Eve Sleep plc (EVE)
Eve Sleep plc: Final Results
18-March-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014
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The issuer is solely responsible for the content of this announcement.
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eve Sleep plc ("eve" the "Company" or the "Group")
Full Year Results
2020 results ahead of twice raised expectations, strong start to 2021
eve, a direct-to-consumer sleep wellness brand operating in the UK, Ireland (together the "UK&I") and France, today
issues its audited results for the year ended 31 December 2020 (the "Period").
Financial Highlights 1
2020 2019
Year ended 31 December Movement
GBPm GBPm
Revenue 25.2 23.9 +6%
Gross profit 14.5 12.7 +14%
Gross profit margin 57.3% 53.1% +418 bps
Marketing contribution2 4.3 (2.5) +GBP6.8m
Underlying EBITDA loss3 (2.0) (10.9) (81%)
Statutory loss for the year (2.0) (12.1) (83%)
Net cash 8.4 8.0 +0.4
Financial Highlights ? Revenue increased to GBP25.2m, with
year-on-year growth in the second half of 19% ? Gross margin
improvement of 418 bps enabled by focus on profitable sales ? Group
marketing efficiency4 improved by 2634 bps to 24.2% (2019: 50.5%) ?
The UK&I and France generated a positive marketing contribution
? Cash flow neutral for the first time, after adjusting for GBP0.3m
of tax payments deferred until after the year end
Operational Highlights ? Entry into sleep gifts market with
launch of 'well slept' range online and in partnership with Boots
UK seeing
strong success ? UK brand awareness grew 200 bps to 17% in
August 2020 and is expected to have remained strong since, with
the
launch of eve's latest TV campaign from November ? Group
conversion rate grew year-on-year by 60 bps, the third consecutive
year of improvement ? Re-platformed the UK&I websites to
Shopify, with the French website also completed post year end, to
secure more
stable, scalable and lower maintenance websites ? Upgraded
supply chains to localise manufacturing ahead of Brexit ?
Restructured warehousing and distribution to allow shipments to
customers to be consolidated into one delivery,
deriving lower costs and better customer experience ? Winner of
the best two mattresses in the UK according to Which? and 3 of the
top 5, and the best mattress in France
according to Que Choisir
Current trading
Revenues in the first two months of the year increased 16%,
representing an acceleration from the last quarter of 2020, where
growth was held back by some supply constraints.
Cheryl Calverley, CEO of eve Sleep, commented:
"eve's rebuild strategy is essentially complete, six months
ahead of plan. We move now to accelerate our business, with a mind
to leveraging our strong brand, efficient marketing, high
performing products and excellent customer service to allow us to
diversify across markets, channels and categories. But we do so
carefully. Successful e-commerce businesses win through balancing
growth, with customer experience and business resilience, and we
will do the same. We seek sustainable, profitable growth and will
avoid growth at any cost, and certainly to the detriment of
customer experience or business resilience. We're excited about the
opportunities the next few years bring, and we now have a business
ready to grasp those opportunities."
The management team will be hosting a live presentation with
Q&A for retail investors at 13:30 GMT today. The presentation
can be accessed via the Investor Meet Company platform. Interested
investors can sign up to Investor Meet Company for free and add to
meet EVE SLEEP PLC via the link:
https://www.investormeetcompany.com/eve-sleep-plc/
register-investor
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 payroll and 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,
fundraise-related expenditure (2019 only) adding back IFRS16
adjustments for the office lease costs.
4 Marketing efficiency is defined as total reported marketing
cost divided by the reported revenue for the specified segment,
thus as the reported percentage falls marketing efficiency
improves.
For further information, please contact:
eve Sleep plc
Cheryl Calverley, Chief Executive Officer via M7 Communications LTD
Tim Parfitt, Chief Financial Officer
finnCap Limited (NOMAD and Broker)
Matt Goode / Ed Whiley (Corporate Finance) +44(0)20 7220 0500
Alice Lane (ECM)
M7 Communications LTD
+44(0) 7903 089 543
Mark Reed
chairman's statement
"eve is now a stronger, more resilient business, with a
ready-made platform for future growth." - Paul Pindar
completing the rebuild strategy
In what has been one of the most difficult and unpredictable
years for business, eve has exited 2020 in far better shape than it
entered the year, through a combination of favourable external
factors and sound execution of the strategy. The accelerated
transition to online ordering and the strength of the homewares
market brought about by the pandemic has provided tailwinds for the
business. Whilst the sector remains highly competitive, there has
been an improvement in the landscape, with the retrenchment of some
online mattress companies, as well as reduced store based
competition, from both temporary and permanent shop closures.
The rebuild strategy is largely complete and eve now has a more
resilient and efficient technology, logistics and operational
platform for future growth. The product ranges have been expanded,
alongside a broadening of distribution in both the UK and France,
which has had the added benefit of further raising brand awareness.
Underpinning the whole business is the quality of the mattresses
themselves, which have been widely recognised as best in class.
Consumer champion Which? in November 2020 rated eve's original and
its premium hybrid the two best mattresses in the UK. The Premium
Hybrid has also been awarded 'Meilleur Choix' (best choice) by the
French equivalent of Which? - Que Choisir.
eve has continued to build on its differentiated strategy of
focusing on the broader sleep wellness category as compared to more
mattress focused peers where competition is largely price driven.
Existing product categories have been deepened with further
products, as well as eve's move into new categories. eve's first
foray into gifting with Boots for a 'well slept' range of sleep
gifts for the Christmas period sold out and the new partnership
with the French homewares retailer Olivier Desforges goes from
strength to strength. In tandem with new partnerships, eve has
exited those which were not economically viable, including Amazon
UK, in order to stay focused on profitable sales growth.
The Company continued its ongoing investment in broadcast TV and
supported its existing 'wake up dancing' campaign with an
additional new campaign designed to build long term brand presence
for eve as a sleep wellness brand. This longer term investment is a
sign of increasing confidence in the business and its ongoing
growth potential. The new 'switch off with eve sleep' campaign
launched in November 2020 and runs every Sunday night across the
Channel 4 estate, digital and mobile advertising through until
spring 2021. The analytics on the campaign performance so far have
been very positive, with payback above projected expectations.
Over the last two years the entire operations and processes of
the business have been carefully analysed and restructuring plans
put in place. The consumer websites have been re-platformed to
Shopify, which, in addition to providing an improved customer
experience and a more stable platform, reduces ongoing maintenance
costs and is easily replicable across markets. As part of wider
Brexit preparations to minimise any trade frictions and stay cost
competitive, mattress manufacturing has been largely localised in
the UK for the UK and Irish markets and Belgium for sales to the
French market. Distribution capability for the UK&I, in terms
of both warehousing and carriers has also been upgraded, resulting
in an improved customer experience and a reduction in logistics
cost through the consolidation of all items in an order into a
single delivery.
financial performance ahead of expectations
The central focus of the rebuild strategy has always been to
reduce losses and cash burn in order to put the business on a
secure and sustainable long term footing. Great progress in 2020
has been made in this regard, with underlying EBITDA[1] losses cut
by 81% to GBP2.0m and statutory loss reduced by 83% to GBP2.0m.
Cash generation was even stronger, achieving a cash improvement of
GBP0.4m, which after adjusting for GBP0.3m of tax payments deferred
until post period end, resulted in a maiden cash flow neutral
position for the full year. Accordingly, eve closed the year with a
healthy statement of financial position, with GBP8.4m (2019:
GBP8.0m) of cash and no debt (other than the lease liability for
our office premises), without recourse to any further funding.
The period was dominated by the pandemic, with heightened sales
volatility in the early months of the year. Sales from May onwards
grew strongly and have remained at elevated levels as a result of
the trend to online ordering and the strength of the homewares
market. Sales for the full year grew by 6% to GBP25.2m, driven by
19% growth in the second half. This result, which exceeded the
Board's twice raised expectations, was achieved on a marketing
budget 49% lower than the previous year. Overheads (defined as
wages, salaries and other administrative expenses but excluding
share based payment charges) were also kept under tight control and
33% lower than the prior year.
