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Good morning, and welcome to the third quarter presentation for Europris. Today, we have a webcast only, and there will be a Q&A session at the end, and you are very welcome to type your questions during the presentation. 2020 has obviously been a very special year with COVID-19, been important and difficult for the whole society and impacting many businesses. During the pandemic, the priority of Europris has been and it will continue to be, to ensure a safe working environment for all our employees and the safe shopping environment for our customers. We've managed to do this. It has been difficult and has demanded more than a little extra from all our employees. And today, I'm here presenting a very strong quarter.I'm standing completely alone in an almost empty [ Arcbrig ] this morning. But tomorrow, in the 265 stores across the country, it's celebrating Halloween, and we will have 200,000 customers in our stores and served by our 2,500 employees. And that's where the results really are created. And I think you should have that in mind, when we go through the strong numbers for the third quarter; the true heroes, the results; they are created out in the stores.Highlights for the third quarter, solid merchandising and successful campaigns, ensure that we continue to gain market shares in a very strong retail market. Gross margins were kept stable, despite the shift towards groceries in the sales. And scalability and improved efficiency kept costs low and lifted also net profit. All this contributed to a very strong financial position at the end of the quarter, and we have opened 1 new store, and we have added another 3 to the pipeline of new stores openings to come.We are well prepared for the very important Christmas seasons, which is our peak season, and we have had a strong start to the fourth quarter. I'm standing alone today. But from next year, I will be joined by our new CFO. Stina Charlene Byre was appointed, and she will be presented to you in the start of the next year. I'm looking really forward to that.Sales performance has been strong. Chain sales grew by 27.2% in the third quarter, with the like-for-like sales growth of 26.5%. Obviously, we have positive impacts from COVID-19 infection control measures, with people staying more at home. That's increasing the domestic consumption. And also the closed borders towards Sweden has halted trade leak. But in addition to that, solid merchandising and in stores -- and the in-store campaigns, the way we are working, that's another key driver. And that's one of the things I'm really proud of that's -- the work we have done, that has made us -- it made it possible to have stable growth throughout the quarter. So it's a solid merchandising and very good work done in the whole organization.We had solid sales growth across all categories, but a shift towards groceries. Geography-wise, we've had growth in all geographies of the country, solid double-digit growth in all geographies, but highest growth in the Central East part of the country, towards the Swedish border. The sales growth has been relatively evenly distributed between customers and baskets. And the basket increase is mainly driven by a larger number of items per customer.Looking at the graphs, we see that actually Q3, which is normally low season, is trading on the same level as the fourth quarter last year. So it's an impressive effort that has been done. Our organization has more or less had Christmas volumes for the past 6 months, and they are really ready and eager to get started with the Christmas season of this year. So it's a lot of hard work that has been done and a lot of preparations for the sales that is still ahead of us.The market and the whole society has been in a difficult position this year. The COVID-19 has impacted many businesses and all -- at least impacted all people in society. And many businesses have struggled. In this challenging market, the retail, Norwegian retail, has actually performed quite well. It was a very mixed start with mixed results in April and March. But after then, it has actually picked quite well up. And most sectors has performed quite good.The national infection control measures and closed borders had a major impact on domestic consumption for all sectors. But there are large variations between the market segments. While total retail has increased year-to-date by 9.2%, we see that the shopping centers has actually struggled quite a lot, with 3.7% growth. But they have the strong third quarter, so they are picking up.Grocery sector is up by 15.4%, and the variety retail sector is up by 17.7%. Europris' growth has been 26.1% year-to-date. So we see that in this mixed market, the discount variety retail sector is actually thriving. And what we're offering is basically one-stop shopping and low prices. And the fact that discount variety retail is thriving is not something new. It has proven to compete very well in the shifting retail landscape, we see these days.But especially in Norway now, we see that new customers are attracted to the segment. And I think it's obvious, just more people experience that smart shopping. That's just smart. You get everything you need at one place and you get low prices at the same time. So the discount variety retail sector is continues to grow. And in that sweet spot of the market, Europris continues to take market shares.The gross margin of the quarter was 43.6%, down from 44.3% last year. We have some timing