1
annual report
eve S leep p lc 20 17
2
3
Good morning!
Welcome to eve’s
first annual report...
contents
4
c o m p a n y i n f o r m a t i o n
8
h i g h l i g h t s
1 0
c h a i r m a n ’ s s t a t e m e n t
1 3
s t r a t e g i c r e p o r t
3 0
g o v e r n a n c e r e p o r t
46
a u d i t o r ’ s r e p o r t
5 0
g r o u p fi n a n c i a l s t a t e m e n t s
76
c o m p a n y fi n a n c i a l s t a t e m e n t s
eve Sleep p lc 20 17 a nnual repor t
4
5
c o m p a n y
information
directors
Paul Pindar (Non-executive Chairman)
Jas Bagniewski (Chief Executive Officer)
Abid Ismail (Chief Financial Officer)
auditor
KPMG LLP, Statutory Auditor
15 Canada Square
Canary Wharf
Thomas Enraght-Moony (Non-executive Director)
Peter Hepworth (Non-executive Director)
London
E14 5GL
secretary
Link Company Matters Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
registered office
128 Albert Street
Camden
London
NW1 7NE
registered number
09261636
6
7
“2017 has been
an important
year for eve. We
have continued
to strengthen our
position in the UK,
where we have
become the most
searched mattress
brand online.”
- Jas Bagniewski, CEO
8
9
c o m p a n y
the highlights
eve has achieved what it set out to do in 2017, in just
its third year of operation and its first year as an AIM
listed company.
+132%
+109%
g r o u p r e v e n u e
g r o w t h
Group revenue growth
increased 132% from £12.0m in
2016 to £27.7m in 2017.
U K & I 5 r e v e n u e
UK&I revenue increased 109%
from £7.7m in 2016 to £16.1m in
2017.
+910
bps
+175%
g r o s s p r o f i t
m a r g i n
Gross profit margin increased
+910bps from 48.6% in 2016 to
57.7% in 2017.
g r o s s p r ofi t
Gross Profit increased 175% from
£5.8m in 2016 to £16.0m in 2017.
1.
2.
3.
4.
5.
Source: Populus Omnibus when asked question “What mattress brands can you think of?” with sample sizes Dec16 / Nov17 (2,042 / 1,993)
Trustpilot rating based on reviews on evemattress.co.uk at 29 Mar 2018, which is based on UK customer reviews
Based on a market share of £2.1bn per Euromonitor 2018E
Financial data has been rounded for presentation purposes. As a result of this rounding the totals, comparatives and calculations presented in this document may vary
slightly from the arithmetic totals or calculations using such data
UK and Republic of Ireland
9.6 out of 10
t r u s t p i l o t r a t i n g 2
For evemattress.co.uk at Mar 2018.
15 products
p r o d u c t o f f e r i n g
Inreased number of products from
4 in 2016 to 15 in 2017.
+13%
n o n - m a t t r e s s
r e v e n u e
Non-mattress revenue increased
from 7% 2016 to 13% in 2017.
0.9%
U K m a t t r e s s
m a r k e t s h a r e 3
Share of the UK mattress market
increased from 0.5% in 2016 to
0.9% in 2017.
+5.1%
U K b r a n d
a w a r e n e s s 1
UK brand awareness increased from
1.4% in Dec 2016 to 6.6% in Nov
2017.
+174%
n o n - U K r e v e n u e
Non-UK revenue increased 174%
from £4.2m in 2016 to £11.6m
in 2017.
145 stores
p a r t n e r s h i p s
Available in145 stores across the
UK and Germany, up from one in
Dec 2016.
£19.0m
l o s s f o r t h e y e a r
The loss for the year increased from
£11.3m in 2016 to £19.0m 2017.
£26.9m
c l o s i n g c a s h
Compared to £4.6m in 2016.
10
11
c o m p a n y
chairman’s statement
During 2017 eve has made extensive strategic
progress in terms of international development,
increasing the product range and developing an
omnichannel offering.
Pau l P indar
about eve
eve has achieved what it set out
to do in 2017, in just its third year
of operation and its first year as an
AIM listed company. The focus has
been on rapid sales growth, with
increasing cost efficiency. This has
been achieved in both the UK and
international markets. Underpinning
this top line growth is a customer
proposition that resonates with
consumers and growing brand
awareness. At the start of 2017 eve
had unprompted brand awareness
in the UK of 1.4%, rising to 6.6% by the
end of the year.
strategic progress
It is not just the customer proposition
in the sleep market that has been
tired and unchanged for many
decades; it is also the vertically
integrated, high fixed cost business
model pursued by many of the more
established, larger operators. eve is
confident that the sleep market will
follow the other retail markets and
transition to online and has built a
scalable business around a direct
to consumer model. eve offers a
premium product at an affordable
price. Equally by focusing on the
product, design and marketing,
while outsourcing the manufacturing
and delivery, eve can focus on its core
strengths, whilst maintaining a low fixed
cost, flexible business model.
During 2017 eve has made extensive
strategic progress in terms of
international development, increasing
the product range and developing an
omnichannel offering. The number of
international markets has increased
and the product range has broadened
and now includes a bed frame,
bedspread, throw as well as the Folk
and eve sleepwear collection.
While eve will retain its direct to
consumer focus we recognise
the advantages that select retail
partnerships provide, including
brand awareness and an additional
sales channel. Substantial progress
has been achieved in retail in 2017,
surpassing our own expectations with
the signing of Next Homeware in the
UK and Karstadt in Germany, which
have supplemented our Debenhams
partnership.
As a result, the number of physical
stores offering eve products in the UK
and Germany has increased from 1
to 145 by the end of the year.
thank you
I would like to take this opportunity
to thank the world class team we
have assembled at eve whose hard
work has made all we achieved in
2017 possible. They have created
a product, brand and customer
experience that has been disrupting
a stagnant industry, changing the
way people buy and think about
mattresses and other sleep products.
Paul Pindar
Chairman
19 April 2018
“...eve has made extensive
strategic progress in
terms of international
development, increasing
the product range
and developing an
omnichannel offering.”
12
13
s t r a t e g i c r e p o r t
introduction
our vision
eve’s aim is to become the leading pan-European sleep brand.
our business
There are four principal growth drivers for the eve business:
1.
2.
marketing and growing brand awareness
in core markets
international growth in existing and target
european markets
3.
extensions to the eve product range
4.
omni-channel partnerships in core markets
14
15
s t r a t e g i c r e p o r t
marketing and growing
brand awareness in core
markets
Building brand awareness is at the heart of what we do. Our brand and
marketing, in alignment with our wider business strategy, aims to position
eve as an expert in sleep. Our focus is on continuing to disrupt what has
traditionally been a sleepy industry, by focusing on the positive benefits
of a good night’s sleep, and the impact sleep has on how you feel the
next morning. We believe that a perfect start begins the night before,
and our creative brand and marketing communications brings this ethos
to life through positive, engaging and design-led content. We assess
our success in brand awareness through progress on two key metrics:
unprompted brand awareness; and marketing efficiency, measured as
marketing spend as percentage of revenue.
s t r a t e g i c r e p o r t
international growth
in existing and target
european markets
Our business goal is to become the number one sleep brand in Europe.
Our low capital expenditure expansion model, alongside our strong
in-house tech and product team, enable us to launch new e-commerce
markets with relative ease. By outsourcing logistics and manufacturing, we
have the ability to launch into new countries effectively, using the strength
of our premium products, our marketing effectiveness, and by growing our
omni-channel partnerships.
16
17
s t r a t e g i c r e p o r t
extensions to the eve
product range
All of our products are eve branded, and designed by our in-house
product development team. Each product is carefully designed to
simplify the customer proposition and to be premium quality for an
accessible price. Our curated range of sleep products continues to
grow, as we move beyond our flagship mattress to other products, all of
which support our focus on sleep, such as the eve pillow, linen bedding,
duvet and topper.
s t r a t e g i c r e p o r t
omni-channel
partnerships in core
markets
We put customers first, and we aim to make the customer journey as
seamless as possible. Easy access to eve products – giving our customers
the chance to touch and feel the eve product range – is an important
part of our strategy. Whilst we are a direct-to-consumer e-commerce
brand, we are selectively increasing our offline presence in order to give
our customers more ways to experience, and purchase, eve products.
18
19
s t r a t e g i c r e p o r t
CEO statement
This has been a year of aggressive growth and significant
efficiency gains at eve Sleep.
Jas Bagniewski
general review of
the year
Group marketing efficiency,
measured as marketing as a % of
revenue, has steadily improved
during the second half of the year. In
2017 has been an important year
UK&I it improved from 64.1% in H1, to
for eve. We have continued to
49.2% in H2, and for the Group as a
strengthen our position in the UK,
whole it improved from 69.7% in H1 to
where we have become the most
56.4% in H2.
searched mattress brand online.
We have also ramped up our
internationalisation efforts, extended
our non mattress product offering
and grown our retail presence to
become a truly pan European sleep
brand awareness and
marketing
business, while in the background
This has been a year of aggressive
becoming the first UK retail IPO of
growth and significant efficiency
2017.
gains at eve Sleep. We are
particularly pleased to see our
In the UK & Republic of Ireland
longer-term UK investment in the
(“UK&I”), revenue has grown +109%
eve Sleep brand starting to bear
to £16.1m. Following completion of
fruit, with unprompted awareness
the IPO process in the first half of the
moving from 1.4% in December 2016
year, renewed focus on delivery and
to 6.6% in November 2017. This has
execution has supported a step up in
been aided by a strong reaction
growth in the second half of the year,
to our Join the Sleep Rich television
with UK&I revenue growth increasing
advertising campaign, which first
from +107% in H1 to +110% in H2.
aired in August 2017.
Strong trends were also experienced
in the international business with H1
revenue growth of +153% rising to
+194% in H2, generating revenue
growth of +174% for the full year.
“ b r a n d e d t r a f f i c t o t h e
U K w e b s i t e h a s g r o w n b y
1 2 2 % ”
Over the same December 2016 to
November 2017 period, branded
traffic to the UK website has
grown by +122%. This provides
significant validation of our brand
and marketing strategy, giving us
confidence as we roll out similar
strategies to our other geographies.
international growth
2017 saw us accelerate our
international growth strategy and
we are now operating in 15 markets.
We achieved particularly strong
year-on-year growth in France of
+493% following a successful launch
at the start of February 2016. Though
late in the year, the agreement with
Karstadt in Germany, which went live
in November 2017 for a presence in
79 stores, supports our retail strategy
and helps grow brand awareness in
Europe’s largest mattress market.
The progress achieved to date
demonstrates that our customer
proposition, which combines a strong
value for money proposition with an
equally strong and distinctive brand,
has international appeal. While the
UK&I remains our largest market,
contributing 58% of group revenues,
the international contribution has
risen from 35% in 2016 to 42% in 2017.
20
21
new product
development
eve considerably strengthened its
product portfolio of design-led sleep
products from 4 in December 2016
to 15 in December 2017, including
a design collaboration with Folk
clothing.
Customers have shown a high
adoption of new products, with
non-mattress products contributing
13% of group revenue (2016: 7%). We
also have widened our global supply
base this year, continuing to focus on
European sourcing wherever possible
to support the agile and flexible
approach to stock holding and
management.
In 2018 we intend to further build
out our capacities for innovation,
product design and creative
concepts, as well as getting even
closer to consumers to identify
purchase drivers and human needs
through insight generation.
omni-channel
We have seen considerable growth
with Karstadt, one of the leading
through omni-channel in 2017,
department store chains in Germany,
mainly due to the acceleration of
giving eve a physical presence in
partnerships in the UK, which include
79 stores across Germany. These
a mix of offline and online retailers
two deals give eve a significant
including Amazon, Debenhams, Next
omnichannel presence in one of the
Home and Fenwick.
largest mattress markets in Europe.
On the international landscape,
eve signed two significant deals
in November 2017 in Germany,
one with Otto Group, one of the
country’s biggest ecommerce and
catalogue companies, the second
future developments
thank you
The eve strategy is focused on
I would like to take this opportunity
winning share from traditional
to thank our customers who have
operators in the £26bn European
embraced a new way of shopping
sleep market, as the transition
for mattresses and for their advocacy
from offline to online purchase
which has resulted in thousands of
accelerates over the next few
recommendations, positive online
years. Forecasts by Euromonitor
reviews and user generated content
expect the online furniture market
that continues to build trust in our
to be the second fastest growing
brand and product offering.
category, growing +55% between
2017 and 2022. The company remains
I would also like to thank our staff
confident that it has a customer
and shareholders, new and existing,
proposition, direct to consumer
without whose investment and
focused agile business model and a
commitment into our company we
fast growing brand that is sufficiently
would not have been able to grow
strong and differentiated to win in
at the speed we have done into the
this transition.
business we are today.
We have invested heavily in our
technology platform, brand and
team in 2017 and we look forward to
continued growth in 2018.
Jas Bagniewski
Chief Executive Officer
19 April 2018
“ w e h a v e i n v e s t e d h e a v i l y i n o u r t e c h n o l o g y p l a t f o r m ,
b r a n d a n d t e a m i n 2 0 1 7 a n d w e l o o k f o r w a r d t o
c o n t i n u e d g r o w t h i n 2 0 1 8 .”
22
23
s t r a t e g i c r e p o r t
key performance
indicators
The following KPIs are the tools used by management to
monitor the performance of the Company, in addition
to the more traditional income statement, statement of
financial position and cash flow analysis reviewed at
regular Board meetings.
