Beter Bed N : Minutes AGM 2023 (300.0kb)

MINUTES ANNUAL GENERAL MEETING OF BETER BED HOLDING N.V.

Held on Wednesday, 10 May 2023 at 14.00 hours at Van der Valk Hotel, Rondweg 2 in Uden, the Netherlands.

Present on behalf of Beter Bed Holding N.V.
Supervisory Board:	Mr B.E. Karis (chair)
`	Mrs B.A.M. van Hussen (vice chair)
	Mrs M.C. Schipperheijn
	Mr A. Beyens

Management Board:	Mr A.J.G.P.M. Kruijssen (CEO)
	Mrs G.E.A. Reijnen (CFO)

1. Opening

The chair opens the meeting and welcomes the shareholders and observers who attend the meeting. Attending in addition to the chair are Barbara van Hussen, Maaike Schipperheijn and Alain Beyens on behalf of the Supervisory Board (SB), and John Kruijssen and Gabrielle Reijnen on behalf of the Management Board (MB) of Beter Bed Holding N.V. (BBH). Also in attendance are Michel van Agt, civil-law notary with Loyens & Loeff, who casts the proxy votes; Jaap Westland, GLT member responsible for Sustainability & Innovation; the executive committee of BBH's Works Council, and Inghwa Hengefeld, auditor. Bas Dekker, legal counsel at BBH, keeps the minutes in his capacity as secretary. Gusta de Jong, executive assistant at BBH, acts as counting assistant.

Of the total 27,538,426 issued shares, 15,319,172 (55.63%) voting shares are represented at the meeting. All relevant requirements for the Annual General Meeting (AGM) have been met, so that legally valid resolutions may be passed.

The minutes of the AGM of 11 May 2022 were posted on the Company's corporate website within three months of the end of that meeting. No comments were received on the minutes, whereupon they are adopted and signed by the chair and the secretary.

All information relevant for the shareholders is available on the corporate website at www.beterbedholding.com.

An audio recording will be made of the meeting.

2. Report of the Management Board for the 2022 financial year

John Kruijssen (CEO), Jaap Westland (GLT member, responsible for Sustainability and Innovation), and Gabrielle Reijnen (CFO) give a presentation of the key developments in the 2022 financial year. These include the management report, progress on the sustainability strategy, and the financial results in the past year. The presentation is also published on the corporate website.

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John Kruijssen starts his presentation by looking back at 2022, in which year BBH was confronted with a two-week lockdown and the consequences of the war in Ukraine. Despite the turbulent year, BBH achieved solid results. John Kruijssen mentions a number of highlights, which mark the implementation of the strategic agenda. This is illustrated by a video showing the activities in the past year (slides 7+8). The strategy is based on the pillars of growth 'Brick & Mortar', 'Online' and 'New Business', with sustainability as key enabler, as explained in the next few slides (slide 9). To further strengthen the strategy for brick-and-mortar shops, a second Experience Store was opened in Eindhoven in 2022, in addition to the one in Groningen. These Experience Stores showcase the latest innovations, such as Better Sleep ID, the Day-and-Night experience zone, the interactive pillow wall, Karlsson's rebranding, interactive pedestals, and the Emma Motion smart mattress (slide 10). Regarding the pillar of growth 'Online', BBH is on track to meet its 2025 growth targets. Although traffic slowed after two years of COVID, the online team nevertheless managed to generate activities, as a result of which the conversion rate and average receipt amount increased. The online team has been nominated several times for its digital-first culture of experimentation, and has won several awards in the digital marketing domain. Furthermore, the Company boasts a team of data analysts to model the data lake. The online NPS has grown with double digits and search engine optimisation has been applied, and efficiencies have been implemented in the E-DC in Veghel (slide 11). Steps have also been taken in respect of the supply chain. These include a new DC in Uden, a tender for a new warehouse management system, operational improvements in the eDC in Veghel, and exploring the possibilities of robotisation and mechanisation. As regards Category Management, the new Karlsson collection was launched last year and Beter Bed launched a collection of self-developed duvet covers, among other things. It was also again possible to organise a physical suppliers day to strengthen existing partnerships with suppliers (slide 12). The pillar of growth 'New Business', which includes DBC's wholesale operations, has developed well, although DBC struggled during the COVID period. While on the one hand sales of Mline at the dealers were disappointing compared with last year, and B2B commitments were suspended, intercompany sales and thus Mline's turnover at BB increased. Last year, the Simmons brand was added to DBC's product portfolio. In addition, online websites and international platforms, such as Amazon, experience growth as well (slide 13). In 2022 many efforts were made to expand the Sleep Better, Live Better strategy: raising awareness of sleep as the third pillar of health; creating a 'brand of choice'; and becoming an 'employer of choice', which terms are explained in the next slides (slide 14). Activities to put thought leadership on sleep on the map include rolling out the Better Sleep ID in the store network; recruiting sleep experts; actively posting sleep facts; the sleep event with Matthew Walker; partnerships with media; and presence in films and at health festivals. The new TV commercial linked to the new brand campaign is shown (slides 15 and 16). In order to become the brand of choice for retail and wholesale and to build a strong brand portfolio, A-brands such as Tempur, Emma and Simmons have been included in the product range, in addition to in-house developed, formula-specific brand labels such as BBright, Karlsson and Mline (slide 17). Finally, many initiatives have been taken to become an 'employer of choice'. These contribute to greater job satisfaction as well as a safer working environment. Together with the SB and the GLT, the MB has conducted and is further anticipating a talent check on tomorrow's leaders (slide 18).

