Notes to the consolidated balance sheet and profit and loss account

in thousand €, unless otherwise stated

• 1 Tangible assets

  	Land	Buildings	Other fixed operating assets	Total
  Book value 1 January 2017	7,132	3,983	26,955	38,070
  Additions	-	54	17,520	17,574
  Revaluation	(20)	-	-	(20)
  Currency adjustment	-	-	(67)	(67)
  Disposals	(22)	(11)	(174)	(207)
  Depreciation	-	(347)	(10,767)	(11,114)
  Book value 31 December 2017	7,090	3,679	33,467	44,236
  Accumulated depreciation	-	6,827	82,232	89,059
  Accumulated revaluation	(3,730)	-	-	(3,730)
  Purchase price	3,360	10,506	115,699	129,565
  Book value 1 January 2018	7,090	3,679	33,467	44,236
  Additions	-	-	12,274	12,274
  Revaluation	295	-	-	295
  Currency adjustment	-	-	18	18
  Disposals	-	-	(432)	(432)
  Depreciation	-	(327)	(13,168)	(13,495)
  Impairment	-	-	(1,639)	(1,639)
  Book value 31 December 2018	7,385	3,352	30,520	41,257
  Accumulated depreciation and impairment	-	7,154	84,541	91,695
  Accumulated revaluation	(4,025)	-	-	(4,025)
  Purchase price	3,360	10,506	115,061	128,927

  A further explanation of the investments is enclosed in the report of the Management Board.

  The cumulative revaluation relates to the land forming part of the properties owned. The land forming part of the properties was valued by an independent valuer in December 2018. The valuations have been performed using the GIY/NIY method.

  In relation to the discontinuation of the operations in Spain, an impairment of € 1.2 million is recognised in 2018. Furthermore, an impairment of € 0.4 million is recognised in relation to the store closures in Germany, Austria and Switzerland following the restructuring of Matratzen Concord.

  Both impairments are included in 'Other fixed operating assets' category.

  The tangible assets are intended for own use.

• 2 Intangible assets

  		2018	2017
  Book value 1 January		9,030	7,002
  Additions		5,054	3,810
  Currency adjustment		(70)	(49)
  Disposals		(92)	-
  Amortisation		(2,148)	(1,733)
  Impairment		(463)	-
  Book value 31 December		11,311	9,030
  Accumulated amortisation and impairment		13,774	12,917
  Purchase price		25,085	21,947

  A further explanation of the investments is enclosed in the report of the Management Board.

  The intangible assets are comprised of the acquired 'Sängjätten' brand name (€ 1.4 million) and licenses and software (€ 9.9 million).

  In relation to the migration to one web shop platform in the Netherlands and Belgium an impairment of € 0.5 million is recognised for the old platform.

• 3 Financial assets

  The financial assets consist on the one hand of deposits of € 94 (2017: € 526) and on the other hand of deferred tax assets of € 13,273 (2017: € 2,353).

  The guarantee deposits are related to rental agreements for stores. These are classified under financial assets due to the non-current nature of these receivables.

  The deferred tax assets at year-end can be broken down as follows:

  	2018	2017
  Tax loss carry-forwards	12,758	1,772
  Difference tax and financial reporting valuation (in)tangible assets	294	312
  Difference tax and financial reporting valuation pension	221	253
  Difference tax and financial reporting valuation inventories	-	16
  Balance at 31 December	13,273	2,353

  At year-end 2018, a tax credit of € 12,758 (2017: € 1,772) for future loss carry-forwards was recognised under financial assets. This relates partly to losses available for carry-forward in Germany, Austria, Switzerland and Sweden. In addition, in this tax credit an amount of € 4.9 million is recognised in relation to the anticipated liquidation of the Spanish legal entities in 2019. As Beter Bed Holding N.V. 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 € 10,356 (2017: € 10,790) in loss carry-forwards has not been recognised. Beter Bed Holding N.V.’s policy is that tax losses available for carry-forward 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 carry-forward expire as follows:

  Term
  1 year	-
  2 to 5 years	-
  6 to 10 years	2,759
  11 to 15 years	-
  Indefinite	7,597

  Movements in deferred tax assets in 2018 and 2017 were as follows:

  	2018	2017
  Balance at 1 January	2,353	1,217
  Through profit and loss account	10,920	1,136
  Through equity	-	-
  Balance at 31 December	13,273	2,353

• 4 Inventories

  This comprises inventories held in stores of € 48,418 (2017: € 58,914) and inventories held in warehouses of € 7,261 (2017: € 6,783). The write-down for possible obsolescence included in this item can be broken down as follows:

  		2018	2017
  Balance at 1 January		1,215	1,874
  Additions		1,062	1,236
  Withdrawals		(1,507)	(1,895)
  Balance at 31 December		770	1,215

  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 obsolete inventories mainly relates to 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 € 3,009 (2017: € 5,492). The direct net realisable value of these inventories is € 2,239 (2017: € 4,277). Therefore the percentage of inventories for which there is a risk of obsolescence compared with total inventories was 5.3% (2017: 8.2%).