The improved financial performance of the business was UK led,
with Ireland also benefitting in the fourth quarter from some
marketing investment. This is reflected in the UK&I's increased
share of total revenues, which has risen from 78% in 2019 to 81% in
2020. The French business, which has been reset during the year
with minimal marketing investment, improved its marketing
contribution; defined as profit after all direct costs including
marketing but before overheads, by GBP1.5m.
acting responsibly
We will continue to evolve our business to minimise our wider
impact on the world and be a better corporate citizen. Our major
initiative during the year was forming a partnership with TFR Group
in the UK, a prominent furniture recycling company, on the removal,
rejuvenation and recycling of mattresses. This policy is part of
ensuring that 100% of eve sleep's returned mattresses are diverted
away from landfill, saving over 100 tonnes of waste, whilst also
optimising revenue recovery. A separate partnership with our
carriers also encourages customers to have their previous mattress
removed and recycled at the point their new mattress is
delivered.
all credit to our people
This year has brought about unprecedented change for our team,
who have been working through the rebuild strategy since late 2018.
During the first national lockdown in May we announced a change in
CEO with the promotion of Cheryl Calverley, eve's Chief Marketing
Officer at the time, replacing James Sturrock, who has stayed on as
a non-executive director. The entire team has once again adapted
and stepped up to the challenge, showing great flexibility and
fortitude, including making a seamless move to home working from
March and ensuring a smooth transition to Cheryl's leadership.
We are proud to have been able to navigate 2020 without the need
to announce new redundancies or furlough staff. Having met our
targeted performance objectives for the year we have been able to
pay a bonus to each and every staff member by way of a thank you to
our team for their unswerving commitment to eve. Our team remain
our greatest asset and we will continue to invest in their
development, safety and well-being.
A brighter outlook
Trading for January and February has continued to be strong,
benefitting from the ongoing weekly TV campaign in the UK, the
latest Which? ratings and the wider behavioural shift to online
purchasing. Revenue growth for the first two months of the year of
16% represents an improvement from the last quarter of 2020 and has
been boosted by an easing of supply constraints and improved stock
management, which had previously held back the rate of growth in
late 2020. Whilst we are still experiencing some challenges in
componentry supply and inflationary pressures, we expect these
issues to further ease in the coming months.
In the year ahead we will continue to expand and deepen our
product offering. These wider categories including gifting and CBD
are initially trialled through a license model, which limits both
the initial risk but also the financial upside.
We will continue to invest steadily in the UK, with efficient
marketing now driving consistent growth and a positive marketing
contribution. We anticipate a slowing in our rate of UK progress
from around May as a result of tougher comparatives and a likely
shift in consumer spending to out of home as the country exits
lockdown measures. However, we firmly believe that the recent shift
to e-commerce will not reverse, and the underlying trend of sleep
wellness, on which the eve brand is built, is a fundamental
societal force that will continue in the long term.
We plan to increase investment in France through 2021 and build
on the higher profile that our highly successful retail partnership
with Olivier Desforges has provided. This will accelerate our
growth in the country and provide a more balanced and sustainable
growth profile to the wider business. Unlike the UK, France has not
experienced such an accelerated shift to e-commerce over the past
year, having maintained 'open high streets' through most of the
pandemic. We expect good growth from France in 2021 and beyond
through a combination of the continued structural shift to online,
combined with investment in our own established and award winning
proposition.
With the rebuild strategy now largely behind us, eve is now well
placed to embrace the future with renewed confidence.
Paul Pindar
Chairman
17 March 2021 strategic report
strategic review
"well placed in a large, fragmented, rapidly changing
market"
Sleep is increasingly recognised as an essential element of
wellness at a time when wellness has never been more important.
There is a growing body of research and evidence which testifies to
the importance of sleep and the risks to physical and mental health
of insufficient sleep. In a poll commissioned by eve and taken
shortly after the start of the pandemic, as many as 48% of
respondents said that they were kept up due to worry about Covid19
and nearly one in four admitted that their quality of sleep was
worse than ever. 'Sleep' has now overtaken both 'diet' and
'exercise' as the most searched for term on google (UK) across the
'wellbeing triad' of 'sleep', 'diet' and 'exercise', showing the
increased awareness that consumers have of this vital component of
wellbeing.
With the increasing understanding of the importance of sleep has
come consumer change. Consumers are spending more on wellness and
the sleep market has been a beneficiary of this. Not only are
consumers spending more on sleep wellness related products, they
are also willing to spend more on the central element of a good
night's sleep; the mattress. The strong sales performance of eve's
premium hybrid mattress testifies to this point, generating over
30% of mattress sales by volume. Every customer that purchases an
eve mattress is asked at 100 days whether they're sleeping better
thanks to their eve, and 80% tell us they are. A strong piece of
advocacy for the quality and effectiveness of our products.
Sleep is a huge market, which has evolved substantially since
the start of the pandemic. Data from Euromonitor estimates that the
European sleep market is worth approximately GBP26bn, with the Core
Markets that eve is focused on (UK &I and France) being worth
approximately GBP6bn. The advent of the first national lockdown
from March 2020 and the consequent switch to working from home,
coupled with a lack of leisure spending alternatives, drove a
strong increase in industry wide demand for bedding and homewares
products. Consumers en masse literally 'bedded down' for lockdown
as they sought to renovate their homes and bedrooms. Data from
Barclays UK Consumer Spending Reports show that spending in the
Household category experienced double digit year-on-year growth
each and every month from June 2020 through December 2020.
The growth in spending has been online led, resulting in an
acceleration of the trend to ecommerce. Data from the Office for
National Statistics shows that non-food retail sales online grew to
25.5% of all sales in Q4 2020, from 12.9% in Q4 2019. Historic data
suggests that shifts to online show limited tendency to reverse,
and with the country entering 2021 in its third national lockdown
and all but essential shops closed, it is reasonable to assume that
a substantial element of the shift to online will become
permanent.
Whilst the sector remains fragmented and highly competitive the
competitive landscape across beds and mattresses has eased, with a
number of online mattress providers choosing to retrench from the
UK market, alongside a reduction in store based competition, both
permanent and temporary as a result of the pandemic. There is also
evidence to suggest that the mattress in a box brands are growing
their share of the market. Despite the level of ongoing competition
in mattresses, there is no company that as yet has established
itself as a sleep wellness brand which commands widespread
recognition and brand loyalty. eve's ambition is to achieve just
this; to be seen as the go to brand for 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 direct to
consumer (DTC) led proposition, supported by partnerships with
leading retailers. This omni-channel approach reflects how
consumers increasingly identify, research and purchase 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 and
grows its brand awareness and product understanding.
Building a strong brand and customer experience and ultimately
therefore enjoying repeat sales 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, providing the authority and consumer trust to
sell a broader range of products at a greater frequency across the
category.
As a DTC focused 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 deliver better targeted incentives for
customers to return and buy further products directly from eve.
Some 13.2% of customers that purchased an eve product in 2018 have
returned to buy further eve products in the subsequent two
years.
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, which require heavy
fixed cost investment, are outsourced to leading third party
suppliers in the UK and Continental Europe. This set-up helps to
de-risk the business in terms of currency and any potential 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 Premium Hybrid
and Original Hybrid ranges in Which? Consumer surveys.
The outsourced manufacturing and fulfilment model, coupled with
the DTC led setup, enables a lower and more flexible cost base than
a traditional 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 rent, it is
flexible in nature and is quick and easy to scale up and down as
well as optimise and accelerate where opportunities arise.
chief executive's report
"we have navigated the many challenges of 2020 well and enter
2021 in good shape thanks to the tireless dedication, creativity
and commitment of the entire eve team" - Cheryl Calverley
introduction
Taking on your first CEO role can be daunting at the best of
times but add in a global pandemic, an unplanned for acceleration
in demand and your entire team working from home and the challenges
quickly multiply. However, I am pleased to say that the transition
in May 2020 went smoothly, with no noticeable impact on
performance. This has been aided by my deep involvement in the
rebuild strategy since joining eve in December 2018 as Chief
Marketing Officer and the strong culture of dedication, care,
creativity and commitment across the entire eve team, something
that has been a priceless asset during this remarkable period.
I first joined eve because I could see the unique opportunity to
build a sleep wellness brand. A brand of significant size and
strength occupying an uncontested territory, meeting a rapidly
growing consumer need with a differentiated proposition to the more
price led, mattress focused competitors, or generalist homewares
retailers. I am pleased to say that the opportunity still remains
and during 2020 we've made good progress towards achieving this, as
part of our wider rebuild strategy.