The presentation is continued by Jaap Westland, who explains the sustainability developments at BBH. In 2021 the sustainability strategy was presented, which takes its cue from the Sleep Better, Live Better strategy. Three objectives were defined in this regard:

1. The pledge to customers of offering a good and sustainable night's sleep;
2. Taking care of allpeople involved in the chain; and
3. Reducing the organisation's environmental impact by offering more sustainable products (slide 20).

A number of KPIs were adopted in this strategy. This led to the rolling out of the Better Sleep ID technology to 40 Beter Bed stores in 2022, with 58% of visitors using the system. In BBH's own operations, a 64% reduction of CO2 was achieved by switching to green electricity, electrification of the vehicle fleet and increased sustainability of the offices and stores (e.g. LED lighting), among other things. The focus was also on controlling human rights in the supply chain with all suppliers signing the Code of Conduct. The product portfolio has become about 16% more sustainable. A distinction is made as regards products between circular, modular, natural and recycled materials.

This year's challenge is to continue implementing the sustainability strategy and anticipating the implementation of the CSRD, the European Corporate Sustainability Reporting Directive, which will take place in close consultation with the auditor. The European Sustainability Reporting Standards (ESRS) lay down the content and manner of reporting (slide 21+22). Jaap Westland goes on to explain how the ESRS standards work (slide 23 and 24).

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In terms of planning, BBH is currently examining the dual materiality of a number of specific standards. Once this examination is completed, the applicable standards will be translated into a blueprint for next year's annual report (slide 25). Attention is also given to the EU Taxonomy regulations, which serve as guidelines for sustainable investments. Jaap Westland goes on to explain how the regulations concerning EU Taxonomy work and shows the impact of these regulations on the organisation (slide 26). The Better Sleep ID is expected to be rolled out to all BB stores in 2023. The stores will also be modernised, which should yield expected savings in energy consumption of between 30% and 50% for each store. In addition, the car lease scheme will be amended in the sense that henceforth only electric cars may be leased, as a first step towards reducing emissions from company cars. The 'People' objective focuses on human rights in the supply chain. When suppliers have signed the Code of Conduct, their compliance will be monitored, for which BBH has joined the network of BSCI, an organisation that provides audits. BBH is also carrying out an inventory to gain insight in the activities and suppliers in the chain. This is in anticipation of the Corporate Sustainability Due Diligence legislation that is being drawn up. As regards our staff, safety is a priority. The Company has launched a senior leadership programme for high potentials, among other things. The organisation also focuses on the KPI of making products from materials from the waste stream, specifically cardboard and plastic (slide 27).

Gabrielle Reijnen takes over and continues the presentation by explaining the key financial figures for 2022.

Gabrielle Reijnen is proud of the staff's performance and the resilience shown by the Company in 2022, in light of the uncertainties surrounding the macroeconomic conditions and their impact on consumer confidence, combined with a tight labour market.

