Q2 and H1 2015 - Results

14 August 2015

Norway’s leading

discount variety retailer

2

So far in 2015 - Summary

Europris continues to outperform the market

Europris realises growth potential through a record number of store upgrades

Europris rules the seasons

Europris remains on a strong profitable growth track

1

2

3

4 1

1

1

1

3

Q2 – Highlights:

A robust quarter in a challenging season

• Group revenue increased by 4.4% – Easter peak sales days in Q1 vs. Q2 last

year

• Two new store openings

• Like-for-like sales growth of 1.9% vs. market

of 0.7%

• EBITDA (excluding IPO cost) up 15.3%

• Refinancing – improved terms and flexibility

• Listed on Oslo Børs

33

147

113

258

67

168

Q1 Q2 Q3 Q4

EBITDA adjusted, NOK million

2014 2015

854

1,053 1,054

1,297

985 1,100

Q1 Q2 Q3 Q4

Group revenue, NOK million

2014 2015

4

H1 2015 – Highlights:

Growth track underpinned by first half year performance

• Group revenue increased by 9.4%

• Delivering on the store rollout programme with

five new store openings

• Like for like sales growth of 6.2% vs. market of

2.1%

• EBITDA (excluding IPO cost) up 30.6%

Parasols:

9,521 pieces

+41% from last year

Soil:

667,559 sacks

+9%

Lounge sets:

10,769 sets

+39%

Harris paintbrushes:

618,432 pieces

+51%

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

•1. Market includes a large number of shopping centres throughout Norway (e.g. 230 in 2014)

•Source: Kvarud Analyse, Europris

Continued outperformance of the market

LFL growth performance

Y-o-Y LFL growth (%)

x Europris growth relative to market growth in the period

2.6x 3.3x 2.7x 3.0x

7.0 %

11.7 %

1.9 %

6.2 %

2.7 %

3.6 %

0.7 %

2.1 %

0%

2%

4%

6%

8%

10%

12%

14%

2014 Q1 2015 Q2 2015 H1 2015

Europris Market

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• Spring/summer is our most weather

dependent season – According to yr.no south-eastern Norway has

had the coldest May in 36 years and June was

not better…

• Planning and execution of the season has

been very good

• Flexibility in marketing and campaigns

• Active in-season management

• First seasonal evaluation done in June – Still room for improvements next year!

Seasonals drive traffic despite tough conditions

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Europris rules the seasons

January sales, Åsane Easter, Hunstad Spring started in week 12, Eiker

National day, Lillehammer Summer start, Fauske Fun for kids, Åssiden

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Gross margin development

• Gross margin was 44.1% in H1 2015 vs.

41.4% in H1 2014.

• Gross margin positively impacted by: – Realised savings from our low cost country

sourcing program

– Take over of franchise stores

– Currency hedging

• Currency hedging – The market has adjusted selling prices faster

than the six month horizon we have on

hedging.

– Assuming a stabilisation in the fx rates for

USD and EUR to NOK we expect the gross

margin to be normalised going forward.

44.8 % 44.1 % 42.5 % 41.4 %

43.1 %

Q2 H1 FY

2015 2014

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OPEX* development

• OPEX in % of revenue was 32.8% in H1

2015 vs. 32.0% in H1 2014.

• Store modernisation programme

accelerated

• Takeover of franchise stores

• Project costs related to – Automatic store replenishment system

– E-commerce

• Overall good cost control

29.5 %

32.8 %

28.5 %

32.0 % 30.2 %

Q2 H1 FY

2015 2014

* Adjusted for nonrecurring expenses.

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EBITDA* development

• EBITDA* margin of 11.3% in H1 2015 vs.

9.5% in H1 2014.

• High like-for-like sales growth

• Improved gross margin – Currency hedging

– Sourcing savings

• OPEX increased, but overall good cost

control.

15.3 %

11.3 %

13.9 %

9.5 %

12.9 %

Q2 H1 FY

2015 2014

* Adjusted for nonrecurring expenses.