T he s ix key met ri c s eve lo oks at i n eval u a ti ng i t s business p erformanc e:
reve nue grow th
gross margins
132%
Group revenue of £27.7m (2016:
£12.0m)
57.7%
+910 BPS improvement (2016: 48.6%)
re turn rate s 1
12%
UK brand awarene ss
6.6%
Group return rates of 12% (2016:
17%)
Unrprompted UK brand awareness
at Nov-17 (Dec16: 1.4%)
marke ting as % of reve nu e
closing c ash
61.9%
+ 360 BPS improvement (2016:
65.5%)
£26.9m
at 31 December 2017
1.
Return rate % is calculated by dividing the total value of sales returns by the value of net sales of goods including freight (all
excluding VAT).
24
25
s t r a t e g i c r e p o r t
financial review
This has been a year of significant growth and
targeted investment at eve.
Ab i d Ismail
£m
Revenue
Gross profit
Distribution
Gross profit after distribution
Payment fees
Marketing
Gross profit after distribution, payment fees and marketing
Wages & Salaries
Other administrative expenses
Adjusted EBITDA Loss
IPO Related Expenditure
Net finance income
Share based payment charge
Loss before tax
% of Revenue
Gross Profit
Distribution
Gross profit after distribution
Marketing
Administrative expenses excluding marketing
2017
27.7
16.0
(3.4)
12.6
(0.7)
(17.2)
(5.3)
(4.5)
(5.3)
(15.1)
(2.1)
0.0
(1.8)
(19.0)
2017
57.7%
(12.4%)
45.3%
(61.9%)
(37.9%)
2016
12.0
5.8
(1.2)
4.6
(0.4)
(7.8)
(3.7)
(2.6)
(5.1)
(11.3)
-
-
-
Movement
+132%
+175%
(179%)
+174%
(54%)
(119%)
(43%)
(75%)
(5%)
(33%)
-
-
-
(11.3)
(67%)
2016
Movement
48.6%
(10.3%)
38.3%
(65.5%)
(67.5%)
+910bps
(210bps)
+700bps
+360bps
+2960bps
Administrative expenses per the income statement include payment fees, marketing, wages & salaries and other administrative expenses
revenue
eve group revenue grew by +132%
from £12.0m to £27.7m, underpinned
by growth across all regions.
UK&I revenue was up +109% and
represented 58% of the group (2016:
65%). International revenues have
grown +174% underpinned by France
and Germany.
gross margins
In 2017, gross margins improved to
57.7% (2016: 48.6%), despite foam
raw material prices increasing
throughout the year. The margin
improvements were driven primarily
by economies of scale (500bps),
lower product return rates and
cost recovery through refurbished
mattresses (310bps) and efficiency
gains (100bps).
distribution costs
Distribution costs increased in 2017 in
line with business growth, reflecting
the expansion into more European
countries an increased product
range. Consequently, distribution
costs over revenue increased to
12.4% in 2017 (2016: 10.3%).
U K & I
r e v e n u e
+ 1 0 9 %
marketing costs
Marketing expenditure includes all
media buying spend by eve with
the two primary channels being
TV and digital marketing (primarily
Facebook and Google Ads). In 2017,
total marketing spend increased
119% to £17.2m. However, despite
this increased investment in building
the eve brand, Group marketing
efficiency improved by 360 bps, and
UK&I by 750 bps compared with 2016.
administrative expenses
(excluding marketing)
The largest cost within this category
is wages & salaries making up 43%
of the total cost (2016: 32%). The
increase in wages & salaries reflects
the investment in the eve team, with
average headcount increasing from
51 to 96. Despite this, administrative
expenses as a proportion of revenue
improved to 37.9% (2016: 67.5%).
adjusted EBITDA loss
(before IPO costs & share based
payment charges)
The underlying EBITDA loss increased
to £15.1m (2016: £11.3m) and reflects
the investment in marketing and
the team to support the continued
growth targeted in 2018.
26
27
IPO costs
capital expenditure
On 18 May 2017, eve Sleep Ltd was
Due to the Group’s outsourced
admitted on to the AIM following a
business model, capital expenditure
successful Initial Public Offering (IPO).
requirements remain low. The main
The one-off costs associated with the
area of capital expenditure in 2017
IPO were £2.1m.
share based payment
In accordance with IFRS, a share
based payment charge for the
options exercised in 2017 has been
related to development work on
the eve websites. The total capital
expenditure for 2017 was £0.4m
(2016: £0.0m).
cash position
calculated and charged to the
The Group had net cash of £26.9m
income statement. The charge for
at year end.
2017 was £1.8m and reflects the
accelerated vesting of some of the
options in May 2017 as part of the
IPO.
loss for the year
The loss for the year has increased to
£19.0m (2016: £11.3m).
Abid Ismail
Chief Financial Officer
19 April 2018
28
29
s t r a t e g i c r e p o r t
principal risks and
uncertainties
Risk management is an important part of the management
process for the Group. Regular reviews are undertaken to
assess the nature of risks faced, the magnitude of the risk
presented to business performance and the manner in which
the risk may be mitigated. Where controls are in place, their
adequacy is regularly monitored.
The risks considered to be particularly important at the current time are
set out below.
marketing
product
Marketing is an important investment
The Group is responsible for the
area for the Group and there is a risk
design of eve products and could
that this expenditure may not result
face exposure to product liability
in the targeted increase in sales or
claims or claims against health and
brand awareness levels.
safety procedures or practices in
different territories. There could also
eve constantly monitors and analyses
be high return rates owing to the
financial performance and key
100 night trial offered on the eve
business metrics to ensure up to
mattress.
date and accurate forecasting. The
Group also supplements its
The Group has a robust new product
in-house marketing expertise with
and supplier onboarding process to
third party media and marketing
ensure new products and suppliers
agencies to monitor and advise on
are of the highest standards. The
the effective implementation and
Group also retains insurance brokers
roll out of marketing and advertising
to review and analyse insurance
campaigns to meet targeted KPIs.
coverage to ensure sufficient
insurance coverage for product
liability and associated losses. In
addition, return rates is a KPI which is
monitored closely.
The Group is subject to fluctuations
in the cost of materials which may
adversely impact on the Group’s
profit margins.
The Group manufactures its EU
mattress in the EU and manufactures
its UK mattress in the UK creating a
hedge against currency movement
for its key products. For other
products and markets the Company
looks to agree prices for a period
of time where possible to provide
a degree of certainty on currency
fluctuations.
operations
competition
The Group operates in the highly
competitive mattress and pillow
industries and may not be able
to grow, or maintain, its existing
marketing share.
The Group constantly reviews and
analyses its performance against its
business plan and against market
competitors. The Group has both
internal talent and external advisors
who can advise on and respond
to any changes in the competitive
environment to ensure it maintains on
track for execution to business plan.
As the Group is growing rapidly, there
Approved and signed on behalf of
is a reliance on outsourced partners,
the board
there is a risk that the business
may be unable to cope with rapid
demand or disruption occurring with
its manufacturing or logistics partners.
The Group has a close working
relationship with its outsourced
Abid Ismail
partners and regularly reviews
Chief Financial Officer
forecasts to ensure capacity
19 April 2018
constraints are managed. In
addition, the Group maintains a
list of alternative suppliers who
can be onboarded or switched
to very quickly, reducing the risk
of relying on any specific supplier.
30
31
g o v e r n a n c e r e p o r t
board of directors
Paul Pindar
Chairman of the Board
appointed: November 2016
experience
Paul joined the eve Board in November 2016. Prior to this,
Paul spent 26 years at Capita Plc, retiring in February
2014. Paul was one of the UK’s longest serving Chief
Executive Officers of a FTSE100 company. During his
tenure, the market value of Capita grew to £7.5bn and
employee numbers grew from 33 to 62,000. Paul was a
founder investor in online estate agent Purplebricks which
originally launched in April 2014 and is now AIM-listed
on the London Stock Exchange. Paul is also Chairman of
Literacy Capital Plc, an investment company focussed
on investing in and supporting early stage and small
companies whilst also providing charitable funding in
order to materially improve child literacy in the UK.
committee membership:
Audit Committee
Nomination Committee (Chair)
Remuneration Committee (Chair)
Jas Bagniewski
Founder and Chief Executive Officer
appointed: January 2015
experience
Jas co-founded eve in 2014 alongside Kuba Wieczorek
and James Fryer. Previously, Jas was Chief Executive
Officer of Zen Bedrooms, a direct to consumer mattress
company. Prior to this, Jas worked at Rocket Internet as a
Country Manager of various start-ups including Zalando
and Groupon. Jas started his career as a consultant at
Accenture.
committee membership:
None
Abid Ismail
Chief Financial Officer
appointed: November 2016
experience
Abid joined eve in 2016 from Capita Plc, having been
Chief Financial Officer and then Chief Executive Officer
of AXELOS Ltd — a joint venture between Capita Plc and
the UK government. Prior to this Abid held senior positions
within Capita group as well as Ernst & Young’s M&A team.
Abid is a Chartered Accountant.
committee membership:
None
Peter Hepworth
Senior Independent Non-Executive Director
appointed: April 2017
experience
Peter joined eve in April 2017. Peter is currently Executive
Officer of the Professional Services Division of Capita Plc,
as well as Chief Executive Officer of AXELOS — a joint
venture between Capita Plc and the UK Government.
Prior to AXELOS, Peter held a number of positions at
Activision Blizzard, one the world’s leading interactive
entertainment companies, including being Managing
Director of UK & Ireland. Prior to Activision, Peter worked
in senior finance, sales and marketing positions in France
and the UK at L’Oréal and Sara Lee Corporation. Peter is a
Chartered Accountant.
committee membership:
Audit Committee (Chair)
Nomination Committee
Remuneration Committee
Thomas Enraght-Moony
Independent Non-Executive Director
appointed: April 2017
experience
Tom joined Eve in April 2017. Tom is the Chief Customer
Officer at McArthurGlen, Europe’s leading owner &
operator of Designer Outlet Malls. Prior to McArthurGlen
Tom spent over 15 years leading brand transformation and
growth for tech-enabled consumer businesses including
Leisure Pass Group, Match.com, E*TRADE, AT&T Wireless
and Clearwire. He holds an undergraduate degree from
The University of Glasgow and an MBA from INSEAD in
France.
committee membership:
Audit Committee
Nomination Committee
Remuneration Committee
32
33
and, where appropriate, agreed with the rest
of the Board.
The table below sets out the Board and
Committee attendance from the date the
Company’s shares were admitted to trading
on AIM up to 31 December 2017. Attendance
is shown as the number of meetings attended
out of the total number of meetings possible
for the individual Director during the year.
If any Directors are unable to attend
a meeting, they are encouraged to
communicate their opinions and comments
on the matters to be considered via the
Chairman of the Board or the relevant
committee chairman.
attendance at Board and Commitee meetings since May 2017
Paul Pindar
Jas Bagniewski
Abid Ismail
Thomas Enraght-Moony
Peter Hepworth
Board
3 of 3
3 of 3
3 of 3
3 of 3
3 of 3
Audit
Committee
Remuneration
Committee
1 of 1
1 of 1
-
-
1 of 1
1 of 1
-
-
1 of 1
1 of 1
g o v e r n a n c e r e p o r t
corporate governance
report
The Board is committed to achieving high standards of
corporate governance, integrity and business ethics.
Under the AIM Rules for Companies the
Company is not required to comply
with the provisions of the UK Corporate
Governance Code published by the
Financial Reporting Council. Whilst that
code has not been applied in full, the
Board has taken into consideration the QCA
Corporate Governance Code for Small and
Mid-Size Quoted Companies produced
by the Quoted Companies Alliance, and
taken steps to apply the principles of the
UK Corporate Governance Code in so far
as it can be applied practically, given the
size of the Company and the nature of its
operations.
the Board and its Committees
The Board is collectively responsible to the
shareholders for the overall direction and
control of the company and delegates the
day to day management of the business
to the executive directors and senior
management.
The Board also delegates certain matters
to its Board Committees so that it can
operate efficiently and give the right level
of attention and consideration to relevant
matters. The composition, responsibilities and
activities of each of the Board Committees
are set out on pages 36 to 38. The terms of
reference of each committee are available
from our website.
board composition
The successful delivery of our strategy depends
upon attracting and retaining the right talent.
This starts with having a high-quality Board.
Balance is an important requirement for the
composition of the Board, not only in terms of
the number of Executive and Non-executive
Directors, but also in terms of skill, knowledge
and expertise each Director brings.
The Board comprises a non-executive
chairman, two executive directors and two
other independent non-executive directors.
A short biography of each of the directors in
office at the year end is set out on pages 30 to
31.
Peter Hepworth and Thomas Enraght-
Moony are considered by the Board to be
independent. The Board are of the opinion
that both act in an independent and
objective manner and are free from any
relationship that could affect their judgement.
Paul Pindar, as non-executive chairman, was
considered independent on appointment.
Notwithstanding any cross-directorships,
the Board is satisfied that it has a suitable
balance between independence (of both
character and judgement) on the one hand,
and knowledge of the Company on the
other, to enable it to discharge its duties and
responsibilities effectively.
