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Edited Transcript of EPR.OL earnings conference call or presentation 30-Jan-20 7:30am GMT

Q4 2019 Europris ASA Earnings Call

FREDRIKSTAD Feb 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Europris ASA earnings conference call or presentation Thursday, January 30, 2020 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Espen Eldal

Europris ASA - CFO

* Pål Wibe

Europris ASA - CEO

* Trine Engløkken

Europris ASA - Business Controller

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Conference Call Participants

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* Martin Stenshall

Danske Bank Markets Equity Research - Senior Analyst

* Ole Martin Westgaard

DNB Markets, Research Division - Analyst

* Oliver Schüler Pisani

Nordea Markets, Research Division - Analyst of Consumer Goods

* Petter Nyström

ABG Sundal Collier Holding ASA, Research Division - Lead Analyst

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Presentation

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Pål Wibe, Europris ASA - CEO [1]

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Okay, guys. I think we're going to start. [The clock] at the back is wrong.

Of course, we'll start with a show today, too. And as you all know, we have a kitchen effort going on now. We are actually remodeling our kitchen section of the stores in February. So we have -- obviously, we thought that you guys also need to see a little bit of it. So we bought some goody bags for you to bring. Unfortunately, it's not enough for everybody. So after the show, you have to run up here. The first 15 will get something. And the rest, unfortunately, can't.

We have onion cutter, new assortment. One of my favorite, which is a Spanish -- this is the top model in the new section, basically a frying pan. It's a 10-year guarantee, not just the usual 5 years. And it's at the bargain price, of course. And then, Trine, I don't know if it's -- she tries to be nice to me, but she is -- she asked me to demonstrate the cutter head, it's razor sharp, very high-quality cutter that you can use at your home, also in a new section. So if you use it, don't cut your fingers, but we have enough of products up here, so you can try afterwards.

We also have a plate, which is about 98%, Trine said, of biodegradable material. So it's sort of sustainable products. Everything in the assortment, it will be, in the next few weeks, in the stores. So it will be in the new kitchen section.

We also have some sweets for you. The Madonnas biscuit at NOK 10, it's a bargain. That's -- and this one is NOK 26, but at an offer, special offer price of NOK 20.

So everything in the goody bags. So please bring along afterwards when we are finished.

Okay. And we also have, of course, all the things you need for the kitchen, but I'm not going to wear this today.

To get to the presentation, I think for the quarter four result, this is the Champions League final of Retail. And obviously, we are very, very pleased that also in 2019, we won what we call the Champions League Final of the year for the sixth time in a row. We beat the market. I'm particularly pleased with the growth in gross margin because it demonstrate a kind of discipline in the team, managing the campaigns and managing the sell outs. That was very, very good, and we also had an 8.6% increase in operating results, which is very, very good, obviously, in a very, very tough market. So very, very happy with the team and the efforts and the Christmas season.

Yes. You've seen this before. This is now year #27 of consecutive year of growth in Europris. So it's something we're very proud of.

The highlights. 3.3% growth in total revenue, 1.1% like-for-like, obviously, slightly below the last year, which was 7.0% above the market. And as I said, gross profit increased by 7.4%. This is always a balancing act between sales growth and gross margin growth. In this quarter, we prioritized definitely the gross margin. And it increased by 7.4%. 8.6% increase in operating results. Net profit was slightly lower, but this is mainly due to unrealized hedging gains -- losses. And this is because the krone actually unexpectedly increased in value towards the end of the year, which is -- today, it's back again to the normal weak level. So if we had closed the books today, it would have been a bit different picture, but at the end of the year, that was the situation.

We also refinanced our term loan in December. So that's sort of completed now. And we also completed in the Q4, the transaction for the first 20% of the Runsven group.

If you look at the full year, 7.2% growth in revenues, 4.4% like-for-like. Again, very, very proud of it. I mean, we are doing well, but also the market is not doing so well. So in a very, very tough market with a lot of headwind, we are doing well. I think that in uncertain times, people flock to discount variety retail. This gives you value for money. We see that not just for us but also for the entire sector.

