B&M European Value Retail S.A.

morning guys thank you for coming good afternoon Asia and really good afternoon America I think we have so you guys know 140 people on the line okay so thank you for coming so let me a few introductions before we kick off I think most of you have already met Gareth Bilton he will introduce himself in a minute incoming trading director he has a big job ahead of him he's going to do fantastic so Let's wait for Gareth. James Kueh, retail director, enrolled since July. So Gareth is no longer in retail since the summer. James is running the shops. How many years at B&M, James? Nearly 14 years now. Nearly 14 years. So this shop is running an operation which has 32,000 people?

Yeah.

Roughly. So a lot of continuity. James used to... work for Gareth. So it's been a nice transition. Everybody knows Mike. Some of you have already met once before. Leslie Buchanan. Leslie, how many years in the business?

Over ten.

Ten years. Leslie is a senior buyer in home, key category for us. And this is Vianney D. I'm not going to pronounce the D because I'll embarrass myself. Vianney is now the trading director in France. Executive director reporting to Anthony, the MD. How do you pronounce your last name, Vianney? Just for the record. I'm not going to embarrass myself on that one, actually. My French is too basic for that. So you will hear from the team today. So today, I'll really anchor the conversation on two fundamental points, which I will keep coming back. EDLP, volume, and how we continue to drive prices down. It's a continuous process of price deflation, year in, year out. You can call it deflation, disinflation, but we're in the business of driving volume through ADLP to continue to give every quarter customers the lowest price. And that's basically the equation. And the second piece, which hopefully comes to life for me, in over two years of running the business, This is a team effort. And in every result you are always going to meet part of the senior team. And actually it's all, come in, hello. Please come in. Thank you. I thought English time was accurate in the good old days. Sorry for that. And it's all around the B&M culture. It's a very distinct culture. We do things in a very entrepreneurial, different way, and hopefully it actually comes to life with the guys, okay? So EDLP, volume, continued price reductions. So, let me kick us off. I'll just highlight a couple of numbers, have one group adjusted EBITDA, 274 million pounds, which is 2% up in the year. That shows a high degree of discipline in the business on how we buy, how we sell, and how we control the cost lines. Interim dividend, 5.3 P, 3.9% up for the half. And Mike is going to give you some color of actually our dividend payout, which is stronger. Anchoring on those two numbers, let me talk the first two bullet points combine what we've done on volume. If you remember what we said at the end of Q1, even before that, by the time we had in June the full year results, I said I detect significant weakness in the market in general merchandise. And I said we had bought in advance to basically take volume market share in general merchandise against the broad competition on what I sense and see as a weakness. You can see it in some of the competitor numbers. You've seen home base as an example yesterday. It's a broad market, okay? So we set up Q2 to gain volume market share in general emerge. So let me just give you an example. What is the main category in home? It's a broad cooking, dine, textiles. It's a very broad area which is instrumental and the number one category in general in March. Don't take the numbers literally to the decimal, but let me give you the sense of actually the volume we have driven. This is just in Q2, okay? Total sales in home, roughly grew up in Q2 by 10% pounds. And the volumes, units, that we drew in Q2 in-home is roughly 20%. 10% nominal sales growth total in-home and 20% volume in-home in the quarter. You've seen the shops EDV, everyday value, we've been buying purposefully for one year ago bringing that price point in an organized way to drive that volume okay and i am pleased to say that general merchandise performed exceptionally well in q2 units pounds and nominal if you look at it from a broader point of view Roughly, if you look at the last five years, this business has grown the top line, let's say, rounded up plus 40%. You've seen it in the RNS, and I'm going to reiterate it here. Our number of containers of the same period coming in general merch from China is up 40%. Top line of the business, 40% over five years. Containers, physical volume, and that's tens of thousands of containers, up 40%. Don't get distracted because there is mix. There is always a bit of mix change in those containers. But what that tells you is that over five years, the inflation in general merchandise, cumulatively, is nil, zero. Zero. This is a business that buys and trades in volume. We are not in the business of driving or selling inflation. You've seen it on a cumulatively basis over five years. There is no inflation in general merge. You see it in home in Q2. The level of units and volume throughput is twice the nominal pounds coming into the business. And the way to think about it is