Additional details

• Independent auditor's report

  To: the general meeting and supervisory board of Beter Bed Holding N.V.

  Report on the financial statements 2018

  Our opinion
  In our opinion:

  • Beter Bed Holding N.V.’s consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2018 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code;
  • Beter Bed Holding N.V.’s company financial statements give a true and fair view of the financial position of the Company as at 31 December 2018 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

  What we have audited
  We have audited the accompanying financial statements 2018 of Beter Bed Holding N.V., Uden (‘the Company’). The financial statements include the consolidated financial statements of Beter Bed Holding N.V. together with its subsidiaries (‘the Group’) and the company financial statements.

  The consolidated financial statements comprise:

  • the consolidated balance sheet as at 31 December 2018;
  • the following statements for 2018: the consolidated profit and loss account and the consolidated statements of comprehensive income, cash flows and changes in equity; and
  • the notes, comprising the accounting policies applied and other explanatory information.

  The company financial statements comprise:

  • the company balance sheet as at 31 December 2018;
  • the company profit and loss account for the year then ended;
  • the notes, comprising the accounting policies applied and other explanatory information.

  The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements.

  The basis for our opinion
  We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.

  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

  Independence
  We are independent of Beter Bed Holding N.V. in accordance with the European Regulation on specific requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO – Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA – Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct).

  Our audit approach
  Overview and context
  Beter Bed Holding N.V. is a European retail- and wholesale organisation in the bedroom furnishing sector. The group is comprised of several components and therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the company, being revenue and inventories. 

  The financial year was characterised by negative development of the financial results. This has had an impact on the adit approach as described in the section ‘Key audit matters’

  As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the management board made important judgements, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In the annual report, the entity has disclosed the accounting estimates and most important sources of estimation uncertainty in the section estimates and judgements on page 67. As a retail organisation, the inventory makes up 40% of the balance sheet of Beter Bed Holding N.V. The valuation of this inventory contains an important estimation uncertainty, which is partly based on management’s judgment. Given this uncertainty and the absolute volume of the inventory, we consider the existence and the valuation of the inventory a key audit matter. This has been further disclosed in the section ‘key audit matters’ of this auditor’s report.

  Beter Bed Holding N.V. has strategic objectives related to increasing customer satisfaction and growth of both revenue and market share. To reach the objectives investments are made in online solutions, shop formulas and extension/optimisation of shops in different countries. Based on this, stakeholders are mainly referring to the development in revenue. As a result, we have identified accuracy of revenue as the second key audit matter in our audit. Furthermore, we have used revenue as basis in determining materiality as is further disclosed in the relevant section.

  The aforementioned two key audit matters are consistent with prior years. In addition, we have included the negative development of the financial results as a third key audit matter. The development of revenue (and as a result the result) have stayed behind expectations. Amongst others, this has resulted in a preventive adjustment of the bank covenant ‘net-interest-bearing-debt divided by EBITDA’ to an absolute EBITDA. The management board has made plans and executed actions, which should result in recovery. Because of the increased risk which is inherent to future plans we have paid specific attention to this topic in our audit.

  We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit. Therefore, we have included specialists in the areas of IT and income tax in our team. In addition, we have included experts in assessing the continuity assumption as a result of the negative development of the financial results, valuation of buildings and IFRS 16.

  The outline of our audit approach was as follows:

  Materiality Overall materiality: € 3.960.000. Audit scope We conducted audit work on the financial reporting of 3 entities. We have audited the full financial statements of Beter Bed B.V., BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria) as part of the audit of the consolidated financial statements of Beter Bed Holding N.V. We have visted the auditor who has performed audit procedures on the German and Austrian entities. Audit coverage: 89% of consolidated revenue, 88% of total assets and 77% of profit before taxation. Key audit matters Accuracy of net revenue Existence and valuation of inventories. Consequences of the negative development of financial results on the financial statements.

  Materiality
  The scope of our audit is influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the audit of the financial statements’.

  Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion. 