Gross margin was slightly up for the full year. Of course, the results for the full year was influenced by the situation in the first half of the year, where we had extra cost of NOK 51 million, most of it in the first half of the year. But we rebounded in the second half and did well.

Yes. We have -- the board has proposed a dividend of NOK 1.95, which is up from NOK 1.85 the year before. And as we have said before, most important is to try and have a steady sort of increase in dividend per share.

Yes. The retail market, you already read about. We got the SSB figures this morning. In terms of the -- it was a poor December and the market was poor. We still beat the market on top of very, very tough comparables last year. Very, very good category work. The big categories did very well. Some of the grocery categories also did very well in the fourth quarter, but also the key seasonal categories did very well.

So that's the main reason for the good growth. Very solid execution of campaigns. And as I said, this disciplined sell down. So we didn't rebate too hard, even though the market was very tough towards the end of the quarter, and that resulted in a very good improvement in gross margin. We should always beat the market. This is our long-term target. The market might go up and down, we should always beat the market. You see it more easily here. Over several years, it is going to go up and down, but we should always beat the market. That is the main target of the Europris.

If you look at our strategy that we presented at the Capital Markets Day, a little bit more than a year ago. It's 3 main elements that we were focusing on. The first is to strengthen the price and the cost position. We are a discount retailer. So you need to have cost down, so you can actually sell at a low price with a bit of good margin. We want to improve the customer experience, and then we want to drive customer traffic, not just in the physical world, but also in the digital world.

On the price and cost position, we have talked a lot about the partnership with Tokmanni and ÖoB. Together, we represent close to NOK 18 million -- NOK 18 billion in sales. So we are, by far, the biggest discount variety retailer in the Nordics, obviously. And that gives us a power to get the best possible prices.

We are working a lot on achieving those synergies. They are backlogged because it takes a full year to get the -- Christmas is only once a year. So you need a couple of seasons before you get all the Christmas products.

We have defined into 3 different approaches. One is where we called it Gold, where we actually have the same factory, the same product and exactly the same brand and packaging. This is obviously the best because then we get the optimal price. Then we have Silver, where we have the same factory and the same product, but not the same brand or packaging. It might be different packaging from -- for different markets. And then we also have the Bronze where it's just the same sort of supplier. And in many categories, even Bronze is actually significant savings because the factories are used to producing for different type of suppliers and don't have a big cost and change in production lines.

So all these elements, we're working on it. And of course, it takes time. As we provide us in a package, a little bit more information about the savings. We are still confident on the total savings, but we have only seen a few of them so far.

We have said that total, we should have -- by 2022, we should have NOK 80 million in savings, distributed evenly between the 2 companies. So that's a full effect in 2022. And so far, we have realized savings of NOK 16 million and approximately 1/3 of it is accrued to Europris. So it's still early days, but of course, we see the pipeline, and we already negotiated the prices for the Christmas products for 2020. So this is -- we feel very confident about this.

On the new warehouse. Someone asked me about that. We had a board meeting yesterday, of course, at the new central warehouse. And I could actually see the pallets, test pallets coming out of the big, fully automatic warehouse. So we're now in the final testing phase of that. And on the mid-February, it's going to go live, and then we're going to ramp it up step-by-step until June. But at least from my perspective, the pallets were coming in and out, and we are testing, it's going okay. So there's only green flag so far.

And then in the second half of 2020, we will start testing and fine-tuning the shuttle system, which is a semi-automatic picking, where the products comes to the packer and not the packer goes with the truck to the products. And that will be fully operational from the first half of 2021. So exciting times.

Look at the customer experience. As I said, we won best in test of this, one of our Christmas lighting range, that was 1 and 2 days before Black Friday. So it was a good timing. 2 days afterwards, it was like sold out in all stores, of course, because we hadn't expected it to win the test. But I think it just demonstrates the quality of the category work in some of our key Christmas categories.

And the guy who's buying Christmas lightening is a Christmas lightening nerd. He knows everything about Christmas lightening. And you have to do that in order to get the best prices and the best assortment.

