Eve Sleep plc (EVE) Eve Sleep plc: Interim Results and FSP
Update 20-Sep-2022 / 07:00 GMT/BST Dissemination of a Regulatory
Announcement that contains inside information in accordance with
the Market Abuse Regulation (MAR), transmitted by EQS Group. The
issuer is solely responsible for the content of this
announcement.
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/ 2014 AS IT
FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH
THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR.
eve Sleep plc ("eve", "eve sleep" the "Company")
Interim Results and FSP update
eve Sleep, the direct-to-consumer sleep wellness brand operating
in the UK, Ireland (together the "UK&I") and France, today
issues its results for the six months ended 30 June 2022 (the
"Period").
Key financials1
2022 H1 GBPm 2021 H1 GBPm Movement
Revenue 11.6 13.9 -16%
Gross profit 5.1 7.6 -33%
Gross profit margin 43.8% 55.0% -1127bps
Marketing costs as a % of revenue 32.8% 32.7% +12bps
Marketing contribution2 (1.2) 0.7 -GBP1.9m
Underlying EBITDA Loss3 (4.2) (1.9) -GBP2.3m
Loss before tax (4.6) (2.3) -GBP2.3m
Cashflow from operations (2.7) (3.1) +GBP0.4m
Cash at period end 1.4 5.2 -GBP3.8m
Financial highlights
-- UK revenues 18% lower year-on-year, against a homewares
market estimated to be down 23%4
-- B2C UK revenue outperformed the wider business and the
market, decreasing 14% year-on-year
-- Revenues in France decreased year-on-year by 8% against a
market estimated to be down 32%4
-- Gross margin reduction reflects the need to compete in a
highly promotional UK market as well as costinflationary
pressures
-- Effective cash management limited the net cash outflow in the
period to below the EBITDA loss and belowH1 2021
Business highlights
-- Product ranges have been consolidated in the period to focus
on the most profitable lines
-- The new partnership with DFS, which launched in March, has
expanded both its range of products availableon the DFS and Dwell
websites and increased the number of stores to 10
-- Launch of Channel 4 TV campaign from April, sponsoring 'late
nights on 4' for 12 months
Post Period End
-- Completed cost saving measures to cut overheads on an
annualised basis by c.GBP2.5m
-- Positive marketing contribution in July and August (H1 2022:
loss GBP1.2m), which management expect toremain positive for H2 as
a whole
-- Launched the 'well slept club' sleep wellness content
platform in July as part of eve's content anddigital experience led
strategy to improve marketing efficiency
-- At 31 August the Company's cash balance was GBP1.0m. In
addition, the Company had a drawn working capitalfacility of
GBP0.7m
Current Trading and Outlook
There has been no let-up in the challenging market backdrop over
the summer, with UK consumer confidence reaching another new record
low in August of -44, according to data and analytics specialist
GfK, as rising inflation continues to erode real household incomes.
The impact on demand for big ticket items and the Homewares market
in particular has been profound. Against this backdrop eve's
direct-to-consumer (B2C) sales orders for the months of July and
August are down 14% in the UK&I against the same period in
2021, in what remains a highly promotional market. In France, B2C
sales orders for the same period are down year-on-year by 16%.
Having had a very strong start to the year, with January ahead
of plan, it became clear over February and March that a combination
of the war in Ukraine, falling consumer confidence, and increasing
inflation were affecting the homewares market significantly. The
business underwent a rapid and wide-ranging cost saving exercise
during Q2 and into Q3 to minimise costs and preserve the cash. This
included substantial salary reductions for the non-executive board
and board level directors, a restructuring of the eve team and cost
savings across all overheads in the business. The cost of these
actions has been taken in Q3, with the benefit of these measures
fully realised in the second half of the year, with overheads in Q4
expected by management to be approximately 30% lower than Q1 2022.
On an annualised basis the collective savings are expected to
reduce overheads by c.GBP2.5m, and result in reduced losses in the
second half of this year and into 2023.
