Okay. I think we're going to start. Of course, first of all, welcome to the Q4 presentation of Europe, please. It's a pleasure to welcome you, of course, with these figures. But also since it's been Christmas, we have a special treat for you today.
So we'll start off with our normal lottery. Trina has asked me to urge you today. Of course, now we have the everyday season. Now it's not Christmas anymore. It's everyday season.
So today, we have a plastic bucket of everyday products. It's Europrize profile products at unbeatable prices. It's everything from toilet pressures to the dustpans and yes, a lot of disposable products, of course, everything you need for daily life until the next season is here. So make sure that you bring them so that Tina doesn't have to take them home, all of them. We also have some snacks for you, our own private label, just an example of the kind of private label development we do.
We are, of course, very big in snacks. So now we are developing also what I would call the medium level snacks. So it's fresh packaging, 100% sunflower oil, SEK 19.90 kroner, and it's all different types of tasteless. It's onion, it's jalapeno, it's bacon, it's cheese, whatever you want. And it's served in the product, disposable product from bamboo fallouts.
So it's a very sort of environmentally friendly product, so you can have a good conscience when you eat the snacks. We are also going, since it's Christmas, to have a special lottery today. You've all been seeing that it's been snowing in the last few days. Of course, we planned that. So we're going to have a snowblower that we're going to give out to one of you.
That snowblower you won't find in a European store, but you will find it in the click and collect selection, of course. So the lucky guy can come home and get away all the snow. I urge you to draw the lucky guy or Joe. Okay. It's H68.
Who's the lucky one? Okay. We are bribing the journalists also, so that's very good. Okay. It's a battery driven one.
So of course, we expect some good press coverage on that one. Okay. So with that, with the advertising, I think we'll go to the juicy stuff. As I said, I think it's a great pleasure to welcome you these kind of figures. Of course, we always tell it that Q4 is the Champions League of retail and it's very good to win Champions League finals.
I think the credit for that performance is to these guys, as the team. Retail is really a team effort. And in this quarter, in particular, it's been a true team effort, not just by the people in the stores, but all the way back through to the people in the warehouse, logistics and last but not least in the replenishment team that has been instrumental in making this performance. And the good thing was that we not only did we do well, but we actually did best when we had the toughest comparables in the quarter. So when they have been sort of from Black Week and on, it was I will call it a magic period actually.
It was it's not magic periods every quarter, but this period, it was a magic quarter. So we have once again cemented our position as the number one discount variety retailer in Norway with respect to customers, marketing, stores, logistics and sourcing. And of course, I'm very happy to be able to present 'twenty six here of continued growth for Europies. We think that I'm very sure also it will continue in the years to come. If you look at the 4th quarter, we had an almost 13% increase in group revenues, which is driven by a very solid like for like performance, but then also that we are converting, taking over some franchise stores.
And we had a 7% like for like, which is good. Of course, it was last Q4 last year was somewhat on the lower side. But as I said, the best part of this quarter was actually where we had really good comparables last year in the Christmas season. So it was a very solid performance. Gross margin was down slightly.
It's the same reason that we had in last quarter where we actually been doing better at campaign implementation, making sure that you have all the campaign products you're looking for all the through the week. That being said, keep in mind that the majority of the like for like sales growth is from non campaign products. So even though campaign sales has been good and putting a bit a little bit of pressure on the gross margin, the majority of the increase in like for like is obviously not campaign products, but it's non campaign products. OpEx, a little bit affected by the positive sales growth. We are at part of this quarter, we were operating at 100% capacity.
So obviously, it's difficult to have scale advantages at 100% capacity. Net profit up almost 14.5%, a little bit more than 14.5%, which is also very good. So we're very, very happy with that. We're also very happy obviously with the fact that the new warehouse, which is the big thing happening this year, is on plan with respect to time and costs. And of course, then we will have a little bit easier operational situation.
If you look at the full year, as you faithful people have known, 2018 was a sort of a year of up and downs, started slow but has picked up. We ended up with 2.2 percent like for like sales for the year, which is on the loan side compared to historical figures, above the market and we should always beat the market, that is our target. The market was on the lower side in 2018. So I think that having 2.2% growth in that market condition is okay. 8 net new stores and 8 franchise takeovers.