There are effective procedures in place to
monitor and deal with conflicts of interest. The
Board is aware of the other commitments and
interests of its directors, and changes to these
commitments and interests are reported to
34
35
Board and Committee effectiveness
relations with shareholders
We are committed to communicating
openly with our shareholders to ensure
that our strategy and performance are
clearly understood. We communicate with
shareholders through the Annual Report
and Accounts, full-year and half-year
announcements, trading updates and the
annual general meeting (AGM); and we
encourage shareholders’ participation in
face-to-face meetings. A range of corporate
information (including all announcements and
presentations) is also available to shareholders,
investors and the public on our corporate
website at investor.evemattress.co.uk.
The Board continually strives to improve its
effectiveness and recognises that its annual
evaluation process is an important tool in
reaching that goal.
We will be undertaking an evaluation of the
Board’s effectiveness, and of the effectiveness
of each of the Board Committees in 2018, and
will report to shareholders in the 2018 Annual
Report on the outcomes of that exercise.
internal controls and risk
management
The Group has a comprehensive system of
internal controls in place, designed to ensure
that risks are mitigated and that the Group’s
objectives are attained. The Board recognises
its responsibility to present a fair, balanced and
understandable assessment of the Group’s
position and prospects. It is accountable for
reviewing and approving the effectiveness
of internal controls operated by the Group,
including financial, operational and
compliance controls, and risk management.
The Board recognises its responsibility in
respect of the Group’s risk management
process and system of internal control, and
oversees the activities of the Group’s external
auditors and the Group’s risk management
function (supported by the Audit Committee).
A review of the Group’s risk management
approach, and detail on the management
and mitigation of each principal risk is
discussed in the Strategic Report on pages 28
to 29.
36
37
g o v e r n a n c e r e p o r t
audit committee report
g o v e r n a n c e r e p o r t
nomination committee
Committee composition
The Committee comprises Peter Hepworth
(Committee chair), Paul Pindar and Thomas
Enraght-Moony.
Committee responsibilities
The main responsibilities of the Audit
Committee are:
• Monitoring the integrity of the financial statements;
• Reviewing the Company’s internal control arrange-
ments and risk management systems;
• Making recommendations to the Board as regards
the appointment, re-appointment and removal of
the Company’s external auditor; and
• Overseeing the relationship with the
external auditor.
objectivity and independence of the
external audit
It is the Committee’s responsibility to
monitor the performance, objectivity and
independence of the Auditor and this is
evaluated by the Committee each year. In
evaluating their performance the Committee
examines five main criteria – robustness of the
audit process, independence and objectivity,
quality of delivery, quality of people and
service, and value-added advice. Having
carried out the review the Committee is
satisfied with the Auditor’s performance,
objectivity and independence.
significant issues considered in
relation to the financial statements
The Board has discussed areas of risk with the
auditors and agreed for
the following areas of heightened risk to be
reviewed and assessed
in the audit of the Company’s performance in
the financial year to
31 December 2017.
risk of fraud in revenue recognition:
The greatest risk of revenue recognition
fraud is at the financial statement level,
through the posting of manual journals. The
expectation from investors has put pressure on
management which would increase the risk
of fraud for premature revenue recognition/
under-recognition of sales return provision.
inventory valuation and existence:
Inventory is a material balance and there is
a risk that the closing stock is not accurately
recorded in the financial statements.
management override of controls:
Management is in a unique position to
perpetrate fraud because of their ability to
manipulate accounting records and prepare
fraudulent financial statements by overriding
controls that otherwise appear to be
operating effectively.
Although the Committee did not meet
formally in the period from IPO up until 31
December 2017, it did meet on 6 March
2018 to discuss year end matters. The
Committee reviewed the size, structure and
composition of the Board and agreed that
this remains appropriate.
Committee composition
The Committee comprises Paul Pindar
(Committee chair), Peter Hepworth and
Thomas Enraght-Moony.
Committee responsibilities
The main responsibilities of the Nomination
Committee are:
• Reviewing the size structure and
composition of the Board;
• Considering succession plans for Directors and
senior management;
• Satisfying itself that plans are in place for orderly
succession for appointments to the Board;
• Identifying and nominating to the Board candi-
dates for Board vacancies.
38
39
g o v e r n a n c e r e p o r t
remuneration report
composition
key activities in 2017
The main focus of the Committee in 2017 has
been to review proposals around Executive
Directors’ remuneration arrangements for 2018
and scrutinise management bonus scheme
proposals. The Committee will continue to
focus in 2018 on ensuring that executive
remuneration and shareholder interests remain
closely aligned.
The Remuneration Committee comprises
three non-executive directors: Paul Pindar
(Chairman of the Committee), Thomas
Enraght-Moony and Peter Hepworth.
Members of the management team are
invited to attend meetings as appropriate,
unless there is an actual or potential conflict of
interest.
responsibilities
The role of the Committee is to assist the
Board to fulfil its responsibility to shareholders
to ensure that the remuneration policy and
practices of the Company reward fairly and
responsibly, with a clear link to corporate and
individual performance, having regard to
statutory and regulatory requirements.
The Terms of Reference for the Remuneration
Committee are available on our website at
investor.evemattress.co.uk/corporate-
governance#committee-composition.
These were last reviewed by the Committee on
22 November 2017.
remuneration policy
The Company’s policy is that the remuneration
package of the Executive Directors should
be sufficiently competitive to attract, retain
and motivate those directors to achieve
the Company’s objectives without making
excessive payments. The Board determines
the terms and conditions of the Non-Executive
directors.
fixed remuneration elements
Purpose
How it operates
Maximum opportunity
Performance-related
framework
Base salary
Reflects an individual’s
Reviewed annually, normally
There is no prescribed
The performance of the
responsibilities, experience
with effect from 1 January,
maximum annual base
individual in the period since
and performance in their
with any changes taking
salary or salary increase.
the last review is considered
role.
effect from that date.
The Committee is guided
when their salary is being
Salaries are normally paid
by the general increase
reviewed.
monthly.
for the broader employee
population but has discretion
Decisions on salary
to decide to award a
levels are influenced
lower or higher increase to
by: responsibilities,
Executive Directors.
abilities, experience and
performance of an individual
the performance of the
individual in the period
since the last review the
Company’s salary and
pay structures and general
workforce salary increases.
Pension
To contribute financially post
Defined contribution
The Company may
Not applicable.
retirement.
arrangement.
contribute up to 1% of base
Only base salary is
salary.
pensionable.
The Committee has
Employees may opt out of
discretion to amend the
the scheme.
contribution level should
market conditions change.
variable remuneration elements
Purpose
How it operates
Maximum opportunity
Performance-related
framework
Supports the strategy and
Awards of share options
Not applicable
Not applicable
business plan by incentivising
to certain employees,
and retaining the eve senior
which normally vest
management team in a way
after three years subject
Share plan
that is aligned both with
to the achievement of
the Company’s long-term
performance conditions.
financial performance
and with the interests of
shareholders.
To support the personal
Benefits include private
There is no overall maximum
Not applicable
health and wellbeing of
medical insurance and
level of benefits provided
employees.
discount on eve products.
to Executive Directors,
Other benefits
To reflect and support the
Company’s culture.
and the level of some of
these benefits is not pre-
determined but may vary
from year to year based
on the overall cost to the
Company.
40
41
g o v e r n a n c e r e p o r t
remuneration
report (continued)
Directors’ remuneration table
The remuneration of the Directors for the year to 31 December 2017 is set out in the table
below
Director
Appointed
Resigned
Salary / fees £
Pension £
Total remuneration £
2017
2016
2017
2016
2017
2016
Executive Directors
Jas Bagniewski(1)
Abid Ismail(2)
Kuba Wieczorek(3)
Non-Executive Directors
Paul Pindar
Peter Hepworth
Thomas Enraght-Moony
Luke Hakes
6 January 2015
N/A
132,708
77,897
2 November 2016
N/A
130,000
13,576
8 December 2015
28 April 2017
36,667
70,423
21 November
N/A
25,000
2,000
2016
28 April 2017
28 April 2017
N/A
N/A
17,500
20,115
1 August 2015
28 April 2017
-
-
-
-
98
98
-
-
-
-
-
361,990
163,896
196
-
-
-
-
-
-
-
-
132,806
77,897
130,098
13,576
36,667
70,423
25,000
2,000
17,500
20,115
-
-
-
-
362,186
163,896
Directors interest in share plans
Director
Scheme
Date of Grant
As at 31 December
Performance
Exercise Price
2017 (No of Shares)
conditions
(pence)
Jas Bagniewski
(Executive Director)
EMI
12/05/2017
243,628
Length of service
101.2p
Unapproved
12/05/2017
353,372
Length of service
101.2p
Abid Ismail
(Executive Director)
EMI
12/05/2017
242,932
Length of service
101.2p
Unapproved
12/05/2017
146,911
Length of service
101.2p
Peter Hepworth
(Non-Executive Director)
Thomas Enraght-Moony
(Non-Executive Director)
EMI
EMI
12/05/2017
99,000
Length of service
101.2p
12/05/2017
99,000
Length of service
101.2p
There were no options granted before 2017.
Directors shareholdings
The Directors who held office at 31 December 2017 had the following interests in the
shares of the Company,
Director
Beneficially
owned at
31 December
2017
No. of shares
Beneficially
owned at
18 May 2017
No. of shares
Beneficially
owned at 31
December
(1)
2016
No. of shares
Outstanding
share options
at
31 December
2017
Jas Bagniewski (Executive Director)
9,341,668
9,341,668
5,893,480
597,000
Abid Ismail (Executive Director)
4,151,841
4,151,841
-
389,843
There were no taxable benefits, bonus, long term incentives or other incomes
Paul Pindar (Non-Executive Director)
(2)
6,287,927
6,287,927
6,287,927
-
1. On 18 May 2017, 3,448,188 ordinary shares of 0.1 pence each were allotted to Jas Bagniewski, following the exercise of options over ordinary shares.
The gain on these options amounted to £3,582,667. The charge for the year for all options held by this director amounted to £341,371.
2. On 12 May 2017, 4,151,841 ordinary C shares of 0.1 pence each were allotted to Abid Ismail, following the exercise of options over ordinary C shares.
The gain on these options amounted to £3,995,510. The charge for the year for all options held by this director amounted to £244,959.
3. The charge for the year for all options held by this director amounted to £174,810.
Peter Hepworth (Non-Executive Director)
Thomas Enraght-Moony (Non-Executive Director)
-
-
-
-
-
-
99,000
99,000
There were no sales of shares by a director to report.
1. 2016 comparative requires modification to account for bonus issue and consolidation of shares
2. Includes connected persons
42
43
g o v e r n a n c e r e p o r t
statement of directors’ responsibilities
in respect of the annual report and the
financial statements
g o v e r n a n c e r e p o r t
directors’ report
position of the parent Company and enable
them to ensure that its financial statements
comply with the Companies Act 2006. They
are responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error, and have general responsibility
for taking such steps as are reasonably open
to them to safeguard the assets of the Group
and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the
directors are also responsible for preparing a
Strategic Report and a Directors’ Report that
complies with that law and those regulations.
The directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the company’s
website. Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
The directors are responsible for preparing
the Annual Report and the Group and parent
Company financial statements in accordance
with applicable law and regulations.
Company law requires the directors to
prepare Group and parent Company financial
statements for each financial year. As
required by the AIM Rules of the London Stock
Exchange they are required to prepare the
Group financial statements in accordance
with International Financial Reporting
Standards as adopted by the EU (IFRSs as
adopted by the EU) and applicable law and
have elected to prepare the parent Company
financial statements on the same basis.
Under company law the directors must not
approve the financial statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Group and parent
Company and of their profit or loss for that
period. In preparing each of the Group and
parent Company financial statements, the
directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasona-
ble, relevant and reliable;
• state whether they have been prepared in accor-
dance with IFRSs as adopted by the EU;
• assess the Group and parent Company’s ability to
continue as a going concern, disclosing, as appli-
cable, matters related to going concern; and
• use the going concern basis of accounting unless
they either intend to liquidate the Group or the
parent Company or to cease operations, or have
no realistic alternative but to do so.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
Company’s transactions and disclose with
reasonable accuracy at any time the financial
The Corporate Governance Report approved
by the Board is provided on pages 32 to 34 and
incorporated by reference into this Directors’
Report.
presence outside of UK
the company has the following subsidiaries
outside of the UK
Eve sleep inc
Eve Sleep SASU
Principal place of
185 W. Broadway,
business/ Registered
Suite 101, PO Box
office address
1150, Jackson, USA
Registered Number
EIN
47-4164566
Ownership
2017
Ownership
2016
100%
100%
5 Rue Des Suisses,
75014, Paris
823397419 R.C.S
Paris
100%
100%
information contained elsewhere in this
Annual Report
Information required to be included in this
Directors’ Report can be found elsewhere in the
Annual Report as indicated in the table below
and is incorporated into this report by reference:
Information
Page(s)
Future Developments
Going Concern Statement
Risk Management and principal risks
Corporate Governance Statement
Information on the Group’s financial risk
management objectives and policies,
and its exposure to credit risk, liquidity
risk, interest rate risk, foreign currency
risk and financial instruments
21
54
28
42
72
significant events since the end of the
financial year
There have been no significant events affecting
the Company since 1 January 2018.
44
45
annual general meeting
The Annual General Meeting of the Company
will be held at 12.00pm on Thursday 24 May
2018 at Instinctif offices, 1st Floor, 65 Gresham
Street, London, EC2V 7NQ . The Notice of
Meeting has been sent to shareholders along
with this Annual Report.
