Europris September 2018 Norways leading discount variety retailer - - PowerPoint PPT Presentation

Europris

September 2018

Norway’s leading discount variety retailer

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• 1 000

2 000 3 000 4 000 5 000 6 000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Europris at a glance

Norway’s leading discount variety retailer Europris total revenue development1

 Undisputed market leadership in Norway  Nationwide presence  Wide assortment at very low prices  Efficient sourcing with direct access to end producers  25 years of continuous growth since start in 1992

• 1. Based on chain sales 2017 (including franchise stores).

Source: Europris

(NOKm)

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Wide assortment that taps into a large addressable market

Europris has a truly mixed assortment2  Large market  Competitive flexibility  Resilience Groceries General merchandise Speciality retail

Total addressable market1:

~NOK 280bn

Groceries 12% Candy & Chocolate 5% Personal Care 9% Laundry & Cleaning 3% Pets 3% Home & Kitchen 15% Hobby & Office 7% Handyman 7% House & Garden 11% Travel, Sports & Leisure 11% Electronics 9% Clothes & Shoes 8%

• 1. Total addressable market for packaged food, home & garden, clothing & shoes, leisure & office, health & beauty, and electronics & appliances. 2. Active SKUs year end 2014
• Source: Euromonitor, Europris

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Europris is #1 in Norwegian discount variety retail with NO 1:1 competitor

Offering

Discount variety retail Tools, car supplies, leisure products Hardware, home, leisure, electrical, multimedia Tools, home, electrical, DYI, garden, leisure, car supplies, clothing Discount variety non-food retail Clothing, textiles, cosmetics, tools, home Home, DIY, tools, garden, leisure, electrical

# of stores May 2018

253 64 89 33 360 24 24

Assortment

• verlap to

Europris2

Sales in Norway 2017 (NOKm)

Entered in 2014

1

• Source: Euromonitor, Ravninfo, Europris
• 1. Chain sales – including franchise stores. 2. Management estimates.
• 1 000

2 000 3 000 4 000 5 000 6 000 7 000

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• Source: 3i Capital Markets Day presentation 2018, 9th March 2018; OC&C research; company information; and Europris estimates
• Note: Sales CAGRs for each region denotes the straight average of the respective companies highlighted for the relevant years

Discount variety retail experiences solid growth across all Western geographies 18% 22% 10%

Average ‘12-’17 Sales CAGR Average ‘12-’17 Sales CAGR Average ‘12-’17 Sales CAGR

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Clear long term white space opportunity and a solid near term pipeline

• Seven new stores opened in 2018
• Robust pipeline of new stores

– Two planned for the rest of 2018 – Nine stores in pipeline for 2019 and beyond (six stores subject to zoning process)

• Long-term potential of 320-330 stores

defined in 2015

5 7 14 7 14 19 9 22 9 10 10 12 14 18 16 16 25 9

Total: 257

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Lillehammer

More than 25k inhabitants per store Between 15k and 25k inhabitants per store 15k or fewer inhabitants per store

Rykkinn

• Note: # of stores updated as per August 2018

Digernes Stokke Kjørbekk Ørnes Lura

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Preparing the group for future growth…

New warehouse: capacity 34% up; rental space 13% down

Hjalmar Bjørges vei Havnelageret Værste Kampenveien Øra

Automatic high bay storage 65,000 pallets Traditional warehousing 35,700 pallets

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• Significant efficiency gains long term
• Expected reduction in the ratio of opex/group

revenue of between 0.5-1.0 p.p

• Several drivers of increased efficiency
• Lower lease expenses
• Reduction in transportation costs
• General savings from more efficient operations
• Note: assuming normal course of business, and no other efficiency gains or losses affecting the ratio of operational expenses to group revenue

…while also contributing to significant gains in efficiency

30,8 % 29,8 % 30,3 % 2017 … … 2023

Reduction

• f between

0.5-1.0 p.p

Period of transition

• OPEX in % of group revenue

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A leader in concept development – clear shop-in-shop layout and spacing

• Improved “shop-in-shop” categorisation
• Brands more prominently displayed
• “Value for money” visualisation one step up
• The best of all…

– Same investment as previous version – Limited cost for roll-out of main elements to existing stores

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Clear category strategy with specific focus on seven destination categories

7 focus “Destination” product article groups

• 12 main categories – 7 specific

“Destination” areas to drive traffic

• Prominent positions in stores
• Proven category management

models

• Low ticket items
• Seasonal offerings across all

categories underpin category strategy

40% of sales

Personal Care Petfood & Accessories Laundry & Cleaning Candy & Chocolate Candles & Napkins Socks & Underwear Home Storage Seasonal

