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Good morning, and welcome to the presentation of Q4 and 2021 full year results for Europris. Joining me on today's webcast is CFO, Stina Byre, and she will present the financial details; and of course, Trine Englokken, the IR Manager, who will manage the Q&A at the end of the session. Please feel free to send in your questions as I speak, and try to put in 1 question at a time. That will make it easier at the end. Wiggo Erichsen founded Europris 30 years ago back in 1992. And I can't think of a better way to enter the anniversary year than on the back of the fantastic results we have delivered in 2021. Growth and success has been the story of Europris for more than -- not more, but for 30 years and 2021 was no exception. And I think that tells a lot about the strong concept and the strong culture of the company. In 2021, we have successfully delivered on the growth strategy and solid operations drove profits to an all-time high in the fourth quarter. Sales increased by 12.6%. Gross margin increased to 50%. Net profit increased by 39% to NOK 510 million and our customer club, Mer, passed 1 million members. For the full year 2021, we have delivered a solid performance and successfully completed 2 acquisitions of online pure players. On top of a record year in 2020 with 28.5% growth, we have increased sales by 2.6% in the Europris chain in 2021. Execution of campaigns and category upgrades has been crucial to this strong achievement. The acquired companies, Lunehjem and Lekekassen, have both delivered profitable growth, a very strong gross margin on the back of the fixed freight agreement and also from currency hedging. And we have continued to see operational leverage on operating expenses. And all this resulted in a new record result with net profit of NOK 1.1 billion, and a very strong financial position at the end of the year. The strong performance is also reflected in the proposed dividend, which is NOK 4 per share. The ordinary dividend is proposed at NOK 2.50 per share. And based on the strong financial performance, the Board proposed an extraordinary dividend of NOK 1.50 per share. So totaling NOK 4 per share for the year 2021. I'm truly proud of the impressive job that our employees has done over the past year. In a very challenging environment, with ever changing COVID-19 restrictions, they have ensured a safe place to shop for more than 34 million customers, they have adapted to ever-changing regulations for COVID-19 restrictions and successfully secured the supply of goods in a very challenging freight and supply chain environment. I think that the Europris culture once again has proven very resilient. Over the past 2 years, we have invested a lot in improving our ways of working. We have systematically reviewed all major work processes in the company, applying lean methodology in order to be more efficient, but also in order to make sure that we do less mistakes. This is really paying off and the result is that we have increased the overall capacity, and simply, we just worked smarter. And this is also appreciated by the employees, and I'm really proud to say that employee satisfaction survey in 2021 also reached a new all-time high. Sustainability is rising on the agenda for every company, and we've truly welcomed this focus and change. Europris increased the focus on sustainability several years ago and we are really proud that we have maintained the B score on the CDP reporting. But sustainability is, of course, much more than reporting. For us, it's a key priority, and in October, we arranged the annual sustainability week for our employees. And the key target is to educate, motivate and also encourage all our employees to take sustainability into account in everything we do. So it should be part of every single drop of the business we have. Of course, still, it's a lot more work to be done, but we're moving in the right direction. And one of the new category initiatives we are testing is about making it easier for the consumers to take sustainable choices in the stores while shopping with us, and I'm truly looking forward to see the results of those tests. Europris has truly outperformed the market over the past 2 years and gained new market shares. If we look at the 2-year stacked development for Norwegian retail, we see that it has overall been a very strong performance by Norwegian retailers. The pandemic has created some winners and losers. While the shopping centers has been more severe hit by infection control measures, groceries and discount retail, variety retail has performed very well. Variety retail, they offer convenient shopping at low prices and that has been a winning segment in the market for several years. And in this sweet spot of the market, Europris continue to take market shares and outperform the rest of the market with a growth of 30% organic over the past 2 years compared to the market of 17.9%. With that, I leave the stage to Stina to give you more of the financial details.
