Quarterly Report • Feb 1, 2024
Quarterly Report
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| Highlights 20234 | |
|---|---|
| Key figures 6 | |
| Period review8 | |
| Financial review12 | |
| Financial statements 16 | |
| Alternative performance measures 26 |
• Total sales of NOK 3,072 million, up 1.2 per cent
• Gross margin of 43.9 per cent (45.5 per cent)
• Opex-to-sales ratio of 20.3 per cent (20.4 per cent)
• Lower earnings reflecting the lower gross margin
• The group has decided to exercise its option to acquire the remaining 80 per cent of the Swedish retailer ÖoB
Figures for the corresponding period of the year before in brackets. The figures are unaudited. See page 26 for definition of APMs.
* The Strikkemekka group was consolidated from July 2022 (ie, figures exclude January to June 2023 numbers)
| (Amounts in NOK million) | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 |
|---|---|---|---|---|
| GROUP KEY INCOME STATEMENT FIGURES | ||||
| Retail sales | 2,852 | 2,796 | 8,745 | 8,263 |
| Wholesale sales | 194 | 211 | 634 | 666 |
| Other | 26 | 27 | 88 | 87 |
| Total operating income | 3,072 | 3,034 | 9,467 | 9,016 |
| % growth in total operating income | 1.2% | 6.8% | 5.0% | 4.3% |
| Cost of goods sold | 1,724 | 1,655 | 5,276 | 4,833 |
| Gross profit | 1,348 | 1,379 | 4,191 | 4,183 |
| Gross margin | 43.9% | 45.5% | 44.3% | 46.4% |
| Opex | 625 | 619 | 2,222 | 2,132 |
| Opex-to-sales ratio | 20.3% | 20.4% | 23.5% | 23.6% |
| EBITDA | 723 | 760 | 1,970 | 2,051 |
| EBITDA margin | 23.5% | 25.0% | 20.8% | 22.8% |
| EBIT (Operating profit) | 554 | 604 | 1,295 | 1,440 |
| EBIT margin (Operating profit margin) | 18.0% | 19.9% | 13.7% | 16.0% |
| Net profit | 435 | 440 | 908 | 1,042 |
| Net profit attributable to owners of the parent | 434 | 422 | 908 | 1,020 |
| Earnings per share (in NOK) | 2.69 | 2.62 | 5.64 | 6.34 |
| Dividend per share (in NOK) | 3.25 | 3.75 | ||
| GROUP KEY CASH FLOW AND BALANCE SHEET FIGURES | ||||
| Net change in working capital | 385 | 419 | 281 | (374) |
| Capital expenditure | 15 | 47 | 142 | 143 |
| Financial debt | 3,715 | 3,627 | 3,715 | 3,627 |
| Cash | 676 | 464 | 676 | 464 |
| Net debt | 3,039 | 3,163 | 3,039 | 3,163 |
| - Lease liabilities* | 2,669 | 2,537 | 2,669 | 2,537 |
| Net debt ex lease liabilities | 371 | 626 | 371 | 626 |
| Cash and liquidity reserves | ||||
| 2,205 | 1,897 | 2,205 | 1,897 | |
| EUROPRIS CHAIN KEY FIGURES | ||||
| Total chain sales | 2,774 | 2,723 | 8,945 | 8,586 |
| % growth in total chain sales | 1.8% | 5.1% | 4.2% | 0.2% |
| % growth in like-for-like chain sales | 0.4% | 3.3% | 2.6% | (1.1%) |
| Total number of chain stores at end of period | 282 | 276 | 282 | 276 |
| - Directly operated stores | 257 | 249 | 257 | 249 |
| - Franchise stores | 25 | 27 | 25 | 27 |
For definitions and reconciliations of APMs, please see page 24.
* 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.
The group delivered a mixed performance in the fourth quarter of an otherwise solid year. Campaign execution was strong, with particularly good sales progress for the front page of the marketing leaflet. Europris has a relevant base range of products that customers need in their everyday lives regardless of seasons, and these products continued to sell well in the fourth quarter. However, price competition remains tough and, combined with more campaign sales and a higher share of consumables in the product mix, this affected the margin negatively.
The Christmas season is important for performance in the fourth quarter. With hindsight, it is clear that the group had applied too conservative estimates for certain seasonal best-sellers and thereby saw these sell out early in the season. That had a negative effect on both sales and margins, since these products typically have above-average margins. Purchase orders for these seasonal items were placed almost a year in advance, on the basis of 2022 volumes and a cautious outlook with household finances remaining very difficult. On the positive side, the group exited 2023 with healthy inventory levels, and the improvements in net working capital had a positive effect on cash development.
The Europris concept proved relevant in a challenging retail market during 2023, as demonstrated by a higher footfall and a continued increase in members for the Mer customer club. That reflects a consistent execution of the strategy, with continuous product-category upgrades and the strengthening of Europris as a shopping destination. The group's highly competent and capable employees demonstrate a strong operational performance, and the EssenceMediacom Brand Tracker for 2023 found that customers have never had a more positive impression of Europris.
