Beter Bed Holding N.V. — Annual Report 2005

Mar 10, 2006

B E T E R B E D H O L D I N G Hard at work on a good night's rest

PRESS RELEASE

Uden, The Netherlands, 10 March 2006

BETER BED: 88% INCREASE IN NET PROFIT IN 2005

• Net profit increased from € 8.3 million in 2004 to € 15.6 million in 2005.
• Net profit in the fourth quarter increased to € 7,2 million (2004: € 3,0 million).
• Earnings per share for 2005 total year increased to € 1.81 (2004: € 0.97).
• Proposed dividend of € 1.50 per share (2004: € 0.75); pay-out ratio of 83% (2004: 77%).
• Proposal for share split (2.5 for 1).

Outlook for 2006:

• Based on an expected revenue increase of more than 10% over the first quarter of 2006 compared to the first quarter of 2005 the company expects a net profit increase of at least 20%.

Beter Bed Holding N.V. achieved net profit in the fourth quarter of 2005 totalling € 7.2 million, which is more than double the amount achieved in the fourth quarter of 2004 (€ 3.0 million). Net profit for the entire year 2005 consequently totalled € 15.6 million, in comparison to € 8.3 million for the entire year 2004. Earnings per share rose from € 0.97 in 2004 to € 1.81 in 2005.

The Annual General Meeting of Shareholders will be proposed a final dividend for 2005 of € 1.10. An interim dividend of € 0.40 was already paid in November 2005. This means that the total dividend for 2005 amounts to € 1.50 in comparison to € 0.75 for 2004.

Frans Geelen, Chief Executive Office: 'There are currently, for the first time in a number of years, signs pointing to a slight recovery in consumer spending on our products in the Netherlands, which is one of our key markets. I am delighted to see that our employees and formulas not only perform well during periods of declining spending, but have also shown their ability to fully benefit from a market recovery. This is reflected in the results in the fourth quarter of 2005. The company has also further improved its future prospects for achieving profitable growth through its acquisition of El Gigante del Colchón in Spain and by developing larger stores in Germany.'

Fourth Quarter 2005

Revenue rose by 19.8% to € 80.7 million (fourth quarter 2004: € 67.4 million). Revenue in comparable stores rose by 4%. Gross profit amounted to 55.0%, compared to 54.7% in the fourth quarter of 2004. Although the sharp increase in the number of stores caused the operating expenses to rise from € 31.3 million in 2004 to € 33.5 million in 2005, the average expenses per store actually fell for the 15th quarter in a row. This lower costs per store was the outcome of decreased store expenses, logistical expenses and overhead expenses.

Operating profit (EBIT) totalled € 11.0 million, representing 13.6% of revenue, compared to 8.4% in the preceding year. Net profit improved by 136.2%, rising from € 3.0 million in the fourth quarter of 2004 to € 7.2 million in the fourth quarter of 2005.

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Entire year 2005

• After years of declining spending on bedroom products, the market in the Netherlands began to show signs of recovery in the third quarter. For the entire year 2005 the market still showed a negative development. The market shrunk in Germany for the fifth year in a row and there are at present still no signs of recovery.
• The recovery of the market in the Netherlands was reflected in a larger order book in the third quarter and resulted in more revenue and profits in the fourth quarter.
• The acquisition of a profitable chain of 20 stores in Spain was finalised in September 2005.
• The closure of the last factory in Poland means that the company can now focus entirely on its retail activities.

Financial

Revenue for the entire year 2005 rose by 12.5% to € 287.1 million, compared to € 255.2 million in 2004. Revenue increased by 5% at comparable stores. It was possible to once again improve gross profit through economies of scale and product innovation, despite a further rise in raw material prices and large-scale promotional activities. The company realised a gross margin of 53.2% in 2005, compared to 52.7% in 2004.

Operating expenses rose to € 127.9 million in 2005 from € 119.6 million in 2004. This increase was due to the growth in the number of stores. Operating expenses as a percentage of revenue, however, actually decreased from 46.9% in 2004 to 44.6% in 2005. After three consecutive years of decreasing expenses (6%, 4% and 3% respectively), the average expenses per store once again decreased by 4% in 2005.

The operating margin once again improved from 5.9% over 2004 to 8.6% over 2005.

Operating profit (EBIT) for 2005 consequently totalled € 24.7 million compared to € 15.0 million in 2004. The growth in operating profit was attributable for approx. one third to Beter Bed, approx. one third to Matratzen Concord and approx. one third to all other activities.

Net profit rose from € 8.3 million (€ 0.97 per share) in 2004 to € 15.6 million (€ 1.81 per share) in 2005.

Solvency at year-end 2005 amounted to 46.3% compared to 36.8% at year-end 2004. Despite the acquisition in Spain that was paid with own funds, the rapid rate of expansion and considerably higher dividend payments, Beter Bed still had a positive balance of € 1.7 million in cash and cash equivalents minus interest-bearing liabilities at the end of 2005, whilst at the end of 2004 the company still had net liabilities totalling € 5.5 million.

