Europris

Earnings Release • Feb 2, 2023

Q4 2022 presentation

2 February 2023

CEO Espen Eldal CFO Stina C Byre

Disclaimer

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Norway's discount variety retailer #1

Strong brand and loyal customer base

Low prices and powerful marketing and campaign engine

Proven category management model

Expanding store network and e-commerce operation

Highly satisfactory performance in a tough retail market in Q4

• Total sales of NOK 3,034m, up 6.8%
• Sales increase of 4.8% excluding structural* growth
• Like-for-like sales growth pf 3.3% for the Europris chain
• Gross margin of 45.5%, down 4.5%-p
• Higher freight costs, unrealised currency loss on hedging contracts and higher share of campaign sales
• Opex-to-sales ratio of 20.4%, down 0.5%-p
• EBITDA of NOK 760m, down 8% from record Q4-21
• EBITDA margin of 25%, down 4%-p
• Solid profitability with net profit to parent of NOK 422m (489m)

•Group sales (NOK million)

•Net profit attributable to parent (NOK million)

Solid performance for the full year 2022

• Total sales of NOK 9,016m, up 4.3%
• Sales increase of 0.7% excluding structural* growth
• Gross margin of 46.4%, down by 0.5%-p
• Opex-to-sales ratio of 23.6%, up 0.8%-p
• EBITDA of NOK 2,051m, down 1.5%
• EBITDA margin of 22.8%, down 1.3%-p
• Solid profitability
• Net profit to parent of NOK 1,022m (1,082m)
• EPS of NOK 6.35 excluding treasury shares (6.72)
• Strong financial position with cash and liquidity reserves of NOK 1,897m (1,981m)

•Group sales (NOK million)

•Net profit attributable to parent (NOK million)

Strong performance reflected in high dividend

• The board of directors proposes total dividend per share of NOK 3.75 for 2022 (4.00)
• Ordinary dividend of NOK 2.75 per share (2.50), up 10%
• Additional dividend of NOK 1.00 per share, reflecting strong financial performance and position
• Total dividend of NOK 604m excluding treasury shares
• Pay-out ratio of 59.1% of net profit to majority, within the dividend policy of 50%-60% payout

DPS and EPS

Continuously outperforming the retail market

• Overall strong retail market performance over the last three year, with Europris consistently outperforming the market
• Covid-19 effects beginning to wane
• Q4 22 development more comparable to the previous year, although Covid-19 supported December 21
• Europris chain +5.1% in Q4
• Compares to +0.1% for shopping centres and -1.3% for the stores in shopping centres

Retail sales development per December, three-year-stacked (%)*

* Source: Kvarud analyse, Shopping Centre Index, Virke retail index (using figures reported by statistics Norway) Note: Europris chain is all stores, both directly operated by the group and the franchise stores

30 years of growth

NOK 9bn

Note: sales for the Europris chain (directly operated and franchise stores), Lunehjem (consolidated as of March 2021), Lekekassen (consolidated as of August 2021) and the Strikkemekka group (consolidated as of July 2022) 8

Financials

CFO Stina C Byre

Strong sales performance in the fourth quarter

Total group sales (NOK million)

• Group sales of NOK 3,034m, up 6.8%
• Increase of 4.8% excluding structural growth*
• Like-for-like sales increase of 3.3% for the Europris chain**
• Christmas shopping started early
• Sales growth driven by consumables on campaigns
• Decline for higher value seasonal items

* Lekekassen consolidated from August 2021 (ie, July 2022 considered to be structural growth) and the Strikkemekka group consolidated from July 2022 (ie, considered to be structural growth in full)

** All Europris stores, both directly operated by the group and the franchise stores

Pure play strategy increases online sales

Total e-commerce sales* (NOK million)

• Total e-com sales of NOK 425m (367m)
• 14% of group sales
• Strong quarter for Lekekassen in Sweden and Denmark, decline in Norway
• Sales growth for Strikkemekka
• Europris.no sales of NOK 16m (18m)

* Europris.no, Lunehjem (from March 2021), Lekekassen (from August 2021) and the Strikkemekka group (from July 2022)

Gross margin decline - as expected

• Gross margin of 45.5%, down 4.5%-p
• Higher freight costs
• Unrealised currency loss on hedging contracts
• Higher share of campaign sales
• Increased sales of low-price consumables

Opex impacted by acquisitions and more stores

• Opex of NOK 619m in Q4, up 4.1%
• Structural growth*
• Increased number of directly operated stores, from 242 to 249
• Opex-to-sales ratio of 20.4% in Q4 (20.9%)