Update on the FSP
The Board commenced a Formal Sales Process on 6 June 2022 to
explore the strategic and financing options available to the
Company, including the possibility of a sale of the Company. To
date, a number of indicative offers have been received but have not
yet translated into firm offers following discussions and the
facilitation of due diligence. As noted above, significant costs
savings have been made in the business in order to conserve cash.
Notwithstanding these savings, eve will require further funding in
October 2022, based on current management forecasts. If further
funding cannot be raised, or a firm offer for the Company is not
received before the Company's cash reserves are fully depleted, the
Board will take the appropriate steps to preserve value for
creditors. Further announcements will be made as appropriate. There
can be no certainty that the terms of any offer or investment
received will be suitable for the Company and its stakeholders.
Cheryl Calverley, CEO of eve Sleep, commented:
"We are doing everything possible to manage the business through
these incredibly difficult times, whilst speaking with potential
investors and strategic partners to secure fresh investment aiming
to put eve on a more secure and sustainable footing. The business
has been streamlined dramatically, with cash preservation our
absolute focus.
eve has a strong brand, an award-winning product range, a
differentiated position in sleep wellness and a restructured
business with a greatly reduced breakeven point, all backed up by a
fantastically talented team. Truly unprecedentedly appalling market
conditions have stopped 2022 being the transformative year that it
was intended to be despite a very bright start and our focus is now
on navigating the current storm through to calmer waters with a
much more efficient business."
Footnotes
1. Financial data has been rounded for presentation purposes. As
a result of this rounding the totals, comparatives and calculations
presented in this document may vary slightly from the arithmetic
totals or calculations using such data.
2. Marketing contribution is defined as the profit/loss after
marketing expenditure but before overhead costs; a measure also
referred to as operational profitability.
3. Underlying EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, impairment, share-based
payment charges connected with employee remuneration and
fundraising-related expenditure.
4. Source: IMRG in the UK and FEVAD in France
For further information, please contact:
eve Sleep plc via M7 Communications LTD
Cheryl Calverley, Chief Executive Officer
Tim Parfitt, Chief Financial Officer
finnCap Limited (NOMAD and broker) +44(0)20 7220 0500
Matt Goode / Teddy Whiley (Corporate Finance)
Alice Lane / Charlotte Sutcliffe (ECM)
M7 Communications LTD +44(0) 7903 089 543
Mark Reed
Summary
Challenging first half
The Group had been planning for significant growth in 2022 and
as such was structured to deliver increased sales volumes. At the
start of the period revenue was on target and comfortably ahead of
2021. From late February, the impact of the war in Ukraine,
consumer price inflation, the fear of rising fuel prices and four
increases In UK base rates in the period weakened consumer
confidence and led to reduced spending on household furniture.
The outcome was a fall in Group revenue in H1 of 16%, compared
to the same period in 2021. The direct-to-consumer (B2C) channels
fared better than the wholesale (B2B) business with UK B2C
declining 14% and France B2C declining by just 2%. These results
were achieved against tough comparatives (2021 H1 revenue +13% vs
2020) and in a market reported by industry monitors to be 23% down
in the UK (source: IMRG) and 32% in France (source: FEVAD).
Promotional activity in the UK market has increased with larger
discounts being offered to consumers. In May, eve launched a new UK
pricing and promotional strategy, and this has driven higher sales
volumes than would otherwise have been possible but with a lower
margin. At the same time, the decision was taken to exit less
profitable product lines in both the UK and France which diluted
the total margin. Further margin pressure came from cost increases
on the key mattress and furniture product ranges.
Actions to reduce losses
In addition to the new UK pricing and promotional strategy,
several initiatives to improve margins were launched in the period.
The production of most of the foam mattresses was moved to a new
supplier to achieve significant cost savings from H2. The hybrid
mattresses which comprise foam and springs, were not moved and
working with the existing manufacturer has enabled some cost
savings. The benefit of these actions will also be seen from
H2.
