Notes to the consolidated financial statements
- General information
Beter Bed Holding N.V. operates in the European bedroom furnishings market. Its activities include retail trade through the chains Beter Bed, Beddenreus, Sängjätten and Matratzen Concord (until 2 December 2019). Beter Bed Holding N.V. is also active in the field of developing and wholesaling branded products in the bedroom furnishing sector via its subsidiary DBC International. The registered office of Beter Bed Holding N.V. is Linie 27 in Uden, the Netherlands. Beter Bed Holding N.V.'s shares are listed on Euronext Amsterdam.
The consolidated financial statements comprise the financial information of the Company itself and that of its subsidiaries (referred to together as the Group). The list of subsidiaries is presented in the note on 'Principles of consolidation'.
The 2019 consolidated financial statements of Beter Bed Holding N.V. have been prepared by the Management Board and were authorised by both the Management Board and Supervisory Board for issuing on 17 March 2020.
- Basis of preparation of financial statements
The consolidated financial statements of Beter Bed Holding N.V. have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs, hereafter referred to as IFRS). The company financial statements have been prepared using the option of article 2:362-8 of the Dutch Civil Code, meaning that the accounting principles used are the same as for the consolidated financial statements.
- Basis of measurement of financial statements & significant accounting policies
The consolidated financial statements have been prepared on a historical cost basis, except for land, derivative financial instruments, debt and equity financial assets which have been measured at fair value. Unless explicitly stated otherwise, the amounts stated in these notes refer to the consolidated figures. The financial statements are presented in euros and have been rounded to thousands of euros, unless otherwise stated.
Changes to the presentation of comparative figures
From the date on which all criteria of IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations - are met, discontinued operations are deconsolidated on the balance sheet to assets and liabilities of discontinued operations. In the statement of profit and loss and the statement of cash flow, on which all IFRS 5 criteria are met, are deconsolidated and separately reported.
- Foreign currency translation
The consolidated financial statements have been prepared in euros. The euro is the functional currency of Beter Bed Holding N.V. and is the Group's reporting currency. Monetary assets and liabilities in foreign currencies are converted at the exchange rate on the balance sheet date; profit and loss account items are converted at the exchange rate at the time of the transaction. Non-monetary assets and liabilities in foreign currencies which are measured at fair value are converted at the exchange rate when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are not translated. The resulting exchange differences are credited or debited to the profit and loss account, presented in finance costs.
Exchange differences in the financial statements of foreign group companies included in the consolidation are taken directly to equity through other comprehensive income. The results and assets and liabilities of consolidated foreign participations are translated into euros at the average exchange rate per month and the closing rate for the year under review respectively. Upon a disposal of a foreign entity, the deferred accumulated amount recognised in equity of that foreign entity concerned is taken to the profit and loss account.
The table below shows the applied currency rates of 2019 respectively 2018.
SEK/EUR
CHF/EUR
USD/EUR
Year-end exchange rate
31-12-2018
10.2548
1.1269
1.1450
31-12-2019
10.4468
1.0854
1.1234
Average exchange rates
2018
10.2567
1.1549
1.1815
2019
10.5867
1.1127
1.1197
- Principles of consolidation
The consolidated financial statements comprise of the financial statements from Beter Bed Holding N.V. and its Group entities. Group entities are defined as entities controlled by the Company, meaning the Company is exposed to or is entitled to the variable results following the Company's involvement and ability to influence these results in her power to steer on the activities of that entity.
In general the Group assumes that it has control if it holds the majority of the voting rights. However, in all cases factors that are relevant to support this assumption are considered and include contractual arrangements with any other vote holders of the investee, voting rights from other arrangements and the potential voting rights of the Group. When there are changes in circumstances or facts which could impact if the Group controls an investee, a reassessment will be made to conclude if an investee still needs to be consolidated. Group entities are included in the consolidation at the date when the entities gains control. As of the date an entity does not meet the aforementioned criteria of an investee, the entity is no longer included in the consolidation.
For consolidation purposes, the Group has applied the full consolidation method. All financial relations and results between consolidated companies are eliminated in full. If the Group loses control over an investee, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while a gain or loss is recognised in profit or loss. In case an investee is retained but the Group ceases control it is recognised at fair value.
Interests in subsidiaries
The Group’s subsidiaries at 31 December 2019 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business.
Ownership interest held by the Group in %
Name
Registered Office
2019
2018
Bedden & Matrassen B.V.
Uden, The Netherlands
100
100
Beter Bed B.V.
Uden, The Netherlands
100
100
Beter Beheer B.V.1
Uden, The Netherlands
100
100
DBC International B.V.
Uden, The Netherlands
100
100
DBC Nederland B.V.
Uden, The Netherlands
100
100
Sängjätten Sverige AB
Göteborg, Sweden
100
100
Sängjätten AB
Göteborg, Sweden
100
-
BBH Beteiligungs GmbH2
Cologne, Germany
-
100
BBH Services GmbH & Co K.G.
Cologne, Germany
-
100
Beter Bed Holding N.V. y Cia S.L.3
Barcelona, Spain
-
100
El Gigante del Colchón S.L.3
Barcelona, Spain
-
100
Linbomol S.L.3
Barcelona, Spain
-
100
M Line Bedding S.L.3
Barcelona, Spain
-
100
Matratzen Concord (Schweiz) AG2
Malters, Switzerland
-
100
Matratzen Concord GmbH2
Cologne, Germany
-
100
Matratzen Concord GesmbH2
Vienna, Austria
-
100
Procomiber S.L.3
Barcelona, Spain
-
100
Sängjätten Sverige Wholesale AB4
Göteborg, Sweden
-
100
- 1 In 2020 Beter Beheer B.V. is renamed into Beter Bed Financial Services B.V.
- 2 The activities in Germany, Austria and Switzerland have been divested in a share deal in 2019.
- 3 The Spanish entities have been liquidated in 2019.
- 4 Sängjätten Sverige Wholesale AB has been liquidated in 2019.
- Use of estimates
Estimates and judgments
In preparing the financial statements, the Management Board is required to exercise judgment, make assumptions and estimates that affect the application of the accounting standards and the valuation of the recognised assets and liabilities and income and expenses. Following those judgments, assumptions and estimates, the actual valuation may subsequently differ materially from the reported valuation.
The actual timing of the utilisation of amounts in provisions is uncertain when determining these at inception. Judgments, assumptions and estimates are continually reviewed and are based on historical experience and other factors, including future expectations. These future expectations are based on reasonable expectations concerning the relevant factors affecting the financial statement item concerned.
Adjustments of estimates are recognised in the period in which those adjustments are made and, where relevant, in the future periods concerned.
Where estimates are made when preparing the financial statements, an explanation is provided in the notes for each item in question.
- Going concern
The financial statements have been prepared on a going concern basis.
Over the year ending on 31 December 2019 the Group had a total net loss of € 52.6 million and a total cash flow from operating activities of € 3.2 million. These numbers include the operational and divestment loss of the discontinued operations of Matratzen Concord, and the final costs relating to the liquidation of the remaining legal entities in Spain for which the operational activities were sold in 2018.
Excluding the results of the discontinued operations the Group had an operating loss of € 0.4 million and a positive operational cash flow of € 23.8 million. Normalised for one-off cost, these results indicate that the continuing operations of the Group are able to generate positive operating profits and free cash flows.
The divestment of Matratzen Concord and the liquidation of the remaining Spanish entities, together with the newly entered into banking covenant, the sale and leaseback of the real estate property for Uden, Hoogeveen and Nieuw-Vennep and the (partly perpetual) shareholder loans provide a stable platform for the remaining activities.
The positive outlook of the continuing operations in combination with the divestment of Matratzen Concord, supports management that the Group can continue as going concern.
