DJ 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 +44(0)20 7220 0500
Broker)
Matt Goode / Hannah Boros
(Corporate Finance)
Alice Lane / Manasa Patil
(ECM)
M7 Communications LTD +44(0) 7903 089 543
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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of the strategy and to strengthen the statement of financial position we
successfully raised GBP11.7m (net of expenses) plus GBP0.9m of advertising
credits with Channel 4 in February 2019. As at 31 December 2019 eve has
GBP8.0m of cash and cash equivalents, GBP0.3m of advertising credits available
for use and no debt (excluding the lease liability arising under IFRS 16).
The team has made good strategic and financial progress in the year. Product
development which is central to our aim of building a sleep wellness brand,
was strong in both mattress and wider sleep range products. The eve premium
hybrid mattress, which was launched in June 2019 was announced as the top
scoring mattress by Which? in December 2019, giving eve's full adult
mattress range a Which? Best Buy rating. Good progress was also made with
the expansion of wider sleep products including the launch of new bed frames
and bedding, all of which has driven a 140 bps and 590 bps year-on-year
increase in the contribution from non-mattress sales in the UK&I and France
respectively. Range expansion has also supported an improvement in the
customer repeat rate, increasing 230 bps in the UK&I and 360 bps in France.
We continue to develop our multi-channel offering through partnerships with
leading retailers where the relationship is strategically and commercially
value creating for both parties. During the year we signed and launched
partnerships with Argos, Homebase and Dunelm and in addition to creating
more sales opportunities, these partnerships help to raise eve's brand
awareness.
Elevating the brand position above our peers has always been a core strength
at eve and it remains so. In July 2019 we launched a new and highly
successful brand campaign featuring the eve sloth and in September we signed
a three year deal with British Rowing to be their official sleep partner,
including managing the sleep environment of the GB Rowing Team athletes both
at home and overseas. Together, these marketing initiatives have driven a
50% increase in unprompted brand awareness to 15%.
improving financial performance
As planned, Group revenues from Core Markets reduced year on year, declining
by 19% to GBP23.8m (2018: GBP29.4m) as we optimised our DTC marketing, scaling
back marketing investment by 32% across UK&I and France in order to
prioritise profitable revenues over revenue growth alone. Year-on-year Group
gross profit margin improved from 52.8% to 53.1% reflecting margin
prioritisation over revenue growth. Group underlying EBITDA losses[1]
reduced by 44% to GBP10.7m, supported by a 24% reduction in administrative
expenses (excluding marketing expenses, fundraise-related expenditure,
depreciation, amortisation and impairment charges) for the year. The
reduction in the cash outflow from operating activities was even greater,
down 55% year-on-year.
Our results in the last four months of the year showed further progress on
our path to profit, reaching for the first time break-even at the operating
level, defined as a positive margin contribution after all direct costs and
marketing but before overheads. The attainment of this milestone follows
further significant cost savings in Q4 as well as the benefits flowing
through from earlier initiatives. Accordingly, we see our results for the
final four months of the year as more indicative of our prospects for 2020.
our people
This has been the second year of considerable change for our people, which
has included a move to new local offices as well as an organizational
restructure. Whilst this has been the right course of action strategically
for the business, I understand that it is both difficult and unsettling and
I would like to thank them all personally for their continued loyalty,
positivity and commitment to rebuilding eve.
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.
current trading and outlook
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 contribution[2] 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. Since mid-March 2020,
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.
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.
Paul Pindar
Chairman
23 March 2020
strategic report
strategic review
"Building customer loyalty and ultimately driving repeat sales is at the
centre of the eve model and is essential to attaining profitability."
on trend in a large and growing market
Wellness is a mega trend, transcending age and geography. Within the
wellness sphere there is an increasing understanding and recognition that
sleep sits alongside nutrition and physical fitness as the foundations of
wellness. There is also a growing body of research and evidence which
testifies to the importance of sleep and the risks to physical and mental
health of insufficient sleep. In a recent poll of 2,000 UK adults
commissioned by eve, 58% of respondents expressed worry about the potential
impact a lack of sleep can have on mental and physical health and 75% of
customers tell us they are better slept simply by having one of our
products.
With the increasing understanding of the importance of sleep has come
consumer change. Consumers are spending more on wellness and the sleep
market has been a beneficiary of this. Not only are consumers spending more
on sleep wellness related products but they are willing to spend more on the
central element of a good night's sleep; the mattress. The strong sales
performance of eve's most recently launched premium hybrid mattress testify
to this point.
Data from Euromonitor estimates that the European sleep market is worth
GBP26bn, with the Core Markets that eve is focused on (UK&I and France) being
worth GBP6bn. The market is however highly fragmented, populated by many
traditional operators offering a proposition that has changed little in the
last fifty years. There is also an increasing willingness on the part of
consumers to purchase big ticket items online, with Euromonitor predicting
that the online furniture market will be the second fastest growing retail
category, with online purchase penetration expected to increase by 55%
between 2018 and 2023.
In terms of the competitive landscape there are a limited number of well
branded new digital offerings. However, no company is yet to break through
in terms of establishing a sleep wellness brand which commands widespread
recognition and brand loyalty. eve's ambition is to achieve just this; to be
seen as the go to brand for sleep wellness products.
business model
eve is a digitally native business, with a direct to consumer (DTC) led
proposition, supported by partnerships with leading retailers. This
omni-channel approach reflects how consumers increasingly identify, research
and purchase items, moving seamlessly between online and offline channels.
