Q3 2015 Europris ASA Interim Report

Highlights third quarter 2015 (Figures for the corresponding period of last year in brackets. The figures are unaudited.) •

Increase of 7.6 per cent in group revenue to NOK 1,135 million (NOK 1,054 million)

•

Adjusted EBITDA (excluding nonrecurring items in 2014) up 8.1 per cent to NOK 122 million (NOK 113 million)

•

Two new store openings – Europris Giske and Europris Begby

•

Outperformed market average of 1.9 per cent for like-for-like sales growth with a 2.9 per cent increase

•

Significantly lower interest expenses owing to successful refinancing

•

Net profit increased 99 per cent to NOK 74.5 million (NOK 37.5 million)

•

Nominated for Retail Company of the Year award by Virke

Retail sales, NOK million

Number of stores

Contents Highlights third quarter 2015

2

Financial statements 9

Key figures 3

Definitions 18

Operational review 4

Europris in brief 19

Financial review 6

2

Key figures Q3 2015

Q3 2014

YTD 15

YTD 14

FY2014

CHAIN Total retail sales Growth Like-for-like sales growth Number of stores at end of period

1,242.4 6.4% 2.9% 227

1,167.3 9.3% 7.6% 216

3,537.2 7.8% 5.0% 227

3,281.7 8.9% 6.6% 216

4,732.9 9.3% 7.0% 220

GROUP Sales directly operated stores Sales from wholesale to franchise stores Franchise fees and other income Group revenue Growth

863.2 248.2 23.3 1,134.7 7.6%

784.5 244.1 25.7 1,054.3 13.9%

2,441.3 709.2 69.7 3,220.2 8.7%

2,190.0 695.5 75.8 2,961.4 12.9%

3,168.5 984.3 106.1 4,258.8 13.3%

COGS Gross profit Gross margin

639.6 495.1 43.6%

621.7 432.6 41.0%

1,806.4 1,413.8 43.9%

1,739.1 1,222.3 41.3%

2,423.7 1,835.1 43.1%

Operating expenses EBITDA EBITDA margin

373.5 121.6 10.7%

323.8 108.8 10.3%

1,093.4 320.4 10.0%

933.3 289.1 9.8%

1,294.7 540.4 12.7%

Nonrecurring items Adjusted EBITDA Adjusted EBITDA margin

121.6 10.7%

3.7 112.5 10.7%

36.7 357.1 11.1%

3.7 292.8 9.9%

10.5 550.9 12.9%

Profit before tax Profit for the period

102.1 74.5

51.3 37.5

118.2 90.5

77.8 56.8

206.5 149.3

Earnings per share

0.45

0.12

0.30

-0.03

0.46

Amounts in NOK million

3

Operational review Europris continued to outperform the market in the third quarter, with a like-for-like sales growth of 2.9 per cent compared with 1.9 per cent for the market.1 The quarter was yet another period with challenging weather conditions. Cold weather in July meant the sales period for seasonal merchandise became relatively short. When good summer weather finally arrived in mid-August, it was too late to boost these sales. Following the summer season, the key priority areas have been wide stocktaking, extensive sales training and thorough preparations for the peak Christmas season in the fourth quarter, as well as close follow-up to realise Europris’ growth potential through new store openings. In-season management Despite the challenging weather conditions during the summer, Europris continued to beat the market by a significant margin. The very dynamic nature of a seasonal business is an integral part of the group’s operations. Europris generally succeeded in adjusting operations in the third quarter to take account of the summer results, and the group is fully prepared for the peak season as it enters the last and most important quarter of the year: •

detailed plans are already in place for sales campaigns aimed at Black Friday and Christmas, as well as at fireworks for New Year’s Eve.

•

marketing kits and sales material have been improved from last year and are ready for distribution.