differences with stocktaking results. The results altogether are in -- on the same level as last year. But due to COVID-19, the stocktaking was delayed. So more results will come in the fourth quarter than compared to last year. So adjusting for the stocktaking results, the gross margin was 42.8%, an increase from 42.6% last year. I think that's a strong achievement, when we see that sales mix has been skewed towards groceries. But obviously, we had seasonal campaigns last year, and we were selling out seasonal towards the end of the season. But this year, sales were so high in the second quarter that we actually sold a lot of seasonal products, so we don't have a realization sale during the summer.On the operating expenses, that was NOK 425 million. That was 22.5% of sales, down from 26.5% last year. It's a lower ratio due to scale. And I must admit that the cost control demonstrated by the store managers in this quarter has been tremendous. They have managed to tackle the sales growth without adding costs accordingly, and it's really impressive effort that has been done on the cost control in the stores. Also at the central warehouse, we have just added the man hours we need to handle the goods and the transportation costs we need to tackle the increased volume. It's been overall a very solid cost control in the quarter.All this leads to an adjusted EBITDA of NOK 402 million for the quarter, a significant increase from last year, and the margin was 21.2%. Cash flow, still strong positive development in working capital this year. And at the end of the quarter, we had cash and liquidity reserves of NOK 1.4 billion, an increase from NOK 463 million last year. So it's a solid financial position for the company.Europris has developed a strategy for profitable growth. And that is based on 3 key pillars: it's to strengthen the price and cost position, improve the customer experience and to drive customer growth. When it comes to strengthen the price and cost position, the new warehouse in Moss is 1 of the key initiatives. And during the quarter, we see that the progress with the new warehouse is still on track. It's on time and it's on budget. We have started testing automation in the low-bay area in the quarter. And the next milestones will be in the first half of next year. We will move out of the old warehouse in Fredrikstad and concentrate all operations out of the new warehouse in Moss, where we'll then put the new automated low-bay area into operation. And it's still a period of transition and until the end of 2022, then we will start seeing the savings, and the savings is still estimated at 0.75% to 1.25% of sales.On OoB, that's another key driver to keeping costs low. The sourcing partnership we have that continue and performs quite well. On the financial side and when you look at the potential acquisition we have for the remaining 80% of the shares. OoB grew sales by 6.7% year-to-date to SEK 3.1 billion. And they had a high sales growth in the first quarter following the hoarding they saw in connection with the outbreak of COVID-19. After that, the sales have stabilized at a somewhat lower level.The growth is mainly driven by an increase in the basket, while they see a slight reduction in customer traffic, mainly driven by the stores close to the Norwegian border that has experienced a significant reduction in sales following the closed borders and lack of trade leak from Norway. In addition, some city stores in Stockholm has experienced lower traffic.But the suburban stores are performing quite well, growing and also showing good performance. EBITDA year-to-date was SEK 24.6 million, an increase from SEK 20.3 million last year. The gross margin is somewhat lower due to sales mix changes and realization of old seasonal items, and they had some increased distribution costs to the stores.The financial due diligence will be commenced now in the fourth quarter, and that will form the basis of the preliminary purchase price, if the option is exercised. And the option period for 6 months that starts from -- when we have reached agreement on the 2019 financials of OoB.On improving customer experience, that is all about continuously developing the concept and new products you offer to the customers. And this is what should support the long-term like-for-like growth for retailers. And you always need a good pipeline of new initiatives on how you develop your concept. Europris has focused a lot on sustainability over the years. We've done a lot on our own value chain and a lot on the reporting and setting up the systems we need to have a good focus on that.And now, we're moving the focus towards the consumers. And we really believe this is where we can make a difference. And we see sustainability at something that everybody should be -- should afford. It doesn't have to cost more. It should be sustainable and at low prices. And we see this as a big opportunity, not only for the environment and the customers, but also for our business.In the third quarter, we launched a new range of sustainable products in the washing and cleaning category under the brand name Effekt, our private label. It's 100% vegan. It's 100% recycled, Norwegian plastic for packaging. And Effekt is sold in both Europris and OoB stores. And with large volumes we are able to keep production costs low and also the sales price is low. So you'll find this in every Europris across the country, at the multi buy offer 2 for 35, unbeatable price and also unbeatable value.I want to talk a little bit