REITAN CONVENIENCE - Reitangruppen€¦ · Reitan Convenience has a strong market position in the convenience market in seven countries, across the Nordics and Baltics. We hold a

ANNUAL REPORT 2018REITAN CONVENIENCE

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KEY FIGURESAmounts in NOK million 2018 2017

TURNOVER/STORESTurnover including franchisee turnover 16,134 15,900Growth in turnover 1.4 % 0.1 %Number of stores at 31 December 2,173 2,275Number of employees in stores at 31 December 12,920 13,831

RESULTOperating revenues 4,386 4,183EBITDA 783 927Operating profit 409 569Profit before income tax expenses 405 481Profit for the year 308 373

PROFITABILITYOperating margin 2.5 % 3.6 %Cash flow margin 4.9 % 5.8 %Return on total assets 7.4 % 9.0 %Return on equity 14.7 % 16.0 %Return on capital employed 15.9 % 22.6 %

BALANCE SHEETNon-current assets 3,943 3,989Current assets 1,796 1,655Equity 2,007 2,178Non-current liabilities 999 779Current liabilities 2,733 2,687Total capital 5,739 5,644Equity ratio 35.0 % 38.6 %

CASH FLOWNet investment in property, plant and equipment 328 358Cash and cash equivalents at 31 December 513 290Cash flow from operations 1,022 820Non-current borrowings at 31 December 578 420Current borrowings at 31 December 2 2Net interest-bearing debt at 31 December - -

Turnover, including franchisee turnover, consists of total sale of goods, agent income from transport tickets, lotteries, telephone and gift cards etc. in franchised stores and company owned convenience stores, and distribution of press products to other business areas within Reitangruppen and other external units. Turnover from franchised stores is not part of Reitan Convenience’s operating revenues. However, the group’s management believes that the turnover is important, and essential to understand the economic development of the business.

See page 70 for definition of key figures

Årsrapport 2018

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Contents

INTRODUCTION

CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS REITAN CONVENIENCE AS

Key figures 1 Director's report 6 Comprehensive income statement 50

Letter from the CEO 3 Comprehensive income statement 11 Balance sheet – assets 51

Balance sheet – assets 12 Balance sheet – equity and liabilities 52

OTHER Balance sheet – equity and liabilities 13 Equity 53

Auditor's report 67 Equity 14 Statement of cash flows 54

Definitions of key figures 70 Statement of cash flows 15 Notes to the financial statements 55

Address list 71 Notes to the financial statements 16

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Letter from the CEOReitan Convenience has a strong market position in the convenience market in seven countries, across the Nordics and Baltics. We hold a proud 125-year-long history of convenience retailing. In 2018, we continued to strengthen our position as a high-quality provider in food to go, bakery, and hot and cold beverages through our 2,200 stores in all seven countries we operate in. Reitan Convenience had a turnover of NOK 16.1 billion and cash flow of NOK 783 million in 2018.

Answering our customers' demands for high-quality food and beverages on the go, including healthier options, is of high importance to us. We see an increase in the sales of food to go, bakery, and hot and cold beverages, and we work continuously to improve and widen our assortment. Our daily distribution of fresh food, juices, and juice shots to our stores, and the preparation of fresh food onsite in our stores ensures freshness and quality in all our products.

The convenience market is highly competitive, and we face strong competition from both old and new players in the market. We believe that the best formula to succeed involves our franchise-operated stores, which are highly efficient units that keep our customers' needs in focus. In our seven countries, we support our 2,200 stores from our local offices. Our co-workers in these seven Support-offices serve the stores based on local knowledge and frequent store visits. The evolving understanding of the customers’ needs can be captured in the stores where goods and services are purchased and meetings with the customer take place.

At Reitan Convenience, we focus on value-based leadership and building great people that act based on trust. We firmly believe in individuals, and we work continuously to encourage our people to make good decisions, by creating a performance culture, focusing on personal development, and driving results. We want to build successful people and solid companies.

Being a responsible company is tightly linked to both our philosophy and values. At Reitan Convenience, we refer to Corporate Social Responsibility as Our Responsibility. We have centered our efforts in this field around three main areas: People, Product, and Planet. People development and training, healthier options, and systematic work to

reduce energy consumption in our stores are some examples of how we work in these three areas. Reitan Convenience also support a range of charitable organisations in the seven countries we operate in. MOT is one organisation that we have had a long and close cooperation with across some of our countries. We have cooperated with MOT in Norway since 1997 and in Denmark since 2014 and because of this close relationship, our Latvian operation was directly involved in the founding of MOT in Latvia in 2016.

We have a positive view of the future of our business. Convenience is considered a megatrend around the world, and we feel confident that the convenience market will continue to increase in the years to come. For us to succeed and keep moving forward, we must respond quickly to our

Johannes SangnesCEO

Årsrapport 2018

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customers' needs and follow trends closely so that we can react to their constantly changing demands. One factor that will certainly influence us in the future is how well we respond to digitalisation as an accelerator of change. We are currently piloting various new opportunities that are emerging from the sharing economy as well as different digital activities. We think that digital solutions should focus on reducing friction for our customers and our stores to simplify our stores' operation.

In 2018, we opened 50 new stores, all of which were specifically designed to meet the demands of our 400 million customers. From 2019, YX will be our new fuel partner at our gas stations in Norway.

We at Reitan Convenience want to expand further, and in 2018, we acquired Caffeine Roasters, a leading coffee chain in Lithuania, Latvia and Estonia. We will be operating the Caffeine coffee shops from March 2019.

Through passion and knowledge, Reitan Convenience will continue to operate with excellence in existing markets and will seek expansion into new European countries, and this is in line with our ambitious vision to become the biggest, best, and most profitable convenience retailer in Europe.

KEY FIGURES – CONCEPTNorway Sweden Denmark Finland Latvia Estonia Lithuania

KioskTurnover (NOK million) 2,280 2,862 - 3,001 616 281 339Growth in turnover -1.9% 3.8% - 1.5% 6.2% 5.3% 14.9%Number of stores 312 312 - 545 235 96 199

7-Eleven CityTurnover (NOK million) 705 861 2,008 - - - -Growth in turnover -4.2% 5.5% 1.2% - - - -Number of stores 59 85 118 - - - -

7-Eleven Gas stationsTurnover (NOK million) 820 1,115 750 - - - -Growth in turnover -0.3% -4.2% -1.0% - - - -Number of stores 90 61 56 - - - -

NorthlandTurnover (NOK million) 109 - - - - - -Growth in turnover 41.0% - - - - - -Number of stores 5 - - - - - -

Press distributionTurnover external distr. (NOK million) - - - - 129 130 126Growth in turnover - - - - -1.9% -0.6% 1.9%

Kiosk includes Narvesen in Norway, Latvia and Lithuania, Pressbyrån in Sweden, R-kioski in Finland, R-kiosk in Estonia and Lietuvos Spauda in Lithuania.