actually quite simple. If you take home, we've grown 20% of units in Q2. I can tell you categorically we're gaining market share. And you see that in the bottom line. That's kind of the first point I wanted to anchor. You will hear from the team how that comes to life. I might steal a bit of Gareth input in here. but just to give you a sense. FMCG, Gareth is going to talk about FMCG in more detail. Current year inflation in FMCG, zero. In fact, it's even marginally negative, deliberately. So we're in the business of selling EDLP. We don't do high-low. We drive volume and units. And that is a virtual circle of B&M. Volume. And we're in the business of bringing prices down in an orderly manner to give customers the best value proposition we can in the business we operate. Okay? I will jump to the one before last. Very smooth transition team. Since I became CEO, I've been running succession in every function. You have Mike as CFO. France is a very strong, stable team. Logistics, you've met John Parry and Sharon in Bedford. Retail, James is in this role not because of accidents. This is probably the guy who spends most of my time in shops, James. That might be a bad thing for him, but we kind of enjoy it. So all of this has been planned for a number of years. And Gareth is absolutely the right person to take over from Bobby, who is retiring in March, currently. All of this is planned. Very smooth succession, and you can work on the assumption that the transition is largely completed. So Bobby stays in here until March, and then he's going to help us on an advisory basis for a number of months on a non-exec capacity actually need or help on a needs basis. Think about over six months or so consultancy in FY26. Full year, $620 to $660 million. That's a range. And you guys know me by now, I don't shoot at the bottom end. you can read what you think is appropriate on that statement. Full year EBITDA, 620 to 660 million, compared to a 53 weeks last year of six to nine, and a meaningful 52 weeks of 616 million. Okay? That's basically setting the scene. You guys can go through slides later. The pipeline in the UK is performing very well. You know we're going to open 45 shops per year. They're in good nick, highly disciplined, and they are performing actually quite nicely. So we're going to open the 45 shops per year at BNM UK, we said. The foundations for growth in France are in place. I'm happy how France is performing. I've spent the last year and a half with the team putting a lot of the back end. to make sure we can continue to grow the business confidently. And you can assume that I'm going to open a higher number of stores next year than the 11 which I will open this year. So this year, France will open 11, and it will be higher next year in an orderly BNM way. You know that we have returned $1.9 billion of cash since 2020 to shareholders. This is a highly disciplined business that grows the bottom line and returns cash to shareholders. And I am pleased to formally put on the RNS that share buybacks are underway. We're doing the internal work. It's already in progress. It's not a comment. It's formal. So we will continue to return cash to shareholders every year in the appropriate optimal way. Okay? And when we have all of this in place, we'll update you basically how we're going to do it. Simple terms, we will re-domicile Lux into a different location, but we continue in the LLC as a normal business. So share buybacks are coming, okay? Couple of key points on these slides before I hand it over to Mike. The sales densities of this business are structurally higher than pre-pandemic. You can see it in the top of the chart. Those sales densities have no inflation. It's volume. You've heard me in general merchandise. We've delivered through this period 40% increase in containers coming from China, which matches the top line. So those blue bars have no inflation. we're not in the business of driving inflation. EDLP is designed to lower prices and offer our customers the best price every year. And our growth in stores is highly disciplined. You've heard me before. We went for 51 Wilco shops. We didn't go for 53. I could have chosen 220. So the returns and the cash generation of these incremental capex is highly productive. And Mike is going to bring that to life. So that discipline in volume that translates into the bottom line and the discipline on how we deploy new capital, which delivers best in class in this market return on capital is at the bedrock of the business. Next slide. I reiterate the same. From pre-pandemic, the top line of this business has grown by 40%. Our volumes in general merchandise have grown by 40%. There is no inflation, and we continue to drive prices for the customer. The reason why that is important, it's because EDLP volume structurally higher sell densities. or revenue growth is underpinned by units of volume per box. There is no inflation in this box. And the lack of inflation allows us to buy more quantities, sell them at low prices, which are winning prices in the market, and that's a virtuous circle of return. Really important that I emphasize this message. We are not in the business of driving inflation, guys. It's all around volume. Mike, to you. Thank you, Alex.

