Europris

Investor Presentation • Apr 25, 2019

Q1 2019 presentation

25 April 2019

Norway's #1 discount variety retailer

• 31 million customer transactions in 2018 •Widely recognised brand and price position¹

Marketing

Stores

•Over 1 million leaflets in distribution • More than 300 000 subscribers to digital newsletter

• Cost-efficient locations and operations
• 224 of 238 like-for-like (LFL) stores profitable in 2018 •Track-record of 15 new or relocated stores p.a.

• More than 40 years of wholesaler experience •Efficient set-up and nationwide reach
  • New modern central warehouse from Q2 2019

• •From more than 30 countries
  • •Pan-Nordic agreement with ÖoB and Tokmanni

Europris – a growth story

4

Highlights in the first quarter

• Strong top line growth driven by number of customers
  • Sales negatively affected by around 5% (NOK 60m) because of the timing of Easter
  • Comparable figures per 4th week of April mid-single-digit LFL growth
  • Group revenue for the quarter was NOK 1,237m (NOK 1,199m)
• Stable gross margin at 41.4% (41.2%)
• OPEX affected by increased costs related to high fill-rate at the central warehouse, additional costs of NOK 11m
• Promising introduction of first Europris City concept store
• New warehouse on schedule first operations to start during May
• Adjusted net loss of NOK 24m (profit of NOK 9m)

•Group revenue (NOK million)

Sales performance

• Total retail sales growth of 1.3% in Q1, well above total market growth of 0.3%(1)
• Timing of Easter distorts comparability
• Number of customers is the main growth driver
• Continued capitalisation on the efforts to increase central control of volumes and spacing in the stores
• Focus on implementing the weekly sales campaigns
  • Reduce sold-out conditions
  • Improve customer satisfaction and price position

Retail sales per quarter (NOK million)

Comparability affected by timing of Easter

Source: Kvarud analyse, Shopping Centre Index and Europris

Be the best discount variety retailer in Europe

Refining Handyman category to improve sales and profitability

New product ranges in the Grocery category

Non-prescription medications and health care

Bijouterie

Europris City store concept introduced

• First City concept store opened in March
  • Gunerius shopping centre, down town Oslo
• Sales space of 400 sqm
• Streamlined product range focused on:
  • Consumables
  • Home and interior
• Terminals for on-line shopping
• Europris explore potential for further City stores

Developing the store estate

• One new store opened in the quarter
  • Gunerius, down-town Oslo
• One store expansion in the quarter
  • Stord in Hordaland county
• 12 stores in pipeline for 2019 and beyond
  • Six new stores expected in 2019
  • Four of the stores are subject to local authority planning processes
• The store at Grini in Akershus is at risk
  • According to local municipal authorities the store operates in violation with local planning permissions
  • Awaiting final decision from the court
  • Risk for lost annual sales of NOK 51m and one-off costs in the range NOK 5-8m

Opening of Europris City, Gunerius

Entering the transition period for the new warehouse

• Main production sites

From inefficiency (2019) To efficiency (2020/2021) To Nordic retail best practice (2021/2022)

• 3PL handling

• Buffer storage

Overview of the transition period

2019	• 1 May: Take over of new warehouse in Moss • Q2: Operation start in low-bay area. Start testing of high-bay automation • Q2: Lease expires at one small warehouse in Fredrikstad • Q3: Lease expires at the second largest warehouse in Fredrikstad
2020	• H1: Operation start in high-bay area • H1: Lease expires at two smaller warehouses in Fredrikstad • H2: Start testing of automation in low-bay area
2021	• H1: Start of automated shuttle solution in low-bay area • H1: All distribution out of the new warehouse in Moss
2022	• 28 Feb: Lease expires at the largest warehouse, Øra in Fredrikstad

Financial review

Gross margin development

• Gross margin was 41.4% in Q1 2019 vs. 41.2% in Q1 2018
• Timing of Easter distorts comparability
  • Last year includes sales of lower margin seasonal products
• Effect of the changes in sugar tax:
  • The increase in sugar tax in 2018 had a positive effect of NOK 12m, of which NOK 5m was booked in Q1
  • The reversal of the sugar tax in 2019 had a negative effect of NOK 8m, of which full effect was booked in Q1

Gross margin

OPEX development

• OPEX in % of revenue was 31.3% in Q1 2019 vs. 37.3% in Q1 2018
  • Adjusted for IFRS 16 effect, the OPEX ratio was 39.5%
• Number of directly operated stores increased from 211 to 224, up by 6.2%
• High fill-rate at central warehouse causes capacity constraints
  • Early arrival of summer seasonal products, late Easter and too high base-range inventory in some categories
  • Extra use of 3rd party handling, personnel costs and container rent amounting to NOK 11m
  • Corrective actions taken, but will take 3 to 6 months
  • Expect additional costs of around NOK 15m in Q2 and NOK 5-10m in Q3

OPEX in % of group revenue

EBITDA development

• EBITDA was NOK 125m in Q1 2019 vs NOK 46m in Q1 EBITDA (NOK million)