•

the Christmas season is better planned than ever before, and the flow of goods has been optimised with weekly delivery schedules to each store based on experience from 2014.

modernised stores which is above the chain average. The programme has reached its peak, and only a few modernisation are planned in the fourth quarter. New store openings Europris opened two new directly operated stores in the third quarter, bringing the total number of stores in the chain to 227, including 164 directly operated and 63 franchises. The new stores are located at Giske outside Ålesund and at Begby in Fredrikstad. Sales in both stores have been good and slightly ahead of the group’s estimates. Seven new stores have been opened this year, and Europris will open two new stores (Grorud in Oslo and Bodø) during the fourth quarter. That brings the total number of additional stores in 2015 to nine. This is one fewer than planned owing to a last minute cancellation because a landlord failed to satisfy Europris’ commercial terms, and the planned store in Råde was postponed until 2016 owing to late planning permission.

At 30 September, most seasonal goods were in stock and the group is well prepared for the expected sales peak in the fourth quarter.

At 30 September, the group had a solid pipeline of new stores, with nine approved by the board. Of these, six are confirmed for 2016 and one for 2016-17. Two stores are awaiting planning permission. In addition, Europris had five prospects which are subject to negotiations at 30 September. The group has no plans to close any stores in 2016.

Modernisation programme Europris modernised 13 of its own stores during the third quarter. By 30 September, 73 per cent of the stores had been upgraded to the latest format. The positive effect from modernisations continues, and is demonstrated through a like-for-like sales growth for the 1

“Market” includes a large number of shopping centres throughout Norway (eg, 230 in 2014). Source: Kvarud Analyse.

4

Category development In some new stores, Europris is testing a new visual profile for its shop-in-shop concept. Product pictures are displayed above the top shelves, and shelves are marked with the respective product categories in order to make it easier for customers to locate the items they want. Brands are more prominently displayed to increase value-for-money visualisation. The improved profile does not increase store investment and can be rolled out to existing stores at limited cost.

Total revenues from the business-to-business (B2B) market in Europris are currently just below NOK 50 million, and the group sees an attractive potential in this segment for the future. Consequently, Europris is planning to step up its activity in the B2B market and has recently hired a B2B manager who will start in the fourth quarter. The Enterprise Federation of Norway (Virke) announced on 15 September that Europris was one of five nominees for its annual Retail Company of the Year award. According to Virke, nominations are based on an overall assessment of the relevant companies, involving requirements for revenue growth in combination with profitability over time. The emphasis is also on corporate reputation and how the nominees act as role models for other retail companies.

Europris launched a new sales display for yarn during the first half of September in more than 150 stores after successful results from the pilot phase, which has been under way since May. Sales of yarn increased by 37.5 per cent from last year during the final two weeks of September. In the textile category, a new line of women’s underwear was launched in March, and a bamboo collection for men’s underwear and socks was introduced during the third quarter. Where pet food is concerned, Europris has signed an agreement with Purina, the leading quality brand. Its product line for both cat and dog food will be introduced in early 2016. Purina Pro Plan was awarded “best in test” for dog food by Testfakta in August 2014. Sales training More than 75 per cent of all store staff completed the e-learning programme during September, with attention concentrated on campaign implementation and add-on sales. An iPad version of this programme will be launched before Christmas to increase the participation rate even further. Early results show that stores with high participation rates are growing more quickly than the chain average. This training forms part of Europris’ cost-efficient and repetitive training sessions, which are intended to serve as a model for future performance improvement programmes. Operational improvements The group has started the roll-out of its automatic store replenishment system, and more than 90 stores had started using this solution for the base assortment by 30 September. Seasonal and campaign assortment will be implemented later. So far, the roll-out is slightly ahead of schedule and results are in line with expectations. The new system is expected to improve the accuracy of store product orders and to help reduce logistical inefficiencies and inventory over time.

Picture at Europris Begby on Opening Day in September Photo: Erik Faukland

5

Financial review PROFIT AND LOSS are adjusted when the stocktaking is conducted. The third quarter included NOK 20.9 million in calculation differences, about NOK 15 million of which relate to previous quarters. Excluding calculation differences from earlier periods, the gross margin was up by 1.3 percentage points. The stocktaking in 2014 was completed in the fourth quarter, and a positive calculation deviation of NOK 25.4 million was recognised for that period.