about campaigns, because that's a very important part of the concept of Europris. We use the campaigns to attract and drive new and existing customers, and we've done that even through this exceptional times this year. We have not canceled any campaigns. We think campaigns is important. And our -- the new customers we get into our stores should get the campaigns and get the positive surprise. It serves as a key traffic generator to the stores and it supports and strengthen the price position of Europris in the market. And it improves customers' loyalty and satisfaction.And during the pandemic, we have increased, more than expected, the volumes. So when we plan the campaigns for this summer, we were planning that based on all the sales figures and what we ended up with. And of course, then you have to adjust the concept because we cannot afford to invite customers to a campaign and be sold out of the products early in the week. The customers should get what they come for, every day of the week.And I think the direct mail you see on this page is actually a quite good example. This is from week 33, let's say, in -- yes, first half of August, still summer holiday, but you don't see any summer seasonal products. And we were sold out for many of these products. We couldn't have enough volumes to offer it in all our stores. So we shifted the focus, and we started doing that early because you need to get the volumes in. So we shifted our campaign focus, a focus towards groceries, towards consumables.And that's the nice thing you can do in a concept like Europris. When you have a variety retail, you have many products to utilize. So if you sell-out of something, you can replace it with something else. But you need to act fast and you need to be ahead of the development. And we were this quarter, and we have done that in a very good way. So I think seeing this kind of direct mail during the summer holiday is quite special. But that was something that really drive -- drove our sales growth in the quarter. And without doing these adjustments, we could not have been able to deliver stable growth in the quarter.And I think it's important to understand the concept. When you have an organization like Europris that this is drilled through every week, which shifts from one campaign to another, we shift from season to season. Today, it's Halloween in our stores. On Tuesday, it will be Christmas in all our stores. So we're shifting between the seasons. We're shifting between the campaigns. And that just makes that change is part of the DNA of the Europris culture. And that is something you can't copy. And you can't learn it just over a few weeks. You need 27, 28 years of experience of continuous change, then you can actually do this. And I think that's 1 of the key drivers for the strong quarter we had now.On driving customer growth, it's about getting the physical stores to play on the same team as the digital solutions. And on the digital side, we have now opened our new e-commerce store in the second quarter. It still performs very well. It had growth of 106% in the third quarter, but it still only accounts from 0.9% to total sales. So it's still from a very small base, but it's growing, and that shows that it has been a successful launch of the new concept.Home deliveries grew by 57%, but click and collect grew by 119%, and that accounts for 84% of the total e-commerce sales. That means that all the e-commerce sales we have, actually, 84% ends up in the physical stores. So that -- that really demonstrates how these 2 store concepts can work together. And with 2.2 million website sessions a month on our homepage, we get more data, but also our focus is to take this traffic and convert it into sales. If that happens in 1 of the physical stores, or if it happens in the e-commerce store, that's up to the consumers. They should have the opportunity to shop the way they want.And I think we are now developing a very good solution. We're giving the customers the opportunity to shop the way they want. And with the sales growth and also the increased digital visibility, 2.2 million visitors a month proves that many customers start their shopping journey online, but they end up in the physical stores. So having this to play together has been quite important. And we are still continuing to increase the membership numbers. We are now up to 612,000 members in our customer club. That gives us valuable data so we can start doing more personal marketing and doing better campaigns.On the physical stores, we opened 1 new store in the quarter, and we did 1 relocation, both in Vestland, and we have a healthy pipeline of new stores with 3 new stores added to the pipeline in the third quarter. And we now have 8 stores in the pipeline. One new store opening will be this year and the remaining is for the years to come. And that includes 2 city concept stores in Oslo and 1 in Bergen.On the outlook, as you've seen, we've had a strong development in 2020, with profitable growth under the current COVID-19 conditions. Sales growth trend was stable throughout the third quarter and also into the first weeks of October. The long-term effect of COVID-19, that depends on how the pandemic develops and the magnitude of the infection control measures in society. It's very difficult to determine the long-term effects.The financial due diligence of OoB is scheduled to commence now in the fourth quarter, and we are extremely well prepared for the Christmas season.With that, I think I will open up for questions.
