StrongPoint : "Q2 and 1st half 2021 report

StrongPoint  |

Q2 and 1st half 2021

Financial report and status

Jacob Tveraabak CEO of StrongPoint

StrongPoint  |  Q2 and 1st half 2021

CEO's perspective

As societies prepare for a relatively more 'normal' summer, the grocery retail megatrends continue to impact the industry. This includes grocery e-commerce growing across the board and higher customer expectations for in-store experiences, frictionless shopping and food safety. All these trends - and more - are resulting in an increased margin pressure on grocery retailers' stores and consequently, additional technology solutions are needed to drive efficiency gains. Our announcements and deliveries in the second quarter of 2021 - and the first half of 2021 - underlines StrongPoint's "double opportunity": capitalizing on the

opportunities arising from the increased demand for e-groceries and in-store efficiency gains. As such, I believe we continue to be on track to achieving our 2.5 BNOK 2025 ambitions.

StrongPoint  |  Q2 and 1st half 2021

Highlights 2nd quarter

Solid revenue growth. EBITDA negatively impacted by Spain

• Revenue growth 13% to 252 MNOK (222) in the quarter, 15% growth year to date
• EBITDA was 12 MNOK (17) in the quarter including the impact of 20 MNOK in write down of inventory and operational losses in Spain
• Strong balance sheet. Positive cash flow from operations of 16 MNOK (-11) and the disposable cash amount is 124 MNOK

Continued customer success in priority areas

● Mulitiple sales orders announced in Norway for electronic shelf labels and payment solutions

● Substantial increase in media coverage on StrongPoint's e-commerce solutions

● Glovo partnership continues with a signed agreement with Carrefour Spain using

In our second quarter this year, we achieved a solid 13% organic topline growth in our continued operations (i.e., excluding the divested Labels and Cash Security businesses) resulting in a revenue of 252 MNOK. Our EBITDA was12 MNOK (4.8% EBITDA margin) which would have been significantly higher if not for the required one-off write down of inventory in Spain. If the Spanish operations had only broken even and after taking into consideration the impact of the 14 MNOK one-off write down, our EBITDA would have been 20 MNOK higher at

32 MNOK (12.8% EBITDA margin). As has been previously reported the Spanish operations have been hampering our overall financial results but I am extremely confident that under the leadership of our newly appointed SVP for Spain we are on the right path to achieving growth and a thriving local business. We have already seen new opportunities in the market as the Spanish operations grew by 17% compared to the same quarter last year, and this is expected to increase as the Covid-19 restrictions are lifted and the economy goes back to some kind of 'normal'.

At the end of June, we announced the divestment of our Labels business, and completed our strategy to becoming a pure Retail Technology company. I am very pleased to see our Labels business become part of a larger industrial conglomerate that has the potential to develop this business further. And I am very pleased with the price that our Labels business achieved which we will invest into our core focus and business of Retail Technology.

On the customer side I am very satisfied about the announcements in the quarter, including the large-scale rollout of Electronic Shelf Labels (ESL) to Coop Norway and the roll-out of Cash Management solutions to NorgesGruppen in Norway. In addition, we have started a Click & Collect grocery locker pilot in Denmark, whilst following-up on numerous pilots elsewhere to be considered into rollouts. Furthermore, although it has taken longer than desired, we are running the first orders

with our E-commerce Order Picking solution in partnership with Glovo to Carrefour Spain. Although we do not report on order intake and order backlog, I can say that with

all of the successes outlined here we are confident they will constitute important contributions for the months, quarters and even years to come. This is important to us as lead times for many of the solutions we provide can be significant.

We continue our investment and recruitment in E-commerce. Investments are in continuous product development, integrations, and IT-security. IT security is increasingly an issue at the top of the agenda with our customers, and we have significantly invested over the past year to ensure the highest standard of IT security for our customers and ourselves. With growing international attention for our E-commerce solutions, we are also recruiting a base of seasoned E-commerce resources both in the markets where we have our own office representation as well as in other markets where we see major growth opportunities. I am very proud to see how StrongPoint is increasingly emerging as an employer of choice for top candidates, which will be important for the continuous growth in this business area.

Having completed the second quarter and first half year of 2021, I am proud of the results the organization has delivered thus far. At the same time, I am excited for what is to come. Our team is growing stronger day-by-day, our solutions are constantly improving, and we are becoming increasingly relevant for grocery retailers all over. In addition, we are experiencing an increased level of media attention on StrongPoint's solutions which opens new doors. With all this, I continue to believe we have all the reasons to be optimistic about achieving our 2025 strategic ambitions.

Stay safe and strong!