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Significant initiatives in category development – coffee, tea and accessories

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Significant initiatives in category development – pet food and accessories

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Significant initiatives in category development – small textiles

Building credibility in small textiles

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Focusing on digital capabilities with E-CRM as a first step towards a full online offering

TOTAL # OF POTENTIAL CUSTOMERS DM LEAFLET / TRADITIONAL MARKETING DIGITAL MARKETING + RECEIPT / CUSTOMER BEHAVIOUR ANALYSES

INCREASED SOPHISTICATION IN DECISION MAKING

• MER customer loyalty

programme – customer specific communication and information

• Analyses of general customer

behavior and shopping patterns

• Better decision making for

marketing, campaigns and

• ther customer facing activities

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Launch of e-commerce in June

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Source: Europris

Smart sourcing is part of the Europris DNA

Opportunistic spirit Innovative approach Bargain hunters Relationship driven Highest ethical standards The Europris DNA The Competitive edge

Longstanding relationships with high quality producers Unique Nordic sourcing cooperation together with Tokmanni and ÖoB Strong product and production knowledge High value chain flexibility and fast execution More than 25 years sourcing experience from low cost countries Direct access to the local end producer

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• Note: Numbers for Runsvengruppen converted to NOK using SEK / NOK rate as of Friday, 8th June 2018

Achieving international competitiveness with a solid Nordic footprint

“Bringing the segment’s two strong players in Norway and Sweden together, leveraging a significantly overlapping assortment, deep retail know-how and a common strategic agenda to create a robust Nordic constellation in discount variety retail”

# of stores 257 Retail sales 2017A NOK 5.9bn # of stores 94 Retail sales 2017A NOK 3.6bn

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• Chain sales:

NOK 9.5bn

• EBITDA: NOK 720m
• Stores: 351
• 2 countries: Norway

and Sweden

• Note: Combined 2017 revenue for Europris / ÖoB. Actual 2017 Adj. EBITDA for Europris and ÖoB (excluding non-recurring items). Rusta figures not adjusted for acquisition of Hong Kong in Finland

Partners with strategic potential on a European scale…

• Chain sales:

NOK 33bn

• EBITDA: NOK 3.7bn
• Stores: 1,095
• 7 countries: Benelux,

Germany, France, Austria, Poland

• Chain sales:

NOK 33bn

• EBITDA: NOK 3.0bn
• Stores: 927
• 2 countries: United

Kingdom and Germany

• Chain sales:

NOK 4bn

• EBITDA: NOK 271m
• Stores: 101
• 4 countries: Norway,

Sweden, Finland, Germany The Europris & ÖoB partnership emerges among the top three major European structures in the fast growing discount variety retail sector

Estimated combined partnership numbers Not PF for Hong Kong

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A low-risk synergistic partnership today – potential for true European scale tomorrow

2018 2019 2020 2021 2022 Turnaround of ÖoB Store initiatives (incl. ÖoB 2.0) Best practice sharing Implementation new warehouse Potential exercise of

• ption to

acquire remaining 80% stake Purchasing cooperation Best practice sharing Continued store roll-out in Norway Nordic discount variety retail champion and platform established – true European scale within reach Strategic Initiatives Strategic Initiatives EPR acquisition

• f 20%
• wnership

stake in ÖoB

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Creating a pan-Nordic platform in discount variety retail

…with sourcing power to reflect an even larger grouping (through Shanghai JV with Tokmanni) Representing sales of NOK 17.1bn

351 stores across Norway & Sweden

• Note: Numbers based on each company’s 2017A revenue numbers, converted to NOK as of Friday, 8th June 2018

NOK 5.9bn NOK 3.6bn

NOK 7.6bn

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Key investment highlights

Unchallenged market leader in a fast growing retail segment Unique discount variety retail model Impressive track record of growth, high profitability and solid cash generation Strong future growth potential

1 2 3 4

Appendix

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Strong revenue growth

Consistent store roll-out… …and solid LFL growth has driven sales

8% Total sales CAGR: 5%

• Avg. LFL

growth:

# of Chain stores (year end) Y-o-Y total sales growth (%) Sales (NOKm)

x

# of new store openings

• General note: Please refer to page 25 for important terms and definitions that apply on this page.
• Source: Europris

4 259 4 629 5 085 5 423 13% 9% 10% 7% 0% 2% 4% 6% 8% 10% 12% 14% 1 000 2 000 3 000 4 000 5 000 6 000 2014 2015 2016 2017 220 229 239 250 50 100 150 200 250 300 2014 2015 2016 2017

11 9 9 11

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High and stable profitability

