Europris ASA
OSE:EPR
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Europris ASA
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Okay, I think we will start. First of all, welcome, everybody, to this presentation in the -- in July.We start, as always, with some gifts and a little bit of lottery. Today, we have -- for the world championship finals, of course, you need some snacks. You can buy these small ones at 4 for NOK 20 at Europris. Or you can go to a petrol station and buy 20 -- cost NOK 25 for 1, or you can go to buy at [indiscernible] kiosk and get ripped off at NOK 32 or something for one of these. So it's a good everyday price, four for NOK 20. So you know that. Also, I think that you can pick -- on the way out, you can pick up some of those unicorns. This is actually small-sized unicorns. My personal favorite that I'm going to spend the next 2 weeks on is this big one, and we will have a lottery for that one. You can buy it in the stores for NOK 3.99. This cost NOK 1.99. This is a giant one, much bigger than these. And today, we will draw the lucky winner who can spend the summer in -- on one of those. And I think, Espen...
Yes.
You can't draw yourself, but...
29.
29.
Yes.
Okay, we are bribing the papers, so that's okay. Here you are, there.
Thanks so much.
And one more lucky guy actually, or girl.
[indiscernible].
He bought it already.
31.
31. Okay, summer is secured. There you are. Okay, congratulations. And of course, for all the others that is a little bit disappointed now, we have these sales leaflets. It's sales weeks in the European stores now, so it's a really good -- the right time to get some good bargains. Every week, we come with new offers for the next 3 weeks, so it's -- if you want to make a bargain on a bargain price, you have to come to Europris in the next few days or weeks. Okay, so we go to the quarterly results. The key message is low growth on the top line in a very soft market, but very pleased with the way we have worked with the gross margin in particular, where we have turned a negative development into positive; and the way we worked with the cost side, so sort of partly compensating for the lower -- low growth. I'll go to -- with the figures.The second quarter is really not comparable, so I encourage you, as I've said before, to look at the half year figures, but in the second quarter, this is, of course, because of the timing of the Easter. We had a 1.5% increase in group revenues. We had an improvement in gross margin, also partly due to Easter. And net profit was up 5.6%.The more important things that happened in this quarter was the soft launch of the e-commerce operation, I will come back to that; and the acquisition of 20% of the shares in the Runsvengruppen or ÖoB that is strategically and long term very important.More important, more comparable is the first half, where we had a 4.4% increase in group revenues, 0. -- that was solid sales performance during Easter and spring. So the main seasons, we're doing very good, but overall, 0.6% like-for-like growth, which is below our expectations obviously. Gross margin, as I said, increased from last year and has turned up a development that has been negative, that's -- very pleased with that. And we had overall very good cost control. Adjusted net profit increased by 13%.We had 6 new store openings, and as I'll come back to later, those store openings met or exceeded our expectations. So that's also very pleasing, that the new stores are meeting the budget expectations we have for them when we make the decisions. And we took over 5 franchised stores in the first half.If we look on the sales performance. It is a very slow market at the moment, from the indications we got from [indiscernible] and others. So we had a lower-than-expected like-for-like growth which we are not satisfied with. The spring/summer has been good, actually very good in the South, as you all know. And it's been basically not existing in the North. So I think that in the northern part of Norway, there wasn't any spring or summer season before end of June or something. So it's very unusually cold and challenging season in the North, very good season in the South. Campaign pressure has been slightly adjusted. Basically what we have done is that we have changed the mix of products, especially on the front page, slightly. That has been successful, and we've been able to have a positive impact on gross profit. It has reduced campaign share of sales by 3.3%. But that was a deliberate strategy that has been successful.In some categories like personal care and laundry and cleaning, there has been a more sort of competitive environment on price. That happens from time to time. We have -- previously we had some in chocolate and snacks. Now it's personal care and laundry and cleaning, but we have stable volumes. So prices have gone down. People have not bought more shampoo or soap or anything, but -- so we have stable volumes. And the prices have gone down in these categories. We see a slightly improvement towards the end of the period, so it seems like especially personal care is picking up now again.And as I said, new stores are on track. And that is also very pleasing. We're opening 6 stores so far this year, 3 more stores to go. And we have 9 signed for next year. And the stores we have opened have met or exceeded our expectations, so there's no diminishing returns from new stores at the moment.These are the 4 new stores opened in this quarter. So it's basically all over. Rykkinn is in the parking lot at the Rykkinn shopping center. Kjørbekk is a new shopping area that is growing between Porsgrunn and Skien, so it is basically all over the country. We expect 3 more stores to open in the end of -- towards the end of the year, but 1 closure means that the net will be 8 as it looks now for this year. And we already signed 9 contracts for next year. Some of them are due -- subject to some municipal zoning regulations, so they can change a little bit on the timings in particular.We have already talked about the e-commerce. We had a soft launch. And with soft launch, we mean that we have started it and actually sped up a little bit the implementation of the launch just to get started and get going and get experience and fine-tune the operations. And then in the fall, we will market it more to the consumers. So that's why it's a soft launch. We haven't sort of put on the marketing yet. We still just want to make the technical things work and the operations behind the scene work smoothly.One of the more important things that happened in the second quarter, we had a special presentation here a few weeks ago, is obviously the partnership with ÖoB, Runsvengruppen. I think that, in the long run, this is maybe one of the most important things that has happened in Europris over the last years and in the next few years too. What we are doing is that we're combining 2 strong, leading discount variety retailers. And I think, long term, that is a way for us not just to get synergies but also to make sure that we can stay competitive on price and protect our margins. So it's very, very important strategically in the long run, in addition to the synergies.So we have already started working on the purchasing cooperation. Obviously, it's only a few weeks since we launched it, but we are working on that. And then we have the option to buy the remaining 80% of Runsvengruppen in 2020. And obviously, we'll come back to that.And with that partnership, we will -- together with the joint venture we have with Tokmanni, we now have a partnership that has combined retail sales of more than NOK 17 billion. And the reason why I think this is very important is obviously that I think -- in the long run, I think that it's important to have the lowest prices in order to be successful in the discount variety retail sector. And I think size matters. And this is a way for us to make sure that we really get a regional Nordic stronghold, and it's important to secure long-term growth on profits of Europris. So I think it's very exciting about that; the partnership both with ÖoB and Tokmanni.And with that, I'll hand over to Espen, who will take us quickly through the financial figures.