  Overall group materiality		€ 3.960.000 (2017: € 4,000,000).
  Basis for determining materiality		We used our professional judgement to determine overall materiality. As a basis for our judgement, we used 1% of total revenue.
  Rationale for benchmark applied		We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements. On this basis we believe that revenue is an important metric for the financial performance of the company. Profit before taxation is not considered an appropriate benchmark, because this would result in large fluctuations in overall group materiality year over year.
  Component materiality		To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was between € 2.000.000 and € 3.950.000.

  We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.

  We agreed with the supervisory board that we would report to them misstatements identified during our audit above € 100.000 (2017: € 100.000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

  The scope of our group audit
  Beter Bed Holding N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of Beter Bed Holding N.V.

  We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at component level by the Group engagement team and by each component auditor.

  The group audit primarily focussed on the significant components: Beter Bed B.V. and BBH Services GmbH & Co. KG (consolidated). At the level of BBH Services GmbH & Co. KG a subconsolidation is made for the German entities.

  We have performed an audit of the complete financial information for these two entities as these entities are individually significant considering their financial volumes. Additionally, three entities have been included in the group scope to achieve appropriate coverage on financial line items in the consolidated financial statements. As such, Matratzen Concord GmbH (Vienna, Austria) was subjected to audit of their financial information. For Beter Beheer B.V. and Beter Bed Holding N.V. specific audit procedures have been performed on material financial line items to achieve appropriate coverage on financial line items in the consolidated financial statements.
  

  In total, in performing these procedures, we achieved the following coverage on the financial line items:

  Net revenue		89%
  Total assets		88%
  Profit before tax		77%

  None of the remaining components represented more than 5% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.

  The group audit team performed audit procedures on the components Beter Bed B.V., Beter Beheer B.V. and Beter Bed Holding N.V. As the auditor of the group we used the work performed by the component auditor of BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria).

  Where component auditors performed the work, we determined the level of involvement we needed to have in their audit work to be able to conclude whether we had obtained sufficient appropriate audit evidence as a basis for our opinion on the consolidated financial statements as a whole.

  Before the start of their audit procedures we have shared detailed instructions. As group aditor, we have had periodic meetings with the auditor of the components where we discussed risks, the audit approach, process of the audit, and based on reports received from the auditor, findings and conclusions. For both entities the group audit team reviewed the audit file of the component auditor to assess the quality of work performed. We discussed the financial results, (important) estimates and findings of the audit with the financial director and the audit team of the components. Furthermore, the group engagement team visited the component team multiple times throughout the year and for example attended the year end clearance meeting on site in Germany for BBH Services GmbH & Co. KG (consolidated) and Matratzen Concord GmbH (Vienna, Austria).

  The group engagement team at the head office audits the group consolidation, financial statement disclosures and a number of specific items. These include share based payments, taxes and related disclosures and the company financial statements of Beter Bed Holding N.V.

  By performing the procedures above at components, combined with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial statements.

  Key audit matters
  Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters.

  We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comments or observations we made on the results of our procedures should be read in this context.