Total revenues for the group in the third quarter of 2015 came to NOK 1,135 million (NOK 1,054 million), which represented a growth of 7.6 per cent from the same period of 2014. Growth was driven by new stores and the chain’s like-for-like sales growth of 2.9 per cent, which was well above the market average of 1.9 per cent.

For the first nine months of 2015, the group’s gross profit was NOK 1,414 million (NOK 1,222 million), which represented a growth of 15.7 per cent. The gross margin was 43.9 per cent, compared with 41.3 per cent for the same period of 2014. Operating expenses, in the third quarter rose to NOK 374 million (NOK 324 million). This represented an increase of 15.4 per cent from the same period of last year. The growth was driven by volume increase, new store openings and takeover of franchise stores. The third quarter accounts included NOK 15.3 million in special costs related to stocktaking, opening of a new warehouse and timing differences in marketing costs. Excluding these special costs, the increase from the same period of last year was 10.6 per cent.

For the first nine months of 2015, group revenues amounted to NOK 3,220 million (NOK 2,961 million), which represented a growth of 8.7 per cent from the same period of last year. The key drivers of revenue growth were the chain’s like-forlike sales growth of five per cent over the first nine months of 2015 and new store openings.

For the first nine months of 2015, operating expenses came to NOK 1,093 million (NOK 933 million), an increase of 17.2 per cent, which included nonrecurring items of NOK 37 million, mostly related to the IPO. Excluding nonrecurring items, the increase from the same period of last year was 13.7 per cent.

Gross profit for the group was NOK 495 million (NOK 433 million), representing a growth of 14.3 per cent. The gross margin was 43.6 per cent in the third quarter, compared with 41 per cent in the same period of last year. Takeover of franchise stores and savings from sourcing initiatives had a positive effect on the gross margin. The margin improvement also partly reflected a positive result from the annual stocktaking, which took place in AugustOctober this year as opposed to SeptemberNovember in 2014. During the year, the group reports a calculated gross margin for the stores and any calculation differences

Adjusted EBITDA was NOK 122 million (NOK 113 million) in the third quarter, up by 8.1 per cent from the same period of last year. The adjusted EBITDA margin was 10.7 per cent (10.7 per cent). This increase was driven mainly by higher revenues and improved gross profit as explained above.

6

Income tax expense for the third quarter came to NOK 28 million (NOK 14 million). The increase of NOK 14 million correlated with the rise in profit before tax. For the first nine months of 2015, income tax expense was NOK 28 million (NOK 21 million). Income tax expense for 2015 included tax income of NOK 4 million related to the settlement of a tax issue from 2011. Net profit for the third quarter was NOK 74 million (NOK 37 million). For the first nine months of 2015, net profit, including nonrecurring items, was NOK 91 million (NOK 57 million). For the first nine months of 2015, adjusted EBITDA amounted to NOK 357 million (NOK 293 million), which represented an increase of 21.8 per cent from the corresponding period of last year. The adjusted EBITDA margin was 11.1 per cent (9.9 per cent).

CASH FLOW Net cash flow from operating activities was NOK 0 for the first nine months of 2015 (NOK 118 million). The decrease mainly reflected an increase in income tax paid (from last year) and a rise in net working capital. The latter was caused by higher inventory levels owing to the opening of new stores, greater inventory value for goods purchased in foreign currencies, and a delay in supplier payments during the third quarter of last year. A significant portion of the negative change compared with last year related to timing differences in supplier payments. This will even out naturally over time.

Net financial expenses amounted to NOK 1.5 million in the third quarter of 2015 (NOK 26 million). The decrease reflects significantly lower interest expenses under the new bank agreement. The interest rate on term loans in the third quarter of 2015 was 2.22 per cent, which produced an interest expense of NOK 9 million (NOK 28 million). Other banking fees are also reduced under the new agreement. Europris recognised an unrealised profit of NOK 10.6 million for the third quarter on currency hedging contracts and on accounts payable in foreign currencies.

Net cash flow used in investing activities was negative at NOK 87 million (negative at NOK 86 million) and net cash flow from financing activities was NOK 15 million (negative at NOK 167 million). The rise in cash flow from financing activities reflected a net capital increase of NOK 28 million in connection with the IPO, as well as both scheduled and non-scheduled repayment of non-current debt during 2014.