Approved and signed on behalf of the Board
Paul Pindar
Chairman
19 April 2018
auditor
KPMG LLP was appointed as auditor and is
willing to continue in office. In accordance with
s489(4) of the Companies Act 2006 a resolution
for their reappointment will be proposed at the
forthcoming Annual General Meeting.
share capital
The issued share capital of the Company at 31
December 2017 was 138,621,020 ordinary shares
of 0.1p. Full details of the issued share capital,
together with the details of shares issued during
the year to 31 December 2017, are shown in
Note 16 to the financial statements on page 68.
statement on disclosure of information to
auditors
The directors confirm that, so far as each is
aware, there is no relevant audit information
of which the Group’s auditors are unaware.
Each of the directors has taken all the steps he
should have taken as a director to make himself
aware of any relevant audit information and to
establish that the Group’s auditors are aware of
that information.
dividends
The directors do not recommend the payment
of a dividend.
strategic report
This is set out on pages 13 to 29 of the Annual
Report and includes an indication of likely
future developments, and forms part of this
Directors’ Report.
research and development
The Group undertakes a continuous
programme of development expenditure.
Development expenditure is capitalised only
when the end product is technically and
commercially feasible and when sufficient
resource is available to complete the
development, as disclosed in note 2.10 to the
accounts.
political donations
The interests of the directors and their closely
associated persons in the share capital of
the Company, along with details of directors’
share options and awards, are contained in
the Directors’ Remuneration Report on pages
40 to 41. At no time during the year did any of
the directors have a material interest in any
significant contract with eve Sleep plc.
The Company’s policy is for all of the Executive
Directors to have twelve month rolling service
contracts. All Non-Executive Directors are
salaried and are appointed for an initial term
of three years from Admission to AIM which
took place on 18 May 2017.
eve maintains directors’ and officers’ liability
insurance which gives appropriate cover for
any legal action brought against its directors.
The Company has also provided an indemnity
for its directors, which is a qualifying third-party
indemnity provision, for the purposes of section
234 of the Companies Act 2006. This was in
place throughout the year and up to the date
of approval of the financial statements.
No political donations have been made during
this financial year.
articles of association
directors
Details of the directors as at the date of this
report and who served throughout the period
are set out on page 40.
eve Sleep’s Articles of Association can only
be amended by special resolution and are
available on our website.
46
47
g o v e r n a n c e r e p o r t
independent auditor’s report
to the members of eve Sleep plc
1. Our opinion is unmodified
Basis for opinion
We have audited the financial statements
of eve Sleep Plc (“the Group”) for the year
ended 31 December 2017 which comprise the
consolidated statement of profit and loss and
other comprehensive income, consolidated
statement of financial position, consolidated
statement of changes in equity, consolidated
statement of cash flows, Company statement
of financial position, Company statement of
changes in equity, Company statement of
cash flows and the related notes, including the
accounting policies in note 2.
In our opinion:
• the financial statements give a true and fair
view of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2017 and of the Group’s loss for the year then
ended;
• the group financial statements have been pro-
perly prepared in accordance with Internatio-
nal Financial Reporting Standards as adopted
by the European Union (IFRSs as adopted by
the EU);
• the parent Company financial statements
have been properly prepared in accordance
with IFRSs as adopted by the EU and as applied
in accordance with the provisions of the Com-
panies Act 2006; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
Materiality:
Group financial statements as
a whole
£0.25m (2016: £0.3m)
1% (2016: 2.5%) of total
Group revenues
Coverage
100% (2016: 100%) of Group
loss before tax
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have
fulfilled our ethical responsibilities under, and
are independent of the Group in accordance
with, UK ethical requirements including the FRC
Ethical Standard as applied to listed entities.
We believe that the audit evidence we have
obtained is a sufficient and appropriate basis
for our opinion.
Risks of material
misstatement
Consolidated and
parent Company
- recurring risk
Revenue recognition
including management
override of controls
Risk vs 2016:
Down (cid:122)
Consolidated and
parent Company
- new risk
Accounting for share
options scheme
New risk
2017
2. Key audit matters: our assessment of
risks of material misstatement
Key audit matters are those matters that, in
our professional judgement, were of most
significance in the audit of the financial
statements and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) identified by us,
including those which had the greatest effect
on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts
of the engagement team. These matters
were addressed in the context of our audit of
the financial statements as a whole, and in
forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In arriving at our audit opinion above, the key
audit matters, in decreasing order of audit
significance, were as follows:
Revenue recognition including
management override of
controls
(Consolidated: £27.7m; 2016:
£12.0m)
Refer to page 36 (Audit
Committee Report) and note
2.15 on page 57 (accounting
policy)
Accounting for eve sleep share
option scheme
(Consolidated and parent
Company:£1.8 million; 2016: £ nil)
Refer to note 2.17 on page 58
(accounting policy) and note
17 on pages 69 to 71 (financial
disclosures).
The risk
Our Reponse
Sales revenue recognition
Our procedures included:
The Group’s revenues have increased significantly
in the current year in line with the business
model and investment in the group’s chosen
markets following its admission to AIM in May
2017. Accordingly, there is significant focus on
management to deliver revenue growth from the
group’s operating activities.
We therefore concluded that there was
heightened risk at the financial statement level of
management override of control, as the directors
may seek to modify the results through the posting
of fictitious sales transactions by way of manual
journal entries or by intentionally manipulating
judgements used in determining the provision for
sales returns.
- Tests of detail: We agreed gross revenue (before
accounting for returns) recognised in the financial year
to cash receipts per bank statements and taking into
account year on year movements in trade receivables
in order to check the occurrence of revenue
recognised.
- Benchmarking assumptions: We challenged the key
assumptions used in sales return provision calculation, in
particular the rate of return through comparing the year
end provision to actual 2017 sales returns in 2018. In
addition, we also considered the historical accuracy of
the provision by checking historical return data trends.
Tests of detail: We considered the adequacy of the
Group’s disclosures in respect of revenue and provision
for sales returns.
- Assessing transparency: We considered the adequacy
of the Group’s disclosures in respect of revenue and
provision for sales returns.
Subjective valuation
Our procedures included:
The directors have put in place new share option
schemes during in 2017. A number of options
were issued prior to the IPO which were valued
using a valuation model, which includes various
assumptions. There is a heightened risk of error due
to the number of options issued and the fact that
certain option vested early on IPO.
- Benchmarking assumptions: We obtained the
valuations prepared by the directors and challenged
the key assumptions applied in determining the grant
date fair value of the options awarded, being the risk
free rate, volatility rate, enterprise value and option life
against externally derived data.
- Re-performance: We independently recalculated the
value of the awards granted, accelerated due to the
IPO, and the related share based payment expense
recognised.
- Assessing transparency: We considered the
adequacy of the Group’s disclosures in respect of the
employee share option schemes.
3. Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements
as a whole was set at £0.25m (2016: £0.30m),
determined with reference to a benchmark
of Group revenue of £27.4m (2016: £12.0m),
of which it represents 1% (2016: 2.5%). We
consider total revenue to be the most
appropriate benchmark as it provides a more
stable measure year on year than group loss
before tax.
Materiality for the parent company financial
statements as a whole was set at £0.18m
(2016: £0.19m), determined with reference to
a benchmark of company total revenue of
£16.1m (2016: £7.7m), of which it represents 1%
(2016: 2.5%).
We agreed to report to the Audit Committee
any corrected or uncorrected identified
misstatements exceeding £0.013m (2016:
£0.0.15m), in addition to other identified
misstatements that warranted reporting on
qualitative grounds.
The Group team performed the audit of
the Group as if it was a single aggregated
set of financial information. The audit was
performed using the materiality levels set out
above.
4. We have nothing to report on going
concern
We are required to report to you if we have
concluded that the use of the going concern
basis of accounting is inappropriate or there
is an undisclosed material uncertainty that
may cast significant doubt over the use of that
basis for a period of at least twelve months
from the date of approval of the financial
statements. We have nothing to report in
these respects. basis for a period of at least
twelve months from the date of approval of
the financial statements. We have nothing to
report in these respects.
48
49
g o v e r n a n c e r e p o r t
independent auditor’s report to
the members of eve Sleep plc
Continued
5. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other
information presented in the Annual Report
together with the financial statements. Our
opinion on the financial statements does not
cover the other information and, accordingly,
we do not express an audit opinion or,
except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider whether,
based on our financial statements audit work,
the information therein is materially misstated
or inconsistent with the financial statements
or our audit knowledge. Based solely on
that work we have not identified material
misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other
information:
• we have not identified material misstatements in
the strategic report and the directors’ report;
• in our opinion the information given in those reports
for the financial year is consistent with the
financial statements; and
• in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6. We have nothing to report on the other
matters on which we are required to
report by exception
Under the Companies Act 2006, we are
required to report to you if, in our opinion:
• adequate accounting records have not been kept
by the parent Company, or returns adequate for
our audit have not been received from branches
not visited by us; or
• the parent Company financial statements are not
in agreement with the accounting records and
returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and ex-
planations we require for our audit.
We have nothing to report in these respects
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set
out on page 42, the directors are responsible
for: the preparation of the financial statements
including being satisfied that they give a
true and fair view; such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error; assessing the Group and,
parent Company’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern; and using
the going concern basis of accounting unless
they either intend to liquidate the Group or
the parent Company or to cease operations,
or have no realistic alternative but to do so.
7. Respective responsibilities (Continued)
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of
assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK)
will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material
if, individually or in aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the basis
of the financial statements.
A fuller description of our responsibilities is
provided on the FRC’s website at www.frc.org.
uk/auditorsresponsibilities.
8. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the Company’s
members those matters we are required
to state to them in an auditor’s report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than the
Company and the Company’s members, as a
body, for our audit work, for this report, or for
the opinions we have formed.
Craig Douglas (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory
Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
19 April 2018
50
51
consolidated statement of profi t and loss and other
comprehensive income
for the year ended 31 December 2017
consolidated statement of fi nancial position
at 31 December 2017
Revenue
Cost of sales
Gross Profi t
Distribution expense
Administrative Expenses
Operating loss before IPO related expenditure and share
based payment charge
IPO Related expenditure
Share based Payment Charges
Operating loss
Net fi nance income
Loss before tax
Taxation
Loss for the year
Note
3
4
17
7
8
2017
£
2016
£
Non-current assets
Property, Plant and equipment
27,744,995
11,966,770
Intangible assets
(11,749,049)
(6,152,136)
15,995,946
5,814,634
(3,430,085)
(1,231,308)
(27,686,895)
(15,921,078)
(15,121,034)
(11,337,752)
(2,124,528)
(1,757,204)
-
-
(19,002,766)
(11,337,752)
25,096
-
(18,977,670)
(11,337,752)
-
-
(18,977,670)
(11,337,752)
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Total liabilities
Net assets
Note
9
10
11
12
13
14
15
2017
£
36,458
378,538
414,996
691,340
4,177,056
26,926,389
2016
£
7,945
-
7,945
491,181
1,049,660
4,639,355
31,794,785
6,180,196
32,209,781
6,188,141
4,548,019
2,186,241
826,702
715,097
5,374,721
2,901,338
5,374,721
2,901,338
26,835,060
3,286,803
Basic and diluted loss per share
18
(16.17p)
(16.78p)
There was no other comprehensive income for the year. All results relate to continuing activities.
Notes 1 to 24 form part of the historical fi nancial information shown above
Equity attributable to equity holders of the parent
Share capital
Share Premium
16
138,631
316
36,716,371
16,124,928
Share based payment reserve
138,794
-
Retained earnings
Total Equity
(10,158,736)
(12,838,441)
26,835,060
3,286,803
Notes 1 to 24 form part of the historical fi nancial information shown above
These fi nancial statements were approved by the board of directors on eve Sleep plc and were signed on it’s behalf by:
Abid Ismail
Director
19 April 2018
Company registered number: 09261636
52
53
consolidated statement of changes in equity
for the year ended 31 December 2017
consolidated statement of cash flows
for the year ended 31 December 2017
For the year ended 31 December 2017
Share
Capital
£
Share
Premium
£
Share based
payment reserve
£
Retained
Earnings
£
Total Equity
£
Balance at 1 January 2017
316
16,124,928
Issue of shares
Bonus share issue
38,767
85,948
40,698,396
(85,948)
Share premium cancellation
-
(20,038,965)
Exercise of options
13,600
17,960
Share based payment charge
Transfer on exercise of options
-
-
-
-
-
-
-
-
-
1,757,204
(12,838,441)
3,286,803
-
-
20,038,965
-
-
40,737,163
-
-
31,560
1,757,204
(1,618,410)
1,618,410
-
Transactions with owners
138,315
20,591,443
138,794
21,657,375
42,525,927
Cash flows from operating activities
Operating loss after taxation
IPO related expenditure
2017
£
2016
£
(18,977,670)
(11,337,752)
2,124,528
-
Operating loss before IPO related expenditure
(16,853,142)
(11,337,752)
Adjustments for
Net finance income
Depreciation and amortisation
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Increase in provisions
Share based payment charge
IPO related expenditure
(25,096)
7,945
(3,127,396)
(200,159)
2,361,778
111,606
1,757,204
(2,124,528)
-
2,647
(629,515)
(491,181)
1,992,740
540,962
-
-
Loss for the year
(18,977,670)
(18,977,670)
Net cash outflow from operating activities
(18,091,788)
(9,922,099)
Balance at 31 December 2017
138,631
36,716,371
138,794
(10,158,736)
26,835,060
for the year ended 31 December 2016
Balance at 1 January 2016
226
3,112,439
Issue of shares
Transactions with owners
Loss for the year
90
90
13,012,489
13,012,489
Balance at 31 December 2016
316
16,124,928
-
-
-
-
(1,500,689)
1,611,976
-
-
13,012,579
13,012,579
(11,337,752)
(11,337,752)
(12,838,441)
3,286,803
Cash flows from investing activities
Acquisition of property, plant and equipment
Development of intangible assets
(36,458)
(378,538)
(10,592)
-
Net cash outflows from investing activities
(414,996)
(10,592)
Cash flows from financing activities
Proceeds from issue of share capital
40,768,722
13,012,579
Net finance income
25,096
-
Net cash inflows from financing activities
40,793,818
13,012,579
Cash at beginning of year
Movement in cash
Cash at end of year
4,639,355
22,287,034
26,926,389
1,559,467
3,079,888
4,639,355
54
notes to the financial statements
forming part of the financial statements
1. Reporting Entity
notes to the financial statements
continued
Transactions eliminated on consolidation
55
eve sleep PLC (the “Company”) is a public company, domiciled and registered in England in the UK. The registered number is
09261636 and the registered address at 31st December 2017 was Interchange Atrium, The Stables Market, Chalk Farm Road, London,
England, NW1 8AH. On 5th February 2018 the company changed its registered address to 128 Albert Street, London, England, NW1
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the
extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the
7NE
2. Accounting Policies
2.1 Basis of preparation
The group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”).
