Notes to the consolidated balance sheet and profit and loss account
in thousand €, unless otherwise stated
- 1 Property, plant and equipment
Land
Buildings
Other fixed operating assets
Total
Book value 1 January 2015
5,460
3,240
20,189
28,889
Additions
1,719
1,149
11,725
14,593
Revaluation
(47)
-
-
(47)
Effect of movements in exchange rates
-
-
82
82
Disposals
-
-
(591)
(591)
Depreciation
-
(390)
(8,016)
(8,406)
Book value 31 December 2015
7,132
3,999
23,389
34,520
Accumulated depreciation
-
6,343
70,314
76,657
Accumulated revaluation
(3,750)
-
-
(3,750)
Purchase price
3,382
10,342
93,703
107,427
Book value 1 January 2016
7,132
3,999
23,389
34,520
Acquisitions
-
-
293
293
Additions
-
239
12,899
13,138
Effect of movements in exchange rates
-
-
(1)
(1)
Disposals
-
-
(325)
(325)
Depreciation
-
(255)
(9,300)
(9,555)
Book value 31 December 2016
7,132
3,983
26,955
38,070
Accumulated depreciation
-
6,599
76,371
82,970
Accumulated revaluation
(3,750)
-
-
(3,750)
Purchase price
3,382
10,582
103,326
117,290
A further explanation of the investments is enclosed in the Report of the Management Board.
The cumulative revaluation relates to the land in Uden, Nieuw-Vennep and Hoogeveen, as well as the value of the land forming part of the retail properties owned. These retail properties are located in Elst, Den Helder, ’s Hertogenbosch and Uden. The land forming part of the retail properties was valued on 30 June 2015 and the land forming part of the distribution centres in Uden and Hoogeveen was valued on 25 November 2015, both by an independent valuer. The valuation of the distribution centre in Nieuw-Vennep was performed on 25 July 2014 by an independent valuer. The valuations have been performed using the rental value capitalisation method.
The items of property, plant and equipment are intended for own use.
- 2 Intangible assets
2016
2015
Book value 1 January
3,477
3,517
Acquisitions
1,776
-
Additions
3,396
1,370
Effect of movements in exchange rates
(34)
9
Amortisation
(1,613)
(1,419)
Book value 31 December
7,002
3,477
Accumulated amortisation
7,693
6,260
Purchase price
14,695
9,737
A further explanation of the investments is enclosed in the Report of the Management Board.
Following the acquisition of Sängjätten, the ‘Sängjätten’ brand name has been capitalised at € 1.8 million with an amortisation period of 20 years. The majority of the other intangible fixed assets is comprised of licenses and software.
- 3 Financial assets
The financial assets consist on the one hand of non-current receivables of € 660 (2015: € 395) and on the other of deferred tax assets of € 1,217 (2015: € 1,185).
The non-current receivables relate to guarantee deposits for the rental agreements for stores. These are classified under financial assets due to the non-current nature of these receivables.
The deferred tax assets at 31 December 2016 can be broken down as follows:
2016
2015
Tax losses carried forward
643
632
Temporary differences in valuation of (in)tangible assets
291
291
Temporary differences in valuation of pensions
261
251
Temporary differences in valuation of stock
22
11
Balance at 31 December
1,217
1,185
At year-end 2016, a tax credit of € 643 (2015: € 632) for future loss carry-forwards was recognised under financial assets. € 530 of this tax credit related to the acquisition of BettenMax in 2015. At the time of the acquisition, BettenMax had tax losses available for carrying forward that had not been capitalised. As Beter Bed Holding expects, on the basis of the currently available information, to be able to set off these tax losses within five years, they have been capitalised in full.