At the end of 2022, the outlook was that 2023 would be difficult for household finances, and the group was prepared to fight for its share of the consumer's wallet. Attention was accordingly shifted more towards everyday consumables and private labels, and to campaign sales. Predicting volumes has become something of an art in the prevailing market conditions - as expected, customers held back on investment purchases through the summer season, while certain seasonal items sold better than the group had expected in the run-up to Christmas. The group's strategic choices for volumes and product mix supported sales growth during 2023, and it also exited the year with healthy inventories.
Margins were under pressure for a variety of reasons throughout 2023, reflecting both external factors and the group's strategic decision to concentrate more on consumables and campaign sales. Price competition was intense during the first half of the year, and the effect of this was enhanced by the skewing of the product mix towards consumables. Margins on summer sales were negatively affected by seasonal product overliers from 2022 which carried higher freight costs. Throughout the year, margins have also been under pressure from higher input costs owing to a weak NOK. Overall, the group is satisfied to have kept margins above pre-pandemic levels despite the contrary headwinds and a dilutive effect from acquisitions of pure play companies in recent years.
The year 2023 was the first full 12 months since 2019 with no restrictions in society related to Covid-19. Chain sales were up 36 per cent compared with 2019, thereby outperforming the variety retail discount market (measured as a stacked growth of 23 per cent for the years 2019 to 2023, according to Statistics Norway).
Group sales came to NOK 3,072 million for the fourth quarter, an increase of 1.2 per cent. The quarter had two fewer sales days than the year before (Christmas Eve and New Year's Eve).
The Europris chain had total sales growth of 1.8 per cent and like-for-like growth of 0.4 per cent. As in the previous quarter, sales from the front page of the marketing leaflet performed particularly well. The combination of low-price-point products and sharp campaigns on relevant products has proven valuable for drawing customer traffic, and sales of consumables and private labels developed positively.
The Christmas season is a main priority in the fourth quarter. Sales of seasonal items performed well and above expectations, with the result that some best-sellers were sold out early in the season. The group also saw high volume growth for higher-valued items like Christmas trees.
Like-for-like traffic was slightly below the year before, although this would have shown growth if adjusted for the loss of two sales days. The basket value rose slightly, with higher average prices per item offsetting a smaller average number of articles.
Group sales came to NOK 9,467 million for the full year, an increase of five per cent. The rise was four per cent when the structural effect of acquiring Strikkemekka is excluded (consolidated from July 2022).
The Europris chain had total sales growth of 4.2 per cent and like-for-like growth of 2.6 per cent for the full year. Growth was driven by sales from the front page of the marketing leaflet, consumables and private labels. Like-for-like traffic was higher than the year before. The basket was also larger, with an increased average price per item offsetting a reduced number of articles.
As expected, consumers were cautious about investment purchases in the summer season. Sales of products with a price point above NOK 1,000 declined by 6.7 per cent in 2023, but constituted only three per cent of the chain's total sales.
Growth for the Europris chain in 2023 developed favourably compared with the overall variety retail segment and total retail. Chain performance was almost on a par with total growth for shopping centres, while groceries showed higher growth.
| Sales growth to 31 December | 2023 | 2022 |
|---|---|---|
| Virke: total retail* | 2.2% | 2.6% |
| Virke: groceries* | 7.7% | (3.0%) |
| Virke: variety retail* | 2.9% | 1.8% |
| Kvarud shopping centre index** | 4.3% | 4.4% |
| Europris chain | 4.2% | 0.2% |
* Virke retail index (using figures reported by Statistics Norway)
** Kvarud Analyse shopping centre index
The personal care category was upgraded at the end of the third quarter in 2023. This has been well received by customers and the category made good progress during the fourth quarter.
The toy category was upgraded in the fourth quarter of 2022, with both a modernised lay-out and an updated product range developed in cooperation with Lekekassen. The fourth quarter is important for this category, and it was rewarding to see that this upgrade was well received by customers and generated strong sales growth during all quarters of 2023.
Europris had almost 1.5 million members in its Mer customer club at 31 December 2023, up by 19 per cent over the year. Mer accounted for almost 50 per cent of chain sales for the full year of 2023. Members have a higher frequency of purchases and a greater average basket value than other customers. More than 800,000 people subscribe to weekly digital newsletters.
The group works to improve the personal experience for customers exposed to the electronic newsletters. These efforts continued in the Christmas season for typical seasonal products and showed good results. During the fourth quarter, the group started testing product recommendations, using employees as a test in the initial phase before launching to Mer members.
E-commerce sales in the group amounted to NOK 406 million in the fourth quarter, down by 4.5 per cent. Full year sales increased by 6.4 per cent to NOK 907 million. Excluding structural growth from the acquisition of Strikkemekka, sales declined by 3.4 per cent in 2023.
The fourth quarter is the most important period for Lekekassen. Sales declined in all three markets, primarily due to continued intense price competition, particularly in Sweden and Denmark.
For the full year of 2023, the Lekekassen group had sales of NOK 609 million (NOK 622 million), a decline of 2.1 per cent. Sales fell in Norway and Sweden while Denmark witnessed a slight increase. Sales in Norway lagged behind the year before throughout 2023, whereas Sweden and Denmark had a more difficult second half after a good first six months. The gross margin declined, but lower volumes and strict cost control resulted in a lower Opex. EBITDA was NOK 93 million (NOK 99 million).
