Europris ASA (OSL:EPR)

CMD 2018

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Dec 5, 2018

I don't have to tell you that retail is changing. Some people say that that's a challenge. I would say that that's an opportunity. It's never been more fun to work in retail than today because the tools we have necessary, available, is much more than what we had a few years ago. We'll come back to that later. If you look in this world and you look outside of Norway, there are many markets that are much more mature with respect to e-commerce penetration than in Norway. In the U.S. and the U.K., the interesting thing is that in all these markets, what we see is that discount variety retail is thriving, and it's actually outpacing the growth of the total retail market by roughly twice. In the last few years, the gap has been a little bit smaller, but it's still profound that discount variety retail is growing alongside the growth of the online giants. If you look a little bit deeper into the U.S., you will see that the likes of Dollar General, Family Dollar Tree and Family Dollar, all those dollar stores are doing well alongside the growth of Amazon and the other online giants. In the grocery sector, some of you might know that Aldi is doing great in the U.S. too, and thriving next to the online growth. If you go to the U.K., you see a similar pattern where B&M and Home Bargains, which is in our sort of It's a typical Europris of U.K., is doing well next to Amazon and the other online giants. You see the same on the discount in the grocery sector, where Aldi and Lidl is really eating away on the big four supermarket chains. In the last years, Aldi and Lidl, and the other discounters, has taken 7.5 percentage point market share from the big four supermarket chains. It's a huge change towards online, towards value in the U.S. and in the U.K. If you go closer to home, obviously, everyone today is digital. Everyone is online, everyone is mobile. This is something that is influencing our business in a profound way, too. As I said before, I think it's a huge opportunity for us. Our physical business is not cannibalized by online retail, but the digital opportunities we have in eCRM and also later on in online sales are huge. We see that in online, e-commerce for us represent much more. We already start seeing the first sign, an opportunity for added sales. It's not necessarily cannibalizing our existing assortment. It's an opportunity for us to extend the assortment and sell much more online than what we're doing in the physical world. I'll come back to it later, but we have a NOK 300 billion Norwegian kroner addressable market in Norway. We are selling for a little bit south of NOK 6 billion. The discount variety retail sector is selling somewhere between NOK 15 billion and NOK 20 billion. There's NOK 280 billion waiting for us if we can get to that. We also see that, as I talked about before, e-commerce is not starting to penetrate the grocery discount sector or the discount variety retail sector. There are several reasons for it, according to McKinsey. Some of them is the challenging economics. If you have a product that on average costs NOK 30 in your existing assortment, it's challenging to sell that to consumers in a profitable way and send it home to everybody, especially if you're going to get free delivery. From a consumer convenience point of view, especially in the grocery sector, we see that it takes time to change habits. Long time. Even though some players are very successful in this segment, it's still a very small part of the market. If you look at all these retail trends together with McKinsey, we see that a lot of these retail trends are also relevant to Europris, and to the discount variety retail sector, but as I'll come back to later, we actually think that most of these trends are beneficial to our segment. It's an opportunity more than a threat to our industry. That is the first part of the presentation, is more the key message to you is that online is obviously growing. It's a digital shift, but discount variety retail, if you look outside of Norway, is thriving. If you go to the fun part, this is Europris and what we are going to do in this sector. Now it's Christmas. You can see it here. You can see it in the stores later today. We are the ultimate seasonal store of Norway. This was actually last year's stores, but still is valid. You will see even more of it this year. This should be the first place for anyone who want to shop convenient, smart, big, and at a low price, obviously. If you look at the history of the company, we have been growing for 26 years now. I can tell you a message, we are also obviously going to grow this year, too. For 26 years, we have been growing every single year. Now we are at 257 locations. Tomorrow, at 9:00 A.M., I'll open the 258th store at Rjukan. Very close to my cabin, actually, so I'm very happy about that. We have 30 million customer transactions every year. 30 million people coming into our stores and being influenced and giving us an opportunity to influence them. We have more than 1 million physical leaflets, like this one, distributed every week. Obviously, it's a tremendous growth also online. People want it on their mobiles or access it on the web. That's growing. We have, as I said, more than 257 stores, and out of the like-for-like stores, more than 90%, 95% of the stores are profitable. We have a thriving, financially sound, physical network. We have a lot of contact points, and the whole idea is just to be a little bit better every time we meet our consumers, 30 million times throughout the year in the 257 stores. We also have a very strong brand in Norway. This is the result from the 2018 survey that came out in November. This year, I don't think we can improve on this first one. We have 100% brand recognition in Norway, which is a little bit difficult to beat next year. Everybody knows Europris. You might love us or you might hate us, but you know us, and that's the most important thing. Even if you hate us, we can actually change that, but we cannot change you if you don't know us. It's important, 100% brand recognition. Among the discount variety retailers in Norway, there's an annual survey being done every year for the last 10 years, we are the undisputed number one on price, which is obviously also important for the discount variety retailer. The reason for Europris to exist is in many ways that we want to give our customers "Mer til overs," more to spend. So we always focus on categories, on occasions and seasons where we can give our customers more to spend, "Mer til overs." That's the key underlying thing for everything we do. We want to give our customers more time and money to buy what they need and what they want, not just for everyday life, which is our focus lately, also to make it nice at home, and then for these seasonal holidays and the special occasions. We will focus on categories and occasions and seasons where we can make a difference. Over time, the Europris concept will evolve so that we focus most of our energy and time and resources on the occasions where we can make a difference to the consumers compared to the alternatives. I started off saying that I think that Europris is thriving and Europris has a good future. I think the most important in retail, someone once said that culture eats strategy for breakfast. Basically that even though these strategy plans and priorities are important, it's even more important about the culture of the company. The last proof of that we actually saw a couple of weeks ago, on the 23rd of November. I was fortunate enough to be able to work in the store. That was the Christmas Eve of retail this year, which is the Black Friday. All the leaders of Europris, all top 50 leaders of Europris, was out in the stores working on that day because it's a big day out in the stores, so it's important that everybody works there. I was at Vollebekk, which is close to Bjerkebanen in Oslo. I was there at 6:45 A.M., 6:40 A.M., and we opened the store at 7:00 A.M. Wasn't a lot of customers in the beginning. It was early morning, but even the car liquid was on offer, but even that couldn't get people to get in big numbers. At 6:40 A.M. at Vollebekk, I was expecting the store to be pretty in need of getting up to shape because we had a really good Black Thursday. When I came there at 6:40 A.M., everything was okay. I didn't have anything to do for the first two hours, except serving customers, of course. The reason was, of course, that Seher and her team had been busy preparing, not just that morning, but actually the day before. It wasn't special just because I was coming there, it was in many stores. Towards the end of the Black Thursday, you start working and preparing for the Black Friday, which is the big day of the year. I think that kind of culture, that kind of commitment to your job is important and what makes us different from many others. The best thing is that you cannot copy this. Culture is something you cannot really copy. It's the energy of the organization is really important. We'd like to say that Europris is not just a job, it's a way of life, and especially during our Champions League final, which is the Christmas season. You see that kind of commitment. That's invaluable. Sustainability is another thing that is important to us. It's also important to our customers. Sustainability is not just an ambitious vision and target and strategies. Sustainability for us is also a lot about action, specific actions. Because in retail, strategy is one thing, but you live by what you actually achieve. We are more concerned about the things we actually achieve to create a more sustainable future than the grand visions and the targets and the long-term aims for this area. Since 2014, we've done a lot, but even more important is that we're going to do a lot also going forward on sustainability. If you look at the track record of Europris, we have obviously growth, as I said, every year since 1992. Our long-term target is always to beat the market. This is total growth, and keep profitability high. As we have seen, even over the last few years, profitability has remained at a high level. The growth is coming both from customer growth and from basket, which is important that it's sort of balanced both ways. As I said before, we believe that we have a roughly NOK 300 billion addressable market in Norway. We have NOK 6 billion in sales. If you add up all the other players in this segment, maybe we get to NOK 15 billion, NOK 20 billion. There's a NOK 280 billion market there out waiting for us. I said it before that when we look at the physical stores, what we are looking at is what gives us the highest gross margin per square meter selling area in the stores. We can sell anything as long as it's legal. We just have to prioritize what gives us the biggest return. Online, the good thing is that we are not bound by the physical world. We can actually try and target maybe not NOK 280 billion of it, but at least much bigger than the NOK 6 billion we're targeting today. In the online world, we are not bound by the physical size of the stores. We can sell anything as long as it's low price and we can make a margin. You also see that if you look at the discount variety retail sector in Norway, it's growing every year. It's also taking market share from the total retail market every year since we started measuring it in 1999. This is new figures from Virke, so it's a little bit different the numbers that you've seen before, but it's sort of the same message. Discount variety retail in Norway is growing, taking market share every year. We are the biggest player in this segment in Norway, but we don't look upon the others necessarily as the competitors. The competitor is just getting the consumer to get into a car and drive to our offsite location. That's our main competitor. The main competitor is the NOK 280 billion, NOK 285 billion addressable market that we have not reached yet. It's not necessarily these other players in this segment. Very often, we are next to Biltema, Jula, Rusta and those players, and we are thriving next to them. That was a little bit about Europris. Long term, our vision and target, what make me tick and get up in the morning, is I want us to be the best discount variety retailer in Europe. It's not just because it's nice to be European champion as a Norwegian. We are never European champions in any sports at least. It's not just that. It's also because we have to be. If we are not the best discount variety retailer in Europe, someone is going to look at the Nordic market and say, "Hey, we can go there, and we can actually beat these guys." If we are the best discount variety retailer on all the things we do in the different parts of our business, they will actually maybe not go to the Nordics and even maybe also partner with us, so we can create an even bigger base for further growth. It's important because it's fun to be the European champion, but it's also important because we need to in order to be positioned among the leading players in Europe. If you take a hard look at ourselves and look at some of the key areas we then need to focus on, let's put something up here. Price. We are, as I said before, we've asked our customers or the consumers in Norway, we are the undisputed price leader in Norway. If you want to be best in Europe, the bar is raised, and we need to work with Nordic sourcing, with our colleagues in ÖoB and Tokmanni. You'll meet some of the people at ÖoB later today. We have to work with them in order to become that best in the Nordics, best in Europe. On the concept side, we need to continuously develop the concept. If you are standing still, you're being eaten. You always have to improve the concept, and I'll come back to that in a second. On the value chain and the cost efficiency, if we want to have the lowest price, you have to have the lowest cost. Having the lowest cost, it's tough, and it requires a relentless focus on driving down costs. We'll come back to that and shed some light on what we are doing in order to do that. Of course, in the end, we are in retail business, and as I said, culture eats strategy for