eve Sleep plc 2021
company number 09261636
year ended 31 December 2021
annual report
good morning
welcome to eve’s
2021 annual report
e v e S l e e p p l c 2 0 2 1 a n n u a l r e p o r t
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c o m p a n y i n f o r m a t i o n
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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
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
c o n t e n t s
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c o m p a n y
information
directors
Cheryl Calverley (Chief Executive Officer)
Masood Choudhry (Independent Non-Executive Director)
Tom Enraght-Moony (Independent Non-Executive Director)
Mike Lloyd (Independent Non-Executive Chairman)
Tim Parfitt (Chief Financial Officer)
James Sturrock (Non-Executive Director)
secretary
Link Company Matters Limited
Central Square
10th Floor, 29 Wellington Street
Leeds
LS1 4DL
auditor
Nexia Smith & Williamson
25 Moorgate
London
EC2R 6AY
registered office
29A Kentish Town Road
London
NW1 8NL
registered number
09261636
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the attractions of eve
I was delighted to be appointed Chairman in
May 2021.
We are a business that has built strong
capabilities, in a market that is ripe with
opportunity.
The near-term opportunity is to continue to
grow our strong UK&I Direct-To-Consumer (DTC)
mattress business. The longer-term opportunity
is carving out a unique set of products and
services in sleep wellness. This is a market
that no-one has truly captured yet and is
fast-emerging in the mainstream of public
consciousness.
Eve was one of the first DTC mattress
companies when we were founded in 2015. It
was soon joined by a large number of other
start-ups with a similar model - in the UK, Europe
and North America. This created a level of
intense and unprofitable competition. Many
players have now been shaken out with a small
number remaining. We decided ourselves to
reset and rebuild in 2018 with a new leadership
team – which now has Cheryl at its helm.
Since this time, the new team has
established a record of strategic and financial
progress, including the delivery of the rebuild
strategy. The most marked result of this is that in
our UK&I DTC business over the last two years,
sales are up 49% while we spent 44% less on
marketing.
Last year, our UK&I business performed well
with revenues up 10% year on year and profit
before group overheads also up 5% to £3.7m.
Within the UK&I, the largest area is our DTC
business which performed strongly and offset a
decline in our smaller B2B business. In B2B, we
have just started a new relationship with DFS,
giving support to the attainment of our growth
targets for 2022.
The French market has been more
challenging. In 2019, we decided to reassess
where we stood in France. As a result, we
stopped any material investment in broadcast
advertising – which has a payback period
over several years. Whilst the resulting savings
over 2020 allowed our French business to
deliver a profit before group overheads, our top
line in this market began to decline. We sought
to re-establish growth in our French business in
2021, investing again in brand advertising from
mid-year. The immediate result of this has been
to swing France from contributing a £0.6m profit
in 2020 to a £0.6m loss in 2021. While the top-
line decline has been reducing, it is fair to say
we’d hoped for a quicker turn-around than we
have seen, in the face of unexpected market
headwinds, with both increased competition
and softening consumer demand ameliorating
the growth.
eve is well placed to carve out a
leadership position in the huge, growing
and untapped market of sleep wellness.
chairman’s statement
Mike Lloyd
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s t r a t e g i c r e p o r t : chairman's statement
Our Group overheads reduced slightly by
£0.2m in the year. This plus the improvement
in UK&I contribution did not offset the swing in
profitability in France. Consequently, our Group
EBITDA loss increased from £2.0m in 2020 to
£3.0m in 2021.
It is clear we have a strong UK&I business.
Our brand commands a premium and we
have invested in it continuously since 2015.
Our mattresses top the Which? Best Buy tables.
Our service and operations are strong. Our HQ
and core production is in the UK and we have
a strong management team and wider set of
colleagues.
The rebuild strategy has also given us a
stronger platform to extend this momentum. It
has given us a robust data set-up we did not
have. This is critical to being effective at digital
marketing. It has also given us a more scalable
and resilient website platform. Having now got
these in place there is more to be gained from
both in 2022.
The rebuild strategy has also given us a
product development and content capability
to expand beyond mattresses and ultimately
to become a true sleep wellness business. We
are doing this in natural steps from where we
started. In 2021 product development was
stepped up. This included the creation of a
range of ‘sleep-away’ products and we have
accelerated the development of our gifting
and wellness ranges, spanning everything from
weighted blankets, sleep aids and candles,
through to night lights and CBD oils.
second consecutive year of
revenue growth
Looking at the numbers in more detail:
this was another year of financial progress
towards our goal of building a profitable and
sustainable business.
Group revenue increased year-on-year by
5% to £26.6m (2020: £25.2m). On two-year pre-
Covid comparatives, revenue has grown 11%
in tandem with a 40% reduction in marketing
spend over the same period.
Revenue growth was led by the UK&I
market, which achieved its third consecutive
year of improvement. UK&I revenues grew 10%
year-on-year and 22% on two-year pre-Covid
comparatives. Within that the DTC revenues
grew 21% year-on-year and 49% on two-year
comparatives. The UK&I business generated
a positive net contribution, defined as profit
before overhead costs, for the second
consecutive year, reporting a profit of £3.7m in
2021 (2020: £3.6m), an increase of 5% year-
on year and an improvement of £5.4m on the
2019 loss.
We have reset the French business as I
outlined. Here revenues declined 13% in the
year to £4.0m. However, there are early signs of
improvement including a growing conversion
rate, which increased in the fourth quarter.
At the Group level EBITDA losses increased
year-on-year to £3.0m (2020: loss £2.0m)
reflecting the additional investment in
France. This is 73% below 2019 pre-Covid loss
levels of £10.7m. The increased EBITDA loss,
compounded by a £1.0m cash outflow in H1
2021 for one-off factors relating to increased
stock holding, payment of deferred VAT and
other working capital movements, reduced the
net cash position to £4.5m at 31 December
2021 (31 December 2020: £8.4m).
We are of course cognisant of how we
are using our cash going into 2022, and a
key objective this year is for the UK&I business
to reach breakeven after covering its share
of group overheads while building top-line
growth.
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s t r a t e g i c r e p o r t : chairman's statement
Trading in Q1 last year was eve’s strongest
quarter, as a result of extensive lockdown
restrictions, with comparatives normalising
from the start of May. In this context, trading
for January and February has been softer
than the prior period last year, but 6% up on
2020. Whilst there are heightened geopolitical
uncertainties and the path for consumer
spending is currently unclear for the year, our
targets on growth and UK&I profitability remain.
With the invasion of Ukraine, we have
entered a period of more intense uncertainty.
Just as we did when COVID kicked-off, we
will respond as things develop and seek
to capture opportunities as they arise. Our
direction and objectives remain unchanged
however.
Mike Lloyd
Chairman
23 March 2022
all credit to our people
Coming into eve, I have been impressed by
the culture and openness in the business.
It is a creative, fun place to work, and an
organisation with strong values and real
purpose. For shareholders, this is an asset for
our long-term success.
And in terms of our team: whilst often
said, it is deeply felt – they have endured two
unprecedented years. They have managed
Covid induced uncertainty as well as working
systematically through the challenging
rebuild strategy. Throughout these trying times
they have demonstrated incredible levels of
resilience and flexibility. During the Christmas
period, where Covid brought challenges to our
delivery network and our own team capacity,
all members of the team, irrespective of
seniority jumped in to help resolve some of the
resulting customer challenges.
I would also like to thank Paul Pindar for
his service as Chairman to eve over many
years. He has done a sterling job, overseeing
both the appointment of a new and first-
class management team as well as the
delivery of the rebuild strategy. At the same
time, I welcome Masood Choudhry, who was
appointed to the board as a Non-Executive
director in February 2021. Masood’s 20-year
background in logistics and supply chain (he
is currently VP of logistics at Zalando) has and
will prove invaluable in an environment where
global supply chains are being disrupted.
outlook
The priorities we set out for this year are
twofold. First, to build on the momentum
we have in our UK&I business to deliver a
breakeven result. Second, to accelerate our
move to be a wider sleep wellness business.
As I write this, it is three weeks since Russia
invaded Ukraine. The Bank of England has
just put up interest rates and said they expect
inflation to be hitting over 8% soon. Consumer
sentiment has clearly turned since Christmas.
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sleep wellness is a large,
growing, global industry
Consumers en masse have woken up to the
fact that sleep is an essential element of
wellness that should be taken as seriously
as diet and exercise. The pandemic has
brought this issue to the fore, with reports
of a substantial rise in sleep disruption,
caused by anxiety, stress and lockdowns. Not
getting enough sleep is correlated with many
conditions including but not limited to an
increased risk of depression, anxiety, weight
gain, diabetes, heart disease and strokes.
In a survey undertaken for eve in 2021
nearly two thirds of respondents say that they
worry about the amount of sleep they are
getting and that nine in ten consumers asked
had suffered some form of sleep disruption in
the last three months. In the same eve survey,
almost 75% of respondents had purchased
or would consider purchasing a product or
service to help them sleep.
With the increasing understanding of the
importance of sleep has come consumer
change. Consumers are spending more on
wellness and the sleep wellness market has
been a beneficiary of this. Data from the
marketing intelligence and consulting firm
P&S Intelligence estimates that the global
sleep wellness market was worth US$79bn in
2019 and is expected to grow at a compound
annual growth rate (CAGR) of 7.1% between
2020 and 2030. The key drivers of this projected
growth include: the stress of modern life,
ageing populations, increased use of caffeine,
alcohol and screens, all of which impede a
good night’s sleep.
With the advent of lockdown restrictions
from March 2020 in the UK and the switch to
working from home, coupled with the lack of
opportunities for travel and leisure activities,
bedding and the wider homewares market
has seen a significant and sustained increase
in consumer spending. Whilst year-on-year
comparatives are distorted by the timing
of Covid restrictions and the associated
closure of high street competition, data from
Barclays UK Consumer Spending Reports
show that retail spending in the household
category increased each and every month
through 2021 against two-year, pre-Covid
comparatives. Furthermore, with the exception
of January 2021, the two-year growth rate was
in double digits every month.
eve experienced this trend in their own
product categories. Not only did consumers
spend more on sleep wellness related
products but they also invested more on the
central element of a good night’s sleep: the
mattress. The strong sales of eve’s premium
hybrid mattress testify to this point, generating
over 23% of Group mattress sales by volume
in 2021. As one of the Company’s KPIs every
customer that purchases an eve mattress is
asked at 100 days whether they’re sleeping
better thanks to their eve, and over 8/10 of
them tell us that they are. A strong piece of
advocacy for the quality and effectiveness of
our products.
ecommerce has held onto
much of the lockdown gains
The pandemic accelerated the already
established structural shift to online ordering
and although the proportion of online sales
was for a while artificially high, boosted by the
enforced temporary closure of physical store-
based competition, ecommerce has held onto
a significant proportion of the gains. Data from
the Office for National Statistics shows that
ecommerce sales represented 15.5% of total
non-food retail sales in December 2019 before
strategic review
sleep is an essential element of
wellness that should be taken as
seriously as diet and exercise.
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s t r a t e g i c r e p o r t : strategic review
the pandemic, rising to 35.2% by December
2020, following the return of lockdown
restrictions in the month. By December 2021
ecommerce’s share of total non-food retail
sales was 23.3%, a 780 bps increase from pre-
Covid levels of December 2019.
fragmented market, with most
pursuing a volume driven,
mattress focused strategy
Whilst the sector remains fragmented and
highly competitive the landscape has
changed through the pandemic. There has
been a number of online mattress providers
choosing to retrench from the UK market over
the last two years, alongside a reduction in
store-based competition, as some estates are
parred back and other retailers fail to survive.
The evidence suggests that the mattress-
in-a-box brands are growing their share of
the market given their rates of growth and in
eve’s case the fact that they own the two most
highly rated mattresses by Which? in the UK.
Whilst competition remains intense it is clear
that many online brands are largely focused
on price driven, volume sales of mattresses,
with eve adopting a differentiated strategy,
aiming to be the go-to brand for high quality
sleep wellness products, content and support
across a range of categories and sales
channels.
business model
eve is an agile, digitally native business, with
a DTC led proposition, supported by selected
partnerships with leading retailers. This omni-
channel approach reflects how consumers
increasingly discover, choose and buy items,
moving seamlessly between online and offline
channels. By being where the customer is,
without incurring the fixed costs of a large
store estate, eve increases its potential sales
opportunities, its customer reach and grows its
brand awareness and product understanding.
Building a strong brand and customer
experience, developing direct customer
relationships with first party data and
ultimately therefore enjoying repeat sales of
wider sleep wellness products is at the centre
of the eve model and is essential to attaining
profitability. To achieve this goal, eve is focused
on establishing itself as a go to brand for sleep
wellness products, underpinning its offering
with the authority and consumer trust to sell
a broader range of products at a greater
frequency across the category.
As a primarily DTC business, eve has the
privilege of vast amounts of first party data
from which to better understand customer
needs and to evolve both its marketing and
its product offering. This enables the business
to offer a more complete sleep solution to suit
each customer.
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As a brand led business, resources in
terms of investment and talent are focused on
the key operations of product development,
marketing, operations and customer
experience. In-line with many in the industry,
manufacturing and fulfilment are outsourced
to leading third party suppliers in the UK
and Continental Europe. Mattresses for the
UK&I market are made in the UK and those
for France are manufactured in Belgium. This
set-up helps to de-risk the business in terms of
currency and post Brexit trade frictions. It has
also proved to be highly scalable and flexible,
enabling significant seasonal variations in
product demand to be met without any
noticeable margin impact or variance in stock
holding.
There is a close working relationship with
eve’s manufacturing partners to innovate
and develop best in class products that
out-perform competitors in terms of function
and design, as evidenced by the high
performance of the ranges in the Which? and
Que Choisir consumer surveys in the UK and
France respectively.
As eve continues to expand into new
and adjacent product categories, there is a
consequent evolution in the business model.
In addition to selling products developed by
eve, there is a growing focus on leveraging
the brand strength of eve and its ecommerce
capability to build a position in the eyes of
consumers as a sleep retailer. To support this
goal eve has started working with innovative
partner brands, such as eym, Morphee, Three
Spirit and Rescue Remedy who bring a unique
breadth to the overall eve sleep wellness
offering, whilst retaining eve’s reputation for
quality.
The outsourced manufacturing and
fulfilment model, coupled with the DTC led
setup, enables a lower and more flexible cost
base than a traditional store-based retailer.
This has been evident throughout the rebuild
strategy, where non-profitable sales have
been cut, processes completely overhauled
without the negative margin impact and/
or incurrence of substantial restructuring
costs which would typically be expected
from a more asset backed business. For
eve, marketing is one of its largest costs, but
unlike manufacturing, it is flexible in nature
and is relatively quick to scale up and down
as well as optimise and accelerate where
opportunities arise, once core advertising
assets have been invested in and developed.
s t r a t e g i c r e p o r t : strategic review
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our journey
To fully understand the progress made in the
year, as well as the end destination and how
we plan to get there, we must first set-out the
wider context and the improvements made to
date that make this vision achievable.
where we have come from
Three years ago eve kicked off a rebuild
strategy designed to turn around the business
and put it on a more sustainable long term
footing. EBITDA losses, which peaked at £19m
in 2018, and the resulting cash burn needed
to be stemmed fast by addressing their
underlying causes. The causes were multiple
but included chasing sales growth in too
many markets at any cost, a lack of discipline
and control in marketing investment, an
inflated cost base built for a far larger scale, a
narrow product set with limited opportunity to
drive basket value, repeat purchase or margin
enhancement, and a creaking technology
platform. Strategically eve was competing
head-on with numerous DTC competitors
focused on high volume mattress sales
and needed to differentiate itself, targeting
wider, untapped market opportunities. These
issues and our subsequent progress can be
categorised into four key elements:
• Unit economics
• Marketing efficiency
• Competitive position
• Infrastructure and operations
Over the last three years there have
been extensive changes to the management
team, to lead and deliver the rebuild strategy.
In addition to my own appointment as CEO
in 2020, Tim Parfitt joined as CFO in 2019,
having previously held the same position at
the profitable ecommerce furniture operator
Loaf. Most recently we secured the services of
Mike Lloyd as Chairman, whose background
includes director level roles at The AA and
McCarthy & Stone and Masood Choudhry,
currently VP of logistics at Zalando, as a non-
executive director. For a company of eve’s size,
we have a heavy weight team, with a wealth
of experience and relevant expertise, all of
whom believe in the opportunity of building
a sustainably profitable digital sleep wellness
retailer.
our progress to date:
unit economics have significantly improved
with a higher gross margin
We have improved our unit economics by
focusing on driving profitable sales rather
than chasing topline growth as an objective
in its own right. Low margin sales channels
including Amazon and some other retail
partnerships have been terminated. Products
have been reviewed and redeveloped, ranges
refined, and logistics and supply chains
improved throughout. The resulting impact on
we are creating the world’s first digital
sleep wellness retailer.