By being where the customer is, eve increases its potential sales
opportunities and grows its brand awareness and product understanding.
Building customer loyalty and ultimately driving repeat sales is at the
centre of the eve model and is essential to attaining profitability. To
achieve this goal eve is focused on establishing itself as a go to brand for
sleep wellness products, which would provide the authority and consumer
trust to sell a broader range of products in the category.
As a DTC focused business, eve maintains close relationships with its
customers and leverages a rich data set from which to better target repeat
customers and attribute purchases to the many touchpoints eve has in the
marketplace. eve has worked to greatly expand its collection and use of such
data during 2019 culminating in detailed econometric and attribution insight
now at the forefront of the business. The insights gained from customer
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feedback also power new product development and refinements to existing
ranges. The continued growth in eve's customer repeat rate which in the UK
has more than doubled to 17.3% in the second half of 2019 from just 8.0% in
the first half of 2016, demonstrates that eve is succeeding in building
brand loyalty amongst its customers. As a brand led business, resources in
terms of investment and talent are focused on the key operations of product
development, branding, marketing and customer experience. As is common in
the industry, manufacturing and fulfilment, which require heavy fixed cost
investment, are outsourced to leading third party suppliers in the UK and
Continental Europe. This set-up has proved to be highly scalable and
flexible, enabling significant seasonal variations in monthly product demand
to be met without any noticeable margin impact or the requirement to hold
large amounts of product stock. There is also a close working relationship
with eve's manufacturing partners to innovate and develop new products that
work better in terms of function and design and that differentiate eve from
peers, without a premium price tag.
The outsourced manufacturing and fulfilment model, coupled with the DTC led
setup, enables a lower and more flexible cost base than a traditional
retailer. Although marketing costs are one of the largest costs for eve,
they are more flexible in nature and it is easy to scale them up and down
quickly and switch between marketing channels.
chief executive's report
"What is certain is that eve has closed out 2019 in a stronger position than
it started the year. There is still much that can and will be done to drive
further improvements and this work will continue through 2020." - James
Sturrock
introduction
In 2019 we completed the restructuring of the management team, made
significant progress in professionalising internal operations, processes and
reporting, optimised our supplier and logistics footprint, and significantly
reduced the operating costs of the business. These things, alongside the
progress of our customer facing rebuild strategy have significantly improved
EBITDA results on the path to profitability and put eve on a steadier
footing to deliver our plans for the long-term health of the business. We
consider that headwinds in the competitor landscape and discounting pressure
will continue, but the premium positioning of the brand and the work we have
completed to create a stable and lean platform, along with a healthy cash
balance, will aid the execution against our plans in order to succeed in the
future.
The first few months of my tenure, which commenced in September 2018, were
spent evaluating the business and formulating what we refer to as the
rebuild strategy. Although implementation of the rebuild strategy commenced
in late 2018, work has continued throughout 2019 on effecting and embedding
change and improvement throughout all areas of the business in order to
attain our stated goal of profitability and positive cash generation in the
near term. There is still much that can and will be done to drive further
improvements and this work will continue through 2020 and beyond.
What is certain is that eve has closed out 2019 in a stronger position than
it started the year. We have a broader, award-winning product range.
Operational KPIs, including the customer repeat rate and the sale of
non-mattress products improved during the year, while our financial
performance strengthened considerably, evidenced by a reduction in
administrative expenses excluding marketing costs, fundraise-related
expenditure, depreciation, amortisation and impairment of 24%. We reduced
our underlying EBITDA losses by 44% and trimmed our cash outflows from
operating activities by 55%, which is all the more pleasing given the
challenging retail backdrop and ongoing price led competition in the
mattress market. Our cash position has also improved, with a year-end net
cash position of GBP8.0m plus GBP0.3m of advertising credits with Channel 4,
compared with GBP6.0m as at 31 December 2018, owing to the fund raising in
February 2019.
the rebuild strategy
The rebuild strategy focuses on three core pillars:
· differentiated brand positioning;
· expanded product range; and
· lower friction customer experience.
differentiated brand positioning
To differentiate eve from the plethora of mattress in a box brands, where
competition is largely price led, our strategy is to establish eve as a
trusted go to destination for sleep wellness products. To achieve this we
have been refocusing and aligning our marketing investment and
communications on the benefits that eve can bring consumers in sleep
wellness. This is best exemplified in the three-year partnership deal we
signed in 2019 with British Rowing to be their official sleep partner. As
part of the deal we will be managing the sleep environment of the GB Rowing
Team athletes as they train and compete both at home and overseas.
During the first half of the year we ran existing marketing campaigns whilst
testing new promotional strategies and channel mix, as well as carrying out
analysis on a granular level of marketing return on investment. This
supported the development of the new brand, communications and the creative
strategy, which launched in the UK&I at the start of H2 2019 with the 'wake
up dancing' campaign, featuring the eve sloth. The campaign has proved
immensely successful, raising unprompted brand awareness by 50% to 15%
between January 2019 and August 2019. It has also driven increased
engagement with customers, so much so that in response to customer demand we
have produced and sold circa. 6,000 soft toy eve sloths at the close of
2019.
