annual report
eve Sleep plc 2020
co mpany number 092 61636
year ended 31 December 2 0 20
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e v e S l e e p p l c 2 0 2 0 a n n u a l r e p o r t
good morning
welcome to eve’s
2020 annual report
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c o n t e n t s
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c o m p a n y i n f o r m a t i o n
c h a i r m a n ’ s s t a t e m e n t
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s t r a t e g i c r e p o r t
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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
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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)
auditor
Nexia Smith & Williamson
James Sturrock (Non-executive Director)
Statutory Auditor
Thomas Enraght-Moony (Non-executive Director)
25 Moorgate
Tim Parfitt (Chief Financial Officer)
Nikki Crumpton (Non-executive Director)
(Resigned 30 September 2020)
London
EC2R 6AY
registered office
29A Kentish Town Road
Camden
London
NW1 8NL
registered number
09261636
Masood Choudhry (Non-executive Director)
(Appointed 3 February 2021)
Cheryl Calverley (Chief Executive Officer)
(Appointed 1 June 2020)
secretary
Link Company Matters Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
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g r o u p
chairman’s statement
eve is now a stronger, more resilient
business, with a ready-made platform
for future growth.
Pau l P inda r
completing the rebuild strategy
In what has been one of the most difficult
eve has continued to build on its
and unpredictable years for business, eve has
differentiated strategy of focusing on the
exited 2020 in far better shape than it entered
broader sleep wellness category as compared to
the year, through a combination of favourable
more mattress-focused peers where competition
external factors and sound execution of the
is largely price driven. Existing product categories
strategy. The accelerated transition to online
have been deepened with further products, as
ordering and the strength of the homewares
well as eve’s move into new categories. eve’s
market brought about by the pandemic has
first foray into gifting with Boots for a ‘well slept’
provided tailwinds for the business. Whilst the
range of sleep gifts for the Christmas period
sector remains highly competitive, there has
sold out and the new partnership with the
been an improvement in the landscape, with
French homewares retailer Olivier Desforges goes
the retrenchment of some online mattress
from strength to strength. In tandem with new
companies, as well as reduced store-based
partnerships, eve has exited those which were
competition, from both temporary and
not economically viable, including Amazon UK,
permanent shop closures.
in order to stay focused
The rebuild strategy is largely complete
on profitable sales growth.
and eve now has a more resilient and efficient
The Company continued its ongoing
technology, logistics and operational platform
investment in broadcast TV and supported its
for future growth. The product ranges have
existing ‘wake up dancing’ campaign with an
been expanded, alongside a broadening
additional new campaign designed to build
of distribution in both the UK and France,
long term brand presence for eve as a sleep
which has had the added benefit of further
wellness brand. This longer term investment is
raising brand awareness. Underpinning
a sign of increasing confidence in the business
the whole business is the quality of the
and its ongoing growth potential. The new
mattresses themselves, which have been
‘switch off with eve sleep’ campaign launched
widely recognised as best in class, consumer
in November 2020 and runs every Sunday night
champion Which? in November 2020 rating
across the Channel 4 estate, digital and mobile
eve’s original and its premium hybrid the two
advertising through until spring 2021.
best mattresses in the UK. The Premium Hybrid
The analytics on the campaign performance so
has also been awarded ‘Meilleur Choix’
far have been very positive, with payback above
(best choice) by the French equivalent of
projected expectations.
Which? - Que Choisir.
Over the last two years the entire operations
s t r a t e g i c r e p o r t : chairman's statement
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and processes of the business have been
£25.2m, driven by 19% growth in the second
carefully analysed and restructuring plans
half. This result, which exceeded the Board’s
put in place.
twice raised expectations, was achieved on
The consumer websites have been
a marketing budget 49% lower than the
re-platformed to Shopify, which, in addition to
previous year. Overheads (defined as wages,
providing an improved customer experience
salaries
and a more stable platform, reduces ongoing
and other administrative expenses but
maintenance costs and is easily replicable
excluding share based payment charges)
across markets. As part of wider Brexit
were also kept under tight control and
preparations to minimise any trade frictions and
33% lower than the prior year.
stay cost competitive, mattress manufacturing
The improved financial performance of
has been largely localised in the UK for the
the business was UK-led, with Ireland also
UK and Irish markets and Belgium for sales to
benefitting in the fourth quarter from some
the French market. Distribution capability for
marketing investment. This is reflected in the
the UK&I, in terms of both warehousing and
UK&I’s increased share of total revenues, which
carriers has also been upgraded, resulting in an
has risen from 78% in 2019 to 81% in 2020. The
improved customer experience and a reduction
French business, which has been reset during
in logistics cost through the consolidation
the year with minimal marketing investment,
of all items in an order into a single delivery.
improved its marketing contribution; defined
financial performance
ahead of expectations
The central focus of the rebuild strategy
as profit after all direct costs including
marketing but before overheads, by £1.5m.
acting responsibly
has always been to reduce losses and
We will continue to evolve our business
cash burn in order to put the business on
to minimise our wider impact on the world
a secure and sustainable long term footing.
and be a better corporate citizen. Our
Great progress in 2020 has been made in this
major initiative during the year was forming
regard, with underlying EBITDA1 losses cut by 81%
a partnership with TFR Group in the UK,
to £2.0m and statutory loss reduced by 83%
a prominent furniture recycling company,
to £2.0m. Cash generation was even stronger,
on the removal, rejuvenation and recycling
achieving a cash improvement of £0.4m, which
of mattresses. This policy is part of ensuring
after adjusting for £0.3m of tax payments
that 100% of eve sleep’s returned mattresses
deferred until post period end, resulted in a
are diverted away from landfill, saving over
maiden cash flow neutral position for the full
100 tonnes of waste, whilst also optimising
year. Accordingly, eve closed the year with a
revenue recovery. A separate partnership
healthy statement of financial position, with
with our carriers also encourages customers
£8.4m (2019: £8.0m) of cash and no debt (other
to have their previous mattress removed
than the lease liability for our office premises),
and recycled at the point their new mattress
without recourse to any further funding.
is delivered.
The period was dominated by the
pandemic, with heightened sales volatility in
the early months of the year. Sales from May
onwards grew strongly and have remained at
elevated levels as a result of the trend to online
ordering and the strength of the homewares
market. Sales for the full year grew by 6% to
Notes
1.
Underlying EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment, share-based payment charges connected with
employee remuneration (2020 and 2019), fundraise-related expenditure (2019 only), adding back IFRS16 adjustments to office lease costs. Underlying
EBITDA reflects what management believe to best demonstrate the underlying performance of the business in a given year.
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s t r a t e g i c r e p o r t
all credit to our people
This year has brought about
model, which limits both the initial risk but
unprecedented change for our team, who
also the financial upside.
have been working through the rebuild
We will continue to invest steadily in
strategy since late 2018. During the first
the UK, with efficient marketing now driving
national lockdown in May we announced
consistent growth and a positive marketing
a change in CEO with the promotion of
contribution. We anticipate a slowing in our
Cheryl Calverley, eve’s Chief Marketing
rate of UK progress from around May as a
Officer at the time, replacing James
result of tougher comparatives and a likely
Sturrock, who has stayed on as a
shift in consumer spending to out-of-home
non-executive director. The entire team has
as the country exits lockdown measures.
once again adapted and stepped up to
However, we firmly believe that the recent
the challenge, showing great flexibility and
shift to e-commerce will not reverse, and
fortitude, including making a seamless move
the underlying trend of sleep wellness, on
to home working from March and ensuring a
which the eve brand is built, is a fundamental
smooth transition to Cheryl’s leadership.
societal force that will continue in the long term.
We are proud to have been able
We plan to increase investment in France
to navigate 2020 without the need to
through 2021 and build on the higher profile
announce new redundancies or furlough
that our highly successful retail partnership
staff. Having met our targeted performance
with Olivier Desforges has provided. This will
objectives for the year we have been able
accelerate our growth in the country and
to pay a bonus to each and every staff
provide a more balanced and sustainable
member by way of a thank you to our team
growth profile to the wider business. Unlike
for their unswerving commitment to eve. Our
the UK, France has not experienced such
team remain our greatest asset and we will
an accelerated shift to e-commerce over
continue to invest in their development,
the past year, having maintained ‘open high
safety and well-being.
a brighter outlook
streets’ through most of the pandemic.
We expect good growth from France in 2021
and beyond through a combination of the
continued structural shift to online, combined
Trading for January and February has
with investment in our own established and
continued to be strong, benefitting from the
award winning proposition.
ongoing weekly TV campaign in the UK, the
With the rebuild strategy now largely
latest Which? ratings and the wider behavioural
behind us, eve is now well placed to embrace
shift to online purchasing. Revenue growth
the future with renewed confidence.
Paul Pindar
Chairman
17 March 2021
for the first two months of the year of 16%
represents an improvement from the last
quarter of 2020 and has been boosted by an
easing of supply constraints and improved
stock management, which had previously held
back the rate of growth in late 2020. Whilst
we are still experiencing some challenges
in componentry supply and inflationary
pressures, we expect these issues to further
ease in the coming months.
In the year ahead we will also continue
to expand and deepen our product offering.
These wider categories including gifting and
CBD are initially trialled through a license
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s t r a t e g i c r e p o r t
strategic review
well placed in a large, fragmented,
rapidly changing market
Sleep is increasingly recognised as an
consequent switch to working from home,
essential element of wellness at a time when
coupled with a lack of leisure spending
wellness has never been more important. There
alternatives, drove a strong increase in industry
is a growing body of research and evidence
wide demand for bedding and homewares
which testifies to the importance of sleep
products. Consumers en masse literally
and the risks to physical and mental health
‘bedded down’ for lockdown as they sought
of insufficient sleep. In a poll commissioned
to renovate their homes and bedrooms.
by eve and taken shortly after the start of the
Data from Barclays UK Consumer Spending
pandemic, as many as 48% of respondents
Reports show that spending in the Household
said that they were kept up due to worry
category experienced double digit year-on-
about COVID-19 and nearly one in four
year growth each and every month from June
admitted that their quality of sleep was worse
2020 through December 2020.
than ever. ‘Sleep’ has now overtaken both ‘diet’
The growth in spending has been online
and ‘exercise’ as the most searched for term
led, resulting in an acceleration of the trend to
on google (UK) across the ‘wellbeing triad’
ecommerce. Data from the Office for National
of ‘sleep’, ‘diet’ and ‘exercise’, showing the
Statistics shows that non-food retail sales
increased awareness that consumers have of
online grew to 25.5% of all sales in Q4 2020,
this vital component of wellbeing.
from 12.9% in Q4 2019. Historic data suggests
With the increasing understanding of the
that shifts to online show limited tendency to
importance of sleep has come consumer
reverse, and with the country entering 2021
change. Consumers are spending more on
in its third national lockdown and all but
wellness and the sleep market has been a
essential shops closed, it is reasonable to
beneficiary of this. Not only are consumers
assume that a substantial element of the shift
spending more on sleep wellness related
to online will become permanent.
products, they are also willing to spend
Whilst the sector remains fragmented and
more on the central element of a good
highly competitive the competitive landscape
night’s sleep; the mattress. The strong sales
across beds and mattresses has eased, with a
performance of eve’s premium hybrid mattress
number of online mattress providers choosing
testifies to this point, generating over 30% of
to retrench from the UK market, alongside a
mattress sales by volume. Every customer
reduction in store based competition, both
that purchases an eve mattress is asked at
permanent and temporary as a result of the
100 days whether they’re sleeping better
pandemic. There is also evidence to suggest
thanks to their eve, and 80% tell us they are. A
that the mattress in a box brands are growing
strong piece of advocacy for the quality and
their share of the market. Despite the level of
effectiveness of our products.
ongoing competition in mattresses, there is
Sleep is a huge market, which has evolved
no company that as yet has established itself
substantially since the start of the pandemic.
as a sleep wellness brand which commands
Data from Euromonitor estimates that the
widespread recognition and brand loyalty.
European sleep market is worth approximately
eve’s ambition is to achieve just this; to be
£26bn, with the Core Markets that eve is
seen as the go to brand for sleep wellness
focused on (UK&I and France) being worth
products, content and support across a range
approximately £6bn.The advent of the first
of categories and sales channels.
national lockdown from March 2020 and the
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s t r a t e g i c r e p o r t
business model
eve is an agile, digitally native business, with
marketing, operations and customer
a direct to consumer (DTC) led proposition,
experience. In-line with many in the industry,
supported by partnerships with leading
manufacturing and fulfilment, which require
retailers. This omni-channel approach reflects
heavy fixed cost investment, are outsourced
how consumers increasingly identify, research
to leading third party suppliers in the UK
and purchase items, moving seamlessly
and Continental Europe. This setup helps
between online and offline channels. By
to de-risk the business in terms of currency
being where the customer is, without incurring
and any potential trade frictions. It has also
the fixed costs of a large store estate, eve
proved to be highly scalable and flexible,
increases its potential sales opportunities
enabling significant seasonal variations in
and grows its brand awareness and product
product demand to be met without any
understanding.
noticeable margin impact or variance
Building a strong brand and customer
in stock holding. There is a close working
experience and ultimately therefore enjoying
relationship with eve’s manufacturing
repeat sales is at the centre of the eve model
partners to innovate and develop best in
and is essential to attaining profitability.
class products that out-perform competitors
To achieve this goal eve is focused on
in terms of function and design, as
establishing itself as a go to brand for sleep
evidenced by the high performance of the
wellness products, providing the authority and
Premium Hybrid and Original Hybrid ranges
consumer trust to sell a broader range
in Which? Consumer surveys.
of products at a greater frequency across
The outsourced manufacturing and
the category.
fulfilment model, coupled with the DTC-led
As a DTC-focused business, eve has the
setup, enables a lower and more flexible
privilege of vast amounts of first party data
cost base than a traditional retailer. This
from which to better understand customer
has been evident throughout the rebuild
needs and to evolve both its marketing and
strategy, where non-profitable sales have
its product offering. This enables the business
been cut, processes completely overhauled
to deliver better targeted incentives for
without the negative margin impact and/
customers to return and buy further products
or incurrence of substantial restructuring
directly from eve. Some 13.2% of customers
costs which would typically be expected
that purchased an eve product in 2018 have
from a more asset backed business. For
returned to buy further eve products in the
eve, marketing is one of its largest costs,
subsequent two years.
but unlike rent, it is flexible in nature and
As a brand-led business, resources in
is quick and easy to scale up and down
terms of investment and talent are focused on
as well as optimise and accelerate where
the key operations of product development,
opportunities arise.
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s t r a t e g i c r e p o r t
chief executive’s report
we have navigated the many challenges
of 2020 well and enter 2021 in good shape
thanks to the tireless dedication, creativity
and commitment of the entire eve team.
C he r yl Calverley
introduction
Taking on your first CEO role can be daunting
2019, and statutory losses reduced by 83% to
at the best of times but add in a global
£2.0m. The improvement in cash generation
pandemic, an unplanned for acceleration
has been even more dramatic, with the Group
in demand and your entire team working
reporting its first ever neutral cash flow for the
from home and the challenges quickly
year, after adjusting for £0.3m VAT payments
multiply. However, I am pleased to say that the
from 2020 Q1, which were deferred until after
transition in May 2020 went smoothly, with no
the year-end under the UK Government’s
noticeable impact on performance. This has
Coronavirus support measures. This compares
been aided by my deep involvement in the
with a net cash outflow of £10.1m (excluding
rebuild strategy since joining eve in December
£12.0m equity funding) in 2019 and an outflow
2018 as Chief Marketing Officer and the
of £21.0m in 2018 and means eve exits 2020
strong culture of dedication, care, creativity
with a healthy cash balance of £8.4m and
and commitment across the entire eve team,
no debt, other than the lease liability on our
something that has been a priceless asset
office premises.
during this remarkable period.
The improvements to infrastructure and
I first joined eve because I could see
operations of the business are less visible
the unique opportunity to build a sleep
but of equal, if not greater importance. The
wellness brand. A brand of significant size and
restructuring that has taken place to date is
strength occupying an uncontested territory,
about more than just greater efficiency, it is
meeting a rapidly growing consumer need
about building a platform and a collection
with a differentiated proposition to the more
of product and marketing assets that can
price led, mattress focused competitors, or
be readily scaled across markets, without
generalist homewares retailers. I am pleased
markedly increased overheads or damaging
to say that that opportunity still remains and
the customer experience. We have been
during 2020 we’ve made good progress
rebuilding in preparation for future growth,
towards achieving this, as part of our wider
and whilst work will remain ongoing, eve now
rebuild strategy.
has a tech platform that can be rolled out
Since taking over as CEO the focus has
across new markets without incurring higher
remained on delivering the rebuild strategy,
overheads. Complementing this more scalable
with the central goal of putting the business
platform is a broader product set, a brand
on a more sustainable, long term financial
positioning and a marketing strategy that is
footing. The improvement in the financial
instantly replicable across markets, supported
performance is clear to see with underlying
by a highly scalable logistics and customer
EBITDA losses in 2020 reduced by 81% year-
service operation.
on-year to £2.0m on revenues 6% higher than
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s t r a t e g i c r e p o r t
the rebuild strategy
To best evaluate the performance of the
business in 2020 it is necessary to analyse
the performance against the three core
pillars of the rebuild strategy:
• differentiated brand positioning;
• expanded product range; and
•
lower friction customer experience.
differentiated brand positioning
To differentiate eve from the other mattress
During the first half of the year, we grasped
in a box brands, where competition is largely
the opportunity offered by the depressed
price-led, our strategy is to establish eve as
TV market to run our existing, highly effective
a trusted destination for high quality sleep
campaigns in both the UK and France. These
wellness products. To achieve this, we have
drove a strong customer response and
refocused our marketing communications on
further gains in marketing efficiency.
the benefits that eve can bring consumers in
The success of our marketing is
sleep wellness. A fine example is where eve
demonstrated in our unprompted UK brand
partnered with Channel 4 to celebrate World
awareness, which increased from 15% in
Sleep Day on 13 March 2020 by removing the
August 2019 to 17% at August 2020. This
brain-stimulating blue light from TV ads and
understates the full improvement achieved
replacing it with an amber-coloured filter to lull
during the year, with the benefits of the
viewers into a good night’s sleep. This initiative
latest TV campaign that launched in
was supported by an eve ad, which aired on
November and the brand presence in Boots
a Sunday evening time slot on Channel 4 and
to come through in the next survey.
related channels, providing simple and effective
Our Irish business, which is now ready
sleep tips to further amplify the eve message.
for growth, benefited from some increased
The concept evolved further with the
marketing investment in the fourth quarter
new UK campaign, ‘switch off with eve sleep,’
of the year, though this was not extended
which leant on some of the key themes from
to TV. Marketing investment in France, with
the World Sleep Day campaign. The new
the exception of the running of a small
campaign, which launched in November 2020
amount of TV media utilising an existing TV
and runs every Sunday night on Channel 4
campaign in May was minimal during the
through to spring 2021, revived the iconic
year, as the business is at an earlier stage
‘test Card F’, which until 1997, signalled the
in its development than the UK.
end of programming in a bid to encourage
In addition to refocusing the positioning
the nation to switch off their minds and
of our brand, considerable effort has
bodies and start winding down for bed.
gone into improving marketing efficiency,
The campaign extends to casual gaming,
including the development of enhanced
popping up on the screens of popular gaming
data analytics. Subsequent marketing
apps such as Candy Crush, to remind
investment has been evaluated in depth,
users that it is time to grab some sleep.