So good to see you all. Thank you for joining us. So we're going to begin with a short overview of our P&L. So group revenues for the first 26 weeks were 2.644 billion, which is 3.7% up on last year. Driven by the sales growth, adjusted EBITDA before IFRS 16 grew by 2% up to 274 million pounds, which meant our earnings margin, as you can see, was broadly flat at 10.4%. So given the trading environment and the strength of the prior prior year first half comparator, which was a record financial year, of course, the progress in adjusted EBITDA really does show the resilience of our business model and our growth strategy in driving value for our stakeholders. Further down the P&L, our adjusted diluted EPS stepped back to 14.7 pence, which is linked to the higher interest charges on our borrowings and also the larger asset base from our store opening program. Moving on to our balance sheet metrics at the bottom of the page, our net debt ratio stands at 1.2 times, which is comfortably in the lower half of our 1 to 1.5 times target operating range. And including IFRS 16 liabilities, the ratio is 2.5 times. Again, a resilient position. So looking at our revenue performance in more detail. Firstly, Our like-for-like sales of negative 3.6% reflected the weather in the early part of the spring-summer season, the overall consumer environment, but of course, as Alex has already touched on, the trading strategy that we adopt. As Alex has outlined, our trading approach remains to offer customers the lowest prices possible and to drive our profit generation through volume growth. Importantly, the business has been gaining volume momentum across the half, and we're particularly pleased with the general merchandise progress that Alex has touched on as we enter the key golden quarter period. Secondly, as we outlined in the full year, we've got multiple growth drivers. UK new stores primarily drove the revenue growth in the period, as you can see, but we also have a positive contribution coming through from both France and Air in that. So overall, total revenue growth was 3.7%, underpinned by increases in sales volumes with performance strengthening across the period. Moving on to gross margin, the biggest driver was a 66 basis point step-on in UK trading margin. This was driven by a favorable mix, underpinned by the volumes being driven, beneficial FX rates, and again, disciplined approach to the limited markdowns that we implemented. Our operations in France and Heron Foods have also shown robust margins, and I'd particularly call out that I'm pleased with our clean spring-summer stock exit position because this sets us up well for the next trading year where we know we'll be buying at a comparatively more favorable FX rate year on year. Slide 12, our adjusted EBITDA increased by 2%. That's driven by volume-led sales growth across all segments. And as I said at the start, that is 2% growth on a strong first half of a record financial year. BNM UK's EBITDA margin has remained broadly stable despite absorbing the pre-opening costs for 30 new stores opened in the half and also of course the significant increases in hourly wages. France's underlying EBITDA margin is up, however the reported margin you can see on the screen shows a dip due to the one-off costs of a new warehouse management system transition that has now successfully completed. Heron Foods continues to report a very healthy 6.7% EBITDA margin. And so as we look at the group result, we see it as all three businesses contributing well to the overall profit performance. Looking at our operating costs, the adjusted costs have increased in nominal terms, primarily due to the expansion of our store estate across the three fascias. The most significant increases in UK operating costs this year have been driven by the national living wage rate, which rose by nearly 10% for the second consecutive year. And we have a robust approach of using our higher volumes to offset those increases through enhanced productivity. You can see the mitigation has already been significant. And indeed, we estimate that with a flat like-for-like position in the first half, we would have achieved a stable operating cost margin there in the UK. Our cost base, however, is significantly variable and controllable, which has also helped us maintain our margins during this period. We consistently drive the cost discipline across all our businesses. However, this cost discipline is implemented in a way that protects the integrity of our operating standards, something that James no doubt will touch on. If you visited any one of our stores on any day of the trading period, be it the first, the last, or a day in the middle, I think you would find that the operational standards remain the same throughout. And protecting our standards and maintaining our cost margin advantage in the industry is critical to our business model. And as we look at upcoming cost pressures, both our targets and our mitigation approach will be no different. So I mentioned the discipline focus we keep on our financial returns and I thought it useful at this stage to update you all on the latest performance of our store opening program. Before today, we most recently updated our cohort of new store openings through to the end of March 2022. So here I update that on the 18 months of openings that have followed since that last update given to the market. This is a group of 35 stores. It took a required total investment of £50 million to get those open. That is capex, of course, fitting out the stores, but it's also the pre-opening OPEX, and it is also the working capital that we include within the financial returns metrics we adopt. So that's the stock on the shelves. Those stores generated last 12 months revenues of £257 million, and the contribution including a full allocation of costs, be it central costs, be it distribution costs. The profit contribution was £50 million. So that is a £50 million profit return on £50 million of investment. That is a fully loaded payback of 12 months. On a cash on cash basis, of course, with rent incentives that will typically be available, it is even more rapid. And if you look at where those stores were opened on the map, you can see that there are balanced groups spread across the country and actually spread across the type of stores that were opening, just showing how well each format within our model works. So moving on to the cash flow. Our post-tax free cash flow for the first half was 73 million pounds, down from 143 million pounds in the same period in the prior year. Two things that drove that change in performance. Firstly, increase in working capital. Secondly, higher capital expenditure year on year. I see both of those factors as timing effects. Across the full year, we expect a similar number of store openings as we saw in the financial year 24. So that's around 45. And so that capex number across the full year for new stores will balance out. And then on the working capital side, the working capital investment in the first half has been higher this year because of the earlier shipping of autumn and winter stock. And again, we expect to sell that through and end the year with a year-on-year stock position that only reflects the additional new stores that we're operating. So given the ongoing underlying profit and cash generation progress of the business, the rapid payback of our capex spends, we're declaring an increased 5.3 pence per share interim dividend up from 5.1 pence in the prior year. That reflects an updated post-IFRS 16 dividend policy where we will aim to pay out a stable or growing ordinary dividend that is near the midpoint of a range of 40 to 50% of post-tax earnings. And it really is the resilience of our cash generation and earnings progress that gives us confidence declaring that increased range. So finally, before I hand back to Alex, it's just worth reiterating what we see as critical in the business from a finance perspective. I think the first piece is around the discipline we have in driving profitable and sustainable growth. For us, that means growth is volume-led, coming from both like-for-likes and from new stores. Secondly, we see the long-term potential for total growth as significant, the returns from our new stores as highly attractive. And attached to that growth focus is the relentless control of our operating costs to retain our customer value proposition and to retain our margins for shareholders as well. We have cash discipline, we keep our stock buys tight, we exit each season clean, we maintain our capital light investment base, and we're going to carry on operating with a robust balance sheet And together, that means we're going to continue to grow our profits and our cash returns to shareholders. Alex.

