XXL

XXL ASA XXL ASA Annual report 2023 All sports united. Sports unite all. Revenue Development (NOK Billion) XXL ASA Annual Report 20232 2001 2002 0,2 0,3 2003 0,4 2004 0,5 2005 0,6 2006 0,7 2007 1,0 2008 1,6 2009 2,0 2010 2,5 2011 3,1 2012 4,0 2013 5,2 2014 6,5 2015 7,8 2016 8,7 2017 9,1 2018 8,5 2019 9,9 2020 9,6 2021 8,4 8,0 2022 2023 XXL ASA Annual Report 20233 Highlights 4 Key figures 5 CEO Comment 9 Historical milestones 11 About us 12 Our strategy 22 Board of Directors Report 28 Corporate Governance 32 The XXL share 37 Consolidated Financial Statement 39 Financial Statement XXL ASA 61 Footnotes/Definitions 71 Content Denne siden er ikke oppdatert XXL ASA Annual Report 20234 1) Please refer to definitions at the end of the report for descriptions of alternative performance measures that are used in highlights and key figures (numbers in brackets are numbers for 2023 unless otherwise stated) Total revenues of NOK 7 961 million (NOK 8 426 million) Negative EBITDA of NOK 80 million (NOK 237 million) Net income of negative NOK 1 590 million (negative NOK 411 million) Successful exit from Austria during 2023 New strategy plan "Reset and Rethink" launched July 2023 Highlights 237 Numbers of stores 84 86 -80 2022 2023 EBITDA (Amounts in MNOK) (Amounts in MNOK) Operating revenues 8 426 7 961 XXL ASA Annual Report 20235 Key figures / Group (Amounts in NOK million) Earnings per share: See Note 14 FY 2023 FY 2022 (Audited) (Audited) Operating revenue 7 961 8 426 Growth (%) -5,5 % -12,2 % Gross profit 2 509 2 721 Gross margin (%) 31,5 % 32,3 % OPEX % 32,5 % 29,5 % EBITDA -80 237 EBITDA margin (%) -1,0 % 2,8 % Impairment losses 576 1 EBIT -1 409 -467 EBIT margin (%) -17,7 % -5,5 % Net Income -1 590 -441 Basic Earning per share (NOK) -1,93 -1,63 Earning per share (adj) -2,18 -2,15 Average number of shares (1 000 shares) 822 974 252 437 Cash provided by operating activities 198 682 Like for like revenue growth -9,3 % -12,1 % Number of stores at period end 86 84 New stores in the period 2 2 Closed stores in the period – 2 XXL ASA Annual Report 20236 Key figures / Segment (Amounts in NOK million) FY 2023 FY 2022 (Audited) (Audited) Norway Operating revenue 4 049 4 394 Growth (%) -7,9 % -10,2 % Gross profit 1 342 1 671 Gross margin (%) 33,1 % 38,0 % OPEX % 22,6 % 19,9 % EBITDA 425 661 EBITDA margin (%) 10,5 % 15,1 % Number of stores at period end 39 38 New stores in the period 1 1 Sweden Operating revenue 2 387 2 488 Growth (%) -4,1 % -16,0 % Gross profit 672 816 Gross margin (%) 28,2 % 32,8 % OPEX % 29,3 % 27,4 % EBITDA -28 32 EBITDA margin (%) -1,2 % 1,3 % Number of stores at period end 30 29 New stores in the period 1 1 Closed stores in the period – 2 Finland Operating revenue 1 525 1 543 Growth (%) -1,2 % -11,5 % Gross profit 495 536 Gross margin (%) 32,5 % 30,7 % OPEX % 28,1 % 25,4 % EBITDA 67 82 EBITDA margin (%) 4,4 % 5,3 % Number of stores at period end 17 17 New stores in the period – - HQ & logistics EBITDA -544 -538 EBITDA margin (% of Group revenues) -6,8 % -6,4 % XXL ASA Annual Report 20237 This is my first Annual Report since stepping into the role as CEO of XXL in May 2023. I have been in retail, digital and physical, includ- ing various turnarounds and transformations, for many years, but with close to a year in the XXL jersey I can truly say that I feel privi- leged to lead a company with such a clear purpose. All Sports Unit- ed – Sports Unite All. It is a commitment to our many colleagues, our customers and to the societies where we operate. As the Nor- dic market leader within sports and outdoor, we have a responsi- bility to foster an active and healthy lifestyle. We believe in the idea of democratizing sports. Through our wide range of products, now again increasingly at low prices, we make sports and outdoor activ- ities accessible to the many and by that contribute to combatting inactivity. Sports and outdoor activities also unite people, it breaks down barriers and brings people together across the globe. This past year, we have seen both tremendous head wind, strong strategic deliveries and not least 5000 colleagues that has really stepped up when facing difficult market conditions. So, 2023 was, as 2022 before it, a challenging year for retail in Europe. The Nordic sports market has seen two years – eight con- secutive quarters – with negative growth. Along with a few other consumer categories, our industry is maybe the one that has been hit the hardest. High inventory levels and weak demand, driven by record low consumer confidence levels, have led to increased pro- motional pressure and a squeeze on margins. As 2023 concluded, we closed the most difficult year to date in XXL’s history. The industry-wide struggle impacted us significant- ly. Despite these challenges, we are proud of the resilience and dedication shown by our 5,000 employees. In response to these challenges, we embarked on a new journey over the past year, be- ginning to lay the foundation for future proofing XXL in 2024 and beyond. To strengthen XXL both financially, commercially, and operational- ly, we launched a new long-term strategy called Reset & Rethink, where the first part outlines how and what we will reset to re-en- vision what was once our winning formula, and the latter defines where we need to rethink to adapt and adjust for a new future ahead. With Reset we address top line quick wins and cost-control through five must win battles. These are expected to deliver an EBITDA run-rate uplift of NOK 500-750 million. The first and most crucial one, is resetting category, i.e. how we buy, what we buy and how we build our assortment, which remains the widest in the mar- ket. Reducing buying of high and mid, and increasing low, price points is key. In Q4 we already saw a strong sales growth for lower price points compared to 2022. Historically XXL has always been strong in low price points but still being able to sell through the en- tire price ladder. Strict capital and buying discipline have already given effects, with significant stock level increase within fast-mov- ing, and corresponding reduction of slow-moving, products. We have throughout 2023 streamlined our inventory and taken de- cisive steps to normalize and then further optimize our inventory levels, reducing it by more than NOK 800 million. Related to this is availability, where lower price points will materially change inven- tory composition and product volumes going forward. Allocating more capital towards lower price points will increase both availa- bility and conversion rates. We are also addressing store opera- tions and we have initiated several actions to improve this core and vital aspect of our company. Among other things, we have made strategic exits from non-performing markets and ventures – exiting Austria, closing the XXL App and closing our online store in Den- mark. Stronger price control is also leading to improved underlying gross margins, moving towards the target of 40 %. After having im- plemented best practice online improvements, we see clear pos- itive shifts in online conversion rates cross all markets. We have also initiated a cost reduction program that will yield gross savings of NOK 300 million. With Rethink we aim to accelerate key top line levers. To achieve this, we launched four strategic pillars. Firstly, we have started to restructure our physical stores, with the goal of strengthening our store EBIT. We are rethinking store con- cept, and we are getting closer to our customers’ needs through localizing the assortment. A big part of this is relocating and resiz- ing stores. On the one hand, rent is our second largest expense, and we are critical of the rent increases we have seen in today's market. It is completely unacceptable, and we have been – and will continue to be – clear about this to our landlords. If we cannot find a solution, we will close stores and instead find alternative loca- tions with better terms. We feel that landlords in general do not understand the seriousness of the situation. On the other hand, we see a smaller store as more effective in most aspects. The resized stores will also be upgraded to the latest concept. This gives us a more modern, efficient, and customer-friendly store, that still re- tains a full range of products, in other words, everything one needs for sports and wilderness. We also opened two new stores in 2023 – Lillehammer and Skellefteå – to great success! Secondly, to increase e-com share we are accelerating e-com de- velopment. We are scaling personalization, developing a leading customer experience, and expanding online assortment. Thirdly, to improve gross margin, we have developed a new private label strategy where we plan to double down on own brands and in- CEO Comment crease the private label share. I am especially proud of our part- nership with Stormberg, with a lot of new products at lower price points that already hit our stores in 2023, and significant volumes are expected during 2024. Lastly, to elevate brand preference, we are leveraging our service offering. Developing and expanding and strengthening our instore workshops. 2023 marked a significant turning point for our workshops, transforming a NOK 29 million loss in 2022 into a triumphant profit. Our workshops have two custom- ers: the sales departments and the customers returning for product repairs. This dual focus sets us apart from competition, allowing us to cater for both new and used products in an environmental- ly friendly way as well. Here we also see great potential to build a circular offering for our customers, but this is a priority that we will start to focus on in the second of half 2024, at the earliest. In October, we relaunched our customer club in all markets. With the revamped club, our customers are getting points on all pur- chases, bonus checks and personalised offers. By the end of last year, after only three months of activation, we saw an increase of 8 % to a total of 3.6 million members. I am also delighted to say that we have bolstered our senior leader- ship team with key appointments in 2023. Emelie Friis (CMO), Si- men Helly-Hansen (CCO), Peter Jansson (SVP IT) and Dawid Go- sciniak (COO) are all joining XXL with strong competence and long experience from the retail sector as well as strong track records. As in previous quarters, we expect the market to remain chal- lenging and uncertain into 2024, with generally high promotional pressure also in the winter season. However, we expect a gradual improvement from the second half of the year. The sports and out- door market are still backed by strong megatrends which we will capitalize on in the mid to long run. Good health, regular exercising and well-being are keywords, as well as the fun and joy that comes from both playing sports and spending time in our great Nordic outdoors. XXL is thus extremely well positioned to continue to be the shopping destination that will enable people to live healthier, more exciting and joyful lives. Lastly, the Reset & Rethink plan is progressing well, and we are entering 2024 with gradually stronger prerequisites to succeed throughout the year and thus taking XXL back to a winning position as the unrivalled Nordic champion. I am really looking forward to work together with our 5 000 employees to achieve this in 2024. XXL is, and remains, All Sports United – Sports Unite All! Freddy Sobin CEO XXL XXL ASA Annual Report 20238 2000 2001 2002 2007 2010 2010 2011 2012 2012 2013 2013 2014 2014 2015 2017 2017 2019 2019 2020 2021 2022 2023 Founded by Øivind Tidemandsen The first XXL store was openedin central Oslo Norwegian webpage was launched Reached a 10 per cent market share in Norway with 8 stores Private equity company EQT acquired a majority stake in XXL Opened the first three Swedish stores during a three month period Opened central warehouse at Gardermoen, Norway Swedish webpage was launched XXL gained a 20 per cent market share in Norway with 18 stores XXL became the market leader in Norway with a 24 per cent market share Established a central warehouse in Sweden for distribution in the EU Entered the Finnish market with 1 store and launch of Finnish website Successful IPO of XXL ASA at Oslo Stock Exchange XXL became the largest sports retailer in the Nordics Crossed 30 per cent market share in Norway and above 15 per cent market share in both Sweden and Finland Opened the first two stores in Austria and launched Austrian website Acquisition of West System Norge AS – a niche player within the watersport segment (XXL’s first acquisition) Private equity company ALTOR acquired a majority stake in XXL Passed NOK 10 billion in annual turnover for the first time Opened central warehouse in Austria Decision to exit Austria during 2023 XXL closed it’s operations in Austria Historical milestones XXL has quickly grown to be a leading distribution channel for sports, outdoors and wilderness in Europe with the formula of cost-efficient op- erations, broad product range, focus on branded goods and high degree of service. XXL entered the Norwegian market in 2001, Sweden in 2010, Finland in 2014, Denmark in 2016 and Austria in 2017 with a concept that became a game changer in the sports retail market. Important historical milestones are listed below; XXL ASA Annual Report 20239 Business model and value chain We have a scalable retail model that drives efficiency and cost leadership. This model is a result of a large unit store format, controlled value chain, efficient logistics, centralized purchasing, and a fully integrated IT system resulting in a low-cost operating structure, which allows us to offer products at low prices. We have, and strive to maintain, lower operating expenses than all competitors. This is achieved by XXL’s scale, integrated value chain and a continuous focus on costs. The Group exercises tight control over store-level expenses, central warehouse expenses, real estate costs and corporate overhead costs. The cost consciousness and low-cost base is critical to XXL as it ena- bles XXL to meet competition by delivering price leadership and to constantly innovate and stay ahead of market development. Moreover, it has enabled XXL historically to have a higher EBITDA margin than its Nordic competitors over time. XXL operates a fully integrated value chain that facilitates simple and lean operations, which results in low costs. XXL controls all the stores without joint venture or any fran- chise arrangements. This means that the Group has control of the product ﬂow with continuous tracking of key performance metrics such as sales data and inventory lev- els. XXL maintains central purchasing and distribution functions to manage inventory planning, allocate ﬂow of goods to the stores and oversee the replenishment of goods to the central warehouses Omni-channel The Group has logistics and IT systems to support both e-commerce operations and sales through physical stores. As a result, Management considers the Group to be an omni-channel sports retailer. Omni-channeling allows the Group to provide its custom- ers with ﬂexibility and a seamless shopping experience by facilitating in-store shopping and online shopping, as well as a combination of the two. Additionally, omni-channe- ling also allows the Group to utilize customer data to optimize marketing and facilitate cross-selling and upselling. Moreover, the Group has introduced pick-up points in all its physical stores, thus enabling online shoppers to retrieve their goods from their nearest XXL store. All products purchased at the XXL websites can be returned to the physical stores, which also provides necessary services such as fittings and adjustments for all customers. XXL has in 2023 further developed the omni-channel offering. To improve sold-out sit- uations and broadening the available assortment, XXL has made all products in the Groups product range available for sales in all stores. XXL has continued to roll out new self-service pick-up solutions in some stores by using locker solutions for smaller stores and automated pick-up towers in larger stores. XXL was the first Nordic retailer to test out the tower solution which uses state of the art robotics and engineering. These self-service solutions provide for frictionless shopping and enhanced customer expe- rience in stores as well as improved store efficiency and lower costs. XXL has also con- tinued to install self-service cashier solutions in many stores in the Nordics with great feedback from customers and will continue to roll out more in the years to come. E-commerce operation The Group's e-commerce operations are defined as its sales activities through online sales channels, contrary to sales through retail stores that are physical stores. For the year ended 31 December 2023, the revenue contribution from the Group's e-commerce activities corresponded to 23.8% of its total revenues. The Group's websites in Norway (xxl.no), Sweden (xxl.se) and Finland (xxl.fi) function as extensions of the XXL brand and work as platforms for sale of goods, marketing of the XXL brand, as well as product education for its customers. The Group uses multi- ple channels to drive traffic to its websites, such as through newspaper advertisement, marketing material in its retail stores, search engine marketing, Internet advertisement placement, social media, and e-mail marketing such as through newsletters. Moreover, the Group has initiated several measures to improve customers’ online shopping expe- rience, such as through its automated personalization features and segmentation solu- tions on the landing pages and in its newsletters. The purpose of such initiatives is to improve relevancy and customer experience and enhance the efficiency for technical development. XXL has adopted parts of AI-generated images in production, with a view to a sustainable solution by reducing the need for expensive photoshoots and the envi- ronmental impact of the production process. The websites are also used by the Group to provide its customers with information on upcoming events, promotions, new products, and store locations. The websites feature a similar range of products offered in the retail stores at generally the same prices as in the physical stores. Store concept XXL stores aim at simplicity with highly uniform store layouts, a high degree of overlap in product ranges across stores and a lean cost structure. Each XXL store features spe- cialist stores within a store concept for 1) sport, running & training, 2) leisure & youth, 3) outdoor & hunting, 4) ski, bike & tech. The ski/bike store changes in accordance with the relevant season and XXL has the ﬂexibility of changing assortment quickly when needed. The fully integrated model of XXL with a centralized purchasing function can shift goods to regions with the highest demand and rapidly switching from winter to summer assortment. XXL also places a strong emphasis on maximizing customer con- venience with respect to the entire shopping experience, from accessibility and parking to customer service and product placement. XXL uses a comprehensive product infor- mation system which allows customers to easily assess where products are located, with the key facts on each product. This leads to a high degree of self-service among customers and an efficient use of skilled staff. The Group focuses on providing the best customer service with trained category specialists for each section of the store. The majority of the Group’s stores are in shopping centers and retail parks in high-den- sity residential areas, with a substantial number of potential customers in the surround- ing area and convenient access to transportation. XXL leases all its stores. XXL has suc- cessfully opened new stores in city centers as well as suburban areas. In larger cities, such as Oslo, Bergen, Stockholm, and Helsinki, XXL has opened more than one store. This allows us to take advantage of local synergies, for example in respect of marketing. XXL is a true omni-channel sports retailer with the largest stores, well-functioning online websites, the widest assortment of products, focusing on well- known quality brands at the best prices in the mar- ket. The core objective revolves around customer satisfaction and cost consciousness and thereby maximization of the Group’s profitability. XXL pur- sues a broad customer appeal, both in the stores and online, offering a wide range of products for sports, hunting, skiing, biking, and other outdoor activities, as well as sportswear, shoes, health & fitness and sports technology products. XXL is the leading sports retailer in the Nordics with stores and E-commerce in Norway, Sweden, and Finland. XXL has a strong, performance-based culture throughout the organization. The business is based on trained, skilled, and enthusiastic employees strengthening the XXL brand every day. Motivated employees are crucial to maximize customer satis- faction. Big data, artificial intelligence and automa- tion processes will strengthen the XXL value chain in the coming years. About us XXL ASA Annual Report 202310 Local infrastructure, the presence of competitors, the condition of available buildings for lease (i.e. technical standard, features and size) and the logistical fit into XXL’s sup- port system are important factors in selecting locations for new stores. In addition, XXL has a strong focus on cost-efficiency and synergies when rolling out new stores. The Group operates in total 86 stores within Norway, Sweden, and Finland, with the distribu- tion of stores set out in the table below. In 2023 XXL closed its’ 8 stores in Austria. The Group opened in total two new stores during 2023, of which one was opened in Norway and one in Sweden. Products XXL aims to offer a full assortment of branded goods for a wide range of sports and outdoor activities. The product range includes branded goods from well-known interna- tional brands and strong national brands. Our product ranges are tailored to meet na- tional brand preferences and local conditions at the best prices. We compare our pric- es to competitors daily and seek to always offer customers the best prices. The Group has a high degree of overlap in product ranges in the stores, but there are certain local and national differences in products and brand offerings due to demand and trends. The range of products available in XXL’s stores and on the websites is based upon mar- ket development, customer preferences and our understanding of evolving customer needs. XXL strives to offer a full range of equipment, sportswear, and shoes for almost all sports and outdoor activities. The Group pays close attention to the performance of each prod- uct and product category and makes continuous adjustments to the product range. The purchase department centrally decides the product assortments, quantities, and price for the products. The Group purchases branded goods from an extensive list of major sporting goods suppliers. XXL also offers a limited but increasing range of products under private labels to com- plement the branded product range, mainly for brand insensitive products with relative- ly low-price points. Around 12 per cent of the operating revenues in 2023 were related to sales of private label goods. The products are organized into four product categories to match the stores-in-store model and the E-commerce offering. 1. Sport, Running & Training covers sports equipment and sportswear for several sports including running, football, golf, water sports, racket sports and ice hockey to mention a few. It also covers fitness equipment like treadmills and rowing machines, as well as food supplements and nutrition. 2. Leisure & Youth include a wide assortment of clothes for men, women, and children for baselayers, outerwear, casual wear, sportswear, and swimwear to name some. The sector also covers lifestyle shoes and winter shoes for both adults and children. 3. Outdoor & Hunting stocks a wide range of products to cater for fishing, wilderness living and camping, such as tents, lavvos, sleeping bags, backpacks, cooking equip- ment as well as climbing gear. I also include firearms and ammunition, clothes, binocu- lars, optics, knives, and axes. 4. Skis & Bikes is the product category with the most seasonal ﬂuctuations. This cate- gory covers skis and ski accessories, such as shoes, poles, clothes, and other equip- ment needed for cross-country and downhill skiing as well as snowboarding. On bikes the Group offers both high-end and everyday bikes for children, women, and men as well as bike equipment such as helmets, shoes, spare parts, and clothes. The Group sells a wide range of bikes such as hybrid bikes, mountain bikes, city bikes and electric bikes. The category also includes Sportstech that covers products that connect tech- nology and sports/outdoor activities including sport watches, action cameras, drones, GPS, earplugs and headphones, portable loudspeakers, sunglasses, pulse meters, pow- er banks and cycle computers. Services Due to the Group’s scale and highly efficient logistics setup, XXL can offer low prices and a price promise. Keeping costs low is critical for XXL to be able to maintain its price strategy of always having the lowest prices. If a product is found at a lower price at the time of purchasing from XXL, the customer is entitled to pay the same price as with the competitor. XXL also has a 100 percent satisfaction guarantee which a customer who is not satisfied with a product may exchange it for another product within the same prod- uct category within 30 days of purchase. In addition, unused products with receipt may be exchanged or fully refunded within 100 days of purchase (up to 365 days in Swe- den). For its’ XXL Reward-members, XXL offers 3 cost-free returns within 12 months. Each store also has its own studio for services and maintenance of products such as ski preparations, boot fitting and annual bicycle maintenance. This builds loyalty and good customer experience and currently XXL is working on building an environmentally friendly workshop solution. Marketing XXL recognizes the value of powerful marketing and has adopted a forceful marketing strategy with the aim to be the dominant force across targeted channels. Marketing activities principally relate to the promotion of XXL’s stores and websites. We employ a range of marketing tools with direct marketing through weekly printed and digital news- letters as the backbone of the marketing strategy. We also use newspaper ads, TV-com- mercials, and different digital marketing. XXL uses multiple digital channels to drive traffic to the stores and websites such as search engine marketing, internet ad place- ment, social media, email marketing such as weekly newsletters and personalization/ retargeting through CRM initiatives. The marketing activities mainly focus on smart mar- keting across channels to build brand awareness, improve customer loyalty, attract new customers, and increase sales. To strengthen customer loyalty and satisfaction, XXL successfully launched a new re- ward bonus program for its customers at the end of 2023. Sourcing and purchasing XXL purchases goods from suppliers inside and outside the EU. The Group’s purchas- ing vehicles are XXL Grossist Norge AS for Norway and XXL Europe GmbH for countries outside Norway. All the purchases of the Group are made by one of these two compa- nies. Merchandise is sold by XXL Grossist Norge AS to XXL Sport & Villmark AS for fur- ther distribution to Norwegian stores and online sales in Norway and similar sold by XXL Europe GmbH to XXL Sport & Vildmark AB in Sweden, XXL Sport and Outdoors OY in Finland and XXL. Group’s private label products are produced by manufacturers abroad, primarily in China and Taiwan. XXL possesses huge amount of data of which products that sells well and poorly in each market and geography. To ensure that the Group’s product offerings are tailored to local market conditions and demand, the purchasing managers regularly meet with the Store development per country: Numbers of stores 2021 2022 2023 17 17 17 37 30 39 30 Norway Sweden Finland 38 29 XXL ASA Annual Report 202311 vendors, review trade sales, and evaluate merchandise offered by other sports retailers. In addition, they frequently gather feedback and new product reviews from store man- agement and employees, as well as reviews submitted by the Group’s customers. Logistics and distribution The Group has two central warehouses, one at Gardermoen Norway (outside EU), one in Õrebro Sweden. The Norwegian warehouse serves the Norwegian market, while the Swedish serves Sweden and Finland. All warehouses are equipped with state-of-the-art robotics (Autostore) which allows them to operate in an efficient and cost-effective way. In addition, XXL has developed customized order packing and shipping