Eve Sleep plc: Trading Update

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)"

Trading update

Group revenue 11% ahead of 2019 pre-Covid comparators, targeting UK&I breakeven in 2022

eve Sleep ("eve", the "Group" or the "Company"), the direct to consumer sleep wellness brand operating in the UK, Ireland (together "UK&I") and France announces a trading update for the full year ended 31 December 2021.  All figures remain subject to audit. The Company plans to publish its full year audited results on 24 March 2022.

Business highlights

• Two year Group revenue growth of 11% achieved on 40% lower marketing spend
• Broadened range to operate in 6 categories, having developed bedframes into a sizable business
• Premium ranges now account for over 40% of revenue
• Continued expansion into gifting and wellness, now with over 50 SKUs
• Robust supply chain; average delivery lead times for all large items remains below 10 days

Financial highlights

• UK&I revenue increased 10% to £22.5m (2020: £20.5m) and 22% on 2019 pre-Covid comparatives
• Group revenue increased 6% to £26.6m (2020: £25.2m) and 11% on 2019 comparatives
• EBITDA losses in H2 reduced 20% to £0.9m (2020 H2: loss £1.1m)
• In-line with our plans, higher marketing investment resulted in full year EBITDA losses increasing to £2.9m, a 73% reduction on pre covid 2019 comparators (2020: EBITDA loss of £2.0m, 2019: £10.7m loss)
• Cash outflow in H2 reduced to £0.7m (2021 H1: £3.1m outflow)
• Closing net cash at 31 December 2021 of £4.5m (2020: £8.3m) following a £1.0m outflow in H1 2021 for one-off factors relating to increased stock holding, payment of deferred VAT and other working capital movements

Strong 2021 performance led by the UK

This is the third year of consecutive revenue growth in the UK&I market, demonstrating clearly that the benefits of the rebuild strategy continue to deliver and that the recovery is built on sustainable foundations. Revenue growth in the UK&I was led by ongoing strength in eve's ecommerce platform, reflecting the now structural shift to online ordering. Demand was strong throughout the year, including in December, where year-on-year growth remained positive despite strong comparatives resulting from heavy lockdown restrictions and store closures over the prior year Christmas 2020 period.

Revenue growth in the UK&I was broad based across mattresses and non-mattress products, with particular strength in eve's award winning premium hybrid mattress, the spindle bedframe and the temperature balancing protector, in addition to new ranges, most notably the 'sleep away' sleep over range. The increasing expansion into sleep gifting and wellness ranges not only acts as a key differentiator to more price led, mattress focused peers but it is also driving up attachment rates as eve builds an increasingly loyal customer following.

There are some early positive signs of progress in France as we begin the reinvestment programme, including improved conversion rates in the fourth quarter, against what remains a challenging market backdrop of covid accelerated comparators and heavy competitor activity.

eve's local manufacturing and re-engineered logistics has enabled the Company to navigate the industry wide supply chain issues and labour challenges that continue to constrain growth and fuel inflationary pressures effectively. However, in the Christmas trading period high levels of covid infection placed additional strain on the delivery network resulting in customer service challenges. We believe these challenges will be short lived and reflect the current peak of absence due to illness across the delivery network, and hence foresee customer experience returning to our usual high levels over the next few months.

2022 trading and outlook - targeting UK&I breakeven

Notwithstanding increasing pressures on household discretionary income as the cost of living crisis starts to bite, trading in the first few weeks of the year has started well, with the Group  continuing to show year on year growth against challenging comparisons with last year's January lockdown, (with 2021 one of the strongest January's for e-commerce on record). The rebuild strategy and the ongoing push into sleep wellness give the Company confidence that despite the limited visibility on the broader macro-economic backdrop, eve can move the UK&I business to a position of breakeven in the current financial year whilst continuing with the strategy in France to reach sustained topline growth with a positive marketing contribution before overheads.

The management team will be hosting a live presentation with Q&A for retail investors at 10:00 GMT today. The presentation can be accessed via the Investor Meet Company platform. Interested investors can sign up to Investor Meet Company for free and add to meet EVE SLEEP PLC via the link: https://www.investormeetcompany.com/eve-sleep-plc/register-investor

Cheryl Calverley, CEO of eve Sleep commented:

"eve has made great progress in 2021, overcoming the many external challenges we have faced, thanks to the dedication and unswerving commitment of our incredible team. Our UK&I business continues to go from strength-to-strength, on reduced marketing spend, achieving 22% growth on pre-Covid 2019 comparatives. Whilst COVID has put temporary challenges at the door of the delivery network and a resulting pressure on our customer service team, eve's unique strength is our supportive culture. This has seen an 'all hands on deck' mentality to addressing these customer issues, with the executive team and colleagues from right around the business leaning in to solve queries.

eve is fast evolving into a unique, digitally led retail business, focused on the growing area of sleep wellness. This transition is expected to accelerate, becoming more evident in 2022 as brand consideration continues to grow, alongside the launch of new products and services, with the resulting improvement in customer repeat rates. As a result we're proud to say we expect to move the UK&I business to breakeven in 2022."

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