Quarterly Report • Apr 28, 2022
Quarterly Report
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| Highlights 20223 | |
|---|---|
| Key figures 4 | |
| Period review5 | |
| Financial review8 | |
| Financial statements 12 | |
| Alternative performance measures 20 |
Figures for the corresponding period of the year before in brackets. The figures are unaudited. See page 20 for definition of APMs.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| GROUP KEY INCOME STATEMENT FIGURES | |||
| Sales directly operated stores | 1,467 | 1,538 | 7,438 |
| Sales from partly owned subsidiaries | 92 | - | 423 |
| Sales from wholesale to franchise stores | 138 | 162 | 707 |
| Franchise fees and other income | 19 | 18 | 80 |
| Total operating income | 1,716 | 1,718 | 8,648 |
| % growth in total operating income | (0.2%) | 24.3% | 7.9% |
| Cost of goods sold | 956 | 974 | 4,592 |
| Gross profit | 760 | 744 | 4,056 |
| Gross margin | 44.3% | 43.3% | 46.9% |
| Opex | 482 | 452 | 1,973 |
| Opex-to-sales ratio | 28.1% | 26.3% | 22.8% |
| EBITDA | 278 | 292 | 2,083 |
| EBITDA margin | 16.2% | 17.0% | 24.1% |
| EBIT (Operating profit) | 126 | 151 | 1,512 |
| EBIT margin (Operating profit margin) | 7.4% | 8.8% | 17.5% |
| Net profit | 89 | 104 | 1,104 |
| Profit attributable to owners of the parent | 88 | 104 | 1,082 |
| Earnings per share (in NOK) | 0.55 | 0.65 | 6.72 |
| GROUP KEY CASH FLOW AND BALANCE SHEET FIGURES | |||
| Net change in working capital | (598) | (495) | (139) |
| Capital expenditure | 30 | 20 | 131 |
| Financial debt | 3,012 | 2,890 | 3,010 |
| Cash | - | 141 | 570 |
| Net debt | 3,012 | 2,749 | 2,440 |
| - Lease liabilities | 1,912 | 1,895 | 1,914 |
| Net debt ex lease liabilities | 1,100 | 854 | 526 |
| Cash and liquidity reserves | 1,383 | 1,526 | 1,981 |
| CHAIN KEY FIGURES | |||
| Total chain sales | 1,672 | 1,777 | 8,569 |
| % growth in total chain sales | (5.9%) | 24.0% | 2.2% |
| % growth in like-for-like chain sales | (6.7%) | 23.5% | 1.5% |
| Total number of chain stores at end of period | 271 | 267 | 270 |
| - Directly operated stores | 244 | 239 | 242 |
| - Franchise stores | 27 | 28 | 28 |
Europris has seen strong growth and lifted its performance over the past few years, and the group is satisfied with developments in the first quarter of 2022. Total sales were almost on par with last year, with a higher gross margin, although a slight underlying cost increase and costs from acquired companies reduced profit.
Several factors affected progress compared with last year, making a comparison of the underlying performance challenging.
In addition to these factors, the company sees a more challenging economic scenario for consumer spending, with very high prices for electricity and fuel, a general increase in inflation, and rising interest and mortgage rates. The Europris concept has, however, proven robust in turbulent times and the group sees that its campaigns continue to drive traffic to stores. Sales in the first quarter of 2022 was 31 per cent higher than the first quarter in 2019 (pre Covid-19).
| 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|
| 1,279 | 1,432 | 1,777 | 1,672 |
| 100% | 112% | 139% | 131% |
| 259 | 265 | 267 | 271 |
| 4.9 | 5.4 | 6.7 | 6.2 |
| Neg | Neg | Pos | Neg |
| Neutral | Neg | Pos | Neg |
| N/A | Pos | Mixed*/ pos |
Mixed/ neg |
* Positive effect on open stores. On average, 10 per cent of the stores were closed.
The group has not been directly affected by the war in Ukraine. It has very limited sourcing from Russia and Ukraine, and all sourcing from Russia has been stopped. Like the general market, Europris could face some agricultural raw material shortages in the coming periods.