Thank you, Mike. This will take me five seconds. This is a team effort. This is already on the website. You've already met John. Susie Williams, hands up. Susie is our group IT director. How many years in the business, Susie, already? IT systems in this business transform. Thank you for the hard work, Susi. Pete Waterhouse, group financial controller. He stood up with me when I took over. You already know Pete. And it's a fantastic team, actually, a broad set of skills with depth in each function. And you will hear from Susi. We're going to invite Susi to talk about IT in May, June. No pressure. Gareth.

Thanks, Alex. Good morning. So if you'll allow me a couple of minutes just to indulge, because I've stood here and talked to most of you before, but usually I stand and talk to you with James's hat on as the retail director, so it's different for me to stand and talk to you as the trading director. But I guess a couple of things I wanted to say before I get into the detail is, I'm 26 years in the business, and I've seen the business through lots of different lenses over the years. And to be studying with the incoming trading director is a real privilege for me. I've seen the business grow from seven stores on our first joint. So to be the incoming trading director at this level is a real privilege for me. I'm actually pretty lucky to inherit such an exceptionally strong foundation in that trading function. I've got some brilliant buyers, experienced buyers that really know our market well. And I'm really looking forward to to building on that foundation and taking the business forward. So I guess buzzing is probably the phrase you would describe for me for the last few months and the years ahead. So I'm going to share some headlines with you from our function. I'm going to enlist the help of Lesley and Vianney to talk about some detail. But I'm going to talk to you about price specifically because it's fundamental to our business. And measuring price is key to us so we know where we're at. And measuring price actually in FMCG and against general merchandise is two completely different animals. And I'll talk to you about the difference going forward. But I'll talk to you about FMCG first. So you can see the slide behind me. But the first point I'd make is we are religious and obsessive. about measuring price in FMCG. We have a weekly rhythm that probably John White, who's my grocery trading controller, would say is the highlight of his week and the bane of his life, both at the same time, because that index can drive lots of emotion, good and bad. But basically, I'll talk to you about the how we do it and a bit about the why we do it. And how we do it is we... We religiously measure a broad basket on a weekly basis across the four big mults and the appropriate discounters. And then we index that price on a like-for-like comparison product-wise, gram-for-gram, pound-for-pound. And we index it. And you can see from the slide that our index against that competition is anywhere between 120 and 127. And it's important to point out that that index is pre-loyalty schemes. Because we don't do loyalty schemes. We leave apps and complexity to others. We prefer an everyday low price model, as Alex has talked about, and keep it as simple as we can. That said, we can't ignore the impact of the loyalty scheme. You take the competitive loyalty schemes, they make a big difference to their price. So we do measure against that loyalty scheme impact. And even when you take that loyalty scheme impact into account, across that same broad basket, the index is still between 115 and 120, best case to worst case. So we take massive confidence from that, that our price in FMCG on a like-for-like comparison against the same products gram-for-gram, we are worst case when you take into loyalty schemes 15% to 20% different and pre-loyalty, the index is 120 to 127. And we audit that, and we document it, and we're really comfortable with that. And Alex has already made that point, but it's important to stress at this point that in our grocery pricing model, currently, there's zero inflation. Slightly backwards, as Alex said. In terms of the how, as well, and the why, the way we're able to achieve it is, I guess, discipline is the word that I would use. Discipline in EDLP. discipline in SKU count, managing that SKU count and staying as a limited SKU count retailer is really important. Because what that allows us to do is it allows us to buy in volume. So we constantly review the range. We chop out the tail. If we can't generate volume in a product, then we would rather drop out of a product than not be able to sustain volume or not be able to be competitive. And to bring that to life, if you take the beers, wines, and spirits category, for us to be competitive in any real way in beers, wines, and spirits, we would have to engage in stunt deals, high low pricing, loss leaders. And it's not our game. So we stock it as a category. We've got a range that we consider appropriate for our customer. But it's never a category that we're going to push to try to be market leading. And because we would have to move away from our core strategy and pricing to do that. So that's an example of how we do it. In the EDLP philosophy, you shouldn't confuse that with a reluctance from us to engage with our brand partners to drive promotions, because clearly we do that. We've got strong brand partnerships, but we will enter promotions from a planned and organized and cyclical basis. And the main reason for that is it enables us to drive volume, It enables us to pass on more value to our customers, and it drives something new and exciting to the customer, which keeps that FMCG piece rolling. So if I move on to general merchandise, it's more difficult to index price in general merchandise for a number of reasons. One, comparing like-for-like products is difficult quite often. So if you take a throw in household textiles, for example, you compare our throw to a Dunham throw or a home bargain throw or a Tesco throw, There may be a different size, there may be a different weight, there may be a different thread count. It's very different and very difficult to get an exact match. So we index it best we can. That doesn't mean we are any less relentless about benchmarking that price gap. Leslie and her team at home are all over that. And we have to benchmark it because there's a couple of important things to mention about general merchandise as well. The difference in quality or size may not be immediately obvious to the customer. In fact, in some general merchandise categories, that difference in quality might not even be relevant to that customer. If you take a dustpan and brush, for example, I don't think anybody cares too much whether one brand's dustpan and brush has got a heavier plastic weight or a different bristle count in the brush. A dustpan and brush has got to be fit for purpose and the right price. because value and price perception in that market is much more important. So that's a bigger focus for us as price as well. Our price gap in general merchandise, we are confident after all the benchmarking and measuring that we do, is actually stronger in general merchandise than it is in FMCG. We're very comfortable with our price, we're very comfortable in our quality, and we are very comfortable in our breadth of range because we think that gives us an edge over some of our competition. And I'm sure Leslie would argue, particularly over recent weeks, that skew discipline in general merchandise is probably more important than it is in FMCG, because generating volume in general merchandise is much more difficult than it is in FMCG. So constantly reviewing those ranges, reviewing that line detail of sales and profit at a line granular detail is fundamental, and we will very quickly exit lines from the tail so that we can focus on the volume lines. So we won't get involved messing around with products and general merchandise where we're selling one and two singles a month. That's not our game. Our game is volume, volume driving value, the value and the cost price upside we pass on to the customer. That's what we're in, and that requires a relentless, never-ending cycle from Leslie and her team. What's consistent with... With FMCG, there was the EDLP as our start point in general merchandise. Alex talked about the everyday value event. And just to add some color to that, the everyday value event is an event that we planned to close the end of summer season sale. It was almost a new event. And we bought a range of products that was deliberately low priced, a retail price. The quality was no different than the standard ranges, but we bought in volume. So it was non-margin dilutive. We didn't mark down to that price. The margin was built into the cost price, and the retails were reflected in the plan. And it generated incremental sales. It was a successful event for us, and it helped us transition from one series to the next. All of those elements added together meant that we were able to generate exactly what we set out to do. We offered fantastic value for money for our customers and strengthened our market share through the value proposition. So I'm going to pass you to Leslie and Vianney in a second and we'll talk through some product detail. But before I do, just to hold on price for a second because it's a really important point. I think there's three points that I would want you to take away from the price. Firstly, value to our customers is always our start point. Driving value Getting the right price first time is important. We don't want to mark down to a price. We buy good volume at healthy margins, but let us maintain that. And any upside in that volume buying process in the cost price, we are relentless and obsessed with passing that to the customer to drive the value message. That's the first thing I asked him to take away. The second thing is that volume is the key to unlocking value. The more we're able to ramp that volume up, the better cost price we get, the easier it is for us to unlock value and keep that ball rolling and generate value for our customer and continue to take market share. And the last thing is it's always EDLP. We don't do gimmicks. We don't do high lows. We won't ask you to download an app and scan it at the till to get 50 pence off one thing, which is hard work. It's a clear, transparent pricing model for our customers that keeps it simple. Mike talked about operating costs and keeping it simple. All of these things are key to our process. They're part of our heritage, and we have no intention of changing any of those things going forward. So thanks for listening to me about price. I'm going to pass you to Leslie and Vianney, who are going to talk about – I'll flip your slide on for your chaps – I'm going to talk to you about product, and then I'll just come on at the end if that's okay, just to indulge myself further in a few minutes. I've got the chance. Leslie?