The Group financial statements have been prepared and approved by the directors in accordance with International Financial
Reporting Standards as adopted by the EU (“Adopted IFRSs”).
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
Group financial statements.
Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material adjustment in the next year are discussed in note 2.19.
2.2 Measurement Convention
The financial statements are prepared on the historical cost basis.
2.3 Going Concern
The financial statements are prepared on a going concern basis, notwithstanding that the Group has reported an operating loss
of £19.0m (2016: £11.3m) and has operating cash outflows of £18.1m (2016: £9.9m) for the year ended 31 December 2017, which the
directors believe to be appropriate for the reasons set out below
The directors consider that despite incurring losses since inception, the business plan and cashflow forecasts that the directors have
prepared demonstrate that the Group will generate cash inflows from operating activities and there is sufficient cash to enable the
group to operate. With cash resources of £26.9M as at 31 December 2017 the directors are of the opinion that there is sufficient cash
for the Group and parent company to continue to meets its liabilities for a period of at least 12 months from the date of approval of
these financial statements.
2.4 Functional and presentation Currency
The financial statements are presented in Sterling, which is the functional and presentational currency of the Company
2.5 Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing
control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to
the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
extent that there is no evidence of impairment.
2.6 Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date
are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement (except for differences arising on the retranslation of a financial liability
designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are
recognised directly in other comprehensive income). Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates
ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
to the Group’s presentational currency, Sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and
expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange
rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income
and accumulated in the foreign currency translation reserve (FCTR) or non-controlling interest, as the case may be. When a foreign
operation is disposed of, such that control, joint control or significant influence (as the case may be) is lost, the entire accumulated
amount in the FCTR, net of amounts previously attributed to non-controlling interests, is recycled to profit or loss as part of the
gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while
still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests. When the
Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while still retaining
significant influence or joint control, the relevant proportion of the cumulative amount is recycled to profit or loss.
2.7 Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet
the following two conditions:
(a) they include no contractual obligations upon the group to deliver cash or other financial assets or to exchange financial assets
or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company’s own equity instruments, it is either a non-derivative that
includes no obligation to deliver a variable number of the company’s own equity instruments or is a derivative that will be settled
by the company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the company’s own shares, the amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to those shares.
2.8 Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash
equivalents, loans and borrowings, and trade and other payables.
56
notes to the financial statements
continued
2.8 Non-derivative financial instruments (Continued)
Trade and other receivables
notes to the financial statements
continued
2.11 Inventories
57
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing
cost using the effective interest method, less any impairment losses.
location and condition. A provision is also made to write down any slow-moving or obsolete inventory to net realisable value.
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes
Trade and other payables
2.12 Investments
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
Investments in subsidiary companies are stated at cost and are subject to review for impairment indicator if identified.
using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
2.13 Impairment excluding inventories
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a
the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that
component of cash and cash equivalents for the purpose only of the cash flow statement.
can be estimated reliably.
2.9 Property, plant and equipment
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Interest on
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of
the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount
an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and
of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
equipment. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment.
The estimated useful lives are as follows:
"
"
Computer equipment
Fixtures and fittings
3 years
3 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
2.10 Intangible assets
2.14 Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
2.15 Revenue
Revenue and profit before tax are attributable to the one principal activity of the business. Revenue represents the net sales of goods
including freight, excluding value added tax. Revenue from the sale of goods is recognised when the Group has transferred the
goods to the buyer, less appropriate deduction for actual and expected returns and relevant discounts.
The costs of acquiring and developing software that is not integral to its related hardware is capitalised separately as an intangible
asset.
2.16 Expenses
Capitalised software costs include external direct costs of material and services and payroll related costs for employees who
are directly associated with the project. Capitalised software development costs are stated at historic cost less accumulated
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.
amortisation. Amortisation is calculated on a straight-line basis over the assets’ expected economic lives, normally between three
Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
to five years, and applied starting in the financial year after capitalisation. Software under development is held at cost less any
recognised impairment loss.
Expenditure on development activity is capitalised if the product or process is technically and commercially feasible, and if the
Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and finance leases recognised in
Group intends to, and has the technical ability and sufficient resources to complete development, future economic benefits are
profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are
probable, and if the Group can measure reliably the expenditure attributable to the intangible asset during its development.
recognised in the income statement (see foreign currency accounting policy). Borrowing costs that are directly attributable to the
Development activities involve a plan or design for the production of new or substantially improved products or processes.
acquisition, construction or production of an asset that takes a substantial time to be prepared for use, are capitalised as part of
the cost of that asset. Financing income comprise interest receivable on funds invested, dividend income, and net foreign exchange
Where no intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is
gains.
incurred. Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend
income is recognised in the income statement on the date the entity’s right to receive payments is established. Foreign currency
gains and losses are reported on a net basis.
58
notes to the financial statements
continued
notes to the financial statements
continued
59
2.17 Employee benefits
2.19 Significant estimates and judgements
Defined contribution plans
The company operates a defined contribution plan. A defined contribution plan is a post-employment benefit plan under which the
The preparation of financial statements in conformity with IFRS as adopted by the EU requires management to make judgements,
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
liabilities. The estimates and assumptions are based on historical experience and various other factors believed to be reasonable
Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in
under the circumstances. Actual results could differ from these estimates and any subsequent changes are accounted for when such
the periods during which services are rendered by employees
information becomes available. The judgements, estimates and assumptions that are the most subjective or complex are discussed
Share based payment transactions
Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments
are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the
Group.
below:
Accounting estimates
Inventory valuation
Note 11: Inventories: Inventory is carried at the lower of cost or net realisable. The estimation of net realisable value may be different
The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a
from the future actual value realised due provisions for slow moving or obsolete inventory. The provision for slow moving or
corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair
obsolete inventory is based upon an analysis of the inventory turnover and management’s best estimate of the subsequent volumes
value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which
of inventory held at year end sold in subsequent periods. This estimate is sensitive to the evaluation of slow moving inventory.
the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the
Actual net realisable value may be different from these estimates. Refer to note 11 for amounts relating to valuation of inventories.
related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For
share-based payment awards with market and non-vesting conditions, the grant date fair value of the share-based payment is
Trade receivables
Note 12: Trade and other receivables: Management assess the likely recoverability of amounts invoiced to customers on the
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
creditworthiness of its credit partners and the age of debts at the period end. The directors consider the carrying amount of trade
Share based payments reserve
This comprises the cumulative share-based payment charge recognised in the Statement of Comprehensive Income in relation to
equity-settled options and share rights issued but not yet exercised.
2.18 Taxation
receivables approximates to their fair value.
Share based payments
Note 17: Share based payments: The fair value of services received in return for share options granted is measured by reference to
the fair value of share options granted. The estimate of fair value is measured using the Black-scholes model. The use of a valuation
model such as this involves making certain assumptions around the inputs into the model. There is also uncertainty around the
number of shares likely to vest and the model therefore takes into accounts management’s best estimate of this.
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Accounting judgements
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Intangible Assets
Note 10: Intangible assets: Development expenditure is recognised on the statement of financial position when certain criteria are
met, as described more fully in the accounting policy on the treatment of research and development expenditure. Management
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
uses its judgment in assessing development against the criteria. After capitalisation, management monitors whether the recognition
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
requirements continue to be met and whether there are any indicators that the asset may be impaired, as discussed above.
recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in
a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised.
60
notes to the financial statements
continued
notes to the financial statements
continued
61
2.20 Adopted IFRS not yet applied
3 Segmental analysis
The accounting policies applied are consistent with those adopted and disclosed in the Group financial statements for the year
IFRS 8, “Operating Segments”, requires operating segments to be determined based on the Group’s internal reporting to the Chief
ended 31 December 2016. Various new accounting standards and amendments were issued during the year, none of which have an
Operating Decision Maker. The Chief Operating Decision Maker has been determined to be the executive board and the primary
impact on the current year.
segmental reporting format of the Group is geographical by customer location, based on the Group’s management and internal
The following accounting standards are in issue but not yet effective and have not been adopted by the Group:
reporting structure.
The executive board assesses the performance of each segment based on revenue and gross profit after distribution expenses, which
IFRS 9 ‘Financial Instruments’ replaces IAS 39 ‘Financial Instruments Recognition and Measurement’.
The standard is effective for accounting periods beginning on or after 1 January 2018. The Group has
completed an assessment of IFRS 9 and it is expected that adoption will not have a material impact on the
results or financial position of the Group.
IFRS 15 ‘Revenue from Contracts with Customers’ replaces IAS 18 ‘Revenue’. This standard is effective for
accounting periods beginning on or after 1 January 2018. The Group has completed an assessment of IFRS
15 and it is expected that adoption will not have a material impact on the results or financial position of the
Group.
IFRS 16 ‘Leases’ is effective for periods beginning on or after 1 January 2019. Early adoption is permitted if
IFRS 15 has also been adopted. The standard will require lease liabilities and the right of use assets for leases
to be recognised on the Statement of Financial Position. The Group has completed an assessment of IFRS
16. The net impact on the income statement between the old and the new leasing standards is immaterial,
and a recognition of leased assets and liabilities will be presented on the balance sheet.
excludes administrative expenses.
For the year ended 31 December 2017
Revenue
Cost of Sales
Gross Profit
Distribution expenses
Segment results
Administration expenses
IPO Related expenditure
Share based payment charge
Net finance income
Loss for the year
For the year ended 31 December 2016
Revenue
Cost of Sales
Gross Profit
Distribution expenses
Segment results
Administration expenses
IPO Related expenditure
Share based payment charge
Net finance income
Loss for the year
UK&I
Rest of Europe
Rest of the World
Total
16,145,542
10,565,634
1,033,819
27,744,995
(6,554,822)
(4,861,552)
(332,675)
(11,749,049)
9,590,720
5,704,082
701,144
15,995,946
(1,412,199)
(1,828,462)
(189,423)
(3,430,084)
8,178,521
3,875,620
511,721
12,565,862
(27,686,895)
(2,124,528)
(1,757,204)
25,096
(18,977,670)
UK&I
Rest of Europe
Rest of the World
Total
7,733,404
3,150,950
1,082,416
11,966,770
(3,781,404)
(1,769,754)
(600,978)
(6,152,136)
3,952,000
1,381,196
481,438
5,814,634
(628,538)
(369,591)
(233,178)
(1,231,308)
3,323,462
1,011,605
248,260
4,583,326
(15,921,078)
-
-
-
(11,337,752)
No analysis of the assets and liabilities of each operating segment is provided to the Chief Operating Decision Maker in the monthly
management accounts. Therefore no measure of segmental assets or liabilities is disclosed in this note.
Due to the nature of its activities the group is not reliant on any major customers.
62
notes to the financial statements
continued
4 Expenses and auditor’s remuneration
Included in profit/loss are the following:
Auditors remuneration: Audit of these financial statements
Audit of these financial statements
Audit related assurance services
Amounts received by auditor’s and their associates in respect of:
Tax advisory services
Reporting accounting for admission to AIM
Other non audit services
Tax compliance services
Other items
Depreciation of property, plant and equipment
Cost of inventory sold
Cost of inventory write down
Adjustment of inventories to net realisable value
Lease expenditure - other
5 Staff numbers and cost
2017
£
60,000
15,000
126,650
150,000
7,500
10,649
7,945
11,749,049
-
-
423,959
2016
£
47,500
-
-
-
-
-
2,647
5,541,540
610,596
92,969
269,057
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
Finance
Marketing
Operations
2017
2016
4
22
70
96
3
15
33
51
notes to the financial statements
continued
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social Security costs
Share based payment
Expenses relating to defined contribution plans
63
2017
£
3,992,354
476,234
1,757,204
6,894
6,232,686
2016
£
2,356,332
202,929
-
-
2,559,261
6 Remuneration of key management personnel and Directors
The aggregate compensation to the Directors of eve Sleep PLC (Executive and Non-Executive) who were the key management
personnel was as follows:
Salaries or fees
Pension
Employer’s national insurance
Share based payment charge
2017
£
361,990
196
44,109
761,139
1,167,434
2016
£
163,896
-
19,995
-
183,891
Directors’ aggregate emoluments, pension payments, and gains on the exercise of share options are detailed in the Directors’
Remuneration Report on pages 40, along with directors’ interests in issued shares and share options on page 41, which form part of
these audited financial statements.
