Eve Sleep plc: Final Results

Eve Sleep plc (EVE) 
Eve Sleep plc: Final Results 
 
24-March-2020 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
    eve Sleep plc ("eve" the "Company" or the "Group") 
 
    Full Year Results 
 
Benefits of rebuild strategy increasingly evident, operationally profitable4 
    across last four months of 2019 
 
 eve, a direct-to-consumer sleep wellness brand operating in the UK, Ireland 
      (together the "UK&I") and France, its "Core Markets", today issues its 
         audited results for the year ended 31 December 2019 (the "Period"). 
 
         Financial Highlights 1 
 
                             2019 GBPm 2018 GBPm Movement 
                   Revenue 2    23.9    29.4     -19% 
              Gross profit 2    12.8    15.5     -18% 
       Gross profit margin 2   53.4%   52.7%  +70 bps 
Marketing contribution 2,3,4   (2.6)   (5.8)   +GBP3.2m 
    Underlying EBITDA loss 5  (10.7)  (19.1)   +GBP8.5m 
 Statutory loss for the year  (12.1)  (20.1)   +GBP8.0m 
 Cash and cash equivalents 6     8.0     6.0   +GBP2.0m 
 
         Financial Highlights 
 
· Sharpened focus on profitable sales, with gross margin in Core Markets2 
up 70bps; 
 
· Planned reduction in revenue and focus on move to profitability resulted 
in improved underlying EBITDA loss, which reduced by 44% to GBP10.7m (2018: 
GBP19.1m loss); 
 
· Reduced operating cash burn by 55%, with further cost savings made in Q4 
such that the combined trading performance in the last four months of the 
financial year reached the milestone of marketing contribution breakeven4; 
 
· Raised GBP11.7m net of expenses in new equity and GBP0.9m in advertising 
credits from Channel Four in February 2019. 
 
         Operational Highlights 
 
· 50% increase in UK&I unprompted brand awareness from 10% in January 2019 
to 15% in August 2019; 
 
· Increased brand loyalty with the customer repeat rate in the UK&I up 
230bps to 16.7% and up 360bps in France to 17.0%; 
 
· eve's premium hybrid mattress, launched June 2019, announced as the top 
scoring mattress by Which? in December 2019, giving eve's full adult 
mattress range Which? Best Buy ratings; 
 
· Extended ranges, with the contribution of non-mattress products in core 
markets up 230bps to 22.0%; 
 
· Extended omni-channel reach with new retail partnerships with Argos, 
Homebase and Dunelm; 
 
· Commenced 3 year deal with British Rowing to be their official sleep 
partner, supporting the GB Rowing Team as they train and compete at home 
and overseas; 
 
· Returns rate in core markets reduced 40bps to 8.9%. 
 
         Current trading 
 
 Trading in the first two months of the year has started well and is in-line 
  with the Board's expectations, with demand for the premium hybrid mattress 
      proving particularly strong. The business has now generated a positive 
         marketing contribution4 for the six months to 29 February 2020. 
 
  Wider market uncertainty increased further in the first two weeks of March 
   with the advent of COVID-19 but at that time there had been no noticeable 
   impact on demand, our operations or our supply chain. Over the last week, 
    since mid-March, we have seen some impact on traffic and consumer demand 
     attributable to the fast changing COVID-19 situation, and believe it is 
reasonable to expect somewhat subdued demand for a period of time whilst the 
         COVID-19 situation prevails. 
 
      The Board has reviewed planning scenarios and has prepared a number of 
    appropriate measures to conserve the Group's cash balance and ensure the 
robustness of the business should it be required. Given eve's business model 
  as a direct to consumer (DTC) led retailer, its most significant costs are 
 marketing rather than the costs associated with a store estate, and we have 
 significant flexibility to control our spending and therefore cash outflows 
in this regard. The Company's marketing spend will continue to be kept under 
    constant review, with adjustments to plans made where appropriate and in 
         line with the fast changing economic situation. 
 
     On 15 March, the Board took the decision to ensure all of the Company's 
employees were to work from home. The Company's employees are more than used 
  to working from home as a result of a flexible working culture and as such 
 we have not experienced any material issues or disruptions to the Company's 
         operations as a result of this decision. 
 