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CONSOLIDATED FINANCIAL STATEMENTSREITAN CONVENIENCE

Consolidated financial statements | Annual Report 2018

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Director's reportMANAGEMENT'S INTRODUCTIONReitan Convenience is one of five business areas in Reitangruppen, besides REMA 1000, Uno-X Energi, Reitan Eiendom (real estate) and Reitan Kapital.

REITANGRUPPEN'S VALUESReitangruppen's vision is to be known as the most value-driven company. Reitangruppen's values describe the basis of its culture and have been developed throughout the company's longstanding history. A strong corporate culture based on Reitangruppen's eight values is important to achieve its overall targets, and value-based leadership are part of the company's philosophy.

VALUES1. We focus on our business idea2. We keep a high business moral3. We are committed to be debt-free4. We encourage a winning culture5. We have a positive and proactive mindset6. We talk with each other, not about each other7. The customer is our ultimate boss8. We want our work to be enjoyable and profitable

Reitan Convenience has a leading position in operation of franchise-based convenience concepts in the Nordic and Baltic kiosk and convenience market. Reitan Convenience’s vision is through successful franchisees to become the biggest, best and most profitable convenience retailer in Europe.

REITAN CONVENIENCE'S OPERATIONSReitan Convenience consists of convenience operations in Norway, Sweden, Denmark, Finland, Latvia, Estonia and

Lithuania. The operations include Narvesen in Norway, Latvia and Lithuania, Pressbyrån in Sweden, R-kioski in Finland, R-kiosk in Estonia, Lietuvos Spauda in Lithuania and Northland in Norway. Our operations also include 7-Eleven in Norway, Sweden and Denmark. Reitan Convenience is entitled to use 7-Eleven’s trademark in these countries by agreement with 7-Eleven Inc. Reitan Convenience has a leading position in all countries the group is represented in. Our operations also include distribution of press products through Preses Serviss in Latvia, Lehepunkt in Estonia and Press Express in Lithuania. Reitan Convenience operates from Oslo, Stockholm, Copenhagen, Helsinki, Riga, Tallinn and Vilnius. As of 31 December 2018, Reitan Convenience had 2,173 stores (2,275 in 2017).

CONCEPTSNarvesen was established in 1894 and is a nationwide convenience store chain. Narvesen is established to be easy accessible where many people are on the go and focus on giving the customer the fastest and most convenient service on the market.

Pressbyrån was established in 1899 and is the leading convenience chain in Sweden. Pressbyrån provides a wide range of products and services for people on the go.

7-Eleven was established in Dallas in 1927, and is the world’s largest retail chain with 67,000 stores in 17 countries around the world. 7-Eleven is the leading convenience chain in Scandinavia, and was established in Sweden in 1980, in Norway in 1986 and in Denmark in 1993.

Through a cooperation agreement with St1 in Norway and Sweden, and DCC in Denmark, Reitan Convenience has operated the stores at 7-Eleven Gas stations in Norway, Sweden and Denmark, while St1 and DCC have handled the fuel operations through the fuel brand Shell at the stations. Scandinavian Fuel Infrastructure (SFI) owns the fuel infrastructure at the 7-Eleven Gas stations in Norway and Denmark. The cooperation agreement with St1 in Norway expired end of 2018. From 2019, YX is the new fuel partner at the current 7-Eleven Gas stations in Norway. The cooperation agreement with St1 in Sweden on store operations at their gas stations in Sweden expired end of 2018. The process of closing down stores started in October 2018 and will continue until March 2019. The cooperation agreement with DCC in Denmark is valid until end of 2023.

R-kioski in Finland was established in 1910 at railway stations. The history of the brand is very similar to Narvesen and Pressbyrån.

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Narvesen in Latvia was established in 1997 and acquired the dominant kiosk chain Preses Apvieniba in 2000.

R-kiosk in Estonia was established in 1993 and has a leading position in the Estonian convenience market.

Lietuvos Spauda in Lithuania was established in 1944 and is a traditional kiosk chain, mainly consisting of small window kiosks.

Northland is a freshly made sandwiches concept for high-traffic locations such as airports, railway etc., and was established in Norway in 2015.

In September 2018, Reitan Convenience acquired Caffeine Roasters, the leading coffee chain in the Baltics. The chain has 60 coffee shops in Lithuania, Latvia and Estonia, and is the only coffee chain with presence in all three Baltic countries. In February 2019, the Lithuanian competition authorities approved the transaction.

NORWAYReitan Convenience in Norway had a growth in store turnover of -0.9 percent (1.0 percent) in 2018, and a comparable growth of 2.7 percent in Narvesen, 1.1 percent in 7-Eleven City and -1.3 percent in 7-Eleven Gas stations. The estimated 2018 market share for Reitan Convenience Norway was 29.7 percent (30.7 percent).

SWEDENReitan Convenience in Sweden had a growth in store turnover of 2.2 percent (0.0 percent) in 2018 and a comparable growth of 1.4 percent in Pressbyrån and 2.3 percent in 7-Eleven City. The estimated 2018 market share for Reitan Convenience Sweden was 21.2 percent (21.0 percent).

DENMARKReitan Convenience in Denmark had a growth in store turnover of 0.6 percent (-2.7 percent) in 2018 and a comparable growth of 1.9 percent in 7-Eleven City, 0.2 percent in 7-Eleven Gas stations and 2.1 percent in DSB/7-Eleven. The estimated 2018 market share for Reitan Convenience Denmark was 32.2 percent (32.8 percent).

FINLANDR-kioski in Finland had a growth in store turnover of 1.5 percent (3.9 percent) in 2018 and a comparable growth of 5.0 percent. The estimated 2018 market share for R-kioski in Finland was 66.4 percent (62.6 percent).

LATVIANarvesen in Latvia had a growth in store turnover of 6.2 percent (0.2 percent) in 2018 and a comparable growth of 6.5 percent. The estimated 2018 market share for Narvesen in Latvia was 49.4 percent (49.2 percent).

ESTONIAR-kiosk in Estonia had a growth in store turnover of 5.3 percent (4.6 percent) in 2018 and a comparable growth of 2.9 percent. The estimated 2018 market share for R-kiosk in Estonia was 32.2 percent (28.4 percent).

LITHUANIAReitan Convenience in Lithuania had a growth in store turnover of 14.9 percent (0.9 percent) in 2018 and a comparable growth of 12.3 percent. The estimated 2018 market share for Reitan Convenience in Lithuania was 21.7 percent (22.8 percent).