processes tai- lored to meet the specific requirements of the E-commerce business. XXL has centralized inventory management. XXL implemented in 2019/2020 a new data driven and algorithm-based replenishment system with the result of significantly lower distribution of goods to the stores and more predictability for the central warehouses. It has reduced handling time for store personnel, provided more accurate and lower stock values combined and provides a more differentiated distribution of goods (by geogra- phy, season differences, size of store, relevant products). We use third party transport providers to deliver stock to the warehouses and stores with one day delivery from the central warehouse to most of the stores and E-commerce delivery points. IT-systems XXL has one key operating IT-system, Axapta, for management of supply chain, ware- house, E-commerce operations, stores, financial, accounting and payroll systems. The IT infrastructure of XXL is designed to be able to access real-time data from any store or channel. The network infrastructure is fully integrated and allows for quickly and cost-efficiently adding of new stores to the network. XXL has further incorporat- ed reporting tools that allow comprehensive monitoring of business performance and benchmarking, which is critical to management’s ability to drive strong store level per- formance. XXL launched in 2019 a new business analytics solution (PBI), providing significant improved insight within supply chain, stock management, sales, and pricing. The solution takes full advantage of one ERP system and the Group has developed sev- eral dashboards to support decision making and take more correct actions to resolve critical issues. Competitive landscape XXL is currently serving the Norwegian, Swedish and Finnish sporting goods markets with an omni-channel offering through large unit stores and E-commerce. During 2023 XXL successfully exited its’ operations in Austria, and the Danish e-commerce busi- ness will be departed in Q1 2024 XXL is offering a full range of sporting equipment and apparel at the best prices and focusing on branded products. The competitors consist primarily of focused sporting goods chains, independent specialty stores and to a less- er extent general department stores as well as online retailers. In each market, the four largest retailers have a combined market share of more than 50 per cent. The most prevalent structure in the sporting goods market is companies operating un- der a franchise or buying union structure, where a local merchant operates a store and owns the operating company, while a central sports chain owns the brand and has a central warehouse and marketing function. Examples of these structures are Intersport and Sport 1 in Norway, Team Sportia and Intersport in Sweden, and Intersport in Finland. Chains primarily relying on a franchising structure typically also have, to a varying de- gree, some stores operated by the chain. Less prevalent in the markets are stores that are operated by a single company, such as XXL and Stadium in Sweden. In these cases, the store manager is an employee of the chain company, and the sports chain owns the operations of the individual stores. These chains have the benefit of having integrated value chains and ﬂexibility to plan for optimal execution across the full store network. In addition to the sports chains, there are several independent sports retailers and spe- cialist stores that operate a single store or a small number of stores. Because of the ad- vantage of being part of a larger system or buying group in terms of supplier terms, the number of independent stores and specialist stores has been declining for some time. In recent years, more producers have established stand-alone wholly owned brand stores. Several discount and general retailers offer a range of sporting goods in addition to oth- er general merchandise, and in many cases offer a wide range of products across the full spectrum of sport categories. Key players include Coop, Prisma and Citymarket. With the rise of E-commerce, several pure online players focusing on sporting goods have emerged, including Fjellsport and Milrab in the Norway or Outnorth in Europe. Typically, also the sport retail chains operate with an E-commerce platform. In addition, there are general online retailers that offer selected sporting goods as part of their as- sortment such as e-Bay, Amazon and Zalando. The E-commerce market is also at the time being characterized by many niche players. The sports retail industry has experienced a long-term trend of declining number of stores characterized by an increase in chain formation, high growth online and a re- duction in independent stores. We believe this trend has been driven by the changing industry dynamics that resulted in part from XXL’s introduction of large unit store con- cepts as well as the industrial transformation of sales over to online channels. Drivers and trends The Nordic markets for sporting goods have for several years had growth, except for 2019, with a decline in Norway, a more stable market in Sweden and weak growth in Finland. During covid in 2020 and 2021 the market all over Nordics proved to be strong, due to more of the disposable income to buy sports- and outdoor equipment. In 2022 and 2023 all markets were negatively impacted by the weak consumer sentiment, as most of the retail sector, and reduced demand for sporting goods, and a higher share of consumer spending towards travel and services after years with pandemic. Declining markets, combined with a normalisation of the supply from Asia, have led to high inven- tory levels for several of the largest sport retailers in the Nordics, including the Group, and subsequently high promotion and discount activities. The traditional sport retail market has, especially in Norway and Sweden, experienced high competition from retailers in lower price segments, especially from outlet store concepts, which have grown significantly during the last five to six years. Further, E-commerce is growing fast as a sales channel and continues to gain customers who previously shopped in physical stores. During covid in 2020 and 2021, the Group had significant competition from pure players within E-commerce who only rely on digital sales and do not have any physical stores. These E-commerce players constitute strong competition for the Group and offer other high-end brands and products than the Group has in its product offering and have in a short period of time gained significant market shares within some categories of sports and outdoors merchandise. This is in line with the trend that sales channels such as E-commerce, outlets and direct-to-consumer sales have gained market shares from the sports retail chains in recent years. Further, consumers are becoming increasingly concerned with sustainability and the effects consumerism has on the environment, supporting the emerging trend of restric- tive consumerism and consumer shaming. A survey performed by Finn.no and Opinion shows that three out of five have become more concerned with sustainable production and the environment than just a few years ago, while four out of five believe they will be more attentive to the environment in the future. This is in line with a global consumer trend of more conscious consumption to protect mankind, animals, and the environ- ment. Alternative marketplaces for secondhand goods, sharing economy and clothing and equipment rental have also increased in popularity. There is, however, uncertainty regarding the size of the secondhand market and the extent to which it replaces trade in the traditional retail market. XXL ASA Annual Report 202312 General economic factors such as development of disposable income and consumer confidence The Nordic economies are all among the most prosperous in the world as measured by GDP per capita. XXL believes that the strategy of offering attractive value to consumers has made the business to some extent resilient in the face of adverse macroeconomic conditions, as consumers become more price-sensitive, which have strengthened our position relative to competitors. Health, wellness and physical activity trends We believe health and wellness is a key trend among consumers and to identify them- selves with an active lifestyle. Consequently, strong public promotion of, and a positive attitude towards, health and fitness are observable in all our markets. Technology is also evolving into the sports industry and the market is experiencing in- creased demand for goods related to sports technology products and connected de- vices. Environmentally friendly solutions are also in strong demand. The electric bicycle is a good example and is also used as a way of commuting, adapted to a broad range of us- ers, and saves the environment. More interest in equipment-focused sports Many of the most popular amateur sport competitions are equipment intensive such as bicycling, skiing and triathlons. We have seen a more sophisticated demand for a wider range of specialized products among consumers. The new generation of amateur, pro- fessional, and aspiring athletes has affected the traditional market for such merchan- dise through its strong purchasing power and preferences for high quality. Technology is also becoming more important with products such as sport watches, GPS, heart rate monitors, wearable technology, and cameras. Weather and seasonal patterns Given the popularity of both winter and summer sports, most of the markets XXL is ex- posed to have a clear four-season sporting environment which is a key characteristic affecting the sporting goods market. The demand for sports retail merchandise changes dependent on the time of the year. Although the local weather can impact local sales, the overall sales across the regions are more resilient as weather conditions typically vary considerably within each country. The fully integrated model of XXL with a central purchasing function is to some extent less exposed to these seasonal and geographical variations, as we can shift merchandise to the regions with the highest demand. Fashion trends and retail industry fragmentation Several of the categories we sell are heavily inﬂuenced by fashion trends and are in- creasingly becoming lifestyle products for the consumers. Sports shoes and sportswear are the clearest examples. The industry is expanding into products traditionally sold by specialist fashion and shoe retailers as well as other categories such as health & well- ness and home products. The Nordic sportinggoods markets are driven by a number of factors and trends. The most important are: XXL ASA Annual Report 202313 Senior Executive Management Team Tolle Grøterud EVP Staff Stein Alexander Eriksen CFO Stein Alexander Eriksen has been the CFO in XXL ASA since October 2018. Eriksen came from the position as CFO in Orkla Care, one of the key business areas in the leading European branded consumer goods company Orkla. Eriksen held several key financial positions during his career in Orkla, including SVP Finance in Orkla ASA and CFO in Lilleborg. He has also served as head of Business Controlling in RIMI, one of the former market leaders in Norwegian grocery retail. Stein Alexander Eriksen started his career as an auditor in Arthur Andersen and holds an M.Sc. in Economics and Business administration (Siviløkonom) degree from the Norwegian School of Economics. Eriksen is a Norwegian citizen and resides in Norway. Tolle Grøterud has been the EVP Staff since XXX. Grøterud joined XXL in October 2014 as Investor Relations and Business Development Director and has had several roles within XXL, including Interim CEO and Interim CFO. Grøterud came from the position as VP Investor Relations in Telenor, a leading telecommunications company across the Nordics and Asia with 158 million subscribers and annual sales of around NOK 99 billion (2022). He has 20 years of experience from investor relations and finance, of which 10 years in retail. Prior to Telenor, he was Partner in Arctic Securities. Tolle Grøterud holds an M.Sc. in Economics and Business Administration (Siviløkonom) from Norwegian School of Economics. Grøterud is a Norwegian citizen and resides in Norway. Freddy Sobin CEO Freddy Sobin joined XXL ASA as CEO in May 2023. Sobin came from the position as CEO in Kicks Group, a leading Nordic retailer within beauty products with 230 stores in Sweden, Norway and Finland and strong online presence and growth. Sobin held this position since 2018. Before Kicks Group, he has served as CEO of Consortio Fashion Group, with Bubbleroom as the most known brand, for nearly seven years. He is also an experienced Board Member currently serving on the Board of Svensk Handel, Svenskt Näringsliv and successful retail companies like Salling Group (Denmark) and Bubbleroom (Sweden). Freddy Sobin holds an M.Sc. with Major in Business Management and Minor in Entrepreneurship from Stockholm School of Economics. Sobin is a Swedish citizen and resides in Sweden. In 2023 XXL hired new CEO, EVP Category, Buying & Supply, EVP Marketing & Growth and SVP IT Development & Support, all with extensive experience from the retail industry. XXL ASA Annual Report 202214 Emelie Friis Simen Swanstrøm Peter Jansson EVP Marketing & Growth Helly-Hansen, EVP Category, Buying & Supply SVP IT Development & Support Simen Swanstrøm Helly-Hansen joined XXL ASA as EVP Category, Buying & Supply in November 2023. Helly-Hansen comes from the position as Director Category and Procurement in Vinmonopolet focusing on customer driven category and assortment development, procurement, replenishment and business development. Vinmonopolet is a state-owned company that has the exclusive right to sell spirits, wine and strong ale with more than 4,7 percent alcohol to consumers in Norway. Prior to Vinmonopolet, Helly-Hansen held several positions within Phoenix Group and Apotek1 (pharmaceuticals), including Director Commercial Relations in Phoenix Group Europe, Supply Chain Director Apotek1 and Category and Procurement Director Apotek1. Helly-Hansen holds a B.Sc. of Business from Auckland University of Technology, M.Sc. Marketing Management from KEDGE Business School and an M.Sc. In Economics from BI Norwegian Business School. Helly-Hansen is a Norwegian citizen and resides in Norway. Peter Jansson has been the SVP IT Development & Support since November 2023. Jansson joined XXL in 2014 as a Solution Architect and has since then held several roles within the company, the most recent being Head of IT Development. The years before XXL were spent with some well-known brands in Norway and Sweden - Ericsson, IKEA, Alfa Laval, Jernia, Granngården, and Lindex. The focus has primarily been within retail, both B2B and B2C, where the platforms have sold everything from dog food to heat exchangers and tankers. Peter Jansson M.Sc. In Computer Science from Kungliga Tekniska Högskola and B.Sc in Computer Science from Blekinge Tekniska Högskola. Jansson is a Swedish citizen and resides in Sweden. Emelie Friis joined XXL ASA as EVP Marketing & Growth in August 2023. Friis came from the position as CMO in Kronans Apotek, that has 320 pharmacies all over Sweden, 2,600 employees and annual turnover of approximately SEK 8 billion. Friis has more than 25 years of experience from marketing with focus on FMCG, retail and consumer brands. Before Kronans, Friis worked with companies like Åhlens and Pernod Ricard, with strong brands like Absolut Vodka, Malibu and Kahlua. Friis started her career as an art director and creative director in several communication agencies and she has an Executive education in Strategic Marketing Management from Harvard Business School. Friis is a Swedish citizen and resides in Sweden. XXL ASA Annual Report 202315 Håkan Lundstedt Chairman of the Board Håkan Lundstedt has been President and CEO, and member of the Board of Synsam Group since 2015. Lundstedt was previously President and CEO of Mekonomen Group and CEO of Lantmännen AXA. Lundstedt is also currently Board member of Clas Ohlson AB. Lundstedt has Marketing studies from IHM Business School, Sweden. Kari Ekelund Thørud Board Member Kari Ekelund Thørud is Vice President of Ownership and Governance, Business Unit Energy in Norsk Hydro. Thørud was previously CEO of NordPool. She is Board member in Hafslund Oslo Celsio and has previous board experience from Sval Energi, Eidsiva Energi and Energi Norge. Thørud has business degrees (Siviløkonom) from Tecnológico de Monterrey and BI Norwegian Business School. Kjell-Arne Fikerud Board Member – Employee Representative Kjell-Arne Fikerud is working at the Central Warehouse facility in Norway, with the fulfilment system Autostore. Fikerud has long experience within logistics serving for several industrial and retail companies before joining XXL. Ronny Blomseth Board Member Ronny Blomseth has been CEO of Power International since 2014. Blomseth was previously COO at Expert (now Power International) and CEO of Elkjøp Nordic. Blomseth is also currently Board member of Ark Bokhandel and has previously held Board member functions in Elektroimportøren and Europris. Blomseth has Marketing studies from BI Norwegian Business School. Helena Ebersten Henriksen Board Member – Employee Representative Helena Ebersten Henriksen is VP Category Leisure & Youth since 2016. She has been the responsible buyer for various categories within sports and outdoor after starting in XXL in 2010 as a Sales Manager. Board of Directors In 2023 a new chairman and three new members were elected, bringing with them extensive experience from the retail industry and large corporations to the Board of Directors. Kjersti Hobøl Board Member Kjersti Helen Krokeide Hobøl is CEO of Nille, a retailer with 360 stores, revenues of NOK 1.7 billion and 2,000 employees. She came to Nille from leading Kid Interiør over 8 years. In both of these jobs, she has taken over the management in a demanding situation and demonstrated strong ability to drive change, develop and improve business. From 2001 to 2010, Kjersti worked for DNB in the corporate market division, where she among other things built up a unit for handling demanding engagements. Kjersti studied economics at BI Norwegian Business School, and had various roles within finance in COOP and DNB early in her career. Kjersti combines strong operational retail expertise with a solid background from the corporate treasury and financing. She is a Norwegian citizen and resides in Norway. Tom Jovik Board Member Tom Jovik is a Principal at Altor Equity Partners and has been in the company since 2011. Prior to joining Altor he worked as management consultant for Arkwright. Jovik holds an MBA from the Wharton School of the University of Pennsylvania (US) and a degree from the Norwegian School of Economics (NHH). He is a Norwegian citizen and is resident in Norway. Tor Andrin Jacobsen Employee respresentative Tor Andrin Jacobsen is a sales leader in XXL’s store in Åsane, Bergen, and has been in the company since january 2009. He has held various positions in the company, from part time worker in store to substitute store- and sales manager in Norway. From 2016 has he also been responsible for education of all outdoor departments in new stores, both in Norway and Austria. Tor Andrin is educated nutritionist and also studies business economics at the University of Tromsø. He is a Norwegian citizen and resides in Norway. XXL ASA Annual Report 202316 The Norwegian Market XXL opened the first store in Norway in 2001, growing to 39 stores and E-commerce at the end of 2023 and revenues of NOK 4.0 billion for 2023. XXL’s market share in 2023 was about 31 per cent, according to Sportsbransjen AS. The market increased with above 4 per cent each year from 2014 to 2021, while de market contraction began in 2022, according to Sportsbransjen AS. In 2023 the market showed a decline of 2.9 per cent, while XXL had in the same period a negative growth of 7.9 per cent, hence losing market shares. Alta Naf-Huset Forus Alnabru Lade Tune Jessheim Drammen Tiller Lagunen Majorstua Åsane Kristiansand Haugesund Moss Tromsø Ålesund Strømmen Steinkjer Tønsberg Ski Fredrikstad Mo i Rana Hamar Bodø Harstad Sandefjord Sartor Skien Lyngdal Porsgrunn Buskerud Storsenter Sandvika Storsenter Arendal Bryne Storo Gjøvik Hønefoss Lillehammer XXL ASA Annual Report 202317 The Swedish Market In 2010 XXL started in Sweden and had in 2023 30 stores and E-commerce. To date we have captured a significant share of the market and our total revenues for 2023 in Sweden amounted to NOK 2.4 billion. According to SCB the Swedish sports marked declined by 2.2 per cent while XXL decreased by 8.4 per cent (in local currency), hence losing market shares. Bromma Arninge Sisjön Bäckebol Örebro Uppsala Kungens Kurva Linköping Sundsvall Jönköping Stockholm City Västerås Norrköping Karlstad Helsingborg Barkarby Luleå Gävle Umeå Östersund Växjö Kalmar Länna Halmstad Malmö Trianglen Malmö Emporia Sickla Charlottenberg Borlänge Skellefteå XXL ASA Annual Report 202318 The Finnish Market XXL opened the first store Tammisto, Helsinki, in April 2014 as part of the strategy to build on the successful entry into Sweden and extend the XXL concept to new markets. XXL are developing a sol- id presence in the Finnish market with currently 17 stores and E-commerce and total sales amounted to NOK 1.5 billion in 2023. Finland, figures from TMA (Finnish Fashion and Sports Commerce Associa- tion) which represents about 75 per cent of the total market, showed a decline of 3.9 per cent while XXL experienced a negative growth of 12.5 per cent in local currency, hence losing market shares. Tammisto Itäkeskus Tampere Kaleva Kluuvi Espoo Lielahti Skanssi Mylly Oulu Lahti Vaasa Lappeenranta Jyväskylä Kuopio Pori Redi Seinäjoki XXL ASA Annual Report 202319 Our strategy To strengthen customer experience & operational efficiency XXL has since July 2023 implemented its Reset & Rethink strategy with aim for an EBITDA uplift of 500-750 million in 12-18 months. The Reset & Rethink strategy encompasses the five “Must-Win Battles” Category Reset, Availability, Store Operations, Pricing, and E-Commerce Profitability. The strategy is progressing well and is expected to boost performance in 2024. Other initiatives that have been executed and will improve the overall profitability is exiting the unprofitable operation in Austria, launching of a new customer bonus program. The company will continue its focus on cash management, cost reductions and exploring new ways of working. XXL will exit Denmark in Q1 2024 to focus on its three core geographies: Norway, Sweden and Finland. XXL ASA Annual Report 202320 Our vision To be the preferred destination for the sports and outdoor enthusiasts Our vision is to be the preferred destination for the sports and outdoor enthusiasts. XXL is in the sports and outdoor segments of the market. In this part of the market, we target the active people – the enthusiasts. Those who already find joy in sports and outdoor activities, and those who have just started. For our target group, we want to become a complete destination for sports and outdoor gear—a place they actively want to visit. To achieve that, we also need to become preferred in two other important dimensions - with our suppliers and our employees. XXL ASA Annual Report 202321 As a market leader within sports and outdoor gear, we feel we have a great responsibility to foster an active and healthy lifestyle. We believe in the idea of democratizing sports. Through our wide range of products and great prices we can make sports and outdoor activities accessible to the many. All in one place, all in one destination. And thereby make more people live more active lives. Sports and outdoor activities unite people. Regardless of age, gender, skin color, geography or financial position, everyone can participate — on their own terms. This way, sports break down barriers and brings people together across the globe. In a common movement and a common spirit. At XXL, we are true believers of that spirit. We want even more people to discover the joy of being active. And doing what they love. By making our wide assortment of affordable sports and outdoor gear accessible to the many — we can make it happen. Our purpose All sports united. Sports unite all. XXL ASA Annual Report 202322 50 per cent of the surplus generated from fees associated with XXLs sale of shopping bags has been allocated to the XXL Children’s Foundation. In 2023, the XXL Children Foundation has donated NOK 250,000 to the organization Bring Children from Streets, earmarked for building a dormitory with a capacity of 400 sleeping places at the First Lady School in Uganda. The remaining 50 per cent of the surplus is designated for other charitable initiatives within XXL, aligning with our commitment to mobilize the Sports Unite All dimension. In 2023, several initiatives have been funded. BUA, a non-profit foundation that works to make sports and outdoor equipment easier and more accessible to more people. Grow the Game, a concept owned by XXL with Bauer as a partner is all about lowering the barrier caused by expensive equipment for participation in hockey. Grow the Game donates hockey equipment to a selected hockey club in Norway, Sweden, and Finland. Joshua King football school, is about including children who are often left out of social and inclusive activities in general, is supported with equipment. The event engaged approximately 500 children in a community where sport activities and inclusion help to break down barriers in society. XXL has also been engaged in support to the Norwegian Childhood Cancer Society. Charity Social responsibility Bilde skal byttes XXL ASA Annual Report 202323 Our value propositions describe what we strive to offer in the continuous pursue to create the best value for our customers. Great accessibility. Great brands. Great selection. Great prices. Great expertise. We offer all the brands and models expected from a true sports and outdoor destination —by our target group: the enthusiasts. Both within sports and outdoor - equipment and apparel. Our breadth of categories and wide assortment within each category is unparallel to any other sports retailer. We offer the enthusiasts products at all relevant price ranges. Large purchasing volumes and efficient operations allow us to keep our prices down. Our prices are either better than our competitors, or on par with them. Never higher. At XXL, we offer our customers the best deals guaranteed. Investing more than others in staff training gives our customers access to the best trained employees in the industry. Both through our stores, e-com, workshops and service offering. Supportive self-service tools (on-and ofﬂine) complement our knowledgeable staff. With big stores in great locations and our strong eCom platform, our wide assortment is always highly accessible to our many customers. Flexible and efficient delivery options is a given when shopping at XXL. Our value propositions XXL ASA Annual Report 202324 We care genuinely about our customers, suppliers, the environment —and about each other. We honor great sportsmanship and celebrate as a team. We have a deep passion for sports and outdoor. Helping our customers find just the gear, for their individual needs, is what makes us thrive. As a sports and outdoor specialist, our own know-how is key. We have relevant expertise in all categories we represent — and we are generous with our knowledge. At XXL, we always put our customer first. We all share the belief that this is what makes us profitable, which in turn lets us invest in our own business and people. Our corporate values In order to attain our wanted position, deliver on our value proposition and ultimately reach our vision we need to act in ways that support that. Our values guide us to the right behaviors. Customer first Knowlegdeable Passionate Caring XXL ASA Annual Report 202325 The five must-win battles 1. Category reset (NOK 300-350 million) Category Reset entails rebalancing the inventory and purchasing to be more weighted on goods with low-price points. Also, more of the capital will be used towards building controlled brands, whereof the minority investment in Stormberg, a strong Norwegian outdoor brand, played a major part in achieving this. 2. Availability (NOK 50-100 million) With the Category Reset it will be possible to increase Availability of fast-moving low- price point products, which is expected to reduce storage time and improve sales and margins. 3. Pricing (NOK 50-100 million) XXL aims to regain its market leading position in the low-price point segment through inventory rebalancing and market leading prices with data-driven pricing routines sup- ported by electronic price tags balanced by strict price controls to strengthen the un- derlying gross margin performance. 