In France, the investment and media strategy has been adapted to make better
use of the peak sales periods, driving more efficient spend with an
optimised creative strategy and revitalised positioning. This positioning,
which launched with the 'reborn again each morning' ('renaissez chaque
matin') campaign in July 2019 is designed to elevate eve to be the premium
brand in the nascent direct-to-consumer mattress category in France, premium
mattress sales making up 44.9% of total mattress sales in December 2019.
The success of our marketing to date is demonstrated in our unprompted UK
brand awareness, which has increased from 11.2% in November 2018 to
approximately 15% at August 2019.
In addition to refocusing the positioning of our marketing, considerable
effort has gone into improving marketing efficiency, including the
development of a bespoke-built optimisation model. Subsequently, marketing
investment has been substantially reviewed, with the removal of channels
that were not generating a sufficient return, in line with our strategy of
focusing on profitable sales and margin positive first orders. The success
of this strategy is best evidenced in the efficiency of our marketing spend,
which has improved in all three of our core markets in tandem with growing
awareness. In the UK&I marketing efficiency has improved from 54.1% in 2018
to 52.3% in 2019; marketing efficiency being defined as marketing
expenditure as a percentage of revenue. This is the third successive year of
improvement and we see scope to further reduce this percentage in 2020. In
France, marketing efficiency improved from 82.9% in 2018 to 44.1% in 2019.
To measure our success in delivering on this strategic pillar we will
continue to monitor and report on the KPI of unprompted brand awareness in
the UK and marketing efficiency, given its importance for the pathway to
profitability.
expanded product range
In 2019 we stepped up new product development, building out a range of sleep
products to complement our successful next generation foam mattress. Range
expansion gives eve a clear trajectory to dominating the ecommerce sleep
wellness space in our chosen markets and provides the opportunity to grow
the frequency of customer purchases.
In the mattress category we launched the premium hybrid mattress, which
received a Which? Best Buy rating, scoring the highest rating ahead of all
competitor mattresses in the UK in December 2019. At the close of 2019, eve
now has a suite of four mattress products sold via its DTC channel - the
premium foam, the premium hybrid, the original foam and the hybrid, as well
as the baby mattress.
The rate of new product development increased significantly in the period,
with the launch of new bedframes and expanded ranges of bedding, pillows,
sleep accessories and the baby category. Sales of bedframes, including two
new storage bedframes, have performed particularly well.
The improvements in this pillar of the strategy are evident in our KPIs. In
2019 the customer repeat rate in the UK&I grew 230bps to 16.7% and in France
increased 360bps to 17.0%. This growth was underpinned by an increase in
sales of non-mattress products in each of the core markets. In the UK&I, the
contribution from non-mattress DTC sales increased by 130bps to 24.8% and in
France improved by 590bps to 28.2%.
To measure our success in delivering on this strategic pillar we will
continue to monitor and report on the KPIs of conversion rates and the
growth in non-mattress sales.
lower friction customer experience
Enhancing the customer experience throughout the online journey and in our
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service proposition to enable stronger site conversion and customer
satisfaction metrics is central to our rebuild strategy. Improved conversion
will not only drive higher revenues but also greater marketing efficiency,
which is key to achieving profitability.
The entire customer journey through the eve website prior to purchase has
been substantially upgraded during the year. This includes a 50% plus
increase in the speed of loading the website plus a redesigned home page
with more focus on inspiring customers, building out category pages to help
users more easily discover products within our expanded ranges and new
imagery, with copy/zoom functionality. Improvements have also been made to
how promotions are presented on the website.
To improve the purchase process, the basket and checkout have been rebuilt
to make them faster and more intuitive, resulting in an improvement in the
basket completion rate. The delivery proposition has also been improved with
a move to a new carrier portfolio and warehouse consolidation, which is
expected to result in improved delivery experience for customers and
efficiencies in distribution costs. In addition to better communications
with customers around confirmation, delivery tracking and product care
guides, customers are now able to select a nominated delivery day for larger
orders.
The changes made to the website and customer proposition have driven a 30bps
year-on-year improvement in the conversion rate.
We recognise the importance of providing an omnichannel approach, for
consumers that freely move between online and offline channels, when
researching and purchasing products. During the year we have extended our
reach with three new retail partnerships with Argos, Homebase and Dunelm,
all of which have subsequently launched.
To measure our success in delivering on this strategic pillar we will be
monitoring and reporting on the KPIs of conversion rates and eve's new sleep
wellness score, a measure of customers reporting improved sleep as a result
of purchasing an eve product.
responsible business
As a business we recognise our responsibility to our stakeholders and the
wider community at large. We continue to strive to make improvements
throughout our operations in order to reduce our environmental footprint.
Our localised production facilities mean that we are not trucking or
airfreighting long distances, while our mattress boxes used for packaging
are produced in the UK and made from Forest Stewardship Council approved
card. When customers return mattresses they are either broken down and the
materials recycled or refurbished, depending on their condition. We do not
send mattresses to landfill.
culture and diversity
We thrive on individuality at eve. We believe that irrespective of age,
gender, ethnic origin, religion, sexual orientation, gender identity, gender
expression, or disability, eve is a place of opportunity, respect and
support for individuals to bring their best to work and do their best work.
eve are pleased to present the following metrics relating to gender balance
as at 31 December 2019. The following breakdown shows the number of persons
of each sex who were:
(i) directors of the company;
(ii) senior managers of the company (other than those falling within
category (i)); and
(iii) employees of the company.