FRANCHISE – OUR MOST IMPORTANT COMPETITIVE ADVANTAGEReitan Convenience's retail concepts are based on franchising. Franchising is a close collaboration between two independent parties, the franchisor and the franchisee. Franchising is about striking a balance between freedom and systems operations. The franchisee is self-employed, but must comply with the concept and philosophy established by the franchisor. The franchisor delivers a “turn-key” store to the franchisee. The franchisor owns the rental contract and do all the investments in the store. The franchisor develops standards for establishment and operation of businesses with certain goods and/or services under a common brand name. The franchisee runs his/her local business based on this, with assistance from the franchisor. This requires a great sense of responsibility on both sides, and a franchisee who manages a brand also has a special responsibility towards the brand itself. The franchisor negotiates terms for and decides upon the distribution of goods and/or services to the franchisee. In principle, the work is divided between the parties so that the franchisor performs services in areas where it is more efficient, both with regards to time and cost, to do it centrally. The franchise system makes great mutual demands on the parties, which results in a continuous development of skills in the organisation.

FINANCIAL HIGHLIGHTSReitan Convenience's financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU. The separate financial statements of the parent company have been prepared according to simplified IFRS. The board of directors is of the


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opinion that the financial statements give a fair view of the company's financial position. The board of directors considers the requirements of the going concern assumption to have been met, and the accounts have been prepared on that basis.

RESULTSIn 2018, turnover including franchiseoperated units amounted to NOK 16,134 million (NOK 15,900 million), corresponding to a growth of 1.4 percent (0.1 percent). Growth in turnover equals the average weighted growth measured in local currency. Operating revenue amounted to NOK 4,386 (NOK 4,183). Earnings before interest, taxes, depreciation and amortisation (EBITDA) amounted to NOK 783 million (NOK 927 million), while operating profit were NOK 409 million (NOK 569 million). The profit in 2018 is affected by provisions for onerous lease contracts. The change in net finance income from 2018 to 2017 relates primarily to unrealised currency effects on foreign currency loans. Profit before income tax was NOK 405 million (NOK 481 million). Profit for the year amounted to NOK 308 million (NOK 373 million).

BALANCE SHEET AND LIQUIDITYTotal assets as at 31 December 2018 were NOK 5,739 million (NOK 5,644 million). Cash and cash equivalents as at 31 December 2018 amounted to NOK 513 million (NOK 290 million), while net interest-bearing debt was NOK 0 million (NOK 0 million). As at 31 December 2018, total borrowings were NOK 580 million (NOK 429 million). Net investments in non-current assets were NOK 328 million (NOK 358 million). The group has unused loan facilities of NOK 1,766 million (NOK 1,419 million). Equity at the end of the year amounted to NOK 2,007 million (NOK 2,178 million), which gives an equity ratio of 35.0 percent (38.6 percent).

CASH FLOW FROM OPERATIONSCash flow from operations amounted to NOK 1,022 million (NOK 820 million). EBITDA were NOK 783 million (NOK 927 million). Changes in working capital resulted in a positive cash flow of NOK 256 million (NOK -63 million). Cash flow from investing activities amounted to NOK -340 million (NOK -365 million). The group's ability to finance its own investments is considered good. Cash flow from financing activities amounted to NOK -343 million (NOK -373 million).

FINANCIAL RISKReitan Convenience has its core activities in the convenience market, and is exposed to ordinary financial risk related to this type of activity. Reitan Convenience operates in a market with high turnover. Annual cash flows are considerable and

stable, however volatile in the short perspective. The group handles its liquidity risk by ensuring a sufficient liquidity reserve combined with sufficient available overdraft facilities. The group’s financing sources include a multi-currency loan facility which is syndicated to a bank syndicate consisting of six banks. The loan is due for payment at the end of 2023.

The turnover in Reitan Convenience comes from both franchised and company owned units. The franchisor has a good overview of the individual franchisee’s financial situation. Historically, defaults and losses on trade receivable have been low. We do not expect any material deviations from the credit risk level or any major changes in creditor composition in the near future. As for market risk, this will largely be dependent of changes in legal conditions in the individual countries in the long run. The general market development for various product groups will vary. The product group press products has been declining, and we expect it to decline further in the years ahead. As for the product group tobacco, there are common expectations of a decline, in light of a healthier lifestyle among people, while product groups such as coffee, cold drinks and fast food are expected to show a positive development. Since Reitan Convenience operates in seven different countries, the total market risk is considered acceptable.

We seek to limit exposure related to ownership interests in foreign operations by adjusting the composition of our debt portfolio to reflect the importance of the individual currency and country in relation to the group's total activities. Reitan Convenience has established strategies to handle risk related to interest and exchange rates. We make transactions to cushion the effect of short term fluctuations in the interest markets and to provide somewhat greater predictability related to future interest costs. The interest rate profile of our debt portfolio is adjusted through choice of interest structure on the group's loan and through the use of interest swaps.

OUR RESPONSIBILITYOur business is based on the company's eight core values. One core value is “we keep a high business moral”. Accordingly, all of our operations are obliged to comply with this value. In Reitan Convenience we refer to our corporate social responsibility (CSR) as «Our Responsibility». Reitan Convenience aims to be a socially responsible company by providing charitable support to selected social organisations. These contributions come in addition to, and not instead of, responsibility measures related to our core operations. In 2018, Reitan Convenience supported a range of charitable organisations in the seven countries we operate in. One

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example is the long and close cooperation we have had with the organisation MOT in Norway since 1997 as well as in Denmark. As a consequence of this, our Latvian operation was directly involved in founding MOT in Latvia in 2016. Our goal is to operate as efficiently as possible, and we continuously strive to minimise the environmental impact of our operations throughout the entire value chain. Two examples are our commitment to use only cage-free eggs in our own products by 2025, and our program with our supplier to reduce plastic in our packaging material. When we establish new stores or renovate existing ones, we focus on measures that minimise negative environmental impact. We are members of various return and recycling schemes for packaging waste, and we also partake in national and local cooperation on waste reduction together with NGOs and suppliers. The environmental strategy of Scandinavian Fuel Infrastructure, leasing and operating service stations in Norway and Denmark, is based on EAM (Environmental Assessment Management). This ensures optimal and continuous monitoring and cleaning of contaminated areas according to applicable requirements and guidelines.

ONGOING PROJECTSOur responsibility efforts are organized in three categories: People, Product, and Planet. Operations in each country decides on which areas to focus, and all countries are obliged to concentrate their efforts at least in two areas. Examples are working employment training and development for both franchisees and store personnel, and to offer a broader selection of healthier products. Moreover, all seven country management teams report to the board on their responsibility initiative “Planet". Through "Planet", we seek to reduce our energy consumption and thus negative environmental footprint. In addition to our shared efforts, we work broadly on improving the working environment and social aspects.

