Europris Asa Unsp / Adr

Good morning everyone and welcome to Avrupa's second quarter presentation. We are gathered at Spiderbank and IAN Markets today so thank you for hosting this event and if anybody wants a free lunch you are welcome to join us for the presentation at lunch as well. I'm Espen Heldahl, CEO of Avrupa and joining me today I have CFO Stina Byrö who will present the financial details and EI officer Trine Engelöken and she will manage the Q&A session at the end of the presentation. It's very nice actually to see we have live audience here in the summer weather in Oslo so very welcome to you and we will start with questions afterwards from the live audience and then we will take questions from the web but feel free to type in the questions as we speak. Today it's actually one year ago since we presented the acquisition of ÖBE and our plans for how Avrupa should become a Nordic retail champion. And one year down the road I can confirm that we are still in the making but we have made good process on the integration plans we have in Sweden. During this first year we have focused on established joint sourcing, testing the key commercial elements of Avrupa in the ÖBE stores and preparing the organization in Sweden for a full modernization of the store base. I'm pleased to see that we have made good progress on the integration plan. It's also good to see that the increased focus management has put in Sweden not as common the expense of continued profitable growth in Norway. If we look at the results for the second quarter we have delivered a very strong second quarter. We have sales growth in both markets, good cost control and that has contributed to an increase a bit for the group. The timing of Easter has a significant impact on the numbers and to evaluate the underlying performance you should look at the first half to make good comparison for the group. So if you look at the first half here still the acquisition of ÖBE are affecting the comparable numbers and Stina will explain that in more detail during the financial review. I will highlight the segment Norway which are comparable and the sales growth was .9% for the first half year and combined with good cost control that has contributed to a solid EBIT increase of .1% for the first six months. Talking about segment Norway they are continuing the positive trend we have reported for the past few quarters. The sales growth for the Avrupa chain has been very healthy. It's driven by volumes following increased footfall to the stores and we have also continued to develop the commercial elements of Avrupa's seasons and campaigns and the sales growth was exceptionally strong during Easter. Towards the end of the first quarter we upgraded the home and interior category and sales has developed very well during the second quarter and this is an important category for us to grow as this is a high margin category and also important to drive new customers to the stores. Last year we initiated a focus on improving flow of goods and service levels in the stores and I'm really proud to say that the stores in Norway actually have never looked better than they do right now. And we have increased the inventory level but that has been important in order to support the high sales growth. On the cost side we have improved efficiency at the central warehouse in Moss without compromising on the service level to the stores. Retail statistics for the first half is not yet published but statistics per May show that Avrupa has outperformed the retail market in Norway and taken new market shares. So all in all it's a very solid performance of Norway in the first half year. If you look to Sweden the Öreberg integration is progressing to plan and we have achieved several milestones in the quarter. We have upgraded three of the non-food categories with same conceptual and visual elements and the same spacing as Avrupa's and we are gradually introducing the same product range as in Avrupa's stores. This is the first step in the modernization of Öreberg and the customers are responding well to the changes. We see higher sales of these categories and we also see a positive gross profit impact from the sales mix but the basket size remains unchanged leaving us with limited impact on the total figures for Öreberg. It's clear that the category of modernizations are not enough to revitalize Öreberg as a shopping destination but it's an important first step. We need a full remodeling of the stores in order to create a more inspiring and attractive shopping environment and get new customers to visit the stores as well. We are also working on harmonization of IT systems and in the second quarter we went live with a new ERP system in Sweden. On 18th of June we opened the first fully remodeled OBS store in Uddervalla. The store is now fully aligned with Avrupa's concept and non-food product categories are close to 100% aligned with Avrupa's. The project was very well planned and very well executed by the Öreberg team in close collaboration with the category and the concept team in Avrupa's. We have received very positive feedback from existing and new customers. It's too early to conclude but the results so far provide confidence in this last but very important step in the monetization journey of Öreberg. We see higher sales from both food fall and the basket size and we see an improved gross profit from product mix as a result of higher non-food sales. So everything that we want to see in the term round process we are seeing from this store. This is very encouraging of course and the remodeling will now be tested at three more stores in 2025 before we plan for a rollout across the store base. When we presented the Öreberg plan a year ago we had three key pillars in the turn around process and the first step in the plan for Öreberg was the category harmonization and sourcing and this work is well underway and will be close to finalized during 2026. The second step is to improve the customer experience and by this we mean a full remodeling of the stores and the first test is now live and more will follow in 2025 before we plan for a full rollout in 2026 and 2027 with up to 40 stores per year. The third pillar in the turnaround plan is to strengthen the execution across the value chain. We are introducing the out of this concept for seasons and campaigns in Öreberg and we are working to harmonize IT systems in order to allow us to better collaborate and share best practice across the two concepts. With the results we have seen from category modernizations and remodeling of the stores now in the second quarter we remain very confident in our long-term target for Öreberg on delivering five million in sales in 28 with the 5% EBIT margin. And with that I will leave the floor to Stina to give the financial details.