Operational

A total of 110 stores were opened, 37 closed and 20 acquired in 2005. At the end of 2005 there were a total of 775 stores at all the formulas, 93 more stores than in the previous year. Matratzen Concord generated 55% of the total sales (2004: 55%), while Beter Bed's share of the total sales amounted to 38% (2004: 39%).

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Number of Stores	31-12-04	Opened	Closed	Acquired	31-12-05
Matratzen Concord	571	92	24		639
Beter Bed	83	6	10		79
Beddendump	15	8			23
Dormaël (Slaapgenoten)	8		1		7
El Gigante del Colchón		2	1	20	21
WasserbettenDiscount	5	2	1		6
Total	682	110	37	20	775

Matratzen Concord

The revenue of the Matratzen Concord cash & carry formula rose by 13% from € 140.8 million in 2004 to € 159.0 million in 2005. Despite somewhat deteriorated market conditions in Germany in the second half of the year, Matratzen Concord achieved a growth in revenue of 1.3% in comparable stores, following a 6.8% increase in the previous year. The growth in revenue was realised through further expansion, heightened sales activities, an enhanced product range and increased promotions. The development of the number of Matratzen Concord stores is shown below:

Number of Matratzen Concord stores	31-12-04	Opened	Closed	31-12-05
Germany	511	82	22	571
Austria	21	4	1	24
Switzerland	17	3	--	20
Netherlands	22	3	1	24
Total	571	92	24	639

Beter Bed

Beter Bed's revenue grew by 7.9% to € 108.2 million in 2005 (2004: € 100.3 million).

Beter Bed Netherlands

Beter Bed opened six stores and closed five. Consumer demand for bedroom products was approximately 1% lower for the entire year 2005 than in 2004. The market showed signs of recovery from the third quarter of the year. Beter Bed once again performed very well in terms of revenue and profits in the Netherlands in 2005. This performance gained added impetus in the fourth quarter due to the market recovery. Increased sales activities and enhancements to the product range and promotional activities enabled Bed Bed to increase its order intake by 16.2% for the entire year 2005 (the increase in comparable stores was +11.2%). Revenue (the orders that have been delivered to the customer) grew by 8.7%. The year 2005 was closed with a well filled order book. Beter Bed also once again succeeded in improving the logistics efficiency in 2005.

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Beddendump, a discount cash & carry formula, grew from 15 to 23 stores in 2005 and realised € 7.4 million revenue, marking a 31.7% increase in comparison to 2004. The revenue development at comparable stores was slightly negative at -0.4%. This formula utilises the central organisation of Beter Bed.

Beter Bed Germany

The four Beter Bed and six WasserbettenDiscount stores that were part of Beter Bed Germany achieved revenue totalling € 4.4 million in 2005. This is 7.3% lower than in 2004. Due to lack of perspective this activity was discontinued in the fourth quarter. The stores have been reopened as Matratzen Concord stores.

DBC

DBC develops and wholesales brand-name products in the bedroom furnishings market in the Netherlands, Belgium and Germany based on its M Line mattresses and box springs. The M Line products are sold through own stores and via third-party stores, therapists and healthcare institutions. Sales increased by 40.1% from € 6.4 million in 2004 to € 8.9 million in 2005. The M Line products are increasingly acknowledged as leading in the field of pressure-reducing sleeping systems.

Dormaël/Slaapgenoten

Four stores were repossessed from a franchisee in 2004. One of these stores was converted into a Beddendump store and a new formula in the higher segment named Slaapgenoten was launched in another store. The results of this are satisfactory. Revenue rose from € 1.6 million in 2004 to € 3.1 million in 2005.

El Gigante del Colchón

El Gigante was acquired on 15 September 2005 and has been included in the figures from 1 September 2005. Since September 1st two stores were opened and one closed. At the end of the year the formula had 21 stores in the Barcelona region. In order to realise further growth in Spain, the logistics systems will be brought up to date by utilising the knowledge and expertise available within the company and the chain's middle management will be strengthened. El Gigante achieved revenue of € 3.8 million during the period 1 September – 31 December 2005. This represents a 28% increase in comparison to the same period of 2004. The order intake in comparable stores increased by 13.3%. The difference between the 28% growth of the revenue and the 13.3% growth at comparable stores is mainly attributable to the acceleration of the logistics process.

Dividend

The strong cash flow gives the company the opportunity to expand the existing activities at an accelerated pace and to finance moderately sized acquisitions with own funds and existing credit facilities, whilst continuing to pay out a large percentage of the profit to the shareholders.

An interim dividend of € 0.40 was paid out in November 2005. The Annual General Meeting of Shareholders will be proposed payment of a final dividend of € 1.10 in cash. This will bring the total dividend for 2005 to € 1.50 compared to € 0.75 for 2004. This amounts to a pay-out ratio of 83% for 2005 (2004: 77%).

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Share split

With a view to promoting the liquidity of the shares, a proposal will be presented to the Annual General Meeting of Shareholders to split each share with an nominal value of € 0.05 into 2.5 new shares with a nominal value of € 0.02.