breakfast. It's more important what you actually achieve in the stores than what you say. I think that culture is one of our strongest asset. If we want to be European champion, we have to raise the bar even further. That I know is energizing for the Europris organization, so it's what makes this fun. If you go back to those trends that I've talked about previously, McKinsey saw in the retail sector, not just in Norway, but across Europe and the U.S., a lot of these trends is actually beneficial to the discount variety retail sector in general and to Europris in particular. The retail polarization is great for value companies like us. It's the guy stuck in the middle who has the trouble. The marketing, the 1.1 million leaflets we distribute every week, the 257, soon 258 stores, the 30 million customer transactions a year, it creates a kind of scale advantage that is very, very difficult to copy in Norway. Of course, with the things we're doing with our Swedish friends and partners and the Finnish, we are also creating a Nordic buying alliance that gives us an opportunity to have a scale advantage in the Nordics that is unprecedented. I think a lot of these trends is an opportunity for us more than a threat. We have defined three areas where we want to focus our efforts going forward. One is on the strengthening price and cost position. That's maybe the single most important focus area we are going to spend time on in the next few years. If we want to stay the price leader, not just in Norway but in the Nordic market, we have to have the lowest cost, and we're going to work hard for that. We have to continuously improve customer experience. That's important, always developing. This is the fun part of retail. You can never stand still. Then we have to drive customer growth because customer growth is the blood into the veins of any retailer, and you always have to come up with things. Now we have a toolbox that is much bigger than we're used to, and that's why I think it's fun to be in retail now compared to previously because the toolbox is so much wider. With the digital channels, with the big data that we are now starting to get, we can really optimize in a fact-based way. This is fun. We also have some long-term financial targets and operational ambitions that I know that the stock market always love to hear about. Our focus today is more on the things we're doing, and then eventually we will deliver something that you will see. As I said, we want to beat the market on like-for-like growth. That might sound easy for you, but it's not. That means that we have to work smarter and harder than anyone else in the market to always beat the market for the now 11th consecutive year or something. Like-for-like is here defined as the stores that was open on the 1st of January last year, which means that it's the older stores. The new stores is, of course, always catching up and having high growth as they start penetrating the local market. But looking at the old existing store base and creating growth there, that's the real proof of the pudding. We also want to open, on average, five stores net per year. We are beating that target by far this year and probably next year. As I said before, we do not have a hard target. We're not going to open stores just to open stores. We might open more, we might open less. Over time, we believe that relocations and expansions will be more and more important because we have 257 stores now, and a lot of them is not in the best place. As the retail market is changing, we are getting more and more attractive as a tenant, and we see that we get more and more opportunities for attractive, profitable relocations and expansions. That's going to be even more focus in the years to come. On the EBITDA, obviously, we're going to do a lot to improve our margins and to reduce cost. We're going to give away part of that to keeping and maintaining of a strong price position, we think that we can increase the EBITDA margin over time. It's just about filling up the arsenal of things we have. Then some we'll give back to the customers and some we'll keep for the shareholders. We'll maintain the dividend policy, as we said before to you, we are not planning on starting a bank. If we have some excess cash, we will give it back to the shareholders as we have done in the last three years on the stock market, because there's no point in holding cash in the bank accounts. We will keep an efficient balance sheet. Just a few words on the first big focus area, strengthening price and cost position. If you are going to have the lowest prices, you have to have the lowest costs. Okay, what do we do? Basically, we look at all the things we do in the value chain, from the factory to the consumer. Then we look at everything, we challenge everything, and we look at how can new technology, especially in the Nordics, we are good at adopting new technology because it's expensive with labor in the Nordics. We look at what can we do in order to reduce costs and increase efficiency. We will talk today a lot about the sourcing cooperation that we have with ÖoB, which has started off with a great start. That's a big part of it, obviously, but it's also about the automatic replenishment using smarter and smarter data to optimize automatic replenishment. For Kristian, we'll talk later today about the new warehouse going from five to one and starting automating it. That's a moving target. It's going to move further as time goes because there's huge opportunities now in doing automation. All the way, actually, to the stores. We believe that we also in the stores have to work in a simpler way, make it easier for the store managers to do a good job, and use technology to improve their everyday life so that we can actually be more efficient also in the stores. Our price position, as I said, is sort of undisputed in Norway. We are number one, we see when we look forward, we think that some of you have commented, we are going to get challenged on the price position. We think that even if we're not, we have to prepare for it. We have to build up this arsenal of cost savings, some of them we'll give back to the consumers and some we will give back to the shareholders. We think that this is important. Nordic sourcing is a key initiative there. Private label is another one. We see the success that the grocery players, discount players have, for example, in the U.K. It's a really important area for us to develop. Just building scale, reducing cost, and increasing efficiency in the value chain, as I talked about. We have to do all these things in order to keep and maintain our price position. We will not compromise on price. That's the only thing that I can assure you, as a 100% guarantee. When you wake up in the morning on a Monday, or you get access it on the email or digital on a Sunday afternoon, this is the key reason why people come to Europris. We can never be beaten on the front page of these leaflets, and we very seldom are. That's one part of it. The other part of it is that we have defined what we call profile products. Profile product at Europris is a big volume item that is important to the consumer in a big category for us. We should not be beaten on price for that. Here we can benefit from the cooperation with Tokmanni and ÖoB to really create profile products that are astonishingly low price, attractive value to the consumer. You see the cute Santa Clauses over there. We developed a 70-centimeter Santa Claus this year. We said that it has to cost NOK 99. It's unbeaten in the market. We designed the Santa Claus just to fit that price. Next year, we're probably going to buy some volumes also for Sweden and for Finland, it's going to be Christmas in all Nordic countries. Fantastic products, a very good example of how you design a product to the price. You work your way backwards, you scale it up in the Nordics. Now we just have a bigger toolbox to create those kind of profile products. On the rest of the assortment, we should obviously be competitive with the other discount variety retailers overall. We have to add, obviously, a value compared to the specialty stores. Private label is another area that I find very fascinating. If you look to the U.K., you can actually see that Aldi. I think that's one of our heroes in terms of private label development. A few years ago, when they had these prizes for the best private label development, the big four supermarket chains won all the prizes. Last year, in 2017, Aldi won more prizes for private label development than the four supermarket chains combined. I think private label is a very important tool for discounters. We make an attractive product at high discount to the A brands, we give the consumer the choice. It's good for us because it reinforces the value message for us. It gives the consumers value, it also creates margins for us as a retailer. We are going to focus a lot on creating more private label, also creating stronger brands among the private labels. A private label is a brand that you just didn't know was a brand. Trysil Sokken is a brand, fantastic brand, but you can only find it at Europris. Effekt is another fantastic brand, and today you can only find it at Europris. In 2019, Mikael and the team in Sweden, they will also introduce it in Sweden, then probably late 2019 or 2020, you'll also get it in Finland. You have a Nordic brand, Effekt, great brand all over the Nordics, but you can only find it at Europris and their partners. These kind of products gives you a 25%-40% price difference to the A brands, great value for the consumer and good margins for us as a retailer. The quality, I challenge you, try and buy them and tell me if it doesn't stand up to the standards of the A brand, because it does. Very often it's actually produced sometimes at the same factories, too. That's a very important area for us. We're going to put a lot of emphasis into private label development in the years to come. With that, I think I'll hand over to Espen, who'll talk a little bit more about the sourcing and the benefits we're going to get from sourcing. Thank you. Like Pål has already said a couple of times, if you want to have the lowest prices, you need to have the lowest costs, that is my favorite topic. We'll go a little bit more into the details. Pål-Kristian will afterwards tell you about the new warehouse and the savings we see there. First of all, I will update on the sourcing partnerships we have with Tokmanni and with ÖoB. Actually, we'll start with a short film showing the vendor summit we had in Shanghai in October. Today, we are very happy to invite these gentlemen to have a presentation. Now also ÖoB. We started the partnership with Tokmanni back in 2013. What we've done is that we established a joint sourcing office in Shanghai. From that, we have moved away from agents and are now sourcing most of the products directly from the manufacturers. Through this, we have captured significant savings over the past couple of years. Now with ÖoB on board, we add even a larger scale and also knowledge to our team, and we are expecting bigger savings in the years to come. These three companies working now well together, and what has actually surprised us the most with the start of the partnership is that the teams are working so well together. The chemistry is there, and we have got off to a really good start. Together we represent the combined retail sales of NOK 17.1 billion in the Nordics. That is a sourcing scale, really a world scale, and we have a deep knowledge on how we can do it. With the negotiation power we have and the reach we have, this partnership is really of a scale that matters. You might ask, why does it matter? That is we have created a unique scale in the Nordic region. No one has this scale in the discount variety retail sector in the Nordics. We are able to reduce costs through better terms and larger orders. We will benefit from best practice sharing with the knowledge we have. Like Pål had the example on Effekt, sharing this knowledge to create common private labels is really going to drive volumes and profitability for the companies. With the combined volumes we have, we are one of the few in the Nordics that can actually run joint Scandinavian campaigns of a significant scale. This is adding volume, and we can do thing cross-border, and that is a new feature for Europris and also for Tokmanni and ÖoB. Together with ÖoB, we're taking the partnership a little bit further beyond just the sourcing. With the joint ownership, we will actually have equal share in each other's success. ÖoB has proved to be a perfect match for Europris. It's a large category overlap, more than 90%, and actually the cultural fit has been surprisingly strong. We think that the start we have got is very, very good. In addition, we believe that the strengths of the companies are different. ÖoB is living in a much more price intense and more competition environment than we are doing at the moment. On the other hand, we are much better on the seasons than on the inspiration. I think we can learn from each other and really take benefit of these differences. That's what we're going to do going forward. Because the partnership is a great strategic fit, and we really see that when we combine the best practices, this will boost the strategic initiatives we have already started in both companies. ÖoB has been in the process of increasing the profitability, while we are working on strengthening the price and the cost position. We believe that we can learn from each other to really take benefit of what we know in this partnership. At the same time, we've already started the joint sourcing work. In 2020, Europris has the option to require the remaining 80% stake in ÖoB, depending on whatever offers the best shareholder value. Talking about the sourcing. The sourcing teams have started off very well. They are really working good together. Surprisingly, actually, to see Swedes and Norwegians working so well together, that was a surprise. They got off to a good start, and they are working in parallel with two things. We started with common suppliers in the Nordics. We are also working with suppliers in the Far East. On the Nordic scales, there we have