Several projects had been launched in H1 including developing an
improved customer returns experience, upgrades to the website,
building a new data infrastructure and scoping a sleep wellness
customer offering. These were all one-off costs and ceased before
the end of the period. In total one-off project costs in the period
were approximately GBP0.2m.
In order to adapt to the economic environment, the headcount has
reduced from 55 at the start of the year to around 30 by August,
through a combination of natural attrition and some
restructuring.
As a result of the completion of the one-off projects, combined
with lower employee costs, overhead costs in Q4 are expected to be
30% lower than the same period in 2021. Marketing contribution is
expected to be positive in H2.
Notwithstanding the above actions, there remains a material
uncertainty that may cast doubt upon the ability of eve to continue
as a going concern.
Cash
At the period end, cash at bank was GBP1.4m. A funding facility
was commenced in the period with ClearCo which provides a mechanism
for delaying the settlement of inventory and marketing costs by
offsetting against future ecommerce revenue receipts. At the end of
the period GBP0.9m was owed to ClearCo. This is recorded in 'Trade
and Other Payables' in the balance sheet below. As at 31 August,
cash at bank was GBP1m, with GBP0.7m owed to ClearCo.
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
6-month period ended 30 6-month period ended 30 12-month period ended 31
June 2022 June 2021 December 2021
Note (Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Revenue 2 11.6 13.9 26.6
Cost of sales 2 (6.5) (6.3) (11.9)
Gross profit 5.1 7.6 14.7
Distribution expenses 2 (2.1) (1.9) (3.7)
Administrative expenses (7.6) (8.0) (14.2)
Share-based payment charges - - (0.2)
Operating loss (4.6) (2.3) (3.4)
Finance income - - -
Loss before tax (4.6) (2.3) (3.4)
Taxation - - 0.3
Loss for the period (4.6) (2.3) (3.1)
Other comprehensive income
Foreign currency differences from 0.0 0.1 0.1
overseas operations
Total comprehensive loss for the (4.6) (2.2) (3.0)
period
Basic and diluted loss per share 3 (1.67p) (0.83p) (1.12p)
Consolidated Statement of Financial Position
6-month period ended 30 6-month period ended 30 12-month period ended 31
June 2022 June 2021 December 2021
Note (Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 0.5 - 0.7
Intangible assets 0.4 0.5 0.4
0.9 0.5 1.1
Current assets
Inventories 1.1 1.2 1.3
Trade and other receivables 1.0 1.6 1.3
Cash and cash equivalents 1.4 5.2 4.5
Current tax receivable - - -
Total current assets 3.5 8.0 7.1
Total assets 4.4 8.5 8.2
Current liabilities
Trade and other payables 3.9 2.7 2.8
Provisions 0.6 1.2 0.8
Lease liabilities < 12 months 0.4 - 0.4
Total current liabilities 4.9 3.9 4.0
Lease liabilities > 12 months 0.1 - 0.3
Total liabilities 5.0 3.9 4.3
Net (liabilities) / assets (0.6) 4.6 3.9
Equity attributable to the equity
holders of the parent
Share capital 0.3 0.3 0.3
Share premium 49.5 49.5 49.5
Share-based payment reserve 0.3 0.7 0.3
Retained earnings (51.0) (46.1) (46.4)
Foreign currency translation reserve 0.3 0.2 0.2
Total equity (0.6) 4.6 3.9
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2022
Share Share Share-based Retained Foreign currency Total
capital premium payment earnings translation equity
reserve reserve
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP GBP GBP GBP
Balance at 1 January 2022 274,322 49,518,786 297,987 (46,420,508) 233,501 3,904,088
Exercise of employee share options 421 - - - - 421
Share-based payment charge - - 26,579 - - 26,579
Transfer on cancelled, lapsed and - - (5,138) 5,138 - -
forfeiture of employee share options
Transfer on exercise of employee - - (18,791) 18,791 - -
share options
Total transactions with owners 421 - 2,650 23,929 - 27,000
