Annual General Meeting 19 March 2019 CEO review Mika Rautiainen 2 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni Executive Group Mika Rautiainen Markku Pirskanen Sirpa Huuskonen Harri Koponen CEO CFO HR Director Store Network and Concept Director Mathias Kivikoski Tuomas Hyvärinen Timo Heimo Janne Pihkala Sales and Marketing Director Purchasing Director Director, Information Director, Business Management and Development 319.3.2019 Tokmanni's Annual General Meeting 2019 Supply Chain Tokmanni today #1 1 million 188 870 MEUR 3,600 General Customer visits Stores in Revenue 2018 Employees discount retailer per week Finland in Finland 4 19.3.2019 Tokmanni's Annual General Meeting 2019 Main focus in 2018: IMPROVING CUSTOMER CONFIDENCE YEAR OF POSITIVE TURNAROUND 5 2018 - year of a positive turnaround • Strengthening Tokmanni strategy • Renewing management and organization • Improving customer confidence • All Tokmanni's employees involved in building customer confidence • Implementing a strong investment plan in store network, online business and store concept renewals • Increasing imports from Far East 6 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni’s customer base, family households being slightly overemphasized Whole population Tokmanni’s customers 43% 40% 17% 16% 17% 16% 13% 12% 7% 7% 5% 6% Family households Adult households Pensioners Adult singles Young singles Young couples 7 19.3.2019 Tokmanni's Annual General Meeting 2019 Note: Tokmanni’s customers = Customers that frequently visit Tokmanni Sources: TNS Mind 2018 Smart shoppers are overemphasized and price insensitives underemphasized in Tokmanni’s customers Whole population Tokmanni’s customers 57% 45% 33% 31% 18% 9% 4% 3% Smart shoppers Sale and discount addicts Price insensitives Price comparers 8 19.3.2019 Tokmanni's Annual General Meeting 2019 Note: Tokmanni’s customers = Customers that frequently visit Tokmanni Sources: TNS Mind 2018 Improving Tokmanni’s customer confidence • Unbeatable prices in destination categories and products • Wider assortment in destination categories • Renewing store concept in destination categories • Stronger marketing • Quarterly incentive program for the whole Tokmanni personnel 914 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni’s like-for-like customer visits development 3.0% 0.2% -0.1% -0.4% -1.0% -1.4% 2013 2014 2015 2016 2017 2018 10 19.3.2019 Tokmanni's Annual General Meeting 2019 Revenue development Revenue development Like-for-like revenue development 9.3% 5.6% 3.0% 3.0% 2.9% 2.7% 2.7% 0.0% -0.1% -0.3% -0.6% -1.3% 2013 20142015 2016 2017 2018 11 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni has a unique market position Tokmanni’s distinctive positioning… …has 3 competitive advantages Better price image vs. hypermarkets Lidl Kärkkäinen Motonet Puuilo Gigantti Halpa-Halli Hong Kong Ikea Broader assortment width Prisma City- vs. specialty retailers market Price image H&M Clas Ohlson Discounters Hypermarkets Specialty Retail Nationwide coverage Discounter groceries Sokos Stockmann and better shopping experience Department stores vs. local discounters Expensive Value Narrow Assortment Wide 12 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni’s and non-grocery market development Sales development, % 12,0 10,9 11,0 8,0 7,8 8,0 4,5 4,0 4,4 1,9 0,0 1,1 1,4 1,6 -1,1 -1,9 -4,0 -2,9 -8,0 -7,4 -9,0 -12,0 -11,0 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Tokmanni Non-grocery market Source: FGTA FGTA STATISTICS DOESN’T INCLUDE ONLINE RETAIL SALES 13 19.3.2019 Tokmanni's Annual General Meeting 2019 2018: revenue grew +9.3%, comparable EBIT +19.7% • Revenue grew by 9.3% (2.7%) • Like-for-like revenue grew by 5.6% (-1.3%) • Comparable gross margin totalled EUR 295.0 million (268.1) and comparable gross margin 33.9% (33.7%) • Comparable EBITDA amounted EUR 63.3 million (55.0), 7.3% of revenue (6.9%) • Comparable EBIT totalled EUR 48.6 million (40.6), 5.6% of revenue (5.1%) • Cash flow from operating activities amounted to EUR 44.9 million (27.1) • Earnings per share were EUR 0.61 (0.45) 14 19.3.2019 Tokmanni's Annual General Meeting 2019 Inventories 250 186 190 • The increase was primarily due to growth 185 in the store network and partly to the 200 controlled addition of stock keeping units to 180 the assortment. 