Yes, there's a lot of questions. The first 1 is from Markus Bjerke, SEB. Can you talk a bit about to what degree new customers are driving part of the growth? Do you have any sense of sales in Q3, which is to customers you did not have in 2019? Further, where do you see the strongest growth in new customers and the differences in geography?
That's a rather long question, Markus. You have been typing the whole presentation. It's a very good question. It's difficult to give an exact answers because to have a good analysis, you need also a strong data. But we see that we gain new customers and we gain new customers across the country. So we get new customers in all geographies and also all ages. So it's not that easy to give a picture. This is exactly the newcomers. But it's all over the place. When we talk to store managers, they see -- they sell -- they tell us, we see a lot of new people in our stores. And the positive thing, we track the bank cards. So we also see that they come again. What we have seen is that the frequency of existing customers has increased, and that is the largest part of the traffic growth in the quarter. But we also see new customers. Still the data we have so far this year show that they have a slightly lower frequency than the old regular customers. So maybe it takes some time to make sure they get -- become regular customers, but we will work on that, making sure they get the positive experience.
Next couple of questions is from Petter Nystrom, ABG. I'll take 1 at a time. Are you comfortable with your inventory level entering Q4? It looks somewhat low in a historical perspective.
I think it's -- I'm very comfortable with the inventory level we have. I think it looks more healthy than what we had historically, especially if you look at last year, where we had some -- too high inventory on the summer seasonal items from the summer season, where we over purchased. That has been sold this year. I think the question is directed at, do you have enough goods to support the sales growth during Christmas? And I have to say, yes, I think we have. But we need to balance campaigns and adjust the offering, making sure that we only do campaigns on the products where we can supply all the 265 stores, just like we have done in the third quarter, we will continue to do that in the fourth quarter. This is basically the same exercise as we did with the seasonal products for summer season. And we managed to do that well in the second quarter, and I'm sure that we will do the same in the fourth quarter.
And the supply issues due to COVID-19?
There are some. I think the Far East suppliers are actually performing quite well. The biggest difficult we have these days is the domestic suppliers. And Norwegian brands, with the growth we had, close to 15% growth in the grocery sector. Discount variety retail domestically thriving. That means the production capacity for Norwegian suppliers is actually quite demanding. So it's more difficult to get some truckload from Orkla, than it is to get some Christmas lightning from China.
Regarding Q4 gross margin, should we expect any positive effect from the remaining stock taking in Q4? Also, will we start to see some positive effect from the OoB sourcing in Q4? Or is that mainly an effect further out?
On the inventory take, you will see some positive effect from the stocktaking. As I said, the result has been delayed. It was around NOK 10 million difference in the third quarter compared to last year, and that is the difference you should expect to see materialize in the fourth quarter. Just -- it's just the mathematical effect we have been delayed in the accounting, and that effect will come then in the fourth quarter. On the sourcing benefits, that's always coming in. We are seeing good results from the sourcing OoB, but it's the local, a Nordic agreement that has given the best effect so far. We are starting to see on the seasonal items. Some -- we have some already this year on the Christmas lightning, that will be even bigger next year, and the seasonal products will come next year. But some is coming in, and it will continue to come in over the next couple of years.
And the next question is from Ole Martin Westgaard, DNB. How is the organic growth mix between basket price and traffic? And how has the sales of discretionary items performed relative to other categories.
Sales growth has been relatively evenly distributed between traffic and basket, and the basket increase is driven by a number of items per customer. It's a volume-driven growth and a very healthy growth. On the discretionary items, I think that's the grocery part is looking for it, Trine?
Yes.
Yes. And that has over-performed on the back of nonfood categories. We see strong development in home and interior kitchen. But still, it has not been the best year for suitcases and travel effects. So it's a mix change towards more groceries. When people stay more at home, you need more cleaning products, you need more household paper. So in all these home consumption categories, has had an increase. And we have also shifted our focus in campaigns. When we get sold out of seasonal items, we have made campaigns on everyday products you need at home, in order to drive traffic and supply the demand in the market. And also to cover up that we were selling out of products, so we can't put that on campaigns.
And then Eirik Rafdal from Carnegie sends, it's congratulations with our new solid quarter and a couple of questions. Could you give some more thoughts on why you're grabbing so much market share? Are you top of mind because consumers? Is your product offering better tailored for the current environment?
