annual report
eve Sl eep pl c 2018
4
Good morning!
Welcome to
eve’s 2018 annual
report...
eve Sleep pl c 201 8 a nnu a l rep o r t
5
co ntents
6
c o m p a n y i n f o r m a t i o n
8
c h a i r m a n ’ s s t a t e m e n t
10
s t r a t e g i c r e p o r t
2 6
g o v e r n a n c e r e p o r t
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a u d i t o r ’ s r e p o r t
52
g r o u p f i n a n c i a l s t a t e m e n t s
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c o m p a n y f i n a n c i a l s t a t e m e n t s
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c o m p a n y
information
directors
Paul Pindar (Non-executive Chairman)
James Sturrock (Chief Executive Officer)
Abid Ismail (Chief Financial Officer)
auditor
KPMG LLP, Statutory Auditor
15 Canada Square
Canary Wharf
Thomas Enraght-Moony (Non-executive Director)
Nikki Crumpton (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
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8
g r o u p
chairman’s statement
“There was much to be proud of in 2018, with
considerable progress made
in many key
elements of the strategy, which we will build
upon in 2019 and beyond.”
Paul P indar
overview
2018 was a tough year for the
business but I am pleased to
state that following substantial
restructuring1 in the second half of
the year we enter 2019 in better
shape and on a sounder financial
footing. It became apparent in
the first half of 2018 that the costs
of rapid international expansion
across Europe were too great and
that there were more profitable
opportunities for growth in the
Core Markets in which eve had
growing brand awareness and was
experiencing more efficient growth
in revenue. Swift and decisive action
was taken, including a change in
CEO and, following a country-by-
country review, a refocus, for now,
on our most developed markets of
the UK&I and France, resulting in
the withdrawal from other European
territories and the US over the
summer months. As a result we now
operate from a materially lower cost
base.
There was also much to be proud of
in 2018, with considerable progress
made in many key elements of
the strategy, which we will build
upon in 2019 and beyond. Product
development remains a key focus
and in 2018 eve extended the
mattress range from the original,
adding a hybrid mattress (of foam
and spring construction) as well as a
premium and an entry price offering. In
tandem, additional non-mattress sleep
products were added, with the result
that the total range has increased to 21
products (2017: 15) by the end of the
year, with Core Markets non-mattress
sales accounting for 19% of total Core
Markets sales in 2018 (2017: 14%).
We have always believed that we
should be where the consumer shops
and as such we remain committed
to our ecommerce led, multi-channel
approach, working with leading retail
partners. This approach, along with
our marketing investment has driven
a substantial improvement in brand
awareness in the Core Markets and
substantial revenues. As at February
2019 eve was the 5th most recognised
mattress brand in the UK and the
most well-known of the “mattress in
a box” brands. This is an impressive
achievement in just four years since
launch.
performance
Group revenues in the year grew 25%
to £34.8m, with gross profit increasing
15% to £18.4m. The gross profit margin
reduction from 57.7% to 52.8% year
on year was primarily due to the
planned shift in channel mix to omni-
9
channel and increased sales of
typically lower margin non-mattress
products. Group underlying EBITDA2
losses increased 27% to £19.2m
on the £15.1m reported in 2017,
primarily reflecting a 24% increase
in administrative expenses and the
reduction in gross margin.
An analysis of the Core Markets
performance provides a better
reflection of underlying trading
trends. The Core Markets revenues in
the year grew 35% to £29.4m (2017:
£21.7m), with marketing costs as a
percentage of revenues reducing by
360bps to 54.3% in 2018 from 57.9% in
2018. In the UK&I, marketing costs as
a percentage of revenues reduced
by 840bps to 46.6% in 2018 from
55.0% in 2017.
our people
There has been much change
this year, which can be unsettling
for our people. I have been really
impressed with how the entire team
has embraced this and I would like
to personally thank them for their
continued loyalty, professionalism
and commitment to eve. Our
people are our most valuable
asset and we continue to invest in
their development and wellbeing.
The market opportunity for eve is
undiminished and I am confident
that we now have the right strategy,
funding and team, led by James to
deliver value for our shareholders.
Paul Pindar
Chairman
11 March 2019
Notes
1.
2.
In July 2018, the Board reviewed the number of territories that eve traded from, deciding to focus on the Core Markets of UK&I and France,
withdrawing, for now, from other territories. As a result, Group revenue for 2018 includes approximately seven months of trading from 15 territories, and
approximately 5 months of trading in UK&I and France. The 2017 comparatives have not been restated and refl ect trading for the 12 months across a
larger European footprint.
Underlying EBITDA is calculated as earnings before interest, taxation, depreciation, amortisation, share-based payment charges (2017 and 2018), IPO-
related expenditure (2017 only) and staff and country exit costs (2018 only).
10
s t r a t e g i c r e p o r t
strategic review
The European sleep market is estimated to be
worth £26bn, with the Core Markets that eve is
now focused on (UK&I and France) being worth
£6bn.
Introduction
Business Model
eve is a direct to consumer led business
supported by retail partnerships. The
direct to consumer focus enables
greater control over the customer
journey and experience and to build
an on-going relationship with the
customer. The central strategy for the
business is to establish eve as a sleep
wellness brand. Accordingly, resources
in terms of investment and talent
are focused on the key operations
of product development, branding,
The European sleep market is
estimated to be worth £26bn, with
the Core Markets that eve is now
focused on (UK&I and France) being
worth £6bn. While there are many
traditional operators, in what is a
highly fragmented sleep market
across Europe, there are limited
well branded digital operators of
any meaningful size owning the
wider sleep category. There is also
an increasing willingness on the
part of consumers to purchase big
ticket items online, with Euromonitor
predicting that the online furniture
market will be the second fastest
growing retail category, with online
purchase penetration expected to
increase by 55% between 2018 and
2023.
There is also an increasing awareness
of the importance of sleep for
everyday health and wellbeing and
the dangers of having insufficient
sleep. There is currently no brand in
Europe that has established itself as a
sleep wellness brand. eve’s ambition
is to achieve just this; to be seen as
the go to brand for sleep wellness
products.
11
marketing and customer experience
that will facilitate the achievement of
this objective.
Manufacturing and fulfilment, which
require heavy fixed cost investment
are outsourced to leading third party
suppliers in the UK and Continental
Europe. This set-up has proved to be
highly scalable and flexible, enabling
significant seasonal variations
in monthly product demand to
be met without any noticeable
margin impact or the requirement
to hold large amounts of mattress
stock. There is also a close working
relationship with eve’s manufacturing
partners to innovate and develop
new products that work better in
terms of function and design and
that differentiate eve from peers,
without a premium price tag.
Establishing eve as a sleep wellness
brand is a major differentiator to its
mattress-only focused peers and
will give the Group the authority
and trust to sell a broader range
of products in the category to
its customer base. This in turn is
expected to increase the level of
repeat purchases and improve
marketing efficiency, a key element
of the new strategy to building a
sustainable and growing business
on a clear path to profitability. The
increased scale from additional
revenues is also expected to drive
down overheads as a percentage of
revenues. Aligned with the business
objectives, unprompted brand
awareness, eve’s website conversion
rate and marketing efficiency are
all KPIs of the Group. Trends in all
operational KPIs in the Core Markets
of UK&I and France have been
positive in 2018.
The inherent agility in the business
model was demonstrated in the
year, when the decision to focus on
the UK&I and France, withdrawing
from other European territories,
was achieved at minimal cost and
disruption.
12
s t r a t e g i c r e p o r t
CEO statement
“Sleep grows ever more relevant in a
world where wellbeing, wellness and
a desire to switch off and de-stress is
becoming more and more of a zeitgeist
of modern living. ”
James Sturro ck
what attracted me to
eve?
business review
I joined eve in September 2018
because I believe in eve’s mission to
bring sleep wellness to the nation.
1 in 5 consumers say they have
restless nights due to discomfort
or anxiety (YouGov Survey 2017).
Sleep grows ever more relevant in
a world where wellbeing, wellness
and a desire to switch off and
de-stress are becoming more and
more of a zeitgeist of modern living.
eve has not only created beautiful
products to give everyone the best
possible start to the day but has also
simplified the way mattresses and
other sleep products are purchased
and delivered. Our sleep products
are rated highly by consumers as
evidenced by our Trustpilot score of
9.4 out of 10 and our recent win of
a Which? Best Buy rating. I believe
that we are on our way to building a
brand that is differentiated and can
be the category leader.
While there was considerable
progress in 2018, including 35%
revenue growth in Core Markets
and a substantial improvement in
UK unprompted brand awareness,
our financial performance fell
short of our own and the market’s
expectations. This was due primarily
to company specific factors related
to over expansion into too many
countries too quickly and not helped
by the uncertain and challenging
retail market backdrop.
To address this underperformance,
one of my first actions since joining
eve was to lead a Board review
of the Group’s business, which has
resulted in an updated, and fully
funded, rebuild strategy, with many
improvements already made. The
central objective of the strategy is to
build the team, the systems
and the products in order to create
a platform enabling sustainable
future growth for the business,
which has an increased focus on
cash generation and profitability.
In addition to a territory refocus, to
support this central objective, action
has been taken to reduce inefficient
investment in marketing and
reducing overheads in 2019, when
compared to 2018.
13
the rebuild strategy
The rebuild strategy focuses on three
core pillars:
• differentiated brand
positioning;
• expanded product
range; and
• lower friction customer
experience.
differentiated brand
positioning
We are broadening the Group’s
current position to become a trusted
destination for a wider range of
products. To achieve this we are
refocusing marketing investment and
communications around the benefits
that eve can bring consumers in
sleep wellness.
We start from a good place, having
already invested significantly in
marketing over the last two years
in our Core Markets, including
campaigns “Every great day starts
the night before” and “Join the Sleep
rich”. The success of our marketing
to date is demonstrated in our
unprompted UK brand awareness,
which has increased consistently
from 1.4% in December 2016 to
approximately 10% today. In 2018
eve was the UK’s 5th most well-
known mattress brand and the most
well-known bed-in-a-box brand. In
France in 2018, eve was the 8th most
well-known mattress brand and the
most well-known bed-in-a-box brand.
14
The efficiency of our marketing
spend has improved in our Core
Markets in tandem with our
growing awareness. In the UK&I
marketing as a percentage of
revenue has fallen from 62.5%
in 2016, 55.0% in 2017 to 46.6%
in 2018. Notwithstanding this
substantial progress, more can be
achieved.
Our new Chief Marketing Officer,
Cheryl Calverley, who has
previously worked at the AA and
Unilever, joined in December 2018.
Cheryl is charged with building a
strong brand that consumers can
relate to; a brand that will be front
of mind when they look at making
purchases in the category.
To measure our success in
delivering on this strategic pillar we
will be monitoring and reporting
on the KPI of unprompted brand
awareness in the UK and marketing
costs as a percentage of revenues
will continue to be a KPI, given its
importance for the pathway to
profitability.
expanded product range
We are building out a range of
sleep products to complement
our successful next generation
foam mattress, giving eve a clear
trajectory to owning the ecommerce
sleep wellness space in our chosen
markets and encouraging a stronger
repeat purchase business model.
Recent new products include a
baby mattress, a light and premium
mattress to address all price points
as well as a hybrid mattress (of
foam and spring construction) to
target a broader range of consumer
preferences. During the year we also
launched a selection of bed frames
and extended our range of bed
linens.
Range expansion helped to drive
a repeat purchase rate of 14% in
2018 in the Core Markets, up from
11% in 2017. In addition, sales from
non-mattress products increased in
2018 to 19% of total sales in the Core
Markets (2017: 14%).
To measure our success in delivering
on this strategic pillar we will be
monitoring and reporting on the KPIs
of product returns rate, conversion
rates and the growth in non-mattress
sales.
15
There are additional developments
to the online purchasing experience
including improvements to the
search, discovery and checkout
processes on the website and
plans to further improve post-sales
customer relationship marketing
encouraging repeat purchase
behaviour.
To measure our success in delivering
on this strategic pillar we will be
monitoring and reporting on the
KPIs of conversion rates and our Net
Promoter Score (NPS).
2019 focus summary
lower friction customer
experience
Enhancing customer experience
throughout the online journey
and in our service proposition to
enable stronger site conversion and
customer satisfaction metrics is core
The focus for the next six to twelve
to our rebuild strategy. Improved
months is to continue to lay the
conversion will not only drive higher
foundations for the rebuild strategy,
revenues but also greater marketing
embed the changes into the business
efficiency, which is key to achieving
and to focus on reducing underlying
profitability.
EBITDA losses, whilst growing revenue
in a sustainable way. Notwithstanding
We have set up specific squads in
on-going macro headwinds in 2019,
our Digital Product team tasked with
I am confident that we have the
identifying the friction points in the
team, strategy and product range,
customer research, consideration
combined with the strength of brand,
and purchase journey and
to build a sustainable and profitable
implementing solutions to create an
business which meets the needs of
optimised experience. A number
our customers and delivers value for
of improvements to the customer
shareholders.
experience have already been
made, which have contributed to a
positive increase in the conversion
rate in the Core Markets. By way of
example, we have recently improved
our delivery offering, adding a
James Sturrock
premium service to complement our
Chief Executive Officer
free standard delivery, as well as a
11 March 2019
greater choice of time slots, including
nominated day delivery and a
choice of morning or afternoon slots.
16
s t r a t e g i c r e p o r t
Key performance
indicators
In 2018, for approximately seven months of the year, eve was operating in fifteen
territories. Where Group is referred to this relates to trade in all eve territories. Early in the
second half of the year, eve rationalised the markets in which it operated to focus on
UK&I and France and these three countries are referred to as the Core Markets.
In 2018, the key performance indicators (KPIs) used to evaluate and monitor the
performance of the business were updated to support the three core pillars of the rebuild
strategy (differentiated brand positioning, extended product range and lower friction
customer experience). In 2017, closing cash and gross margin were financial KPIs of the
Group; in 2018, the impact on cash and gross margin is monitored via the financial KPIs
set out below and therefore these metrics are no longer separate financial KPIs of the
business. There are now three financial KPIs and five operational KPIs.