StrongPoint's Order Picking solution

Steady progress on 2025 strategic ambitions

● Divestment of Labels business area, financial gain of 165 MNOK to be accounted in Q3

• Reiteratied our strategic ambition of 2.5 BNOK with 13-15% EBITDA margin
• Continued investment in technology, sales and marketing resources

Key figures (MNOK)

	Q2	Q2	YTD	YTD	Year
	2021	2020	2021	2020	2020
Revenue	251.5	222.4	500.8	437.0	941.7
EBITDA	12.0	16.9	25.6	27.4	68.7
EBITDA margin	4.8 %	7.6 %	5.1 %	6.3 %	7.3 %
Operating profit (EBIT)	5.9	10.1	13.3	13.9	41.8
Ordinary profit before tax (EBT)	6.9	7.1	15.5	9.1	36.9
Cash flow from operational activities	16.3	-11.0	37.9	-15.9	131.8
Disposable funds	123.6	54.0	123.6	54.0	175.0
Earnings per share from continued operations (NOK)	0.11	0.12	0.30	0.14	0.60
Earnings per share from continued operations, adjusted	0.15	0.27	0.38	0.25	0.80

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StrongPoint  |  Q2 and 1st half 2021

StrongPoint  |  Q2 and 1st half 2021

StrongPoint Group

StrongPoint is a retail technology company that provides solutions to make shops smarter, shopping experiences better and online grocery shopping more efficient. The two non-core business areas Cash Security and Labels have been divested in December 2020 and June 2021 respectively. Historic contribution from the divested units is presented as "discontinued operations".

Revenue	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Retail Technology	254.5	226.5	507.0	446.8	957.2
Elim / ASA	-3.0	-4.0	-6.2	-9.9	-15.4
Total	251.5	222.4	500.8	437.0	941.7

EBITDA	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Retail Technology	21.1	24.3	45.0	41.9	95.5
Elim / ASA	-9.1	-7.4	-19.3	-14.5	-26.9
Total	12.0	16.9	25.6	27.4	68.7
Number of employees	399	372	399	372	385

Solid revenue growth. EBITDA negatively impacted by Spain

The revenue grew by 13%1 in the quarter, driven by a good momentum in the Norwegian and Swedish markets. Year to date, the growth was 15%1. The EBITDA was significantly impacted by the negative profit from operational activities and the required one-off write down in Spain (see section for Spain/Partners for more information). Adjusting for the total operational losses and write down of 20 MNOK in the quarter, the EBITDA margin would have been12.8% in the quarter. The increased cost at ASA level consists of investments in IT Security and costs related to the long term incentive share option program.

1) Foreign exchange rates affected the growth negatively by 4% in the quarter and 2% YTD.

Continued customer success in priority areas

In the quarter, several new large orders with a total value of around 300 MNOK have been announced in Norway. The orders were mainly signed with large grocery chains, but one announced order was signed for the supplying and installing of electronic shelf labels to a do-it-yourself-chain. The orders will be delivered and installed over the next 2-5 years.

Marketing activities, primarily focusing on e-commerce, created high visibility with significant coverage and opinion editorials in key retail and general business focused media.

Following the announcement of our Order Picking technology partnership with Glovo, it has been confirmed that their first customer to be onboarded is Carrefour Spain.

Steady progress on 2025 strategic ambitions

The strategic ambitions for 2025 clearly identified retail technology as the core focus. On June 28, StrongPoint announced the divestment of the Labels business unit to the Swedish company Volati Tryck Holding AB. The transaction includes both the Swedish legal entity StrongPoint Labels AB and the Norwegian business which is currently a part of StrongPoint AS. Closing for the Swedish operation was completed on July 1 2021, while closing on the Norwegian part of the transaction is dependent on a demerger process. The final cash payment for the sale is expected during Q3 and will generate an accounting gain of approximately

165 MNOK.

StrongPoint business locations

Core markets

Partners in Europe 1)

1. Outside Europe: USA, Canada, Malaysia, Australia, and
   South Africa

StrongPoint Group
Operating revenue per quarter (MNOK)
300
250
200
150
100
50
2018	2019	2020	2021

EBITDA per quarter (MNOK)
25
20
15
10
5
2018	2019	2020	2021

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StrongPoint held a webcast on June 30, restating the strategic ambitions for 2025 at 2.5 BNOK as well as the 13-15% EBITDA margin.

StrongPoint has continuously invested in technology, sales and marketing resources. Compared with Q2 last year, the organization has increased by 27 employees, shared between R&D, Production and Sales & Marketing. All core markets have increased sales resources, while R&D resources mainly relates to e-commerce. The increased "other operating costs" stems primarily from the increased hire of software development resources for the Order Picking solution.

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StrongPoint  |  Q2 and 1st half 2021

2025 Strategic ambition

In February 2020 StrongPoint set a strategic ambition to achieve NOK 2.5 billion in revenues and EBITDA margins of 13-15% by 2025.

StrongPoint's world class retail technology solutions for increasing in-store efficiency and e-commerce technology for online order picking and last mile solutions have a double opportunity to meet two key global trends affecting grocery retailers. Firstly, the pressure on brick and mortar retailers' margins means that grocery retailers need to find ways to increase in-store productivity to boost profitability. Secondly, the pressure to develop an online presence, grow their market share and reduce costs means they need highly efficient order fulfilment solutions and provide multiple last-mile delivery and pick-up options. These two key industry trends have only been accelerated by the skyrocketing global demand for online groceries during the global Covid-19 pandemic.