Strikkemekka's yarn sales in Norway declined, but overall sales growth was recorded in the fourth quarter. Sales for the full year of 2023 amounted to NOK 188 million (NOK 193 million), down by 2.6 per cent. Sales from the knitting business fell in Norway but rose in the Swedish and Danish markets, which were entered in the fourth quarter of 2022. EBITDA was NOK 9 million for 2023 (NOK 7 million).
| NOK million | Q4 2023 |
Q4 2022 |
Change | FY 2023 |
FY | 2022 Change |
|---|---|---|---|---|---|---|
| E-com sales* | 406 | 425 | (4.5%) | 907 | 853 | 6.4% |
| Percentage of total group sales |
13.2% | 14.0% | (0.8%-p) | 9.6% | 9.5% | 0.1%-p |
* Europris online sales and sales from pure play companies (the Lekekassen group, the Strikkemekka group and Lunehjem).
Note: Strikkemekka was consolidated from July 2022.
Europris opened two new stores in the fourth quarter, at CC in Drammen in Viken county and at Rognan in Nordland county. A total of seven new stores were opened during 2023.
At 31 December 2023, the chain had a total of 282 stores, of which 257 were directly operated and 25 were franchises.
Europris has a healthy pipeline of new stores, and the board has approved an additional six for 2024 and beyond. Two of the planned new stores are subject to a planning permission process.
| Month | Store | County |
|---|---|---|
| January | Froland | Agder |
| March | Grensen – city store | Oslo |
| June | Dombås | Innlandet |
| June | Hamar | Innlandet |
| September | Triaden (Lørenskog) | Viken |
| October | CC Drammen | Viken |
| November | Rognan | Nordland |
Europris constantly pays close attention to the health of the store portfolio and its attractiveness to customers, and one store was modernised during the fourth quarter. A total of five stores were relocated, one expanded and nine modernised in 2023. One store was closed, following an accident whereby the shopping centre has now been demolished.
Europris repeated its annual sustainability week for all employees in October 2023. The goal is to increase awareness of and knowledge about environmental, social and governance (ESG) issues throughout the organisation.
It is important for the group to be transparent to customers about the group's efforts as a socially and environmentally responsible organisation, and initiatives to improve in-store communication for reaching customers were launched during the fourth quarter. The group has also improved the information published on its websites.
Europris conducts annual employee surveys to monitor satisfaction and to ensure a structured approach to honest and anonymous feedback. The results in recent years have been very strong, and it is gratifying to see that employees continue to be very satisfied.
All store employees received training ahead of the important Christmas season. The aim was to strengthen their ability to assist and provide service to customers by improving their product knowledge.
The combined strategy and leadership programme for managers continued through 2023. A physical gathering was held over two days in the fourth quarter, with extra attention paid to how Europris can strengthen its role as a socially responsible local player. With its 282 stores nationwide, the group can play an important role in many local communities.
All managers spent at least half a day working in one of the chain's stores during the fourth quarter. This annual event is important and appreciated by both store personnel and head office staff.
Europris has a joint-venture sourcing office with Tokmanni in Shanghai. This office celebrated its 10th anniversary in October 2023 with a celebration and a vendor summit.
The group pays great attention to avoiding and reducing sickness absence, and it was rewarding to see a decline of 1.3 percentage points to 7.8 per cent in 2023. Structured efforts to prevent and reduce absences will continue in 2024.
| Sickness absence | FY 2023 | FY 2022 |
|---|---|---|
| Group | 7.8% | 9.1% |
A total of nine lost-time injuries were recorded in 2023. Europris has a zero vision for injuries, and each case is evaluated immediately so that any possible corrective actions can be implemented as soon as possible in order to avoid injuries from similar situations in the future.
Europris owns 20 per cent of Runsvengruppen AB, and Europris and RuNor have disagreed over the expiry of the option to acquire the remaining 80 per cent. An arbitration procedure to decide i) whether the option period had expired and ii) if the accountant's decision
in September 2021 on the 2019 EBITDA was correct ended in September 2023 and the final results were announced on 18 December 2023. The tribunal decided in favour of Europris, meaning that the group's option to acquire RuNor's shareholding in Runsvengruppen has not expired and may therefore still be exercised within six months from that date.
The tribunal decided that Runsvengruppen's EBITDA for 2019, which will form the basis for calculating the option strike price, is to be adjusted down to SEK 64.6 million. This lays the basis for an option strike price of about NOK 211 million for the remaining 80 per cent of the shares in Runsvengruppen, reflecting the NOK/SEK exchange rate, net debt and normalised working capital.
The option strike price will be settled with shares in Europris, valued on the basis of a volume-weighted average prior to the final settlement. The final purchase price for the remaining 80 per cent of the shares in Runsvengruppen will be based on an average of Runsvengruppen's EBITDA for 2019 and 2020. The EBITDA for 2020 has yet to be agreed between the parties.
ÖoB is one of the leading discount variety retailers in Sweden. The chain has around 90 stores and an annual turnover of about SEK 4 billion. The ÖoB concept is similar to that used by Europris, with a large product overlap – particularly for non-food items. However, Europris' assessment is that ÖoB needs a turnaround after several years of limited sales growth and weak profitability.