Group sales for the first quarter came to NOK 1,716 million, down by a marginal 0.2 per cent. Excluding acquisitions, sales declined by 5.5 per cent, whereas the like-for-like decline for the Europris chain in the first quarter of 2022 was 6.7 per cent.
Given the significant effects of the Covid-19 pandemic on consumer patterns, sales developments need to be evaluated in a longer perspective. The Europris chain has grown by a total of 30.1 per cent over the past three years, compared with 15.3 per cent for variety retail and 19.1 per cent for total retail.
| Sales growth to 31 March | 2020 | 2021 | 2022*** | Three years com bined |
|---|---|---|---|---|
| Virke: total retail* | 3.8% | 12.1% | 3.1% | 19.1% |
| Virke: groceries* | 7.6% | 13.8% | (4.2%) | 17.3% |
| Virke: variety retail* | 4.8% | 9.9% | 0.5% | 15.3% |
| Kvarud shopping centre index** | (4.0%) | 1.0% | 11.6% | 8.6% |
| Europris chain | 12.0% | 24.0% | (5.9%) | 30.1% |
* Virke retail index (using figures reported by Statistics Norway)
** Kvarud Analyse shopping centre index *** Virke numbers are to 28 February
As described above, the Europris chain had a like-for-like sales decline of 6.7 per cent for the first quarter of 2022, with traffic slightly below last year's figures. The mild winter negatively affected the basket size, owing to fewer sales of higher value seasonal items compared with last year. The later timing of Easter also negatively affected both basket size and traffic. Cross-border trade is picking up, although it remains below the pre-pandemic level. The Europris stores closest to the Swedish border have experienced larger declines in sales than the chain average from 2021, but higher than average growth compared with 2019.
Europris is a campaign-driven low-price retailer and works continuously to improve the campaign concept. Its 30th anniversary this year will be celebrated with customers throughout 2022, with several very attractive campaign weeks. The first Birthday Week was completed with very good results during the first quarter. Campaign-driven discount retail is a cornerstone of Europris, and it is reassuring to see this engine continuing to drive traffic and sales even in a more challenging retail environment.
The pet food and accessories category has been a strong performer over time, and was revitalised in the stores during the first quarter. The shop-in-shop was renewed and rebuilt to improve the customer experience and drive sales. New sales-promoting elements were introduced to make the category more attractive and enhance the overall customer impression.
Sales from the acquired Lekekassen and Lunehjem online companies accounted for NOK 92 million in the first quarter. The first quarter is a relatively modest quarter for Lekekassen in seasonal terms. Online volumes have generally been boosted by the pandemic over the past two years and, as expected, the company saw a decline in sales during the first quarter in Norway. In Sweden, Lekekassen (ToySpace) achieved flat growth for the first quarter, reflecting several successful changes aimed at boosting customer loyalty in a competitive market. In Denmark, Lekekassen (ToySpace) is still in its early stages after the launch in September 2021, and is performing as planned.
Sales from Europris.no were down by NOK 4 million from the first quarter of last year. This decline related mainly to lower click and collect sales from stores which were temporarily closed in 2021.
| NOK million | Q1 2021 | Q1 2022 | Change |
|---|---|---|---|
| Europris e-com sales* | 16 | 12 | (28%) |
| Total group e-com sales** | 16 | 103 | 87 |
| Percentage of total group sales |
0.9% | 6.4% | 5.4%-p |
* Home deliveries and click and collect.
** Europris, Lunehjem and Lekekassen (Lunehjem included from March 2021 and Lekekassen from August 2021).
Europris continued to improve the customer interface on its website during the first quarter by making it easier for customers to navigate across the different categories. That also improves the experience for customers navigating via their mobile phones, which is the most-used platform. Europris also launched ratings and reviews on the website. This function is currently at an early stage, with only customers shopping online able to review products, but it will be expanded to include MER customers shopping in physical stores as well.