the low-hanging fruits where you can get some benefits fast. We gathered local suppliers in the Nordics, and basically it's about harmonizing contractual terms. Now we have an access to how we work in the different countries. We're harmonizing the contractual terms. We talked with 16 suppliers. We've completed now negotiations with six of them. We also benchmark the prices, because we know that the brands, they take different prices in the different markets. We want to put an end to that, so we want to have the lowest price in all markets. Just by doing this on the six first suppliers, we have been able to make savings of NOK 13 million, which is rather equally shared between the two companies. This is savings that's actually coming quick. This will start coming on from January. While the Far East savings we're working on, that will take a little bit longer because of the lead time of the products. Those will also come. Like Pål said, we have the Santa example. We will work on the private labels, we will work on the signed products to cost. That's going to drive the partnership forward. We believe that the partnership is great when it comes to strategy, and it will create value for the shareholders. We're very happy with the good start. ÖoB has a strong management team. You will meet them afterwards. They have dedicated employees, and we actually realize they share all the same kind of focus areas as Europris. We're working on the same things, we have the same challenges, and we also find some common solutions. The initial savings estimates we had was NOK 30 million to NOK 40 million for Europris. That has been confirmed through the first months of work. For both companies, doing this partnership is international expansion at a very low risk and also at a very low cost. Now we move on to the distribution focus down. Am I live? Yes. Thank you. I will just start off with showing a movie of the new premises we are building in Moss. I have to disappoint everyone. It's not going to be available on Netflix, so you have to sort of look at it at this version. The facility is large. It's 62,000 sq m. The total area is 125,000 sq m where we operate on. We have already built in the building's infrastructure, the support for future extension. For example, the high bay warehouse there is already prepared for another extension of additional 30,000 pallets, and the same applies to the low bay warehouse in the other end. What you see there is a mezzanine, which we inserted actually quite late in the project. It's a mezzanine of approximately 2,500 sq m, which is inserted there to support what we hopefully is going to see our e-commerce business going forward. When we launch and move the e-commerce business back to the central warehouse, this is where the production is going to take place, so we don't interrupt, obviously, the wholesale business. We actually will get the key for the building in May next year. All the outdoor work has just been completed. Some of all the contractors are working inside. We have put in place 30 gates for inbound and 30 gates for outbound activities. Really large scale in order to have all trucks coming and going at any given time. Moving from 5 to 1, obviously something we have been waiting for a long time. Doing so, the total footprint of the warehouse is actually declining with 13%, and at the same time increasing the capacity with 34%. That's a really good combo. There is a 15-year lease agreement with the Fabritius Gruppen in place to support the setup. As I just showed you, it's already prepared for future expansions. We will be partially operational from May next year and take full access to the automation a year later in May/June 2020, which means that we will work from two sites in a transition period from 2019 to 2020. Before we talk about automation, I would actually like to draw your attention to two other quite analog items. It is unique in Norway. It's the first dry port setup that is set up in Norway, and it's set up in this area here, which literally is a 30,000 sq m area, our next-door neighbor. When we moved and decided to move for Moss's location, obviously we're one of the Norwegian's largest importers of containers. We import approximately 6,000 TEUs annually, and their proximity to the port is important. Having the port now as a next-door neighbor, you don't get that much better setup than this. We will have an extreme flexibility and closeness to our complete container park in the dry port. Moss Port authorities have rent agreements with Moss Port authorities for 10 years on this piece of land. Obviously, they will keep a lot of customers also in addition to Europris on this piece of land. It's going to be a great setup and a huge benefit for us. The other item, which is literally on the other scale of being automated is our Lean program. We introduced our Lean program roughly eight months back. Starting off in trying to make Lean facilitate the realization of automation at the full scale. Really and truly, Lean is also about embracing, engaging, involving your people to get them truly involved and be a part of the decision-making. We are now in the program where all 180 operators are actually doing that. Lean is first and foremost 80% culture, and it's 20% about methods. We are taking advantage of some of the methods initially. There is a whole stack of different methods, but we are taking advantage of the 5S method, which really is about housekeeping, really, putting your things where it's supposed to be and clean up after yourself. My favorite is the blackboard meetings. When the photographer is there, I even participate myself. We divided the whole group of 180 operators, meeting weekly in small groups, 5 to 10 people, looking at the whiteboard, looking at their key numbers, writing them in there with a pen, using traffic light colors to indicate if it's good or bad news, engaging with the people, talking about the problems, having suggestions. All that interaction is extremely valuable. Even though we're just eight months down the road, we have seen remarkable results. I mean, it's actually too soon, but our sick leave is all-time low, just eight months into the program. At the same time, the employee satisfaction survey we just completed showed an all-time high in terms of employee satisfaction. Extremely attractive combo from our point of view. High bay and automation. The high bay as such is really first and foremost something about storage efficiency and storage density. This black box, 10,000 sq m, is going to have a capacity of 65,000 pallets. We will have control of all inflow through the part here, where it's going to be format controls, labeling, taking part. What you don't see that well is that we have inserted. We being one of the largest campaign machines in Norway. We have inserted a campaign pick area here, which is going to get constant feed from the high bay or being continuously replenished. We're going to take, I think, the 100 to 150 largest products from the campaign every week, and we're going to pick them in this area. Meaning that the operator is going to have a very short sort of picking route to complete his order. Extremely efficient. Which is also don't show in the picture is that our low bay warehouse is going to be 250 m long. That's quite a distance to travel with a forklift. We have inserted in the ceiling, nine meters up, we have ceiling-mounted a conveyor that's going to take pallets automatically from the high bay warehouse, and we have created two drop points inside the warehouse to move pallets out with a capacity of around 100 pallets per hour. It's an efficient way to move pallets when the building is large, because the building needs to be large our scale of business. This, in many ways, illustrates our journey. We are in my hometown now in Fredrikstad, literally working out of five locations, six if you add our third-party logistics provider, which at seasonal peaks actually consumes almost 50% of our business during spring and Christmas periods. Hopefully this soon, this efficiency represents the past. This will soon represent, together with the automation part up here, represent the present. We will talk now to the future, which is illustrated by these two photographs. The automation part two is about, we have been screening our main processes, inbound, picking and packing, outbound. Fairly quickly, we fell down on looking at our picking process. For the obvious reason that that's where the most of the man-hours are consumed. Secondly, also, that's where you find most of the developed technologies available. We have been looking at the other processes as well, and there are techniques there, but they are not that developed, at least not meeting our requirements and demands. Moving into the picking area, we felt that we had fairly satisfactory solutions for high-moving products, pallets coming in and out. You don't automate a full pallet and put it into a high bay area and take it out later on. That is just moving constantly. We also have coverage for our campaign products in the picking route that I talked about initially. At the same time, you don't automate your slow-moving products. That is a business case that will never flow. We have been looking at the white spot in the middle where most of the products are actually lying. Looking at different technologies available, being miniload, shuttle systems and AutoStore. We are fitting our product assortment and our processes was the shuttle solution. I will show you a part of that conceptually in a video now. We are currently in a tender process with several vendors, so this is an example from one of them. Thomas has been out for two hours now, and I'm not allowed to come out until he says it's ready. A shuttle system is actually not a new invention. Shuttles has been around for 10, 15 years at least. This is generation 2, if you like, which was introduced to the marketplace three, four years ago. It's getting mature. This is a goods-demand solution. Here you can see part of why we decided on a shuttle compared to the AutoStore, for example. It's visualized by the cardboard boxes you see here. Because in other solutions, you have to literally empty the cardboard box into a plastic bin, in a plastic tote. This shuttle solution, generation 2, carries the cardboard box for you because this is how we receive it from the supplier. This is the same box that we later on is going to pick and put onto the store order. We don't want to move that around, pick and pack it, and with no added value in the meantime. That's new for the generation 2 of shuttles. What is also new to the generation 2 is that the sizing of the location can vary according to your product. The phase of the generation 1 solution had a fixed size for storage. Normally that was 60 by 40 by 40, which is a standardized box in the industry. The generation 2 can actually narrow that down to be 30 by 30 by 20, if that's what your product size is, you don't have to compromise on the scale of the complete setup. We are now designing a shuttle solution, which is going to take somewhere between 50,000 to 60,000 locations, and it's going to hold production for six or seven days of inventory. That means that it's going to be a constant flow of products going in and out constantly. That's why we were seeking the solution where we could handle things easily. We can't empty a cardboard box of products into a plastic tote and then take it out two days later. That doesn't make sense at all. To support our business, we estimate that we, looking at the shuttles here, we need to support the business we're setting up between 100 and 150 of these little babies to support all the traffic going in and out at any given time. That's a part of the business case, obviously. What you also can do, having a shuttle solution, which you can also do with other solutions, obviously, is that you can sequence your products so that the operator receiving the products and creating the pallet and the order for the customer, we can sequence the products to match our store layout to improve the goods receiving process in the store, which tomorrow is going to be 258 stores, and that's going to carry a lot of value. In our world, it's going to look like another black box, and you're going to have operators on the front who's receiving products, constant flow. We have estimated that approximately 70% of the SKUs will actually be handled via this shuttle solution. We are designing it for what we expect to be our 2026 volumes, that's going to be our design year. The bullet point 3 is probably the most important bullet points on the slide as such, because that's actually carrying the business case. We obviously increase the picking efficiency. Instead of having an operator on a forklift driving around on 40,000 square meters, he or she is going to stand still now and receive products constantly. Our evaluation of this has been that we are currently running at just north of 90 picks per hour, and this solution is going to give us 350 picks per hour. That's really where the business case is lying. Busy days trying to get the shuttle project, if you like, going into parallel with the automation part 1, if you like, of our project so that we can meet mid-late 2020 as our finish date. As I said earlier, that means that we will operate out of Moss, where we get the key in May next year, and we will continue to be in Fredrikstad until mid-2020 to support our total business. Oops. I won't keep you too long on this slide, but obviously the financing part for automation part 1 is a 10-year lease agreement, covering the investment of NOK 150 million. The CapEx requirements for automation part 2, and there, the finance part is still undecided. I do refer you to the appendix for additional information on the topic. What? This is sort of the key number. The OpEx in % of group's revenue, accumulated based on all the initiatives that are shown now, is going to take that down with 0.75 to 1.25 percentage points, and doing so at a full scale in 2023. The savings are, of course, then this bandwidth is equivalent to a ratio of NOK 8 million-NOK 70 million, assuming 2017 volumes. Savings coming from the quite obvious factors, obviously