WORKING ENVIRONMENTOur people are our most important resource. We believe companies with a good working environment, where employees feel well treated and respected, are more likely to succeed. Creating and maintaining a safe and positive working environment is a prerequisite for profitability, and an important part of Our Responsibility. In total, Reitan Convenience and its franchisees had 13,728 employees by the end of 2018 (14,660). In the group itself, there were 1,895 employees (1,829). The cooperation with employee organisations is considered good, and we seek to continue this. We want Reitan Convenience to be a workplace with equal employment opportunities for everyone, regardless of age, gender, ethnicity, religion, sexual orientation or

disabilities. Our personnel policy states that there should be no discrimination in matters concerning recruitment, personal development, promotion, and remuneration. We strive to promote equal status for all employees and prevent any actions contrary to the Anti-discrimination Act. Among our employees, there are 333 men and 1,562 women. In Reitan Convenience, there are 62 employees at the top executive level, of which 35 are men and 27 women. Among 68 employees in middle management, 29 are men and 39 women. In storage and transport, there are 127 employees in total, 43 men and 84 women. Among the store employees, 73 are men and 1,014 women, while there are 551 office employees, of which 153 are men and 398 women. Among the 1,895 employees in Reitan Convenience, 426 work part-time, of which 54 are men and 372 women. The board of directors in Reitan Convenience AS consists of two men and one woman.

Employee development is crucial to Reitan Convenience. In 2018, we carried out a number of different programmes, such as courses in value-based leadership, talent programmes, measurements of corporate culture and various individual programmess to engage our employees. In 2018, Reitangruppen was named the second-best place to work in Norway, and the 14th best place to work in Europe, by Great Place to Work® (in the category “large businesses”). In Reitan Convenience Norway, 97 percent of respondents stated that Reitan Convenience Norway is a great place to work. Reitan Convenience has a systematic approach to security and safety, and we aim to optimise routines, minimise sick leave and increase employee involvement. In 2018, sick leave was 3.4 percent (3.0 percent), corresponding to 13,618 days (13,215). The group had no serious personal injuries during 2018. There were 5 injuries resulting in sick leave during the year 2018.

SOCIAL ASPECTSReitan Convenience does not only have responsibilities towards our employees, but also towards our customers and the society at large. Our activities directly and indirectly impact a broad range of stakeholders. Directly, through our operations, and indirectly, through our effects on customers, in the market place and other organisations in the supply chain. Reitan Convenience seeks to avoid causing or contributing to negative human rights impacts through our activities and addresses such impacts when they occur. We have a responsibility to prevent or mitigate adverse human rights impacts that are directly linked to our operations, products or services through our business relationships. Reitan Convenience’s ethical guidelines are part of our supplier contracts. Our suppliers are subject to a number of


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ethical guidelines, covering the central principles, in UNs Declaration of Human Rights and ILO's Core Conventions. The guidelines state our commitment to human rights, health, safety and environment and anti-corruption. No breaches were reported in 2018. The seven country organisations also work directly with several suppliers on fair trade and certification programmes. Legal and regulatory compliance is a cornerstone of our operations. Any violation of laws, rules or regulations applicable to us could be a risk to our integrity. We do not tolerate any forms of fraud, bribery or criminal conduct. We expect all of the employees in Reitan Convenience to understand and comply with laws, rules and regulations applicable to their jobs and responsibilities. Employees are also required to comply with the company's ethical guidelines. Employees must report to the company's management if they should become aware of any cases of illegal activities, corruption or other circumstances that represent a breach of the company’s commitment to social responsibility. No such incidents were reported in 2018, as was also the case in 2017.

ORGANISATIONORGANISING AND INTERNAL CONTROLReitan Convenience follows Reitangruppen's philosophy in organising its activities in a way that makes the distance between responsibility/authority and operative execution as short as possible. As a franchise organisation, Reitan Convenience is based on systems operations, both for operative and administrative activities. This also means to establish and comply with routines and internal control in all areas of the organisation. Solid routines ensure good and continuous control of the company, and through this, the management is provided with the best information for making decisions at any time.

BOARD OF DIRECTORSThe board of directors in Reitan Convenience consists of chair Odd Reitan, deputy chair Magnus Reitan and Kristin S. Genton.

SHAREHOLDERSReitan Convenience AS is a wholly owned subsidiary of Reitan Handel AS, which again is fully owned by Reitangruppen AS. Reitangruppen AS is controlled 100 percent by the Reitan family.

ALLOCATION OF PROFIT FOR THE YEARProfit for the year for Reitan Convenience AS amounted to NOK 287 million, and is proposed allocated as follows:

Dividend provided NOK 400 millionTransferred to (from) other reserves NOK -113 millionTotal amount allocated NOK 287 million

THE FUTUREThe board emphasises that there is normally uncertainty related to future development. Reitan Convenience is an important part of Reitangruppen's core operations. Reitan Convenience aims to be the biggest, best and most profitable kiosk and convenience company in Europe, and a specialist in development, organisation and operation of franchise based convenience concepts. This must be viewed as a long-term target, which at any time will depend on the possibilities that appear and the company's ability to create the cash flow necessary to pursue them. Growth in the markets where Reitan Convenience is already present, will primarily take place through further development of existing concepts and products.

Oslo, 5 March 2019

Odd Reitan Chair of the board

Magnus Reitan Kristin S. Genton Johannes SangnesDeputy chair of the board Board member Chief Executive Officer

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CONSOLIDATED COMPREHENSIVE INCOME STATEMENTAmounts in NOK million Note 2018 2017

Operating revenues 6 4,386 4,183Other income 7 642 603Net other gains (losses) 8 5 4Share of profit of associates 1 19Cost of goods sold 19 -1,358 -1,191Employee benefit expenses 9 -652 -617Other operating expenses 10 -2,241 -2,074EBITDA 783 927

Amortisation and impairment intangible assets 14 -13 -14Depreciation and impairment property, plant and equipment 15 -361 -344Operating profit 409 569

Interest income 12, 28 4 5Interest expenses 12, 28 -21 -20Other financial income (expenses) 12 13 -73Net financial income (expenses) -4 -88

Profit before income tax expenses 405 481

Income tax expenses 13 -97 -108Profit for the year 308 373

Other comprehensive income:Remeasurement of post-employment benefit obligations 21 3 1Items that will not be reclassified to profit or loss 3 1

Currency translation differences 13, 21 18 177Items that may be subsequently reclassified to profit or loss 18 177

Other comprehensive income for the year, net of tax 21 178

Total comprehensive income for the year 329 551

Attributable to:Owners of the parent company 308 373Non-controlling interests - -Profit for the year 308 373

Attributable to:Owners of the parent company 329 551Non-controlling interests - -Total comprehensive income for the year 329 551


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CONSOLIDATED BALANCE SHEET - ASSETSAmounts in NOK million Note 2018 2017

NON-CURRENT ASSETSDeferred income tax assets 13 107 107Intangible assets 14 2,304 2,285Investment property 4 4Property, plant and equipment 15 1,116 1,152Investments in associated companies 7 7Derivative financial instruments 27 - 1Pension funds 9 2 -Financial investments 17 156 160Trade and other receivables (NC) 18 247 273Total non-current assets at 31 December 3,943 3,989