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s t r a t e g i c r e p o r t : chief executive's report
with the removal of channels that were not
Complimenting the increased mattress and
generating a sufficient return, in line with our
bed frame range is ongoing growth in the
strategy of focusing on profitable sales. The
bedding ranges, with the notable addition
success of this strategy is best evidenced in
of eve’s first weighted blanket in the second
the efficiency of our marketing spend, which
half of the year, to combat anxiety and aid a
has improved in all three of our markets in
restful sleep. The weighted blanket forms part
tandem with growing awareness in the UK. In
of eve’s exploration into sleep accessories
the UK&I marketing efficiency has improved
alongside its new ‘well slept’ range of sleep
from 52.3% in 2019 to 25.1% in 2020. This is the
wellness gifting products and supporting items
fourth successive year of improvement and we
such as bedside storage and sleep aids.
are now confident our marketing efficiency
In the second half of the year eve
has reached sustainable levels. In France,
announced the launch of this first ever
marketing efficiency improved from 44.1%
gifting range of sleep wellness products, with
in 2019 to 21.0% in 2020, though it should be
Boots UK. The range was launched online
recognised that our ambition is not to sustain
and exclusively in 446 Boots wellness areas
these levels, but to invest for further growth
nationwide as part of its Christmas promotion
in France.
expanded product range
Range expansion offers eve a clear trajectory
to leading the sleep wellness space and
provides the opportunity to grow the
frequency of customer purchases. Mattresses
remain at the heart of the business and
increased from four to seven products in the
year, with the relaunch of the Original Hybrid
mattress in October a key move in response
to the increasing importance of the hybrid
category to the mattress market. eve also
offers a cot mattress as part of its child and
baby offering. Recognition of the quality of the
product range is widespread and eve now has
the top two most highly rated mattresses in the
UK – the Original and Premium Hybrid - and
three of the top five mattresses, according to
consumer champion Which?. In France the
Premium Hybrid Mattress has been awarded
the ‘Meilleurs Choix’ (best choice) by the
French equivalent of Which?.
eve has further expanded its range of
bedframes, and now offers four distinct styles,
two of which offer ‘storage’ options. Furniture
represents 5.8% of eve’s sales value for 2020,
with furniture sales growing 40% year on
year in the UK. As with mattresses, eve sees
particularly strong sales in its premium ranges,
with the more expensive ‘spindle back’ range
now representing almost 10% of bed frame
sales across the Group.
and comprised a range of smaller items from
candles and diffusers to hot water bottles and
pyjamas. The range proved highly successful
and sold out quickly, despite the turbulence
on the high street. The partnership’s key focus
was to further raise eve’s brand awareness and
extend knowledge of our products to a wider
audience.
To best measure the success of range
extension we have introduced a new KPI,
which is the percentage of customers who
make a repeat purchase within two years
of their initial order. This new KPI will replace
the existing KPI that measures sales of non-
mattress products as a percentage of total
revenues. For the base year of 2020 the
percentage of customers who had repeated
was 13.2%.
lower friction customer
experience
During the year there has been extensive
work on restructuring the e-commerce
platform, manufacturing and distribution
processes that ultimately underpin the
customer experience and drive a higher
conversion rate, as well as improving cost
efficiency. The ecommerce websites for our
three markets of the UK, Ireland and France
were re-platformed to Shopify during the
year, with France completing shortly after
the period end. The new platform requires less
s t r a t e g i c r e p o r t : chief executive's report
17
ongoing maintenance and provides greater
The rapid and unplanned for uplift
stability at times of high traffic, which proved
in demand that followed the start of the
invaluable during the record Black Friday
pandemic caused some early capacity
and winter sale periods. This has improved our
issues in terms of speed of delivery and
baseline performance, reducing failure and
an overstretched customer service team,
error on-site, and opens up opportunity for
resulting in not all customers receiving
further improvement in functionality without
the first rate service that they rightfully
increasing overheads.
deserve. To address this issue, eve invested
In 2020 the business restructured its
in bolstering the Customer Experience team
mattress manufacturing, which remains
with new hires over the summer months. To
outsourced to third parties, to run along
further support customers during a difficult
geographic lines. Having previously worked
socio-economic time, in April, eve increased
with three manufacturers in the UK, France and
its ‘risk free trial’ period from 100 to 200 nights
Belgium, this was reduced to two, resulting in
and introduced an additional discount
mattresses for the UK and Irish markets being
for all NHS staff. The trial period has now
made in the UK and those for the French
returned to 100 nights, having seen very
market largely manufactured in Belgium.
little uptake beyond the usual 100-night end
Concentrating manufacturing within end
point, but the NHS staff discount remains.
markets has clear benefits in the post-Brexit
The aggregate impact of the above
era in terms of frictionless trade, speed of
initiatives that should continue to benefit
delivery to customers and lower warehousing
2021 has been a 60 bps increase in the
and delivery costs.
group-wide conversion rate in 2020, which
Historically eve has worked with a variety
follows a 30 bps increase in 2019.
of carriers in each of its three territories
depending on the size of the product being
delivered. Customer orders, which contained
products of different sizes, would be delivered
responsible business
separately by several carriers, increasing
As a business we recognise our
costs and providing the customer with a sub-
responsibility to our stakeholders and the
optimal experience. Since the implementation
wider community at large. We continue
of Shopify, this issue has been resolved for the
to make improvements throughout
UK and Irish markets and will be extended to
our operations in order to reduce our
France in 2021. Orders are now consolidated
environmental footprint. Our localised
to allow all items in an order to be delivered in
production facilities mean that we are not
a single delivery. In Q2 eve further introduced
trucking or airfreighting long distances, while
a new delivery service of ‘remove and recycle’
our mattress packaging boxes are produced
allowing customers to have their previous
in the UK and made from Forest Stewardship
mattress removed and recycled at the point
Council approved card.
their new mattress was delivered. This has
In early 2020 eve partnered with TFR
had a strongly positive customer response
Group in the UK, a prominent furniture
with uptake over 30% of all orders.
recycling company, on the removal,
Warehouse consolidation took place
rejuvenation and recycling of mattresses.
in 2019 in the UK, moving from three to one
The partnership includes taking them
facility. The new site, which is under third party
through stringent sanitisation and quality-
professional management has a superior
check processes before rolling and boxing,
stock management system and this has
saving on CO2 emissions, storage and re-
enabled further efficiencies and improvements
delivery. This also lets the end refurbished
in 2020, including the need to hold less stock
mattress customer enjoy the benefits of a
and occupy less warehouse space.
rolled mattress. To date the partnership has
achieved a rejuvenation
18
rate of approximately 60%. Remaining
our extended leadership team share options
mattresses that are not capable of being
so they can share in the success they bring to
rejuvenated are broken down and each
the business.
material individually recycled.
At the same time we have moved
This policy is part of ensuring that 100% of
to a flat bonus structure, meaning everyone
eve sleep’s returned mattresses are diverted
in the business, regardless of salary, tenure
away from landfill, saving over 100 tonnes of
or experience receives the same cash reward
waste, whilst also optimising revenue recovery.
at year end, should we achieve our aims. This
A separate partnership also encourages
further fosters our culture of transparency,
customers to have their previous mattress
equality and openness, whilst showing real
removed and recycled at the point their
respect for the efforts each and every one
new mattress is delivered.
of the team put in to help us achieve our
culture and diversity
mission of sleep wellness.
Our focus on diversity has just begun
in earnest with two key initiatives. Firstly an
evolution to our approach to recruitment to
We thrive on individuality at eve. We believe
ensure we recruit purely on capability and
that irrespective of age, gender, ethnic origin,
blind to background, through the introduction
religion, sexual orientation, gender identity,
of the ‘applied’ blind recruitment software.
gender expression, or disability, eve should be
And secondly, in November we took on our
a place of opportunity, respect and support
first apprentice in the marketing department,
for individuals to be themselves, allowing them
in partnership with the Marketing Academy.
to do their best work. We understand that our
eve is pleased to present the following
people, capability and culture are one of the
metrics relating to gender balance as at 31
most powerful competitive advantages that
December 2020. The following breakdown
we have, and a focus on developing talent,
shows the number of persons of each sex
retaining high performers and attracting a
who were:
diverse intake are core to our future success.
There has been significant investment in the
period and beyond in the development of
our leadership team, with leadership skills
training and individual coaching core to this.
To widen our positive impact on development
further, we have been working with ‘You
Can Now’ giving students of design globally
the opportunity to learn their craft on a live
‘eve’ brief to further develop our products
and brand. Our business wide investment
in learning was recently recognised by the
Campaign for Learning for its impact.
Retaining and motivating our key talent
whilst engaging the whole eve business with
the challenges at hand has been top of our
mind. To this end we have this year redesigned
our rewards and benefits scheme, awarding
(i)
(ii)
directors of the company;.
senior managers of the company
(other than those falling within category (i)); and
(iii)
employees of the company.
Male
Female
Directors
Senior Managers
Employees
4
3
15
1
2
36
19
the next two years
With the restructuring of the business now
2021 will see a substantial increase in
largely complete and the technology, logistics
marketing investment in France, targeted
and operations placed on a more stable and
on a new marketing campaign, including
efficient platform, the time is right to update
TV, which is expected to launch in the
the strategy for the next two years. The Group’s
spring. There will also be an increased focus
focus will be on accelerating the business
on retail partnerships, including but not
through the three pillars of Growth, Customer
limited to an expansion of the successful
Obsession and Resilience. Growth, as defined
relationship with homewares retailer Olivier
in terms of profitable revenues, will be the
Desforges.
primary objective and will be achieved from
The Irish market received some
new and existing markets as well as
increased focus and investment in the
a continued focus on product development,
fourth quarter of 2020 and this will continue
with Customer Obsession and Resilience the
through 2021. As the strategy develops and
key enablers. Customer obsession will focus
progress is achieved in France and Ireland
on developing products and services that
we will look at entering new European
help people sleep so well, and a customer
markets. Expansion will be executed in a
experience so seamless that they become
controlled and disciplined way, leveraging
vocal advocates for the brand. Resilience for
existing infrastructure and product assets in
eve can be defined as having a strong and
order to keep a tight control of costs.
stable tech, team and operational capability
The investment in growth is expected
that can adapt quickly to changing market
to increase costs in the current year. The
conditions in existing markets and expand into
strategy does not represent a return to the
new territories at minimal cost, whilst enjoying
past, but a well thought out and costed
robust margins.
strategy to accelerate to a sustainable,
The UK is eve’s largest market and has
profitable and balanced business. The
been the engine of growth in 2020, benefitting
investment required
from not only the strong external tailwinds
to finance the growth will come from the
but also the significant improvement in
Group’s existing cash resources.
marketing efficiency and the addition of the
new TV led campaign from November 2020.
We will continue to invest in the UK market
over 2021, including the running of our weekly
TV campaign until the spring, to maintain
sales momentum and leverage our position
as having the two best mattresses in the UK
Cheryl Calverley
according to consumer champion Which?.
Chief Executive Officer
To build a stronger, broader and larger,
17 March 2021
profitable business we must look beyond the
UK market for balanced growth. Our near term
focus is on the French market, where we have
traded since 2016. Like the UK, our French
business has been restructured as part of the
rebuild strategy, including a re-platforming
of the website to Shopify which completed
shortly after the period end, but unlike the
UK it has not received significant marketing
investment in recent years.
20
s t r a t e g i c r e p o r t : chief executive's report
key performance
indicators
In 2020, the key performance indicators
(KPIs) used to evaluate and monitor the
performance of the business were as follows
and are designed to support the three core
pillars of the rebuild strategy (differentiated
brand positioning, extended product range
and lower friction customer experience). There
are three financial KPIs and five operational KPIs.
financial KPIs
Overall
revenue
growth
Marketing
efficiency
Underlying
EBITDA1
operational KPIs
UK brand
awareness
Product
return rates
eve website
conversion rate
eve customer
sleep wellness
score
Non-mattress
revenue
growth
Notes
1.
Underlying EBITDA is defined in the Glossary on page 23
21
22
s t r a t e g i c r e p o r t : key performance indicators
update to KPIs for 2021
Operational KPIs relate to group performance
To reflect the updated strategy which
across all three markets unless otherwise stated.
will focus on the new three pillars
As can be seen in the data provided below,
of Growth, Customer Obsession and
all financial KPIs improved significantly in the
Resilience, eve will be updating one
period, along with four of the five operational
of the KPIs. From 2021 onwards rather
KPIs. Importantly, for the first time eve has generated
than reporting the increase in non-
revenue growth, whilst also improving the bottom line
mattress sales as a proportion of total
performance of the business, with an 83% reduction year-
sales, by way of a proxy for repeat
on-year in underlying EBITDA losses.
business, the Group will report the
The 200bps growth in unprompted brand
percentage of customers who have
awareness probably understates the full improvement
actually made a second purchase
given that the survey was undertaken before the
within two years of the initial order.
benefits of the latest UK TV led marketing campaign
This new operational KPI: ‘Repeat
and the Boots UK licensing deal. The conversion rate
Customers’, more accurately measures
has now improved for the last three years, which not
the focus on growth through customer
only underpins improved marketing efficiency but also
obsession and establishing eve as
testifies to the continued improvements that have
the go to place for all sleep wellness
been made to the third pillar of lower friction customer
needs. For the base year 2020 the
percentage of customers making a
repeat purchase within two years was
13.2%.
experience.
financial KPIs
• Group revenue increased by
6% to £25.2m (2019: £23.9m)
•
Improvement in Group marketing
efficiency by 2634bps to 24.2% (2019: 50.5%)
• Group underlying EBITDA losses reduced
by 81% to £2.0m loss (2019: £10.7m loss)
operational KPIs
• Unprompted UK brand awareness: 200bps
increase in unprompted UK brand awareness
to 17.0% at August 2020 (August 2019: 15.0%)
•
120 bps year-on-year improvement in the
returns rate to 7.8% (2019: 9.0% restated)
•
60 bps year-on-year improvement
in the eve websites conversion rate
• eve customer sleep wellness score:
8/10 (2019: 8/10)
• Decrease in non-mattress sales as a proportion
of total sales by 480bps to 20.8% (2019: 25.6%)
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, thus
as the reported percentage falls
marketing efficiency improves.
underlying EBITDA – earnings before
interest, tax, depreciation, amortisation and
impairment, share-based payment charges
connected with employee remuneration
(2020 and 2019), fundraise-related expenditure
(2019 only), adding back IFRS16 adjustments
to office lease costs. Underlying EBITDA
reflects what management believe to best
demonstrate the underlying performance
of the business in a given year.
s t r a t e g i c r e p o r t : key performance indicators
23
non-mattress sales as a proportion of
total sales – % of reported sales attributable
to non-mattress products for the specified
financial 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
the 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 by the total website
traffic. This figure is compared
on a bps movement between periods.
eve customer sleep wellness score – the
average number of customers out of every
ten customers that report improved sleep
as a result of purchasing an eve mattress
(internally assessed using post-purchase
email campaigns, sent to all customers who
have purchased a mattress in the period).
24
25
financial review
eve achieved 6% growth in group
revenue and at the same time
doubled the marketing efficiency
and reduced underlying EBITDA
losses by more than 80%.
Tim Parfitt
group financial performance
£m
Group revenue
Group profit
Distribution expenses
Profit after distribution expenses
Payment fees
Marketing costs
Profit/(loss) after distribution expenses,
payment fees and marketing costs
Wages & Salaries (excluding share-based payment charges)
Other administrative expenses
Share-based payment charges connected to employee remuneration
Operating loss
Net finance income
Loss before tax
Taxation
Loss after tax
Reconciliation to underlying EBITDA:
Taxation
Net finance income
Fundraise-related expenditure
Share-based payment charge connected to employee remuneration
Depreciation and amortisation
Impairment
Underlying EBITDA (as stated in 2019)
Application of IFRS 16 to lease for serviced office
Underlying EBITDA (restated)
2019
Movement
2020
25.2
14.4
(3.5)
10.9
(0.5)
(6.1)
4.3
(3.3)
(3.2)
(0.2)
(2.4)
-
(2.4)
0.4
(2.0)
23.9
12.7
(2.7)
10.0
(0.4)
(12.1)
(2.5)
(4.4)
(5.0)
(0.5)
(12.5)
-
(12.5)
0.4
(12.1)
(0.4)
(0.4)
-
-
0.2
0.7
-
(1.5)
(0.5)
(2.0)
-
0.2
0.5
0.5
0.6
(10.7)
(0.2)
(10.9)
+6%
+14%
+28%
+10%
+25%
(49%)
(269%)
(24%)
(37%)
(57%)
(80%)
(80%)
+18%
(83%)
(85%)
(81%)
s t r a t e g i c r e p o r t
s t r a t e g i c r e p o r t : financial review
26
group financial performance as a % of revenue
% of Revenue
Gross profit
Distribution
Profit after distribution
Marketing
Administrative expenses excluding marketing
Administrative expenses excluding marketing, fundraise-related
expenditure, depreciation, amortisation and impairment expenditure
2020
57.3%
(13.9%)
43.4%
(24.2%)
(28.0%)
(25.5%)
2019
53.1%
(11.4%)
41.7%
(50.5%)
(41.4%)
Movement
+418bps
+244bps
+174bps
(2634bps)
(1335bps)
(35.9%)
(1044bps)
Wages & salaries (excluding share-based payment charges)
(13.2%)
(18.4%)
(515bps)
UK&I financial performance
£m
Revenue
Gross profit
Distribution
Profit after distribution
Payment fees
Marketing
Profit/(loss) after distribution, payment fees and marketing
2020
20.5
11.8
(2.7)
9.1
(0.5)
(5.0)
3.6
2019
18.5
10.2
(1.8)
8.4
(0.4)
(9.7)
(1.7)
Movement
+11%
+16%
+47%
+10%
+31%
(47%)
+308%
Marketing costs as % of revenue
(25.1%)
(52.3%)
(2725bps)
France financial performance
£m
Revenue
Gross profit
Distribution
Profit after distribution
Payment fees
Marketing
Profit/(loss) after distribution, payment fees and marketing
2020
4.6
2.5
(0.8)
1.7
(0.1)
(1.0)
0.6
2019
5.3
2.6
(1.0)
1.6
(0.1)
(2.4)
(0.9)
Movement
(14%)
(3%)
(17%)
+6%
(22%)
(59%)
+173%
Marketing costs as % of revenue
(21.0%)
(44.1%)
(2308bps)
other financial performance
£m
Revenue
Gross profit
Distribution
Profit after distribution
Payment fees
Marketing
Profit after distribution, payment fees and marketing
2020
0.1
0.1
0.0
0.1
(0.0)
0.0
0.1
2019
(0.0)
(0.1)
0.1
0.0
0.0
0.0
0.0
Movement
+424%
+263%
(100%)
+750%
(378%)
(75%)
27
s t r a t e g i c r e p o r t : financial review
revenue
Revenue increased by 6% to £25.2m (2019:
As a result of this focus, the Group
£23.9m). The growth was driven by UK&I which
successfully more than doubled the
lifted 11% to £20.5m (2019: £18.5m), with
efficiency to 24.2% (2019: 50.5%) an
the direct-to-consumer channel performing
improvement of 2634bps. UK&I improved by
exceptionally well. France revenue declined
2725bps to 25.1% (2019: 52.3%) and France
by 14% to £4.6m (2019: £5.3m) following a
improved by 2308bps to 21.0% (2019: 44.1%).
large reduction in marketing investment.
gross margins
profit after distribution,
payment fees and marketing
Gross margins for the Group improved by
Both core markets of UK&I and France
418bps to 57.3% (2019: 53.1%). This was a result
achieved profits after distribution, payment
of the more profitable direct-to-consumer
fees and marketing. UK&I delivered a £5.3m
business growing as proportion of total sales
improvement to £3.6m (2019: £1.7m loss)
and also from a rigorous focus on margin
and France delivered a £1.5m improvement
and the decision to exit unprofitable retail
to £0.6m (2019: £0.9m loss).
partnerships when appropriate.
distribution costs
administrative expenses
(excluding marketing)
Distribution costs as a percentage of revenue
Wages & salaries (excluding share-based
increased by 244bps to 13.9% in 2020 (2019:
payment charges connected with employee
11.4%). The mattress sales mix shifted from
remuneration) reduced by £1.1m to £3.3m
the previous year to more premium products
in 2020 (2019: £4.4m) following reductions
which are heavier and therefore more
in headcount made at the end of 2019. This
expensive to deliver. The relative increase in
represents a decrease from 18.4% to 13.2%
direct-to-consumer revenue also added to
of Group revenue.
the higher costs as a smaller proportion of
Other administrative costs reduced
orders were shipped in bulk to retail partners.
by £1.8m to £3.2m (2019: £5.0m).