• 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.

  A provision of € 8 (2017: € 13) has been recognised for receivables due from wholesalers. This is 2.6% (2017: 1.7%) of the overdue receivables.

• 6 Cash and cash equivalents

  Cash and cash equivalents can be broken down as follows:

  		2018	2017
  Bank balances		2,842	15,557
  Cash		470	407
  Cash in transit		2,861	1,705
  Cash and cash equivalents in the consolidated balance sheet		6,173	17,669
  Bank overdrafts		(22,998)	(17,481)
  Cash and cash equivalents in the consolidated cash flow statement		(16,825)	188

• 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:

  		2018	2017
  Issued and paid-up shares as at 1 January		21,955,562	21,955,562
  Share issue on exercise of employee stock options		-	-
  Issued and paid-up shares as at 31 December		21,955,562	21,955,562
  Shares in portfolio as at 1 January		-	-
  Repurchased during the year		-	-
  (Re)issue on exercise of options		-	-
  Sale of shares in portfolio		-	-
  Shares in portfolio as at 31 December		-	-

  The revaluation reserve relates to land.

• 8 Provisions

  In relation to the restructuring of Matratzen Concord in Germany, Austria and Switzerland, a provision of € 5.0 million was recognised. This amount relates to employee termination payments and to lease contract termination costs. The Group expects to settle the majority of these contracts in 2019.

  The remaining provision relates to onerous contracts for long-term leases relating to discontinued retail 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 can be broken down as follows:

  		2018	2017
  Balance at 1 January		121	275
  Additions		4,999	-
  Withdrawals		(77)	(154)
  Balance at 31 December		5,043	121
  Of which current (in other liabilities)		4,040	77
  Total provisions		1,003	44

• 9 Deferred tax liabilities

  The deferred tax liabilities relate mainly to the differences between the valuation of fixed assets and inventories in the Netherlands, Germany and Switzerland for tax and financial reporting purposes. These differences are long-term by nature.

  The deferred tax liabilities at year-end can be broken down as follows:

  	2018	2017
  Difference tax and financial reporting valuation tangible assets	1,743	1,609
  Revaluation of company land	825	932
  Difference tax and financial reporting valuation inventories	835	770
  Difference tax and financial accounting rental obligations	49	72
  Total	3,452	3,383

  Movements in this item in 2018 and 2017 were as follows:

  	2018	2017
  Balance at 1 January	3,383	2,154
  Through profit and loss account	177	1,229
  Through equity	(108)	-
  Balance at 31 December	3,452	3,383

• 10 Current liabilities

  To fund the Group the company has current account facilities totalling € 40.5 million at its disposal. Furthermore, facilities totalling € 7.9 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, amounting € 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 net interest-bearing debt/EBITDA ratio of 2.5. The net interest-bearing debt/EBITDA ratio was not measured at year-end 2018 due to the fact that the way of measuring was amended as agreed with the banks. Based upon discussions held with the banks the aforementioned ratio is amended into an absolute EBITDA measure per 31 December 2018. The amended agreements have been met and as of 30 June 2019 the original ratio of net interest-bearing debt/EBITDA with a maximum of 2.5 will be measured again.

  At the end of the year under review, an amount of € 23.0 million (2017: € 17.5 million) was used under the current account facilities. These facilities were also used for providing bank guarantees for the purpose of rental payments amounting to € 0.7 million (2017: € 0.5 million). Of the facilities available specifically to provide guarantees, a total of € 6.8 million was used at year-end 2018 (2017: € 6.7 million).

  The other liabilities can be broken down as follows:

  	2018	2017
  Prepayments	12,050	11,977
  Accruals personnel and staff benefits	8,512	8,413
  Provisions	4,040	77
  Other	4,599	3,393
  Total	29,201	23,860

  The item accrual for staff costs and employee benefits includes a pension liability for a former employee. This liability of € 1.4 million (2017: € 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
  2018
  Accounts payable	24,409	-	-
  Credit institutions	22,998	-	-
  Total	47,407	-	-
  2017
  Accounts payable	30,629	-	-
  Credit institutions	17,481	-	-
  Total	48,110	-	-

  The market value of the financial liabilities approximates their amortised cost.
  