CURRENT ASSETSInventories 19 214 187Trade and other receivables 18 1,069 1,178Cash and cash equivalents 20 513 290Total current assets at 31 December 1,796 1,655

Total assets at 31 December 5,739 5,644

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CONSOLIDATED BALANCE SHEET - EQUITY AND LIABILITIESAmounts in NOK million Note 2018 2017

EQUITYShare capital 3 3Share premium 199 199Other reserves 21 522 504Retained earnings 1,281 1,470Equity attributable to the parent company at 31 December 2,005 2,176

Non-controlling interests 2 2Total equity at 31 December 2,007 2,178

NON-CURRENT LIABILITIESDeferred income tax liabilities 13 199 188Pension liabilities 9 26 32Provisions for other liabilities 26 196 132Borrowings 22, 23 578 427Total non-current liabilities at 31 December 999 779

CURRENT LIABILITIESBorrowings 2 2Provisions for other liabilities 26 37 15Current income tax liabilities 13 26 25Derivative financial instruments 27 - 4Trade and other payables 29 2,668 2,641Total current liabilities at 31 December 2,733 2,687

Total liabilities at 31 December 3,732 3,466

Total equity and liabilities at 31 December 5,739 5,644

Oslo, 5 March 2019




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EQUITYAmounts in NOK million

Share capital and premium

Other reserves

Retained earnings Total

Non-controlling

interestsTotal

equity

Equity at 1 January 2017 202 327 1,946 2,475 2 2,477

Profit of the year - - 373 373 - 373

Remeasurement of post-employment benefit obligations

- - 1 1 - 1Items that will not be reclassified to profit or loss - - 1 1 - 1

Currency translation differences - 177 - 177 - 177Items that may be subsequently reclass. to profit or loss - 177 - 177 - 177

Total other comprehensive income - 177 1 178 - 178

Total comprehensive income - 177 374 551 - 551

Dividends - - -850 -850 - -850Equity at 31 December 2017 202 504 1,470 2,176 2 2,178

Profit for the year - - 308 308 - 308

Remeasurement of post-employment benefit obligations

- - 3 3 - 3Items that will not be reclassified to profit or loss - - 3 3 - 3

Currency translation differences - 18 - 18 - 18Items that may be subsequently reclass. to profit or loss - 18 - 18 - 18

Total other comprehensive income - 18 3 21 - 21

Total comprehensive income - 18 311 329 - 329

Dividends - - -500 -500 - -500Equity at 31 December 2018 202 522 1,281 2,005 2 2,007

See note 21 - Other comprehensive income for further information.

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CONSOLIDATED STATEMENT OF CASH FLOWAmounts in NOK million Note 2018 2017

CASH GENERATED FROM OPERATIONSProfit before income tax 405 481Amortisation and impairment, intangible assets 14 13 14Depreciation and amortisation of property, plant and equipment 15 361 344Loss (profit) on disposals of property, plant and equipment 8 - 1Loss (profit) on sale of shares 8 -2 -1Change in retirement benefit obligations 9 -8 -2Change in fair value of derivatives 8, 12 -3 -4Net financial items excl. change in fair value of derivatives 12 1 69Share of profit from associates -1 -19Change in inventories 19 -27 -29Change in trade and other receivables 150 -153Change in trade and other payables 133 119Cash generated from operations 1,022 820

Interest paid 12 -7 -7Income tax paid 13 -109 -137Net cash generated from operating activities 906 676

CASH FLOW FROM INVESTING ACTIVITIESPurchase of property, plant and equipment 15 -333 -363Sale of property, plant and equipment 15 5 5Purchase of intangible assets 14 -26 -22Sale of intangible assets 14 5 -Sale of financial investments 17 5 10Interest received 12 4 5Net cash used in investing activities -340 -365

CASH FLOW FROM FINANCING ACTIVITIESIncrease of borrowings 396 708Repayment of borrowings -248 -298Dividend payments -480 -771Interest paid - borrowings -11 -12Net cash used in financing activities -343 -373

Net increase (decrease) in cash and cash equivalents 223 -62

Cash and cash equivalents at 1 January 20 290 352Exchange gains (losses) on cash and cash equivalents 8 - -Cash and cash equivalents at 31 December 20 513 290


16

Notes to the financial statement - ContentNote 1 - General information 17

Note 2 - Summary of significant accounting policies 17

Note 3 - Financial risk management 18

Note 4 - Critical accounting estimates and jugdements 21

Note 5 - Segment reporting - Operational 22

Note 6 - Operating revenue 24

Note 7 - Other income 24

Note 8 - Net other gains (losses) 25

Note 9 - Employee benefit expenses, fees and key management compensation 25

Note 10 - Other operating expenses 27

Note 11 - Leases 28

Note 12 - Net financial items 29

Note 13 - Income tax 30

Note 14 - Intangible assets 32

Note 15 – Property, plant and equipment 34

Note 16 - Investments in subsidiaries 35

Note 17 - Financial investments 36

Note 18 - Trade and other receivables 36

Note 19 – Inventories 38

Note 20 – Cash and cash equivalents 39

Note 21 - Other comprehensive income 39

Note 22 - Loan agreements 40

Note 23 - Borrowings 41

Note 24 - Guarantees 43

Note 25 - Net interest-bearing liabilities 43

Note 26 - Provisions for other liabilities 44

Note 27 - Derivative financial instruments 45

Note 28 - Financial instruments by category 46

Note 29 - Trade and other liabilities 47

Note 30 - Related parties

Note 31 – Events after the reporting period

47

48

17

NOTE 1 - GENERAL INFORMATIONReitan Convenience AS is registered and domiciled in Norway, and its head office is located at Gladengveien 2, Oslo. The group companies operate from Oslo, Stockholm, Copenhagen, Helsinki, Riga, Tallinn and Vilnius. Reitan Convenience AS is owned by Reitan Handel AS, which in turn is owned by Reitangruppen AS. Odd Reitan Private Holding AS is the group’s ultimate parent company.

Reitangruppen AS’ head office is located at Lade Gaard in Trondheim. Reitan Convenience AS is included in the consolidated financial statements of Reitangruppen AS.

The consolidated financial statements of Reitan Convenience AS were approved by the company's board of directors on 5 March 2019.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 BASIS OF PREPARATIONThe consolidated financial statements of Reitan Convenience AS have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

The consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of land and buildings, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

The consolidated financial statements are prepared on the assumption of going concern.

2.2 CONSOLIDATIONThe consolidated financial statements include Reitan Convenience AS and its subsidiaries. Inter-company transactions and balances have been eliminated.