lease expenses. We are moving the complete business, sort of the distribution business, 30 kilometers closer to the origin of the chain. That's going to carry value, especially in a country like Norway, where transport costs are extremely high. We will get sort of automatic savings from the pure fact going from five to one site. Obviously at the same time, we will get benefits from the automation initiatives, both 1 and 2, as we have described. I think that was my message. Very good. Okay. Thank you, Per-Christian. Yes, we will continue. You will have the opportunity of course to chat with Per-Christian in the break if you are interested, as we are, in these automation opportunities are exciting. We'll move on just before the break to the efforts we're doing to improve customer experience. This is a constantly moving target, and it's a fun part of the business, too, I think. Let's look at the movie first. From your homes where you can show me your front and facade. Of course, Europris as a consumer concept is all about serving the needs of the consumers. Our customers are the most price-conscious in Norway. They love doing a bargain. That's why they come to Europris every single week. They love seasons, and they love the accessibility of the Europris network. That's key reasons for why they come. What we're doing is, in the end, the consumers are the ultimate owners and managers of Europris. What we are doing is that every year, we are asking them a set of brand statements to measure, in a fact-based way, how do they actually appraise us on the most important brand statements. The survey this year was out just a couple of weeks ago, and we mentioned some of it before, but every year we do this. We're following the development to make sure that, yes, they trust us on prices. Yes, we are the campaign machine of Norway. Yes, we are the ultimate seasonal store of Norway. Not just because I believe it, I think we are, but because the consumers, the customers think we are. That's important. On all these kind of brand statements, what we have seen over the last 5 years is a huge trend, where we are moving on all of them. We are moving in a positive way. On some of them, we are already number one in Norway, and on some we don't, but we are going to get there. We're going to continue doing that, obviously also going into the future. This is a proof of the pudding. The journey we have started in Europris is, I think, one of the biggest transformations in Norwegian retail in the last years. We are going to continue that, and we are going to measure that the customers appreciate it. Concept development. On the left-hand side, you see a picture of, I think it's from one of our stores in Bodø that is closed now. It's actually a great store. Øyvind, our Sales and Ops Director, will say that you see the products, you see the volumes, pricing, good, but obviously a little bit more old-fashioned. We have modernized now the stores. We have gone from being a store with 6,000, 7,000 products at a low price, but just a lot of products, to be having distinct shop-in-shops. Going forward, what we're going to do is that we're going to make more within each shop-in-shop, even more distinct shop-in-shops in shop-in-shops. The coffee is a good example of that. In some parts of the stores, we need to simplify because it's getting too complex. In some parts of the store, we need to simplify the message to get the price message across to the consumers. In other parts of the store, we need to inspire more. In the home and interior segment, we are too efficient. You're not getting inspired enough. Not you guys, maybe, but the girls here, you're not getting inspired enough. We need to calm people down, let them go there and browse and get inspired because then they buy more products. Of course, this is also the high-margin part of our business. That's on the concept side. We know that concept matters. We have seen from our own figures that when we refurbish the stores, the consumers like it. Some people ask me, "Europris, are you getting too nice?" I say that you can never fool the customers. You're not getting too nice if your prices is not getting, relative to competitors, too high. The consumers are the ultimate judge on how we're doing, and they like the new concept. They like the concept changes we do. They like Europris more today than they did five years ago. They are going to like Europris even more five years ahead than they do today. It's a constant journey. On the seasons, we are, as I said, the seasonal. Five years ago, I would say we were one among many seasonal stores in Norway. You could go to Europris, but you could also go other places. Today, I think we are the undisputed seasonal store of Norway. If you only can have time to go one place, you come to Europris to get everything you need at attractive prices for Christmas. Going forward, we are going to do more within each season. Next year, we're going to be the lawn expert. Sounds strange, maybe. We're going to be the pesticide control expert. We're going to have a more distinct position within each season, that is going to reinforce the message to the consumer that we are the seasonal store of Norway. In the same way as we do with the concept, with the shop-in-shops, we're going to be more distinct within each season. We see that all the category developments we do is actually changing the mix of our business. In the last four, five years, we have actually grown the part of our business that is the most competitive, the grocery part. That is the business that has grown most in Europris. Going forward, we're going to put a lot of emphasis also on the other parts of our business. The good thing there is that it's not just creating sales, but it will also create better margins. If we are able to succeed also in the general merchandise and specialty retail part of our business, that will have two benefits, increased sales and increased margins on average. We're going to do it in the same way as we have done it on the grocery part. We have a toolbox, we call it internally. We have a toolbox that we use to develop our categories. In some categories, some are important, and others, other things are important. We go through the checklist for all the categories, and we constantly look at our categories, challenge ourselves, constantly trying to become a little bit better. So this is a toolbox, or part of it that we're using. We don't want to give all the details to our competitors. The best example of it is actually one of my favorite categories, even though I don't have a dog or a cat. It's a pet. Five years ago, we were one place where you could buy pet food, primarily for your dog. We didn't have any A brands. We had Maxdog that was attractive price, but we didn't have any brands. Over the last four or five years, we have introduced brands. Now we have a good, better, and best offering to our customers. Good being our own private label, and then better and best being branded products. We started introducing the shop-in-shop that was dedicated to pet food, all types of pet, not just dogs, but any pet. We introduced our authorities to give more credibility to what we're doing in there. They are also our advisors on the assortment development. We started using them in the marketing. Lately, we have also started developing our own private label, a little bit inspired, as you said previously, by the Aldi and Lidls of this world. Now we have not just the Maxdog, the price fighter. We also have a Maxdog premium, which is like a better product. World news today, we are also going to have Max Dog Premium Selected. This is a world launch of Max Dog Premium Selected. It is only for you here today. It is going to be in the stores Q1 next year, so we have to be a little bit patient. I do not know how many of you have a dog. Fantastic. This is the Maxdog premium. Great packaging and great products. You know that when you make dry food for dogs, what you are actually doing is that you are heat treating it twice. It is a little bit like you are cooking your vegetable twice. Of course, that is not optimal for taste, but that is what you are doing when you are making the basic products. In Max Dog Premium Selected, you are only heat treating it once, and then you are dipping the product into duck fat, which the dog loves, and then you are serving them. Does it sound nice? I thought you would say that, so I actually brought some for you. In the break, you can try and taste it. Fantastic. It is a great product. Wow. Woof, woof. Max Dog Premium Selected, launch next year. Fantastic products. Now we are going to have a break, and after 10 minutes, take a coffee, some drinks, refreshments, and come back and we will give you more details about our strategy. Everybody. Welcome back. We had an extended break since I understood that most of you not only had coffee and gingerbread but also had a little taste of the Max Dog Premium Selected. That is good. We will continue on the third focus area that we have defined today, which is driving the customer growth. As I said, this is the blood in the veins of a retailer, and you always have to increase customer base. Now we have a lot of digital tools in addition to the physical ones. We see that our physical tools are still working, and I will come back to it in a minute. Of course, the exciting thing is just that we have a range of digital tools today that we are just in the starting phase of utilizing, and this is an exciting part of being a retailer today. Our consumers are in many different channels today, and we as a retailer have to follow them in all these different channels. As I said, we know that the physical marketing we are doing is working and has a huge effect. Obviously, we also need to communicate with the consumers also in new channels. The data we get from that process, this is the fun thing about the digital area, is that gives us an invaluable insight into what the consumers really want. Not just what they say they want, but also what they really want. I will come back to that in a minute. The digital marketing, the eCRM and loyalty program, e-commerce, all have to connect. I think one of the assets we have as a physical retailer is that we have the physical network, and when we get a bigger online presence, we can actually combine the physical presence, the 30 million people coming into the stores every year, with our online offering. There is a reason why Amazon is investing into physical retail, and there is a reason why physical leading retailers are investing into online. The future is not online or physical, it's actually both. The tools we have, obviously, I see that all of you are every now and then checking your mobiles. We are in a mobile society. The fun thing is that means that we can reach an audience that we are not reaching today as good as we want with the physical leaflets. In addition, we can actually create more loyalty among our most best customers. It's not just about attracting new customers, it's also about building loyalty. If I am a dog lover, which I of course am, and we have an offer on the Max Dog Premium Selected, I want to know about it. If I don't have a dog, I don't want to know about it. It's noise. If I knit. Europris has some special tips or some new sweater that you can produce by making with our knitting, then of course, I want to know about it. I want to know it. If I'm not knitting, I don't want to know about it. This is the relevance of mobile technology and mobile market, digital marketing. What really gets me up at night, which I think is in a fun way, is of course that when you do that in the digital channels, you create all that kind of data. This data is the goldmine of Europris. It's not just the physical network, it's actually the data we have on the 30 million customers, not just what they say, or that's also valuable, but also what they do. What we have put in place now this fall is starting to accumulate data, so it's still in the build-up phase, is that we are starting to create a database of information about what our customers, frequent, infrequent customers, loyal, not so loyal customers, what they're actually buying. We can start understanding who are the bargain hunters? How do the bargain hunters differ in a very profound way from the most loyal customers, from the most profitable customers? If we have a front page in these leaflets, we can know if we reach our most profitable customer or we've only reached bargain hunters. We can see in certain categories when we do the seasonal offering, what kind of categories within Christmas is really appreciated by our most profitable customers, and what is really just attracting the bargain hunters. When we do the category plans, we can understand in which categories are the customers coming back frequently. Maybe we should give them more value, more offers, and in which categories do they come very infrequent. It's a wealth of data that we have here. This is the gold. That's why we have our own dedicated chief data officer in the company, is just because this is the goldmine of Europris in the future. The biggest challenge today is actually that we are not able to process it fully to the extent that we can. We are getting the tools more and more. The key thing is it doesn't matter how many tools you have, if you don't have the data, you don't control the data, you don't get it, and access it in a way that you can utilize it. In the future, this is going to mean that we can, in a much more fact-based way, develop our business, the categories, the seasons, and the campaigns. This is exciting. Another thing, we just talked to a journalist here in the break, tried to explain that for us, you saw the example from the U.S. and the U.K. In markets that are much more e-commerce mature than Norway, discount variety retail, most players actually don't have an online offering. They don't have an e-commerce offering at all. We think that's unwise. We think that you should have an online offering, not because it's going to be huge business in 2018 and 2019, but because you're starting to learn, what can we sell online and what can we sell only in the physical stores, and what can we sell in both? Actually, if you have NOK 300 billion addressable market in Norway, we are in the physical stores only able to reach NOK 6 billion of it. We have NOK 294 billion that we can reach theoretically, of course, online. There's a much bigger market outside of that. We are not necessarily competing with the grocery chains or with the Amazons of this world, we are very often also competing with specialty stores, inefficient specialty retailers that has trying to protect the local position. It's a good competition. A very small example of that is the Christmas tree this year. It's not the biggest example, but you see that tree over there? That costs you only NOK 2,499 or regular price if it's not on offer. Fantastic Christmas tree. It won the test best in test in VG 2017. I think it has 2,478 tips. This is branches. It has 345 candles, lights. A fantastic product. You can go to Hageland and find something similar, but you have to pay NOK 1,000 more for a 180-meter tree instead of 210. It's your choice, I would advise you to buy this one. We have now nine trees that we have in all stores. We have four extra trees that we have only in the biggest stores. Then this year, this new thing, we're just testing it, is that we have one tree that is only online. 