Beter Bed Holding

Annual Report 2014

Notes to the consolidated balance sheet
and profit and loss account

in thousand €, unless otherwise stated

  • 1. Tangible fixed assets

    Land

    Buildings

    Other fixed operating assets

    Total

    Book value 1 January 2013

    5,460

    3,878

    21,598

    30,936

    Investments

    -

    -

    4,353

    4,353

    Currency adjustment

    -

    -

    (12)

    (12)

    Disposals

    -

    -

    (803)

    (803)

    Depreciation

    -

    (363)

    (7,511)

    (7,874)

    Impairment

    -

    -

    (1,009)

    (1,009)

    Book value 31 December 2013

    5,460

    3,515

    16,616

    25,591

    Accumulated depreciation

    -

    5,599

    70,111

    75,710

    Accumulated revaluation

    (3,797)

    -

    -

    (3,797)

    Purchase price

    1,663

    9,114

    86,727

    97,504

    Book value 1 January 2014

    5,460

    3,515

    16,616

    25,591

    Investments

    -

    79

    11,293

    11,372

    Currency adjustment

    -

    -

    17

    17

    Disposals

    -

    -

    (1,002)

    (1,002)

    Depreciation

    -

    (354)

    (6,735)

    (7,089)

    Book value 31 December 2014

    5,460

    3,240

    20,189

    28,889

    Accumulated depreciation

    -

    5,953

    72,550

    78,503

    Accumulated revaluation

    (3,797)

    -

    -

    (3,797)

    Purchase price

    1,663

    9,193

    92,739

    103,595

    The revaluation relates to the company land at Uden and Hoogeveen and the land forming part of retail properties owned. These properties are located in the Dutch cities of Elst, Den Helder, ’s Hertogenbosch and Uden. This land was revalued on 11 December 2012 by an independent valuer.

    In the company’s judgment, the fair value has not changed significantly since the last valuation.

    The writedown included in the statement of movements for 2013 relates to the tangible fixed assets of the Dutch and Belgian Matrassen Concord stores and the Slaapgenoten stores. The recoverable value relating to the capitalised tangible fixed assets at these stores is estimated at zero, and the carrying amounts of the tangible fixed assets of the Dutch and Belgian Matrassen Concord stores and the Slaapgenoten stores were accordingly written down to zero.

    The tangible fixed assets are intended for own use.

  • 2. Intangible fixed assets

    2014

    2013

    Book value 1 January

    2,833

    2,855

    Investments

    1,839

    1,086

    Disposals

    (2)

    (3)

    Depreciation

    (1,153)

    (1,057)

    Impairment

    -

    (48)

    Book value 31 December

    3,517

    2,833

    Accumulated depreciation

    4,839

    3,748

    Purchase price

    8,356

    6,581

    The intangible operating assets consist mainly of licenses and software.

    The writedown included in the statement of movements for 2013 relates to the intangible fixed assets of the Dutch and Belgian Matrassen Concord stores and the Slaapgenoten stores.

  • 3. Long-term accounts receivable

    The deposits in connection with the rent of stores are presented as financial fixed assets given the long term nature of these receivables.

  • 4. Stocks

    This comprises stocks held in stores to the value of € 47,923 (2013: € 50,043) and stocks held in warehouses to the value of € 5,558 (2013: € 5,506). The write-down for possible obsolescence included in this item can be specified as follows:

    2014

    2013

    Balance at 1 January

    2,357

    1,863

    Additions

    82

    1,038

    Withdrawals

    (766)

    (544)

    Balance at 31 December

    1,673

    2,357

    The provision is determined taking account of the quantity of goods withdrawn from the range or returned to suppliers.

    Within the additions included in the statement of movements € 643 relates to the writedown of the stocks of the Slaapgenoten stores and the Dutch and Belgian Matrassen Concord stores set to be closed. The provision of € 772 recognised in 2013 for these stores was nil at year-end 2014.

  • 5. Debtors

    All the accounts receivable fall due within less than one year and are carried at amortised cost price which is equal to the nominal value. Sales in stores and deliveries are settled in cash. Receivables relate mainly to receivables due from wholesale customers and trade receivables arising from agreed bonuses. A provision of € 60 (2013: € 91) is recognised for wholesale accounts receivable. This is 44.9% (2013: 100%) of the overdue receivables.