175 150 175 • The inventories were also increased by the 170 inventories of the acquired Ale-Makasiini stores by EUR 6.4 million. 100 162 190,5 165 155,2 170,2 160 50 155 0 150 31.12.2016 31.12.2017 31.12.2018 Inventories, MEUR Number of stores 15 19.3.2019 Tokmanni's Annual General Meeting 2019 Balance sheet and financial position Cash flow from operating activities 70 • At the end of December 2018, Tokmanni’s 60 interest-bearing debt totalled EUR 173.0 62,5 million (176.6) 50 • The ratio of net debt to comparable 40 44,9 EBITDA (rolling 12 months) was 2.1 (2.4) 30 • The company’s cash and cash equivalents totalled EUR 37.9 million (42.5) at the end 20 27,1 of 2018 10 • Return on capital employed % (rolling 12 0 months) was EUR 15.0% (12.0%) 2016 2017 2018 16 19.3.2019 Tokmanni's Annual General Meeting 2019 Net capital expenditure 25,0 • Capital expenditure in 2018 increased due to, in particular, the expansion of the store 20,0 network and the business acquisition, 19,8 renovations of grocery stores and other 15,0 stores and the development of digital services 10,0 • Net capital expenditure includes goodwill of 9,8 EUR 6.0 million arising from the acquisition 8,1 of the business of Ale-Makasiini 5,0 • Capital expenditure in 2019 is expected to roughly equal the level of depreciation 0,0 2016 2017 2018 17 19.3.2019 Tokmanni's Annual General Meeting 2019 Main focus in 2019: IMPROVING PROFITABILITY 18 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni competitive 1. Low prices 4. Lean and efficient advantages operation model 2. Inspiring and wide 3. Nationwide store network assortment combined with an online store 19 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni business drivers PERSONNEL Best place to work in retail CUSTOMERS Customer NPS >60 REVENUE 1 billion € PROFITABILITY 9% Comparable EBIT margin SUSTAINABILITY Tokmanni values people and environment 20 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni’s year 2019 • Reducing the share of fixed costs • Strengthening supply chain and reducing real estate rentals and maintenance costs • Enhancing operations of stores • Increasing the gross margin • Increasing direct import and sales of own brands • Increasing batch sales • Improving product group performance in terms of loss and inventory management • Continuing to strengthen customer confidence especially in Tokmanni's key product groups • Increasing sales of e-commerce and improving profitability 21 19.3.2019 Tokmanni's Annual General Meeting 2019 Long-term goal: comparable EBIT margin about 9% About 9% 1.0% - 2.0% 1.0% - 1.5% 6.1% EBIT-% 2018* Operating expenses Gross margin EBIT-% target improvement potential improvement potential * IFRS 16 impact of 0.5% has been taken into account 22 19.3.2019 Tokmanni's Annual General Meeting 2019 Tokmanni’s updated long-term financial targets • Tokmanni’s goal is to continue to reinforce its position as the leading general discount retailer in Finland by making the most out of its key competitive advantages, which are its low perceived price image, wide and attractive assortment and good shopping experience. Like-for-Like revenue growth Low single digit growth Target of over 200 stores Stores New about 5 p.a. 12 000 sqm annually Comparable EBIT margin Gradually increase to ~9% Net Debt / Comparable EBITDA In long-term below 3.2x Dividend policy About 70% 23 19.3.2019 Tokmanni's Annual General Meeting 2019 Corporate Responsibility TOKMANNI IS FOR EVERYONE 24 19.3.2019 Tokmanni's Annual General Meeting 2019 2018 highlights 25 19.3.2019 Tokmanni's Annual General Meeting 2019 26 19.3.2019 Tokmanni's Annual General Meeting 2019 27 19.3.2019 Tokmanni's Annual General Meeting 2019.