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. 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.