  • 6. Cash and cash equivalents

    This item relates to the cash, cheques and bank balances. The amount is composed as follows: cash € 260 (2013: € 272), bank balances € 19,361 (2013: € 6,340) and cash in transit € 1,262 (2013: € 2,942).

  • 7. Equity

    The movements in the equity items are shown in the consolidated equity movement overview. The company’s authorised share capital amounts to € 2,000, divided into 100 million ordinary shares with a nominal value of € 0.02.

    Movements in the number of issued and fully paid-up shares and movements in the number of shares in portfolio are shown below:

    2014

    2013

    Issued and paid-up shares as at 1 January

    21,805,117

    21,805,117

    Share issue on exercise of employee stock options

    100,445

    -

    Issued and paid-up shares as at 31 December

    21,905,562

    21,805,117

    Shares in portfolio as at 1 January

    23,805

    75,805

    Repurchased during the year

    -

    -

    (Re)issue on exercise of options

    (21,082)

    (2,000)

    Sale of shares in portfolio

    -

    (50,000)

    Shares in portfolio as at 31 December

    2,723

    23,805

    A total of 121,527 shares were sold at a price of € 15.23 with a view to the exercise of employee stock options, resulting in an increase of equity by € 1,851.

    The shares in portfolio have not yet been cancelled and therefore not been deducted from the number of issued and paid-up shares. These repurchased shares are no longer included in the earnings per share calculation.

    The revaluation reserve relates to company land.

    A proposal will be submitted to the Annual General Meeting of Shareholders to distribute a final dividend in cash of € 0,37 per share. The total dividend for 2014 will therefore amount to € 0.65 per share (2013: € 0.27).

  • 8. Provisions

    The formula portfolio in the Benelux was streamlined in 2014. The strategic focus is on the Beter Bed and Beddenreus formulas. The operations of the Matrassen Concord the Netherlands and Belgium and Slaapgenoten formulas were therefore discontinued in the course of 2014.

    A provision for onerous contracts has been formed for the long-term leases relating to the stores of these two formulas.

    This can be broken down as follows:

    2014

    2013

    Balance at 1 January

    4,542

    -

    Additions

    -

    4,542

    Withdrawals

    (1,885)

    -

    Releases

    (602)

    -

    Balance at 31 December

    2,055

    4,542

    Of which short-term (in other liabilities)

    804

    1,864

    Total provision for onerous rental contracts

    1,251

    2,678

    The provision for onerous rental contracts is based on the rent and the remaining term, taking account of a subletting probability and a mark-up for service costs.

  • 9. Long-term obligations

    The deferred tax liabilities relate to the differences between the valuation of stocks and fixed assets, including company land, in the Netherlands, Germany and Switzerland for tax and financial reporting purposes. This difference is long-term in nature.

    The movements in this item in 2014 and 2013 are as follows:

    2014

    2013

    Balance at 1 January

    2,424

    2,400

    Over profit and loss account

    (206)

    24

    From equity

    -

    -

    Balance at 31 December

    2,218

    2,424

    Within deferred tax liabilities at the end of the financial year € 949 (2013: € 949) relates to the revaluation of company land and € 614 (2013: € 731) to the difference between the valuation of stock for tax purposes and for financial reporting purposes; € 655 relates to the difference between the valuation of the tangible fixed assets for tax purposes and for financial reporting purposes (2013: € 744).

    A loan of € 10.0 million at a fixed rate of interest of 4.75% was entered into in mid-June 2009. The loan has a term of five years and will be repaid in monthly instalments. The annual repayment obligation of € 2.0 million is paid from current cash flows. This loan was repaid in full in June of this year.

  • 10. Current obligations

    To fund the group the company has current account facilities totalling € 42.8 million at its disposal. Furthermore, facilities totalling € 7.2 million are available for providing guarantees.

    For the purpose of the current account facilities, the company and its subsidiaries have undertaken not to encumber their assets with any security rights without the prior consent of the credit providers. 