Europris has decided to exercise its option and the process to finalise the acquisition will now be initiated. The group will provide the market with information on closing and when the final purchase price has been settled. More information about operational plans for ÖoB will be shared at a later stage.
Operating income for the fourth quarter amounted to NOK 3,072 million (NOK 3,034 million), up by 1.2 per cent. The chain had a like-for-like sales growth of 0.4 per cent. The quarter had two fewer sales days than the same period of the year before.
Gross profit came to NOK 1,348 million (NOK 1,379 million). The gross margin was 43.9 per cent (45.5 per cent), a reduction of 1.6 percentage points. This reflected a larger campaign share and changes to the product mix, in addition to price competition. The group recognised a net unrealised loss of NOK 14 million (loss of NOK 39 million) on hedging contracts and accounts payable, which had a positive effect of 0.9 percentage points on the margin change. The timing of inventory counting last year (booking of calculation differences) had a negative effect of 0.7 percentage points on the margin change.
Operating expenditure (Opex) was NOK 625 million in the fourth quarter (NOK 619 million), an increase of 0.9 per cent. The number of directly operated stores rose from 249 to 257. Opex amounted to 20.3 per cent of group revenue (20.4 per cent). The group has booked a reversal of legal costs of NOK 11 million following the arbitration between Europris and RuNor (Runsvengruppen/ÖoB).
EBITDA was NOK 723 million (NOK 760 million), down by NOK 37 million or 4.9 per cent. The EBITDA margin was 23.5 per cent (25 per cent).
EBIT was NOK 554 million (NOK 604 million), down by NOK 51 million or 8.4 per cent. Depreciation increased by NOK 14 million, mainly from lease liabilities. The EBIT margin was 18 per cent (19.9 per cent).
Total financial expenses came to NOK 72 million, up by NOK 23 million. The group recognised a net unrealised loss on interest swaps of NOK 24 million (loss of NOK 9 million). A writedown of NOK 43 million has been booked
on the 20 per cent stake in ÖoB because of weaker results. This was more than offset by the booked value of NOK 102 million from the valid option to acquire the remaining 80 per cent, resulting in a net positive effect of NOK 59 million (see note 7 for more information).
Net profit amounted to NOK 435 million (NOK 440 million). Net profit attributable to owners of the parent company amounted to NOK 434 million (NOK 422 million). Lower share of profit to minority in 2023 compared to the year before, due to the acquisition of the remaining 33 per cent of Lekekassen in 2023.
Total operating income for 2023 amounted to NOK 9,467 million (NOK 9,016 million), up by five per cent. Excluding the acquisition of the Strikkemekka group, which was consolidated from July 2022, sales rose by four per cent. The Europris chain saw a like-for-like sales increase of 2.6 per cent.
Gross profit for for the group amounted to NOK 4,191 million (NOK 4,183 million). The gross margin was 44.3 per cent (46.4 per cent), a reduction of 2.1 percentage points, reflecting a higher campaign share and changes to the product mix, in addition to higher input costs and price competition. The group recognised a net unrealised loss of NOK 14 million (loss of NOK 14 million) on hedging contracts and accounts payable.
Opex came to NOK 2,222 million (NOK 2,132 million). This represented an increase of 4.2 per cent from the same period of the year before - but up by 2.5 per cent excluding the acquisition of the Strikkemekka group. The number of directly operated stores rose from 249 to 257. Operating expenses came to 23.5 per cent (23.6 per cent) of group revenue.
EBITDA was NOK 1,970 million (NOK 2,051 million), down by NOK 81 million or four per cent. The EBITDA margin was 20.8 per cent (22.8 per cent), down by two percentage points.
EBIT was NOK 1,295 million (NOK 1,440 million), down by NOK 145 million or ten percent. Depreciation increased by NOK 64 million, mainly from lease liabilities. The EBIT margin was 13.7 per cent (16 per cent).
Total financial expenses came to NOK 191 million, up by NOK 83 million. Net unrealised loss on interest swaps was NOK 5 million in 2023 (unrealised profit of NOK 39 million). The group has interest-rate swap agreements
totalling NOK 600 million, covering 60 per cent of the Europris term loan.
The group recorded an estimated loss of NOK 11 million (profit of NOK 4 million) on its 20 per cent stake in Runsvengruppen AB (ÖoB). This is based on preliminary and non-audited figures from this associated company. In addition, a writedown of NOK 43 million has been booked on the 20 per cent stake in ÖoB because of weaker results. This was more than offset by a booked value of NOK 102 million from the valid option to acquire the remaining 80 per cent. See note 7 for more information.
Net profit for the full year was NOK 908 million (NOK 1,042 million). Net profit attributable to owners of the parent company was NOK 908 million (NOK 1,020 million). Lower share of profit to minority in 2023 compared to the year before, due to the acquisition of the remaining 33 per cent of Lekekassen in 2023.
Cash flow from operating activities for 2023 was NOK 1,769 million (NOK 1,248 million). The improvement from the same period of the year before reflected the net change in working capital.
Net change in working capital was positive at NOK 281 million (negative at NOK 374 million). Net working capital in 2023 was positively affected by reduced inventory levels while 2022 was negatively affected by seasonal summer overliers. The inventory level is healthy, with value and volume lower than the year before.