4. Store operations (NOK 50-100 million) Store Operations involves refocus on up-sales and add-sales lists and strategies rein- troduced from Category and Buying department. Also, it includes training of sales staff, RFID tag, standardization of store operations, staff planning, loss prevention and meas- ures to increase the customers’ in-store experience. 5. E-commerce (NOK 50-100 million) E-Commerce is expected to grow going forward and XXL will increase its’ profitability by enhancing the online experience, reducing returns and unprofitable “ship-from-store” orders. The strategy is progressing well and is expected to boost performance in 2024. Reset & Rethink strategy The Group has since July implemented its’ Reset & Rethink strategy, which aims for an EBITDA uplift of 500-750 million in 12-18 months. The Reset & Rethink strategy encom- passes the five “Must-Win Battles” Category Reset, Availability, Store Operations, Pric- ing, and E-Commerce Profitability. Other key initiatives to boost the Group’s performance 1. Completed: Reward 2.0 To strengthen customer loyalty and satisfaction, XXL successfully launched a new reward program for its customers at the end of 2023. 2. Completed: Exit Austria During 2023 XXL exited the unprofitable Austrian market, thus reducing the complexity of the business. Only an insignificant liability remains on the balance sheet. 3. Ongoing: Cash & Liquidity During 2023 XXL successfully reduced its working capital and thus freed up substan- tial cash. The Group continues its focus on liquidity and cash management to finance its’ transition and growth. In 2023 XXL successfully refinanced its’ credit facilities. The strong focus on liquidity control continues into 2024. 4. Ongoing: Cost-out program We need to adapt the cost to income. Effective actions have already been taken in 2023 especially on personnel cost in the stores. The cost cut program continues in 2024 with several measures to be implemented, both organic and structural. The Group targets gross effects from these actions of around NOK 250-300 million with full run rate effect by the end of 2024. The long-term goal of XXL is an Opex share of 30% rela- tive to income. Strategic targets XXL’s target and goal going forward is to gradually gain market share in all markets and continue the growth in the E-commerce channel. XXL is in the phase of implementing several strategic initiatives and projects to improve profitability and operational efficiency going forward. The longer-term target is “40-30- 10” on gross margin, OPEX and EBITDA respectively excluding IFRS 16 effects. In line with the existing strategy, XXL will continue to invest in operational efficiency, selective new store openings, E-commerce platform, existing stores, infrastructure, and IT. Total CAPEX for XXL Group in 2024 is expected to be around NOK 100-150 million, Going forward XXL has not planned any store openings in 2024, but the long-term ambition is 2-3 stores per year, including relocations of existing stores. XXL opened 2 new stores in 2023, whereof 1 in Norway and 1 in Sweden. At the same time XXL will be downsizing several existing stores. The Group will continue to focus on optimizing the store portfolio. XXL ASA Annual Report 202326 Board of Directors’ Report 2023 was a challenging year for the retail industry in Nordics, and sports was no exception. Weak consumer sentiment led to reduced demand for sports and outdoor equipment in all markets where XXL is present. Through sales campaigns and capital control XXL successfully reduced its’ inventory level from 2022, being at a healthy level at year-end 2023. After several years with significant losses in Austria, XXL successfully exited the market in 2023. The company will continue to consol- idate markets and sales channels by closing its’ operations in Denmark by Q1 2024. Total operating revenue in 2023 was NOK 7 961 million (NOK 8 426 million) equaling 5.5 per cent decline compared to 2022, and Net Income was negative of NOK 1 590 million (negative of NOK 411 million). After the Balance Sheet date XXL has raised NOK 500 million in new equity. Both 2022 and 2023 have been challenging years for the sports industry and XXL Group as a whole. XXL aims to fortify its’ market leading position in Norway, Sweden and Finland with the Reset & Rethink strategy which was launched in 2023. In short, XXL aspires to apply its’ historical winning recipe adapted to a new reality with the support of technology and data-driven decision-making. Reset & Rethink Strategy The Group implemented its’ Reset & Rethink strategy in July 2023, which aims for an EBITDA uplift of NOK 500-750 million in 12-18 months. The Reset & Rethink strategy encompasses the five “Must-Win Battles” Category Reset, Availability, Store Opera- tions, Pricing, and E-Commerce Profitability. Category Reset entails rebalancing the inventory and purchasing towards goods with low-price points. Also, more of the capital will be used towards building controlled brands, whereof the minority investment in Stormberg, a strong Norwegian outdoor brand, played a major part in achieving this. With the Category Reset it will be possible to increase Availability of fast-moving low-price point products, which is expected to reduce storage time and improve sales and margins. Store Operations involves training of sales staff, RFID tagging for improved control of inventory, standardization of store operations, staff planning, loss prevention and measures to improve the customers’ in-store experiences. With Pricing, XXL aims to regain its market leading position in the low-price point segment through inventory rebalancing and market leading prices with data-driven pricing routines supported by electronic price tags balanced by strict price controls to strengthen the underlying gross margin performance. E-Commerce is ex- pected to grow going forward and XXL will increase its’ profitability by enhancing the online experience, reducing returns and unprofitable “ship-from-store” orders. The strat- egy is progressing well and is expected to improve performance in 2024. Other initiatives that have been executed and will improve the overall profitability is ex- iting the unprofitable operation in Austria and launching of a new customer bonus pro- gram. The company will continue its focus on cash management, cost reductions and exploring new ways of working. XXL will exit Denmark in Q1 2024 to focus on its three core geographies: Norway, Sweden, and Finland. Revenue development Total operating revenue in 2023 was NOK 7 961 million (NOK 8 426 million) a decrease of 5.5 per cent. There was a negative like for like sales of 9.3 per cent adjusted for cur- rency ﬂuctuations. The decline vs 2022 were mainly explained by challenging markets, driven by low consumer confidence and reduced demand for sporting goods. During 2023 XXL closed the remaining stores in Austria and opened two new stores in Lillehammer in Norway, and Skellefteå in Sweden. E-commerce had a decline of 2.5 per cent for the year. The revenue contribution from E-commerce for the Group corresponded to 23.8 per cent in 2023 (22.8 per cent). The decline in E-com sales was mainly explained by post-covid effects of reopened stores and changed consumer habits back to traditional retail channels. Trends In Norway, figures from “Sportsbransjen” (The Norwegian sports association) showed a market decline of 2.9 per cent for 2023 while XXL decreased by 7.9 per cent. Sweden figures from SCB (Statistics Sweden) showed a market decline 2.2 per cent while XXL decreased by 8.4 per cent (in local currency). In Finland, figures from TMA (Finnish Fashion and Sports Commerce Association) which represents about 75 per cent of the total market, showed a decline of 3.9 per cent while XXL had a negative growth of 12.5 per cent (in local currency). The loss of market shares, especially towards the outlet segment in all Nordic countries was undesirable and has spurred the Reset & Rethink strategy. XXL believes that E-commerce will continue to increase its’ share of sport retail. It is therefore of highly importance for XXL to be in front of this development and invest significantly in the E-commerce platform. XXL believes that having the combination of E-commerce and stores is the most convenient and winning model. XXL will continue to utilize its scale to have the lowest operating costs through a cen- tralized model and provide the broadest selection of attractive products at the best prices with the most qualified employees. 2021 2022 2023 Numbers of stores 17 17 17 37 30 39 30 Norway Sweden Finland 38 29 XXL ASA Annual Report 202327 Financial information Consolidated financial result Total operating revenue in 2023 was NOK 7 961 million (NOK 8 426 million), a decline of 5.5 per cent. There was negative like-for-like growth in total of 9.3 per cent adjusted for currency ﬂuctuations. The decline vs 2022 were mainly explained by challenging markets, driven by low consumer confidence and reduced demand for sporting goods in general. E-commerce is included in the like-for-like figure. EBITDA in 2023 was nega- tive by NOK 80 million (NOK 237 million). The sales shortfall led to a drop in gross profit of NOK 213 million. In combination with a reduced gross profit, Opex increased with NOK 104 million explaining the negative change in EBITDA. The revenue contribution from E-commerce for the Group corresponded to 23.8 per cent in 2022 (22.3 per cent). The decline on E-com was mainly explained by post-cov- id effects of reopened stores and changed consumer habits back to traditional retail channels. Operating income decreased from negative NOK 467 million in 2022 to negative NOK 1 409 million in 2023, partly affected by sales shortfall and clearance campaigns, neg- ative profitability effect of NOK 213 million, Opex increase of NOK 104 million, mainly explained by negative currency translation effects, and impairment of goodwill and Right-of-use assets amounting to NOK 576 million. The operating margin decreased from negative 5.5 per cent to negative 17.7 per cent and is explained by reduced reve- nue, increased Opex and impairment losses. The Group had net financial expenses of NOK 186 million in 2023 compared to NOK 64 million in 2022. The increase in financial expenses is caused mainly by higher interest expenses and adverse currency ﬂuctuations. Loss before tax was negative of NOK 1 595 million (negative NOK 531 million) and Net income was negative by NOK 1 796 million (negative NOK 542 million) negatively af- fected by impairment of goodwill and right-of-use assets of NOK 576 million. Basic earnings per share for continuing operations were negative by NOK 1.93 (negative NOK 1.63). Consolidated Balance Sheet and Cash Flow Statement Total assets were NOK 7 542 million at the end of 2023 (NOK 9 034 million). The reduc- tion is mainly explained by inventory reduction of NOK 552 million and by goodwill im- pairment of NOK 522 million. Net interest bearing debt was NOK 876 million (NOK 1 054 million). Net cash position was NOK 406 million (NOK 552 million). Adding available credit facilities, the liquidity reserve was NOK 760 million (NOK 746 million) at the end of 2023. Group equity was NOK 2 310 (NOK 3 066 million) resulting in an equity ratio of 30.6 per cent (33.8 per cent). Cash ﬂow provided by operating activities was NOK 198 million (NOK 682 million). The change is mainly due to the weaker Operating result. The reduction in inventory is part- ly offset by the reduction in accounts payable. The difference between Operating In- come and Operating Cashﬂow is NOK 1 607 million, mainly explained by depreciations of NOK 754 million, impairment of NOK 576 million and reduction of working capital of NOK 233 million. Cash ﬂow from operations does not consider GAAP differences (i.e. IFRS 16) which constitute the major difference between cash ﬂow from operations and Operating in- come in the financial statements. Cash used for investing activities was NOK 129 million (NOK 139 million). This is mainly related to investments in existing stores and proprietary software. Cash used by financing activities amounted to NOK 285 million (cash used of NOK 164 million) in 2023. The figure includes capital raise of MNOK 1 001 and repayment of loans of MNOK 774 million. Parent company XXL ASA In 2023, the Parent company XXL ASA incurred a net loss of NOK 84,3 million (NOK 48 million) Cash ﬂow from operating activities was negative of NOK 966 million (NOK 52 million). The negative operational cashﬂow is mainly explained by income before in- come taxes of negative 84 million and increase of intra-group working capital of NOK 864 million. Cash provided through share issues was MNOK 974 which was predomi- nantly used for financing of subsidiaries through intercompany accounts. Total assets at Year-end amounts to NOK 4.162 million (NOK 3.777 million) and total eq- uity is NOK 3.722 million (NOK 2.832). Allocation of net income (Group) Due to the negative result the Board of Directors propose that no dividend distribution will take place for the fiscal year 2023. Long term XXL has a dividend policy with a tar- get pay-out ratio of 40-50 per cent of annual net income. Risk management Risk Management in XXL has indentified five risk areas; being; financial risk, market risk, operational risk, management risk, and IT risk. The mitigation of risk is based on an ap- proach based on whether it is safeguarding measure of a preventive or detective nature. The company evaluates risk based on three categories; Financial Impact on EBITDA, probability and severity of the respective risks. Overall, XXL has seen an evolution of the company’s risk profile in a context of increas- ing sustainability expectations as well as an uncertain geopolitical and competitive landscape. Despite XXL’s best efforts, the risk-mitigating initiatives may fail or prove to be inadequate to mitigate all risks. As risks increase, decrease or change and new risks emerge over time. Financial risk XXL uses bank loans and existing cash ﬂow from operating activities as its main source of funding to secure capital for the growth. For commercial hedging purposes, the Group uses derivatives. XXL does not apply hedge accounting or use any financial in- struments, including derivatives, for trading purposes. Procedures for risk management are approved by the Board. The main financial risks that the Group is exposed to are interest rate risk, liquidity risk, currency risk and credit risk. The Group's management regularly evaluates these risks and establishes guidelines to manage these risks. Credit risk The Group is mainly exposed to credit risk for trade and other receivables. The Group mitigates its exposure to credit risk by ensuring that all parties requiring credit, such as customers, are approved and subject to a credit check. The Group does not have signif- icant credit risk associated with a single counterparty or counterparties which can be viewed as a Group due to similar credit risk. The Group has policies in place to ensure that sales are made to customers who have not had significant problems with payment and the outstanding amount does not exceed the established credit limits. Maximum risk exposure is represented by the carrying amount of the financial assets in the bal- ance sheet. The Group considers its maximum risk exposure to be the carrying amount of accounts receivable. Interest risk The Group is exposed to interest rate risk through its financial activities. The inter- est-bearing debt has ﬂoating rates, which means it is affected by changes in interest rates. The purpose of the Group's interest rate risk management is to reduce interest costs and at the same time keep the volatility of future interest payments within accept- able limits. Market risk The Group faces substantial competition in the sports retail industry from a wide range of different concepts, including pure online players. Actions taken by competitors, as well as actions taken by the Group to maintain its competitiveness and reputation, will continue to put pressure on the pricing strategy, net sales growth and profitability. Customer preferences and trends in the sports and outdoor equipment market are vol- atile and tend to change rapidly. The business of the Group is dependent upon being able to anticipate, identify and respond to changing trends and customer preferences. If not, the sales may be lower than predicted and the Group faced with an increased amount of unsold inventory. This could lead to the need of more promotional sales and may also impact the XXL brand image and customer recognition. The business is subject to seasonal peaks and the Group must actively manage the purchase of inventory. Sports retail in general is also to some extent affected by periods of abnormal, severe, and unseasonal weather conditions, such as unfavorable snow conditions. Efficient logistics of the Group provides for the ability to rapidly switch from winter to summer assortment. XXL ASA Annual Report 202328 The Group believes it is well-positioned with regards to relative price offerings in the markets, but consumer spending on sporting and outdoor goods may be adversely impacted by economic conditions such as consumer confidence, interest and tax rates, employment level, salary and wage levels, general business conditions, consumer cred- it and housing, energy, and food costs. Supply chain risk Disruption to the supply chain leading to shortages of goods is a risk that has increased during the last years due to the increased challenging macro environment. The Group monitor the supply chain risk closely to make sure XXL take mitigating actions when necessary. Sustainability reporting As a major player in the retail sector of sporting goods, the group is aware of the imper- ative to engage with environmental, social, and governance (ESG) issues proactively. Our corporate values is underpinned by the conviction that our business objectives must be pursued in a manner that is ethically sound, respectful of human dignity, and environmentally sustainable. The evolution of sustainable development into a key competitive lever in today's fast- paced market environment is an acknowledgment of its role in securing market expan- sion, customer diversity, and innovation. The European Union's sustainable finance action plan has been a pivotal inﬂuence, reshaping investment landscapes and empha- sizing the importance of sustainability. This plan aims to channel investments into sus- tainable ventures, diminish funding for industries that exacerbate climate change, man- age environmental and resource-related financial risks, and encourage a shift towards transparency and sustainability in economic and financial decision-making. In response to these shifts, XXL works to integrate sustainability initiatives, manage risks, mitigate negative impacts and pursue opportunities in both our own operations as well as our value chain. We are committed to embedding sustainability at the core of our business strategy and operations. Our intent is to maximize shareholder value while making meaningful contributions to societal well-being and environmental preservation. This commitment not only aligns with emerging global trends but also resonates with our dedication to fostering sustainable, inclusive growth. XXL has reported with reference to the Global Reporting Initiative (GRI) Standards. The GRI index is provided as an annex to this report. In response to the EU Corporate Sus- tainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), XXL restructured its sustainability reporting for FY 2023, with full compliance expected in the 2024 annual report. Corporate Governance XXL adheres to the Norwegian Code of Practice for Corporate Governance, ensuring alignment with governance standards for companies listed on the Oslo Stock Exchange. Compliance with the standards is detailed in the section Corporate Governance in XXL ASA, referencing relevant sections of the Code of Practice. XXL's corporate governance policy is rooted in the Code of practice, serving as a framework to uphold transparency and accountability, supporting our core objectives and shareholder interests. Approved by the Board of Directors, XXL's governance documents establish clear prin- ciples for conducting business across all company units. The Board exercises oversight to ensure the implementation of robust governance practices, revising these docu- ments annually to maintain relevance and effectiveness in promoting responsible cor- porate behavior. Our evaluation of risks and impacts—both external and internal—facilitates a compre- hensive understanding of our priorities in mitigating adverse occurrences that affect our financial stability and have detrimental effects on the environment and society. We recognize that our approach to addressing these challenges and seizing the opportuni- ties they present is of increased value for our enduring financial health and competitive stance in the market. The XXL Code of Conduct is anchored in the group's four core values: CUSTOM- ER-FIRST, KNOWLEDGEABLE, PASSIONATE, CARING. These values serve as the bed- rock of our identity and guide our actions. The Code articulates our pledge to uphold the utmost legal and ethical standards in both our business operations and individu- al conduct. To ensure the Code's principles and the directives of our Anti-Corruption Guide are thoroughly understood and adhered to, we offer a case-based e-learning training program. This educational initiative is mandatory for all employees, including management and the Board of Directors, reinforcing our collective commitment to in- tegrity and compliance. The XXL whistleblowing channel is accessible to all employees, business partners, and external parties wishing to report actual or suspected violations of applicable laws, reg- ulations, or deviations from the XXL Code of Conduct. We are dedicated to upholding the highest standards of ethical conduct, promoting an environment were speaking up is valued, and actively encouraging all stakeholders to voice any concerns. These con- tributions are vital for the continual ethical evolution and integrity of XXL. The internal control functions oversee the group’s activities, aiming to maintain high quality standards while identifying and mitigating potential risks and deficiencies. The comprehensive approach encompasses regular risk evaluations prior to procurement, in-store audits for internal control, meticulous pre-shipment quality assessments, and thorough audits at manufacturing sites. We consistently refine our internal protocols for product compliance, ensuring they are in alignment with both European Commission regulations and national legislative standards. The group manages and controls risks, collaborating with the Board Audit Committee and external auditors. By utilizing expert insights and comprehensive analyses, the company aims to mitigate potential negative impacts on both itself and society. Recog- nizing the risks of inaccurate sustainability reporting and data errors, XXL ASA continu- ously improving stringent review and control processes across its operations to ensure data integrity. Organization XXL is a sport retail chain, with stores and E-commerce in Norway, Sweden, and Fin- land. The Group successfully exited Austria in 2023. The Group’s headquarter is in Oslo (Norway), and the Group also has an office in Stockholm (Sweden), Helsinki (Finland), as well as a procurement service office in Lucerne (Switzerland). By year end 2023 XXL had 39 stores in Norway, 30 in Sweden and 17 in Finland, as well as a central ware- house at Gardermoen (Norway) and Örebro (Sweden). After the closure from the Austri- an market, the Group operates 86 stores. The working environment and the employees The Group has 4 356 employees (incl. full- and part time) at year end 2023 (4 749 in 2022). Leave of absence due to illness totaled at 6.9 per cent of total working hours in the Group in 2023 (7.8 per cent in 2022). No incidences or reporting of work-related ac- cidents resulting in significant material damage or personal injury have occurred during the year. The Board would like to thank all the XXL employees for their dedication to the com- pany and our concept. 2023 has been the most challenging year for the Group and we appreciate all your hard work and dedication. Equal opportunities The Group aims to be a workplace with equal opportunities and has included in its poli- cies regulations to prevent gender discrimination regarding salary, promotion, and re- cruiting. The Discrimination Act’s objective is to promote gender equality, ensure equal opportu- nities and rights, and to prevent discrimination due to ethnicity, national origin, descent, skin color, language, religion, and faith. XXL is working actively, determined and system- atically to encourage the act’s purpose within the business through recruiting, salary and working conditions, promotion, development opportunities and protection against harassment. The Group is actively investigating and analyzing sources of discrimination in the organization. The Group has traditionally recruited from environments equally dominated by both men and women. Out of the Group 4 365 employees there are 1 827 female employees which equals 42 per cent. We refer to the sustainability report for statement on gender equality and fulfilment of activity obligation. Norwegian Transparency Act XXL has rigorously upgraded its supply chain due diligence frameworks to be in line with the OECD guidelines tailored for Multinational Enterprises. This enhancement is in direct response to the stipulations of the Norwegian Transparency Act, enacted on July 1, 2022, which mandates that Norwegian corporations systematically engage in due diligence to identify, mitigate, and disclose how they address both direct and potential adverse impacts within their supply chains. To fortify sector-wide adherence to these requirements, XXL has assumed a pioneering role in fostering collaboration within the Norwegian Sporting Goods Industry organiza- tion. This initiative aims to cultivate a consensus on supply chain due diligence stand- ards that prioritize human rights and fair labor practices. By consolidating our efforts and adhering to unified principles, we anticipate a marked reduction in the risks associ- ated with non-compliance and regulatory infractions. XXL ASA Annual Report 202329 Our proactive stance in this collaborative industry effort not only exemplifies our leader- ship but also signifies our unwavering commitment to ethical business conduct. By inte- grating these enhanced due diligence processes, XXL is setting a benchmark for corpo- rate responsibility, and affirming our reputation for principled operational practices. A statement detailing XXL’s adherence to the diligent practices mandated by the Nor- wegian Transparency Act is accessible on the XXL’s website, within the Sustainability section. The forthcoming 2023 update, which outlines the group's continuous commit- ment to these diligent practices, will be made available on XXL’s website in June 2024. The board of directors confirms that XXL is compliant with the Norwegian Transparency Act. EU Taxonomy In compliance with regulation EU (2020/852) and its supplementing delegated acts, XXL, as a non-financial company, presents its report on revenue (turnover), capital ex- penditure, and operating expenses related to Taxonomy-eligible and Taxonomy-aligned economic activities. The report includes detailed information on our alignment with the EU Taxonomy framework. published as a separate annex to this report, outlining our ac- tivities in accordance with the specified regulations. The Board of Directors is dedicated to incorporating risk management into strategic de- cision-making, enhancing profitability while maintaining a commitment to societal and environmental responsibility. Going Concern and Business Outlook Going Concern In accordance with Norwegian accounting regulations, the Board of Directors confirms that the prerequisites of a going concern have been met in the presentation of the an- nual financial statements. 