    The above-mentioned current account facilities include a committed facility in the amount of € 20.0 million, which will expire on 31 July 2015. As security for the committed facility, mortgages have been provided for the Uden and Hoogeveen distribution centres and for the Den Helder store premises. The main conditions of the account overdraft facilities are a minimum solvency rate of 25% and a maximum net interest-bearing debt/EBITDA ratio of 2.5.

    At the end of the year under review, the current account facilities were only used for providing bank guarantees, mainly for the purpose of rent payments in the amount of € 0.7 million (2013: € 0.8 million). Of the facilities available specifically to provide guarantees, a total of € 6.1 million was in use at year-end 2014 (2013: € 5.5 million).

    The other liabilities include a pension liability for a former employee of € 1.4 million (2013: € 1.3 million), calculated on an actuarial basis.

  • 11. Financial obligations

    The financial obligations can be specified as follows:

    up to 3 months

    3 to 12 months

    1 to 5 years

    2014

    Accounts payable

    17,517

    -

    -

    Credit institutions

    -

    -

    -

    Total

    17,517

    -

    -

    2013

    Accounts payable

    8,746

    -

    -

    Credit institutions

    4,475

    500

    -

    Total

    13,221

    500

    -

    The market value of the financial obligations is roughly equal to amortised cost.

  • 12. Information by geographic area

    Revenue by country

    2014

    %

    2013

    %

    Germany

    213,159

    58

    201,114

    56

    The Netherlands

    109,203

    30

    114,984

    32

    Other countries

    42,660

    12

    41,852

    12

    Intercompany adjustment

    (1,069)

    -

    (587)

    -

    Total

    363,953

    100

    357,363

    100


    (In)tangible fixed assets by country

    2014

    2013

    The Netherlands

    19,361

    13,774

    Germany

    10,194

    12,312

    Other countries

    2,851

    2,338

    Total

    32,406

    28,424

  • 13. Wage and salary costs

    The following wage and salary components are included in the operating expenses:

    2014

    2013

    Wages and salaries

    74,637

    71,739

    Social security costs

    13,371

    13,141

    Pension costs

    2,289

    2,590

    Employee stock options

    (439)

    (101)

    Total

    89,858

    87,369

    The pension contributions relate virtually exclusively to defined contribution schemes or schemes designated as such. Free fall for employee stock options, € 116 relate to the current and former members of the company’s Management Board (2013: € 83).

    Average number of employees

    All the companies included in the consolidation had an average of 2,388 employees (FTE) in 2014 (2013: 2,458):

    2014

    2013

    Germany

    1,558

    1,561

    The Netherlands

    576

    629

    Spain

    49

    62

    Austria

    117

    116

    Switzerland

    79

    78

    Belgium

    9

    12

    Total

    2,388

    2,458

  • 14. Option program

    The options are long-term in nature and can be exercised providing that the profit target has been met. The costs of the option program are calculated using the Black & Scholes model. With effect from 2013, the costs of the options program are calculated using a combined model of Black & Scholes and Monte Carlo simulations. An overview of the details of the options granted and still outstanding, as well as the values employed in the Black & Scholes model, is provided hereafter.

    The conditions have been changed with effect from the options series 2013. In the first three years after the award of the options granted, 33.3% of the options will vest annually if the ‘Total Shareholder Return’ (TSR = share price gains plus dividend distributed) of Beter Bed Holding N.V. exceeds the ‘Total Shareholder Return of the AScX, based on the year of the award. In addition, the employee is required to continue to be employed by the company for three years. Options can only be exercised if these conditions are met after three years. The previous options policy/options contract will continue to apply up to 2012 for options already granted.

    From the 2013 series, this means that the calculation will be based on three different Black & Scholes values, risk-free interest rates and volatility percentages. The ranges of those percentages are set out in the table below. 