Europris is also making changes to its online shopping delivery options. Customers have previously been able to order goods online with free shipment to an Europris store. Delivery time was considered to be too long with this option, and it was removed in late February to improve customer service. Delivery of products purchased online is now available as either shipment to the customer's home or to a pick-up-point, or as click and collect at an Europris store within two business hours. While this change is expected to have a negative effect on online sales, it is expected to enhance the customer's online shopping experience and to improve the profitability of online sales.
Europris' MER customer club has more than one million members, giving the group a direct marketing channel to around 700,000 of these members. Analysis of membership data will be used to improve digital marketing as part of a planned gradual transition from printed leaflets to digital messaging. Over time, the aim is also to increase frequency of store visits, both from existing customers and by reaching new customers, through better-targeted digital communication.
Europris opened one new store during the first quarter, at Frøya in Trøndelag county. Two stores were relocated during the period, at Rakkestad in Viken county and Volda in Møre og Romsdal county respectively. At 31 March 2021, the chain had a total of 271 stores, of which 244 were directly operated and 27 were franchises.
Europris has a healthy pipeline of new stores, and the board has approved an additional nine stores for 2022 and beyond. Two of the planned new stores are subject to planning permission processes.
| Month | Store | County |
|---|---|---|
| March | Frøya | Trøndelag |
| Store relocations in 2022 | ||
| Month | Store | County |
| January | Rakkestad | Viken |
| March | Volda | Møre og Romsdal |
A construction permit has been granted for the expansion of the warehouse in Moss, and the project is progressing on schedule. Suppliers have confirmed that building materials and logistics are available, although possible delays cannot be ruled out given current macroeconomic developments. The lease of the old central warehouse at Øra in Fredrikstad has been extended to 30 June 2024, securing capacity until the expansion in Moss has been finalised. After vacating the Øra facility, Europris will operate from one central warehouse.
Testing of the automated shuttle system for picking goods in the low bay area has made progress, but it is not yet operating at full speed. The company will continue working to resolve software-related issues in the second quarter. Some hardware components will also be changed to improve the stability of the solution, which will take place during the third quarter of this year.
Europris launched a combined strategy and leadership programme for managers in 2021, to prepare managers for changing market trends. A two-day session was held in the first quarter, where the main topic was how Europris can improve and contribute to the circular economy.
All store managers and assistant store managers were gathered for physical meetings during the quarter, with extra attention devoted to preparing for the important spring/summer season, sales training, concept discipline and improved understanding of the importance of a local presence. In addition, all employees participated in a virtual kick-off presenting the summer/spring season.
The group is giving great attention to avoiding and reducing sick leave, and store managers also took various training sessions on this issue during the first quarter. Higher sick leave for the first quarter reflected Covid-19 and the related quarantine requirements. The employees did a fantastic job to ensure that operations could run as normal.
| Sickness absence | Q1 2021 | Q1 2022 |
|---|---|---|
| Group* | 9.5% | 11.5% |
* Excluding partly owned subsidiaries
Two lost-time injuries were recorded during the quarter.
Europris acquired a 20 per cent equity stake in ÖoB in 2018, and the acquisition closed on 13 December 2019 with payment in Europris shares. As part of the agreement with ÖoB, the group secured an option to acquire the remaining 80 per cent of the ÖoB shares, which runs for six months from the date the parties reach an agreement on ÖoB's 2019 EBITDA.
Pricing is based on an EV/EBITDA multiple of 7.7, adjusted for net debt and average net working capital, with the final price for the remaining 80 per cent to be based on an average of 2019 and 2020 EBITDA.
The financial development of ÖoB has not been as anticipated when the parties entered into the agreement, and disagreements about how to interpret the terms for pricing the remaining 80 per cent of the company have delayed a decision on exercising the option.
An arbitration process on the dispute concerning the 2019 EBITDA has been initiated, to decide i) whether the option period has expired, and ii) if an accountant's decision from September 2021 on the 2019 EBITDA was correct. Europris' position is that the decision by the accountant is erroneous and that the option period has not begun. ÖoB takes the view that the option period commenced when the accountant made their statement and that it has now expired.
