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Presentation of results for third quarter 2015
CEO Pål Wibe
CFO Espen Eldal 12 November 2015
Norway’s leading
discount variety retailer
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2
Highlights in the third quarter
• Group revenue increased 7.6%
• Like-for-like sales increased 2.9%, outperforming
market growth of 1.9%
• Improved gross margin
• Adjusted EBITDA* up 8.1%
• Close to doubling of net profit in the quarter
• Successful category developments
• Two new store openings
• Significantly lower interest expenses due to
successful refinancing
• Nominated to Retailer of The Year Award
Group revenue, NOK million
Adjusted EBITDA*, NOK million
• Adjusted for nonrecurring expenses of NOK 3.7 milllion in 2014.
854
1 053 1 054 985
1 100 1 135
Q1 Q2 Q3
2014 2015
33
147
113
67
168
122
Q1 Q2 Q3
2014 2015
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3
0
126
196
0
0
0
75
75
77
212
0
49
255
124
0
239
90
24
55
122
42
183
177
169
•Market includes a large number of shopping centres throughout Norway (e.g. 230 in 2014)
•Source: Kvarud Analyse, Europris
Continues to outperform the market
Overall growth performance
Y-o-Y LFL growth (%)
x Europris growth relative to market growth in the period
2.6x 1.5x 2.4x
1.9 % 2.1 %
2.7 % 2.9 %
5.0 %
7.0 %
0%
1%
2%
3%
4%
5%
6%
7%
8%
Q3 2015 YTD 2015 2014
Market Europris
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4
0
126
196
0
0
0
75
75
77
212
0
49
255
124
0
239
90
24
55
122
42
183
177
169
•Market includes a large number of shopping centres in Rogaland. Europris has 23 LFL stores in Rogaland
•Source: Kvarud Analyse, Europris
Strong performance in oil region
Growth performance in Rogaland
Y-o-Y LFL growth (%)
x Europris growth relative to market growth in the period
2.6x Nm. 11.3x
-0.9 %
0.6 %
3.0 %
6.7 % 6.8 %
7.7 %
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Q3 2015 YTD 2015 2014
Market Europris
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5
0
126
196
0
0
0
75
75
77
212
0
49
255
124
0
239
90
24
55
122
42
183
177
169
Nonstop growth focus:
Concept and category development
Two core drivers of the Europris growth plan:
Concept and category
development
supporting LFL growth
Focused new store
rollout programme
LFL growth 2014:
LFL growth YTD 2015:
7.0%
5.0%
Net new stores 2015:
Planned net new
stores 2016:
9
8
Europris growth relative
to market
2.6x
2.4x
Europris growth relative
to market
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6
Pre 2013/2014 Pre 2013/2014
Europris generetion 5.0 is introduced
BEFORE (Pre 2013/2014)
TODAY (2014/2015)
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7
Realizing the potential in
concept development
• We are testing an upgrade to
5.01!
• Improved “shop-in-shop”
categorisation
• Brands more prominently
displayed
• “Value for money” visualisation
one step up
• The best of all… – Same investment as previous
version
– Limited cost for roll-out of
main elements to existing
stores
POST 2015
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8
Successful test pilot 5.01
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9
Successful test pilot 5.01
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10
Category development - yarn
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11
• Successful yarn pilot since May
• Roll-out in early September to
app. 150 stores – Improved sales display
– Increased shelf space
• Investment covered by supplier
• Results: 37.5% growth on yarn
last two weeks of September
A very promising start
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12
Pet food “A” brand to be launched
• Pet food is an important traffic
driver
• Purina is a quality brand and dog
food test winner
• On sale in Europris from Q1 2016
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More modern stores than ever
• Expect 75-80% of own stores to be in latest format at year end 2015 – Six projects planned for Q4 of which three are relocations
– Several franchise stores in the pipeline for modernisation in 2016
– Relocation/extension pipeline for 2016 very strong with 11 projects confirmed
• Positive sales results in modernised stores – Basket increased from day 1
– Traffic growth expected to come over time
Share of own stores in latest format: Chain store projects:
12%
44%
2013 2014 YTD 2015
73%
9 7 5 5
46 47
0
20
40
60
80
2014 YTD 2015
New stores Relocations Modernisations
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14
0
126
196
0
0
0
75
75
77
212
0
49
255
124
0
239
90
24
55
122
42
183
177
169
Nonstop growth focus:
New stores
Two core drivers of the Europris growth plan:
Concept and category
development
supporting LFL growth
Focused new store
rollout programme
LFL growth 2014:
LFL growth YTD 2015:
7.0%
5.0%
Net new stores 2015:
Planned net new
stores 2016:
9
8
Europris growth relative
to market
2.6x
2.4x
Europris growth relative
to market
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Extensive plan for store rollout
• Seven new stores opened so far in 2015
of which two opened in Q3 - Giske and
Begby
• Two store openings planned in Q4 –
Bodø and Grorud
• One store was cancelled due to
disagreement on commercial terms
• Solid pipeline of new stores with 9
approved by the Board and several in
negotiations: – 6 confirmed for 2016
– 1 confirmed for 2016/2017
– 2 waiting for municipal approval
– Wide range of prospects and good
opportunity flow
– No closures planned for 2016
5
7
11
6
13
15
7
19
20
10 8 8
11
12
15
15
16
21
8
Total: 227
More than 25k inhabitants per store
Between 15k and 25k inhabitants per store
15k or fewer inhabitants per store
Stokmarknes
Ottestad
Strømsø
Enebakk
Pindsle
Giske
Begby
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Financial review
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17
Gross margin development
• Gross margin was 43.6% in Q3 2015 vs.
