year, and 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, but obviously, we are going to work hard to simplify a business, take costs out so we can keep prices low for customers, but directly linked to the Iran conflict, we don't see a large impact on our business.

Thank you. I think that's Andrew Wade from Jefferies at the back.

Let's take your question, Andy.

Thanks very much. Three actually from me.

First one, digging a bit more into what Ben was asking around the clearance side of things. FY27 benefit to working capital from was was £90 million.

You've talked about that being almost all sort of stock benefit. 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 store count, and you probably didn't sell it at cost or NRV.

We're probably talking £100, £150 million revenue benefit in H2. It maybe my maths is all all out there, but that that looks like sort of 5% boost to revenue in the second half.

Is is is that £100 million on £2.3 billion of UK revenue in H2?

I think part of the equation there is that some of that working capital benefit was unwinding our generally overstocked 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.

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

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

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

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 have 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.

Okay. All right.

Thanks very much. Second one, talked about a couple of times you mentioned about gaining share.

Just interested as to what benchmark you're using there because obviously, supermarkets, M&S non-food and Home Bargains Yeah. That

was France. It's a panel company, I think it's called Circana, and we also subscribe, of course, to the UK, Worldpanel, for example, and there B&M UK, we hold our market share in the market.

We've held it at similar levels, but in France, we're growing.

Which category would that be in the UK? Is that discounters specifically or is that

That's Worldpanel, the Kantar data. Yeah.

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

Yeah.

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% to 4% like-for-like uplift, I think what we'd sort of hoped would happen.

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

That's good question. Six categories were positive, and on average, between 1% and 3% more or less.

The ones we showed were probably representative. The seventh was negative, and of course, your question is going to be why?

Why didn't you fit it? The seventh was a very high-churn category, and what we've learned, it's very interesting.

What we've trialed a lot, you can actually see a lot and learn a lot. The six categories that are positive are probably more predictable, routine categories with a more static range.

The seventh was actually crisps and snacks, where we had negative sales, and the main learning is that we just over-trade and we use secondary, tertiary space in the store to merchandise crisps and snacks across the shop because it's an impulse products. We have a lot of when it's gone, it's gone products 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. We actually measured store not merchandising crisps and snacks across the estate, but just in its home bay.

Obviously, then you get a negative outcome. We've learned that that's a very high, let's say, churn category where you need to merchandise much harder.

The numbers we quote on the presentation are representative of the seven categories.

It's from a similar sort of space or maybe even less slightly, the other way?

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.

Cool. Thanks.

Yeah.

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

Hello. Richard Clarke from Bernstein.

Three quick ones from me. The UK consumer maybe 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?

Then

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

Good questions. I think UK consumer, I think 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. Actually, 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. We, for example, we drop Island Life, 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.

They're buying into their own clothes, but they're decorating their 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 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, 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 UK, I think that's one. I think, two, we are faced in France with a very different competitive pressure.

I think we all know the competitor that's so strong in France, and 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 2.5 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. 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. Then finally, yeah, private label is indeed on our roadmap.

It's the third phase. I've made the 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, and if you would think about our business, 90% of our non-food or general merchandise is private brands, 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, but the focus now is really finishing Back to B&M Basics, working on the estate, and this is a phase three opportunity, but it's very much on our roadmap to look into.

Yeah.

Thanks very much.

We have time for two more questions. Matt, I know you have one.

I'm just going to take one online first, and we've got a couple of questions on non-cash impairments. Could you comment on that and, specifically, is it tied to any actions on the Back to B&M Basics, and therefore, should we expect that kind of impairment to continue in terms of magnitude and regularity?

Probably one for you, Pete.

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. It's a technical calculation we have to carry out each year to analyze the assets at our stores and, 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 £3 and £5 million per annum. When we step 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 £35 million of impairment.

Now, you can't impair the same asset twice, we don't expect those sort of levels of impairment to continue, so as profitability grows going forwards, we should revert back to our usual run rate level of about £3 to £5 million per annum.

Very clear. Matt, thank you for your patience.

Let's finish with your question. Matt from Barclays.

Sure. Thank you.

Matt Carty 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 sort 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.

On the Employment Rights Act, I think the consultation started this week on the next phase of the rights. We, as B&M, but also as member of the BRC, are very clear.

We would like to keep the flexibility and the agility with employment in our stores. We always do the right thing for our people, but 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, and if anything, most people in my company, and including myself, started their careers at entry-level roles in retail, and then, you can actually grow your career quite strongly. 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 try to influence government to do the right thing this time. Obviously, clearly, if the legislation would come out, it's effective life, it will be a level playing field for retailers and we have just to accept and work with it, but 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, but the good thing is, as I outlined today, we actually see quite some opportunities in terms of customer offering that we don't have part of the playbook of Heron Foods.

Food-to-go, lottery, coffee, sandwiches, much better meal deal, but 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, and we will make sure that the right capability of people are working there with supporting Heron Foods business, but we feel that there's opportunity still to go for at Heron Foods.

Yeah. Good.

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.

Thank you very much.