Given the current social and economic circumstances, which have no relation to the business operations year to date, we believe our business could be impacted for a period of time. Looking ahead, we see increased uncertainties following the COVID-19 worldwide outbreak and market volatility. These conditions could indicate the possible existence of a material uncertainty which may cast significant doubt on the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
We have no indication whether the governmental measures will have an effect in preventing a further spread around the world. Therefore we currently do not know whether these measures will be effective and what kind of duration we will be faced with. Such situation, especially when it takes longer, may have an effect on the financial performance of the Company. The Group has taken many measures to ensure our customers and employees continue to be safe while interacting together. The Group has initiated, already for a couple of weeks, a task force to ensure supply is managed and alternatives are available in case supply of goods is getting under pressure. Critical inventory has been identified and incremental stock has been ordered. Only as of 14 March we saw an initial decline in consumer traffic where till that moment our traffic, order intake and sales were developing very well against previous year. In Belgium the government has decided to have stores closed at the weekend and this has affected order intake. Baring transport disruption our current order book foresees usual revenue levels for the next 4 to 6 weeks. The financial situation of the Group is currently healthy. At the moment we are in discussion with the banks to successfully agree new credit facilities and the establishment of a fit-for-the-future group financing structure. Current uncertainty might delay this process. We appreciate that the government has indicated to support companies when needed to ensure continuity for companies and employees. At this moment we do not have any reason to believe that the Group is not able to continue as a going concern.
Refinancing including divestment Matratzen Concord
In July 2020 the current credit facilities available to the Group will expire. As a result of this upcoming expiration, the Company is working on several initiatives to secure new credit facilities in order to contribute to its operational business goals.
The financial deleveraging realised during the course of 2019 consisted of:
- Sale-and-leaseback transactions on real estate in the Netherlands.
- Issuance of share capital.
- Agreement of a shareholder loan (partly perpetual).
- The divestment of Matratzen Concord in Germany, Austria and Switzerland.
These initiatives led to a cash income of € 38.3 million of which € 16.7 million was used to repay outstanding bank debt. Per year-end 2019, this resulted in a substantially lower utilisation (€ 5.7 million utilised) of the credit facility compared to the € 43.5 million at the Group's disposal. Following the repayment, new financial covenants were agreed with the financing parties.
The recently optimised business structure, followed by current and expected positive free cash flow during 2020, will contribute to successfully agree new credit facilities during the first half of 2020 and the establishment of a fit-for-the-future Group financing structure.
In 2020 Beter Bed Holding N.V. will continue working on optimising and continuing its credit facilities. So far, requests for proposals are issued to several financial institutions. At the date of the annual report, several meetings with these parties have been held to discuss requested terms and conditions.
Formal ending of the Spanish operations
In 2019 the Company liquidated the Spanish legal entities which led to the formal ending of the Spanish operations. This resulted in the utilisation of the deferred tax assets formed in 2018 amounting € 4.9 million. As a consequence these deferred tax assets have been reclassified from deferred tax assets to current tax assets.
- Changes in significant accounting policies
IFRS 16 Leases, effective 1 January 2019
Until the 2018 financial year leases of property, plant and equipment were classified as either finance leases or operating leases. From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The Company has chosen to grandfather the existing lease contracts upon first-time adoption, meaning applying IFRS 16 to all contracts that included a lease in accordance with IAS 17.
Beter Bed Holding N.V. has adopted IFRS 16 Leases retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.
Beter Bed Holding N.V. leases various offices, warehouses, retail stores, equipment and vehicles.
It has adopted IFRS 16 through application of the ‘modified retrospective approach’ and applies the standard to its rented stores, car and truck leases in countries in which Beter Bed Holding N.V. is active. In accordance with the practical expedients the standard proposes, Beter Bed Holding N.V. has made no specific distinction in type of costs for car and truck leases and subsequently full lease costs will be capitalised. Also, all lease contracts for which the underlying asset value is defined to be below US$ 5,000 or short-term (less than 12 months) are exempted at adoption and going forward from capitalisation as lease assets.
Beter Bed Holding N.V. has implemented a software tool which enables transparent, efficient and effective reporting of lease contracts under the new IFRS 16 standard. This tool provides insights in leased assets and its associated liabilities per country and per category.
Lease contracts will be capitalised for the duration of non-cancellable periods (mostly fixed periods of four to eight years) and renewal periods are only taken into account if deemed reasonably certain. Assets and liabilities arising from a lease are initially measured on a present value basis.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
The incremental borrowing rate applied by Beter Bed Holding N.V., is periodically determined by an external valuator. A specific discount rate (incremental borrowing rate) is applied to a portfolio of leases with reasonably similar characteristics depending on their duration and associated country, varying between 0% and 3.4%.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of twelve months or less. Low-value assets comprise IT equipment and small items of office furniture.
Aforementioned variables and applied practical expedients have resulted in an identification of right-of-use assets amounting € 142.5 million (continuing operations € 49.4 million and discontinued operations € 93.1 million) and will therefore result in an increase of the total balance sheet of this magnitude per 1 January 2019. Moreover, the profit and loss statement will display a shift from operational lease costs to depreciation costs and interest charges.
Adoption of this standard also has an inevitable and significant impact on several ratios, including solvency and the net interest-bearing debt/EBITDA. However, the covenants with credit institutions are not impacted, given the fact that the covenants include conditions stating that ratios concerned are calculated excluding the impact of new reporting standards.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect or are known. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Practical expedients applied
In applying IFRS 16 for the first time, Beter Bed Holding N.V. has used the following practical expedients permitted by the standard:
- Applying a single discount rate to a portfolio of leases with reasonably similar characteristics (varying between 0-1.32%).
- Relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at 1 January 2019.
- Accounting for operating leases with a remaining lease term of less than twelve months as at 1 January 2019 as short-term leases.
- Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application.
- Using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
Beter Bed Holding N.V. has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
Measurement of lease liabilities
The table below shows the reconciliation of the off-balance commitments per the end of December 2018 and the opening balance of IFRS 16.
in thousand €
Benelux
New Business
DACH
Total
Operating lease commitments disclosed at 31 December 2018
35,743
10,180
89,667
135,590
Add/(less): Changes from contract reassessment1
3,338
(919)
1,518
3,937
Add/(less): Changes applied in IBRs (discounting effect)2
788
225
1,985
2,998
Lease liability recognised at 1 January 2019
39,869
9,486
93,170
142,525
Of which are:
- Current lease liabilities
45,841
- Non-current lease liabilities
96,684
Lease liability recognised at 1 January 2019
142,525
- 1 Resulting from the IFRS 16 adoption, all contracts have been reassessed in detail on accuracy, completeness and options (where relevant) in the first half year of 2019.
- 2 In 2018 a general discounting factor of 2% was applied to calculate the operational lease commitments. Due to the introduction of IFRS 16, specific IBRs per country and per asset class have been applied leading to a higher commitment.
- Segment reporting
Various operating segments have been identified within the Group as these segments are reviewed by the decision-makers within the entity. These operating segments independently generate revenue and incur expenses. The principal operating segments are comparable in each of the following aspects:
- Nature of the products and services
The operating segments primarily sell mattresses, bedroom furnishings (including box springs), bed bases and bed textiles. The operating segments also provide the home delivery service.
- Customers for the products and services
The operating segments sell directly to consumers, focusing specifically on customers in the value-for-money segment.
- Distribution channels for the products and services
The operating segments generate their revenue in stores (the offline retail channel) and also have a web shop (online retail channel). Online revenue compared to total revenue is similar for the operating segments.
- Economic characteristics
The operating segments have similar economic characteristics, e.g. in terms of revenue, gross profit and inventory turnover rate.
In view of the comparability of above characteristics, the operating segments are aggregated into a single reportable segment.
Information by geographical area is disclosed in note 14.
- Discontinued operations
A disposal group qualifies as discontinued operations if it is a component of an entity that has been disposed of, and:
- Represents a separate major line of business or geographical area of operations.
- Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
- Is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit and loss.