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated

from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

2.3 FOREIGN CURRENCY TRANSLATIONItems included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Norwegian krone (NOK), which is the group's presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Foreign exchange gains and losses that relate to working capital are classified as operating profit/loss. Currency items related to financing activities are included in net financial income (expenses).

2.4 NEW AND AMENDED STANDARDS ADOPTED BY THE GROUPIFRS 15 Revenue from contracts with customers replaces IAS 11 Construction contracts, IAS 18 Revenue recognition and related guidance on revenue recognition. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.


18

The group adopted the new standard 1 January 2018 using the full retrospective method. The standard has no material impact on the consolidated financial statements.

IFRS 9 Financial instruments replaces IAS 39 Financial instruments: Recognition and measurement. The Group adopted this new standard 1 January 2018 with full retrospective method. This standard has no material impact on the consolidated financial statements.

2.5 NEW STANDARDS AND AMENDMENTS TO / INTERPRETATIONS OF EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE AND NOT HAVE BEEN EARLY ADOPTED BY THE GROUPIFRS 16 Leases takes effect from 1 January 2019. The standard requires recognition of an asset and a liability on the balance sheet related to the lease liabilities. The group will adopt the standard using the modified retrospective method, where the right-of-use asset (before adjustments of accrued lease payments etc.) is to be set equal to the lease liability per 1 January 2019.

The total effects of the standard have not been finally determined. The group expects that the lease liability as of 1 January 2019 will amount to approximately NOK 2.9 billion based on current interpretations of the accounting standard. The right-of-use asset is expected to be at approximately the same level. The total capital would have increased from NOK 5.7 billion to NOK 8.6 billion if the calculated amount was

recognised in the balance sheet as of 31 December 2018. The group’s equity of NOK 2.0 billion would not have been changed, but the equity ratio would have decreased from 35 percent to 23 percent.

Lease expenses related to low value assets, short-term leases and variable lease (that do not depend on an index or a rate) will not be recognised in the balance sheet, but be recognised as lease expenses. Expenses for leases that are recognised in the balance sheet will be classified as depreciation of right-of-use asset and interest expenses of the lease liability, and be accrued according to the new standard. Changed presentation will result in a significantely increased EBITDA and an increased operating profit. The new standard does not result in any change in profit before tax over time, but changed accruals will have an effect on profit before tax as the results in periods will be higher or lower compared with the previous standard.

The group has established principles for using the standard’s excemptions, assessment of option periods and determination of discount rates.

See note 11 for more information about the group's leases.

There are no other IFRSs or IFRIC interpretations that are not yet effective that are expected to have any material impact on our consolidated financial statements.

NOTE 3 – FINANCIAL RISK MANAGEMENTThe group operates in the convenience market, and includes the concepts Narvesen in Norway, Latvia and Lithuania, 7-Eleven in Norway, Sweden and Denmark, Pressbyrån in Sweden, R-kioski in Finland, R-kiosk in Estonia, Lietuvos Spauda in Lithuania and Northland in Norway. The operations also include distribution of press products in Latvia, Estonia and Lithuania to internal and external retailers, and rental and operation of gas stations in Norway and Denmark.

The group's activities involve various financial risks: market risk (including currency risk, fair value interest risk, floating interest risk and price risk), credit risk and liquidity risk. The group's overall risk management plan focuses on the capital markets' unpredictability and represents an attempt to minimise potential negative effects on the group's financial

performance. The group makes use of financial derivatives to hedge against certain risks. The group's risk management is performed by a central finance department, in accordance with instructions which have been presented to and approved by the board of directors. The group's finance department identifies, evaluates and manages financial risk in close cooperation with the different operational units. The board of directors approves the principles for overall risk management, and provides guidelines for specific areas such as currency risk, credit risk, use of financial derivatives and use of surplus cash.

3.1 MARKET RISK 3.1.a Currency risk The group is exposed to currency risk according to Swedish kroner, Danish kroner and euro. Currency risk arises from

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

19

future trading transactions, assets and liabilities recognised in the balance sheet, and net investments in international operations. This risk is still limited, as our operational units mainly have their income and costs and keep their accounts in local currency. The group has financial hedging for currency exposure, and thus is subject for volatility in the P&L. The group has investments in foreign subsidiaries, where net assets are exposed to currency risk in foreign currency translation. The group tries to limit this exposure by ensuring an overall debt portfolio composition which to the greatest possible extent is adapted to the individual currency's and country's relative importance in the group's activities.

The effect of a 10 percent change in the currency against the Norwegian kroner is shown in the table below. The effects are calculated on the basis of the group's net assets (liabilities) in each currency at 31 December 2018.

Balance sheet items in currency DKK SEK EURCurrency gain (loss) -10 % 2 16 15Effect on equity -10 % -34 -65 -144

Currency gain (loss) +10 % -2 -16 -15Effect on equity +10 % 34 65 144

3.1.b Price riskThe group owns shares in real estate in Finland that are made to get access to premises for the group’s operations. These shares are classified as "financial assets available for sale". The exposure for price risk on the underlying properties is considered to be limited when these are mainly used by R-kioski franchisees. The group’s exposure to other stocks' and securities' price risks is limited.

3.1.c Interest risk Since the group has no major interest-bearing assets, its profits and cash flows from operating activities are mainly independent of fluctuations in the market interest rates.

The group's interest risk is related to borrowings, lending and bank deposits. Borrowings within the group are entered with floating interest rate and represent an interest risk for the group’s cash flow. Interest rate swaps have been established to minimise the interest risk related to borrowings in both NOK and foreign currency. The group's borrowings are in NOK, SEK, DKK and EUR.

The effect of change in market interest rates by one percentage point of the group’s borrowings, lending and bank deposits at floating rates, are shown in the table below.

-1%-point +1%-pointDecrease (increase) in interest cost -2 2Effect on equity -1 1

3.2 Credit risk The most significant part of the group's operating revenues comes from franchisees. The franchisor has a good overview of each franchisee's financial situation. Historically, default and losses on accounts receivables have been low in the Nordic and Baltic markets. A certain credit risk also arises from committed transactions with customers and derivatives and deposits with financial institutions. Counterparties in derivative contracts and financial deposits are limited to financial institutions with high creditworthiness.

3.3. LIQUIDITY RISK The group operates in a market with high turnover. Cash flows are high and relatively stable, but volatile within a week/month. The group manages its liquidity risk by ensuring a sufficient amount of cash in combination with sufficient headroom on its undrawn borrowing facilities.

Management monitors the group's liquidity reserves (consisting of various borrowing facilities (note 23) and cash equivalents (note 20) through rolling forecasts based on expected cash flow. Management follows its liquidity reserves separately for each main currency (NOK, DKK, SEK and EUR).

The group’s primary sources of funding in 2018 are loans from a multi-currency credit facility syndicated among six banks (note 22 – Loan agreements). The loan facility expires in December 2023. Detailed maturity for other loans is presented in note 23 - Borrowings.