Male Female
Directors 4 1
Senior managers 3 4
Employees 28 33
2020 focus
In the second half of 2019 we took the decision to accelerate our move to
profitability and positive cash generation by making additional significant
cost efficiencies in the business, primarily in the areas of marketing and
overheads. These changes were made in the fourth quarter of the year.
The cumulative benefits of management initiatives and efficiencies made
throughout 2019 as part of the rebuild strategy are coming through in an
improved financial performance. I am delighted to report that in the final
four months of the year we reached a milestone in terms of achieving
operational breakeven, after all direct costs and marketing but before
overheads. We enter 2020 with a sizeable year-on-year reduction in both
overheads and planned marketing investment, which we expect to drive a
further substantial reduction in losses and cash burn.
We are well placed to make further significant progress in 2020, with a
differentiated brand position, a broader product range than peers and
ongoing improvements to the customer experience, supported by a lower cost
base, a substantial cash balance of GBP7.8m as at 29 February 2020 and no debt
(excluding the lease liability arising under IFRS 16).
James Sturrock
Chief Executive Officer
23 March 2020
key performance indicators
In 2019, the key performance indicators (KPIs) used to evaluate and monitor
the performance of the business were as follows and are designed to support
the three core pillars of the rebuild strategy (differentiated brand
positioning, extended product range and lower friction customer experience).
There are three financial KPIs and five operational KPIs.
Financial KPIs [3]:
· Overall revenue growth;
· Marketing efficiency;
· Underlying EBITDA.
Operational KPIs 3:
· UK brand awareness;
· Product return rates;
· eve website conversion rate;
· eve customer sleep wellness score;
· Non-mattress revenue growth.
The results of the KPIs are set out below. Financial KPIs focus on both
Group and Core Markets results whilst the operational KPIs focus on measures
tracked in the Core Markets of UK&I and France. Whilst lower than original
expectations (due to the reasons set out in the Strategic Report), both
financial and operational KPIs show broadly positive trends against 2018:
Group and Core Markets Financial KPIs 3
· Group revenue decreased by 31% to GBP23.9m (2018: GBP34.8m);
· Core Markets revenue decreased by 19% to GBP23.9m (2018: GBP29.4m);
· Improvement in Group marketing efficiency by 1313bps to 50.5% (2018:
63.7%);
· Improvement in Core Markets marketing efficiency of 1030bps to 50.5%
(2018: 60.8%);
· Group underlying EBITDA losses reduced by 44% to GBP10.7m loss (2018:
GBP19.1m loss).
Core Markets Operational KPIs 3
· Increase in non-mattress Core Markets sales as a proportion of total
sales by 230bps to 22.0% (2018: 19.0%);
· Unprompted UK brand awareness: 380bps increase in unprompted UK brand
awareness (August 2019: 15.0%; November 2018: 11.2%);
· eve customer sleep wellness score: 8/10 (2018: n/a as a new metric in
2019);
· 40bps year-on-year improvement in the returns rate to 8.9% (2018: 9.3%);
· 30bps year-on-year improvement in the eve website conversion rate.
glossary
Definitions of Financial and Operational KPIs:
Overall revenue growth - % change in value of reported revenue for the
specified segment of the latest period vs the previous period.
Marketing efficiency - total reported marketing cost divided by the reported
revenue for the specified segment, thus as the reported percentage falls
marketing efficiency improves.
Underlying EBITDA - earnings before interest, tax, depreciation,
amortisation and impairment, share-based payment charges connected with
employee remuneration (2018 and 2019), fundraise-related expenditure (2019
only) and staff and country exit costs (2018 only). Underlying EBITDA
reflects what management believe to demonstrate the underlying performance
of the business in a given year.
Non-mattress sales as a proportion of total sales - % of reported sales
attributable to non-mattress products for the specified financial period.
The Group track this Operational KPI in addition to the Financial KPI of
overall revenue growth as returns and deferrals are not tracked in isolation
for non-mattress sales. Total sales represents all sales after discounts and
VAT and before deferred revenue, refunds processed and the refunds
provision. Non-mattress sales represents the value of sales from
non-mattress products.
UK Brand awareness - when asked question "What mattress brands can you think
of?" the % of total respondents that answer eve (externally assessed using
industry polling agencies).
Product return rates - return rate % is calculated by dividing the total
value of sales returns by the value of net sales of goods including freight
(all excluding VAT).
eve website conversion rate - the percentage of website traffic in a
specific period that complete a purchase. Calculated by dividing the number
of completed sales orders divided by the total website traffic. This figure
is compared on a bps movement between periods.
eve customer sleep wellness score - the average number of customers out of
every ten customers that report improved sleep as a result of purchasing an
eve product (internally assessed using post-purchase email campaigns).