Thank you Espen. Good morning everyone. Before I start I would like to highlight two things. First, as the group closed the acquisition of Öreberg in May last year, reported figures for the group and for Segment Sweden are not comparable between the years. And second, as Espen mentioned, the timing of Easter also impacted the second quarter figures in a positive way and attention should primarily be on the performance for the full first half. I will start with Segment Norway and in the second quarter sales were 2.7 billion. This is an increase of 11.7%. The Avirpris chain had a like for like growth of .8% positively impacted by the timing of Easter. And when the Easter is late and also combined with good weather, normally this is very good for sales as it also kickstarts the spring and summer season and we witnessed this this year. Adjusting for the divestment of Lunehjem, the Pure players had sales growth of 2.3%. Lekekassen had growth in Norway but decline in Sweden and Denmark. Strikkemäcke had growth in all markets. If we exclude impact from unrealized currency, then the gross margin was down by one percentage point. The timing of Easter impacted the product with a higher share of sales both from consumables and from campaigns. In addition to good cost control, the timing of Easter also gave scale effects and the OPEX to sales ratio declined by 1.7 percentage points. It was a strong second quarter with an EBIT of 457 million up by 28.9%. For the first half, Segment Norway had sales of 4.2 billion, a growth of .9% and the Euripides chain had a -for-like growth of 6.1%. This was mainly due to higher footfall, underlining the relevance of the concept. The sales uplift was also a result of operational improvements. We have enhanced service levels and ensured well-stocked shelves in the stores. Adjusting for the divestment of Lune-Jem, the Pure Players had a sales growth of 2.8%. Excluding impact from unrealized currency, the gross margin showed a growth of 0.5 percentage points and the OPEX to sales ratio improved by 0.6 percentage points. This was related to good cost control and operational improvements in the value chain. We have had higher efficiency at the software and also due to a reorganization. All in all, it has been a solid first half with an EBIT of 535 million up .1% and a lift in the EBIT margin of 0.9 percentage points. I would like to remind you that the reported figures for Segment Sweden includes the full second quarter this year, but only May and June last year. Looking at the sales development in local currency and for the full second quarter both years, then the OAB chain had a -for-like growth of 4.7%. Obviously, this was positively impacted by the timing of Easter, but we also saw results from strengthened execution of promotional activities. It is too early to evaluate any lasting effects, but the categories that were upgraded in the second quarter showed good development and also improves the product mix, as these categories have margins that are higher than the chain average. The pilot store has also shown promising results in the first few weeks that it has been open after the full remodeling. The segment had an EBIT loss of 34 million for the second quarter this year. Reported figures include the full first half this year, but again only May and June last year, so you cannot compare the figures between the years. Looking at the sales development for the full first half both years and in local currency, the OAB chain had a -for-like sales decline of 0.9%, and this was driven by lower footfall. As I mentioned, we have taken measures to improve promotional sales, and these sales showed strong development, but at the expense of other products, the overall basket size has remained relatively stable. For the first half this year, the segment had an EBIT loss of 149 million. To sum up the second quarter, group figures include one additional month with OAB and were positively impacted by the timing of Easter, and group sales therefore showed significant increase. OAB had a dilutive impact on the gross margin, and this was somewhat compensated by unrealized currency effects, where we had a gain this year compared to a loss last year, with a total impact on the margin change of 0.7 percentage points. EBIT for the group was 423 million, higher than last year, as significant growth in Norway, more than offset loss in Sweden. For the first half, four additional months with OAB this year naturally impacted the top line growth, but it also had a dilutive impact on the gross margin and the OPEX to sales ratio. The gross margin decline was mainly explained by the inclusion of OAB, and also 0.5 percentage points of the decline was related to unrealized currency loss this year compared to unrealized gain last year. EBIT for the first half was 386 million, down from last year as growth for segment Norway was more than offset by loss in Sweden. A lower net profit was due to segment Sweden. Also, we had financial effects last year related to the OBEA transaction, and from interest rate swaps, where the group had an unrealized loss this year compared to an unrealized gain last year. And these two elements combined explained a pre-tax decline compared to last year of 55 million. I will comment on the -to-date figures. Cash from operating activities were negative with 40 million this year, compared to positive with 208 million last year. This was explained by more negative development for networking capital, and that was due to timing of accounts payables and also the inventory development. To boost sales, inventories in stores have been increased, and in addition we have made strategic purchases ahead of price increases from suppliers. We also have higher inventories in Sweden to support future growth in non-food categories. Net cash from financing activities were less this year, as more of the credit facility in Sweden has been drawn upon. A dividend of 573 million was paid in May. Net depth was 5.3 billion or 1.8 billion excluding lease liabilities, and cash and liquidity reserves were 1.1 billion. And before I hand it back to Espen, I would like to share the happy news that the group's science-based targets have been officially approved. This is an important milestone for the group, and the next step will be to develop a transition plan to ensure we deliver on these targets. We will do our part, but we also recognize that we cannot do this on our own, and we need to work with suppliers and partners to reach our

