Europris Asa

Good morning everyone and welcome to AvroPris fourth quarter presentation. I'm Espen Eldahl, CEO of AvroPris and joining me today we have CFO Stina Byhre who will present the financial details and the ER manager Trine Engløken who will manage the Q&A session at the end of the presentation. Please feel free to type in your questions as we speak and we will sum it up at the end. It's always a pleasure to see a live audience in the room and actually today we have some visitors and that is a special welcome to you guys. Good to see you. Okay, let's get started. In retail, the fourth quarter is the most important quarter of the year and I'm really pleased to see that we delivered a solid finish to 2024. In Norway, we had prepared well for the Christmas season and was rewarded with sales growth above the market. And the gross margin improved both from last year and also the preceding quarters. All that contributed to an EBIT increase of 20% from last year. So strong performance in Norway. In Sweden, we get more and more confirmation that our initiatives to increase sales from campaigns and margins and also sales of non-food products are giving results. So we're making significant progress on the integration plan and we are getting ready for the first important product upgrades in the early years. Good morning everyone and welcome to AvroPris fourth quarter presentation. I'm Espen Eldahl, CEO of AvroPris and joining me today we have CFO Stina Byhre who will present the financial details and the ER manager Trine Engløken who will manage the Q&A session at the end of the presentation. Please feel free to type in your questions as we speak and we will sum it up at the end. It's always a pleasure to see a live audience in the room and actually today we have some visitors and that is a special welcome to you guys. Good to see you. Okay, let's get started. In retail, the fourth quarter is the most important quarter of the year and I'm really pleased to see that we delivered a solid finish to 2024. In Norway, we had prepared well for the Christmas season and was rewarded with sales growth above the market. And the gross margin improved both from last year and also the preceding quarters. All that contributed to an EBIT increase of 20% from last year. So strong performance in Norway. In Sweden, we get more and more confirmation that our initiatives to increase sales from campaigns and margins and also sales of non-food products are giving results. So we're making significant progress on the integration plan and we are getting ready for the first important product upgrades in the early start of 2025. So we are on track for Sweden and a good end to the year in Norway. Looking at the financial figures, they are, of course, impacted by the acquisition of ÖOB. And the organic numbers represent segment Norway, which is comparable to last year. Stina will provide more details on the financials. But overall, we saw very good sales development combined with the improved gross margin in Norway, resulted in group EBIT of 624 million and increase of 12.7% from last year. Looking at the market, in Norway we delivered a solid finish to the year with growth above the market growth. According to Kvaru Analyse, the shopping centres in Norway had a growth of 4.1% in the quarter and Statistics Norway reported a variety retail growth of 5% compared to Adrupis growth of 5.2% in the fourth quarter. Also for the full year, we exceeded the shopping center growth and also the broad variety retail index as reported by Statistics Norway. So it's a solid sales performance. And we were very well prepared for the Christmas season and managed to balance the sales and the campaigns during the important black weeks in November. We've seen a high share of non-food sales and also private label products in the quarter, while the more intense price competition from the grocery chains has led to lower sales from groceries. So it's been a mixed market. We've seen both for outer piece and also the rest of the market that in home and interior has performed very well in the quarter, while groceries has had a more difficult time. And I think the price competition we've seen for especially seasonal goods this quarter has been more intense than what we have seen in previous years. We still see that consumers are cautious and good campaigns are very important to drive footfall to the stores and get sales growth. And one shift we have seen for some time is that over the years, we've seen that sales have been shifting from December to November. And this was even more evident this year. We saw that November is becoming more and more important as the seasonal Christmas period for sales. And that is especially valid for physical retail. And I think what we have seen is that we have educated the consumers to be a little bit more smart. They're taking advantage of the Black Week campaigns and getting ready with the Christmas shopping early at low prices. So the consumers are getting smarter and the retailers, they have to adapt. and for online retail we actually seen another shift this year that for them november has been the most important month of the quarter for some years but we saw that sales actually moved far into december this year as Logistics chains have improved and delivery is more reliable. We saw that the sales period up towards Christmas was prolonged this year. And we saw that in the market and we also saw with our pure players that we got more sales in December. But still, November is the most important month. So a lot of changes in the market. And also another thing, the strong price position and the product offering of Europis was also well recognized in the market. In October and November, Netavisen compared prices on everyday products among seven discount