No date has yet been set for this arbitration. It is likely to take at least 12 months before a ruling is made, and it will consequently take time before any exercise of the option can and will be decided on. In January 2022, the arbitration decision regarding Europris' right to challenge the 2020 EBITDA went in the group's favour.
This process does not affect operational developments or the execution of Europris' strategy in any way.
Total operating income for the group amounted to NOK 1,716 million (NOK 1,718 million) in the first quarter, down by 0.2 per cent year-on-year. Excluding acquisitions, sales declined by 5.5 per cent. The chain had a like-for-like decline of 6.7 per cent, following like-for-like growth of 23.5 per cent last year. The mild winter and the timing of Easter had a negative effect on sales in the quarter.
Gross profit came to NOK 760 million (NOK 744 million). The gross margin was 44.3 per cent (43.3 per cent), affected positively by a fixed-rate agreement on inbound freight. The group recognised a net unrealised loss of NOK 5 million on hedging contracts and accounts payable (gain of NOK 21 million). In addition, the gross margin was somewhat diluted by the margin from acquired companies.
Operating expenditure (Opex) was NOK 482 million in the first quarter (NOK 452 million), up by 6.6 per cent. The increase is mainly explained by the inclusion of acquired companies. Excluding the acquisitions, operating costs increased by 1.7 per cent, which mainly reflects the increase from 239 to 244 directly operated stores. Opex amounted to 28.1 per cent of total operating income for the group (26.3 per cent).
EBITDA was NOK 278 million (NOK 292 million), down by NOK 14 million or 4.9 per cent from the first quarter last year.
The group recorded an estimated loss of NOK 9 million (loss of NOK 8 million) on its 20 per cent stake in Runsvengruppen (ÖoB). This is based on preliminary and unaudited figures.
Net profit for the first quarter of 2022 was NOK 89 million (NOK 104 million). Net profit attributable to owners of the parent was NOK 88 million (NOK 104 million).
Net change in working capital was negative at NOK 598 million (negative at NOK 495 million). Working capital was negatively affected by shipping goods earlier and increased purchase prices.
Capital expenditure was NOK 30 million (NOK 20 million). The increase is related to more store projects and IT investments.
Financial debt at 31 March 2022 was NOK 3,012 million (NOK 2,890 million). Adjusted for lease liabilities, financial debt amounted to NOK 1,100 million (NOK 995 million).
Net debt at 31 March 2022 was NOK 3,012 million (NOK 2,749 million). Adjusted for lease liabilities, net debt came to NOK 1,100 million (NOK 854 million).
Cash and liquidity reserves for the group at 31 March 2022 amounted to NOK 1,383 million (NOK 1,526 million).
Europris has so far been shielded from the unstable market for container freight, with a fixed-rate agreement on inbound freight and on-time deliveries. Major Covid-19 outbreaks or other factors in the global supply chain could change the situation, and a long-lasting shutdown of important ports in China could affect future deliveries. Europris continuously monitors the situation in close cooperation with the shipping agent and employees at the sourcing office in Shanghai.
The broad variety retail segment has performed well over time, and Europris has been a market winner with 30 years of consecutive growth. Although such an environment naturally attracts increasing competition, the group's competitive position is stronger than ever with upgraded categories and a significant expansion of the customer base over the past few years.
Norwegian society has finally opened up and is gradually returning to normal after two years of pandemic, and product sales must now compete with services, travel, entertainment and experiences for consumer attention and wallet share. At the same time, consumers have to deal with record prices for electricity and fuel, generally higher inflation and rising interest rates. The macroeconomic environment is unstable and uncertain. Summing up, these significant elements must be expected to have a negative effect on consumer spending.
The Europris concept has proven resilient in uncertain times, with a wide and accessible store network, a broad product offering at low prices, and attractive
campaigns. Europris has a flexible business model and a demonstrated ability to adapt quickly to changes, and the board remains confident that the group also continues to be well positioned for the future in a more challenging environment.
Year-to-date sales growth for the Europris chain was 4.6 per cent at 26 April. During the same period last year, an average of 13 per cent of the chain's stores were temporarily closed. Goods for the summer have already been delivered and Europris is ready for the important season ahead.