financial review
"Whilst Core Markets revenue fell by 19% from GBP29.4m in 2018 to GBP23.9m in
2019, eve achieved a 70% reduction in group losses after distribution costs,
payment fees and marketing expenses with losses falling from (GBP8.6m) in 2018
to (GBP2.5m) in 2019." - Tim Parfitt
group financial performance
GBPm 2019 2018 Movement
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DJ Eve Sleep plc: Final Results -5-
Restated
Core Markets revenue 23.9 29.4 (19%)
Other revenue (0.0) 5.5 (101%)
Group revenue 23.9 34.8 (31%)
Core Markets gross profit 12.8 15.5 (18%)
Other gross profit (0.1) 2.9 (103%)
Gross profit 12.7 18.4 (31%)
Distribution expenses (2.7) (4.1) +33%
Profit after distribution expenses 9.9 14.3 (31%)
Payment fees (0.4) (0.7) +41%
Marketing costs[4] (12.1) (22.2) +46%
Loss after distribution expenses, (2.5) (8.6) +70%
payment fees and marketing costs
Wages & Salaries (excluding share-based (4.4) (5.4) (18%)
payment charges)
Other administrative expenses (5.0) (6.1) (17%)
Share-based payment charges connected (0.5) (0.3) +76%
to employee remuneration
Operating loss (12.5) (20.3) (39%)
Net finance income 0.0 0.0 (60%)
Loss before tax (12.5) (20.3) (38%)
Taxation 0.4 0.2 +82%
Loss after tax (12.1) (20.1) (40%)
Reconciliation to underlying EBITDA:
Taxation (0.4) (0.2)
Net finance income (0.0) (0.0)
Fundraise-related expenditure 0.2 -
Share-based payment charges connected 0.5 0.3
to employee remuneration
Staff and country exit costs - 0.8
Depreciation and amortisation 0.5 0.1
Impairment 0.6 0.0
Underlying EBITDA (10.7) (19.1) (44%)
group financial performance as a % of revenue
% of Revenue 2019 2018 Movement
Restated
Gross Profit 53.1% 52.8% +37bps
Distribution (11.4%) (11.6%) +21bps
Profit after distribution 41.7% 41.1% +57bps
Marketing (50.5%) (63.7%) +1313bps
Administrative expenses excluding (41.4%) (35.0%) (634bps)
marketing
Administrative expenses excluding (35.9%) (34.6%) (135bps)
marketing, fundraise-related
expenditure, depreciation,
amortisation and impairment
expenditure
UK&I financial performance
GBPm 2019 2018 Movement
Restated
Revenue 18.5 22.5 (18%)
Gross Profit 10.2 11.8 (14%)
Distribution (1.8) (1.7) +7%
Profit after distribution 8.4 10.1 (17%)
Payment fees (0.4) (0.4) (13%)
Marketing (9.7) (12.2) (20%)
Loss after distribution, payment fees (1.7) (2.5) (31%)
and marketing
France financial performance
GBPm 2019 2018 Movement
Restated
Revenue 5.3 6.8 (22%)
Gross Profit 2.6 3.7 (29%)
Distribution (1.0) (1.2) (16%)
Profit after distribution 1.6 2.5 (36%)
Payment fees (0.1) (0.1) (34%)
Marketing (2.4) (5.7) (58%)
Loss after distribution, payment fees (0.9) (3.3) (74%)
and marketing
Other financial performance
GBPm 2019 2018 Movement
Restated
Revenue (0.0) 5.5 (101%)
Gross Profit (0.1) 2.9 (103%)
Distribution 0.1 (1.2) (108%)
Profit after distribution 0.0 1.7 (99%)
Payment fees 0.0 (0.2) (103%)
Marketing 0.0 (4.3) (100%)
Loss after distribution, payment fees 0.0 (2.8) (101%)
and marketing
revenue
Revenue in Core Markets decreased by 19% to GBP23.9m in 2019 (2018: GBP29.4m).
Group revenues during 2018 totalled GBP34.8m, reflecting nine months in the
year of operating on a wider international footprint. Direct to consumer
remains the dominant revenue channel, with revenues from omni-channel
contributing 27% of the group total (2018: 22%). Reflecting a strategic
focus on profitable revenues and a reduction in marketing investment, UK&I
revenues decreased by 18% and in France by 22% during 2019 as expected.
gross margins
Gross margins in Core Markets have remained at attractive levels, supported
by a focus on profitable sales. Core Markets gross profit margin increased
by 70bps to 53.4% in 2019 (2018: 52.7%).
distribution costs
Distribution costs as a percentage of revenue reduced by 20bps to 11.4% in
2019 (2018: 11.6%). Core Markets profit after distribution fell by 130bps to
41.6% in 2019 (2018: 42.8%) reflecting increased outbound logistics and
warehousing costs in H2 2019.
marketing investment
Marketing is an important driver of growth in the business. In 2019,
marketing investment in Core Markets was reduced by 32% to GBP12.1m (2018:
GBP17.8m). The efficiency of marketing investment is closely monitored and is
an important KPI for the business. In 2019 Core Markets marketing
efficiency, defined as marketing costs as a percentage of revenues, improved
by 1030 bps to 50.5% (2018: 60.8%).
In the UK&I marketing efficiency improved by 176bps to 52.3% (2018: 54.1%).
In France, marketing efficiency improved significantly by 3876bps to 44.1%
(2018: 82.9%).
