Europris — Earnings Release 2016

Aug 11, 2016

Presentation of results for the second quarter and first half year 2016

CEO Pål Wibe CFO Espen Eldal 11 August 2016

Norway's leading discount variety retailer

Highlights in the second quarter

• Group revenues increased 13.4% with likefor-like growth of 10.0%, outperforming market of 5.5%
• Sales day adjusted LFL of +5.6%
• Some pressure on gross margin from successful campaign sales
• Adjusted net profit up 72.1%
• Six new store openings

Highlights first half 2016

• Group revenues increased 8.5% with likefor-like growth of 5.1%
• Sales day adjusted LFL of +4.3%
• Robust operational cost control
• Significantly improved cash-flow from operating activities
• Adjusted net profit up 60.5%

•Adjusted net profit

• Sales growth of 13.5% for the chain in Q2
• Three more trading days (+4.2%)
• Sales of spring and summer seasonal items very good
• Well planned seasonal sales
• Excellent in-store execution
• Successful sales campaigns
• Putting some pressure on gross margin
• Sales performance of new stores above expectations
• 11 new store openings in the last 12 months

•Retail sales per quarter

Continued strong performance in all regions

• Europris continues to outperform the market in the "oil regions" as well as the overall market in Norway
• The market is growing below average in Rogaland and Hordaland while Europris delivers above average growth in these regions
• Rogaland figures based on 19 LFL stores
• Hordaland figures based on 20 LFL stores

Category development

• Category development a key driver for growth
• Pet food, yarn and underwear focus areas last year and in Q1. Results so far are promising and all three initiatives delivered double digit growth in H1
• Concept development taken one step further
• Store layout version 5.01 rolled out in our new stores
• Improved "shop-in-shop" solution

Traditional marketing still works!

• In May Europris distributed a weekly average of 1.2 million DM's
• DM's are the backbone of the groups marketing efforts and management see no diminishing returns
• Regular effect studies conducted with consistent results
• DM's are complemented by radio spots, adds in newspapers and on the web, and recently TV

Making progress on electronic media

• Europris is progressing its e-channel/online initiatives
• Upgraded home pages, both mobile and web
• Electronic distribution of DM and newsletters more than doubled since last year reaching above 100.000 subscribers
• Launched "click & collect" on selected seasonal items in Q2 2015
• Working to improve PIM (Product Information Management)
• Soon ready to launch web shop for B2B customers

•Home page traffic development

Solid pipeline of stores

• Six new stores opened in Q2
• Twelve new stores scheduled in 2016, of which the following three are confirmed for Q3:
• Stovner, Oslo
• Vormsund, Akershus
• Laksevåg, Bergen
• One store closure, originally intended for 2017, has been rescheduled to late 2016 for operational reasons
• Positive development in new store pipeline for 2017 with 5 new stores confirmed so far

New central warehouse

• New and efficient warehouse facility to be located in Moss – late 2019 opening expected
• Significant capacity increase, with reduction in total rental space
• Long term rental agreement with highly reputed real estate developer, Fabritius Gruppen AS
• No capital investment needed in facility
• Future expansion area secured
• Acquisition of 31k square meter area next to new facility (NOK 25m investment in 2017)
• Return on investment secured via lease to Moss Harbour

Financial review

Gross margin development

• Gross margin was 43.3% in Q2 2016 vs. 44.8% in Q2 2015
• Last year included a positive impact from fx hedging
• Margin improved from Q1 as price increases due to fx effects were implemented
• Some margin pressure from increased campaign sales

•Gross margin

OPEX development

• OPEX* in % of revenue was 28.0% in Q2 2016 vs. 29.5% in Q2 2015
• Continued strong operational cost control
• Focus on efficiency throughout the value chain
• Head office operational leverage

•OPEX in % of group revenue

Adjusted EBITDA development

• The gross margin reduction was offset by OPEX savings

•Adjusted EBITDA margin

Cash flow

• Significantly improved cash flow from operating activities
• Increase in profits
• Inventory less impacted by fx changes than last year
• Investments reduced as the modernisation programme has passed its peak
• Dividend payment of NOK 234 million in Q2
• Solid cash position at end of Q2 with leverage of 2.27x

Cash flow, NOK million	YTD 2016	YTD 2015
Cash from operating activities	6	-131
Cash used in investing activities	-50	-55
Cash (used in)/from financing activities	-237	18
Net change in cash and cash equivalents	-280	-168
Cash and cash equivalents at 1 January	447	245
Cash and cash equivalents at end of period	167	77

Summary – one year perspective

• Europris remains on its profitable growth track
• Continues to outperform the market with mid-single digit like-for-like growth
• New store rollout ahead of plan with 20 net new stores in 2015/2016
• Outlook was 18 (10/8)
• Gross margin on-track
• Outlook was stable margins from 2014
• Starting to realise operational leverage within OPEX

Outlook

• Back on track with a solid performance in Q2
• The group is well prepared for the important upcoming sales seasons
• Continued growth focus
• Strong focus on concept and category development
• Healthy pipeline of new stores
• Cost control remains strong
• Market leader in a growing segment
• Discount variety retail continue to take market share
• Mixed assortment provides a large addressable market and competitive flexibility
• Resilient business model

Q & A

Presentation of results for third quarter 2016

See you Thursday 3 November