Capital expenditure amounted to NOK 142 million (NOK 143 million).
Financial debt at 31 December 2023 came to NOK 3,715 million (NOK 3,627 million). The group completed its refinancing at 30 June 2023 (3+1+1 year facility arrangement).
Net debt at 31 December 2023 amounted to NOK 3,039 million (NOK 3,163 million). Adjusted for lease liabilities, net debt was NOK 371 million (NOK 626 million).
Cash and liquidity reserves for the group at 31
December 2023 amounted to NOK 2,205 million (NOK 1,897 million).
The board of Europris ASA will propose an ordinary dividend of NOK 3.25 per share for 2023 to the general meeting. This represents an 18 per cent increase from the ordinary dividend of NOK 2.75 for 2022, but is 13 per cent below the total dividend of NOK 3.75 in that year. The dividend amounts to NOK 523 million excluding treasury shares (NOK 604 million) and represents a pay-out ratio of 57.6 per cent of the majority's share of the profit (59.1 per cent).
Owing to the attacks on vessels in the Red Sea, shipping from Asia to Europe has been routed around the Cape of Good Hope, with an increase of up to two weeks in transit time. Because of this, some market participants report capacity constraints in the market because of a shortage of containers. Europris' main priority is to continue getting goods delivered on time. However, the group is exposed to the rise in shipping costs as a result of the situation.
Household finances in Norway continue to be strained, with yet another interest-rate hike in December 2023 adding to the challenge. Although this will take some time to filter through to mortgage payments, consumer spending is expected to remain cautious in 2024 as well – particularly in the first half, as inflation and interest rates will remain key issues for consumers.
These kinds of market conditions represent opportunities for a concept like Europris, and the group is ready to continue fighting hard for its share of the wallet. It is well positioned, with a well-recognised low-price concept, strong campaigns, and a broad and relevant product offering. Over time, the chain has outperformed the retail market and the board is confident that Europris will continue to play an important role and remain a leader in the variety discount retail market.
Europris has decided to exercise its option to acquire the remaining 80 per cent of the Swedish retailer ÖoB. The board is intrigued by the opportunities this gives for Nordic expansion. The board is confident that this will serve as a platform for further growth and the creation of significant shareholder values.
| Figures are stated in NOK 1,000 | Notes | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 |
|---|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Audited | ||
| Total operating income | 3,071,806 | 3,034,033 | 9,466,921 | 9,015,766 | |
| Cost of goods sold | 1,724,058 | 1,654,925 | 5,275,652 | 4,832,783 | |
| Employee benefit expenses | 389,180 | 370,026 | 1,373,081 | 1,295,131 | |
| Depreciation | 5 | 169,268 | 155,288 | 674,608 | 611,035 |
| Other operating expenses | 235,695 | 249,348 | 848,421 | 836,461 | |
| Operating profit | 553,604 | 604,447 | 1,295,159 | 1,440,356 | |
| Net financial income (expense) | (72,325) | (49,423) | (190,515) | (107,394 ) | |
| Profit/(loss) from associated companies | 7 | (41,902) | 6,604 | (54,489) | 4,047 |
| Change in fair value of option | 7 | 101,789 | - | 101,789 | - |
| Profit before tax | 541,165 | 561,628 | 1,151,943 | 1,337,009 | |
| Income tax expense | 106,323 | 122,105 | 243,463 | 295,153 | |
| Profit for the period | 434,842 | 439,523 | 908,480 | 1,041,856 | |
| Profit attributable to non-controlling interests | 1,065 | 17,388 | 259 | 21,887 | |
| Profit attributable to owners of the parent | 433,778 | 422,135 | 908,220 | 1,019,969 | |
| Interim condensed consolidated statement of comprehensive income |
|||||
| Profit for the period | 434,842 | 439,523 | 908,480 | 1,041,856 | |
| Total comprehensive income | 434,842 | 439,523 | 908,480 | 1,041,856 | |
| Profit attributable to non-controlling interests | 1,065 | 17,388 | 259 | 21,887 | |
| Profit attributable to owners of the parent | 433,778 | 422,135 | 908,220 | 1,019,969 | |
| Earnings per share (basic and diluted - in NOK) | 2.69 | 2.62 | 5.64 | 6.34 |
| Figures are stated in NOK 1,000 | Notes | 31 Dec 2023 | 31 Dec 2022 |
|---|---|---|---|
| Unaudited | Audited | ||
| ASSETS | |||
| Total intangible assets | 5 | 2,861,038 | 2,875,288 |
| Total fixed assets | 5 | 3,050,724 | 2,906,989 |
| Total financial assets | 6,7 | 253,910 | 246,617 |
| Total non-current assets | 6,165,671 | 6,028,893 | |
| Inventories | 2,142,699 | 2,383,837 | |
| Trade receivables | 217,673 | 215,175 | |
| Other receivables | 6 | 109,848 | 132,863 |
| Cash | 676,323 | 464,488 | |
| Total current assets | 3,146,543 | 3,196,363 | |
| Total assets | 9,312,214 | 9,225,256 | |