This is also something we are sourcing now more and more. Next year, we will also be doing all of these sourcing together with Tokmanni and ÖoB. So that will provide further savings.

On the customer growth, obviously, that our e-commerce revenues are small at the moment, not just for us, but the entire kind of discount variety retail sector is roughly 0.6% of sales. So it's not a lot. But keep in mind that the online offering we have today is a very, very rough and rude kind of crude page and service, and we are launching a remodeled version in a few weeks where we also would move the operations of the e-commerce to the central warehouse mezzanine. So we will have a much larger selection and the service level will be much higher because the entire assortment at the central warehouse will be available for online sales. So we expect the -- at least the offering to the customers to improve dramatically this year.

More important than e-commerce is actually this digital traffic and digital marketing and communication because what we are seeing is, even though that our customers predominantly buy offline, they actually get their information online, and we see the traffic to our web page and the kind of our MER Customer Club membership is increasing. So people are getting their information online and then they're coming to the store.

So we are doing a lot of work on search word optimalization, on improving our web page and improving our customer club. This is really, really important for us, but the customers eventually mainly come to the store.

We also opened new stores. In this quarter, we had 2 relocations and 3 store expansions with very good results. This is a picture from Nordfjordeid which relocated and had more than 20% growth afterwards. So a very, very sort of -- obviously, in the retail market, we are now -- when we get the opportunity to relocate, we always relocate to a better location and don't necessarily pay more. So that's very, very attractive for us. And it's a value driver. We have 5 stores in the pipeline, but this is still early days, so this might change.

Yes, status on ÖoB -- Espen, I think you're going to take us through a little bit more details on -- this is the deep dive and the Christmas gifts for the analysts this year.

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Espen Eldal, Europris ASA - CFO [2]

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Yes. Thank you. Yes. Today, we will give some more details on the partnership with ÖoB. Pål talked about the sourcing partnership. I will give some more details on the equity transaction and also on the operational and financial performance of ÖoB in 2019.

First, I'll start with a recap of what we announced back in June 2018. It's low-risk partnership, but with a potential for a true European scale on time. The joint sourcing is the very backbone of the collaboration. And as Pål explained earlier, we are starting to see the savings coming through and the initial savings potential has been confirmed. The structure of the transaction allows both companies to focus on their own strategy and also work on the strategic initiatives to improve their own operations. Before, Europris, sometime during late 2020, needs to make a decision on whether or not to exercise the option to make a full acquisition of ÖoB.

The transaction of the first 20% stake in ÖoB was completed in December last year. It's a share for share transaction and the sellers of ÖoB got ownership stake of 2.6% in Europris. The purchase price was settled at NOK 115 million. And Europris settled transaction with treasury shares that was acquired in the market at NOK 98 million. The option we have to acquire the remaining 80% of the shares in ÖoB may be exercised within 6 months after agreement on the 2019 EBITDA for ÖoB.

The pricing model is the same as for the first 20%. And this time, the multiple is based on the average EBITDA of 2019 and 2020.

ÖoB started a strategic turnaround back in 2017 with a clear strategy of modernizing the store base and rebalancing the product assortment, with the aim to get the more sales of nonfood products and get a clear seasonal profile to drive operating margins. This turnaround has taken longer than expected and results are so far not meeting expectations.

During 2019, there has been a change in the management of ÖoB. A new CEO has been recruited. Magnus Carlsson will join the company on 1st of March this year. Magnus is a very experienced retailer and he comes now from the position as CEO for Reitan Convenience in Sweden.

In 2019, the focus in ÖoB has been to strengthen the company's seasonal profile and also to change the product mix towards higher-margin categories within nonfood.

While the results from these initiatives actually had been quite positive, the EBITDA has remained below expectations and also last year.

Over the past few years, ÖoB has refurbished 8 stores into new concept, more in line with the strategic direction of getting more nonfood sales and also a clear seasonal profile. These stores have, in 2019, delivered above-average growth. And in late 2019, ÖoB opened a new concept store outside Stockholm. This store has a much more clearer shop-in-shop layout and is more comparable with the latest Europris concepts. It's still very early days, but this store has delivered a favorable sales mix and both gross margin and basket value well above the rest of the chain. So it's promising results, but it's early days.