In the final quarter this increase was partially
The application of IFRS 16 to the office
offset by consolidating customer deliveries
lease costs has resulted in a depreciation
where possible. Previously customers could
charge of £0.5m (2019: £0.2m). The adoption
receive multiple deliveries for a single order.
was applied from August 2019 onwards,
This has become possible following the UK
when the Group moved to its existing
implementation of Shopify.
marketing investment
The Group marketing investment was reduced
by 49% to £6.1m in 2020 (2019: £12.1m). As
a key performance indicator, the marketing
efficiency, defined as marketing costs as a
percentage of revenues, is closely monitored
and investment targeted to achieve the
best possible outcome.
premises. Included in Other Administrative
Costs for 2020 is a charge of rent and rates
of £nil (2019: £0.5m).
There were further reductions to
administrative costs with £nil impairment
charge (2019: £0.6m), £nil fund raising
expenses (2019: £0.2m) and £0.2m share
based payment charges relating to
employee remuneration (2019: £0.5m).
28
s t r a t e g i c r e p o r t : financial review
underlying EBITDA loss
loss after tax
(Defined as: earnings before interest, tax,
depreciation, amortisation, impairment
charges, share-based payment charges
relating to employee remuneration,
fundraise-related expenditure in 2019, adding
back IFRS16 adjustments to office lease costs).
The loss after tax improved by £10.1m
to £2.0m loss (2019: £12.1m loss).
capital expenditure
The Directors consider that they are best
Due to the Group’s outsourced business
able to monitor Group financial performance
model, capital expenditure requirements
via underlying EBITDA by removing fundraise-
remain low. The main area of capital
related expenditure, share-based payment
expenditure in 2020 related to ecommerce
charges relating to employee remuneration
and ERP systems infrastructure. Total capital
and adding back the office lease costs which
expenditure in 2020 in the form of intangible
represent a material monthly cash outflow.
software assets totalled £0.3m (2019: £0.5m).
This has been restated from 2019 as the office
lease costs were previously shown for only part
of the year, and the new lease effective from
August 2019 was presented under IFRS 16.
The application of IFRS 16 has resulted in
a depreciation charge recognised in 2020 of
£0.5m (2019: £0.2m). Under IAS 17, expenditure
relating to operating lease rentals would have
been included within administrative expenses
and hence EBITDA.
The underlying Group EBITDA loss
decreased by £8.9m to £2.0m loss in 2020
(2019: £10.9m loss). The 81% reduction in
the loss reflects the increased focus on
working capital
Inventories reduced by 64% to £0.6m (2019:
£1.6m) through better management of stock
and realisations from obsolete inventory. Trade
and Other Receivables reduced by 30% to
£1.9m (2019: £2.7m) largely following the
return of a rent deposit on the Group’s
previous registered office, vacated in 2019.
cash position
profitable sales, greater efficiency in marketing
The Group had cash and cash equivalents
investment and substantial overhead
of £8.4m at the year-end (2019: £8.0m).
Tim Parfitt
Chief Financial Officer
17 March 2021
reductions.
share-based payment
In accordance with IFRS, a share-based
payment charge for 2020 has been calculated
and charged to the statement of profit and
loss. The fair value of options granted is
recognised as an expense over the vesting
period with a corresponding credit being
recognised in equity. The charge for 2020 was
£0.5m (2019: £1.1m) of which £0.3m (2019:
£0.6m) related to equity issued in exchange
for marketing services and £0.2m (2019:
£0.5m) relating to employee remuneration.
29
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
Marketing is an important investment area
The Group is subject to fluctuations in
for the Group and there is a risk that this
the cost of materials which may adversely
expenditure may not result in the targeted
impact on the Group's profit margins. The
increase in sales or brand awareness levels.
price of many components is impacted by
eve monitors and analyses the
global events such as the demand for key
effectiveness of marketing spend on a daily
chemicals used in the manufacture of foam.
basis and adjusts accordingly. The Group
The Group primarily manufactures its
has built a deep understanding of the most
French sold mattresses in the EU and its
appropriate marketing strategies and also
UK&I sold mattresses in the UK, creating a
supplements this with third party media and
natural hedge against currency movement
marketing agencies to monitor and advise
for its key products. For other products and
on the effective implementation and roll-out
markets the Group looks to agree prices for
of marketing and advertising campaigns to
a period of time with manufacturers where
meet targeted outcomes.
possible to provide a degree of certainty
over currency fluctuations.
product
The Group is responsible for the design of eve
products and could face exposure to product
liability claims or claims against health and
safety procedures or practices in different
territories. The Group has a robust product
and supplier onboarding process to ensure
new products and suppliers are of the highest
standards. The Group also retains insurance
brokers to ensure sufficient insurance coverage
for product liability and associated losses.
30
s t r a t e g i c r e p o r t
s t r a t e g i c r e p o r t : principle risks and uncertainties
operations
Brexit
The Group relies on outsourced partners
The Group took steps in 2019 and 2020
for manufacturing and logistics who are
to mitigate the effect of Brexit by aligning
typically able to scale their operations to meet
manufacturing geographically so that
increased demand. However, the Group may
mattresses are manufactured close to
be exposed to disruption at these suppliers.
the customers. This minimises the transit
Close working relationships are
of products between the UK and EU.
maintained with outsourced partners.
Close attention has been paid to export
The Group regularly reviews and
requirements, particularly shipping to
communicates forecasts to ensure
customers in Northern Ireland and Ireland.
capacity constraints are managed.
Investments have been made in the Group’s
eve seeks to offer exceptional customer
technology platforms to develop processes
service and facilitate smooth returns which
to minimize disruption.
could result in high return rates under the
100-night trial offered on mattresses. Reverse
logistics is an area of focus and the Group
works with third parties to ensure an efficient
collection and recycling process to recover
costs. Return reasons is a key metric which is
monitored closely and fed back into product
development.
competition
COVID-19 virus
During 2020 the restrictions placed on
movement for the UK population resulted
in increased demand from consumers for
the Group’s products. COVID-19 has driven
a significant shift from physical retail to
ecommerce and whilst that may re-balance
somewhat, it is expected that consumers
will continue to shop online more than they
The Group operates in the highly competitive
did pre-pandemic.
mattress and pillow industries and may not
In the near-term, a relaxing of travel
be able to grow, or maintain, its existing
restrictions may see consumer spending move
market share.
away from homewares onto leisure and travel.
The Group constantly reviews and
This could have an adverse impact on revenues.
analyses its performance against its business
Furthermore, forecasting revenues in 2021 is
plan and against market competitors. The
made more difficult given that it’s not possible
Group has both internal talent and external
to determine the level of incremental sales
advisors who can advise on and respond to
generated in 2020 as a result of physical retail
any changes in the competitive environment.
competitors being closed.
Approved and signed on behalf of the board.
Tim Parfitt
Chief Financial Officer
17 March 2021
31
32
s t r a t e g i c r e p o r t
g o v e r n a n c e r e p o r t
section 172 reporting
COVID-19
The directors took the early decision to close
the company’s office in mid-March 2020 and
request all employees work from home before
it was mandated by the UK government.
This was done to protect the health of the
Company’s employees. The Board were kept
appraised throughout the year of the various
activities and measures introduced by the
Company to support employees’ well-being
throughout the pandemic.
The decision was taken to extend the
normal 100-night trial to 200 nights during
the first UK and French lockdowns giving
customers the flexibility to work around any
self-isolations and supply chain disruptions.
The Board of Directors confirm that during
the year under review, it has acted to promote
the long-term success of the Company for
the benefit of shareholders, whilst having due
regard to the matters set out in section 172(1)
(a) to (f) of the Companies Act 2006, being:
(a) the likely consequences of any
decision in the long term
(b) the interests of the Company’s employees
(c) the need to foster the Company’s
business relationships with suppliers,
customers and others
(d) the impact of the Company’s operations
on the community and the environment
(e) the desirability of the Company
maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly between members
of the Company.
issues, factors and stakeholders
The Board has direct engagement principally
with our employees and shareholders but is
also kept fully apprised of the material issues
of other stakeholders through the Executive
Directors, reports from senior management
and external advisers. We outline the ways
in which the Board and management have
engaged with key stakeholders in our Corporate
Governance Report on pages 39 to 45.
Stakeholder engagement not only allows
the Board to understand the impact of its
decisions on key stakeholders, but also ensures
it is kept aware of any significant changes
in the market, including the identification of
emerging trends and risks, which in turn can
be factored into its strategy discussions.
The Directors define our stakeholders as
individuals or groups who have an interest
in, or are affected by, the activities of our
business. The directors consider the key
stakeholders to be shareholders, employees, local
communities, key suppliers and key partners.
The directors have identified and selected
the following Board-level decision making
processes as those of greatest strategic
significance made during 2020 and would
like to highlight the consultation undertaken by
eve across a range of stakeholders due to their
business impact.
33
g o v e r n a n c e r e p o r t
adjustments to 2020 plan
retail partnership profitability
The Board reviewed revised financial plans
to model the impact of a slow-down in
consumer spending and made contingency
plans to minimize any adverse impact. When
it became clear that consumer demand for
the company’s products had returned, the
Board approved plans to increase marketing
investment to take advantage of more
economical TV advertising at a time when
other consumer facing brands were reducing
their spending.
supporting communities
The directors were delighted to be able to
support healthcare workers in UK and France
by providing mattresses free of charge to
several hospitals for use in staff rest areas.
Furthermore, NHS staff in UK have been
offered an ongoing discount.
The decision to withdraw from a
relationship with Amazon in the UK was
taken, despite the loss of revenue, to improve
margins and allow management time to be
focused on building long term relationships
with other retailers.
2021 plan
The Board scrutinized and approved the
2021 financial plan taking into account
the Company’s available resources
with a particular focus on sensible,
sustainable growth.
board changes
Following the appointment of Cheryl
Calverley to the role of Chief Executive
Officer, James Sturrock was appointed as a
non-executive director to enable the Board
to continue to benefit from his experience
leading the business over the previous two
years.
A search was commenced in the final
quarter of the year for a new independent
non-executive director who could bring
operational and logistical experience
which was identified as an area of expertise
missing from the Board.
34
g o v e r n a n c e r e p o r t
directors’ governance
statement
The Board recognises the
importance of achieving the
highest possible standards
of corporate governance.
Pau l P indar
Dear
Shareholders,
The Board recognises the importance of
achieving the highest possible standards
of corporate governance.
High standards of corporate governance
remain pivotal to, and complementary to,
our long-term strategy. Our commitment to
good corporate governance is based on a
recognition that good governance allows
us as a Board to identify and to focus on
supporting the drivers of long-term growth; it
allows us to take into account the full range
of our stakeholders, including investors,
employees, customers, those in our supply
chain; and facilitates constructive discussions
between the Board and management on the
Company’s strategic and operational priorities.
As detailed elsewhere in this Annual
Report, the Board has dedicated significant
time in 2020 toward overseeing and
scrutinising the development and delivery of
eve’s long-term strategy. Clearly, 2020 posed
several unprecedented challenges to the
business and we have dedicated significant
time this year to overseeing management’s
response to the enormous changes, both
in terms of the Company’s operations and
the wider market environment in which the
Company is operating.
As a Board, we are pleased with the progress
we have made on a range of corporate
governance actions in 2020, of which I would
particularly like to highlight the following:
•
Regularly considered the potential
impact of COVID-19 on the Company’s
operations and actions taken and
proposed by management in response
whilst taking into account the views
of a range of stakeholders. For further
information on the ways in which we have
engaged with stakeholders over the course
of 2020, please see pages 32 to 33.
• We have also ensured that we focus
on succession planning at senior
management and are pleased with
the strength and depth of talent we are
developing at all levels of the business.
We were delighted to confirm the internal
promotion of Cheryl Calverley to be our
new Chief Executive Officer in 2020, which
we feel reflects the strong succession
planning processes we have in place.
• We received and challenged several
detailed updates on a number of our core
35
reviews this compliance annually and last
reviewed our compliance in November 2020.
We remain fully committed to the principles
and spirit of the Code and disclose both in our
compliance statement (available on investor.
evesleep.co.uk/corporate-governance)
and in this governance statement, on how
we have applied the Code’s principles.
Paul Pindar
Chairman
operational functions, including product
development, operations
and marketing functions, and the
ways in which such functions have
reoriented to meet the unprecedented
changes brought about by the
COVID-19 pandemic.
• We undertook an internally facilitated
Board evaluation in 2020, which was a very
positive exercise in ‘taking the temperature’
of how we function as a Board and how
we perform our roles and responsibilities
as a group and as individuals.
• We focused on succession planning
at a Board level and as a result, we
began the recruitment process for the
onboarding of Masood Choudhry, the
Company’s new Non-Executive Director.
Further information on each of the above
points is set out subsequently in this report.
The Board decided in 2018 to formally adopt
the QCA Code (the “Code”). The Board
36
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
Nomination Committee
Remuneration Committee (Chair)
Cheryl Calverley
Chief Executive Officer
appointed: May 2020
experience:
Cheryl joined eve in December 2018 as Chief Marketing
Officer before her promotion to the role of Chief Executive
Officer in May 2020. Cheryl has over 20 years’ experience
in marketing and building brands, working with leading
consumer facing companies including Unilever, Birds Eye
Iglo and most recently The AA, where she held the position
of Marketing Director.
committee membership:
None
g o v e r n a n c e r e p o r t : board of directors
37
Tim Parfitt
Chief Financial Officer
appointed: June 2019
experience:
Tim joined eve in June 2019. Prior to this, he spent six
years as Finance Director with privately-owned, multi-
channel furniture retailer, Loaf, during which turnover
grew from £8m to £50m. Before Loaf, Tim held finance
director roles with early stage businesses including
Benugo and Deliverance. He also spent four years as
a portfolio finance director helping owner-managers
to grow their businesses.
committee membership:
None
James Sturrock
Non-Executive Director
appointed: May 2020
experience:
James joined eve in September 2018 as Chief Executive
Officer before stepping away from this role in May 2020.
James remained on the Board as a Non-Executive
Director, with effect from May 2020, allowing the
Company to continue to benefit from his expertise. Prior
to his roles at eve he had 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.
Before 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. James is
also Chief Executive Officer of Tapi Carpets & Floors Limited.
committee membership:
Audit Committee
Nomination Committee
Remuneration Committee
38
g o v e r n a n c e r e p o r t : board of directors
Thomas Enraght-Moony
Independent Non-Executive Director
appointed: April 2017
experience:
Tom joined Eve in April 2017. He has spent over 20
years leading brand transformation at fast growing,
global technology firms. He currently serves as
President, International for ecoATM a global leader
in offering consumers eco-friendly trade-in of used
mobile phones. Prior to ecoATM, he served as Chief
Customer Officer at McArthurGlen, Europe’s largest
owner and operator of outlet malls with €4.5 billion
in annual sales. Prior to that he was COO and then
CEO of Leisure Pass Group. Previous to that he served
as CEO of Match.com (owned by Barry Diller’s IAC),
the world’s largest online dating business. Earlier he
held roles at E*TRADE and AT&T Wireless. He holds an
undergraduate degree from The University of Glasgow
and an MBA from INSEAD.
committee membership:
Audit Committee
Nomination Committee (Chair)
Remuneration Committee
Masood Choudhry
Independent Non-Executive Director
appointed: February 2021
experience:
Masood joined Eve in February 2021. Masood has
over 20 years’ of experience working in supply chain
having worked for a number of digital and multi-
channel retailers. Masood is currently Vice President
of Logistics at Zalando, Europe's biggest online
fashion retailer, with responsibility for managing
their supply chain and has held this position for the
last four years. Prior to this Masood spent time at
various other leading direct to consumer businesses
including World Stores, where he held the position of
Chief Operating Officer and ASOS for six years, where
he was Director of Supply Chain Development and
Director of Logistics, overseeing a period of rapid
global
committee membership
Audit Committee (Chair)
Nomination Committee
Remuneration Committee
corporate governance
report
39
g o v e r n a n c e r e p o r t
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 Company also takes steps to apply the principles of the UK Corporate Governance Code
in so far as it can be applied practically, given the size of the Company and the nature
of its operations.
compliance statement
our governance structure
During the year ended 31
December 2020, the Board
has reviewed its compliance
with the QCA Code and has
reviewed and approved a
revised compliance statement,
which sets out how the
Company complies with the
Code’s ten principles and
explains any areas in which
the Company’s practice and
policies deviate from the Code.