Exit of Matratzen Concord
On 2 December 2019, Beter Bed Holding N.V. successfully completed the divestment of the Matratzen Concord companies in Germany, Austria and Switzerland with economic transfer at the end of 30 November 2019. The financial result relating to the discontinued operations is set out below.
The parties agreed upon an additional contingent deferred payment of up to maximum € 7.5 million from Matratzen Concord to Beter Bed Holding N.V. if certain profitability milestones are met in the first year after the transaction. At the time of the sale the fair value of the consideration was determined at zero. It has been recognised as a financial asset at fair value through profit or loss.
Exit of El Gigante del Colchón
Beter Bed Holding N.V. has divested the operations of El Gigante del Colchón effective 1 November 2018. Via an asset deal all stores and employees related to the operation were transferred to the purchaser. The liquidation of the legal entities in Spain has been realised in 2019. The associated activities are presented as discontinued operations.
Financial performance and cash flow information
The financial performance and cash flow information presented below are for the relevant periods during 2019 and 2018 respectively. Matratzen Concord (MC) was divested via a share deal and the results below represent January up to and including November 2019 (2018: full year). The activities of El Gigante del Colchón (EGDC) have been divested via an asset deal on 1 November 2018 and the included results relate to January-October 2018; the remaining dormant legal entities have been liquidated in 2019 leading to some remaining costs that are included in the overview.
in thousand €
2019
2018
MC
EGDC
Total
MC
EGDC
Total
Sales
162,747
4
162,751
223,520
6,310
229,830
Cost of sales
(73,241)
(15)
(73,256)
(96,662)
(3,453)
(100,115)
Gross profit
89,506
(11)
89,495
126,858
2,857
129,715
Other expenses
(116,696)
(407)
(117,103)
(155,606)
(7,503)
(163,109)
Loss before income tax
(27,190)
(418)
(27,608)
(28,748)
(4,646)
(33,394)
Income tax (expense)/gain
(7,533)
-
(7,533)
3,263
-
3,263
Loss from discontinued operations
(34,723)
(418)
(35,141)
(25,485)
(4,646)
(30,131)
Net cash in/(out)flow from operating activities
(20,599)
-
(20,599)
(4,226)
(2,298)
(6,524)
Net cash in/(out)flow from investing activities
15,891
(418)
15,473
(7,485)
(702)
(8,187)
Net cash in/(out)flow from financing activities
-
-
-
(87,228)
12,288
(74,940)
Net increase / (decrease) in cash generated by the subsidiary
(4,708)
(418)
(5,126)
(98,939)
9,288
(89,651)
Details of the sale of Matratzen Concord
in thousand €
2019
Consideration received or receivable:
- Cash
7,134
- Fair value of contingent consideration
-
Total disposal consideration
7,134
Carrying amount of net assets sold
(20,402)
Gain / (loss) on sale after income tax
(13,268)
The carrying amounts of assets and liabilities as at the date of economic transfer (30 November 2019) were:in thousand €
2019
Intangible fixed assets
1,090
Property, plant and equipment
14,586
Right-of-use assets
68,274
Trade receivables
906
Inventories
20,553
Other assets
2,768
Cash and cash equivalents
4,146
Total assets
112,323
Trade payables
(6,142)
Lease liabilities
(68,447)
Other liabilities
(17,332)
Total liabilities
(91,921)
Net assets
20,402
- Significant accounting policies relating to balance sheet
Financial instruments
Non-derived financial instruments
Non-derived financial instruments include other financial fixed assets, trade and other accounts receivables, cash and cash equivalents, liabilities to credit institutions, trade and other payables. Initial recognition of non-derived financial instruments is at fair value. Thereafter, these non-derived financial assets are valued at amortised cost (excluding cash and cash equivalents).
Impairments of financial assets
Beter Bed Holding N.V. applies a model of the impairments of financial assets against amortised cost. In order to determine the provision, Beter Bed Holding N.V. applies a general or simplified method.
For the general method, the following is applied:
- A 12-month expected credit loss; or
- Lifetime expected credit losses for financial assets when the credit risk increases significantly due to certain circumstances. All credit losses for the expected lifetime are accounted for; or
- Lifetime expected credit losses for financial assets, whereby interest is calculated based on the net receivable less impairment loss.
Loans granted to subsidiaries and receivables against suppliers following the supplier model, as well as all other receivables go through the process of impairment testing based on the aforementioned general method.
The simplified method is applied to other receivables. For these, at inception, lifetime expected credit losses are processed, which are determined following a historical set of average irrecoverable amounts (based on historical debt collection details).
Trade and other receivables
Trade and other receivables represent the Group’s right to an amount of consideration that is unconditional. Trade and other receivables are carried at amortised cost, less impairment losses.
Trade and other payables
Trade and other payables are carried at amortised cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances and other call deposits payable on demand. Bank overdrafts that are repayable on demand, and form an integral part of the Group’s cash management, are included as a component of cash and cash equivalents in the statement of cash flow. They are measured at fair value.
Offsetting financial assets and liabilities
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Derecognition of financial assets and liabilities
A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is derecognised if the Group is no longer entitled to the cash flow from that asset or if substantially all risks and rewards of the asset have been transferred or – if substantially all risks and rewards of the asset have not been transferred – the entity has transferred ‘control’ of the asset.
A financial liability is derecognised when the obligation has been discharged or cancelled or has expired. If an existing financial liability is replaced by another from the same lender, under substantially different terms, or if substantial modifications are made to the terms of the existing liability, the replacement or modification is accounted for through recognition of the new liability in the balance sheet and derecognition of the original liability. The difference between the relevant carrying amounts is accounted for through profit and loss.
Intangible assets
Intangible assets relate to the brand name Sängjätten and (acquired) software. For each category the applicable finite useful life has been determined and applied.
Intangible assets with finite lives are amortised over their useful life and tested for impairment if there are indications that the intangible asset might be impaired. The amortisation period and method for an intangible asset with a finite useful life are assessed at least at the end of each period under review; the applied amortisation percentages vary between 5% and 33%. Any changes in the expected useful life or expected pattern of the future economic benefits from the asset are recognised by means of a change in the amortisation period or method and must be treated as a change in accounting estimate. Amortisation charges on intangible assets with a finite useful life are recognised in the profit and loss account.
Any gains or losses arising from the derecognition of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account when the asset is derecognised.
Property, plant and equipment
Tangible fixed assets other than land are valued at the cost of purchase or construction less straight-line depreciation and impairments (if applicable) based on the expected economic life or lower recoverable amount. Land is carried at fair value on the basis of the valuations by an external expert in December 2018, who used the GIY/NIY method.
Any revaluations are recognised in equity through other comprehensive income, with a provision for deferred taxation being formed at the same time. Land and other tangible fixed assets under construction are not depreciated.
Applied depreciation percentages are as follows:
- Land 0%.
- Buildings 3.33%.
- Other fixed operating assets 10-33%.
- Right-of-use assets 8-100% (depending on remaining lifetime of underlying contract as of adoption).
Depreciation, amortisation and impairment are presented combined in the profit and loss and detailed in its notes.
Tangible fixed assets are derecognised in the event of disposal or if no future economic benefits are expected from its use or disposal. Any gains or losses arising from its derecognition (calculated as the difference between the net proceeds on disposal and the carrying amount of the asset) are taken to the profit and loss account for the year in which the asset is derecognised. Any residual value of an asset, its useful life and valuation methods are reviewed and if deemed necessary, adapted at the end of the financial year.
The tangible fixed assets are intended for own use.
Inventories
Inventories are valued at the lower of cost and net realisable value. The cost consists of the latest purchase price less purchase discounts and plus additional direct costs using first in first out. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs for settling the sale. Unrealised intercompany gains and losses are eliminated from the inventory valuation.
Impairment of assets
The Group reviews at each reporting date whether there are indications that an asset has been impaired. If there is any such indication or if the annual impairment testing of an asset is required, the Group estimates the asset’s recoverable amount. Intangible assets with an indefinite useful life are tested for impairment annually. Impairment losses are recognised in profit or loss.