Thank you, Espen. I will then take you through the fourth quarter financials. Sales were NOK 2.8 billion in the fourth quarter. This is an increase of 12.6%. And if we exclude sales from acquired companies, sales declined by 1.3%. It was solid seasonal execution in the quarter and all goods were delivered in time. And this was also the case for Lekekassen as they were brought aboard the Europris agreement for inbound freight immediately after closing. And this ensured that they had goods ahead of the important fourth quarter. The Europris chain had like-for-like sales decline of 3% in the fourth quarter, and it's good to keep in mind the sales -- like-for-like sales growth of 30.5% in the fourth quarter of 2020. For the first 2 months of the quarter, there were no COVID restrictions in the society, and in these 2 months, the chain had sales growth. In the middle of December, restrictions were again implemented, and in this month, the chain delivered sales growth. We are very pleased that the upgraded category home and interior continued to show strong performance. It was lower frequency in the quarter, but the basket size increased and that was both from a higher number of articles in the basket and from higher average price per item. And then we move on to online sales. Total e-commerce sales were NOK 368 million in the fourth quarter, and this constituted 13% of group sales. In 2021, sales from Europris.eno were NOK 147 million, which is an increase of 71%. And we see that customers shopping online prefer to use click & collect as their delivery method. And to accommodate these customer preferences, we are slimming the assortment offered for home delivery and we are expanding the assortment offered for click & collect. It was strong performance in 2021 for Lekekassen and Lunehjem and they both exceeded their previous record year 2020, both for sales and profits. The sales growth for Lekekassen was 8.5%, and the growth in EBITDA was 17.1%. And the higher growth in EBITDA shows that we are already seeing synergies from the acquisition, for instance, through Lekekassen being included in Europris' agreement for inbound freight. What a journey it has been for our Mer customer club. It was started in 2019, and already, we have reached more than 1 million members. The growth in 2021 was more than 50% and this shows the strong market position that Europris holds. And I would like to direct a big thank you to all our store employees for a fantastic job they have done when it comes to recruiting members and also to our marketing team that has made it so attractive to become a member that 1 out of every 5 Norwegians has decided to join our club. We send digital newsletters to 1 out of 7 Norwegians. And this means that every week, we communicate directly with 700,000 customers and we continuously work to tailor-make product offering and to trigger store visits through this marketing channel. And the customer club is an important arena for us to build customer loyalty. The development in gross margin was very strong for the fourth quarter, coming in at 50%, which is an increase of 5.8 percentage points. During 2021, Europris has benefited from a fixed agreement for inbound freight and a new agreement has been signed. And this is a 2-year agreement, which secures volumes, and guaranteed capacity has been a main priority for us in the challenging global supply chain that exists. Prices will increase, and we estimate NOK 170 million to NOK 200 million on an annual basis. And it's good to keep in mind that even though costs increase, we have signed a very competitive deal with prices well below the spot market. OpEx to sales -- the OpEx-to-sales ratio increased by 2 percentage points to 20.9% in the fourth quarter. And the OpEx was NOK 595 million. And this was affected by the inclusion of partly owned subsidiaries and also from a higher number of directly operated stores. We're very pleased to have delivered yet another record quarter with an EBITDA of NOK 826 million. This is an increase of 29.3%. And the EBITDA margin was 29.1%, which is an improvement of 3.8 percentage points. Net change in cash was positive with NOK 31 million for 2021 compared to negative with NOK 28 million for 2020. Change in net working capital was negatively affected by timing of accounts payable and from higher inventory. And the latter was affected by inclusion of partly owned subsidiaries and also from earlier shipment of goods. Cash was also affected by the closing of the Lekekassen acquisition of around NOK 500 million. Net debt was NOK 2.4 billion. And if we exclude lease liabilities, it was NOK 525 million. And we exit 2021 with a cash and liquidity position of almost NOK 2 billion. And with that, I hand it back to you, Espen.