Cheryl Calverley
chief executive’s report
gross margin has been significant with the
UK&I gross margin in 2021 improving to 55.9%,
an increase of 347bps on the 52.5% reported
in 2018. We are comfortable that margins
at or around this level give us appropriate
headroom for long term profitable growth.
marketing efficiency has more than doubled
Marketing costs were poorly controlled in 2018
with little understanding as to the effectiveness
of the investment. I joined the business at
the end of the 2018 financial year as CMO,
when marketing costs peaked at £22.2m for
the Group, representing 64% of total revenues.
Since then we have developed a more
thorough understanding of the marketing mix
and creative effectiveness, allowing us to focus
investment on marketing channels with the
strongest financial return.
The results have been impressive. In 2021
marketing investment totalled £7.2m, with
marketing efficiency, defined as marketing
costs as a percentage of revenues, falling to
27.0%, an improvement of 58% on the 2018
result, reflecting a reduction of marketing
costs between 2018 and 2021 of £15.0m, with
the associated fall in sales limited to £8.2m.
2020 was an anomalous year in this journey
where media pricing, notably the costs of
social media, search and TV fell ahead of
plan across the industry, due to the impact of
lock downs. 2021 marketing costs are more
normalised, and in line with our rebuild plan.
competitive position and product set is now
highly differentiated to peers
Two of the three pillars of the rebuild strategy
were essentially about moving eve forward
from being a pure play mattress seller towards
becoming a sleep wellness retailer, through
a differentiated market position which could
support a broader product suite. The new
positioning has been built through a series of
marketing campaigns since the start of 2019
onwards, and a growing amount of digital
content highlighting the benefits that eve can
bring consumers in sleep wellness.
The updated market positioning is
reinforced with the focus on new product
ranges. Bedframes, which were one of the
earlier new categories, have grown to become
a significant business in their own right,
generating 7% of Group revenues in 2021.
Gifting and wellness ranges were initially
introduced as a test in late 2020 and have
enjoyed further development in 2021. We now
have some 50 products on the UK&I website
spanning the Morphee Sleep aid, a range of
eym candles, Rescue Remedy balms, capsules
and droppers, nightlights and even a non-
alcoholic nightcap drink to soothe consumers
into a deep and restful sleep.
The sleepovers category was introduced
in the year, with a range of sleep away
products including a mattress that rolls up
and has its own carry handle. Early indications
for this category are extremely positive with
sales in the first six months surpassing £0.2m,
and due to its initial success we have listed
this product with Argos in addition to our
own site.
s t r a t e g i c r e p o r t : chief executive's report
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s t r a t e g i c r e p o r t : chief executive's report
developing in alignment with our sleep
wellness vision, all supported by a more robust,
effective and efficient infrastructure and
operations. This is clearly evident in our 2021
financial performance in the UK&I with the
third consecutive increase in net contribution,
despite the disruption to global supply chains
and labour shortages. Our average delivery
time in the UK&I in 2021 was just ten days.
Informed by in depth consumer research,
early in 2022 we extended our risk-free trial
from 100 nights to one whole year. This is an
industry leading proposition, made possible
by the quality of our award-winning mattresses
and their very low return rates. We calculate
that the additional sales secured through
this offer will more than compensate for any
increase in the number of returns.
In 2021 we passed an important milestone
on the path to sustainable profitability in
the UK&I, achieving a positive marketing
contribution for the second consecutive
year. Profit after marketing costs but before
overheads in the UK&I grew by 5% to £3.7m
(2020: £3.6m). Only two years ago the UK&I
business reported a loss after marketing costs
of £1.7m in 2019, demonstrating a £5.4m
improvement in profitability over the period.
We estimate that the French business
is some 18 months behind the UK&I in its
development, with the market place some 2-3
years behind the UK in terms of its transition to
online. But the same business improvements
seen in the UK&I have also been made in
France, with the unit economics restructured
and the infrastructure and operations re-
engineered to provide a more robust, effective
and efficient platform. By way of example the
French gross margin, which stood at 48.5% in
2019, increased to 52.2% in 2021.
The new French marketing campaign
which launched in May 2021 is the first
significant investment in the brand since 2018.
It is bespoke to the French market but reflects
the same differentiated brand proposition
in sleep wellness as the UK&I equivalent. As
we know from our history in the UK, this will
take time to build and pay back through
infrastructure and operations are now more
robust, effective and efficient
All aspects of operations from manufacturing,
warehousing, couriers and the website
platform have been restructured over the
last three years. Manufacturing has been
consolidated from three to two locations, one
in the UK, serving the domestic market and
one in Belgium for European orders. This has
given us greater cost efficiency, lower risk and
flexibility to scale-up and down production
with demand.
Warehouse operations have been
consolidated in both the UK and France.
We now have a more reliable warehouse
operation, which allows us to maintain
greater stock levels more efficiently – key in
these times of supply chain disruption and
unpredictability.
At the start of the rebuild strategy we
ran our own website platform, designed and
managed in-house. But it was not sufficiently
robust, with site downtime running at excessive
levels and costly to maintain. We have since
migrated the UK, Irish and French sites to
Shopify, and developed a high performing
and efficient technology team in India to
support further development of this platform.
The combination of the Shopify platform and
new couriers has also enabled us to improve
the customer delivery experience and reduce
costs, with the ability to combine all items in
an order into a single delivery which previously
was not possible.
The financial benefits of these changes to
our operations are clear to see. Administrative
costs (excluding marketing) as a % of revenue
have fallen from a peak of 41.8% in 2019 to
24.7% in 2021.
where we are now
The rebuild strategy has worked and the
benefits are coming through strongly in the
UK&I market. The brand and product range
are highly differentiated to peers and are
17
s t r a t e g i c r e p o r t : chief executive's report
increased sales. Our initial focus is returning
brand awareness to growth and establishing
confidence in the core product. Despite a
challenging and highly competitive market
in France during the year, there are some
early signs of encouragement in terms of an
improving conversion rate in the fourth quarter.
The profile of eve is further supported by our
partnership with homewares retailer Olivier
Desforges, which delivered £166k of revenue
into the business in 2021, significantly ahead
of expectations.
The eve product range in France is more
limited than in the UK, in part reflecting the
business’ earlier stage of development and
the importance of first establishing the core
mattress product in the minds of consumers.
However, in tandem with building momentum
in mattress sales, ranges will continue to be
developed that are aligned with the sleep
wellness vision and localised for the French
customer.
where we are going
sustainable profitability
Our near-term focus is moving eve into
sustainable profitability, reaching a position
where the business is growing and achieving
both a profit and a positive cashflow each
year. Anything less than this is not sustainable
in the long term. Our initial focus is in reaching
breakeven in the UK&I, returning to growth in
France, and building an increasingly broad
sleep wellness offering to engender ever
improving customer repeat rates, fuelling
organic underlying growth for the long term.
With the benefits of the rebuild strategy
now coming through we expect to reach
breakeven in the UK&I in the current financial
year, though we are cognisant of the financial
pressures facing UK consumers. It is a rapidly
changing economic and socio-political
picture, so we are retaining our focus on
business resilience and flexibility. In France
we expect a return to topline growth and an
improvement in the bottom line performance
compared to 2021, however again this is cast
against a rapidly changing market place
with strong and somewhat unexpected
headwinds, and we will invest according to the
circumstances we see before us.
Our improving margins and premium
ranges give us the opportunity to drive
stronger growth through maintaining our price
position of ‘accessible premium’ to customers,
despite inflationary cost pressures. This is
particularly vital over the next 6-12 months
when we anticipate consumer confidence
may be weaker and price will become a
more significant factor than usual in buyers’
decision making. The hard work over the past
two years in driving efficiency puts us in a
strong position to be able to offer great value
to customers at a time they need it most, with
no need to further expand margins.
We will achieve our financial goals
through the continuation of our strategy
of further product development, improving
customer experience, backed up by a
robust and efficient infrastructure, data and
technology platform.
growing the ranges
Our new product categories including gifting,
wellness and sleepovers, have been well
received and we expect strong growth in
both consideration and purchases as our
customer base becomes more aware of our
wider ranges and we develop our marketing
communications around them. It takes time to
build momentum in new ranges, particularly
with an eye to marketing efficiency, but the
retail model we are working to allows for
gradual and careful new category entry and
range development with minimal risk.
We are planning further new product
development during the year as we move
towards the goal of becoming a ‘sleep
retailer’ with further developments in core
and supporting categories. eve has adopted
a new model for developing its ranges as
18
s t r a t e g i c r e p o r t : chief executive's report
it seeks to move towards a more retail lead
mindset, using a combination of in-house
development and partner branded products,
supported with a licensing model that allows
us to trial and test new products in a low-risk
way.
As we develop our knowledge in new
categories, ranges and products, we will
continually assess our ‘make, buy or brand’
decisions, allowing us to balance margin,
growth and risk in each new category and
product range we enter.
leveraging data to enhance the customer
experience
There are significant plans to further advance
the customer experience in the current year.
Historically we have not had the bandwidth
to leverage our data set in any meaningful
way, but that is now changing. In early
2022 we brought on board an experienced
Data Director to help guide the business in
developing a strong data capability. We see
this as a key growth enabler, through the
ability to better understand and personalise
our offering to customers, acquiring and
serving customers ever more efficiently, and
delivering stronger repeat rates and customer
lifetime value as a result. This will drive further
improvements in our marketing efficiency,
conversion rate and the number of repeating
customers. Whilst seven years old, many parts
of the business remain immature, and moving
to a more data driven, automated model in
many areas is at the top of our priority list to
facilitate improving customer service as we
scale, beginning with our customer returns
management process.
creating a content and digital experience
led strategy – the ‘well slept club’
To further improve our marketing efficiency we
will continue reducing our reliance on paid
search and high marginal marketing costs
to acquire customers. We have made our first
steps towards a more content and digital
experience led strategy with the launch of
the ‘well slept club’, a personalised platform
of sleep advice, articles and support. This
is currently in beta and will formally launch
during the spring. This not only supports
marketing efficiencies, but allows us to
generate an additional, positive contribution
from marketing channels that were previously
a drain on eve’s resources, for example, social
media. This will integrate more fully with our
e-commerce experience over time, allowing
customers to find the help and advice they
need to improve their sleep alongside the
products that will make a difference. The well
slept club creates a sleep wellness presence
for eve more widely on Google, and there are
over 1,000 sleep related words that customers
might search for (from ‘helping kids sleep’ to
‘am I a night owl or a lark’) that eve’s content
will now appear alongside.
In 2023 we will further accelerate our
focus on the digital experience for customers.
We will build on the well slept club and
develop new digital innovations and services
to enhance the digital experience, moving
ever closer to becoming the world’s first digital
sleep wellness business.
As with many retailers over the early part
of the year, Covid created challenges in our
logistics operation and customer service. We
have now moved through this period and
back to the more normal, high levels of service
we expect to deliver to our customers. We see
19
s t r a t e g i c r e p o r t : chief executive's report
no reason for further upsets to our service and
are working to build ever more resilience into
our operation to handle any future turmoil.
responsible business
As a business we recognise our responsibility
to our stakeholders and the wider community
at large. We continue to make improvements
throughout our operations in order to reduce
our environmental footprint. Our localised
production facilities mean that we are not
trucking or airfreighting long distances, while
our mattress packaging boxes are produced
in the UK and made from Forest Stewardship
Council (FSC) approved card. During the year
we have been able to make improvements to
our mattress plastic packaging in the UK&I,
which is now made from a minimum of 40%
recycled materials.
Since early 2020 eve has partnered
with TFR Group in the UK, a prominent
furniture recycling company, on the removal,
rejuvenation and recycling of mattresses.
The partnership includes taking them
through stringent sanitisation and quality-
check processes before rolling and boxing,
saving on CO2 emissions, storage and re-
delivery. This also lets the end refurbished
mattress customer enjoy the benefits of a
rolled mattress. To date the partnership has
achieved a rejuvenation rate of approximately
60%. Remaining mattresses that are not
capable of being rejuvenated are broken
down and each material individually recycled.
This policy is part of ensuring that 100% of
eve sleep’s returned mattresses are diverted
away from landfill, saving 125 tonnes of
waste per annum, whilst also optimising
revenue recovery. A separate partnership also
encourages customers to have their previous
mattress removed and recycled at the point
their new mattress is delivered.
culture and diversity
We thrive on individuality at eve. We believe
that irrespective of age, gender, ethnic origin,
religion, sexual orientation, gender identity,
gender expression, or disability, eve should be
a place of opportunity, respect and support
for individuals to be themselves, allowing them
to do their best work. We understand that our
people, capability and culture are one of the
most powerful competitive advantages that
we have, and a focus on developing talent,
retaining high performers and attracting a
diverse intake are core to our future success.
I, and my executive team are seeking to build
the business that we would have thrived in
when we were earlier in our careers, giving
our team the opportunity to develop to their
greatest potential.
There continues to be significant
investment 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 work 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.
20
s t r a t e g i c r e p o r t : chief executive's report
Cheryl Calverley
Chief Executive Officer
23 March 2022
Retaining and motivating our key talent
whilst engaging the whole eve business with
the challenges at hand remains top of our
mind. To this end we redesigned our rewards
and benefits scheme in 2020, awarding our
extended leadership team share options
so they can share in the success they bring
to the business. At the same time, we have
moved to a flat bonus structure, meaning
everyone in the business, regardless of salary,
tenure or experience receives the same cash
reward at year end, should we achieve our
aims.
Our desire for team inclusivity and fair
pay for all is also in evidence in our pay
ratio, which measures the ratio of the CEO’s
total remuneration to that of the lowest paid
full-time member of eve. In 2021 this ratio
was 7.9x and whilst there is limited data
against which to accurately benchmark
eve’s performance, the Company is of the
view that this compares favourably with the
wider market. This further fosters our culture of
transparency, equality and openness, whilst
showing real respect for the efforts each
and every one of the team put in to help us
achieve our mission of sleep wellness.
Our focus on diversity continues with
two key initiatives. Firstly an evolution to
our approach to recruitment to ensure we
recruit purely on capability and blind to
background, through the introduction of the
‘beapplied.com’ blind recruitment software.
And secondly, 2021 saw us take on our first
apprentice in the marketing department, in
partnership with the Marketing Academy.
The concerted efforts that we are making
with regards to employee well-being and
fairness are evident in our employee survey
scores. Using the Peakon employee survey,
our employee scores for health and well-
being have increased from 8.0 in 2020 to 8.2
in 2021, which compares favourably with the
industry benchmark of 7.8. In addition our
diversity and inclusion score has improved
substantially from 7.9 to 8.4 in the year.
eve is pleased to present the following
metrics relating to gender balance as at 31
December 2021. The following breakdown
shows the number of persons of each sex
who were:
(i)
directors of the company;
(ii)
senior managers of the company
(other than those falling within category (i)); and
(iii)
employees of the company.
Male
Female
Directors
5
1
Senior Managers
3
2
Employees
14
31
21
In 2021 the key performance indicators
(KPIs) used to evaluate and monitor the
performance of the business and measure
the effectiveness of the three pillars of
Growth (increasing revenue and profitability),
Customer Obsession (offering customers
an increasingly better service and range of
products) and Resilience (structuring the
business to ensure it can flex and adapt to
external changes) are listed below.
Overall
revenue
growth
Underlying
EBITDA1
Marketing
efficiency
financial KPIs
operational KPIs
UK brand
awareness
Product
return rates
eve customer
sleep wellness
score
Repeat
customers
eve website
conversion rate
key performance
indicators
notes
1Underlying EBITDA is defined in the Glossary on page 25.
22
23
Operational KPIs relate to group performance
across all three markets unless otherwise stated.
Unprompted Brand Awareness is
calculated by an external consultancy. The
methodology for calculating the score was
amended in the year and the August 2020
figure has been rebased.
