Annual Report 2018

Investment, financing and cash flow

Total capital investments amounted to € 17.4 million in 2018. This largely related to investments in early 2018 in new and existing stores, in a new distribution centre in Switzerland and in the IT infrastructure. The largest investments were made in refurbishments at Matratzen Concord and the opening of stores in the growth markets Belgium and Sweden. These investments in the physical channel were discontinued in the course of 2018. By contrast, investments in the new strategic themes Online, Digital, Data Analytics and IT infrastructure were continued.

The change in net cash and cash equivalents was € (17.0) million. This consisted of a positive operating cash flow, a cash flow from investing activities of € (16.4) million, and a cash flow from financing activities of € (0.7) million. The improvement in net working capital1 by € 3.8 million was entirely driven by a reduction of inventories by € 10.0 million. This was achieved by improved process design, such as shifting ordering inventory at a store level to centrally coordinated store ordering on the basis of customer orders and the commercial program. In addition, accounts payable decreased by € 6.2 million due to lower purchasing.

The negative cash flow led to an increase in amounts owed to credit institutions. Due to the significant improvements of inventory levels in the second half of 2018, it was possible to absorb the entire negative cash flow within the existing facilities. Therefore the entire restructuring was financed from existing funds.

Due to the financial results the Group expects not to pay dividend over 2018 and 2019.

Solvency decreased to 33.2% compared with 44.8% in 2017. This decrease was mainly attributable to the fact that the net loss resulted in lower equity. The ratio between net interest-bearing debt and EBITDA was not measured at the end of 2018 because of a one-time adjusted method of measuring the agreements with the banks. This was adjusted based on the requirement of providing, as a minimum, an absolute EBITDA excluding the one-off costs for the restructuring. The one-time adjusted agreement was implemented and as from 30 June 2019, the original ratio between net interest-bearing debt and EBITDA will be measured again with a maximum permitted ratio of 2.5.

1Net working capital = inventories -/- trade payables + trade accounts receivable.