The compliance statement
can be viewed via:
investor.evesleep.co.uk/
corporate-governance
The Board
Responsible for setting
the tone from the top,
determining strategic
direction and monitoring
operational delivery
Chief Executive
Officer
Responsible for day-to-
day management of eve
Audit
Committee
Nomination
Committee
Remuneration
Committee
Responsible for
Responsible for ensuring
Responsible for
reviewing the integrity
that the board and
determining executive
of eve's financial, risk
senior management has
remuneration and for
management and
the right balance of
reviewing the overall
reporting processes and
skills, experience
approach to pay and
oversight of the external
and diversity
rewards across eve
audit function
40
g o v e r n a n c e r e p o r t : corporate governance report
shareholder and
stakeholder engagement
We actively engage with shareholders
throughout the year to ensure that the Board
understands the views of shareholders and
our key stakeholders on some of our most
critical decisions and incorporates these into
its decision-making process.
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 46 to 56. The terms of reference of each
committee are available from our website
found at investor.evesleep.co.uk/corporate
governance#governance-docs
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 November 2020.
The Board is collectively responsible to
shareholders and to our wider stakeholders
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. For details
of who we consider to be our key stakeholders,
and the ways in which we engage with them,
please see page 44.
We see the Board as having the following
main roles:
setting our purpose, strategy,
values and culture
By setting the tone at the top, establishing the
core values of the Group and demonstrating
our leadership, management are able to
implement key policies and procedures in
a manner that clearly sets an expectation
that every employee acts ethically and
transparently in all of their dealings.
setting and oversight of
execution of strategy
Among our responsibilities are setting
and overseeing the execution of eve’s
strategy within a framework of effective
risk management and internal controls.
oversight of operations
We monitor management’s execution of
strategy and financial performance. While our
ultimate focus is long-term growth, the Group
also needs to deliver on short-term objectives
and we seek to ensure that management
strikes the right balance between the two.
g o v e r n a n c e r e p o r t : corporate governance report
41
board activity in 2020
strategy
Purpose, values and culture
•
•
•
Regularly considered the potential impact
of COVID-19 on the Company’s operations
and actions taken and proposed by
management in response
Regularly received and discussed strategic
updates, proposals and reviews from the
Executive Directors
Reviewed the product strategy for 2020
operations
• Considered the financial performance of
the Group and key performance targets,
including a review of
the monthly accounts at each
Board meeting
• Monitored performance
through regular presentations
from the CEO and CFO
Purpose
Why we do what we do
Value
The qualities we embody
Culture
How we work together
Our strategy revolves around building a
sustainable and profitable business that will
deliver long-term value to our shareholders.
The Board believes that our corporate
culture continues to serve as one of our key
competitive advantages. We encourage all
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.
• Approved the Annual Report, half-year and
In respect of the Board’s role, we recognise
annual results announcements
• Approved the 2021 budget
shareholder and stakeholder engagement
•
•
Took into account the views of a range
of stakeholders when considering the
Company’s actions in response to the
COVID-19 pandemic
Reviewed a technology migration in
order to provide improve efficiency and
customer experience
corporate governance
• Discussed the outcome of the Evaluation
of Board Effectiveness
and agreed actions for 2021
• Appointed James Sturrock as a Non-
Executive Director and as a member of the
Audit Committee, Nomination Committee
and the Remuneration Committee
Received updates on legal and
governance developments affecting
the Company
Began the recruitment of Non-
Executive Director, Masood Choudhry
•
•
the importance of setting a tone from the top
and have met with a number of staff over 2020
at various levels of the business. This is an area
where we want to keep on developing in terms
of the Board’s awareness and engagement
with corporate culture in 2021, including
regular reporting to the Board on a number
of cultural metrics. These metrics will include
the following focus areas: engagement,
growth, diversity and inclusiveness, and
transparency and communication of strategy.
Culture and engagement is measured and
facilitated by an external technology platform
which highlights key focus areas in order to
shape the Company’s people strategy and
benchmark against peers. The Board in 2021
will receive regular updates on progression
against these metrics through incorporation
within the Chief Executive Officer report
presented at each meeting. Our aim is to
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.
42
g o v e r n a n c e r e p o r t : corporate governance report
With a view to securing further independence
on the Board, and having had regard
to the current and desired further skills,
competencies and diversity mix on the
Board, the Board approved the appointment
of Masood Choudhry to the Board as an
independent non-executive director, effective
3 February 2021. A short biography of each of
the directors in office at the date of this Report
is set out on pages 36 to 38.
The role of Chairman is to run the
business of the Board, ensuring appropriate
strategic focus and direction in the Board’s
discussions, and to facilitate relationships and
engagement with shareholders. The Chairman
also holds responsibility for ensuring that the
Company is appropriately governed and that
eve embraces not just the principles of good
corporate governance but also the values that
underpin those principles.
Thomas Enraght-Moony and Masood
Choudhry are considered by the Board to
be independent. During the reporting year,
Nikki Crumpton was also considered by the
Board to be independent. The Board is of the
opinion that both Thomas and Masood act in
an independent and objective manner and
are free from any relationship that could affect
their judgement. Paul Pindar, as non-executive
chairman, was considered to be independent
upon appointment.
Not withstanding 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.
We have internal policies covering a range of
ethical behaviours, such as an anti-bribery and
anti-corruption 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 2020, there were no instances of the
anti-bribery and anti-corruption policy or
whistleblowing policy being invoked.
In respect of our forthcoming priorities for
2021, the Board will be looking at:
• How eve responds to the short-term
and likely longer-term structural and
market changes created by the
COVID-19 pandemic, and focus on
long-term value generation;
The ways in which we develop
our corporate culture and talent
management processes,
as described above;
•
• Continued engagement with our
shareholders and wider stakeholders.
board composition
The successful delivery of our strategy
depends upon attracting and retaining
the right talent. This starts with having a
high-quality Board. Balance is an important
requirement for the composition of the Board,
not only in terms of the number of Executive
and Non-executive Directors, but also in terms
of skill, knowledge and expertise each Director
brings. Our assessment of the current skills,
knowledge and expertise of each Director is
set out in the Nomination Committee report
on page 50.
As at 31 December 2020, the Board
comprised a non-executive chairman,
two executive directors, and two non-
executive directors, one of whom is deemed
independent by the Board.
g o v e r n a n c e r e p o r t : corporate governance report
43
election/re-election ofdirectors
board and committee meetings
The table below sets out the Board
and Committee attendance for 2020.
Attendance is shown as the number of
meetings attended out of the total number
of meetings possible for the individual
Director during the year.
If any Directors are unable to attend
a meeting, they are encouraged to
communicate their opinions and comments
on the matters to be considered via the
Chairman of the Board or the relevant
committee chairman.
Under the Company’s Articles of Association,
Directors are required to stand for election
at the first AGM after their appointment.
Thereafter, at each AGM, any Director who has
not stood for appointment or re-election at
either of the two preceding AGMs is required
to retire and offer him/herself for re-election,
as is any Director who has held office for a
continuous period of nine years or more.
Beyond these requirements, the Board
has agreed that all Directors will seek annual
re-election at the Company’s AGMs. All
Directors will therefore stand for re-election at
the forthcoming AGM. The Board considers
that, during the year ended 31 December
2020, each Director that served in 2020
has performed effectively and continues
to demonstrate commitment to the role. It
therefore believes that it is in the best interests
of shareholders that each director is re-elected
at the AGM.
Board
Audit
Remuneration
Committee
Committee
Nomination
Committee
Paul Pindar
6 of 6
3 of 3
2 of 2
2 of 2
Cheryl Calverley1
Tim Parfitt
3 of 3
6 of 6
-
-
-
-
-
-
James Sturrock2
3 of 3
1 of 1
1 of 1
1 of 1
Tom Enraght-Moony
6 of 6
3 of 3
2 of 2
2 of 2
Nikki Crumpton3, 4
4 of 5
2 of 2
1 of 1
1 of 1
Masood Choudhry5
-
-
-
-
Notes
1.
2.
3.
4.
Cheryl was appointed as a director from 1 June 2020.
James resigned from the role of Chief Executive Officer on 11 May 2020, remaining on the Board as a Non-Executive Director with effect from
12 May 2020. James was also appointed to the Nomination Committee and Remuneration Committee with effect from 30 September 2020.
Nikki resigned 30 September 2020.
Nikki was unable to attend the February Board meeting due to prior commitments which were communicated to and agreed by the
Board in advance.
5. Masood was appointed to the Board as a Non Executive Director on 3 February 2021.
44
g o v e r n a n c e r e p o r t : corporate governance report
relations with shareholders
our engagement with stakeholders
We are committed to communicating
The Board places due weight on stakeholder
openly with our shareholders to ensure
awareness and engagement. It assesses
that our strategy and performance are
stakeholders according to the definition of
clearly understood. We communicate with
stakeholders set out in the Global Reporting
shareholders through the Annual Report
Initiative (Standard 101 paragraph 1.1)
and Accounts, full-year and half-year
as organisations or individuals who have
announcements, trading updates and the
“a reasonable expectation of being
annual general meeting (AGM); and we
significantly affected” by the Group’s activities
encourage shareholders’ participation in
or products. In addition to our shareholders,
face-to-face meetings. A range of corporate
the Board has identified the Group’s other
information (including all announcements
major stakeholders, and approved a strategy
and presentations) is also available to
for engaging with these groups, as follows:
shareholders, investors and the public on our
corporate website, at 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;
Continuing personal development plans.
Local communities
relevant charities through selective partnerships and the regular review of additional ways
The Company has a range of initiatives including volunteer days for employees, support of
it can provide support to the local community and relevant charitable organisations.
Key suppliers
Regular meetings and reviews with key contacts within the Company and senior management team.
Key partners
Regular meetings with partnership managers and continuous review of partnership generally.
g o v e r n a n c e r e p o r t : corporate governance report
45
board and committee effectiveness
internal controls and risk management
The Board continually strives to improve its
The Group has a comprehensive system
effectiveness and recognises that an annual
of internal controls in place, designed to
evaluation process is an important tool in
ensure that risks are mitigated and that the
reaching that goal. The Directors are aware
Group’s objectives are attained. The Board
of the importance to monitor performance
recognises its responsibility to present a fair,
through Board evaluations and that feedback
balanced and understandable assessment
from these evaluations leads
to improving Board effectiveness.
of the Group’s position and prospects. It is
accountable for reviewing and approving
During the year, an internally facilitated
the effectiveness of internal controls
performance evaluation of the Board,
operated by the Group, including financial,
committees and individual directors was
operational and compliance controls, and
undertaken. The evaluation was informed in
risk management. The Board recognises its
part by a tailored questionnaire that each
responsibility in respect of the Group’s risk
Director responded to, which focussed on
management process and system of internal
Board composition, Board dynamics and
control and oversees the activities of the
behaviours, the ways in which the Board was
Group’s external auditors and the Group’s
fulfilling its remit and responsibilities and
risk management function (supported by
suggested focal areas for the Board in 2021.
the Audit Committee).
Overall, the Board was pleased with the
A review of the Group’s risk
findings. The evaluation found strong general
management approach is further discussed
agreement amongst respondents that the
in the Strategic Report on pages 12 to 13. For
Company’s purpose and mission was clear
detail on the management and mitigation
and that all Directors were encouraged
of each principal risk see pages 29 to 30.
to participate fully in Board discussions,
highlighting a culture of openness and
honesty within the boardroom.
Helpful suggestions were provided in
terms of further embedding the culture,
considerations of the Company into
Board discussions, increasing stakeholder
engagement and further enhance the
succession planning process of the Board
and senior management. These will be
taken forward by the Board over 2021, with
support from management and the Company
Secretary. A number of other suggestions were
received in respect of the focal areas for the
Board in 2021.
Throughout the COVID-19 pandemic
Board and Committee meetings took place
via video conference to the schedule agreed
at the start of the year.
46
g o v e r n a n c e r e p o r t
audit committee report
committee composition
financial reporting
Over the reporting period, the members
of the Audit Committee were as follows:
• Paul Pindar (Chair of the Committee);
• Nikki Crumpton (resigned from the
Committee on 30 September 2020);
• Thomas Enraght-Moony; and
• James Sturrock (appointed to the
Committee on 30 September 2020).
Following the year-end, Masood Choudhry
was appointed as Chair of the Committee
on 3 February 2020. Paul Pindar remains
a member of the Committee.
The Board is satisfied that all members of the
Audit Committee have recent and relevant
financial experience and that the Audit
Committee as a whole has competence
relevant to the sector in which the Company
•
•
•
review the integrity of the interim
and annual financial statements;
review the appropriateness of accounting
policies and practices; and
review the significant issues and
judgements considered in relation to the
financial statements, including how each
was addressed.
external audit
•
•
•
review and monitor the objectivity and
independence of the External Auditor,
including the policy to govern the
provision of non-audit services;
review and monitor the effectiveness of the
external audit process and the on-going
relationship with the External Auditor; and
review and make recommendations to
and Group operate. The Board is of the view
the Board on the tendering of the external
that Paul Pindar, as a qualified accountant,
audit contract, and the appointment,
holds recent and relevant financial experience.
remuneration and terms of engagement
audit Committee Responsibilities
The Committee reports to the Board on how
it discharges its responsibilities and makes
recommendations to the Board, all of which
have been accepted during the year 2020.
The main responsibilities of the Committee
are set out below:
of the External Auditor.
risk management and internal control
•
•
review and monitor the effectiveness of
the management of risk and internal
control and appropriate systems;
review the framework and analysis to
support both the going concern and
ongoing viability statement; and
• oversee appropriate whistleblowing
and fraud prevention arrangements.
The Terms of Reference for the Audit
Committee are available on our website:
investor.evesleep.co.uk/corporate-
governance#committee-composition.
These were last reviewed and approved
by the Board on 18 November 2020.
key activities in 2020
fair, balanced and understandable
47
In line with best practice, the Committee
has reviewed the 2020 Annual Report to
consider whether it provides a true and fair
view of the Group’s affairs at the end of the
year and provides shareholders with the
necessary information in a fair, balanced and
understandable way in order to enable them
to assess the Group’s position, performance,
business model and strategy.
When forming its opinion, the Committee
considered the following questions in order
to encourage challenge and assess whether
the Annual Report and Accounts was fair,
balanced and understandable:
Is the report fair?
• Is the whole story presented?
• Have any sensitive material
areas been omitted?
Is the report
• Is there a good level of consistency
balanced?
between the front and back
sections of the Annual Report
and Accounts?
• Is the Annual Report a document
for shareholders and
other stakeholders?
Is the report
• Is there a clear & understandable
understandable?
framework to the Annual Report?
• Is the Annual Report presented
in straightforward language
& a user-friendly and easy to
understand manner?
conclusion
After completion of its detailed review, the
Committee is satisfied, when taken as a whole,
the Group’s Annual Report and Accounts
are fair, balanced and understandable,
and provides the information necessary for
shareholders to assess eve’s performance,
business model and strategy.
•
The main focus of the Committee in 2020
has been to:
•
review and the recommend the
reappointment to shareholders of
the Company’s external auditor at
the 2020 AGM;
review and recommend to the Board the
approval of the 2020 full year preliminary
results and Annual Report and Accounts;
• assess the company’s risk management
systems and the risk register and conduct
an annual review of the Committee’s Terms
of Reference.
financial reporting
A principal responsibility of the Committee is
to consider the significant areas of complexity,
management judgement and estimations that
have been applied in the preparation of the
financial statements.
significant areas considered in
relation to the financial statements
One of the focal areas for the Committee was
in considering the most significant financial
reporting for the Company. These are set out
below, alongside details of how such risks
are mitigated which are detailed below,
and details of how those risks are mitigated:
Significant
Risk
Going
concern
Provision
for returns
What?
How this is mitigated
Risk of inability to
meet liabilities as
they fall due
Review of 24-month
rolling financial
forecasts and cash
projections
Risk of returns
increasing above
historic levels
particularly
following the
temporary extension
of the mattress trial
from 100 to 200
days in 2020
Review of provision
methodology
Revenue
recognition
Fraud risk related
to define risk and
to misstatement of
reward transfer criteria
revenues
for recognition as
Review of methodology
revenue
Inventory
valuation
and
existence
Risk of error in
Review of gross profit
stock costing and
margins and bi-annual
provisioning
inventory counts
Fraud risk related
Review of control
Management
to unpredictable
processes and
override of
way management
permission structures
controls
override of controls
within Finance and the
may occur
wider business
48
g o v e r n a n c e r e p o r t : audit committee report
risk management
and internal control
external audit
external audit effectiveness
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 Committee has had regard to a
number of sources of assurance over the
course of the year on the adequacy of
the risk management and internal control
processes in place across eve, including
the following:
• Reviewed and scrutinised the corporate
risk register, including the approach toward
assessing the impact and likelihood of
these risks and the ways
in which management has proposed
to manage the risks;
• Reviewed the anti-fraud and bribery
policies and procedures in place across
the Company and the ways in which such
policies are implemented; and
• Reviewed the external audit plan for the
2020 financial year and findings from the
2020 external audit.
The Committee notes that there were no
instances of the Company’s whistleblowing
and anti-bribery and anti-corruption policies
being invoked over the course of 2020.
As per previous years, the Company
continues to not adopt an internal audit
function. The Committee remains of the view
that, due to the size and current complexity of
the Group, the adoption of such
a function would not be appropriate,
and that the existing control environment
remains robust.
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 the reports prepared by the external
auditor); and
•
• a review of the final audit report,
noting the conclusions reached by
the auditors and the reasoning behind
such conclusions.
The Committee held a meeting with Nexia
Smith & Williamson (without management
present) and management (without the
external auditor present) in order to discuss
the external audit process and to identify
any potentials for improvement for the
forthcoming audit process.
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 Nexia Smith & Williamson were,
and are, effectively able to challenge
management when required; and
that productive discussions were held
with the Committee throughout the audit
planning process.
•
•
g o v e r n a n c e r e p o r t : audit committee report
49
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 as a byproduct of the
audit process.
Having carried out the review, the
Committee is satisfied with Nexia Smith
& Williamson’s performance, objectivity
and independence.