Is that the slide the other way? Have you missed one? Yeah. That's yours? That's mine. Okay. So over 10 years being here, but in the last six years, I've been heading up the homeware buying team. So I'm just going to put a bit of colour around kind of how we've been buying and what we're doing and what we're moving forward with. So... I'm going to pick up on the EDLP because from a product ranging perspective, that is always the starting point for us. Always the starting point of that EDLP. I think last time I talked about our Simply ranges. Our Simply ranges are our volume, value, core ranges. They are ultimately the foundation of where we start. That's the starting point. That's where we start to layer on them, the seasonal, the trend, and the newness. Myself and the buyers and recently Gareth, we have been traveling four or five times a year now, so since September. We've been in Tokyo, we've been in Chicago, and we've been in China. And what we're doing out there is just looking for inspiration, what the new colors are, what's coming next, what's new. How can we tweak some of those lines that... that we've got in the ranges. Now, I've brought some trend boards next to me here. So, you can see alongside me, these are where we've brought all the inspiration back. We've pulled everything together, brought it back to the UK, and that's when we start to build the ranges. So, trying to build commercial EDLP product into these fun ranges, really. You know, they're design-led, they've got colour, but equally completely commercial for our B&M customer. So, these are three ranges here. They are seasonally relevant, so they're relevant to the season, as in they fit with that time of year, but they are not weather dependent. So, real core products at great prices, but a bit of fun. Now, using our design team has been key because it gives us exclusivity we've got products that are just exclusive to us and excited to share that we did win some awards this season so the big christmas press day so and i've brought three things to show you so the first award was this one so this is a snow globe candle size pound gorgeous fragrance if you want to have a little sniff on the way out and comes in three colors And then we've got, we won this for the gingerbread advent calendar. So gingerbread, probably one of the biggest things going on at the moment. This comes already filled, but you can use the drawers, you can fill it with yourself. So innovation exclusive to us and designed by us. And then finally, I think this is my personal favorite, the movie night in. So seven pounds, you get sweets, popcorn, the cups to put the drinks in. So perfect. And the most fun thing is the tray turns into a tray like you get in the cinema. So exciting and new things going on. We've been working through customer moments, so staying completely customer-focused obviously is key. We recognize our customers have got really busy lives. There's so much going on, and we want to take them through the year, through the season. So whether that's spring clean, whether it's the kids going back to school, older kids going to uni, so much going on, and we want to be there for them. What that then allows us to do is bring those events into the stores and It allows us to create a bit of fun in the seasonal space. James' team land it for us. And then the most exciting thing is how we get that through social media. So we're super passionate about our social media at the moment. Our buyers absolutely love it with TikTok, Instagram, any platform. What's fascinating and what is really exciting about social for us is we get so much user-generated content. And what I mean by that is there are so many wannabe influencers out there that they love shopping at B&M, they buy, and then they love showing their haul. So everybody wants to like, everybody wants to share. And what that gives us is a lot of content then for us to share with our new customers and equally our existing customers to come in and buy. Now, to do all of that, we've got to stay really close to our sourcing. And we... have some great factories in China, direct sources, but we also have our Hong Kong office as well. So our buyers have such a range and a scope of getting the best cost prices, the best quality, finding the best new product. And that is all done through the travelling and through the trips. Now, we're going to do something a bit different this year with Gareth. We'll be signing off our Christmas ranges in the UK. And then what we're doing is we'll travel and we'll go into Hong Kong and we will invite our biggest volume factories to come and sit face to face. We'll talk through the quantities we're buying, what the product's going to look like, what colour it is, what fragrance we want in it. Everything will be done sat there in that room so we know we're walking away with the best cost price the best quality and the best product that we can put into our range at the same time leveraging that buying power so with bianni and his team and on a much smaller scale heron where they will play into some of our events we will add their volume into ours and that buy so the buying power just becomes you know really really impressive for us and then we can drive those cost prices down And the last thing, Gareth already touched on, but ski discipline. It's very much what keeps our business simple. You know, the granular detail and the level that we will go down to. I think, you know, a recent conversation on the buying floor is toilet brushes. So, you know, how many toilet brushes are in the range? Right, we've got to cut the tail. These are the best. These are the volume ones. That's what we keep driving. Take the tail away and we layer the new lines in. I'm really happy with the progress that we've made on home, but also super excited about what else we can do with it and moving forward with Gareth, bringing those new products again, travelling and keeping the newness flowing. Exciting for our customers.

Thanks, Leslie. To be honest, can you tell us about France-UK synergies?

Well, so I'm the French trading director. I have more than 15 years of experience in retail business for an international group. I worked six years in China. I think we, for most of you, we met last year. What I can tell you is that B&M culture is so disruptive in France. We talk about discipline. We talk about simplicity. And I can tell you that Even also in France, we say sanity, not vanity. And this is very important in our business model. So to make sure that BNM France is not disturbing the UK business, we, I mean, Gareth, Leslie, and I, we have defined some points of synergies that will drive a mutual growth. So let's go through the three points. So the first one is by operating in two different countries, BNM can tap into a broader broader pool of consumer insights. So that means we can take benefits of the two markets. So that's the first point. Second, as Leslie mentioned, our teams are traveling together. We go to Europe, we go to China, all together. We have also joint sign-off on product ranges that make it more simple, the process of buying. It reduces complexity and also we leverage the UK private level portfolio. This is very important. In France, we don't invent any new brands. We take benefits of UK private level. That means we have a consistent brand image of B&M, whether you are in France or in UK. Last, and this is my favorite topic, I'm passionate about sourcing. So direct sourcing, And I spent years in China visiting factories. This provides a really, really strong competitive edge in the markets. When you direct sourcing, you can have a better cost efficiency. You can have supply chain control. Well, in simple words, we choose a product we want. There is no middleman between, which is sometimes the case for direct competitor. There is a middleman, yeah. But we do buy direct at BNM. And also, what is very important is that we pull the stock when we need it. And we just mentioned that our business is driven by volume, and it is very important to pull the stock when we need it. So we consolidate orders together, and we have a fantastic office in Hong Kong, and this is our share window to grow the business all together. So to make it simple, we buy together in volume, and we localize what is needed. either for price point reason, because we do have different price points in France, or for any specific needs for the French market. So I think you can understand that France is successful. We have a double digit growth in transaction. We have a double digit growth in sales volume. And on the top of that, we have now more than 3,000 SKUs in FNCG. which can drive footfall for the business. So, B&M France is now a scalable business. And later on, Alex will talk about all the investments we did. And from my side, I'm very... I'm looking forward also to go to U.S. with James and Alex to meet a few investors in person and open funds. Okay. Thank you very much.

Thank you, Rene.

Thanks, Vianney. So just before I sit down, as I said, whilst I've got the podium in a new role, I'll just take a couple of minutes. At risk of repeating myself, I've been in the business forever, and I've seen it through lots of different lenses. So for me to be able to move forward, I am beyond excited about this new role. And because I've been in the business forever, the buying team that we've got, I know most of them already from previous roles, so that transition's been smooth. And being able to have that relationship with them from the start, it's enabled the transition and enabled us to get some traction quickly. Going forward, buying decisions will sit with me. We're already locked down for spring-summer 25. Volume, value, and customer are at the root of those ranging decisions. We're just about finalizing autumn-winter 25 and those same... Yeah, back in FY26, autumn-winter 25. We're just about ready to sign those off, and volume, value, and customer will sit at the root of those ranging decisions as well. We've been to Hong Kong and China a couple of times already. Relationships with China are as strong as ever. It's a good transition there. We are actually in January 2026 buying mode. Christmas this year is yesterday for us. We're already moving down that road, and we're making good progress. We're in a good place to move forward, and I'm really excited about pushing it on. So thanks for listening to me. I'm going to pass you over to James, who's going to talk about store standards and retail.