Opex-to-sales ratio

EBITDA decline reflecting the gross margin decline

• EBITDA of NOK 760m, down 8% compared to record Q4 21
• EBITDA margin of 25%, down 4.1%-p
• Full-year EBITDA almost on a par with the strong 2021
• EBITDA of NOK 2,051m, down 1.5%
• EBITDA margin of 22.8%, down 1.3%-p

15

Solid financial position

• Net change in cash of NOK -106m for the full year 2022 (+30m)
• Higher level of inventory from increased purchase prices and larger volumes of seasonal summer items
• Timing differences in payment of accounts payable and other accrued expenses
• Net debt of NOK 2,641m (2,440m)
• Net debt excluding lease liabilities of NOK 626m (526m)
• Cash and liquidity reserves of NOK 1,897m (1,981m)

Cash flow, NOK million	Q4 2022	Q4 2021	FY 2022	FY 2021
Cash from operating activities - of which change in net working	1,059	861	1,248	1,591
capital	419	200	(374)	(139)
Cash used in investing activities	(47)	(43)	(209)	(684)
Cash from financing activities	(423)	(214)	(1,144)	(877)
Net change in cash	588	604	(106)	30
Cash at beginning of period	(124)	(33)	570	540
Cash at end of period	464	571	464	570

Our key strategic focus areas

Successful campaign targeting and category upgrades

• More campaigning towards everyday consumables
• Driving traffic to stores and generating sales
• Upgrade of the Toy category in the fourth quarter
• Modernised store lay-out
• Product range set in cooperation with Lekekassen
• Growth in sales and margins
• Categories upgraded in 2022 performed better than the chain average

Increasing conversion and profitability through the digital customer

• 30-40% higher engagement on personalised communication
• 5-10% higher basket value for those exposed to personalised content
• Communication from local stores creates higher attention and increases loyalty and shopping frequency
• Use of AI in digital advertising, using Mer customer club data to boost traffic both to physical stores and Europris.no ^{278 000}

#Mer members +22% in 2022

750,000 subscribers to digital newsletter

Expanding store network in attractive areas

• One new store opening in Q4
• Nittedal in Viken county a location on our wish-list for a long time
• Six new store openings in 2022
• Of which three in the greater Oslo area
• Stronger start on new stores than estimated in the business cases
• Nine stores in pipeline for 2023 and beyond
• Two stores are subject to planning permission

Committing to net zero emissions by 2050

Application approved by the Science Based Target initiative

• Application for science-based targets officially approved by the Science Based Target Initiative
• Currently in mapping phase
• Increased focus on sustainability competence
• "Sustainability week" for all employees and separate manager training program
• Maintained 'B' score on CDP* reporting

Our climate profile Our products Our people Our social responsibility Sustainability incorporated in all parts of our strategy -across four key focus areas

Summary & outlook

Strong and profitable growth over the past three years

Average annual growth across the P&L

• Volume increases Improved gross margins + +
• Strong cost discipline +

High earnings growth =

Well positioned with a relevant offering for a tougher economic environment

• More challenging household finances
• Rising interest rates and higher prices for food, energy and other necessities
• The Europris concept offers good value for money
• Well-recognised low-price concept
• Strong campaigns
• Broad and relevant product offering

Strong strategic position

Clear market leader in a growing market segment

Strong track record with 30 years of consecutive growth

Well managed with proven ability to adapt to changing market conditions

Clear operational and financial strategy

Committed to profitable growth and cash distribution

Next event: Q1 presentation 27 April 2023

Appendix

Long-term financial and operational ambitions
ÖoB
Sales days and store projects
Analytical information
Alternative Performance Measures (APM's)

Long-term financial and operational ambitions

Growth	Continue to deliver like-for-like growth above the market over time
Number of new stores	Target to open a net average of five new stores per year, depending on availability of locations which meet strict return requirements, and the potential for relocations, expansions and modernisations
EBITDA	Increase EBITDA margin over time from improved sourcing and a more cost-effective value chain
Dividend	Dividend policy of paying out 50-60% of net profit while maintaining an efficient balance sheet

A low-risk synergistic partnership today

Potential for true European scale tomorrow

Transaction highlights

20% initial stake in Runsven-gruppen AB	• Based on EV using fixed multiple of 7.7x actual EBITDA 2018 • Purchase price settled in Q4 at NOK 115 million based on ÖoB EqV of NOK 574 million • Shares acquired in the market by Europris at a total cost price of NOK 98 million • Share for share transaction, settled by treasury shares • 2.6% ownership stake in Europris (4,35m shares)
Option to acquire remaining 80% stake	• Exercisable in 2020 within six months after agreement on ÖoB's 2019 EBITDA • Based on EV using fixed multiple of 7.7x average 2019 and 2020 EBITDA • Share for share transaction
Lock-up	• Shares issued to sellers of ÖoB are subject to lock-up