Gross margin for the year was actually up 0.5 percentage point, which was due to the situation in the 1st part of the quarter where we deliberately softened the campaign pressure and focused more on the gross margin growth. So in the first half, that was the main driver behind the gross margin improvement. And adjusted net profit was then up 10% last year. And once again, I think we could be pretty happy with that given that it was a tough year and every time you read in the papers, you read about retailers having trouble. So having 10% growth in net profit is okay.
We also it was a landmark year, of course, with the 20% per share acquisition of the RuneScen Group. So it's also an important long term thing happening in 2018. Yes. And since we are not planning on starting a bank and we are doing okay, then we obviously also give a little bit more back to our shareholders. So we keep a steady increase in our dividend to our shareholders.
If you look at the sales performance, it was high growth throughout the quarter. We had one more sales day in the quarter in October, but as I said, the sales actually picked up throughout the quarter. So we did best when we had the toughest comparable and then it matters the most, which is basically Black Week and onwards. That was the most important. And I think that's showing the seasonal position that we have at Europrize.
We had good comparables in 2017 that the team stepped up its effort and we did a very, very good seasonal campaign. It's thousands of details that has to fix in, and everyone has to know what they have to do in that part of their plan. And this quarter, we really, really performed at a high level, especially towards the end of the quarter. That was a period that we call magical actually. Also very pleasing for us operational people is that we have been presenting to you figures historically that has not been up to your expectations.
We said that we have focused a lot on central control of spacing and volumes, and that is one of the key drivers behind that improvement in performance. And in retail, it's if you fix something, you don't fix it in the next month or the quarter. It takes some time. But having worked now over the last one and a half year on operational improvement and getting more better systems and better control of the spacing in the stores, I'm very happy that we could see the fruits of that in the important 4th quarter and in the important final weeks of that quarter. So really, really good performance by the replenishment team and the systems supporting it.
Yes. And these figures, obviously, I hope that we can present it forever, but it's fantastic. The green bar far, far above the market. I'll come almost not to see the market. So the market is obviously on the low side, but obviously, Europe is on the higher side too.
So very, very good in a tough retail market. And I think that cement what we talked about on December 5, the fact that there are 2 segments growing in retail at the moment, not just in Norway, but in the Nordics, in U. K. And in U. S, it's e commerce and it's a different variety retail.
And in
between, it's very tough times are. This is the same as we talked about in December. We just wanted to reiterate it because it's important. This is the long term plan. We have a very clear plan for where we're going in the next few years.
We are going to do a lot of work to strengthen our price and cost position. We're going to do a lot of things to improve customer experience, and we're going to do a lot of things to drive customer growth. And that's the three areas that we are focusing on in the years to come. This we talked about also then in December, effect of one of our private label prime private labels now becoming Nordic. So we are busy translating it to Swedish text and then maybe after a while also finish.
So we think that we can develop some Nordic private label that is getting scale advantages and also developing and strengthening the brands. And you saw the snacks over there, but there's a range of products that we're going to launch within the private label, and it's very exciting. And this is one of the key elements of our new strategic plan is to use private label as a driver for growth and to distinguish ourselves from the other chains. And I think with our Nordic kind of footprint, we can actually get scale advantages in that. So that's a very interesting area and a focus area for us.
We also obviously, we are still engaged with the OBE and we're still in love. So it's a very positive development in the working relationship with our friends at. We also have the, of course, the long term relationship to TUKMANI, and we think that, that kind of partnership within these three partners are an important way we can have a competitive advantage in a tough and steadily tougher retail environment. With SEK 17,100,000,000 in retail sales to customers, we have an unprecedented scale in sourcing for Nordic kind of products. Distribution is also obviously a very important focus area for us in 2019 'twenty.
It's only a few months until we open the first phase of the new central warehouse. It's the new temple, as we call it. It's a fantastic going to be state of the art operations. And of course, for our shareholders and ourselves, we also it's also going to have an economic effect. But one thing is a direct economic effect, but the other thing is just that it's also easier to scale when you have that kind of modern automated facilities compared to having it operating in 5, 6 different warehouses and trying to do things more manually.
So that's also an important milestone for us in 2019 'twenty. The other thing is, which is, I think, obviously is exciting and a fun part of the job is doing this constant category development. And we saw it once again in this Christmas season, one of the key reasons in addition to the replenishment system and procedures was the category development we've done. We've taken some real leadership in some seasonal categories. And we always have to have a portfolio of different category activities.