Taking all of the above into account,
the Committee has recommended to the
Board that Nexia Smith & Williamson be
re-appointed and the Directors will be
proposing the re-appointment and the
determination of Nexia Smith & Williamson’s
remuneration to shareholders at the
2021 AGM.
Following a tender for the provision of
external audit services in 2019, the Group
will be required to put the external audit
contract out to tender no later than 2029.
The Committee is comfortable that this
period is appropriate for the Group and that
there are a number of measures in place
to monitor and assure the external auditor’s
independence, as set out in this Audit
Committee report.
50
g o v e r n a n c e r e p o r t
nomination committee
committee composition
Over the reporting period, the members of
the Nomination Committee were as follows:
• Thomas Enraght-Moony (Chair of the
Committee);
• Nikki Crumpton (resigned from the
Committee on 30 September 2020);
• Paul Pindar; and
• James Sturrock (appointed to the
Committee on 30 September 2020).
Following the year-end, Masood Choudhry was
appointed as a member of the Committee on
3 February 2020.
committee responsibilities
The main responsibilities of the Nomination
Committee are:
• Reviewing the size, structure
and composition of the Board;
• Considering succession plans for
Directors and senior management;
• Satisfying itself that plans are in place
for orderly succession for appointments
to the Board; and
Identifying and nominating
candidates for Board vacancies.
•
The Terms of Reference for the Nomination
Committee are available on our website:
investor.evesleep.co.uk/corporate-
governance#committee-composition.
These were last reviewed and approved
by the Board on 18 November 2020.
key activities in 2020
appointment of Chief Executive Officer
Paul Pindar and Tom Enraght-Moony, as
Chairman of the Nomination Committee,
were closely involved with the appointment
of Cheryl Calverley as Chief Executive Officer.
In assessing potential candidates, we
took the following areas into account:
•
in depth knowledge of the sector
and geographies in which the
Company operates;
the ability to motivate and develop
the management team and employees
more generally;
•
• strong fit with the culture and values
of the Company; and
• diversity considerations.
Shortlisted candidates were considered by the
Chairman of the Board. The process identified
Cheryl as the outstanding candidate and
the Nomination Committee was pleased to
recommend her appointment to the Board.
The Nomination Committee was particularly
pleased to note the fact that this was an
internal appointment, which is testament to
the strong pipeline of talent that has been
developed across the business, including at a
senior level.
succession planning
The Committee is of the view that it is
important to develop career pathways for
each individual in the business, including
those identified as having potential to in future
occupy senior management positions within
the business. The Committee considers that
succession needs to involve a combination of
internal talent
with external hires, which balances creating
internal expertise and retention incentives
with fresh perspectives.
We are pleased to note that a number
of initiatives are underway to support
development across the company in a way
that is consistent with, and serves to promote,
our unique corporate culture and values.
A focal area for the Committee, and for the
Board in 2021, will be on the way in which we
support our leaders, and help to develop the
next generation of leaders within our business,
and we look forward to reporting on those
areas in our next annual report.
The Committee will also dedicate further
time in 2021 toward Board level succession
planning. Further details on Board succession
considerations are set out below.
appointment of an independent
Non-Executive Director
A further focus of the Committee in 2020
has been to review the size, structure
and composition of the Board and
Board Committees to ensure these
remained appropriate.
As part of the wider Board evaluation
process that took place in 2020, the Board
identified the need for further experience
and expertise in operations and supply
chain management.
In late 2020, Renaissance Leadership,
Tim Parfitt
The Board has also been mindful of the
need to ensure sufficient independent
representation on the Board. With that in
mind, the Committee has been engaged in
the search process for a further independent
non-executive Director on the Board.
an independent consultancy, were
commissioned to lead the search for
a non-executive Director. Renaissance
Leadership have no other connections
with the Company. Following an extensive
search process, the Committee was pleased
in February 2021 to be able to recommend the
appointment of Masood Choudhry to the Board.
size, structure and composition of the Board
Following the appointment of Masood, the
Committee considers the size, structure and
composition of the Board is appropriate,
and is well structured to help to support and
oversee the next stage of the Company’s
strategic growth. This will be an area that will be
kept under continued review by the Committee.
The below table sets out the key experience,
skills and capabilities that each director brings
to the Board, which cumulatively support the
delivery of the Company’s strategy for the
benefit of all shareholders over the medium
to long-term. Our AGM Notice includes details
of the contributions of each Director to the
Board and to the Company more widely, and
the reason for the recommendation from the
Board to re-elect each Director.
Director
Key experience, skills
and competencies
Paul Pindar
Cheryl Calverley
Masood Choudhry
•
•
•
•
•
•
•
•
•
Leadership experience in
large public limited companies
Significant experience
of chairing Boards
Strong understanding of market
expansion and market penetration
strategies
Brand building and marketing
Strong understanding of
the e-commerce and sleep
wellness sector
Product development & innovation
Expertise in customer experience
Supply chain and
logistics expertise
Strategic operations experience
51
g o v e r n a n c e r e p o r t
Director
Key experience, skills
and competencies
Tom
Enraght-Moony
James Sturrock
•
•
•
•
•
•
Marketing and customer focus
Tech and e-commerce experience
Recent and relevant
financial experience
Risk management
People and culture management
Strong understanding of
the e-commerce sector
directors’ time commitments
All the Non-Executive Directors are required
to devote sufficient time to eve to enable the
Board to discharge its duties effectively. This
includes preparation for and attendance at
scheduled Board and committee meetings,
engagement with the business more generally,
as well as ad hoc meetings or calls as
required. Following review by the Committee,
the Board confirms that each of the Non-
Executive Directors can commit the necessary
time to fulfil their roles.
diversity and inclusion
We recognise the business benefits of diversity
and inclusion. Our aim is to go beyond the
legal requirement to treat everyone fairly,
so we can ensure that eve is an attractive
employer to everyone, regardless of their
background.
eve supports and encourages a diverse and
inclusive workforce, no matter their ethnic
origin, colour, gender, sexual orientation,
gender expression, disability, age or status.
The Committee is pleased to note that,
as at March 2021, 43% of eve’s leadership
team are female. However, this is just a starting
point; there is further work to do on improving
diversity in terms of ethnic and social
backgrounds, as an example. We recognise
that there is further work to do on our diversity
and inclusion agenda, and we have a number
of initiatives underway to drive this agenda –
including anonymised recruitment processes
across the business - over the next few years.
The Committee, and the Board, recognise
the Hampton-Alexander and Parker Review
targets on boardroom diversity. Currently, the
Board does not adopt formal diversity targets
at Board level but this is an area that the
Committee will continue to keep under review.
We aspire to be progressive in this area, and
a focal area for the Committee in 2021 will be
on diversity and inclusion across the business.
52
g o v e r n a n c e r e p o r t
remuneration committee report
committee composition
key activities in 2020
Over the reporting period, the members of the
The main focus of the Committee in 2020 has
Remuneration Committee were as follows:
been to review proposals around Executive
•
Paul Pindar (Chair of the Committee);
Directors’ remuneration arrangements for 2020
• Nikki Crumpton (resigned from the
and scrutinise management bonus scheme
Committee on 30 September 2020);
proposals. The Committee will continue to focus
•
•
Thomas Enraght-Moony; and
in 2021 on ensuring that executive remuneration
James Sturrock (appointed to the
and shareholder interests remain closely aligned.
Committee on 30 September 2020).
Following the year-end, Masood
remuneration policy
Choudhry was appointed as a member
The Company’s policy is that the remuneration
of the Committee on 3 February 2021.
package of the Executive Directors should
Members of the management team are
be sufficiently competitive to attract, retain
invited to attend meetings as appropriate
and motivate those directors to achieve the
unless there is an actual or potential conflict
Company’s objectives without making excessive
of interest.
payments. The Board determines the terms and
conditions of the Non-Executive directors.
responsibilities of the committee
We have summarised the main principles
behind Executive Directors’ remuneration in the
The role of the Committee is to assist the
table to the right:
Board to fulfil its responsibility to shareholders
to ensure that the remuneration policy and
practices
of the Company reward fairly and responsibly,
with a clear link to corporate and individual
performance, having regard to statutory and
regulatory requirements.
The Terms of Reference for the
Remuneration Committee are available on our
website: investor.evesleep.co.uk/corporate-
governance#committee-composition. These
were last reviewed and approved by the
Board on 18 November 2020.
g o v e r n a n c e r e p o r t : remuneration committee report
53
fixed remuneration elements
Purpose
How it operates
Maximum opportunity
Performance-related
framework
base salary
Reflects an individual’s
responsibilities, experience
and performance in their
role.
Reviewed annually, normally
with effect from 1 January,
with any changes taking
effect from that date. Salaries
are normally paid monthly.
Decisions on salary levels are
influenced by: responsibilities,
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.
There is no prescribed
The performance of the
maximum annual base
individual in the period since
salary or salary increase.
the last review is considered
The Committee is guided
when their salary is being
by the general increase
reviewed
for the broader employee
population but has
discretion to decide to award
a lower or higher increase to
Executive Directors.
pension
To contribute financially
Defined contribution
The Company contributes up
Not applicable.
post-retirement.
arrangement.
to 3% of base salary on
Base salary and bonus
a “relief at source” basis.
elements are 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 business plan by
incentivising and retaining
the eve senior management
team in a way that is aligned
both with the Company’s
long-term financial
performance and with the
interests of shareholders
Awards of share options
to certain employees,
which normally vest after
three years subject to the
achievement of performance
conditions
Not applicable.
Not applicable.
other benefits
To support the personal
Benefits include private
There is no overall maximum
Not applicable.
health and wellbeing
medical insurance and
level of benefits provided
of employees. To reflect
discount on eve products.
to Executive Directors, and
and support the Company's
culture.
the level of some of these
benefits is not pre¬determined
but may vary from year to
year based on the overall c
ost to the Company.
54
g o v e r n a n c e r e p o r t : remuneration committee report
directors’ remuneration table
The remuneration of the Directors for the year to 31 December 2020
is set out in the table below.
Director
Appointed
Resigned
Salary / fees
£
Pension
£
Bonus
£
Compensation
for loss of
Total remuneration
office
£
£
2020
2019
2020
2019
2020
2019
2020
2020
2019
Executive Directors
Tim Parfitt
17 June 2019
N/A
140,760
66,523
1,314
658
14,076
Cheryl Calverley1
1 June 2020
N/A
87,500
-
766
-
14,500
James Sturrock 2
September
8 May 2020
77,833
200,000
557
1,188
10
Non-Executive Directors
2018
3
30
Nikki Crumpton
September
September
15,000
26,667
85
557
2018
2020
Thomas
Enraght- Moony
28 April 2017
N/A
15,000
26,667
-
-
James Sturrock 2
9 May 2020
N/A
10,833
N/A
206
N/A
Paul Pindar
21
November
2016
N/A
10,000
26,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
NA
156,150
67,181
NA
102,766
-
-
78,390
201,188
-
15,085
27,223
N/A
15,000
26,667
N/A
11,039
N/A
N/A
10,000
26,667
1.
2.
Cheryl Calverley was appointed to the Board on 1 June 2020. The above salary does not include earnings prior to the appointment.
During the reporting period, James Sturrock held office as an Executive Director of the Company between
1 January 2020 and 11 May 2020. His appointment as a Non-Executive Director of the Company took effect from 12 May 2020.
His annualised salary for the year was £200,000, and his annualised fee as a Non-Executive Director of the Company for the year
was £10,000 to 30 September 2020 and £30,000 from 1 October to 31 December.
The Executive Directors holding office at 31
December were awarded a bonus, paid after
the year end, on the same criteria as all staff.
No other directors were awarded bonuses,
long term incentives or other income.
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
17 to the financial statements.
Over the reporting period, private medical
insurance was provided to Cheryl Calverley,
James Sturrock and Tim Parfitt, the value of
which management have deemed immaterial
to the users of these financial statements.
g o v e r n a n c e r e p o r t : remuneration committee report
55
directors interest in share plans
The Directors who held office at 31 December 2019 had the following
interests in the share plans of the Group.
Director
Date of Grant
Executive Directors
As at 31
December
2019
(no. of
options)
Granted
during the
year to 31
December
2020 (no. of
options)
Lapsed during
the year
Exercised
during the
year
As at 31
December
2020 (no.
of options)
Service
conditions
Exercise
price
(pence)
-
-
-
-
-
-
187,500
262,500
Length of
service
Length of
service
Length of
service
Subject
to certain
performance
criteria
Length of
service
0.1p
0.1p
0.1p
0.1p
0.1p
-
1,500,000
2,250,000
2,000,000
-
n/a
n/a
180,000
2,444,444
1,555,556
-
4,400,000
Length of
service
Length of
service
Length of
service
0.1p
0.1p
0.1p
Cheryl Calverley
1 April 2019
450,000
-
17 February
2020
1 June 2020
1 June 2020
-
-
-
300,000
1,500,000
2,250,000
Tim Parfitt
17 December
2019
2,000,000
Non-Executive Directors
Paul Pindar
n/a
-
Tom
Enraght-Moony
1 April 2019
180,000
James Sturrock
23 May 2019
4,400,000
17 December
2019
4,400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.
Performance criteria for these awards are as follows: 750,000 vest on each of the following events: (i)
the quoted share price of eve sleep plc remaining above 5p for five consecutive days; (ii) the quoted
share price of eve sleep plc remaining above 10p for five consecutive days; (iii) the Group achieving
a positive underlying EBITDA for three consecutive months
Any gain on option exercises made by Directors in 2020
is presented in note 17 to the financial statements.
56
g o v e r n a n c e r e p o r t : remuneration committee report
directors shareholdings
The Directors who held office at 31 December 2020 had the
following interests in the shares of the Group.
Director
Executive Directors
Cheryl Calverley
Tim Parfitt
Non-Executive Directors
Paul Pindar
James Sturrock
Thomas Enraght-Moony
Beneficially owned
at 31 December 2020
(no. of shares)
Beneficially owned
at 31 December 2019
(no. of shares)
280,285
527,048
15,334,885
2,697,194
-
-
27,048
15,334,885
252,750
-
57
g o v e r n a n c e r e p o r t
statement of directors’
responsibilities
The directors are responsible for preparing the Group Strategic Report,
the Directors’ Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare
sufficient to show and explain the Company’s
financial statements for each financial year.
transactions and disclose with reasonable
Under that law the directors have elected
accuracy at any time the financial position
to prepare the group and parent company
of the Company and the Group and enable
financial statements in accordance with
them to ensure that the financial statements
applicable law and International Financial
comply with the Companies Act 2006. They are
Reporting Standards (IFRSs) as applied
also responsible for safeguarding the assets of
in accordance with the provisions of the
the Company and the Group and hence for
Companies Act 2006. Under Company law
taking reasonable steps for the prevention and
the directors must not approve the financial
detection of fraud and other irregularities.
statements unless they are satisfied that they
The directors are also responsible for
give a true and fair view of the state of affairs
ensuring that they meet their responsibilities
of the Company and of the Group and of
under the AIM rules.
the profit or loss of the Group for the period.
The directors are responsible for the
In preparing these financial statements, the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable
and prudent;
• state whether applicable IFRSs in
conformity with the requirements of the
Companies Act 2006 have been followed,
subject to any material departures
disclosed and explained in the financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping
adequate accounting records that are
58
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 39 to 45 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
Page(s)
10, 19
72
29-30,
45, 46, 48
corporate governance statement
39-45
There have been no significant events
affecting the Group since 1 January 2021.
presence outside of UK
the company has the following subsidiaries
outside of the UK:
eve Sleep SASU
Principal place of business/
5 Rue Des Suisses, 75014,
registered office address
Paris
Registered number
823397419 R.C.S Paris
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
Ownership 2020
89-90
Ownership 2019
100%
100%
dividends
The directors do not recommend
the payment of a dividend.
strategic report
This is set out on pages 12 to 28 of the
Annual Report and includes an indication
of likely future developments, and forms part
of this Directors’ Report.
research and development
The Group undertakes a continuous
programme of development expenditure.
Development expenditure is capitalised
only when the end product is technically
and commercially feasible and when
sufficient resource is available to complete
the development, as disclosed in note
10 to the accounts.
g o v e r n a n c e r e p o r t : director's report
59
political donations
auditor
No political donations have been made
during this financial year.
directors
The Directors who held office
during the year were:
• Cheryl Calverley
(appointed 1 June 2020)
• Nikki Crumpton
(resigned 30 September 2020)
• Thomas Enraght-Moony
• Tim Parfitt
• Paul Pindar
• James Sturrock
Biographical details of the Directors
are shown on pages 36 to 38.
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 page 54. At no time during the
year did any of the directors have a material
interest in any significant contract with
eve Sleep plc.
The Company’s policy is for all
Executive Directors to have twelve month
rolling service contracts. All Non-Executive
Directors are salaried and are appointed
for an initial term of three years, which
is ordinarily renewable once, subject to
annual reappointment by shareholders at
the Company’s Annual General Meeting.
eve maintains directors’ and officers’
liability insurance which gives appropriate
cover for any legal action brought against
its directors. The Company has also provided
an indemnity for its directors, which is a
qualifying third-party indemnity provision,
for the purposes of section 234 of the
Companies Act 2006. This was in place
throughout the year and up to the date
of approval of the financial statements.
articles of association
eve Sleep’s Articles of Association can only
be amended by special resolution and are
available on our website at investor.evesleep.
co.uk/corporate-governance#governance-
docs pursuant to AIM Rule 26.
Nexia Smith & Williamson (Audit) Limited was
appointed as auditor in November 2019 and is
willing to continue in office. In accordance with
s489(4) of the Companies Act 2006, a resolution
for their reappointment will be proposed at the
forthcoming Annual General Meeting.
share capital
The issued share capital of the Company at
31 December 2020 was 272,569,414 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
2020, are shown in Note 16 to the financial
statements on page 86.
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
they should have taken as a director to
make themself aware of any relevant audit
information and to establish that the Group’s
auditors are aware of that information.
annual general meeting
The Annual General Meeting of the Company
will be held at 10am on 26 May 2021 at
29A Kentish Town Road, London NW1 8NL.
The Notice of Meeting has been sent to
shareholders along with this Annual Report.
Approved and signed on behalf of the Board
Tim Parfitt
Chief Finance Officer
17 March 2021
60
independent auditor’s report
to the members of eve Sleep plc
61
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
entities, and we have fulfilled our other ethical
responsibilities in accordance with these
requirements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we
have concluded that the directors’ use
of the going concern basis of accounting in
the preparation of the financial statements is
appropriate. Our evaluation of the directors’
assessment of the group’s and company's
ability to continue to adopt the going concern
basis of accounting included:
•
Reviewing the future cash flow forecasts
prepared by management and
challenging the inputs and assumptions
included in the forecasts.
• Comparing forecasts with actuals
in the year and post year-end.
•
Reviewing the current cash reserves and
comparing these to the cash outflows
forecast over the period
to December 2022.