Thank you, Stina. On the strategy, that remains the same as before. It's about strengthening the price and cost position, improving customer experience and to drive customer growth. As a discounter, it's crucial to strengthen the price and cost position, and of course, we need to have the lowest cost in the operations of the company. And as announced earlier, we have had very high growth, higher than expected so we have announced that we are going to expand the central warehouse in Moss. And in Q4, we have signed contracts with key partners on the building of the new warehouse and also on the automation in the low -- in the high-bay area. And this will enable us to manage the future summer seasonal volumes. We are increasing the capacity in Moss by around 25%. And -- and we will finally be in a position where we can move out and exit the old warehouse in Fredrikstad. The construction application is being processed in Moss municipality as we speak, and we expect to start construction rather soon. And the goal is to finalize the construction work by the first half of 2023 and that installation of the high-bay area be completed by the first quarter of 2024. In the low-bay area, we're working with automation and the ramp-up of the automatic shuttle system for efficiency of picking up goods at the new central warehouse has been delayed until after the year-end. We didn't make any attempt to start to ramp up during the fourth quarter as we do not take any risk on the peak season. But the system has been operated daily, but on low volumes but we already see positive efficiency gains from the system. So we see that it is contributing, and we are looking forward now to start a full ramp-up in the first quarter and to get the system up and running so we can get the savings we have estimated from this very important investment. On sourcing of goods, the sourcing partnership with ÖoB has continued in the fourth quarter. We completed the joint sourcing of Christmas seasonal lighting for 2022 successfully together with ÖoB in the fourth quarter. The sourcing partnership that is the key element to the partnership we have with ÖoB. And over time, we are aligning more and more products and making more and more joint sourcing of the products we are sourcing from Far East. On the equity transaction, we have not made any significant progress. The first arbitration regarding our right to challenge the 2020 financials was completed in January this year and a decision is expected during the first quarter. The second arbitration regarding the ÖoB's 2019 EBITDA is still to be scheduled. The equity transaction is unfortunately taking much longer time than expected. But the processes are necessary in order to have an agreed basis for exercise of the option. The sourcing partnership, that remains the backbone of the partnership we have with ÖoB, but we truly believe that there are more synergies that can be achieved under a joint ownership. But in order to decide on exercising the option, we need to determine the sales price and we then have to complete these arbitration processes. In 2021, ÖoB experienced a negative sales development, but an increase in the gross margin contributed to an overall increase in the EBITDA. Improving customer experience is crucial to any retailer in order to stay relevant to the customers. And for Europris, that means a lot about category upgrades. And category upgrade has been important for our performance in the past years, and especially in 2021, we see very strong results from the categories we have upgraded. In early '20, we upgraded the kitchen category. And in 2021, we have upgraded the home and interior category and also the chocolate and snacks category. And we are very systematic in the approach to category upgrades, and we are testing a lot before we go live. And one of the things we started testing in the fourth quarter is to include Lekekassen products in our toys category. We started testing 10 stores, and those stores delivered above-average growth for the chain in the toys category. So it's very promising results, and we will continue to test. But based on this, we are planning a full rollout in the second half of 2022. And I think this is a very strong demonstration on how we, as a physical retailer, can make an online acquisition and use their expertise to increase the sales and the product offering in our physical stores. Every year, Europris conducts a very detailed market and customer survey. And we are extremely pleased with this year's results, and we make progress in all important areas. We're increasing price perception, performing better on deals, increasing product quality and also the shopping experience has been increased. And these are all areas where we have worked hard to improve. The focus we've had on campaign implementation, category upgrades and training of staff is really paying off and showing good results. And the customers, they actually acknowledge what we are doing and that is the final proof we need. And Stina reported that we are doing a lot on the e-comm side and also on the customer club and that is all about driving traffic to our stores, whether it's digital or physical. But on the store side, we are also working very hard to drive customer growth through working on the current physical store setup we have. And this is all about new store openings and relocations. And in the fourth quarter, we opened 1 new store and we relocated 2 stores, all 3 in the county of Trøndelag. And we have a very healthy pipeline of new stores to come with 10 stores for the years ahead of us. And one happy message at the end. The legal dispute regarding our store at Grini has been settled, and it was subject to court proceedings in the fourth quarter and it was a very positive outcome for Europris. And we are very pleased that we are allowed to continue our operations at Grini and especially for the employees who have lived with this uncertain situation for many years. It was really a good day when we heard that we can continue the store, and I'm sure that the customers at Grini also appreciate that decision. Yes, I think it's time to wrap it all up. For the second time in just a few months, the government has now announced that the pandemic is coming to an end and this time I certainly hope that it's right. But while the Norwegians are celebrating that the pandemic is over, there are some uncertainty in the macroeconomic environment for Norwegian consumers. The rising energy prices, combined with high interest rates and also general inflation, that is going to affect consumer spending in the year to come. And -- in such an environment, smart shopping become increasingly important and the discount variety retail has historically performed very well under such conditions. And with our concept, I think Europris should be well positioned and we are coming out of the pandemic as a stronger company. I think we have spent the time over the past 2 years very well. We have all-time high customer satisfaction. We have improved the shopping experience through many important category upgrades. We have expanded the customer base by reaching more than 1 million members in our customer club. And we have strengthened the online position through the acquisitions of Lunehjem and Lekekassen. And of course, all this is supported by a very unique company culture and very dedicated staff. And with that final remark, I think we will open for questions. And Trine, do you have any questions from the web audience?
