Investor Presentation • Nov 2, 2023
Investor Presentation
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2 November 2023
CEO Espen Eldal CFO Stina C Byre
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.
By reviewing this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the businesses of the Company. This Presentation must be read in conjunction with the recent financial reports of the Company and the disclosures therein. The distribution of this Presentation in certain jurisdictions may be restricted by law. Persons in possession of this Presentation are required to inform themselves about, and to observe, any such restrictions. No action has been taken or will be taken in any jurisdiction by the Company that would permit the possession or distribution of this Presentation in any country or jurisdiction where specific action for that purpose is required.
No shares or other securities are being offered pursuant to this Presentation. This Presentation does not constitute an offer to sell or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of an offer to buy or subscribe for, any shares or other securities in any jurisdiction, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company.
By reviewing this Presentation you agree to be bound by the foregoing limitations.
This Presentation speaks as of 2 November 2023. 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.
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
1992 LTM 2023
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) 4
Retail sales – year to 30 September, year-on-year growth %*
CFO Stina C Byre
Total group sales (NOK million)
9
| Q3 | Q3 | YTD | YTD | |
|---|---|---|---|---|
| Cash flow, NOK million | 2023 | 2022 | 2023 | 2022 |
| Cash from operating activities | 526 | 197 | 734 | 189 |
| - of which change in net working capital |
163 | (211) | (104) | (793) |
| Cash used in investing activities | (33) | (121) | (343) | (162) |
| Cash from financing activities | (284) | (167) | (774) | (721) |
| Net change in cash | 209 | (91) | (383) | (694) |
| Cash at beginning of period |
(128) | (33) | 464 | 570 |
| Cash at end of period | 81 | (124) | 81 | (124) |
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| Long-term financial and operational ambitions |
|---|
| ÖoB |
| Sales days and store projects |
| Analytical information |
| Alternative Performance Measures (APM's) |
| 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 |
| 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) when closing the deal • Sold 2.9m shares in May 2023 and holds 1.45m shares (0.9% ownership) |
|---|---|
| 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 |
| Year | Q1 | Q2 | Q3 | Q4 | Total |
|---|---|---|---|---|---|
| 2022 | 76 | 72 | 79 | 81 | 308 |
| 2023 | 77 | 71 | 79 | 79 | 306 |
| 2024 | 75 | 73 | 79 | 80 | 307 |
| 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 | 2 | 1 | 2 | 7 |
| Store closures |
- | - | 1 | - | 1 |
| Relocations / expansions |
3 | 2 | 1 | - | 6 |
| Modernisations | 3 | 3 | 2 | (1) | 9 |
| 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 2.4 million per store (average of five per year) • Relocation – NOK 1.7 million per store (average of 10 per year) • Modernisation – NOK 1.5 million per store (average of 10 per year) • Category development – NOK 15 million per year • IT and maintenance – NOK 30 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 45 million (est. of NOK 30m in 2024) |
| Rent | • Majority of contracts are CPI-adjusted • Recognised under IFRS-16 leases |
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 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.
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.
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.
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.
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.
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.
Financial debt is the sum of borrowings and lease liabilities. From the first quarter of 2023 lease liabilities include both non-current and current lease liabilities, and last year figures are restated to also include current lease liabilities. Financial debt is useful to see total debt as defined by IFRS.
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.
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.
Directly operated store means a store owned and directly operated by the group.
Franchise store means a store operated by a franchisee under a franchise agreement with the group.
Chain means the sum of directly operated stores and franchise 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. 28
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