| EQUITY AND LIABILITIES | |||
| Total paid-in capital | 9 | 235,171 | 234,738 |
| Total retained equity | 3,325,642 | 2,725,783 | |
| Total shareholders' equity | 3,560,814 | 2,960,521 | |
| Non-controlling interests | 50,617 | 322,082 | |
| Total equity | 3,611,430 | 3,282,603 | |
| Provisions | 46,703 | 57,622 | |
| Borrowings | 6 | 1,041,843 | 1,085,349 |
| Lease liabilities | 6 | 2,079,997 | 2,015,033 |
| Total non-current liabilities | 3,168,542 | 3,158,004 | |
| Borrowings | 6 | 5,000 | 5,000 |
| Current lease liabilities | 6 | 588,626 | 521,958 |
| Accounts payable Tax payable |
879,851 254,838 |
876,419 291,305 |
|
| Public duties payable | 396,594 | 393,683 | |
| Put option liabilitiy | 27,980 | 281,221 | |
| Other current liabilities | 6 | 379,353 | 415,063 |
| Total current liabilities | 2,532,241 | 2,784,650 | |
| Total liabilities | 5,700,784 | 5,942,654 | |
| Total equity and liabilities | 9,312,214 | 9,225,256 |
Fredrikstad, 31 January 2024 THE BOARD OF DIRECTORS OF EUROPRIS ASA
Figures are stated in NOK 1,000
| Share capital |
Treasury shares |
Share premium |
Other paid in capital |
Retained earnings |
Total | Non controlling interests |
Total equity |
|
|---|---|---|---|---|---|---|---|---|
| At 1 January 2023 | 166,969 | (5,938) | 51,652 | 22,054 | 2,725,784 | 2,960,521 | 322,082 | 3,282,603 |
| Profit for the period | - | - | - | - | 908,220 | 908,220 | 259 | 908,480 |
| Dividend | - | - | - | - | (603,865) | (603,865) | (20,034) | (623,899) |
| Net sale of treasury shares | - | 16 | - | 418 | 416 | 850 | - | 850 |
| Non-controlling interests on acquisition of subsidiary |
- | - | - | - | 293,561 | 293,561 | (252,054) | 41,507 |
| Translation differences | - | - | - | - | 1 526 | 1,526 | 364 | 1,890 |
| Other comprehensive income | - | - | - | - | - | - | - | - |
| At 31 December 2023 | 166,969 | (5,922) | 51,652 | 22,472 | 3,325,642 | 3,560,814 | 50,617 | 3,611,430 |
(unaudited)
| 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 | - | - | - | - | 1,019,969 | 1,019,969 | 21,887 | 1,041,856 |
| Dividend | - | - | - | - | (643,886) | (643,886) | (16,500) | (660,386) |
| Net sale of treasury shares | - | 59 | - | 1,336 | 1,505 | 2,900 | - | 2,900 |
| Non-controlling interests on acquisition of subsidiary |
- | - | - | - | (4,437) | (4,437) | 47,977 | 43,540 |
| Put option liability | - | - | - | - | (34,693) | (34,693) | - | (34,693) |
| Translation differences | - | - | - | - | 622 | 622 | 38 | 660 |
| Other comprehensive income | - | - | - | - | - | - | - | - |
| At 31 December 2022 | 166,969 | (5,938) | 51,652 | 22,054 | 2,725,784 | 2,960,521 | 322,082 | 3,282,603 |
(audited)
| Figures are stated in NOK 1,000 | Notes | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 |
|---|---|---|---|---|---|
| Unaudited | Unaudited | Unaudited | Audited | ||
| Cash flows from operating activities | |||||
| Profit before income tax | 541,165 | 561,628 | 1,151,943 | 1,337,009 | |
| Adjusted for: | |||||
| Depreciation of fixed and intangible assets | 5 | 169,268 | 155,288 | 674,608 | 611,035 |
| Loss on sale of fixed assets | - | - | - | 945 | |
| Change in fair value of option | 7 | (101,789) | - | (101,789) | - |
| Profit/loss from associated companies | 41,902 | (6,604) | 54,489 | (4,047) | |
| Changes in net working capital | 385,114 | 419,481 | 280,938 | (374,048) | |
| Income tax paid | (689) | (71,079) | (291,182) | (323,191) | |
| Net cash generated from operating activities | 1,034,972 | 1,058,714 | 1,769,008 | 1,247,703 | |
| Cash flows from investing activities | |||||
| Proceeds from sale of fixed assets | 84 | - | 84 | 26,021 | |
| Purchases of fixed and intangible assets | 5 | (15,380) | (47,198) | (141,700) | (142,677) |
| Acquisition | 8 | - | - | (216,598) | (92,351) |
| Net cash used in investing activities | (15,296) | (47,198) | (358,214) | (209,007) | |
| Cash flows from financing activities | |||||
| Net change RCF (Revolving Credit Facility) | (250,000) | (300,000) | - | - | |
| Repayment of debt to financial institutions | (41,988) | (1,250) | (45,738) | (5,000) | |
| Principal paid on lease liabilities | (132,560) | (121,781) | (530,171) | (482,008) | |
| Dividend | - | - | (603,865) | (643,886) | |
| Sale of treasury shares | - | - | 850 | 2,900 | |
| Dividends paid to non-controlling interests in subsidiaries | - | - | (20,034) | (16,500) | |
| Net cash from financing activities | (424,548) | (423,031) | (1,198,959) | (1,144,494) | |
| Net increase (decrease) in cash | 595,127 | 588,485 | 211,835 | (105,798) | |
| Cash at beginning of period | 81,196 | (123,998) | 464,488 | 570,286 | |
| Cash at end of period | 676,323 | 464,488 | 676,323 | 464,488 |
The interim condensed consolidated financial statements of Europris ASA and its subsidiaries (collectively, the group) for the fourth quarter and the period ended 31 December 2023 were authorised for issue by the board on 31 January 2024.