And some play out in 1 quarter, some play out in another quarter, but it's important to have enough time and resources to spend on that kind of category development. This is the fun part of the job when we always have a long thing. In these days, when we are talking now, we are soon going to roll out some new pharmacy products in our stores. You will see it in a couple of weeks. And there's always a continued kind of and some will have a big effect, some will have a small effect, but increasing.
And I think that it's some of those activities that make us distinguish ourselves from our competitors. So really, really happy with that. And of course, in modern retail, even though we only have 0.5% of our sales is in e commerce, I think it's very important to understand that for us, the digital area is very, very important. I don't care where the customers buy our products. A lot of our digital activities is concerned about getting people, reaching them in a different arena, but then the sales might come in the physical world.
It doesn't really matter. It's up to the customers. So we don't distinguish that much between e commerce and sort of physical commerce. It's just commerce. But we try to reach the customers in all different areas where we can reach them, and it doesn't really matter where they end up buying the products.
And part of the success in the Q4 is also obviously that we are stepping out of our efforts in the digital area, and that is never negative for the physical world. So that omnichannel experience, customers don't really distinguish between Europe is digital and Europe is physical. It's Europe is. And you saw the snowblower today. For Christmas, we also started out having more Christmas trees.
I think we took a position on Christmas trees in Norway, artificial Christmas trees, very, very positive sales development. And of course, here's another area where not all stores can have all these trees. They're very sort of big items. So for example, in the end of March, we're opening a store at the Gunerios. That's going to be 500 square meter sales area.
Obviously, you're not going to have a space for a lot of Christmas trees, but you can buy it, we can collect and pick it up in the store or get it home delivery. So we think that, that's a very interesting area for our e commerce operation to extend the assortment online to complement the assortment we have in the physical space. And we still have a robust pipeline of new stores. We opened 2 new stores in the and closed one in this quarter. Basically, we just moved from Mavira to Nandla Star, which is quite close.
And then we opened another new store at Rukan, where we haven't had a store. People in Ryukan is very happy because they previously, they had to drive for 45 minutes to get to the closest European store. Now they can buy it in their hometown. So very, very positive. We have 12 stores as a pipeline for 2019.
As I said before, we do not have a sort of split hard target on number of new stores. It could be this year, it could be 7, it could be more or it could be less. It's really important that it's the right kind of stores and that they are profitable stores. But if we get to an increasing extent interesting either new stores or relocations or extension opportunities, obviously, we will say yes if the calculations are right. But it's not a focus to have the maximum number of stores.
It's the profitable stores. And with that, I think, Jesper, you can show us the juicy stuff.
At least we can show the numbers. Gross margin in the quarter was 43 point 4%, down from 44% in the same quarter last year. As Paul said, we have increased the focus on implementation of the weekly sales campaigns. It doesn't mean that we have increased the level of discounting because that remains on the same level. But what we've done is that we have made sure that all the customers coming into our store throughout the week, they actually get the weekly offers.
So we have enough products that has lifted sales, and we also believe that on the long term, this will also increase the customer satisfaction and also helps to drive traffic going forward. So it's deliberate something we've done to increase sales and also to keep the customers more happy, and it's also strengthening our price position with great offers. On the operating expenses in percent of sales, that was 26.9% compared to 26.5% the year before. The key reason for increasing cost is the increase we have in number of directly operated stores, going from 205 last year to 221 in the 4th quarter this year. We also experienced that the large volumes we had during the Q4 is putting some pressure on the logistics setup we have at the moment.
As you know, we're planning for a new warehouse because the old one, we see now that we are reaching the limits. So we had to spend some extra cost on 3rd party handling because we couldn't handle all the goods ourselves, and we also need to rent some containers. And that added cost of about SEK8 1,000,000 in the quarter. When you compare the numbers year over year, please also remember that operating expenses in 2017 was impacted by almost SEK 20,000,000, reducing cost due to performance based remuneration and also received marketing support from the suppliers. So the benchmark was also tough when it comes to operating expenses.
On the adjusted EBITDA, we ended on DKK304 1,000,000 in the quarter, up from DKK285 1,000,000 the year before. The EBITDA margin was 16.5%. The adjusted EBITDA, of course, affected by the high sales growth, but also then held back a little bit by the extra cost we had related to the large volumes during the quarter. If we look at the cash flow, this quarter, the cash flow was reduced from last year due to the share buyback programs we have completed that amounted to $77,000,000 this quarter. For the full year 2018, the cash flow was impacted by the increase in the inventory.