    2014

    2013

    2011

    2010

    2009

    Number granted

    166,700

    166,500

    218,000

    218,000

    218,000

    Number outstanding

    166,700

    111,000

    180,750

    176,750

    174,250

    Value according to Black & Scholes

    € 1.78 - € 1.93

    € 1.26 - € 1.76

    € 1.58

    € 3.54

    € 3.20

    Exercise from

    19-5-2017

    25-4-2016

    28-10-2013

    29-10-2012

    28-10-2011

    Exercise through

    19-5-2019

    25-4-2018

    28-4-2017

    29-4-2016

    28-4-2015

    Profit target (in millions)

    -

    -

    € 32.0

    € 32.0

    € 25.0

    Profit target achieved in year

    -

    -

    -

    -

    2010

    TSR > AScX

    No

    No

    -

    -

    -

    Share price on the allotment date

    € 17.37

    € 14.09

    € 14.67

    € 19.07

    € 15.23

    Exercise price

    € 17.37

    € 14.09

    € 14.67

    € 19.07

    € 15.23

    Expected life

    5 years

    5 years

    3.8 years

    5.5 years

    3.8 years

    Risk-free rate of interest (%)

    0.78 - 0.46

    0.75 - 0.48

    1.71

    2.25

    2.40

    Volatility (%)1

    27.50 - 21.94

    31.93 - 30.19

    32.15

    40.40

    48.00

    Dividend yield (%)

    5.20

    5.90

    9.00

    7.35

    5.00

    1. 1 Expected volatility is based on end-of-month closing prices for the most recent period with a length equalling the expected term with a maximum of five years.

    A total of 121,527 options were exercised in 2014 at a price of € 15.23. This related to 121,527 options from the 2009 series. In 2014, another 39,575 options expired, as a number of employees holding options left the company before the expiration dates. No options expired in 2014 due to the expiry of their term. However, a portion of the options expired because the vesting conditions were not satisfied. The series concerned is the series 2013 part I. Lastly, 166,700 new options were granted in 2014. See the summary of option series outstanding.

  • 15. Depreciation

    2014

    2013

    Depreciation and impairment on tangible fixed assets

    7,089

    8,883

    Depreciation and impairment on intangible fixed assets

    1,153

    1,105

    Total of depreciation and impairment

    8,242

    9,988

    The depreciation rates, which are based on the expected economic life, are as follows:

    Company land

    0%

    Buildings

    3.33%

    Other fixed operating assets

    10% - 33%

    Software, licenses and other

    10% - 33%

  • 16. Other operating expenses

    The other operating expenses comprise € 45.6 million in rental and lease costs (2013: € 53.0 million), with the remainder relating mainly to selling and distribution costs.

    The Dutch and Belgian Matrassen Concord stores and the Slaapgenoten stores were closed in 2014. A provision for the costs to be incurred for this was recognised in 2013. In addition, a number of the stores of El Gigante del Colchón were closed in 2013 and a reorganisation of the Benelux head office was carried out. The costs incurred for these reorganisations and restructuring in 2013 totalled € 7.4 million.

  • 17. Income tax expense

    A tax asset is recognised at year-end 2014 under financial fixed assets of € 31 (2013: € 83) relating to future tax loss carryforwards.

    The differences between the valuation of tangible fixed assets for tax purposes and for financial reporting purposes give rise to the recognition of a tax asset of € 323 (2013: € 321). The other differences between the tax and accounting bases of valuation totalled € 143 (2013: € 145).

    An amount of € 7,623 (2013: € 6,390) in tax loss carry forwards is not recognised in the balance sheet, as their utilisation is currently assessed as being unlikely. These tax-offsettable losses are subject to the following terms:

    Term

    1 year

    -

    2 - 5 years

    -

    6 - 10 years

    384

    11 - 18 years

    4,358

    Infinite

    2,881

    The reconciliation between the tax liability and the results of the calculation of the profit before taxes, multiplied by the local tax rate in the Netherlands, was as follows on 31 December 2014 and 31 December 2013:

    2014

    2013

    Profit before taxes

    22,743

    11,568

    At the applicable legal rate of 25.0% in the Netherlands (2013: 25.0%)

    5,686

    2,892

    Adjustment profits tax previous years

    109

    100

    Permanent differences

    (1,613)

    (1,259)

    Future loss set-off not included

    407

    939

    Recognition of previously unrecognized deferred tax assets

    -

    (72)