•
Reviewing sensitivity analysis prepared
by management to assess the effect of
changing key assumptions.
Please see further detail regarding procedures
performed in the Key audit matters section of
our report.
Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that, individually
or collectively, may cast significant doubt on
the group and parent company’s ability to
continue as a going concern for a period of
at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of
opinion
We have audited the financial statements
of eve Sleep plc (the ‘parent company’)
and its subsidiary (the ‘group’) for the year
ended 31 December 2020 which comprise
the Consolidated Statement of Profit and
Loss and Other Comprehensive Income, the
Consolidated and Company Statements
of Financial Position, the Consolidated and
Company Statements of Changes in Equity,
the Consolidated and Company Statements
of Cash Flows, and the notes to the financial
statements, including significant accounting
policies. The financial reporting framework
that has been applied in their preparation is
applicable law and international accounting
standards in conformity with the requirements
of the Companies Act 2006.
In our opinion, the financial statements:
• give a true and fair view of the state of
the group’s and of the parent company’s
affairs as at 31 December 2020 and of the
group’s loss for the year then ended;
• have been properly prepared in
accordance with international accounting
standards in conformity with the
requirements of the Companies Act 2006;
and
• have been prepared in accordance with
the requirements of the Companies Act 2006.
basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described
in the Auditor’s responsibilities for the audit of
the financial statements section of our report.
We are independent of the group and parent
company in accordance with the ethical
requirements that are relevant to our audit of
the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed
62
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
the directors with respect to going concern
to uncertainties, which have been modelled
are described in the relevant sections of
through sensitivity analysis. Where sensitivity
this report.
key audit matters
analysis indicates the possibility of a material
impact to the ability of the group to meet its
liabilities as they fall due, the directors have
considered what mitigating actions would be
We identified the key audit matters described
required and the timeframe within which these
below as those that were of most significance
actions are needed.
in the audit of the financial statements of the
current period. Key audit matters include the
How the matter was addressed in the audit
most significant assessed risks of material
misstatement, including those risks that
We considered management’s assessment
had the greatest effect on our overall audit
of the group’s ability to continue as a going
strategy, the allocation of resources in the
concern and as part of our procedures we:
audit and the direction of the efforts of the
•
Reviewed the future cash flow forecasts
audit team.
prepared by management and
In addressing these matters, we have
challenged the inputs and assumptions
performed the procedures below which were
included in the forecasts. Where
designed to address the matters in the context
appropriate we corroborated the
of the financial statements as a whole and in
inputs and assumptions to supporting
forming our opinion thereon. Consequently, we
information.
do not provide a separate opinion on these
• Compared forecasts with actuals in the
individual matters.
year and post year-end, to consider
management's forecasting ability.
•
Reviewed the current cash reserves and
going concern – group and parent company
compared to the cash outflows forecast
(note 2.4)
Description of risk
over the period to December 2022
•
Reviewed sensitivity analysis performed
by management to assess the effect of
The historic trading losses and cash outflows
changing key assumptions.
of the group indicate a higher risk that the
group may not be able to continue to trade
revenue recognition -
for the foreseeable future. For the year ended
group and parent company (note 2.15)
31 December 2020, the group reported
Description of risk
an operating cash inflow of £1.2m and an
operating loss of £2.4m.
Under International Standards on Auditing
In order to assess going concern, the
there is a rebuttable presumption that
directors have prepared a business plan and
revenue recognition gives rise to a material
financial model, including cashflow forecasts
risk of fraud, and given that eve Sleep has
covering a period of more than 12 months
a potential incentive to overstate its revenue
from the date of approval of these financial
to respond to market pressure, we have
statements, that indicates that the group will
not rebutted this presumption with respect
continue to reduce operating losses and work
to cut-off of revenue at the statement of
towards generating an operating profit and a
financial position date.
positive EBITDA, therefore putting the business
Specifically, we identified the risk
on a sustainable footing.
that revenue transactions recorded in
The achievement of the projections is subject
the year may not have been delivered
to the customer before year-end and
63
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
therefore may have been recorded in
We reviewed management’s method for
the incorrect period.
estimating the returns provision. We challenged
the assumptions and assertions made
How the matter was addressed in the audit
by management in their assessment and
We reviewed management's revenue
with reference to post year-end actual returns.
recognition policy and ensured revenue
The estimate was recognised and
was being measured and recognised in
measured in accordance with IAS 37.
considered the completeness of the provision
accordance with IFRS 15.
As part of our procedures we:
• Substantively tested revenue by agreeing
amounts recognised in the year through to
invoice and payment.
• Substantively tested that revenue is
As part of our procedures we:
• Confirmed the methods were
consistent with the prior year.
• Confirmed the provision had
been calculated accurately.
• Corroborated management’s
complete, by testing that a sample of
inputs and assertions where reasonably
orders from the sales ordering systems
practicable, through agreement
which have been fulfilled in the year have
to supporting documentation.
been included in revenue.
• Substantively tested that revenue has
• Reviewed post year-end evidence of
actual returns to gain comfort over the
been recognised in the correct period,
completeness of the provision.
through agreeing a sample of revenue
entries from either side of the year-end to
goods delivered notes.
• Ensured the revenue recognition policy is
compliant with IFRS 15, through reference
• Reviewed management’s sensitivity analysis
on the key assumptions used in the model.
• Confirmed appropriate disclosures have
been made in the accounts.
to the five-step revenue recognition policy.
our application of materiality
provision for returns –
group and parent company
Description of risk
The materiality for the group financial
statements as a whole (“group FS materiality”)
was set at £504,000. This has been determined
with reference to the benchmark of the
The Group offers a 100-night trial on the eve
group’s revenue, which we consider to be one
mattress, giving customers the option to return
of the principal considerations for members
the mattress within 100 days of purchase and
of the company in assessing the group’s
receive a full refund. During the year, this trial
performance. Given the group is loss making,
was extended to 200 nights for the month
an earnings-based measure would not be
of April only. A material provision is therefore
appropriate. FS materiality represents 2% of the
recorded based on the expected number of
group’s revenue as presented on the face of
returns post year end.
the Consolidated Statement of Profit and Loss
The level of expected returns is subject
and Other Comprehensive Income.
to estimation uncertainty. There is a risk
The materiality for the parent company
that the provision could be materially
financial statements as a whole (“parent FS
misstated due to the estimation uncertainty.
materiality”) was set at £413,000.
The financial statements (note 2.19) disclose
management’s consideration that the sensitivity
estimated by the Group is immaterial.
How the matter was addressed in the audit
64
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
This has been determined with reference
an overview of the scope of the audit
to the benchmark of the parent company’s
revenue, which we consider to be one of
The group has two components. The parent
the principal considerations for members
company’s financial statements were audited
of the parent company in assessing
by us. The subsidiary’s financial statements
the performance of the company. Given
were subject to audit procedures by us for
the parent company is loss making, an
the purpose of auditing the group financial
earnings-based measure would not be
statements.
appropriate. Parent FS materiality represents
2% of the parent company’s revenue.
other information
Performance materiality for the group
financial statements was set at £327,600,
The other information comprises the
being 65% of group FS materiality, for
information included in the Annual Report,
purposes of assessing the risks of material
other than the financial statements and
misstatement and determining the
our auditor’s report thereon. The directors
nature, timing and extent of further audit
are responsible for the other information
procedures. We have set it at this amount
contained within the annual report. Our
to reduce to an appropriately low level
opinion on the financial statements does not
the probability that the aggregate of
cover the other information and, except to the
uncorrected and undetected misstatements
extent otherwise explicitly stated in our report,
exceeds FS materiality. We judged this
we do not express any form of assurance
level to be appropriate based on our
conclusion thereon. Our responsibility is to
understanding of the group and its
read the other information and, in doing
financial statements, as updated by our
so, consider whether the other information
risk assessment procedures and our
is materially inconsistent with the financial
expectation regarding current period
statements or our knowledge obtained in
misstatements including considering
the course of the audit or otherwise appears
experience from previous audits. It was
to be materially misstated. If we identify
set at 65% to reflect the fact that few
such material inconsistencies or apparent
misstatements were expected in the current
material misstatements, we are required
period, management are generally keen to
to determine whether this gives rise to
process adjustments and there are some
a material misstatement in the financial
areas of judgement and estimation in the
statements themselves. If, based on the
financial statements.
work we have performed, we conclude that
Performance materiality for the parent
there is a material misstatement of this other
company financial statements was set at
information, we are required
£268,450, being 65% of parent FS materiality.
to report that fact.
It was set at 65% to reflect the fact that few
misstatements were expected in the current
We have nothing to report in this regard.
period, management are generally keen to
process adjustments and there are some
areas of judgement and estimation in the
financial statements.
65
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
opinions on other matters prescribed by
for being satisfied that they give a true and
the Companies Act 2006
fair view, and for such internal control as the
directors determine is necessary to enable the
In our opinion, based on the work
preparation of financial statements that are
undertaken in the course of the audit:
•
the information given in the strategic
free from material misstatement, whether due
to fraud or error.
report and the directors’ report for the
In preparing the financial statements,
financial year for which the financial
the directors are responsible for assessing
statements are prepared is consistent
the group’s and the parent company’s ability
with the financial statements; and
to continue as a going concern, disclosing,
•
the strategic report and the directors’
as applicable, matters related to going
report have been prepared in
accordance with applicable
legal requirements.
concern and using the going concern basis of
accounting unless the directors either intend
to liquidate the group or the parent company
or to cease operations, or have no realistic
matters on which we are required
alternative but to do so.
to report by exception
Auditor’s responsibilities for the audit
In the light of the knowledge and
of the financial statements
understanding of the group and the parent
company and their environment obtained
Our objectives are to obtain reasonable
in the course of the audit, we have not
assurance about whether the financial
identified material misstatements in the
statements as a whole are free from material
strategic report or the directors’ report.
misstatement, whether due to fraud or error,
We have nothing to report in respect of
and to issue an auditor’s report that includes
the following matters in relation to which the
our opinion. Reasonable assurance is a high
Companies Act 2006 requires us to report to
level of assurance but is not a guarantee
you if, in our opinion:
• adequate accounting records have not
been kept by the parent company, or
that an audit conducted in accordance
with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
returns adequate for our audit have not
can arise from fraud or error and are
been received from branches not visited
considered material if, individually or in
by us; or
•
the parent company financial
the aggregate, they could reasonably be
expected to influence the economic decisions
statements are not in agreement with
of users taken on the basis of these financial
the accounting records and returns; or
statements.
• certain disclosures of directors’
Irregularities, including fraud, are
remuneration specified by law are
instances of non-compliance with laws and
not made; or
• we have not received all the information
and explanations we require for our audit.
responsibilities of directors
regulations. We design procedures in line
with our responsibilities, outlined above, to
detect material misstatements in respect
of irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud, is
As explained more fully in the directors’
detailed below:
responsibilities statement set out on page
57, the directors are responsible for the
preparation of the financial statements and
66
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
We obtained a general understanding
of the company’s legal and regulatory
framework through enquiry of management
• Reviewed board meeting minutes held
during the year and post year-end; and
• Obtained written management
concerning: their understanding of relevant
representations regarding the adequacy
laws and regulations; the entity’s policies
of procedures in place.
and procedures regarding compliance; and
how they identify, evaluate and account
The senior statutory auditor led a discussion
for litigation claims. We also drew on our
with senior members of the engagement team
existing understanding of the company’s
regarding the susceptibility of the entity’s
industry and regulation.
financial statements to material misstatement,
We understand that the company
including how fraud might occur. The key
complies with the framework through:
• Outsourcing payroll and research
areas identified in this discussion were with
regard to the manipulation of the financial
and development tax credit calculation
statements through manual journal entries
to external experts.
and incorrect recognition of revenue.
• Subscribing to relevant updates from
These areas were communicated to
external experts and making changes
the other members of the engagement team
to internal procedures and controls
who were not present at the discussion.
as necessary.
• The directors’ close involvement in the
day-to-day running of the business,
The procedures we carried out to gain
evidence in the above areas included:
• Testing of a sample of revenue
meaning that any litigation or claims
transactions either side of the year-end to
would come to their attention directly.
underlying documentation to corroborate
that revenue was recognised in the correct
In the context of the audit, we considered
period; and
those laws and regulations: which
• Testing of manual journal entries, selected
determine the form and content of the
based on specific risk assessments
financial statements; which are central
applied based on the group and parent
to the company’s ability to conduct its
company’s processes and controls
business; and where failure to comply could
surrounding manual journal entries.
result in material penalties. We identified the
following laws and regulations as being of
A further description of our responsibilities
is available on the Financial Reporting
Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
significance in the context of the company:
• The Companies Act 2006 and IFRS
in respect of the preparation and
presentation of the financial statements;
• AIM regulations and Market Abuse
Regulations; and
• Consumer product regulations.
We performed the following specific
procedures to gain evidence about
compliance with the significant laws
and regulations identified above:
• Made enquiries of the legal team;
•
Inspected correspondence with regulators;
67
i n d e p e n d e n t a u d i t o r ’ s r e p o r t
Use of our report
This report is made solely to the parent
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 parent 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 parent company and
the parent company’s members as a body,
for our audit work, for this report, or for the
opinions we have formed.
Sancho Simmonds
Senior Statutory Auditor, for
and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
25 Moorgate
London
EC2R 6AY
Date: 17 March 2021
68
consolidated statement of profit and loss
and other comprehensive income
for the year ended 31 December 2020
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Operating loss
Net finance income
Loss before tax
Taxation
Loss for the year
Other comprehensive income
Foreign currency differences from overseas operations
which may be reclassified subsequently to profit or loss
Note
2020
£
2019
£
3
3
3
7
8
25,218,550
23,852,931
(10,763,508)
(11,176,905)
14,455,042
12,676,026
(3,500,916)
(2,729,317)
(13,394,391)
(22,453,901)
(2,440,265)
(12,507,192)
1,641
18,022
(2,438,624)
(12,489,170)
414,541
352,240
(2,024,083)
(12,136,930)
35,822
17,310
Total comprehensive loss for the year
(1,988,261)
(12,119,620)
Basic and diluted loss per share
18
(0.75p)
(4.92p)
All results relate to continuing activities.
Notes 1 to 24 form part of these financial statements.
consolidated statement of financial position
at 31 December 2020
69
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
Non-current liabilities
Lease liabilities
Current liabilities
Trade and other payables
Provisions
Lease Liabilities
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
23
16
17
2020
£
273,496
466,330
2019
£
518,575
344,456
739,826
863,031
559,915
1,574,648
1,880,188
2,637,650
8,438,453
7,988,769
414,542
354,466
11,293,098
12,555,533
12,032,924
13,418,564
-
40,000
4,024,210
3,983,174
1,041,236
273,857
768,965
470,391
5,339,303
5,222,530
5,339,303
5,262,530
6,693,621
8,156,034
272,570
263,445
49,421,049
48,887,392
766,749
998,495
(43,918,599)
(42,109,328)
Foreign currency translation reserve
151,852
116,030
Total equity
6,693,621
8,156,034
Notes 1 to 24 form part of these financial statements.
These financial statements were approved by the board of directors on eve Sleep plc and were signed on its behalf by:
Tim Parfitt
Director
17 March 2021
Company registered number: 09261636
70
consolidated statement of changes in equity
for the year ended 31 December 2020
Share
Capital
£
Share
Premium
£
Share-based
reserve
£
Retained
Earnings
£
Foreign
currency
translation
reserve
£
Total Equity
£
For the year ended 31 December 2020
Balance at 1 January 2020
263,445
48,887,392
998,495
(42,109,328)
116,030
8,156,034
Exercise of employee share options
3,734
Share-based payment charge
Transfer on exercise of employee
share options
Transfer on issue of equity for
marketing services
-
-
-
-
220,084
-
-
(214,812)
214,812
5,391
533,657
(237,018)
-
Total transactions with owners
9,125
533,657
(231,746)
214,812
Loss for the period
Other comprehensive income for the year
-
-
-
-
-
-
(2,024,083)
-
35,822
35,822
Balance at 31 December 2020
272,570
49,421,049
766,749
(43,918,599)
151,852
6,693,621
For the year ended 31 December 2019
Balance at 1 January 2019
139,735
36,716,372
250,073
(30,073,145)
98,720
7,131,755
Issue of shares
120,317
11,911,415
Exercise of employee share options
770
-
-
1,111,396
-
-
-
(100,747)
100,747
-
-
-
2,623
259,605
(262,228)
-
Share-based payment charge
Transfer on exercise of employee share
options
Transfer on issue of equity for marketing
purposes
Total transactions with owners
123,710
12,171,020
748,421
100,747
Loss for the period
Other comprehensive income for the
period
-
-
-
-
-
-
(12,136,930)
-
17,310
17,310
Balance at 31 December 2019
263,445
48,887,392
998,495
(42,109,328)
116,030
8,156,034
-
-
-
-
-
-
3,734
220,084
-
(302,030)
525,848
(2,024,083)
-
-
-
-
-
-
-
12,031,732
770
1,111,396
-
-
13,143,898
(12,136,930)
-
-
-
-
consolidated statement of cash flows
for the year ended 31 December 2020
71
Cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation
Amortisation
Impairment
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Share-based payment charge
Note
2020
£
2019
£
(2,024,083)
(12,136,930)
470,211
169,192
-
1,014,733
697,384
41,036
272,271
522,116
198,048
263,046
594,724
(446,772)
1,827,827
(578,619)
(186,984)
1,111,396
9
10
10
11
12
14
15
17
Net cash flow from operating activities
1,162,860
(9,344,264)
Cash flows from investing activities
Additions to intangible assets
10
(291,066)
Right of use asset initial direct costs
-
(532,484)
(15,375)
Net cash flow from investing activities
(291,066)
(547,859)
Cash flows from financing activities
Interest payable
Proceeds from the issue of share capital
Repayment of capital element of finance lease rentals
16
23
18,334
3,734
9,144
12,032,502
(480,000)
(200,000)
Net cash inflows/(outflows) from financing activities
(457,932)
11,841,646
Net cash inflow
413,862
1,939,523
Cash at beginning of year
Movement in cash
Effect of exchange rate fluctuations on cash held
Cash at end of year
7,988,769
6,031,936
413,862
35,822
1,939,523
17,310
8,438,453
7,988,769
72
notes to the financial statements
forming part of the the financial statements
1.
Reporting entity
eve sleep PLC (the "Company") is a public company, domiciled and registered in England in the United Kingdom and its shares are
listed on the London Stock Exchange AIM market. eve sleep PLC is a company limited by shares. The registered number is 09261636
and the registered address at 31st December 2020 was 29A Kentish Town Road, London, England, NW1 8NL. Prior to 5th August 2019
the registered address of the Company was 128 Albert Street, London, England, NW1 7NE.