An asset’s recoverable amount is the higher of the fair value of an asset or the cash-generating unit (after deduction of the selling costs) and the value in use. If an asset’s carrying amount exceeds the recoverable amount, the asset is deemed to have been impaired and its value is written down to the level of the recoverable amount. When assessing the value in use, the present value of the estimated future cash flow is determined, applying a discount rate before tax that takes into account the current market assessment of the time value of money and the specific risks associated with the asset.
On each reporting date an assessment is made whether there are indications that an impairment loss recognised in prior periods no longer exists or has decreased. If there is any such indication, the recoverable amount is estimated. An impairment loss recognised in prior periods is only reversed if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. In that case, the carrying amount of the asset is increased to the recoverable amount. This increased amount cannot exceed the carrying amount that would have been determined (net of amortisation) if no impairment loss had been recognised for the asset in prior years. Any such reversal is recognised in profit or loss.
Restricted reserves
These non-distributable reserves are formed for exchange differences for participations, for the revaluation of tangible fixed assets and for the equity instruments. These reserves have also been included in the consolidated statement of changes in equity to ensure reconciliation with the shareholders' equity as recognised in the company financial statements.
Dividend
The holders of ordinary shares are entitled to receive dividend as determined from time to time by the Annual General Meeting.
The Management Board has the authority to decide, with the approval of the Supervisory Board, what portion of the profit will be allocated to the reserves. If applicable, the declared but unpaid dividends are recognised as a liability.
Provisions
Provisions are recognised for legal or constructive obligations existing at the balance sheet date for which it is probable that an outflow of resources will be required and the amount can be reliably estimated. Provisions are carried at the best estimate of the amounts required to settle the obligation at the balance sheet date, being the nominal value of the expected expenditures, unless otherwise stated.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit and loss when incurred. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in future payments will occur.
Defined benefit plans
The Group currently does not have any defined benefit plans.
Taxes
Current income tax assets and liabilities are valued at the amount that is expected to recover from or paid to the tax authorities. The amount is calculated on the basis of the tax rates set by law and enacted tax laws, which are reviewed periodically. Current income tax items directly related to items in equity are also recognised in equity.
A provision is formed for deferred tax liabilities based on the temporary differences on the balance sheet date between the tax base of assets and liabilities and the carrying amount in these financial statements. Deferred tax liabilities are recognised for all taxable temporary differences. The deferred tax liabilities are valued at nominal value.
Deferred tax assets are recognised for available tax loss carry forwards and deferred tax assets arising from temporary differences at the balance sheet date between the tax base of assets and liabilities and the carrying amount in the financial statements. Deferred tax assets are valued at nominal value. Deferred tax assets arising from future tax loss carry forwards are only recognised to the extent that it is probable that sufficient future taxable profits will be available against which these can be utilised.
Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on enacted tax laws. Deferred tax items are recognised in correlation to the underlying transaction either in the overview of comprehensive income (OCI) or directly in equity.
Deferred tax assets and deferred tax liabilities are offset by the Group if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
- Significant accounting policies relating to the profit or loss account
Presentation
The presentation of the profit and loss account is based on the categorical classification. Gross profit is the result of revenue less cost of materials and services from third parties. Personnel expenses, depreciation, amortisation and impairments of fixed assets and other operating expenses are presented immediately after gross profit due to short term influenceability and the fact that these costs do not directly relate to the level of revenue.
Revenue
The revenue is understood as the proceeds of the sale of goods and services to third parties less discounts and similar rebates, and sales taxes. Revenue is recognised when mutual contractual obligations are met. Revenue is based on transaction prices allocated to individual performance obligations, being either a distinct good or service or a series of distinct goods or services that are largely the same, and showing the same pattern of transfer to a customer. Revenue from sales of goods is recognised in the profit and loss upon transfer of the right of disposal of the goods by the Group. In the circumstance when goods are instantly being taken by consumers, this is at the time of payment at the cash register. In the circumstance when goods are assembled and/or delivered, the sales are recognised at the moment when the transfer has led to a physical delivery of the goods to the customer.
Materials and services from third parties
This comprises the cost and associated services of the goods sold, after deduction of any payment discounts and purchase bonuses received, added with directly attributable purchase and supply cost.
Expenses
Expenses are determined in accordance with the aforementioned accounting policies, and are allocated to the financial year to which they relate. Interest is recognised as an expense in the period to which it relates.
Pensions
A variety of pension schemes is in use within the Company. In the Netherlands, the majority of the employees participate in the Detailhandel Industrial Pension Fund. This is an average pay scheme with a maximum pension accrual on the income for social security contributions. Consequently this pension scheme is accounted for as a defined contribution scheme.
The other pension schemes are also defined contribution schemes. The contributions paid to the Detailhandel Industrial Pension Fund and insurance companies respectively are recognised as expenses in the year to which they relate. There are no company-specific pension schemes in the other countries.
Depreciation and amortisation
Depreciation and amortisation are calculated using the straight-line method based on the expected economic life of the underlying assets. Additions in the year under review are depreciated and amortised from the date of purchase respectively inception for right-of-use assets onwards.
- Significant accounting policies to the cash flow statement
The cash flow statement is prepared using the indirect method. Beter Bed Holding N.V. discloses discontinued operations in a separate note.
- Capital and financial risk management
Financial risk management
The main financial risk consists of failing to achieve the budgeted revenue and therefore the planned cash margins, mainly as a result of changes in consumer behaviour in response to changing economic conditions. Revenue and order intakes for each format are reported on a daily basis to manage this risk. On a weekly basis, data on realised margins, numbers of visitors, conversion and average order values are provided to senior management and commented on.
Based on the analyses, adjustments are made in the marketing mix, including pricing policy and the use of advertising. In addition, cost budgets are periodically reviewed and adjusted if necessary. Economic and macroeconomic information from the market, including sector-specific reports, is also utilised.
Currency risk
Currency risk, arising mainly from purchases in dollars, is not hedged. A 5% change in the average dollar exchange rate would, on the basis of the purchasing volumes in the financial year, result in an effect of approximately € 90,000 (2018: € 83,000) on the operating profit (EBIT) if sales prices remain the same. There are virtually no financial instruments in foreign currencies. Currency risk owing to the presence and/or transactions in Sweden and Switzerland (relating to discontinued operations) and the potential volatility of the Swedish krona and the Swiss franc (relating to discontinued operations) are considered to be limited due to the fact that the majority of goods purchases takes place in euros.
Interest rate risk
Interest rate risk resulting from the current capital structure of the Company is limited. The effect on the result following a change (increase or decrease) in the interest rate of 50 basis points would be € 0.1 million before taxation (2018: € 0.2 million), on the basis of the use of the credit facilities at year-end 2019. The carrying amount of the financial liabilities is virtually equal to the fair value.
Credit risk
Credit risk is limited to the wholesale operations and trade receivables under bonus agreements.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for the relevant trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of revenue over a period of 36 months before 31 December 2019 or 1 January 2019 respectively and the corresponding historical credit losses experienced within this period.
Liquidity risk
Liquidity risk resulting from the current capital structure is limited.
Capital management
The Group's objectives when managing capital are to:
- Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and
- Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
In 2019 the fixed assets became pledged to the banks as security for its credit facility. The activation of pledge security dismissed the Group from the applicable solvency and debt/EBITDA preconditions relevant up to that moment. We refer to the note Borrowings on the applicable agreements at year-end.
Daily management of the cash positions and the banks' headroom is part of the standard checks and balances of the Group and continuously monitored. When necessary, conscious planning on payments is executed.