The focus for ÖoB going forward will be to update the strategic plan and to create a new master layout for the stores based on the experiences from the refurbished stores and from the new concept store. This will be rolled out to several stores during 2020.

In addition, we will also continue to develop the seasonal concept by sharing best practice between Europris and ÖoB.

If we return to Europris and have a look at the financial review, and as Pål mentioned at least a couple of times, he's very satisfied with the financial results in 2019 and especially the fourth quarter with the gross margin.

Looking at the gross margin, that came in at 45.1% in the fourth quarter, up from 43.1% last year, representing an increase in gross profit of 7.4%.

We have talked a lot about the campaign execution over the last couple of quarters, and we have continued to improve that during the fourth quarter, and we are also deliberately adjusting the campaign pressure in order to drive the gross margin.

Towards the end of the Christmas season, we have a more controlled realization of seasonal goods. That had a somewhat negative effect on sales but contributed overall to the increase in gross profits.

As Pål mentioned earlier, we're starting to see the positive contribution from the sourcing partnership with the Tokmanni and ÖoB coming through. But still, it's small amount. But it's good that we see that the long-term savings are confirmed.

Operating expenses in percent of sales was 21.4% in the quarter compared to 26.9% last year. When we adjust for the IFRS 16 effects, the OpEx ratio was 27.8%.

The number of directly operated stores, which is the key cost driver, increased by 4.5% in the quarter compared to last year.

In the quarter, we have some extra costs associated with operating both the old and the new central warehouse. And we will continue to have some costs throughout the transition period due to operating out of several warehouses.

When we look at adjusted EBITDA, that was NOK 450 million, a significant increase from last year. Even when you adjust for the IFRS 16 effects, EBITDA was NOK 330 million, an increase of 8.6% from last year. The high increase in EBITDA is caused by the sales growth and the improvement in gross margin.

For the cash flow, I'll comment on the full year figures. We see a very positive development in working capital, as last year was affected by -- well, last year, that's 2018, was affected by the increase in inventories. We see lower inventories at year-end 2019. But the inventory level will remain on a relative high level until the end of summer season, 2020, as we have communicated earlier.

Investments are increasing as we're making progress on the new central warehouse and getting closer to the start-up of the automated solutions. And by year-end, we had cash and liquidity reserves of NOK 1 billion, which was a significant increase from the year before.

As Pål said, we have refinanced the group. The agreement was signed by year-end, and the transaction was completed this week.

Pål, as normal, I'll leave it to you to summarize.

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Pål Wibe, Europris ASA - CEO [3]

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Yes. So the outlook, I mean, we still think that we are positioned as the -- obviously, as the leading player in our sector and in a sector that is doing well, in a market that on our European scale is doing well. It's exciting times. We are realizing the synergies that we have in the sourcing relationship with ÖoB and Tokmanni. We're also in the middle of implementing the new central warehouse and all the improvements there.

And as I said earlier, everything is sort of so far on time and within cost, have a healthy pipeline of new stores. We will only open new stores if they are profitable, and if the annual audit show that they keep on surpassing our expectations. So there's no specific target to open new stores just to do it. We do it because it's profitable for us, and we are not alone in our sector to do it. And we have completed a couple of franchise takeovers at the year-end, and we expect a few more to come in the natural course of the business.

So that's -- with that, I think we will -- we just only quest to be the best in Europe in our industry. We are getting closer now to being the best in terms of warehouse operations, but we still have some room to go in many of the other aspects.

So with that, I think we will open up for questions.

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Questions and Answers

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Unidentified Analyst [1]

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I have a question about the city stores. As this is the first Q4 with the city store in operation, have you made any experiences from this going forward?