2.
2.1
Accounting policies
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 accounting
standards in conformity with the Companies Act 2006 ("Adopted IFRSs"). The Company has elected to prepare its parent company
financial statements in accordance with adopted IFRS.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
Group financial statements.
2.2
Changes in accounting policy
(a) New and amended Standards and Interpretations adopted by the Group and Company
There are no changes to accounting policies adopted by the Group in the year ended 31 December 2020.
(b) New and amended Standards and Interpretations mandatory for the first time for the financial year beginning 1 January 2020 but
not currently relevant to the Group or Company.
Amendments to IFRS 16 addressing COVID-19 related rent concessions became effective for annual reporting periods beginning
on or after 1 June 2020. As neither the Group not Company has received such concessions, this is not relevant.
(c) New and amended Standards and Interpretations mandatory for periods beginning on or after 1 January 2021
These may have a significant impact in future years:
•
Amendment to IFRS 9: “Financial Instruments”
•
•
Amendment to IAS 39: “Recognition and Measurement”
Amendment to IFRS 7: “Financial Disclosures”
2.3
Measurement convention
The financial statements are prepared under the historical cost convention.
2.4
Going concern
The financial statements are prepared on a going concern basis notwithstanding that the Group is still generating losses.
The Group has reported an underlying EBITDA1 of £2.0m loss (2019: £10.7m loss) with an operating cash inflow of £1.2m (2019:
outflow of £9.3m). The closing cash balance at 31 December 2020 was £8.4m (2019: £8.0m) with £0.3m VAT deferred from Q1 2020
under the UK Government Coronavirus support measures and due for payment in April 2021
The directors have prepared a business plan and financial model including cashflow forecasts covering a period of more than 12
months from the date of approval of these financial statements.
The business plan makes the following key assumptions:
•
Revenue growth in the French and Irish markets driven by further marketing investment in these territories having
underinvested in 2020. The directors understand that the impact of COVID-19 on French consumer behaviour has been less
extreme that the UK and thus investment in these markets will reduce the reliance on UK consumers to drive revenue growth in
the Group.
• Minimal growth in the UK direct-to-consumer market due to uncertainties around the impact of COVID-19 on consumer
behaviour and spending capacity. When travel and leisure restrictions are eased in the UK, consumers may divert spending
away from homewares to these areas. However, the shift from physical retail to ecommerce spending is likely to be permanent
and the business is extremely well placed to capitalize on this.
• Marketing efficiencies throughout all territories broadly in line with 2020, measured as % of revenue. Having doubled marketing
1.
Underlying EBITDA loss defined as earnings before interest, tax, depreciation, amortisation and impairment, share-based payment charges connected with employee
remuneration (2020 and 2019), fundraise-related expenditure (2019 only), adding back IFRS16 adjustments to office lease costs. Underlying EBITDA reflects what
management believe to best demonstrate the underlying performance of the business in a given year.
notes to the financial statements continued
73
efficiency from 2019 to 2020, the directors are confident that a similar return on investment can be made in the foreseeable
future.
•
•
Short-term investment in people and technology to deliver improvements in the efficiency and resilience of the business. This
will generate an increase in some discretionary costs in 2021 but these can be reduced if required.
There will be minimal disruption from Brexit given the changes made in 2020 to the location of mattress manufacturing.
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. The delivery of the strategic plan is subject to uncertainty and
these have been modelled through sensitivity analysis to revenue and costs.
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 debtor days through facilities such as debt factoring as the group does not presently
have any debt (excluding the lease liability arising under IFRS 16).
The directors consider that given the strong opening cash position relative to the 2020 underlying EBITDA loss, the expected
performance over the next 12-18 months and the level of fixed and non-discretionary costs, that the Group will be able to continue
realising its assets and discharging its liabilities in the normal course of business and it is therefore appropriate to prepare the
financial statements on a going concern basis.
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 statement of
financial position date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the statement of profit and loss. 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 statement of financial position 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.
74
notes to the financial statements continued
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).
2.8
Classification of financial instruments issued by the Group
This note provides information about the group’s financial instruments, including:
•
an overview of all financial instruments held by the group
•
•
•
specific information about each type of financial instrument
accounting policies
information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.
The group holds the following financial assets:
Financial
instrument type
Financial asset
Note
Classification rationale
Financial assets held
at amortised cost
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. They are
generally due for settlement within 60 days and are therefore all
classified as current.
Trade receivables are recognised initially at the amount of
Trade receivables
12
consideration that is unconditional.
The group holds the trade receivables with the objective of collecting
the contractual cash flows and therefore measures them subsequently
at amortised cost using the effective interest method.
Details about the group’s impairment policies and the calculation of
the loss allowance are provided in note 12.
Other receivables
12
Other current assets
12
Cash and cash
equivalents
13
These receivables relate to items that cannot be classified as
trade receivables including rent deposits, accrued income and
volume rebate receivables. Collateral is not normally obtained and
although interest may be charged or is automatically due where
the terms of repayment exceed six months, this is not normally
applied.
Cash comprises cash balances and call deposits (financial assets
held with electronic money providers) whilst cash equivalents
comprise term deposits. Term deposits are presented as cash
equivalents if they have a maturity of three months or less from
the date of acquisition and are repayable with 24 hours’ notice
with no loss of interest.
75
notes to the financial statements continued
Financial
instrument type
Financial asset
Note
Classification rationale
Liabilities at amortised
cost
Trade payables
Non-trade payables and
accrued expenses
14
14
Lease liabilities
23
These payables are unsecured and are usually paid within 30 days of
recognition.
The carrying amounts of these payables are considered to be the same as
their fair values, due to their short-term nature.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
•
•
•
•
•
fixed payments (including in-substance fixed payments), less any
lease incentives receivable
variable lease payment that are based on an index or a rate, initially
measured using the index or rate as at the commencement date
amounts expected to be payable by the group under residual value
guarantees
the exercise price of a purchase option if the group is reasonably
certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term
reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options
are also included in the measurement of the liability.
2.9
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 statement of profit and loss 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:
Right of use asset The shorter of 3 years or length of lease
Depreciation methods, useful lives and residual values are reviewed at each statement of financial position date.
76
notes to the financial statements continued
2.10
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 three years, and
applied starting in the financial year after capitalisation. Amortisation and impairment charges are recognised within administrative
expenses on the face of the statement of profit and loss. 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 statement of financial position date.
2.11
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.
2.12
Investments
Investments in subsidiary companies are stated at cost and are subject to review for impairment indicators if identified.
2.13
Impairment excluding inventories
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost
(as defined in IFRS 9).
The Group 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.
2.14
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a
result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific
to the liability.
2.15 Revenue
Revenue and profit before tax are attributable to the one principal activity of the business. Revenue represents the net sales of goods
including freight, excluding value added tax. Revenue from the sale of goods is recognised when the Group has transferred the
goods to the buyer, less appropriate deduction for actual and expected returns and relevant discounts.
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
Multi-channel revenue
2020
£
19,791,409
5,427,141
25,218,550
2019
£
17,382,370
6,470,562
23,852,931
Whilst direct to consumer revenues represent sales placed and fulfilled via the Group’s own websites, multi-channel revenues
represent wholesale sales to third-party partners of the Group who ultimately sell the product on to their own end customers.
notes to the financial statements continued
77
2.16 Expenses
Operating lease payments
In line with the short-term lease exemption under IFRS 16, payments relating to the short-term lease of the former registered
office of the Group at 128 Albert Street were recognised in the statement of profit and loss during 2019 on a straight-line basis over
the remaining term of the lease. See note 23 for treatment of the lease for the office at 29A Kentish Town Road under IFRS 16.
Finance income and expenses
Finance expenses comprises interest payable related to lease liabilities and the unwinding of the discount on provisions.
Finance income comprises interest earned on cash equivalents.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Foreign
currency gains and losses are reported on a net basis.
2.17
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 statement of profit
and loss 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.
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 profit and loss in relation to equity-
settled options and share rights issued but not yet exercised.
2.18
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of profit and
loss 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 statement of financial position 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 statement of financial position 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.
2.19
Significant estimates and judgements
The preparation of financial statements in conformity with international accounting standards to meet the requirements of the
Companies Act 2006 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 as follows:
78
notes to the financial statements continued
Accounting estimates
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. 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 statement of financial position date and inventory of items for which management has
decided to discontinue from sale, either before the year-end or within three months of the year-end. In reference to this inventory
population a slow-moving stock provision is calculated. Following sensitivity analysis, management have concluded that the estimate
is not materially sensitive to variance of the input estimates and is therefore not a key estimate in the accounts.
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. Upon sensitivity analysis management have concluded that the estimate is not materially sensitive to
variance of the input estimates and is therefore not a key estimate in the accounts.
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. Following sensitivity analysis,
management have concluded that the estimate is not materially sensitive to variance of the input estimates and is therefore not a
key estimate in the accounts. In addition, based on the current level of warranty claims experienced across the Group, there is no
evidence to suggest that current inputs would lead to a material misstatement.
Accounting judgements
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.
2.20
Equity settled expenses
Where shares are issued in settlement of marketing service liabilities, those services have been provided at the normal market rate
with no discount.
notes to the financial statements continued
79
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 board assesses the performance of each segment based on revenue, gross profit and profit after distribution expenses,
payment fees and marketing expenses. Payment fees and marketing expenses are presented within administrative expenses on
the statement of profit and loss and other comprehensive income.
UK&I
France
Rest of
Europe
Rest of the
World
Total
For the year ended 31 December 2020
Revenue
Cost of Sales
Gross profit
20,501,151
4,586,988
130,411
(8,692,158)
(2,071,350)
-
11,808,993
2,515,638
130,411
Distribution expenses
(2,658,227)
(842,746)
57
Payment Fees
(461,143)
(70,214)
(15,760)
Marketing expenses
(5,138,937)
(964,248)
806
Segment results
3,550,686
638,430
115,514
Administration expenses (excluding
payment fees and marketing expenses)
Net Finance Income/(Expense)
Taxation
Total
-
-
-
-
-
-
-
25,218,550
(10,763,508)
14,455,042
(3,500,916)
(547,117)
(6,102,379)
4,304,630
(6,744,895)
1,641
414,541
(2,024,083)
UK&I
France
Rest of
Europe
Rest of the
World
Total
For the year ended 31 December 2019
Revenue
Cost of Sales
Gross profit
18,548,073
5,345,076
(45,141)
4,923
23,852,931
(8,385,865)
(2,751,453)
-
(39,587)
(11,176,905)
10,162,208
2,593,623
(45,141)
(34,664)
12,676,026
Distribution expenses
(1,809,692)
(1,014,775)
94,185
Payment fees
(352,702)
(90,180)
Marketing expenses
(9,703,321)
(2,357,403)
5,418
6,346
964
245
(2,729,317)
(437,219)
-
(12,054,377)
Segment results
(1,703,507)
(868,734)
60,808
(33,454)
(2,544,887)
Administration expenses (excluding
payment fees and marketing expenses)
Net Finance Income/(Expense)
Taxation
Total
(9,962,304)
18,022
352,239
(12,136,930)
80
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
73,500
70,000
Amounts received by auditor’s and their associates in respect of:
2020
£
2019
£
Tax advisory services
Tax compliance services
Other items
Depreciation of property, plant and equipment (note 9)
Amortisation of intangible assets (note 10)
Impairment (note 10)
Cost of inventory write offs (note 11)
Lease expenditure (note 2.16)
-
-
470,211
169,192
-
60,003
-
-
-
198,048
263,046
594,724
361,583
424,266
5
Staff numbers and cost
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
Finance
Marketing
Operations
Total
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
2020
2019
6
9
44
59
7
17
58
82
2020
£
2019
£
2,788,003
3,838,096
312,632
220,084
51,225
452,443
534,315
66,999
Total
3,371,944
4,891,853
notes to the financial statements continued
81
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
Total
2020
£
362,427
3,038
43,469
162,386
-
571,320
2019
£
424,389
2,824
52,746
124,804
31,788
636,551
Directors' aggregate emoluments and pension payments are detailed in the Directors' Remuneration Report on page 54, along
with directors' interests in issued shares and share options on page 55, which form part of these audited financial statements.
The gain on exercise of share options in respect of directors for the year was £nil (2019: £nil).
Directors of the Company and their immediate relatives control 7.3% per cent of the voting shares of the Company.
7
Net finance income
Finance income receivable on cash and cash equivalents is recognised in the statement of profit and loss as it is earned.
Interest receivable on cash and cash equivalents
Interest expense on lease liabilities
Total
2020
£
19,975
(18,334)
1,641
2019
£
27,165
(9,143)
18,022
82
notes to the financial statements continued
8
Taxation
Recognised in the statement of profit and loss:
Current tax credit
Research and development tax credit for the prior year
Total current tax
Reconciliation of effective tax rate:
Loss for the year
Total tax credit
2020
£
414,541
414,452
2019
£
352,240
352,240
2020
£
2019
£
(2,024,083)
(12,136,930)
414,541
352,240
Loss excluding taxation
(2,438,624)
(12,489,169)
Tax using the UK corporation tax rate of 19% (2018: 19%)
463,339
2,372,942
Effects of:
Expenses not deductible for tax purposes
Fundraise-related expenditure
Depreciation, amortisation and impairment
Share-based payment charges
Research and development tax credit for the prior year
-
-
(121,487)
(101,072)
414,541
(10,242)
(46,440)
(200,605)
(101,520)
352,240
Current year losses for which no deferred tax asset was recognised
(242,650)
(2,014,135)
Total tax credit
414,541
352,240
The Group has accumulated tax losses available for offset against future profits of £60,576,652 (2019: £58,552,569).
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.
The UK corporation tax rate is consistent year on year at 19%.
notes to the financial statements continued
83
9
Property, plant and equipment
Right of use asset
£
Plant and equipment
£
Fixtures and fittings
£
Cost
Balance at 1 January 2019
Additions
Balance at 31 December 2019
Additions
Balance at 31 December 2020
Depreciation and Impairment
Balance at 1 January 2019
Depreciation charge for the year
Balance at 31 December 2019
Depreciation charge for the year
Balance at 31 December 2020
Net Book Value
At 31 December 2019
At 31 December 2020
10
Intangible assets
Cost
Balance at 1 January 2019
Additions - internally generated
Additions - externally generated
-
716,623
716,623
225,132
941,755
-
198,048
198,048
470,210
668,258
518,575
273,497
10,476
-
10,476
-
10,476
10,476
-
10,476
-
10,476
-
-
39,724
-
39,724
-
39,724
39,724
-
39,724
-
39,724
-
-
Development costs
£
Assets under
construction
£
387,970
-
-
402,343
310,573
221,912
Transfers
747,553
(747,553)
Total
£
50,200
716,623
766,823
225,132
991,955
50,200
198,048
248,248
470,211
718,459
518,575
273,496
Total
£
790,313
310,573
221,912
-
Balance at 31 December 2019
1,135,523
187,274
1,322,797
Additions - internally generated
Additions - externally generated
Transfers
Balance at 31 December 2020
Amortisation and Impairment
Balance at 1 January 2019
Amortisation for the year
Impairment for the year
Balance at 31 December 2019
Amortisation for the year
-
-
193,459
1,328,982
120,571
263,046
526,954
910,571
169,192
268,305
22,761
(193,459)
268,305
22,761
-
284,881
1,613,863
-
-
67,770
67,770
-
120,571
263,046
594,724
978,341
169,192
Balance at 31 December 2020
1,079,763
67,770
1,147,533
Net Book Value
At 31 December 2019
At 31 December 2020
224,952
249,219
119,504
217,111
344,456
466,330
84
notes to the financial statements continued
10
Intangible assets (continued)
Development costs relate to internal and external costs incurred in respect of the infrastructure of the website platform and
ERP system; the impairment charge in the prior period relates wholly to capitalised website platform costs. Assets under
construction at 31 December 2020 relate to internal costs incurred for the development of ERP software for internal use
where the asset is expected to go live in 2021.
The carrying value of intangible assets has been reviewed by management at the year-end date for potential impairment and
an impairment charge has been recognised totalling £nil (2019: £594,724). The charge for 2019 was related to capitalised website
platform costs following the decision to transition to a new front-end platform to support the Group’s direct-to-consumer websites.
11
Inventories
Finished goods
2012
£
559,915
2019
£
1,574,648
There was no write-down of inventories to net realisable value in the year (2019: £nil). Included within inventories is £143,364
expected to be recovered in more than 12 months from the statement of financial position date. This balance of inventory is fully
provided for within the Group's slow-moving inventory provision of £200,774 (2019: £401,998). Inventory days were 19 days in
2020 (2019: 51 days). Finished goods recognised in cost of sales in the year amounted to £10,763,508 (2019: £11,176,905).
12
Trade and other receivables
Trade receivables
Other receivables
Prepayments
Other current assets
2020
£
656,032
221,030
883,126
120,000
2019
£
676,537
447,051
784,083
729,979
1,880,188
2,637,650
The average credit period offered on sales of goods during 2020 was 32 days (2019: 32 days). The average days sales outstanding
(‘‘DSO'') in 2020 was 38 days (2019: 38 days). At 31 December 2020, trade receivables at a nominal value of £nil (2019: £3,481)
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 expected credit losses based on the probability of default
(using past default experience with that customer and alongside analysis of the counterparty's current financial position where
specific credit risk is known), risk exposure (being the value of receivables outstanding with that customer) and finally a percentage
representative of the loss due to default.
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.
Four major retail customers each accounted for more than 10% of the total balance of trade receivables on 31 December 2020,
identical to 2019 where four major retail customers each accounted for more than 10% of the total balance of trade receivables on
31 December 2019.
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
Overdue over 90 days
2020
£
289,305
142,721
113,216
72,200
38,590
2019
£
277,934
21,493
245,198
131,912
-
656,032
676,537
notes to the financial statements continued
85
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
8,438,453
7,988,769
2020
£
2019
£
As at 31 December 2020, the group had an available £680,000 and €30,000 credit card facility.
14
Trade and other payables
Trade payables
Non–trade payables and accrued expenses
Deferred revenue
Taxes and social security payable
2020
£
1,183,802
1,027,043
949,411
863,954
2019
£
2,430,596
649,995
573,082
329,501
4,024,210
3,983,174
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 contractual 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 2020 financial year.
The Company took advantage of the UK Government Coronavirus support measures in the year, to defer VAT
due in April 2020 until April 2021. The amount deferred is included in the above taxes and social security payable.