14 trees online, 13 trees in the biggest stores, and nine in the smallest stores. If we open a city store at some point, which we might do, actually we do it in Gunerius in March. If you come into Gunerius, 560 sq m selling area, you're not going to find 14 trees. You can access it, click and collect, you have the full assortment online. That combination is obviously going to open up new markets to us. We think the e-commerce business growing from minuscule, small, tiny volumes, of course it's going to be in the future, it's going to be more and more important in the future. The good thing for the discount variety retail sector is we are smart and aggressive, is that it's not going to cannibalize existing sales. It's more going to be additional sales in categories that we are not reaching or in product areas we are not reaching with our physical network. That's why it's so important and so fun. We see that our consumers today are really, really getting digital. 70% of the traffic at europris.no is now digital and mobile. Mobile, 70%. The traffic has been increasing every year over the last five, six years, and now it's at 1.2 million hits every month, and even more obviously during Christmas. Consumers are getting oriented online, and then they're going to the physical stores. I think roughly a third in a new survey done by PostNord, almost a third of the consumers also say that they actually check prices online when they are in the physical stores. That separation between physical stores and online is just artificial. It's not in the mind of the consumer. I expect Europris to be present and effective online, digital, physical, wherever I am. I don't think Europris physical is something different than Europris digital. Transparency is an opportunity for us because it tells you that you can go and check that Christmas tree at Hageland, and you understand that that looks very similar to the Europris tree. Then you check the number of lights, and you check the tips, and you check the height, and you say, "Hmm, maybe I should try and check this out at Europris." Transparency is good for value retailers. We have to provide some estimate. We call it estimates just because we don't really know how much and the pace of it. We think, obviously, that at some point, e-commerce is going to be a significant part of our business, too. The good thing is that we think that majority of that business is things we are not able to sell in the physical stores. We still think, and you can ask other retailers, too, who have a much higher e-commerce penetration than us, most of the e-commerce sales today is click and collect. We think that even in 2025, it's still going to be the same. Today, much more than 90% of our sales are click and collect. Even when our e-commerce home delivery business is maturing, we think that most of it is still going to be click and collect. The reason is that you don't buy the 10, 20, 25 NOK products online, but you buy the Christmas trees, the lawn movers, the bigger items. That is a value for you to buy online. That's why it's going to be more click and collect. With that, we also think that, of course, there are opportunities in the physical world, but once again, I would like to emphasize that we don't see a distinction between physical and digital. It's one Europris. To talk about the physical opportunities to drive customer growth, I will ask Espen to come back again and maybe he will eat some Max Dog Premium Selected here, too. That's my bonus. Yeah. Pål is talking about the digital opportunities, and we truly believe that this will help drive traffic to the physical stores as well. Honestly, the physical stores will be the main source of sales and also profits for Europris for many years to come. We have a robust pipeline of new stores. We closed one store this year, opened eight new so far, and Pål is really proud tomorrow opening store number 258 at Rjukan. I actually opened my first store three years ago. You see this nice picture? It was actually meant to be Terje Håkonsen opening the store, but he was stuck at the airport. This is my store at BigB in Fredrikstad. Based on current information, we expect to open eight new stores next year, and we have a pipeline also beyond that. It's a good pipeline of new stores coming forward. As Pål said, we're not that concerned about the number of new stores. It's more important that we open the right stores, and we have a very strict set of criteria when we evaluate new store openings. They should be EBITDA profitable for the group in the first year of operation. They should meet a very strict return criteria. Coming to payback on the CapEx should be less than three years, and including the inventory, it should be less than five years. If the new stores doesn't meet these criteria, we say no, because we want to have a profitable store base. This is very important for us. We work on this, and we do post-calculations every year in order to make sure that we actually follow up on the investment criteria we presented to the board of directors. What we see is actually that the new stores we open, they deliver on these criteria. In fact, the stores we have opened in the past years are actually more profitable than they were a few years ago. The latest vintage we have a full year of operation on is 2016. This is the 2017 numbers, and you see that the revenue is growing in these stores year by year. Profitability is high, and they are actually meeting the payback criteria as well as the CapEx is low on the new stores. We will continue to open new stores, and we will continue to do this benchmarking. We have a revenue-driven concept. It is important for us that they meet the revenue targets we put in their prospectus for each business case. We are doing also post calculations on how good the prospectus are for each case. We see that we are hitting the revenue targets better and better, and that makes sure that we actually hit the profitability criteria as well. What we see when we look at the store base is that the new stores have a high growth in their first year of operations. This actually confirms what we have seen in the past, that the new stores, they have a high growth as it takes normally four to five years for an Europris store to become mature. During the first four, five years, we have a high growth above the chain average, which was 3.1% in 2017. The more mature generations, they develop into a more steady state of growth over time. Looking on like-for-like sales, we have also said that we will focus on developing the existing store base. We are basically doing relocations to more attractive locations and also doing modernizations and refurbishments. During the past years, we have done many relocations and refurbishments. If we look at 2016, we did 10 relocations, showing a growth of 7.1% in 2017. In 2017, we relocated seven stores, delivering a growth of 10.8%. Doing this is very important to develop the existing store portfolio, and we will continue to do that. We do the same investment criteria when we do these kinds of relocations. Working on the store profitability is extremely important. The like-for-like benchmark is basically all stores that was open on 1st January, the year before we are doing the analysis. When we put more focus on the potential in relocating stores, we also need to evaluate how they are located next to other retail. We actually see that competition can be positive. We have 76 stores that are located next to a grocery store, and they deliver above average growth. Same thing for the 12 stores we have in shopping centers, and also for the stores we have in small shopping areas. That is what we are going to visit this afternoon. We are going to one of these 10 stores, and we can see that they are delivering good growth. While the standalone or the retail park stores actually deliver somewhat lower growth than average. We see that competition can be positive. We know that when we relocate ourselves next to other retail, both drive traffic and both benefit from that. Competition is good. When we look at the store base we have, we see it is very profitable. We believe that this is a testament that we are putting focus on new store openings, that it should be profitable. We see that reflected in the current store portfolio. In 2017, we had 228 like-for-like stores, of which 212, actually 93%, were profitable. That's a very strong statement. We do have some that are not positive. Those we work really hard to turn. We saw that one-third of the tail we had back in 2016 turned into positive in 2017. That is basically working with relocations, management issues, and putting focus on costs. We think that the biggest potential is actually on working on this side of the tail, developing the existing portfolio. We believe that doing a little bit more relocations, a little bit more expenses than what we've done in the past, is going to drive growth going forward. We see now that in the market, we are offered better locations than we were in the past, and sometimes also at more attractive rents. Working on this is going to be quite important. Normally, investors ask, "What's in it for me?" We are, of course, focused on delivering returns to shareholders, creating value. We believe that delivering on the long-term ambitions we presented, that Pål talked about, we will create value. We shall capture market share with the like-for-like sales above the market. We will add new stores and work on better locations and do relocations in order to improve profitability and sales. We'll reduce costs and increase efficiency to improve profitability for the company. In the end, return cash to the owners. Talking about like-for-like and growth, we target to continue to deliver like-for-like growth above the market. We will add new stores, but the key driver will be the existing store portfolio, where we believe that working on the concept we have, the category management, also the digital opportunities, will drive like-for-like sales in the stores. We have a focus strategy when it comes to developing the store portfolio, very strict on the investment into new stores. As Pål said, if we don't find it profitable, we will not open the store. If it's five one year, that's fine. If it's zero, that's also fine, because it should be profitable, and it could also be more than five stores. Let's see what kind of opportunities this comes ahead, but we will remain very strict to the investment criterias we have. Talking about the margin, the target for us is to increase the EBITDA margin over time. We believe still that the gross margin effects we will see from the sourcing corporation, together with ÖoB and Tokmanni, that will be, to some extent, be reinvested into the price position. The reason we exist is the low prices, and we cannot compromise on that. We expect that some of those savings will be reinvested into the competitive situation we are in. The OpEx reductions we get from the warehouse, that's what's going to drive the savings and the margin improvements going forward. When we presented the first case, it was automation in the high bay area. We're extending that, and we have raised the bar for the savings potential with also the shuttle solution that Pål-Kristian showed before the break. The savings from the new warehouse, that's going to be the key for driving profitability forward. Like Pål said, we're not going to be a bank. We target to return excess cash to the shareholders, and that's just what we have done in the past. The wording in the dividend policy remains unchanged, so it's 50%-60%, but also then to keep an eye on maintaining an efficient balance sheet. That's what we've done in the past. We also have now done a share buyback program. Europris completed this week. We hold now 4.5 million shares in Europris. That equals 2.7% of the issued shares, and that will not affect the dividend next year. What is an efficient balance sheet? We'll believe that the healthy liquidity position we have at the moment, that is a healthy balance sheet. That's what we've seen in the past. We know that the Q4, like Pål said, is the Champions League of Europris every year. That's also the Champions League for the CFO, because it's the high season for cash. By year-end, I'm sure that we will have an efficient and healthy balance sheet, with a leverage ratio that's acceptable. We are in the process of refinancing as well. By May 2020, we need to refinance, and optimizing the terms is key. It's really promising to see so many banks in the room. I'm looking forward to see your offers. It's a lot of competition out there, also among banks. We are an attractive customer for the banks, and the refinancing will be done in due time. Then we will also decide on how we do the financing of the automation part two at the NOK 150 million that Pål-Kristian talked about. We are implementing the IFRS 16 from the 1st of January 2019. That has no cash effect, but it has a balance sheet effect, and it has