For the first nine months of 2015, net financial expenses were NOK 149 million (NOK 118 million). The increase was driven by nonrecurring items of NOK 57 million related to refinancing the group’s bank debt, as explained on page 8 of the interim report for the second quarter of 2015.

The net change in cash and cash equivalents for the first nine month of 2015 was negative at NOK 72 million (negative at NOK 135 million).

Profit before tax was NOK 102 million (NOK 51 million). The increase of NOK 51 million reflected higher revenues, improved gross profit and reduced financial expenses.

Capital expenditure was NOK 85 million (NOK 58 million). The increase from last year reflected the opening of two additional directly operated stores during the first nine months of 2015, while the modernisation programme for directly operated stores is progressing as planned.

For the first nine months of 2015, profit before tax, including nonrecurring items, was NOK 118 million (NOK 78 million).

7

was influenced by a net increase of NOK 46 million (see the condensed consolidated statement of changes in equity for detailed information).

FINANCIAL POSITION AND LIQUIDITY Net debt at 30 September 2015 was NOK 1,474 million (NOK 1,536 million). The group is in compliance with all financial covenants.

OUTLOOK

Refinancing of the group’s existing bank debt was completed on 23 June 2015 with a new five-year term loan facility of NOK 1,650 million.

The pace of growth in the Norwegian retail sector is slowing, but Europris is continuously outperforming the market. Some geographical regions have experienced more adverse effects from the slowdown in the petroleum industry, such as Rogaland county with the oil city of Stavanger. However, Europris is showing relative strength in this region. The Kvarud Analyse report shows that, while the likefor-like contraction in the county during the third quarter was 0.9 per cent, compared with overall national growth of 1.9 per cent, Europris experienced a growth of 6.7 per cent in Rogaland and of 2.9 per cent overall in the third quarter.

The new loan agreement has no fixed repayment schedule, and all debt is accordingly classified as non-current in the balance sheet. Cash and cash equivalents at 30 September 2015 for the group were NOK 173 million (NOK 158 million). The group’s liquidity reserves include a total revolving credit facility of NOK 450 million, of which NOK 110 million has been reserved for non-cash drawings related to guarantees and letters of credit. Of the remaining NOK 340 million set aside for liquidity purposes, NOK 0 had been drawn at 30 September 2015 (NOK 0).

The group remains the market leader in the fast growing discount variety retail segment, which is still a highly underpenetrated segment in Norway, and continues to gain market share from specialist retailers. It has a truly mixed assortment, which gives it a large addressable market, competitive flexibility and a resilient business model.

Equity at 30 September 2015 was NOK 1,341 million, compared with NOK 1,205 a year earlier, and represented an equity ratio of 34.2 per cent. Equity increased by a net NOK 46 million owing to the share issue in the IPO, and net profit for the period was NOK 91 million.

Europris will continue to concentrate attention on category development and on expanding the seasons. Combined with the store modernisation programme, it expects this to be the key driver behind like-forlike sales growth in the future. Europris has initiated operational improvement projects in the supply chain with the aim of reducing inventory levels and making store operations even more efficient.

IPO As part of the new capital structure implemented at the time of the IPO, the group also raised NOK 850 million in new equity. These funds were used to redeem the group’s existing 222,120,000 preference shares (with a total value of NOK 804 million) and to repay a small outstanding shareholder loan of NOK 18 million. The remaining funds from the new equity issue were applied to funding nonrecurring costs of NOK 30 million incurred in connection with the IPO. Following the new equity issue, the group’s outstanding shareholder loan was accordingly reduced to zero. Following the capital increase and the redemption of the preference shares, the group’s equity

The group is solidly positioned to continue outperforming the market, and is well prepared for the fourth quarter.