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Pål Wibe, Europris ASA - CEO [2]

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I think the experience, there is only 1 city store, which is Gunerius, which is at least the purest city store and that was doing -- is doing very well. So it's still doing very well. We are looking to open more city stores. So if you have a landlord that they can give us something at the bargain price, we will close the deal any moment.

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Unidentified Analyst [3]

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And one more question. I saw you have a pipeline of 4 -- 5 expected store openings in 2020. Previously, you have spoken about, at least Grini in risk of being shut down. Are there any other stores, which may be shut down against your sort of strategy?

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Pål Wibe, Europris ASA - CEO [4]

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I think Grini is -- as you said, it will be decided later this year. We also have a store in Kongsberg, where we -- actually, we will open a store in the center of Kongsberg, and we have a store outside Kongsberg, that is in an area that is on what they call it exception from the municipality regulations. So we might actually just change that this year.

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Oliver Schüler Pisani, Nordea Markets, Research Division - Analyst of Consumer Goods [5]

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Oliver Pisani, Nordea. Does this work? Regarding these temporary costs of operating the new and the old warehouse, you don't say anything about the size of those. What were they in this quarter? And what do you expect for those going forward?

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Espen Eldal, Europris ASA - CFO [6]

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We have not set a fixed amount on that. It's -- there are some costs in the quarter. It's something that we will look into if we can give an exact figure, but just operating 2 large warehouses, more than 30,000 square meters, with electricity, cleaning and operation, that drives some costs. So there will be some costs over the next transition period. So until 2021, we will have some costs related to this.

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Oliver Schüler Pisani, Nordea Markets, Research Division - Analyst of Consumer Goods [7]

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All right. And could you remind me, I just saw the distribution of these savings that you realized with the ÖoB agreement. I think you harvested 1/3 of that. What was that according to expectations, the expectations you set out?

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Espen Eldal, Europris ASA - CFO [8]

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We -- what we've communicated was that we should have savings in the range of NOK 60 million to NOK 80 million, evenly distributed between the 2 companies. The initial savings are based mainly on Nordic sourcing agreements and on those agreements, we see a larger share of savings going to ÖoB and 1/3 accrued to Europris. But as Pål said, on the long term, the total potential we have identified is NOK 80 million, and that is evenly distributed. So I think it's absolutely fully in line with the expectations we have.

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Martin Stenshall, Danske Bank Markets Equity Research - Senior Analyst [9]

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First, I would like to touch upon your option to exercise the 80% in ÖoB. Obviously, the turnaround process has been slow or to some extent, in excess, not successful over the past 18 months. Basically, you will see the EBITDA in ÖoB actually going down. So my question is really, what makes you confident that it will be a good idea to exercise 80%?

And then the second part relating to ÖoB. This concept 2 with the store in ÖoB, that might seem to be interesting. What is the CapEx of actually lifting an ÖoB store from, let's say, version 1 to version 2? And is that actually an idea that you're pursuing, if you were to exercise the remaining 80%?

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Espen Eldal, Europris ASA - CFO [10]

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That was a lot -- a very long question, Martin. To start off with your third question. The decision on exercising the option has not been taken. That will be taken by the Board of Directors later this year. So we will not comment on that specifically. But of course, if they decide to exercise the option, that is based on the potential and not the historic performance. Looking at the rollout of a new master layout, I don't -- do not have the figures exactly for what that will cost, but I would assume it's less than NOK 0.5 million per store, based on the preliminary figures we have heard. But those are not fully confirmed. And as you remember, going back to 2014, 2015, Europris did their own upgrade of the store base. That was actually a little bit more expensive. We did a larger modernization program than what is needed for ÖoB to come to the new master layout. But that has proved to be very successful and also helped to lift the image of the company and to add more value to the customers. So definitely, we believe it's the correct thing to improve the shopping environment.

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Martin Stenshall, Danske Bank Markets Equity Research - Senior Analyst [11]

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And then regarding sourcing. What are your considerations about the coronavirus? Does that -- have you seen any indication that that affects sourcing from Asia right now? What you believe, if it continues, would you have problems actually sourcing the goods that you need?