Both the financial and operational KPIs on
the face of it show a mixed performance year-
on-year. Whilst Group revenue has continued
to grow year-on-year by 5%, Group marketing
efficiency declined by 274bps. However, Covid
distorted some underlying trends in 2020
and alongside consumers essentially being
forced to shop online and a marked increase
in TV viewing, the costs of google search,
social media and other marketing costs were
artificially lower in 2020 than they ordinarily
would have been, with on-site conversion rates
higher than planned. On a two-year, pre-Covid
basis, Group marketing efficiency in 2021
improved by 2355 bps from 50.5% in 2019 to
27.0% in 2021 and the conversion rate, which
declined year-on-year by 32 bps in 2021, is
still ahead of 2019 comparatives. As we move
to a broader content strategy on site, with
many more pages dedicated to educating
and supporting our customers in improving
their sleep, this ‘site conversion rate’ metric will
become an increasingly unclear metric, and
we will introduce alongside the more nuanced
‘product conversion rate’ metric, which reflects
the % of customers that purchase having
visited a website page featuring one of our
products.
The decline in brand awareness in the
year was planned and reflects the maturing
of the marketing strategy, which evolved
from an early focus on raising awareness
to a concentration on building familiarity,
consideration and purchase. The success of
this shift in focus can be seen in the 200 bps
increase in familiarity from 5% in August 2020
to 7% in September 2021, the achievement
of a third consecutive year of UK&I revenue
growth and the improvement in the marketing
contribution, which rose to £3.7m (2020:
£3.6m) in the year.
s t r a t e g i c r e p o r t : key performance indicators
update to KPIs for 2022
To reflect the current UK focus on prioritising
brand familiarity, consideration and purchase
over brand awareness, eve will for 2022 report
UK brand familiarity alongside unprompted
brand awareness as a KPI. This new KPI is
measured externally.
To reflect the evolution of the website to
deliver content alongside commerce, going
forward eve will report ‘product conversion
rate’ alongside ‘site conversion rate’.
financial KPIs
•
Group revenue increased by 5% to £26.6m
(2020: £25.2m);
•
Decrease in Group marketing efficiency by
279bps to 27.0% (2020: 24.2%); and
•
Group underlying EBITDA losses increased
by 48% to £3.0m loss (2020: £2.0m loss).
operational KPIs
•
Unprompted UK brand awareness: 400bps
decline in unprompted UK brand aware
ness to 8% at August 2021 (August 2020
rebased: 12.0%);
•
27 bps year-on-year improvement in the
returns rate to 7.5% (2020: 7.8%);
•
32 bps year-on-year reduction in the eve
websites conversion rate;
•
eve customer sleep wellness score: 8/10
(2020: 8/10); and
•
The percentage of mattress customers
who have gone on to buy another product
within two years: 12.4% (2020: 12.4%).
24
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 (2021
and 2020), adding back IFRS16 depreciation
relating to lease costs. Underlying EBITDA
reflects what management believe to best
demonstrate the underlying performance of
the business in a given year.
UK brand awareness – when asked question
“What mattress brands can you think of?”
the % of total respondents that answer eve
(externally assessed using industry polling
agencies).
glossary
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).
repeat customers – the percentage of
mattress customers who have made a second
purchase within two years of their initial order.
25
26
Tim Parfitt
delivered topline growth over a
restructured financial model.
financial review
group financial performance
27
£m
2021
2020
Movement
Group revenue
26.6
25.2
+5%
Group profit
14.7
14.4
+2%
Distribution expenses
(3.7)
(3.5)
+7%
Profit after distribution expenses
11.0
10.9
+0%
Payment fees
(0.7)
(0.5)
+19%
Marketing costs
(7.2)
(6.1)
+17%
Profit after distribution expenses, payment fees and marketing costs
3.1
4.3
(27%)
Wages & Salaries (excluding share-based payment charges)
(3.2)
(3.3)
(2%)
Other administrative expenses
(3.1)
(3.2)
(2%)
Share-based payment charges connected to employee remuneration
(0.2)
(0.2)
(27%)
Operating loss
(3.4)
(2.4)
(40%)
Loss before tax
(3.4)
(2.4)
(40%)
Taxation
0.3
0.4
(14%)
Loss after tax
(3.1)
(2.0)
(51%)
Reconciliation to underlying EBITDA:
Taxation
(0.3)
(0.4)
(14%)
Share-based payment charges connected to employee remuneration
0.2
0.2
(27%)
Depreciation and amortisation
0.6
0.7
(1%)
Application of IFRS 16 to lease for serviced office
(0.4)
(0.5)
(11%)
Underlying EBITDA
(3.0)
(2.0)
(48%)
UK&I financial performance
group financial performance as a % of revenue
s t r a t e g i c r e p o r t : financial review
28
% of Revenue
2021
2020
Movement
Gross profit
55.4%
57.3%
(193bps)
Distribution expenses
(14.1%)
(13.9%)
(20bps)
Profit after distribution expenses
41.3%
43.4%
(213bps)
Marketing
(27.0%)
(24.2%)
(274bps)
Administrative expenses excluding marketing
(26.5%)
(28.0%)
148bps
Administrative expenses excluding marketing, fundraise-related
expenditure, depreciation, amortisation and impairment expenditure
(24.1%)
(25.5%)
134bps
Wages & salaries (excluding share-based payment charges)
(12.5%)
(13.2%)
75bps
£m
2021
2020
Movement
Revenue
22.6
20.5
+10%
Gross profit
12.6
11.8
+7%
Distribution expenses
(2.9)
(2.7)
+10%
Profit after distribution expenses
9.7
9.1
+6%
Payment fees
(0.6)
(0.5)
+29%
Marketing
(5.4)
(5.0)
+5%
Profit after distribution, payment fees and marketing
3.7
3.6
+5%
Marketing costs as % of revenue
(23.9%)
(25.1%)
118bps
£m
2021
2020
Movement
Revenue
4.0
4.6
(13%)
Gross profit
2.1
2.5
(17%)
Distribution expenses
(0.8)
(0.8)
(2%)
Profit after distribution expenses
1.3
1.7
(24%)
Payment fees
(0.1)
(0.1)
+11%
Marketing
(1.8)
(1.0)
+82%
Profit/(loss) after distribution, payment fees and marketing
(0.6)
0.6
(196%)
Marketing costs as % of revenue
(44.5%)
(21.0%)
(2352bps)
France financial performance
revenue
Group revenue was up 5% to £26.6m (2020:
£25.2m), 11% above pre-Covid revenue (2019:
£23.9m).
UK&I grew 10% to £22.6m (2020: £20.5m),
22% above pre-covid levels (2019: £18.5m).
More specifically, the UK&I direct-to-consumer
business increased revenue by 21% to £19.1m
(2020: £15.8m) and was 49% higher than two
years previously (2019: £12.8m).
France declined 13% to £4.0m (2020:
£4.6m). Prior to the launch of a new TV
campaign in May 2021, there had been very
limited marketing investment in France for two
years and revenue had declined as a result.
gross margins
Gross margins declined 193bps to 55.4%
(2020: 57.3%) but were 229bps above 2019
(2019: 53.1%) This was in part due to cost price
pressure and partly due to sales discounting.
In 2020 supply constraints prevented the
Group from offering the normal promotional
prices at certain points in the year as this
would have created demand which could not
be fulfilled. In 2021 inventory was increased to
mitigate against supply chain disruption and
this allowed promotional pricing to be offered
thus driving higher revenue.
distribution expenses
Distribution expenses lifted 20 bps to 14.1%
(2020: 13.9%). This marginal increase was the
result of taking more warehouse space early
in the year to facilitate the increased inventory
holding.
marketing investment
Group marketing investment increased by
17% to £7.2m (2020: £6.1m). In UK&I marketing
efficiency improved 118 bps to 23.9% (2020:
25.1%). France efficiency reduced 2352
bps to 44.5% (2020: 21.0%). The low level of
investment in France in 2020 constrained
revenue, as noted above. In 2021 a TV
campaign was developed and launched
contributing to the bulk of the 82% increase
in spend to £1.8m (2020: £1.0m). The images
and video created for the TV campaign will
be reused in future years so whilst there will
be airtime costs, the creative and production
costs will not re-occur.
profit after distribution,
payment fees and marketing
UK&I achieved a 5% improvement in profit
after distribution, payment fees and marketing
with £3.7m (2020: £3.6m). France fell to a loss
of £0.6m after distribution, payment fees and
marketing (2020: £0.6m profit).
administrative expenses
(excluding marketing)
Group administrative costs reduced 5%
to £6.4m (2020: £6.7m). Wages & salaries
(excluding share-based payment charges
connected with employee remuneration) were
unchanged at £3.3m (2020: £3.3m).
Other administration costs reduced 1% to
£3.1m (2020: £3.2m).
s t r a t e g i c r e p o r t : financial review
29
s t r a t e g i c r e p o r t : financial review
underlying EBITDA loss
(Defined as: earnings before interest, tax,
depreciation, amortisation, impairment
charges, share-based payment charges
relating to employee remuneration, unrealised
currency gains and losses, adding back IFRS16
adjustments to office lease costs)
The Directors consider that this is the
most useful method of monitoring Group
performance as it closely correlates to
movements in cash.
EBITDA losses widened to £3.0m (2020:
£2.0m). The main difference was the increase
in marketing investment in France, as noted
above.
share-based payment
In accordance with IFRS, a share-based
payment charge for 2021 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 2021 was
£0.2m (2020: £0.5m) of which £0.0m (2020:
£0.3m) related to equity issued in exchange
for marketing services and £0.2m (2020:
£0.2m) relating to employee remuneration.
loss after tax
The loss after tax was £3.1m (2020: £2.0m loss).
capital expenditure
Due to the Group’s outsourced business
model, capital expenditure requirements
remain low. The main area of capital
expenditure in 2021 related to ecommerce
and ERP systems infrastructure. Total capital
expenditure in 2021 in the form of intangible
software assets totalled £0.2m (2020: £0.3m).
working capital
Inventories were increased to £1.3m (2020:
£0.6m) to provide a buffer against potential
supply chain disruption and ensure that
customer deliveries could continue to be
met in periods of high demand. Tax liabilities
reduced by £0.5m to £0.3m (2020: £0.8m) with
the repayment of £0.3m deferred VAT from
Q1 2020, delayed under the UK government’s
Covid-19 support measures.
cash position
The Group had cash and cash equivalents of
£4.5m at the year-end (2020: £8.4m).
Approved and signed on behalf of the board.
Tim Parfitt
Chief Financial Officer
23 March 2022
30
has built a deep understanding of the most
appropriate marketing strategies and also
supplements this with third party media and
marketing agencies to monitor and advise on
the effective implementation and roll-out of
marketing and advertising campaigns to meet
targeted outcomes.
‘best-buy’ recommendations
Consumer recommendations such as Which?
and Que Choisir play an important role in
giving customers the confidence to buy eve
products. The Group takes time to ensure that
existing products are refined when necessary
to remain market-leading.
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.
cash
The Group has yet to achieve positive
cashflow and the Board is therefore very
focussed on the cash position and the use of
cash within the business. The Board is mindful
of the impact on cash should the business
experience weaker than expected revenue
growth and hence larger losses.
consumer confidence
eve's products are a discretionary purchase
for most consumers. The business is therefore
exposed to fluctuations in consumer
confidence which may be adversely affected
in the current year by increases in the cost of
living and very recently by the war in Ukraine.
marketing
Marketing is an important investment area
for the Group and is the principal driver of
customer visits to the Group websites. There is
a risk that expenditure may not result in the
targeted increase in brand awareness and
website traffic.
eve monitors and analyses the
effectiveness of marketing spend on a daily
basis and adjusts accordingly. The Group
31
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.
principal risks and
uncertainties
The Group is subject to fluctuations in the
cost of materials which may adversely impact
on the Group's profit margins. The price and
availability of many components is impacted
by global events such as the demand for
key chemicals used in the manufacture of
foam. The Group primarily manufactures its
French sold mattresses in the EU and its UK&I
sold mattresses in the UK, creating a natural
hedge against currency movement for its key
products. For other products and markets the
Group looks to agree prices for a period of
time with manufacturers where possible to
provide a degree of certainty over currency
fluctuations.
operations
The warehousing of inventory and delivery
of customer orders is outsourced to third
parties who have the ability to flex their
operations to meet fluctuations in demand.
With the increase in home shopping during
the Covid-19 pandemic and as a result of
increased pandemic related sickness, the
demands on logistics companies have
increased and at times the service provided
to eve and its customers has fallen below
expected standards. The Group constantly
monitors the performance of service providers
and maintains the flexibility to switch providers
if service levels cannot be maintained.
Tim Parfitt
Chief Financial Officer
23 March 2022
s t r a t e g i c r e p o r t : principle risks and uncertainties
competition
The Group operates in the highly competitive
mattress and pillow industries and may not be
able to grow, or maintain, its existing market
share. The Group constantly reviews and
analyses its performance against its business
plan and against market competitors. The
Group has both internal talent and external
advisors who can advise on and respond to
changes in the competitive environment.
staff retention and recruitment
eve recognises that the employment market
is highly competitive with many opportunities
available to employees in other organisations.
The Group strives to make eve an attractive
place to work through focussing on employee
engagement and wellbeing.
customer reviews
Customer review websites are monitored as
these give impartial feedback on the products
and service levels received by customers.
These are a useful source of information
confirming areas of the business operations
requiring improvement. Prospective new
customers use these websites to compare
against competitors and adverse reviews may
have a negative impact on Group revenues.
32
33
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 41
to 47.
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 2021 and would
like to highlight the consultation undertaken
by eve across a range of stakeholders due to
their business impact.
section 172 reporting
34
Covid-19 and employee
wellbeing
Throughout the pandemic the Board were
kept appraised of the various impacts on the
business and were supportive of a phased
return to office working in September 2021
which both met the needs of the business
and was conscious of employee wellbeing
following 18 months of working from home for
most employees.
investment in inventory
Following supply chain disruption during
2020, the Board approved an increase in the
investment in inventory in order to provide
some protection against potential disruption
in 2021, particularly during periods of high
demand, in order to minimise delays to
customer orders and ease the pressure on key
suppliers.
board changes
When vacancies have arisen, the Board has
sought candidates with skills and expertise
required to maximise shareholder value in the
Group.
Following a search at the end of 2020,
the Board were pleased to appoint Masood
Choudhry to fulfil the requirement for a
non-executive director with operational and
logistics experience.
Mike Lloyd was identified as the
outstanding candidate to assume the position
of Chairman given his prior executive and
consultancy roles. He was appointed to the
Board on 20 April 2021.
2022 plan
The Board scrutinized and approved the
2022 financial plan taking into account
the Company’s available resources with a
particular focus on sensible, sustainable
growth.
35
g o v e r n a n c e r e p o r t : section 172 reporting
I am pleased to present the Corporate
Governance Report for the year ending 31
December 2021. In my first year as Chairman
of eve I have been hugely impressed by the
quality of our leadership. eve has made great
progress in 2021, overcoming many external
challenges, including industry wide supply
chain pressures and challenges in the delivery
network. Thanks to the unwavering dedication
of our incredible team, the Board and I have
focused on our continued commitment to
achieving the highest possible standards of
corporate governance. Effective governance
has enabled the Board to concentrate on the
three pillars of Growth, Customer Obsession
and Resilience and promoting eve as a sleep
wellness brand.
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 give our full range of our
stakeholders, including investors, employees,
customers and those in our supply chain,
the confidence that the business is being
run effectively and facilitates constructive
discussions between the Board and
high standards of corporate
governance remain pivitol to,
and complementary to, our
long-term strategy.
Mike Lloyd
management of the Company’s strategic and
operational priorities.
As detailed elsewhere in this Annual Report,
the Board has dedicated significant time in
2021 toward overseeing and scrutinising the
development and delivery of eve’s long-term
strategy. Amidst high levels of uncertainty in
the external environment the Board witnessed
management’s response to the enormous
changes, both in terms of the Company’s
operations and the wider market environment
in which the Company operates.
As a Board, we are pleased with the progress
we have made on a range of corporate
governance actions in 2021, of which I would
particularly like to highlight the following:
•
It has been an important part of the
Board’s role over the year to support the
transition of Cheryl Calverley as Chief
Executive Officer. In addition to taking
over the leadership of the business during
the pandemic, Cheryl has put in place
a strong management team, refocused
the culture and purpose of the business,
and recently completed a soft launch of
the Well Slept Club. The Well Slept Club
is an exciting new endeavour, further
details of which can be found on page
Dear Shareholders,
36
directors’ governance
statement
19. Cheryl has made a strong start as our
Chief Executive Officer and has skilfully
managed the exceptional challenges of
the pandemic whilst making real progress
with the priorities of the business.