Sales in 2022 increased by 7.1% to €229.4M, driven by an 8.0% growth in the Benelux and a 6.3% decline in New Business (which excludes sales to BB); total sales of DBC increased by 16.0% to €30.5M (2021: €26.3M). In Q1 BBH still suffered from the lockdown effects and catch-up sales. Despite this, the Company was able to match the strong sales in Q2 2021 in the second quarter. Q3 was weak due to hot weather, after which the trend reversed in September and BBH was able to close Q4 strongly, both in terms of order intake (+16%) and turnover (+3.5%). Black Friday and the holiday season also contributed to these results (slide 29). Due to the strong increase in order intake in Q4, combined with the permanent conversion to sales, the order book closed at €23.1M in 2022. This is 9% less compared with 2021, but a 16.2% increase from 30 September 2022, which bodes well for 2023 (slide 30). Online sales amounted to €42.1M (2021: €50.1M). In 2022 the online channel share was 18.3%, compared with 23.4% in 2021. In Q1 and Q2 online sales dropped by 33.9% and 24.9% respectively, before increasing by 4.5% in Q3 and 12.8% in Q4 (slide 31). Despite higher retail prices due to the increase in the costs of goods, BB was able to maintain its value-for-money proposition, allowing sales to increase while gross margin remained flat at 55.1%. Gross profit increased by €8.3M, to €126.4M. This is in line with the 2022 outlook. Operating costs increased by 13.0%, to €117.7M (2021: €104.2M) as a result of: i.) the 12.8% increase in staff costs due to the wage increase agreed in the collective labour agreement; a tight labour market, which led to the hiring of temporary staff, quality improvement and the hiring of specialists; ii.) higher depreciation due to adjustments in rents (the E-DC and the sale and leaseback of three retail properties). Other operating costs, relating to sales and marketing costs, logistics costs, and other operating costs such as higher electricity and fuel prices, increased by €6.2M (slide 32). All this resulted in an underlying EBIT of €10.6M (2021: €14.5M). Due to the E-DC and the sale and leaseback of retail properties and investments, depreciation of tangible and intangible assets was up €0.5M. Together with a €1.5M higher depreciation of right-of-use assets, this resulted in an underlying EBITDA of €30.7M (2021: €32.8M) (slide 33). Net profit in 2022 reached €5.3M. To compare 2022 with 2021, a tax effect due to the sale of the business operations in Sweden and the sale and leaseback of three retail properties need to be taken into account (slide 34). Investments in 2022 increased to €6.3M (2021: €4.2M) to fund the rollout of the strategic plan. Investments were made in IT infrastructure and the customer journey, to improve the store network, roll out the Better Sleep ID, and model a data lake. Net fixed assets increased, with investments exceeding depreciation in 2022 (slide 35). As of 31 December 2022, the net cash position was €37.7M. In addition, BBH has a €30.0M bank credit. This credit facility has not yet been used. Partly because of the €67.7M cash headroom, there is sufficient room to further implement the strategic plan; in line with the revised dividend policy, BBH proposes a cash dividend of €0.15 per share (see agenda item 7) (slide 36). This is in line with last year and the revised dividend policy.

The following questions are raised in respect of this agenda item:

Before Mr R. Snoeker asks his question, he shares with the shareholders his good experience of his visit to the Experience Store in Eindhoven and the use of the Better Sleep ID. He asks the following questions, which are answered by John Kruijssen:

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• Looking at the current situation, is the target stated in the annual report, i.e. an annual growth of 15% in turnover, realistic?
  The target is ambitious. The strategy was launched two years ago during a period when society was facing the COVID crisis, and the effects thereof were unclear. This has resulted in a delay. Additionally, BBH has also been confronted with the consequences of the war in Ukraine. The challenges have certainly not diminished. The MB and management periodically assess the feasibility of the target. At present, BBH still has sufficient options and the underlying dynamics are favourable. Moreover, the plan extends until the end of 2025; BBH has not reached the halfway point of that timeframe. If at any time BBH believes that the target is not attainable, this will be communicated with the shareholders. Since this has not happened yet, it can be concluded that BBH is currently optimistic about the feasibility. However, it will require hard work to achieve the target.
• Is it possible to provide more specific details on the growth, and on the results of each product group/division in the next annual report?
  Turnover is growing due to the continuous growth in the stores, and the margin shows a positive development due to the purchasing policy, which enables BBH to increase the margin in the next few years without immediately reflecting this in the retail prices. BBH is confident that the B2B funnel, which was delayed by COVID, will be revived. Analyses show that 'Online' is increasingly outdistancing competitors. There are also growth elements that are not shared with shareholders for competition reasons. John Kruijssen considers copying BB as confirmation that the strategy works, and only increases the drive to do better. Gabrielle Reijnen adds that, on the one hand, reporting takes place based on the split between Benelux and New Business, and on the other hand by offline and online sales. As a listed company, the Company is obliged to publish periodic reports. To not make the competition any wiser, that what is not required to be reported is not disclosed.

Mr A. Jorna asks on behalf of the VEB the following questions; Gabrielle Reijnen answers the question on the online growth strategy, Jaap Westland answers the question on the code of conduct at buyers, and John Kruijssen answers the remaining questions.