variety retailers. And Europis was a clear winner. And I think that's a very strong achievement, especially in the quarter where we also increased the gross margin. And over the last couple of years, we've worked really hard to improve our sourcing model and also to develop private level products. And this allows us to keep prices low without compromising on the gross margin. We've also been awarded for our seasonal products in our piece, winning several product tests during the Christmas season. On the pure play side I'm really pleased to see that Lekekassen was awarded by Perisjakt as online store of the year for families and children and they got the second place in online store for the year. And these rewards are very important for me and also to all the employees of Aeropolis because this gives us motivation to continue working hard to develop even better solutions and be more competitive and increase the value for our customers. So it's a strong achievement by the team and we are really proud to present this today. Let's look to Sweden, where we see that the ERBE integration process is progressing according to plan. The organization continues to work well together, and I see that the collaboration between Aerobis and ERBE is actually getting better and better as we get more time to know each other. And in the quarter, we've taken actions to build a more robust governance model. And this has been one of the key tasks of Andreas Roseth after he took over as country manager. He's established a new leadership structure and also established arenas to promote more collaboration across the various functions in the company, which is really important if we shall be successful with the plans we have ahead of us. We need to collaborate better and we need to get more management attention in the organization. On the positive side, we see that we get very good results from the initiatives we have taken to increase both sales and margins from campaigns and also the sale of non-food items. And that is really comforting for us to see, as this is some of the cornerstones in the turnaround plan we have for ÖOBEA. But still, we don't see an uplift in the basket. We see that we get an improved sales mix and the consumers are responding to the changes we're making. But the current customer segment needs to be added up with more customers coming in. We need to take back some of the customers that have been lost over the past years. And the product upgrades and the product range upgrades we are going to start now in 2025 will be evident to really attract new customers and increase the customer experience in the stores. That's what we need to get long-term growth into ÖOB. We'll look at the fourth quarter. It's been extremely busy. It's a lot of activities that have been carried out in the Swedish organization. First of all, we have initiated large clearance sales in order to prepare for the upcoming category upgrades. We need to sell out the old items before we can improve and introduce a new product range. We have implemented the Avrupes campaign methodology and ways of working. We have implemented a new visual profile in 70 stores. And we have also introduced carpets and rugs as a new product category in the stores. We've upgraded the business intelligence system and we are making progress on the ERP system where we expect to go live in the first half of 2025 as planned. So it's truly been a busy quarter, but you're making good progress, and the team is really motivated, and we see that the initial results are pointing in the right direction. Overall, on ÖB, we remain very confident on our long-term ambition to increase revenues by 1 billion and reach an EBIT margin of 5% in 2028. The cornerstones of our turnaround plan is to do the category harmonization and the joint sourcing, where we have come off to a good start. Improving customer experience is actually what we're going to start now in this year. and strengthen the execution across the whole value chain is something we're working on all the way. With that, I hand over to Stina to present more of the financial details.

Thank you, Espen. As Espen said, the fourth quarter is the most important quarter for the group. And it was therefore highly satisfactory to see the strong development in Norway. And the group delivered growth in both top line and profit in this important quarter. Group sales were 4.4 billion. And the large growth compared to last year was explained by the inclusion of ÖOB that was not part of the group figures last year. But the organic growth was also good with an increase of 4.9%. The gross margin was 42.5% and the decline compared to last year was explained by ÖAB that has a lower margin level. If we exclude impact from currency, the organic gross margin showed an improvement of 1.4 percentage points. The OPEX to sales ratio was 22.3%. This is an increase compared to last year due to the inclusion of ÖB. The organic development showed an improvement of 0.3 percentage points. But I would like to mention that the OPEX was positively impacted by timing of costs and accruals of 20 million. EBIT was 624 million. This includes a loss of 41 million from ÖAB and the organic improvement was 20.2%. Net profit to parent was 443 million, up by 9 million despite the loss in ÖAB. ÖB was consolidated into the group figures from May, so to meaningfully compare to last year, you should look at the organic growth. For the full year, group sales were 12.8 billion, with an organic growth of 4.3%. The gross margin was 41.7%, and this included a dilutive impact from ÖB of 3 percentage points. The organic gross margin excluding currency effects was slightly above last year, which I think is a good performance considering headwind from a weaker local currency compared to central