In addition to cash and cash equivalents, the Group had GBP0.3m of advertising
credits with Channel 4 available at the year-end date, following a placing
of shares in February 2019, which raised GBP11.7m (net of expenses) from
investors and secured GBP0.9m in future advertising with Channel 4, which will
be satisfied through the issuance of new shares when fully utilised.
administrative expenses
(excluding marketing)
Wages & Salaries (excluding share-based payment charges connected with
employee remuneration) are the largest component of administrative expenses,
contributing 36.2% (2018: 36.8%) of total administrative expenses excluding
marketing costs in the year. The cost of Wages & Salaries decreased by 18%
to GBP4.4m (2018: GBP5.4m) primarily reflecting a lower headcount.
underlying EBITDA loss
(earnings before interest, tax, depreciation, amortisation, impairment
charges, share--based payment charges relating to employee remuneration,
fundraise-related expenditure in 2019 and staff and country exit costs in
2018)
The Directors consider that they are best able to monitor Group financial
performance via underlying EBITDA by removing fundraise-related expenditure,
share-based payment charges relating to employee remuneration and staff and
country exit costs from EBITDA on the basis that these items do not occur
evenly year on year.
The underlying Group EBITDA loss decreased by GBP8.5m to (GBP10.7m) loss in 2019
(2018: (GBP19.1m) loss). The 44% reduction in the loss reflects the increased
focus on profitable sales, greater efficiency in marketing spend,
substantial overhead reductions and losses in 2018 relating to the wider
international footprint for part of the year.
UK&I performance for the year demonstrated improved efficiency, where the
loss after distribution expenses, payment fees and marketing costs (before
overhead allocation) totalled (GBP1.7m) loss (2018: (GBP2.5m) loss). This was
achieved on lower revenues down 18% to GBP18.5m (2018: GBP22.5m).
France, whilst at an earlier stage of development for eve compared to UK&I,
made headway in reducing losses after distribution expenses, payment fees
and marketing costs (before overhead allocation) by 74% to (GBP0.9m) loss
(2018: (GBP3.3m) loss) despite revenues falling 22% to GBP5.3m (2018: GBP6.8m).
It should be noted that the application of IFRS 16 in 2019 has resulted in a
depreciation charge recognised in 2019 of GBP0.2m (2018: GBP0.0m); this charge
is excluded from underlying EBITDA. Under IAS 33 however, expenditure
relating to operating lease rentals (presented within administrative
expenses) would have totalled GBP0.2m and would have been included within
underlying EBITDA. In this way, GBP0.2m of the year on year improvement to
underlying EBITDA is attributable to the application of IFRS 16.
share-based payment
In accordance with IFRS, a share-based payment charge for 2019 has been
calculated and charged to the statement of profit and loss. The fair value
of options granted is recognised as an expense over the vesting period with
a corresponding credit being recognised in equity. The charge for 2019 was
GBP1.1m (2018: GBP0.3m) of which GBP0.6m related to equity issued in exchange for
marketing services and GBP0.5m relating to employee remuneration.
loss after tax
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DJ Eve Sleep plc: Final Results -6-
The loss after tax reduced to GBP12.1m loss (2018: GBP20.1m loss) as a result of
the 44% reduction in the underlying EBITDA loss.
capital expenditure
Due to the Group's outsourced business model, capital expenditure
requirements remain low. The main area of capital expenditure in 2019
related to ERP systems infrastructure. Total capital expenditure in 2019 in
the form of intangible software assets totalled GBP0.5m (2018: GBP0.4m).
cash position
The Group had cash and cash equivalents of GBP8.0m at the year-end (2018:
GBP6.0m).
Tim Parfitt
Chief Financial Officer
23 March 2020
principal risks and uncertainties
Risk management is an important part of the management process for the
Group. Regular reviews are undertaken to assess the nature of risks faced,
the magnitude of the risk presented to business performance and the manner
in which the risk may be mitigated. Where controls are in place, their
adequacy is regularly monitored. The risks considered to be particularly
important at the current time are set out below.
marketing
Marketing is an important investment area for the Group and there is a risk
that this expenditure may not result in the targeted increase in sales or
brand awareness levels.
eve constantly monitors and analyses financial performance and key business
metrics to ensure up to date and accurate forecasting. The Group also
supplements its in-house marketing expertise with third party media and
marketing agencies to monitor and advise on the effective implementation and
roll out of marketing and advertising campaigns to meet targeted KPIs with
especial focus on marketing efficiency.
product
The Group is responsible for the design of eve products and could face
exposure to product liability claims or claims against health and safety
procedures or practices in different territories. There could also be high
return rates owing to the 100-night trial offered on the eve mattress.
The Group has a robust product and supplier onboarding process to ensure new
products and suppliers are of the highest standards. The Group also retains
insurance brokers to review and analyse insurance coverage to ensure
sufficient insurance coverage for product liability and associated losses.
In addition, return rates is a KPI which is monitored closely.
The Group is subject to fluctuations in the cost of materials which may
adversely impact on the Group's profit margins.
The Group primarily manufactures its EU mattress in the EU and its UK
mattress in the UK for its main product (the eve original mattress),
creating a natural hedge against currency movement for its key products. For
other products and markets the Group looks to agree prices for a period of
time with manufacturers where possible to provide a degree of certainty over
currency fluctuations.
operations
As the Group relies on outsourced partners, there is a risk that the
business may be unable to cope with rapid demand or disruption occurring
with its manufacturing or logistics partners.