Financial KPIs1
Overall
revenue
growth
Marketing
efficiency
Underlying
EBITDA2
Operational KPIs1
UK brand
awareness
Product
return rates
eve website
conversion rate2
Net Promoter
Score2
Non-mattress
revenue
growth2
Notes
1. Definitions of Financial and Operational KPIs, see page 18
2.
These financial and operational KPIs are monitored by the Group in 2018 which were not monitored in 2017.
17
The results of the KPIs are set out below. Financial KPIs focus on both Group and Core
Markets results whilst the operational KPIs focus on measures tracked in the Core Markets
of UK&I and France. Whilst lower than original expectations (due to the reasons set out
in the Strategic Report), both financial and operational KPIs show broadly positive trends
against 2017:
Group and Core Markets Financial KPIs
• Group revenue increased by 25% to £34.8m (2017: £27.7m);
• Core Markets revenue increased by 35% to £29.4m (2017: £21.7m);
•
•
Improvement in Group marketing efficiency of 510bps to 56.8% (2017: 61.9%);
Improvement in Core Markets marketing efficiency of 360bps to 54.3% (2017: 57.9%);
• Group underlying EBITDA loss: £19.2m (2017: £15.1m loss).
Core Markets Operational KPIs
•
Increase in non-mattress Core Markets sales as a proportion of total sales by 500bps
to 19% (2017: 14%);
• Unprompted UK brand awareness: 560bps year-on-year increase in unprompted
UK brand awareness (November 2018: 11.2%; November 2017: 6.6%);
120bps year-on-year improvement in the returns rate to 9.3% (2017: 10.5%);
33bps year-on-year improvement in the conversion rate;
•
•
• Net promoter score of 58 in UK and 69 in France (2017: 56 in UK and 61 in France).
18
s t r a t e g i c r e p o r t
Glossary
Definitions of Financial and Operational KPIs:
Overall revenue growth - % change in value of reported revenue for the specified segment
of the latest period vs the previous period
Marketing efficiency - total reported marketing cost divided by the reported revenue for
the specified segment
Underlying EBITDA - earnings before interest, tax, depreciation and amortisation, share-
based payment charges (2017 and 2018), IPO-related expenditure (2017 only) and staff
and country exit costs (2018 only). Underlying EBITDA reflects what management believe to
demonstrate the underlying performance of the business in a given year.
Non-mattress sales as a proportion of total sales - % change in value of reported sales
attributable to non-mattress products for the specified segment of the last period vs the
previous period. The Group track this Operational KPI in addition to the Financial KPI of overall
revenue growth as returns and deferrals are not tracked in isolation for non-mattress sales.
Total sales represents all sales after discounts and VAT and before deferred revenue, refunds
processed and the refunds provision. Non-mattress sales represents the value of sales from
non-mattress products.
UK Brand awareness - when asked question “What mattress brands can you think of?” the
% of total respondents that answer eve (externally assessed using industry polling agencies)
Product return rates - 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).
eve website conversion rate - the percentage of website traffic in a specific period that
complete a purchase. Calculated by dividing the number of completed sales orders divided
by the total website traffic. This figure is compared on a bps movement between periods
Net promoter score - calculated based on responses to a single question: “How likely is it
that you would recommend our company/product/service to a friend or colleague?” The
scoring for this answer is based on a 0-10 scale and KPI is based on % of those that responded
with score 9-10 minus the number of those responding 0-6. NPS scores presented are
December 2017 and 2018 results.
19
20
s t r a t e g i c r e p o r t
financial review
“Group revenue increased by 25% from
£27.7m in 2017 to £34.8m in 2018 and
revenue from the core markets of the
UK&I and France grew by 35% to £29.4m
from £21.7m in 2017.”
Abid Ismail
Group financial performance
£m
Revenue
Gross profit
Distribution
Profit after distribution
Payment fees1
Marketing1
Loss after distribution, payment fees and marketing
Wages & Salaries (excluding share-based payment charges)1
Other administrative expenses1
Share-based payment charges
Loss before IPO-related expenditure
IPO Related Expenditure
Net finance income
Loss before tax
Taxation
Loss after tax
Reconciliation to underlying EBITDA:
Taxation
Net finance income
IPO-related expenditure
Share-based payment charge
Staff and country exit costs
Depreciation and amortisation
2018
34.8
18.4
(4.1)
14.3
(0.7)
(19.8)
(6.2)
(5.4)
(8.5)
(0.3)
(20.3)
-
0.0
(20.3)
0.2
(20.1)
(0.2)
(0.0)
-
0.3
0.8
0.1
2017
Movement
+25%
+15%
(18%)
+14%
(5%)
(15%)
(16%)
(20%)
(59%)
+83%
(21%)
n/a
+79%
(7%)
n/a
(6%)
27.7
16.0
(3.4)
12.6
(0.7)
(17.2)
(5.3)
(4.5)
(5.3)
(1.8)
(16.9)
(2.1)
0.0
(19.0)
-
(19.0)
-
(0.0)
2.1
1.8
-
0.0
Underlying EBITDA
(19.2)
(15.1)
(27%)
1 Administrative expenses per the Consolidated Statement of Profit and Loss and Other Comprehensive Income include payment fees, marketing, wages & salaries
(excluding share-based payment charges) and other administrative expenses.
Financial data has been rounded for presentation purposes. As a result of this rounding, totals, comparatives and calculations presented in this document may vary
slightly from the arithmetic totals or calculations using such data.
Group financial performance as a % of revenue
21
% of Revenue
Gross Profit
Distribution
Profit after distribution
Marketing
Administrative expenses1 excluding marketing
Administrative expenses1 excluding marketing and one-off costs
UK&I financial performance
£m
Revenue
Gross Profit
Distribution
Profit after distribution
Payment fees
Marketing
Loss after distribution, payment fees and marketing (before
overhead allocation)
France financial performance
£m
Revenue
Gross Profit
Distribution
Profit after distribution
Payment fees
Marketing
Loss after distribution, payment fees and marketing (before
overhead allocation)
Other financial performance
£m
Revenue
Gross Profit
Distribution
Profit after distribution
Payment fees
Marketing
Loss after distribution, payment fees and marketing (before
overhead allocation)
2018
52.8%
(11.6%)
41.1%
(56.8%)
(41.9%)
(39.7%)
2018
22.5
11.8
(1.7)
10.1
(0.4)
(10.5)
(0.8)
2018
6.8
3.7
(1.2)
2.5
(0.1)
(5.4)
(3.1)
2018
5.5
2.9
(1.2)
1.7
(0.2)
(3.8)
(2.3)
2017
57.7%
(12.4%)
45.3%
(61.9%)
(37.9%)
(37.9%)
Movement
(490bps)
+80bps
(420bps)
+510bps
(400bps)
(180bps)
2017
Movement
16.1
9.6
(1.4)
8.2
(0.4)
(8.9)
(1.1)
+40%
+23%
(20%)
+24%
(6%)
(18%)
+29%
2017
Movement
5.5
3.0
(0.8)
2.2
(0.1)
(3.7)
+23%
+20%
(49%)
+10%
(14%)
(48%)
(1.6)
(101%)
2017
Movement
6.1
3.4
(1.2)
2.2
(0.2)
(4.6)
(2.7)
(10%)
(14%)
+5%
(19%)
+4%
+17%
+15%
22
revenue
Group revenue increased by 25%
to £34.8m in 2018 (2017: £27.7m).
Direct to consumer remains the
dominant revenue channel.
However, Group revenues from
omni-channel did grow strongly,
representing 22% of revenue in 2018
(2017: 14%), increasing 97% to £7.8m
in 2018 (2017: £4.0m). As a result of
investment in marketing and product
expansion, revenue from the Core
Markets of the UK&I and France
combined grew by 35% to £29.4m
(2017: £21.7m) with UK&I revenues
growing 40% and France growing
23% respectively.
gross margins
Group gross margins remained strong
however they have been negatively
impacted by both product mix
(increasing non-mattress revenues)
and channel mix (increasing omni-
channel revenues). As a result, Group
gross margin reduced by 490bps to
marketing investment
Effective investment in marketing
is an important driver of growth in
the business. In 2018 investment in
Group marketing increased by 15%
to £19.8m (2017: £17.2m). Marketing
investment in the Core Markets
increased by 27% to £15.9m (2017:
£12.6m). The efficiency of marketing
investment is closely monitored and
is an important KPI for the business.
In 2018 Core Markets marketing
efficiency, defined as marketing
costs as a percentage of revenues,
improved by 360bps to 54.3%
(2017: 57.9%). In the UK&I marketing
efficiency improved by 840bps to
46.6% (2017: 55.0%). In France, which
is at an earlier stage of development
than the UK, marketing efficiency
reduced by 1330bps to 79.6% (2017:
66.3%).
administrative expenses
(excluding marketing)
52.8% in 2018 (2017: 57.7%). Core
Wages & Salaries (excluding share-
Markets gross margin (UK&I and
based payment charges) remain the
France) reduced by 550bps to 52.7%
largest component of administrative
in 2018 (2017: 58.2%).
distribution costs
expenses and increased 20% to
£5.4m (2017: £4.5m) and making up
36.8% of administrative expenses
excluding marketing (2017: 42.6%).
Other administrative expenses
Distribution costs as a percentage of
included £0.8m of staff and country
revenue reduced by 80bps to 11.6%
exit costs related to the exit from
in 2018 (2017: 12.4%), reflecting the
non-Core Markets in the second half
exit from European countries and
of 2018.
increased share of revenue from
retail, which typically has lower
distribution costs as shipment is often
in bulk.
underlying EBITDA loss
(earnings before interest, tax,
depreciation, amortisation, share-
based payments (2017 & 2018), IPO-
related expenditure in 2017, staff and
23
country exit costs in 2018)
options granted is recognised as
an expense over the vesting period
The Directors consider that they
with a corresponding credit being
are able to monitor Group financial
recognised in equity. The charge for
performance via underlying EBITDA
2018 was £0.3m (2017: £1.8m).
by removing share-based payment
charges, IPO-related expenditure and
staff and country exit costs from EBITDA
on the basis that these items do not
occur evenly year on year.
The underlying Group EBITDA loss
increased by £4.1m to £19.2m in 2018
(2017: £15.1m loss). The increased loss
reflects under performance in the first
half of the year, where Group losses
increased year-on-year by £6.9m to
£11.9m. In the second half of the year
loss after tax
The loss after tax increased to £20.1m
(2017: £19.0m loss) and underlying
EBITDA increased to a loss of £19.2m
(2017: £15.1m loss).
capital expenditure
underlying EBITDA losses reduced
Due to the Group’s outsourced
reflecting the decision to focus on the
business model, capital expenditure
Core Markets of the UK&I and France
requirements remain low. The main
and greater focus on efficiency of
area of capital expenditure in 2018
marketing spend.
France is at an earlier stage of
related to development cost in
respect of the infrastructure for the
website platform and ERP systems.
development for eve compared to
Total capital expenditure in 2018 was
UK&I. Its revenue grew 23% to £6.8m
£0.4m (2017: £0.4m).
(2017: £5.5m) driven mainly by higher
marketing spend which resulted in a
loss after distribution, payment fees and
marketing (before overhead allocation)
of £3.1m (2017: £1.6m loss).
UK&I performance for the year,
whilst below original year on year
expectations, was positive with revenue
growth of 40% to £22.5m (2017: £16.1m)
resulted in a loss after distribution,
payment fees and marketing (before
overhead allocation) of £0.8m (2017:
£1.1m loss).
share-based payment
cash position
The Group had net cash of £6.0m at
the year end (2017: £26.9m). Since
the year end the Group has raised an
additional £11.7m (net of expenses)
from investors through a placing of
new shares and secured £0.9m in
future advertising with Channel 4,
which will be satisfied through the
issuance of new shares when utilised.
In accordance with IFRS, a share-
Abid Ismail
based payment charge for 2018 has
Chief Financial Officer
been calculated and charged to the
11 March 2019
income statement. The fair value of
24
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
claims or claims against health and
safety procedures or practices in
Marketing is an important investment
different territories. There could also
area for the Group and there is a risk
be high return rates owing to the
that this expenditure may not result
100 night trial offered on the eve
in the targeted increase in sales or
mattress.
brand awareness levels.
The Group has a robust new product
eve constantly monitors and analyses
and supplier onboarding process to
financial performance and key
ensure new products and suppliers
business metrics to ensure up to
are of the highest standards. The
date and accurate forecasting. The
Group also retains insurance brokers
Group also supplements its
to review and analyse insurance
in-house marketing expertise with
coverage to ensure sufficient
third party media and marketing
insurance coverage for product
agencies to monitor and advise on
liability and associated losses. In
the effective implementation and
addition, return rates is a KPI which is
roll out of marketing and advertising
monitored closely.
campaigns to meet targeted KPIs.
product
The Group is responsible for the
design of eve products and could
face exposure to product liability
The Group is subject to fluctuations
in the cost of materials which may
adversely impact on the Group’s
profit margins.
The Group primarily manufactures
its EU mattress in the EU and its UK
25
mattress in the UK for its main product
(the eve original mattress), creating
a hedge against currency movement
for its key products. For other
products and markets the Group
looks to agree prices for a period
of time where possible to provide
a degree of certainty on currency
fluctuations.
operations
brexit
As with all UK companies involved in intra-community
cross border trade the impact of Brexit is a potential
risk for the Group.
The board of directors and senior management
regularly review developments surrounding Brexit
throughout the organisation and in addition to this
the operations team has a dedicated task force
focused on Brexit planning within the supply and
logistics chain. The Group has a natural Brexit hedge
with its UK and French companies and its main
As the Group is growing rapidly, there
product, the eve original mattress, is manufactured
is a reliance on outsourced partners,
in both the UK and the EU providing a hedge for its
there is a risk that the business
most significant product.
may be unable to cope with rapid
demand or disruption occurring with
As with most UK based technology companies,
its manufacturing or logistics partners.
eve employs a significant non-UK workforce in the
The Group has a close working
relationship with its outsourced
partners and regularly reviews
forecasts to ensure capacity
constraints are managed. In
addition, the Group maintains a
UK. Approximately 44% of the Group’s workforce
in London are non-British employees of which
approximately 80% of these individuals are EU
nationals. Therefore the outcome of Brexit with
regards to freedom of movement will have an effect
on our workforce planning and recruitment.
list of alternative suppliers who can
At present the precise details of Brexit and how it
be onboarded or switched to very
relates to freedom of movement between the EU
quickly, reducing the risk of relying on
and UK are unknown but the Group continuously
any specific supplier.