• 12 Information by geographical area

  Sales by country	2018	%	2017	%
  Germany	185,523	47	202,426	50
  The Netherlands	151,858	38	149,052	36
  Other countries	60,385	15	58,546	14
  Intercompany adjustment	(1,435)	-	(1,239)	-
  Total	396,331	100	408,785	100

  
  

  (In)tangible fixed assets by country			2018	2017
  The Netherlands			25,969	25,285
  Germany			17,650	19,482
  Other countries			8,949	8,499
  Total			52,568	53,266

• 13 Personnel expenses

  The operating expenses include the following wage and salary components:

  		2018	2017
  Wages and salaries		90,234	86,389
  Social security costs		16,526	15,582
  Pension costs		3,412	3,581
  Employee stock options		83	268
  Total		110,255	105,820

  The pension contributions relate virtually exclusively to defined contribution schemes or schemes designated as such. Within the costs of employee stock options, € 28 relates to the current and former members of the company’s Management Board (2017: € 116).

  Average number of employees

  The companies included in the consolidation had an average of 2,807 employees (FTE) in 2018 (2017: 2,728):

  		2018	2017
  Germany		1,651	1,667
  The Netherlands		749	711
  Austria		155	155
  Switzerland		133	109
  Sweden		94	68
  Belgium		25	18
  Total		2,807	2,728

• 14 Option program

  The options are long-term in nature and can be exercised providing that the profit target has been met. With effect from 2013, the costs of the option 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.

  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 program 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.

  	2018 Signing options	2018	2017	2016	2014
  Number granted	100,000	37,500	128,500	197,500	166,700
  Number outstanding	100,000	27,500	5,000	5,000	12,000
  Value per option in €	0.31	1.11	1.54	2.44	1.78 - 1.93
  Exercise from	01-04-2021	26-04-2021	18-05-2020	19-05-2019	19-05-2017
  Exercise through	31-03-2022	25-04-2023	17-05-2022	18-05-2021	19-05-2019
  TSR > AScX	N/A	-	-	-	Partly
  TSR > Peer Group	N/A	-	-	-	33.3%
  Share price in € on the allotment date	9.31	9.04	15.78	20.00	17.37
  Exercise price in €	13.06	8.24	15.53	19.99	17.37
  Expected life	4 years	5 years	5 years	5 years	5 years
  Risk-free rate of interest (%)	(0.25)	0.03	(0.27)	(0.52)	0.78 - 0.46
  Volatility (%)1	23.17	22.80	22.10	25.40	27.50 - 21.94
  Dividend yield (%)	4.71	4.70	4.40	3.40	5.20

  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 2018 204,066 options expired as a number of employees holding options left the company before the expiration dates. In addition, a total of 1,666 options expired in 2018 due to the expiry of their term. Furthermore, a portion of the options expired because the vesting conditions were not satisfied. It concerned the 2015 part III series. Lastly, 137,500 new options were granted in 2018.

• 15 Depreciation and amortisation

  		2018	2017
  Depreciation and impairment on tangible assets		13,690	10,833
  Amortisation and impairment on intangible assets		2,497	1,726
  Total of depreciation, amortisation and impairment		16,187	12,559

  
  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% to 33%
  Intangible assets	5% to 33%

• 16 Other operating expenses

  The other operating expenses comprise € 54.1 million in rental and lease costs (2017: € 49.3 million), with the remainder relating mainly to marketing expenses of € 21.1 million (2017: € 15.0 million), general expenses of € 17.0 million (2017: € 13.9 million) and other housing expenses of € 15.2 million (2017: € 14.6 million).

• 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:

  	2018	2017
  Profit (loss) before taxes from continuing operations	(24,843)	15,322
  Tax using the company's domestic tax rate: 25.0% (2017: 25.0%)	6,211	(3,830)
  Adjustment profit tax previous years	(2,438)	(60)
  Permanent differences	3,074	79
  Future loss set-off not included	(1,516)	(633)
  Tax losses carried forward	-	120
  Effect of the tax rates outside the Netherlands	908	(170)
  At an effective tax rate of 25.1% (2017: 29.3%)	6,239	(4,494)
  Profit tax in the consolidated profit and loss account	6,239	(4,494)

  The effective tax rate decreased to 25.1% in 2018 (2017: 29.3%). A tax gain of € 4.9 million is recognised as permanent difference in relation to the anticipated liquidation of the Spanish legal entities in 2019. This liquidation loss regulation is part of the Dutch corporate income tax laws and regulations.

  Furthermore a tax loss of € 2.5 million is recognised as adjustment profit tax previous years in relation to the outcome of a tax audit in Germany. The impact relates to intercompany loans and its interest rates over the period 2011-2016.