James, you have to save all the time that Gareth, Leslie, and Vianney have used.

Sorry, no problem. Morning. As Alex touched on at the beginning of the session, I've been with the business 14 years now. I started way back then as a store manager and operated around 10 different stores and opened several new stores in the south of the country. I then went on to do roles as area manager and retail operations, and my most recent role was retail operations director, where I clearly worked closely with Gareth over a number of years and a lot of the projects that we obviously did in stores The key one being, I suppose, the transformation of our store standards that we've seen in the past few years. And if I look back even further than that, when I joined the business 14 years ago, there's a significant difference in our store standards. So for me, there's no change to that. We prioritize our store standards. It's what our customers deserve. It's what our colleagues deserve. And we continue to push on and build those store standards. We're currently running at 8 out of 10. You've seen it in the pack. We can push it further than that. There's a limit of where we need to go, but we've absolutely got more opportunity to push it further. I spend my whole week in stores, quite a lot of time with Alex on a Sunday, down to London, straight up to Liverpool. It is a very long day, and it also involves around... 30,000 WhatsApps a day is what I'm currently receiving. So Susie, our IT director, goes through a few phones for me through the year as I fill up the storage. Additionally, I have a separate team outside of my retail field team that now complete 350 visits per week. It's a great tool for me because it gives me a real non-biased view of my estate every three weeks. And also, we use it for multiple other elements as well. We get validation of completion of activity. We can use it for a number of things. So we are running 8 out of 10, 350 visits per week, 20,000 WhatsApps. And the main measure the guys are looking for when they're doing these visits is, is it available to every shelf, every day, every shop? Is the store clean? And is the store well-priced? So really simple measures, but that's what we're great at. We keep it simple in stores so that the stores can crack on trading their shops. So really pleased where standards are currently. The link between retail, buying, and logistics, I would say, is stronger than ever. And that is really enabling us to land events quicker, more efficiently, and at a much lower cost. And this is an example of something we landed this year, EVV, where it's all SRP. The store managers loved it, straight on the shelf, easy to implement, and easy to move around. So one thing we have introduced is a bit more of a disciplined approach to our secondary space. So store managers join our business because they love the autonomy in our stores of being able to trade the shops. But at the same time, we know that our best selling lines are a big percentage of our business. So we put a little bit more discipline for the stores around what they should do with these lines so we can hold the volume in every single shop every week. So that's been a bit of a change. As a store manager, I think you still have a good level of autonomy in your store. And you feel you can trade it, because that's something we can never lose And when we have store managers join us from competitors or other businesses, quite often that's why they love joining B&M, because it feels like a bit of old school retailing where they can actually trade the shop. And I think my final point, I suppose, is that everything I'm saying, how do I know that it's actually making a difference to our stores and to our colleagues? Well, we're now in our third successive year of a 500-bit reduction on our labor turnover. So three years in a row we've seen that, which is clearly helping me to build a more robust succession plan as we look to open more stores and need more senior management to run these shops. So all in all, we keep it very similar to what we've done in retail. It works. I was very lucky to inherit it from Gareth, and obviously we've done a lot of work for a number of years. We look at standards. We keep availability strong every day. We clean our shops, and we price our shops. And I've got no doubt now that we're in a great position with some of the new things Gareth will want to do in terms of activity. We'll be able to land them really quick, let's say at a low cost, for our customer to ensure that the product's on the shelf as quick as possible.

OK.

I'll pass back to you. I will be very quick, so we can open up to questions. And hopefully, Dave, we can allow an extra 15 minutes or so just to make sure we cover any questions. 20 seconds. That gives you an idea how the store will open. last financial year and year to date, highly disciplined. Mike has already covered the detail. Every single store we open earns its return. It's highly targeted. We choose a place where we open them. I'm very happy with this pipeline. Capacity. We are already on contract. We are going to open, rather than calling it a DC, I will call it an import center, Ellesmere Port. It's a big animal, 674,000 square feet. open second half next year, and I'm going to put this in writing and in statement. We only open at DC because we have the volume. Only a MAP person would open 674,000 feet if we didn't have the volume. Good deal. Work in progress. Sign. We're building it. fitting it out, it's not a bill, and this is not a bet for guys, don't worry, this is a lease, no dramas, it's low cost, it's all designed to keep pumping that volume on general merge. France, WMS implemented, we're already extending the DC, comes into line next year, we're going to be easily adding 60% DC capacity in France, going large by the second half. Again, why do we do that? Because we're growing volume, okay? France, the business is trading well. We're going to grow the business. I'm very happy with the French senior team. Vianney is a good example. We continue to grow that business with discipline. Heron, it's a great small business. We cross-fertilize. We learn where it's appropriate. I never talk too much about Heron, but there is not much to say. It's a nicely run business as part of the portfolio that keeps growing with discipline. I'll close with a couple of key messages. We're going to trade well. We're going to trade with volume, share and golden quarter. The stores and the range and the pricing is well set up. The team will deliver between 620 and 660 million current year EBITDA. I never pitch at the low end. So you take your own judgment on that and share with purchases are on the way. The work is now advanced, and when I'm ready to update you in the new year, I will do that. But it's a formal commitment and statement. Open to questions, Dave.

We'll go to online first of all, Alex. So we've got one here from Christian. How are price gaps versus the two out of the big four, Tesco and Sainsbury's? Are they stable over time or have they diminished? I think we've answered that in writing.

Gareth has already gone into the detail. It's stable and it's in the chart. After this count, against the big four, we're as high as 20%, never below 15%. And you can assume that the most expensive of the four, it's at 20, so it's very stable and steady.