- 1 Intangible assets
in thousand €
Software
Brand
Total
Cost
18,468
1,725
20,193
Accumulated amortisation
(10,947)
(130)
(11,077)
At 1 January 2018
7,521
1,595
9,116
Additions
5,054
-
5,054
Disposals
(92)
-
(92)
Amortisation charges
(2,148)
(86)
(2,234)
Impairment charges
(463)
-
(463)
Foreign exchange differences
(70)
-
(70)
Movement 2018
2,281
(86)
2,195
Cost
23,360
1,725
25,085
Accumulated amortisation
(13,558)
(216)
(13,774)
At 31 December 2018
9,802
1,509
11,311
Additions
96
-
96
Amortisation charges
(1,718)
(75)
(1,793)
Discontinued operations
(1,103)
-
(1,103)
Foreign exchange differences
-
(28)
(28)
Movement 2019
(2,725)
(103)
(2,828)
Cost
15,867
1,694
17,561
Accumulated amortisation
(8,790)
(288)
(9,078)
At 31 December 2019
7,077
1,406
8,483
The intangible assets are comprised of software (€ 7.1 million) and the Sängjätten brand name (€ 1.4 million).
In the purchased software an amount of € 1.4 million is included related to assets under construction (2018: € 3.1 million).
In relation to the migration to one web shop platform in the Netherlands and Belgium an impairment of € 0.5 million in the 2018 results was recognised for the old platform.
- 2 Property, plant and equipment
in thousand €
Land
Buildings
Other fixed operating assets
Total
Cost or fair value
7,090
10,506
115,699
133,295
Accumulated depreciation
-
(6,827)
(82,232)
(89,059)
At 1 January 2018
7,090
3,679
33,467
44,236
Additions
-
-
12,274
12,274
Revaluation
295
-
-
295
Disposals
-
-
(432)
(432)
Depreciation charges
-
(327)
(13,168)
(13,495)
Impairment charges
-
-
(1,639)
(1,639)
Foreign exchange differences
-
-
18
18
Movement 2018
295
(327)
(2,947)
(2,979)
Cost or fair value
7,385
10,506
127,559
145,450
Accumulated depreciation
-
(7,154)
(97,039)
(104,193)
At 31 December 2018
7,385
3,352
30,520
41,257
Additions
-
-
4,301
4,301
Revaluation
389
-
-
389
Disposals
(6,859)
(2,555)
(43)
(9,457)
Depreciation charges
-
(285)
(4,724)
(5,009)
Impairment charges
-
-
(290)
(290)
Discontinued operations
-
-
(20,595)
(20,595)
Movement 2019
(6,470)
(2,840)
(21,351)
(30,661)
Cost or fair value
915
2,012
70,471
73,398
Accumulated depreciation
-
(1,500)
(61,302)
(62,802)
At 31 December 2019
915
512
9,169
10,596
In relation to the anticipated closure of some stores with low profitability in Sweden, an impairment of € 0.3 million has been recognised in 2019.
The impairment in 2018, relates to the discontinuation of the operations in Spain, amounting € 1.2 million and to the store closures in Germany, Austria and Switzerland following the restructuring of Matratzen Concord, amounting € 0.4 million.
Carrying amounts that would have been recognised if land were stated at cost
If freehold land were stated on the historical cost basis, the amounts would be as follows:
in thousand €
2019
2018
Freehold land
Cost
402
3,360
Accumulated depreciation
-
-
Net book amount at 31 December
402
3,360
Gains on sale-and-leaseback transactionsDuring 2019 the Group has entered into three separate sale-and-leaseback transactions for its distribution centers in Uden, Hoogeveen and Nieuw-Vennep. These resulted in a gain amounting € 9.7 million of which at year-end € 6.4 million relates to the rights transferred to the buyer-lessor and has been processed directly in the consolidated profit and loss account. The remainder has been included in the value of the right-of-use assets (and is therefore unrecognised); at year-end an amount of € 3.3 million remains to be realised in the upcoming years.
- 3 Right-of-use assets
in thousand €
Right-of-use assets:
PropertyRight-of-use assets:
FleetTotal
Cost
-
-
-
Accumulated amortisation
-
-
-
At 31 December 2018
-
-
-
Accounting changes at 1 January 2019
134,795
7,703
142,498
Additions
7,382
(231)
7,151
Depreciation charges
(12,768)
(1,235)
(14,003)
Impairment charges
(581)
-
(581)
Discontinued operations
(91,335)
(1,807)
(93,142)
Foreign exchange differences
(173)
(3)
(176)
Movement 2019
37,320
4,427
41,747
Cost
50,669
5,662
56,331
Accumulated amortisation
(13,349)
(1,235)
(14,584)
At 31 December 2019
37,320
4,427
41,747
In relation to the anticipated closure of some stores with low profitability in Sweden, an impairment of € 0.6 million has been recognised in 2019.
Leases
The total cash outflow for leases relating to continuing operations in 2019 was € 14.4 million (2018: € 15.8 million).
Lease amounts recognised in the statement of profit or loss
in thousand €
2019
20181
Depreciation charge of right-of-use assets
Property lease
(12,768)
(10,615)
Other lease
(1,235)
(1,246)
Total depreciation charge
(14,003)
(11,861)
Impairment charges
(581)
-
Interest expense (included in finance cost)
(349)
-
Total amount recognised in the statement of profit or loss
(14,933)
(11,861)
- 1 IFRS 16 was adopted as of 2019. The comparative figures are based upon the like-for-like lease amounts.
The increase in expenses has been influenced by the sale-and-leaseback transactions in the fourth quarter of 2019.
Expenses following from short-term leases, low-value assets and/or variable lease payments are not included in the abovementioned lease amounts. Due to its insignificance, these are not disclosed either.
- 4 Deferred tax balances
Deferred tax assets
in thousand €
2019
2018
The balance comprises temporary differences attributable to:
- Tax losses
1,018
12,758
- Valuation of property, plant and equipment
190
294
- Valuation of pension obligations
-
221
- Valuation due to lease accounting (IFRS 16)
754
-
- Valuation due to interest deductibility
125
-
At 31 December
2,087
13,273
Movements:
in thousand €
Tax losses
Property, plant and equipment
Pension obli-
gationsInventories
Lease accounting
Interest
Total
At 1 January 2018
1,772
312
253
16
-
-
2,353
(Charged)/credited
- to profit or loss
10,986
(18)
(32)
(16)
-
-
10,920
At 31 December 2018
12,758
294
221
-
-
-
13,273
(Charged)/credited
- discontinued activities
(6,890)
-
(221)
-
-
-
(7,111)
- transfer to current tax assets
(4,850)
-
-
-
-
-
(4,850)
- to profit or loss
-
(104)
-
-
754
125
775
At 31 December 2019
1,018
190
-
-
754
125
2,087
Significant estimates
At year-end 2019 a tax credit of € 3,777 thousand (2018: € 8,562 thousand) relating to continuing operations for future loss carry-forwards was recognised under financial assets. A tax credit amounting € 4.9 million in relation to the (anticipated) liquidation of the Spanish legal entities has been realised in 2019 and thus could be transferred to current tax assets.
Beter Bed Holding N.V. has concluded that the deferred assets will be recoverable using the estimated future taxable income based on the business plans and improvement initiatives enrolled. The tax losses have been capitalised to the extent in which tax profits are expected in the coming five years.
An amount of € 14,160 thousand (2018: € 7,257 thousand relating to continuing operations) in loss carry-forwards has not been recognised. Beter Bed Holding N.V.’s policy is that tax losses available for carry-forward are capitalised only if reasonable possibilities for set-off are expected within five years on the basis of a substantiated forecast of the results for tax purposes. Set-off of these losses is insufficiently probable on the basis of the currently available information.