Since taking over as CEO the focus has remained on delivering
the rebuild strategy, with the central goal of putting the business
on a more sustainable, long term financial footing. The improvement
in the financial performance is clear to see with underlying EBITDA
losses in 2020 reduced by 81% year-on-year to GBP2.0m on revenues
6% higher than 2019, and statutory losses reduced by 83% to
GBP2.0m. The improvement in cash generation has been even more
dramatic, with the Group reporting its first ever neutral cash flow
for the year, after adjusting for GBP0.3m VAT payments from 2020
Q1, which were deferred until after the year-end under the UK
Government's Coronavirus support measures. This compares with a net
cash outflow of GBP10.1m (excluding GBP12.0m equity funding) in
2019 and an outflow of GBP21.0m in 2018. This means eve exits 2020
with a healthy cash balance of GBP8.4m and no debt, other than the
lease liability on our office premises.
The improvements to infrastructure and operations of the
business are less visible but of equal, if not greater importance.
The restructuring that has taken place to date is about more than
just greater efficiency, it is about building a platform and a
collection of product and marketing assets that can be readily
scaled across markets, without markedly increased overhead or
damaging the customer experience. We have been rebuilding in
preparation for future growth, and whilst work will remain ongoing,
eve now has a tech platform that can be rolled out across new
markets without incurring higher overheads. Complementing this more
scalable platform is a broader product set, a brand positioning and
a marketing strategy that is instantly replicable across markets,
supported by a highly scalable logistics and customer service
operation.
the rebuild strategy
To best evaluate the performance of the business in 2020 it is
necessary to analyse the performance against the three core pillars
of the rebuild strategy: ? differentiated brand positioning; ?
expanded product range; and ? lower friction customer
experience.
differentiated brand positioning
To differentiate eve from the other mattress in a box brands,
where competition is largely price led, our strategy is to
establish eve as a trusted destination for high quality sleep
wellness products. To achieve this, we have refocused our marketing
communications on the benefits that eve can bring consumers in
sleep wellness. A fine example is where eve partnered with Channel
4 to celebrate World Sleep Day on 13 March 2020 by removing the
brain-stimulating blue light from TV ads and replacing it with an
amber-coloured filter to lull viewers into a good night's sleep.
This initiative was supported by an eve ad, which aired on a Sunday
evening time slot on Channel 4 and related channels, providing
simple and effective sleep tips to further amplify the eve
message.
The concept evolved further with the new UK campaign, 'switch
off with eve sleep,' which leant on some of the key themes from the
World Sleep Day campaign. The new campaign, which launched in
November 2020 and runs every Sunday night on Channel 4 through to
spring 2021, revived the iconic 'test Card F', which until 1997,
signalled the end of programming in a bid to encourage the nation
to switch off their minds and bodies and start winding down for
bed. The campaign extends to casual gaming, popping up on the
screens of popular gaming apps such as Candy Crush, to remind users
that it is time to grab some sleep.
During the first half of the year, we grasped the opportunity
offered by the depressed TV market to run our existing, highly
effective campaigns in both the UK and France. These drove a strong
customer response and further gains in marketing efficiency.
The success of our marketing is demonstrated in our unprompted
UK brand awareness, which increased from 15% in August 2019 to 17%
at August 2020. This understates the full improvement achieved
during the year, with the benefits of the latest TV campaign that
launched in November and the brand presence in Boots to come
through in the next survey.
Our Irish business, which is now ready for growth, benefited
from some increased marketing investment in the fourth quarter of
the year, though this was not extended to TV. Marketing investment
in France, with the exception of the running of a small amount of
TV media utilising an existing TV campaign in May was minimal
during the year, as the business is at an earlier stage in its
development than the UK.
In addition to refocusing the positioning of our brand,
considerable effort has gone into improving marketing efficiency,
including the development of enhanced data analytics. Subsequent
marketing investment has been evaluated in depth, with the removal
of channels that were not generating a sufficient return, in line
with our strategy of focusing on profitable sales. The success of
this strategy is best evidenced in the efficiency of our marketing
spend, which has improved in all three of our markets in tandem
with growing awareness in the UK. In the UK&I marketing
efficiency has improved from 52.3% in 2019 to 25.1% in 2020. This
is the fourth successive year of improvement and we are now
confident our marketing efficiency has reached sustainable levels.
In France, marketing efficiency improved from 44.1% in 2019 to
21.0% in 2020, though it should be recognised that our ambition is
not to sustain these levels, but to invest for further growth in
France.
expanded product range
Range expansion offers eve a clear trajectory to leading the
sleep wellness space and provides the opportunity to grow the
frequency of customer purchases. Mattresses remain at the heart of
the business and increased from four to seven products in the year,
with the relaunch of the original Hybrid mattress in October a key
move in response to the increasing importance of the hybrid
category to the mattress market. eve also offers a cot mattress as
part of its child and baby offering. Recognition of the quality of
the product range is widespread and eve now has the top two most
highly rated mattresses in the UK - the original and premium hybrid
- and three of the top five mattresses, according to consumer
champion Which?. In France the premium hybrid mattress has been
awarded the 'Meilleurs Choix' (best choice) by the French
equivalent of Which?.
eve has further expanded its range of bedframes, and now offers
four distinct styles, two of which offer 'storage' options.
Furniture represents 5.8% of eve's sales value for 2020, with
furniture sales growing 40% year on year in the UK. As with
mattresses, eve sees particularly strong sales in its premium
ranges, with the more expensive 'spindle back' range now
representing almost 10% of bedframe sales across the Group.
Complimenting the increased mattress and bedframe range is
ongoing growth in the bedding ranges, with the notable addition of
eve's first weighted blanket in the second half of the year, to
combat anxiety and aid a restful sleep. The weighted blanket forms
part of eve's exploration into sleep accessories alongside its new
'well slept' range of sleep wellness gifting products and
supporting items such as bedside storage and sleep aids.
In the second half of the year eve announced the launch of this
first ever gifting range of sleep wellness products, with Boots UK.
The range was launched online and exclusively in 446 Boots wellness
areas nationwide as part of its Christmas promotion and comprised a
range of smaller items from candles and diffusers to hot water
bottles and pyjamas. The range proved highly successful and
sold-out quickly, despite the turbulence on the high street. The
partnership's key focus was to further raise eve's brand awareness
and extend knowledge of our products to a wider audience.
To best measure the success of range extension we have
introduced a new KPI, which is the percentage of customers who make
a repeat purchase within two years of their initial order. This new
KPI will replace the existing KPI that measures sales of
non-mattress products as a percentage of total revenues. For the
base year of 2020 the percentage of customer who had repeated was
13.2%.
lower friction customer experience
During the year there has been extensive work on restructuring
the e-commerce platform, manufacturing and distribution processes
that ultimately underpin the customer experience and drive a higher
conversion rate, as well as improving cost efficiency. The
ecommerce websites for our three markets of the UK, Ireland and
France were re-platformed to Shopify during the year, with France
completing shortly after the period end. The new platform requires
less ongoing maintenance and provides greater stability at times of
high traffic, which proved invaluable during the record Black
Friday and winter sale periods. This has improved our baseline
performance, reducing failure and error on-site, and opens up
opportunity for further improvement in functionality without
increasing overhead.
In 2020 the business restructured its mattress manufacturing,
which remains outsourced to third parties, to run along geographic
lines. Having previously worked with three manufacturers in the UK,
France and Belgium, this was reduced to two, resulting in
mattresses for the UK and Irish markets being made in the UK and
those for the French market largely manufactured in Belgium.
Concentrating manufacturing within end markets has clear benefits
in the post-Brexit era in terms of frictionless trade, speed of
delivery to customers and lower warehousing and delivery costs.
Historically eve has worked with a variety of carriers in each
of its three territories depending on the size of the product being
delivered. Customer orders, which contained products of different
sizes, would be delivered separately by several carriers,
increasing costs and providing the customer with a sub-optimal
experience. Since the implementation of Shopify, this issue has
been resolved for the UK and Irish markets and will be extended to
France in 2021. Orders are now consolidated to allow all items in
an order to be delivered in a single delivery. In Q2 eve further
introduced a new delivery service of 'remove and recycle' allowing
customers to have their previous mattress removed and recycled at
the point their new mattress was delivered. This has had a strongly
positive customer response with uptake over 30% of all orders.