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
monitors the situation to ensure it is as prepared
as possible for any outcome. The Group is already
registered as a sponsoring entity with the relevant
UK authorities and also has a French subsidiary,
which combined with the expected transitional
period provides the foundations for mitigating the
immediate effect of Brexit on the Group with this
regards.
Approved and signed on behalf of the board
Abid Ismail
Chief Financial Officer
11 March 2019
26
g o v e r n a n c e r e p o r t
Directors’ Governance
Statement
“As a Board, we are pleased with the
progress we have made on a range of
corporate governance actions in 2018,”
Dear Shareholders,
As Chairman, my primary roles are
to run the business of the Board,
The Board recognises the importance
ensuring appropriate strategic
of achieving the highest possible
focus and direction in the Board’s
standards of corporate governance.
discussions, and to facilitate
Our commitment to good corporate
relationships and engagement
governance is based on the
with shareholders. I am responsible
recognition that good governance
for ensuring that the Group is
supports Board and management
appropriately governed and that,
discussion on identifying and
as a Group, we embrace not just
facilitating the drivers of long-term
the principles of good corporate
growth; for our Group it allows us to
governance but also the values that
take into account the full range of
underpin those principles.
our stakeholders, including investors,
employees, customers, and those
in our supply chain; and facilitates
constructive discussions between
the Board and management on the
Group’s strategic and operational
priorities, and the ways in which
these priorities are being delivered
upon, and on how we build upon our
unique corporate culture.
27
As a Board, we are pleased with the
The Board decided in 2018 to
progress we have made on a range
formally adopt the QCA Code (the
of corporate governance actions in
“Code”), and reported in September
2018, of which I would particularly
2018 on the Group’s compliance with
like to highlight the following:
the Code. The Board was briefed
on the revisions made to the Code
• We have successfully supported
for the 2019 reporting year, as well
the onboarding of James
Sturrock as the Group’s new
as additional legislation introduced
by the Government. We remain fully
Chief Executive Officer, and Nikki
committed to the principles and spirit
Crumpton as the Board’s new
Senior Independent Director;
• We have carefully reviewed
the Group’s strategic direction.
While there have been a number
of the Code, and disclose both in our
compliance statement, and in this
governance statement, on how we
have applied the Code’s principles.
of difficult strategic decisions to
Approved and signed on behalf of
make in 2018, we are as a Board
the board
truly excited and optimistic about
the growth opportunities for our
business in 2019 and beyond.
• We have received and
challenged a number of detailed
updates on a number of our core
operational functions, including
product development and
marketing functions.
Paul Pindar
Chairman
11 March 2019
28
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 CEO’s
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 is Chairman of and 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 (Chair)
Nomination Committee
Remuneration Committee (Chair)
James Sturrock
Chief Executive Officer
appointed: September 2018
experience
James joined eve in September 2018 having previously
been Managing Director of Moonpig, the UK’s leading
online greetings card, flower and gift company, where he
delivered four consecutive years of double-digit revenue
and EBITDA growth, expanded the product offering, and
led the successful rebranding of the business in 2017.
Prior to Moonpig, James was part of Direct Line Group
and formerly Direct Line Insurance for more than seven
years where he held a number of senior divisional and
marketing roles across the Group before becoming
General Manager of Commercial Direct in 2012.
Committee membership
None
29
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
Nikki Crumpton
Senior Independent Non-Executive Director
appointed: September 2018
experience
Nikki joined eve in September 2018. Nikki is founder of
brand and communications consultancy The Active
Strategist and has previously held senior roles within
international agencies including McCann Worldgroup
where she was Regional Planning Director EMEA, and as
Chief Strategy Officer for McCann London for seven years.
committee membership:
Audit Committee
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 of experience 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 (Chair)
Remuneration Committee
30
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, which it believes in turn serve
to drive growth over the long term. Under the AIM Rules for Companies,
the Company has decided to apply the QCA Corporate Governance Code
for Small and Mid-Size Quoted Companies (the “Code”) and provides
details to shareholders, both through this Annual Report and in an
annually updated compliance statement available on the Company’s
website, on eve’s compliance with the Code.
the Board and its committees
The Board has adopted a Board
Governance document, which sets out
Board membership and processes alongside
powers reserved for the Board. This
document was last reviewed by the Board in
February 2019.
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 30 to 41. The terms of
reference of each committee are available
from our website.
board composition
The Board of Directors hold a variety of skills
and experience wihtin various backgrounds
including finance, government services,
entertainment, retail and consumber services.
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 28
and 29.
Nikki Crumpton 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.
On appointment, our Non-executive Directors
are provided with a letter of appointment
that sets out the terms and conditions of their
directorship, including the fees payable and
the expected time commitment. Each Non-
31
Executive Director is expected to commit
approximately 20 days per year to the role.
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, with
Directors’ other current commitments being
disclosed at each and every Board meeting.
As such, the Board is aware of the other
commitments and interests of its directors, and
changes to these commitments and interests
are reported to and, where appropriate,
agreed with the rest of the Board.
board and committee meetings
The table below sets out the Board and
Committee attendance for 2018. Attendance
is shown as the number of meetings attended
out of the total number of meetings possible
for the individual Director during the year.
attendance at Board and Commitee meetings since January
Paul Pindar
11 of 11
3 of 3
2 of 2
1 of 1
Board
Audit
Remuneration
Committee
Committee
Nomination
Committee
James Sturrock (appointed 10 September 2018)
Abid Ismail
3 of 3
10 of 11
-
-
-
-
-
-
Thomas Enraght-Moony
9 of 11
3 of 3
2 of 2
1 of 1
Nikki Crumpton (appointed 3 September 2018)
3 of 3
1 of 2
0 of 1
Jas Bagniewski (resigned with effect from 29 June 2018)
5 of 6
-
-
- *
-
Peter Hepworth (resigned with effect from 31 August 2018)
7 of 8
1 of 1
1 of 1
1 of 1
* Nikki Crumpton joined the Nomination Committee after the only meeting of 2018.
32
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.
board and committee effectiveness
The Board continually strives to improve its
effectiveness and recognises that an annual
evaluation process is an important tool in
reaching that goal. The Directors are aware
of the importance to monitor performance
through Board evaluation and that feedback
from these evaluations leads to improving
Board effectiveness.
We delayed the undertaking of our first
evaluation due to the introduction of our new
Directors appointed in 2018 to allow them to
gain a comprehensive understanding of the
Company, of our governance structures and
processes.
Over the next six months, we intend to
review the performance of the Board and its
committees by conducting an evaluation via
detailed questionnaire to assess the strengths
and independence of the Chairman and
the Board along with the performance of
the committees. This questionnaire will be
completed by all Directors and the results
of this evaluation will be discussed by the
Board, the Committees and the Chairman in
order to seek improvements and reflect on
performance as a whole.
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 is further discussed in the Strategic
Report on pages 24 and 25. For detail on the
management and mitigation of each principal
risk see pages 24 and 25.
our corporate culture
We believe that our corporate culture serves
as one of our key competitive advantages.
We encourage all of our employees at all
levels of the Group to take responsibility for
their work and to actively contribute toward
the development and delivery of our strategy.
We promote a culture within the Group of
ethical values and behaviours, and we also
have a number of due diligence processes
in place to ensure that all suppliers meet
our standards and our values. We have
internal policies covering a range of ethical
behaviours, such as an anti-bribery and
anti-corruption policy and an anti-money
laundering policy, which serve to promote and
preserve the right corporate behaviours.
As part of our induction process, new
employees receive training on all corporate
policies and the expectations of the Company
when it comes to ethical values and
behaviours and this is refreshed on a regular
basis for all employees.
We have an active programme of employee
engagement, including regular employee
engagement surveys, throughout the year.
Such engagement shapes both the way in
which we develop our products and deliver
services. We also have a whistleblowing policy
and hotline available for all employees.
In 2018, there were no instances of the
anti-bribery and anti-corruption policy or
whistleblowing policy being invoked.
In respect of our forthcoming priorities for
2019, the Board will be actively engaging
with the ongoing development of our culture
33
Our engagement with stakeholders
The Board places due weight on stakeholder
awareness and engagement. It assesses
stakeholders according to the definition of
stakeholders set out in the Global Reporting
Initiative (Standard 101 paragraph 1.1) as
organisations or individuals who have “a
reasonable expectation of being significantly
affected” by the Group’s activities or
products.
In addition to our shareholders, the Board
has identified the Group’s other major
stakeholders, and approved a strategy for
engaging with these groups. as follows:
and considering the development of metrics
for measuring and monitoring culture and
employee engagement.
relations with shareholders
We are committed to communicating openly
with its shareholders to ensure that its 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 https://investor.evesleep.co.uk
Stakeholder
Channel of engagement
Employees
•
•
•
•
•
Quarterly performance reviews;
Weekly feedback exercises;
Exit interviews;
Mental health awareness and training and employee support; and
Continuing personal development plans.
Local communities
through selective partnerships and the regular review of additional ways it can provide support to the local
The Company has a range of initiatives including volunteer days for employees, support of relevant charities
community and relevant charitable organisations.
Key suppliers
Regular meetings and reviews with key contact within Company and senior management team.
Key partners
Regular meetings with partnership managers and continuous review of partnership generally.
34
g o v e r n a n c e r e p o r t
audit committee report
committee composition
The Committee comprises Paul Pindar (Chair),
Nikki Crumpton and Thomas Enraght-Moony.
carried out the review the Committee is
satisfied with the Auditor’s performance,
objectivity and independence.
committee responsibilities
The main responsibilities of the Audit Commit-
tee are:
• Monitoring the integrity of the financial
statements;
• Reviewing the Company’s internal con-
trol arrangements and risk management
systems;
• Making recommendations to the Board as
regards the appointment, re-appointment
and removal of the Company’s external
auditor;
• Overseeing the relationship with the exter-
nal auditor.
The Terms of Reference for the Audit Com-
mittee are available on our website: https://
investor.evesleep.co.uk/corporate-govern-
ance#committee-composition.
These were last reviewed and approved by
the Board on 18 December 2018.
objectivity and independence of the
external audit process
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
key activities in 2018
The main focus of the Committee in 2018
has been to review and recommend the
reappointment of the Company’s external
auditor and approve the 2017 full year results.
The Committee also assessed the Company’s
risk management system and the risk register
and conducted an annual review of the
Committee’s Terms of Reference.
statement on going concern
Going Concern statement
We have also had careful regard over the year
to changes to:
• the Group’s principal risks and uncertain-
ties, including those that will threaten our
business model, future performance and
solvency or liquidity, and the way in which
those risks and uncertainties are managed;
and
• the current financial and operational po-
sition of the Group, including future cash
flows and capital allocation, allocated
capital expenditure and funding require-
ments.
On that basis, the Committee’s opinion
continues to be that it remains appropriate to
adopt the going concern basis in preparing
the Group’s financial statements.
KPMG LLP was appointed as our Group
statutory auditor in 2015 ahead of our listing
on AIM market, following a competitive tender
process. The Group will be required to put the
external audit contract out to tender no later
than 2025.
35
significant issues considered in
relation to the financial statements
The most significant issues the Committee
considered in relation to the financial
statements concerned are shown below:
Significant Risk
What
Actions taken
Revenue recognition
Fraud risk related to misstatement of revenues
Share based payment charges
Risk of error in valuation and vesting likelihood
Inventory valuation and existence
Risk of error in stock costing and provisioning
Management override of controls
Fraud risk related to unpredictable way
management override of controls may occur
•
•
•
•
•
•
•
•
Engagement with KPMG as external auditors
Regular reports from management on risk
management processes in place
Engagement with KPMG as external auditors
Regular reports from management on risk
management processes in place
Engagement with KPMG as external auditors
Regular reports from management on risk
management processes in place
Engagement with KPMG as external auditors
Regular reports from management on risk
management processes in place
36
g o v e r n a n c e r e p o r t
audit committee
report (continued)
external audit effectiveness
We have an established framework for
assessing the effectiveness of the external
audit process. This includes:
• a review of the audit plan, including the
materiality level set by the auditors and
the process they have adopted to identify
financial statement risks and key areas of
audit focus;
• regular communications between the
external auditor and both the Committee
and management, including discussion of
regular reports prepared by KPMG;
• regular discussions with KPMG (without
management present) and management
(without KPMG present) in order to discuss
the external audit process; and
• a review of the final audit report, noting the
conclusions reached by the auditors and
the reasoning behind such conclusions.
We are confident that the evaluation
process is effective, allowing for an objective
assessment against the principal focus areas.
After carefully considering the outcome of the
above review, we concluded, in conjunction
with management, and reported to the Board
that in our opinion:
• the audit team was sound and reliable;
• the quality of the audit service provided
was of a high standard;
• that KPMG continued to remain independ-
ent and objective;
• that KPMG was effectively able to chal-
lenge management when required; and
• that productive discussions were held with
the Committee throughout the audit plan-
ning process.
External auditor independence
The Committee has undertaken a formal
assessment of KPMG’s independence, which
included a review of: a report from KPMG
describing their arrangements to identify,
report and manage any conflicts of interest;
their policies and procedures for maintaining
independence and monitoring compliance
with relevant requirements; and the value of
non-audit services provided by KPMG.
KPMG have confirmed that they believe
they remained independent throughout the
year, within the meaning of the regulations
on this matter and in accordance with their
professional standards.