Fredrikstad, 11th of November 2015 The board of directors of Europris ASA 8

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS FOR THE THIRD QUARTER AND THE NINE MONTHS ENDED 30 SEPTEMBER Figures are stated in NOK 1,000

Notes

Total operating income (group revenue) Cost of goods sold (COGS) Employee benefits expense Depreciation

6

Q3 2015

Q3 2014

YTD 2015

YTD 2014

FY 2014

Unaudited

Unaudited

Unaudited

Unaudited

Audited

1,134,730

1,054,168

3,220,236

2,961,371

4,258,837

639,604

621,571

1,806,426

1,739,040

2,423,728

182,470

161,051

506,094

435,301

616,314

18,076

31,741

53,061

93,704

126,207

-

-

-

-

78,344

Other operating expenses

Impairment

191,047

162,739

587,283

497,946

678,372

Operating profit

103,533

77,066

267,372

195,380

335,872

(1,480)

(25,737)

(149,211)

(117,512 )

(129,381)

102,054

51,329

118,161

77,867

206,491

Net financial income (expense) Profit before tax Income tax expense Profit for the period Attributable to the equity holders of the parent

8

27,554

13,859

27,628

21,024

57,200

74,499

37,470

90,532

56,843

149,291

74,499

37,470

90,532

56,843

149,291

Interim condensed consolidated statement of comprehensive income Profit for the period

74,499

37,470

90,532

56,843

149,291

Total comprehensive income

74,499

37,470

90,532

56,843

149,291

Attributable to the equity holders of the parent

74,499

37,470

90,532

56,843

149,291

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

9

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE NINE MONTHS ENDED 30 SEPTEMBER Figures are stated in NOK 1,000

Notes

30 Sept 2015

30 Sept 2014

31 Dec 2014

Unaudited

Unaudited

Audited

1,990,647

2,088,882

1,999,894

ASSETS Total intangible assets

5,6

Total fixed assets

6

230,703

171,639

185,784

Total financial assets

7

2,499

17,717

16,633

2,223,849

2,278,238

2,202,311

1,251,454

1,066,187

984,336

211,543

202,453

229,550

Total non-current assets Inventories Trade receivables Other receivables

7

63,760

72,009

106,682

173,188

157,876

245,016

Total current assets

1,699,945

1,498,524

1,565,585

Total assets

3,923,794

3,776,763

3,767,896

1,070,162

925,500

925,500

Cash and cash equivalents

EQUITY AND LIABILITIES Total paid-in capital Total retained equity Total shareholders' equity Provisions Borrowings Other non-current liabilities

7 7,9

Total non-current liabilities Borrowings

7

Accounts payable

271,256

186,654

279,102

1,341,418

1,112,154

1,204,602

103,515

130,032

72,817

1,644,099

1,550,826

1,481,445

3,363

24,402

41,873

1,750,977

1,705,260

1,596,135

-

119,000

110,500

559,313

585,955

481,507

Tax payable

49,076

41,391

99,525

Public duties payable

60,267

60,103

112,670

Other current liabilities

7

162,743

152,900

162,957

831,399

959,349

967,159

Total liabilities

2,582,376

2,664,609

2,563,294

Total equity and liabilities

3,923,794

3,776,763

3,767,896

Total current liabilities

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

10

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED 30 SEPTEMBER Attributed to equity holders of the parent

Share capital

Share premium

Retained earnings

Total equity

9,255

916,245

45,590

971,090

Reverseal of dividend payable 2013

-

-

84,221

84,221

Profit for the period

-

-

56,843

56,843

Figures are stated in NOK 1,000

At 1 January 2014

Other comprehensive income At 30 September 2014

-

-

-

-

9,255

916,245

186,654

1,112,154

(unaudited) Attributed to equity holders of the parent

Share capital

Share premium

Retained earnings

Total equity

At 1 January 2015

9,255

916,245

279,102

1,204,602

Capital reduction 1

(5,553)

(797,974)

-

(803,527)

144,378

(46,000)

(98,378)

-

18,889

830,922

-

849,811

-

-

90,532

90,532

-

-

-

-

166,969

903,193

271,256

1,341,418

Capital contribution by transfer from 2 distributable equity (bonus issue) Proceeds from shares issued (initial public offering) 3 Profit for the period Other comprehensive income At 30 September 2015 (unaudited) 1

Restructuring of the company's share capital implemented by redemption of 222,120,000 preference shares, see of the Norwegian Public Limited Companies Act, section 12-1 paragraph 2.