Outlook

There has been a clear increase in revenue in the first two months of 2006. This growth took place in all the countries in which the company has operations. The rise in revenue in Germany was, however, slower in the first two months of 2006 than in the final months of 2005. The company does not currently see signs of an upswing in consumer spending on bedroom furnishings products in Germany at this time. Therefore the company is cautious in its expectations. The Dutch market currently looks more positive.

Based on an expected revenue increase of more than 10% over the first quarter of 2006 compared to the first quarter of 2005 the company expects a net profit increase of at least 20%. Also based on the first quarter development and barred unforeseen circumstances the company once again expects a good year.

Profile

Beter Bed operates in the European bedroom furniture market. The company's activities encompass retail operations with a total of 775 stores. The company operates via the chains Beter Bed (operating in the Netherlands), Matratzen Concord (operating in the Netherlands, Germany, Austria and Switzerland), El Gigante del Colchón (operating in Spain), Beddendump, Dormaël and Slaapgenoten (all three operating in the Netherlands). Beter Bed Holding is also active in the development and wholesaling of branded products in the bedroom furniture market in the Netherlands, Belgium and in Germany via its subsidiary DBC International. Beter Bed Holding achieved net sales of EUR 287 million in 2005 and has been listed on the Eurolist of Euronext Amsterdam since December 1996 and is included in the NextPrime segment.

APPENDICES:

• Consolidated profit and loss account
• Consolidated balance sheet
• Consolidated cash flow statement

For more information, please contact: Frans Geelen, Chief Executive Officer Tel. +31 (0)413 338819 / Fax +31 (0)413 338829 / Mob. +31 (0)6 29565517 E-mail: frans.geelen@beterbed.nl / Website: www.beterbedholding.com

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Consolidated profit and loss statement

(*) EUR 1.000
Fourth quarter			Cumulative
2005	2004		2005	2004
80.734	67.404	Revenue	287.136	255.166
(36.294)	(30.503)	Cost of sales	(134.517)	(120.571)
44.440	36.901	Gross margin	152.619	134.595
55,0%	54,7%		53,2%	52,7%
16.593	14.825	Staff costs	62.396	57.642
1.616	1.648	Depreciation of tangible fixed assets	6.318	6.361
15.273	14.785	Other operating expenses	59.220	55.632
(33.482)	(31.258)	Total operating expenses	(127.934)	(119.635)
-41,5%	-46,4%		-44,6%	-46,9%
10.958	5.643	Operating result (EBIT)	24.685	14.960
13,6%	8,4%		8,6%	5,9%
(241)	(196)	Financial income and expense	(785)	(922)
10.717	5.447	Profit before tax	23.900	14.038
(3.535)	(2.406)	Income tax expense	(8.263)	(5.722)
7.182	3.041	Net profit	15.637	8.316
8,9%	4,5%		5,4%	3,3%
0,83	0,35	Earnings per share €	1,81	0,97
0,81	0,35	Diluted earnings per share €	1,79	0,97

The figures presented are in line with the current IFRS standards and interpretations.

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Consolidated balance sheet

(* EUR 1.000)	31-12-2005	31-12-2004
Tangible fixed assets	22.889	22.867
Intangible fixed assets	3.811	---
Stocks	36.789	31.595
Debtors, prepayments and accrued income	3.394	5.964
Cash and cash equivalents	5.343	8.562
TOTAL ASSETS	72.226	68.988
Equity attributable to equity holders of the parent	33.422	25.372
Provisions	1.182	1.595
Long-term liabilities	1.417	12.214
Short-term bankloans	2.224	1.858
Current liabilities	33.981	27.949
TOTAL LIABILITIES	72.226	68.988

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Consolidated cash flow statement

(* EUR 1.000)

	cumulative
	2005-Q4	2004-Q4
Cash flow from/(used in) operating activities
Net group profit	15.637	8.316
Depreciation	6.318	6.361
Movements in:
Stocks	(4.463)	(917)
Debtors	2.858	(1.464)
Creditors	4.667	5.522
Provisions	(413)	(236)
Cash flow from/(used in) operating activities	24.604	17.582
Cash flow from/(used in) investing activities
Acquisitions of subsidiaries, net of cash acquired	(3.506)	---
Additions to tangible fixed assets	(7.512)	(4.593)
Disposals of tangible fixed assets	1.213	806
Cash flow used in investing activities	(9.805)	(3.787)
Cash flow from/(used in) financing activities
Income from the issue of new shares	31	1.013
Movement in equity because of costs of employee share options	230	---
Exchange gain/(loss) on foreign participating interests	(96)	(103)
Revaluation	39	(83)
Repayment of long-term liabilities	(10.797)	(1.875)
Dividend paid	(7.791)	(3.435)
Cash flow from/(used in) financing activities	(18.384)	(4.483)
Net cash flow for financial year	(3.585)	9.312
Cash and cash equivalents at the beginning of the year	6.704	(2.608)
Cash and cash equivalents at the end of the year	3.119	6.704