The tax losses available for carry-forward expire as follows:
Term
Total
1 year
-
2 to 5 years
-
6 to 10 years
2,759
11 to 15 years
-
Indefinite
15,178
Total tax losses
17,937
Not recognised
(14,160)
At 31 December 2019
3,777
Deferred tax liabilities
in thousand €
2019
2018
The balance comprises temporary differences attributable to:
- Valuation of (in)tangible assets
105
1,743
- Revaluation of land
129
825
- Valuation of inventories
568
835
- Other
-
49
At 31 December
802
3,452
Movements:
in thousand €
Valuation of (in)tangible assets
Revaluation
of landValuation inventories
Other
Total
At 1 January 2018
1,609
932
770
72
3,383
(Charged)/credited
- to profit or loss
134
-
65
(23)
176
- to other comprehensive income
-
(107)
-
-
(107)
At 31 December 2018
1,743
825
835
49
3,452
(Charged)/credited
- discontinued activities
(1,432)
-
(320)
(49)
(1,801)
- to profit or loss
(206)
(877)
53
-
(1,030)
- change in applied tax rate
-
181
-
-
181
At 31 December 2019
105
129
568
-
802
- 5 Other non-current financial assets
Other non-current financial assets are composed as follows:
in thousand €
2019
2018
Other receivables
64
94
Balance at 31 December
64
94
Other receivables relate to deposits supporting lease contracts of retail stores.
At year-end 2019 and 2018, the measured amounts at amortised costs equals its carrying amount.
- 6 Inventories
in thousand €
2019
2018
Distribution centers
9,331
7,261
Retail stores
12,902
48,418
Balance at 31 December
22,233
55,679
An amount of € 34.8 million of the inventory at year-end 2018 related to the discontinued operations.
- 7 Receivables
Trade receivables
in thousand €
2019
2018
Trade receivables
1,954
3,022
Allowance for expected credit losses
(124)
(8)
Balance at 31 December
1,830
3,014
An amount of € 1.6 million of the trade receivables at year-end of 2018 related to the discontinued operations.
Information about the impairment of trade receivables and the Group's exposure to credit risk
The impairment of trade receivables is based on the expected credit losses model following the simplified approach. Reference is made to Credit Risks as described under Capital and financial risk management.
Trade receivables are written off where there is no reasonable expectation of recovery; in 2019 an amount of € 24 thousand has been written off (2018: € 10 thousand). Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make a contractual payment for a period of greater than 120 days past due.
The carrying amounts of trade and other receivables are considered to be the same as their fair values, due to their short-term nature.
Income tax receivables
in thousand €
2019
2018
Tax receivable due to liquidation of Spanish entities
4,910
-
Tax (payable)/receivable relating to fiscal result
(3,316)
636
Balance at 31 December
1,594
636
Both tax positions are with the Dutch tax authorities.
Other receivables
Other receivables amounting € 8,655 thousand (2018: € 9,243 thousand) are comprised of to be received credit invoices, prepaid costs, advance payments and miscellaneous receivables.
An amount of € 1.8 million of the other receivables end of 2018 related to the discontinued operations.
- 8 Cash and cash equivalents
in thousand €
2019
2018
Bank balances
1,262
2,842
Cash
111
470
Cash in transit
742
2,861
Balance at 31 December
2,115
6,173
- 9 Equity
Issued share capital and share premium
2019
Shares2018
Shares2019
€'0002018
€'000Issued share capital and share premium
Ordinary shares:
- Fully paid and share premium
21,955,562
21,955,562
18,873
18,873
- Issued for cash
2,150,000
-
5,000
-
Total share capital and premium at 31 December
24,105,562
21,955,562
23,873
18,873
The authorised share capital of Beter Bed Holding N.V. amounts to € 2 million and is divided into 100 million ordinary shares with a nominal value of € 0.02 each. On 31 December 2019 a total of 24,105,562 ordinary shares were issued and outstanding.
All shares rank equally with regard to the Company’s residual assets.
There are no shares that have been repurchased and not yet cancelled. Repurchased shares are no longer included in the earnings per share calculation.
The divestment of Matratzen Concord was accompanied by a concurrent equity investment in Beter Bed Holding N.V. of Magical Honour Limited of € 5 million, consisting of 2.15 million ordinary shares at € 2.32 per share.
The share option programs 2014 and 2016 did not result in the issuance of shares.
Equity instruments
in thousand €
2019
2018
Balance at 1 January
-
-
Proceeds from borrowings
3,500
-
Total equity instruments at 31 December
3,500
-
In 2019 an existing shareholder loan has been converted into a perpetual shareholder loan. The loan carries an interest of 7.5% up to June 2020 and 15% thereafter. Both repayment of the loan and interest are at discretion of Beter Bed Holding N.V. and can be deferred to a future period. Up to full redemption of the loan and its interest, no cash or other distributions can be made to ordinary shareholders.
The fair value of the perpetual shareholder loan equals its carrying amount. The fair value is based upon level 3 of the valuation method following the fair value hierarchy (level 3: inputs for assets or liability that are not based on observable market data).
As the perpetual loan agreement became effective as of 31 December 2019, no interest was included in the 2019 financial statements.
- 10 Provisions
in thousand €
2019
2018
Restructuring provision
- Non-current
-
4,040
- Current
-
1,003
Provisions in the consolidated balance sheet
-
5,043
The provision end of 2018 fully related to the discontinued operations.
Information about individual provisions and significant estimates
Restructuring Matratzen Concord
In the fourth quarter of 2018 the decision was made to restructure Matratzen Concord.
The decision comprised mainly:
- The closure of 172 Matratzen Concord retail stores in Germany, Austria and Switzerland.
- Reduction of 64 FTE of supporting staff of Matratzen Concord.
- Decrease of inventories with at least € 8 million.
The one-off cost of the restructuring operation amounted to € 7.6 million and was beyond the earlier communicated plans. The cost mainly related to termination of rental agreements, dismissal payments and impairment of assets. The various costs are presented in their respective categories in the profit and loss account.
Termination of Spanish activities
During 2018 it was concluded that the Spanish activities did insufficiently contribute to the financial results of the Group and would neither do so in the foreseeable future. Via an asset deal, the activities have been transferred to a third party as per 1 November 2018. The legal closure of the remaining legal companies has been executed in 2019.
In relation to the restructuring of Matratzen Concord in Germany, Austria and Switzerland, a provision of € 5.0 million was recognised in 2018. This amount relates to employee termination payments and to lease contract termination costs.
The remaining provision relates to onerous contracts for long-term leases relating to discontinued retail operations. This provision is based on the rent and the remaining term, taking account of a subletting probability and a mark-up for service costs.
Movement in provisions
in thousand €
Restructuring
Carrying amount at 1 January 2018
121
Charged/(credited) to profit or loss
- Additional provisions recognised
4,999
- Withdrawals
(77)
Total provisions at 31 December 2018
5,043
Charged/(credited) to profit or loss
- Discontinued operations
(5,043)
Total provisions at 31 December 2019
-
- 11 Lease liabilities
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
in thousand €
2019
1 January 2019
Right-of-use assets
Property lease
37,320
134,822
Other lease
4,427
7,703
At 31 December resp. 1 January 2019
41,747
142,525
Lease liabilities
Current
16,346
41,028
Non-current
29,241
101,497
At 31 December resp. 1 January 2019
45,587
142,525
In 2018, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as ‘finance leases’ under IAS 17 Leases, if any. The assets were presented in property, plant and equipment and the liabilities as part of the Group’s borrowings. For adjustments recognised on adoption of IFRS 16 on 1 January 2019, please refer to note Changes in significant accounting policies. Expenses of short-term leases and low-value leases are insignificant. As per 1 January 2019 an amount of € 93.2 million of the lease liabilities related to the discontinued operations.
- 12 Trade payables, taxes and other liabilities
Trade payables are unsecured and are usually paid within 30 days of recognition. An amount of € 11.7 million of the trade payables at year-end 2018 related to the discontinued operations.
Other taxes and social security contributions, composed of VAT, labour tax and social security premiums, are valued at nominal value.
The carrying amounts of other liabilities are considered to be the same as their fair values, due to their short-term nature.
Other liabilities
Other liabilities are composed as follows:
in thousand €
2019
2018
Prepayments customers
10,347
12,050
Accrual staff cost
5,068
7,037
Other liabilities
2,857
6,074
At 31 December
18,272
25,161
An amount of € 14.3 million of the other liabilities at year-end 2018 related to the discontinued operations.