2023 has been the most challenging year for the Group and requires the board to elaborate on the going concern assessment, and the uncertainty relates to sales shortfall. At the end of 2023 XXL had a liquidity reserve of NOK 760 mil- lion and enforces strict control with capital allocation and cash management. The Reset & Rethink strategy is progressing well, and XXL is poised to make substantial improve- ments to its’ operational and financial performance in 2024. The Board of Directors and XXL’s management are closely monitoring performance and frequently updating cash- ﬂow forecasts in order to take advantage of opportunities and mitigate potential down- side risk. Going forward the combination of increased consumer confidence (CGI), stabilized inﬂation and expected lowering of the key interest rate indicates that the pop- ulation will increase its consumer spending. The aforementioned internal and external factors are coherent with the Board of Directors’ assessment of going concern. Subsequent events On 21 March 2024 XXL announced a private placement of NOK 500 million with Altor Invest 5 AS and Altor Invest 6 AS (together "Altor"), Ferd AS and Frasers Group Plc. On 22 March a potential subsequent offering to other existing shareholders was an- nounced. The net proceeds from the offering will be used for general business purpos- es, hereof NOK 300 million will be used to reduce the existing revolving credit facility with DNB ASA and Nordea Bank Abp. More information about the private placement can be found on https://newsweb.oslobors.no/message/614225 Outlook XXL’s target going forward is to over time gain market shares in all markets and continue the growth in the E-commerce channel. XXL has implemented several strategic initiatives in relation to the Reset & Rethink strategy and will continue pursuing improved profitability and operational efficiency going forward. The longer-term target is “40 -30 -10” on gross margin, OPEX and EBIT- DA respectively and when excluding IFRS 16 effects. With FY2022 as a base, Reset & Rethink is expected to improve EBITDA by 500-750 million in the next 12-18 months. In addition to XXL’s best efforts, the full potential of Reset & Rethink will unfold when the Nordic sports market recovers. In line with the existing strategy, XXL will continue to invest in operational efficiency, se- lective new store openings, E - commerce platform, existing stores, infrastructure, and IT. Total CAPEX for XXL Group in 2024 is expected to be around NOK 100 - 150 million. Going forward XXL plans for no new store openings in 2024, albeit considering relo- cating stores where the lease is expiring. At the same time XXL will be downsizing sev- eral existing stores, where the contract period is approaching an end. The downsizing strategy entails reduced store space, and thus the rent, but also maintaining XXL’s wide assortment. The expected annual cost-saving from the store downsizing is NOK 20 mil- lion. The Group will continue to focus on optimizing the store portfolio. Responsibility Statement We, The Board of Directors, confirm to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2023 have been prepared in ac- cordance with current applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the Group tak- en as a whole, as well that the Board of Directors’ Report includes a true and fair review of the development and performance of the business and the position of the entity and the Group, together with a description of the principal risks and uncertainties facing the entity and the Group. The board of Directors and Group leadership have "Directors and Officers Insurance”. The insurance covers personal legal liabilities including defense- and legal costs. XXL ASA Annual Report 202330 Oslo, 24 April 2024 Board of Directors Björn Einar Håkan Lundstedt Tom Christian JovikKjersti Helen Krokeide Hobøl Ronny Blomseth Tor Andrin Jacobsen Helena Ebersten Henriksen Freddy SobinKari Ekelund Thørud Kjell-Arne Fikerud Chairman of the Board Board MemberBoard Member Board Member Board Member Board member CEO Board Member Board Member XXL ASA Annual Report 202331 Corporate governance 1. Implementation and reporting on corporate governance XXL believes that good corporate governance contributes to the best possible value creation and trustworthiness over time for all shareholders, the capital markets and for other key stakeholders. In order to secure strong and sustainable corporate govern- ance, it is important to ensure good and healthy business practices, reliable financial reporting and an environment of compliance with legislations and regulations across the XXL Group. The Norwegian Corporate Governance Board has for companies listed on the Oslo Stock Exchange issued the Norwegian Code of Practice for Corporate Governance (the “Code of Practice”). The Code of Practice is available on www.nues.no and was last amended on 14 October 2021. XXL comply with the Code of Practice. Details are includ- ed in this report with section numbers that refer to the Code of Practice’s articles. XXL’s corporate governance policy is based on the Code of Practice, and as such designed to establish a basis for good corporate governance, to support achievement of the Group’s core objectives on behalf of our shareholders and other stakeholders. XXL has governance documents setting out principles for how business should be con- ducted. These apply to all XXL units. The XXL governance regime is approved by the Board of Directors, which has the overall supervision for corporate responsibility at XXL and ensures that the Group implements sound corporate governance principles. The Board of Directors revises the governance documents on a yearly basis. Deviation from the Code of Practice (NUES) - none 2. Business - XXL’s objectives and activities XXL believes good corporate governance involves openness and trustful cooperation between all stakeholders in the Group – the owners, the Board of Directors and the Executive Management, employees, customers, suppliers, creditors, public authorities, capital markets and society in general. By pursuing the principles of corporate governance, the Board of Directors and Execu- tive Management shall contribute to achieving the following objectives: • Openness – communication with the interest groups of XXL shall be based on openness in issues relevant to the evaluation of the development and position of the company. • Independence – the relationship between the Board of Directors, the Executive Management and the owners shall be based on independence. Independence shall ensure that decisions are made on an unbiased and neutral basis. • Equal treatment – one of XXL’s objectives is equal treatment and equal rights for all shareholders. • Control and management – good control and corporate governance mechanisms shall contribute to achieving predictability and reducing the level of risks for owners and other interest groups. XXL’s vision is to be the preferred sports and outdoor destination in the Nordics. This is reﬂected in the Section 3 of the Articles of Association, which reads “The Company’s business operation is trade business within sport and wilderness products and other business operations that are naturally related therewith. The business can be conduct- ed by the company itself, by subsidiaries or through participation in, or in cooperation with, others”. XXL is committed to interact in an open and responsible way with all the relevant stake- holders to be able to create a profitable business over time. Our corporate governance policies are designed in order to be true to this commitment, including the achievement of sustainable profitability for the stakeholders of XXL. The Board of Directors set clear ambitions for the coming year in the budget process each year. Long term objectives, strategies and the risk profile are also evaluated an- nually or as necessary in connection with major events or structural changes during the year. Included in this is also the sustainability work of the Group which is linked to the overall strategy and evaluated yearly. XXL publishes an annual sustainability report covering the most important aspects of this work which is based on a broad stakeholder materiality analysis. Deviation from the Code of Practice (NUES) - none XXL ASA Annual Report 202332 3. Equity and dividends The company’s equity should continuously be at a level appropriate to XXL’s objectives, strategy and risk profile. Long term XXL has a dividend policy with a target pay-out ratio of 40-50 per cent of annual net income. When proposing a dividend the Board of Directors will take into account legal restrictions, capital requirements and the overall financial position of the Company. The Board of Directors will make an overall assessment in order to secure the Company a healthy capital base both for daily operations and for future growth. Divi- dend payments are subject to approval by the General Meeting. XXL paid no dividends in 2023. Authorization to increase the share capital of the Company will be restricted to defined purposes and will in general be limited in time to no longer than the time of the next Annual General Meeting. If the authorization is for different purposes, the Company will present the authorizations to the shareholders as separate items. Authorizations to ac- quire own shares will also be restricted to defined purposes and if the acquisition is for several purposes, the Company will present the authorization as separate items to the shareholders. Such authority will state the maximum and minimum amount payable for the shares and applies for no longer than the time of the next Annual General Meeting. The aggregate nominal value of treasury shares acquired by the Company must not ex- ceed 10 percent of the total outstanding shares in the company. In the Annual General Meeting held on 6 June 2023, the Board of Directors was grant- ed authorization to increase the share capital of the Company by a maximum of NOK 31,035,477 representing up to 20 per cent of the share capital at that time. The purpose of the authorization is for general financing and strengthening of equity. The authoriza- tion is valid until the Annual General Meeting in 2024, but no longer than to 30 June 2024. The Board of Directors has also granted authorization to increase the share capital of the Company by a maximum of NOK 7,758,894.40 representing up to 5 per cent of the share capital at that time. The purpose of the authorization is to secure delivery of shares under the Company’s share incentive programs. The authorization is valid until the Annual General Meeting in 2024, but not later than 30 June 2024. The Board of Directors has also been granted authorization to repurchase the Compa- ny’s own shares within a total nominal value of NOK 7,758,894.40 corresponding to up to 5 per cent of the Company’s share capital. The main purpose of the authorization is to acquire own shares in order to use such shares in connection with XXL’s share incen- tive programs. To the extent the shares are not required for the share incentive program after all, the shares shall be deleted in connection with a later reduction of the regis- tered share capital. The maximum amount that can be paid for each share is NOK 50 and the minimum is NOK 0.1. The authorization is valid until the Annual General Meeting in 2024, but not later than 30 June 2024. The two above mentioned authorizations must be viewed in connection so that the total utilization of both authorizations combined does not exceed 5 per cent of the Company’s share capital. Further, the Board of Directors was granted authorization to repurchase the Company’s own shares within a total nominal value of NOK 7,758,894.40 corresponding to up to 5 per cent of the Company’s share capital at that time. Shares in XXL acquired in ac- cordance with this authorization are planned in order to optimize the Company’s share capital structure. The maximum amount that can be paid for each share is NOK 50 and the minimum is NOK 0.1. The authorization is valid until the Annual General Meeting in 2024, but no longer than 30 June 2024. Lastly, the Board of Directors was granted authorization to repurchase the Company’s own shares within a total nominal value of NOK 7,758,894.40 corresponding to up to 5 per cent of the Company’s share capital. Shares in XXL acquired in accordance with this authorization are planned for potential use as consideration shares with regards to ac- quisition of other businesses. The maximum amount that can be paid for each share is NOK 50 and the minimum is NOK 0.1. The authorization is valid until the Annual General Meeting in 2024, but no longer than 30 June 2024. XXL held no own shares in treasury at the end of the year 2023. In Q3 2023 XXL conducted a fully underwritten rights issue directed towards all share- holders, of NOK 0.40 per share and raised gross proceeds of NOK 500 million, to strengthen the liquidity of the Group. The rights issue was approved by an extraordinary general meeting on 17 August 2023. In Q1 2024 XXL contemplated a private placement directed towards the 3 largest shareholders of NOK 0.70 per share and raised gross proceeds of NOK 500 million, to strengthen the liquidity of the Group. The private placement was approved by an ex- traordinary general meeting on 12 April 2024. More information about the private place- ment can be found on https://newsweb.oslobors.no/message/614225 Deviation from the Code of Practice (NUES) - none 4. Equal treatment of shareholders Equal treatment of all our shareholders is core in how XXL approaches corporate governance. The total share capital of the Company is NOK 665,429,772 divided into 1,334,852,101 ordinary shares (class A shares) and 328,722,329 non-voting shares (class B shares), in total 1,663,574,430 shares, each with a nominal value of NOK 0.40. The class A shares represent NOK 533,940,840.40 and the class B shares represent NOK 131,488,931.60 of the total share capital. All shares of the Company is registered with a register of secu- rities. Each class A share carry one vote, while the class B shares have no voting rights. Save for the above the class A shares and the class B shares rank pari passu and give equal rights to dividends and other distributions, and all other rights. Any holder of class B shares can at any time request the exchange of, and exchange, any or all of its class B shares into class A shares (ref. Section 4-1 (2) of the Norwegian Public Limited Liability Companies Act) by notifying the Company, provided that such exchange does not result in the holder, taken together with close associates of the holder (as defined in Section 2-5 of the Norwegian Securities Trading Act), exceeding a shareholding of one-third of the total number of outstanding class A shares. Notwithstanding the above, a holder of class B shares may request the exchange of, and exchange, class B shares into class A shares if the holder has already triggered a mandatory offer obligation under the Norwegian Securities Trading Act and publicly an- nounced that it intends to put forward a mandatory offer, provided that such mandatory offer has not been completed at the time of the request for exchange. Shareholders are required to adhere to the above exchange regulations at their own risk, and the Company has no obligation to monitor, consider or express any opinion in this respect. The exchange ratio shall be 1:1, so that each class B share shall be ex- changeable into one class A share. In the event the Company resolves to carry out a rights offering of class A shares or other issuance of class A shares or other equity instruments with preferential rights for holders of class A shares, the Company shall also carry out a corresponding rights of- fering of class B shares or other issuance of class B shares or other equity instruments with preferential rights for the holders of class B shares at the same offer price, allow- ing each holder of class B shares to subscribe for class B shares and such other equity instruments in order to maintain its pro rata shareholding in the Company and preserve the value of the exchange right. The Company shall as soon as practicably possible following receipt of a request for an exchange of class B shares into class A shares implement such exchange by procuring registration of the relevant amendments with the Norwegian Register of Business Enter- prises and the issuance of the new class A shares in the securities depository. Further, the Company shall ensure that the new class A shares as soon as practicably possi- ble become listed and tradeable at the stock exchange(s) and other regulated market place(s) on which the other class A shares are listed. Where the Board of Directors resolves to carry out an increase in the share capital and waive the pre-emptive rights of the existing shareholders on the basis of a mandate granted to the Board of Directors, an explanation will be publicly disclosed in an an- nouncement to the stock exchange in connection with the increase of the share capital. XXL has established instructions for handling inside information, rules for primary insid- ers and insider trading which is closely monitored. Any transaction the Company carries out in its own shares will be carried out either through the stock exchange or at prevailing market prices if carried out in any other way. Such transaction will be publicly disclosed in a stock exchange announcement immedi- ately. Deviation from the Code of Practice (NUES) – none XXL ASA Annual Report 202333 5. Shares and negotiability The shares in both classes of shares are freely transferable. Upon a transfer of class B shares to a transferee who is not a close associates of the holder (as defined in Section 2-5 of the Norwegian Securities Trading Act), the relevant class B shares shall be ex- changed for class A shares, except (at the election of the transferor) for a transfer to a third party acquirer in a mandatory tender offer. There are no provisions in the Company’s Articles of Association that limit the right for class A shares to own, trade or vote for those shares in the Company. The Articles of As- sociation do not provide for any restrictions on the transfer of class A shares, or a right of first refusal for the Company. Share transfers are not subject to approval by the Board of Directors. Deviation from the Code of Practice (NUES) - none 6. General meetings Through the General Meeting, shareholders exercise supreme authority in the Compa- ny. In accordance with Norwegian law, the Annual General Meeting of shareholders is required to be held each year on or prior to 30 June. Norwegian law requires that writ- ten notice of Annual General Meetings, setting forth the time of the venue and the agen- da, to be sent to all shareholders with a known address no later than 21 days before the Annual General Meeting, unless the Articles of Association stipulates a longer deadline, which is not currently the case for the Company. Apart from the Annual General Meeting, Extraordinary General Meetings of share- holders may be held if the Board of Directors considers it necessary. An Extraordinary General Meeting must also be convened if, in order to discuss a specified matter, the auditor or shareholders representing at least 5 per cent of the share capital demands this in writing. The requirements for notice to the Annual General Meeting also apply to Extraordinary General Meetings. According to the Articles of Association, documents relating matters to be dealt with by the Company’s General Meeting, including documents which by law shall be in- cluded in or attached to the notice of the General Meeting, do not need to be sent to shareholders if such documents have been made available on the Company’s website. A shareholder may nevertheless request that documents which relate to matters to be dealt with at the General Meeting are sent to him/her. A shareholder may vote at the General Meeting either in person or by proxy appointed at their own discretion. In accordance with the requirements of the Norwegian Secu- rities Trading Act, the Company will include the proxy form with the notice of General Meetings. Furthermore, the Company will appoint a person, normally the Chairman of the Board of Directors, who may act as a proxy holder for the shareholders. All of the Company’s shareholders who are registered in the register of shareholders maintained with the VPS as of the date of the General Meeting, or who have otherwise reported and documented ownership to shares, are entitled to participate at General Meetings, without any requirement of pre-registration. Shareholders are also able to participate and vote electronically. Shareholders who wish to participate in the general meeting must give the company notice of this in advance. Such notice must be received by the company no later than two working days prior to the general meeting. The board may, however, before the notice to the general meeting has been sent, set a later deadline for such notice. The shareholders may cast their votes in writing, including through elec- tronic communication, in a period prior to the General Meeting. The Board of Directors can establish specific guidelines for such advance voting. The established guidelines must be stated in the notice of the General Meeting. The shareholders have the oppor- tunity to be present at the General Meeting using electronic means. The Chairman of the Board of Directors and the Chairman of the Nomination Commit- tee, the Group CEO and CFO as well as the auditor will under normal circumstances be present at the General Meeting in person. Other members of the Board of Directors and subcommittees are entitled to attend when necessary. The General Meeting elects the members of the Board of Directors, members of the Nomination Committee, determines the remuneration of the members of the Board of Directors and the members of the Nomination Committee, approves the annual ac- counts and the annual report, including distribution of dividend, and any other matters which are referred to the General Meeting by law or the Articles of Association. Decisions that shareholders are entitled to make under the Norwegian law or the Com- pany’s Articles of Association may be made by a simple majority of the votes cast. In the case of elections or appointments, the person(s) who receive(s) the greatest number of votes cast are elected. Certain decisions, including resolutions to waive preemptive rights to subscribe in connection with any share issue in the company, to approve a merger or demerger of the company, to amend the Articles of Association, to authorize an increase or reduction in the share capital, to authorize an issuance of convertible loans or warrants by the company or to authorize the Board of Directors to purchase shares and hold them as treasury shares or to dissolve the company, must receive the approval of at least two-third of the aggregate number of votes cast as well as at least two-third of the share capital represented at a General Meeting. Norwegian law further requires that certain decisions, which have the effect of substantially altering the rights and preferences of any shares or class of shares, receive the approval by the holders of such shares or class of shares as well as the majority required for amending the Articles of Association. Decisions that would reduce the rights of some or all of the company’s shareholders in respect of dividend payments or other rights to assets or restrict the transferability of the shares, require that at least 90 percent of the share capital repre- sented at the General Meeting in question vote in favor of the resolution, as well as the majority required for amending the Articles of Association. There are no quorum require- ments that apply to the General Meetings. The minutes from the General Meeting, as well as the register of participants at the Gen- eral Meeting, will be posted on the Company’s website no later than 15 days after the General Meeting was held, but generally as soon as possible after the end of the meet- ing. Information that a General Meeting has been held will also be made public through a stock exchange announcement as soon as possible after the end of the meeting. The Annual General Meeting of 2023 was held on 6 June 2023. In addition, the Com- pany hosted an Extraordinary General Meeting on 17 August 2023, related to the right issue as described in section 3 above. 7. Nomination committee XXL has established a Nomination Committee pursuant to the Articles of Association and shall consist of two or three members who are shareholders or representatives of shareholders. The majority of the members should be independent of the Board of Di- rectors and the Executive Management. Currently the Nomination Committee consists of three members, Øistein Widding (Chairman), Lars Erikssen and Christian Berg. The Nomination Committee shall give recommendations for the election of shareholder elected members of the Board of Directors, remuneration to the members of the Board of Directors including remuneration for subcommittees, the election of members to the Nomination Committee and remuneration to the members of the Nomination Commit- tee. The General Meeting may adopt instructions for the Nomination Committee. XXL has established an instruction for the Nomination Committee, which includes rec- ommendations for the tasks described above. When nominating members to the Board of Directors, the Nomination Committee should look at competence and diversity, legal requirements, independence from any significant business associates, at least two of the members of the Board of Directors should be independent of the Company’s princi- pal shareholders and that members of the Executive Management should not be mem- bers of the Board of Directors. Remuneration of the Board of Directors should take into account the responsibility of the Board of Directors and that the proposal is suited to the character and time commitment of the tasks it carries out. According to the instruc- tion for the Nomination Committee a certain amount of the annual remuneration is to be used to acquire shares in the Company. The recommendations from the Nomination Committee will be explained. The Nomination Committee must look actively to the shareholders in order to try to en- sure that its recommendations have their support. In its work the Nomination Committee will monitor the need for changes to the composition of the Board of Directors and will pay specific attention to the annual appraisal report for the Board of Directors. In addi- tion, the Nomination Committee will perform individual discussions with the members of the Board of Directors as well as the Group CEO. It must ensure that information is made available on the Company’s website of any deadlines for proposing candidates or making suggestions to the Nomination Committee regarding elections of members to the Board of Directors and Nomination Committee. The recommendations should be given together with the notice of the General Meeting. Deviation from the Code of Practice (NUES) - none XXL ASA Annual Report 202334 8. Board of Directors – composition and independence XXL’s Board of Directors shall consist of a minimum of three and a maximum of seven shareholder elected members according to the decision of the General Meeting. In addition, the Board of Directors has employee elected representatives. Currently the Board consists of five shareholder elected members and three employee elected repre- sentatives. The Board of Directors is responsible for the management of the Company, including the appointment of the CEO to assume the daily management of the com- pany. The composition of the Board of Directors in XXL ASA is in compliance with the independence requirements meaning that the majority of the shareholder elected mem- bers of the Board of Directors is independent of the Company’s Executive Management and material business contacts. At the same time all the shareholder elected members of the Board of Directors are independent of the Company’s main shareholders with one exception, meaning shareholders holding more than 10 percent of the total outstanding shares in the Company. In the Company’s view all the shareholder elected members of the Board of Directors are independent from the Executive Management and material business contacts. Members of the Executive Management should not be a member of the Board of Directors. The term of office for members of the Board of Directors is a maximum of two years, but a member may be re-elected. Information regarding each in- dividual member of the Board of Directors could at all times be found on the Company’s website as well as in the Annual Report. The members of the Board of Directors are encouraged to own shares in the compa- ny. Please see note 3 in the consolidated financial statement for the overview of share ownership and detailed background of the members of the Board of Directors. Deviation from the Code of Practice (NUES) – none 9. The work of the Board of Directors The conduct of the Board of Directors follows the adopted Board of Directors’ rules of procedure, which states that the board members should perform their duties in a loyal manner, attending to the interests of