•
We welcomed Masood Choudhry as
Independent Non-Executive Director to
the Board and notably Chair of the Audit
and Risk Committee. Masood’s plethora
of supply chain expertise, due to having
worked for many of Europe's largest and
most prestigious digital and multi-channel
retailers, has been extremely valued by the
Board. We look forward to his continued
contribution. We also agreed to hire a
Data Director (a non-statutory director
role) who will drive forward our data
capabilities to improve our marketing
efficiency. The appointment was made on
10 January 2022.
•
We considered the industry wide
challenges in supply chain and took
steps to mitigate against these issues by
increasing investment in our inventory.
•
Subsequent to minimal marketing
investment in 2019 and 2020, we increased
investment in our French business. We also
consolidated two warehouses in France
into a single warehouse which is better
equipped to support the business.
•
Once again, we undertook an internally
facilitated Board evaluation, evidencing
that the Board and its Committees
continue to function well in performing
our roles and responsibilities. We identified
three focus areas for the next year, namely
stakeholder engagement, risk control and
Board diversity and succession planning.
Further information on each of the above
points is set out subsequently in this report.
I am pleased to report that in 2021 the
Board has taken strides towards ensuring a
robust governance framework, as evidenced
by our continued adoption of the QCA
Corporate Governance Code (the “Code”),
formally adopted in 2018. We remain fully
committed to the principles and spirit of
the Code. Information on how we have
applied the Code’s principles is disclosed
in our compliance statement (available on
https://investor.evesleep.co.uk/corporate-
governance) and in this governance
statement.
Mike Lloyd
Chairman
37
g o v e r n a n c e r e p o r t : directors' governance statement
38
appointed: April 2021
experience:
Mike joined eve in April 2021. He has held executive
director roles at leading consumer businesses for the
last seven years, most recently as COO of McCarthy &
Stone Limited where he was responsible for their service
operation as well as sales and marketing. Prior to this,
Mike was a director at The AA Limited for five years, as
CEO of their Insurance business and Chief Commercial
Officer. Previously he was a Partner at Oliver Wyman where
he led their consumer service work in the UK.
committee membership:
Audit and Risk Committee
Nomination Committee
Remuneration Committee
board of directors
Mike Lloyd
Chairman of the Board
Cheryl Calverley
Chief Executive Officer
appointed: May 2020
experience:
Initially joining eve in December 2018 as Chief Marketing
Officer, Cheryl was promoted to the role of Chief Executive
Officer in May 2020. In this role she draws on her 20
years’ experience in marketing and building brands, re-
setting market strategies and brand re-launch. Under her
leadership marketing efficiency has jumped, innovation
has accelerated and customer experience has improved.
Cheryl is an expert in building brands in leading
consumer companies including Unilever PLC, Birds Eye
Iglo and most recently The AA Limited, where she held the
position of Marketing Director.
committee membership:
None
39
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
appointed: May 2020
experience:
James served as eve’s Chief Executive Officer from
September 2018 to May 2020. Since May 2020 the Board
has continued to benefit from his expertise through his
role as a Non-Executive Director. Prior to his roles at eve,
he was the Managing Director of Moonpig Group plc,
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 this, James was part of Direct
Line Group and formerly Direct Line Insurance for more
than seven years where he held several 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 and Risk Committee
Nomination Committee
Remuneration Committee (Chair)
g o v e r n a n c e r e p o r t : board of directors
Tim Parfitt
Chief Financial Officer
James Sturrock
Non-Executive Director
g o v e r n a n c e r e p o r t : board of directors
40
appointed: April 2017
experience:
Tom has been a member of eve’s Board since April 2017.
Over the past 20 years he has spearheaded brand
transformations at fast growing, global technology
firms. He currently serves as President for ecoATM
International Limited, a global leader in offering
consumers eco-friendly trade-in of used mobile phones.
His previous roles include Chief Customer Officer at
McArthur Glen, Europe’s largest owner and operator of
outlet malls with €4.5 billion in annual sales and CEO
of Leisure Pass Group, a leading provider of city-based,
multi-attraction tourist passes. He has served as CEO at
the world’s largest online dating business, Match.com
and held positions at both E*TRADE and AT&T Wireless. He
obtained an undergraduate degree from the University of
Glasgow and an MBA from INSEAD.
committee membership:
Audit and Risk Committee
Nomination Committee (Chair)
Remuneration Committee
appointed: February 2021
experience:
Masood joined eve in February 2021 and brings to
the Board a wealth of supply chain expertise, having
worked for several digital and multi-channel retailers in
a career spanning over 20 years. He is currently Senior
Vice President of Logistics at Zalando SE, Europe's biggest
online fashion retailer and for the last five years he has
been responsible for managing their supply chain. Prior
to this Masood spent time at various other leading direct
to consumer businesses including World Stores Ltd, where
he held the position of Chief Operating Officer. He was
also Director of Supply Chain Development and Director
of Logistics at ASOS Plc, which under his guidance
experienced a period of rapid global growth.
committee membership:
Audit and Risk Committee (Chair)
Nomination Committee
Remuneration Committee
Thomas Enraght-Moony
Independent Non-Executive
Director
Masood Choudhry
Independent Non-Executive
Director
compliance statement
During the year ended 31
December 2021, 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
41
The Board is committed to achieving the highest 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 applied the QCA Corporate
Governance Code for Small and Mid-Size Quoted Companies (the “Code”). Details on eve’s
compliance with the Code can be found by shareholders, both through this Annual Report
and in an annually updated compliance statement available on the Company’s website.
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.
corporate governance
report
Chief Executive
Officer
The Board
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
Responsible for setting the
tone from the top, determining
strategic direction and monitoring
operational delivery.
In addition to setting the
business’s strategy and
overseeing its implementation
by management, the Board
provides leadership to the
business on culture, values and
ethics, monitoring the business’s
overall financial performance,
and ensuring effective corporate
governance, succession planning
and stakeholder engagement.
Responsible for the day-to-day
management of eve and for
executing the agreed strategy by
the Board. Creates a framework
of strategy, values, culture,
performance management
and objectives to ensure the
successful delivery of results for
eve and allocates management
responsibilities accordingly.
Responsible for
reviewing the integrity
of eve’s financial
information and
reporting processes,
oversees the systems
of internal control, risk
management and
external audit function.
Responsible for
reviewing the balance
of skills, knowledge,
experience, and
diversity of the Board,
and succession plans
at Board and senior
manage-ment levels.
Responsible for
determining
executive and senior
management remuner-
ation, ensuring it is
aligned to the long-term
success of the business
and for reviewing the
overall approach to pay
across eve.
our governance structure
42
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 establishing the Company’s purpose,
culture, overall direction and strategy to
deliver the long-term growth of the Company
and generate value for shareholders. It
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 34.
We see the Board as having the following
main roles:
(a)
setting our purpose, strategy,
values and culture
By setting the tone at the top, establishing the
core values of the business 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, sustainably and
transparently in all of their dealings.
(b)
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.
(c)
oversight of operations
We monitor management’s execution of
strategy and financial performance. While
our ultimate focus is long-term growth, the
business also needs to deliver on short-
term objectives and we seek to ensure that
management strikes the right balance
between the two.
(d)
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 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 Committee are set out on pages 48 to
59. The terms of reference of each Committee
are available from our website found at
https://investor.evesleep.co.uk/corporate-
governance#governance-docs
g o v e r n a n c e r e p o r t : corporate governance report
43
board activity in 2021
strategy
•
Regularly considered the potential impact
of Covid-19 on the Group’s operations
and actions taken and proposed by
management in response;
•
Regularly received and discussed strategic
updates, proposals and reviews from the
Executive Directors; and
•
Reviewed the product strategy for 2021.
operations
•
Considered the financial performance
of the Company and key performance
targets, including a review of the monthly
accounts at each Board meeting;
•
Monitored performance through regular
presentations from the CFO;
•
Approved the Annual Report, half-year and
annual results announcements; and
•
Approved the 2022 budget.
shareholder and stakeholder engagement
•
Took into account stakeholders views when
considering the Company’s actions in
response to the Covid-19 pandemic; and
corporate governance
•
Discussed the outcome of the Evaluation
of Board Effectiveness and agreed actions
for 2022;
•
Appointed Masood Choudhry as an
Independent Non-Executive Director, Chair
of the Audit and Risk Committee, and
member of the Nomination Committee
and the Remuneration Committee; and
•
Appointed Mike Lloyd as Non-Executive
Chairman of the Board, and member of all
of the Board’s Committees; and
•
Received updates on legal and
governance developments affecting the
Company.
g o v e r n a n c e r e p o r t : corporate governance report
purpose, values and culture
Purpose
Why we do what we do
Value
The qualities we embody
Culture
How we work together
The Board has established the Group’s
purpose. 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
of our employees at all levels of the Group to
take responsibility for their work and to actively
contribute toward the development and
delivery of our strategy.
In respect of the Board’s role, we
recognise the importance of setting a tone
from the top and have met with several staff
at various levels of the business during 2021.
This is an area where we want to keep on
developing in terms of the Board’s awareness
and engagement with corporate culture
in 2022, including regular reporting to the
Board on a number of cultural metrics. These
metrics will include the following focus areas:
engagement, growth, diversity and inclusion
and transparency and communication
of strategy. Culture and engagement is
measured and facilitated by an external party
which highlights key focus areas in order
to shape the Company’s people strategy
and benchmark against peers. During 2021
the Board received regular updates on
progression against these metrics via the
Chief Executive Officer report presented at
each Board meeting. Our aim is to promote a
culture within the Group of ethical values and
behaviours. We have due diligence processes
in place to ensure that all suppliers meet our
standards and our values.
44
We have internal policies covering a range
of ethical behaviours, such as an anti-bribery
and anti-corruption policy and an anti-money
laundering policy, which serve to promote and
preserve the right corporate behaviours.
As part of our induction process, new
employees receive training on all corporate
policies and the expectations of the Company
when it comes to ethical values and
behaviours and this is refreshed on a regular
basis for all employees.
We have an active programme of
employee engagement, including employee
engagement surveys undertaken throughout
the year. Such engagement shapes both the
way in which we develop our products and
deliver services. We also have a whistleblowing
policy for all employees. An updated
whistleblowing policy and training modules
covering compliance, whistleblowing and fraud
will be rolled out across the Company in 2022.
In 2021, there were no known breaches of
the anti-bribery and anti-corruption policy and
no whistleblowing reports made.
In respect of our forthcoming priorities for
2022, the Board will be looking at:
•
The ways in which we develop
our corporate culture and talent
management processes, as described
above;
•
Collating and using data to help us
improve our marketing efficiency; and
•
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 53.
As at 31 December 2021, the Board
comprised a Non-Executive Chairman,
two Executive Directors, and three Non-
Executive Directors, two of whom are deemed
independent by the Board. 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 appointments to the Board
as independent non-executive directors of
Masood Choudhry on 3 February 2021 and
Mike Lloyd on 20 April 2021. A short biography
of each of the directors in office at the date of
this Report is set out on pages 38 to 40.
The role of Chairman is to run the business
of the Board, ensuring appropriate strategic
focus and direction in the Board’s discussions.
The Chairman is responsible for the leadership
and effectiveness of the Board and for setting
the Board agenda. 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. The Chairman
ensures effective communication so that the
Board is aware of the views of shareholders
and wider stakeholders, and demonstrates
objective judgement. Mike promotes a culture
of openness and debate in the boardroom
and constructive relations between Executive
and Non-Executive Directors.
Tom Enraght-Moony and Masood
Choudhry are considered by the Board
to be independent. The Board are of the
opinion that both Tom and Masood act in an
independent and objective manner and are
free from any relationship that could affect
their judgement. Mike Lloyd, as Non-Executive
Chairman, was considered to be independent
upon appointment.
Notwithstanding any cross-directorships,
the Board is satisfied that it has a suitable
balance between independence (of both
character and judgement) on the one
g o v e r n a n c e r e p o r t : corporate governance report
45
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
2021, each Director that served in 2021
has performed effectively and continues to
contribute 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 and committee meetings
The table below sets out the Board and
Committee attendance for 2021. 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 Chair.
g o v e r n a n c e r e p o r t : corporate governance report
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.
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.
election/re-election of directors
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
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Cheryl Calverley
6 of 6
-
-
-
Masood Choudhry1
5 of 5
2 of 2
1 of 1
1 of 2
Mike Lloyd2
4 of 4
1 of 2
0 of 1
1 of 2
Tim Parfitt
6 of 6
-
-
-
Paul Pindar3
3 of 3
1 of 2
1 of 1
1 of 2
Tom Enraght-Moony
6 of 6
2 of 2
1 of 1
2 of 2
James Sturrock
6 of 6
2 of 2
1 of 1
2 of 2
Notes
1Masood joined the Board as a Non-Executive Director with effect from 3 February 2021.2Mike joined the Board as an Independent Non-Executive Director on
20 April 2021. Mike was appointed as Non-Executive Chairman subsequent to the 2021 AGM on 26 May 2021.3Paul resigned 26 May 2021.4The Remuneration
Committee scheduled for November 2021 was postponed to January 2022, therefore only one Remuneration Committee was held in 2021.
46
Stakeholder
Channel of engagement
Employees
•
Half-yearly performance reviews;
•
Weekly feedback exercises;
•
Exit interviews;
•
Mental Health awareness and training and employee support; and
•
Continuing personal development plans.
Local communities
The Company has a range of initiatives including volunteer days for employees, support of relevant charities
through selective partnerships and the regular review of additional ways it can provide support to the local
community and relevant charitable organisations.
Key suppliers
Regular meetings and reviews with key contact within Company and senior management team.
Key partners
Regular meetings with partnership managers and continuous review of partnership generally.
relations with shareholders
We are committed to communicating
openly with our shareholders to ensure
that our strategy and performance are
clearly understood. We communicate with
shareholders through the Annual Report
and Accounts, full-year and half-year
announcements, trading updates and the
Annual General Meeting (“AGM”); and we
encourage shareholders’ participation in
face-to-face meetings. A range of corporate
information (including all announcements
and presentations) is also available to
shareholders, investors and the public on
our corporate website, at
https://investor.evesleep.co.uk/
our engagement with
stakeholders
The Board places due weight on stakeholder
awareness and engagement. It assesses
stakeholders according to the definition of
stakeholders set out in the Global Reporting
Initiative (Standard 101 paragraph 1.1) as
organisations or individuals who have “a
reasonable expectation of being significantly
affected” by the Group’s activities or products.
In addition to our shareholders, the
Board has identified the Group’s other major
stakeholders, and approved a strategy for
engaging with these groups as follows:
g o v e r n a n c e r e p o r t : corporate governance report
47
board and committee
effectiveness
The Board continually strives to improve its
effectiveness and recognises that an annual
evaluation process is an important tool in
reaching that goal. The Directors are aware
of the importance to monitor performance
through Board evaluations and that feedback
from these evaluations leads to improving
Board effectiveness.
We review our effectiveness as a Board on
an annual basis, including an assessment of
the Board and its Committees.
The review was conducted earlier in the
year and continued to explore the themes
that were raised for action in the 2020 review.
Board members completed a questionnaire,
based on last year’s in order to be able to
maintain continuity, which also incorporated
recent developments in the business,
strategy and governance practice. The Board
reviewed its key decision-making processes
during the year, particularly in relation to the
appointment of the new Chairman. The Board
also assessed its culture and engagement
with stakeholders. The Board’s role and
composition, the relationships between the
Board and Executive management, and any
priorities for change, were also assessed.
The Company Secretary discussed the
conclusions with the Chairman and presented
them to the Board. The Board discussed the
key points and agreed certain focal areas for
the Board in 2022.
Overall, the Board was pleased with the
findings which are broadly similar to last year’s.
The evaluation found that the Board continued
to function well and that there had been a
seamless transition of Cheryl as CEO and Mike
as Chairman. No significant concerns were
raised regarding the effectiveness of the Board
and its Committees. The Board were in strong
agreement that the Company’s purpose and
mission continued to be clear and that all
Directors were encouraged to participate
fully in Board and Committee discussions,
highlighting a culture of openness and
honesty within the boardroom.
Several suggestions were received in
respect of the focal areas for the Board in 2022
including increasing stakeholder engagement,
risk control and further enhancing the Board
succession planning process of the Board and
senior management. On the latter, the Board
will be introducing diversity targets in 2022 for
both Board and senior management level.
Despite systems being in place to identify,
evaluate, monitor and control risks across the
business, there will be a more formal risk review
process and a deep dive session on key risk
areas in the business, presented at every
Board meeting.