2

The share capital increased by NOK 144,378 by increasing the par value of the company's 148,080,000 shares from NOK 0.025 by NOK 0.975 to NOK 1 per share through a transfer from other equity, wereof NOK 98,378 from retained earnings and NOK 46,000 from previously paid in capital.

3

In the offering, Europris ASA issued a total of 18,888,888 new shares to investors at an average subscription price of NOK 44.99.

In accordance with sections 9-4 and 9-5 of the Norwegian Public Limited Liability Companies Act, the board of directors is mandated to acquire the company’s own shares on given conditions.

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

11

INTERIM CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED 30 SEPTEMBER Notes

Figures are stated in NOK 1,000

YTD 2015

YTD 2014

FY 2014

Unaudited

Unaudited

Audited

118,161

77,867

206,491

53,061

93,704

126,207

Cash flows from operating activities Profit before income tax Adjusted for: Depreciation of fixed assets and intangible assets

6

Impairment of intangible assets Changes in pension liabilities Changes in net working capital Income tax paid Net cash flows from operating activities

-

-

78,344

(55)

(188)

(254)

(124,717)

(40,052)

(59,040)

(46,186)

(12,935)

(48,126)

263

118,396

303,622

(84,738)

(57,787)

(93,791)

Cash flows from investing activities Purchases of fixed assets and intangible assets

6

Net purchase of shares in subsidiaries

5

Net cash flows used in investing activities

(2,656)

(27,904)

(27,904)

(87,394)

(85,691)

(121,695)

1,636,969

-

-

(17,735)

-

-

(1,650,217)

(167,487)

(229,570)

46,284

-

-

Cash flows from financing activities Proceeds from borrowings Payment of shareholder loan Repayment of debt to financial institutions Net capital increase Net cash flows (used in)/from financing activities

15,301

(167,487)

(229,570)

Net (decrease)/increase in cash and cash equivalents

(71,829)

(134,783)

(47,643)

Cash and cash equivalents at 1 January

245,016

292,659

292,659

Cash and cash equivalents at end of period

173,187

157,876

245,016

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

12

Note 1 Corporate information The interim condensed consolidated financial statements of Europris ASA and its subsidiaries (collectively, the group) for the third quarter and the nine months ended 30 September 2015 were authorised for issue by the board of directors on 11 November 2015. Europris ASA (the company) was listed on Oslo Børs on 19 June 2015 and converted to a public limited company on 22 May 2015. Europris ASA is domiciled in Norway. The group is a discount variety retailer with stores across Norway. These condensed interim financial statements have not been audited.

Note 2 Basis of preparation and changes to the group’s accounting policies Basis of preparation The interim condensed consolidated financial statements for the third quarter and the nine months ended 30 September 2015 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 2014. New standards, interpretations and amendments adopted by the group The accounting policies adopted in the preparation of 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 2014. New standards and interpretations effective at 1 January 2015 do not impact the annual consolidated financial statements of the group or the interim condensed consolidated financial statements of the group. The group has not been an early adopter of standards, interpretations or amendments that have been issued but are not yet effective.

Note 3 Critical accounting estimates and judgements 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 2014.

Note 4 Segment information The group manangement 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.

13

Note 5 Business combinations Figures are stated in NOK 1,000

The Group has acquired four previous franchisees: Surnadaløra Lavpris AS, Brennåsen Lavpris AS and Kvinesdal Lavpris AS for NOK 0 and Levanger Lavpris AS for NOK 1,054. According to the preliminary purchase price allocation, goodwill amounts to NOK 2,511. Surnadaløra Lavpris AS generated revenues of NOK 16,304 and an operating loss of NOK 1,791 in 2014. Brennåsen Lavpris AS generated revenues of NOK 20,121 and an operating loss of NOK 894 in 2014. Kvinesdal Lavpris AS generated revenues of NOK 14,382 and an operating loss of NOK 784 in 2014. Levanger Lavpris AS generated revenues of NOK 24,409 and an operating profit of NOK 20 in 2014.