purchasing currencies like dollars and euros. War surcharges that were imposed on inbound freight from Asia and a higher share of sales from campaigns. On the positive side were lower purchasing prices from Asia and a higher share of sales from private labels. The OPEX delivered better than the expected 10% increase that was communicated in the beginning of the year. And the organic growth ended at 7.1%. Group EBIT was 1.2 billion. This is down from last year due to a loss of 102 million in ÖOB. The organic EBIT grew by 3.4%. Net profit to parent was 839 million, down 70 million due to the loss in ÖOB. I will comment on the full year figures. Cash from operating activities was 1.5 billion, down from 1.8 billion in the previous year. Lower cash from operating activities was mainly explained by the development in inventories. Compared to the previous year, a higher share of goods for the spring season was on its way and had also arrived. In addition, we have also had a planned inventory build-up in order to improve the service level in our stores. This obviously impacted also the net change in cash, which was negative with 73 million compared to positive at 212 million last year. Net depth was 4.2 billion and excluding lease liabilities, it was 720 million. The group had cash and liquidity reserves of 2.2 billion when exiting the year. For segment Norway, sales in the fourth quarter were 3.2 billion, up 4.9%. The AvroPrize chain had a like-for-like growth of 4.8%, and this was driven by higher footfall and strong execution of the seasons and campaigns. Higher sales of Christmas items had a positive impact on the gross margin. And with an OPEX growth of only 3.4%, the EBIT ended 20.2% above last year. The fourth quarter is also the most important quarter for our largest pure prey, Lekekassen, and it was therefore good to see that the development was better than in the previous three quarters. Strikkemekka had strong sales growth in both the fourth quarter and for the full year. For the full year, sales for Segment Norway was 9.9 billion, up 4.3%. The average price chain had a like-for-like growth of 3.5%. The upgraded kitchen category from March showed an increase for the full year that was very strong. The grocery category was upgraded in September. And here we got off to a very good start. And it also delivered higher growth than the chain total for the full year. But growth slowed towards the end of the year due to the competition in grocery that Espen talked about. But with a broad range of categories, the chain can adapt to changes in competitive landscape and or consumer behavior rather quickly. And I think that this illustrates the strength in the concept. One new store was opened in 2024 with a location that is part of the strategy to open more stores in densely populated areas. In addition, we also had 23 other store projects, which is part of keeping the store portfolio up to date. And there are 12 stores in the pipeline, of which seven are expected to open this year, and one will be closed in the first quarter. ÖAB had sales of 1.2 billion in the fourth quarter. Like-for-like sales were lower, but we were happy to see that footfall was on a par with last year. The gross margin was 32.6%, and a clearance sale ahead of the planned category upgrades had a negative impact on the margin. OPEX to sales was 28.8%, and the OPEX was impacted by several things. There were timing of some costs that hit the fourth quarter. There were some one-off costs, and we also had costs related to the upgrade of the business intelligence system and the ERP project. EBIT was negative with 41 million. From May to December, sales were 2.9 billion for ÖAB and EBIT was negative with 102 million. For the full year, like for like sales were down, but it was pleasing to see that after declining footfall in the first half, this stabilized in the second half. One store was closed in 2024 as the location was unbeneficial and the store was too large and therefore unlikely to turn profitable. But the organization is in good spirit and continues to work hard to deliver on the integration plan. And with that, I will hand it back to Espen to talk about dividend and outlook.

Thank you, Stina. We start with the dividend, and as Stina has explained, Europeace has a solid financial position, and profits in Norway are growing. This allows us to increase the dividend, and the board proposed an ordinary dividend per share of 350, which is an increase of 7.7% from last year, and represents a payout ratio of 68.2%. On the outlook, we see an improved outlook in Norway and Sweden for the consumers after some years of weak consumer confidence. Inflation has come down in both countries, and with the high wage increases over the last two years, the average consumer is seeing real wage increases. In addition, the interest rate has already come down in Sweden and is expected to come down in Norway during 2025. And this is all good news for the consumers, but it's also good news for the retail sector. In Norway, Europis has outperformed the general retail market with gradually improving financials through 2024. That is a strong achievement. And the turnaround of ÖBA is progressing as planned, with upgrades of several important product categories planned for 2025. The first store modernizations will take place around summer, And patience is still needed to see the long-term results in sales growth and margin improvements in Sweden. But we are on the right way, and we remain very confident to reach our ambition of SEK 5 billion in sales and a 5% EBIT margin in 2028. And with that, I will invite Stina back on stage, and we will open up for questions. Antline, would you like to start with the questions in the room, or do you prefer to start with the questions from the web?