These will be taken forward by the Board
over 2022, with support from management
and the Company Secretary.
internal controls and risk
management
The Group has a comprehensive system
of internal controls in place, designed to
ensure that risks are mitigated and that the
Group’s objectives are attained. The Board
recognises its responsibility to present a fair,
balanced and understandable assessment
of the Group’s position and prospects. It is
accountable for reviewing and approving
the effectiveness of internal controls
operated by the Group, including financial,
operational and compliance controls, and
risk management. The Board recognises its
responsibility in respect of the Group’s risk
management process and system of internal
control and oversees the activities of the
Group’s external auditors and the Group’s
risk management function (supported by the
Audit and Risk Committee).
A review of the Group’s risk management
approach is further discussed in the Strategic
Report on pages 31 to 32.
g o v e r n a n c e r e p o r t : corporate governance report
48
g o v e r n a n c e r e p o r t
committee composition
Over the reporting period, the members of the
Audit and Risk Committee were as follows:
•
Masood Choudhry (appointed as Chair of
the Committee on 3 February 2021);
•
Tom Enraght-Moony;
•
James Sturrock;
•
Mike Lloyd (appointed to the Committee
on 20 April 2021); and
•
Paul Pindar (resigned from the Committee
on 26 May 2021).
The Board is satisfied that all members of the
Audit and Risk Committee have recent and
relevant financial experience and that the
Audit and Risk Committee, as a whole, has
competence relevant to the sector in which
the Company and Group operate.
audit and risk 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 2021.
The main responsibilities of the Committee are:
(a)
financial reporting
•
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.
(b)
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 the
Board on the tendering of the
external audit contract, and
the appointment, remuneration and terms
of engagement of the External Auditor.
(c)
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 and Risk
Committee are available on our website:
https://investor.evesleep.co.uk/corporate-
governance#committee-composition
These were last reviewed and approved by the
Board on 16 November 2021.
audit and risk
committee report
49
key activities in 2021
The main focus of the Committee in 2021
has been to:
•
review and the recommend the
reappointment to shareholders of
the Company’s external auditor at
the 2021 AGM;
•
review and approve the 2020 FY
preliminary results and Annual Report and
Accounts; and
•
assess the group’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.
(a)
significant issues 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:
(b)
fair, balanced and understandable
In line with best practice, the Committee
has reviewed the 2021 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 is fair, balanced
and understandable:
Significant
Risk
What?
How this is mitigated
Going
concern
Risk of inability to
meet liabilities as
they fall due
Review of 24-month
rolling financial
forecasts and cash
projections
Provision
for returns
Risk of returns
increasing above
historic levels
Review of provision
methodology
Revenue
recognition
Fraud risk related
to misstatement of
revenues
Review of process
for monitoring sales
discounts applied
(c)
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.
Is the report
fair?
•
Is the whole story presented?
•
Have any sensitive material
areas been omitted?
Is the report
balanced?
•
Is there a good level of consistency
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
understandable?
•
Is there a clear & understandable
framework to the Annual Report?
•
Is the Annual Report presented
in straightforward language
and a user-friendly and easy to
understand manner?
g o v e r n a n c e r e p o r t : audit and risk committee report
50
g o v e r n a n c e r e p o r t : audit and risk committee report
risk management
and internal control
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 Group and the ways in which such
policies are implemented; and
•
Reviewed the external audit plan for the
2021 financial year and findings from the
2020 external audit.
The Committee notes that there were no
known breaches of the anti-bribery and
anti-corruption policy and no whistleblowing
reports made over the course of 2021.
As per previous years, the Group
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.
external audit
(a)
external audit effectiveness
We have an established framework for
assessing the effectiveness of the external
audit process. This includes:
•
a review of the audit plan, including
the materiality level set by the auditors
and the process they have adopted to
identify financial statement risks and key
areas of audit focus;
•
regular communications between the
external auditor and both the Committee
and management, including discussion
of regular reports prepared by 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.
51
(b)
objectivity and independence
of the external audit process
It is the Committee’s responsibility to
monitor the performance, objectivity and
independence of the Auditor and this is
evaluated by the Committee each year. In
evaluating their performance, the Committee
examines five main criteria – robustness of the
audit process, independence and objectivity,
quality of delivery, quality of people and
service, and value-added advice.
Having carried out the review the
Committee is satisfied with Nexia Smith &
Williamson’s performance, objectivity and
independence.
g o v e r n a n c e r e p o r t : audit and risk committee report
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 2022 AGM.
Following a tender for the provision of
external audit services in 2019, in accordance
with the Group’s policy the Group will 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 measures in place to
monitor and assure the external auditor’s
independence, as set out in this Audit and
Risk Committee report.
52
nomination
committee report
committee composition
Over the reporting period, the members of the
Nomination Committee were as follows:
•
Tom Enraght-Moony (Chair of the
Committee);
•
Masood Choudhry (appointed to the
Committee on 3 February 2021);
•
Mike Lloyd (appointed to the Committee
on 20 April 2021);
•
Paul Pindar (resigned from the Committee
on 26 May 2021) and;
•
James Sturrock.
committee responsibilities
The main responsibilities of the Nomination
Committee are:
•
Monitor the size, structure and
composition of the Board;
•
Oversee talent and succession plans for
Directors and senior management;
•
Satisfy itself that plans are in place for
orderly succession for appointments to
the Board;
•
Identify and nominate candidates for
Board vacancies and;
•
Ensure that an appropriate and tailored
induction is undertaken by all new
directors.
The Terms of Reference for the Nomination
Committee are available on our website:
https://investor.evesleep.co.uk/corporate-
governance#committee-composition.
These were last reviewed and approved by the
Board on 18 November 2021.
key activities in 2021
appointment of Chairman
The Committee, led by the exiting Chairman
Paul Pindar, oversaw the appointment of Mike
Lloyd to replace Paul following his resignation
notice. Upon announcing his departure as
Chairman of the Board, Paul Pindar brought
recommendations on his successor to
the Committee. Through this process, Mike
Lloyd was identified as the outstanding
candidate and the Committee was pleased
to recommend to the Board his appointment
as a Director of the Company and Chairman
of the Board.
appointment of an independent
Non-Executive Director
On 3 February 2021 Masood Choudhry was
appointed to the Board as an independent
Non-Executive Director and Chairman of the
Audit and Risk Committee. This appointment
enables the Board to benefit from his supply
chain expertise as well as his knowledge in
digital and multi-channel retail.
Masood was given a comprehensive
and tailored induction programme prior
to joining eve. The induction programme
detailed an overview on all aspects of the
business, his statutory duties under the
Companies Act 2006 and the QCA Corporate
Governance Code. He also received
induction materials including the Company’s
Articles of Association, previous Board
papers and minutes, and the Company’s
corporate calendar. The purpose of the
induction programme was to ensure that he
was sufficiently and efficiently onboarded
to commence his duties as quickly and
successfully as possible.
53
g o v e r n a n c e r e p o r t : nomination committee report
Data Director recruitment
A focus for eve in 2022 will be to strengthen
the Group’s data capabilities. With that in
mind, the Committee identified the need to
incorporate data expertise within the senior
leadership team. Following an extensive
search, Phillip Cotton joined the business as
Data Director (a non-statutory director role) in
January 2022 and brought with him a wealth
of knowledge in data analytics.
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 occupy future 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 several
initiatives are underway to support
development across the company in a way
that is consistent with, and serves to promote,
our corporate culture and values. A focal
area for the Committee, and for the Board in
2022, 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 2022 toward Board level succession
planning. Further details on Board succession
considerations are set out below.
size, structure and composition of the Board
Following the appointment of Masood,
the Committee considers the size and
composition of the Board are appropriate,
and it is well structured to help to support and
oversee the next stage of the Group’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
Group’s strategy for the benefit of all
shareholders over the medium to long-term.
Director
Key experience, skills and competencies
Cheryl Calverley
•
Brand building and marketing
•
Strong understanding of
the e-commerce and sleep
wellness sector
•
People and culture management
Masood Choudhry
•
Supply chain and logistics expertise
•
Strategic operations experience
Tom
Enraght-Moony
•
Marketing and customer focus
•
Tech and e-commerce experience
Mike Lloyd
•
Leadership experience in large public
limited companies
•
Service operations experience
Tim Parfitt
•
Recent and relevant financial
management experience
•
Risk management
James Sturrock
•
People and culture management
•
Strong understanding of
the e-commerce sector
directors’ time commitments
All 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 a review by the Committee,
the Board confirms that each of the Non-
Executive Directors can commit the necessary
time to fulfil their roles.
54
diversity and inclusion
The Committee recognises the benefits a
diverse and inclusive culture can have on a
business. 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, encourages, and is
committed to 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 43% of eve’s executive
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. Through
the use of BeApplied, a debiased recruitment
platform, the Group has been able to promote
its diversity and inclusion agenda in the
workforce. BeApplied uses an anonymised
recruitment system and predictive skill-based
assessments to identify the best talent that
would have otherwise been overlooked.
The Committee, and the Board,
acknowledge 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 2022 will be on diversity and inclusion
across the business.
g o v e r n a n c e r e p o r t : nomination committee report
55
remuneration
committee report
committee composition
Over the reporting period, the members of the
Remuneration Committee were as follows:
•
James Sturrock (Chair of the Committee);
•
Masood Choudhry (appointed to the
Committee on 3 February 2021);
•
Mike Lloyd (appointed to the Committee
on 20 April 2021);
•
Tom Enraght-Moony; and
•
Paul Pindar (resigned from the Committee
on 26 May 2021).
Due to his previous role in the Company as
Chief Executive Officer, the Board does not
consider James Sturrock as independent.
However, given the current size, stage and
operations of the Group, the Board believes
that it is appropriate for James Sturrock to
Chair the Committee.
Members of the management team are
invited to attend meetings as appropriate,
unless there is an actual or potential conflict
of interest.
responsibilities of the
committee
The role of the Committee is to assist the
Board to fulfil its responsibility to shareholders
to ensure that the Group reward Executive
senior management fairly and responsibly,
with a clear link to corporate and individual
performance. Executive and senior
management remuneration packages are
designed to support the delivery of the
Group’s long-term strategy and aligned to
eve’s strong culture, whilst having regard to
statutory and regulatory requirements.
The Terms of Reference for the Remuneration
Committee are available on our website:
https://investor.evesleep.co.uk/corporate-
governance#committee-composition. These
were last reviewed and approved by the Board
on 18 January 2022.
key activities in 2021
The main focus of the Committee in 2021 has
been to review proposals around Executive
Directors’ remuneration arrangements for 2022
and scrutinise bonus scheme proposals for
all employees. The Committee will continue
to focus in 2022 on ensuring that executive
remuneration and shareholder interests remain
closely aligned.
remuneration policy
The Group’s policy is that the remuneration
package of the Executive Directors should be
sufficiently competitive to attract, retain and
motivate those directors to achieve the Group’s
objectives without making excessive payments.
The Board determines the terms and conditions
of the Non-Executive directors.
We have summarised the main principles
behind Executive Directors’ remuneration in the
table overleaf.
56
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
maximum annual base salary
or salary increase.
The Committee is guided
by the general increase
for the broader employee
population but has discretion
to decide to award a lower or
higher increase to Executive
Directors.
The performance of the
individual in the period since
the last review is considered
when their salary is being
reviewed.
pension
To contribute financially
post-retirement.
Defined contribution
arrangement.
Base salary and bonus
elements are pensionable.
Employees may opt out of
the scheme.
The Company contributes
up to 3% of base salary on a
“relief at source” basis.
The Committee has discretion
to amend the contribution
level should market
conditions change.
Not applicable.
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.
Some individuals are
granted share options with
performance based criteria.
other benefits
To support the personal
health and wellbeing of
employees. To reflect and
support the Company's
culture.
Benefits include private
medical insurance and
discount on eve products.
There is no overall maximum
level of benefits provided
to Executive Directors, and
the level of some of these
benefits is not predetermined
but may vary from year to
year based on the overall
cost to the Company.
Not applicable.
fixed remuneration elements
variable remuneration elements
g o v e r n a n c e r e p o r t : remuneration committee report
57
Director
Appointed
Resigned
Salary / fees
£
Pension
£
Bonus
£
Compensation
for loss of
office
£
Total
remuneration
£
2021
2020
2021
2020
2021
2020
2021
2021
2020
Executive
Directors
Tim Parfitt
17 June 2019
N/A
144,990
140,760
1,319
1,314
–
14,076
N/A
146,309
156,150
Cheryl Calverley
1 June 2020
N/A
165,000
87,500
1,319
766
–
14,500
N/A
166,319
102,766
Non-Executive
Directors
Tom
Enraght- Moony
28 April 2017
N/A
30,000
15,000
–
–
–
–
N/A
30,000
15,000
James Sturrock 1
9 May 2020
N/A
30,000
10,833
713
206
–
–
N/A
30,713
11,039
Paul Pindar
21 November
2016
26 May
2021
4,167
10,000
–
–
–
–
N/A
4,167
10,000
Mike Lloyd
20 April 2021
N/A
33,023
–
–
–
–
–
N/A
33,023
–
Masood
Choudhry
3 February
2021
N/A
27,500
–
–
–
–
–
N/A
27,500
–
directors’ remuneration table
The remuneration of the Directors for the year to 31 December 2021 is set out in the table below.
The Executive Directors holding office at 31
December are entitled to 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. For 2021
the criteria were not met so no bonus was
awarded.
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 and Tim Parfitt, the value of which
management have deemed immaterial to the
users of these financial statements.
notes
1During the previous 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. Salary for 2020 is his remuneration as
Non-Executive Director and does not include his salary as Chief Executive Officer.
g o v e r n a n c e r e p o r t : remuneration committee report
58
directors interest in share plans
The Directors who held office at 31 December 2021 had the following interests
in the share plans of the Group.
Director
Date of Grant
As at 31
December
2020
(no. of
options)
Granted
during the
year to 31
December
2021 (no. of
options)
Cancelled
during the
year
Exercised
during the
year
As at 31
December
2021 (no. of
options)
Service
conditions
Exercise
price
(pence)
Executive
Directors
Cheryl Calverley
1 April 2019
262,500
–
–
–
262,500
Length of
service
0.1p
17 February
2020
300,000
–
–
–
300,000
Length of
service
0.1p
1 June 2020
1,500,000
–
–
–
1,500,000
Length of
service
0.1p
1 June 2020
2,250,000
–
–
–
2,250,000
Subject
to certain
performance
criteria1
0.1p
28 June 2021
–
400,000
–
–
400,000
Length of
service
0.1p
Tim Parfitt
17 December
2019
2,000,000
–
–
–
2,000,000
Length of
service
0.1p
28 June 2021
–
200,000
–
–
200,000
Length of
service
0.1p
Non-Executive Directors
Mike Lloyd
N/A
–
–
–
–
–
N/A
N/A
Thomas Enraght-
Moony
1 April 2019
180,000
–
–
–
180,000
Length of
service
0.1p
James Sturrock2
29 March 2019
2,811,111
–
1,894,444
–
916,667
Length of
service
0.1p
17 December
2019
3,544,445
–
2,627,728
–
916,667
Length of
service
0.1p
Masood Choudhry
N/A
–
–
–
–
–
N/A
N/A
Notes
1Performance 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.
2Unvested options at 1 September 2021 were cancelled. No further options will vest under the two share plans.
Any gain on option exercises made by Directors in 2021 is presented in note 17
to the financial statements.
g o v e r n a n c e r e p o r t : remuneration committee report
59
Director
Beneficially owned
at 31 December 2021
(no. of shares)
Beneficially owned
at 31 December 2020
(no. of shares)
Executive Directors
Cheryl Calverley
368,004
280,285
Tim Parfitt
1,027,048
527,048
Non-Executive Directors
Mike Lloyd
2,300,000
–
James Sturrock
2,697,194
2,697,194
Thomas Enraght-Moony
–
–
Masood Choudhry
100,000
–
directors shareholdings
The Directors who held office at 31 December 2021 had the following interests
in the shares of the Group.
g o v e r n a n c e r e p o r t : remuneration committee report
60
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors have elected to
prepare the Group and parent Company’s
financial statements in accordance with
UK-adopted international accounting
standards. Under Company law the Directors
must not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs of
the Company and of the Group and of the
profit or loss of the Group for the period. In
preparing these financial statements, the
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 international accounting
standards 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
sufficient to show and explain the Group’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Group and enable them to ensure
that the financial statements comply with the
Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and
hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
The Directors are responsible for ensuring
that they meet their responsibilities under the
AIM rules.