Warehouse consolidation took place in 2019 in the UK, moving
from three to one facility. The new site, which is under third
party professional management has a superior stock management
system and this has enabled further efficiencies and improvements
in 2020, including the need to hold less stock and occupy less
warehouse space.
The rapid and unplanned for uplift in demand that followed the
start of the pandemic caused some early capacity issues in terms of
speed of delivery and an overstretched customer service team,
resulting in not all customers receiving the first rate service
that they rightfully deserve. To address this issue, eve invested
in bolstering the Customer experience team with new hires over the
summer months. To further support customers during a difficult
socio-economic time, in April, eve increased its 'risk free trial'
period from 100 to 200 nights and introduced an additional discount
for all NHS staff. The trial period has now returned to 100 days,
having seen very little uptake beyond the usual 100-night end
point, but the NHS staff discount remains.
The aggregate impact of the above initiatives that should
continue to benefit 2021 has been a 60 bps increase in the group
wide conversion rate in 2020, which follows a 30 bps increase in
2019.
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 approved card.
In early 2020 eve 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 over 100 tonnes of waste,
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. There has been significant
investment in the period and beyond in the development of our
leadership team, with leadership skills training and individual
coaching core to this. To widen our positive impact on development
further, we have been working with 'You Can Now' giving students of
design globally the opportunity to learn their craft on a live
'eve' brief to further develop our products and brand. Our business
wide investment in learning was recently recognised by the Campaign
for Learning for its impact.
Retaining and motivating our key talent whilst engaging the
whole eve business with the challenges at hand has been top of our
mind. To this end we have this year redesigned our rewards and
benefits scheme, awarding 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. 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 has just begun in earnest 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 'applied' blind recruitment
software. And secondly, in November we took on our first apprentice
in the marketing department, in partnership with the Marketing
Academy.
eve is pleased to present the following metrics relating to
gender balance as at 31 December 2020. 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 4 1
Senior managers 3 2
Employees 15 36
the next two years
With the restructuring of the business now largely complete and
the technology, logistics and operations placed on a more stable
and efficient platform, the time is right to update the strategy
for the next two years. The Group's focus will be on accelerating
the business through the three pillars of Growth, Customer
Obsession and Resilience. Growth, as defined in terms of profitable
revenues, will be the primary objective and will be achieved from
new and existing markets as well as a continued focus on product
development, with Customer Obsession and Resilience the key
enablers. Customer obsession will focus on developing products and
services that help people sleep so well, and a customer experience
so seamless that they become vocal advocates for the brand.
Resilience for eve can be defined as having a strong and stable
tech, team and operational capability that can adapt quickly to
changing market conditions in existing markets and expand into new
territories at minimal cost, whilst enjoying robust margins.
The UK is eve's largest market and has been the engine of growth
in 2020, benefitting from not only the strong external tailwinds
but also the significant improvement in marketing efficiency and
the addition of the new TV led campaign from November 2020. We will
continue to invest in the UK market over 2021, including the
running of our weekly TV campaign until the spring, to maintain
sales momentum and leverage our position as having the two best
mattresses in the UK according to consumer champion Which?.
To build a stronger, broader and larger, profitable business we
must look beyond the UK market for balanced growth. Our near term
focus is on the French market, where we have traded since 2016.
Like the UK, our French business has been restructured as part of
the rebuild strategy, including a re-platforming of the website to
Shopify which completed shortly after the period end, but unlike
the UK it has not received significant marketing investment in
recent years. 2021 will see a substantial increase in marketing
investment in France, targeted on a new marketing campaign,
including TV, which is expected to launch in the spring. There will
also be an increased focus on retail partnerships, including but
not limited to an expansion of the successful relationship with
homewares retailer Olivier Desforges.
The Irish market received some increased focus and investment in
the fourth quarter of 2020 and this will continue through 2021. As
the strategy develops and progress is achieved in France and
Ireland we will look at entering new European markets. Expansion
will be executed in a controlled and disciplined way, leveraging
existing infrastructure and product assets in order to keep a tight
control of costs.
The investment in growth is expected to increase costs in the
current year. The strategy does not represent a return to the past,
but a well thought out and costed strategy to accelerate to a
sustainable, profitable and balanced business. The investment
required to finance the growth will come from the Group's existing
cash resources.
Cheryl Calverley
Chief Executive Officer
17 March 2021
key performance indicators
In 2020, the key performance indicators (KPIs) used to evaluate
and monitor the performance of the business were as follows and are
designed to support the three core pillars of the rebuild strategy
(differentiated brand positioning, extended product range and lower
friction customer experience). There are three financial KPIs and
five operational KPIs.
Financial KPIs: ? Overall revenue growth; ? Marketing
efficiency; ? Underlying EBITDA[2].
Operational KPIs: ? UK brand awareness; ? Product return rates;
? eve website conversion rate; ? eve customer sleep wellness score;
? Non-mattress revenue growth.
Operational KPIs relate to group performance across all three
markets unless otherwise stated.
As can be seen in the data provided below, all financial KPIs
improved significantly in the period, along with four of the five
operational KPIs. Importantly, for the first time eve has generated
revenue growth, whilst also improving the bottom line performance
of the business, with an 83% reduction year-on-year in Underlying
EBITDA losses.
The 200bps growth in unprompted brand awareness probably
understates the full improvement given that the survey was
undertaken before the benefits of the latest UK TV led marketing
campaign and the Boots UK licensing deal. The conversion rate has
now improved for the last three years, which not only underpins
improved marketing efficiency but also testifies to the continued
improvements that have been made to the third pillar of lower
friction customer experience.
Financial KPIs ? Group revenue increased by 6% to GBP25.2m
(2019: GBP23.9m); ? Improvement in Group marketing efficiency by
2634bps to 24.2% (2019: 50.5%); ? Group underlying EBITDA losses
reduced by 81% to GBP2.0m loss (2019: GBP10.7m loss).
Operational KPIs ? Unprompted UK brand awareness: 200bps
increase in unprompted UK brand awareness to 17.0% at August 2020
(August
2019: 15.0%) ? 120 bps year-on-year improvement in the returns
rate to 7.8% (2019: 9.0% restated) ? 60 bps year-on-year
improvement in the eve websites conversion rate ? eve customer
sleep wellness score: 8/10 (2019: 8/10) ? Decrease in non-mattress
sales as a proportion of total sales by 480bps to 20.8% (2019:
25.6%)
Update to KPIs for 2021
To reflect the updated strategy which will focus on the new
three pillars of Growth, Customer Obsession and Resilience, eve
will be updating one of the KPIs. From 2021 onwards rather than
reporting the increase in non-mattress sales as a proportion of
total sales, by way of a proxy for repeat business, the Group will
report the percentage of customers who have actually made a second
purchase within two years of the initial order. This new
operational KPI: 'Repeat Customers', more accurately measures the
focus on growth through customer obsession and establishing eve as
the go to place for all sleep wellness needs. For the base year
2020 the percentage of customers making a repeat purchase within
two years was 13.2%.
glossary
Definitions of Financial and Operational KPIs:
Overall revenue growth - % change in value of reported revenue
for the specified segment of the latest period vs the previous
period.
Marketing efficiency - total reported marketing cost divided by
the reported revenue for the specified segment, thus as the
reported percentage falls marketing efficiency improves.
Underlying EBITDA - earnings before interest, tax, depreciation,
amortisation and impairment, share-based payment charges connected
with employee remuneration (2020 and 2019), fundraise-related
expenditure (2019 only), adding back IFRS16 adjustments to office
lease costs. Underlying EBITDA reflects what management believe to
best demonstrate the underlying performance of the business in a
given year.
Non-mattress sales as a proportion of total sales - % of
reported sales attributable to non-mattress products for the
specified financial period. The Group track this Operational KPI in
addition to the Financial KPI of overall revenue growth as returns
and deferrals are not tracked in isolation for non-mattress sales.
Total sales represents all sales after discounts and VAT and before
deferred revenue, refunds processed and the refunds provision.