  The item tax in the profit and loss account comprises the following:

  	2,018	2,017
  Tax for current year	8,677	(4,527)
  Adjustment of profit tax for prior years	(2,438)	(60)
  Temporary differences	-	93
  Profit tax in the consolidated profit and loss account	6,239	(4,494)

• 18 Discontinued operations

  	2018	2017
  Sales	6,310	7,641
  Cost of sales	(3,453)	(4,007)
  Gross profit	2,857	3,634
  Total expenses	(7,503)	(4,937)
  Loss from discontinued operations (net of tax)	(4,646)	(1,303)

  Beter Bed Holding N.V. sold the operations of El Gigante del Colchón effective 1 November 2018, following the announcement made on 27 July 2018 that Beter Bed Holding N.V. would look into possibilities in the second half of 2018 to transfer the exploitation. Via an asset deal all stores and employees related to the operation were transferred to the purchaser. The liquidation of the legal entities in Spain is anticipated in 2019.

  	2018	2017
  Cash flow from operating activities	(2,640)	(1,014)
  Cash flow from investing activities	(692)	(238)
  Net cash flow	(3,332)	(1,252)

• 19 Remuneration of the Management and Supervisory Board

  The remuneration of members of the Management Board was as follows in 2018 and 2017:

  	2018
  	Salary	Variable remune- ration	Pension	Employee stock options	Social security charges	Mobility cost	Total
  A.J.G.P.M. Kruijssen1	338	142	101	8	8	41	638
  H.G. van den Ochtend2	85	43	21	-	3	4	156
  B.F. Koops3	149	-	37	20	10	8	224
  Total	572	185	159	28	21	53	1,018

  1. ¹ As of 1 April 2018.
  2. ² As of 1 September 2018.
  3. ³ From 1 January up to and including 31 July 2018.

  	2017
  	Salary	Variable remune- ration	Pension	Employee stock options	Social security charges	Mobility cost	Total
  A.H. Anbeek1	297	-	89	52	14	10	462
  B.F. Koops	255	56	64	64	17	16	472
  Total	552	56	153	116	31	26	934

  1. ¹ From 1 January 2017 up to and including 31 October 2017.

  The variable remuneration relates to the year under which it is classified and is recognised in the expenses of that year. The maximum variable remuneration for the CEO for 2018 is equal to 60% of the gross fixed annual salary (split into 50% for quantitative targets and 50% for qualitative targets). The maximum variable remuneration for the CFO is 50% of the gross fixed annual salary (split into 40% for quantitative targets and 60% for qualitative targets). For both the CEO and CFO separate agreements were made related to the variable remuneration in 2018 at the time of nomination. The reported variable remuneration is the contractual agreed, guaranteed bonus for 2018.

  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, Mr Kruijssen held 10,000 shares in Beter Bed Holding. 

  The remuneration of the members of the Supervisory Board was as follows in 2018 and 2017:

  	2018	2017
  D.R. Goeminne	40	40
  H.C.M. Vermeulen	17	-
  A. Beyens	3	-
  P.C. Boone	3	-
  B.E. Karis	3	-
  E.A. de Groot 1	28	30
  W.T.C. van der Vis¹	28	30
  A.J.L. Slippens¹	9	26
  Total	131	126

  1. ¹ Stepped down in 2018.

  The members of the Supervisory Board hold no shares or exercisable options on shares in Beter Bed Holding.

• 20 Earnings per share

  A loss of € 23.3 million divided by the average number of outstanding shares totalling 21,955,562 equates to earnings per share of € (1.06) in 2018 (2017: € 0.43). The number of shares used for the calculation of diluted earnings per share also amounts to 21,955,562. This results in diluted earnings per share of € (1.06) compared to € 0.43 in 2017.

  The earnings per share and diluted earnings per share of the continuing operations amount to € (0.85) and € (0.85) respectively compared to € 0.49 and € 0.49 in 2017.

• 21 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	2019	2020	2021	2022	2023	after 2023
  Rental agreements	42,521	34,601	25,540	13,701	6,209	5,263
  Lease agreements	2,825	2,247	1,432	709	370	173
  Total	45,346	36,848	26,972	14,410	6,579	5,436

  The majority of the rental agreements for the company premises required for the Benelux are long-term agreements (between five and ten years), with options for renewal. The majority of the rental agreements for Matratzen Concord 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 € 51.0 million (2017: € 46.5 million) arising from rental agreements and € 3.1 million (2017: € 2.8 million) arising from lease agreements were accounted for in the profit and loss account.

• 22 Audit fees

  The fees for the audit of the financial statements and other non-audit services by the independent auditor PwC Accountants were:

  		2018	2017
  Audit of financial statements		343	265
  Other non-audit services		41	16
  Total		384	281

  The fees for the audit of the financial statements and other non-audit services performed by PwC Accountants in the Netherlands were € 238 (2017: € 130).

  The other non-audit service in 2018 relates to the review of the interim figures.

• 23 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.

  There were no transactions in 2018 between the company and natural or legal persons holding at least 10% of the shares in the company that were of material significance to the company and/or the persons concerned.

• 24 Events after the balance sheet date

  There have been no subsequent events between the end of the year under review and the preparation of these financial statements which ought to be disclosed.