The Directors also are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Group’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
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.
g o v e r n a n c e r e p o r t
61
62
Information
Page(s)
future developments
10, 18, 19,
44, 47, 53
going concern statement
77 note 2.4
risk management and principle risks
31-32
corporate governance statement
36-37
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
31-32
95 note 19
The Corporate Governance Report approved by the Board is provided on
pages 41 to 47 and incorporated by reference into this Directors’ Report.
information contained elsewhere in this
annual report
Information required to be included in this
Directors’ Report can be found elsewhere in
the Annual Report as indicated in the table
below and is incorporated into this report
by reference:
significant events since the end of the
financial year
There have been no significant events
affecting the Group since 1 January 2022
and the signing of this Report.
presence outside of UK
The company has the following subsidiaries
outside of the UK:
eve Sleep SASU
Principal place of business / registered office address:
5 Rue Des Suisses, 75014, Paris
Registered number: 823397419 R.C.S Paris
Ownership: 2021 100%; 2020 100%
dividends
The directors do not recommend the
payment of a dividend.
strategic report
This is set out on pages 12 to 14 of the Annual
Report and includes an indication of likely
future developments, and forms part of this
Directors’ Report.
research and development
The Group undertakes a continuous programme
of development expenditure. Development
expenditure is capitalised only when the end
product is technically and commercially feasible
and when sufficient resource is available to
complete the development, as disclosed in note
2.11 to the accounts.
political donations
No political donations have been made
during this financial year.
directors
The Directors who held office during the
year were:
•
Mike Lloyd (appointed 26 May 2021)
•
Cheryl Calverley
•
Masood Choudhry
(appointed 3 February 2021)
•
Tom Enraght-Moony
•
Tim Parfitt
•
Paul Pindar (resigned 26 May 2021)
•
James Sturrock
directors’ report
63
Biographical details of the Directors are shown
on pages 38 to 40
The interests of the Directors and their
closely associated persons in the share
capital of the Company, along with details
of Directors’ share options and awards, are
contained in the Directors’ Remuneration
Report on pages 57 to 58. At no time during
the year did any of the Directors have a
material interest in any significant contract
with eve Sleep plc except in relation to their
employment as explained in the directors’
remuneration report.
The Company’s policy is for all the
Executive Directors to have twelve month
rolling service contracts. All Non-Executive
Directors are salaried and are appointed
for an initial term of three years, 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 https://investor.evesleep.
co.uk/corporate-governance#governance-docs
pursuant to AIM Rule 26.
auditor
Nexia Smith & Williamson Audit Limited was
appointed as auditor in November 2019 and
is willing to continue in office. In accordance
with s489(4)(a) of the Companies Act 2006,
a resolution for their reappointment will be
proposed at the forthcoming Annual General
Meeting.
g o v e r n a n c e r e p o r t : director's report
share capital
The issued share capital of the Company as at
31 December 2021 was 274,321,862 ordinary
shares of 0.1 pence. Full details of the issued
share capital, together with the details of
shares issued during the year to 31 December
2021, are shown in Note 16 to the financial
statements on page 92.
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 have taken all the
steps they should have taken as a director to
make themselves 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 FinnCap Group, One
Bartholomew Close, London EC1A 7BL on 19
May 2022 at 1pm. The Notice of Meeting has
been sent to shareholders along with this
Annual Report.
Approved and signed on behalf of the Board
Tim Parfitt
Director
23 March 2022
64
independent auditor’s report
to the members of eve Sleep plc
65
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 2021 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 UK-adopted international
accounting standards.
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 2021 and of the
group’s loss for the year then ended;
•
have been properly prepared in
accordance with UK-adopted international
accounting standards; and
•
the financial statements 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 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.
material uncertainty related
to going concern
We draw attention to note 2.4 of the financial
statements which indicates there is a material
uncertainty relating to the Group and Parent
Company’s ability to continue as a going
concern.
The Group has reported an operating
cash outflow of £3.4m for the year to 31
December 2021 with cash on hand as at that
date of £4.5m. 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. These forecasts
indicate the Group will have sufficient funds
to meet its liabilities as they fall due until such
point that it achieves profitability and cash
generation.
However, the achievement of the
projections is subject to uncertainties, which
have been modelled through sensitivity
analysis. Where sensitivity 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 required
and the timeframe within which these actions
are needed. The uncertainties are such that
potential mitigating actions may not be
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
66
sufficient to mitigate all reasonably possible
downsides in assumptions, hence further
funding may be required. These conditions,
along with the other matters explained in note
2.4, represent a material uncertainty that may
cast significant doubt on the Group’s and
the Parent Company’s ability to continue as a
going concern.
Our opinion is not modified in respect of
this matter.
Notwithstanding the above, 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 responsibilities and the responsibilities
of the directors with respect to going concern
are described in the relevant sections of this
report.
The main procedures performed on
the going concern assessment made by
management were as follows:
•
Reviewed the future cash flow forecasts
prepared by management and
challenged the inputs and assumptions
included in the forecasts. Where
appropriate we corroborated the inputs
and assumptions to supporting
information.
•
Compared forecasts with actuals in
the year and post year-end, to consider
management's forecasting ability.
•
Reviewed the current cash reserves and
compared to the cash outflows required
over the next 12-18 months from the date
of signing the annual report.
•
Reviewed management’s sensitivity
analysis to assess the effect of changing
key assumptions.
our approach to the audit
The audit team performed the audit of the
Group as if it was a single aggregated set
of financial information, given the financial
information of all components is included
within one accounting system and is subject
to the same processes and controls. The audit
was performed using the materiality levels set
out below.
key audit matters
In addition to the matter described in
the material uncertainty related to going
concern section, we have determined the
matter described below to be the key audit
matter to be communicated in our report.
Key audit matters are those matters that,
in our professional judgment, were of most
significance in our audit of the financial
statements of the current period, and include
the most significant assessed risks of material
misstatement (whether or not due to fraud)
we identified, including those which had the
greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and
directing the efforts of the engagement team.
These matters were addressed in the context
of our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion on
these matters.
In addition to the matters we have
identified below and above, the audit
committee identified the provision for returns
as a significant risk. This was not assessed as
a KAM as it was not an area which took a
significant amount of the audit team’s time,
as the availability of post year end returns
information covers the majority of the returns
period.
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
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
revenue recognition -
group and parent company
description of risk
Under International Standards on Auditing
there is a rebuttable presumption that
revenue recognition gives rise to a material
risk of fraud, and given that eve Sleep has a
potential incentive to overstate its revenue
to respond to market pressure, we have not
rebutted this presumption with respect to cut-
off of revenue at the statement of financial
position date.
Specifically, we identified the risk that
revenue transactions recorded in the year
may not have been delivered to the customer
before year-end and therefore may have been
recorded in the incorrect period.
how the matter was addressed in the audit
We reviewed management's revenue
recognition policy and ensured revenue
was being measured and recognised in
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
complete, by testing that a sample of
orders from the sales ordering systems
which have been fulfilled in the year have
been included in revenue.
•
Substantively tested that revenue has
been recognised in the correct period,
through agreeing a sample of revenue
entries from either side of the year-end to
goods delivered notes.
•
Checked the revenue recognition policy
for compliance against IFRS 15, through
reference to the five-step revenue
recognition policy. This included identifying
the contract with the customer for each
revenue stream; identifying performance
obligations; determining the transaction
price; allocating the price to relevant
performance obligations; and ensuring
revenue is then recognised as the above
performance obligations are met, being
delivery to the ultimate end customer.
•
Ensured the revenue recognition policy
in the accounts is consistent with audit
evidence obtained and IFRS 15.
our application of materiality
The materiality for the group financial
statements as a whole (“group FS materiality”)
was set at £531,000. This has been determined
with reference to the benchmark of the
group’s revenue, which we consider to be one
of the principal considerations for members
of the company in assessing the group’s
performance. FS materiality represents 2% of
the group’s revenue as presented on the face
of the Consolidated Statement of Profit and
Loss and Other Comprehensive Income.
The materiality for the parent company
financial statements as a whole (“parent
FS materiality”) was set at £451,000. This
has been determined with reference to the
benchmark of the parent company’s revenues,
which we consider to be one of the principal
considerations for members of the parent
company in assessing the performance of the
company. Parent FS materiality represents 2%
of the parent company’s revenue.
Performance materiality for the group
financial statements was set at £345,150,
being 65% of group FS materiality, for purposes
of assessing the risks of material misstatement
and determining the nature, timing and extent
of further audit procedures. We have set it
at this amount to reduce to an appropriately
low level the probability that the aggregate of
uncorrected and undetected misstatements
exceeds FS materiality. We judged this level to
be appropriate based on our understanding
of the group and its financial statements, as
updated by our risk assessment procedures
and our expectation regarding current
period misstatements including considering
experience from previous audits.
68
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
It was set at 65% to reflect the fact that some
misstatements were expected in the current
period and there is some judgement and
estimation in the financial statements.
Performance materiality for the parent
company financial statements was set at
£293,150, being 65% of parent FS materiality. It
was set at 65% to reflect the fact that some
misstatements were expected in the current
period and there is some judgement and
estimation in the financial statements.
other information
The other information comprises the
information included in the Annual Report,
other than the financial statements and
our auditor’s report thereon. The directors
are responsible for the other information
contained within the Annual Report. Our
opinion on the financial statements does not
cover the other information and, except to the
extent otherwise explicitly stated in our report,
we do not express any form of assurance
conclusion thereon. Our responsibility is to
read the other information and, in doing
so, consider whether the other information
is materially inconsistent with the financial
statements or our knowledge obtained
in the course of the audit or otherwise
appears to be materially misstated. If we
identify such material inconsistencies or
apparent material misstatements, we are
required to determine whether this gives rise
to a material misstatement in the financial
statements themselves. If, based on the
work we have performed, we conclude that
there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken
in the course of the audit:
•
the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent with
the financial statements; and
•
the strategic report and the directors’
report have been prepared in accordance
with applicable legal requirements.
matters on which we are
required to report by exception
In the light of the knowledge and
understanding of the group and the parent
company and their environment obtained in
the course of the audit, we have not identified
material misstatements in the strategic report
or the directors’ report.
We have nothing to report in respect of
the following matters in relation to which the
Companies Act 2006 requires us to report to
you if, in our opinion:
•
adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
•
the parent company financial statements
are not in agreement with the accounting
records and returns; or
•
certain disclosures of directors’
remuneration specified by law are not
made; or
•
we have not received all the information
and explanations we require for our audit.
69
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
responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page
60, the directors are responsible for the
preparation of the financial statements and
for being satisfied that they give a true and
fair view, and for such internal control as the
directors determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error.
In preparing the financial statements,
the directors are responsible for assessing
the group’s and the parent company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern basis of
accounting unless the directors either intend
to liquidate the group or the parent company
or to cease operations, or have no realistic
alternative but to do so.
auditor’s responsibilities
for the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
The extent to which our procedures are
capable of detecting irregularities, including
fraud, is detailed below. Irregularities,
including fraud, are instances of non-
compliance with laws and 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
detailed below:
We obtained a general understanding
of the company’s legal and regulatory
framework through enquiry of management
concerning: their understanding of relevant
laws and regulations; the entity’s policies
and procedures regarding compliance; and
how they identify, evaluate and account for
litigation claims. We also drew on our existing
understanding of the company’s industry and
regulation.
We understand that the company
complies with the framework through:
•
Outsourcing payroll and research and
development tax credit calculation to
external experts.
•
Subscribing to relevant updates from
external experts and making changes
to internal procedures and controls as
necessary.
•
The executive directors’ close involvement
in the day-to-day running of the business,
meaning that any litigation or claims
would come to their attention directly.
In the context of the audit, we considered
those laws and regulations: which determine
the form and content of the financial
statements; which are central to the
company’s ability to conduct its business; and
where failure to comply could result in material
penalties. We identified the following laws and
regulations as being of significance in the
context of the company:
•
The Companies Act 2006 and IFRS
in respect of the preparation and
presentation of the financial statements;
and
•
AIM regulations and Market Abuse
70
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: 23 March 2022
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;
•
Reviewed minutes of board meetings held
during the year and post year-end; and
•
Obtained written management
representations regarding the adequacy
of procedures in place.
The senior statutory auditor led a discussion
with senior members of the engagement team
regarding the susceptibility of the entity’s
financial statements to material misstatement,
including how fraud might occur. The key area
identified in this discussion was with regard to
the manipulation of the financial statements
through manual journal entries and incorrect
recognition of revenue.
This area was communicated to the other
members of the engagement team who were
not present at the discussion.
The procedures we carried out to gain
evidence in the above area included:
•
Testing of a sample of revenue
transactions to underlying documentation;
and
•
Testing of manual journal entries, selected
based on specific risk assessments
applied based on the group and parent
company’s processes and controls
surrounding manual journal entries.
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.
71
consolidated statement of profit and loss
and other comprehensive income
for the year ended 31 December 2021
Note
2021
£
2020
£
Revenue
2.16, 3
26,588,811
25,218,550
Cost of sales
3
(11,862,277)
(10,763,508)
Gross profit
14,726,534
14,455,042
Distribution expenses
3
(3,744,647)
(3,500,916)
Administrative expenses
(14,386,775)
(13,394,391)
Operating loss
(3,404,888)
(2,440,265)
Net finance (expense) income
7
(5,764)
1,641
Loss before tax
(3,410,652)
(2,438,624)
Taxation
8
356,428
414,541
Loss for the year
(3,054,224)
(2,024,083)
Other comprehensive income
Foreign currency differences from overseas operations
which may be reclassified subsequently to profit or loss
81,649
35,822
Total comprehensive loss for the year
(2,972,575)
(1,988,261)
Basic and diluted loss per share
18
(1.12p)
(0.75p)
All results relate to continuing activities.
Notes 1 to 24 form part of these financial statements.
72
f i n a n c i a l s t a t e m e n t s
consolidated statement of financial position
at 31 December 2020
Note
2021
£
2020
£
Non-current assets
Property, plant and equipment
9
702,025
273,496
Intangible assets
10
434,616
466,330
1,136,641
739,826
Current assets
Inventories
11
1,291,678
559,915
Current tax receivable
8
–
414,542
Trade and other receivables
12
1,313,830
1,880,188
Cash and cash equivalents
13,19
4,505,041
8,438,453
7,110,549
11,293,098
Total assets
8,247,190
12,032,924
Non-current liabilities
Lease liabilities
261,205
–
Current liabilities
Trade and other payables
14
2,853,975
4,024,210
Provisions
15,19
786,742
1,041,236
Lease Liabilities
23
441,180
273,857
4,081,897
5,339,303
Total liabilities
4,343,102
5,339,303
Net assets
3,904,088
6,693,621
Equity attributable to equity holders of the parent
Share capital
16
274,322
272,570
Share premium
49,518,786
49,421,049
Share-based payment reserve
17
297,987
766,749
Retained earnings
(46,420,508)
(43,918,599)
Foreign currency translation reserve
233,501
151,852
Total equity
3,904,088
6,693,621
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
23 March 2022
Company registered number: 09261636
73
f i n a n c i a l s t a t e m e n t s
consolidated statement of changes in equity
for the year ended 31 December 2021
Share
Capital
£
Share
Premium
£
Share-based
reserve
£
Retained
Earnings
£
Foreign
currency
translation
reserve
£
Total Equity
£
For the year ended 31 December 2021
Balance at 1 January 2021
272,570
49,421,049
766,749
(43,918,599)
151,852
6,693,621
Exercise of employee share options
765
–
–
–
–
765
Transfer of historically exercised and
cancelled options
–
–
(321,764)
321,764
–
–
Share-based payment charge
–
–
182,277
–
–
182,277
Transfer on cancelled, lapsed and
forfeiture of employee share options
–
–
(192,754)
192,754
–
–
Transfer on exercise of employee share
options
–
–
(37,797)
37,797
–
–
Transfer on issue of equity for marketing
purposes
987
97,737
(98,724)
–
–
–
Total transactions with owners
1,752
97,737
(468,762)
552,315
–
183,042
Loss for the period
–
–
–
(3,054,224)
–
(3,054,224)
Other comprehensive income for the year
–
–
–
–
81,649
81,649
Balance at 31 December 2021
274,322
49,518,786
297,987
(46,420,508)
233,501
3,904,088
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
–
–
–
–
3,734
Share-based payment charge
–
–
220,084
–
–
220,084
Transfer on exercise of employee share
options
–
–
(214,812)
214,812
–
–
Transfer on issue of equity for marketing
purposes
5,391
533,657
(237,018)
–
–
302,030
Total transactions with owners
9,125
533,657
(231,746)
214,812
–
525,848
Loss for the period
–
–
–
(2,024,083)
–
(2,024,083)
Other comprehensive income for the
period
–
–
–
–
35,822
35,822
Balance at 31 December 2020
272,570
49,421,049
766,749
(43,918,599)
151,852
6,693,621
74
f i n a n c i a l s t a t e m e n t s
consolidated statement of cash flows
for the year ended 31 December 2021
Note
2021
£
2020
£
Cash flows from operating activities
Loss for the year
(3,054,224)
(2,024,083)
Adjustments for:
Depreciation
9
419,752
470,211
Amortisation
10
216,124
169,193
(Increase)/decrease in inventories
11
(731,764)
1,014,733
Decrease in trade and other receivables
12
980,900
697,386
(Decrease)/increase in trade and other payables
14
(1,170,235)
41,036
(Decrease)/increase in provisions
15
(254,495)
272,271
Share-based payment charge
17
182,277
522,114
Interest expense on lease liabilities
7
6,357
18,334
Net cash flow from operating activities
(3,405,308)
1,181,195
Cash flows from investing activities
Additions to intangible assets
10
(184,409)
(291,067)
Net cash flow from investing activities
(184,409)
(291,067)
Cash flows from financing activities
Proceeds from the issue of share capital
16
765
3,734
Payment of lease rentals
23
(426,109)
(480,000)
Net cash outflows from financing activities
(425,344)
(476,266)
Net cash (outflow)/inflow
(4,015,061)
413,862
Cash at beginning of year
8,438,453
7,988,769
Movement in cash
(4,015,061)
413,862
Effect of exchange rate fluctuations on cash held
81,649
35,822
Cash at end of year
4,505,041
8,438,453
75
f i n a n c i a l s t a t e m e n t s
76
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 2021 was 29A Kentish Town Road, London, England,
NW1 8NL.