  Key audit matter		Our audit work and observations
  Accuracy of revenue Note 12 to the consolidated profit and loss account in the financial statements Revenue is an important measure used to evaluate the performance of the company (also refer to the materiality). There is a risk that the revenue is presented for amounts higher than what has been actually generated by the company, therefore this is a key audit matter. Revenue is accounted for when the sales transactions have been completed. This is when goods are delivered to the customer and no important economic risks remain for Beter Bed. Revenue is generated through store sales as well as online sales. Delivery has been completed when goods are paid and transferred to the customer in store or when goods are paid by the customer and delivered on location. These transactions are mainly processed automatically through IT.		We have assessed and evaluated the design and existence of the most important (automated) internal controls implemented by management, which are designed to ensure accurate processing of revenue transactions. Amongst these controls are controls related to the interface between the cash-register and the financial administration, 4-eye principle which is applied when making price changes, the reconciliation of payments made to drivers with bank receipts and the financial administration and the automated ‘three-way match’. Additionally, by means of a sample we took notice of the internal representation(s) where local management takes responsibility for the reported revenue and determined that these do not contain exceptional items, which could give further direction to the audit of the revenue. Furthermore, we have established the operating effectiveness of the internal controls considered relevant for our audit. The most important internal control procedure for the accuracy of the revenue is the automated three-way-match in SAP. We assessed the Information Technology General Controls (ITGC) as a basis to be able to reperform the three-way-match between sales order-delivery-invoice. By means of data-analysis, we have made the reconciliation to the sales order, packing slip and invoice. No material findings were noted. Furthermore, we have performed risk assessment analytical procedures on realised revenue through detailed store comparison. The results of our controls testing, reperformance of the three-way-match and analytical procedures have been the basis for the nature and scoping of the additional test of details, which mainly consisted of testing individual sales orders by reconciling them to proof of delivery (on location) or release. Additionally, we peformed substantive procedures on credit notes sent thoughout the year and after balance sheet date to ensure appropriate revenue per year-end. These audit procedures have not resulted in material findings.

  Key audit matter		Our audit work and observations
  Existence and valuation of inventories Note 4 to the consolidated balance sheet in the financial statements Total inventories of € 56 million represent ca. 40% of total assets of Beter Bed Holding N.V. These inventories mainly consist of inventories in the stores and inventories kept at the distribution centers. Given the absolute amount of the inventory we consider the existence of these inventories to be a key audit matter. Valuation of the inventories is at cost or at lower net realisable value. Valuation at cost includes different components including allocated supplier bonuses. The allocation of supplier bonuses and the assessment of revaluation of inventories to net realisable value is partly based on management estimates. As a result of this estimation and related uncertainty, we also consider the valuation of inventory to be a key audit matter of our audit.		Our audit procedures to test the existence of the inventories mainly consist of testing the relevant internal control procedures, specifically by testing the inventory cycle counts that are periodically performed by management and the automated recording of sales transactions (three-way-match). Throughout the year, we have attended a selection of inventory cycle counts in stores and in the distribution centers, to validate counts performed by the company. We compared our count results with the results of the counts by Beter Bed representatives and noted no material differences. In addition, we have performed a sample count on the inventory for several distribution centers per year end. We compared our count results with the inventory administration and noted no material differences. To validate the valuation of inventories, we performed test of details on historical costs, actual margins and valuation of obsolete inventories. Historical costs were tested through reconciling historical costs with the original purchase invoice on a sample basis. Hereby, no material differences were noted. We assessed whether there were inventories which were sold with a (consistent) negative margin by evaluating recent sales invoices from January and February 2019 to validate management’s assessment and decision whether inventories should or should not be impaired. Furthermore, we analysed the inventory turnover and compared that to management’s estimates on obsolete inventories. These audit procedures have not resulted in findings to be communicated. For the allocation of supplier bonuses to the valuation of inventories at cost we recalculated the supplier bonuses per supplier based on supporting contracts. The settled supplier bonuses were tested by reconciling them to the bank statements. Furthermore, we have validated mathematical accuracy of the allocation to inventories as per year end. Finally, we have established that for main suppliers not included in the calculation no supplier bonuses were received and were therefore rigthfully excluded from the calculation of the inventory valuation. We have established that in 2019 no credit notes were received for this. Based on the audit procedures performed, we have not found any material findings.