Loss for the period - - - (4,585,635) - (4,585,635)
Other comprehensive income for the 40,984 40,984
period
Balance at 30 June 2022 274,743 49,518,786 300,637 (50,982,214) 274,485 (613,563)
For the 6 months ended 30 June 2021
Share Share Share-based Retained Foreign currency Total
capital premium payment reserve earnings translation reserve equity
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP GBP GBP GBP
Balance at 1 January 2021 272,570 49,421,049 766,749 (43,918,599) 151,852 6,693,621
Exercise of employee share 738 - - - - 738
options
Share-based payment charge - - 43,815 - - 43,815
Transfer on exercise of - - (20,237) 20,237 - -
employee share options
Transfer on issue of equity 778 77,058 (77,836) - - -
for marketing purposes
Total transactions with owners 1,516 77,058 (54,258) 20,237 - 44,553
Loss for the period - - - (2,255,340) - (2,255,340)
Other comprehensive income for - - - - 88,914 88,914
the period
Balance at 30 June 2021 274,086 49,498,107 712,491 (46,153,702) 240,766 4,571,749
For the 12 months ended 31 December 2021
Share Share Share-based Retained Foreign currency Total
capital premium payment earnings translation reserve equity
reserve
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
GBP GBP GBP GBP GBP GBP
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 - - (321,764) 321,764 - -
cancelled options
Share-based payment charge - - 182,277 - - 182,277
Transfer on cancelled, lapsed and - - (192,754) 192,754 - -
forfeiture of employee share options
Transfer on exercise of employee share - - (37,797) 37,797 - -
options
Transfer on issue of equity for 987 97,737 (98,724) - - -
marketing purposes
Total transactions with owners 1,752 97,737 (468,762) 552,315 - 183,042
Loss for the year - - - (3,054,224) - (3,054,224)
Other comprehensive income for the - - - - 81,649 81,649
period
Balance at 31 December 2021 274,322 49,518,786 297,987 (46,420,508) 233,501 3,904,088
Consolidated Statement of Cash Flows
6-month period ended 30 6-month period ended 30 12-month period ended 31
June 2022 June 2021 December 2021
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Cash flows from operating activities
Loss for the period (4.6) (2.3) (3.1)
Taxation - 0.4 -
Adjustments for:
Amortisation and depreciation 0.4 0.3 0.6
(Increase)/Decrease in inventories 0.2 (0.6) (0.7)
Decrease in trade and other receivables 0.3 0.3 1.0
Increase/(Decrease) in trade and other 1.1 (1.3) (1.2)
payables
Increase/(Decrease) in provisions (0.1) 0.2 (0.2)
Share-based payment charge - - 0.2
Net cash inflow/(outflows) from (2.7) (3.0) (3.4)
operating activities
Cash flows from investing activities
Development of intangible assets (0.2) (0.1) (0.2)
Net cash outflows from investing (0.2) (0.1) (0.2)
activities
Cash flows from financing activities
Proceeds from the issue of share - - -
capital
Lease payments (0.2) (0.2) (0.4)
Net cash inflow/(outflow) from (0.2) (0.2) (0.4)
financing activities
Net cash inflow/(outflow) (3.1) (3.3) (4.0)
Cash at the beginning of the period 4.5 8.4 8.4
Movement in cash (3.1) (3.3) (4.0)
Effect of exchange rate fluctuations on - 0.1 0.1
cash held
Cash at the end of the period 1.4 5.2 4.5
Notes to the accounts
1. Basis of preparation
The unaudited interim consolidated statements of eve Sleep plc
are for the six months ended 30 June 2022 and do not comprise
statutory accounts within the meaning of S.434 of the Companies Act
2006. These consolidated financial statements have been prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs) as
endorsed by the UK. IFRS is subject to amendment and interpretation
by the International Accounting Standards Board (IASB) and the IFRS
Interpretations Committee (IFRIC) and there is an ongoing process
of review and endorsement by the UK Endorsement Board.