- 13 Borrowings
in thousand €
2019
2018
Revolving credit facilities
3,320
18,000
Shareholder loan
3,500
-
Bank overdraft
3,174
4,998
At 31 December
9,994
22,998
Credit Facilities
To fund the Group, the Company has current account facilities totalling € 23.3 million at its disposal, including facilities available for providing guarantees.
These current account agreements include two multi-purpose facilities with ABN AMRO and BNP Paribas, amounting to € 10.0 million each, expiring in July 2020. First ranking security is provided in respect of pledge on shares in all Dutch companies, its bank accounts, receivables, inventories and the stores in Uden, Elst and Den Helder. The main conditions of the credit facilities are a net (senior) debt/EBITDA ratio below 2.5x, a guarantor cover over 70% threshold and a month-end clean down of uncommitted multi-purpose facility below € 14.1 million outstanding.
At the end of 2019 Beter Bed Holding N.V. complied with all bank covenants.
At the end of the year an amount of € 3.3 million (2018: € 23.0 million) was used under the revolving credit facilities. These facilities were also used for providing bank guarantees for the purpose of rental payments amounting to € 0.6 million (2018: € 0.7 million). Of the facilities available specifically to provide guarantees, a total of € 0.9 million was used at year-end 2019 (2018: € 6.8 million).
At the end of the year € 3.2 million under the bank overdraft was utilised.
Shareholder loan
In the second half year of 2019 shareholder loans were received for an amount of € 7.0 million as part of the re-financing of the Group (refer to note Going Concern). At year-end an amount of € 3.5 million has been converted into a perpetual shareholder loan qualifying as equity. Second ranking security is provided in respect of pledge on shares in all Dutch companies, its bank accounts, receivables, inventories and the stores in Uden, Elst and Den Helder.
Terms and repayment schedule
in thousand €
Nominal interest rate
Year of maturity
Face value
Carrying amount
Revolving credit facilities
Euribor + 1.50 - 2.00
2020
3,320
3,320
Shareholder loan
30%
2020
3,500
3,500
Bank overdraft
Euribor + 0.80 - 1.30
2020
3,174
3,174
At 31 December 2019
9,994
9,994
Changes in liabilities arising from financing activities
in thousand €
Liabilities from financing activities
Borrowings
Leases
Subtotal
Financial liabilities at 1 January 2018
(17,481)
-
(17,481)
Proceeds from credit facilities
(5,517)
-
(5,517)
Financial liabilities at 31 December 2018
(22,998)
-
(22,998)
Recognised on adoption of IFRS16
-
(142,525)
(142,525)
Financial liabilities at 31 December 2018 after adoption IFRS16
(22,998)
(142,525)
(165,523)
Discontinued operations
-
93,142
93,142
Repayment of borrowings
16,504
-
16,504
Proceeds from shareholder loan
(3,500)
-
(3,500)
Payment lease liabilities
-
14,410
14,410
Sale-and-leaseback commitments
-
(6,331)
(6,331)
Proceeds from changes in other lease commitments
-
(3,934)
(3,934)
Discounting impact of recognised lease liabilities
-
(349)
(349)
Financial liabilities at 31 December 2019
(9,994)
(45,587)
(55,581)
- 14 Information by geographical area
Revenue by country, in thousand €
2019
%
2018
%
The Netherlands
158,731
85.4
150,122
86.9
Belgium
10,516
5.7
8,985
5.2
Sweden
16,558
8.9
13,705
7.9
Total revenue
185,805
100.0
172,812
100.0
(In)tangible fixed assets by country, in thousand €
2019
%
2018
%
The Netherlands
48,403
79.6
25,969
84.1
Belgium
4,223
6.9
1,845
6.0
Sweden
8,200
13.5
3,055
9.9
Total
60,826
100.0
30,869
100.0
- 15 Personnel expenses
in thousand €
2019
2018
Wages and salaries
33,028
29,196
Social security costs
6,745
6,133
Pension costs
3,141
2,764
External staffing
4,015
2,648
Employee stock options
135
83
Total expenses
47,064
40,824
Wages and salaries include an amount of € 362 thousand for the severance package of Mr Van den Ochtend. The pension contributions relate to defined contribution schemes or schemes designated as such. Within the costs of employee stock options, € 99 thousand relates to the current and former members of the Company’s Management Board (2018: € 28 thousand).
Average number of staff
FTE
2019
2018
The Netherlands
776
750
Belgium
30
23
Sweden
108
94
Total FTE
914
867
- 16 Option program
Share-based compensation
Share-based compensation relates to the equity-settled option programs. Charges recognised in the 2019 statement of income for both programs amounted to € 135 thousand and are included in salaries and wages.
Option program
Under the option program, a number of options are granted to key staff each year. The number of participants of the option program at year-end 2019 was 7 (2018: 8).
Options are exercised at the discretion of the holder however may only be exercised after the completion of a three-year vesting period. In addition, the TSR (‘Total Shareholder Return’) of Beter Bed Holding N.V. achieved after three years is compared with the TSR of nine relevant nationally and internationally listed companies that jointly form a peer group. The Management Board of Beter Bed Holding N.V. is under the obligation to retain shares awarded under the option program, for a period of at least four years.
The 2019 signing options may only be exercised after the completion of a two year vesting period. These options expire and are considered to have lapsed after a period of three years following the grant date. Vesting of the options is independently to performance indicators.
The following table summarises information about the stock options outstanding at year-end:
Year of grant
Outstan-
ding at 31 December 2018Granted
Exercised
Forfeited
/ ExpiredOutstan-
ding at 31 December 2019Exercise
priceVesting
dateExpiry
date2016 Management
5,000
-
-
(5,000)
-
19.99
19-05-19
18-05-21
2017 Management
5,000
-
-
-
5,000
15.53
18-06-20
17-05-22
2018 Management
27,500
-
-
-
27,500
8.24
26-04-21
25-04-23
2018 Signing options
100,000
-
-
(100,000)
-
13.06
01-04-21
31-03-22
2019 Management
-
200,000
-
(85,000)
115,000
4.34
24-04-22
24-04-24
2019 Signing options
-
300,000
-
-
300,000
4.34
24-04-21
24-04-22
The fair value of the options is determined using the Monte Carlo simulation models (applicable for management options) and the binomial tree model (applicable for signing options of the CEO). This model contain input variables, including the risk free interest rate, volatility of the underlying share price, exercise price and share price at date of the grant; parameters differ within both models.
2019
Management
options2019
Signing
options2018
Management
optionsShare price at grant date (€)
4.41
4.41
9.04
Exercise price (€)
4.34
4.34
8.24
Expected volatility
28.55%
32.16%
22.80%
Expected average option life in years
5 years
3 years
5 years
Weighted average risk free rate
(0.34)
(0.53)
0.03
Dividend yield
0.36%
0.36%
4.70%
Fair value of option granted (€)
0.91
0.95
1.11
The option value models require the input of highly subjective assumptions, including the expected share price volatility. Volatility is determined using the historical volatility of the Beter Bed Holding N.V. share. The Group's employee stock options have characteristics that are significantly different from those of traded options, and changes in the subjective input assumptions can affect the fair value estimate. There are no market conditions applicable to the grant.
- 17 Other income
Other income represents the realised gains at inception on the divestment of land and property resulting from the IFRS 16 accounting for sale-and-leaseback transactions.
- 18 Depreciation, amortisation and impairment
in thousand €
2019
2018
Depreciation and impairment on tangible assets
19,883
4,879
Amortisation and impairment on intangible assets
1,793
2,289
Total of depreciation, amortisation and impairment
21,676
7,168
Increased depreciation on tangible fixed assets is driven by the adoption of IFRS 16.