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Pål Wibe, Europris ASA - CEO [12]

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I don't think -- I mean, we had the SARS epidemic a few years back. Of course, it might be -- this is evolving at this time, but it might influence the travel to and from China. Obviously, we have people in China, our own staff there. We are, of course, concerned that they are in good health and everything is good to them. Last time, from a product perspective, the product flow was normal. It was just a movement of people that was sort of restricted in a period. So you could argue that a player like us who has people on the ground there is more sort of resistant.

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Martin Stenshall, Danske Bank Markets Equity Research - Senior Analyst [13]

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And then January, would you be able to give any trading comment for January so far? I mean, we have seen a very mild start of January.

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Espen Eldal, Europris ASA - CFO [14]

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Yes. Of course, the weather outside is not favorable for sales of seasonal products. So you sell less of those. That's for sure. And also as a seasonal concept, that takes away one of the reasons that you go to store at the moment. So obviously, the weather had a -- has a negative impact on sales. But it's 1 month in, still 2 to go in the quarter. And Q1 is the smallest quarter for Europris. But of course, this has a negative impact on sales.

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Petter Nyström, ABG Sundal Collier Holding ASA, Research Division - Lead Analyst [15]

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Petter from ABG. Just a follow-up on the gross margin there. Your estimate on gross margin savings of roughly NOK 40 million in 2020. I assume you then will get...

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Pål Wibe, Europris ASA - CEO [16]

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By 2022.

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Espen Eldal, Europris ASA - CFO [17]

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'22. Okay. It's NOK 40 million in 2020. And that is shared between the 2 companies. I've not given the split between the companies.

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Petter Nyström, ABG Sundal Collier Holding ASA, Research Division - Lead Analyst [18]

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No, but should we expect those savings to be back-end loaded on the gross margin?

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Espen Eldal, Europris ASA - CFO [19]

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It will be backloaded because it says in the presentation that it's on the Christmas goods. So it will be backloaded.

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Unidentified Analyst [20]

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So you mentioned 5 new stores in the pipeline. Are you able to comment on where those stores might come? And are there any city stores included in those 5?

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Espen Eldal, Europris ASA - CFO [21]

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There are no city stores in those 5, and we will announce the locations later.

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Unidentified Analyst [22]

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And then years back, we got an overview of the performance per vintage. Are you planning to provide some update on that vintage performance?

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Espen Eldal, Europris ASA - CFO [23]

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No. Actually not, because what we said before is that we will come with an update. We do these analysis every year, and we have completed those for 2019, and we will make an update if we see a change in the pattern we've seen before. So basically, what we see on the 2019 analysis is that it confirms what we have told the market before.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [24]

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Ole Westgaard, DNB Markets. On your like-for-like growth for 2019 and for Q4, can you comment on what the mix was between price, volume and traffic? And secondly, how was private label performing relative to the other categories and what's the current private label share?

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Espen Eldal, Europris ASA - CFO [25]

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Yes. On the sales side, for the total year of 2019, it's mainly driven by traffic, the growth we see in like-for-like. The -- as we said in the report, the traffic is up. Basket value is also up, but -- and the number of items per customer is increasing, while the average price per item is slightly down. And that is also due to a mix change. But we are very satisfied with development. We don't give those comments to the quarter because that's a very short period. So you need to see that a little bit longer term.

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Pål Wibe, Europris ASA - CEO [26]

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I mean, on the private label, I think we have around 33% private label share, 32%, 33%. It's increasing a little bit more than the average. So that's sort of a good development. And most of the seasonal assortment is private label, obviously, so that's a good driver. And we expect it to be sort of slightly above the average.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [27]

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And then on -- in 2018, there was a dispute about how to count the inventory. And now we present an EBITDA figure. Have you now agreed on common principles of how to count the inventory in that figure? Or is that also something that will have to be discussed upon?

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Espen Eldal, Europris ASA - CFO [28]

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Yes. Just -- we have never disagreed on the way they do the actual stocktaking. We believe that they do the stocktaking in a very good way. It was more about how to allocate for the wastage in the stock that was not counted by year-end. So we have agreed on principles on how to discuss that, and we will use those principles going forward when we go to EBITDA settlement for 2019 and 2020.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [29]

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So we should not expect any reservations to something like (inaudible).