An amount of € 10,797 (2015: € 8,824) in loss carryforwards has not been recognised. Beter Bed Holding’s policy is that tax losses available for carryfoward are capitalised only if reasonable possibilities for set-off are expected within five years on the basis of a substantiated forecast of the results for tax purposes. Set-off of these losses is insufficiently probable on the basis of the currently available information. The tax losses available for carryforward expire as follows:
Term
1 year
-
2 to 5 years
1
6 to 10 years
896
11 to 15 years
4,528
Indefinite
5,372
Movements in deferred tax assets in 2016 and 2015 were as follows:
2016
2015
Balance at 1 January
1,185
497
Through profit and loss account
32
(70)
From takeover subsidiary
-
758
Through equity
-
-
Balance at 31 December
1,217
1,185
- 4 Inventories
This comprises inventories held in stores of € 55,239 (2015: € 50,962) and inventories held in warehouses of € 6,645 (2015: € 6,964). The write-down for possible obsolescence included in this item can be broken down as follows:
2016
2015
Balance at 1 January
1,633
1,673
Additions
1,595
806
Withdrawals
(1,354)
(846)
Balance at 31 December
1,874
1,633
In view of the amount of the gross profit, the turnover rate and the fact these products are generally not dependent on trends to any significant extent, the risk of obsolescence of inventories is comparatively low. The prices realised in sales of obsolescent inventories usually exceed their cost.
The provision for obsolescent inventories relates mainly of returned goods that cannot be returned to suppliers, damaged products, showroom products, products that will no longer be carried and products with a very low turnover. The direct net realisable value is estimated for each of these categories. If the carrying amount exceeds the direct net realisable value, the inventories are written down by this difference.
The total carrying amount of inventories for which there is a risk of obsolescence is € 6,203 (2015: € 3,240). The direct net realisable value of these inventories is € 4,329 (2015: € 1,607). Therefore the percentage of inventories for which there is a risk of obsolescence compared with total inventories was 9.7% (2015: 5.4%).
- 5 Receivables
All receivables fall due within less than one year and are carried at amortised cost, which is equal to the nominal value. Sales in stores and deliveries are settled in cash. Receivables relate mainly to receivables due from wholesale customers and trade receivables arising from agreed bonuses.
Provisions are recognised for individual receivables if there are objective indications that the probability of uncollectibility for them exceeds 50%. This assessment is performed on the basis of past experience and other relevant information, such as bankruptcy of the debtor concerned.
A provision of € 25 (2015: € 67) has been recognised for receivables due from wholesalers. This is 5.9% (2015: 47.9%) of the overdue receivables.
- 6 Cash and cash equivalents
This item relates to cash, cheques and bank balances. The amount consists of the following: cash € 380 (2015: € 301), bank balances € 20,070 (2015: € 23,495) and cash in transit € 1,343 (2015: € 1,716).
- 7 Equity
Movements in equity items are shown in the consolidated statement of changes in equity. The company’s authorised share capital amounts to € 2,000, divided into 100 million ordinary shares with a nominal value of € 0.02 each.
Movements in the number of issued and fully paid-up shares and movements in the number of treasury shares are shown below:
2016
2015
Issued and paid-up shares as at 1 January
21,955,562
21,905,562
Share issue on exercise of employee stock options
-
50,000
Issued and paid-up shares as at 31 December
21,955,562
21,955,562
Shares in portfolio as at 1 January
-
2,723
Repurchased during the year
-
-
(Re)issue on exercise of options
-
(2,723)
Sale of shares in portfolio
-
-
Shares in portfolio as at 31 December
-
-
The revaluation reserve relates to land.
A proposal will be submitted to the Annual General Meeting to distribute a final dividend in cash of € 0.40 per share. The total dividend for 2016 will therefore amount to € 0.74 per share (2015: € 0.87).
- 8 Provisions
A provision for onerous contracts has been formed for the long-term leases relating to discontinued format operations. This provision is based on the rent and the remaining term, taking account of a subletting probability and a mark-up for service costs.
The provision for onerous rental contracts can be broken down as follows:
2016
2015
Balance at 1 January
898
2,055
Additions
-
-
Withdrawals
(450)
(714)
Releases
(173)
(443)
Balance at 31 December
275
898
Of which current (in other liabilities)
77
360
Total provision for onerous rental contracts
198
538
The release in 2016 is mainly due to early termination and/or buy-out of one rental contract.