Yes. I have. We start with the Q&A. Ole Martin Westgaard has sent in 4 questions. The first one, can you please provide the mix on like-for-like between price, basket and traffic in Q4 and for 2021?
In the fourth quarter it was slightly higher from number of articles and the opposite was the case for the full year. Fourth quarter and the full year, you have an effect from both.
And the second, what was the underlying gross margin in Europris in Q4 adjusted for the contribution from Lekekassen?
Lekekassen had a negative dilution on the margin of 0.5 percentage points.
Can you comment on how your category mix looks now relative to 2019 prepandemic level?
We have -- compared to 2020, we have a somewhat lower level of groceries in 2021. And compared to 2019, it is still the case, but it's not that big a difference.
You commented that there was no sales growth in October and November and that sales were up in December. How much was sales down in October and November? And do you believe this is representative for what to expect now that restrictions are removed again?
We're not giving details on the monthly figures other than we said that we had a negative development in the first 2 months of the quarter, and it was positive in December. We're not going to publish monthly figures.
[indiscernible] said congrats on a solid quarter. Could you give more flavor on what you would expect the gross margin to be going forward with the new freight agreements and increased cross-border trade?
We can't give you an exact number for what the gross margin will be. But we -- if you look historically to what has happened when costs increase and the market has absorbed this, so if you can look at the history to predict the future, that is a good estimate. But we have taken out higher margins as we have communicated during 2021, so you should not expect increased margins on top of that. But as also communicated, the agreement we have signed going forward, yes, it increases costs, but it is at a competitive pricing.
Markus Heiberg. The first question, how did like-for-like progress through the quarter and into January? And how did you see restrictions impacting sales?
As we said, the sales was -- had a negative development in the first 2 months and then positive in December. And that is, I think, is a good illustration of how it was impacted by the infection control measures. It's -- the situation is ever changing. It was in the fourth quarter and also in the start of this year there are changes in regulations. So it's not really meaningful to look at those figures yet. We need to have some more periods -- a longer period before we can comment on the performance into 2022.
And can you elaborate on how Lekekassen sales growth progressed through the year and in Q4? How did growth rates differ between Norway, Sweden and Denmark?
Lekekassen had sales growth in -- for both the full year and in the fourth quarter. Denmark is, of course, a new market so there is no change there, but it has been a successful start. In Sweden, it is a more challenging and competitive environment. And sales for the full year were on par with the year before. In Norway, there was an increase.
Can you elaborate on where you see increased product prices? In which product categories do you see the most significant price increases?
I think the market is taking on the cost change the market has experienced in the past year. And also, going forward, I think they have already filtered some of that through during 2021. The grocery sector has announced that they expect quite high inflation in 2022. So for us, I think it's a little bit worth it to wait and see which categories are moving. But obviously, the inflation will impact the categories that consists mainly of products sourced from the Far East and also that are more energy-intensive in terms of production.
And how do you consider your new freight terms compared with competitors?
I guess we have already commented on it, but it's -- we don't know what all the competitors have, but we see that we had a very beneficial situation in 2021 and we are very satisfied with the agreement we have signed going forward.
Could you elaborate a bit on COGS. More specifically, how much of this was freight costs in 2021?
We had a little less than NOK 70 million of freight costs in 2021.
You say in the report that sales were down in October and November, but up in December. At the same time, electricity prices are high, which most likely affect the wallets of consumers. It seems fair to assume that, all else equal, this makes consumers more prone to shop at Europris. Have you seen a similar picture so far in 2022?
I think that is a very good and valid question, but unfortunately, it's very hard to give such an answer yet. It's a very short period into 2022, and it's too early to draw any conclusions. But I think we are well positioned as a discount retailer to benefit from the macroeconomic situation. But I think there are many factors at the moment that are moving: the end of the pandemic, the macroeconomic situation. So it's a quite unstable picture and difficult really to give the direction before we have some more history on the data. So we will come back to that when we present the first quarter.