The Group maintains a close working relationship with its outsourced
partners and regularly reviews and communicates forecasts to ensure capacity
constraints are managed. In addition, the Group maintains a list of
alternative product suppliers who can be onboarded to supplement supply,
reducing the risk of relying on any specific supplier.
During 2019, investment in automation across ERP infrastructure particularly
across supply chain and logistics functions, has delivered greater
visibility of logistics partner performance and mitigates the risk of
disruption and allows for logistics partners to easily be switched between.
competition
The Group operates in the highly competitive mattress and pillow industries
and may not be able to grow, or maintain, its existing marketing share.
The Group constantly reviews and analyses its performance against its
business plan and against market competitors. The Group has both internal
talent and external advisors who can advise on and respond to any changes in
the competitive environment.
brexit
As with all UK companies involved in intra-community cross border trade the
impact of Brexit is a potential risk for the Group.
The board of directors and senior management regularly review developments
surrounding Brexit throughout the organisation and in addition to this the
operations team has a dedicated task force focused on Brexit planning within
the supply and logistics chain. The Group has a natural Brexit hedge with
its UK and French companies and its main product, the eve original mattress,
is manufactured in both the UK and the EU providing a hedge for its most
significant product.
As with most UK based companies leveraging technology to deliver its value
proposition, eve employs a significant non-UK workforce in the UK and thus
the outcome of Brexit with regards to freedom of movement will have an
effect on our workforce planning and recruitment. For this reason, during
2019, regular communication for EU nationals has been established and
in-house support provided for those considering applications for settled
status or visas.
At present the precise details of Brexit; how it relates to freedom of
movement between the EU and UK; how it will impact goods movement across
borders between the EU and UK; and how it will affect currency exchange
rates following the transition period (currently expected to end on 31
December 2020) are under negotiation and therefore not fully clarified.
However, the Group continuously monitors the situation to ensure it is as
prepared as possible for any outcome. The Group is already registered as a
sponsoring entity with the relevant UK authorities and also has a French
subsidiary, which combined with the expected transitional period provides
the foundations for mitigating the immediate effect of Brexit on the Group
in this regard.
COVID-19 virus
The Group manufactures core mattress products in the territories in which it
sells them. However, our supply chain has some reliance on sourcing from
China, the Far East and European countries outside the Core Markets for the
wider sleep range products.
There is the risk of reduced consumer demand as well as disruption to the
supply chain from global events and pandemics such as the COVID-19 virus.
Management have assessed the availability of stock on hand and are in close
communication with suppliers to mitigate any adverse impact of planned
supply chain movements in order to fulfil consumer demand during this
period.
The Group's employees are able to work remotely from eve's main office as a
result of laptop computers and the use of multiple communication channels
including email, direct messaging and video conferencing. In the event of
restricted movement around London and the UK, the work force would be able
to continue working and would be able to communicate across teams and key
stakeholders ensuring business continuity.
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.
Approved and signed on behalf of the board.
Tim Parfitt
Chief Financial Officer
23 March 2020
consolidated statement of profit and loss and other comprehensive income
for the year ended 31 December 2019
Note 2019 2018
GBP GBP
Revenue 3 23,852,931 34,818,260
Cost of sales 3 (11,176,905) (16,442,852)
Gross profit 12,676,026 18,375,408
Distribution expenses 3 (2,729,317) (4,056,075)
Administrative expenses 3 (22,453,901) (34,663,758)
Operating loss (12,507,192) (20,344,425)
Net finance income 18,022 44,822
Loss before tax (12,489,170) (20,299,603)
Taxation 352,240 193,192
Loss for the year (12,136,930) (20,106,411)
Other comprehensive income
Foreign currency differences from 17,310 98,720
overseas operations
Total comprehensive loss for the (12,119,620) (20,007,691)
year
Basic and diluted loss per share 4 (4.92p) (14.46p)
consolidated statement of financial position
at 31 December 2019
Note 2019 2018
GBP GBP
Non-current assets
Property, plant and 518,575 -
equipment
Intangible assets 344,456 669,742
863,031 669,742
Current assets
Inventories 1,574,648 1,127,876
Trade and other 7 2,637,650 4,626,750
receivables
Cash and cash 7,988,769 6,031,936
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equivalents
Current tax receivable 354,466 193,192
12,555,533 11,979,754
Total assets 13,418,564 12,649,496
Non-current liabilities
Lease liabilities 40,000 -
40,000 -
Current liabilities
Trade and other 3,983,174 4,561,792
payables
Provisions 8 768,965 955,949
Lease liabilities 470,391 -
5,222,530 5,517,741
Total liabilities 5,262,530 5,517,741
Net assets 8,156,034 7,131,755
Equity attributable to equity holders of the parent
Share capital 5 263,445 139,735
Share premium 48,887,392 36,716,372
Share-based payment 6 998,495 250,073
reserve
Retained earnings (42,109,328) (30,073,145)
Foreign currency 116,030 98,720
translation reserve
Total equity 8,156,034 7,131,755