3.4 RISK RELATED TO FINANCING AND CAPITAL STRUCTUREThe group's ambition regarding financing and capital structure is based on Reitangruppen's value principle no. 3: "We are committed to be debt-free." This entails that the parent company should be debt-free, while the group seeks an optimal business solution within the framework of appropriate risk management.

This value principle is operationalised by the board of directors in Reitangruppen, who has established decision

NOTE 3 – FINANCIAL RISK MANAGEMENT - CONTINUED


20

rules for each individual business area. The decision rules define the scope for financing alternatives and capital structure. The decision rule for Reitan Convenience is that its debt should not exceed 1.5 times EBITDA. Financing is resolved within each individual business area, as long as the capital structure is within the scope defined by the decision rules.

The board of directors in Reitangruppen is authorised to approve arrangements beyond the decision rules for each business area.

To improve capital structure, the group may adjust its investment level, exploit available credit facilities, sell financial investments or adjust the amount of dividend paid to shareholders.

NOTE 3 – FINANCIAL RISK MANAGEMENT - CONTINUED

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NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONSThe group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are addressed below.

4.1.A ESTIMATED IMPAIRMENT OF GOODWILLThe group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in note 14. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require use of estimates. See note 14 – Intangible assets for more information.

4.1.B RENT OBLIGATIONS The group makes provisions for rent obligations for premises where the operation has been or will be terminated. The group also makes provisions for future losses on contracts. The provisions are determined based on discounted cash flow related to existing contractual obligations and expiration dates, including the possibility of buying out the contract and sublease income. Estimated cash flows, length of contract period and discount rate are particularly important judgments. See note 26 – Provisions for other liabilities for more information.

4.1.C RESTORATION LIABILITIESThe group has in some cases assumed a liability to restore properties/locations to its original standard when the activities at the locations cease. The group estimates these restoration liabilities. The present value of the restoration cost is determined by considering all assumptions and uncertain estimates which are included in the present value of expected restoration cost. These include the asset's economic life, cost of restoration, discount rate and rate of inflation. See note 26 – Provisions for other liabilities for further information.

4.1.D ENVIRONMENTAL LIABILITIES The group’s environmental liabilities are related to the Scandinavian Fuel Infrastructure companies in Norway and Denmark, who purchase, store and sell petroleum-based products. When purchasing the companies, the group conducted an environmental review that formed the basis for a reliable estimate of existing environmental liabilities. The results from this review, combined with accumulated knowledge about how these liabilities arise, give the group a basis for estimating the development of our environmental liabilities.

4.1.E TRADEMARKSOn 1 May 2012, the group purchased 1,048 kiosks in Finland, Estonia and Lithuania with the trademarks R-kioski, R-kiosk and Lietuvos Spauda. In this connection, assets were identified related to trademarks acquired in a business combination in accordance with the "relief from royalty" method. The trademarks have indefinite useful lives. The trademarks are not amortised, but tested for impairment.

4.2 CRITICAL JUDGMENTS IN APPLYING THE ENTITY’S ACCOUNTING POLICIES4 .2.a Agreements with franchiseesThe group operates franchise-based business in the convenience market. Franchise concepts are explicitly mentioned in IFRS 10 Consolidated financial statements. The group's assessment is that the franchisees should not be consolidated because the franchisor does not have control, but only protection rights against the franchisees.

4.2.b Useful life of lease rights The group has entered into lease contracts for premises used by the group in the countries in which the group operates. Differences in rental legislation in these countries have resulted in different useful lives of recorded lease rights. This has implications for the amortisation period and whether the lease should be considered temporary or not. Rental rights in Denmark and Sweden are considered unlimited, while in Norway they are considered limited to the lease term in accordance with the contract. There are no lease rights in Finland, Latvia, Estonia and Lithuania.


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NOTE 5 – SEGMENT REPORTING - OPERATIONALThe operating segments are identified based on the reports the board uses when assessing performance, profitability and capital allocation at a strategic level. The board evaluates the company's performance in each of the countries it is represented in. The defined operating segments are Norway, Sweden, Denmark, Finland, Latvia, Estonia and Lithuania. Turnover from the defined segments comes from franchised stores and company owned convenience stores, together with external distribution of press products.

The segment Other includes the operations of the parent company Reitan Convenience AS and eliminations.

SEGMENT - TURNOVER, NUMBER OF STORES AND NUMBER OF EMPLOYEES IN STORES

2018

Amounts in NOK million Norway Sweden Denmark Finland Latvia Estonia Lithuania Other GroupTurnover incl. franchisee turnover 3,914 4,838 2,759 3,001 746 412 465 -1 16,134

Number of stores 466 458 174 545 235 96 199 - 2,173Number of employees in stores 3,116 4,274 1,693 2,115 870 323 529 - 12,920

2017

Amounts in NOK million Norway Sweden Denmark Finland Latvia Estonia Lithuania Other GroupTurnover incl. franchisee turnover 3,950 4,909 2,675 2,879 694 387 407 -1 15,900

Number of stores 487 494 183 561 245 96 209 - 2,275Number of employees in stores 3,330 4,593 1,781 2,425 826 326 550 - 13,831

Turnover including franchisee turnover consists of total sale of goods, agent income from transport tickets, lotteries, telephone and gift cards etc. in franchised stores and company owned convenience stores, and distribution of press products to other business areas within Reitangruppen and other external units. The turnover from franchised operations is not part of Reitan Convenience's operating revenue. However, the group's management believes that the turnover is important and a critical factor to understand the company's economic development.

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SEGMENT – FINANCIAL INFORMATION

2018

Amounts in NOK million Norway Sweden Denmark Finland Latvia Estonia Lithuania Other GroupOperating revenues 957 864 300 642 745 412 466 - 4,386Other revenues 188 174 115 109 26 16 17 3 648Cost of goods sold -10 -7 - -166 -529 -291 -355 - -1,358Other operating expenses -973 -661 -289 -457 -205 -137 -121 -50 -2,893EBITDA 162 370 126 128 37 - 7 -47 783

Amort. and imp. intang. assets -1 1 - -8 -3 -2 - - -13Depreciation and imp. PPE -148 -78 -50 -58 -13 -8 -6 - -361Operating profit 13 293 76 62 21 -10 1 -47 409

Investments 109 93 55 58 25 13 6 - 359

2017

Amounts in NOK million Norway Sweden Denmark Finland Latvia Estonia Lithuania Other GroupOperating revenues 984 888 290 534 694 387 408 -2 4,183Other revenues 177 189 109 94 21 17 15 4 626Cost of goods sold -16 -14 - -81 -494 -276 -309 -1 -1,191Other operating expenses -851 -691 -270 -417 -188 -128 -107 -39 -2,691EBITDA 294 372 129 130 33 - 7 -38 927

Amort. and imp. intang. assets -2 3 -1 -9 -3 -1 -1 - -14Depreciation and imp. PPE -126 -81 -49 -61 -12 -9 -6 - -344Operating profit 166 294 79 60 18 -10 - -38 569

Investments 143 89 71 55 12 12 4 - 386

Other revenues also include net other gains, revaluation of investment property and share of profit of associates.