Sales days and store projects

Number of sales days

Year	Q1	Q2	Q3	Q4	Total
2021	76	71	79	81	307
2022	76	72	79	81	308
2023	77	71	79	79	306

•Number of store projects

2022	Q1	Q2	Q3	Q4	Total
New stores	1	3	1	1	6
Store closures	-	-	-	-	-
Relocations / expansions	6	2	-	3	11
Modernisations	1	3	4	2	10

2023E	Q1	Q2	Q3	Q4	Total
New stores	2	4	1	1	8
Store closures	-	-	-	-	-
Relocations / expansions	3	2	1	1	7
Modernisations	3	2	3	1	9

Analytical information¹

Seasonality	• As a rule-of-thumb, the Easter impact is approximately NOK 60-75 million in revenue and NOK 12-15 million in EBITDA
Quarterly Opex	• Europris stores: as a rule-of-thumb, Opex in quarter one year earlier + inflation + NOK 1.5-1.6 million per extra directly operated store (DOS)
Capex	• New store – NOK 2.2 million per store (average of five per year) • Relocation – NOK 1.7 million per store (average of 10 per year) • Modernisation – NOK 1.2 million per store (average of 10 per year) • Category development – NOK 15 million per year • IT and maintenance – NOK 40 million per year • In addition, estimate for 2023: IT (ERP/POS) of NOK 10-15 million and warehouse (automation expanded high-bay area) of NOK 55-60 million
Rent	• Majority of contracts are CPI-adjusted • Recognised under IFRS-16 leases

Alternative performance measures (APMs)

APMs are used by Europris for annual and periodic financial reporting in order to provide a better understanding of the group's financial performance. APMs are considered as wellknow and frequently used by users of the financial statements and are also used in internal reporting and by management to measure operating performance.

Gross profit / gross margin Gross profit is defined as Total operating income minus the cost of goods sold (COGS). The gross profit represents revenue that the group retains after incurring the direct costs associated with the purchase of the goods. Gross margin is defined as gross profit divided by total revenue and is useful for benchmarking direct costs associated with the purchase of the goods vs total revenues.	Capital expenditure Capital expenditure (Capex) is the sum of purchases of fixed assets and intangible assets as used in the cash flow. Capex is a well-known and widely used term among the users of the financial statements and is a useful measure of investments made in the operations when evaluating the capital intensity.
Opex Operating expenses (Opex) is the sum of employee benefits expense and other operating expenses. It is useful to look at cost of these two components combined, as they compose a large part of the fixed operating costs. The Opex-to-sales ratio divides the Opex by Total operating income and is useful for benchmarking this cost base vs the development in sales.	Financial debt Financial debt is the sum of borrowings and lease liabilities. Financial debt is useful to see total debt as defined by IFRS.
EBITDA / EBITDA margin EBITDA is earnings before interests, tax, depreciation of property, plant and equipment and right-of-use assets and amortisation of other intangibles. EBITDA is a well-known and widely used term among users of the financial statements and is useful when evaluating operational efficiency on a more variable cost basis as they exclude amortisation and depreciation expense related to capital expenditure. EBITDA margin is EBITDA divided by Total operating income and is useful for benchmarking this profitability parameter vs the development in sales.	Cash and liquidity reserves Cash and liquidity reserves is defined as available cash plus available liquidity through overdraft and credit facilities. This measure is useful to see total funds available short term.
EBIT EBIT is earnings before interest and taxes and is the same as the IFRS definition of operating profit. EBIT is a well-known and widely used term among the users of the financial statements and is useful when evaluating operational profitability. EBIT margin is EBIT divided by Total operating income, and thus the same as Operating profit divided by Total operating income.	Total chain sales Total chain sales are sales from all chain stores, that is both directly operated and franchise stores. This KPI is an important measure of the performance of the total Europris chain and considered useful in order to understand the development of the entire chain, regardless of ownership structure of stores.
Working capital Net change in working capital is the sum of change in inventories and trade receivables and change in other receivables less the sum of change in accounts payable and other current liabilities. Net change in working capital is a well-known and widely used term among the users of the financial statements and is useful for measuring the group's liquidity, operational efficiency and short-term financial conditions.	Directly operated store Directly operated store means a store owned and directly operated by the group. Franchise store Franchise store means a store operated by a franchisee under a franchise agreement with the group. Chain Chain means the sum of directly operated stores and franchise stores. Like-for-like sales growth 34 Like-for-like growth is defined as the growth in total chain sales for stores that have been open for every