We have increased the inventory in the stores slightly. That is basically due to more campaign products that we're making sure we have enough products that is lifting the inventory slightly in the stores. And also, we have increased the inventory at the central warehouse to have better service rates to the stores. So we're making sure that we don't run out of products. So this is lifting the performance of the stores, helping sales and also driving customer satisfaction.
We have reduced the CapEx from last year, some fewer store projects. And also in 2017, we had an investment in the land area next to the warehouse in Moss. And during 2018, we have also completed 3 share buyback programs amounting to SEK121 1,000,000 in total. But still, at the year end, we have a very solid cash position. Paul?
Okay.
So to sum up and then talk a little bit about the outlook. We believe that we're going to see continued growth in long term revenue and profits supported by the fact that we're in Norway, favorable retail market sale and in a segment in Norway and Nordics and Europe and the New World, which is very favorable. We are in the middle of transforming Europe from what I would say a pure physical retailer to being an omnichannel retailer. But keep in mind, don't really care where the sales is coming, but we are very concerned about making sure that we reach our customers or potential customers in all different areas, physical and digital. We have a healthy pipeline of new stores, but once again, it's not as a hard target.
We will open only stores that are profitable, we will close any unprofitable stores even though it's we have seen a reduced number of unprofitable stores. We have very, very few unprofitable stores as you can see in the report, and we are getting fewer in 2018. And we expect still some franchise takeovers, 2 franchise takeovers completed on the 1st January and then 2, 3 more expected throughout the year. It's more for natural reasons. The stores is being refurbished and the franchisee might not want to or have the money to reinvest.
So it's nothing dramatic. And this is our long term focus. We want to be the best discounted variety retailer in Europe. That's a tough target. There's a lot of really, really good competitors out there or players out there.
If you set the European benchmark, we are the number one discount variety retailer in Norway, but Europe is at a tougher level. I mean, we have to do a lot of things with respect to price and the cost position. To be that, we have to still work on the concept. Even though I said that concept and seasonal development was an important part of the success in Q4, We still think that that's a continuous effort, and we have a lot of things we need to do that we also talked about on the Capital Markets Day. There's a lot of efforts in doing efficiency in the value chain and cost efficiency because if you want to have the lowest prices, you need to have the lowest cost.
And I also still think that we see it more than ever in a quarter like Q4 that culture and execution is really important in retail. So if I have to choose between the right strategy and the right culture, I would rather take the right culture because it's in the end, that's the most important aspects of retail if you want to succeed. So that's going to be the focus. And as I said, if we put the benchmark not at the Norwegian level but at the European level, we are not there yet. So we still have some hard work out for us.
So with that, I think we will open up for some questions.
Pribbenas Gorgersen, Carnegie. Two quick questions. First, Q1 most likely weak because of Easter. But could you say something about the effects from the reversal in the sugar tax and the not longer that hard war on personal care
products? I think, of course, obviously, Q1 this year will have not have any Easter. So that will have an effect. And I urge you to look at the analytic info we have in the appendix to this presentation to look on the effect of the Easter and how to calculate that. When it comes to the sugar tax, we believe that, of course, prices will go down.
They are on their way down, and that means that we will lose some revenue. So we'll see if the volume picks up. So it's still too early to say the exact effect. On the Personal Care, it's the price war is more intense a year ago. It has more stabilized.
We've seen that we had growth in volumes, but the total revenue has been flat for basically the second half of the year. So I think hopefully, we can see some growth, but that depends on getting customer growth basically.
And then quickly on the Orensveen acquisition. You have booked it in the balance sheet that you haven't had the cash flow outflow cash outflow yet, right? That is correct. That will happen in the Q1?
That depends. We have bought treasury shares, and that could be used to settle the acquisition of the 20% ownership. And we believe that the shares we have on hand by now should be sufficient to cover the purchase of the 20%.
Petter Nystrom, ABG. Two questions. First, can you share some lights on your expectation on the gross margin going into 'nineteen? And then given that we saw some higher share of campaign sales in Q4?