37
g o v e r n a n c e r e p o r t
nomination committee
committee composition
The Committee comprises Thomas Enraght-
Moony (Chair), Paul Pindar and Nikki
Crumpton.
committee responsibilities
The Terms of Reference for the Nomination
Committee are available on our website:
https://investor.evesleep.co.uk/corporate-
governance#committee-
composition
These were last reviewed and approved by
the Board on 18 December 2018.
The main responsibilities of the Nomination
Committee are:
key activities in 2018
• Reviewing the size structure and composi-
tion 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
candidates for Board vacancies.
The main focus of the Committee
in 2018 has been to review the size,
structure and composition of the Board
and Board Committees to ensure these
remained appropriate. The Committee
also conducted an annual review of the
Committee Terms of Reference.
38
g o v e r n a n c e r e p o r t
remuneration report
As Chairman of the Remuneration Committee,
I am pleased to introduce the Directors’
Remuneration Report.
Over the year, we have had to consider
major remuneration issues, arising from wider
strategic changes in our business, and the
changes in our executive team:
• the total individual remuneration package
of each executive including bonuses and
benefits in cash or in kind, base salary,
pension arrangements, incentive payments
and share options or other share awards;
and
• changes to the Group’s share incentive
scheme.
We continue to believe that the remuneration
structure, both for those at senior
management level and throughout the Group
more widely, is structured in such a way that
it supports our strategy and organisational
culture and serves to incentivise and reward
performance in the long-term.
As a Committee, we will continue to focus
on ensuring that our pay structure is the right
one for eve going forward and look forward
to reporting on progress in our next Annual
Report.
composition
The Remuneration Committee comprises three
non-executive directors: Paul Pindar (Chair),
Thomas Enraght-Moony and Nikki Crumpton.
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 Group 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:
https://investor.evesleep.co.uk/corporate-
governance#committee-composition. These
were last reviewed and approved by the
Board on 18 December 2018.
key activities in 2018
The main focus of the Committee in 2018 has
been to review proposals around Executive
Directors’ remuneration arrangements for 2019
and scrutinise management bonus scheme
proposals. The Committee will continue to
focus in 2019 on ensuring that executive
remuneration and shareholder interests remain
closely aligned.
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.
39
fixed remuneration elements
Purpose
How it operates
Maximum opportunity
Performance-related
framework
salary/fees
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
share plan
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
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.
other benefits
health and wellbeing of
medical insurance and
level of benefits provided
employees. To reflect and
discount on eve products.
to Executive Directors,
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
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 2018 is set out in the table
below.
Director
Appointed
Resigned
Salary / fees
£
Pension
£
2018
2017
2018
2017
Compensation
for loss of office
£
2018
Total remuneration
£
2018
2017
Executive
Directors
James Sturrock
10
N/A
54,615
-
269
-
-
54,884
-
September
2018
Abid Ismail
2016
2 November
N/A
140,000
130,000
703
Jas Bagniewski
6 January
29 June
76,308
132,708
315
2015
2018
Non-Executive
Directors
Paul Pindar
21 November
N/A
30,000
25,000
-
2016
Nikki Crumpton
3 September
N/A
10,000
-
160
2018
28 April 2017
N/A
30,000
20,115
-
98
98
-
-
-
-
140,703
130,098
150,000
226,623
132,806
-
-
-
30,000
25,000
10,160
-
30,000
20,115
Thomas Enraght-
Moony
Peter Hepworth
28 April 2017
31 August
27,500
17,500
-
-
-
27,500
17,500
2018
There were no bonuses, long term incentives or other income awarded to directors.
Details of directors interest in share plans is shown on the following page and details of the
share-based payment charge attributable to directors is shown in note 6.
Private medical insurance was provided to James Sturrock, Abid Ismail and Jas Bagniewski.
41
Directors interest in share plans
The Directors who held office at 31 December 2018 had the following interests in the share plans
of the Group.
Director
Date of
Grant
As at 31
As at 31
December
December
2018
(no. of
options)
2017
(no. of
options)
Performance
conditions
Exercise Price
(pence)
n/a
-
-
-
N/A
James Sturrock
(Executive Director)
Abid Ismail
(Executive Director)
Paul Pindar
(Non-executive Director)
Nikki Crumpton
(Non-executive Director)
Thomas Enraght-Moony
(Non-executive Director)
12 May 2017
389,843
389,843
n/a
n/a
-
-
-
-
12 May 2017
99,000
99,000
Jas Bagniewski (resigned)
(former Executive Director)
12 May 2017
Peter Hepworth (resigned)
(former Executive Director)
12 May 2017
-
-
597,000
99,000
Length of
service
-
-
Length of
service
Length of
service
Length of
service
101.2p
N/A
N/A
101.2p
101.2p
101.2p
No directors exercised share options during 2018 therefore no gain on option exercise is
presented here nor in note 6 to the financial statements.
Directors shareholdings
The Directors who held office at 31 December 2018 had the following interests in the shares of
the Group.
Director
James Sturrock
(Executive Director)
Abid Ismail
(Executive Director)
Paul Pindar
(Non-executive Director)
Nikki Crumpton
(Non-executive Director)
Thomas Enraght-Moony
(Non-executive Director)
Jas Bagniewski (resigned)
(former Executive Director)
Peter Hepworth (resigned)
(former Executive Director)
Beneficially owned at 31
Beneficially owned at 31
December 2018
(no. of shares)
December 2017
(no. of shares)
52,750
-
4,151,841
4,151,841
6,527,126
6,287,927
-
-
-
-
8,441,668
9,341,668
-
-
42
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
The directors are responsible for preparing the Annual Report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.
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 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.
Company law requires the directors to
prepare Group and parent Company financial
statements for each financial year. Under 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 they 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 judgments and accounting estimates
that are reasonable, relevant and reliable;
• state whether they have been prepared in
accordance with IFRSs as adopted by the
EU;
• assess the Group and parent Company’s
ability to continue as a going concern,
disclosing, as applicable, 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.
43
g o v e r n a n c e r e p o r t
directors’ report
The Corporate Governance Report approved by the Board is provided on
pages 26 to 33 and incorporated by reference into this Directors’ Report.
information contained elsewhere in this
Annual Report
significant events since the end of the
financial year
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
future developments
going concern statement
risk management and principle 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
Page(s)
15
56 - 57
24 - 25
42
74
On 11 February 2019, the Company
completed a placing of 120,317,323 new
ordinary shares of 0.1 pence each (“Ordinary
Shares”) in the share capital of the Company
(the “Placing Shares”) at a price of 10 pence
per Placing Share (the “Placing Price”) to raise
approximately £11.7m net of expenses (the
“Placing”) from existing and new investors.
In addition Channel Four, which provides
advertising services to the Company and
is an existing Shareholder, has agreed that
£0.9 million of future advertising spend by
the Company with Channel Four will, when
payable, be satisfied by the issue of new
Ordinary Shares at the Placing Price over
a period of up to twenty four months from
Admission.
presence outside of UK
the company has the following subsidiaries
outside of the UK
eve Sleep
SASU
eve Sleep Inc
Principal place of
5 Rue Des
business / registered
Suisses, 75014,
office address
Paris
185 W. Broadway,
Suite 101, PO Box
1150, Jackson,
USA
Registered number
823397419
R.C.S Paris
EIN 47-4164566
Ownership 2018
100%
100%
44
going concern
The financial statements are prepared on a
going concern basis notwithstanding that
the group is competing and disrupting an
established market and as is typical for a
business at this stage of its lifecycle is still
generating losses as it uses working capital to
develop the business model and market share.
The Group has reported an operating loss of
£20.3m (2017: £19.0m) with an operating cash
outflow of £20.5m (2017: £18.1m). The closing
cash balance at 31 December 2018 was
£6.0m however, since the end of the Accounts
Period, the Group completed a share placing
to raise approximately £11.7m before expenses
(the “Placing”) from existing and new investors
and £0.9m of future advertising spend credits.
The closing cash balance at 28 February 2019
was £17.8m.
The directors have set out the three core
pillars of the re-build strategy in the Chief
Executive’s statement and have prepared a
strategic plan in order to grow the business in
the re-focused markets of UK&I and France.
The plan is supported by a financial model,
underpinned by a number of key business
drivers. The business plan assumes continuing
improvement in 2019 over those observed
in 2018 for the majority of these drivers. The
principle assumptions adopted in the forecast
model which reflect these improvements are
set out below:
• Revenue growth driven primarily by Web-
site traffic growth and Conversion rate
improvements;
• Marketing expenditure reduction over the
prior year and more targeted spend mov-
ing forward.
To support the strategic plan the directors
have prepared cash flow forecasts covering
a period of more than 12 months from
the date of approval of these financial
statements. These forecasts in the base case
indicate that the group will have sufficient
funds to meet its liabilities as they fall due
until such point that it achieves sustainable
profitability and cash generation. However,
the delivery of the strategic plan is subject to
uncertainty and these have been modelled
through sensitivity analysis. Where sensitivity
analysis indicates the possibility of a material
impact to the ability of the group to meet
liabilities as they fall due, the directors have
considered what mitigating actions would
be required and the timeframe within which
those actions are needed. The key mitigating
factors are centred around further reductions
in controllable spend, including further
marketing cost appraisal and reductions
in other categories of discretionary spend.
The directors also consider that it would
be reasonable to target working capital
improvements such as reducing days through
lower stock levels and reducing debtor days
through facilities such as debt factoring as the
group does not presently have any debt.
Uncertainties are such that potential mitigating
actions, which would be over and above the
current strategic plan, may not be sufficient to
mitigate all reasonably possible downsides in
assumptions. In such downsides the Directors
would need further funding and would
consider ways of sourcing this, which could
include debt or possible further equity funding.
The Directors consider that such scenarios are
possible, but not the likely outcome.
45
Based on the above, the directors believe it
remains appropriate to prepare the financial
statements on a going concern basis. However,
these circumstances represent a material
uncertainty that may cast significant doubt
upon the company’s ability to continue as
a going concern and, therefore to continue
realising its assets and discharging its liabilities
in the normal course of business. The financial
statements do not include any adjustments that
would result from the basis of preparation being
inappropriate.
dividends
The directors do not recommend the payment of
a dividend.
political donations
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.
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.
No political donations have been made during
this financial year.
articles of association
strategic report
eve Sleep’s Articles of Association can only
be amended by special resolution and are
available on our website.
This is set out on pages 10 to 25 of the Annual
Report and includes an indication of likely future
developments, and forms part of this Directors’
Report.
environment
The Group is committed to minimising
the environmental impact of its business
operations and seeks to actively manage its
carbon footprint. As we continue to grow, we
will continue to ensure that our business model
and operations are set up in such a way as
to limit carbon emissions in the course of our
business in areas such as energy efficienty,
waste, recycling, emissions and transport, and
we will work with all those in our supply chain
to ensure that their procedures and processes
promote sustainable practices.
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
10 to the accounts.
corporate social responsibility
equality, diversity and rights
We have a strong commitment to equality and
opportunity in our employment policies and
practices in the workplace. As prescribed by
law, we commit that no existing or potential
employee will receive less favourable treatment
due to their race, creed, nationality, colour,
ethnic origin, sexual orientation, gender, gender
reassignment, marital status, membership of a
trade union, disability, or any other criteria.
46
directors
annual general meeting
Details of the directors as at the date of this
report are set out on pages 28 and 29.
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.
share capital
The issued share capital of the Company at
31 December 2018 was 139,735,161 ordinary
shares of £0.001. Full details of the issued
share capital, together with the details of
shares issued during the year to 31 December
2018, are shown in Note 16 to the financial
statements.
The Annual General Meeting of the Company
will be held at 10am on Thursday 2 May
2019 at Norton Rose Fulbright offices, 3 More
London Riverside, London, SE1 2AQ. 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
11 March 2019
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 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.
Overview
Materiality: Group
financial statements as
a whole
£0.34m (2017: £0.25m)
0.9% (2017: 1%) of revenue
Coverage
100% (2017:100%) of group revenue
Key audit matters
vs 2017
Event Driven
Going Concern
The impact of
uncertainties
due to the UK
exiting the
European Union
on our audit
5
5
Recurring risks
Provision for
returns
34
We have audited the financial statements of
eve Sleep PLC (“the Company”) for the year
ended 31 December 2018 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 De-
cember 2018 and of the Group’s loss for the
year then ended;
• the group financial statements have been
properly prepared in accordance with
International 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 accord-
ance with IFRSs as adopted by the EU and
as applied in accordance with the provi-
sions of the Companies Act 2006; and
• the financial statements have been pre-
pared in accordance with the require-
ments of the Companies Act 2006.
48
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)
2. Material uncertainty related to going concern
The risk
Our Reponse
Going concern
Disclosure quality
Group and parent company
Our procedures included:
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the Group and
parent company.
That judgement is based on an
evaluation of the inherent risks to the
Group’s and Company’s re-build
strategy and forecast cash flows,
principally any failure to successfully
grow revenue at the projected rate
whilst reducing marketing expenditure,
and how these risks (including the impact
of Brexit) might affect the Group’s and
Company’s financial resources or ability
to continue operations over a period of
at least a year from the date of approval
of the financial statements and until the
Group achieves cash generation.
The risk for our audit is whether or not
those risks are such that they amount
to a material uncertainty that may
cast significant doubt about the ability
to continue as a going concern. If so,
that fact is required to be disclosed
(as has been done) and, along with a
description of the circumstances, is a key
financial statement disclosure.
We draw attention to note 2.4 to
the financial statements which
indicates that there is a material
uncertainty relating to the Group
and Parent Company’s ability to
continue as a going concern.
The Group has reported an
operating cash outflow of £20.6m
for the year to 31 December
2018 with cash on hand as at
that date of £6m. The Group
has set out a re-build strategy
to grow revenue whilst reducing
marketing expenditure. The
Directors’ forecasts underpinning
this strategy indicate that the
group will have sufficient funds to
meet its liabilities as they fall due
until such point that it achieves
sustainable cash generation.