Fredrikstad, 27 April 2022 THE BOARD OF DIRECTORS OF EUROPRIS ASA
| Figures are stated in NOK 1,000 | Notes | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| Total operating income | 1,715,566 | 1,718,236 | 8,648,177 | |
| Cost of goods sold | 956,053 | 974,405 | 4,592,143 | |
| Employee benefit expenses | 306,716 | 311,224 | 1,230,303 | |
| Depreciation | 5 | 151,119 | 141,153 | 571,223 |
| Other operating expenses | 175,243 | 140,813 | 742,749 | |
| Operating profit | 126,435 | 150,641 | 1,511,758 | |
| Net financial income (expense) | (862) | (6,721) | (94,395) | |
| Profit (loss) from associated companies | 7 | (9,226) | (8,000) | 189 |
| Profit before tax | 116,346 | 135,920 | 1,417,551 | |
| Income tax expense | 27,626 | 31,662 | 313,588 | |
| Profit for the period | 88,720 | 104,257 | 1,103,963 | |
| Profit attributable to non-controlling interests | 1,021 | - | 22,152 | |
| Profit attributable to owners of the parent | 87,699 | 104,257 | 1,081,811 | |
| Interim condensed consolidated | ||||
| statement of comprehensive income | ||||
| Profit for the period | 88,720 | 104,257 | 1,103,963 | |
| Total comprehensive income | 88,720 | 104,257 | 1,103,963 | |
| Profit attributable to non-controlling interests | 1,021 | - | 22,152 | |
| Profit attributable to owners of the parent | 87,699 | 104,257 | 1,081,811 |
| Figures are stated in NOK 1,000 | Notes | 31 Mar 2022 | 31 Mar 2021 | 31 Dec 2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| ASSETS | ||||
| Total intangible assets | 5 | 2,732,237 | 2,062,290 | 2,730,061 |
| Total fixed assets | 5 | 2,812,759 | 2,641,325 | 2,814,094 |
| Total financial assets | 6,7 | 224,773 | 183,240 | 195,294 |
| Total non-current assets | 5,769,769 | 4,886,854 | 5,739,449 | |
| Inventories | 2,350,732 | 1,891,656 | 1,997,312 | |
| Trade receivables | 145,801 | 167,599 | 215,480 | |
| Other receivables | 6 | 93,643 | 84,782 | 116,551 |
| Cash | - | 140,975 | 570,286 | |
| Total current assets | 2,590,176 | 2,285,012 | 2,899,629 | |
| Total assets | 8,359,945 | 7,171,866 | 8,639,078 | |
| EQUITY AND LIABILITIES | ||||
| Total paid-in capital | 8 | 233,342 | 229,945 | 233,342 |
| Total retained equity | 2,474,424 | 2,087,870 | 2,386,704 | |
| Total shareholders' equity | 2,707,766 | 2,317,815 | 2,620,046 | |
| Non-controlling interests | 253,357 | - | 268,680 | |
| Total equity | 2,961,123 | 2,317,815 | 2,888,726 | |
| Provisions | 79,898 | 36,334 | 52,332 | |
| Borrowings | 6 | 1,089,032 | 995,082 | 1,091,521 |
| Lease liabilities | 6 | 1,911,869 | 1,894,950 | 1,913,555 |
| Total non-current liabilities | 3,080,799 | 2,926,366 | 3,057,407 | |
| Borrowings | 6 | 10,868 | - | 5,000 |
| Current lease liabilities | 6 | 519,632 | 491,504 | 490,164 |
| Accounts payable | 780,811 | 661,706 | 843,854 | |
| Tax payable | 183,216 | 193,734 | 324,057 | |
| Public duties payable | 210,788 | 218,298 | 376,023 | |
| Put option liability | 6 | 246,528 | - | 246,528 |
| Other current liabilities | 6 | 366,179 | 362,442 | 407,319 |
| Total current liabilities | 2,318,023 | 1,927,684 | 2,692,945 | |
| Total liabilities | 5,398,822 | 4,854,051 | 5,750,352 | |
| Total equity and liabilities | 8,359,945 | 7,171,866 | 8,639,078 |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
| Figures are stated in NOK 1,000 | Attributed to equity holders of the parent | |||||||
|---|---|---|---|---|---|---|---|---|
| Share capital | Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total | Non controlling interests |