To respond to the changes in the industry following the events of 2020, StrongPoint has updated its strategy to achieve its 2025 ambitions.

Our T-shaped strategy to create a BNOK 2.5 Retail Technology company

StrongPoint  |  Q2 and 1st half 2021

StrongPoint Solutions

In-store

In-store Productivity

Pricer Electronic Shelf Labels

ShopFlow Logistics *

Digi Scales and Wrapping Systems

Reflexis Task and Labour Management

Payment Solutions

CashGuard Cash Management *

Check Out Efficiency

Self-Checkout *

Self-Scanning

Vensafe Tobacco Sales Automation *

World-class solutions to selected markets

• E-CommerceLogistics Suite (Picking, Last Mile Solutions and Click & Collect lockers) ​
• Self-Checkout​
• Cash Management

Deep in core markets

• Norway​
• Sweden ​
• Baltics ​
• Spain

Retail Management

POS Systems

Commerce Management System

Online

Grocery Picking

Order Picking solution *

Last mile

StrongPoint's financial ambitions

BNOK 2.5 in 2025

EBITDA 13-15%

Click & Collect lockers * Drive-through * Pick-upin-store * Home delivery with route optimization

* Proprietary technologies

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StrongPoint  |  Q2 and 1st half 2021

Results per core geographic market

Norway

	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Product Sales	68.2	48.8	119.9	96.3	248.8
Service	28.5	25.5	55.0	54.0	113.2
Revenue	96.7	74.3	174.9	150.3	362.0

During the quarter, StrongPoint Norway signed several large contracts within Electronic Shelf Labels (ESL) and payment solutions. In April, an agreement was signed with NorgesGruppen for the supply and installation of cash management solutions, and in May two ESL agreements for COOP Norge and Bygger'n. In total, the contracts are worth almost 300 MNOK, excluding installation, service and support. It is expected that the orders will be delivered as announced, mainly during the next 2-5 years. In Q2, the growth in Norway ended at 30% compared to the same quarter last year. The main contributors to the growth were the installation of ESL and Vensafe.

After the first half of 2021, the growth was 16%, mainly driven by delivery and installation of ESL.

Sweden

	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Product Sales	54.7	42.3	113.4	75.4	165.5
Service	33.6	33.0	69.0	63.0	128.6
Revenue	88.2	75.4	182.4	138.4	294.1

The Swedish organization delivered another good quarter and grew by 17% compared to the same quarter last year. The main contributors to the growth in the quarter were ESL, scales and wrapping machines. The increased growth in e-commerce in Sweden in Q2 can be attributed to the increased demand for online groceries due to the pandemic. In past quarters the e-commerce represents around 30% of the total revenue in this market.

Year to date the business grew almost 32%, with deliveries and installations of ESL and Click & Collect grocery lockers as the main drivers.

StrongPoint  |  Q2 and 1st half 2021

The business in the Baltics is somewhat volatile to project deliveries in the quarterly comparisons. The last part of the SCO contract announced in December 2020 was delivered this quarter. Year to date, the business had a growth of more than 20%. Service revenue had solid growth in the quarter, influenced by development work for Gebr. Heineman, POS/ERP services and installation of SCOs.

However, despite the positive trends the Baltic markets experienced a decline in revenue compared to last year, primarily linked to product sales within self-

checkout (SCO).

Spain/Partners

	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Product Sales	25.5	27.4	45.8	67.9	114.8
Service	3.1	2.7	5.2	8.7	15.9
Revenue	28.5	30.1	51.0	76.6	130.8

Spain

The pandemic measures continues to influence the financial figures in Q2. The current cash management market, mainly within hospitality, has still not recovered but there has been a slightly positive trend towards the end of this quarter. The revenue and additional gross margins did not cover the operational costs and so the operation delivered a negative EBITDA of 6 MNOK in the quarter. In addition a required one-off write down of

14 MNOK was accounted in the quarter related to our Cash Management inventory. The write down is the result of recently uncovered inventory discrepancies. The newly appointed SVP has initiated numerous restructuring activities to align costs with income and to ensure operational control. In addition the Glovo partnership has already opened the door for new customer opportunities in e-commerce and we expect the cash management market to pick up as and when the country recovers from the pandemic. StrongPoint continues to believe that there is significant potential in the Spanish operations and is positive about future growth potential.

Please note that StrongPoint reports its financial results broken in two ways: results per core geographic market and per technology segment. The reason for this is that we have core geographical markets where we have established offices but also sell some selected solutions and services outside those countries, hence the need for the two separate reporting formats.

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Baltics

	Q2		YTD		Year
MNOK	2021	2020	2021	2020	2020
Product Sales	24.8	32.8	68.1	52.6	108.8
Service	16.3	13.9	30.6	28.9	61.5
Revenue	41.1	46.7	98.7	81.5	170.3

Partners

Partner sales declined in Q2 and second half due to the large delivery of more than 500 Cash Management systems through the partner Bullion IT to the First National Bank in South Africa last year.

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