consolidated statement of changes in equity
for the year ended 31 December 2019
Share Share Share Retained Foreign Total
Capital Premium based Earnings currency Equity
payment translat GBP
reserve ion
GBP reserve
GBP GBP GBP
GBP
For the year ended 31 December 2019
Balance at 139,735 36,716,3 250,073 (30,073, 98,720 7,131,7
1 January 72 145) 55
2019
Issue of 120,317 11,911,4 - - - 12,031,
shares 15 732
Exercise of 770 - - - - 770
employee
share
options
Share-based - - 1,111,3 - - 1,111,3
payment 96 96
charge
Transfer on - - (100,74 100,747 - -
exercise of 7)
employee
share
options
Transfer on 2,623 259,605 (262,22 - - -
issue of 8)
equity for
marketing
services
Total 123,710 12,171,0 748,421 100,747 - 13,143,
transaction 20 898
s with
owners
Loss for - - - (12,136, - (12,136
the year 930) ,930)
Other - - - - 17,310 17,310
comprehensi
ve income
for the
year
Balance at 263,445 48,887,3 998,495 (42,109, 116,030 8,156,0
31 December 92 328) 34
2019
for the year ended 31 December 2018
Balance at 1 138,631 36,716, 138,794 (10,158 - 26,835,0
January 2018 372 ,736) 61
Exercise of 1,104 - - - - 1,104
options
Share-based - - 303,281 - - 303,281
payment charge
Transfer on - - (192,002 192,002 - -
exercise of )
options
Total 1,104 - 111,279 192,002 - 304,385
transactions
with owners
Loss for the - - - (20,106 - (20,106,
year ,411) 411)
Other - - - - 98,720 98,720
comprehensive
income for the
year
Balance at 31 139,735 36,716, 250,073 (30,073 98,720 7,131,75
December 2018 372 ,145) 5
consolidated statement of cash flows
for the year ended 31 December 2019
2019 2018
GBP GBP
Cash flows from operating activities
Loss for the year (12,136,930) (20,106,411)
Adjustments for:
Depreciation 198,048 -
Amortisation 263,046 120,571
Impairment 594,724 39,608
Interest payable 9,144 -
(Increase)/decrease (446,772) (436,536)
in inventories
(Increase)/decrease 1,827,827 (642,885)
in trade and other
receivables
Increase/(decrease) (578,619) 13,773
in trade and other
payables
Increase/(decrease) (186,984) 129,247
in provisions
Share-based payment 1,111,396 303,281
charge
Net cash outflow (9,345,120) (20,579,352)
from operating
activities
Cash flows from investing activities
Additions to - (3,150)
property, plant and
equipment
Additions to (532,484) (411,775)
intangible assets
Right of use asset (15,375) -
initial direct costs
Net cash outflows (547,859) (414,925)
from investing
activities
Cash flows from financing activities
Proceeds from issue 12,032,502 1,104
of share capital
Repayment of capital (200,000) -
element of finance
lease rentals
Net cash inflows 11,832,502 1,104
from financing
activities
Net cash 1,939,523 (20,993,173)
inflow/(outflow)
Cash at beginning of 6,031,936 26,926,389
year
Movement in cash 1,939,523 (20,993,173)
Effect of exchange 17,310 98,720
rate fluctuations on
cash held
Cash at end of year 7,988,769 6,031,936
notes to the accounts
1. Reporting Entity
eve sleep PLC (the "Company") is a public company, domiciled and registered
in England in the UK. eve sleep PLC is a company limited by shares. The
registered number is 09261636 and the registered address at 31st December
2019 was 29A Kentish Town Road, London, England, NW1 8NL effective from 5th
August 2019. Prior to that date, the registered address of the Company was
128 Albert Street, London, England, NW1 7NE.
2. Accounting Policies
2.1 Basis of preparation
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
The Group financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards as
adopted by the EU ("Adopted IFRSs"). The Company has elected to prepare its
parent company financial statements in accordance with adopted IFRS.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements.
This preliminary announcement is simultaneous with signed financial
statements on which the audit report is unqualified and unmodified.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2019 or 2018 but is
derived from those accounts. Statutory accounts for 2018 have been delivered
to the registrar of companies, and those for 2019 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did include a reference to which the auditor drew
attention by way of emphasis without qualifying their report in respect of
going concern and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
2.2 Changes in accounting policy
a) New and amended Standards and Interpretations adopted by the Group and
Company
In these financial statements, the Group has changed its accounting policies
in the following areas:
· Lease recognition
The Group has adopted the following IFRSs in these financial statements:
· IFRS 16 Leases
The Company has considered the change in accounting policy associated with
the application of IFRS 16. The Company's lease of 128 Albert Street,
London, NW1 7NE terminated in line with the agreed upon lease term on 17
August 2019 and therefore the Company has taken advantage of the short-term
lease exemption for lease assets and lease liabilities where a lease term
ends within 12 months of the date of initial application of IFRS 16. Thus
the presentation of this lease as an operating lease for the twelve months
ending 31 December 2019 remains consistent with previous periods under IAS
17.
On 1 August 2019 the Company commenced a 24-month lease of 29A Kentish Town
Road, London, NW1 8NL. The Company has recognised a lease asset and lease
liability in relation to this lease from the inception of the lease.
b) New and amended Standards and Interpretations mandatory for the first
time for the financial year beginning 1 January 2019 but not currently
relevant to the Group or Company
The following new and amended Standards and Interpretations are not
currently relevant to the Group or Company; however, they may have a
significant impact in future years:
· IFRIC 23 "Uncertainty over Income Tax Treatments"
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