We will for sure continue to make sure that our customers get the campaign products. So you should expect that, that effort will continue. That has been positive for sales, positive for profits, but dilutive on the margin. So but we will continue to do that. We believe this is the right thing to do.
And finally, what about share buybacks in 'nineteen?
We have not initiated a new program. We said that we buy back shares in order to be ready to either to pay for the acquisition of Odonto and Gjupen or to delete shares. We have enough shares on hand, we believe, to cover the acquisition of Oudrunsoegruppen and have not initiated a new program at the moment.
Markus Berke from SEB. Going back to the like for like of 7%, you mentioned that it was predominantly non campaign products at Broadridge. Can you give us some more color on what kind of categories have performed the best? And also if there is any differences in terms of geography?
Yes. There's no big difference on geography. I think that the biggest cat as I said, it wasn't tilted a little bit growing, good all through the quarter, but even better towards the end when we had the toughest comparables in 2017. Because in 2017, we had a poor quarter, but it was mainly due to the 1st part of the quarter, not the last part. It's basically big seasonal categories, the big hero products.
We sold a lot of Nisse and those kind of things. It was yes, Christmas trees, you saw. We mentioned also Christmas lightning, which is a big category where we've really taken some steps. So it's really just good category work that has been done by the category team.
Karl Reebek from Artech. On the Capital Markets Day, you spoke a lot about or mentioned the Click and Collect and how that has showed very strong growth in the 1st couple of months. For those of us watching the website, you have launched several new products this month already. Could you give us sort of a preliminary update on are you selling any La Zie Spa, JAKUSIS weapon tablets?
Of course. I mean Lazy Spa, you have the Helsinki Lazy Spa, which is very good for when it's very cold. So that's a fantastic product now for February. But it's a deliberate strategy to increase the kind of product range on click and collect. You've seen first part of it now, but actually it's going to more is going to come in the next few months.
And I would say that more than 90% of our online sales is click and collect. That's the majority. It's product that people that has a certain value. It's not a 20%, 25%, 30% NOC products people buy online. It's the 200 plus.
So that's the biggest one. And we think that it's going to be even more important in the springsummer season, but that kind of product is more relevant. That being said, of course, as I said, the majority of ourselves obviously is non e commerce. So it's still the physical that dominates. But we also see that the digital activities we do on e marketing, CRM and all that stuff is also positively influencing physical sales.
Markus Hornsgaard, GMB Markets. When you look at 2018 in total and you look at your like for like growth, how would you split it in terms of volumes and price? And when we look into 2019, how do you think the mix will be between those two categories? Secondly, when you look at your basket, has that changed materially from 2017 to 2018?
I would like 4 questions at least. If we start with the volume on the like for like in 2018, total year, 2.2%. That was more or less equally shared between traffic and price. Number of items in the basket were relatively flat. So that's the place.
Next question was As to the mix, we've said that we will work really hard to in order to get home and interiors and kitchen products up. We have some good initiatives on that. We've seen good performance on that category during the Q4. And also, the CSP promise will be focused. So we're working very hard on the category mix.
We believe that is important also to strengthen the margin. But it's early days, so we can't really see yet. It's these days, it's focused on consumables and the everyday products.
And also a question on your inventory. It's slightly up, and it looks to be at slightly high levels. What level are you comfortable with going forward? And should you do you have a lot of seasonal products that are not sold out after
No, that is on the same level as the year before. So we are very comfortable with the inventory levels we have now. We said before that we expected inventory to go up, and it did go up, especially in the stores that we're very satisfied with because that helps driving sales. On the central warehouse, it's always possible to do some improvements if you work on the flow of goods, but that takes time. So we are very comfortable with the levels we have today.
There is one question here from Thomas Stave. A vendor note was issued when closing the deal. This will be converted to Ebroprize shares following agreement on the adjusted 2018 EBITDA for EOBE. Can you elaborate?
We have updated that in this quarter. So the vendor note, we have re estimated to €134,000,000 Is that correct, Giuliano?
Yes.
Yes. That is based on the preliminary results from Erb and the exchange rates from Sectonok and also the share price at the year end.
More questions from the web? No. Okay. Any more questions? Okay.
So as I said, please make sure that you bring 1 or 2 baskets of everyday products, otherwise Trina will have a hard time. And feel free to have some jalapeno or whatever cheese snacks you want. Yes, January is over soon, so you don't have to worry about that.