Non-mattress sales represents the value of sales from non-mattress
products.
UK Brand awareness - when asked question "What mattress brands
can you think of?" the % of total respondents that answer eve
(externally assessed using industry polling agencies).
Product return rates - return rate % is calculated by dividing
the total value of sales returns by the value of net sales of goods
including freight (all excluding VAT).
eve website conversion rate - the percentage of website traffic
in a specific period that complete a purchase. Calculated by
dividing the number of completed sales orders by the total website
traffic. This figure is compared on a bps movement between
periods.
eve customer sleep wellness score - the average number of
customers out of every ten customers that report improved sleep as
a result of purchasing an eve mattress (internally assessed using
post-purchase email campaigns, sent to all customers who have
purchased a mattress in the period). financial review
"eve achieved 6% growth in group revenue and at the same time
double the marketing efficiency and reduced underlying EBITDA
losses by more than 80%." - Tim Parfitt
group financial performance
GBPm 2020 2019 Movement
Group revenue 25.2 23.9 +6%
Gross profit 14.4 12.7 +14%
Distribution expenses (3.5) (2.7) +28%
Profit after distribution expenses 10.9 10.0 +10%
Payment fees (0.5) (0.4) +25%
Marketing costs (6.1) (12.1) (49%)
Profit/(Loss) after distribution expenses, payment fees and marketing costs 4.3 (2.5) (269%)
Wages & Salaries (excluding share-based payment charges) (3.3) (4.4) (24%)
Other administrative expenses (3.2) (5.0) (37%)
Share-based payment charges connected to employee remuneration (0.2) (0.5) (57%)
Operating loss (2.4) (12.5) (80%)
Net finance income - -
Loss before tax (2.4) (12.5) (80%)
Taxation 0.4 0.4 +18%
Loss after tax (2.0) (12.1) (83%)
Reconciliation to underlying EBITDA:
Taxation (0.4) (0.4)
Net finance income - -
Fundraise-related expenditure - 0.2
Share-based payment charges connected to employee remuneration 0.2 0.5
Depreciation and amortisation 0.7 0.5
Impairment - 0.6
Underlying EBITDA (as stated in 2019) (1.5) (10.7) (85%)
Application of IFRS 16 to lease for serviced office (0.5) (0.2)
Underlying EBITDA (restated) (2.0) (10.9) (81%)
group financial performance as a % of revenue
% of Revenue 2020 2019 Movement
Gross Profit 57.3% 53.1% +418bps
Distribution (13.9%) (11.4%) +244bps
Profit after distribution 43.4% 41.7% +174bps
Marketing (24.2%) (50.5%) (2634bps)
Administrative expenses excluding marketing (28.0%) (41.4%) (1335bps)
Administrative expenses excluding marketing, fundraise-related expenditure, depreciation, (25.5%) (35.9%) (1044bps)
amortisation and impairment expenditure
Wages & Salaries (excluding share-based payment charges) (13.2%) (18.4%) (515bps)
UK&I financial performance
GBPm 2020 2019 Movement
Revenue 20.5 18.5 +11%
Gross Profit 11.8 10.2 +16%
Distribution (2.7) (1.8) +47%
Profit after distribution 9.1 8.4 +10%
Payment fees (0.5) (0.4) +31%
Marketing (5.0) (9.7) (47%)
Profit after distribution, payment fees and marketing 3.6 (1.7) +308%
Marketing costs as % of revenue (25.1%) (52.3%) (2725bps)
France financial performance
GBPm 2020 2019 Movement
Revenue 4.6 5.3 (14%)
Gross Profit 2.5 2.6 (3%)
Distribution (0.8) (1.0) (17%)
Profit after distribution 1.7 1.6 +6%
Payment fees (0.1) (0.1) (22%)
Marketing (1.0) (2.4) (59%)
Profit after distribution, payment fees and marketing 0.6 (0.9) +173%
Marketing costs as % of revenue (21.0%) (44.1%) (2308bps)
Other financial performance
GBPm 2020 2019 Movement
Revenue 0.1 (0.0) +424%
Gross Profit 0.1 (0.1) +263%
Distribution 0.0 0.1 (100%)
Profit after distribution 0.1 0.0 +750%
Payment fees (0.0) 0.0 (378%)
Marketing 0.0 0.0 (75%)
Profit after distribution, payment fees and marketing 0.1 0.0
revenue
Revenue increased by 6% to GBP25.2m (2019: GBP23.9m). The growth
was driven by UK&I which lifted 11% to GBP20.5m (2019:
GBP18.5m), with the direct-to-consumer channel performing
exceptionally well. France revenue declined by 14% to GBP4.6m
(2019: GBP5.3m) following a large reduction in marketing
investment.
gross margins
Gross margins for the Group improved by 418bps to 57.3% (2019:
53.1%). This was a result of the more profitable direct-to-consumer
business growing as proportion of total sales and also from a
rigorous focus on margin and the decision to exit unprofitable
retail partnerships when appropriate.
distribution costs
Distribution costs as a percentage of revenue increased by
244bps to 13.9% in 2020 (2019: 11.4%). The mattress sales mix
shifted from the previous year to more premium products which are
heavier and therefore more expensive to deliver. The relative
increase in direct-to-consumer revenue also added to the higher
costs as a smaller proportion of orders were shipped in bulk to
retail partners. In the final quarter this increase was partially
offset by consolidating customer deliveries where possible.
Previously customers could receive multiple deliveries for a single
order. This has become possible following the UK implementation of
Shopify.
marketing investment
The Group marketing investment was reduced by 49% to GBP6.1m in
2020 (2019: GBP12.1m). As a key performance indicator, the
marketing efficiency, defined as marketing costs as a percentage of
revenues, is closely monitored and investment targeted to achieve
the best possible outcome.
As a result of this focus, the Group successfully more than
doubled the efficiency to 24.2% (2019: 50.5%) an improvement of
2634bps. UK&I improved by 2725bps to 25.1% (2019: 52.3%) and
France improved by 2308bps to 21.0% (2019: 44.1%).
profit after distribution, payment fees and marketing
Both core markets of UK&I and France achieved profits after
distribution, payment fees and marketing. UK&I delivered a
GBP5.3m improvement to GBP3.6m (2019: GBP1.7m loss) and France
delivered a GBP1.5m improvement to GBP0.6m (2019: GBP0.9m
loss).
administrative expenses
(excluding marketing)
Wages & Salaries (excluding share-based payment charges
connected with employee remuneration) reduced by GBP1.1m to GBP3.3m
in 2020 (2019: GBP4.4m) following reductions in headcount made at
the end of 2019. This represents a decrease from 18.4% to 13.2% of
Group revenue.
Other administrative costs reduced by GBP1.8m to GBP3.2m (2019:
GBP5.0m).
The application of IFRS 16 to the office lease costs has
resulted in a depreciation charge of GBP0.5m (2019: GBP0.2m). The
adoption was applied from August 2019 onwards, when the Group moved
to its existing premises. Included in Other Administrative Costs
for 2020 is a charge of rent and rates of GBPnil (2019:
GBP0.5m).
There were further reductions to administrative costs with
GBPnil impairment charge (2019: GBP0.6m), GBPnil fund raising
expenses (2019: GBP0.2m) and GBP0.2m share based payment charges
relating to employee remuneration (2019: GBP0.5m).
underlying EBITDA loss
(Defined as: earnings before interest, tax, depreciation,
amortisation, impairment charges, share-based payment charges
relating to employee remuneration, fundraise-related expenditure in
2019, adding back IFRS16 adjustments to office lease costs)
The Directors consider that they are best able to monitor Group
financial performance via underlying EBITDA by removing
fundraise-related expenditure, share-based payment charges relating
to employee remuneration and adding back the office lease costs
which represent a material monthly cash outflow. This has been
restated from 2019 as the office lease costs were previously shown
for only part of the year, and the new lease effective from August
2019 was presented under IFRS 16.
The application of IFRS 16 has resulted in a depreciation charge
recognised in 2020 of GBP0.5m (2019: GBP0.2m). Under IAS 17,
expenditure relating to operating lease rentals would have been
included within administrative expenses and hence EBITDA.
