Annual Report 2019

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. 1 In 2020 Beter Beheer B.V. is renamed into Beter Bed Financial Services B.V.
    2. 2 The activities in Germany, Austria and Switzerland have been divested in a share deal in 2019.
    3. 3 The Spanish entities have been liquidated in 2019.
    4. 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. 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. 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 transactions

    During 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:
    Property

    Right-of-use assets:
    Fleet

    Total

    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. 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-
    gations

    Inventories

    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 land

    Valuation 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
    Shares

    2018
    Shares

    2019
    €'000

    2018
    €'000

    Issued 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 2018

    Granted

    Exercised

    Forfeited
    / Expired

    Outstan-
    ding at 31 December 2019

    Exercise
    price

    Vesting
    date

    Expiry
    date

    2016 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
    options

    2019
    Signing
    options

    2018
    Management
    options

    Share 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. 1 Non-dilutive in 2019 and not applicable in 2018.
    2. 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-
    ration

    Options
    on shares

    Pension
    benefits

    Social
    security
    charges

    Sub-
    total

    Other
    employee
    benefits

    Seve-
    rance
    cost

    Total

    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. 1 Up to and including 12 December 2019.

    in thousand €

    2018

    Salary

    Variable
    remune-
    ration

    Options
    on shares

    Pension
    benefits

    Social
    security
    charges

    Sub-
    total

    Other
    employee
    benefits

    Seve-
    rance
    cost

    Total

    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. 1 As of 1 April 2018.
    2. 2 As of 1 September 2018.
    3. 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. 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. 2 D.R. Goeminne stepped down from the Supervisory Board after the Annual General Meeting held at 25 April 2019.
    3. 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

    -