Note 6 Fixed and intangible assets FIXTURES & FITTINGS

SOFTWARE

TRADEMARKS

CONTRACTUAL RIGHTS

GOODWILL

TOTAL

185,784

32,393

387,573

-

1,579,928

2,185,678

1,484

-

-

-

2,511

3,995

Additions

71,424

13,314

-

-

-

84,738

Disposals

-

-

-

-

-

-

(27,989)

(25,072)

-

-

-

(53,061)

-

-

-

-

-

-

230,703

20,635

387,573

-

1,582,439

2,221,350

FIXTURES & FITTINGS

SOFTWARE

TRADEMARKS

CONTRACTUAL RIGHTS

GOODWILL

TOTAL

147,381

39,200

387,573

141,019

1,557,392

2,272,565

1,337

-

-

-

22,536

23,872

51,782

6,308

-

-

-

58,090

(303)

-

-

-

-

(303)

(28,558)

(18,139)

-

(47,006)

-

(93,704)

Figures are stated in NOK 1,000

Carrying amount 1 January 2015 Acquisition of subsidiaries

Depreciation Impairment Carrying amount 30 Sept 2015

Carrying amount 1 January 2014 Acquisition of subsidiaries Additions Disposals Depreciation Impairment Carrying amount 30 Sept 2014

-

-

-

-

-

-

171,639

27,369

387,573

94,013

1,579,928

2,260,520

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Note 7 Financial instruments Figures are stated in NOK 1,000

Fair values Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities at 30 September 2015 and 31 December 2014. 30 SEPT 2015 Financial assets

CARRYING AMOUNT

31 DEC 2014 FAIR VALUE

CARRYING AMOUNT

FAIR VALUE

Loans and receivables Non-current receivables Total

2,127

2,127

16,263

16,263

2,127

2,127

16,263

16,263

1,644,099

1,644,099

1,481,445

1,481,445

-

-

16,773

16,773

1,644,099

1,644,099

110,500 1,608,718

110,500 1,608,718

2,322

2,322

-

-

16,347 16,347

16,347 16,347

39,728 39,728

39,728 39,728

3,363

3,363

25,100

25,100

3,363

3,363

25,100

25,100

Financial liabilities Other financial liabilities Borrowings Other non-current debt Borrowings (first year installment) Total

Financial instruments measured at fair value through profit and loss Derivatives - asset Interest rate swaps Foreign exchange forward contracts Total Derivatives - liabilities Interest rate swaps Foreign exchange forward contracts Total

Fair value hierarchy 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. Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. 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: • fair value of interest rate swaps is measured as the net present value of estimated future cash flows based on observable yield curves • fair value of foreign exchange forward contracts is measured by the net present value of the difference between the contractual forward rate and the forward rate of the currency at the balance sheet date, multiplied by the contractual volume in foreign currency.

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Note 8 Earnings per share Figures are stated in NOK 1,000, except per share amounts.

Earnings per share are calculated by dividing profit attributable to ordinary shareholders by a weighted average of ordinary shares outstanding during the period. Owing to the share split of 1:4 in May 2015, the figures per share are re-calculated for all periods presented.

Profit for the period Dividends to holders of preference shares Profit available to holders of ordinary shares Weighted average of ordinary shares outstanding Earnings per ordinary share (basic and diluted) 3

Q3 2015

Q3 2014

YTD 2015

YTD 2014

2014 (RESTATED) 1)

2014 PRO FORMA 2)

74,499

37,470

90,532

56,843

149,291

149,291

-

(20,358)

(43,828)

(61,073)

(81,431)

0

74,499

17,112

46,704

(4,230)

67,860

149,291

166,969

148,080

154,999

148,080

148,080

166,969

0.45

0.12

0.30

(0.03)

0.46

0.89

Calculation of weighted average of ordinary shares outstanding Number of ordinary shares opening

37,020

37,020

37,020

37,020

37,020

37,020

Share split (ratio 1:4) 22.5.2015 Adjusted number of ordinary shares after share split Share issue initial public offering 22.6.2015