2. accounting policies
2.1 basis of preparation
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as
the "Group").
The Group and Company financial statements have been prepared and approved by the directors in accordance
with UK-adopted international accounting standards.
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 2021.
b.
New and amended Standards and Interpretations mandatory for the first time for the financial year beginning
1 January 2021 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 nor Company has received such concessions,
this is not relevant.
Interest rate benchmark reform – phase 2 – amendments provided a practical expedient when accounting for
a modification of a financial instrument when an old interest rate benchmark is replaced with an alternative
(SONIA) as a result of the reform. As neither the Group nor Company has such financial instruments, this is not
relevant.
a.
New and amended Standards and Interpretations issued but not effective for the financial year beginning
1 January 2021:
•
Amendment to IAS 1: “Classification of Liabilities as Current or Non-current”
•
Amendment to IAS 12 ‘Deferred tax related to assets and liabilities arising from a single transaction’
•
IAS 8: Definition of accounting estimates
•
IAS 1: Disclosure initiative – accounting policies
•
IFRS 9: Fees in the ’10 per cent’ test for derecognition of financial liabilities
•
IAS 37: Onerous contracts – cost of fulfilling a contract
•
IAS 16: PPE: Proceeds before intended use
•
IAS 41: Taxation in fair value measurements
•
IFRS 17: Insurance Contracts
2.3 measurement convention
The financial statements are prepared under the historical cost convention.
notes to the financial statements
forming part of the the financial statements
77
notes to the financial statements continued
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 a loss for the year of £3.1m (2020: £2.0m) with net cash outflow of £3.9m (2020: inflow £0.5m).
The closing cash balance at 31 December 2021 was £4.5m (2020: £8.4m).
There were two material cash outflows in the year totalling £1.0m which are non-recurring: firstly, there was a planned
increase in inventories of £0.7m with the intention that this would mitigate against potential supply chain disruption
during the year and allow customer orders to be fulfilled; secondly, £0.3m VAT was paid to HMRC in April 2021 having been
deferred from 2020 Q1 under the UK Government Coronavirus support measures. Without these cash outflows, the net cash
outflow for the year would have been £2.9m and the prior year cash outflows would have been higher.
The directors have prepared a business plan and financial model including cashflow forecasts for 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 all markets with UK direct to consumer continuing the strong growth seen over the previous
two years and remaining the predominant sales channel;
•
Some margin improvement generated through economies of scale including increased purchasing power and
more efficient use of warehouse space and logistics; and
•
Minimal increase in total marketing spend with a greater emphasis on performance marketing and the
ongoing use of existing TV assets in UK and France resulting in improved total efficiency, measured as % of revenue.
The base case forecast demonstrates that the company will reduce its net loss compared to 2021 and cash outflow will be
less than £2.0m annually.
The delivery of the business plan is subject to uncertainty which has been modelled through sensitivity analysis.
Uncertainties are such that potential mitigating actions, which would be over and above the current strategic plan, may
not be sufficient to mitigate all reasonably possible downsides in assumptions. The impact of weaker consumer confidence
is one such uncertainty which management are assessing and managing the impact of on the business.
Mitigating actions would include reviewing all discretionary spend including changes to marketing investment and fixed
overheads. In addition, the directors have considered opportunities to improve working capital such as debt factoring and
reducing inventory investment.
Based on the above, the directors believe it remains appropriate to prepare the financial statements on a going
concern basis. However, these circumstances represent a material uncertainty that may cast doubt upon the company’s
ability to continue as a going concern and, therefore to continue realising its assets and discharging its liabilities in the
normal course of business. The financial statements do not include any adjustments that would result from the basis of
preparation being inappropriate.
2.5 presentational currency
The Group financial statements are presented in Sterling.
2.6 basis of consolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) prepared to 31 December each year. Control is achieved where the Company is exposed to, or
has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity.
All intra-group transactions and balances and any unrealised gains and losses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 from publishing its
individual income statement and related notes.
2.7 revenue recognition
Revenue is measured at the transaction price received or receivable allocated to the performance obligation satisfied
and represents amounts receivable for goods and services provided in the normal course of business, net of discounts,
VAT and other sales related taxes. As the expected period between transfer of a promised good or service and payment
from the customer is one year or less then no adjustment for a financing component has been made. Sales of goods are
recognised when goods are delivered, and control has passed.
78
notes to the financial statements continued
2.8 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.
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).
2.9 financial instruments
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; and
•
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
12
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
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
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, this is not normally applied.
Other current assets
12
Cash and cash
equivalents
13
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.
79
Financial
instrument type
Financial asset
Note
Classification rationale
Liabilities at
amortised cost
Trade payables
14
These payables are unsecured and are usually paid within
30 days of recognition.
Non-trade payables
and accrued
expenses
14
The carrying amounts of these payables are considered
to be the same as their fair values, due to their short-term
nature.
Lease liabilities
23
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.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate, a shorter
period, to the net carrying amount on initial recognition.
2.10 property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment. Depreciation is charged to the 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 length of lease up to the first tenant break point.
Depreciation methods, useful lives and residual values are reviewed at each statement of financial position date.
notes to the financial statements continued
80
2.11 intangible assets
The costs of acquiring and developing software that is not integral to its related hardware is capitalised separately as an
intangible asset. Capitalised software costs include external direct costs of material and services and payroll related costs
for employees who are directly associated with the project. Capitalised software development costs are stated at historic
cost less accumulated amortisation. Amortisation is calculated on a straight-line basis over the assets' expected economic
lives, normally 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.
2.12 inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them
to their existing location and condition. A provision is also made to write down any slow-moving or obsolete inventory to net
realisable value.
2.13 investments
Investments in subsidiary companies are stated at cost and are subject to review for impairment indicators if identified.
2.14 impairment excluding inventories
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost (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.
2.15 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.
2.16 revenue
Revenue and profit before tax are attributable to the one principal activity of the business. Revenue represents the net sales
of goods including freight, excluding value added tax. Revenue from the sale of goods is recognised when the Group has
transferred the goods to the buyer, less appropriate deduction for actual and expected returns and relevant discounts.
notes to the financial statements continued
81
2021
£
2020
£
Direct to consumer revenue
22,508,425
19,791,409
Multi-channel revenue
4,080,386
5,427,141
26,588,811
25,218,550
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
2.17 expenses
lease payments
On 1st August 2019 the Group entered into a two-year lease for the office at 29A Kentish Town Road. This was renewed on
1st August 2021 for a term of four years with a break on 31st July 2023. See note 23 for treatment of the lease 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.
2.18 employee benefits
defined contribution plans
The company operates a defined contribution plan. A defined contribution plan is a post-employment benefit plan under
which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the
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 payment 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.
Non-exercised and un-vested share-based payment awards are cancelled 90 days after employment by the Group
ceases. The previously recognised expenses are reversed and the balance in the share based payment reserve is reduced
accordingly with benefit shown in retained earnings.
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.
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:
82
2.19 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.
2.20 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:
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.
notes to the financial statements continued
83
2.21 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.
2.23 leases
A right of use asset and a lease liability has been recognised for all leases except leases of low value assets, which are
considered to be those with a fair value below £4,500, and those with a duration of 12 months or less. These are further
explained in note 23. The right-of-use asset has been measured at cost, which is made up of the initial measurement of the
lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at
the end of the lease, and any lease payments made in advance of the lease commencement date.
The Group will depreciate the right-of-use assets on a straight-line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Where impairment indicators exist,
the right of use asset will be assessed for impairment.
The lease liabilities are measured at the present value of the lease payments due to the lessor over the lease term,
discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental
borrowing rate.
After initial measurement, any payments made will reduce the liability and the interest accrued will increase it. Any
reassessment or modification will lead to a remeasurement of the liability. In such case, the corresponding adjustment
will be reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment.
notes to the financial statements continued
84
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
Total
For the year ended 31 December 2021
Revenue
22,586,531
3,997,720
4,560
26,588,811
Cost of Sales
(9,949,919)
(1,912,106)
(252)
(11,862,277)
Gross profit
12,636,612
2,085,614
4,308
14,726,534
Distribution expenses
(2,920,261)
(824,386)
–
(3,744,647)
Payment Fees
(575,848)
(77,658)
–
(653,506)
Marketing expenses
(5,396,865)
(1,779,751)
–
(7,176,616)
Segment results
3,743,638
(596,181)
4,308
3,151,765
Administration expenses (excluding payment
fees and marketing expenses)
(6,556,653)
Net Finance Income (Expense)
(5,764)
Taxation
356,428
Total
(3,054,224)
UK&I
France
Rest of
Europe
Total
For the year ended 31 December 2020
Revenue
20,501,151
4,586,988
130,411
25,218,550
Cost of Sales
(8,692,158)
(2,071,350)
–
(10,763,508)
Gross profit
11,808,993
2,515,638
130,411
14,455,042
Distribution expenses
(2,658,227)
(842,746)
57
(3,500,916)
Payment Fees
(461,143)
(70,214)
(15,760)
(547,117)
Marketing expenses
(5,138,937)
(964,248)
806
(6,102,379)
Segment results
3,550,686
638,430
115,514
4,304,630
Administration expenses (excluding payment
fees and marketing expenses)
(6,744,895)
Net Finance Income
1,641
Taxation
414,541
Total
(2,024,083)
notes to the financial statements continued
85
2021
2020
Finance
6
6
Marketing
10
9
Operations
49
44
Total
64
59
4. expenses and auditor’s remuneration
Included in profit/loss are the following:
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:
The aggregate payroll costs of these persons were as follows:
2021
£
2020
£
Wages and salaries
3,012,316
2,788,003
Social security costs
334,644
312,632
Share-based payment charge (note 17)
161,389
220,084
Employer pension contributions
56,405
51,225
Total
3,564,754
3,371,944
2021
£
2020
£
Auditors remuneration
Audit of these financial statements
76,440
73,500
Amounts received by auditor’s and their associates in respect of:
Tax advisory services
–
–
Tax compliance services
–
–
Other items
Depreciation of property, plant and equipment (note 9)
419,752
470,211
Amortisation of intangible assets (note 10)
216,124
169,192
Cost of inventory write offs (note 11)
64,735
60,003
notes to the financial statements continued
86
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:
Directors' aggregate emoluments and pension payments are detailed in the Directors' Remuneration Report on page 57,
along with directors' interests in issued shares and share options on pages 58 and 59, which form part of these audited financial
statements.
The gain on exercise of share options in respect of directors for the year was £nil (2020: £nil).
Directors of the Company and their immediate relatives control 2.4% 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.
notes to the financial statements continued
2021
£
2020
£
Salaries or fees
359,990
362,427
Employer pension contributions
3,241
3,038
Employer’s national insurance
44,398
43,469
Share-based payment charge
110,461
162,386
Total
518,090
571,320
2021
£
2020
£
Interest receivable on cash and cash equivalents
593
19,975
Interest expense on lease liabilities
(6,357)
(18,334)
Total
(5,764)
1,641
2021
£
2020
£
Loss for the year
(3,054,224)
(2,024,083)
Total tax credit
356,428
414,541
Loss excluding taxation
(3,410,652)
(2,438,624)
Tax using the UK corporation tax rate of 19% (2020: 19%)
648,024
463,339
Effects of:
Expenses not deductible for tax purposes
–
–
Fundraise-related expenditure
–
–
Depreciation, amortisation and impairment
(120,816)
(121,487)
Share-based payment charges
(34,633)
(101,072)
Research and development tax credit for the prior year
356,428
414,541
Current year losses for which no deferred tax asset was recognised
(492,575)
(242,650)
Total tax credit
356,428
414,541
Reconciliation of effective tax rate:
The Group has accumulated tax losses available for offset against future profits of £69,203,678 (2020: £68,097,038).
A deferred tax asset has not been recognised in respect of these losses as there is uncertainty when and if these losses
will be recovered.
The UK corporation tax rate is consistent year on year at 19% and is expected to increase to 25% in 2023 for companies
with profits above £250,000.
8. taxation
Recognised in the statement of profit and loss:
2021
£
2020
£
Current tax credit
Research and development tax credit for the prior year
356,428
414,541
Total current tax
356,428
414,541
87
notes to the financial statements continued
9. property, plant and equipment
Right of use asset
£
Plant and
equipment
£
Fixtures and
fittings
£
Total
£
Cost
Balance at 1 January 2020
716,623
10,476
39,724
766,823
Additions
225,132
–
–
225,132
Balance at 31 December 2020
941,755
10,476
39,724
991,955
Disposals
(941,755)
(10,476)
(39,724)
(941,755)
Additions
848,280
–
–
848,280
Balance at 31 December 2021
848,280
–
–
848,280
Depreciation and Impairment
Balance at 1 January 2020
198,048
10,476
39,724
248,248
Depreciation charge for the year
470,211
–
–
470,211
Balance at 31 December 2020
668,259
10,476
39,724
718,459
Depreciation charge for the year
419,752
–
–
419,752
Disposals
(941,755)
(10,476)
(39,724)
(941,755)
Balance at 31 December 2021
146,255
–
–
146,255
Net Book Value
At 31 December 2020
273,496
–
–
273,496
At 31 December 2021
702,025
–
–
702,025
88
notes to the financial statements continued
Development
costs
£
Assets under
construction
£
Total
£
Cost
Balance at 1 January 2020
1,135,523
187,274
1,322,797
Additions - internally generated
–
268,305
268,305
Additions - externally generated
–
22,761
22,761
Transfers
193,459
(193,459)
–
Balance at 31 December 2020
1,328,982
284,881
1,613,863
Additions - internally generated
–
100,561
100,561
Additions - externally generated
–
83,849
83,849
Transfers
284,881
(284,881)
–
Write down of previously impaired assets
–
(67,770)
(67,770)
Balance at 31 December 2021
1,613,863
116,640
1,730,503
Amortisation and Impairment
Balance at 1 January 2020
910,571
67,770
978,341
Amortisation for the year
169,192
–
169,192
Balance at 31 December 2020
1,079,763
67,770
1,147,533
Amortisation for the year
216,124
–
216,124
Write down of previously impaired assets
–
(67,770)
(67,770)
Balance at 31 December 2021
1,295,887
–
1,295,887
Net Book Value
At 31 December 2020
249,219
217,110
466,330
At 31 December 2021
317,976
116,640
434,616
89
10. intangible assets
notes to the financial statements continued
Development costs relate to internal and external costs incurred in respect of the infrastructure of the website platform and
ERP system. Assets under construction at 31 December 2021 relate to internal costs incurred for the development of ERP
software for internal use where the asset is expected to go live in 2022.
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 (2020: £nil).
