Europris — Earnings Release 2016

May 13, 2016

Presentation of results for the first quarter 2016

CEO Pål Wibe CFO Espen Eldal 13 May 2016

Norway's leading discount variety retailer

Highlights in the first quarter

• Group revenues increased 3.1%, a like-forlike growth of -0.7%. Adjusted for sales days the LFL was +2.0%
• Reduced comparability due to Easter calendar effect
• "Price war" on pick & mix candy
• Gross margin pressure
• Strong operational cost control
• Solid pipeline of new stores eleven planned in 2016 (net ten)
• Adjusted net profit of NOK 9 million
• Adjusted EPS of NOK 0.05

Sales performance

• Sales growth of 2.2% for the chain
• Two fewer trading days (-2.6%)
• Early Easter is not favourable for sales of seasonal items for spring season
• Historically the quarter with lowest sales (app. 21% of FY sales and 8% of FY EBITDA)
• Sales was satisfactory and above market average during January and February
• Price "war" on pick and mix candy
• Significant negative short term effect on traffic
• Joining the "war" would have lifted sales, but had a negative impact on profits

Full pace forward on category and seasonal development

• Christmas kicking off early
• Q1 2017 plan revitalised
• Final parts of concept development 5.1 to be rolled out late summer
• Long pipeline of category development initiatives
• B2B starting to take shape

The art of creating a good offer

• Malaga lounge set has been a bestseller for several years
• Sourced in USD, but retail sales price unchanged from 2014
• Smarter sourcing
• Combined volumes with Tokmanni through Shanghai sourcing office
• Product redesign
• Redesign of packaging to reduce transportation costs and minimise waste
• Direct distribution from factory to stores to minimise handling costs
• Buffer storage kept by distribution partner to make store operations more efficient

Solid pipeline of new stores

• One new store opened at Ågotnes outside Bergen in Q1
• Plan eleven new stores in 2016, of which the following six are confirmed for Q2:
• Andenes
• Råde
• Geilo
• Stranda
• Jevnaker
• Strømmen
• One store closure, originally planned in 2017, has for operational reasons been rescheduled to late 2016
• In Q1 Europris completed nine store modernisations and one relocation.
• Increased store space by 775 sqm.

Financial review

Gross margin development

• Gross margin was 41.6% in Q1 2016 vs. 43.2% in Q1 2015
• As a result of reduced traffic during Easter, discounts on all seasonal items were increased to avoid surplus stock at end of season
• General price increases due to fx effects came late in the quarter

•Gross margin

OPEX development

• OPEX* in % of revenue was 36.1% in Q1 2016 vs. 36.4% in Q1 2015
• Strong operational cost control
• OPEX % reduced despite sales below management expectations
• Focus on efficiency throughout the value chain

•OPEX in % of group revenue

Adjusted EBITDA development

• Adjusted EBITDA* margin was 5.5% in Q1 2016 vs. 6.8% in Q1 2015
• The gross margin reduction in Q1 had a negative effect on profits
• Strong focus on OPEX offset some of the negative effect

Cash flow and working capital

• Cash-flow subject to normal seasonality
• Investments reduced as the modernisation programme has passed its peak
• Solid cash position at end of Q1 with leverage of 2.36x
• Working capital increase mainly inventory related
• Opening of new stores and build-up of inventory for spring/summer season
• Value of goods purchased in foreign currencies increased, but not to same extent as last year
• Increase in accounts payable due to calendar effects as quarter end was during Easter last year

Cash flow, NOK million	YTD 2016	YTD 2015
Cash from operating activities	-253	-190
Cash used in investing activities	-17	-36
Cash (used in)/from financing activities	-2	-3
Net change in cash and cash equivalents	-271	-229
Cash and cash equivalents at 1 January	447	245
Cash and cash equivalents at end of period	176	16

Change in working capital, NOK million	YTD 2016	YTD 2015
Inventory	-193	-248
Accounts receivables and other short-term
receivables	30	5
Accounts payable and other short-term
liabilities	-74	50
Change in working capital	-237	-192

Summary and outlook

• A moderate start to the new year with sales below expectations in March
• Cost control remains strong
• Operational improvement projects in the supply chain and store operations aim to reduce inventory levels and costs
• The group is well prepared for the spring/summer season
• Continued growth focus
• Strong focus on concept and category development
• Healthy pipeline of new stores
• Discount variety retail continue to take market share
• Mixed assortment provides a large addressable market and competitive flexibility
• Resilient business model

Presentation of results for second quarter 2016

See you Thursday 11 August