Total equity | |
| At 1 January 2022 | 166,969 | (5,997) | 51,652 | 20,718 | 2,386,704 | 2,620,046 | 268,680 | 2,888,726 |
| Profit for the period | - | - | - | - | 87,699 | 87,699 | 1,021 | 88,720 |
| Translation differences | - | - | - | - | 21 | 21 | 156 | 177 |
| Other comprehensive income | - | - | - | - | - | - | - | - |
| At 31 March 2022 | 166,969 | (5,997) | 51,652 | 20,718 | 2,474,424 | 2,707,766 | 253,357 | 2,961,123 |
| (unaudited) |
| Attributed to equity holders of the parent | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total | Non controlling interests |
Total equity | |||
| At 1 January 2021 | 166,969 | (6,150) | 51,652 | 17,475 | 1,983,661 | 2,213,608 | - | 2,213,608 | ||
| Profit for the period | - | - | - | - | 104,257 | 104,257 | - | 104,257 | ||
| Net purchase of treasury shares |
- | (1) | - | - | (49) | (50) | - | (50) | ||
| Other comprehensive income | - | - | - | - | - | - | - | - | ||
| At 31 March 2021 | 166,969 | (6,151) | 51,652 | 17,475 | 2,087,870 | 2,317,815 | - | 2,317,815 |
(unaudited)
| Figures are stated in NOK 1,000 | Notes | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|---|
| Unaudited | Unaudited | Audited | ||
| Cash flows from operating activities | ||||
| Profit before income tax | 116,346 | 135,920 | 1,417,551 | |
| Adjusted for: | ||||
| Depreciation of fixed and intangible assets | 5 | 151,119 | 141,153 | 571,223 |
| Loss on sale of fixed assets | 945 | - | - | |
| Profit/loss from associated companies | 9,226 | 8,000 | (189) | |
| Changes in net working capital | (597,871) | (494,657) | (138,706) | |
| Income tax paid | (113,604) | (58,310) | (258,529) | |
| Net cash generated from operating activities | (433,839) | (267,895) | 1,591,351 | |
| Cash flows from investing activities | ||||
| Proceeds from sale of fixed assets | 26,021 | - | 176 | |
| Purchases of fixed and intangible assets | 5 | (29,760) | (20,093) | (130,940) |
| Acquisition | 637 | (1,112) | (553,204) | |
| Proceeds from sale of financial assets | - | 50 | 62 | |
| Net cash used in investing activities | (3,102) | (21,155) | (683,906) | |
| Cash flows from financing activities | ||||
| Proceeds from borrowings | - | - | 2,636 | |
| Repayment of debt to financial institutions | (1,250) | - | (3,750) | |
| Principal paid on lease liabilities | (121,463) | (109,981) | (449,162) | |
| Dividend | - | - | (434,207) | |
| Buy-back of treasury shares | - | (50) | (7,270) | |
| Dividends paid to non-controlling interests in subsidiaries | (16,500) | - | - | |
| Net cash from financing activities | (139,213) | (110,031) | (877,214) | |
| Net increase (decrease) in cash | (576,154) | (399,081) | 30 231 | |
| Cash at beginning of period | 570,286 | 540,056 | 540,056 | |
| Cash at end of period | (5,868) | 140,975 | 570,286 |
The interim condensed consolidated financial statements of Europris ASA and its subsidiaries (collectively, the group) for the three months ended 31 March 2022 were authorised for issue by the board on 27 April 2022.
Europris ASA is domiciled in Norway and is a discount variety retailer with stores across Norway. The group also offers online shopping.
These condensed interim financial statements have not been audited.
The interim condensed consolidated financial statements for the three months ended 31 March 2022 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the group's annual financial statements at 31 December 2021.
