Beter Bed Holding N.V. — Earnings Release 2017

Mar 2, 2018

Press release

Annual results 2017

Profile

Beter Bed Holding is a European retail organisation that strives to offer its customers a comfortable and healthy night's rest every night at an affordable price. The company does this via stores and its own web shops through the formats:

• Matratzen Concord, located in Germany, Switzerland and Austria.
• Beter Bed, located in the Netherlands and Belgium.
• Beddenreus, located in the Netherlands.
• Sängjätten, located in Sweden.
• El Gigante del Colchón, located in Spain.

The retail formats ensure products of good quality, offer customers the best advice and always the best possible deal.

Beter Bed Holding is also active as a wholesaler of branded products in the bedroom furnishing sector via its subsidiary DBC International. The international brand M line is sold in the Netherlands, Germany, Belgium, Spain, Austria, Switzerland and Sweden.

In 2017, the company achieved revenue of € 416.4 million with a total of 1,188 stores. 64.2% of this figure was realised outside the Netherlands.

Beter Bed Holding N.V. has been listed on the Euronext Amsterdam since December 1996 and its shares (BBED NL0000339703) have been included in the AScX Index.

For more information please visit www.beterbedholding.com.

In case of textual contradictions between the Dutch and the English annual results, the first shall prevail.

Contents

Press release

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Press release

Uden, the Netherlands, 2 March 2018

Beter Bed Holding: revenue increases by 1.5% in 2017

• Continuing favourable macroeconomic conditions in the Netherlands.
• Decreasing visitor numbers in the fourth quarter in Germany due to supplier-related problems.
• Successful reintroduction of the Sängjätten format in Sweden.
• Closure in France.
• Increased customer satisfaction.
• Growing role of omnichannel.

Key figures for the year

(in millions of € unless stated otherwise)

	2017	2016	Change
Revenue	416.4	410.5	1.5%
Gross profit	57.5%	57.8%
EBITDA	27.5	37.5	-26.8%
EBIT	14.4	26.0	-44.6%
Net profit	9.5	19.0	-49.9%
Earnings per share (in €)	0.43	0.87	-50.6%
Dividend per share (in €)	0.37	0.74	-50.0%
Payout ratio	86%	85%
	31-12-2017	31-12-2016
Solvency	44.8%	53.5%

Bart Koops, CFO

'Beter Bed Holding presented a mixed picture in 2017. Performance varied sharply from country to country. The group realised higher revenue with slightly decreasing margins and higher expenses, which resulted in lower operating profit in 2017 compared to the previous year.

Economic developments remain favourable for 2018. We are optimistic for the Benelux due to the developments in 2017 and the plans for 2018.

Matratzen Concord has started with a new management in 2018. The majority of the stores has been refurbished and the introduction of box springs has been finalised. Supported by the new web shop platform and a new marketing campaign Matratzen Concord should be able to once again attract consumers to its stores and web shops.'

2017

Revenue for 2017 increased by 1.5% to € 416.4 million. Revenue at comparable stores decreased by 0.4% in 2017.

Revenue performance per country in 2017 was as follows:

	2017
the Netherlands	7.9%
Germany	-5.3%
Austria	-8.6%
Switzerland	-1.4%
Spain	5.6%
Sweden1	133.7%
Belgium	36.3%

1 Included in the consolidation as of 17 June 2016.

With the exception of Matratzen Concord the group's formats showed positive revenue performance. Revenues and margins improved in the Benelux and the focus on retail marketing, with customer satisfaction as the spearhead, continued to bear fruit. Supplier-related problems in the sector and the ensuing attention in the media conversely led to a strong decline in the number of visitors in Germany, Austria and Switzerland. Sängjätten in Sweden benefited from the successful introduction of the group's (private label) brand portfolio. Revenue in Spain increased due to a higher average number of stores.

Gross profit as a percentage of revenue amounted to 57.5% in 2017, which represents a slight decrease in comparison to the previous year (2016: 57.8%). This decrease was due to an increasing share of box springs and textiles in the revenue, which was partially compensated by improvements in the terms and conditions and changes to the range. Product innovation and the implementation of price increases also had a positive effect on margins.

Total expenses increased from € 211.1 million in 2016 to € 225.1 million in 2017. Expenses rose in the Benelux primarily due to the further expansion of the omnichannel and customer satisfaction activities and increased logistic efforts as a result of the substantial increase in revenue. In Germany, the further professionalisation of the organisation (connected with the reorganisation expenses) in general and the expansion of the omnichannel organisation in particular led to higher expenses. The marketing efforts were also increased and the amortisation costs rose due to the refurbishment of the stores in Germany. Furthermore the expenses of the activities in Sweden have now been included for a full year in the consolidated figures.