a profit and loss effect. That is explained in detail in the appendix to the presentation. I think we'll move over to ÖoB and the presentation of the Swedes. Pål? Yes. Thank you. Thank you, Espen. Even CEOs can be sick every now and then. Fredrik sends his regards. He's actually sick, so he couldn't be here today. You have to picture me now as Fredrik. I'm 10, 15 centimeters lower. I'm much more fit. This guy runs a marathon in 3 hours and 13 minutes, which I'm not even trying to. I'm Fredrik. Okay. I will present Runsvengruppen and ÖoB. Luckily for us, it's not going to be just me because that would be boring. It's also Mikael and Meta on the side here from ÖoB. Part of the team there, great people. As you'll see, very experienced managers in the most commercial positions at ÖoB. As Espen and we have talked about before, the relationship and the cooperation with ÖoB has really hit off to a good start. It's almost love at first sight. Very good. Looking at ÖoB, I'm going to start, and now I'm Fredrik. Not really. Just some key facts. There's more facts in the material handed out. ÖoB is actually 70 years this year, so I think it makes it the oldest discount variety retailer in the Nordics. A proud company started by Rune Svensson in a small town, very much like my hometown, Hamar, but it's called Skänninge in south of Stockholm. Basically, it's very much similar to Europris. Not just in the culture and the people, and the managers, but it's also in the assortment, and the offering to the consumer. I'll leave that to Mikael and Meta. They can do that much better than me. The management team, because retail is all about operations and obviously management is important. Fredrik has long experience from ICA and from the pharmacy business. A seasoned executive, great guy. He was at the extended management team meeting in Europris in October and got a standing ovation. Really good performance. Eva represents the continuity. She has been in the company for almost 10 years on HR. Kent as the CFO. Mikael and Meta are the key commercial managers. Mikael has the responsibility for buying and category development and logistics. No small feat. Meta has the responsibility for the store operations and the marketing and concept. Mikael has extensive experience from IKEA, Fantasia, and Viscard. Not just in the Nordics, but also been in the Far East. Meta has worked with numerous retailers, also IKEA, and also worked with Rusta, was one of the architects in the change at Rusta back in 2011 and a couple of years forward. Great people to have on the team. It's an asset also for us at Europris because we can exchange ideas. ÖoB can benefit from our learnings, but we can also benefit from the experience that we have in Sweden, in addition to all the synergies that we're getting together. Guess what? At ÖoB, the price is the difference. It's all about price also in Sweden. I think there's no one who's more price-conscious than the Swedes. I think they can learn us Norwegians a lesson in that aspect. Even better is the fact that ÖoB is really known in Sweden for having low prices. In the discount variety sector, they are unrivaled in terms of price position. When you think about it's sort of ÖoB, that's where you get the lowest and best prices. What's taken place over the last few years is that over the last two years at ÖoB, there's been some big changes. There's some very experienced managers coming in with Mikael, Meta, and Fredrik heading up. In 2017, it was a focus on developing a plan. When you want to do a turnaround, you start cutting costs first. They cut down the cost base in an impressive way to get the kind of platform they need to be able to profitably start growing. That was the focus in 2017. I'll show you some figures afterwards. We have started working on the assortment and the concept and eventually the seasons and all that stuff, and on how we operate the stores. Very similar to what we have done at Europris. Of course, they can benefit from our experiences, but we can also benefit from their expertise and learnings. Going forward, it's all about setting the concept, setting the category plans and the seasonal offering, and then comparing notes and learning from each other. It's an ideal point of time where you started cutting costs and having a clear plan, and now it's time to grow. The first initial part, this is not a listed company. It's not like they are doing quarterly details on the figures. The sales are quite flat, slightly up, but flat. Gross margin is improving. This is year to date, October. Sorry? September. September. Sorry, September. The work they have done on the cost side means that it's a huge improvement this year compared to 2017, and that is before we start growing. It's an exciting time. I think the cultural fit are good, and we are very much committed to the cooperation together with them. We think there's an exciting times ahead of us. We can learn from each other. In order to present a little bit more what they're doing much better than I could do, I'll hand the word over first to Mikael, who then hand it over to Meta, and then I'll be back again as Fredrik, the fit guy, in a second. Okay. Thank you, Pål. As Pål said, my name is Mikael Demitz-Helin, and I'm responsible for range and supply within Runsvengruppen. I started here at Runsvens at the end of 2016. Before that, I spent 10 years in Asia, in various positions, mainly focusing on sourcing from Asia. Before that, I was three years in North America, focusing on range and sourcing within the Americas. If we look at how we have organized our business within Runsvens, we are organized in two different business areas, groceries and general merchandising. From the category level, we have approximately 11 different categories, which are then more or less synchronized to the same categories that you would find in Europris. We have approximately 90%, 95% match between our categories and the Europris categories. What we have done also in Runsvens is we have five profile categories, which you could say are destination categories, and that is wash and clean. We have health and beauty, pet and personal care, and the seasonal business is also a destination category within Runsvens ÖoB. If we look at the split between groceries and general merchandising, today, general merchandising stands for 37% of our total sales and groceries for 63% of our sales. Looking at 2019, general merchandise will be at 40% our sales, and thus, of course, groceries being at 60%. Our goal here is to improve the general merchandising up to 50%, so we will have an equal share of sales, groceries 50% and general merchandise 50%. One key in driving our profitability is private label. We have today 10 brands that we own ourselves, which you can see on the right-hand side, and they vary from barbecue ranges to small appliances to mobile and computer products, et cetera. Here we are also working together with Europris, as mentioned earlier. Our first common brand will be Effekt. Effekt will be also Runsvens ÖoB's wash and clean cleaning brand going forward. That will be implemented within Runsvens during 2019. Looking at our own brands, majority of our brands are sourced in Asia. Today, we are sourcing approximately 20% of our annual sales are coming from Asia. The target now is to increase up to 25% of our total sales should now come from Asia going forward. In order to support the journey of going to an equal sale of 50/50 between general merchandise and groceries, we have also for 2019 and 2020, 4 specific categories that we are focusing on in driving sales and profitability. One is one area that Pål has spoken about, and that is the seasonal area, where we will increase, if you look at spring/summer, where we will have a much wider range and deeper range going forward. We will also allocate more space, both floor space and shelf space in the stores during 2019 to support the growth of spring and summer sales. The same goes for Christmas. We will also have a new, wider and deeper range going forward with an improved gross margin. Here I can also say, Pål, that it's not just a hope, but we will in 2019 also have common products that we will source together, starting with the small Santa that Pål was talking about before. That will already start in 2019. Here we have both decorative items and lighting items that will be commonly sourced between Europris and Runsvens. Another focus area is the disposable range that we have, which is a big part of our business. Here we now are starting the journey of phasing out all plastic items within the disposable area and replacing that with biodegradable items. We are also improving a new range of seasonal items, both when it comes to spring, summer and Christmas, and a new basic range for disposable items. The third area that we are focusing on during 2019 will be small appliances, where we will have a new wider offer with improved gross margin. Also new packaging and new communication. There will also be a new layout of the area in the store where the items will be displayed. Finally, the focus area that we have is also what we call multiculture. We have today a range of what we call world foods in the grocery side, which we will continue to develop going forward. We are also introducing multiculture items when it comes to health and beauty, candy, etcetera, and not the least then in home decoration. We will also then have a new range of more multicultural items. Parallel with these four focus areas that will support then our sales and profitability, we are also working on two areas, more in projects, where we're looking at what we call a green room, which we today are testing in two stores, which consists, of course, of green plants, hence the name. Also then gathering green plants, artificial plants, and all the accessories around the plant business into one area in the store. This then we are running now in two stores, and we will evaluate in the beginning of 2019. We have also started a project around the family. How can we be more relevant for the family? Thus focusing on children zero to five years and the range and the products around kids zero to five years. This we aim to start to test at the end of 2019 and then going into 2020. These are the six main focus areas then that we are running currently when it comes to the range and how that supports our sales and profitability. To support then the category organization in Sweden, we have our sourcing organization in Asia. Today we have three offices in Asia, Ningbo, Shenzhen, and Ho Chi Minh. They are then focusing on the sourcing part of the business, meaning being the prolonged arm of the category manager, dealing with the supplier on a day-to-day basis, doing the negotiations, doing the quality management, and also when it comes to supplier code of conduct is also a vital part for this organization. Looking at supplier code of conduct, we are since 2017 a member of BSCI, amfori BSCI. Today, 86% of all our suppliers in Asia are also then connected to amfori BSCI, and that's also audited by BSCI. We are putting our effort and concentrating more on then moving the supplier up towards a higher standard than maybe what they are today. The important thing is that we have the cooperation and we're then taking also responsibility of moving and improving the conditions at the suppliers. Coming back to maybe the most exciting part, I would say, and that is the start of the sourcing cooperation that we have with Europris, which has started in a very good way, I would say. I would also maybe, Espen, say that we have concluded 14 of our suppliers where we have finalized now the common negotiations with 14 of our largest European suppliers, which is really exciting. Also the initial saving, I would say, are maybe in the more moderate side. I think we will see a good improvement when it comes to cost savings, starting only with these 14 suppliers. We had an exercise together all category managers a couple of months ago and identified approximately 115 common projects that we are now running in the sourcing organization. We will have a follow-up now on the status of those projects in January 2019. Parallel to that, we have also then identified eight projects, significant projects that we are running together then, Runsvens, Europris, and Tokmanni, which we're also now then moving forward with. That will also improve our gross margin. That was short about the sourcing. Very good. Thank you. Join me to visit a brand new ÖoB store. Warm welcome. The meaning was it was supposed to be really nice music here, and my first was to say now, did you enjoy the ride? You can feel the ride, I hope. I know that our customers like our new customer flow because they stay much longer in our store. What you'll see was we are working within the big opening areas. We have those red breaks with strong low prices, campaign areas, of course, big volumes and simple materials. We really want this to be the feeling of low prices. Don't get too fancy. ÖoB is a low price company, strong low price company within Sweden. Our goal, grand opening every day, or as we say, a store in shape is new every morning for our customers. I think that's very important to focus on every day so the customers have a first impression that is very strong. My name is Meta. I've been working within retail for the whole of my life. I am the commercial manager for ÖoB since one and a half year. Before that, I have the same position at the Sweden company, Rusta. During my years within Rusta, I also started up Rusta Norway. It's really nice to be back in Norway again. It has been some years ago, though. For me, it's very important to have the feeling of ease and joy of shopping. I think that's my passion, and that's why I've been working so many years within the retail business. I bring that with me into ÖoB today. Ease and joy of shopping, that's really something extra. I live in Stockholm, I'm very happy now because now I can take by foot to our new concept store or concept shops, ÖoB City. We built some of those ÖoB City shops now in the big city areas. ÖoB City is one of many new things within the ÖoB company we started up this year. ÖoB City is brand new for us in April in Stockholm. In November, we