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 fourth quarter and the period ended 31 December 2023 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 2022.
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 2022. New standards and intepretations effective at 1 January 2023 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 2022, see note 3 for more details.
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 |
Land | Buildings | Right-of use asset |
Software | Trademarks | Goodwill | Total |
|---|---|---|---|---|---|---|---|---|
| Carrying amount 1 January 2023 | 338,070 | 21,224 | 113,230 | 2,434,465 | 92,967 | 591,267 | 2,191,054 | 5,782,277 |
| Acquisition of subsidiaries | 348 | - | - | - | - | - | 323 | 671 |
| Additions | 119,282 | - | 701 | 661,804 | 21,718 | - | - | 803,504 |
| Disposals | (84) | - | - | - | - | - | - | (84) |
| Depreciation | (77,084) | - | (6,201) | (555,032) | (36,291) | - | - | (674,608) |
| Carrying amount 31 December 2023 | 380,532 | 21,224 | 107,730 | 2,541,237 | 78,394 | 591,267 | 2,191,378 | 5,911,762 |
| Figures are stated in NOK 1,000 | Fixtures and fittings |
Land | Buildings | 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 | 2,214 | - | - | 24,449 | - | - | 117,681 | 144,343 |
| Additions | 82,750 | 2,000 | - | 589,102 | 57,927 | - | - | 731,779 |
| Disposals | - | (26,966) | - | - | - | - | - | (26,966) |
| Depreciation | (75,414) | - | (6,132) | (499,108) | (30,381) | - | - | (611,035) |
| Carrying amount 31 December 2022 | 338,070 | 21,224 | 113,230 | 2,434,465 | 92,967 | 591,267 | 2,191,054 | 5,782,277 |
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities at 31 December 2023 and 31 December 2022:
| Figures are stated in NOK 1,000 | 31 December 2023 | 31 December 2022 | |||
|---|---|---|---|---|---|
| Carrying amount | Fair value | Carrying amount | Fair value | ||
| Financial assets | |||||
| Loans and receivables | |||||
| Non-current receivables | 1,990 | 1,990 | 36,651 | 36,651 | |
| Total | 1,990 | 1,990 | 36,651 | 36,651 | |
| Financial liabilities | |||||
| Other financial liabilities | |||||
| Borrowings | 1,041,843 | 1,041,843 | 1,085,349 | 1,085,349 | |
| First year instalment non-current debt | 5,000 | 5,000 | 5,000 | 5,000 | |
| Lease liabilities | 2,079,997 | 2,079,997 | 2,015,033 | 2,015,033 | |
| Current lease liabilities | 588,626 | 588,626 | 521,958 | 521,958 | |
| Put option liability | 27,980 | 27,980 | 281,221 | 281,221 | |
| Total | 3,743,445 | 3,743,445 | 3,908,561 | 3,908,561 | |
| Financial instruments measured at fair value through profit and loss | |||||
| Derivatives - asset | |||||
| Interest rate swaps | 71,322 | 71,322 | 76,667 | 76,667 | |
| Foreign exchange forward contracts | 446 | 446 | 4,725 | 4,725 | |
| Total | 71,768 | 71,768 | 81,392 | 81,392 | |
| Derivatives - liabilities | |||||
| Foreign exchange forward contracts | 31,274 | 31,274 | 8,973 | 8,973 | |
| Total | 31,274 | 31,274 | 8,973 | 8,973 |
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:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
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 some 90 stores across Sweden. The Europris group owns 20 per cent of the shares and voting rights in Runsvengruppen AB. The vendor note issued to owner company RuNor AS when closing the deal was converted to 4,349,695 Europris shares, corresponding to 2.61 per cent of the share capital. In May 2023, RuNor AS sold 2,899,797 Europris shares and now holds 1,449,898 shares corresponding to 0.87 per cent of the share capital. At initial recognition of Europris' 20 per cent stake, an excess value was identified as goodwill. In addition to the 20 per cent holding of shares in ÖoB, Europris holds an option to acquire the remaining 80 per cent of the shares. In previous periods, the fair value of the option has been considered immaterial.
An arbitration procedure to decide i) whether the option period had expired and ii) if the accountant's decision in September 2021 on the 2019 EBITDA was correct ended in September 2023 and the final results were announced on 18 December 2023. The tribunal decided in favour of Europris, meaning that the group's option to acquire RuNor's shareholding in Runsvengruppen has not expired and may therefore still be exercised within six months from that date.
Operationally, Runsvengruppen AB has lost market share over time, has seen profitability decline and will, in Europris' opinion, be dependent on a turnaround to operate profitably in the future. Performance has been below the expectations expressed in the initial investment case in 2018.