They do not include all disclosures that would otherwise be
required in a complete set of financial statements. The
consolidated financial statements are presented in Sterling, which
is also the Group's functional currency.
Statutory accounts for the year ended 31 December 2021 have been
delivered to the registrar of companies. The auditor has reported
on those accounts; their report was (i) unqualified, (ii) did
include a reference to which the auditor drew attention by way of
emphasis without qualifying their report in respect of going
concern and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
Going concern
The interim consolidated statements are prepared on a going
concern basis notwithstanding that the group is generating losses
and is currently seeking additional funding through a Strategic
Review and Formal Sale Process. There is 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
Group has been reducing costs and losses but will require further
funding in October 2022. No impairments or adjustments have been
made to assets and liabilities that would be required if the Group
was not considered to be a going concern.
Changes to accounting standards
The interim consolidated statements have been prepared in
accordance with accounting policies that are consistent with the
accounts of the year ended 31 December 2021 and that are expected
to be applied in the Report and Accounts of the year ended 31
December 2022.
2. 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 has determined that
the primary segmental reporting format of the Group is geographical
by customer location, based on the Group's management and internal
reporting structure. The executive board assesses the performance
of each segment based on revenue and gross profit after
distribution expenses, which excludes administrative expenses.
For the period 1 January 2022 - 30 June 2022
(Unaudited)
UK&I France Total
GBPm GBPm GBPm
Revenue 9.6 2.0 11.6
Cost of sales (5.4) (1.1) (6.5)
Gross Profit 4.2 0.9 5.1
Distribution expenses (1.6) (0.5) (2.1)
Segmental results 2.6 0.4 3.0
Administrative expenses (7.6)
Loss before tax (4.6)
For the period 1 January 2021 - 30 June 2021
(Unaudited)
UK&I France Total
GBPm GBPm GBPm
Revenue 11.7 2.2 13.9
Cost of sales (5.3) (1.0) (6.3)
Gross Profit 6.4 1.2 7.6
Distribution expenses (1.5) (0.4) (1.9)
Segmental results 4.9 0.8 5.7
Administrative expenses (8.0)
Loss before tax (2.3)
For the year ended 31 December 2021
(Audited)
UK&I France Total
GBPm GBPm GBPm
Revenue 22.6 4.0 26.6
Cost of sales (10.0) (1.9) (11.9)
Gross Profit 12.6 2.1 14.7
Distribution expenses (2.9) (0.8) (3.7)
Segmental results 9.7 1.3 11.0
Administrative expenses (14.2)
Share-based payment charge (0.2)
Loss before tax (3.4)
No analysis of the assets and liabilities of each operating
segment is provided to the Chief Operating Decision Maker in the
monthly management accounts. Therefore, no measure of segmental
assets or liabilities is disclosed in this note.
Due to the nature of its activities the group is not reliant on
any major customers.
3. Earnings per share
The basic earnings per share is calculated by dividing the net
profit or loss attributable to equity holders of the Group by the
weighted average number of ordinary shares in issue during the
year.
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
Weighted average shares in issue 274,529,646 273,309,103 273,623,423
Loss attributable to the owners of the parent company (GBP) (4,585,635) (2,256,226) (3,054,224)
Basic earnings/(loss) per share (pence) (1.67) (0.83) (1.12)
Diluted earnings/(loss) per share (pence) (1.67) (0.83) (1.12)
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 30 June 2022, options outstanding amounted to 12,089,563 (30
June 2021: 16,985,396). Given the loss for the period of
GBP4,585,635 (six months to 30 June 2021: loss of GBP2,256,226),
these options are anti-dilutive.
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ISIN: GB00BYWMFT51
Category Code: IR
TIDM: EVE
LEI Code: 2138007BAC29AUXWQE6
Sequence No.: 189046
EQS News ID: 1445633
End of Announcement EQS News Service
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