had a new market survey, I'm very proud and happy that we still have this strong low price position within the Swedish market. For us, that says that we are in good direction for the coming years. It's not just low prices. It's also good bargains for our customers and, of course, ease and joy of shopping in our stores. All this together is also very good position for us for the next coming years. We have a strong start for 2019. We are a popular brand. Customer loves us. Even they likes and loves us. I think that's also a nice position to have customers are so frequently in our stores. One year ago, we decided to launch a new commercial concept, low price party or lågprispartiet. For us, it was very important to put the foot on the Swedish market again, to tell the market that we have the lowest prices to still be very strong. I will show you an example of our manifest low price party. Enjoy it, even though it's in Swedish. I should be trying to get the sound on it? Yes. Could you? We will try at least. Can't promise. That would be very nice. I'm very happy that Espen is with me. This was the first manifest we launched in April this year, to be very strong at a low price position within the Swedish market. It was the election year that start up with a low price party. Okay? I'm not sure if it's okay, but we'll try. Nice. Price party, and it was really nice for us to do this. We've been using it in all commercial channels this year, and I think you need to be strong in all channels and make it very simple. It's a low price party that's been used for 2018. I guess we are the only party that also keep our promises, because we have some difficulties in Sweden right now, but we are very strong to keep our promises. Every crown counts, and we say low price. Yes to that. We have a lot of customers who loves us, and we have a lot of new customers. Altogether, I'm very proud today to present our new loyalty program. We launched it last week. For us, it's important to now be thoughtfulness, work with simplicity, and also do some surprises for our customers, so they feel a very good feeling within our stores. Low Price Party or low price club, so to speak, even more ÖoB lovers, we guess, for the coming years. The Swedes have made a choice. Now it's up to you. You're so warm welcome to a new ÖoB store. Thank you. Okay. Now I'm back again, Fredrik. 10, 15 centimeters lower, but much more fit. ÖoB, just to sum up, I think that obviously, I hope you understand that the logic is very strong between the cooperation between ÖoB and Europris. one plus one is in this aspect, three. We think that size matters. It's important. The market is consolidating and becoming European. It's really, really important to get that kind of European scale, especially on the buying side, but also on the best practice sharing. Because very many things that Mikael and Meta talked about is also relevant to Europris and the other way around. For that to work, the culture has to work together and the cultural fit. I think there's many examples of that not happening. I think the start of the Europris and the ÖoB cooperation has really, really been good. Very happy with that. Just to sum up the ÖoB part, I think that we have a strong management team on board with seasoned executives that really have done this before, too. The new organization has set itself in Sweden and is working well, it's turning in. There's a stable sales development. The costs has been focused in the first part, and it's under control. I think that's a smart way to start. Now the focus is on improving and increasing sales and earnings. It's at the end of the first initial turnaround. Of course, the cooperation with Europris is important, but also the things we are doing on the category, the concept, the seasons and the campaigns. There's a lot of benefits from cooperating together. We're very excited about the start. Sweden and Norway actually is a love story. That's good. Now I'm back again. Now I'm Pål, 15 centimeters higher and a bit less fit. Our long-term vision is to be the best discount variety retailer in Europe. I hope that we have been able throughout these presentations to convey to you that conviction. Not just that we want to be European champions because everyone wants that, but that we also have the actions and the focus to achieve it. I think this is what makes it fun to be in retail today. Some people say that it's never been as challenging to be in retail today than it has been ever. I would say it's never been as fun because the kind of tools we have necessary available now is unprecedented in our history. Being a retailer has never been more fun. With the alliance with Tokmanni and ÖoB, we have a unique opportunity to achieve that, being the best discount variety retailer in Europe. The three focus areas, I hope you remember, and I hope also you will get the impression that it's not just focus areas and lofty ideas, it's actually also supported by specific actions. Because in the end, retail is all about implementation and operations more than strategy. Everyone wants to be the best, everyone wants to be better, but it's actually what you achieve eventually online or in the stores that actually matters. I hope that we have given you a little bit of a glimpse into what we are actually doing to achieve strengthen our price and cost position, to improve the customer experience, and to drive customer growth. To sum up, why should you guys who are sitting at home, many of you are already investors, so I don't have to convince you, but we have to go out and convince even more. I think, first of all, we are in Norway. It's a fantastic market to be in. There are significant untapped potential in the thriving discount variety retail sector in Norway, but also in the Nordics. We are the undisputed number 1 in Norway in discount variety retail, so we have a good basis for growing. We have more than two decades, actually, of consecutive growth, which is also good. Even more important is that we have a clear plan for where we want to go. We want to increase, we want to have like-for-like above the market. We want to beat the market all the time. We want to improve the EBITDA margin. If we have any excess cash, we will hand it back to you guys so you can enjoy it. It's very much the same plan, but we have a toolbox now that is much bigger with the cooperation with the ÖoB and Tokmanni, and with all the digital tools we have available for a modern retailer. With that, I think we're going to open up for a session with some questions if you have anything. After that, there will be a break. We will serve you some lunch outside here. After that, at 12:15 P.M., there will be a bus. You have an Europris bus to Lambertseter, where we show you one of the newest stores. We will take you through and explain a little bit about how we think about the concept, because it might look incidental, but it's actually have some thinking behind it, the way we do the seasonal stores. We've done it now for some time, so we know what we're doing. I hope that as many as possible can join us on the bus ride. The bus was quite full before you all showed up, and you showed a lot more than I thought. If any one of you haven't signed up for the bus ride, please make sure that you contact Trine at the back there. We will get you there, but we just have to make sure that there's space for everyone. With that, Espen, I think we'll open up for if there are any questions. Trine? Okay. Just a second. There's help on the way. Yeah. Hi. Niklas Roman from Handelsbanken. I have a question to Øy or Bjørn, I'm not sure who I should be- I'm Fredrik. Just ask me. Yeah. I see that the EBITDA has improved in the first nine months from NOK 21 to NOK 51. I was just wondering if you are on track to deliver the NOK 164 million in EBITDA for the full year that was in the budget. I think that the most important part of the year is still to come, so I think we will have to come back on that when we are finished with the year, I think. Okay. The like-for-like below 1% is going to ask if that was sort of in line with the expectations considering very strong summer? Well, a strong summer. I think that the market in Sweden in the summer has been quite challenging as in Norway, I mean, with the heat. I think this has been a tough year for many retailers, not just in Sweden but in Norway. I think when you do a turnaround, the most important thing is the first initial phase is to get the cost base right, and then you have to start to do the things in order to grow. I think the key message today, and that we have conveyed here, is just that it's an early phase of the development. Very much the same kind of challenges that we have seen in Norway over the last five years, and it's a start of a journey. I wouldn't be too worried about the quarterly monthly figures. I would be much more excited about the long-term prospects. Okay, thank you. For sure. Yeah, hi. This is Shah from Morgan Stanley. Four quick questions. Yeah, yeah. One: private labels. Can you give us what is your current penetration of private label is, and what do you expect with the combination to go up to? We have 37, 38% of our sales is A brands today, 37, 38. The rest is, you could call it private label, 25% is pure private label. The rest is factory brands, which means that it's basically brands where there's no special. It's either the factory brand or it's no brand. We want the private label part to increase over time by roughly 10 percentage point. We think that there's a huge potential in making it more distinct. Creating brands. It can come from the factory brands, it can also come from the A brands. Making more brands, stronger brands, is an important emphasis for us. Can you just talk about, you've talked to us a lot about on the seasonal products. Yeah. I think one thing you haven't been talking about is with the low season, how you're trying to improve it. Yeah. Can you give us a color what are the initiatives and how they're going over? Yeah. The only reason why we didn't talk about it was because it's definitely high season now. We are so excited about Christmas. Obviously, for Europris, this is one of those areas of the year where we think that we are on a journey where we can improve, and we can learn a lot from ÖoB and the kind of experience and focus they have on price and consumables. We started, you remember last year, to really see that and focus on it, and we started the first things this year. Low season is basically from mid-August to late October, and it's from mid-January after the January sales until Easter. That's what we call the low season. We have done a lot of learnings in the first year. Overall, very positive. We know that it's the right direction. Now we are all basically just using facts to tune in what we are going to optimize, to optimize and improve the replenishment systems and the processes. I would say that if I'm even more convinced now than I was 12 months ago, that it's the right way to go. Focus on consumables, make sure that we centrally control the best sales spaces in the store throughout the year, not just in high season, to get the best possible bargains. Then using new technology to optimize the business. It's a learning process. I think it's going to take two or three or four years for us to optimize it, if we're ever going to do it. You're always going to have a possibility of doing it better, but it's really a promising science. Okay. Just in terms of the mix, new grocery has increased over time. Yeah. You're focusing more on the general merchandising. The idea is to bring back the mix to what it was in 2015 or a more stabilized mix there? I think we should do at least the reverse, then it goes back. It's not necessarily a target to go back to the previous mix, but definitely we see that, as I said, grocery has increased its share, and that's the most competitive part of our business. We think that we have huge opportunities in kitchen and home and some decorations, and we are sort of setting the pieces in place now. We expect more of ourselves in this area. In many of it, is slightly different success factors where you have to inspire a little bit more. Last question, Preben last one. Two things like, is it something you are sending from the warehouse when the customer is asking, or you are picking from the store? At the moment, it's from the central warehouse. Actually, I think it's quite impressive that we are able to sell the kind of figures we're doing, and we only have a limited number of SKUs from the central warehouse at the moment. We are just in the process of turning up so we can increase the number of SKUs available, and we can utilize store inventory. We are just in that transition. The figures you saw earlier today was just, I think it's 50 or 100 products, where F pack is the same as a D pack, as consumer pack is same as a D pack, and is serviced from the central warehouse. Very simple just to get started. We are really in the initial stage of that development. We see that our consumers, not just our, but also in other formats, they like that convenience of buying online, but picking up offline. Sorry, last question. You can ask as many as you want. What's the medium-term margin target? Have you given that? No, we haven't. Thank you. Martin Stensholm from DNB. I also got four or five questions, so please bear with me. The first one relates to the sourcing agreement you started to put in place back in 2013. Do you have any numbers for us in terms of what you have gained, let's say, in gross margin, also good sales on back of that sourcing partnership? Roughly based on the figures we have, it should be supportive on the gross margin, in the range 1% to 1.5% points. About the premises leases, I mean, of the stores and also the new warehouse. Yep. Will you be able to say anything about the renegotiations on the store premises? What you feel about the lease terms on the warehouse? Yeah. If you look at the store lease terms, obviously what we can say as a general direction is that it's better to be a tenant now than it was five years ago. It's going to be even better to be a tenant in five years if you're surviving, and we are the survivors and the winners. I