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Realisation of growth potential on track

• Three new stores in Q1 – Stokmarknes, January

– Strømsø, March

– Ottestad, March

• Two new stores in Q2 – Enebakk, June

– Pindsle, June

• One more store opened on 2 July with a

strong start – Giske

• On track to deliver net 10 new stores in

2015

5

7

11

6

13

14

7

19

20

10 8 8

11

12

15

14

16

21

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Total: 225

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

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Modernisations at all-time high

• 33 stores modernised – Q1: 17

– Q2: 16

• 3 stores relocated – Q1: 1 (Bø)

– Q2: 2 (Kongsvinger and

Iseveien/Sarpsborg)

• Expect 75-80% of own stores to be in

latest format at year end – Several franchise stores in the

pipeline for modernisation

Share of own stores in latest format:

Chain store projects 2014 and H1 2015:

12%

44%

65%

2013 2014 H1 2015

9 5

51

36

0

10

20

30

40

50

60

70

2014 H1 2015

Modernisation/reloc.

New stores

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Our key focus areas

1. Continuing to gain market share – Extensive modernisation programme continues

– Ambitious category development programme

– Owning the seasons in Norway

– Improved store network: More stores and better

locations

2. Maintaining good underlying cost control

3. Improving working capital through increased

inventory turnover

Financial review

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Improved financial terms and flexibility

• On 23 June the Group refinanced its existing bank debt.

• Net finance in Q2 includes nonrecurring cost of NOK 57 million (no cash effect) related to the

former term loan and credit facilities.

• New 5 year term loan of NOK 1,650 million with SEB (agent) and DNB – Amortization optional within the period

– RCF of NOK 450 million of which NOK 350 million may be used for ancillary facilities

• Significantly improved terms with reduced fees and interest margins. Interest rate of 2.22% in

Q3.

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Profit and Loss

• Q2 2015 – Revenue growth of 4.4%

– IPO related costs of NOK 30 million

– Refinancing costs of NOK 57 million

– Income tax expense reduced by NOK 4 million

due to final decision on pending tax issue

• H1 2015 – Revenue growth of 9.4%

– Depreciation of contractual rights included in

H1 14 with NOK 38 million, fully written down

at year end 2014.

– Adjusted profit before tax increased by NOK

45 million

Amounts in NOK million Q2 15 Q2 14 H1 15 H1 14

Total operating income 1,100 1,053 2,086 1,907

Operating profit 120 116 164 118

Net financial income (exp.) -113 -46 -148 -92

Profit before tax 8 69 16 27

Income tax expense -2 19 0 7

Profit for the period 10 51 16 19

Non-recurring items

IPO cost and refinancing 87 0 87 0

Other nonrecurring items 0 19 7 38

Total nonrecurring items 87 19 94 38

Profit before tax, adjusted 95 88 110 65

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Cash flow and working capital

Cash flow, NOK million Jun 15 Jun 14 FY 14

Cash from operating activities -135 -69 296

Cash used in investing activities -52 -63 -114

Cash (used in)/from financing activities 18 -161 -230

Net change in cash and cash equivalents -168 -293 -48

Cash and cash equivalents at 1 January 245 293 293

Cash and cash equivalents at end of period 77 0 245

Change in working capital, NOK million Jun 15 Jun 14 FY 14

Inventory -128 -34 -105

Accounts receivables and other short-term

receivables

95 -11 -28

Accounts payable and other short-term

liabilities

-103 -96 74

Change in working capital -136 -141 -59

• Cash-flow subject to normal seasonality

• Inventory increased due to – Opening of net 10 new stores and take-over of

7 franchise stores

– Value of goods purchased in foreign

currencies increased

• No repayment of loans in 2015 – Voluntary repayment of NOK 100 million in

June 2014 in addition to scheduled repayment

• Net cash-flow from the IPO of NOK 46 million

of which; – NOK 18 million is used for repayment of

shareholder loan.

– The remaining amount will be used to pay the

IPO related costs

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Outlook

• Norwegian retail market continue its positive

development

• Discount retail is still underpenetrated in Norway

and continue to take market shares

• Europris has a truly mixed assortment – Large market

– Competitive flexibility

– Resilient business model

• White space and new business opportunities

• We maintain our positive outlook from the IPO

19

So far in 2015 - Summary

Europris continues to outperform the market

Europris realises growth potential through a record number of store upgrades

Europris rules the seasons

Europris remains on a strong profitable growth track

1

2

3

4 1

1

1

1

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«Norway’s leading discount variety retailer»

The best is still ahead of us.