The accounting policies adopted in preparing the interim condensed consolidated financial statements are consistent with those followed in the preparation of the group's annual consolidated financial statements for the year ended 31 December 2021. New standards and intepretations effective at 1 January 2022 do not impact the annual consolidated financial statements of the group or the interim condensed financial statements of the group.
The preparation of interim condensed financial statements requires management to make accounting judgements and estimates that impact how accounting policies are applied and the reported amounts for assets, liabilities, income and expenses. Actual results may differ from these estimates. The critical accounting estimates and judgements are consistent with those in the consolidated financial statements for 2021.
The group management is the group's chief operating decision-maker. Reporting to the group management, which is responsible for evaluating profitability and achivements, is on a consolidated basis that forms the basis for the group management's assessment of profitability at a strategic level. The group as a whole is therefore defined and identified as one segment.
| Figures are stated in NOK 1,000 | Fixtures and fittings |
Buildings | Land | Right-of use asset |
Software | Trademarks | Goodwill | Total |
|---|---|---|---|---|---|---|---|---|
| Carrying amount 1 January 2022 | 328,520 | 46,190 | 119,362 | 2,320,022 | 65,421 | 591,267 2,073,373 | 5,544,155 | |
| Acquisition of subsidiaries | 158 | - | - | - | - | - | 1,000 | 1,158 |
| Additions | 18,841 | 2,000 | - | 148,007 | 8,920 | - | - | 177,768 |
| Disposals | - | (26,966) | - | - | - | - | - | (26,966) |
| Depreciation | (17,502) | - | (1,556) | (124,317) | (7,744) | - | - | (151,119) |
| Carrying amount 31 March 2022 | 330,016 | 21,224 | 117,806 | 2,343,712 | 66,597 | 591,267 2,074,373 | 5,544,996 |
| Fixtures and fittings |
Buildings | Land | Right-of use asset |
Software | Trademarks | Goodwill | Total | |
|---|---|---|---|---|---|---|---|---|
| Carrying amount 1 January 2021 | 301,400 | 24,966 | - | 2,262,555 | 58,030 | 387,573 1,617,731 | 4,652,255 | |
| Acquisition of subsidiaries | 58 | - | - | 2,652 | - | - | 227 | 2,936 |
| Additions | 15,122 | - | - | 169,483 | 4,971 | - | - | 189,577 |
| Disposals | - | - | - | - | - | - | - | - |
| Depreciation | (18,597) | - | - | (116,313) | (6,242) | - | - | (141,153) |
| Carrying amount 31 March 2021 | 297,983 | 24,966 | - | 2,318,377 | 56,759 | 387,573 1,617,958 | 4,703,616 |
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities at 31 March 2022 and 31 December 2021:
| 31 December 2021 31 March 2022 Carrying amount Fair value Carrying amount Fair value Financial assets Loans and receivables |
|
|---|---|
| Non-current receivables 36,785 36,785 28,391 |
28,391 |
| Total 36,785 36,785 28,391 |
28,391 |
| Financial liabilities Other financial liabilities |
|
| Borrowings 1,094,032 1,094,032 1,096,521 1,096,521 |
|
| Lease liabilities 1,911,869 1,911,869 1,913,555 1,913,555 |
|
| Current lease liabilities 519,632 519,632 490,164 |
490,164 |
| Put option liability 246,528 246,528 246,528 |
246,528 |
| Total 3,772,061 3,772,061 3,746,767 3,746,767 |
|
| Financial instruments measured at fair value through profit and loss Derivatives - asset |
|
| Interest rate swaps 67,988 67,988 37,676 |
37,676 |
| Foreign exchange forward contracts 3,631 3,631 11,494 |
11,494 |
| Total 71,619 71,619 49,169 |
49,169 |
| Derivatives - liabilities | |
| Foreign exchange forward contracts 7,379 7,379 2,940 |
2,940 |
| Total 7,379 7,379 2,940 |
2,940 |
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole, as follows:
For assets and liabilities that are recognised at fair value on a recurring basis, the group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
All the group's financial instruments measured at fair value are classified as level 2.