• Regarding the 'Brick & Mortar' growth strategy: In addition to Groningen, an Experience Store has opened in Eindhoven. When will the next two Experience Stores be opened and how many high-traffic locations are currently open? How much budget has been allocated to achieve the transition in retail product range and reduce the floor area on shopping boulevards?
  There is every chance that another Experience Store will be opened this year, and a fourth one next year. The City Store is still a pilot and there will be only one of them for the time being. Elements from the Experience Store will be introduced in boulevard shops, albeit on a smaller scale. BB has started rolling out the Better Sleep ID to all stores in the Netherlands and Belgium, with other components to follow. This will keep the Company within the investment parameters for the next five years, with an average of max 3% of turnover per year.
• Regarding the 'Online' growth strategy: What is the net profit percentage of online sales compared to offline and what is the growth target for online over time? Does online focus predominantly on the Beddenreus product range?
  Because of the omnichannel principle, the profitability partly depends on the channel to which certain costs are allocated. Online is used both for browsing and as a platform on which products can be bought. The webshop mainly sells bedding textile products and lower-priced mattresses. BBH is sticking to its online channel share target of 25%, as it has been shown that consumers mainly use online to browse, whereupon they make their purchases offline.
• Regarding the 'New Business' growth strategy: What is the current relationship with DeRucci and what progress has been made on the Leazzzy model; how many contracts have been signed?
  John Kruijssen confirms that a contract has been signed and that containers of test products have been shipped to China. However, the COVID pandemic made doing physical business in China impossible. The Company is trying to re-establish the ties, but it is not easy, also due to the fact that former contacts left. The further rollout of Leazzzy and the related marketing activities have been suspended in view of anticipated new legislation that may impact the decision whether or not to continue this business model.
• What is the strategy for Belgium?
  The marketing campaign launched in Belgium last year significantly increased BB's visibility in Belgium, resulting in significant growth. John Kruijssen is positive about the possibility of opening other stores in Belgium.

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• Are there any plans to go international online?
  Yes, on the one hand through Amazon, with country alignment and a selection of products. BBH is also willing to consider the acquisition of an online organisation, should the opportunity arise.
• BBH has paid close attention to scope 3 by the signing of the Code of Conduct by suppliers. Is it also observed by commercial partners, such as Ajax and KNVB?
  It has been agreed with the partners that the products will be returned. Depending on the duration of use by the commercial partners, returned mattresses are either used for social projects such as projects in Ukraine and asylum seekers' centres, or recycled. BBH participates in the Stichting Matrasrecycling Nederland, a foundation whose aim is to collect 85% of mattresses by 2028. In 2022 that figure stood at 55%. The materials of the collected mattresses are separated by the firm of RetourMatras. Of these materials, 81% is effectively reused.

3. Report of the Supervisory Board for the 2022 financial year

The chair refers to pp. 90 - 95 of the Annual Report for the Supervisory Board's report.

The SB supervises and assists the MB on behalf and for the benefit of the stakeholders. The SB is responsible for ensuring the continuity of the management and the organisation.

In the past year the SB consisted of Bart Karis (chair), Barbara van Hussen (vice-chair), Alain Beyens, and Maaike Schipperheijn.

In 2022 the SB was involved in the developments at BBH and its subsidiaries. In preparation of the SB meetings the chair had frequent contact with the MB. The SB met, both in person and virtually, ten times with the MB in 2022, with the SB being regularly, timely and properly informed by the MB, both orally and in writing, about topics including the operational results of the various formulas; the Company's finances; the further implementation of the strategy; and the further development and implementation of the ESG strategy.

The SB met with the external auditor on the 2022 results, the audit findings, the half-year results, the results for the 2022 financial year (until the end of November), and the findings with regard to the internal audit systems.

The functioning of the MB and the implementation of the remuneration policy for the MB, among other things, were discussed behind closed doors. This was coordinated in individual talks. Following an explanation by the audit committee (AC), the SB also discussed the risk inventory with the MB. The procedure regarding risk analysis, risk management, risk control, and the external auditor's audit of the AO/IC in the context of the annual accounts gives the SB sufficient assurance to issue the management declaration regarding the operation of the risk control and risk management system.

In the 2022 financial year the AC consisted of Maaike Schipperheijn (chair), Alain Beyens, and Barbara van Hussen. The AC met four times in the past financial year. All meetings were attended by the external auditor, EY Accountants N.V. In addition, the AC held a private session with the external auditor.

The AC discussed the financial statements; the management report; the half-year figures, and the management letter with the MB and the external auditor. It also considered the 2022 control plan, the internal control plan, the annual budget, financing and the risk management and control system. Discussions also took place between the Internal Auditor and the chair of the AC, which included the review of DBC's sales and procurement process, the security & privacy process, and the internal control plan.

In 2022 the remuneration committee (RC) consisted of Barbara van Hussen (chair), Bart Karis, and Maaike Schipperheijn. The committee met four times in 2022, at which the performance and remuneration of the MB and the organisation's Group Leadership Team was discussed with the MB, among other topics.

In 2022 the selection and appointment committee consisted of Bart Karis (chair), Barbara van Hussen, and Maaike Schipperheijn. The committee met twice.

There have been no changes in the composition of the SB. The reappointments of Bart Karis and Alain Beyens will be discussed in agenda items 10 and 11 respectively.

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