think we are seeing that a lot of good and smart and long-term investors in the real estate business, they want to have the best formats in their portfolio because they know that's the best assurance they have for the values of their property. I think that it's going to be better and better. We don't see the same development yet as we see in the U.K. and the U.S., where basically premises are thrown after you. I think it's going to improve, and I think we see the trend in relocations where we see it's picking up. One of the reason for that is that a lot of landowners, they really want a tenant like Europris to be there. When it comes to the warehouse, I can only say that I think we have a very competitive lease agreement there. The reason is just basically that we bought the option to buy the land, and then we had a bidding war between the different developers and of course then you get a little bit more of the value instead of just being a tenant. We are very happy with the cooperation with Fabritius. He's a first-class owner, really good start to that cooperation. About not only Black Friday, but Black Week. Can you say anything about the, let's say, the Black Week performance now? Right. Also the week, let's say before and after, how that has been, let's say, compared to last year. I think you have to wait until January 31st. I can say that at Vollebekk we had a very good Friday. We'll see. It's the Champions League of the year, and it's the most fun part of the year. We'll see. I'll provide you with the details. I would like to ask you about It's actually a question regarding ÖoB- -this City store. As you said, it opened in April. Would you have any comments on the uptake in revenues and margin so far? What would you expect, let's say, with Gunerius or the city concept? Yeah. It's a lower or higher margin concept than the average? I think that, first of all, you have to keep in mind that there's a lot more Swedes than Norwegians, there's a lot more Swedes in Stockholm than in Oslo. I'm a board member now of ÖoB, when I see the figures for the city stores in ÖoB, I'm amazed how we get even more Swedes than Norway. Obviously, it's an even bigger potential in Stockholm for city stores than in Norway, and the traffic is impressive. We see that the first city stores is doing very well. The newest one is developing well. Some are already surpassed expectations. Some are going up towards expectations. I think that's the early sign. It's only a few months, it's really early days. If you ever get the figure for a city store in Stockholm, don't apply that to Gunerius because we are a little bit fewer people, in Oslo. We still think that we are not going to get that many 1,200 square meter selling area spaces in central Oslo, we are open for discussions with the landlords, only if we get the right price. The last one. What about self-checkout systems in stores? Mm. Mm. Will we see that in the next conference? I think that's one of the things we learned. The city store concept, when we opened at Gunerius, obviously, we have been looking and talking to Meta and Mikael about the experiences in Sweden. One of the things we saw was that, yes, they had some self-checkout counters. We are also eventually going to have that in Norway. It's not a priority yet because of the traffic isn't as strong in central Oslo as it is in central Stockholm. Obviously, we have a first-hand look at the experiences they're having. It's very good. Thank you. Okay. Preben on the front. Thank you. Preben Rasmusson, Carnegie. Yeah. Just one question from me. Very detailed, very good overview of the warehousing and the effects we will see both short-term and long-term. My main risk is, do you underestimate the changes to the rest of your cost base, given your new and bigger toolbox that you might risk, for instance, running double marketing expenses, both the leaflets and going online with marketing? Are there other consequences short-term. With both of these sort of the transition and the new warehousing coming in, Terje? The short answer is, it's no. That's a very good question. I think that we are already seeing that first phase of the two worlds where you have a digital world and you have a physical world. At the moment, as you can see from our figures, we are not really scaling up the marketing in % of sales. The reason is that we are gradually getting cost advantages and scale advantages in the physical world and taking down the physical world and increasing the digital. The customer club is another grand example of that where we can actually communicate directly to our consumers. It's a very cost-efficient, but also very personalized way of communicating with our customers. We don't foresee that it's going to be huge investment. There's some investment in the IT and the systems and the backbone, but it's not in a big scale. It's not really high. That's why we still think that it's an opportunity for us more than a threat. It's a good question. Ole Martin? Yeah. Oh, yeah, okay. Markus. Ole Martin comes soon. Banks are already starting to compete. If you could start with reminding me about the size of the SKU base four or five years ago and where you are today. If you can say something about where you think that will go the next three years, both in terms of complexity and size, and also in terms of planning cycles for your campaigns. If I remember correctly, I think it was quite a few campaigns were planned six to nine months ahead a few years ago. What that cycle looks like today, and where do you see it going in the next years? What was the first? The SKU base. SKU base. Okay. We think that we're going to have to see some increases in the SKU base, but not dramatic. The key reason for that is that we believe that the main assortment that we see coming online is products that we don't sell in the physical stores today but that can equally be sold from partners. It's not necessarily just that we need to put them in our central warehouse and service our customers with it. We also see that the online is a way for us to test the potential of certain SKUs, and then if it's big enough, we can actually take it into all the stores. If it's marginal or we can actually sell it purely online, delivered sometimes directly from suppliers. Some increase, but not a dramatic increase. That could, of course, change if the potential changes, and then we have the expansion opportunities at Moss. That's one part of it. I think that when it comes to the planning cycles, I think it's quite stable. We think that you need actually very much the same planning cycles to get the really best offers online. Some products, like the grocery part, it's more short-term cycles because the suppliers are closer to us. In the others, it's more Far East, and then it's longer planning cycles. What you have to do every now and then, is you have to be more tactical in the pricing and the way you play with the mix. That you can be even more short-term on the digital side. A different one. When you show the statistics which all the three criteria has 14 new stores, how about closing stores? Obviously, you do have some stores that are loss-making and need it off. What will it take for you to actually closing those stores? Basically, it will be that we see that it's loss-making and we don't see potential to relocate or to make it profitable doing changes to the management. Basically, that's the one. If you don't see an option to relocate, make it profitable through management issues, then you can close it down. The last one we closed was in 2013. I mean, there was one in 2015/16, but that was just because the building was demolished. We don't have any precedent. We will close stores if they're not having a path to profitability. Yeah. We also closed one this year because. That's Yeah. we didn't get the rent we wanted. Yeah. Okay. Peter Nyström, IG, from North Color. A couple of questions. First, on the dividend. You have two criteria, 50%-60% payout, and then an efficient balance sheet. My understanding is that you already think you have an efficient balance sheet. Why do you keep the 50%-60% payout ratio? Because it actually works. We kept the same policy for the last couple of years, and it works well. As you know, the payout has been above that range because we have an efficient balance sheet, so we don't see any to change something that already works. Okay, thanks. A follow-up on Mike's question here. You are targeting five new stores net each year. Can you say something about the gross number, or should we expect that also to be around five? As we said that, average five, I think that we might actually surpass expectation this year or next year. As we said, we are not really vetted to have specific numbers. It could be zero, it could be 10. It depends on the availability of premises, and that we can actually see that it's going long-term to be profitable. Every year we're going to go back and audit. If we see that there's a deteriorating trend in profitability, obviously then we will turn it down. I think that you can expect around five. It's not going to be a lot of closures that we see now, but that can change. From the last three to five years, we've been able to improve on the stores that are unprofitable. It's not going to be a huge number of difference between gross and net. Okay, a final one from me. You're also saying that your target is to increase the EBITA margin- going forward. In that target, is there any effect from the potential of lower store rent costs in that guidance or in that target? I think in looking at an improved EBITDA margin over time, that includes basically every cost item that comes in. To balance, I don't care where the savings comes from. If it comes from rent, if it comes from purchase agreements, it's from efficiencies, that doesn't really matter. Over time, we expect to see EBITDA margin need to increase. Now for Vidar Martin has to come and get the microphone. Okay, thank you. Martin Vesco from BIMBY Markets. On slide 61. you showed the category mix on your sales. Yeah. If you do some back of envelope calculations, you end up with that from 2015 to 2018, some 60% of your growth has been in groceries. the ambition is to reverse that trend, growing into more general merchandise. What makes you comfortable on that shift? Hasn't it been very important to have groceries growing? Mm. Mm. support the traffic? It's not necessarily we want to reverse the trend. We don't want to decrease the growth in grocery. I think as you say, it's a valuable traffic builder and it's the most competitive categories we have, but still we've been able to succeed. It's more a sign that we want to put emphasis on growing also the other categories as we have been growing the grocery. It's not a target in itself to reverse it's a target to increase the other things. We see some promising signs in the specialty part, and then we need to have more work cut out for us in the home and inspiration side. It's not a specific target to get the grocery down and the other one up. It's get the other one up, as we have been succeeding with the grocery. Finally, I guess at your IPO, you had a target initially of some long-term 330 stores. Now you're taking down the long-term store loss guidance from eight to five on average. Have you revisited the long-term potential and what do you see for maximum number of stores in Norway? No, we haven't. We still think that the composition might be a little bit different. It might be more city stores and there might be less standalone stores. It might be that at some point the growth is so big online that we don't have to take the last 10 or 20 stores. As I said, this is one of the few areas in our business where we say we're only going to open if there's a business case for it, and the audits every year show a good trend. That it has done over the last few years. Probably it's going to be more city stores, in that portfolio than we thought a few, five years ago. Finally, on the franchise stores, that have been a bit of a drag on the margins. What is the situation there? Should we expect several franchise store takeovers over the next three years? I think we should expect that it comes like three to four franchise stores every year, that is quite normal. We are in the phase now where many franchisees has been there for more than 20 years, and it's a generation shift and not many want to pass that on to the next generation. We take the stores over. Three to four per year, I think that will continue going forward. There's some questions from the web, I think. Just one question. How aggressively are you chasing cost saving initiatives for your supply and value chain? It looks like a lot of areas are being digitalized. Are you looking at more experimental solutions like distribution ledgers or blockchain technology that are proven to bring about both efficiency and cost benefits? I think the quickest answer to that is that we are definitely going to go do the proven technologies. I think that it's for others to be the first to develop the technologies to achieve the cost savings, even in the automation that Pål-Kristian talked about. This is not something that no one has done before. I think it's a prudent advice to follow from the learnings of others. There's a lot of things happening. Blockchain is not necessarily the biggest trend, but artificial intelligence, big data, there's a lot of things happening. We will eventually be, not necessarily first mover, but quick adapters. Okay. With that, now it's time for lunch. Some of you Oh. Christmas present. Christmas present, yes. How can I forget that? Of course, we always have a handout for you. That's probably why there's so many people here today. Today we've done it a little bit different since it's Christmas, and we want to give you a nice Christmas, of course. There's a surprise gift for all of you there. You don't know what it is, but I can promise you it's from the best discount variety chain in Europe. Rest assured, Christmas is in the box. Please make sure that you grab all of those, have lunch outside, and at 12:15 P.M., we meet upstairs for the bus to Lambertseter. Thank you for coming.

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