However, the projections are
subject to uncertainty and
not wholly within the Group’s
control. In downside scenarios,
where these forecasts are
not achieved, the Group will
consider further reductions in
marketing expenditure and other
cost saving measures. However
reasonably possible downside
outcomes could result in the
Group and company needing
to seek further funding. These
events and conditions, along
with the other matters explained
in note 2.4, constitute a material
uncertainty that may cast
significant doubt on the group’s
and the parent company’s
ability to continue as a going
concern.
Our opinion is not modified in
respect of this matter.
Historical comparisons: Evaluated the track record of
assumptions used versus actual results in order to assess the
historical accuracy of the group’s forecasting process. Key
assumptions evaluated included the assessment of expected
revenue growth for the forecast period and the relationship of
key direct costs and marketing to revenue.
Key dependency assessment: assessing the Group’s cash flow
model to identify key inputs for further enquiry. The key inputs
included: Revenue growth, marketing expenditure, the impact of
Brexit on the supply chain and gross profit margin percentage.
Sensitivity analysis: We considered sensitivities over the level
of available financial resources indicated by the Group’s
financial forecasts taking account of reasonably possible (but
not unrealistic) adverse effects that could arise from these key
dependencies individually and collectively.
Performing sensitivity analysis on the revenue growth, marketing
expenditure, the impact of Brexit on the supply chain and gross
profit margin percentage assumptions in the forecast to identify
whether reasonably plausible adverse scenarios could exhaust
available resources.
Our sector experience: Critically assessed the directors’ going
concern assessment, including the feasibility of forecasts and
the level of downside sensitivities applied, challenging key
assumptions in the forecast by comparing them to actual past
performance of the entity, our knowledge of the business, the
market and key changes in the business that have occurred
during the current financial year. In particular, we challenged the
forecast decrease in forecasted marketing spend, the change
in marketing strategy and the ability of the Group to generate
brand awareness and required level of interest in the Group to
generate sales.
Evaluating directors’ intent: We evaluated the achievability of
the actions the Directors consider they would take to improve the
position should the risks materialise. This included consideration of
committed marketing spend and management’s ability to adjust
this in line with cash availability.
Assessing transparency: Assessing the completeness and
accuracy of the matters covered in the going concern disclosure
by critically assessing the disclosures in respect of going concern
within the financial statements our knowledge of the relevant
facts and circumstances developed during our audit work,
considering economic outlook, key areas of uncertainty and
mitigations plans and actions by management to respond to
these risks.
49
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. Going concern is a significant
key audit matter and is described in section
2 of our report. In arriving at our audit opinion
above, the other key audit matters were
as follows:
g o v e r n a n c e r e p o r t
3. Other key audit matters: including
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
The risk
Our Reponse
The impact of uncertainties
due to the UK exiting the
European Union on our audit
Unprecedented levels of
uncertainty
Group and parent company
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in planning
and performing our audits. Our procedures included:
Refer to page 25 (principal risks),
page 56 (accounting policy).
Provision for returns
(Consolidated: Provision for
Returns £0.8m; 2017:£0.8m)
Refer to page 35 (Audit
Committee Report) and note
2.16 on page 60 (accounting
policy)
All audits assess and challenge the
reasonableness of estimates and related
disclosures and the appropriateness of
the going concern basis of preparation
of the financial statements (see above).
All of these depend on assessments
of the future economic environment
and the Group’s future prospects and
performance.
Brexit is one of the most significant
economic events for the UK and at the
date of this report its effects are subject
to unprecedented levels of uncertainty
of outcomes, with the full range of
possible effects unknown.
Our Brexit knowledge: We considered the directors’ assessment
of Brexit-related sources of risk for the Group’s business and
financial resources compared with our own understanding of
the risks. We considered the directors’ plans to take action to
mitigate the risks.
Sensitivity analysis: When addressing going concern and other
areas that depend on forecasts, we compared the directors’
analysis to our assessment of the full range of reasonably
possible scenarios resulting from Brexit uncertainty and, where
forecast cash flows are required to be discounted, considered
adjustments to discount rates for the level of remaining
uncertainty.
Assessing transparency: As well as assessing individual
disclosures as part of our procedures on going concern we
considered all of the Brexit related disclosures together, including
those in the strategic report, comparing the overall picture
against our understanding of the risks.
However, no audit should be expected to predict the
unknowable factors or all possible future implications for a
company and this is particularly the case in relation to Brexit.
Subjective estimate
Group and parent company
The Group has one main source of
income which relates to the sale of
goods. The sale of goods is recognised
on delivery, with customers having the
right to return the goods within 100
days for a full refund. A provision is
recognised for expected returns post
year-end, which is subject to estimation
uncertainty.
The effect of these matters is that, as part
of our risk assessment, we determined
that the provision for returns has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the
financial statements as a whole. The
financial statements (note 2.20) disclose
the sensitivity estimated by the Group.
Benchmarking assumptions: We challenged the key
assumptions used in sales return provision calculation, in
particular the percentage rate of return applied by comparing
the year end provision to actual 2018 sales returns in 2019.
Methodology choice: We critically assessed the methodology
applied to calculate the returns provision by comparing whether
this is reasonable based on our knowledge of the business, the
market and key changes in the business that have occurred
during the current financial year. We compared the rate of return
applied with the average rate of return for 2018 for sales where
the 100 day period has lapsed.
Historical comparisons: We considered the historical accuracy
of the Group’s previous provision estimates by comparing
the prior year provision recorded to actual returns in the 2018
financial year.
Assessing transparency: We considered the adequacy of the
Group’s disclosures in respect of provision for sales returns.
50
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)
We continue to perform procedures over the
accounting for eve Sleep plc’s share option
scheme. However, given that there has been
no significant issue of new share options during
the year that would be subject to valuation
and estimation uncertainty, we have not
assessed this as one of the most significant risks
in our current year audit and, therefore, it is
not separately identified in our report this year.
4. 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 £0.34m (2017: £0.25m),
determined with reference to a benchmark
of Group revenue of £34.8m (2017: £27.7m),
of which it represents 0.9% (2017: 1%). 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 £0.24m
(2017: £0.18m), determined with reference to
a benchmark of company total revenue of
£27.2m (2017: £16.1m), of which it represents
0.9% (2017: 1%).
We agreed to report to the Audit Committee
any corrected or uncorrected identified
misstatements exceeding £0.017m (2017:
£0.013m), 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
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 misstate-
ments in the strategic report and the direc-
tors’ report;
• in our opinion the information given in
those reports for the financial year is con-
sistent with the financial statements; and
• in our opinion those reports have been pre-
pared 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 re-
turns adequate for our audit have not been
received from branches not visited by us; or
51
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
11 March 2019
g o v e r n a n c e r e p o r t
• the parent Company financial statements
are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’ remunera-
tion specified by law are not made; or
• we have not received all the information
and explanations 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.
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
52
consolidated statement of profit and loss and other
comprehensive income
for the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Share-based payment charge
Operating loss before IPO-related expenditure
IPO-related expenditure
Operating loss
Net finance income
Loss before tax
Taxation
Loss for the year
Other comprehensive income
Note
3
17
4
7
8
2018
£
2017
£
34,818,260
27,744,995
(16,442,852)
(11,749,049)
18,375,408
15,995,946
(4,056,074)
(3,430,085)
(34,360,477)
(27,686,895)
(303,281)
(1,757,204)
(20,344,425)
(16,878,238)
-
(2,124,528)
(20,344,425)
(19,002,766)
44,822
25,096
(20,299,603)
(18,977,670)
193,192
-
(20,106,411)
(18,977,670)
Foreign currency differences from overseas operations
98,720
-
Total comprehensive loss for the year
(20,007,691)
(18,977,670)
Basic and diluted loss per share
18
(14.46p)
(16.17p)
All results relate to continuing activities.
Notes 1 to 26 form part of the historical financial information shown above.
consolidated statement of fi nancial position
at 31 December 2018
53
Non-current assets
Property, plant and equipment
Intangible assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current tax receivable
Total assets
Current liabilities
Trade and other payables
Provisions
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
Share premium
Share-based payment reserve
Retained earnings
Note
9
10
11
12
13
8
14
15
16
17
2018
£
-
669,742
669,742
1,127,876
4,626,750
6,031,936
193,192
2017
£
36,458
378,538
414,996
691,340
4,177,056
26,926,389
-
11,979,754
31,794,785
12,649,496
32,209,782
4,561,793
4,548,019
955,949
826,702
5,517,741
5,374,721
5,517,741
5,374,721
7,131,755
26,835,060
139,735
138,631
36,716,371
36,716,371
250,073
138,794
(30,073,145)
(10,158,737)
Foreign currency translation reserve
98,720
-
Total equity
7,131,755
26,835,060
Notes 1 to 26 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
11 March 2019
Company registered number: 09261636
54
consolidated statement of changes in equity
for the year ended 31 December 2018
Share
Capital
£
Share
Premium
£
Share based
payment
reserve
£
Retained
Earnings
£
Foreign
currency
translation
reserve
£
Total Equity
£
For the year ended 31 December 2018
Balance at 1 January 2018
138,631
36,716,371
138,794
(10,158,736)
Exercise of options
Share-based payment charge
Transfer on exercise of options
1,104
-
-
Total transactions with owners
1,104
Loss for the year
Other comprehensive income for the year
-
-
-
-
-
-
-
-
-
303,281
-
-
(192,003)
192,003
111,279
192,003
(20,106,411)
-
-
-
98,720
98,720
-
-
-
-
-
-
26,835,060
1,104
303,281
-
304,385
(20,106,411)
Balance at 31 December 2018
139,735
36,716,371
250,073
(30,073,145)
98,720
7,131,755
For the year ended 31 December 2017
Balance at 1 January 2017
316
16,124,928
Issue of shares
Bonus share issue
38,767
40,698,396
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
(12,838,441)
-
-
20,038,965
-
-
(1,618,410)
1,618,410
Total transactions with owners
138,315
20,591,443
138,794
21,657,375
Loss for the year
(18,977,670)
Balance at 31 December 2017
138,631
36,716,371
138,794
(10,158,736)
-
-
-
-
-
-
-
-
-
-
3,286,803
40,737,163
-
-
31,560
1,757,204
-
42,525,927
(18,977,670)
26,835,060
consolidated statement of cash flows
for the year ended 31 December 2018
55
Cash flows from operating activities
Loss for the year
IPO-related expenditure
Finance income
Taxation
Adjustments for:
Interest paid
Amortisation
Impairment
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase in provisions
Share-based payment charge
IPO-related expenditure
2018
£
2017
£
(20,106,411)
(18,977,670)
-
(44,822)
(193,192)
44,822
120,571
39,608
(436,536)
(449,694)
13,773
129,247
303,281
-
2,124,528
(25,096)
-
25,096
7,945
-
(200,159)
(3,127,395)
2,361,778
111,606
1,757,204
(2,124,528)
Net cash outflow from operating activities
(20,579,352)
(18,066,692)
Cash flows from investing activities
Acquisition of property, plant and equipment
Development of intangible assets
(3,150)
(411,775)
(36,458)
(378,538)
Net cash outflows from investing activities
(414,925)
(414,996)
Cash flows from financing activities
Proceeds from issue of share capital
1,104
40,768,722
Net cash outflows from financing activities
1,104
40,768,722
Net cash outflows
(20,993,173)
22,287,034
Cash at beginning of year
Movement in cash
Effect of exchange rate fluctuations on cash held
26,926,389
(20,993,173)
98,720
4,639,355
22,287,034
-
Cash at end of year
6,031,936
26,926,389
56
notes to the financial statements
forming part of the financial statements
1. Reporting Entity
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 2018 was 128 Albert Street, London, England, NW1 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 Company has elected to prepare its parent company financial
statements in accordance with adopted IFRS, these are presented on pages 78 to 80.
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 2.20.
2.2 Changes in accounting policy
In these financial statements, the Group has changed its accounting policies in the following areas:
•
•
Financial instruments
Revenue recognition
The Group has adopted the following IFRSs in these financial statements:
•
•
IFRS 9 Financial Instruments (see note 19)
IFRS 15 Revenue from Contract with Customers (see note 2.16)
These accounting policies have been applied retrospectively. The impact of transition to these IFRS has not required restatement of
the primary statements (see note 25).
2.3 Measurement Convention
The financial statements are prepared on the historical cost basis.
2.4 Going Concern
The financial statements are prepared on a going concern basis notwithstanding that the group is competing and disrupting an
established market and as is typical for a business at this stage of its lifecycle is still generating losses as it uses working capital to
develop the business model and market share.
The Group has reported an operating loss of £20.3m (2017: £19.0m) with an operating cash outflow of £20.6m (2017: £18.1m).
The closing cash balance at 31 December 2018 was £6.0m however, since the end of the Accounts Period, the Group completed a
share placing to raise approximately £11.7m net of expenses, (the “Placing”) from existing and new investors and £0.9m of future
advertising spend credits. The closing cash balance at 28 February 2019 was £17.8m.
The directors have set out the three core pillars of the re-build strategy in the Chief Executive’s statement and have prepared a
strategic plan in order to grow the business in the re-focused markets of UK&I and France. The plan is supported by a financial
model, underpinned by a number of key business drivers. The business plan assumes continuing improvement in 2019 over those
observed in 2018 for the majority of these drivers. The principle assumptions adopted in the forecast model which reflect these
improvements are set out below:
57
notes to the financial statements
continued
2.4 Going Concern (continued)
•
Revenue growth driven primarily by Website traffic growth and Conversion rate improvements;
• Marketing expenditure reduction over the prior year and more targeted spend moving forward.
To support the strategic plan the directors have prepared cash flow forecasts covering a period of more than 12 months from the
date of approval of these financial statements. These forecasts in the base case indicate that the group will have sufficient funds
to meet its liabilities as they fall due until such point that it achieves sustainable profitability and cash generation. However, the
delivery of the strategic plan is subject to uncertainty and these have been modelled through sensitivity analysis. Where sensitivity
analysis indicates the possibility of a material impact to the ability of the group to meet liabilities as they fall due, the directors have
considered what mitigating actions would be required and the timeframe within which those actions are needed. The key mitigating
factors are centred around further reductions in controllable spend, including further marketing cost appraisal and reductions
in other categories of discretionary spend. The directors also consider that it would be reasonable to target working capital
improvements such as reducing days through lower stock levels and reducing debtor days through facilities such as debt factoring as
the group does not presently have any debt.