The underlying Group EBITDA loss decreased by GBP8.9m to GBP2.0m
loss in 2020 (2019: GBP10.9m loss). The 81% reduction in the loss
reflects the increased focus on profitable sales, greater
efficiency in marketing investment and substantial overhead
reductions.
share-based payment
In accordance with IFRS, a share-based payment charge for 2020
has been calculated and charged to the statement of profit and
loss. The fair value of options granted is recognised as an expense
over the vesting period with a corresponding credit being
recognised in equity. The charge for 2020 was GBP0.5m (2019:
GBP1.1m) of which GBP0.3 (2019: GBP0.6m) related to equity issued
in exchange for marketing services and GBP0.2m (2019: GBP0.5m)
relating to employee remuneration.
loss after tax
The loss after tax improved by GBP10.1m to GBP2.0m loss (2019:
GBP12.1m loss).
capital expenditure
Due to the Group's outsourced business model, capital
expenditure requirements remain low. The main area of capital
expenditure in 2020 related to ecommerce and ERP systems
infrastructure. Total capital expenditure in 2020 in the form of
intangible software assets totalled GBP0.3m (2019: GBP0.5m).
working capital
Inventories reduced by 64% to GBP0.6m (2019: GBP1.6m) through
better management of stock and realisations from obsolete
inventory. Trade and Other Receivables reduced by 30% to GBP1.9m
(2019: GBP2.7m) largely following the return of a rent deposit on
the Group's previous registered office, vacated in 2019.
cash position
The Group had cash and cash equivalents of GBP8.4m at the
year-end (2019: GBP8.0m).
Tim Parfitt
Chief Financial Officer
17 March 2021 Principal risks and uncertainties
Risk management is an important part of the management process
for the Group. Regular reviews are undertaken to assess the nature
of risks faced, the magnitude of the risk presented to business
performance and the manner in which the risk may be mitigated.
Where controls are in place, their adequacy is regularly
monitored.
The risks considered to be particularly important at the current
time are set out below.
marketing
Marketing is an important investment area for the Group and
there is a risk that this expenditure may not result in the
targeted increase in sales or brand awareness levels.
eve monitors and analyses the effectiveness of marketing spend
on a daily basis and adjusts accordingly. The Group 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.
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.
The Group is subject to fluctuations in the cost of materials
which may adversely impact on the Group's profit margins. The price
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 Group relies on outsourced partners for manufacturing and
logistics who are typically able to scale their operations to meet
increased demand. However, the Group may be exposed to disruption
at these suppliers.
Close working relationships are maintained with outsourced
partners. The Group regularly reviews and communicates forecasts to
ensure capacity constraints are managed.
eve seeks to offer exceptional customer service and facilitate
smooth returns which could result in high return rates under the
100-night trial offered on mattresses. Reverse logistics is an area
of focus and the Group works with third parties to ensure an
efficient collection and recycling process to recover costs. Return
reasons is a key metric which is monitored closely and fed back
into product development.
competition
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 any changes in the competitive environment.
brexit
The Group took steps in 2019 and 2020 to mitigate the effect of
Brexit by aligning manufacturing geographically so that mattresses
are manufactured close to the customers. This minimises the transit
of products between the UK and EU. Close attention has been paid to
export requirements, particularly shipping to customers in Northern
Ireland and Ireland. Investments have been made in the Group's
technology platforms to develop processes to minimise
disruption.
covid-19 virus
During 2020 the restrictions placed on movement for the UK
population resulted in increased demand from consumers for the
Group's products. Covid has driven a significant shift from
physical retail to ecommerce and whilst that may re-balance
somewhat, it is expected that consumers will continue to shop
online more than they did pre-pandemic.
In the near-term, a relaxing of travel restrictions may see
consumer spending move away from homewares onto leisure and travel.
This could have an adverse impact on revenues.
Furthermore, forecasting revenues in 2021 is made more difficult
given that it's not possible to determine the level of incremental
sales generated in 2020 as a result of physical retail competitors
being closed.
Tim Parfitt
Chief Financial Officer
17 March 2021
consolidated statement of profit and loss and other
comprehensive income
for the year ended 31 December 2020
Note 2020 2019
GBP GBP
Revenue 3 25,218,550 23,852,931
Cost of sales 3 (10,763,508) (11,176,905)
Gross Profit 14,455,042 12,676,026
Distribution expenses 3 (3,500,916) (2,729,317)
Administrative expenses 3 (13,394,391) (22,453,901)
Operating Loss (2,440,265) (12,507,192)
Net finance income 1,641 18,022
Loss before tax (2,438,624) (12,489,170)
Taxation 414,541 352,240
Loss for the year (2,024,083) (12,136,930)
Other comprehensive income
Foreign currency differences from overseas operations 35,822 17,310
Total comprehensive loss for the year (1,988,261) (12,119,620)
Basic and diluted loss per share 4 (0.75p) (4.92p)
consolidated statement of financial position
at 31 December 2020
Note 2020 2019
GBP GBP
Non-current assets
Property, plant and equipment 273,496 518,575
Intangible assets 466,330 344,456
739,826 863,031
Current assets
Inventories 559,915 1,574,648
Trade and other receivables 7 1,880,188 2,637,650
Cash and cash equivalents 8,438,453 7,988,769
Current tax receivable 414,542 354,466
11,293,098 12,555,533
12,032,924 13,418,564
Total assets
Non-current liabilities
Lease liabilities - 40,000
Current liabilities
Trade and other payables 8 4,024,210 3,983,174
Provisions 9 1,041,236 768,965
Lease liabilities 273,857 470,391
5,339,303 5,222,530
Total Liabilities 5,339,303 5,262,530
Net Assets 6,693,621 8,156,034
Equity attributable to equity holders of the parent
Share capital 5 272,570 263,445
Share premium 49,421,049 48,887,392
Share-based payment reserve 6 766,749 998,495
Retained earnings (43,918,599) (42,109,328)
Foreign currency translation reserve 151,852 116,030
Total equity 6,693,621 8,156,034
consolidated statement of changes in equity
for the year ended 31 December 2020
Share Share Share-based Retained Foreign currency Total
capital premium payment reserve earnings translation reserve equity
Balance at 1 January 2020 263,445 48,887,392 998,495 (42,109,328) 116,030 8,156,034
Exercise of employee share 3,734 - - - - 3,734
options
Share-based payment charge - - 220,084 - - 220,084
Transfer on exercise of employee - - (214,812) 214,812 - -
share options
Transfer on issue of equity for 5,391 533,657 (237,018) - - 302,030
marketing purposes
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 - - - - 35,822 35,822
the period
Balance at 31 December 2020 272,570 49,421,049 766,749 (43,918,599) 151,852 6,693,621
for the year ended 31 December 2019
Share Share Share-based Retained Foreign currency Total equity
capital premium payment reserve earnings translation reserve
Balance at 1 January 2019 139,735 36,716,372 250,073 (30,073,145) 98,720 7,131,755
Issue of shares 120,317 11,911,415 - - - 12,031,732
Exercise of employee share 770 - - - - 770
options
Share-based payment charge - - 1,111,396 - - 1,111,396
Transfer on exercise of - - (100,747) 100,747 - -
employee share options
Transfer on issue of equity for 2,623 259,605 (262,228) - - -
marketing purposes
Total transactions with owners 123,710 12,171,020 748,421 100,747 - 13,143,898
Loss for the year - - - (12,136,930) - (12,136,930)
Other comprehensive income for - - - - 17,310 17,310
the period
Balance at 31 December 2019 263,445 48,887,392 998,495 (42,109,328) 116,030 8,156,034
consolidated statement of cash flows
for the year ended 31 December 2020
Note 2020 2019
GBP GBP
Cash flows from operating activities
Loss for the year (2,024,083) (12,136,930)
Adjustments for:
Depreciation 470,211 198,048
Amortisation 169,192 263,046
Impairment - 594,724
Decrease in inventories 1,014,733 (446,772)
(Increase)/decrease in trade and other receivables 7 697,384 1,827,827
Increase/(decrease) in trade and other payables 8 41,036 (578,619)
Increase/(decrease) in provisions 9 272,271 (186,984)
Share-based payment charge 522,116 1,111,396
Net cash flow from operating activities 1,162,860 (9,344,264)
Cash flows from investing activities
Additions to intangible assets (291,066) (532,484)
Right of use asset initial direct costs - (15,375)
Net cash flow from investing activities (291,066) (547,859)
Cash flows from financing activities
Interest Payable 18,334 9,144
Proceeds from the issue of share capital 3,734 12,032,502
Repayment of capital element of finance lease rentals (480,000) (200,000)
Net cash inflows from financing activities (457,932) 11,841,646
Net cash inflow/(outflow) 413,862 1,939,523
Cash at beginning of year 7,988,769 6,031,936
Movement in cash 413,862 1,939,523
Effect of exchange rate fluctuations on cash held 35,822 17,310
Cash at end of year 8,438,453 7,988,769
notes to the accounts
1. Reporting Entity
eve sleep PLC (the "Company") is a public company, domiciled and
registered in England in the United Kingdom and its shares are
listed on the London Stock Exchange AIM market. eve sleep PLC is a
company limited by shares. The registered number is 09261636 and
the registered address at 31st December 2020 was 29A Kentish Town
Road, London, England, NW1 8NL. Prior to 5th August 2019 the
registered address of the Company was 128 Albert Street, London,
England, NW1 7NE.