In 2017 the average number of stores was 1.7% higher than in 2016.

EBITDA decreased by 26.8% to € 27.5 million in this period. EBITDA as a percentage of revenue decreased from 9.1% to 6.6%.

Operating profit (EBIT) decreased in this period by 44.6% to € 14.4 million. Operating profit as a percentage of revenue decreased from 6.3% to 3.5%.

Net profit for 2017 decreased by 49.9% from € 19.0 million to € 9.5 million. Earnings per share for 2017 amounted to € 0.43 (2016: € 0.87).

Investment and cash flow

Investments in intangible and tangible fixed assets amounted to € 21.4 million in 2017 (2016: € 16.5 million). Investments in stores were € 14.8 million in 2017 (2016: € 10.4 million). In addition high investments took place in the omnichannel infrastructure (e-commerce and web shops).

Solvency

Solvency amounted to 44.8% on 31 December 2017, compared to 53.5% at year-end 2016.

Operational

59 stores were opened and 77 stores were closed in 2017. The group had a total of 1,188 stores at year-end 2017.

Number of stores

Format		1-1-2017	Closed	Opened	31-12-2017
Matratzen Concord	Germany	861	46	34	849
	Austria	84	-	1	85
	Switzerland	59	5	11	65
		1,004	51	46	999
Beter Bed	The Netherlands	90	6	-	84
	Belgium	10	2	3	11
		100	8	3	95
El Gigante del Colchón	Spain	48	5	2	45
Beddenreus	The Netherlands	33	7	7	33
Sängjätten	Sweden	16	-	-	16
Literie Concorde	France	5	6	1	-
Total		1,206	77	59	1,188

Matratzen Concord

Revenue of the format Matratzen Concord for 2017 totalled € 243.2 million (58.4% of total group revenue). This is a decrease of 5.4% in comparison to 2016. Revenue decreased by 6.0% in comparable stores. 83.2% of the revenue of this format was achieved in Germany and 16.8% in Austria and Switzerland.

Beter Bed

This format operates in the Netherlands and Belgium. Revenue grew from € 122.4 million to € 133.3 million in 2017, which equals an increase of 8.8%. Order intake at comparable stores increased by 7.2% in 2017. Beter Bed contributes 32.0% to the total group revenue.

Other formats

The revenue of the other formats amounted to € 39.9 million for 2017, contributing 9.6% to the total group revenue. This includes the revenue of the store formats Beddenreus (The Netherlands), El Gigante del Colchón (Spain), Sängjätten (Sweden) and the wholesaler DBC.

Outlook 2018

Economic developments remain favourable in the countries in which the group operates. As in 2017, the outlook for the current financial year is primarily determined by the extent to which revenue recovers in the German-speaking markets (more than 50% of group revenue). The introduction of a renewed marketing campaign, the availability of a sufficient range of box springs and the completion of the refurbishment of the stores must enable Matratzen Concord to strengthen its position in the market under new management.

The group continues to pursue fully the objectives set out in the strategic plan 'From Good to Great 2016-2020', with the primary focus being on maximising customer satisfaction within an omnichannel environment. The group furthermore aims to gain market leadership in the various markets through mainly like-for-like growth in revenue and expansion.

Dividend

Beter Bed Holding N.V.'s dividend policy is aimed at maximising shareholder returns while maintaining a solid capital position. The company aims to distribute at least 50% of its net profit to the shareholders provided that its solvency is not less than 30% and the net interest-bearing debt/EBITDA ratio does not exceed two.

The company paid an interim cash dividend of € 0.34 per share in November 2017. A proposal will be submitted to the Annual General Meeting, scheduled for 26 April 2018, to distribute a final cash dividend of € 0.03. This brings the dividend for 2017 to € 0.37 per share (2016: € 0.74 per share) and 86% of net profit will be distributed to shareholders.

Auditor's report

The financial information in the appendices is taken from the consolidated financial statements of Beter Bed Holding N.V., which will be submitted for adoption to the Annual General Meeting on 26 April 2018, and for which an unqualified auditor's report has been issued by the independent auditor.