the company. The Board of Directors prepares a plan for the ordinary meetings for each calendar year. The Board of Directors will meet several times a year and it will host additional meetings when required due to special circumstances. Between meetings, the chairman and the CEO have frequent contact on current matters and update the board members accordingly. The board meetings en- sure that the Group’s activities are organized in a prudent manner, maintaining systems, procedures and a corporate culture that promote high ethical conduct and in compli- ance with legal and regulatory requirements. Each board meeting includes a briefing by the CEO and a review of the latest financial development by the CFO. The Board of Di- rectors keeps itself informed of the financial position of the company to ensure that the corporate accounts and asset management are subject to satisfactory controls. The chairman of the Board of Directors ensures that board members are kept informed, convene and chair the board meetings and ensure that the matters are handled in ac- cordance with applicable law and procedures. In the case of the chairman’s absence, the Board of Directors elects a board member to chair the meeting. If the chairman of the Board of Directors is, or has been, personally involved in matters of material sig- nificance to the company, such matters will be chaired by some other member of the Board of Directors. A member of the Board of Directors or the CEO could not participate in the discussion or decision of issues of such special importance to the member in question or to any closely related party to that said member. The Board of Directors’ rules of procedure include instructions on how the Board of Directors and the Executive Management handle agreements with related parties and whether an independent valuation must be obtained. There have been no significant transactions between the Company and closely related parties in 2023. If XXL should enter into agreements or transactions with closely related parties within the Compa- ny, or with companies in which a leading director or leading employee of XXL or close associates of these have a material direct or indirect interest, the agreements or trans- actions will immediately be notified to the Board of Directors. Any such agreements or transactions must be approved by the Board of Directors and be publicly disclosed if required. In the event of an agreement or transaction between the Company and closely related parties, the Board of Directors will arrange for an independent valuation over- view from an independent third party, unless the agreement or transaction requires an approval of the General Meeting. Any such agreements will also be disclosed in the Annual Report. For further information on closely related transactions, please see note 10 in the con- solidated financial statements. The Board of Directors has established a Remuneration Committee and an Audit Com- mittee. The Remuneration Committee shall have at least two members of the Board of Directors and comprises for the time being of two members, Håkan Lundstedt (chair- man) and Kari Thørud. The primary purpose of the Remuneration Committee is to assist the Board of Directors in performing its duty relating to determining the compensation to the Executive Management. The Remuneration Committee reports and makes rec- ommendations to the Board of Directors, but the Board of Directors retains responsi- bility for implementing such recommendations. The Audit Committee shall compose of at least two members of the Board of Directors and the current members are Kjersti Hobøl (chairman) and Tom Jovik. The primary purposes of the Audit Committee are to act as a preparatory and advisory committee for the Board of Directors in questions concerning accounting, audit and finance. The Audit Committee monitors the financial reporting process and internal control, reviews the independent auditor’s qualifications and independence and the Group’s compliance with applicable legal and regulatory requirements. The Audit Committee reports and makes recommendations to the Board of Directors, but the Board of Directors retains responsibility for implementing such rec- ommendations. The Board of Directors carries out an annual evaluation of its performance. The evalua- tion report for the year 2023 has been presented to the Nomination Committee. Deviation from the Code of Practice (NUES) - none 10. Risk management and internal control The Board of Directors supervises the daily management and the activities and risks of the Company in general. XXL’s risk management and internal control are an integral part of all daily business activities and are integrated in the business planning processes and corporate strategy. The day-to-day risk management is placed on the business seg- ments and governed by the Executive Management team. The Board of Directors carries out separate reviews of the most important risk expo- sures. The Audit Committee monitors on an ongoing basis the risk and control related to the financial situation including review and implementation of accounting principles and policies, the effectiveness of the Company’s internal control, internal audit and risk management system. The Audit Committee has full access to all books, record and per- sonnel of the Group, as well as the external auditor of the Company. Instructions for the CEO’s responsibilities and duties have been implemented by the Board of Directors to clarify the powers and responsibilities between the Board of Di- rectors and the Executive Management team. The CEO has the right to represent the Company within the adopted budget and is responsible for implementing the resolu- tions adopted by the Board of Directors. It is the CEO’s responsibility that the Compa- XXL ASA Annual Report 202335 ny’s bookkeeping and accounting are performed in accordance with the law and that the management of company’s assets is conducted safely. The Board of Directors en- sures that the CEO uses proper and effective management and control systems, in- cluding systems for risk management. The internal control systems also encompass the company’s corporate values, ethical guidelines and corporate social responsibility. XXL operates internationally and is exposed to various financial risks such as currency risk, interest rate risk, liquidity risk and credit risk. The CFO has the day-to-day responsi- bility for managing activities related to this. In order to manage foreign currency risk ex- posure, XXL hedge approximately 50 per cent of its purchases of own produced goods (private label products). The Group is exposed to interest rate risk through its financial activities. The interest-bearing debt has ﬂoating rates, which means it is affected by changes in interest rates. The purpose of the Group's interest rate risk management is to reduce interest costs and at the same time keep the volatility of future interest pay- ments within acceptable limits. The Group constantly monitors the interest rate level and uses derivatives to adjust the effective interest rate exposure when necessary. XXL monitors liquidity ﬂows, short- and long-term, through reporting and forecasting, that better control the liquidity risk. The management of credit risk related to trade and other receivables is handled as part of business risk and is continuously monitored by XXL’s finance department. The Group mitigates this risk by ensuring that all parties requiring credit, such as customers, are approved and subject to credit check. Policies are in place to ensure that sales are made with customers who have not had significant prob- lems with payment and the outstanding amount does not exceed the established credit limits. XXL has agreements with third parties related to recoverability of trade receiva- bles from online sales and supplier bonuses. In order to comply with the arm’s length principle as stated in applicable standards and laws and to maintain good control, XXL has established transfer pricing policy. The main purpose of this policy is to ensure that all significant intra group transactions are priced in accordance with the arm’s length principle and relevant domestic tax regimes. It en- sures a simple, coherent and logical transfer pricing methodology, and consistency and transparency on how the intra group prices are set and tested. It further minimizes the risk of double taxation and captures any relevant and significant issues and need for revisions. The Group’s accounting unit is responsible for the preparation of the financial state- ments and to ensure that they are in accordance with applicable laws, regulations and adopted accounting policies. The CFO and the controller functions are responsible for reporting to the Board of Directors and the Executive Management, as well as planning and coordinating the business plan process. The finance department prepares financial reporting and provides a set of procedures and processes detailing the requirements with which the local reporting units must comply. The Group has established process- es and a variety of control measures that will ensure quality assurance in the financial reporting. The Group is reporting to the Board of Directors on a monthly basis. Several controls are established such as reconciliation, segregation of duties, management review and authorization. All monthly and quarterly reports are analyzed and assessed relative to budgets, forecasts, trends and the long-term business plan. The Executive Management comments on the financial results on a quarterly basis and the results are announced to the Oslo Stock Exchange. The external auditor provides a description of the main elements in the audit, including opinions on internal control related to financial reporting. XXL is subject to a yearly ex- ternal statutory audit. XXL Board of Directors has also implemented ethical procedures in the company, sub- ject to all employees and the members of the Board of Directors. These documents contain the basic principles of business practice, personal conduct, roles and respon- sibilities, covering topics including employee relations, anti-corruption, health, envi- ronment, human rights, anti-discrimination, handling business information, conﬂicts of interest, fair competition, money laundering. Please also see the Sustainability report for 2023. Deviation from the Code of Practice (NUES) - none 11. Remuneration of the Board of Directors The remuneration of the Board of Directors will be proposed by the nomination com- mittee and approved by the Annual General Meeting. The remuneration is a fixed an- nual fee and is not linked to the company’s performance. It reﬂects the responsibility, qualifications, time commitment and complexity of the Company’s activities in general and also separate fees for participation in committees of the Board. Shareholder elect- ed members are not granted share options but are considered for investing in the XXL management investment program, and none of them (or any company associated with such member) have specific assignments for the Company in addition to their duties as Board members. The Annual General Meeting decided that parts of the remuneration to the shareholder elected members of the Board of Directors are subject to being invested in shares in the Company. This means that shareholder elected members of the Board of Directors shall utilize  of their annual gross board fee (excluding any fee for committee work) to purchase shares in XXL until they (including their related parties) own shares in XXL at a value equivalent to two times their gross board fee (excluding any fee for committee work). These shares must be retained as long as the member serves on the Board of Directors. For more information please see note 3 in the consolidated financial statements. Deviation from the Code of Practice (NUES) - none 12. Remuneration of executive personnel XXL Board of Directors has established a Remuneration Committee with a set of in- structions for the Committee to follow. The Committee acts as preparatory and advisory body to the Board of Directors in relation to the Company’s remuneration of Executive Management. The Board of Directors determines the remuneration of the CEO based on a proposal from the Remuneration Committee and approves the general terms of the Company’s incentive plans for the Executive Management and key employees. The CEO determines the compensation to other members of XXL’s Executive Management. In accordance with the Norwegian Public Limited Companies Act, a statement related to the determination of salary and other benefits for the Executive Management will be prepared by the Board of Directors. The statement will be presented to the Annual Gen- eral Meeting for voting and the statement will also be a separate appendix in the notice to the Annual General Meeting. The Board of Directors has established guidelines for the remuneration to the CEO and members of the Executive Management. It is a policy to offer competitive remuneration based on current market standards, company and individual performance. The remu- neration consists of a basic salary element combined with a performance-based bonus program. The Executive Management participates in the Company’s insurances and is entitled to certain other elements like benefits upon termination, internet access and phone expenses. Executives on expatriate contracts have various other costs covered by the Company. The annual salary adjustment for employees in Norway forms the ba- sis for the XXL’s Executive Management salary development. Members of the Executive Management do not receive separate remuneration for board membership in XXL sub- sidiaries. The Group has established a bonus scheme for the Executive Management, which is based on elements such as the Group's results before tax exceeding the budget and certain KPIs. Under the bonus scheme, members of the Executive Management may be awarded an annual bonus of up to 50 per cent of the respective employee's gross base salary. The annual bonus for Executive Management will be communicated by the Board of Directors each year. The Group does not include bonus payments in the basis for calculation of holiday pay and pension. The Group has established an equity-based long term investment program for members of the Executive Management. The main objective of the Program is to align the long- term interests of the Executive Management with those of the shareholders of XXL ASA. The Group has a defined contribution plan which covers all of the XXL’s employees. The guidelines to be presented at the Annual General Meeting in June 2024 are dis- closed in note 3 in the consolidated financial statements. For information on salary and other benefits for 2023 for the Executive Management see note 3 in the consolidated financial statements. For additional information about the pension plans see note 3 in the consolidated financial statements. Deviation from the Code of Practice (NUES) - none XXL ASA Annual Report 202336 13. Information and communications XXL’s communication with the financial market is based on openness and equal treat- ment of all shareholders. Investor Relations is a high priority and the Board of Directors has established an Investor Relations policy to build trust and awareness in the investor community. The XXL corporate website (www.xxlasa.com) includes an updated financial calendar, financial reports, announcements, contact details and other Investor Rela- tions information. XXL regularly hosts meetings with investors and analysts, participates on investor conferences and arranges regular presentations and roadshows. To ensure all stakeholders have equal access to information at the same time, important events affecting the company are reported immediately to the Oslo Stock Exchange in accord- ance with applicable legislation and also at the same time on XXL’s corporate website. Deviation from the Code of Practice (NUES) - none 14. Take-overs In accordance with the Norwegian Securities Trading Act and the Code of Practice, the Board of Directors has adopted guiding principles for how to act in the event of a take- over bid. The Board of Directors will not seek to hinder or obstruct any takeover bids. In a take-over process, the Board of Directors and Executive Management each have an individual responsibility to ensure that the Company’s shareholders are treated equally and that there are no unnecessary interruptions to the Company’s business activities. The Board of Directors will ensure that the shareholders have sufficient information and time to assess the offer and will not undertake any actions intended to give sharehold- ers or others an unreasonable advantage at the expense of other shareholders. Information about agreements entered into between the Company and the bidder that are material to the market’s evaluation of the bid will be publicly disclosed no later than at the same time as the announcement that the bid will be made is published. Any agreements with the bidder that acts to limit the Company’s ability to arrange other bids for Company’s shares will only be entered into where the Board of Directors believes it is in the common interest of the Company and its shareholders. If a take-over offer is made, the Board of Directors will obtain a valuation from an inde- pendent expert. On this basis, the Board of Directors will issue a statement making a recommendation as to whether shareholders should accept the offer or not. The valua- tion from the independent expert will be disclosed at the same time. Deviation from the Code of Practice (NUES) - none 15. Auditor The external auditor participates in meetings with the Audit Committee or the Board of Directors when matters falling within the scope of the external auditors responsibilities are considered. The external auditor provides to the Audit Committee a description of the main elements of the audit for the preceding financial year, including in particular the elements that caused the most discussions with the Executive Management and material weaknesses uncovered related to internal controls of the financial reporting process and proposals for improvement. The auditor participates in meetings of the Board of Directors and the Audit Committee that approves financial statements. Once a year the Board of Directors holds a meeting with the auditor and no member of the Ex- ecutive Management participates. Norwegian laws and regulations stipulate the type of non-audit services that external auditors can perform for XXL. The Board of Directors has established guidelines with re- spect to the use of the auditor by the company’s executive personnel for services other than the audit. The Annual General Meeting is informed about the Company’s engage- ment and remuneration of the auditor and for fees paid to the auditor for services other than the annual audit. Details are disclosed in note 3 to the consolidated financial state- ments. Deviation from the Code of Practice (NUES) - none XXL ASA Annual Report 202337 XXL is committed to maintaining a consistent dialogue with the shareholders and potential inves- tors. The communication with the financial market is based on openness and equal treatment of all share- holders. Good relations with the investor community contribute to building trust and reducing cost of capi- tal. XXL gives high weight to providing accurate, clear, relevant, comprehensive and up-to-date information about the Company through stock exchange an- nouncements, interim reports, annual reports, general meetings, presentations and meetings with investors and analysts. The XXL share should be an attractive investment op- portunity, providing competitive returns to the owners, both through dividends and by increasing the value of the equity through positive developments in the oper- ations over time. Extensive information about the Investor Relations policies and the XXL share is available on www.xxlasa.com/investor The XXL share and shareholder information The quarterly results presentations take place at the XXL head office, Alna Center, Strømsveien 245, Oslo and through digital channels. The Annual General Meeting is hosted as a digital event. Share performance The XXL share started the year at a price of NOK 1.64 and closed the year 2023 at NOK 0.95, giving a negative return of 58 per cent. XXL’s market value as of year-end 2023 was NOK 1 572 million. The highest closing price was NOK 1.67 and the lowest was NOK 0.58. The average daily volume in 2023 was NOK 2.9 million or 3.1 million shares. Dividend policy XXL ASA will over time target a dividend pay-out of at 40-50 per cent of the Group’s annual net income. When proposing a dividend, the Board of Directors will take into account legal restrictions, capital requirements and the overall financial position of the company. The Board of Directors will make an overall assessment in order to secure the Company with a healthy capital base both for daily operations and for future growth. Shareholders XXL ASA had on 31 December 2023 a total share capital of NOK 665,429,772 divided into 1,334,852,101 ordinary shares (class A shares) and 328,722,329 non-voting shares (class B shares), in total 1,663,574,430 shares, each with a nominal value of NOK 0.40. XXL ASA had 13,817 shareholders as of 31 December 2023. Non-Norwegians amounted to 18.3 per cent of the share capital, with shareholders from Belgium representing 13.8 per cent and shareholders from Sweden representing 2.4 per cent. The largest share- holder was Altor Equity Partners AS with 46.50 per cent of the share capital. Annual General Meeting 2024 XXL ASA’s Annual General Meeting is scheduled for Tuesday 4 June 2024 at 09.00 CET as a digital meeting. Attendance, electronically or by proxy should be registered within 3 June 2024 at 15.00 CET. Shareholders may register by submitting a registra- tion form or electronically on www.xxlasa.com or at the Norwegian Central Securities Depository investor services website (VPS – www.vps.no). Financial calendar 2024 24 April Q1 2024 results 4 June Annual General Meeting 12 July Q2 2024 results 6 November Q3 2024 results XXL XXL and OSEBX Performance (rebalanced to XXL) 0 0.5 1.0 1.5 2.0 2.5 3.0 Oslo Børs /OSEBX Index XXL ASA Annual Report 202338 Overview of major shareholders as of 31 .12.2023 Geographical shareholder distribution Norway 81,68 % Belgium 13,79 % Sweden 0,24 % UK 0,06 % Other 1,53 % Total amount of shares Ownership Voting right ALTOR INVEST 6 AS 386 836 522 23,3 % 16,7 % ALTOR INVEST 5 AS 386 836 507 23,3 % 16,7 % EUROCLEAR BANK S.A./N.V. 229 200 308 13,8 % 17,2 % FERD AS 151 118 316 9,1 % 11,3 % VERDIPAPIRFOND ODIN NORDEN 88 261 617 5,3 % 6,6 % VERDIPAPIRFOND ODIN NORGE 44 923 725 2,7 % 3,4 % STORMBERG GROUP AS 34 000 000 2,0 % 2,6 % FUNKYBIZ AS 32 000 000 1,9 % 2,4 % BJERKNES EIENDOM AS 24 711 124 1,5 % 1,8 % MP PENSJON PK 20 202 619 1,2 % 1,5 % NORDKRONEN II AS 19 889 159 1,2 % 1,5 % AVANZA BANK AB 9 715 430 0,6 % 0,7 % NORDNET BANK AB 7 301 237 0,4 % 0,5 % J.P. MORGAN SE 6 793957 0,4 % 0,5 % OLA RUSTAD AS 6 779 158 0,4 % 0,5 % AG HOLDING AS 5 000 000 0,3 % 0,4 % NORDEA BANK ABP 4 891 097 0,3 % 0,4 % STANZA AS 4 262 786 0,3 % 0,3 % GENI HOLDING AS 4 194 932 0,3 % 0,3 % NYE BERGHOL INVEST AS 3 750 000 0,2 % 0,3 % Other 192 905 936 11,6 % 14,5 % Sum 1 663 574 430 100 % 100 % XXL ASA Annual report 2023 Consolidated Financial Statements XXL ASA Annual Report 202340 Consolidated Statement of total comprehensive income 41 Consolidated Statement of Financial Position / Assets 42 Consolidated Statement of Financial Position / Equity and Liabilities 43 Consolidated Statement of Cash Flows 45 Consolidated Statement of Changes in Equity 46 Notes to the financial statements 47 Content Denne siden er ikke oppdatert XXL ASA Annual Report 202341 Consolidated Statement of total comprehensive income Note 2023 2022 Operating Revenue 2 7 961 8 426 Cost of Goods Sold 5 452 5 705 Personnel Expenses 3 1 657 1 665 Depreciation and Amortization 4, 5 754 703 Impairment Losses 4, 5, 18 576 1 Other Operating Expenses 6, 23 931 819 Operating Income (1 409) (467) Net Financial Expenses 19 (186) (64) Net Financial Income (Expense) (186) (64) Income before tax (1 595) (531) Income Tax Expense 7 -5 (120) Net Income from Continuing Operations (1 590) (411) Net Income Discontinued Operations (206) (130) Net Income (1 796) (542) Net income attributable to non-controlling interest -65 -20 Net income attributable to owners of the parent -1 731 -522 Basic Earnings per share (NOK) 14 -1,93 -1,63 Basic and diluted Earnings per share from discontinued operations (NOK) 14 -0,25 -0,52 Diluted Earnings per share (NOK) 14 -2,18 -2,15 Statement of other comprehensive income Items that may be subsequently reclassified to profit or loss Currency translation differences 17 – Total other comprehensive income 17 – Total comprehensive income (1 779) (542) Notes 1 to 24 are an integral part of the Consolidated Financial Statements (Amounts in NOK million) XXL ASA Annual Report 202342 Consolidated Statement of Financial Position / Assets Note 31.12.2023 31.12.2022 NONCURRENT ASSETS Intangible Assets Trademarks 5 192 192 Proprietary software 5 58 53 Software 5 20 19 Deferred tax asset 7 253 166 Goodwill 5 2 222 2 744 Total Intangible Assets 2 745 3 175 Property, Plant and Equipment Construction in progress 4 5 6 Machinery and equipment 4 19 31 Land and buildings 4 18 19 Fixtures and fittings 4 447 556 Right-of-Use Assets 18 1 804 1 842 Total Property, Plant and Equipment 2 293 2 455 Total Non-current Assets 5 039 5 630 CURRENT ASSETS Inventory Inventories 8 1 776 2 328 Total Inventory 1 776 2 328 Trade and Other Receivables Trade receivables 12 98 136 Other receivables 12, 20 222 124 Total Trade and Other Receivables 320 260 Cash and Cash Equivalents Cash and cash equivalents 11 406 552 Total Cash and Cash Equivalents 406 552 Total Current Assets 2 503 3 140 Total assets of disposal group held for sale 24 – 263 Total Assets 7 542 9 034 Notes 1 to 24 are an integral part of the Consolidated Financial Statements XXL Austrian segment is not classified as held for sale in 2023, see note 24 (Amounts in NOK million) XXL ASA Annual Report 202343 Consolidated Statement of Financial Position / Equity and Liabilities Note 31.12.2023 31.12.2022 SHAREHOLDERS’ EQUITY Paid-in Capital Share capital 13 665 101 Share premium 13 3 355 2 900 Other paid-in equity 13 44 40 Total Paid-in Capital 13 4 065 3 043 Retained Earnings Other equity 13 (1 754) 24 Total Retained Earnings (1 754) 24 Total Shareholders’ Equity 2 310 3 066 LIABILITIES Non-Current Liabilities Non-Current interest bearing debt 21, 22 276 494 Non-Current lease liabilities 18 1 528 1 568 Total Non-Current Liabilities 1 804 2 062 Current Liabilities Accounts payable and supplier finance 16 908 1 214 Current Lease liabilities 18 585 533 Current interest bearing debt 21, 22 1 006 1 135 Tax payable 7 28 9 Public duties payable 342 360 Other current liabilities 17 560 495 Total Current Liabilities 3 428 3 745 Total Liabilities 5 232 5 808 Total liabilities of disposal group held for sale 24 – 160 Total Equity and Liabilities 7 542 9 034 Notes 1 to 24 are an integral part of the Consolidated Financial Statements XXL Austrian segment is not classified as held for sale in 2023, see note 24 (Amounts in NOK million) XXL ASA Annual Report 202344 Oslo, 24 April 2024 Board of Directors Björn Einar Håkan Lundstedt Tom Christian JovikKjersti Helen Krokeide Hobøl Ronny Blomseth Tor Andrin Jacobsen Helena Ebersten Henriksen Freddy SobinKari Ekelund Thørud Kjell-Arne Fikerud Chairman of the Board Board MemberBoard Member Board Member Board Member Board member CEO Board Member Board Member XXL ASA Annual Report 202345 Consolidated Statement of Cash Flows Note 2023 2022 Operating Activities Income before tax (1 595) (531) Income tax paid – (38) Depreciation and amortization 4, 5 754 703 Impairment 4, 18 576 1 Net financial expense 165 64 Changes in inventory 552 (374) Changes in accounts receivable (44) 337 Changes in accounts payable and supplier financing (340) 572 Other changes 103 (96) Cash provided (used) by operating activities from discontinuing operations 28 44 Cash provided (used) by operating activities 198 682 Investing Activities Investment in fixed assets 4, 5 (129) (132) Cash provided (used) by investing activities from discontinuing operations – (7) Cash provided (used) by investing activities (129) (139) Financing Activities Proceeds from share capital increase 1 001 – Transaction costs (35) – Sales/(purchase) of own shares – (8) Dividends – (145) Payments from and repayments of borrowings 21 (774) (150) Proceeds on debt 21 342 883 Interest payments (95) (61) Interest on lease liabilities 18 (84) (78) Total leasing payments for the lease liability 18 (607) (560) Cash provided (used) by financing activities from discontinuing operations (33) (45) Cash provided (used) by financing activities (285) (164) Net Change in Cash and Cash Equivalents (216) 379 Cash and cash equivalents - beginning of year 11 575 173 Effect of foreign currency rate changes on cash and equivalents 24 – Cash and Cash Equivalents - Assets held for sale - End of period 23 23 Cash and Cash Equivalents - End of Year 406 575 Notes 1 to 24 are an integral part of the Consolidated Financial Statements (Amounts in NOK million) XXL ASA Annual Report 202346 Consolidated Statement of Changes in Equity Shareholders’ Equity 31.12.21 101 3 049 36 583 (47) 30 3 753 Net Income 2022 – – – (522) – (20) (542) Foreign currency rate changes – – – – Transaction with owners: Employee share incentive programme – – 4 – – – 4 Dividends – (145) – – – – (145) Purchase of own shares – (3) – – – – (3) Shareholders’ Equity 31.12.22 101 2 900 40 61 (47) 10 3 066 Net income 2023 (1 731) – (65) (1 796) Foreign currency rate changes – 17 17 Transactions with owners: – Employee share incentive programme – – 3 – – – 3 Share issue 564 455 – – – – 1 020 Purchase of own shares – – – – – – – Shareholders’ Equity 31.12.23 665 3 355 44 (1 670) (30) (54) 2 310 Notes 1 to 24 are an integral part of the Consolidated Financial Statements The share capital as of 31.12.2023 is 665 million NOK The translation reserve is comprised of foreign currency rate changes arising from the translation of financial statements of the Group’s foreign entities into NOK. (Amounts in NOK million) Share Capital Share premium Other Paid in Equity Other Equity Non- controlling interest Total Share- holders’ Equity Foreign Currency Rate Changes XXL ASA Annual Report 202347 Notes to the financial statements 1.1 Organization XXL ASA was founded in Year 2000 and is incorporated and domiciled in Norway. The address of its registered office is Strømsveien 245, N-0668 Oslo, Norway. XXL ASA’s shares are listed on the Oslo Børs (OSL, Norway) with the ticker XXL. The XXL is omni-channel sports retailer focusing on well-known quality brands at the best price of the market. XXL operates in Norway, Sweden, Finland, Denmark, and until end of 2023 in Austria. The group has successfully exited the Austrian market during 2023. XXL ASA is the ultimate parent of the group. The consolidated financial statements for XXL ASA, including notes, for the year 2023 were approved by the Board of Directors of XXL ASA on 24 April 2024. 