Directors of the Company and their immediate relatives control 14.3% per cent of the voting shares of the Company.
7. Finance income
Finance income receivable on cash and cash equivalents is recognised in the Statement of Total Comprehensive Income as it is
earned
Interest receivable on cash and cash equivalents
2017
£
25,096
2016
£
-
64
notes to the financial statements
continued
8 Taxation
Recognised in the income statement:
Current tax expense
UK Corporation tax for the current year
Total current tax
Deferred Tax
Deferred tax for the current year
Total deferred tax
Taxation charge to the income statement
Reconciliation of effective tax rate:
Loss for the year
Total tax expense
2017
£
2016
£
-
-
-
-
-
-
-
-
-
-
2017
£
2016
£
(18,977,670)
(11,337,752)
-
-
Loss excluding taxation
(18,977,670)
(11,337,752)
notes to the financial statements
continued
9 Property, plant and equipment
Plant and equipment
£
Fixtures & Fittings
£
Cost
Balance at 1 January 2016
Acquisitions
Balance at 31 December 2016
Acquisitions
Balance at 31 December 2017
Depreciation and Impairment
Balance at 1 January 2016
Depreciation charge for the year
Balance at 31 December 2016
Depreciation charge for the year
Balance at 31 December 2017
Net Book Value
At 31 December 2016
At 31 December 2017
10 Intangible Assets
-
7,326
7,326
-
7,326
-
1,831
1,831
5,495
7,326
5,495
-
-
3,266
3,266
36,458
39,724
-
816
816
2,450
3,266
2,450
36,458
65
Total
£
-
10,592
10,592
36,458
47,050
-
2,647
2,647
7,945
10,592
7,945
36,458
Tax using the UK corporation tax rate of 19.25% (2016: 20%)
(3,653,201)
(2,267,550)
Development Costs
£
Assets under construction
£
Total
£
Effects of:
Expenses not deductible for tax purposes
Fixed asset differences
799,837
472
64,716
-
Current year losses for which no deferred tax asset was recognised
2,852,892
2,202,834
Total Tax expense
-
-
The Group has accumulated tax losses available for offset against future profits of £26,653,156 (2016: £11,899,457). A deferred tax
asset has not been recognised in respect of these losses as there is uncertainty regarding the timing of when these losses will be
recovered.
A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013.
Cost
Balance at 1 January 2017
Acquisitions - internally generated
Acquisitions - externally generated
Balance at 31 December 2017
Depreciation and Impairment
Balance at 1 January 2017
Amortisation and impairment for the year
Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October
Balance at 31 December 2017
2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the
company’s future current tax charge accordingly.
Net Book Value
At 31 December 2016
At 31 December 2017
-
92,705
190,235
282,940
-
-
-
-
-
-
95,598
95,598
-
-
-
-
-
92,705
285,833
378,538
-
-
-
-
282,940
95,598
378,538
Development costs relate to internal and external costs incurred in respect of the infrastucture of the website platform. Assets
under construction at 31 December 2017 relate to internal and external costs incurred for the development of ERP software for
internal use. The software is expected to go live in 2018.
66
notes to the financial statements
continued
11 Inventories
Finished Goods
2017
£
691,340
691,340
2016
£
491,181
491,181
There was no write-down of inventories to net realisable value in the year (2016: £703,565). Included within Inventories is a
slow-moving inventory provision of £181,752 (2016: £610,596) Inventory days were 21 days in 2017 (2016: 29 days).
12 Trade and Other receivables
Trade Receivables
Other receivables
Prepayments
2017
£
767,426
2,608,934
800,696
4,177,056
2016
£
322,503
494,806
232,351
1,049,660
The average credit period offered on sales of goods during 2017 was 34 days (2016: 60 days). The average days
sales outstanding (‘‘DSO’’) in 2017 was 51 days (2016: 60 days). At 31 December 2017, trade receivables at a nominal value of £25,301
(2016: £0) were impaired and fully provided for.
notes to the financial statements
continued
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the relevant year-end. Aside from the major retail customers accounting for the year
end trade receivable balance mentioned above, the concentration of credit risk is limited due to the customer base being large and
67
diverse.
13 Cash and Cash equivalents
Cash and cash equivalents per balance sheet
Cash and cash equivalents per cash flow statement
14 Trade and other payables
Trade payables
Non trade-payables and accrued expenses
Taxes and social security payable
2017
£
26,926,389
26,926,389
2017
£
1,591,520
2,796,848
159,651
4,548,019
2016
£
4,639,355
4,639,355
2016
£
1,424,718
463,856
297,667
2,186,241
All trade and other payables are short-term. The directors consider that the carrying amount of trade and other payables
All trade and other receivables are short-term. The directors consider that the carrying amount of trade receivables approximates to
approximates to their fair value.
their fair value. All trade and other receivables have been reviewed for indications of impairment.
Trade receivables represent amounts due from wholesale and retail customers.
The Group has not charged interest for late payment of invoices in the current year or prior period.
Allowances against doubtful debts are estimated by reference to irrecoverable amounts based on past default experience. Specific
counterparty risk is also considered where an analysis of the counterparty’s current financial position indicates a change in credit
risk.
Before accepting any significant new customer, the Group uses a variety of credit scoring systems to assess the potential customer’s
15 Provisions
Balance at 1 January 2017
Provisions made during the year
Refunds
£
560,683
4,118,714
Sales Return
£
Total
£
154,414
-
715,097
4,118,714
credit quality and to define credit limits for each customer. Limits and scoring attributed to customers are reviewed regularly.
Provisions used during the year
(3,815,835)
(154,414)
(3,970,249)
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31 December 2017,
compared to 2016 where 72% of the total balance was attributable to one major customer.
Unused amounts reversing in the year
Balance at 31 December 2017
(36,860)
826,702
-
-
(36,860)
826,702
Advances for which related work has not started, and billings in excess of costs incurred and recognised profits are presented as
A refund provision is required as the Group provides certain products to customers under a 100 day trial period.
deferred income and amounted to £0.5m (2016: £0.2m)
Included in other receivables is £0.7m relating to VAT which is expected to be fully recoverable.
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
2017
£
378,260
378,240
10,183
743
767,426
2016
£
294,172
4,203
3,664
20,464
322,503
During this period the customer is entitled to return goods for a full refund. The provision is calculated by reference to the rate of
returns experienced by the Group in preceding periods and the level of sales subject to the relevant trial periods of each product at
the year end. An analysis of the rate of return over historical periods does not indicate a significant variation in the rate of refunds
provided to customers and accordingly, whilst there is a degree of estimation in the calculation of this provision, any reasonable
sensitivity analysis in the rate applied to sales at the year end would not result in a material impact.
A sales return provision was required in 2016 as inventory purchased by a specific wholesale customer was expected to be returned
under warranty or other contractual conditions. The Group is able to monitor the level of inventory held by third parties in order to
identify the level of returns likely to arise at period ends. At 31 December 2017 no provision was recognised in this respect.
68
notes to the financial statements
continued
16 Share Capital
Allotted, issued and fully paid:
Number
Nominal Value £
31 December 2017
31 December 2016
Ordinary Shares
138,631,020
Ordinary Shares
Ordinary A Shares
Ordinary B Shares
Ordinary C Shares
Preference Shares
830,400
738,780
68,500
165,412
358,600
Preference A Shares
1,001,379
£0.001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
138,631
-
-
-
-
-
-
Total
138,631
-
83
74
7
17
36
100
316
69
notes to the financial statements
continued
16 Share Capital (Continued)
The following fully paid shares were allotted during the year at a premium as shown below:
- 68,077 Preference AA shares of £0.0001 each were allotted with £11.75 paid up on each share
- 206,773 Preference A shares of £0.0001 each were allotted with £24.18 paid up on each share
On 12 May 2017, the company issued 859,480,250 bonus shares to meet the minimum nominal share capital requirements for a
public company and consolidated the share capital of the company so that shares of 0.01 pence each in the capital of the Company
of every class were consolidated into shares of 0.1 pence each, with the resulting total share capital being 20,843,040 ordinary
shares of 0.1 pence each, 18,543,378 Ordinary A shares of 0.1 pence each, 1,719,350 Ordinary B shares of 0.1 pence each, 4,151,841
Ordinary C shares of 0.1 pence each, 9,000,860 Preference shares of 0.1 pence each and 32,033,347 Preference A shares of 0.1 pence
each.
On 12 May 2017, 4,151,841 Ordinary C shares of 0.1 pence each were allotted, following the exercise of options over ordinary C shares.
The Company was re-registered as a public company on 12 May 2017 and by special resolution changed its name to eve Sleep PLC.
Immediately prior to admission all shares in the company converted to Ordinary Shares in accordance with Articles 10, 12A and 12B
of the company’s articles of association in force at the relevant time with the resulting total share capital being 90,443,657 Ordinary
The table below summarises the movements in number of shares at the beginning and end of the period
shares immediately prior to admission.
Ordinary
Shares
Ordinary A
Shares
Ordinary B
Shares
Ordinary C
Shares
Pref Shares
Pref A Shares
The Company’s issued share capital on admission to AIM became 138,349,644 Ordinary shares (with an aggregate nominal value of
£138,350) by virtue of the 34,587,411 placing shares and exercise over options of 13,318,576 shares.
Share Capital 31 Dec 2016
830,400
738,780
68,500
165,412
358,600
1,001,379
138,631,020 at 31 December 2017.
Nominal Value £
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
During the year since admission to AIM, a further 281,376 exercise over options took place to bring the total share capital to
Value of Share Capital £
83
74
Summary of Movements
Investors shares allotted
-
-
7
-
17
36
100
17. Share based payments
-
-
274,850
The Group recognised a charge of £1.8m (2016: £0.0m) related to share-based payments during the year to 31 December 2017, all of
which relates to equity-settled schemes. Of this charge, £1.6m related to options exercised.
Shares prior to bonus issue
830,400
738,780
68,500
165,412
358,600
1,276,229
Bonus issue and consolidation prior to
admission
20,012,640
17,804,598
1,650,850
3,986,429
8,642,260
30,757,118
Shares post bonus issue
20,843,040
18,543,378
1,719,350
4,151,841
9,000,860
32,033,347
Exercise of options over C Ordinary shares
-
-
-
4,151,841
-
-
Conversion of all share classes to ordinary
shares
69,600,617
(18,543,378)
(1,719,350)
(8,303,682)
(9,000,860)
(32,033,347)
Shares allotted on admission to AIM
34,587,411
Exercise of share options over ordinary
shares
13,599,952
Share capital 31 December 2017
138,631,020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Nominal Value £
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
Value of Share capital £
138,631
-
-
-
-
-
The Company issues equity-settled share-based payments to certain employees, whereby employees render services in exchange for
shares or rights over shares of the parent company. Equity-settled awards are measured at fair value at the date of grant. The fair
value is calculated using an appropriate option pricing model and is expensed to the Statement of Total Comprehensive Income on a
straight-line basis over the vesting period after allowing for an estimate of shares that will eventually vest.
70
notes to the financial statements
continued
notes to the financial statements
continued
71
17. Share based payments (Continued)
17. Share based payments (Continued)
The Company operates an HMRC approved executive management incentive plan (EMI). The vesting conditions are based on length
The number and weighted average exercise prices of share options are as follows:
of service with typically 25% of the options vesting on or after the 12-month anniversary of the employee’s start after which vesting
occurs in equal monthly tranches so that options vest in full on the 48-month anniversary of the employee’s start date. All options
are equity settled.
Weighted Average Exercise
Price
£
Number of Options
*Immediately prior to admission to AIM, the contracts indicated below were modified from the original terms such that their vesting
Outstanding at beginning of year
£0.001
419,171
schedules were accelerated.
The terms and conditions of the grants are as follows:
Grant Date
Number of Contracts
Number of Options
16/01/2017*
16/01/2017
23/01/2017*
25/01/2017*
20/02/2017*
10/04/2017*
12/05/2017
13
3
3
22
1
1
18
14,017,897
4,653,841
56,626
1,289,236
18,825
251,000
2,222,731
Exercise
Price
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
£1.012
Performance Conditions
Expiry Date
Length of service
16/01/2027
Performance Based
16/01/2027
Length of service
23/01/2027
Length of service
25/01/2027
Length of service
20/02/2027
Length of service
10/04/2027
Length of service
12/05/2027
The Company operates an unapproved executive incentive plan. The vesting conditions for grants made on 12 May 2017 are based
on length of service with 100% of the options vesting on 36-month anniversary of the employee’s start date. The remaining options
have vesting conditions based on length of service with typically 25% of the options vesting on or after the 12-month anniversary
of the employee’s start date after which vesting occurs in equal monthly tranches so that options vest in full on the 48-month
anniversary of the employee’s start date. All options are equity settled.