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Espen Eldal, Europris ASA - CFO [30]

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We should -- it's -- like we said, it's preliminary and unaudited figures. So it's too early for me to say that those figures will not change, but this is the best estimate that we have got from (inaudible) at the moment.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [31]

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And based upon transaction in 2018, the net debt figure wasn't that significant in (inaudible), but how has this developed in 2019? And also if you can give the figure on how much net debt is if you include operational leases in (inaudible).

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Espen Eldal, Europris ASA - CFO [32]

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I have not received the full accounts for 2019 for (inaudible). I do not have those figures. So I'm sorry, I can't comment.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [33]

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Okay. So the NOK 75 million EBITDA last year, that's including or pre-IFRS?

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Espen Eldal, Europris ASA - CFO [34]

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That is on comparable basis with previous year, so excluding IFRS 16.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [35]

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Okay. So -- okay. But you don't have gross margins or any opinion about what's working and what does not work?

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Espen Eldal, Europris ASA - CFO [36]

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No, it's -- the good thing is that we have sales growth. And that we have an aggressive competitor that is opening more stores in Sweden. So having growth in that period is actually quite positive when you get a lot of new competitors around you. So that's a positive sign that they are growing. But it's the gross margin and has been difficult. The cost side is more under control. So it's the gross margin that has been difficult.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [37]

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And separately, on the -- you have previously shown contribution per store, where you have some top performers and a few -- or quite a few...

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Pål Wibe, Europris ASA - CEO [38]

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Quite a few.

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Ole Martin Westgaard, DNB Markets, Research Division - Analyst [39]

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Okay. So now it's few. So if you just compare '19 with '18 or '17, is the big contribution from the weaker ones doing better? Or are the best ones excelling even further?

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Espen Eldal, Europris ASA - CFO [40]

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It's not the same ones that are the low performers this year as the last year. We see some high performers that always performed well and continue to deliver good results. But in the tail, we work a lot on those stores, and we see that -- it's a few of those that were red in 2018 that turned into the greens in 2019. Most of the stores in the tail actually improved from 2018 to 2019. And whenever we have an issue with stores like that, it's mainly related to sales performance. So a relocation is very often what solves the issue because the traffic pattern has changed and the shopping pattern has changed since you need to be in the right location. And of course, you also sometimes have to work with management issues.

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Pål Wibe, Europris ASA - CEO [41]

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Keep in mind that, I think it's like 6% or something, quite stable, the number of stores that is sort of in red. And compared to other retailers, also in discount variety retail sector, actually, it is very, very positive figures, actually. So that's why.

More questions?

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Trine Engløkken, Europris ASA - Business Controller [42]

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I think we -- I'll check. There is one question from the web from Tushar Jain. Can you please provide more color on categories that performed well over Christmas and which were below expectations?

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Pål Wibe, Europris ASA - CEO [43]

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Yes. As we said -- as I mentioned in the beginning, I think the grocery categories actually did quite well. And then, of course, some categories like clothing and shoes and like this, the petite assortment, the wild bird assortment is not doing too well, and we don't have snow. So that's not doing so well, but the big grocery category did very well.

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Trine Engløkken, Europris ASA - Business Controller [44]

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Current inventory level is still slightly high. Does it impact your ability to buy new products in 2020?

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Pål Wibe, Europris ASA - CEO [45]

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No.

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Espen Eldal, Europris ASA - CFO [46]

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No, not at all. But we have, of course, reduced the orders we have placed for some of seasonal goods because we have some.

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Trine Engløkken, Europris ASA - Business Controller [47]

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No more questions.

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Pål Wibe, Europris ASA - CEO [48]

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There will be Christmas to come next year, too, so.

Okay. That was it?

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Espen Eldal, Europris ASA - CFO [49]

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Yes.

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Pål Wibe, Europris ASA - CEO [50]

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Okay. So thank you for coming.