the motivation going forward, because no one wants to be the one who misses this streak. And in the first years after the listing in 2015, we went through a modernization program of the stores and we accelerated the category upgrades. And this is very similar to the process we are undergoing in Sweden at the moment with Örbe. In Norway, the reward came during and after the pandemic when several new customers experienced smart shopping at low prices with Avropris. But our shareholders have also been rewarded, and after 10 years as a listed company, we have delivered a total shareholder return of 218%, assuming reinvestment of dividends. This is an average return of .3% per year compared to the OCBX index of 10% in the same period. This is now also part of Avropris history, and I will return to the outlook. Avropris has a very strong concept and a solid market position in Norway, and this has allowed us to outperform the market in the first half of the year. And retail statistics for both Norway and Sweden show very strong sales in 2025, and we believe that with lowered interest rates and also real wage growth in both countries, this should support continued positive development in the consumer sentiment. The international geopolitical climate remains tense and uncertain, and during these circumstances we can only focus on what we can influence ourselves, and we hedge interest rates, we hedge electricity, we hedge the currency, and of course we also have fixed rate agreements for freight and also fixed allocation of containers from Far East on the boats. And the integration of the Ölbe is progressing according to plan with promising results from the category upgrades and the first pilot store we have remodeled, and we remain confident in our long-term target for profitable growth in Sweden. With that, I will invite Stina back on stage, and we will open up for questions. I will start with questions from the audience live here in Oslo if we have any. The journalists might of course have their session afterwards.

Thank you. Perhaps you could elaborate on the potential for news stores in Norway. It seems like you're aiming for 11 this year, which is up, if I'm reading that correctly, up from 9, so it seems to be increasing the potentials of our elaborating this year, and if possible for the next couple years, what are the potential for new store openings, please?