The terms and conditions of the grants are as follows:
Grant Date
Number of Contracts
Number of Options
13/07/2015
01/01/2016
01/02/2016
26/01/2016
12/05/2017
12/10/2017
20/10/2017
1
1
1
1
6
1
1
132,905
49,447
224,269
12,550
991,798
23,939
23,833
Exercise
Price
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
Performance Conditions
Expiry Date
Length of service
13/07/2025
Length of service
01/01/2026
Length of service
01/02/2026
Length of service
26/01/2026
Length of service
12/05/2027
Length of service
12/10/2027
Length of service
20/10/2027
All options over the ordinary shares granted prior to 12 May 2017, remained in place following admission but have been adjusted, in
accordance with the terms of the option agreements, to take into account the Share Capital Reorganisation such that, prior to any
exercise of options in connection with the admission, there were options over 16,554,755 Ordinary shares. The number of options in
the tables above are presented in values in effect after the Share Capital Reorganisation.
Granted During the year
Forfeited during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
£0.139
£0.566
£0.001
-
£0.519
£0.001
23,549,726
(574,401)
(17,751,793)
-
5,642,703
1,000,755
Included in the 17,751,793 options exercised during the year were 4,151,841 options over C Ordinary shares.
The weighted average share price at the date of exercise of share options exercised during the year was 103.94p.
The options outstanding at the year end have an exercise price in the range of £0.001 to £1.012 and a weighted average contractual
life of 10 years.
Awards are categorised with reference to different fair values calculated for each agreement.
The fair value of employee share options is measured using a Black-scholes model. Measurement inputs and assumptions are as
follows:
Share class
Fair Value
Award 1
16/01/17
£
Ord C
£0.06
Award 2
16/01/17
£
Ord
£0.10
Award 3
23/01/17
£
Ord
£0.10
Award 4
25/01/17
£
Ord
£0.10
Award 5
26/01/17
£
Ord
£0.10
Award 6
20/02/17
£
Ord
£0.10
Exercise Price
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
Expected volatility
Option Life
103%
10yrs
103%
10yrs
103%
10yrs
103%
10yrs
103%
10yrs
102%
10yrs
Risk free interest rate
0.200%
0.200%
0.235%
0.276%
0.300%
0.148%
For the purpose of calculating the share based payment charge, awards made between 21 February 2017 and 18 May 2017 have a fair
value of £0.96 with reference to the investment on 15 March 2017.
Subsequent awards fair value is determined in reference to the market share price at the date of grant.
72
notes to the financial statements
continued
notes to the financial statements
continued
73
18. Earnings per share
19. Financial Instruments (Continued)
The basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted
‘Loans and receivables’ includes trade and other receivables and cash and cash equivalents and excludes prepayments and
average number of ordinary shares in issue during the year.
inventories. Included in ‘Financial liabilities at amortised cost’ are trade payables, accruals and other payables. The carrying value
Weighted average shares in issue
Loss attributable to the owners of the parent company
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
2017
117,336,860
(18,977,670)
(16.17)
(16.17)
2016
67,567,744*
(11,337,752)
(16.78)
(16.78)
*2016 comparative requires modification to account for bonus issue and consolidation of shares.
EPS and diluted EPS are not calculated for each class of share as the shares carry the same right to share in profit or loss for the
year.
During the year the Company issued bonus shares prior to its admission to AIM on a 250:1 basis followed by a consolidation of
shares. The number of shares in issue for the current period has been stated to reflect the share capital structure post-bonus issue;
this adjustment assumes the total number of bonus shares were in issue throughout the whole of the period before the IPO on 18
May 2017.
The calculation for the year ended 31 December 2016 is based on the share capital pre IPO Share capital re-organisation and re-
registration of eve Sleep Ltd to become eve Sleep PLC which completed on 18 May 2017.
For the periods presented the weighted average number of shares used for calculating the diluted loss per share are identical to
those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per share
and would not be dilutive under IAS 33.
At 31 December 2017, options outstanding amounted to 5,642,703. Given the loss for the year of £18,977,670 (2016 loss: £11,337,752),
these options are anti-dilutive.
19. Financial Instruments
Categories of financial instruments:
Financial Assets
Loans and Receivables
Financial Liabilities
Amortised Cost
2017
£
2016
£
30,302,749
5,456,664
(5,374,722)
2,186,241
of financial assets and liabilities approximates their fair value.
Risk management
The Company seeks to reduce exposures to capital risk, liquidity risk, credit risk and foreign currency risk, to ensure liquidity is
available to meet foreseeable needs and to invest cash assets safely and profitably. The Group does not engage in speculative trading
in financial instruments and transacts only in relation to underlying business requirements. The Group’s treasury policies and
procedures are periodically reviewed and approved by the Board.
Capital risk
The Group’s objectives when managing capital (defined as cash and cash equivalents plus equity attributable to owners of the
parent) are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits
for other stakeholders through an appropriate amount of equity funding, while maintaining a strong credit rating and sufficient
headroom. The Group makes adjustments to its capital structure in light of changes to economic conditions and the Group’s strategic
objectives.
Credit risk
Credit risk is the risk that a counterparty may default on its obligation to the Group in relation to lending, hedging, settlement
and other financial activities. The Group’s principal financial assets are trade and other receivables, bank balances, and cash in
hand. The Group’s credit risk is primarily attributable to its trade and other receivables. The amounts included in the Statement of
Financial Position are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified
loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. The Group has a low
retail credit risk due to transactions being principally of high volume, low value and short maturity. Whilst a significant proportion
of trade receivables is with a few customers the Group assessed the risk of default as low due to the nature of these customers to be
large well established retailers with which the Group has a good relationship. The credit risk on liquid funds is considered to be low,
as the counterparties are all major banks with high credit ratings from all the key ratings agencies.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The Group manages its exposure to liquidity risk by continuously monitoring short- and long-term forecasts and actual cash flows
and ensuring it has the necessary banking and reserve borrowing facilities available to meet the requirements of the business.
74
notes to the financial statements
continued
notes to the financial statements
continued
75
19. Financial Instruments (Continued)
22. Investments
The company has the following investments in subsidiaries
Principal place of business/
Registered office address
Registered Number
Ownership
2017
Ownership
2016
Company:
eve sleep Inc
eve sleep SASU
185 W. Broadway, Suite 101,
PO Box 1150, Jackson, USA
EIN 47-4164566
5 Rue Des Suisses, 75014,
Paris
823397419 R.C.S Paris
100%
100%
100%
100%
All operating subsidiaries are included in the consolidated financial statements, based on percentage of voting rights held.
No subsidiaries have non-controlling interests that are material to the consolidated financial statements
23. Commitments
There were no commitments in the year.
24. Subsequent events
There were no subsequent events to disclose.
Foreign currency risk
The Group operates internationally and is therefore exposed to foreign currency transactions risk, primarily on sales denominated
in US dollars and Euros. The Group’s presentational currency is pounds sterling, therefore the Group is also exposed to foreign
currency translation risks due to movements in foreign exchange rates on the translation of non-sterling assets and liabilities.
Foreign currency sensitivity
The Group’s principal financial instrument foreign currency exposures are to US dollars and EUROs. The table below illustrates
the hypothetical sensitivity of the Group’s reported profit before tax and closing equity to a 10% increase and decrease in the value
of each of these currencies relative to pounds sterling at the reporting date, assuming all other variables remain unchanged. The
sensitivity rate of 10% is deemed to represent a reasonably possible change based on historic exchange rate volatility.
The following assumptions were made in calculating the sensitivity analysis:
•
•
All sensitivities affecting the Statement of Total Comprehensive Income also impact equity
Translation of foreign subsidiaries and operations into the Group’s presentation currency has been excluded from the
sensitivity analysis
Sterling strengthen by 10% against
US Dollar
Euro
Other
Sterling weaken by 10% against
US Dollar
Euro
Other
2017
£
(27,490)
(106,714)
(52,112)
27,490
106,714
52,112
2016
£
(347)
(2,974)
-
347
2,974
-
A 10% percent strengthening of these currencies against the pound sterling at 31 December 2017 would have decreased profit or
loss by 0.98%. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures
existing at that date.
20. Contingencies
There were no contingent liabilities to be disclosed.
21. Related Parties
During the year, before the company listed on the AIM stock exchange, the Group purchased consultancy
services and photography equipment from Kuba Photography for a value of £4,317 (2016: £58,037). Kuba
Photography is owned by Kuba Wieczorek, a Director of the company until 28/04/2017. The balance owing to
him at 31 December 2017 was nil.
Key management compensation (considered to be the Directors of eve Sleep PLC) disclosures can be found in
Note 6 and on pages 40 to 41 of the Director’s remuneration report.
76
company balance sheet
at 31 December 2017
Non-current assets
Property, Plant and equipment
Intangible assets
Investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payable
Provisions
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
Share Premium
Foreign Currency translation reserve
Share based payment reserve
Retained earnings
Total Equity
Note
3
4
5
6
7
8
9
10
2017
£
36,458
378,538
1,669
416,665
589,344
4,837,014
26,210,595
31,636,953
2016
£
7,945
-
1,669
9,614
491,181
1,004,629
4,561,437
6,057,247
32,053,618
6,066,861
(4,311,212)
(2,053,006)
(687,127)
(435,052)
(4,998,339)
(2,488,058)
(4,998,339)
(2,488,058)
27,055,280
3,578,803
company cash fl ow
for the year ended 31 December 2017
Cash fl ows from operating activities
Operating loss after taxation
IPO Related Expenditure
77
2017
£
2016
£
(19,043,452)
(11,052,422)
2,124,528
-
Operating loss before IPO related expenditure
(16,918,924)
(11,052,422)
Adjustments for
Net fi nance income
Depreciation and amortisation
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Increase in provisions
Share based payment charge
Impact of Forex Reserve
IPO Related Expenditure
(25,096)
7,945
(3,832,385)
(98,163)
2,258,206
252,073
1,757,204
(5,996)
(2,124,528)
-
2,647
(584,484)
(491,181)
1,859,505
260,916
-
5,996
-
Net cash outfl ow from operating activities
(18,729,664)
(9,999,023)
Cash fl ows from investing activities
Acquisition of property, plant and equipment
Development of intangible assets
Investment in subsidiaries
(36,458)
(378,538)
-
(10,592)
-
(994)
Net cash outfl ows from investing activities
(414,996)
(11,586)
11
138,631
316
Cash fl ows from fi nancing activities
36,716,371
16,124,928
-
138,794
5,996
-
(9,938,516)
(12,552,437)
27,055,280
3,578,803
Proceeds from issue of share capital
40,768,722
13,012,579
Net fi nance income
25,096
-
Net cash infl ows from fi nancing activities
40,793,818
13,012,579
Cash at beginning of year
Movement in cash
Cash at end of year
4,561,437
21,649,158
26,210,595
1,559,467
3,001,970
4,561,437
Notes 1-15 form part of the historical financial information shown above
These financial statements were approved by the board of directors on eve Sleep PLC and were signed on its behalf by:
Abid Ismail
Director
19 April 2018
Company registered number: 09261636
78
company changes in equity
for the year ended 31 December 2017
Share Capital
£
Share Premium
£
Share based
payment
reserve
£
Retained
Earnings
£
Foreign
Currency
translation
reserve
£
Total Equity
£
For the year ended 31 December 2017
Balance at 1 January 2017
316
16,124,928
Issue of shares
38,767
40,698,396
Bonus share issue
85,948
(85,948)
Share premium cancellation
-
(20,038,965)
Exercise of options
13,600
17,960
Share based payment charge
Transfer on exercise of options
-
-
-
-
-
-
-
-
-
1,757,204
-
-
20,038,965
-
-
(1,618,410)
1,618,410
notes to the company financial statements
79
1. Accounting Policies
Basis of preparation
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards
(IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations, as adopted by the European Union, and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS. As at the year end, these are the standards, subsequent
amendments and related interpretations issued and adopted by the International Accounting Standards Board (IASB) that have been
(12,552,437)
5,996
3,578,803
endorsed by the European Union.
40,737,163
-
-
31,560
1,757,204
-
The financial statements are prepared under the historical cost convention. The accounting policies have been applied consistently
in the current and prior years. The financial statements have been prepared on a going concern basis as explained in the Directors’
Report.
No new accounting standards or amendments issued during the year have had, or are expected to have, any significant impact on
the Company.
The financial statements are presented in sterling. The Company’s principal accounting policies are the same as those set out in Note
2 of the Group financial statements, with the addition of those included within the relevant notes below.
Unless otherwise stated, these policies have been consistently applied to all the periods presented.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented
its own Statement of comprehensive income in these financial statements. The loss after tax of the parent Company for the year was
£19,043,452 (2016 - loss £11,052,422).