- 9 Deferred tax liabilities
The deferred tax liabilities relate mainly to the differences between the valuation of inventories and non-current assets, including land, in the Netherlands, Germany and Switzerland for tax and financial reporting purposes. These differences are long-term in nature. The deferred tax liabilities at 31 December 2016 can be broken down as follows:
2016
2015
Revaluation of company land
937
937
Temporary differences in valuation of stock
761
699
Temporary differences in valuation of (in)tangible assets
376
563
Temporary differences in valuation of rent obligations
80
80
Total
2,154
2,279
Movements in this item in 2016 and 2015 were as follows:
2016
2015
Balance at 1 January
2,279
2,218
Through profit and loss account
(125)
73
Through equity
-
(12)
Balance at 31 December
2,154
2,279
- 10 Current liabilities
To fund the group the company has current account facilities totalling € 41.5 million at its disposal. Furthermore, facilities totalling € 7.6 million are available for providing guarantees.
For the purpose of the current account facilities, the company and its subsidiaries have undertaken not to encumber their assets with any security rights without the prior consent of the lenders.
These current account facilities include two committed facilities in the amount of € 10.0 million each which will expire on 10 July 2020 and 15 July 2020 respectively. No security has been provided for the committed facilities. The main conditions of the credit facilities are a minimum solvency of 25% and a maximum interest-bearing debt/EBITDA ratio of 2.5.
At the end of the year under review, the current account facilities were only used for providing bank guarantees, mainly for the purpose of rent payments in the amount of € 0.6 million (2015: € 0.5 million). Of the facilities available specifically to provide guarantees, a total € 6.3 million was used at year-end 2016 (2015: € 6.0 million).
The other liabilities can be broken down as follows:
2016
2015
Prepayments
9,804
8,525
Accruals personnel and staff benefits
8,408
8,146
Other
3,344
2,937
Total
21,556
19,608
The item accrual for staff costs and employee benefits includes a pension liability for a former employee. This liability of € 1.5 million (2015: € 1.4 million) has been calculated on an actuarial basis.
- 11 Financial liabilities
up to 3 months
3 to 12 months
1 to 5 years
2016
Accounts payable
31,856
-
-
Credit institutions
-
-
-
Total
31,856
-
-
2015
Accounts payable
22,903
-
-
Credit institutions
-
-
-
Total
22,903
-
-
The market value of the financial liabilities approximates their amortised cost.
- 12 Information by geographical area
Revenue by country
2016
%
2015
%
Germany
213,800
52
222,792
58
The Netherlands
138,115
34
115,254
30
Other countries
59,824
14
48,744
12
Intercompany adjustment
(1,282)
-
(1,350)
-
Total
410,457
100
385,440
100
(In)tangible fixed assets by country
2016
2015
The Netherlands
24,731
23,580
Germany
13,236
10,853
Other countries
7,105
3,564
Total
45,072
37,997
- 13 Personnel expenses
The operating expenses include the following wage and salary components:
2016
2015
Wages and salaries
82,684
75,611
Social security costs
14,881
14,106
Pension costs
2,657
2,267
Costs share-based compensation
301
192
Total
100,523
92,176
The pension contributions relate virtually exclusively to defined contribution schemes or schemes designated as such. Within the costs of employee stock options, € 135 relate to the current and former members of the company’s Management Board (2015: € 83).
Average number of employees
The companies included in the consolidation had an average of 2,621 employees (FTE) in 2016 (2015: 2,427):
2016
2015
Germany
1,610
1,560
The Netherlands
636
586
Spain
69
61
Austria
152
122
Switzerland
96
87
Belgium
11
11
France
3
-
Sweden
44
-
Total
2,621
2,427
- 14 Option program
The options are long-term in nature and can be exercised providing that the profit target has been met. Until 2013, the costs of the options program were calculated using the Black & Scholes model. With effect from 2013, the costs of the options program are calculated using a combined model of Black & Scholes and Monte Carlo simulations. An overview of the details of the options granted and still outstanding, as well as the values employed in the Black & Scholes model, is provided below.
The conditions were changed with effect from the options series 2013. In the first three years after the award of the options granted, 33.3% of the options will vest annually if the ‘Total Shareholder Return’ (TSR = share price gains plus dividend distributed) of Beter Bed Holding N.V. exceeds the ‘Total Shareholder Return of the AScX, based on the year of the award. In addition, the employee is required to continue to be employed by the company for three years. Options can only be exercised if these conditions are met after three years.