Uncertainties are such that potential mitigating actions, which would be over and above the current strategic plan, may not be
sufficient to mitigate all reasonably possible downsides in assumptions. In such downsides the Directors would need further funding
and would consider ways of sourcing this, which could include debt or possible further equity funding. The Directors consider that
such scenarios are possible, but not the likely outcome.
Based on the above, the directors believe it remains appropriate to prepare the financial statements on a going concern basis.
However, these circumstances represent a material uncertainty that may cast significant doubt upon the company’s ability to
continue as a going concern and, therefore to continue realising its assets and discharging its liabilities in the normal course
of business. The financial statements do not include any adjustments that would result from the basis of preparation being
inappropriate.
2.5 Presentational Currency
The Group financial statements are presented in Sterling.
2.6 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.
Transactions eliminated on consolidation
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
extent that there is no evidence of impairment.
2.7 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
58
notes to the financial statements
continued
2.7 Foreign Currency (continued)
on translation are recognised in the income statement. 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 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.
2.8 Classification of financial instruments issued by the Group
Following the adoption of IFRS 9, 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.
2.9 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.
Trade and Other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised
cost using the effective interest method, less any impairment losses.
Trade and Other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost
using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
59
notes to the financial statements
continued
2.10 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of
an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and
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:
¦
¦
Plant and equipment
Fixtures and fittings
3 years
3 years
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
2.11 Intangible assets
The costs of acquiring and developing software that is not integral to its related hardware is capitalised separately as an intangible
asset. 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
amortisation. Amortisation is calculated on a straight-line basis over the assets’ expected economic lives, normally between three
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
Group intends to, and has the technical ability and sufficient resources to complete development, future economic benefits are
probable, and if the Group can measure reliably the expenditure attributable to the intangible asset during its development.
Development activities involve a plan or design for the production of new or substantially improved products or processes.
Where no intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is
incurred. Expenditure on research activities is recognised as an expense in the period in which it is incurred.
The estimated useful lives are as follows:
¦
Development costs
3 years
Amortisation methods, useful lives and residual values are reviewed at each balance sheet date.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing
location and condition. A provision is also made to write down any slow-moving or obsolete inventory to net realisable value.
2.13 Investments
Investments in subsidiary companies are stated at cost and are subject to review for impairment indicators if identified.
2.14 Impairment excluding inventories
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost, debt
investments measured at FVOCI and contract assets (as defined in IFRS 15).
The company measures loss allowances at an amount equal to lifetime ECL, except for other debt securities and bank balances for
which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly
since initial recognition which are measured as 12-month ECL.
60
notes to the financial statements
continued
2.14 Impairment excluding inventories (continued)
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.
2.15 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.
2.16 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.
Management have considered the recognition and measurement of a right of return asset as required under IFRS 15, however the
asset is deemed immaterial to users of these statements and on this basis has not be recognised.
As required under IFRS 15, a disaggregation of revenue in respect of primary geographical markets is shown in the Group’s
Segmental analysis (note 3) and significant distribution channels set out below:
Direct to consumer revenue channel
26,996,512
23,769,603
Multi-channel revenue channel
7,821,748
3,975,392
34,818,260
27,744,995
2018
£
2017
£
2.17 Expenses
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.
Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
Financing income and expenses
Financing expenses comprise interest payable, finance charges on shares classified as liabilities and finance leases recognised in
profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are
recognised in the income statement (see foreign currency accounting policy). Borrowing costs that are directly attributable to the
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
gains.
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.
2.18 Employee benefits
Defined contribution plans
The company operates a defined contribution plan. A defined contribution plan is a post-employment benefit plan under which the
company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account in
the periods during which services are rendered by employees.
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.
61
notes to the financial statements
continued
2.18 Employee benefits (continued)
The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which
the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the
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
measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
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.
2.19 Taxation
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.
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.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial
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.
2.20 Significant estimates and judgements
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
liabilities. The estimates and assumptions are based on historical experience and various other factors believed to be reasonable
under the circumstances. Actual results could differ from these estimates and any subsequent changes are accounted for when such
information becomes available. The judgements, estimates and assumptions that are the most subjective or complex are discussed
below:
Accounting estimates
Slow-moving inventory provision (note 11)
Inventory is carried at the lower of cost or net realisable value. The estimation of net realisable value may be different from the
future actual value realised due to provisions for slow-moving inventory. The provision for slow-moving inventory is based upon
an analysis of forecast inventory turnover. Management calculates the best estimate of the subsequent volumes of inventory held
at year end forecast to be sold in a period greater than twelve months from the balance sheet date. In reference to this inventory
population a slow-moving stock provision is calculated. This accounting estimate is sensitive to the input of forecast inventory
turnover. However, upon sensitivity analysis management have concluded that the estimate is not materially sensitive to variance of
the input estimates and therefore not a key estimate of the financial statements.
2.20 Significant estimates and judgements (continued)
62
notes to the financial statements
continued
Refunds provision (note 15)
The Group recognises a provision for the probable financial liability to refund customers for returned products. Provisions are
calculated in reference to historical return rates. This estimate is therefore sensitive to management’s estimate of expected customer
refunds in subsequent periods, however, management have conducted sensitivity analysis and have concluded that the estimate is
not materially sensitive to the variance of the key input estimates, evidenced as follows:
1.5 percentage point increase in return rates experienced in subsequent periods
1.5 percentage point decrease in return rates experienced in subsequent periods
2018
£
(107,751)
107,751
Accounting judgements
Warranty provision (note 15)
The Group recognises a provision for the probable financial liability to customers in respect of warranty claims. The provision is
calculated in reference to historical rates of successful manufacturer warranty claims. In the application of IFRS 15, management do
not consider the provision of a warranty to customers to be a separate performance obligation. This is a key management judgement
which will be reviewed in future accounting periods.
Intangible assets (note 10)
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 uses its judgement in assessing
development against the criteria. After capitalisation, management monitors whether the recognition requirements continue to be
met and whether there are any indicators that the asset may be impaired, as discussed above.
2.21 Adopted IFRS not yet applied
The accounting policies applied are consistent with those adopted and disclosed in the Group financial statements for the year
ended 31 December 2018. Various new accounting standards and amendments were issued during the year, none of which have an
impact on the current year.
The following accounting standards are in issue but not yet effective and have not been adopted by the Group:
IFRS 16 ‘Leases’ is effective for periods beginning on or after 1 January 2019. The standard will require lease
liabilities and the right of use assets for leases to be recognised on the Statement of Financial Position.
Lessees will be required to separately recognise the interest expense for the liability and depreciation for
the right of use asset on the Statement of Profit and Loss and Other Comprehensive Income. 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 right of use assets and liabilities will be
presented on the balance sheet. The group has reviewed its portfolio of leases which includes the lease of
its headquarters only and notes that restatement of current assets (right of use asset) and current liabilities
as at 31 December 2018 will be required when preparing its financial statements for the year ended 31
December 2019.
63
notes to the financial statements
continued
3 Segmental analysis
IFRS 8, “Operating Segments”, requires operating segments to be determined based on the Group’s internal reporting to the Chief
Operating Decision Maker. The Chief Operating Decision Maker has been determined to be the executive board and the primary
segmental reporting format of the Group is geographical by customer location, based on the Group’s management and internal
reporting structure.
The executive board assesses the performance of each segment based on revenue and gross profit after distribution expenses, which
excludes administrative expenses.
UK&I
France
Rest of Europe
Rest of the
World
Total
For the year ended 31 December 2018
Revenue
Cost of Sales
Gross Profit
22,520,896
6,833,520
4,744,696
719,148
34,818,260
(10,703,472)
(3,174,414)
(2,197,303)
(367,663)
(16,442,852)
11,817,424
3,659,106
2,547,393
351,485
18,375,408
Distribution expenses
(1,697,775)
(1,204,140)
(1,079,010)
(75,149)
(4,056,074)
Segment results
10,119,649
2,454,966
1,468,383
276,335
14,319,334
Administration expenses
Share based payment charge
Net finance income
Taxation
Loss for the year
(34,360,478)
(303,281)
44,822
193,192
(20,106,411)
UK&I
France
Rest of Europe
Rest of the
World
Total
For the year ended 31 December 2017
Revenue
Cost of Sales
Gross Profit
16,145,542
5,544,040
5,021,594
1,033,819
27,744,995
(6,554,822)
(2,498,587)
(2,362,965)
(332,675)
(11,749,049)
9,590,720
3,045,453
2,658,629
701,144
15,995,946
Distribution expenses
(1,412,199)
(806,097)
(1,022,365)
(189,423)
(3,430,084)
Segment results
8,178,521
2,239,356
1,636,264
511,721
12,565,862
Administration expenses
IPO Related expenditure
Share based payment charge
Net finance income
Taxation
Loss for the year
(27,686,895)
(2,124,528)
(1,757,204)
25,096
-
(18,977,670)
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.
The reporting segments have been updated in 2018 to reflect the change in strategy of the Group effective in the second half of 2018
and as such prior period operating segments have been updated to reflect this.
Due to the nature of its activities the Group is not reliant on any major customers.
64
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
Amortisation of intangible assets
Cost of inventory write down
Lease expenditure
Staff and country exit costs
Research and development expenditure
5 Staff numbers and cost
2018
£
65,000
-
61,050
-
-
236,502
39,608
120,571
70,632
767,480
752,261
-
2017
£
60,000
15,000
126,650
150,000
7,500
10,649
7,945
-
-
423,959
-
-
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
Finance
Marketing
Operations
2018
6
23
82
111
2017
4
22
70
96
notes to the financial statements
continued
5 Staff numbers and cost (continued)
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social Security costs
Share-based payment charge (note 17)
Employer pension contributions
65
2018
£
4,851,555
526,054
303,281
48,664
2017
£
3,992,354
476,234
1,757,204
6,894
5,729,554
6,232,686
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
Employer pension contributions
Employer’s national insurance
Share-based payment charge
Compensation for loss of office
2018
£
368,423
1,447
65,688
36,553
150,000
622,111
2017
£
361,990
196
44,109
761,139
-
1,167,434
Directors’ aggregate emoluments and pension payments 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. The gain on
exercise of share options in respect of directors for the year was £nil (2017: £7,578,177).
Directors of the Company and their immediate relatives control 7.7% 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 profit and los and other comprehensive
income as it is earned.
Interest receivable on cash and cash equivalents
2018
£
44,822
2017
£
25,096
66
notes to the financial statements
continued
8 Taxation
Recognised in the income statement:
Current tax expense
UK Corporation tax for the current year
Research and development tax credit for the prior year
Total current tax
Deferred Tax
Deferred tax for the current year
Total deferred tax
Reconciliation of effective tax rate:
Loss for the year
Total tax credit/(expense)
2018
£
-
193,192
193,192
-
-
2017
£
-
-
-
-
-
2018
£
2017
£
(20,106,411)
(18,977,670)
193,192
-
Loss excluding taxation
(20,299,603)
(18,977,670)
Tax using the UK corporation tax rate of 19% (2017: 19.25%)
(3,856,925)
(3,653,201)
Effects of:
Expenses not deductible for tax purposes
Fixed asset differences
Research and development tax credit for the prior year
Current year losses for which no deferred tax asset was recognised
Total Tax credit/(expense)
549,424
-
193,192
3,307,500
193,192
799,837
472
-
2,852,892
-
The Group has accumulated tax losses available for offset against future profits of £46,415,639 (2017: £26,653,156).
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.
Reductions in the UK corporation tax rate from 20% (effective from 1 April 2017) to 18% (effective 1 April 2020) were substantively
enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September
2016. This will reduce the Group’s future tax charge accordingly.
notes to the financial statements
continued
9 Property, plant and equipment
Plant and equipment
£
Fixtures & Fittings
£
67
Total
£
10,592
36,458
47,050
3,150
50,200
2,647
7,945
10,592
-
39,608
50,200
36,458
-
7,326
-
7,326
3,150
10,476
1,831
5,495
7,326
-
3,150
10,476
-
-
3,266
36,458
39,724
-
39,724
816
2,450
3,266
-
36,458
39,724
36,458
-
Development Costs
£
Assets under construction
£
Total
£
-
92,705
190,235
282,940
-
-
105,030
387,970
-
-
-
120,571
120,571
282,940
267,399
-
-
95,598
95,598
168,833
242,942
(105,030)
402,343
-
-
-
-
-
95,598
402,343
-
92,705
285,833
378,538
168,833
242,942
-
790,313
-
-
-
120,571
120,571
378,538
669,742
Cost
Balance at 1 January 2017
Acquisitions
Balance at 31 December 2017
Acquisitions
Balance at 31 December 2018
Depreciation and Impairment
Balance at 1 January 2017
Depreciation charge for the year
Balance at 31 December 2017
Depreciation charge for the year
Impairment charge for the year
Balance at 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
10 Intangible assets
Cost
Balance at 1 January 2017
Acquisitions - internally generated
Acquisitions - externally generated
Balance at 31 December 2017
Acquisitions - internally generated
Acquisitions - externally generated
Transfers
Balance at 31 December 2018
Amortisation and Impairment
Balance at 1 January 2017
Amortisation and impairment for the year
Balance at 1 January 2018
Amortisation and impairment for the year
Balance at 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
Development costs relate to internal and external costs incurred in respect of the infrastucture of the website platform and ERP
system. Assets under construction at 31 December 2018 relate to internal and external costs incurred for the development of ERP
software for internal use and is expected to go live in 2019.
68
notes to the financial statements
continued
11 Inventories
Finished Goods
2018
£
1,127,876
2017
£
691,340
There was no write-down of inventories to net realisable value in the year (2017: £nil). Included within inventories is £551,580
expected to be recovered in more than 12 months from the balance sheet date. This balance of inventory is fully-provided for within
the Group’s slow-moving inventory provision of £551,580 (2017: £181,752). Inventory days were 25 days in 2018 (2017: 21 days).
