B&M European Value Retail S.A.

Good day and thank you for standing by. Welcome to the BNM Retail H1 Fall Year 26 Trading and Operational Update webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chia Jaegon, CEO. Please go ahead, sir.

Thanks very much and good morning everyone and thank you for joining us on today's call. My name is Chia Jaegon and I'm the CEO of BNM Retail and with me here and on the call is our CFO, Mike Schmidt. We wanted this opportunity to speak to you today following the trade and operational update that we issued at 7 a.m. this morning. and what you can expect from us in this update is that Mike will take us through the financial aspects in a moment and I will then basically talk about the back to BNM basics as we call it program that we've kicked up which is to basically improve our operational performance because it's obviously not where we want it to be but before that I would like to say a few words of introduction and So back in July, I shared my initial observations of our business via the webcast that accompanied our Q1 trading update. I was at that stage four weeks into my role, and it was clear to me that the BNM's business fundamentals were solid, but there were also many immediate opportunities to improve execution and strengthen the customer proposition. And over the past two months, I've had a comprehensive review of diagnostics to see where execution has fallen short, and come with solutions to return the business to its full potential. And this process has left me in no doubt that the original BNM value proposition is still strong. But unfortunately our execution has drifted. And this drift has impacted our trading performance, which is reflected in the four year outlook that we published this morning. We have though a clear action plan to tackle this. We're calling it Back to BNM Basics. And there's only one objective, and one objective only. is to bring back sustainable like-for-like growth to BNN UK. And we're doing so by realigning the business with the principles that make BNN so successful. More on this plan in a moment, but let me first hand over to Mike to run through H1 training and our outlook.

Thank you, Tjeerd. Good morning, everyone. So looking at the first half, our total group revenues grew by 4% to 2.75 billion. This was largely driven by UK total volume and average selling price growth and good trading momentum in BNM France, which delivered double digit growth. Clearly, the UK total volumes were helped by new store openings. We work with discipline on our capital allocation and we opened 23 gross new stores in the UK during the first half with 14 closures or relocations, which leaves an increase of nine net new stores. That puts us on track to open 40 to 45 gross new stores in the UK in this financial year. We also opened five new stores in France and a gross three or net one store at Heron. So in the UK, B&M's like-for-like sales were up by 0.1% for the half. That was led by a very strong April performance in general merchandise particularly, which was helped by an early Easter and by good weather, which pulled forward demand for our outdoor ranges. Our sales then were weaker in May as this trend reversed, following which, each period thereafter, we saw a progressive moderation in like-for-like sales declines from June onwards. And that was helped by the ranges returning towards higher value products and general merchandise, but also some selling price inflation in FMCG. Despite this improving trajectory, BNM UK sales declined by 1.1% in the second quarter, which was weaker than our expectations. So, as communicated in our first quarter trading update, the gross margin for BNM UK across that first quarter was impacted by the deflation that we saw in general merchandise ranges and the lower bought-in product margins, therefore. The negative effect of that price deflation moderated in the second quarter as we started to annualize the price changes and as new autumn-winter ranges were introduced with higher bought-in margins. So driven by those like-for-likes and the lower trade and gross margins, subject to the final review that we need to go through, we expect group-adjusted EBITDA for the first half to be published in November to be approximately 198 million pounds. Of course, you'll realize that the first half and the year-on-year P&L comparison will also include some of the sizeable cost headwinds that all retailers are facing. So that does include around £14 million in new extended producer responsibility tax costs. The full annual cost of that has to be expensed in the first half. There's also non-cash movements of £3 million in the first half relating to FX that will then reverse and unwind in the second half. And then thirdly, As expected, higher wage costs due to the rise in national minimum wage and employer national insurance. The unmitigated effect of the wage cost inflation in the half was around 30 million pounds. So now moving on to our outlook for the second half. So as Chirds shortly will set out, we're correcting the operational weaknesses we've identified to drive an improved financial performance. While we will see the full financial benefits building over time, we have actually seen some gradually improving trends in UK like-for-like sales and gross margins towards the end of the second quarter. So taking this into account, our fully 2026 financial year group adjusted EBITDA guidance range is 510 million pounds to 560 million pounds. We do have line of sight on the trading margins for autumn winter. and on our cost base. So really the principal driver of the outcome within this range is BNM UK's like-for-like sales across our key golden quarter period. We are very early in the season, as you will realize. We normally publish our update range in or guidance range in November. So at this stage, we're setting out a range based on between a low single-digit decline and a low single-digit like-for-like sales growth in the second half for BNM UK. Turning to our balance sheet. Of course, this is a business that's consistently cash generative. However, our leverage ratio is expected to be slightly above our one to one and a half times target range for the full year end, full financial year end, which reflects the lower earnings that we've seen over the last 12 months, but also our usual working capital peaks that are seasonal as we enter the golden quarter. So finally, as Sherwood will outline, the full impact of our back-to-BNM basics actions is going to take 12 to 18 months to take effect. However, with the like-for-like sales growth this plan will drive, we do expect that future adjusted EBITDA profit margins for BNM UK will stabilise at least at the 2026 out-to-turn level. So now I'll hand back to Church to walk you through the plan to drive our like-for-like sales growth.