We said that we should open on average around five new stores every year. Last year we opened one, so of course it's a significant uplift this year. We have, I believe, it's eight in the pipeline. For this year we have opened five up until now, and the additional two we have put in the pipeline is for the year onwards, so it's not in 25. But I believe that we can continue to open around five new stores in Norway for several years to come. We are opening a few city stores, and we believe that for the full version of the stores, it's still a potential to have around 320 stores or something, so let's We have a good runway still for opening new stores.

Then we go to questions from the web. The first one comes from DnB Carnegie, and the first questions are related to Norway. Can you please provide the mix on your like for like growth in Norway between volume and price?

For the first half it's primarily footfall in the that drives the sales growth. The basket is relatively stable, slightly up, but little impact from basket year to date.

And what was your consumable and private label share in Q2, and how does this compare to last year?

It's been a higher share of consumables, which is impacted by the timing of Easter, but if we look year to date, it's still a slight increase in consumables, around one percentage points up compared to last year. The private label share is slightly down in the second quarter. Again, Easter is impacting, so if we look year to date, then it's roughly the same private label share.

And how do you see the development in purchasing prices from China?

We see a slight decrease in the purchasing prices from Far East. We see that it's available capacity at the factories, and some raw material prices have also come down, so we are positive on the outlook on the price development from Far East.

And now we're to Sweden. Can you provide an estimate of the Easter effect on sales in Sweden?

It's difficult to give the exact figure. We don't know that business as well as we know the Norwegian business, but it was definitely an Easter impact. And if, again, you look at the year to date figures, the chain was like for like down with 0.9%. So the gain in the second quarter was not offsetting completely the loss in the first quarter.

You have still low gross margins in Q2 in Sweden, despite stating that there was no impact from clearance sales. How should you think about the gross margin development going forward? And how was the gross margin in Sweden on your pilot store relative to the overall Swedish margin?

Well, if we look at the reported figures in Swedish crowners, then the gross margin was actually up in the second quarter for segment Sweden, and it is flat year to date. And we are modernization journey, we are taking steps, but for now we don't necessarily see that it adds on top. So I think we will still see that this transformation journey we have will take time.

And how should you think about the OpEx base in Sweden? Is Q2 a representative figure, or is there still a high level of project and ERP costs?

Now, the level of ERP costs was about the same as last year. It's been it was higher in the first quarter, but in the second quarter, it was not that big a difference. We will have also other projects going forward with other IT projects as well. So I think roughly normal, but we're still building up finding our way and also with all the projects we will do ahead, especially in 26 and 27, that will impact. So it's still difficult to find the run rate that's still some years out.

And the next question comes from Håkon Fuglue, SEB. What was the Easter sale? Was the Easter sale more or less than normal in Norway and Sweden?

I would say we have given a range in our appendix in the analytical guidelines, and it was in the high range. It's difficult to exactly say what is the Easter effect. You don't know really why the customers come to the stores, but sales of Easter products was on the high side. So I would say it's in the high level of the interval we have given.

And what was the dilutive effect from Easter sale in gross margins in Norway?

Again, it's difficult to quantify exactly what was what, but look at the -to-date figures. You will see that the segment Norway had a growth in this gross margin of 0.5 percent edge points. So I think that's more relevant than the second quarter isolated. And what was the hedge gain in NOC for Norway? We had a loss in -to-date of 20 million and a gain of 9 million last year. I believe Trine, do you remember? Yeah. So 0.6 percentage points decline -to-date for segment Norway based on that.

And the next question comes from Petter Nyström, ABG. ÖB showed a solid improvement from Q1. You mentioned full store remodels and upgrades as a key to hitting your targets. Were these included in your original plan and do you have a rough capex estimate?

Yeah, they were included in the original plan. It's always been a plan that we should start sharing the same non-food concept and integrate these categories. And of course, do the full remodeling of the store. So we're doing the tests now and we will have a lot of efficient capex with the 300 million we have presented earlier on. And we will come back with more figures on the capex needs and also the optics and sales effects from the modernizations when we have finalized the test stores. Thank you. That was all questions? Yeah. Then I wish everyone a nice summer and for the live audience, you should bring your Dubai chocolate home before you leave. Thank you.