[indiscernible] Congratulations on fantastic results. I have 2 questions. Regarding rising prices, will Europris pass on this price to customers?
As also mentioned, historically, the market has absorbed higher costs. And I think at least for many times, you can look at the history to look at the future without giving any exact answer to that.
Yes. And of course, at the same time, it's important for us that we are a discount retailer. We lead from low prices, and we need to follow the market. So we will not pass on cost unless the market is out actually doing the same. So we need to keep our competitive edge and we have done that through 2021 and we will continue to do that in 2022.
And what is the plan to address declining sales at ÖoB?
I think, ÖoB, they have a very strong brand in Sweden. They have great employees. And they are doing a lot of the right things. But it's a tougher market actually in Sweden. And I think that they need to invest some more in the stores and the concept and work on the commercial offering. And I think Europris are supporting as well as we can. But a lot of the things we have done, they also need to do when it comes to category upgrades and also working on the promotions and the campaign implementation. But it's -- overall, it's a strong brand in Sweden. It's a good company. So I think they should just keep on doing what they're doing because I think they are on the right track. And sometimes, you just have to focus on what you're doing and then the results will come.
Petter Nyström. On Lekekassen, Q4 accounted for 60% of full year revenues. How much should we expect in Q1 and Q2?
We haven't gone out with exact numbers for the quarters, but it is correct that it is around 60% of the fourth quarter and that is the main season.
Costs are up 25% year-on-year to NOK 595 million in Q4. Do you expect roughly the same increase in the first half of 2022?
Sorry, could you repeat the...
Costs are up 25% year-on-year to NOK 595 million in Q4. Do you expect roughly the same increase in the first half of 2022?
It's a difficult question. I would say it also depends on how fast our ramp-up on the warehouse succeeds and we can start delivering higher efficiency from that. But you should also keep in mind that the acquisition of Lekekassen was closed for the third quarter, so you will also have growth also from that.
Øyvind Mossige. NOK 185 million in increased freight cost is around 2% of sales. Should we expect that the gross margin going forward will be above pre-COVID levels at 42% to 43%?
I think we have covered that question several times now, so I don't think we should go into any more details.
Joachim Harms. A question to the CFO. Can you elaborate why the cash position was negative at the beginning of Q4 2021? What would have happened if any unforeseen event occurred?
We have substantial cash and liquidity position. So we have no issues when it comes to covering our commitments.
[indiscernible]. Will you consider increasing your payout ratio policy going forward?
I think the Board has just proposed a high dividend with NOK 4 per share, and they are paying out an ordinary dividend that are increasing by double digits compared to last year. On top of that, they have proposed an extraordinary dividend of NOK 1.50 per share. So I think the overall policy we have is to pay out 50% to 60%. And on top of that, we should look at the balance sheet, make sure it's healthy and I think that's exactly what the Board is doing. And the payout ratio is high, and we have managed also to do acquisitions during the year. So I think we are in a healthy position and I'm sure we're not going to work to keep too much cash in the company, but we need the flexibility in order to do our operations.
Carl Frederick Bjerke. How much of the year-on-year increase in OpEx was related to Lekekassen, and how much was the inflation?
We won't go into exact details on the P&L. But the inflation is normal inflation has been we have -- most of our employees are on tariff agreements. So that covers what we give there. And then we have normal KPI adjustments in many of our agreements.
Could you give a comment on how the city stores have performed in 2021 compared to the traditional Europris stores?
That's a good question, but still it's -- then we are measuring a period where the city stores actually has been closed for quite a long period, especially the ones -- the 2 in Oslo, the Gunerius and at the Løren. So it's not really meaningful to compare that to the stores that has been open for the full year.
[indiscernible] Do you have other acquisitions in pipeline for the year 2022 and the years to come?
I think we will be open for possibilities if we find interesting companies like we have done with Lunehjem and Lekekassen, but we have no pipeline of acquisitions coming up. But of course, if anything comes across that, it's interesting and fits our strategy, we will definitely have a look at it.
That's all the questions.
Thank you.