FOR MORE INFORMATION:

Bart Koops CFO +31 (0)413 338819 +31 (0)6 46761405 bart.koops@beterbed.nl

Consolidated balance sheet

Per 31 December

in thousand €	2017	2016
Fixed assets
Tangible assets
Land	7,090	7,132
Buildings	3,679	3,983
Other fixed operating assets	33,467	26,955
	44,236	38,070
Intangible assets
Intangible operating assets	9,030	7,002
Financial assets
Deferred tax assets	2,353	1,217
Long-term accounts receivable	526	660
	2,879	1,877
Total fixed assets	56,145	46,949
Current assets
Inventories
Finished products and goods for resale	65,697	61,884
Receivables
Trade accounts receivable	3,014	4,332
Other receivables	9,669	8,660
Profit tax receivable	4,536	-
	17,219	12,992
Cash and cash equivalents	17,669	21,792
Total current assets	100,585	96,668
Total assets	156,730	143,617

Per 31 december

in thousand €	2017	2016
Equity
Equity attributable to equity holders of the parent
Issued share capital	439	439
Share premium account	18,434	18,434
Reserve for currency translation differences	673	913
Revaluation reserve	2,797	2,812
Other reserves	38,316	35,265
Retained earnings	9,525	19,015
Total equity	70,184	76,878
Liabilities
Non-current liabilities
Provisions	44	198
Deferred tax liabilities	3,383	2,154
	3,427	2,352
Current liabilities
Credit institutions	17,481	-
Trade payables	30,629	31,856
Profit tax payable	1,482	1,410
Taxes and social security contributions	9,667	9,565
Other liabilities	23,860	21,556
	83,119	64,387
Total liabilities	86,546	66,739
Total equity and liabilities	156,730	143,617

Consolidated profit and loss account

in thousand €	2017		2016
Revenue	416,426		410,457
Cost of sales	(176,931)		(173,350)
Gross profit	239,495	57.5%	237,107	57.8%
Personnel expenses	108,262		100,523
Depreciation and amortisation	12,847		11,168
Other operating expenses	103,961		99,381
Total operating expenses	225,070	54.0%	211,072	51.4%
Operating profit (EBIT)	14,425	3.5%	26,035	6.3%
Finance income	104		144
Finance costs	(510)		(302)
Profit before taxation	14,019	3.4%	25,877	6.3%
Income tax expense	(4,494)		(6,862)
Net profit	9,525	2.3%	19,015	4.6%
Earnings per share
Earnings per share in €	0.43		0.87
Diluted earnings per share in €	0.43		0.86

Consolidated statement of comprehensive income

in thousand €	2017	2016
Profit	9,525	19,015
Non-recyclable:
Change in revaluation reserve
- due to revaluation of land	-	-
Recyclable:
Movements in reserve for currency translation differences	(240)	(184)
Total comprehensive income	9,285	18,831

Consolidated cash flow statement

in thousand €	2017	2016
Cash flow from operating activities
Operating profit	14,425	26,035
Net finance costs	(406)	(158)
Income tax paid	(8,865)	(7,838)
Depreciation and amortisation	12,847	11,168
Costs share-based compensation	268	301
Movements in:
– Inventories	(3,813)	(2,457)
– Receivables	309	(4,345)
– Provisions	(154)	(340)
– Current liabilities (excl. credit institutions)	1,179	11,810
– Other	(104)	(131)
	15,686	34,045
Cash flow from investing activities
Additions to (in)tangible assets	(21,384)	(16,534)
Acquisitions	-	(3,287)
Disposals of (in)tangible assets	207	325
Changes in non-current receivables	134	(265)
	(21,043)	(19,761)
Cash flow from financing activities
Dividend paid	(16,247)	(18,004)
	(16,247)	(18,004)
Change in net cash and cash equivalents	(21,604)	(3,720)
Net cash and cash equivalents at the beginning of the financial year	21,792	25,512
Net cash and cash equivalents at the end of the financial year	188	21,792

Consolidated statement of changes in equity

in thousand €	Total	Issued	Share	Reserve for	Revalua	Other	Retained
		share	premium	currency	tion	reserves	earnings
		capital	reserve	translation	reserve
Balance on 1 Jan. 2016	75,750	439	18,434	1,097	2,812	30,409	22,559
Net profit 2016	19,015	-	-	-	-	-	19,015
Other components of
comprehensive income 2016	(184)	-	-	(184)	-	-	-
Profit appropriation 2015	-	-	-	-	-	22,559	(22,559)
Final dividend 2015	(10,539)	-	-	-	-	(10,539)	-
Interim dividend 2016	(7,465)	-	-	-	-	(7,465)	-
Costs of share-based
compensation	301	-	-	-	-	301	-
Balance on 31 Dec. 2016	76,878	439	18,434	913	2,812	35,265	19,015
Net profit 2017	9,525	-	-	-	-	-	9,525
Other components of
comprehensive income 2017	(240)	-	-	(240)	-	-	-
Profit appropriation 2016	-	-	-	-	-	19,015	(19,015)
Final dividend 2016	(8,782)	-	-	-	-	(8,782)	-
Interim dividend 2017	(7,465)	-	-	-	-	(7,465)	-
Transfer to other reserves	-	-	-	-	(15)	15	-
Costs of share-based
compensation	268	-	-	-	-	268	-
Balance on 31 Dec. 2017	70,184	439	18,434	673	2,797	38,316	9,525