41.0% in Q3 2014
• Positive impact from sourcing initiatives and
takeover of franchise stores
• Gross margin positively impacted by annual
stocktaking: – During the year calculated gross margin is
reported and any calculation differences are
adjusted at stocktaking
– Q3 accounts include NOK 20.9 million for
calculation differences of which app. 15
million relates to previous periods
– Excluding calculation differences from
previous periods the gross margin was up
1.3%
– Q4 last year includes a positive result from
stocktaking of NOK 25.4 million.
40,1 % 42,5 %
41,0 %
47,2 %
43,2 % 44,8 %
43,6 %
Q1 Q2 Q3 Q4
2014 2015
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18
OPEX development
• OPEX* in % of revenue was 32.9% in Q3
2015 vs. 30.4% in Q3 2014
• Growth driven by volume increase, new
store openings and takeover of franchise
stores
• Q3 includes NOK 15.3 million in special
costs – Stocktaking
– Opening of a new warehouse
– Timing differences of marketing costs
– Excluding the special cost the OPEX in % of
revenue was 31.6%
36,2 %
28,5 % 30,4 %
27,3 %
36,4 %
29,5 %
32,9 %
Q1 Q2 Q3 Q4
2014 2015
• Adjusted for nonrecurring expenses of NOK 3.7 milllion in 2014.
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Adjusted EBITDA development
• Adjusted EBITDA* margin of 10.7% in Q3
2015 vs. 10.7% in Q3 2014
• Takeover of franchise stores dilutes EBITDA
margin initially, but contributes positively to
EBITDA – Four takeovers last twelve months
• OPEX increased, but overall good cost
control
3,9 %
13,9 %
10,7 %
19,9 %
6,8 %
15,3 %
10,7 %
Q1 Q2 Q3 Q4
2014 2015
• Adjusted for nonrecurring expenses of NOK 3.7 milllion in 2014.
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20
Profit and loss account
• Q3 2015 – Revenue growth of 7.6%
– Improved gross margin
– Interest costs reduced by app. NOK 15 million
after the refinancing
– Unrealised gain on currency hedging contracts
and accounts payable of NOK 10.6 million
– Adjusted profit before tax up 59.4%
– EPS was NOK 0.45 in the quarter
• YTD 2015 – Revenue growth of 8.7%, key driver is LFL of
5.0% for the Chain
– IPO related costs of NOK 30 million and
refinancing costs of NOK 57 million in 2015
– Depreciation of contractual rights included in
2014 with NOK 47 million, fully written down at
year end 2014
– Adjusted profit before tax increased by NOK
83 million (+64.3%)
Amounts in NOK million Q3 2015 Q3 2014 YTD
2015
YTD
2014
Total operating income 1,135 1,054 3,220 2,961
Operating profit 104 77 267 195
Net financial income (exp.) -1 -26 -149 -118
Profit before tax 102 51 118 78
Income tax expense 28 14 28 21
Profit for the period 74 37 91 57
Nonrecurring items
IPO cost and refinancing 0 0 87 0
Other nonrecurring items 0 13 7 51
Total nonrecurring items 0 13 94 51
Profit before tax, adjusted 102 64 212 129
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21
Cash flow and working capital
Cash flow, NOK million YTD
2015
YTD
2014
FY 2014
Cash from operating activities 0 118 304
Cash used in investing activities -87 -86 -122
Cash (used in)/from financing activities 15 -167 -230
Net change in cash and cash equivalents -72 -135 -48
Cash and cash equivalents at 1 January 245 293 293
Cash and cash equivalents at end of period 173 158 245
Change in working capital, NOK million YTD
2015
YTD
2014
FY 2014
Inventory -250 -187 -105
Accounts receivables and other short-term
receivables
77 -19 -28
Accounts payable and other short-term
liabilities
48 165 74
Change in working capital -125 -40 -59
• Cash flow subject to normal seasonality
• Inventory increased due to – Opening of net eleven new stores and
takeover of four franchise stores
– Value of goods purchased in foreign
currencies increased
• Working capital impacted by a delay in
supplier payments in 2014
• No repayment of loans in 2015 – Voluntary repayment of NOK 100 million in
June 2014 in addition to scheduled repayment
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22
Summary and outlook
• Europris continues to outperform the market
despite unfavourable weather conditions
• Resilient business model in a slowing
Norwegian economy – Europris shows relative strength in Rogaland
• Discount retailing is expected to gain market
share in Norway
• Truly mixed assortment – Large market
– Competitive flexibility
• Nonstop growth focus – Strong focus on concept and category
development
– Strong pipeline of new stores, relocations and
extensions
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23
Norway’s leading discount variety retailer
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Q & A
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Presentation of results for fourth quarter 2015
12 February 2016