2021
£
2020
£
Finished goods
1,291,678
559,915
11. inventories
There were £64,735 of write-down of inventories to net realisable value in the year (2020: £nil). Included within inventories
is £103,364 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 £137,774 (2020: £200,774).
Inventory days were 40 days in 2021 (2020: 19 days). Finished goods recognised in cost of sales in the year amounted to
£11,862,277 (2020: £10,763,508).
2021
£
2020
£
Trade receivables
715,938
656,032
Other receivables
9,724
221,030
Prepayments
468,167
883,126
Other current assets
120,000
120,000
1,313,830
1,880,188
2021
£
2020
£
Not overdue
509,464
289,305
Overdue between 0-30 days
71,102
142,721
Overdue between 31-60 days
–
113,216
Overdue between 61-90 days
37,033
72,200
Overdue over 90 days
98,338
38,590
715,938
656,032
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.
2021
£
2020
£
Cash and cash equivalents
4,505,041
8,438,453
90
12. trade and other receivables
The average credit period offered on sales of goods during 2021 was 52 days (2020: 32 days). The average days sales
outstanding (‘‘DSO'') in 2021 was 65 days (2020: 44 days). At 31 December 2021, trade receivables at a nominal value of
£nil (2020: £nil) 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.
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31
December 2021, (2020: Four major retail customers each accounted for more than 10% of the total balance of trade
receivables on 31 December 2020).
13. cash and cash equivalents
As at 31 December 2021, the group had an available £725,000 and €30,000 credit card facility.
notes to the financial statements continued
2021
£
2020
£
Trade payables
1,080,411
1,183,802
Non–trade payables and accrued expenses
594,953
1,027,043
Deferred revenue and customer deposits
884,403
949,411
Taxes and social security payable
294,208
863,954
2,853,975
4,024,210
Refunds
£
Warranty
£
Total
£
Balance at 1 January 2020
567,686
201,279
768,965
Provisions made during the year
3,735,217
106,000
3,841,217
Provisions used during the year
(3,437,640)
(65,221)
(3,502,861)
Prior year under provision recognised in year
(66,085)
–
(66,085)
Balance at 31 December 2020
799,178
242,058
1,041,236
Provisions (released)/made during the year
1,896,711
17,906
1,914,617
Provisions used during the year
(2,126,128)
(42,983)
(2,169,111)
Balance at 31 December 2021
569,761
216,981
786,742
91
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 2021 financial year.
15. provisions
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.
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).
14. trade and other payables
notes to the financial statements continued
Number
Nominal Value
£
31 December 2021
£
31 December 2020
£
Ordinary Shares
274,321,862
£0.001
274,322
272,570
Total
274,322
272,570
Ordinary Shares
Share capital 31 December 2020
272,569,414
Nominal Value £
£0.001
Value of Share capital £
£272,570
Summary of Movements
Issue of shares for marketing services at £0.10 per share
987,245
Exercise of share options over ordinary shares
765,203
Share capital 31 December 2021
274,321,862
Nominal Value £
£0.001
Value of Share capital £
£274,322
92
16. share capital
Allotted, issued and fully paid:
The table below summarises the movements in number of shares at the beginning and end of the period:
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 2021, 987,245 shares were issued and 765,203 share options were exercised bringing the total share capital of the
Company to 274,321,862 at 31 December 2021.
17. share–based payments
The Group recognised a charge of £0.2m (2020: £0.5m) related to share-based payments during the year to 31 December
2021, all of which relates to equity-settled schemes and are presented within administrative expenses. The charge in 2020
included £0.3m issued to Channel 4 in relation to the equity settlement of marketing services provided.
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.
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
conditions, the options will vest when the conditions are met. All options are equity settled.
notes to the financial statements continued
93
17. share–based payments (continued)
The terms and conditions of the grants are as follows:
Grant Date
Number of
Contracts
Number of
Options
Exercise
Price
Performance Conditions
Expiry Date
10/04/2017
1
251,000
£0.001
Length of service
10/04/2027
01/04/2019
7
6,679,364
£0.001
Length of service
01/04/2029
17/12/2019
4
6,850,000
£0.001
Length of service
17/12/2029
17/02/2020
2
550,000
£0.001
Length of service
17/02/2030
01/06/2020
3
1,750,000
£0.001
Length of service
01/06/2030
01/06/2020
2
2,650,000
£0.001
Performance Based
01/06/2030
28/06/2021
15
1,920,000
£0.001
Length of service
28/06/2031
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:
The number and weighted average exercise prices of share options are as follows:
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 £0.001
(2020: £0.001).
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.
Grant Date
Number of
Contracts
Number of
Options
Exercise
Price
Performance Conditions
Expiry Date
26/01/2016
1
12,550
£0.001
Length of service
26/01/2026
01/04/2019
1
150,000
£0.001
Length of service
01/04/2029
notes to the financial statements continued
Weighted Average
Exercise Price
£
Number of Options
Outstanding at beginning of year
£0.001
15,803,099
Granted during the year
£0.001
1,920,000
Forfeited during the year
£0.001
(137,500)
Exercised during the year
£0.001
(765,203)
Lapsed during the year
£0.001
(17,500)
Cancelled during the year
£0.001
(4,522,222)
Outstanding at the end of the year
£0.001
12,280,674
Exercisable at the end of the year
£0.001
7,388,523
94
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 2021 are as follows:
notes to the financial statements continued
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.
2021
2020
Weighted average shares in issue
273,623,423
269,819,716
Loss attributable to the owners of the parent company
(3,054,224)
(2,024,083)
Basic loss per share (pence)
(1.12)
(0.75)
Diluted loss per share (pence)
(1.12)
(0.75)
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 2021, options outstanding amounted to 12,280,674. Given the loss for the year of £3,054,224 (2020 loss:
£2,024,083) these options are anti-dilutive.
Award
28/06/2021
£
Share class
Ord
Fair value
£0.032
Exercise Price
£0.001
Expected volatility
114%
Option Life
10 yrs
Risk free interest rate
1,000%
95
‘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.
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 is given in note 12.
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.
2021
£
2020
£
Financial assets at amortised cost
Cash and cash equivalents, trade receivables and other receivables
5,350,704
9,435,515
Financial liabilities at amortised cost
Trade payables, other payables and provisions
(2,462,106)
(3,252,081)
notes to the financial statements continued
19. financial instruments
Categories of financial instruments:
96
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
4,348,109
156,459
473
–
4,505,041
Trade receivables
678,035
37,903
–
–
715,938
Other receivables
9,725
–
–
–
9,725
Other current assets
120,000
–
–
–
120,000
Trade payables
(722,521)
(344,611)
(13,279)
–
(1,080,411)
Non-trade payables and accrued expenses
(967,295)
(403,358)
(701)
–
(1,371,354)
Provisions
(712,745)
(73,997)
–
–
(786,742)
Total
2,753,308
(627,604)
(13,507)
–
2,112,197
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 2021 would have decreased the
Group loss by less than 1.0%. 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 (2020: £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 57 and 58 of the Director's remuneration report.
22. commitments
There were no commitments in the year (2020: £nil).
97
notes to the financial statements continued
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:
24. subsequent events
There have been no significant events since the year end.
Asset
Carrying
amount
Additions
Depreciation
Impairment
Office Building
848,280
702,025
848,280
419,752
–
Total
848,280
702,025
848,280
419,752
–
31 December 2021
31 December 2020
Current
440,820
277,397
Non-Current
261,205
–
Total
702,025
277,397
23. leases
The Group commenced a 24-month lease of its registered office at 29A Kentish Town Road, London, NW1 8NL on 1 August
2019 and renewed the lease on 1 August 2021 for a further 4-year term with a tenant break at 24 months. 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.
right-of-use asset
Additional information on the right-of-use assets by class of assets is as follows:
31 December
2019
Cash flows
Non-cash
changes:
interest
Non-cash
changes:
Additions
31 December
2020
Lease liabilities
510,391
(480,000)
–
247,006
277,397
Total
510,391
(480,000)
–
247,006
277,397
31 December
2020
Cash flows
Non-cash
changes:
interest
Non-cash
changes:
Additions
31 December
2021
Lease liabilities
277,397
(426,109)
(6,503)
857,240
702,025
Total
277,397
(426,109)
(6,503)
857,240
702,025
reconciliation of liabilities arising from financing activities
98
f i n a n c i a l s t a t e m e n t s
company statement of financial position
at 31 December 2020
Note
2021
£
2020
£
Non-current assets
Property, plant and equipment
4
702,025
273,496
Intangible assets
5
434,616
466,330
Investments
6
768
768
1,137,409
740,594
Current assets
Inventories
7
1,291,679
559,915
Trade and other receivables
8
1,971,180
2,072,457
Cash and cash equivalents
9
4,353,656
7,500,365
Current tax receivable
–
414,542
7,616,515
10,547,279
Total assets
8,753,924
11,287,873
Non-current liabilities
Lease liabilities
18
261,205
–
Current liabilities
Trade and other payables
10
2,634,170
3,183,182
Provisions
11
712,745
924,752
Lease Liabilities
18
441,180
273,857
3,788,095
4,381,791
Total liabilities
4,049,300
4,381,791
Net assets
4,704,624
6,906,082
Share capital
12
274,322
272,570
Share premium
49,518,786
49,421,049
Share-based payment reserve
297,987
766,749
Retained earnings
(45,386,471)
(43,554,286)
Total equity
4,704,624
6,906,082
Notes 1 to 19 form part of these financial statements. The loss for the year was £2,384,500.
These financial statements were approved by the board of directors on eve Sleep PLC and were signed
on its behalf by:
Tim Parfitt
Director
23 March 2022
Company registered number: 09261636
company cash flow
for the year ended 31 December 2021
Note
2021
£
2020
£
Cash flows from operating activities
Loss for the year
(2,384,500)
(1,739,641)
Adjustments for:
Depreciation
419,752
470,211
Amortisation
216,124
169,193
(Increase)/decrease in inventories
7
(731,764)
1,014,733
Decrease in trade and other receivables
8
515,817
967,996
(Decrease) in trade and other payables
(549,012)
(640,788)
(Decrease)/increase in provisions
11
(212,007)
254,483
Share-based payment charge
182,277
522,116
Interest expense on lease liabilities
18
6,357
18,334
Net cash (outflow)/inflow from operating activities
(2,536,956)
1,018,303
Cash flows used in investing activities
Additions to intangible assets
5
(184,409)
(291,067)
Net cash outflow used in investing activities
(184,409)
(291,067)
Cash flows from financing activities
Proceeds from the issue of share capital
765
3,734
Payment of lease rentals
19
(426,109)
(480,000)
Net cash outflows from financing activities
(425,344)
(476,266)
Net cash (outflow)/inflow
(3,146,709)
269,304
Cash at beginning of year
7,500,365
7,231,061
Movement in cash
(3,146,709)
269,304
Cash at end of year
9
4,353,656
7,500,365
99
f i n a n c i a l s t a t e m e n t s
100
company statement of changes in equity
for the year ended 31 December 2021
Share
Capital
£
Share
Premium
£
Share-based
payment
reserve
£
Retained
Earnings
£
Total Equity
£
For the year ended 31 December 2021
Balance at 1 January 2021
272,570
49,421,049
766,749
(43,554,286)
6,906,082
Exercise of employee share options
765
–
–
–
765
Transfer of historically exercised and cancelled options
–
–
(321,764)
321,764
–
Share-based payment charge
–
–
182,277
–
182,277
Transfer on cancelled, lapsed and forfeiture of employee
share options
–
–
(192,754)
192,754
–
Transfer on exercise of employee share options
–
–
(37,797)
37,797
–
Transfer on issue of equity for marketing purposes
987
97,737
(98,724)
–
–
Total transactions with owners
1,752
97,737
(468,762)
552,315
183,042
Loss for the year
–
–
–
(2,384,500)
(2,384,500)
Write down in investments
–
–
–
–
–
Balance at 31 December 2021
274,322
49,518,786
297,987
(45,386,471)
4,704,624
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
Exercise of employee share options
3,734
–
–
–
3,734
Share-based payment charge
–
–
220,084
–
220,084
Transfer on exercise of employee share options
–
–
(214,812)
214,812
–
Transfer on issue of equity for marketing purposes
5,391
533,657
(237,018)
–
302,030
Total transactions with owners
9,125
533,657
(231,746)
214,812
525,848
Loss for the year
–
–
–
(1,739,641)
(1,739,641)
Write down in investments
–
–
–
(900)
(900)
Balance at 31 December 2020
272,570
49,421,049
766,749
(43,554,286)
6,906,082
f i n a n c i a l s t a t e m e n t s
101
1. accounting policies
The Company financial statements have been prepared and approved by the directors in accordance with UK-adopted
international accounting standards.
The Company applies the policies of the Group as disclosed in note 1 of the Group financial statements.
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 £2,384,500 (2020: £1,739,641 loss).
3. staff costs and directors' remuneration
The Company shares the same directors as the Group. Directors' remuneration is disclosed in note 6 of the Group financial
statements.
Staff numbers and costs are disclosed in note 5 of the Group financial statements as all employees of the Group are
employees of the Company.
4. property, plant and equipment
All property, plant and equipment in the Group is owned by the Company. See Group note 9.
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:
Principal place
of business/
Registered office
address
Registered Number
Type of share
Ownership
2021
Ownership
2020
Company:
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.
notes to the company
financial statements
As at 31 December 2021, receivables from subsidiary undertakings of £694k (2020: £606k) 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:
The average credit period offered on sales of goods during 2021 was 55 days (2020: 32 days). The average days sales
outstanding (‘‘DSO'') in 2021 was 67 days (2020: 27 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, collectively also referred to as ‘B2B’
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 limits for each customer. Limits and scoring attributed to customers
are reviewed regularly.
Three major retail customers each accounted for more than 10% of the total balance of trade receivables on 31
December 2021, identical to 2020 when three major retail customers each accounted for more than 10% of the total
balance of trade receivables.
7. inventories
Inventories within the Group are owned by the Company. See Group note 11.
8. trade and other receivables
2021
£
2020
£
Trade receivables
678,035
344,007
Other receivables
10,714
125,748
Receivables from subsidiary undertakings
694,264
605,578
Other current assets
120,000
120,000
Prepayments
468,167
877,124
Total
1,971,180
2,072,457
2021
£
2020
£
Less than 12 months
694,264
605,578
More than 12 months
–
–
Total
694,264
605,578
notes to the company financial statements continued
2021
£
2020
£
Not overdue
487,829
68,729
Overdue between 0-30 days
53,075
128,429
Overdue between 31-60 days
–
103,373
Overdue between 61-90 days
37,034
17,850
Overdue over 90 days
100,096
25,626
678,035
344,007
102
2021
£
2020
£
Cash and cash equivalents per statement of financial position
4,353,656
7,500,365
2021
£
2020
£
Trade payables
1,025,613
909,694
Non-trade payables and accrued expenses
509,696
672,684
Deferred revenue
828,585
868,081
Taxes and social security payable
270,276
732,723
2,634,170
3,183,182
notes to the company financial statements continued
8. trade and other receivables (continued)
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
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 2021 financial year.
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.
10. trade and other payables
11. provisions
Refunds
£
Warranty
£
Total
£
Balance at 1 January 2020
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 under provision recognised in year
(69,517)
139
(69,378)
Balance at 31 December 2020
717,771
206,981
924,752
Provisions made during the year
1,623,899
25,861
1,649,760
Provisions used during the year
(1,826,369)
(35,398)
(1,861,767)
Balance at 31 December 2021
515,300
197,445
712,745
103
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 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.
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.
notes to the company financial statements continued
11. provisions (continued)
104
2021
£
2020
£
Financial assets
Cash and cash equivalents, trade receivables, other receivables and other current assets
5,162,405
8,275,203
Financial liabilities
Trade payables, non-trade payables, accrued expenses and provisions
(2,248,053)
(2,507,129)
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 has 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 2021 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 57 and 58 of the Director's report.
15. commitments
There were no commitments in the year (2020: £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.
notes to the company financial statements continued
105
19. reconciliation of liabilities arising from financing activities
31 December
2019
Cash flows
Non-cash
changes:
interest
Non-cash
changes:
Additions
31 December
2020
Lease liabilities
510,391
(480,000)
–
247,006
277,397
Total
510,391
(480,000)
–
247,006
277,397
31 December
2020
Cash flows
Non-cash
changes:
interest
Non-cash
changes:
Additions
31 December
2021
Lease liabilities
277,397
(426,109)
(6,503)
857,240
702,025
Total
277,397
(426,109)
(6,503)
857,240
702,025
every great day
starts the night before