In light of the positive ruling from the arbitration tribunal in December 2023 and the operational challenges in ÖoB, Europris has carried out an assessment of the value of its shares in ÖoB and the option to acquire the remaining 80 per cent. The valuation represents an estimate for IFRS accounting purposes, based on information available to management. The management is still in the process of assessing whether it will exercise the option.
The group has recorded an estimated loss of NOK 11.3 million on its 20 per cent stake in 2023. The valuation assessment made by management resulted an impairment of NOK 43 million, reducing the excess values (goodwill) identified at initial recognition to NOK 78 million. The total loss from associated companies for 2023 amounts to NOK 54 million.
Applying a consistent approach to valuing the option to acquire 80 per cent of ÖoB results in the recognition of NOK 102 million. An EBITDA of SEK 64.6 million provides for an option strike price of about NOK 211 million for the remaining 80 per cent of the shares in Runsvengruppen, reflecting the NOK/SEK exchange rate, net debt and normalised working capital. The option strike price will be settled with shares in Europris, valued on the basis of a volume-weighted average prior to final settlement. The final purchase price for the remaining 80 per cent of the shares in Runsvengruppen will be based on an average of Runsvengruppen's EBITDA for 2019 and 2020. The EBITDA for 2020 has yet to be agreed between the parties. A decision on whether to exercise the option had not been made at the time of this reporting.
On 30 June 2021, the group acquired 67 per cent of Lekekassen Holding AS (Lekekassen) – Norway's largest player in online shopping for toys. Through this acquisition, Europris entered a strategically important product category and strengthened its expertise in e-commerce. The purchase price was NOK 501 million, and Europris had a pre-emptive right to acquire the remaining shares in Lekekassen. The excess value of the acquisition was related to buildings, trademark and goodwill in the purchase price allocation. Lekekassen was consolidated into the Europris group's financial statements as of 1 August 2021.
On 28 March 2023, the group acquired the remaining 33 per cent of the shares in Lekekassen for a purchase price of NOK 212 million. Following the resignation from the CEO of Lekekassen, Andreas Skalleberg, the remaining shares were purchased from his company Andrino Invest AS. Consequently the put option liability which was recognised for Europris' obligation to purchase these shares, with a corresponding charge directly to shareholders equity, has been reversed.
The number of treasury shares held by Europris ASA changed as follows in the period from 1 January to 31 December 2023.
| Change in number of treasury shares | |
|---|---|
| Treasury shares 1 January 2023 | 5,938,263 |
| Sale of treasury shares to senior executives | (16,328) |
| Treasury shares 31 December 2023 | 5,921,935 |
Average cost price for treasury shares are NOK 44.75.
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) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Total operating income | 3,072 | 3,034 | 9,467 | 9,016 |
| - Cost of goods sold | 1,724 | 1,655 | 5,276 | 4,833 |
| = Gross profit | 1,348 | 1,379 | 4,191 | 4,183 |
| Gross margin | 43.9% | 45.5% | 44.3% | 46.4% |
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) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Employee benefits expense | 389 | 370 | 1,373 | 1,295 |
| + Other operating expense | 236 | 249 | 848 | 836 |
| = Opex | 625 | 619 | 2,222 | 2,132 |
| Opex-to-sales ratio | 20.3% | 20.4% | 23.5% | 23.6% |
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) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Operating profit | 554 | 604 | 1,295 | 1,440 |
| + Depreciation | 169 | 155 | 675 | 611 |
| = EBITDA | 723 | 760 | 1,970 | 2,051 |
| EBITDA margin | 23.5% | 25.0% | 20.8% | 22.8% |
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.
| (Amounts in NOK million) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Change in Inventory | 221 | 224 | 254 | (345) |
| Change in accounts receivable and other current receivables |
(34) | (29) | 62 | (61) |
| Change in accounts payable and other current debt |
198 | 225 | (35) | 32 |
| Net change in working capital | 385 | 419 | 281 | (374) |
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) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Purchases of fixed asets | 13 | 25 | 120 | 85 |
| Purchases of intangible assets |
2 | 22 | 22 | 58 |
| = Capital expenditure | 15 | 47 | 142 | 143 |
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.
| (Amounts in NOK million) | FY 2023 |
FY 2022 |
|---|---|---|
| Borrowings | 1,042 | 1,085 |
| Current borrowings | 5 | 5 |
| Lease liabilities | 2,080 | 2,015 |
| Current lease liabilities | 589 | 522 |
| = Financial debt | 3,715 | 3,627 |
Cash 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) | FY 2023 |
FY 2022 |
|---|---|---|
| Cash | 676 | 464 |
| + Total facilities | 1,536 | 1,436 |
| - Total drawn | (7) | (3) |
| = Cash and liquidity reserves | 2,205 | 1,897 |
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) | Q4 2023 |
Q4 2022 |
FY 2023 |
FY 2022 |
|---|---|---|---|---|
| Sales directly operated stores |
2,461 | 2,389 | 7,932 | 7,519 |
| Sales franchise stores | 312 | 335 | 1,013 | 1,066 |
| = Total chain sales | 2,774 | 2,723 | 8,945 | 8,586 |
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 Europris 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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