Adjusted EBITDA (NOKm) Margin (%) Margin (%)

Stable gross margin Consistently high EBITDA margin

Gross profit (NOKm)

• General note: Please refer to page 25 for important terms and definitions that apply on this page.
• Source: Europris

1 835 2 060 2 184 2 311 43,1 % 44,5 % 42,9 % 42,6 % 0,0 % 5,0 % 10,0 % 15,0 % 20,0 % 25,0 % 30,0 % 35,0 % 40,0 % 45,0 % 50,0 % 500 1 000 1 500 2 000 2 500 2014 2015 2016 2017 551 640 667 641 12,9 % 13,8 % 13,1 % 11,8 % 10,5 % 11,0 % 11,5 % 12,0 % 12,5 % 13,0 % 13,5 % 14,0 % 100 200 300 400 500 600 700 800 2014 2015 2016 2017

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Important terms and definitions

Term Definition

Chain

All Europris stores including both stores owned by the Company (directly operated) and franchise stores

Chain sales

Total retail sales of the Chain

Stores

All stores of the Chain, both franchise and stores owned by the Company (directly operated), unless explicitly stated

LFL growth

Measure of growth rate for same-store sales. Same-store sales exclude the sales of a store if the store was not open for the full calendar year and the entire prior calendar year. The stores included in calculating like-for-like growth are redefined each year at the beginning of the year and include both directly owned stores and franchise stores. The measure includes stores that have been refurbished, relocated or expanded during an applicable calendar year

Company

Europris ASA (with subsidiaries)

Franchise takeover

Acquisition of a franchise store and conversion to a directly operated store. Transaction date and consolidation into Company financial accounts may differ from the date of formal merger

Accounting standards

Europris changed the accounting principles for its audited financial statements from Norwegian GAAP to IFRS with effect from 1 January 2014 and has restated its audited financial figures for 2013 and 2012

Gross profit

Gross profit represents Company revenue less the cost of goods sold excluding unrealised foreign currency effects

Gross margin

Gross profit as a percentage of Company revenue

EBITDA

EBITDA represents operating income before depreciation and write-downs. EBITDA is not a measure of liquidity or performance calculated in accordance with IFRS

Adjusted EBITDA

EBITDA before certain non-recurring operating expenses defined by management

Adjusted EBITDA margin

Adjusted EBITDA as a percentage of Company revenue

EBITA

EBITDA less depreciation of fixtures & fittings and software (consistent with reported operating income going forward before any impairment charges). EBITA is not a measure of liquidity or performance calculated in accordance with IFRS

Adjusted EBITA

EBITA before certain non-recurring operating expenses defined by management (the same as for adjusted EBITDA)

Cash conversion

Adjusted EBITDA less total capital expenditures (excluding amounts under financial lease) divided by adjusted EBITDA. Cash conversion is not a measure of liquidity or performance calculated in accordance with IFRS

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Disclaimer

By attending the meeting where this presentation is made, or by reading the presentation slides or by accepting delivery of this document, you agree to be bound by the following limitations. IMPORTANT INFORMATION The presentation and any information provided does not constitute or form part of, and should not be construed as, an offer to acquire any securities of the Company or any of its subsidiaries nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase any securities of the Company or any of its subsidiaries, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. FORWARD LOOKING STATEMENTS Matters discussed in this document may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as “believe,” “expect,” “anticipate,” “intends,” “estimate,” “will,” “may,” “continue,” “should” and similar expressions. Forward-looking statements include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; and developments in the Company’s markets. The forward-looking statements in this Company Introduction are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although the Company believe that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors could cause the actual results

• f the Company or the industry to differ materially from those results expressed or implied in this Company Introduction by such forward-looking statements. No representation is made that any of these forward-looking statements
• r forecasts will come to pass or that any forecast result will be achieved and you are cautioned not to place any undue influence on any forward-looking statement.

NO UPDATES Nothing contained in this Company Introduction is or should be relied upon as a promise or representation as to the future. Except where otherwise expressly indicated, this Company Introduction speaks as of the date hereof. Neither the delivery of this Company Introduction nor any purchase of any of the securities, assets, businesses or undertakings of Europris shall, under any circumstances, be construed to indicate or imply that there has been no change in the affairs of Europris since the date hereof. In addition, no responsibility or liability or duty of care is or will be accepted by Europris or their respective Representatives for updating this Company Introduction (or any additional information), correcting any inaccuracies in it which may become apparent or providing any additional information. The information contained in this Company Introduction is necessarily based on economic, market and

• ther conditions as in effect on the date hereof or as stated herein. It should be understood that subsequent developments may affect such information and that Europris have no obligation to update or revise such information.