    Effect of the tax rates outside the Netherlands

    1,294

    770

    At an effective tax rate of 25.9% (2013: 29.1%)

    5,883

    3,370

    Profit tax in the consolidated profit and loss account

    5,883

    3,370


    The item tax in the profit and loss account comprises the following:

    2014

    2013

    Tax for current year

    5,929

    3,344

    Adjustment of profit tax for prior years

    109

    100

    Temporary differences

    (208)

    (114)

    Future tax loss carryforwards

    53

    40

    Profit tax in the consolidated profit and loss account

    5,883

    3,370

  • 18. Remuneration of the Management and Supervisory Board

    In 2014 and 2013 the remuneration for the members of the Management Board is as follows:

    A.H. Anbeek

    B.F. Koops

    D. van Hoeve

    Total

    2014

    2013

    2014

    2013

    2014

    2013

    2014

    2013

    Salary

    323

    323

    200

    166

    -

    49

    523

    538

    Variable remuneration

    169

    97

    85

    45

    -

    -

    254

    142

    Pension

    97

    97

    50

    38

    -

    -

    147

    135

    Employee stock options

    (125)

    36

    9

    -

    -

    (119)

    (116)

    (83)

    Social security charges

    9

    9

    9

    7

    -

    2

    18

    18

    Lease car

    13

    13

    16

    12

    -

    4

    29

    29

    Total

    486

    575

    369

    268

    -

    (64)

    855

    779


    In 2014 and 2013 the remuneration for the members of the Supervisory Board is as follows:

    2014

    2013

    D.R. Goeminne

    37

    37

    A.J.L. Slippens

    23

    23

    E.A. de Groot 

    27

    27

    W.T.C. van der Vis

    27

    18

    C.A.S.M. Renders

    -

    9

    Total

    114

    114

    The variable remunerations relate to the year in which they are classified and are included in the expenses of that year. For a detailed explanation, please refer to the remuneration report.

    The costs listed under ‘Employee stock options’ represent the amount accounted for in the profit and loss account for that year.

    The members of the Management Board and the Supervisory Board hold no shares or exercisable options on shares in Beter Bed Holding N.V.

  • 19. Earnings per share

    The net profit of € 16.9 million divided by the average number of outstanding shares totalling 21,854,740 equals to an earnings per share of € 0.77. Due to the option series outstanding, the number of shares used for the calculation of the diluted earnings per share is equal to 21,900,404. This results in diluted earnings per share of € 0.77.

  • 20. Commitments not included in the balance sheet

    The company has entered into long-term rental and lease obligations concerning buildings and other operating assets. The minimum obligation on the balance sheet date can be shown as follows:

    Duration

    2015

    2016

    2017

    2018

    2019

    after 2019

    Rental agreements

    38,635

    26,131

    16,168

    9,418

    6,061

    1,756

    Lease agreements

    2,012

    1,348

    737

    355

    127

    150

    Total

    40,647

    27,479

    16,905

    9,773

    6,188

    1,906

    The majority of the rental agreements for the company premises required for the Beter Bed formula are long-term agreements (between five and ten years), with options for renewal. The majority of the rental agreements for the Matratzen Concord formula have been concluded for a period between five to ten years, whereby a clause has been included stipulating that the agreements can be terminated without charge within the first two years.
    In the year under review amounts of € 43.1 million (2013: € 50.5 million) arising from rental agreements for real estate and € 2.5 million (2013: € 2.5 million) arising from lease agreements have been recorded in the profit and loss account.

    At year-end 2014, the Wonen Industrial Pension Fund for the Home Furnishings Industry had a funding ratio of 111.2% (year-end 2013: 101.1%). As at 31 December 2014, the company had no additional obligation.

  • 21. Related parties

    The companies listed in principles of consolidation are included in the consolidation of Beter Bed Holding N.V. and its participating interests.

    The financial relationships between Beter Bed Holding N.V. and its participating interests consist almost fully in receiving dividends and receiving interest on loans provided.

  • 22. Post-balance sheet events

    No events that are required to be disclosed occurred in the period between the end of the year under review and the preparation of these financial statements.