Europris

Investor Presentation • Apr 28, 2022

Q1 2022 presentation

28 April 2022

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.

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29 years of consecutive growth

1992-2020: Europris chain sales (all stores, both directly operated by the group and the franchise stores) 2021: Europris chain sales, Lunehjem (consolidated as of March 2021) and Lekekassen (consolidated as of August 2021)

Europris shows strength – satisfactory Q1 in a challenging environment

• Total sales of NOK 1,716m, down 0.2%
• Sales down 5.5% excluding acquisitions
• Mild winter and negative timing effect of Easter
• Gross margin of 44.3%, up by 1%-point
• Fixed-rate agreement for inbound freight
• Negative effect from currency hedging
• Opex-to-sales ratio of 28.1% (26.3%)
• Increase in opex of 6.6%, or +1.7% excluding acquisitions
• EBITDA of NOK 278m (292m), down 4.9%
• Net profit to parent of NOK 88m (104m), down 15.9%

•Group sales (NOK million)

•Net profit attributable to parent (NOK million)

• Overall strong market performance last three years

outperformance last three years

Competitive edge has driven market

• Strong development for total retail segment
• Closed borders
• Increased consumption in private households
• Shopping centres more heavily affected by social distancing and temporary closure of stores
• Europris has significantly outperformed the market during Covid-19
• Unique range of quality products at low prices

** Virke numbers (total retail, groceries and variety retail) updated per February for the 2022 numbers

Europris chain: all stores, both directly operated by the group and the franchise stores

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

Financials

Growth strategy drives sales development in Q1-22

• Group sales of NOK 1,716m, down 0.2%
• Ex. acquisitions sales declined 5.5%
• Like-for-like sales decline of 6.7% for the Europris chain*
• Mild winter and timing of Easter affected basket size and traffic to stores negatively
• Border trade picking up

Growth strategy increases online sales

Total e-commerce sales (NOK million)

• Total e-com sales of NOK 103m • 6.4% of group sales • Tough comparables for the online channels • Sales decline in Norway for Lekekassen and Lunehjem, as expected • Flat sales development in Sweden (Toyspace), successful changes implemented in a competitive market • Denmark (Toyspace) still in start-up phase, performance according to plan • E-com sales from Europris.no of NOK 12m (16m) • Higher click and collect sales last year from closed stores • Changes made to improve customer satisfaction 16 96 91 368 103 Q1 Q2 Q3 Q4 2021 2022

Continued good development in gross margin

• Positive contribution from fixed freight rates
• Negative effects from hedging currency
• Dilutive effect from acquisitions

Gross margin

Inclusion of subsidiaries drives costs

OPEX-to-sales ratio

• OPEX was NOK 482m (452m)
• Ex. acquisitions OPEX increased by 1.7%
• Number of directly operated stores increased to 244 (239)
• OPEX-to-sales ratio increased to 28.1% (26.3%)

Satisfactory development in profitability

EBITDA (NOK million)

• EBITDA of NOK 278m, down 4.9%
• EBITDA margin of 16.2% (17.0%)

Solid cash and liquidity position

• Net change in cash was negative with NOK 576m (negative with 399m)
• Increased inventory from shipping goods earlier and increased purchase prices
• Net debt of NOK 3,012m (2,749m)
• Net debt excluding lease liabilities of NOK 1,100m (854m)
• Cash and liquidity reserves of NOK 1,383m (1,526m)

	Q1	Q1	FY
Cash flow, NOK million	2022	2021	2021
Cash from operating activities	(434)	(268)	1,591
- of which change in net working capital	(598)	(495)	(139)
Cash used in investing activities	(3)	(21)	(684)
Cash from financing activities	(139)	(110)	(877)
Net change in cash	(576)	(399)	30
Cash at beginning of period	570	540	540
Cash at end of period	(6)	141	570

Our strategic focus areas

Investing in our employees

• Launched a combined strategy and leadership programme for all managers
• Programme to run over the course of several years
• Preparing managers for changing market trends
• Focus on circular economy in Q1-22
• Physical gatherings for all store managers and assistant store managers in Q1-22
• Preparing for the important spring/summer season, sales training, and concept discipline
• Improve understanding of the importance of local presence
• Focus on avoiding and reducing sick leave

Warehouse expansion progressing on schedule and ramp-up of shuttle automation continues

• Warehouse expansion progressing on schedule
• Construction permit granted
• Prolonged lease at old central warehouse till 30 June 2024
• Ramp-up of shuttle automation continues
• Resolving software issues
• Replacement of some hardware parts

Disagreements continue to delay decision on exercising of ÖoB option

• Arbitration initiated with regards to legal right for Europris to challenge 2019 EBITDA calculation
• No date yet set expected to take at least 12 months before a ruling is made
• Arbitration to decide:
  • Whether option period has expired
  • If accountant's decision from September 2021 was correct
• Europris won arbitration regarding its legal right to challenge the 2020 EBITDA calculation

• This process does not affect operational developments or the execution of Europris' strategy

• First Birthday Week completed during Q1 with good results

• traffic to stores

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Europris celebrates 30 years of success

• 30 years of consecutive growth
• Successful concept as a campaign-driven low-price retailer

• 30-year anniversary will be celebrated with customers throughout 2022

• Strong campaigns continue to drive

Category upgrades continues

• Revitalised the Pet food and accessories category
• Category has been performing strongly over time
• Renewed and rebuilt shop-in-shop
• Introduction of sales promoting elements

One new store opening in the first quarter

• One new store opening in Q1
• Frøya in Trøndelag County
• Two stores relocated in Q1
• Rakkestad in Viken county
• Volda in Møre og Romsdal county
• Nine stores in pipeline for 2022 and beyond
• Two are subject to planning permission

The team at Europris Frøya

Resilient concept and well prepared

• Challenging micro- and macroeconomic conditions
• Expected to affect consumer spending negatively
• Continuously monitoring sourcing situation
• Europris is a market winner over time
• 30 years of consecutive growth and a resilient concept
• Upgraded important categories
• Significantly expanded customer base
• YTD chain sales growth of 4.6% at 26 April
• 13 per cent of the stores temporarily closed last year
• Ready for the important summer season

Next event: Q2 presentation 14 July 2022

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 on average five new stores net per year, depending on availability of locations which meet strict return requirements, potential for relocations, expansion and refurbishment activities
EBITDA	Increased EBITDA margin over time from improved sourcing and more cost-effective value chain
Dividend	Dividend policy of 50%-60% pay-out 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 (franchise projects in brackets)

2021	Q1	Q2	Q3	Q4	Total
New stores	1	1	1	1	4
Store closures	-	-	-	-	-
Relocations	1	1	1	2	5
Modernisations	4	2	2	1	9

2022E	Q1	Q2	Q3	Q4	Total
New stores	1	3	1	1	6
Store closures	-	-	-	-	-
Relocations	2	2	-	1	5
Modernisations	5	3	4	3	15

Analytical info¹

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	• Europris stores: as rule-of-thumb, OPEX in quarter one year ago + inflation + NOK 1.5-1.6 million per extra directly operated store (DOS)
CAPEX	• New store – NOK 2.0 million per store (average of 5 per year) • Relocation – NOK 1.5 million per store (average of 10 per year) • Modernisation – NOK 1.0 million per store (average of 10 per year) • Category development – NOK 15 million per year • IT & Maintenance – NOK 40 million per year • In addition, estimate for 2022: IT (ERP) of NOK 10-15 million and Warehouse (automation expanded high-bay area) of NOK 40 million

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.