-
-
27,055,280
1,612,650
13,012,579
13,012,579
(1,500,015)
-
-
Transactions with owners
138,315
20,591,443
138,794
21,657,375
-
42,525,927
Loss for the year
(19,043,454)
(5,996)
(19,049,450)
2. Loss for the year
Balance at 31 December 2017
138,631
36,716,371
138,794
(9,938,516)
for the year ended 31 December 2016
Balance at 1 January 2016
226
3,112,439
Issue of shares
Transactions with owners
Loss for the year
90
90
13,012,489
13,012,489
Balance at 31 December 2016
316
16,124,928
-
-
-
-
(11,052,422)
5,996
(11,046,426)
(12,552,437)
5,996
3,578,803
80
81
notes to the company financial statements
continued
notes to the company financial statements
continued
3 Property, plant and equipment
Plant and equipment
£
Fixtures & Fittings
£
Cost
Balance at 1 January 2016
Acquisitions
Balance at 31 December 2016
Acquisitions
Balance at 31 December 2017
Depreciation and Impairment
Balance at 1 January 2016
Depreciation charge for the year
Balance at 31 December 2016
Depreciation charge for the year
Balance at 31 December 2017
Net Book Value
At 31 December 2016
At 31 December 2017
4 Intangible Assets
Cost
Balance at 1 January 2017
Acquisitions - internally generated
Acquisitions - externally generated
Balance at 31 December 2017
Depreciation and Impairment
Balance at 1 January 2017
Amortisation and impairment for the year
Balance at 31 December 2017
Net Book Value
At 31 December 2016
At 31 December 2017
-
7,326
7,326
-
7,326
-
1,831
1,831
5,495
7,326
5,495
-
-
3,266
3,266
36,458
39,724
-
816
816
2,450
3,266
2,450
36,458
Total
£
-
10,592
10,592
36,458
47,050
-
2,647
2,647
7,945
10,592
7,945
36,458
Development
Costs
£
Assets under
construction
£
-
92,705
190,235
282,940
-
-
-
-
-
-
95,598
95,598
-
-
-
-
Total
£
-
92,705
285,833
378,538
-
-
-
-
282,940
95,598
378,538
Development costs relate to internal and external costs incurred in respect of the infrastucture of the website platform.
Assets under construction at 31 December 2017 relate to internal and external costs incurred for the development of ERP
software for internal use. The software is expected to go live in 2018.
5. Investments
The company has the following investments in subsidiaries
Principal place of business/
Registered office address
Registered Number
Ownership
2017
Ownership
2016
Company:
eve sleep Inc
eve sleep SASU
6. Inventories
Finished Goods
185 W. Broadway, Suite 101,
PO Box 1150, Jackson, USA
EIN 47-4164566
5 Rue Des Suisses, 75014,
Paris
823397419 R.C.S Paris
100%
100%
2017
£
589,344
589,344
100%
100%
2016
£
491,181
491,181
There was no write-down of inventories to net realisable value in the year (2016: £703,565). Included within Inventories is a slow-
moving inventory provision of £162,513 (2016: £552,598). Inventory days were 24 days in 2017 (2016: 34 days).
7. Trade and Other receivables
Trade Receivables
Other receivables
Receivables from subsidiary undertakings
Prepayments
2017
£
760,330
2,417,455
858,533
800,696
4,837,014
2016
£
322,503
449,775
-
232,351
1,004,629
82
83
notes to the company financial statements
continued
notes to the company financial statements
continued
7. Trade and Other receivables (Continued)
8. Cash and Cash equivalents
As at 31 December 2017, receivables from subsidiary undertakings of £0.8m (2016: £0.0m) were unimpaired and considered by
management to be fully recoverable. The ageing analysis of these receivables is as follows:
Less than 12 months
More than 12 months
2017 £
858,533
-
858,533
2016 £
-
-
-
The average credit period offered on sales of goods during 2016 was 34 days (2016: 60 days). The average days
sales outstanding (‘‘DSO’’) in 2017 was 51 days (2016: 60 days).
All other trade and other receivables are short-term. The directors consider that the carrying amount of trade receivables
approximates to their fair value. All trade and other receivables have been reviewed for indications of impairment.
Trade receivables represent amounts due from wholesale and retail customers.
Cash and cash equivalents per balance sheet
Cash and cash equivalents per cash flow statement
9. Trade and other payables
Trade payables
Non trade-payables and accrued expenses
Taxes and social security payable
2017 £
26,210,595
26,210,595
2017 £
1,525,332
2,626,229
159,651
4,311,212
2016 £
4,561,437
4,561,437
2016 £
1,424,718
463,856
164,432
2,053,006
The Company has not charged interest for late payment of invoices in the current year or prior period.
approximates to their fair value.
All trade and other payables are short-term. The directors consider that the carrying amount of trade and other payables
Allowances against doubtful debts are estimated by reference to irrecoverable amounts based on past default experience. Specific
counterparty risk is also considered where an analysis of the counterparty’s current financial position indicates a change in credit
10. Provisions
risk.
Before accepting any significant new customer, the Group uses a variety of credit scoring systems to assess the potential customer’s
credit quality and to define credit limited for each customer. Limits and scoring attributed to customers are reviewed regularly.
Balance at 1 January 2017
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31 December 2017,
compared to 2016 where 70% of the total balance was attributable to one major customer.
Advances for which related work has not started, and billings in excess of costs incurred and recognised profits are presented as
deferred income and amounted to £0.4m (2016: £0.1m)
Provisions made during the year
Provisions used during the year
Unused amounts reversing in the year
Balance at 31 December 2017
Refunds £
435,052
3,430,454
(3,141,519)
(36,860)
687,127
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
2017 £
371,169
378,235
10,183
743
760,330
2016 £
294,172
4,203
3,664
20,464
322,503
A refund provision is required as the Group provides certain products to customers under a 100 day trial period.
During this period the customer is entitled to return goods for a full refund. The provision is calculated by reference to the rate of
returns experienced by the Group in preceding periods and the level of sales subject to the relevant trial periods of each product at
the year end. An analysis of the rate of return over historical periods does not indicate a significant variation in the rate of refunds
provided to customers and accordingly, whilst there is a degree of estimation in the calculation of this provision, any reasonable
sensitivity analysis in the rate applied to sales at the year end would not result in a material impact.
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable
from the date credit was initially granted up to the relevant year-end. Aside from the
major retail customers accounting for the year end trade receivable balance mentioned above, the concentration of
credit risk is limited due to the customer base being large and diverse.
84
85
notes to the company financial statements
continued
11 Share Capital
Allotted, issued and fully paid:
Number
Nominal Value £
31st December 2017
31st December 2016
Ordinary Shares
138,631,020
Ordinary Shares
Ordinary A Shares
Ordinary B Shares
Ordinary C Shares
Preference Shares
830,400
738,780
68,500
165,412
358,600
Preference A Shares
1,001,379
£0.001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
138,631
-
-
-
-
-
-
Total
138,631
-
83
74
7
17
36
100
316
notes to the company financial statements
continued
11 Share Capital (Continued)
The following fully paid shares were allotted during the year at a premium as shown below:
- 68,077 Preference AA shares of £0.0001 each were allotted with £11.75 paid up on each share
- 206,773 Preference A shares of £0.0001 each were allotted with £24.18 paid up on each share
On 12 May 2017, the company issued 859,480,250 bonus shares to meet the minimum nominal share capital requirements for a
public company and consolidated the share capital of the company so that shares of 0.01 pence each in the capital of the Company
of every class were consolidated into shares of 0.1 pence each, with the resulting total share capital being 20,843,040 ordinary
shares of 0.1 pence each, 18,543,378 Ordinary A shares of 0.1 pence each, 1,719,350 Ordinary B shares of 0.1 pence each, 4,151,841
Ordinary C shares of 0.1 pence each, 9,000,860 Preference shares of 0.1 pence each and 32,033,347 Preference A shares of 0.1 pence
each.
On 12 May 2017, 4,151,841 Ordinary C shares of 0.1 pence each were allotted, following the exercise of options over ordinary C shares.
The Company was re-registered as a public company on 12 May 2017 and by special resolution changed its name to eve Sleep PLC.
Immediately prior to admission all shares in the company converted to Ordinary Shares in accordance with Articles 10, 12A and 12B
of the company’s articles of association in force at the relevant time with the resulting total share capital being 90,443,657 Ordinary
shares immediately prior to admission.
The Company’s issued share capital on admission to AIM became 138,349,644 Ordinary shares (with an aggregate nominal value of
£138,350) by virtue of the 34,587,411 placing shares and exercise over options of 13,318,576 shares.
The table below summarises the movements in number of shares at the beginning and end of the period
During the year since admission to AIM, a further 281,376 exercise over options took place to bring the total share capital to
Ordinary Shares
Ordinary A
Shares
Ordinary B
Shares
Ordinary C
Shares
Pref Shares
Pref A Shares
138,631,020 at 31 December 2017.
12. Financial Instruments
Share Capital 31 Dec 2016
830,400
738,780
68,500
165,412
358,600
1,001,379
Categories of financial instruments:
Nominal Value £
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
£0.0001
Value of Share Capital £
83
74
Summary of Movements
Investors shares allotted
-
-
7
-
17
36
100
-
-
274,850
Shares prior to bonus issue
830,400
738,780
68,500
165,412
358,600
1,276,229
Bonus issue and consolidation prior to
admission
20,012,640
17,804,598
1,650,850
3,986,429
8,642,260
30,757,118
Shares post bonus issue
20,843,040
18,543,378
1,719,350
4,151,841
9,000,860
32,033,347
Financial Assets
Loans and Receivables
Financial Liabilities
Amortised Cost
2017
£
2016
£
29,389,833
5,456,664
(4,998,339)
2,186,241
Exercise of options over C Ordinary
shares
Conversion of all share classes to
ordinary shares
-
-
-
4,151,841
-
-
inventories. Included in ‘Financial liabilities at amortised cost’ are trade payables, accruals and other payables. The carrying value
‘Loans and receivables’ includes trade and other receivables and cash and cash equivalents and excludes prepayments and
69,600,617
(18,543,378)
(1,719,350)
(8,303,682)
(9,000,860)
(32,033,347)
of financial assets and liabilities approximates their fair value.
Shares allotted on admission to AIM
34,587,411
Exercise of share options over ordinary
shares
13,599,952
Share capital 31 December 2017
138,631,020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Nominal Value £
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
Value of Share capital £
138,631
-
-
-
-
-
Risk management
The Company seeks to reduce exposures to capital risk, liquidity risk, credit risk and foreign currency risk, to ensure liquidity is
available to meet foreseeable needs and to invest cash assets safely and profitably. The Company does not engage in speculative
trading in financial instruments and transacts only in relation to underlying business requirements. The Company’s treasury policies
and procedures are periodically reviewed and approved by the Board.
86
87
notes to the company financial statements
continued
notes to the company financial statements
continued
Capital risk
The Company’s objectives when managing capital (defined as cash and cash equivalents plus equity attributable to owners of the
A 10% percent strengthening of these currencies against the pound sterling at 31 December 2017 would have decreased profit or
loss by 0.68%. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures
parent) are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and
existing at that date.
benefits for other stakeholders through an appropriate amount of equity funding, while maintaining a strong credit rating and
sufficient headroom. The Company makes adjustments to its capital structure in light of changes to economic conditions and the
Company’s strategic objectives.
13. Related Parties
Credit risk
Credit risk is the risk that a counterparty may default on its obligation to the Company in relation to lending, hedging, settlement
During the year, before the company listed on the AIM stock exchange, the Group purchased consultancy services and photography
equipment from Kuba Photography for a value of £4,317 (2016: 58,037). Kuba Photography is owned by Kuba Wieczorek, a Director
and other financial activities. The Company’s principal financial assets are trade and other receivables, bank balances, and cash
of the company until 28/04/2017. The balance owing to him at 31 December 2017 was nil.
in hand. The Company’s credit risk is primarily attributable to its trade and other receivables. The amounts included in the
Statement of Financial Position are net of allowances for doubtful receivables. An allowance for impairment is made where there
Key management compensation (considered to be the DIrectors of eve Sleep PLC) disclosures can be found in Note 6 of the group
is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. The
accounts and on pages 40 to 41 of the Director’s report.
Company has a low retail credit risk due to transactions being principally of high volume, low value and short maturity. Whilst a
significant proportion of trade receivables is with a few customers the Company assessed the risk of default as low due to the nature
of these customers to be large well established retailers with which the Company has a good relationship. The credit risk on liquid
14. Commitments
funds is considered to be low, as the counterparties are all major banks with high credit ratings from all the key ratings agencies.
Liquidity risk
Liquidity risk is the risk that the Company will no be able to meet its financial obligations as they fall due.
There were no commitments in the year.
15. Subsequent events
The Company manages its exposure to liquidity risk by continuously monitoring short- and long-term forecasts and actual cash flows
and ensuring it has the necessary banking and reserve borrowing facilities available to meet the requirements of the business.
There were no subsequent events to disclose.
Foreign currency risk
The Company operates internationally and is therefore exposed to foreign currency transactions risk, primarily on sales
denominated in Euros.
Foreign currency sensitivity
The Company’s principal financial instrument foreign currency exposures is to EURO’s. The table below illustrates the hypothetical
sensitivity of the Company’s reported profit before tax and closing equity to a 10% increase and decrease in the value of each of
these currencies relative to pounds sterling at the reporting date, assuming all other variables remain unchanged. The sensitivity
rate of 10% is deemed to represent a reasonably possible change based on historic exchange rate volatility.
The following assumptions were made in calculating the sensitivity analysis:
• All sensitivities affecting the Statement of Total Comprehensive Income also impact equity
• Translation of foreign subsidiaries and operations into the Group’s presentation currency has been excluded from the
sensitivity analysis
Sterling strengthen by 10% against
US Dollar
Euro
Other
Sterling weaken by 10% against
US Dollar
Euro
Other
2017
£
464
(78,482)
(52,112)
(464)
78,482
52,112
2016
£
(347)
(2,974)
-
347
2,974
-
88
89
90
every great day starts the night before