Europris — Investor Presentation 2021

Apr 29, 2021

Q1 2021 presentation

29 April 2021

CEO Espen Eldal CFO Stina C Byre

Disclaimer

This presentation has been produced by Europris ASA (the "Company") exclusively for information purposes. This Presentation has not been approved, reviewed or registered with any public authority or stock exchange. Further to the aforementioned, this presentation is the result of an effort of the Company to present certain information which the Company has deemed relevant in accessible format. This Presentation is not intended to contain an exhaustive overview of the Company's present or future financial condition and there are several other facts and circumstances relevant to the Company and its present and future financial condition that not been included in this Presentation. This Presentation may not be disclosed, in whole or in part, or summarized or otherwise reproduced, distributed or referred to, in whole or in part, without prior written consent of the Company.

This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates or intends to operate. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation to update any forward-looking statements or to conform these forward-looking statements to our actual results. Furthermore, information about past performance given in this Presentation is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its parent or subsidiary undertakings or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document.

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This Presentation speaks as of 29 April 2021. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation shall be governed by Norwegian law, and any disputes relating to hereto is subject to the sole and exclusive jurisdiction of Norwegian courts.

Europris - Norway's #1 discount variety retailer

Customers • 36 million customer transactions in 2020 •Widely recognised brand and price position¹ •Increasing market share and gaining new customers

• Marketing
• 1 million leaflets in distribution • 585 000 subscribers to digital newsletter • 780 000 members in the Mer customer club

• Cost-efficient locations and operations
• 100% of like-for-like (LFL) stores profitable in 2020
• •Track-record of 10-15 new or relocated stores p.a.

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

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

28 years of consecutive growth

4

Best first quarter performance ever

• Sales of NOK 1,718m, growth of 24.3%
  • Strong sales of seasonal goods
  • Positive effects from timing of Easter
  • On average 10% of stores temporarily closed due to the pandemic
• Gross margin of 43.3%, an improvement of 0.7%-p
  • Successful upgrade of Home category
• Operational efficiency continued to improve
• Strong improvement in profitability
  • EBITDA increased by 64% to NOK 292m
• Continued strong financial position
  • Cash and liquidity reserves of NOK 1,526m (966m)

On average 10% of stores temporarily closed due to the pandemic

• Imposed mesaures rapidly changing with short response time
  • Temorarily closure of stores escalating mid-March
  • Closed stores varying from 5 in to 94 in Q1
• 19 closed stores as of 27 April

Swift actions to remedy store closures

• New sales platforms established
  • Call or e-mail orders to stores
• Click-and-collect solutions improved
  • Technical solutions upgraded
  • Available product range expanded
• Increased focus on B2B targeted sales
• Accelerated e-com sales
• 10-15% of normal sales in closed stores
  • Positive employment effects
• Remarkable effort from employees

Continued outperformance of a mixed market

• Significantly outperforming the market and gaining market share
• Mixed effects of Covid-19 in the market
  • Groceries continue to benefit from closed borders and «staycation» during Easter holiday
  • Shopping centres significantly affected by the temporary closure of stores in Oslo and Viken

Total sales growth development*

Y-o-Y total growth as of end-March (%)

Strong sales development

Total chain sales* per quarter (NOK million)

• Total chain sales* growth of 24.0% in Q1
  • 23.5% like-for-like total chain sales* growth
  • Positive sales impact from domestic demand owing to Covid-19
  • Positive effect from timing of Easter
  • Cold winter led to high sales of seasonal items
  • On average 10% of chain stores closed during the quarter
• Sales growth for all categories
  • Double digit sales growth for most categories
• Sales growth largely driven by basket size
  • More articles
  • Higher average price

Category refinement leads to margin growth

• Gross margin of 43.3% in Q1 2021, up 0.7%-p
  • Strong sales of seasonal winter items
  • Category development initiatives
• Net unrealised gain on hedging contracts and accounts payable of NOK 21m (gain of 31)

42,6 % 42,6 % 43,9 % 44,2 % 43,3 % 43,4 % Q1 Q2 Q3 Q4 FY 2020 2021

Gross margin

Operational efficiency continues to improve

• OPEX was NOK 452m in Q1 2021, up by 10%
  • OPEX-to-sales ratio was 26.3% (29.7%)
  • Continued good cost control and operational efficiency
• Number of directly operated stores increased from 235 to 239, up by 1.7%

OPEX-to-sales ratio

Record high first quarter EBITDA

EBITDA (NOK million)

• EBITDA was NOK 292m in Q1 2021, up by 64%
• EBITDA margin was 17.0% in Q1 2021, up 4.1%-p
• EBITDA affected by
  • Sales growth
  • Improved gross margin
  • Continued good cost control

Solid cash and liquidity position

• Net change in cash Q1 2021 was negative with NOK 399m (negative with 490)
  • Negative effect from net working capital, driven by higher inventory level and a reduction in accounts payable
  • Less cash from financing activities vs last year due to net loan repayment from the refinancing last year
• Net debt of NOK 2,749m as of 31 March (3,511)
• Cash and liquidity position as of 31 March of NOK 1,526m (966)

	Q1	Q1	FY
Cash flow, NOK million	2021	2020	2020
Cash from operating activities	(268)	(199)	1,705
- of which change in net working capital	(495)	(281)	255
Cash used in investing activities	(21)	(32)	(112)
Cash from financing activities	(110)	(259)	(1,621)
Net change in cash	(399)	(490)	(28)
Cash at beginning of period	540	568	568
Cash at end of period	141	78	540

