B&M Retail staff member

B&M is preparing to launch an IPO

B&M Bargains has today confirmed its intention to proceed with an IPO as it aims to become the “Dollar General of Europe”.

The general merchandise discounter said the float, believed to be valued at around £2bn, would be the start of the “next phase” of the business as it targets further expansion in the UK and Europe. It said that in “exploiting the opportunities in European discount retail” it was on course to “replicate the success” of the discount chain Dollar General in the US, which has over 17,000 stores. Last month, B&M ventured outside of the UK for the first time when it acquired 50-store strong German discounter Jawoll.

Currently 66% of the UK population did not have “easy access” to a B&M store, according to chief executive Simon Arora, who confirmed reports by The Grocer earlier this month that B&M would aim to double its estate over the coming years.

It plans to continue opening up to 50 stores a year and increase its focus on the south, where this year it is set to open 10 to 15 stores in locations including Yeovil, Dagenham and Abingdon. It is also understood to be considering opening a 800,000 sq ft distribution centre in southern England that would come on stream in 2017. The long-term target is to open 850 stores in the UK, up from 373 at present.

“Over recent years the UK has witnessed a sustained structural shift towards value retailing among consumers and as the success of Aldi and Primark demonstrates, everyone loves a bargain,” said Arora.

“Shopping habits have changed permanently as a result, with B&M completing about 2.7 million transactions a week. By leveraging a lean, cost-efficient business model, with strong supplier relationships and direct sourcing, we give our loyal customers what they are looking for across a range of different price points and categories.”

B&M’s sales have grown from £764m for the year ending 31 March 2012 to £1.29bn for the year ending 29 March 2014. EBITDA has increased from £63m to £113m over the same period, with EBITDA margin growing from 8.2% to 8.9%. The growth in revenue and EBITDA was driven primarily by new store openings and strong like-for-like performance across the store network, B&M said.

Like-for-like sales growth was 5.1%, 6.6% and 6.5% in the years ending 31 March 2012, 30 March 2013 and 29 March 2014 respectively. Despite investment in the growth of the store portfolio over the period, operating cash flow grew from £43m for the year ending 31 March 2012 to £84m for the year ending 29 March 2014.

In addition to financing the opening of new stores, B&M said it had made significant investment in its central functions, as it further developed its business processes, infrastructure and product offering. Capital expenditure has grown from £9m in the year ending 31 March 2012 to £33m in the year ending 29 March 2014.

New appointments

B&M also announced today the appointment of four independent non-executive directors. These include Thomas Hübner, who is currently a director at Carrefour SA; Ron McMillan, a director of the N Brown group; and Harry Brouwer, currently executive vice president of Unilever Germany.

Underlining B&M’s commitment to replicate the success of Dollar General, the fourth appointment is Kathleen Guion, who was executive vice president of Dollar General from 2003 to 2011.

B&M’s non-executive chairman Sir Terry Leahy said the four appointments would help position the company for its “next stage of development” and promised that there was “more growth to come”.

“Today we welcome four new independent non-executive directors to our Board, who collectively bring a blend of valuable and far-reaching experience,” said Leahy.  “I believe B&M has a bright future and that its listing on the London Stock Exchange will position the company for its next stage of development.”