2. Accounting Policies
2.1 Basis of preparation
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group").
The Group financial statements have been prepared and approved
by the directors in accordance with international accounting
standards in conformity with the Companies Act 2006 ("Adopted
IFRSs"). The Company has elected to prepare its parent company
financial statements in accordance with adopted IFRS.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in the
Group financial statements.
This preliminary announcement is simultaneous with signed
financial statements on which the audit report is unqualified and
unmodified.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2020
or 2019 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the registrar of companies, and those
for 2020 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) in 2019
only did include a reference to which the auditor drew attention
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. 2. Changes in accounting policy a. New and
amended Standards and Interpretations adopted by the Group and
Company
There are no changes to accounting policies adopted by the Group
in the year ended 31 December 2020. b. New and amended Standards
and Interpretations mandatory for the first time for the financial
year beginning 1
January 2020 but not currently relevant to the Group or
Company.
Amendments to IFRS 16 addressing Covid-19 related rent
concessions became effective for annual reporting periods beginning
on or after 1 June 2020. As neither the Group not Company has
received such concessions, this is not relevant. c. New and amended
Standards and Interpretations mandatory for periods beginning on or
after 1 January 2021
These may have a significant impact in future years: ? Amendment
to IFRS 9: "Financial Instruments" ? Amendment to IAS 39:
"Recognition and Measurement" ? Amendment to IFRS 7: "Financial
Disclosures"
2.3 Measurement Convention
The financial statements are prepared under the historical cost
convention.
2.4 Going Concern
The financial statements are prepared on a going concern basis
notwithstanding that the Group is still generating losses.
The Group has reported an underlying EBITDA[3] of GBP2.0m loss
(2019: GBP10.7m loss) with an operating cash inflow of GBP1.2m
(2019: outflow of GBP9.3m). The closing cash balance at 31 December
2020 was GBP8.4m (2019: GBP8.0m) with GBP0.3m VAT deferred from Q1
2020 under the UK Government Coronavirus support measures and due
for payment in April 2021
The directors have prepared a business plan and financial model
including cashflow forecasts covering a period of more than 12
months from the date of approval of the Group financial
statements.
The business plan makes the following key assumptions: ? Revenue
growth in the French and Irish markets driven by further marketing
investment in these territories having
underinvested in 2020. The directors understand that the impact
of Covid-19 on French consumer behaviour has been
less extreme that the UK and thus investment in these markets
will reduce the reliance on UK consumers to drive
revenue growth in the Group. ? Minimal growth in the UK
direct-to-consumer market due to uncertainties around the impact of
Covid-19 on consumer
behaviour and spending capacity. When travel and leisure
restrictions are eased in the UK, consumers may divert
spending away from homewares to these areas. However, the shift
from physical retail to ecommerce spending is
likely to be permanent and the business is extremely well placed
to capitalize on this. ? Marketing efficiencies throughout all
territories broadly in line with 2020, measured as % of revenue.
Having
doubled marketing efficiency from 2019 to 2020, the directors
are confident that a similar return on investment can
be made in the foreseeable future. ? Short-term investment in
people and technology to deliver improvements in the efficiency and
resilience of the
business. This will generate an increase in some discretionary
costs in 2021 but these can be reduced if required. ? There will be
minimal disruption from Brexit given the changes made in 2020 to
the location of mattress
manufacturing.
These forecasts in the base case indicate that the group will
have sufficient funds to meet its liabilities as they fall due
until such point that it achieves sustainable profitability and
cash generation. The delivery of the strategic plan is subject to
uncertainty and these have been modelled through sensitivity
analysis to revenue and costs.
Where sensitivity analysis indicates the possibility of a
material impact to the ability of the group to meet liabilities as
they fall due, the directors have considered what mitigating
actions would be required and the timeframe within which those
actions are needed. The key mitigating factors are centred around
further reductions in controllable spend, including further
marketing cost appraisal and reductions in other categories of
discretionary spend. The directors also consider that it would be
reasonable to target working capital improvements such as reducing
debtor days through facilities such as debt factoring as the group
does not presently have any debt (excluding the lease liability
arising under IFRS 16).
The directors consider that given the strong opening cash
position relative to the 2020 underlying EBITDA loss, the expected
performance over the next 12-18 months and the level of fixed and
non-discretionary costs, that the Group will be able to continue
realising its assets and discharging its liabilities in the normal
course of business and it is therefore appropriate to prepare the
financial statements on a going concern basis.
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 Board). 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.
For the year ended 31 December 2020
UK&I France Rest of Rest of Total
Europe World
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
Administrative Expenses (excluding payment fees and (6,744,895)
marketing expenses)
Net Finance Income/(Expense) 1,641
Taxation 414,541
Total (2,024,083)
For the year ended 31 December 2019
UK&I France Rest of Rest of Total
Europe World
Revenue 18,548,073 5,345,076 (45,141) 4,923 23,852,931
Cost of Sales (8,385,865) (2,751,453) - (39,587) (11,176,905)
Gross Profit 10,162,208 2,593,623 (45,141) (34,664) 12,676,026
Distribution Expenses (1,809,692) (1,014,775) 94,185 964 (2,729,317)
Payment fees (352,702) (90,180) 5,418 245 (437,219)
Marketing Expenses (9,703,321) (2,357,403) 6,346 - (12,054,377)
Segment Results (1,703,507) (868,734) 60,808 (33,454) (2,544,887)
Administrative Expenses (excluding payment fees and (9,962,304)
marketing expenses)
Net Finance Income/(Expense) 18,022
Taxation 352,239
Total (12,136,930)
4. 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.
2020 2019
Weighted average shares in issue 269,819,716 246,739,240
Loss attributable to the owners of the parent company (2,024,083) (12,136,930)
Basic loss per share (pence) (0.75) (4.92)
Diluted loss per share (pence) (0.75) (4.92)
For the periods presented, the weighted average number of shares
used for calculating the diluted loss per share are identical to
those for the basic loss per share. This is because the outstanding
share options would have the effect of reducing the loss per share
and would not be dilutive under IAS 33.
At 31 December 2020, options outstanding amounted to 15,803,099.
Given the loss for the year of GBP2,024,083 (2019 loss:
GBP12,136,930) these options are anti-dilutive.
5. Share Capital
Allotted, issued and fully paid:
Nominal Value 31 December 2020 31 December 2019
Number
GBP GBP GBP
Ordinary Shares 272,569,414 GBP0.001 272,569 263,445
Total 272,569 263,445
The table below summarises the movements in number of shares at
the beginning and end of the period:
Ordinary Shares
Share capital 31 December 2019 263,444,823
Nominal Value GBP GBP0.001
Value of Share capital GBP GBP263,445
Summary of Movements
Issue of shares 5,390,479
Exercise of share options over ordinary shares 3,734,112
Share capital 31 December 2020 272,569,414
Nominal Value GBP GBP0.001
Value of Share capital GBP GBP272,569
The holders of Ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
During 2020, 5,390,479 shares were issued and 3,734,112 share
options were exercised bringing the total share capital of the
Company to 272,569,414 at 31 December 2020.