Finished goods recognised in cost of sales in the year amounted to £16,358,170.
12 Trade and Other receivables
Trade Receivables
Other receivables
Prepayments
Other current assets
2018
£
1,815,260
1,124,112
1,320,556
366,823
2017
£
767,426
2,608,934
800,696
-
4,626,750
4,177,056
The average credit period offered on sales of goods during 2018 was 27 days (2017: 34 days). The average days sales outstanding
(‘‘DSO’’) in 2018 was 82 days (2017: 51 days). At 31 December 2018, trade receivables at a nominal value of £35,681 (2017: £25,301)
were impaired and fully provided for.
All 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.
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
credit quality and to define credit limits for each customer. Limits and scoring attributed to customers are reviewed regularly.
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31 December 2018,
consistent with 2017 where three major retail customers each accounted for more than 10% of the total balance of trade receivables
on 31 December 2017.
Included in other receivables is £0.1m 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
Overdue over 90 days
2018
£
1,177,697
382,274
56,070
73,634
125,584
2017
£
378,260
378,240
10,183
743
-
1,815,260
767,426
69
notes to the financial statements
continued
12 Trade and Other receivables (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
diverse.
13 Cash and Cash equivalents
Cash and cash equivalents
6,031,936
26,926,389
2018
£
2017
£
At 31 December 2018, the Group had an available £600,000 credit card facility.
14 Trade and Other payables
Trade payables
Non trade-payables and accrued expenses
Deferred revenue
Taxes and social security payable
2018
£
1,794,803
1,691,425
538,447
537,118
2017
£
1,591,520
2,275,299
521,549
159,651
4,561,793
4,548,019
All trade and other payables are short-term. The directors consider that the carrying amount of trade and other payables
approximates to their fair value. Deferred revenue represents contract liabilities to deliver goods to customers where
consideration has been received prior to the year end date. The opening balance of deferred revenue was fully recognised
during the 2018 financial year.
15 Provisions
Balance at 1 January 2017
Provisions made during the year
Refunds
£
560,683
4,118,714
Provisions used during the year
(3,815,835)
Unused amounts reversing in the year
Balance at 31 December 2017
(36,860)
826,702
-
-
-
-
-
Provisions made during the year
11,647,815
163,832
Provisions used during the year
(11,620,290)
Unused amounts reversing in the year
Balance at 31 December 2018
(62,110)
792,117
-
-
163,832
Warranty
£
Sales Return
£
154,414
-
Total
£
715,097
4,118,714
(154,414)
(3,970,249)
-
-
-
-
-
-
(36,860)
826,702
11,811,647
(11,620,290)
(62,110)
955,949
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 (as demonstrated in note 2.20).
70
notes to the financial statements
continued
15 Provisions (continued)
A warranty provision is required as the Group provides certain products to customers with a 10-year warranty period.
During this period the customer is entitled to claim under warranty a replacement product. The provision is calculated by reference
to the rate of successful claims experienced by the Group in preceding periods and applying a projected distribution of the claims
across the 10-year warranty period. Whilst there is a degree of estimation in the calculation of this provision, any reasonable
sensitivity analysis in the rate applied to claims at the year end would not result in a material impact (as demonstrated in note 2.20).
16 Share Capital
Allotted, issued and fully paid:
Number
Nominal Value
£
31 December 2018
£
31 December 2017
£
Ordinary Shares
139,735,160
£0.001
Total
139,735
139,735
138,631
138,631
The table below summarises the movements in number of shares at the beginning and end of the period
Ordinary Shares
Share Capital 31 December 2017
138,631,020
Nominal Value £
Value of Share Capital £
Summary of Movements
£0.001
138,631
Exercise of share options over ordinary shares
1,104,141
Share capital 31 December 2018
139,735,161
Nominal Value £
Value of Share capital £
£0.001
£139,735
The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
During 2018, 1,104,141 share options were exercised bringing the total share capital of the Company to 139,735,161 at 31 December
2018.
17 Share based payments
The Group recognised a charge of £0.3m (2017: £1.8m) related to share-based payments during the year to 31 December 2018, all of
which relates to equity-settled schemes.
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 Profit and Loss and other
comprehensive income on a straight-line basis over the vesting period after allowing for an estimate of shares that will ultimately
vest.
71
notes to the financial statements
continued
17 Share based payments (Continued)
The Company operates an HMRC approved executive management incentive plan (EMI). The vesting conditions are based on length
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.
The terms and conditions of the grants are as follows:
Grant Date
16/01/2017
16/01/2017
23/01/2017
25/01/2017
20/02/2017
10/04/2017
Number of
Contracts
Number of Options
Exercise
Price
Performance Conditions
Expiry Date
13
3
3
22
1
1
14,017,897
£0.001
Length of service
16/01/2027
4,653,841
56,626
1,289,236
18,825
251,000
£0.001
£0.001
£0.001
£0.001
£0.001
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
The Company operates an unapproved executive incentive plan. The vesting conditions for grants made on 12 May 2017 and during
2018 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
Exercise
Price
Performance Conditions
Expiry Date
13/07/2015
01/01/2016
01/02/2016
26/01/2016
12/05/2017
12/10/2017
20/10/2017
16/01/2018
17/01/2018
02/02/2018
05/02/2018
11/02/2018
1
1
1
1
6
1
1
1
1
1
1
1
132,905
49,447
224,269
12,550
991,798
23,939
23,833
20,000
100,000
15,000
87,500
20,000
£0.001
£0.001
£0.001
£0.001
£1.012
£0.001
£0.001
£1.01
£1.01
£1.01
£1.01
£1.01
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
Length of service
Length of service
Length of service
Length of service
Length of service
16/01/2028
17/01/2028
02/02/2028
05/02/2028
11/02/2028
72
notes to the financial statements
continued
17 Share based payments (Continued)
The number and weighted average exercise prices of share options are as follows:
Outstanding at beginning of year
£0.519
5,642,703
Weighted Average
Exercise Price
£
Number of Options
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
£1.010
£0.768
£0.001
-
£0.613
£0.001
242,500
(1,577,909)
(1,104,141)
-
3,203,153
836,875
All options exercised during the year were options over Ordinary shares.
The weighted average share price at the date of exercise of share options exercised during the year was 80.03p (2017: 103.94p)
The options outstanding at the end of the year have an exercise price in the range of £0.001 to £1.012 and a weighted average
contractual life of 10 years.
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
£
Award 3
23/01/17
£
Award 4
25/01/17
£
Award 5
26/01/17
£
Award 6
20/02/17
£
Ord
£0.10
Ord
£0.10
Ord
£0.10
Ord
£0.10
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%
Award 7
12/05/17
£
Award 8
16/01/18
£
Award 9
17/01/18
£
Award 10
02/02/18
£
Award 11
05/02/18
£
Award 12
11/02/18
£
Share class
Fair Value
Ord
£0.29
Ord
£0.43
Ord
£0.43
Ord
£0.43
Ord
£0.43
Ord
£0.43
Exercise Price
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
Expected volatility *
Option Life
55%
10yrs
77%
10yrs
77%
10yrs
77%
10yrs
77%
10yrs
77%
10yrs
Risk free interest rate
1.000%
1.000%
1.000%
1.000%
1.000%
1.000%
73
notes to the financial statements
continued
17 Share based payments (Continued)
* Expected volatility is measured at the standard deviation of expected share price movements and based on a review of volatility
used by listed companies of comparable industry sector and years of establishment.
18 Earnings per share
The basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted
average number of ordinary shares in issue during the year.
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)
2018
139,087,779
(20,106,411)
(14.46)
(14.46)
2017
117,336,860
(18,977,670)
(16.17)
(16.17)
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 2018, options outstanding amounted to 3,203,153. Given the loss for the year of £20,106,411 (2017 loss: £18,977,670)
these options are anti-dilutive.
19 Financial Instruments
Categories of financial instruments:
Financial assets at amortised cost
2018
£
2017
£
Cash and cash equivalents, trade receivables and other receivables
8,971,308
30,302,749
Financial liabilities at amortised cost
Trade payables, other payables and provisions
(5,517,741)
(5,374,722)
74
notes to the financial statements
continued
19 Financial Instruments (Continued)
‘Financial assets held at amortised cost’ includes trade receivbles, other receivables and cash and cash equivalents and excludes
prepayments and inventories. Included in ‘Financial liabilities at amortised cost’ are trade payables, accruals and other payables.
The carrying value 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.
The ageing of trade receivables at the balance sheet date was:
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
Overdue over 90 days
2018
£
1,177,697
382,274
56,070
73,634
125,584
2017
£
378,260
378,240
10,183
743
-
1,815,260
767,426
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.
75
notes to the financial statements
continued
19 Financial Instruments (Continued)
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.
Sterling
£
Euro
£
US Dollar
£
Other
£
Total
£
Balance Sheet exposure
Cash and cash equivalents
4,929,600
868,014
71,603
162,719
6,031,936
Trade receivables
1,794,122
21,138
-
-
1,815,260
Other receivables
753,010
337,754
6,838
26,510
1,124,112
Trade payables
Other payables
Provisions
Total
(1,471,111)
(300,885)
(22,807)
-
(1,794,803)
(1,893,587)
(607,386)
(85,225)
(180,792)
(2,766,990)
(832,044)
(116,352)
(7,552)
-
(955,949)
3,279,989
202,284
(37,143)
8,437
3,453,567
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 Profit and Loss and Other 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
2018
£
(5,504)
161,161
(136,256)
1,703
177,609
(169,410)
2017
£
(27,490)
(106,714)
(52,112)
27,490
106,714
52,112
A 10% percent strengthening of these currencies against the pound sterling at 31 December 2018 would have decreased profit
or loss by 0.05%. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
76
notes to the financial statements
continued
20 Contingencies
There were no contingent liabilities to be disclosed.
21 Related Parties
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.
22 Investments
The company has the following investments in subsidiaries:
Principal place of
business/ Registered
office address
Registered Number
Type of share
Ownership
2017
Ownership
2016
Company:
eve sleep Inc
eve sleep SASU
185 W. Broadway,
Suite 101, PO Box
1150, Jackson, USA
5 Rue Des Suisses,
75014, Paris
EIN 47-4164566
Ordinary
823397419 R.C.S Paris
Ordinary
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 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2018
£
459,536
-
-
459,536
2017
£
-
-
-
-
The Group leases its office headquarters at 128 Albert Street, London, NW1 7NE. The non-cancellable operating lease rental
disclosed above relates wholly to these office headquarters.
During the year £767,480 was recognised as an expense in the income statement in respect of operating leases.
77
notes to the financial statements
continued
25 Change in significant accounting policies
The Group has applied IFRS 15 using the retrospective with cumulative effect method – i.e. by recognising the cumulative
effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 January 2018. Therefore, the
comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. There has been no
quantitive impact of adopting IFRS 15 on the Group’s financial statements for the year ending 31 December 2018.
The Group has adopted IFRS 9 with a date of initial application of 1 January 2018. The requirements of IFRS 9 represent a
significant change from IAS 39 Financial Instruments: Recognition and Measurement. Changes in accounting policies
resulting from the adoption of IFRS 9 have been applied retrospectively. There has been no quantitative impact of adopting
IFRS 9 on the Group’s financial statements for the year ending 31 December 2018, as follows:
•
•
Financial assets classified as Loans and Receivables under IAS 39 are held at the same valuation under IFRS 9 at
Amortised Cost;
Financial liabilities classified as Other Financial Liabilities under IAS 39 are held at the same valuation under IFRS 9 as
Other Financial liabilities
26 Subsequent events
Since the end of the Accounts Period, the Company has undertaken the following significant events:
On 11 February 2019, the Company completed a placing of 120,317,323 new ordinary shares of 0.1 pence each (“Ordinary
Shares”) in the share capital of the Company (the “Placing Shares”) at a price of 10 pence per Placing Share (the “Placing
Price”) to raise approximately £11.7m net of expenses (the “Placing”), from existing and new investors. In addition, Channel
Four, which provides advertising services to the Company and is an existing Shareholder, has agreed that £0.9m of future
advertising spend by the Company with Channel Four will, when payable, be satisfied by the issue of new Ordinary Shares at
the Placing Price over a period of up to twenty-four months from Admission.
In addition, it is proposed that share option plans with a grant date post-IPO (excluding those grants made in October 2017)
will be cancelled and replaced with a new share option plan. It is proposed that grants from this pool will be granted on the
following basis:
(i) nominal exercise price of £0.001 per ordinary share
(ii) vesting monthly from the date of grant over a 3 year period
Following the year end, it was agreed by mutual consent that Abid Ismail, Chief Financial Officer of the Group, would step
down as a Director of the Company. Abid has agreed to stay on until Summer 2019 to effect a seamless transition.