1.2 Basis of preparation The Consolidated Financial Statements for XXL ASA ("the Group") are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the IFRS Accounting Standards as adopted by the EU as well as Norwegian disclosure requirements pursuant to the Accounting Act. The Consolidated Financial Statements have been prepared in accordance with the historical cost convention, modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value through other comprehensive income or the income statement. The Consolidated Financial Statements are prepared using uniform accounting policies for like transactions and events under similar conditions. Functional and presentation currency Foreign currency transactions are translated into the functional currency of the respec- tive Group entity, using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at closing rates at the reporting date are recognized in the income statement. Non-monetary items are measured at historical cost translated using the exchange rates at the transaction date, except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. The presentation and functional currency is NOK. Group entities with a functional cur- rency other than NOK are translated at the closing rate at the reporting date for bal- ance sheet items, including goodwill, and at transaction rate for income and expenses. Monthly average rates are used as an approximation for transaction rates. Exchange differences are charged/credited to other comprehensive income and recognized in the currency translation reserve in equity. 1.3 Basis of consolidation The Consolidated Financial Statements include the parent company XXL ASA and all of its subsidiaries. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. Subsidiaries Subsidiaries are all entities over which the group has control. The group controls an en- tity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the en- tity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair val- ue of any asset or liability resulting from a contingent consideration arrangement. Iden- tifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. 1.4 Significant accounting policies Revenue recognition The Group provides sporting goods and related equipment to its customers. Customers are individuals who shop at XXL stores and online. Revenue is recognized when it transfers promised goods or services to customers at an amount that reﬂects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue excludes sales taxes, rebates, and trade discounts. Each contract with a customer consists of one or more products, and each product or batch order of the same product constitute one performance obligation, since the customer can benefit from each good or batch on its own or together with other re- sources already available. The fixed transaction price, which represents the stand-alone selling price of each product, is separately stated for each product or batch of products within the contract. The group recognizes revenue from the sale of goods at the point in time when control of the goods is transferred to the customer. Control of an asset refers to the ability to di- rect the use of and obtain substantially all of the remaining benefits from the asset, and the ability to prevent others from directing the use of and receiving the benefits from the asset. The group therefore generally recognize revenue at the point of sale (retail) or delivery (internet sales). Payment within the retail sales channel takes place in the form of cash purchase or by the use of payment cards. Internet customers are invoiced either through debit/credit cards or through a 3. party sales finance provider, in both cases the Group receives payment within a couple of days. The group also has some business-to-business sales where it provides limited credit sales to the customers. This credit is mainly due 30 days after the purchase. Cash receivables through debit/credit cards or the sales finance provider is included in the line item ‘Cash and cash equiva- lents’ in the consolidated balance sheet. The Group's policy is to provide the customer with a right of return within 100 days. As a consequence, revenue is reduced by the right to return. The value of right to return goods is estimated based on historical information. The liability related to the right of return is recognized in the line-item Other current liabilities in the consolidated balance sheet, while the associated asset is recognized in the line-item Inventory. Customers can also purchase gift cards. At the point of sales of the gift card, a liability is recognized. Revenue is recognized at the point in time when the gift card is redeemed. Management estimates the expected value of gift cards that will expire unused based on historical information. The amount not expected to be redeemed is also recognized as revenue each month. The gift card liability is part of Other current liabilities in the consolidated balance sheet. Gift cards expires differently across the countries we oper- ate, the lowest expiry time is two years and the highest is indefinite. XXL launched in September 2023 an upgraded version of its loyalty program, XXL Re- ward, allowing customers to earn bonus points on every purchase from XXL and conse- quently receive bonus checks. The Reward bonus points are considered as a separate element of a sale with multiple elements. The portion of the price allocated to the bonus points is based on the stand-alone selling price. Revenue allocated to accrued bonus points is deferred and recognized as a contract liability, taking into consideration esti- mated redemption rates. The contract liability is included in the line-item Other current liabilities in the consolidated statement of the financial position. The bonuspoint liability is derecognized and recognized as other revenue when the bonus points expire. Un- used bonus points expire one Year after the date of earning. XXL ASA Annual Report 202348 Impairment of financial assets and non-financial assets Financial assets are reviewed for impairment whenever events or changes in circum- stances indicate that the carrying amount of an asset may not be recoverable. Such indications can be significant fall in market values; significant underperformance rel- ative to historical or projected future operating results; significant changes in the use of the assets or the strategy for the overall business, including assets that are decided to be phased out or replaced and assets that are damaged or taken out of use; signifi- cant negative industry or economic trends; significant loss of market share; significant unfavorable regulatory and court decisions and significant cost overruns in the devel- opment of assets Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the income statement. Contingent liabilities and assets In those cases where the possible outﬂow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized. A contingent asset is not recognized in the financial statements but disclosed in notes if it is probable that the benefit will ﬂow to the Group. 1.5 Significant management judgment in applying accounting policies When preparing the Consolidated Financial Statements, management undertakes a number of judgments, estimates and assumptions about the recognition and measure- ment of assets, liabilities, income and expenses. Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below. Estimated impairment of goodwill, trademark, and Right of Use-Assets The Group tests for impairment of goodwill and trademark as necessary, or at a mini- mum annually (note 5). The recoverable amount of cash-generating units are based on the value-in-use calculation. The cash-generating unit for goodwill and trademark corre- sponds with our segment reporting. The Group tests for impairment of the Right-of-Use Assets if there is any indication that an asset may be impaired. IAS 36 is applied to ac- count for any impairment loss identified, and the calculations requires use of estimates. Provision for obsolescence The group makes provision for obsolescence. These provisions are based on a detailed assessment of the age distribution of inventory items and whether the goods are part of an active or expired product range. A provision for obsolescence is made when the net realizable value of the good is lower than the cost of the good. These provisions are estimate-based and require in-depth knowledge about goods and markets. 1.6 New IFRS standards It has been determined that the amendments to standards and interpretations that be- came effective in 2023 did not have a material impact on the consolidated financial statements of the Group. Accordingly, the disclosure of accounting policies has been updated in compliance with the amendments to IAS 1. Furthermore, standards, amend- ments to standards, and interpretations that have been published but are not yet effec- tive have also been evaluated. The Group does not expect these forthcoming changes to have a material impact on its future consolidated financial statements. XXL ASA Annual Report 202349 Note 2 Operating Segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating deci- sion-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that make strategic decisions. Note 3 Personnel expenses The Group's business is the sale of sports and leisure equipment and leisure events. The Group's sales are made primarily from the Group's stores in Norway, Sweden and Finland. The Com- pany’s performance is reviewed by the chief operating decision maker as five reportable geographical segments, and in addition HQ & Logistics. Internet sales are included in each geographic segment based on the geographic location of the consumer. HQ & Logistics includes Group HQ costs, such as IT, Finance, Train- ing and Administration. Group HQ also includes costs related to wholesale and central warehouses. 01.01.2023 - 31.12.2023 HQ & (Amounts in NOK million) Norway Sweden Finland Logistics TotalOperating revenue 4 049 2 387 1 525 – 7 962 Gross profit 1 342 672 495 – 2 509 EBITDA² 425 (28) 67 (544) (80) Operating Income (371) (293) (84) (661) (1 409) 01.01.2022 - 31.12.2022 HQ & (Amounts in NOK million) Norway Sweden Finland Logistics TotalOperating revenue 4 394 2 488 1 543 – 8 426 Gross profit 1 535 713 474 – 2 721 EBITDA² 661 32 82 (538) 237 Operating Income 393 (168) (48) (644) (467) Gross profit represent operating revenue less cost of goods sold. Our EBITDA represents operating income plus impairment losses, depreciation and amortization. Senior Executive management remuneration The following benefits were provided to the members of the Executive Management for 2023: (Amounts in NOK Thousands) Number of Total shares in Name Title Currency Salary Bonus Other Pension remuneration XXL ASAFreddy Sobin CEO NOK 4 333 – 2 003 780 7 117 –Stein Eriksen CEO/CFO NOK 2 762 – 2 511 27 5 301 212 042Rest of the members of the Executive Management NOK 7 232 – 327 886 8 445 177 680Total remuneration NOK 14 328 – 4 841 1 693 20 863 389 722CFO Stein Eriksen operated as CFO and interim CEO until May 2023 ** Rest of the members of the Senior Executive Management consists of 3 people The following benefits were provided to the members of the Senior Executive Management for 2022: Number of Total shares in Name Title Currency Salary Bonus Other Pension remuneration XXL ASAPål Wibe CEO NOK 3 394 – 3 714 22 7 132 2 220 000Stein Eriksen CEO/CFO NOK 2 500 – 2 506 25 5 031 46 848Rest of the members of the Senior Executive Management NOK 6 325 – 227 793 7 346 29 104Total remuneration NOK 12 220 – 6 447 841 19 509 2 295 952CFO Stein Eriksen operated as CFO and interim CEO from july 2022 ** Rest of the members of the Senior Executive Management consists of 3 people We refer to Remuneration Guidelines for determination of salary and other remuneration to the Senior Executive management. . (Amounts in NOK million) Employee benefit expenses 2023 2022Wages, salaries 1 306 1 320 Social security costs 235 227 Pension expenses 82 81 Other benefits 33 37 Total 1 657 1 665 Average number of full time employees 2 527 2 719 XXL ASA Annual Report 202350 Program for restricted share units In 2015, the Board of Directors first implemented the RSU-Program where the participants have a right to acquire shares in the Company following vesting and attainment of certain performance targets. The latest RSU grant took place in February 2024, where a total of around 6,700,000 restricted share units with a strike price of NOK 0.7472 will be granted to the employees. The participants in in the RSU-Program receive RSUs worth up to an average annual salary. The RSUs have a strike price equal to the volume weighted average price in the market the five trading days after the relevant year's Q4 results presentation. The RSUs are exercisable three years after grant, subject to the holder at the time of exercise being employed within the Group. Total profit through the exercise of the RSUs is capped at six Long term investment program In accordance with the guidelines for determination of salary and other remuneration to executive personnel in XXL ASA , the Board of Directors of XXL ASA and the Nomination committee of XXL ASA have resolved to implement a new long term man- agement investment program to align the long term interests of the executive management and the members of the Board with those of the Company's shareholders. The new long term management investment program (the "New Investment Program") will replace the existing management investment program ("XMI1") announced by the Company on 7 January 2020 and approved by the extraordinary general meet- ing on 29 January 2020. XXL has primarily offered certain board members and members of the executive management to participate in the New Invest- ment Program by investing in a newly established management investment company, XXL Management Invest II AS ("XMI2"). To facilitate for such investment, XXL is acquiring 20,540 shares in XMI1 from the existing participants against cash payment and will after the acquisition own approximately 80% of the shares in XMI1. The participants participating in the New Investment Pro- gram will use their proceeds to invest in XMI2. XMI2 will invest in financial instruments having a value that is linked to the value of the XXL shares. The instruments are sold by XXL to XMI2 with a 3-year lock-up and XMI2's investment will be funded partly in cash and partly through a seller's credit which will be converted into equity in XMI2. times the average annual salary at the time of exercise. If the profit exceeds this limit, the number of shares to be issued under the RSU-Program will be reduced accordingly. Any issuance of Shares under the RSU-Program will result in a dilution of existing shareholders not participating in the RSU-Program. The exercise window for vesting restricted share units from 2021 was closed on 14 February 2024. Employees in XXL ASA have exercised 224,856 restricted share units representing 224,856 ordinary shares. No RSU's were exercised during FY2023. Set out below is an overview of the outstanding RSUs at the be- ginning and end of the financial year ended 31 December 2023, compared to the financial years ended 31 December 2022. The total investment of XMI2 will at the implementation of the New Investment Program be in the total amount of NOK 26,350,000 (after deduction of the illiquidity discount of 25% due to the lock-up obligations). XMI2 will be financed solely by equity as follows: • Management and board members will make a cash investment of NOK 8,783,333 by subscribing for ordinary shares (A-shares) • The seller's credit of NOK 17,566,667 will be converted into re- deemable preference shares (C-shares) subscribed for by XXL. • XXL will also subscribe for one super voting B-share for the same price as each A-share. XXL will be the majority shareholder and control XMI2 by holding the majority of the share capital (through the preference shares) and owning one B-share which gives XXL the majority of votes at the general meeting of XMI2. The offers to both dispose shares in XMI1 and participate in the New Investment Program by investing in XMI2 have been ac- cepted by certain members of the executive management and members of the Board. XXL ASA has an ownership of 63% in XMI1 which holds holds 34,583 ordinary shares in XXL Sport & Villmark AS. XXL ASA provided XMI1 a loan in June 2020 which with accrued interest amounts to NOK 60.6 million The loan carries an annual interest of 8% and is secured by a pledge in the shares in XXL Sport & Villmark AS. RSU 2023 2022Outstanding at the beginning of the period 885 466 693 760Released – 220 728Terminated 168 459 170 855Granted 2 205 000 637 289Outstanding at the end of the period 2 922 007 885 466 2023 2022RSU program expensed for the year 4 730 5 097 Former investment program ("XMI1") Board of Directors, Shares in XXL Indirect ownership ofManagement and others: Title Management Invest AS XXL Sport & Villmark ASAnders Lindblom Managing Director Sweden 1 255 0,1%Päsi Lämpsä Managing Director Luxembourg/Finland 1 195 0,1%Kjersti Helen Krokeide Hobøl Board Member 796 0,1%Others 3 583 0,4% Total number of shares in XMI held by Board of Directors, Management and others 6 829 1,1% XXL ASA Annual Report 202351 Board of directors remuneration 2023 (Amounts in NOK Thousands)Number of TotalName Title shares XXL ASA remunerationBjörn Einar Håkan Lundstedt Chairman of the Board – 450Kjersti Hobøl Board member and Chairman audit committee 150 291 410 Tom Christian Jovik Board and audit committee member – 390Ronny Blomseth Board member 2 824 582 350Kari Ekelund Thørud Board member – 350Kjell-Arne Fikerud Board member (employee representative) – 75 Helena Ebersten Henriksen Board member (employee representative) 62 112 75 Tor Andrin Jacobsen Board member (employee representative) 90 524 75 * Tom Jovik represents Altor in the BoD. Altor Invest 5 AS and Altor Invest 6 AS combined owns 444,950,700 ordinary shares (A shares) and 328,722,329 non-voting shares (B shares) in XXL ASA. Remuneration is paid to Altor and not Tom Jovik personally. Board of directors remuneration 2022 (Amounts in NOK Thousands) Number of TotalName Titleshares in XXL ASA remunerationHugo Maurstad Chairman of the Board 2 600 000 450Øivind Tidemandsen Board member 34 500 000 350Kjersti Hobøl Board member and Chairman audit committee 35 000 410Tom Christian Jovik Board and audit committee member – –Ulrike Koehler Board member – 350Christina Moreno Board member (employee representative) 31 238 –Tor Andrin Jacobsen Board member (employee representative) 20 000 –Kai-Arne Nordhaug Board member (employee representative) – –Robert Iversen Election Committee 1 956 403 60Øistein Widding Election Committee – 75 Tom Christian Jovik is representing Altor in the Board of directors. Altor owned a total of 60 118 964 shares in XXL ASA as at 31.12.2022. Remuneration is paid to Altor and not Tom Jovik personally. There are no loans or guarantees to the Managing Director or other related parties. The CEO and the Board do not have any agreement for compensation upon termination or change of employment / directorship. Pension The Group is required to have a compulsory pension in accordance with the Norwegian Accounting Act §7-30ª. The Group has a pension plan that fulfills this requirement, which covers all employees and is a defined contribution plan. Audit Fees Divided by type of service (exclusive of VAT) (Amounts in NOK Thousands) 2023 2022Statutory audit 4 006 4 365Other attestation services 313 194Tax related services – 32Other services 626 238Total fees 4 945 4 830 XXL ASA Annual Report 202352 Note 4 Property, Plant and Equipment Land and Transport and Machinery and Fixtures Construction Total(Amounts in NOK Million) buildings vehicles equipment and fittings in progressBalance 01.01.22 29 4 332 1 635 17 2 017Additions – – 38 67 – 105Disposals (-) / transfer to oth. cat. of fixed assets (+/-) – – – – -11 -11Net exchange differences – – 3 -1 – 2Balance 31.12.22 29 4 372 1 701 6 3 113Accumulated depreciation pr. 01.01.22 -8 -3 -283 -896 – -1 190Impairment – – -4 -83 – -86Depreciation -2 -1 -44 -156 – -202Net exchange differences – – -3 2 – -1Accumulated depreciation pr. 31.12.22 -10 -4 -333 -1 133 – -1 480Carrying amount pr. 31.12.22 19 – 39 568 6 633Balance 01.01.23 29 4 372 1 701 6 2 113Additions – – 12 59 – 71Disposals (-) / transfer to oth. cat. of fixed assets (+/-) – – 8 -53 -1 -46Net exchange differences – – – 1 – 1Balance 31.12.23 29 4 393 1 708 5 2 140Accumulated depreciation pr. 01.01.21 -10 -4 -333 -1 133 – -1 480Depreciation -1 – -41 -128 – -171Accumulated depreciation pr. 31.12.21 -11 -4 -374 -1 261 – -1 651Carrying amount pr. 31.12.23 18 – 19 447 5 489Fixed assets continuing operations 18 – 19 447 5 489 Useful life 20 years 5 years 3-5 years 10 yearsDepreciation method Straight-line Straight-line Straight-line Straight-line None Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses. When assets are sold or disposed of, the difference between the proceeds and the carrying value of the assets is recognized as gain or loss. The cost of fixed assets is the purchase price including taxes and expenses directly attributable to preparing the asset for use. Expenditures incurred after the asset has been put into operation, such as ongoing maintenance, are expensed, while other expenses that are expected to generate future economic benefits are capitalized. Note 5 Intangible assets Proprietary(Amounts in NOK Million) Goodwill Trademarks software Software TotalBalance 01.01.2022 2 888 206 221 46 3 361Additions – – 38 9 46Disposals – – – – –Net exchange differences – – – -1 -2Balance 31.12.2022 2 888 205 258 54 3 406Accumulated amortization pr. 01.01 -144 -13 -171 -29 -357Disposals – – – – –Amortization – – -35 -5 -40Accumulated amortization pr. 31.12 -144 -13 -206 -34 -398Carrying amount pr. 31.12.2022 2 744 192 52 19 3 008Balance 01.01.2023 2 888 205 258 54 3 406Additions – – 42 6 47Disposals -522 – – – -522Net exchange differences –Balance 31.12.2023 2 366 205 300 60 2 931Accumulated amortization pr. 01.01 -144 -13 -206 -34 -398Disposals -522 – – – -522Amortization – – -36 -6 -42Accumulated amortization pr. 31.12 -144 -13 -242 -40 -439Carrying amount pr. 31.12.2023 2 222 192 58 20 2 492 not including deferred tax Amortization of Goodwill and Trademark relates amortization performed prior to the company IFRS conversion Useful life Indefinite Indefinite 5 years 3-5 yearsAmortization method Straight-line Straight-line The following useful lives are applied: Land and Buildings Transport and vehicles Machinery and equipment Fixtures and fittings20 years 5 years 3–5 years 10 years Depreciation is recognized on a straight-line basis to write down the cost less estimated residual value of buildings and equipment. Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising from the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the income statement within other income or other operating expenses. XXL ASA Annual Report 202353 In connection with impairment testing, goodwill is allocated to the related cash-generating units or groups of cash generating units. Acquired intangible assets are capitalized on the basis of the costs incurred to acquire and put the asset into use. Intangible assets acquired in a business combination that qualify for sepa- rate recognition are recognized as intangible assets at their fair values. Expenditure on the research phase of projects to develop new customized software for IT and telecommunication systems is recognized as an expense as incurred. All intangible assets, including capitalized internally developed software, are accounted for using the cost model whereby cap- italized costs are amortized on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. Intangible assets with indefinite useful lives are tested for impairment annually, either individually or as part of a cash-gen- erating unit. Intangible assets with indefinite lives are not amortized. Man- agement reviews annually to determine whether the indefinite life assumption can be justified. If not, a change to the predeter- mined useful life is made. Brand / Trademark Trademark allocated as part of the purchase price allocation in 2010 (190 mNOK) and additions is capitalized and has indefinite life. Trademark is not amortized due to XXL's extensive spending on commercials and advertising, keeping the brand awareness growing.The value of trademark is tested annually for impairment. The carriyng value is allocated to the group of cash generating units comprised of the shops in Norway (part of the operating segment Norway). The impairment assessment of trademark is included in the goodwill impairment test. See below. Software - acquired and developed Expenses related to the purchase of new software are capitalized as an intangible asset if these costs are not part of the original hardware cost. Software is depreciated over three years. Expenses incurred due to service or maintenance are expensed unless the changes in the software increase the future economic benefits of the software. Goodwill The Group’s recorded goodwill per 31.12.2023 is NOK 2.222 million (2022: NOK 2 744 million) which is fully allocated to the Norwegian segment. NOK 2 734 million of this amount is related to the acquisitions of XXL Sport & Villmark AS in 2010 and NOK 10 million is related to the acquisition of West Systems Norge AS in 2019. The carrying value is allocated to the group of cash generating units (CGU) comprised of the shops in Norway (part of the operating segment Norway). The management evaluates and monitors the goodwill based on the performance on an operating segment level. The recoverable amount of each op- erating segment is calculated based on a value in use method. In accordance with IFRS, we have used a 5-year budget period and terminal value in the impairment model. Both Goodwill and Trademark are included in the assessment for impairment. The impairment testing includes estimates such as gross mar- gin, cash ﬂows, growth rates and calculation of cost of capital. These estimates may change over time and is currently impact- ed by higher interest levels. A brief summary of the most impor- tant assumptions and estimates is mentioned below. Climate, transition risk and impact on assumptions Climate, transition risk and impact on assumptions Climate risk is one of the risks factors that could affect the margin's for XXL in the coming years. As climate change makes extreme weather more frequent and/or severe, it increases the annual probabili- ty of events that are more intense and supply chain disruptions can become more common. In our home market, climate change affects several prerequisites as winters are shorter and milder on average affecting market conditions for several product groups. The retail industry is sensitive to changing consumer trends. The changes can come quickly when they first occur, for example as a result of changes in attitudes among consumers to a product or sector’s climate footprint. The consumer response could be different for various product groups. For textile products, water consumption related to cotton production is an important issue. For hardware and other capital goods, short life of the products, small degree of reuse, quality and repairability can be an issue that is gaining more weight and that could lead to pressure on gross margin. Extended producer responsibility schemes can affect our business model in a negative sense if we fail to adapt to a requirements of material consumption and less carbon in- tensive materials and production methods. More details about the abovementioned risks and XXL's re- sponse is released in XXL ASA Sustainability Report 2023. Cash Generating Units (CGUs) (Amounts in NOK million) Shops in Norway 2023 2022Goodwill 2 222 2 744Trademark 192 192Impairment 522 – Sensitivity Discount rate after tax (WACC) 10,30% 8,62 %Increase/ (-decrease) in the discount rate before possible impairment of goodwill -0.8 p.p 1.5 p.pIncrease/ (decrease) in the terminal value gross margin before possible impairment of goodwill 2.6 p.p -2.6 p.p Assumptions in the impairment test model FUTURE CASH FLOWS The first year’s cash ﬂow is based on budgeted figures for 2024, while the consecutive years are calculated based on estimated growth rates. The budget is based on history and the group’s strategy plan and is approved by the Board of Directors. GROWTH RATES AND MARGINS The planned combined revenue growth in the period 2024-2028 is 5% and the long-term growth in terminal value is set to 2%. The growth rate is based on both expected sales in both physical stores and E-com. The growth in E-commerce sales have been substantial prior years, and we expect most of the growth in the next 5 years to derive from the E-com channel. FY2023 has been seen a decline in sales and margin, but with current initiatives an improvement in sales and margin is expected going forward. One of the measures is to increase the sales share of private label which is already initially showing promising results, primarily driven by the partnership with Stormberg, which is off to a solid start with good sales numbers, incremental gross margin uplift and high stock turn over. Other core improvement activities is covered by the improve- ment project “Reset&Rethink”, which is expected to improve sales/margins in 2024 and beyond. The EBITDA margin is estimated based on the current margin level and expected future market developments. The gross margin in the indus- try has been lower in the past two years compared to previous periods due to the low consumer confidence and reduced demand for sporting products. Both gross margin and EBITDA margin is expected to return to historical levels. Given the weaker margins observed over the last two years we have exercised prudence by reducing the margin from budgeted by approximately 3% in FY2024 being the starting point. The margin estimate is uncertain and will be affected by several elements in the coming years, such as changes in freight and commodity cost. COST OF CAPITAL Future cash ﬂows are discounted to present value using the weighted average cost of capital (WACC). The WACC is estimated to be 13.2% pre tax (10.3% after tax), and is based on a risk free interest rate, a risk premium and cost of debt. Below are the most important parameters used in the calculation of the WACC. - Risk-free interest rate is set to the 10-year government bond yield. - Risk premium of 5.25 %, based available market data and observation of similar companies. A size premium is added with 1.2%. - Beta value is set to 1.25 and based on a calculation of historical beta value for XXL ASA, as well as beta values observed from comparable companies. - The current CIT rate in Norway of 22% in 2023 is used in the DCF model. Sensitivity analysis in WACC: (Decrease in the discount rate before no impairment of goodwill) WACC 10,30 % 10,10 % 9,5 % 9 % 8,5 % 8 % 7,5 % 7 % 6,5 %Headroom -522 -344 – 357 790 1 295 1 892 2 610 3 538 Sensitivity analysis in long term growth rate and gross margin The sensitivities are derived from changes in the terminal values. Increase/Decrease in the long term growth rate of 0.5% points has an impact of NOK ~ 200 million. Increase/Decrease in the terminal value gross margin of 0.5% points has an impact of NOK ~180 million. The Goodwill at 31.12.2023 is impaired by NOK 522 million being reﬂected in the table below. XXL ASA Annual Report 202354 Note 7 Tax Income tax expense for the year(Amounts in NOK million)Tax expense for the year 2023 2022Tax payable 28 9 Change in deferred tax asset -87 -102Adjustments for current tax of prior periods 54 –Other adjustments – -27 Total income tax expense (5) (120) * The adjustment relates to the Norwegian entities XXL Sport & Villmark AS and XXL Grossist AS which filed amended tax returns in 2022 with a net tax cost effect of MNOK 54 millions Effective tax rate -4% 23%Current tax payable Tax payable 28 9 Total tax payable in the balance sheet 28 9 Explanation of difference between Norwegian statutory tax rate of 22% and the effective tax rate Income before tax -1 595 -53122 % tax of income before tax -351 -117Permanent differences (22%) 23 25Unrecognised deferred tax assets 336 -34Tax effect of impairment of goodwill 115 – Other tax effects -126 –Foreign tax rate differences -2 5Income tax expense -5 -120 Specification of temporary differences Asset (-)/liability 2023 2022 ChangeProperty, plant and equipment 27 8 19Trade receivables 119 1 119Inventories -129 -378 249Other current liabilites -40 1 -41Trademarks 190 190 –Accrued income -51 – -51Amortization of loan expenses 8 – 8 Financial derivatives – -8 8Leasing (IFRS 16) -308 -177 -131Total temporary differences -185 -364 179Tax loss carried forward -2 437 -414 -2 024Restricted interest carried forward -56 – –Basis for deferred tax assets (-) -2 678 -778 -1 900Basis for deferred tax assets not recognised 1 527 150 1 377Deferred tax assets not recognised 336 33 303Basis for deferred tax recognised -1 151 -628 -523Deferred tax liability in the balance sheet – – –Deferred tax asset in the balance sheet -253 -166 -87 * the tax loss carried forward is located in different geographies and expire in line with local regulation. The expiery varies between 7 years (minimum) and indefinite Deferred tax assets are only capitalised to the extent that it is probable that there will be sufficient future taxable profit for the tax asset to be used, either because the entity recently reported a profit or because assets with excess value have been identified. If it is unlikely that future profits will be sufficient to absorb the tax-reducing temporary differences, deferred tax assets are not recognised. Tax expense recognized in the income statement comprises the sum of changes in deferred tax and current tax not recognized in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claim from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. The calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Based on these evaluations, provisions for anticipated tax payments are made, as necessary. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differ- ences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets are recognized to the extent that it is probable that they will be utilized against future taxable income, based on the Group’s forecast of future operating results which are adjusted for significant non-taxable income and expenses. Deferred tax assets (-) / liabilities are presented net for the Norwegian entities. Tax rate in Norway is 22% Tax rate in Sweden is 20.6% for 2022, tax rate in Finland is 20% in 2022, tax rate in Switzerland is 12.2 % in 2022, tax rate in Austria is 25% in 2022. The Group operates in Norway, which has enacted new legislation to implement the global minimum tax rules (OECD - Pillar Two). The Group expects to be subject to these rules in relation to its operation in multiple jurisdictions, with the newly enacted tax legislation in Norway effective from 1 January 2024." Note 6 Other operating expenses Other operating expenses by nature(Amounts in NOK million) 2023 2022Cost of premises 222 190Marketing expenses 434 375Other operating expenses (incl. IT licenses, maintenance, legal fees and other) 275 254Sum 931 819 XXL ASA Annual Report 202355 Note 9 Investment in subsidiaries The Group has an ownership interest in the following subsidiaries: Year of Business OwnershipSubsidiaries incorporation location percentageXXL Sport & Villmark AS 2000 Oslo 100 %XXL Grossist Norge AS 2000 Oslo 100 %XXL Adventure AS 2002 Oslo 100 %XXL Sport og Vildmark AB 2005 Stockholm 100 %XXL Sports & Outdoor OY 2013 Helsinki 100 %XXL Sports & Outdoor ApS 2016 Copenhagen 100 %XXL Sports & Outdoor Gmbh 2016 Wien 100 %XXL Europe Holding Sarl 2013 Luxembourg 100 %XXL Europe Gmbh 2013 Luzern 100 %XXL Online Gmbh 2013 Luzern 100 %Level2Invest AS 2016 Oslo 100 %West System Norge AS 2019 Oslo 100 % Investments in subsidiaries are consolidated in the Consolidated Financial Statements. Note 10 Related party transactions The Group's related parties include its key management, members of the board and majority shareholders. The Board members represent 26.9% of the shares (voting rights) in the Group, in addition to the shares they hold personally they also represent Altor Invest 5 AS and Altor Invest 6 AS. None of the Board members have been granted loans or guarantees. Furthermore, none of the Board members are included in the Group’s pension or bonus plans. Note 11 Cash and cash equivalents (Amounts in NOK million) 2023 2022Bank deposits (restricted) – – Cash 8 7 Bank accounts (unrestricted) 398 545 Total cash and cash equivalents 406 552 The Group has a multi-currency cash-pool owned by XXL Sport & Villmark AS, a fully owned subsidiary of XXL ASA, and operated by Nordea. XXL Sport & Villmark AS presents total bank deposits in the international cash pool, while subsidiaries/parent who participate in the cash-pool present their share of the international cash pool as intra-group balances in their stand-alone financial statements. For consolidated group reporting the cash balances are shown as the net balance as either cash or as short-term bank loan. Cash includes cash in hand and bank deposits. Funds originally restricted for more than three months are not included in cash and cash equivalents. The Group has undrawn credit facilities with DnB/Nordea for NOK 204 million per year-end 2023 (2022: NOK 161million). Note 12 Trade and other receivables (Amounts in NOK million) 2023 2022Trade receivables, gross 116 156Allowance for credit losses -17 -20Trade receivables 31.12 98 136Changes in allowance for credit losses Beginning balance -20 -18Change in the allowance 3 -3Allowance for credit loss expense 3 -3FX effect reserve balance sheet/profit or loss – – Ending balance 31.12 -17 -20 The table below shows the aging analysis of trade receivables per 31.12 Year Total Not yet due <30 days >30 days >60 days >90 days2023 116 52 13 7 1 382022 136 87 18 6 – 25 All of the Group’s trade and other receivables have been reviewed for indicators of impairment and an allowance for credit losses has been reserved for amounts which are considered uncollectable. Other receivables(Amounts in NOK million) 2023 2022Accrued supplier bonus 52 77Prepaid expenses 25 21Other receivables 102 25Public duties receivables 44 1Other receivables 31.12 222 124 Note 8 Inventories (Amounts in NOK million) 2023 2022Goods purchased for resale 2 051 2 725 Reserve for inventory obsolescence (274) (397)Total inventories 1 776 2 328 Cost is reduced by discounts from suppliers, unless these are determined to be separate services that are delivered to the supplier or reimbursements for joint marketing or similar activities. Sales support billed to suppliers for joint marketing is presented as a reduction in marketing costs under other operating expenses. Inventory cost is recognized based on weighted average. XXL ASA Annual Report 202356 Note 13 Share capital and shareholder information The share capital of XXL is NOK 665,429,772 consisting of 1,663,574,430 shares in total being 1,334,852,101 ordinary shares (A shares) and 328,722,329 non-voting shares (B shares) with a par value of NOK 0.40 each. Overview of the major shareholders of the Group as of 31.12.2023: Total amount of shares Ownership Voting rightALTOR INVEST 6 AS 386 836 522 23,3 % 16,7 %ALTOR INVEST 5 AS 386 836 507 23,3 % 16,7 %EUROCLEAR BANK S.A./N.V. 229 200 308 13,8 % 17,2 %FERD AS 151 118 316 9,1 % 11,3 %VERDIPAPIRFOND ODIN NORDEN 88 261 617 5,3 % 6,6 %VERDIPAPIRFOND ODIN NORGE 44 923 725 2,7 % 3,4 %STORMBERG GROUP AS 34 000 000 2,0 % 2,6 %FUNKYBIZ AS 32 000 000 1,9 % 2,4 %BJERKNES EIENDOM AS 24 711 124 1,5 % 1,9 %MP PENSJON PK 20 202 619 1,2 % 1,5 %NORDKRONEN II AS 19 889 159 1,2 % 1,5 %AVANZA BANK AB 9 715 430 0,6 % 0,7 %NORDNET BANK AB 7 301 237 0,4 % 0,6 %J.P. MORGAN SE 6 793 957 0,4 % 0,5 %OLA RUSTAD AS 6 779 158 0,4 % 0,5 %AG HOLDING AS 5 000 000 0,3 % 0,4 %NORDEA BANK ABP 4 891 097 0,3 % 0,4 %STANZA AS 4 262 786 0,3 % 0,3 %GENI HOLDING AS 4 194 932 0,3 % 0,3 %NYE BERGHOL INVEST AS 3 750 000 0,2 % 0,3 %Other 192 905 936 11,6 % 14,5 %Sum 1 663 574 100 % 100 % All shares have been fully paid. Note 14 Earnings per share (Amounts in NOK million) 2023 2022Net income from continuing operations (1 590) (411) Net income from discontinued operations (206) (130) Weighted average number of ordinary shares in issue 822 974 251 252 436 658Weighted average number of own shares 5 933 654 8 470 000Weighted average number of shares used in calculating basic earnings per share 817 040 598 243 966 658Adjustment for: Basic earnings per share from continuing operations (NOK) -1,93 -1,63 Basic earnings per share from discontinued operations (NOK) -0,25 -0,52Basic earnings per share (NOK) -2,18 -2,15 Reconciliation weighted average number of ordinary shares 2023 2022Number of shares opening 252 436 658 243 966 658Share issue A-shares 1 090 885 443 –Share issue B-shares 328 722 329 –Purchases/(Sales) of own shares -8 470 000 –Number of shares closing (excluding own shares) 1 663 574 430 243 966 658Weighted average 822 974 251 252 436 658Basic and diluted Earnings per share (NOK) -2,18 -2,15 Note 15 Security and guarantees XXL ASA has a total loan engagement of NOK 1300 million with DNB and Nordea as of December 2023 consisting of a Overdraft of NOK 150 million (NIL drawn at 31.12.2023) and a Revolving Credit Facility of NOK 1 150 million out of which NOK 946 million is drawn at 31.12.2023. The loans are secured by a negative pledge from the participants. Note 16 Accounts payable and supplier financing The Group has entered a supplier financing arrangement with DNB. An account payable is derecognized, and a supplier financ- ing payable is recognized when the financial liability to the supplier has been extinguished by DNB paying the supplier on behalf of the Group and a new liability to the bank has been agreed in its stead. The accounts payable is also considered extinguished and derecognized if the rights under the trade receivable are acquired from the supplier by the bank, and the Group is given significantly different terms by the bank. This may be the case if the payment terms are extended for the group.The cash ﬂows from supplier financ- ing are included in the operating activities in the Consolidated Statement of Cash Flows (Amounts in NOK million) 2023 2022Accounts payable 908 1 226 For supplier financing XXL has a contractual agreement with a bank. The balance at 31.12.2023 is NOK 40 million (2022: NOK 118 million) XXL ASA Annual Report 202357 Note 17 Other current liabilities (Amounts in NOK million) 2023 2022Credit notes / gift cards customers 123 138Accrued salary and bonus 76 76Accrued holiday pay 148 153Other short term accruals and right of return 212 127Total other current liabilities 560 494 Note 18 Right-of-Use Assets and Lease Liabilities Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group (the commencement date). Each lease payment is allocated between the liability and finance cost. The right-of-use asset is depreciat- ed over the shorter of the asset's useful life and the lease term on a straight-line basis. The corresponding liability is included as Current lease liabilities in the balance sheet. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: - Fixed payments (including in-substance fixed payments), less any lease incentives receivable - Variable lease payment that are based on an index or a rate - Amounts expected to be payable by the lessee under residual value guarantees The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the lessee’s incremental bor- rowing rate. Right-of-use assets are measured at cost comprising the following: - The amount of the initial measurement of lease liability - Any lease payments made at or before the commencement date less any lease incentives received - Any initial direct costs, and - restoration costs. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are assets with a purchase value below 50 000. As of 31 December 2023, XXL carry Right-of-Use (“ROU”) assets of NOK 1804 million on its balance sheet. The assets are mainly right-of-use of buildings used in the retail stores in the Nordic market as well as the central warehouses in Norway and Sweden. During 2023 we have both seen adverse sales and margin development due to the macroeconomic environment and increasing mar- ket rates resulting in a higher discount rate. With this background there has been performed an analysis of the profitability on an EBIT- DA level of the stores on an individual level. The EBITDA level observed on a store level in 2023 is clearly reﬂecting the overall perfor- mance of the XXL Group in a difficult market throughout 2023. This development has served as an impairment indicator. In order to make an assessment it is required to evaluate future sales development as well as ongoing initiatives to reduce operating costs including downsizing of store space, relocation and possible re-let opportunities of stores. In general, XXL enter into re-nego- tiation with the lessor when the lease is not economically viable, and we offer to extend the contract period if satisfactory terms are offered. XXL’s management also analyze on a continuous basis whether stores should be closed down based on future projections. The princi- pal evaluation is whether a store has / is expected to provide a positive EBITDA result to contribute to XXL’s centralized service cost. The compensation needed to pay the lessor for termination of the lease contract is also part of the evaluation. An impairment test has been conducted to measure the recoverable amount being the higher of the RoU asset's fair value less costs of disposal and its value in use. The value-in-use calculation is based on future expected cash ﬂows of the cash generating units i.e stores, which includes an allocated share of overhead costs such as the central warehouse. The Value-in-use calculation on the individual stores with impairment indicators was performed and showed an impairment was re- quired. As the lease liabilities are part of XXL’s recognized borrowings being financing activities, all payments associated with lease liabilities are excluded from the cash ﬂows used to determine value-in-use. Methodology for impairment testing The discounted free cash ﬂow model is used to calculate the enterprise value for the remaining lease contract period for the cash generating units – I.e the stores tested. Individual value-in-use calculations have been performed for the stores with impairment indi- cators (negative EBITDA in 2023). The first year’s cash ﬂow is based on budgeted numbers for 2024, while the consecutive years are calculated based on the com- pany’s 3 years operations plan. Revenue, GOGS and operating expenses budgeted for FY2024 for each store under review serves as the basis. The budget is based on history and the group’s strategy plan and is approved by the Board of Directors. Retail growth from stores for the period after budget year 2024 is expected to return to pre-pandemic XXL levels. The projected average combined growth in the period 2024-2028 is appr 5% (which includes inﬂation). XXL is currently working on several short-term actions and a longer-term strategic plan, called “Reset & Rethink”, in order to improve profitability. Short term actions include resetting the operating model and ways of working. Five must win battles are also identified and is currently in execution within areas such as; - Reset category strategies - Secure product availability - Store sales strategies and operations - Pricing - E-commerce profitability Cost of capital The current higher interest environment is driving a higher capital cost for discounting of cash ﬂows. Future cash ﬂows are discounted to present value using the weighted average cost of capital (WACC). The WACC pre tax is estimat- ed to be 13.2% and is based on a risk-free interest rate and a risk premium. Ref description under impairment of Goodwill. In the NPV analyses cash ﬂows are calculated excluding tax payments. Conclusion Impairment losses have been observed for 7 stores (CGU’s) in Sweden and 2 in Finland. A total impairment loss is recorded in the amount of NOK 54 million. XXL ASA Annual Report 202358 Right-of-Use Assets 2023(Amounts in NOK million) Buildings, machinery and vehiclesAquisition cost 01.01.2023 4 115Additions and adjustments 449Change incentives -32Net exchange differences 126Aquisition costs 31.12.2023 4 658Accumulated depreciation 01.01.2023 -2 174Depreciation -580Impairment losses (-) Reversal of losses (+) -54Disposals 14 Transfers and reclassifications – Currency exchange differences -60Accumulated depreciation and impairment 31.12.2023 -2 854Total Right-of-Use Assets at 31.12.2023 1 804Lower of remaining lease term or economic life 0 - 9 yearsDepreciation method Linear Lease liabilities 2023 (Amounts in NOK million) TotalSummary of the lease liabilities in the financial statements Total lease liabilities 01.01.2023 2 203New lease liabilities recognised in the period 417Total leasing payments for the lease liability -607Interest expense on lease liabilities 86Reassessment of rental contributions -21Currency exchange differences 34Total lease liabilities at 31.12.2023 2 112whereof Current lease liabilities < 1 year 585Non-current lease liabilities > 1 year 1 528 For maturity profile of the lease liabilities, please refer to disclosure note 20 for this information. (Amounts in NOK thousands) Expensed variable payments linked to performance or use - Expenses related to contracts with exception for short term leases - Expenses related to contracts with exception for low value assets (short term contract excluded) -  All accrued expenses (any possible income substracted) related to transactions classified as “variable payment l linked to performance or use” is included. All accrued expenses (any possible income substracted) for contracts is included. Note 19 Net financial expenses (Amounts in NOK million) 2023 2022Other financial income 16 2Total financial income 16 2Interest expenses bank loans 107 50Interest expenses on lease liabilities 84 78Other financial expenses 11 14Net realized / unrealized foreign exchange losses 1 -76Total financial expenses 202 66Net financial expenses -186 -64 XXL ASA Annual Report 202359 Note 20 Financial instruments The Group has the following financial instruments: trade receivables, cash and cash equivalent, lease liabilities, debt, accounts paya- ble and supplier finance and derivatives. All financial instruments except for derivatives are measured at amortized cost. Trade receivables meet the SPPI criteria of IFRS 9. FX derivatives used to secure purchases in foreign currency are measured at fair value and recognized in the P&L. Financial risk The Group uses financial instruments such as bank loans. The purpose of these financial instruments is to raise capital for investments that are necessary for the Group’s business. In addition, the Group has financial instruments such as accounts receivable, accounts payable, etc. which are directly related to its daily operations. For commercial hedging purposes, the Group uses derivatives. The Group does not apply hedge accounting. The Group does not use financial instruments, including derivatives, for trading purposes. Procedures for risk management are approved by the Board. The financial risks that the Group is exposed to are interest rate risk, liquidity risk, currency risk and credit risk. The Group's management regularly evaluates these risks and establishes guidelines for how they are handled. Credit risk The Group is mainly exposed to credit risk for trade and other receivables. The Group mitigates its exposure to credit risk by ensuring that all parties requiring credit, such as customers, are approved and subject to a credit check. The Group does not have significant credit risk associated with a single counterparty or counterparties which can be viewed as a Group due to similar credit risk. The Group has policies in place to ensure that sales are made to customers who have not had significant problems with payment and the outstanding amount does not exceed the established credit limits. Maximum risk exposure is represented by the carrying amount of the financial assets in the balance sheet. The Group considers its maximum risk exposure to be the carrying amount of accounts receivable (see note 12). Market risk - interest rate sensitivity The Group is exposed to interest rate risk through its financial activities. The interest-bearing debt has ﬂoating rates, which means it is affected by changes in interest rates. The purpose of the Group's interest rate risk management is to reduce interest costs and at the same time keep the volatility of future interest payments within acceptable limits. The Group constantly monitors the interest rate level and uses derivatives to adjust the effective interest rate exposure when deemed necessary. The following table illustrates the sensitivity of the Group to potential interest rate changes. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. Interest rate sensitivity Changes in Effect on profit interest rates before tax Effect on equity in basis points (NOK 1 000) (NOK 1 000)2023 +50 -6 382 -4 978 -50 6 382 4 9782022 +50 -6 273 -4 893 -50 6 273 4 893The average effective interest rate of financial instruments were as follows: 2023 2022Overdraft 8,07 % 3,76 %Bank syndicate 9,25 % 4,32 % Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s strategy for managing liquidity risk is to maintain sufficient liquid funds at all times to meet its financial obligations, both under normal and extraordinary circum- stances, without risking unacceptable losses or damaging its reputation. The Group has large ﬂuctuations related to restricted working capi- tal due to seasonality and the timing of deliveries and payments. Market risk - foreign currency sensitivity Exposures to currency exchange rates arise from the Group’s purchases denominated in USD. Currency exchange rate exposure in EUR and SEK are limited due to the Group's setup with distributors in Sweden, Finland and an European wholesale service entity. The following table shows currency effect on the Group's profit and equity if the exchange rates ﬂuctuate with +/- 10% measured against NOK: 2023 2022 Effect on profit Effect on profitForeign currency Changes in before tax on equity before tax on equitysensitivity currency (NOK 1 000) (NOK 1 000) (NOK 1 000) (NOK 1 000)EUR +10% 19 936 15 550 24 166 18 850 -10% -19 936 -15 550 -24 166 -18 850USD +10% 71 248 55 573 93 077 72 600 -10% -71 248 -55 573 -93 077 -72 600 Furthermore, the carrying amount of its net investments in foreign companies ﬂuctuates in Norwegian kroner compared to the local relevant currencies. Profit after tax for the Group is also affected by changes in exchange rates, as the results of foreign companies are translated into Norwegian kroner at the weighted average exchange rate for the period. The Group hedges its foreign currency in the form of forward contracts. Hedge accounting has not been applied. The contracts are settled continuously throughout the year and if the contract extends over the period end, it is recognized in the financial statements at fair value. Determination of fair value The carrying amount of cash and cash equivalents and bank overdrafts is fair value. Similarly, the carrying amount of accounts receivable and accounts payable approximates fair value as the impact of discounting is not significant. The fair value of capital leases is calculated as the present value of estimated cash ﬂows discounted at the interest rate applicable for the corresponding assets and liabilities at the balance sheet date. The fair value of long-term debt is similar to the par value plus accrued interest. The fair value hierarchy The Group classifies fair value measurements using a fair value hierarchy that reﬂects the significance of the inputs used in making the measurement. The fair value hierarchy has the following levels: - Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; - Level 2: inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices); and - Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) XXL ASA Annual Report 202360 (Amounts in NOK million) The following categories of financial instruments are measured at fair value as of 31 December 2023Assets/Liabilities carried at fair value Level 1 Level 2 Level 3Financial assets at fair value through profit or lossFX derivatives – -1 –Total – -1 – The following categories of financial instruments are measured at fair value as of 31 December 2022(Amounts in NOK million)Assets/Liabilities carried at fair value Level 1 Level 2 Level 3Financial assets at fair value through profit or lossFX derivatives – 8 –Total – 8 – Classification of financial assets and liabilities The Group has the following classification of financial assets and liabilities. See note 1 for a description of the various categories. (Amounts in NOK million) Financial instruments 2023 2022Financial assets at amortized cost Trade receivables 98 136Cash and cash equivalents 406 522Total current financial assets 505 689 At fair value through profit or lossFX derivatives -1 8Total financial assets (+) / liabilities (-) at fair value through profit or loss -1 8 Other Liabilities at amortised cost Interest bearing debt 1 258 1 630Lease liability 2 122 2 101Accounts payable and other short-term debt 1 468 1 708 Total other financial liabilities 4 838 5 439 Note 21 Capital management Capital management policy and equity The main objective of the Group's capital management is to ensure that the Group maintains strong credit ratings and thus affordable financing terms that are reasonable in relation to its activities. The Group manages its capital structure and makes necessary changes to it based on a current assessment of the financial condition of the business and prospects in the short and medium term. Net debt is defined as interest-bearing debt (current and non-current), excluding lease liability, less cash. This definition is in line with our financial covenants. Equity includes all capital and reserves, paid and earned. Dividend policyThe Board of Directors has a long-term dividend policy of distributing 40-50 per cent of annual net income.(Amounts in NOK million) 2023 2022Interest bearing debt excluding lease liability 1 258 1 630Cash -406 -552Net debt 851 1 077Equity 2 310 3 066Total equity and net debt 3 161 4 143 XXL ASA Annual Report 202361 Note 22 Interest bearing debt (Amounts in NOK million) Non-Current Interest-Bearing Liabilities due > 1 year 2023 2022Bank loan 276 494Non-current lease liability 1 528 1 568Sum Non-Current Interest-Bearing Liabilities 1 804 2 062Current Interest-Bearing Liabilities due < 1 year 2023 2022Current lease liability 585 533Deferral of Swedish tax payments 366 – Credit Facility 640 1 135Sum Current Interest-Bearing Liabilities 1 590 1 668Total Interest-Bearing debt 3 394 3 731Total Interest-Bearing debt, excluding Lease Liabilities 1 258 1 630 The fair value of current and non-current debt approximately their carrying amount. The Group has a long-term loan from a consortium of banks consisting of NORDEA BANK NORGE ASA and DNB BANK ASA with an undrawn balance of NOK 204 million as of 31 December 2023. The bank loans are denominated in NOK, SEK and EUR and the interest rates related to the bank loan is based on NIBOR, STIBOR and EURIBOR plus a margin. As of 31 December 2023 the margin is 4.25%. The Group is measured on the following covenants as of 31 December 2023: - Minimum liquidity of NOK 200 million - The maximum amount of drawing is limited to 50% of the consolidated inventory book value. As of 31 December 2023 the company is compliant with all covenants under the loan facilities. XXL's Swedish subsidiary had received a temporary deferral until 12 September 2023 of tax payments for 2021 in the amount of SEK 366 million. The Company has applied to the Swedish tax authorities for a further deferral until 12 September 2024, and that applica- tion has now been approved. This means that the tax payments for 2021 in the amount of SEK 345 million will become due and paya- ble on 12 September 2024, unless a further deferral is being granted. The following table shows the maturity schedule of the Group's financial liabilities based on undiscounted contractual payments. In cases where the other party can demand early redemption, the amount is included in the earliest period payment that can be demanded. If liabilities are redeemed on demand, they are included in the first column: 31.12.2023 Remaining period Financial liabilities Under 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years TotalBank loan 640 276 – – – – 916Deferral of Swedish tax payments 366 – – – – – 366Interest 39 12 – – – – 51Lease liabilities 446 466 374 324 211 281 2 113 (undiscounted cashﬂows)Total 1 491 754 374 324 221 281 3 445 31.12.2023 Remaining period Financial liabilities Under 1 year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years TotalBank loan 1 135 494 – – – – 1 630Interest 69 21 – – – – 90Lease liabilities 616 542 442 340 285 379 2 605 (undiscounted cashﬂows)Total 1 820 1 058 442 340 285 379 4 324 Reconciliation of interest bearing debt 2023 2022Total Opening Balance 3 731 3 371Payments on new short-term debts (1 009) (150)Proceeds from new short-term debts 247 883 Proceeds from deferral of Swedish tax payments 366 –Total Leasing Payments for the lease liability (607) (602)Interest expense on Lease Liabilities 86 81 Changes with Cash effect (916) 212New Lease Liabilities recognized in the period 417 229 Adjustment lease hold for sale 102 –Amortisation of transaction cost of bank loan 7 9FX effects on bank loans + lease liabilities 54 (90) Changes with non Cash effect 580 148 Total Closing Balance 3 394 3 731 XXL ASA Annual Report 202362 Note 23 Ongoing process with tax authorities XXL Sport & Villmark AS a fully owned subsidiary of XXL ASA had in June 2023 received a reassessment from the Norwegian tax au- thorities relating to the XXLgroup's international transfer pricing model. By the reassessment, the Norwegian tax authorities have in- creased the taxable income of XXL Sport & Villmark AS for the years 2015 to 2018 resulting in additional tax payable in Norway in the total amount of NOK 138 908 976 for these years For the year 2019 the taxable income has been reduced with NOK 82 613 828. Based on a demand from Norwegian tax authorities XXL has made a payment of NOK 90 million. The amount is not based on a quali- tative assessment of what is the expected outcome of the case. XXL does not agree with the reassessment and is seeking to mitigate the net tax effects for the XXL group by adjustments to taxable income in another jurisdiction through mechanisms in relevant double taxation treaties. XXL has requested for MAP/APA negotiations between the competent authorities in order to mitigate the net tax effects for the XXL group by adjustments to taxable income in another jurisdiction through mechanisms in relevant double taxation treaties between Nor- way and such jurisdiction and which could lead to a refund from that jurisdiction. XXL has also appealed the reassessment to the tax appeal board. The appeals process is put on hold pending MAP/APA negotiations which started in February 2024. Due to the nature and complexity of the claim and the MAP negotiations a reliable estimate cannot be made to recognise a specific amount of uncertain tax liability in the financial statements for 2023 following the tax office decision dated 15 June 2023. Hence, the preliminary payment is recorded as a prepayment as at 31.12.2023. Note 24 Discontinued Operations The board of XXL concluded its strategic review process of XXL's operations in Austria 21.12.2022 The decision was to exit the Austrian market during 2023 and the management considered that the disposal group was available for immediate sale in its present condition. Austria was consequently classified as a disposal group held for sale in the balance sheet and presented as discontinued operations in the income statement as of 31.12.2022. All XXL stores and operations in the Austrian market was closed during 2023. Summary of financial data for discontinued operations (Amounts in NOK million) FY 2023 FY 2022Total Operating Revenue 229 454Cost of goods sold 169 366Personnel expenses 60 98Other operating expenses 108 112Depreciation 52 48Impairment Losses (+) Reversal of losses (-) 54 -14Total Operating Expenses 443 610Operating Income -214 -156Net Financial Income (+) / Expense (-) 5 -6Profit before income tax -209 -162Income tax expense 3 -31Profit from Discontinued Operations -206 -131Net cash ﬂow from operating activites 28 44Net cash ﬂow from investing activities – -7Net cash ﬂow from financing activities -33 -45 Net change in cash and cash equivalents -5 -8 Impariment losses includes reversal of Right-of-Use assets due to fair value assesment Financial Statements XXL ASA XXL ASA Annual report 2023 XXL ASA Annual Report 202364 Statement of Income 63 Balance Sheet - Assets 64 Balance Sheet – Equity and Liabilities 65 Statement of Cash Flows 67 Notes to the financial statements 68 XXL ASA Annual Report 202365 Statement of income Note 2023 2022 Personnel expenses 2 3 3 Other operating expenses 6 40 29 Total Operating Expenses 43 32 Operating Income -43 -32 Other financial income 18 -3 Interest income group companies 6 6 5 Total Financial Income 24 2 Interest expense – – Interest expense to group companies 6 41 27 Other financial expense 25 6 Total Financial Expense 66 32 Net Financial Income (Expense) -42 -30 Income Before Income Taxes -84 -61 Tax expense 3 – -14 Net Income -84 -48 Allocation of Net Income Other paid-in equity -84 -48 Total allocated -84 -48 (Amounts in NOK million) XXL ASA Annual Report 202366 Balance sheet / Assets Note 31.12.2023 31.12.2022 NONCURRENT ASSETS Intangible assets Deferred tax asset 3 13 13 Total intangible assets 13 13 Financial Assets Investment in subsidiaries 4 3 617 3 614 Total Financial Assets 3 617 3 614 Total Noncurrent Assets 3 630 3 627 CURRENT ASSETS Other Receivables Trade and other receivables 18 – Receivables from Group companies 5 514 150 Total Other Receivables 532 150 Cash and Cash Equivalents Cash and equivalents 7 – – Total Cash and Cash Equivalents – – Total Current Assets 533 150 Total Assets 4 163 3 777 (Amounts in NOK million) XXL ASA Annual Report 202367 Balance sheet / Equity and Liabilities Note 31.12.2023 31.12.2022 SHAREHOLDERS’ EQUITY Paid-in Capital Share capital 8, 10 665 101 Share premium 8, 10 3 938 3 710 Own shares 8, 10 – -182 Total Paid-in Capital 4 603 3 629 Retained Earnings Other equity 10 -882 -797 Total Retained Earnings -882 -797 Total Shareholders’ Equity 3 722 2 832 LIABILITIES Non-Current Liabilities Interest bearing debt – -1 Total Non-Current Liabilities – -1 Current Liabilities Accounts payable 2 – Public duties payable -1 – Liabilities to group companies 5 440 946 Total Current Liabilities 441 755 Total Liabilities 441 946 Total Equity and Liabilities 4 163 3 777 (Amounts in NOK million) XXL ASA Annual Report 202368 Oslo, 24 April 2024 Board of Directors Björn Einar Håkan Lundstedt Tom Christian JovikKjersti Helen Krokeide Hobøl Ronny Blomseth Tor Andrin Jacobsen Helena Ebersten Henriksen Freddy SobinKari Ekelund Thørud Kjell-Arne Fikerud Chairman of the Board Board MemberBoard Member Board Member Board Member Board member CEO Board Member Board Member XXL ASA Annual Report 202369 Statement of Cash Flows 2023 2022 Operating Activities Income before income taxes -84 -61 Changes in Group recivables/ (payables) -864 – Changes in other assets and liabilities -19 114 Cash provided (used) by operating activities -966 52 Investing Activities Investment in subsidiaries -7 -3 Cash provided (used) by investing activities -7 -3 Financing Activities Net procceds share issue 974 – Purchase of own shares – 3 Prior year errors – 84 Dividend – -146 Cash provided (used) by financing activities 974 -59 Net Change in Cash and Cash Equivalents 1 -10 Cash and cash equivalents - beginning of year – 10 Cash and Cash Equivalents - End of Year 1 – (Amounts in NOK million) XXL ASA Annual Report 202370 Notes to the financial statements 1. Accounting Principles The financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway. Classification and valuation of balance sheet items Assets intended for long term ownership or use have been classified as fixed assets. Assets expected to be realised in, or is intended for sale or consumption in, the entity's normal operating cycle have been classified as current assets. Receivables are classified as current as- sets if they are expected to be realised within twelve months after the transaction date. Similar criteria apply to liabilities. Current assets are valued at the lower of cost and fair value. Short term liabilities are reﬂected at nominal value. Fixed assets are carried at historical cost. Fixed assets are written down to net realizable value if a value reduction occurs which is not expected to be temporary. Except for accruals, long term liabilities are reﬂected in the balance sheet at nominal value on the establishment date. Accruals are discounted to present value if the time value of money is material. Foreign currency Foreign currency transactions are translated into Norwegian kroner using the exchange rate prevailing at the date of the transaction (spot exchange rate), while monetary items denominated in foreign currencies are translated at the rate per the balance sheet date. Trade receivables Trade and other receivables are recorded at their nominal value less a provision for losses. Tax Tax expense in the income statement includes the change in the deferred tax asset. Deferred tax is calculated at 22% based on the temporary differences between accounting and tax values, as well as any tax loss carryforwards at the end of the financial year. Taxable and non-taxable temporary differences that reverse or may reverse in the same period are offset. Recognition of the deferred tax asset on net deductible temporary differences that are not offset and carried forward is based on estimated future earnings. If a deferred tax asset that can be recognized, it is classified in the balance sheet. Deposits Receivable/payable cash pooling arrangements are classified as balances with group companies. All figures are stated in NOK million unless otherwise stated. 2. Personnel expenses The Company had no employees in 2023. There were no loans or guarantees given to the CEO, Chairman of the Board or other related parties. Description of the option program and other incentive programmes are disclosed in note 3 in the Group Consolidated Financial Statements. Board of directors remuneration (figures in NOK thousand) Name Title Fee Total remuneration Björn Einar H Lundstedt Chairmain of the Board 450 450 Kjersti Hobøl Board member and Chairman audit committee 410 410 Tom Christian Jovik Board and audit committee member 390 390 Ronny Blomseth Board member 350 350 Kari Ekelund Thørud Board member 350 350 Kjell-Arne Fikerud Board member (employee representative) 75 75 Helena E Henriksen Board member (employee representative) 75 75 Tor Andrin Jacobsen Board member (employee representative) 75 75 Audit fees (figures in NOK thousand) Divided by type of service (exclusive of VAT) 2023 2022 Statutory audit 1 317 1 300 Other services 510 338 Total fees 1 827 1 638 XXL ASA Annual Report 202371 Note 3 Tax Income tax expense for the year Basis for tax payable 2023 2022 Income before tax -84 -61 Permanent differences -9 – Change in temporary differences – 1 Interest limitation rules – – Basis for tax payable -94 -60 Tax payable in the statement of income – – Taxable income – – Tax payable in the balance sheet – – Tax expense for the year Tax payable – – Change in deferred tax 21 -8 Unrecognised deferred tax assets -21 – Prior years error – -6 Total tax expense – -14 Explanation for why tax is not 23% of income before tax 22 % tax of income before tax -19 -14 Permanent differences (22%) -2 – Unrecognised deferred tax assets 21 – Expected tax expense – -6 Effective tax rate -0,0 % 22 % Specification of temporary differences Asset (-)/liability Change 2023 2022 Amortization of loan expenses – 1 Total temporary differences – 1 Tax loss carry forward -105 -60 Basis for deferred tax assets/liability -105 -60 Basis for deferred tax assets/liability, not regonized 45 – Deferred tax assets (+) / liability (-) in the balance sheet 13 13 Note 4 Investment in subsidiaries The Company has an ownership interest in the following subsidiary: Year of Business Ownership Equity (100%) Net income (100%) Book value acquisition location percentage 31.12.2023 31.12.2023 31.12.2023 XXL Sport og Villmark AS 2015 Oslo 99 % (381) (936) 3 599 The investment is booked using the cost method. The subsidiary Gigasport AS was merged into parent XXL ASA in 2015. XXL Sport og Villmark is now directly owned by XXL ASA. Note 5 Balances with group companies The Company has the following receivables and liabilities with group companies: Liabilities 2023 2022 Other current liabilities 106 105 Cash pool arrangement 316 838 Accounts payables 18 – Total liabilities 440 943 Receivables 2023 2022 Other non-current receivables from group companies 514 149 Total receivables 514 149 Note 6 Related party transactions Management remuneration is included in note 2 and intercompany balances are discussed in note 5. The Company’s transactions with related parties are as follows: Interest income 2023 2022 XXL Sport og Villmark AS – – XXL Management Invest AS 5 4 Total interest income 5 4 Interest expense 2023 2022 XXL Sport & Villmark AS 41 27 Total interest expense 41 27 Other operating expenses 2023 2022 Administrative services 19 18 Total operating expenses with related parties 19 18 XXL ASA Annual Report 202372 Note 7 Cash and cash equivalents Cash and cash equivalents include the following items: 2023 2022 Cash and cash equivalents – – Total cash and equivalents – – The Company is a part of a cash pool arrangement with XXL Sport and Villmark AS and other Group companies. The Company's share of the cash pool is NOK 316 million negative per the balance sheet date. The Cash pool balance is classified as current liabilities to Group companies in the balance sheet. Note 8 Share capital and shareholder information The share capital of XXL is NOK 665,429,772 consisting of 1,663,574,430 shares in total being 1,334,852,101 ordinary shares (A shares) and 328,722,329 non-voting shares (B shares) with a par value of NOK 0.40 each. Overview of the major shareholders of the Group as of 31.12.2023: Total amount of shares Ownership Voting right ALTOR INVEST 6 AS 386 836 522 23,3 % 16,7 % ALTOR INVEST 5 AS 386 836 507 23,3 % 16,7 % EUROCLEAR BANK S.A./N.V. 229 200 308 13,8 % 17,2 % FERD AS 151 118 316 9,1 % 11,3 % VERDIPAPIRFOND ODIN NORDEN 88 261 617 5,3 % 6,6 % VERDIPAPIRFOND ODIN NORGE 44 923 725 2,7 % 3,4 % STORMBERG GROUP AS 34 000 000 2,0 % 2,6 % FUNKYBIZ AS 32 000 000 1,9 % 2,4 % BJERKNES EIENDOM AS 24 711 124 1,5 % 1,9 % MP PENSJON PK 20 202 619 1,2 % 1,5 % NORDKRONEN II AS 19 889 159 1,2 % 1,5 % AVANZA BANK AB 9 715 430 0,6 % 0,7 % NORDNET BANK AB 7 301 237 0,4 % 0,6 % J.P. MORGAN SE 6 793 957 0,4 % 0,5 % OLA RUSTAD AS 6 779 158 0,4 % 0,5 % AG HOLDING AS 5 000 000 0,3 % 0,4 % NORDEA BANK ABP 4 891 097 0,3 % 0,4 % STANZA AS 4 262 786 0,3 % 0,3 % GENI HOLDING AS 4 194 932 0,3 % 0,3 % NYE BERGHOL INVEST AS 3 750 000 0,2 % 0,3 % Other 192 905 936 11,6 % 14,5 % Sum 1 663 574 430 100 % 100 % Shares held by Board of Directors & Chief Executive Officer: Title Amount of shares Ronny Blomseth Board member 2 824 582 Kjersti Helen Krokeide Hobøl Board member 150 291 Helena Ebersten Henriksen Board member (employee representative) 62 112 Tor Andrin Jacobsen Board member (employee representative) 90 524 Tom Christian Jovik Board and audit committee member – * Tom Jovik represents Altor in the BoD. Altor Invest 5 AS and Altor Invest 6 AS combined owns 444,950,700 ordinary shares (A shares) and 328,722,329 non-voting shares (B shares) in XXL ASA Note 9 Current and non-current interest-bearing liabilities Current liabilities 2023 2022 Amortization borrowing costs 4 1 Sum 4 1 Note 10 Shareholder’s equity Changes in shareholder’s equity Share capital Share premium Retained earnings Total equity Shareholder’s equity 01.01.23 101 3 528 -797 2 832 Net income 2023 – – -84 -84 Share issues 564 438 – 1 002 Transaction costs – -28 – -28 Purchase of own shares – – – – Shareholder’s equity 31.12.23 665 3 938 -881 3 722 XXL ASA Annual Report 202373 Footnotes / Definitions Alternative Performance Measures (APM) Certain financial measures and ratios related thereto in this quarterly report, including growth, gross profit, gross margin, EBIT, EBIT margin, EBITDA, EBITDA margin, working capital and Net Interest Bearing Debt (collectively, the “Non-GAAP Meas- ures”), are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented in this quarterly report because they are among the measures used by Management to evaluate the cash available to fund ongoing, long-term obligations and they are frequently used by other interested parties for valuation purposes or as a common measure of the ability of a company to incur and meet debt service obligations. These measures may not be compa- rable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to profit for the year, total operating revenues, operating income or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies. All amounts in tables below are in NOK million. All APMs are related to Continuing Operations. We refer to note 10 for details on Discontinued Operations. EBIT Our EBIT represents operating income EBITDA Earnings before interest, tax, depreciation and amortisation (EBITDA) is a key financial parameter for XXL. Our EBITDA repre- sents operating income plus depreciation. Like for Like Like for Like include comparable stores and E-commerce. Comparable stores are stores that have been open all months of the current year and all months of the previous year. Stores that have been relocated or significantly expanded are excluded from Like for Like stores. Gross profit / Gross margin Gross profit represents operating revenue less cost of goods sold. Gross margin is gross profit in per cent of revenue. Working capital Working capital consists of trade and other receivables, accounts payables, inventory, public duties payable and other current liabilities. OPEX OPEX is defined as other operating expenses including person- nel expenses, but excluding depreciation, amortization and im- pairment of right-of-use assets Net interest bearing debt (NIBD) Net interest-bearing liabilities is defined as non-current interest-bearing debt and current interest-bearing liabilities less cash and cash equivalents. NIBD does not include lease liabilities due to IFRS 16. Net debt is a measure of the Group’s net indebtedness that provides an indicator of the overall balance sheet strength. CAPEX Capital expenditure is the sum of purchases of fixed assets and intangible assets as used in our cash ﬂow. Capex is a measure of investments made in the operations in the relevant period and is useful to users of XXL’s financial information in evaluating the capital intensity of the operations. Liquidity reserve Our liquidity reserve is defined as our available cash and cash equivalents plus available liquidity through overdraft and credit facilities. Reconciliation (example)Reconciliation (example) Reconciliation (example) Operating Income -1 409 -467 + Depreciation 754 703 + Impairment Losses 576 0 = EBITDA -80 237 FY 23 FY 22 Cash and Cash Equivalents 483 552 Cash and Cash Equivalents (AHS) 23 23 + Undrawn Credit Facilities 204 171 = Liquidity reserve 760 746 Other operating expenses 931 819 + Personnel expenses 1 657 1 665 = OPEX 2 588 2 484 FY 23 FY 23 Reconciliation (example) Operating revenue 7 961 8 426 ÷ Cost of goods sold 5 452 5 705 = Gross profit 2 508 2 721 Gross margin 31,5% 32,3% FY 23 FY 22 Reconciliation (example) Non-Current Interest Bearing Debt 276 494 + Current Interest Bearing Debt 1 006 1 135 ÷ Cash and Cash Equivalents 406 552 +Cash and cash Equivalents (ASH) 23 23 = Net Interest Bearing Debt 876 1 054 FY 23 FY 22 FY 22 FY 22 XXL ASA Annual Report 202374 Footnotes / Definitions Leverage ratio Leverage ratio is defined as NIBD/EBITDA, a measure for the strength of our financial position. See NIBD/EBITDA for explanation. E-commerce Ecommerce is sales through online sales channels in com- parison to sales through retail stores that are physical stores. Inventory per store Total inventory excluding goods in transit (GIT) divided on number of stores and number of E-commerce markets at end of period. IFRS 16 effects affecting EBITDA and EBIT IFRS 16 was implemented for the Group 1 January 2019. EBITDA ex IFRS 16 effects and EBIT ex IFRS 16 effects represent our EBITDA and EBIT if IFRS 16 had not been implemented, respectively. Pictures All pictures in this report is with and by XXL employees FY 23 EBITDA reported IFRS 16 effects OPEX EBITDA ex IFRS 16 effects EBIT Reported IFRS 16 effects affecting EBIT EBIT ex IFRS 16 effects XXL Group -80 -607 -687 -1 409 -21 -1 430 Nor 427 -244 183 -369 -37 -406 Swe -28 -184 -211 -293 -27 -266 Fin 67 -126 -59 -84 -4 -89 HQ & Logistics -544 -54 -597 -661 -7 -668 Reconciliation (example) Sports unite all XXL ASA Annual report 2023 5967007LIEEXZXHCTC692023-01-012023-12-315967007LIEEXZXHCTC692022-01-012022-12-315967007LIEEXZXHCTC692023-12-315967007LIEEXZXHCTC692022-12-315967007LIEEXZXHCTC692021-12-315967007LIEEXZXHCTC692021-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXHCTC692022-01-012022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXHCTC692022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXHCTC692021-12-31ifrs-full:SharePremiumMember5967007LIEEXZXHCTC692022-01-012022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXHCTC692022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXHCTC692021-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXHCTC692022-01-012022-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXHCTC692022-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXHCTC692021-12-31XXL:RetainedEarningsAndOtherReservesMember5967007LIEEXZXHCTC692022-01-012022-12-31XXL:RetainedEarningsAndOtherReservesMember5967007LIEEXZXHCTC692022-12-31XXL:RetainedEarningsAndOtherReservesMember5967007LIEEXZXHCTC692021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5967007LIEEXZXHCTC692022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5967007LIEEXZXHCTC692022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5967007LIEEXZXHCTC692021-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXHCTC692022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXHCTC692022-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXHCTC692023-01-012023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXHCTC692023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXHCTC692023-01-012023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXHCTC692023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXHCTC692023-01-012023-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXHCTC692023-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXHCTC692023-01-012023-12-31XXL:RetainedEarningsAndOtherReservesMember5967007LIEEXZXHCTC692023-12-31XXL:RetainedEarningsAndOtherReservesMember5967007LIEEXZXHCTC692023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5967007LIEEXZXHCTC692023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5967007LIEEXZXHCTC692023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember5967007LIEEXZXHCTC692023-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:NOKiso4217:NOKxbrli:shares

AI Terminal

More from XXL

Talk to a Data Expert