6. Share based payments
The Group recognised a charge of GBP0.5m (2019: GBP1.1m) related
to share-based payments during the year to 31 December 2020, all of
which relates to equity-settled schemes and are presented within
administrative expenses.
The charge is made up of two components: share-based payment
charges connected with employee remuneration totalling GBP0.2m and
share-based payment charges relating to the equity settlement of
liabilities due to Channel 4 totalling GBP0.3m, of which GBP0.2m
were satisfied with the issue of share capital during the
period.
The Company issues equity-settled share-based payments to
certain employees, whereby employees render services in exchange
for shares or rights over shares of the parent company.
Equity-settled awards are measured at fair value at the date of
grant. The fair value is calculated using an appropriate option
pricing model and is expensed to the consolidated statement of
profit and loss on a straight-line basis over the vesting period
after allowing for an estimate of shares that will ultimately
vest.
The Company operates an HMRC approved executive management
incentive plan (EMI). Under length of service criteria, options
typically vest over a 3 year period in equal monthly amounts. For
those options with performance based condition, the options will
vest when the conditions are met. All options are equity
settled.
The terms and conditions of the grants are as follows:
Number of Exercise
Grant Date Number of Options Performance Conditions Expiry Date
Contracts Price
10/04/2017 1 251,000 GBP0.001 Length of service 10/04/2027
01/04/2019 7 6,679,364 GBP0.001 Length of service 01/04/2029
17/12/2019 4 6,850,000 GBP0.001 Length of service 17/12/2019
17/02/2020 2 550,000 GBP0.001 Length of service 17/02/2030
01/06/2020 3 1,750,000 GBP0.001 Length of service 01/06/2030
01/06/2020 2 2,650,000 GBP0.001 Performance Based 01/06/2030
The Company operates an unapproved executive incentive plan. The
vesting conditions for grants made on 26 January 2016 and 1 April
2019 are based on length of service with 100% of the options
vesting on 36-month anniversary of the grant date. All options are
equity settled.
The terms and conditions of the grants are as follows:
Number of Exercise
Grant Date Number of Options Performance Conditions Expiry Date
Contracts Price
26/01/2016 1 12,550 GBP0.001 Length of service 26/01/2026
01/04/2019 1 150,000 GBP0.001 Length of service 01/04/2029
The number and weighted average exercise prices of share options
are as follows:
Weighted Average Exercise Price GBP Number of Options
Outstanding at beginning of year GBP0.001 17,030,913
Granted during the year GBP0.001 4,950,000
Forfeited during the year GBP0.001 (1,960,642)
Exercised during the year GBP0.001 (3,734,112)
Lapsed during the year GBP0.001 (483,060)
Cancelled during the year -
Outstanding at the end of the year GBP0.001 15,803,099
Exercisable at the end of the year GBP0.001 4,670,603
All options exercised during the year were options over Ordinary
shares.
The weighted average share price at the date of exercise of
share options exercised during the year was 0.1p (2019: 6.37p)
The options outstanding at the end of the year have an exercise
price of GBP0.001 and a weighted average contractual life of 10
years.
The fair value of employee share options is measured using a
Black-Scholes model. Measurement inputs and assumptions for those
share options granted during 2020 are as follows:
Award Award
17/02/2020 01/06/2020
GBP GBP
Share class Ord Ord
Fair Value GBP0.011 GBP0.012
Exercise Price GBP0.001 GBP0.001
Expected volatility 84% 104%
Option Life 10yrs 10yrs
Risk free interest rate 1.000% 1.000%
7. Trade and other receivables
2020 2019
GBP GBP
Trade Receivables 656,032 676,537
Other receivables 221,030 447,051
Prepayments 883,126 784,083
Other current assets 120,000 729,979
1,880,188 2,637,650
The average credit period offered on sales of goods during 2020
was 32 days (2019: 32 days). The average days sales outstanding
("DSO") in 2020 was 38 days (2019: 38 days). At 31 December 2020,
trade receivables at a nominal value of GBPnil (2019: GBP3,481)
were impaired and fully provided for.
All trade and other receivables are short-term. The directors
consider that the carrying amount of trade receivables approximates
to their fair value. All trade and other receivables have been
reviewed for indications of impairment.
Trade receivables represent amounts due from wholesale and
retail customers.
The Group has not charged interest for late payment of invoices
in the current year or prior period.
Allowances against doubtful debts are estimated by reference to
expected credit losses based on the probability of default (using
past default experience with that customer and alongside analysis
of the counterparty's current financial position where specific
credit risk is known), risk exposure (being the value of
receivables outstanding with that customer) and finally a
percentage representative of the loss due to default.
Before accepting any significant new customer, the Group uses a
variety of credit scoring systems to assess the potential
customer's credit quality and to define credit limits for each
customer. Limits and scoring attributed to customers are reviewed
regularly.
Four major retail customers each accounted for more than 10% of
the total balance of trade receivables on 31 December 2020,
identical to 2019 where four major retail customers each accounted
for more than 10% of the total balance of trade receivables on 31
December 2019.
2020 2019
GBP GBP
Not overdue 289,305 277,934
Overdue between 0-30 days 142,721 21,493
Overdue between 31-60 days 113,216 245,198
Overdue between 61-90 days 72,200 131,912
Overdue over 90 days 38,590 -
656,032 676,537
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.
8. Trade and other payables
2020 2019
GBP GBP
Trade payables 1,183,802 2,430,596
Non trade-payables and accrued expenses 1,027,043 649,995
Deferred revenue 949,411 573,082
Taxes and social security payable 863,954 329,501
4,024,210 3,983,174
All trade and other payables are short-term. The directors
consider that the carrying amount of trade and other payables
approximates to their fair value. Deferred revenue represents
contractual liabilities to deliver goods to customers where
consideration has been received prior to the year-end date. The
opening balance of deferred revenue was fully recognised during the
2020 financial year.
The Company took advantage of the UK Government Coronavirus
support measures in the year, to defer VAT due in April 2020 until
April 2021. The amount deferred is included in the above taxes and
social security payable.
9. Provisions
Refunds Warranty Total
GBP GBP GBP
Balance at 1 January 2019 792,117 163,832 955,949
Provisions made during the year 7,869,078 73,574 7,942,652
Provisions used during the year (8,116,237) (36,127) (8,152,364)
Prior year under/(over) provision recognised in year 22,728 - 22,728
Balance at 31 December 2019 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/(over) provision recognised in year (66,085) - (66,085)
Balance at 31 December 2020 799,178 242,058 1,041,236
A refund provision is required as the Group provides certain
products to customers under a 100-day trial period.
During this period the customer is entitled to return goods for
a full refund. The provision is calculated by reference to the rate
of returns experienced by the Group in preceding periods and the
level of sales subject to the relevant trial periods of each
product at the year end. An analysis of the rate of return over
historical periods does not indicate a significant variation in the
rate of refunds provided to customers and accordingly, whilst there
is a degree of estimation in the calculation of this provision, any
reasonable sensitivity analysis in the rate applied to sales at the
year-end would not result in a material impact.
A warranty provision is required as the Group provides certain
products to customers with 2, 3, 5 and 10-year warranty
periods.
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
GBP20,000.
10. Subsequent events
There have been no significant events since the year end.
-----------------------------------------------------------------------------------------------------------------------
[1] Underlying EBITDA is defined as earnings before interest,
tax, depreciation, amortisation and impairment, share-based payment
charges connected with employee remuneration (2020 and 2019),
fundraise-related expenditure (2019 only), adding back IFRS16
adjustments to office lease costs. Underlying EBITDA reflects what
management believe to best demonstrate the underlying performance
of the business in a given year.
[2] Underlying EBITDA is defined in the Glossary
[3] Underlying EBITDA loss defined as earnings before interest,
tax, depreciation, amortisation and impairment, share-based payment
charges connected with employee remuneration (2020 and 2019),
fundraise-related expenditure (2019 only), adding back IFRS16
adjustments to office lease costs. Underlying EBITDA reflects what
management believe to best demonstrate the underlying performance
of the business in a given year.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00BYWMFT51
Category Code: FR
TIDM: EVE
LEI Code: 2138007BAC29AUXWQE6
Sequence No.: 95780
EQS News ID: 1176516
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
(END) Dow Jones Newswires
March 18, 2021 03:00 ET (07:00 GMT)
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