I think Gareth has answered the question in detail. So no big variation from Tesco and Sainsbury's. Correct. Second, do buybacks mean you are unlikely to pay special dividends?

No, we haven't made basically the decision on how we distribute it. That's a recommendation that will come from the CFO. at the right time. What we will is continue to distribute excess cash. We generate a lot of cash. And when we are ready to go, Mike will be updating the market how and when we do it. Cash will continue to be distributed. We will optimize it in the right way.

Okay. How difficult is it to re-domicile? And are there risks in achieving this? No risks.

Requires the right leadership, which we have in the business. And the work is underway.

Okay, we'll go to questions in the room. James Anstead first. We'll work from the back. Hi, James.

Thanks. James Anstead from Barclays. Two questions. One, very clear you wouldn't give a current trading update with first half or full year numbers, but you do make a comment that you're expecting trading momentum to continue to improve from the first half. So I just wonder... Can we deduce from that that like for likes are back in positive territory so far in the third quarter?

Any comment? We don't comment on per quarter. It's in writing. We're going to trade with volume momentum. And there is a reason why we don't comment. Dave said that very clearly. You guys will have a good update in January. We're going to trade. And we will deliver volume market share momentum.

But just so I understand the comment correctly, you're saying that trading momentum has improved from the first half?

Well, trading momentum has improved in Q2 versus Q1, and we will trade wind momentum in golden quarter.

Okay. And then just a clarification on the question about specials, because clearly it doesn't sound like the domicile will be, that issue will be sorted out by the end of this financial year. But you already indicated that the ordinary dividend payout ratio is going to move up quite a bit. Just to measure our expectations correctly for January, because you've been in a bit of a habit of doing special dividends after Christmas, should we assume that this January there isn't? No, there should be. There should be a special.

And it's always subject to the golden quarter when we trade well. We do it, absolutely. So the increased dividend payout, Mike, doesn't have no impact. On the extra cash distribution.

Correct. So let's trade the golden quarter. We always come out post the golden quarter when we've got the view on the full financial year. This is a highly cash-generative business. I'm sure there'll be news to discuss once we've finished that trading.

The business, as you know, James, as Mike says, this business generates a very high degree of cash and we will not hold it. Richard Chamberlain.

Hi, Richard. Hi.

Alex, Richard Chamber in RBC. Three from me, please. You've mentioned that the seasonal impact on light flight was less in Q2, but I wondered if you could make an estimate of that. I think you said it was around one and a half, something like that, in Q1.

What I can say about Q2, which we touched earlier, general merchandise volume and value performed very strongly. And then we set out to do, as you remember, on the back of Q1, particularly on the home areas.

Sure. And then what will be the likely openings rate in Q3? I understand it's going to moderate, I think, but I wondered if that's going to have any impact on sort of light for light on existing stores because it might put less pressure on inventory, I guess, on the existing estate.

We're going to open 45 for the year. If you look at the council websites, from memory, James, we opened 34 already? 35, 34, 34? 34? We've opened 35 now. We're going to open the 45 in a year. We never opened in December for obvious reasons. We want to trade the shops. We'll open up to the end of November, and then we'll resume. So basically, the openings in Q4 will be pretty much done. Okay, thanks.

And then just the final one, probably for you, Mike, would be the dollar sourcing tailwind, the FX tailwind that you're talking about for next year. Can you help us at all with that? Will that go some way to helping offset some of the UK labour, you know, NI cost headwinds, I guess?

We don't comment specifically on what our FX rates will be. I can tell you that they'll be favourable. And I think we do see that benefit coming in, which will help us drive value for customers first and foremost, and that will drive the volume, which will help us offset any inflationary pressures in the business. And I think as we look at the inflationary pressures, of course, we'll be there. We don't see those as being any different to the levels of inflationary pressures we've managed over many years now.

We managed them through volume, Richard. OK. And presumably you're already pretty well hedged, are you, on the FX or you've bought cover?

So we buy cover ahead at least nine months. no more than 15 months ahead, so we are well covered. It gives the buying teams, it gives Gareth and all of the buyers certainty as to the rates that they're going to be buying products at, you know, as and when they're signing off their ranges. Okay, great. Thank you.

Warwick. If we can give you the two questions sharp, guys, it's easier on time.

I just got one, actually, for Warwick. I'm kind of BNP Paribas. Alex, you talked about the virtuous circle. Do you think that to make the flywheel work even harder and stronger, you need to invest in deflation and FMCG? You talked about flat.

Absolutely not. The price is rock solid. We're obsessive about the pricing. The pricing is sacrosanct. The price perception and reality isn't changed. why doesn't that price position move because when somebody tries to move we move it is sacrosanct it's at the right level in some departments we can all of course be a bit more aggressive than others if we're 17 or 18 percent let's say against one of the big four it doesn't mean guys that in every sku in every department so that's a commercial decision we do it on a quarterly basis but now i'm comfortable with the price position thank you work

Isabel.

Hello. Thank you for taking my questions. It's Isabel from Morgan Stanley. So my first question is, you talked about the volumes and the strong price position and the home sales being up 10%. So could you explain what else happened in the quarter which meant that the like-for-like was down 2% if all of the other components are in place? So why was the like-for-like negative? That's my first question.

If I can answer the first question directly, which is reinforcing what I said earlier. The market, most of the competition have been riddled with inflation for a number of years. You had the peak on inflation two or three years ago. We never inflated, so we're in the process of going ahead of market to continue to give price point to the customer. And the fact that we don't have any inflation on FMCG, in fact this is slightly negative, and we continue to drive for the customer the price point on general merchandise, we're simply driving volume market share with the discipline on margin and the buy, And we are driving that volume. And at some point, we will annualize the LFLs.

Okay? Sorry, to be clear, just to follow up on Mark's question. So are you saying there is deflation in FMCG?

For sure.

There is?

Disinflation. Correct. We are driving prices ahead of the market, which is what we do every year. And we choose in which departments. we set out to do. So when we exited Q1, you've heard me, the big opportunity was in home one. There will be more to come in golden quarter and at the right time we'll update everybody. So the message I want to land on this point is the volume engine room of BNM is around low prices and never sell inflation. We sell volume. And the reason why we can put that price to the customer is because we buy in volume. So we don't rely on inflation.