78
company balance sheet
at 31 December 2018
Non-current assets
Property, Plant and equipment
Intangible assets
Investments
Current assets
Inventories
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Total liabilities
Net assets
Note
3
4
5
6
7
8
9
10
2018
£
-
669,742
1,669
671,411
870,011
5,499,057
193,192
5,055,952
2017
£
36,458
378,538
1,669
416,665
589,344
4,837,014
-
26,210,595
11,618,213
31,636,953
12,289,623
32,053,618
4,349,059
845,824
4,311,212
687,127
5,194,883
4,998,339
7,094,740
27,055,279
Equity attributable to equity holders of the parent
Share capital
Share premium
11
139,735
138,631
36,716,371
36,716,371
Share-based payment reserve
250,073
138,794
Retained earnings
Total Equity
(30,011,439)
(9,938,516)
7,094,740
27,055,280
Notes 1-17 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
11 March 2019
Company registered number: 09261636
company cash flow
for the year ended 31 December 2018
Cash flows from operating activities
Loss for the year
IPO-related expenditure
Finance income
Taxation
79
2018
£
2017
£
(20,264,926)
(19,043,452)
-
(49,675)
(193,192)
2,124,528
(25,096)
-
Loss before IPO-related expenditure
(20,507,793)
(16,944,020)
Adjustments for:
Interest received
Amortisation
Impairment
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
Increase in provisions
Share based payment charge
Foreign exchange losses
IPO Related Expenditure
49,675
120,571
39,608
(662,043)
(280,668)
37,847
158,697
303,281
-
-
25,096
7,945
-
(3,832,385)
(98,163)
2,258,206
252,073
1,757,204
(5,996)
(2,124,528)
Net cash outflow from operating activities
(20,740,825)
(18,704,568)
Cash flows from investing activities
Acquisition of property, plant and equipment
Development of intangible assets
(3,150)
(411,775)
(36,458)
(378,538)
Net cash outflows from investing activities
(414,925)
(414,996)
Cash flows from financing activities
Proceeds from issue of share capital
1,104
40,768,722
Net cash inflows from financing activities
1,104
40,768,722
Net Cash outflow
(21,154,643)
21,649,158
Cash at beginning of year
Movement in cash
Cash at end of year
26,210,595
(21,154,643)
4,561,437
21,649,158
5,055,952
26,210,595
80
company changes in equity
for the year ended 31 December 2018
Share Capital
£
Share Premium
£
Share-based
payment
reserve
£
Retained
Earnings
£
Foreign
currency
translation
reserve
£
For the year ended 31 December
2018
Balance at 1 January 2018
138,631
36,716,371
138,794
(9,938,516)
Exercise of options
Share based payment charge
Transfer on exercise of options
1,104
-
-
Transactions with owners
1,104
Loss for the year
-
-
-
-
-
-
-
303,281
-
-
(192,003)
192,003
111,279
192,003
-
(20,264,926)
Balance at 31 December 2018
139,735
36,716,371
250,073
(30,011,440)
-
-
-
-
-
-
-
Total Equity
£
27,055,280
1,104
303,281
-
304,385
(20,264,926)
7,094,739
(12,552,437)
5,996
3,578,803
For the year ended 31 December
2017
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
-
-
20,038,965
-
-
(1,618,410)
1,618,410
Transactions with owners
138,315
20,591,443
138,794
21,657,375
-
-
-
-
-
-
-
40,737,163
-
-
31,560
1,757,204
-
42,525,927
Loss for the year
-
-
-
(19,043,454)
(5,996)
(19,049,450)
Balance at 31 December 2017
138,631
36,716,371
138,794
(9,938,516)
-
27,055,280
81
notes to the company financial statements
1 Accounting Policies
1.1 Basis of preparation
The Company 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
Company 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 2.20 to the Group
financial statements.
1.2 Changes in accounting policy
In these financial statements, the Company has changed its accounting policies in the following areas:
•
•
Financial instruments
Revenue recognition
The Group has adopted the following IFRSs in these financial statements:
•
•
IFRS 9 Financial Instruments (see note 19)
IFRS 15 Revenue from Contract with Customers (see note 2.16)
These accounting policies have been applied retrospectively. The impact of transition to these IFRS has not required restatement of
the primary statements (see note 25 to the consolidated financial statements).
2 Loss for the year
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 £20,264,926 (2017: £19,043,454 loss).
3 Directors’ remuneration
The Company shares the same directors as the Group. Please find Directors’ remuneration disclosed in note 6 of the Group financial
statements.
82
notes to the company financial statements
continued
3 Property, plant and equipment
Plant and equipment
£
Fixtures & Fittings
£
Cost
Balance at 1 January 2017
Acquisitions
Balance at 31 December 2017
Acquisitions
Balance at 31 December 2018
Depreciation and Impairment
Balance at 1 January 2017
Depreciation charge for the year
Balance at 31 December 2017
Depreciation charge for the year
Impairment charge for the year
Balance at 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
4 Intangible Assets
Cost
Balance at 1 January 2017
Acquisitions - internally generated
Acquisitions - externally generated
Balance at 31 December 2017
Acquisitions - internally generated
Acquisitions - externally generated
Transfers
Balance at 31 December 2018
Amortisation and Impairment
Balance at 1 January 2017
Amortisation and impairment for the year
Balance at 1 January 2018
Amortisation and impairment for the year
Balance at 31 December 2018
Net Book Value
At 31 December 2017
At 31 December 2018
7,326
-
7,326
3,150
10,476
1,831
5,495
7,326
-
3,150
10,476
-
-
3,266
36,458
39,724
-
39,724
816
2,450
3,266
-
36,458
39,724
36,458
-
Total
£
10,592
36,458
47,050
3,150
50,200
2,647
7,945
10,592
-
39,608
50,200
36,458
-
Development Costs
£
Assets under construction
£
Total
£
-
92,705
190,235
282,940
-
-
105,030
387,970
-
-
-
120,571
120,571
282,940
267,399
-
-
95,598
95,598
168,833
242,942
(105,030)
402,343
-
-
-
-
-
95,598
402,343
-
92,705
285,833
378,538
168,833
242,942
-
790,313
-
-
-
120,571
120,571
378,538
669,742
83
notes to the company financial statements
continued
4 Intangible Assets (continued)
Development costs relate to internal and external costs incurred in respect of the infrastucture of the website platform.
Assets under construction at 31 December 2018 relate to internal and external costs incurred for the development of ERP
software for internal use expected to go live in 2019.
5 Investments
The company has the following investments in subsidiaries:
Principal place
of business/
Registered office
address
185 W. Broadway,
Suite 101, PO Box
1150, Jackson, USA
5 Rue Des Suisses,
75014, Paris
Registered Number
Type of share
Ownership
2017
Ownership
2016
EIN 47-4164566
Ordinary
823397419 R.C.S Paris
Ordinary
100%
100%
100%
100%
2018
£
870,011
2017
£
589,344
Company:
eve sleep Inc
eve sleep SASU
6 Inventories
Finished Goods
There was no write-down of inventories to net realisable value in the year (2017: £nil). Included within inventories is £551,580
expected to be recovered in more than 12 months from the balance sheet date. This balance of inventory is fully-provided for within
in the Company’s slow-moving inventory provision totalling £551,580 (2017: £181,752). Inventory days were 25 days in 2018 (2017: 21
days). Finished goods recognised in cost of sales in the year amounted to £12,924,738.
7 Trade and Other receivables
Trade Receivables
Other receivables
Receivables from subsidiary undertakings
Other current assets
Prepayments
2018
£
1,794,871
1,001,937
1,027,915
366,823
1,307,511
2017
£
760,330
2,417,455
858,533
-
800,696
5,499,057
4,837,014
As at 31 December 2018, receivables from subsidiary undertakings of £1.0m (2017: £0.9m) have been considered in light of IFRS 9 and
expected credit losses arising were not considered material by management and no allowance has been recognised on this basis.
The ageing analysis of these receivables is as follows:
Less than 12 months
More than 12 months
2018
£
1,027,915
-
2017
£
858,533
-
1,027,915
858,533
84
notes to the company financial statements
continued
7 Trade and Other receivables (Continued)
The average credit period offered on sales of goods during 2018 was 26 days (2017: 34 days). The average days sales outstanding
(‘‘DSO’’) in 2018 was 88 days (2017: 51 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.
The Company 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 Company 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.
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31 December 2018,
compared to 2017 where three major retail customer seach accounted for more than 10% of the total balance of trade receivables.
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
Overdue over 90 days
2018
£
1,161,596
377,985
56,070
73,634
125,586
2017
£
371,169
378,235
10,183
743
-
1,794,871
760,330
In determining the recoverability of a trade receivable the Company 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.
8 Cash and Cash equivalents
Cash and cash equivalents per balance sheet
5,055,952
26,210,595
2018
£
2017
£
85
notes to the company financial statements
continued
9 Trade and Other payables
Trade payables
Non-trade payables and accrued expenses
Deferred revenue
Taxes and social security payable
2018
£
1,740,634
1,322,691
408,406
877,328
2017
£
1,525,332
2,187,595
438,634
159,651
4,349,059
4,311,212
All trade and other payables are short-term. The directors consider that the carrying amount of trade and other payables
approximates to their fair value. Deferred revenue represents contract liabilities to deliver goods to customers where consideration
has been received prior to the year end date. The opening balance of deferred revenue was fully recognised during the 2018
financial year.
10 Provisions
Balance at 1 January 2017
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
Warranty
£
-
-
-
-
-
Total
£
435,052
3,430,454
(3,141,519)
(36,860)
687,127
Provisions made during the year
9,924,452
142,351
10,066,803
Provisions used during the year
Unused amounts reversing in the year
(9,844,534)
(63,572)
-
-
(9,844,534)
(63,572)
Balance at 31 December 2018
703,473
142,351
845,824
A refund provision is required as the Company 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 Company 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 warranty provision is required as the Company provides certain products to customers with a 10-year warranty period.
During this period the customer is entitled to claim under warranty a replacement product. The provision is calculated by reference
to the rate of successful claims experienced by the Company in preceding periods and applying a projected distribution of the
claims across the 10-year warranty period. Whilst there is a degree of estimation in the calculation of this provision, any reasonable
sensitivity analysis in the rate applied to claims at the year end would not result in a material impact.
86
notes to the company financial statements
continued
11 Share Capital
Allotted, issued and fully paid:
Number
Nominal Value
£
31 December 2018
£
31 December 2017
£
Ordinary Shares
139,735,160
£0.001
Total
139,735
139,735
138,631
138,631
The table below summarises the movements in number of shares at the beginning and end of the period:
Ordinary
Shares
Share capital 31 December 2017
138,631,020
Nominal Value £
Value of Share capital £
Summary of Movements
£0.001
138,631
Exercise of share options over ordinary shares
1,104,141
Share capital 31 December 2018
139,735,161
Nominal Value £
Value of Share capital £
£0.001
£139,735
During 2018, 1,104,141 share options were exercised bringing the total share capital of the Company to 139,735,160 at 31
December 2018.
12 Financial Instruments
Categories of financial instruments:
Financial Assets
2018
£
2017
£
Cash and cash equivalents, trade receivables and other receivables
7,838,633
29,389,833
Financial Liabilities
Trade payables, other payables and provisions
(5,493,665)
(4,998,339)
‘Financial assets held at amortised cost’ include trade receivables, other receivables and cash and cash equivalents and
excludes prepayments and inventories. ‘Financial liabilities held at amortised cost’ include trade payables, accruals and
other payables. The carrying value of financial assets and liabilities approximates their fair value.
87
notes to the company financial statements
continued
12 Financial Instruments (continued)
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.
Capital risk
The Company’s objectives when managing capital (defined as cash and cash equivalents plus equity attributable to owners of the
parent) are to safeguard the Company’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 Company makes adjustments to its capital structure in light of changes to economic conditions and the
Company’s strategic objectives.
Credit risk
Credit risk is the risk that a counterparty may default on its obligation to the Company in relation to lending, hedging, settlement
and other financial activities. The Company’s principal financial assets are trade and other receivables, bank balances, and cash
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
is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. The
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
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.
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.
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.j
88
notes to the company financial statements
continued
12 Financial Instruments (continued)
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
2018
£
(13,098)
(222,770)
(136,256)
(2,007)
(114,551)
(169,410)
2017
£
(347)
(2,974)
-
347
2,974
-
A 10% percent strengthening of these currencies against the pound sterling at 31 December 2018 would have decreased profit or
loss by 1.84%. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures
existing at that date.
13 Related Parties
Key management compensation (considered to be the Directors of eve Sleep PLC) disclosures can be found in Note 6 of the Group
accounts and on pages 40 to 41 of the Director’s report.
14 Commitments
There were no commitments in the year.
15 Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2018
£
459,536
-
-
459,536
2017
£
-
-
-
-
The Group leases its office headquarters at 128 Albert Street, London, NW1 7NE. The non-cancellable operating lease rental disclosed
above relates wholly to these office headquarters.
During the year £767,480 was recognised as an expense in the income statement in respect of operating leases.
89
notes to the company financial statements
continued
16 Change in significant accounting policies
The Company has applied IFRS 15 using the retrospective with cumulative effect method – i.e. by recognising the cumulative
effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 January 2018. Therefore, the comparative
information has not been restated and continues to be reported under IAS 18 and IAS 11. There has been no quantitive impact of
adopting IFRS 15 on the Company’s financial statements for the year ending 31 December 2018.
The Company has adopted IFRS 9 with a date of initial application of 1 January 2018. The requirements of IFRS 9 represent a
significant change from IAS 39 Financial Instruments: Recognition and Measurement. Changes in accounting policies resulting from
the adoption of IFRS 9 have been applied retrospectively. There has been no quantitive impact of adopting IFRS 15 on the Company’s
financial statements for the year ending 31 December 2018, as follows:
•
•
Financial assets classified as Loans and Receivables under IAS 39 are held at the same valuation under IFRS 15 at Amortised
Cost;
Financial liabilities classified as Other Financial Liabilities under IAS 39 are held at the same valuation under IFRS 15 as Other
Financial liabilities
17 Subsequent events
Since the end of the Accounts Period, the Company has undertaken the following significant events:
On 11 February 2019, the Company completed a placing of 120,317,323 new ordinary shares of 0.1 pence each (“Ordinary Shares”)
in the share capital of the Company (the “Placing Shares”) at a price of 10 pence per Placing Share (the “Placing Price”) to raise
approximately £11.7m net of expenses (the “Placing”), from existing and new investors. In addition, Channel Four, which provides
advertising services to the Company and is an existing Shareholder, has agreed that £0.9m of future advertising spend by the
Company with Channel Four will, when payable, be satisfied by the issue of new Ordinary Shares at the Placing Price over a period
of up to twenty-four months from Admission.
In addition, it is proposed that share option plans with a grant date post-IPO (excluding those grants made in October 2017) will be
cancelled and replaced with a new share option plan. It is proposed that grants from this pool will be granted on the following basis:
(i) nominal exercise price of £0.001 per ordinary share
(ii) vesting monthly from the date of grant over a 3 year period
Following the year end, it was agreed by mutual consent that Abid Ismail, Chief Financial Officer of the Group, would step down as a
Director of the Company. Abid has agreed to stay on until Summer 2019 to effect a seamless transition.
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