111,060

111,060

111,060

111,060

111,060

111,060

148,080

148,080

148,080

148,080

148,080

148,080

18,889

-

18,889

-

-

18,889

Number of shares closing

166,969

148,080

166,969

148,080

148,080

166,969

166,969

148,080

148,080

148,080

148,080

148,080

-

-

-

-

-

18,889

-

-

6,919

-

-

-

166,969

148,080

154,999

148,080

148,080

166,969

Adjusted number of ordinary shares opening including share split Weighted number of shares from IPO 'as if' effective 1.1.2013 (pro forma) Weighted number of shares from IPO effective 22.6.2015 (actual) Weighted average of ordinary shares outstanding

1

In the calculation of EPS in Note 14 to the 2014 annual financial statements, dividends to the holders of the preference shares were inadvertantly not deducted.

2

As the preference shares were redeemed with the funds obtained in the IPO, pro forma figures for 2014 have been prepared which illustrates what the EPS would have looked like if the capital reorganisation had taken place at 1 January 2014. This EPS figure is believed to be more comparable to the actual EPS for the future. No adjustment has been made for interest on the shareholder loan that was redeemed in the IPO owing to immateriality.

3

There are no instruments with a dilutive effect.

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Note 9 Related party transactions The group’s related parties include its associates, key management, members of the board of directors and major shareholders. The following table presents the total number of transactions that have been entered into with related parties during the nine months ended 30 September 2015 and 2014, as well as balances with related parties at 30 September 2015 and 31 December 2014: LOAN FROM RELATED PARTY

INTEREST PAID

AMOUNT OWED TO RELATED PARTY

Figures are stated in NOK 1,000

NC Europris Holding BV

2015

962

-

NC Europris Holding BV

2014

1,797

16,773

Loans from related parties were repaid in full in connection with the IPO in June. The loan from NC Europris Holding BV had an interest rate of 12 per cent per annum. There have been no other significant transactions with related parties.

Note 10 Events after the reporting period No significant events have occurred after the reporting period.

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FORWARD LOOKING STATEMENTS

DEFINITIONS

This condensed interim report contains forward-looking statements, based on various assumptions. These forwardlooking 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.

•

Directly operated store means a store owned and 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 are stores which have been open for every month of the current calendar year and for every month of the previous calendar year.

•

Net sales include sales through the directly operated stores and wholesale sales to franchise stores.

•

Gross profit represents group revenue less the cost of goods sold.

•

EBITDA (earnings before interest, tax, depreciation and amortisation) represents operating profit excluding depreciation expense.

•

Adjusted EBITDA is EBITDA adjusted for nonrecurring expenses.

•

Working capital is the sum of inventories, trade receivables and other receivables less the sum of accounts payable and other current liabilities.

•

Capital expenditure is the sum of purchases of fixed assets and intangible assets.

•

Net debt is the sum of term loans and financial leases less bank deposits and cash.

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Europris in brief Europris is Norway’s largest discount variety retailer by sales. The group offers its customers a broad range of quality private-label and brand-name merchandise across 12 product categories: home and kitchen, groceries, house and garden, travel, leisure and sport, electronics, personal care, clothes and shoes, handyman, hobby and office, sweets and chocolate, laundry and cleaning, and pets. It delivers a unique value proposition for shoppers by offering a broad range of quality merchandise at low prices in destination stores across Norway. The group’s merchandise is sold through the chain, which comprises a network of 227 stores throughout Norway. Of these, 164 are directly operated and 63 run as franchises. Europris stores are designed to facilitate a consistent, easy and efficient shopping experience with a defined layout and “store-in-store” concept. The group centrally manages the chain’s range of merchandise, which results in a consistent array of products in each category at both directly operated and franchise stores. Europris employs a low-cost operating model with attention concentrated on efficiency across the entire value chain from factory to customer. It aims to maintain a low cost base through optimised and efficient sourcing, logistics and distribution processes. The group’s experienced procurement team purchases large volumes of goods, which are principally sourced directly from suppliers in low-cost European and Asian countries. High-quality sourcing operations are central to the group’s value proposition.

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Contact Europris ASA Hjalmar Bjørges vei 105, P O Box 1421 NO-1602 Fredrikstad switchboard: +47 971 39 000 fax: +47 69 31 99 00 www.europris.no

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