The design of the option program was modified in 2016. The options are vested in full three years after their award (in contrast to 33.3% vested annually). In addition, the TSR of Beter Bed Holding achieved after three years is compared with the TSR of nine relevant national and international listed companies that jointly form a peer group. The Management Board of Beter Bed Holding N.V. is under the obligation to retain shares awarded under the option programme for a period of at least four years. The former option policy / option agreement continues to prevail for options already awarded until 2016.
From the 2013 series, this means that the calculation will be based on three different Black & Scholes values, risk-free interest rates and volatility percentages. The ranges of those percentages are set out in the table below.
2016
2015
2014
2011
Number granted
197,500
186,000
166,700
218,000
of which A.H. Anbeek
50,000
50,000
40,000
50,000
of which B.F. Koops
40,000
40,000
32,000
-
Number outstanding
197,500
113,333
97,800
133,650
Value according to Black & Scholes
€ 2.41 - € 2.44
€ 2.19 - € 2.67
€ 1.78 - € 1.93
€ 1.58
Exercise from
19-05-2019
19-05-2018
19-05-2017
28-10-2013
Exercise through
18-05-2021
19-05-2020
19-05-2019
28-04-2017
Profit target (in millions)
-
-
-
€ 32.0
Profit target achieved in year
-
-
-
-
TSR > AScX
-
No
Partly (33,3%)
-
TSR > Peer Group
-
-
-
-
Share price on the grant date
€ 20.00
€ 22.79
€ 17.37
€ 14.67
Exercise price
€ 19.99
€ 22.79
€ 17.37
€ 14.67
Expected life
5 years
5 years
5 years
3.8 years
Risk-free rate of interest (%)
-0.52
0.30
0.78 - 0.46
1.71
Volatility (%)1
25.40
26.58
27.50 - 21.94
32.15
Dividend yield (%)
3.40
5.40
5.20
9.00
- 1 Expected volatility is based on end-of-month closing prices for the most recent period with a length equalling the expected term with a maximum of five years.
In 2016 87,108 options expired, as a number of employees holding options left the company before the expiration dates. In addition a total of 127,750 options expired in 2016 due to the expiry of their term. Furthermore, a portion of the options expired because the vesting conditions were not satisfied. The series concerned are the series 2013 part III, 2014 part II and 2015 part I. Lastly, 197,500 new options were granted in 2016. See the summary of options series outstanding.
- 15 Depreciation and amortisation
2016
2015
Depreciation and impairment on tangible assets
9,555
8,406
Amortisation and impairment on intangible assets
1,613
1,419
Total of depreciation, amortisation and impairment
11,168
9,825
The depreciation and amortisation rates applied are based on expected economic life and are as follows:
Company land
0%
Buildings
3.33%
Other fixed operating assets
10% - 33%
Intangible assets
5% - 33%
- 16 Other operating expenses
The other operating expenses comprise € 47.8 million in rental and lease costs (2015: € 45.2 million), with the remainder relating mainly to selling and distribution costs.
- 17 Income taxes
The reconciliation between the effective tax rate and the results of the calculation of the profit before taxes, multiplied by the local tax rate in the Netherlands, was as follows on 31 December 2016 and 31 December 2015:
2016
2015
Profit before taxes
25,877
30,648
Tax using the company's domestic tax rate: 25,0% (2015: 25,0%)
6,469
7,662
Adjustment profit tax previous years
105
(40)
Permanent differences
(1,406)
(1,559)
Future loss set-off not included
602
397
Recognition of previously unrecognized deferred tax assets
-
-
Tax losses carried forward
(42)
-
Effect of the tax rates outside the Netherlands
1,134
1,629
At an effective tax rate of 26,5% (2015: 26,4%)
6,862
8,089
Profit tax in the consolidated profit and loss account
6,862
8,089
The EU is continuing its work on the harmonisation of tax legislation. As a result, it is expected that Beter Bed Holding will no longer be able to make use of certain tax facilities in Germany as from 2017. This will probably have a detrimental effect on the group's effective tax rate in 2017.