Thank you.Yes, we'll start with the gross margin, where we have seen a positive development in the start of the year. In the second quarter, the margin was 43.8%, up from 42.9% last year. Comparison with last year is a little bit difficult due to timing of Easter, but on the gross margin ,this had a positive effect in the quarter of about to -- 0.3 to 0.4 percent points. On the negative side, we had 1 franchise takeover, which affected the gross margin roughly with 1 million. The positive development we've seen has, as Pål explained, been due to a slight adjustment of the campaign pressure, which had then a positive effect on the gross margin. So this also has compensated for the price competition we've seen in select categories during the quarter. So year-to-date, we see both in the first and the second quarter a positive development in the margin.Operating expenses in percent of revenue was 30% in the quarter, up from 28.3% last year. Operating expenses in total increased by 7.4%, while the number of directly operated stores increased by 9.1%. It's important to see the operating expenses in relation to the number of directly operated stores and not only as a percentage of sales. From last year, we have increased the store base from 198 directly operated to 216, of which 12 are new stores. And 4 of those opened in the second quarter. 6 franchise takeovers over the last 12 months. Overall, we see very good cost control. We see very great cost focus in the stores. The store managers has a great focus and have done a good job on the cost side, which is good in periods where we have some challenges on the revenue side.EBITDA adjusted was 13.8% margin in the second quarter, which is down from 14.5% last year. The increase in number of directly operated stores affects the operating expenses. On the positive side, we have the improved gross margin, which contributes positively in both the quarter and year-to-date.On cash flow, again, it's a little bit difficult to compare the quarter due to the timing of Easter, but if we look at year-to-date figures, we see an improvement in operating cash flow from last year. Last year, we had the buildup of inventory. We see now that, that has stabilized, so we don't have that additional working capital need this year. On the investment side, compared to last year, we did the investment in the land area next to the new warehouse in Moss last year. So the investments are done. And also, the dividend payment was NOK 50 million down from last year.So all in all, that leads to a cash position of NOK 136 million at the end of the second quarter, up from NOK 16 million last year.So it's time to look at the outlook, Pål.
Yes. For the outlook, we simply mean long-term growth in revenue and profits supported by our leading position not just in Norway but in the Nordics. And it is a changing retail landscape. And I think that the partnership with ÖoB and the older and the existing partnership we have with Tokmanni is important in order to secure our position in the long run.And we did a launch of the e-commerce operation. We are becoming an e-CRM system we're launching in these days. We are becoming a truly omnichannel retailer. I think that's important milestones in the long run. You won't see it in this first half year figures, but in the long run, that's important.And as Espen mentioned, the board has initiated a share buyback program of up to 2 million shares.That's the main things, but the key sort of things that happened in the first half of 2018, I think was the launch of the e-commerce operations and the partnership with ÖoB. And that secures our long-term growth in profits.And with that, I think we will open up for questions. You will get a microphone.
Christian Nordby, Kepler Cheuvreux. A warm spring and warm May, how did that really affect you? Because Orkla says that it affected them quite a bit. Now you sell more soft drinks and stuff like they do, of course. But how did that really affect you compared to the timing of Easter that obviously affected more?
I think, in general, timing of Easter obviously is a huge effect. If you look at the market reports, I think everybody wants the summer to start, spring to start. So in the northern part of Norway you saw what happens if the spring never starts. It didn't start before the end of June. Then you don't get the seasonal sales. So we saw a -- obviously, we see -- when the seasons kicks off, you see a very positive growth because people understand what they need. As the warm weather continues for a record-breaking period of time, it's a little bit more sort of negative just because people are -- it's too warm and people are just buying the necessities. So in the beginning, it's positive, but a long period like this, which has been unprecedented, it's negative. But that being said, as I said, we had a very good total seasonal sales in spring in the South. So altogether, we as a retailer has done well in this environment, but I think from a market point of view, I think long periods like this of very warm weather is slightly negative. Okay, everybody's sitting in their cabins and calling in.
There's one question from the web, Harri Paakkola, Nordea. What was the market growth and market like-for-like growth during both Q2 and first half of 2018?
The figures are not out yet. I think that there is still some lagging in terms of getting the figures from the shopping centers. The early indications we have got is that the growth was surprisingly slow in June and sort of fairly moderate also in the first half, but the official figures, I think, will come next week. Okay, loud and clear.Okay, so thank you all for coming. Make sure you take some Pringles with you so you can enjoy it together with the football championship. And thank you for coming.