• EBITDA affected by timing effects and one-off's of around NOK 35m

▪ Adjusted for IFRS 16 effect, the EBITDA was NOK 23m

• Timing of Easter

2018

• Changes in sugar tax
• Increased OPEX following the high fill-rate at central warehouse

666

Cash flow

• Cash flow in the quarter reduced from last year due to increased inventory at the central warehouse
• IFRS 16 has no net cash effect
  • Cash from operating activities increase
  • Cash used in investing activities increase
  • Cash from financing activities decrease

	Q1	Q1	FY
Cash flow, NOK million	2019	2018	2018
Cash from operating activities	(301)	(298)	350
- of which change in net working capital	(343)	(260)	(169)
Cash used in investing activities	(73)	(24)	(92)
Cash from financing activities	(43)	(1)	(413)
Net change in cash	(417)	(323)	(155)
Cash at beginning of period	427	582	582
Cash at end of period	10	259	427

Outlook

• Continued growth in long-term revenue and profits supported by the group's leading position in an expanding retail segment
• Short-term impacted by higher OPEX related to capacity constraints at central warehouse
• Transforming Europris to an omni-channel retailer through ecommerce and e-crm
• Healthy pipeline of new stores
  • Twelve stores planned for 2019 and beyond
• One franchise takeover completed in April and 1-2 additional takeovers expected during 2019

On the quest to be the best

The goal is to be the best in all four areas below

Price	Number 1 in price perception in Norway, the fight for lower prices continues
Concept	Continuous development, focus on customer need-based flow and distinct shop-in-shop
Value chain and cost efficiency	Nordic sourcing, new warehouse and automation of operations to improve further
Execution and culture	Continue to build on our strong company culture and dedicated employees

Next event: Q2 presentation 12 July 2019

Appendix

Sales days and store projects

Number of sales days

Year	Q1	Q2	Q3	Q4	Total
2017	77	71	79	79	306
2018	75	73	78	80	306
2019	76	71	79	80	306
2020	77	72	79	79	307

•Number of store projects (franchise projects in brackets)

2018	Q1	Q2	Q3	Q4	Total
New stores	2	4	1	2	9
Store closures	-	-	-	1	1
Relocations	2	1 (1)	2 (1)	(1)	5 (3)
Modernisations	5	2	1	1	9

2019E	Q1	Q2	Q3	Q4	Total
New stores	1	4	1	-	6
Store closures	-	-	-	-	-
Relocations	-	3	(1)	3	6 (1)
Modernisations	7	2	5 (1)	1	15 (1)

¹ All figures are approximations and subject to change without further notice 26

Seasonality	• As rule-of-thumb, the Easter impact is approximately NOK 50 million in revenue and NOK 10 million of EBITDA
Quarterly OPEX	• As rule-of-thumb, OPEX in year ago quarter + inflation + NOK 1.5 – 1.6 million per extra directly operated store (DOS)
CAPEX	• New store – NOK 2.3 million per store (5 per year) • Relocation – NOK 1.5 million per store (10 per year) • Modernisation – NOK 1.0 million per store (10 per year) • Category development – NOK 10 million per year • IT & Maintenance – NOK 35 million per year
Estimated one-time CAPEX items 2019	• New warehouse and new head office of approximately NOK 30 million (IT, system integration, fixtures and fittings)

Analytical info¹

Analytical info: New warehouse

NOK million	Q1 2019	Q2 2019	Q3 2019	Q4 2019	2019	2020	2021	2022
Investments
IT, office equipment and other (CAPEX)		~10	~5		~15	~5
Automation, part 1 (lease)	15	~25	~30	~40	~110	~5
Automation, part 2 (CAPEX)		~20	~10	~35	~65	~50
OPEX items
Ordinary rent	14	19	19	19	70	71	53	41
Redundant warehouse capacity in 2019 and Øra lease from H2 2021 (lease ends March 2022)		1	4		~6		0-13	0-5

Non-recurring moving costs 5-10 5-10 3-5 3-5

Alternative performance measures (APMs)

APMs are used by Europris for annual and periodic financial reporting in order to provide a better understanding of Europris' financial performance and are also used by management to measure operating performance. APMs are adjusted IFRS figures defined, calculated and used in a consistent and transparent manner.

Gross profit represents group revenue less the cost of goods sold excluding unrealised foreign currency effects.	Working capital is the sum of inventories, trade receivables and other receivables less the sum of accounts payable and other current liabilities
Opex is the sum of employee benefits expense and other operating expenses.	Capital expenditure is the sum of purchases of fixed assets and intangible assets
EBITDA (earnings before interest, tax, depreciation and amortisation) represents gross profit less Opex.	Net debt is the sum of term loans and financial leases less bank deposits and cash
Adjusted EBITDA is EBITDA adjusted for nonrecurring expenses.	Directly operated store means a store owned and operated by the group
Adjusted profit before tax is net profit before tax adjusted for non-recurring items	Franchise store means a store operated by a franchisee under a franchise agreement with the group
Adjusted net profit is net profit adjusted for non-recurring items	Chain means the sum of directly operated stores and franchise stores
Adjusted earnings per share is adjusted net profit divided by the current number of shares, adjusted by the monthly average of treasury shares	Like-for-like are stores which have been open for every month of the current calendar year and for every month of the previous calendar year