Financial results

The year 2018 was characterised by strongly decreasing financial results in the first three quarters and the restructuring in the fourth quarter. Both sales and profit fell sharply due to changing customer trends and retail developments, to which Beter Bed Holding failed to respond in time and effectively enough until the strategy was refocused on 26 October 2018.

This led to a 3.0% decrease in sales from continuing operations in 2018, to € 396.3 million. This no longer included the sales of € 6.3 million in 2018 from the Spanish activities (see Discontinued operations). Two different trends were clearly visible in the results. Various commercial measures were taken in the Benelux markets, leading to good results. This positive effect was more than offset by disappointing results at Matratzen Concord in Germany, Austria and Switzerland in the first three quarters. However, the successful completion of the necessary restructuring of Matratzen Concord in the fourth quarter was a positive outcome.

Sales at Beter Bed Benelux increased by 4.9%. Within the operations in the Netherlands, both Beter Bed and Beddenreus increased their market share by executing commercial activities with greater focus and better execution than in 2017. This led to relevant innovation, simplification of the product range, more competitive pricing, clearer communication and new advertising campaigns, such as the Mattress for Life. In addition, very strong growth of the online channel was achieved. The share of online sales is competitive in the Dutch market. The specific online knowledge in the Dutch organisation and the operational infrastructure are considered to be future-proof and provide a solid basis for achieving synergies between the retail brands of Beter Bed Holding.

In 2018 the market share in the Netherlands increased, as higher sales growth was achieved than for the market overall on the basis of INretail data.

As in 2016 and 2017, the Matratzen Concord stores in Germany, Austria and Switzerland had a very hard time in 2018. Significant market trends, such as the growing demand for box springs, the growth of the online channel and customers’ need for a one-size-fits-all mattress were identified but not responded to adequately. As a result, sales per store fell sharply since 2015 and the gross profit on sales was insufficient to cover the cost base. The cost base, at an absolute level, was also strongly driven by investments in various projects and departments which, in retrospect, led to neither growth in sales nor profit contributions. Overall, this resulted in significant losses within the Matratzen Concord organisation.

In response to these developments, Matratzen Concord announced a restructuring in October 2018 to make it resilient again for the future. Measures taken as part of this restructuring included the closure of 172 stores, a reduction of the workforce by 64 FTEs, a reduction of surplus inventories of more than € 8 million and the discontinuation of non-performing marketing and IT projects. All these objectives were successfully achieved in the fourth quarter of 2018, as a result of which the cost base in the profit and loss account as at 1 January 2019 was reduced by € 15 million. In order to carry out this restructuring as rapidly and successfully as possible, one-off costs of € 8 million were recognised in the fourth quarter of 2018 for, in the main, settling the rental agreements of the closed stores and responsibly and respectfully terminating the contracts of the redundant employees. The impact of these one-off costs on cash flow will be mainly recognised in 2019 and has been financed in full by the inventory measures referred to above.

Developments at Sängjätten in Sweden were mixed. A significant focus point for 2018 was to further roll out the store network by adding 11 locations, reaching a total of 27 stores at the end of 2018. This was a first successful expansion towards a national coverage in Sweden. As the focus was mainly on expansion, there was insufficient attention for the performance of the existing stores, which will however be prioritised in 2019. The leadership team has been adjusted with a view to achieving this.

In total, Beter Bed Holding achieved sales of € 396.3 million and EBITDA – adjusted for the one-off costs for the restructuring – of € 0.6 million. The net loss totalled € 23.3 million.

EBITDA was driven by a combination of a falling gross profit due to the lower sales and a rising cost base. The successful implementation of the restructuring in the fourth quarter of 2018 to address this will make it possible to start 2019 on a healthier basis.

Gross profit decreased to 55.7% in 2018. This decrease was attributable to various mix effects in the portfolio of Beter Bed Holding. Firstly, owing to the strongly increased competitive pressures, an increased proportion of sales promotion campaigns and local price cuts were implemented, which was not yet compensated for by the cost saving projects on goods purchasing initiated in the course of 2018. Secondly, the changed relation between growth in the Benelux region and decreases at Matratzen Concord had a negative impact on profit. Thirdly, the impact of the increased online share was slightly negative. Lastly, the inventory sales of the closed Matratzen Concord stores led to pressure on margins.

Costs increased by € 24.5 million to € 244.6 million in 2018. Firstly, an amount of € 7.6 million in one-off costs was recognised for the restructuring of the Matratzen Concord organisation in Germany, Austria and Switzerland. Secondly, depreciation and impairments of fixed assets increased due to the investments made until the start of 2018 and the sale of the activities in Spain. Thirdly, the other operating expenses increased due to the operational costs relating to the expansion in the growth markets Belgium and Sweden (rental and logistics costs). Fourthly, additional sales and logistics staff needed to be deployed to achieve the growth in the Benelux market. Lastly, various costs were incurred in early 2018 in connection with additional marketing, online expansion and logistics. These logistics costs relate mainly to the addition of a distribution centre in Switzerland.

The decrease in sales and profit on the one hand and the increase in costs on the other (partly as a result of the one-off costs relating to the restructuring) resulted in a net loss of € 23.3 million.