Our strategic focus areas

Acceptance test for automation passed

• Acceptance test for the automatic shuttle system in the low-bay area was approved in Q1
  • Will make picking of goods more efficient
  • A controlled ramp-up is in progress
• Delayed exit from the old central warehouse
  • Will be used to manage seasonal products for spring/summer
  • New plan for exit will be decided after the summer season

Warehouse transition on track

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	✓ ✓ ✓
2020	• Q1: Operation start in high-bay area (mid February) • Q2: Lease expires at two smaller warehouses and at the second largest warehouse in Fredrikstad • Q3: Start testing of automation in low-bay area	✓ ✓ ✓
2021	• H1: Start of automated shuttle solution in low-bay area • Q4: All distribution out of the new warehouse in Moss – changed from Q3
2022	• 28 February: Lease expires at the largest warehouse, Øra in Fredrikstad • Total reduction in opex/group revenue ratio expected between 0.75 to 1.25 percentage points after the transition period (compared to 2017 figures)

Timeline is based on estimations as of Q1 2021

ÖoB financial and transaction update

• ÖoB had sales of SEK 839m in the first quarter, a decline of 10.4%
• EBITDA was SEK -36.6m (SEK -25.3m)
  • Improved gross margin of 1.6%-p
• Lower OPEX of SEK 6 million (lower rent and marketing costs)
• Still searching for an external expert to review 2019 financials after due diligence disagreements on 2019 EBITDA
  • 2019 EBITDA forms the basis of the preliminary purchase price if option is exercised
  • Option period of six months from agreement on ÖoB's 2019 financials

Successful upgrade of important Home category

• New Home concept well received
  • Among categories with highest sales growth in Q1
  • High share of own brands
  • Above-average margins
  • Emphasis on base selection requires less category management
• Further development of shop-in-shop for the Home category will continue in 2021
• Acquisition of 67% of the e-commerce store Lunehjem.no
  • Small, but well positioned and profitable company within home and interior

Store closures escalated e-commerce growth

E-commerce

• Growth in all product categories
  • Seasonal products sold well
• Sales growth escalating after higher share of store closures mid-March
• Lower basket value due to widened product range offered online

E-crm

• New search engine launched in the quarter
• Improved insights from the Mer customer club
• 790,000 Mer customer club members 31 March
  • 90,000 more members vs year-end

Solid performance in new stores

• Latest vintage of new stores has performed in accordance with their strict investment criteria
• One new store opening in Q1
  • Austevoll in Vestland county
• One store relocated in Q1
  • Vågsbygd in Agder county
• Nine stores in pipeline for 2021 and beyond
  • First city concept store in Norway's second largest city, Bergen

The team at Europris Austevoll

Outlook

Outlook

• As expected, sales in April have been negatively impacted by timing of Easter and temporary store closures
  • Year to date chain sales growth of 5.5% per 27 April, with on average 13% of the chain's stores closed
  • 19 stores closed at 27 April and open stores continue to perform well
• Well prepared for the spring/summer season
• Favorable market fundamentals
  • Europris well positioned to be a market winner in discount variety retail post Covid-19 outbreak
  • Strong operational performance with swift responses to changes in market conditions
  • Strong culture and remarkable efforts from employees
• Long-term financial and operational ambitions remain unchanged

Be the best discount variety retailer in Europe

Next event: Q2 presentation 15 July 2021

Appendix

Status on ÖoB
Sales days and store projects
Analytical information
Alternative Performance Measures (APM's)

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
2020	77	72	79	80	308
2021	76	71	79	81	307
2022	76	72	79	81	308

•Number of store projects (franchise projects in brackets)

2020	Q1	Q2	Q3	Q4	Total
New stores	1	-	1	2	4
Store closures	-	1	-	1	2
Relocations	1	-	1	-	2
Modernisations	2	5	2	2(1)	11(1)

2021E	Q1	Q2	Q3	Q4	Total
New stores	1	1	2	2	6
Store closures	-	-	-	-	-
Relocations	1	2	1	2	6
Modernisations	4	3	2	3	12

¹ All figures are approximations and subject to change without further notice 34

Seasonality	• As rule-of-thumb, the Easter impact is approximately NOK 60-75 million in revenue and NOK 12-15 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

Analytical info: New warehouse

NOK million	2019	2020	Q1 2021	Q2 2021	Q3 2021	Q4 2021	2021	2022
Investments
IT, office equipment and other (Capex)	28	8	1.5	~1.9	~1.9	~1.9	~7	~7
Automation, part 1 (lease)	52	28	-	~	~	~	~	~
Automation, part 2 (Capex)	65	24	0.2	~35.2	~	~	~35	~
OPEX items
Ordinary rent	68	67	16.5	~16.5	~16.5	~10.1	~60	~41
Non-recurring rent	14	9	-	~	~	~10.7	~11	~
Non-recurring moving

5 4 - ~ ~ ~2.4 ~2 ~

No material changes since last reporting.

expenses

Alternative performance measures (APMs)

term financial conditions.

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. Like-for like growth is defined as the growth in total chain sales for stores that have been open for every month of both the previous and the current calendar year.
Working capital Working capital is the sum of inventories and trade receivables and other receivables less the sum of accounts payable and other current liabilities. Net change in working capital is the change in the mentioned parameters; i.e., 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	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.

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