I think it comes back to the fact that the discount variety retail, it's not only Europris does -- performing well. It's more players in that sector is also performing well. But it is -- the shopping format we offer the consumers these days, especially with the infection control measures. We have relatively large stores, good parking facilities and you get everything you need at 1 stop. And many of our stores are co-located with a grocery store. And of course, then you can do your shopping trip, you plan it, you go to Europris and the grocery store and you get everything you need. It's convenient shopping, it's smart shopping these days. And of course, you have low prices. And many people are careful with economy these days. Many people are laid off temporarily. So it's a tough situation for many. And I think in this kind of market, we have seen that in the U.S., in Europe, that discount variety retail is thriving in the current market landscape, and we are in that sweet spot of the market. And honestly, I also think we are doing some things right, especially with the way we are working with the campaigns, the way we are adjusting. All the small tunes we have done throughout the quarter is about improving sales and really taking everything that we can out of the possibility that is there in the market. It's a strong achievement.
You stayed a solid start to Q4 and also that the growth was good throughout Q3. Does this imply similar levels in October as Q3?
Yes, that's what it means. It means that we have stable growth in the third quarter, and we see the same stable growth in the first weeks of October.
You are accumulating a lot of cash with the strong performance year-to-date. Could you share your thoughts on capital allocation? How much should we expect dividends to be up this year?
That's not up to me. That's up to the Board. And they will make a proposal to the Annual General Meeting. But of course, the policy Europris has that stays firm. We will pay out 50% to 60% of net profit and keep a healthy balance sheet. In some years, we have paid out more because we have a healthy balance sheet. Obviously, we have that this year as well. But I would expect that the history, the Board has created with increasing the nominal dividend per share every year. That is what you should expect also to be for 2020.
And the last 1 from Eirik. OoB, you state the option period starts from when we have reached agreement. Could you please confirm that you have not agreed on this yet? If so, when do you expect to reach agreement?
We will commence the financial due diligence now in the fourth quarter. And when we then are completing that and we agree on the numbers, then the option period will start. So we are commencing the financial due diligence now, in the fourth quarter. When it will end, it depends on when we agree. So it's a difficult question. Last year, unfortunately, we did not agree. So it took longer than expected to reach an agreement on the financials. So I am open minded, let's see where we end. It will take the time it takes. And we are not stressed. It's no stress neither for the sellers or for us. So we are focusing on running the business, and this is just something on the side.
Thank you. And then there's a lot of questions from Markus Heiberg, Kepler Cheuvreux. I think a couple of them has already been covered, so I'll jump to the strong OpEx control this quarter. Any one-offs should -- we should be aware of, other than excess cost of 5 million last year? Or is the development we see mostly volume drive -- driven?
It's mostly volume-driven. Absolutely. We have been able to tackle the sales growth without adding costs accordingly. And of course, in retail, fixed costs are actually quite high. The house -- the rent expenses are more or less fixed. And also, we have opening hours that we need to apply with our staff. And we are basically quite stretched when it comes to the staff in the stores. And they cover up the opening hours, but they have also been able to handle higher sales growth. And I think that is also partly due to the change in consumer behavior that people are now utilizing the store openings hours better. We see that sales are coming more evenly distributed than before, over the day and also during the week. It's less peaks and more stable, also the sales in the stores. Makes it more easy to handle the growth without adding more personnel costs.
And 1 on inventory. Which goods do you have sufficient availability on to support campaigns? May we see an increase in branded goods and groceries in Q4?
That depends on the development. But yes, we are preparing also to adjust some of the campaigns for the fourth quarter, and that is basically because if we see that we sell-out of some Christmas lightning that we can't supply demand in all 265 stores, then we won't put it on a campaign because then we will disappoint the customers. And then we make sure that they still get good offers, but it will be on the different products. So we will shift the campaigns where necessary. And I think that's part of the strength of the concept.
And 1 question from Oyvind Mossige, SpareBank 1 Markets. What is the private label share in Q3 and moving into Q4 versus last year?
Honestly, we are not measuring the private label share on a quarterly basis, but it's around 1/3 of total sales is from private labels.
Then there's no further questions. Thank you.
Thank you.