15
Provisions
Balance at 1 January 2019
Provisions made during the year
Refunds
£
792,117
7,869,078
Warranty
£
163,832
73,574
Total
£
955,949
7,942,652
Provisions used during the year
(8,116,237)
(36,127)
(8,152,364)
Prior year under provision recognised in year
Balance at 31 December 2019
Provisions made during the year
22,728
567,686
3,735,217
-
201,279
106,000
22,728
768,965
3,841,217
Provisions used during the year
(3,437,640)
(65,221)
(3,502,861)
Prior year over provision recognised in year
Balance at 31 December 2020
(66,085)
799,178
-
(66,085)
242,058
1,041,236
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.
A warranty provision is required as the Group provides certain products to customers with 2, 3, 5 or 10-year warranty periods
depending on the product category.
86
notes to the financial statements continued
15
Provisions (continued)
During these periods 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. A 10% sensitivity applied to the estimated rate for warranty
claims would result in the warranty charge increasing or decreasing by around £20,000. (See note 2.19).
16
Share capital
Allotted, issued and fully paid:
Number
Nominal Value
£
31 December 2020
£
31 December 2019
£
Ordinary Shares
272,569,414
£0.001
Total
272,569
272,569
263,445
263,445
The table below summarises the movements in number of shares at the beginning and end of the period:
Ordinary Shares
Share capital 31 December 2019
263,444,823
Nominal Value £
Value of Share Capital £
Summary of Movements
£0.001
£263,445
Issue of shares for marketing services
at £0.10 per share
5,390,479
Exercise of share options over ordinary shares
3,734,112
Share capital 31 December 2020
272,569,414
Nominal Value £
Value of Share capital £
£0.001
£272,569
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 2020, 5,390,479 shares were issued and 3,734,112 share options were exercised bringing the total
share capital of the Company to 272,569,414 at 31 December 2020.
17
Share–based payments
The Group recognised a charge of £0.5m (2019: £1.1m) related to share-based payments during the year to
31 December 2020, all of which relates to equity-settled schemes and are presented within administrative expenses.
The charge is made up of two components: share-based payment charges connected with employee remuneration
totalling £0.2m and share-based payment charges relating to the equity settlement of liabilities due to Channel 4 totalling
£0.3m, of which £0.2m were satisfied with the issue of share capital during the period.
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 consolidated statement
of profit and loss on a straight-line basis over the vesting period after allowing for an estimate of shares that will ultimately vest.
notes to the financial statements continued
87
17
Share-based payments (continued)
The Company operates an HMRC approved executive management incentive plan (EMI). Under length of service criteria,
options typically vest over a 3 year period in equal monthly amounts. For those options with performance based condition,
the options will vest when the conditions are met. All options are equity settled.
The terms and conditions of the grants are as follows:
Grant Date
10/04/2017
01/04/2019
17/12/2019
17/02/2020
01/06/2020
01/06/2020
Number of
Contracts
Number of
Options
Exercise
Price
Performance Conditions
Expiry Date
1
7
4
2
3
2
251,000
£0.001
Length of service
10/04/2027
6,679,364
£0.001
Length of service
01/04/2029
6,850,000
£0.001
Length of service
17/12/2029
550,000
£0.001
Length of service
17/02/2030
1,750,000
£0.001
Length of service
01/06/2030
2,650,000
£0.001
Performance Based
01/06/2030
The Company operates an unapproved executive incentive plan. The vesting conditions for grants made on 26 January 2016
and 1 April 2019 are based on length of service with 100% of the options vesting on 36-month anniversary of the grant date.
All options are equity settled.
The terms and conditions of the grants are as follows:
Grant Date
26/01/2016
01/04/2019
Number of
Contracts
Number of
Options
Exercise
Price
Performance Conditions
Expiry Date
1
1
12,550
£0.001
Length of service
26/01/2026
150,000
£0.001
Length of service
01/04/2029
The number and weighted average exercise prices of share options are as follows:
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Lapsed during the year
Cancelled during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted Average
Exercise Price
£
Number of Options
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
£0.001
17,030,913
4,950,000
(1,960,642)
(3,734,112)
(483,060)
-
15,803,099
4,670,603
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 0.1p (2019: 6.37p)
The options outstanding at the end of the year have an exercise price of £0.001 and a weighted average contractual life of 10 years.
88
notes to the financial statements continued
17
Share-based payments (continued)
The fair value of employee share options is measured using a Black-Scholes model. Measurement inputs
and assumptions for those share options granted during 2020 are as follows:
Share class
Fair Value
Exercise Price
Expected volatility
Option Life
Risk free interest rate
Award
17/02/2020
£
Award
01/06/2020
£
Ord
£0.011
£0.001
84%
10yrs
1.000%
Ord
£0.012
£0.001
104%
10yrs
1.000%
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 loss per share (pence)
Diluted loss per share (pence)
2020
269,819,716
(2,024,083)
(0.75)
(0.75)
2019
246,739,240
(12,136,930)
(4.92)
(4.92)
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 2020, options outstanding amounted to 15,803,099. Given the loss for the year of £2,024,083
(2019 loss: £12,136,930) these options are anti-dilutive.
19
Financial instruments
Categories of financial instruments:
Financial assets at amortised cost
2020
£
2019
£
Cash and cash equivalents, trade receivables and other receivables
9,435,515
9,842,336
Financial liabilities at amortised cost
Trade payables, other payables and provisions
(3,252,081)
(3,849,556)
‘Financial assets held at amortised cost' includes trade receivables, other receivables (including accrued income) and cash and
cash equivalents and excludes prepayments and inventories. Included in ‘Financial liabilities at amortised cost' are trade payables,
accruals and other payables (albeit excluding deferred income). The carrying value of financial assets and liabilities approximates
their fair value.
notes to the financial statements continued
89
19
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 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 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. Allowances against doubtful debts are estimated by reference to
expected credit losses based on the probability of default. 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 statement of financial position date was:
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
Overdue over 90 days
Total
2020
£
289,305
142,721
113,216
72,200
38,590
2019
£
277,934
21,493
245,198
131,912
-
656,032
676,537
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 facilities available to meet the requirements of the business.
90
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 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
£
Statement of financial
position exposure
Cash and cash equivalents
7,224,328
1,105,488
108,636
Trade receivables
Other receivables
Other current assets
413,876
242,155
126,314
120,000
91,285
-
-
-
-
Trade payables
(761,350)
(390,101)
(32,349)
Non-trade payables and accrued
expenses
(957,306)
(69,736)
(959,828)
(81,407)
-
-
Provisions
Total
-
-
8,438,452
656,031
3,429
221,028
-
-
-
-
120,000
(1,183,800)
(1,027,042)
(1,041,235)
5,206,034
897,684
76,287
3,429
6,183,434
Foreign currency sensitivity
The Group's principal financial instrument foreign currency exposures are to Euros. The Group has considered the sensitivity of the
Group's reported loss before tax and closing equity to a 10% increase and decrease in the value of this currency 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.
A 10% percent strengthening of these currencies against Sterling at 31 December 2020 would have decreased the Group loss
by 5.4%. This calculation assumes that the change occurred at the statement of financial position date and had been applied to risk
exposures existing at that date.
20
Contingencies
There were no contingent liabilities to be disclosed (2019: £nil).
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
53 to 54 of the Director’s remuneration report.
22. Commitments
There were no commitments in the year (2019: £nil).
notes to the financial statements continued
91
23. Leases
The Group commenced the lease of its registered office at 29A Kentish Town Road, London, NW1 8NL on 1 August 2019.
This is the only lease reflected on the statement of financial position as a right-of-use asset and a lease liability.
The Group classifies its right-of-use asset in a consistent manner to its property, plant and equipment as an Office Building.
The terms of the lease at 29A Kentish Town Road, London, NW1 8NL do not include variable lease payments therefore
management have not been required to consider the impact of such payments.
At 31 December 2020, the Group had no further commitments to short-term leases.
Right-of-use-asset
Additional information on the right-of-use assets by class of assets is as follows:
Office Building
Total
Asset
941,755
941,755
Carrying
amount
-
-
Additions
Depreciation
Impairment
225,132
225,132
668,259
668,259
-
-
The right-of-use assets are included in the same line item as where the corresponding underlying assets would be presented
if they were owned.
Lease liability
Lease liabilities are presented in the statement of financial position as follows:
Current
Non-Current
Total
31 December 2020
31 December 2019
277,397
-
277,397
470,391
40,000
510,391
Reconciliation of liabilities arising from financing activities
31 December
2019
Cash flows
Non-cash
changes:
Additions
31 December
2020
Lease liabilities
510,391
(480,000)
Total
510,391
(480,000)
247,006
247,006
277,397
277,397
31 December
2018
Cash flows
Non-cash
changes:
Additions
31 December
2019
Lease liabilities
Total
-
-
(200,000)
(200,000)
710,391
710,391
510,391
510,391
24.
Subsequent events
There have been no significant events since the year end.
92
company statement of financial position
at 31 December 2020
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Current assets
Cash and cash equivalents
Inventories
Trade and other receivables
Current tax receivable
Total assets
Non-current liabilities
Lease liabilities
Current liabilities
Trade and other payables
Provisions
Lease liabilities
Total liabilities
Net assets
Share capital
Share premium
Share-based payment reserve
Retained earnings
Total Equity
Note
4
5
6
9
7
8
18
10
11
18
2020
£
273,496
466,330
768
740,594
7,500,365
559,915
2,072,457
414,542
2019
£
518,575
344,456
1,669
864,700
7,231,061
1,574,648
3,100,528
354,466
10,547,279
12,260,703
11,287,873
13,125,403
-
40,000
3,183,182
3,823,970
924,752
273,857
670,269
470,391
4,381,791
4,964,630
4,381,791
5,004,630
6,906,082
8,120,773
12
272,570
263,445
49,421,049
48,887,392
766,749
998,495
(43,554,286)
(42,028,559)
6,906,082
8,120,773
Notes 1 to 19 form part of the historical financial information shown above. The loss for the year was £1,739,641.
These financial statements were approved by the board of directors on eve Sleep PLC and were signed on its behalf by:
Tim Parfitt
Director
17 March 2021
Company registered number:
09261636
company statement of cash flows
for the year ended 31 December 2020
Cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation
Amortisation
Impairment
Increase/(decrease) in inventories
Increase/(decrease) in trade and other receivables
(Increase)/decrease in trade and other payables
(Increase)/decrease in provisions
Share based payment charge
93
Note
2020
£
2019
£
(1,739,641)
(12,117,866)
470,211
169,193
-
1,014,733
967,996
(640,788)
254,483
522,116
198,048
263,046
594,724
2,237,255
(704,636)
(525,089)
(175,556)
1,111,396
Net cash outflow from operating activities
1,018,303
(9,118,678)
Cash flows from investing activities
Additions to property, plant and equipment
Additions to intangible assets
Right of use asset initial direct costs
-
(291,067)
-
-
(532,484)
(15,375)
Net cash outflow from investing activities
(291,067)
(547,859)
Cash flows from financing activities
Interest payable
Proceeds from issue of share capital
18,334
3,734
9,144
12,032,502
Repayment of capital element of finance lease rentals
19
(480,000)
(200,000)
Net cash inflow from financing activities
(457,932)
11,841,646
Net cash inflow/(outflow)
269,304
2,175,109
Cash at beginning of year
Movement in cash
Cash at end of year
7,231,061
269,304
7,500,365
5,055,952
2,175,109
7,231,061
94
company statement of changes in equity
for the year ended 31 December 2020
Balance at 1 January 2020
263,445
48,887,392
998,495
(42,028,559)
8,120,773
Share Capital
£
Share
Premium
£
Share-based
payment
reserve
£
Retained
Earnings
£
Total Equity
£
Exercise of employee share options
3,734
Share-based payment charge
Transfer on exercise of employee share options
Transfer on issue of equity for marketing
purposes
-
-
-
-
-
-
220,084
-
-
3,734
220,084
(214,812)
214,812
-
5,391
533,657
(237,018)
-
302,030
Transactions with owners
9,125
533,657
(231,746)
214,812
525,848
Loss for the year
Write down in investments
-
-
-
-
-
-
(1,739,641)
(1,739,641)
(900)
(900)
Balance at 31 December 2020
272,570
49,421,049
766,749
(43,554,286)
6,906,082
for the year ended 31 December 2019
Balance at 1 January 2019
139,735
36,716,371
250,073
(30,011,440)
7,094,739
Issue of shares
120,317
11,911,415
Exercise of employee share options
Share-based payment charge
Transfer on exercise of employee share options
Transfer on issue of equity
for marketing purposes
770
-
-
-
-
-
-
-
1,111,396
-
-
-
(100,747)
100,747
2,622
259,605
(262,227)
-
12,031,732
770
1,111,396
-
-
Transactions with owners
123,710
12,171,020
748,422
100,747
13,143,898
Loss for the year
-
-
-
(12,117,866)
(12,117,866)
Balance at 31 December 2019
263,445
48,887,392
998,495
(42,028,559)
8,120,773
notes to the financial statements continued
95
1
Accounting policies
The Company financial statements have been prepared and approved by the directors in accordance with international
accounting standards in conformity with the Companies Act 2006 ("Adopted IFRSs"). The Company has elected to prepare
the financial statements in accordance with adopted IFRS.
The Company additionally applies the following accounting policies:
1.1
Investment in subsidiaries
These investments are held at cost less impairment.
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 £1,739,641 (2019: £12,117,866 loss).
3
Directors’ remuneration
The Company shares the same directors as the Group. Directors' remuneration is disclosed in note 6 of the Group financial statements.
4
All property, plant and equipment in the Group is owned by the Company. See Group note 9.
Property, plant and equipment
5
Intangible assets
All intangible assets in the Group are owned by the Company. See Group note 10.
6
Investments
During the year the company held the following investments in subsidiaries:
Company:
eve sleep Inc
Dissolved on 16
June 2020
Principal place
of business/
Registered office
address
185 W. Broadway,
Suite 101, PO Box
1150, Jackson,
USA
Registered Number
Type of share
Ownership
2019
Ownership
2018
EIN 47-4164566
Ordinary
100%
100%
eve sleep SASU
5 Rue Des Suisses,
75014, Paris
823397419 R.C.S
Paris
Ordinary
100%
100%
All 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. Following the decision of July 2018
for the Group to exit the US market, eve Sleep Inc was a non-trading entity during 2020 and was dissolved on 16 June 2020.
96
notes to the financial statements continued
7
Inventories
Inventories within the Group are owned by the Company. See Group note 11.
8
Trade and other receivables
Trade receivables
Other receivables
Receivables from subsidiary undertakings
Other current assets
Prepayments
Total
2020
£
344,007
125,748
605,578
120,000
877,124
2019
£
494,991
443,577
650,048
729,979
781,933
2,072,457
3,100,528
As at 31 December 2020, receivables from subsidiary undertakings of £1.3m (2019: £0.7m) 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
Total
2020
£
2019
£
605,578
650,048
-
-
605,578
650,048
The average credit period offered on sales of goods during 2020 was 32 days (2019: 32 days).
The average days sales outstanding (‘‘DSO'') in 2020 was 27 days (2019: 32 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 expected credit losses based on the probability of default
(using past default experience with that customer and alongside analysis of the counterparty's current financial position where
specific credit risk is known), risk exposure (being the value of receivables outstanding with that customer) and finally a percentage
representative of the loss due to default.
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 2020,
identical to 2019 when three major retail customers each accounted for more than 10% of the total balance of trade receivables.
notes to the financial statements continued
97
2020
£
68,729
128,429
103,373
17,850
25,626
344,007
2019
£
277,934
-
85,624
131,433
-
494,991
Not overdue
Overdue between 0-30 days
Overdue between 31-60 days
Overdue between 61-90 days
Overdue over 90 days
Total
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.
9
Cash and cash equivalents
Cash and cash equivalents per statement of financial position
7,500,365
7,231,061
2020
£
2019
£
10
Trade and other payables
Trade payables
Non-trade payables and accrued expenses
Deferred revenue
Taxes and social security payable
2020
£
909,694
672,684
868,081
732,723
2019
£
2,411,997
559,148
544,478
308,347
3,183,182
3,823,970
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 2020
financial year.
98
notes to the financial statements continued
11
Provisions
Refunds
£
Warranty
£
Total
£
Balance at 1 January 2019
703,473
142,351
845,824
Provisions made during the year
7,286,602
43,129
7,329,731
Provisions used during the year
(7,510,509)
(28,289)
(7,538,798)
Prior year under provision recognised in year
33,512
-
33,512
Balance at 31 December 2019
513,078
157,191
670,269
Provisions made during the year
4,135,093
106,000
4,241,093
Provisions used during the year
(3,860,883)
(56,349)
(3,917,232)
Prior year over provision recognised in year
(69,517)
139
(69,378)
Balance at 31 December 2020
717,771
206,981
924,752
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 2, 3, 5 and 10-year warranty
periods, depending on the product type.
During these periods 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. A 10% sensitivity applied to the estimated rate for warranty claims would result in the
warranty charge increasing or decreasing by less than £20,000.
12
Share Capital
See Group note 16.
13
Financial instruments
Categories of financial instruments:
Financial Assets
2020
£
2019
£
Cash and cash equivalents, trade receivables, other receivables and other current assets
8,275,203
9,367,754
Financial Liabilities
Trade payables, non-trade payables, accrued expenses and provisions
(2,507,129)
(3,641,415)
‘Financial assets held at amortised cost' include trade receivables, other receivables (including accrued income) and cash and cash
equivalents and excludes prepayments and inventories. ‘Financial liabilities held at amortised cost' include trade payables, accruals
and other payables and excludes deferred income. The carrying value of financial assets and liabilities approximates their fair value.
notes to the financial statements continued
99
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 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. Allowances against doubtful debts are estimated by reference
to expected credit losses based on the probability of default. 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 not 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 are to Euros. The Company have considered
the sensitivity of the Company's reported loss before tax and closing equity to a 10% increase and decrease in the value
of this currency 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.
A 10% percent strengthening of these currencies against Sterling at 31 December 2019 would have increased the
Company loss by 3.85% and an immaterial absolute value. This calculation assumes that the change occurred at the
statement of financial position date and had been applied to risk exposures existing at that date.
14
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 53 and 54 of the Director's report.
15
Commitments
There were no commitments in the year (2019: £nil).
16
Change in significant accounting policies
There have been no changes to accounting policies in the year.
17
Subsequent events
There have been no events subsequent to the year end that would have a material effect on the Company.
18
Leases
See Group note 23.
100
notes to the company financial statements continued
19
Reconciliation of liabilities arising from financing activities
31
December
2019
Cash flows
Non-cash changes:
Additions
31 December 2020
Lease liabilities
510,391
(480,000)
Total
510,391
(480,000)
247,006
247,006
277,397
277,397
31
December
2018
Cash flows
Non-cash changes:
Additions
31 December 2019
Lease liabilities
Total
-
-
(200,000)
(200,000)
710,391
710,391
510,391
510,391
101
every great day
starts the night before