The item tax in the profit and loss account comprises the following:
2016
2015
Tax for current year
6,802
7,985
Adjustment of profit tax for prior years
105
(40)
Temporary differences
(146)
(14)
Utilisation tax losses carried forward
101
158
Profit tax in the consolidated profit and loss account
6,862
8,089
- 18 Remuneration of the Management and Supervisory Boards
The remuneration of members of the Management Board was as follows in 2016 and 2015:
A.H. Anbeek
B.F. Koops
Total
2016
2015
2016
2015
2016
2015
Salary
350
350
250
250
600
600
Variable remuneration
110
180
73
91
183
271
Pension
105
105
63
63
168
168
Share-based compensation
78
52
57
31
135
83
Social security charges
16
15
16
15
32
30
Lease car
13
13
16
16
29
29
Total
672
715
475
466
1,147
1,181
The variable remuneration relates to the year under which it is classified and is recognised in the expenses of that year. The variable remuneration of the CEO is based for 50% on the achievement of quantitative targets; the remaining 50% depends on the achievement of qualitative targets. The CFO’s variable remuneration is based for 40% on the achievement of quantitative results while the remaining 60% is based on the achievement of qualitative targets. For more detailed information, see remuneration report.
The costs listed under ‘Employee stock options’ represent the amount accounted for in the profit and loss account for that year.At the end of the financial year, the CEO held 3,000 shares in Beter Bed Holding N.V. and the CFO held 1,500 shares. They do not hold any exercisable options for shares in Beter Bed Holding N.V. per 31 December 2016.
The remuneration of the members of the Supervisory Board was as follows in 2016 and 2015:
2016
2015
D.R. Goeminne
40
40
A.J.L. Slippens
26
26
E.A. de Groot
30
30
W.T.C. van der Vis
30
30
Total
126
126
The members of the Supervisory Board hold no shares or exercisable options on shares in Beter Bed Holding N.V.
- 19 Earnings per share
The net profit of € 19.0 million divided by the average number of outstanding shares totalling 21,955,562 equates to earnings per share of € 0.87 in 2016 (2015: € 1,03). Due to the options series outstanding, the number of shares used for the calculation of diluted earnings per share is equal to 22,003,666. This results in diluted earnings per share of € 0.86 (2015: € 1,02).
- 20 Commitments not included in the balance sheet
The company has entered into long-term rental and lease obligations concerning buildings and other operating assets. The minimum obligation on the balance sheet date can be broken down as follows:
Duration
2017
2018
2019
2020
2021
after 2021
Rental agreements
42,128
28,637
19,529
12,047
7,122
1,277
Lease agreements
2,092
1,550
1,130
721
457
380
Total
44,220
30,187
20,659
12,768
7,579
1,657
The majority of the rental agreements for the company premises required for the Beter Bed format are long-term agreements (between five and ten years), with options for renewal. The majority of the rental agreements for the Matratzen Concord format have been concluded for a period between five to ten years, and include a clause stipulating that the agreements can be terminated without charge within the first two years.
In the year under review, amounts of € 45.1 million (2015: € 42.6 million) arising from rental agreements and € 2.7 million (2015: € 2.6 million) arising from lease agreements were accounted for in the profit and loss account.At year-end 2016, the Wonen Industrial Pension Fund for the Home Furnishings Industry had an estimated funding ratio 94.3% (year-end 2015: 103.3%). As at 31 December 2016, the company had no additional obligation.
- 21 Audit fees
The fees for the audit of the financial statements and other non-audit services by the independent auditor PwC Accountants N.V. were:
2016
2015
Audit of financial statements
252
189
Other non-audit services
16
16
Total
268
205
The fees for the audit of the financial statements and other non-audit services performed by PwC Accountants N.V. in the Netherlands were € 145 (2015: € 104).
The other non-audit service in 2016 relates to the review of the interim figures.
- 22 Related parties
The companies listed in principles of consolidation are included in the consolidation of Beter Bed Holding N.V. and its participating interests.
Beter Bed Holding N.V. has issued declarations of joint and several liability for all Dutch group companies for the obligations arising from legal transactions entered into by these group companies. Pursuant to these letters of guarantees, the Dutch group companies have made use of the exemption options laid down in Section 403, paragraphs 1 and 3, of Part 9, Book 2 of the Dutch Civil Code.
The financial relationships between Beter Bed Holding N.V. and its participating interests consist almost fully in receiving dividends and receiving interest on loans provided.
- 23 Events after the balance sheet date
No events that are required to be disclosed occurred in the period between the end of the year under review and the preparation of these financial statements.