  Key audit matter		Our audit work and observations
  Consequences of the negative development of financial results on the financial statements [Note ‘Extraordinary items’ of the general notes] Because of several circumstances, the development of revenue (and as such the results) has lagged behind. This has resulted into a strategic redesign, scenario analysis, reorganisation of Matratzen Concord, sale of the Spanish activities and a temporary, preventive amendment to the financing agreement where the bank covenant ‘net-interest-bearing-debt divided by EBITDA’ was adjusted once with an absolute EBITDA per 31 December 2018. The plans and actions taken by management should result in recovery of revenue and as such, the results. This recovery is partly dependent on external factors. Because of the uncertainty inherent in forward-looking plans and the underlying assumptions of, amongst others, revenue growth, we have included the consequences of the negative development of the financial result as a key audit matter for our audit.		The management board has made an analysis of the expected compliance of the company with the criteria on the bank covenants, including the ‘net-interest-bearing-debt divided by EBITDA’ ratio as at 30 June 2019, 31 December 2019 and 30 June 2020. In this analysis, management made various assumptions. We have assessed this analysis, including the assumptions, with the support of our experts. Where possible, we have tested these assumptions by comparing them to previously realised results, operational KPIs, results of actions taken and external sources. The underlying assumptions, opportunities and threads have been important points of attention in this process, as well as the sensitivity analysis on the bank covenant ‘net-interest-bearing-debt divided by EBITDA’. We have assessed the analysis by means of a mix of audit techniques such as inquiry with different people within the company, calculations on the different models, reconciliation to supporting documentation and external documents. In addition, we have assessed the notes in the financial statements and the annual report. Based on the work performed we have no material findings to the applied assumption of continuity.

  Report on the other information included in the annual report

  In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of: Introduction, Organisational structure, Management Board, Facts and figures, Strategy, Report of the Management Board, Regions, CSR, Corporate Governance, Supervisory Board, Report of the Supervisory Board, Remuneration report, Share information, Discontinued Operation, Additional details, Appropriation of result pursuant to the articles of association, Historical summary and Financial calendar.

  Based on the procedures performed as set out below, we conclude that the other information:

  • is consistent with the financial statements and does not contain material misstatements;
  • contains the information that is required by Part 9 of Book 2 of the Dutch Civil Code.

  We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

  By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.

  The management board is responsible for the preparation of the other information, including the directors’ report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code.

  Report on other legal and regulatory requirements

  Our appointment
  We were appointed as auditors of Beter Bed Holding N.V. on 19 May 2015 by the supervisory board following the passing of a resolution by the shareholders at the annual meeting held on 19 May 2015. Our appointment has been renewed annually by shareholders representing a total period of uninterrupted engagement appointment of 4 years.

  No prohibited non-audit services
  To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of the European Regulation on specific requirements regarding statutory audit of public-interest entities.

  Services rendered
  The services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to which our statutory audit relates, are disclosed in note 22 to the financial statements.

  Responsibilities for the financial statements and the audit

  Responsibilities of the management board and the supervisory board for the financial statements
  The management board is responsible for:

  • the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code; and for
  • such internal control as the management board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

  As part of the preparation of the financial statements, the management board is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the management board should prepare the financial statements using the going-concern basis of accounting unless the management board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The management board should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements.

  The supervisory board is responsible for overseeing the Company’s financial reporting process.

  Our responsibilities for the audit of the financial statements
  Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

  Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

  A more detailed description of our responsibilities is set out in the appendix to our report.

  Rotterdam, the Netherlands, 28 February 2019
  PricewaterhouseCoopers Accountants N.V.
  
  
  
  Original has been signed by drs. W.C. van Rooij RA

  Appendix to our auditor’s report on the financial statements 2018 of Beter Bed Holding N.V.

  In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.

  The auditor’s responsibilities for the audit of the financial statements
  We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error.

  Our audit consisted, among other things of the following:

  • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
  • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management board.
  • Concluding on the appropriateness of the management board’s use of the going-concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the company to cease to continue as a going concern.
  • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

  Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.

  We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect, we also issue an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

  We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

  From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

• Appropriation of result pursuant to the articles of association

  Article 34 of the Articles of Association states the most important provisions pertaining to the appropriation of result:

  Paragraph 1

  Every year the Management Board, subject to approval from the Supervisory Board, determines the proportion of the company’s profit – the positive balance of the profit and loss account – to be added to the company’s reserves.

  Paragraph 2

  The profit remaining after the reservation pursuant to the previous paragraph shall be placed at the disposal of the Annual General Meeting.