Specific valuation methods being used to value financial instruments include:
In June 2018, the group acquired 20 per cent of Runsvengruppen AB (ÖoB), a Swedish discount variety retailer. ÖoB has its headquarters in Skänninge and runs 93 stores across Sweden.
The Europris group owns 20 per cent of the shares and voting rights in Runsvengruppen AB.
Based on equity value, using a fixed multiple of 7.7 on adjusted EBITDA for ÖoB in 2018, the purchase price was determined as NOK 115.2 million. NOK 4.3 million in transaction expenses has also been recognised as part of the acquisition cost, bringing the total investment to NOK 119.5 million.
The group has recorded an estimated loss of NOK 9.2 million from its 20 per cent stake in 2022.
The vendor note issued when closing the deal is converted to 4,349,695 Europris shares, corresponding to 2.61 per cent of the share capital.
Europris holds an option to acquire the remaining 80 per cent of the shares in Runsvengruppen AB. Whether the option is to be exercised has been further delayed. The fair value of the option is considered immaterial and is not recognised in the balance sheet.
The number of treasury shares held by Europris ASA changed as follows in the period from 1 January to 31 March 2022.
| Treasury shares 1 January 2022 | 5,997,376 |
|---|---|
| Sale/buy-back of treasury shares | - |
| Treasury shares 31 March 2022 | 5,997,376 |
Average cost price for treasury shares are NOK 44.47.
The condensed interim report contains forward-looking statements, based on various assumptions. These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risk and uncertainties because they relate to events and depend on circumstances that will occur in the future. Although Europris believes that these assumptions were reasonable when made, it cannot provide assurances that its future results, level of activity or performances will meet these expectations.
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 well-know 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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Total operating income | 1,716 | 1,718 | 8,648 |
| - Cost of goods sold | 956 | 974 | 4,592 |
| = Gross profit | 760 | 744 | 4,056 |
| Gross margin | 44.3% | 43.3% | 46.9% |
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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Employee benefits expense | 307 | 311 | 1,230 |
| + Other operating expenses | 175 | 141 | 743 |
| = Opex | 482 | 452 | 1,973 |
| Opex-to-sales ratio | 28.1% | 26.3% | 22.8% |
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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Operating profit | 126 | 151 | 1,512 |
| + Depreciation | 151 | 141 | 571 |
| = EBITDA | 278 | 292 | 2,083 |
| EBITDA margin | 16.2% | 17.0% | 24.1% |
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.
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-term financial conditions.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Change in Inventory | (349) | (254) | (185) |
| Change in accounts receivable and other current receivables |
54 | 6 | (55) |
| Change in accounts pay able and other current debt |
(303) | (247) | 101 |
| = Net change in working capital |
(598) | (495) | (139) |
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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Purchases of fixed assets | 21 | 15 | 98 |
| Purchases of intangible assets |
9 | 5 | 32 |
| = Capital expenditure | 30 | 20 | 131 |
Financial debt is the sum of borrowings and lease liabilities. Financial debt is useful to see total debt as defined by IFRS.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Borrowings | 1,089 | 995 | 1,092 |
| Current borrowings | 11 | - | 5 |
| Lease liabilities | 1,912 | 1,895 | 1,914 |
| = Financial debt | 3,012 | 2,890 | 3,010 |
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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Cash | - | 141 | 570 |
| + Total facilities | 1,400 | 1,400 | 1,425 |
| - Total drawn | (17) | (15) | (15) |
| = Cash and liquidity reserves |
1,383 | 1,526 | 1,981 |
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.
| (Amounts in NOK million) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Sales directly operated stores |
1,467 | 1,538 | 7,438 |
| Sales franchise stores | 205 | 238 | 1,131 |
| = Total chain sales | 1,672 | 1,777 | 8,569 |
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.
Europris ASA Dikeveien 57, P O Box 1421 NO-1661 Rolvsøy
Switchboard: +47 971 39 000 email: [email protected]
www.europris.no
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