To date we have seen only a small impact upon our supply chain, and where we 
   have seen impact, we have taken precautionary measures including stronger 
stock holding of products to ensure adequate coverage for the coming months, 
  and hence we currently envisage being able to meet customer demand for our 
 products, albeit at reduced levels. Further interventions by governments in 
     the jurisdictions in which we operate may have a material impact on our 
         supply chain and/or delivery capability going forward. 
 
         James Sturrock, CEO of eve Sleep, commented: 
 
     "We enter 2020 in good shape, with the benefits of the rebuild strategy 
        becoming increasingly evident. We have award winning products and an 
       increasingly differentiated, premium brand position in sleep wellness 
      compared to the more price led, mattress focused peers, underpinned by 
      upgraded operational capability and a significantly reduced cost base. 
      Improved financial and operational KPIs demonstrate increased customer 
         loyalty across our expanding product suite. 
 
  I am delighted that in the six months to 29 February 2020 eve has improved 
    marketing efficiency 7 and reduced central overheads and is on course to 
       deliver a significant EBITDA improvement in 2020. While there remains 
  considerable wider market uncertainty over the rest of the financial year, 
we have a healthy net cash position of GBP7.8m as at 29 February 2020, no debt 
         and a rebuild strategy that is delivering." 
 
         Footnotes 
 
 1 Financial data has been rounded for presentation purposes. As a result of 
   this rounding the totals, comparatives and calculations presented in this 
 document may vary slightly from the arithmetic totals or calculations using 
         such data. 
 
2 In July 2018, the Board reviewed the number of territories that eve traded 
   from, deciding to focus on the "Core Markets" of the UK&I and France, and 
   withdrawing from the other territories. Thus, this note presents revenue, 
gross profit, gross profit margin and marketing contribution attributable to 
         the Core Markets for the current and prior period. 
 
3 Indirect marketing costs, such as the costs of production of TV campaigns, 
      were previously presented within overheads but are now included within 
   marketing costs. 2018 marketing costs have been restated to include these 
     indirect marketing costs. The impact of this restatement solely impacts 
  management information (direct and indirect marketing costs being included 
        in administrative expenses in both the current and prior period) and 
  therefore there is no impact of the restatement on the statutory statement 
         of profit and loss and other comprehensive income. 
 
      4 Marketing contribution is defined as the profit/loss after marketing 
  expenditure but before payroll and overhead costs; a measure also referred 
         to as operational profitability. 
 
       5 Underlying EBITDA is defined as earnings before interest, taxation, 
         depreciation, amortisation, impairment, share-based payment charges 
   connected with employee remuneration, fundraise-related expenditure (2019 
         only) and staff and country exit costs (2018 only). 
 
       6 In addition to the cash and cash equivalents balance of GBP8.0m at 31 
    December 2019, the Group also benefits from GBP0.3m in advertising credits 
   outstanding with Channel 4, following GBP0.9m of credits raised at the fund 
         raising in February 2019. 
 
  7 Marketing efficiency is defined as total reported marketing cost divided 
     by the reported revenue for the specified segment, thus as the reported 
         percentage falls marketing efficiency improves. 
 
 The information contained within this announcement is deemed by the Company 
         to constitute inside information stipulated under the Market Abuse 
         Regulation (EU) No. 596/2014. 
 
               For further information, please contact: 
 
               eve Sleep plc  via M7 Communications LTD 
 
       James Sturrock, Chief 
           Executive Officer 
 
Tim Parfitt, Chief Financial 
                     Officer 
  finnCap Limited (NOMAD and         [phone] 
                     Broker) 
 
   Matt Goode / Hannah Boros 
         (Corporate Finance) 
 
   Alice Lane / Manasa Patil 
                       (ECM) 
       M7 Communications LTD        [phone] 
 
                   Mark Reed 
 
         chairman's statement 
 
"We are confident that we have a winning product, the right strategy and the 
 team to build a sleep wellness brand of size and strength that delights our 
     customers and delivers value to all of our stakeholders." - Paul Pindar 
 
         delivering the rebuild strategy 
 
        The focus in 2019 has been on the continued execution of the rebuild 
    strategy through the prioritisation of reducing losses and stemming cash 
        flows, over chasing sales growth at any cost. To effect this we have 
    sharpened our focus on profitable sales, removing unprofitable channels, 
         while further improving our marketing efficiency. 
 
       We remain confident that this is the right strategy for the business, 
particularly given the continued challenging retail backdrop and the ongoing 
  discount-reliant competition in the mattress market. To fund the execution 

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