- 19 Other operating expenses
The other operating expenses are comprised as follows:
in thousand €
2019
2018
Housing expenses
4,280
15,584
Sales and marketing expenses
11,129
9,909
Travel and entertainment expenses
6,677
6,640
General expenses
12,114
6,844
Other personnel expenses
2,364
2,415
Other costs
67
72
Total expenses
36,631
41,464
Housing expenses are resulting from the adoption of IFRS 16 replaced by depreciation of right-of-use assets and interest relating to lease liabilities as of 2019.
General expenses increased reflecting incidental advisory and legal costs relating to the transition of the Group.
- 20 Finance costs
in thousand €
2019
2018
Interest expenses on recognised lease liabilities
349
-
Other interest cost
2,101
688
Total interest expenses
2,450
688
Lease liabilities are calculated using the applicable incremental borrowing rate. The rate applied during 2019 amounts on average 0.74%.
- 21 Income tax
The reconciliation between the effective tax rate and the results of the calculation of the profit before taxes, multiplied by the local tax rate in the Netherlands on 31 December, was as follows:
in thousand €
2019
%
2018
%
Profit / (loss) before taxes from continuing operations
(2,882)
100.0
3,905
100.0
Tax using the company's domestic tax rate: 25.0% (2018: 25.0%)
(721)
25.0
976
25.0
Unrecognised operating losses
1,703
(59.1)
793
20.3
Step-up rate The Netherlands 19%-25%
(38)
1.3
(38)
(1.0)
Permanent tax differences
400
(13.9)
98
2.5
Spain recoverable tax
(60)
2.1
(4,805)
(123.1)
At an effective tax rate of 44,6% (2018: 76,2%)
1,284
(44.6)
(2,976)
(76.2)
The effective tax rate decreased to 44.6% in 2019 (2018: 76.2%). Excluding the impact of differences resulting from Spain, the effective tax rate would have been 46.6% (2018: 46.8%) is heavily influenced by non-tax deductible expenses.
2019 includes a tax gain of € 0.1 million (2018: € 4.8 million) that is recognised in relation to the (anticipated) liquidation of the Spanish legal entities. This liquidation loss regulation is part of the Dutch corporate income tax laws and regulations.
The item tax in the profit and loss account comprises the following:
in thousand €
2019
2018
Current tax expenses / (gains)
Current tax on fiscal profits for the year
3,256
2,310
Tax regarding Spain result 2019
(60)
-
Other
(107)
(6)
Total current tax expense
3,089
2,304
Deferred income tax
Decrease/(increase) in deferred tax assets
(775)
(5,241)
(Decrease)/increase in deferred tax liabilities
(1,030)
(39)
Total deferred tax expense/(income)
(1,805)
(5,280)
Income tax expense/(gain)
1,284
(2,976)
Income tax is attributable to:
Result from continuing operations
1,284
(2,976)
Income tax expense/(gain)
1,284
(2,976)
- 22 Earnings per share
in cents €
2019
2018
Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the company
(19)
31
From discontinued operation
(219)
(137)
Total basic earnings per share attributable to the ordinary equity holders of the company
(238)
(106)
Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the company
(19)
31
From discontinued operation
(219)
(137)
Total diluted earnings per share attributable to the ordinary equity holders of the company
(238)
(106)
Reconciliation of earnings used in calculating earnings per share
in thousand €
2019
2018
Basic earnings per share
Result attributable to the ordinary equity holders of the company used in calculating basic earnings per share:
- From continuing operations
(4,166)
6,881
- From discontinued operations
(48,409)
(30,131)
Total result used in calculating basic earnings per share
(52,575)
(23,250)
Weighted average number of shares used as the denominator
Number
2019
2018
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
22,132,274
21,955,562
Adjustments for calculation of diluted earnings per share:
- PIK interest on shareholder loan in arrears1
-
-
- Options2
-
-
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share
22,132,274
21,955,562
- 1 Non-dilutive in 2019 and not applicable in 2018.
- 2 Non-dilutive in both 2019 and 2018.
- 23 Remuneration of the Management Board and Supervisory Board
The remuneration of members of the Management Board was as follows in 2019 and 2018:
in thousand €
2019
Salary
Variable
remune-
rationOptions
on sharesPension
benefitsSocial
security
chargesSub-
totalOther
employee
benefitsSeve-
rance
costTotal
A.J.G.P.M. Kruijssen
450
351
91
135
12
1,039
42
-
1,081
H.G. van den Ochtend1
255
-
8
64
12
339
12
362
713
Total
705
351
99
199
24
1,378
54
362
1,794
- 1 Up to and including 12 December 2019.
in thousand €
2018
Salary
Variable
remune-
rationOptions
on sharesPension
benefitsSocial
security
chargesSub-
totalOther
employee
benefitsSeve-
rance
costTotal
A.J.G.P.M. Kruijssen1
338
142
8
101
8
597
41
-
638
H.G. van den Ochtend2
85
43
-
21
3
152
4
-
156
B.F. Koops3
149
-
20
37
10
216
8
-
224
Total
572
185
28
159
21
965
53
-
1,018
- 1 As of 1 April 2018.
- 2 As of 1 September 2018.
- 3 Up to and including 31 July 2018.
The variable remuneration relates to the year under which it is classified and is recognised in the expenses of that year.
The cost listed under Options on shares represent the amount accounted for in the profit and loss account for that year.
The cost in 2019 include the severance package relating to Mr H. van den Ochtend including the salary until formal dismissal. Mr Van den Ochtend is no longer attending Beter Bed Holding N.V.
At the end of the financial year, Mr Kruijssen held 10,000 shares in Beter Bed Holding N.V.
The remuneration of the members of the Supervisory Board was as follows in 2019 and 2018:
in thousand €
2019
2018
B.E. Karis
36.7
2.5
H.C.M. Vermeulen
21.0
17.0
A. Beyens
30.0
2.5
P.C. Boone
30.0
2.5
G.E.A. Reijnen1
18.2
-
D.R. Goeminne2
13.3
40.0
E.A. de Groot3
-
27.5
W.T.C. van der Vis3
-
27.5
A.J.L. Slippens3
-
8.5
Total
149.2
128.0
- 1 G.E.A. Reijnen was appointed as a member of the Supervisory Board at the Annual General Meeting held at 25 April 2019. She stepped down from the Supervisory Board on 12 December 2019 upon her appointment as CFO.
- 2 D.R. Goeminne stepped down from the Supervisory Board after the Annual General Meeting held at 25 April 2019.
- 3 Stepped down in 2018.
The members of the Supervisory Board hold no shares or exercisable options on shares in Beter Bed Holding N.V.
- 24 Events after the balance sheet date
There have been no subsequent events between the end of the year under review and the preparation of these financial statements which ought to be disclosed.
- 25 Related party transactions
The companies listed in principles of consolidation are included in the consolidation of Beter Bed Holding N.V. and its participating interests.
Beter Bed Holding N.V. has issued declarations of joint and several liability for all Dutch group companies for the obligations arising from legal transactions entered into by these group companies. Pursuant to these letters of guarantees, the Dutch group companies have made use of the exemption options laid down in Section 403, paragraphs 1 and 3, of Part 9, Book 2 of the Dutch Civil Code.
The financial relationships between Beter Bed Holding N.V. and its participating interests consist almost fully in fundings, receiving dividends and receiving interest on loans provided.
There were no transactions in 2019 between the Company and natural or legal persons holding at least 10% of the shares in the Company that were of material significance to the company and/or the persons concerned.
Key management personnel compensation
in thousand €
2019
2018
Short-term employee benefits
1,432
1,018
Termination benefits
362
-
Total
1,794
1,018
Key management personnel compensation relates to the Management Board. Detailed remuneration disclosures are provided in note 23.
There have been no other relevant transactions with key management personnel.
Transactions with other related parties
in thousand €
2019
2018
Subscription for new ordinary shares by Magical Honour Limited
5,000
-
Perpetual shareholder loan
3,500
-
Shareholder loan
3,500
-
Interest on shareholder loan
1,575
-
Total
13,575
-