Okay? Thank you. And Alex, I'll just add that that volume comes from total sales. I mean, there's this obsession with like for like. But don't forget, we've got a very good, very profitable new store opening program. And the beauty of a new store opening program is 100% of the sales from that are volume.

I'll just make one final point in here, and then we can move on from this question. I would suggest LFL transactions every single quarter are well ahead of nominal LFLs, which tells me the health of the basket and the health of the footfall. You've heard that last year. It was the same in Q1. It's the same on Q2. We're in here. Gareth has been clear. Low prices, volume, SKU discipline. And we will never allow an inch of inflation in the business versus the market. Next question, Dave.

Can I ask my second question? Of course. I had a question about the buybacks or the specials. So depending on which mix you choose, I'm interested in the total extra cash return level that you're thinking about. And my question is, is the free cash flow generation of the business the binding constraint? Or would you be willing to increase the leverage in order to maintain the special, whether that's in a dividend or a buyback form?

So we're jumping ahead to a situation where we have buybacks open to us, which is what we're working on currently. So I don't want to move too far ahead in terms of the guidance we're giving. However, cash generation, as you can see, is very strong each year. We've got a clearly stated leverage policy. We're not changing that. So it's one to one and a half times as being the range as we're operating the business within and targeting the midpoint of that range at this point in time.

Simple English is no change.

And there's no change, therefore. What we will be doing is optimizing the capital allocation between buyback and dividends.

It's not how much we distribute, it's how and when. Next question, Dave.

Hi. Good morning. Vincent Ryan here from GoodBuddy. Good morning. Two questions for me, please. Of course. Firstly, within the guidance range of the 620 to 660, I appreciate you say you're not aiming for the bottom, but what are the puts and takes, the bottom of the range versus the top of the range? And then secondly, just in the statement, I think there's a slight change in the statement around margins within France. I appreciate you said there's an incremental cost from the warehousing in H1, but is there any change? Good question.

So, look, the range... is well underpinned by our cost prices and price position, so margin are fairly comfortable. We have a full tank to trade at the right time with discipline, as we always do. The cost lines are well controlled. Let me trade the golden quarter. If I continue to do exactly what we did in Q2, which is volume throughput, I am comfortable with the range. Without getting into a numbers conversation, I think what I can tell you is that I don't need a high nominal LFL to be comfortable in the range. So, why is that? Because the volume that is going through the system basically oils the whole machine. Volume is very high. I keep coming back to LSMU pour. I'm not opening 700,000 square feet because I'm pumping oxygen. And I get what I'm saying in between the lines. There's a lot of people pumping out oxygen. So let me trade the volume. The stock availability is fantastic. It's on the shelf at the right time. We'll trade it. That's the first question. And on France, basically, to be able to continue to grow the business, we basically put the same warehouse management system as we put a few years back in the UK. All done, implemented. If you guys have been in IT, there is no IT implementation which is actually Is it going? Is it done? All correct and the business is going to trade strongly for the balance of the year.

Okay. Hi there. Thanks. Adam Tomlinson. Adam, how are you? Good, thanks. Just the first question is just on general merch. So you talked about homewares particularly. Can you just give a flavor of some of the development that's gone on in other categories and just how that's changed over the last year or two versus last Christmas? And the second question is just On pricing, you talked about the UK in comparison to the supermarkets. Can you just give a flavor again of how you're positioned in France as well?

Great, thanks. Good question. I think what you will find if you get into the shops, our Christmas seasonal ranges, the pricing is really sharp, Adam. I think you've got really in between the lines. We've planned that a year ago. This is not markdown. This is not giving away margin. We've planned this for... a year ago so some of what you have seen in home probably you can see it as a customer in the shop so that would be a good example yeah and in terms of fmcg as warwick asks i'm very cool with the price i won't let them move yeah france vianney i think france is going to trade well expect them to trade well the guys will continue to drive volume it's the same product really on general merch And the FMCG, as Vianney has said, is not just over 3,000 SKUs that drive the footfall. And it's the same dynamic in France that you can expect, I expect, the team expects from the year. As the sales densities of France continue to converge to the UK, which is actually the objective, the driver of that LFL in France is fundamentally, largely, customer transaction. So I always expect the LFL on a yearly basis in France to be driven by footfall, Adam.

Okay. A couple more questions online. Why keep net debt? Why keep a net debt balance sheet? And what is the impact of the NI contribution and minimum wage increase on EBITDA? If Mike answers it first, I'll answer the second one.

So we keep a prudent level of net debt within the business because we think it helps drive returns for our shareholders. It's that simple. It's about having a robust balance sheet but having capital discipline there.

Alex? NI, what I'm going to say about NI is the opposite of what some competitors have said. A discounter has an advantage cost-based relative to higher cost-based business in being able to absorb whatever they throw at us. That's what we do in BNM in running the business on an EDLC basis. What I can tell you categorically is that we are not going to drive inflation to pay for NI because NI is a fairly insignificant number in a tank which is full. We'll continue to drive volume. We'll continue to buy and source on an advantage basis. And on the record is the business is not going to use inflation to pay for taxation.

Okay, any more questions? Back to you, Alex.

Apologies for the 15 or 20 minutes delay. I think it was important for me that you get to know the team. This is a team exercise. James is already up and running in shops. He's enjoying it thoroughly. Gareth is going to be fantastic. And this business has been a very well succession plan between Bobby and I. And I will be remiss if I don't say that Bobby has been a wonderful partner to work. I've always worked very closely with him and Bobby. And actually he leaves when he retires in March the business in very good hands. This was a joint decision. We knew the characters. We interviewed the right people. we got the best guy to the job. So the team is well comfortable. There is depth on that bench. So read by what I'm saying is that this chap is already making all the decisions for next financial year. And in terms of New York, Boston, Chicago, I think Dave, you and I will be flying to the US to meet a few investors face-to-face. And this time around, I've invited Vianney and James to come with us. so actually they can spend time with them. Thank you for your time. Good to see you.