Investments are presented as operational investments in property, plant, equipment and intangible assets.

REVENUE FROM CONTRACTS WITH CUSTOMERS

2018Amounts in NOK million Norway Sweden Denmark Finland Latvia Estonia Lithuania Other GroupOperating revenues from sale of goods 17 12 - 203 712 406 443 - 1,793Operating revenues from sale of services

804 853 234 439 33 6 21 - 2,390Marketing income 182 149 118 106 20 8 9 - 592Other revenues 177 189 109 94 21 17 15 4 626Total revenues from contracts with customers

1,009 1,033 352 751 771 428 481 - 4,825

NOTE 5 – SEGMENT REPORTING – OPERATIONAL - CONTINUED


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NOTE 6 – OPERATING REVENUEIFRS 15 Revenue from contracts with customers was adopted 1 January 2018. This standard will not have any material impact on the consolidated financial statements. See note 5 – Segment reporting operational for disaggregated revenue information.

Revenue is measured at the fair value of the consideration received, stated net of discounts, returns and value added taxes.

Most types of income will be recognised at the time of delivery.

REVENUE FROM SALES OF SERVICESThe group's retail concepts are based on franchising. Agreed franchise fees are recognised each month in accordance with the franchise agreements and based on gross margin.

The group also recognises commissions from the sale of transportation tickets, lotteries, telephone and gift cards etc. through company owned stores and the commission-based stores in Latvia and Estonia.

REVENUE FROM SALES OF GOODSThe press distribution companies sell goods purchased for resale. The sales of goods are recognised when a group entity has delivered its products to the store. Delivery does not occur until the products have been shipped to the specified location, and the risk of loss and obsolescence has been transferred to the store.

In addition, the group sells products directly to retail customers through company owned stores and through the commission-based stores in Latvia and Estonia. Sales of goods are recognised when a group entity has delivered its products to the retail customers.

RENTAL INCOMERental income is mainly related to operating leases of fuel infrastructure at the 7-Eleven gas stations in Norway and Denmark.

Amounts in NOK million 2018 2017Revenue from sales of services 2,390 2,407Revenue from sales of goods 1,793 1,573Rental income 203 203Total operating revenue 4,386 4,183

NOTE 7 – OTHER INCOMESupplier loyalty agreements are classified as goods discount or other income based on the substance of each agreement. To the extent that a payment from the supplier is related to a specific ad or campaign that Reitan Convenience has expensed, and for which the supplier has agreed to cover its share of, the payment is deducted from the period's marketing costs. Other revenues from suppliers are classified as other income.

Amounts in NOK million 2018 2017Marketing income 592 558Other income 50 45Total other income 642 603

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NOTE 8 - NET OTHER GAINS (LOSSES)

Amounts in NOK million 2018 2017Net gains (losses) on sale of property, plant and equipment - -1Net realised gains (losses) on financial investments 2 1Net unrealised gains (losses) on energy derivatives 3 4Total other gains (losses) - net 5 4

NOTE 9 – EMPLOYEE BENEFIT EXPENSES, FEES AND KEY MANAGEMENT COMPENSATION

Amounts in NOK million 2018 2017Wages and salaries -507 -476Social security costs -85 -83Pension costs -54 -50Other employment benefits -6 -8Total employee benefit expenses -652 -617

Average number of fulltime equivalents 1,585 1,607

COMPENSATION FOR CHIEF EXECUTIVE OFFICER

The CEO has in 2018 received a total compensation of NOK 14.7 million (NOK 15.5 million at December 2017), of which NOK 11.5 million is salary and other short-term benefits, and NOK 3.2 million is pension costs (payroll tax not included).

The CEO has an agreement of compensation after termination of employment. The compensation cannot exceed 2 years' salary including bonus.

BOARD OF DIRECTORSThe board of directors consists of Odd Reitan (chair), Magnus Reitan (deputy chair) and Kristin S. Genton.

Remuneration for board members in 2018 amounted to TNOK 50 (TNOK 50 at 31 December 2017). The chair has no bonus or special compensation on termination of office.

SHARES IN THE COMPANY OWNED BY EXECUTIVES, DIRECTORS OR THEIR RELATED PARTIESThe chair and deputy chair own shares in Reitangruppen AS, which is the parent company of Reitan Handel AS. Reitan Convenience AS is owned 100 percent by Reitan Handel AS.

RETIREMENT BENEFIT OBLIGATIONSThe group has several pension schemes for the employees, both defined benefit plans and defined contribution plans. There are various schemes in the seven countries Reitan Convenience operates in, and the schemes also vary between companies in the same country.

For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

A defined benefit plan typically define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. In addition to funded defined benefit plans funded through insurance companies, the group also has unfunded pension liabilities covered by operations.


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The liability recognised in the balance sheet in respect of defined benefit pension plans, is the present value of the defined benefit obligation at the end of the reporting period, less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Pension liabilities at 31 December 2018 2017Discount rate 2.60% 2.30%Expected rise in compensation 2.75% 2.50%Expected rise in pension 0.00% 0.00%Expected rise in social base amount (G) 2.50% 2.25%Expected turnover 2%-15% 2%-15%

NUMBER OF MEMBERS

Defined contribution plans 2018 2017In employment 907 848

Funded at 31 December 2018 2017In employment 41 51On retirement 99 96

Unfunded at 31 December 2018 2017In employment 768 687On retirement 1 1

Amounts in NOK million

Pension expenses 2018 2017Defined benefit plans -4 -4Defined contribution plans -50 -46Total pension expenses -54 -50

Pension liabilities at 31 December 2018 2017Pension funds at 31 December 37 34Pension liabilities at 31 December -61 -66Net pension assets (liabilities) in balance sheet at 31 December -24 -32

NOTE 9 – EMPLOYEE BENEFIT EXPENSES, FEES AND KEY MANAGEMENT COMPENSATION - CONTINUED

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NOTE 10 OTHER OPERATING EXPENSES

Amounts in NOK million Note 2018 2017Rental of premises 11 -1,279 -1,173Maintenance of premises -195 -150Distribution -66 -65Commission fee -114 -106Fees -48 -46IT -210 -225Marketing expenses -10 -10Loss on bad debt -9 -10Other operating expenses -310 -289Total other operating expenses -2,241 -2,074

FEES TO AUDITORS

Amounts in NOK million 2018 2017Statutory audit -4 -4Assurance services - -Non-audit services - -Tax advisory services -1 -

All amounts relating to audit fees specified above are exclusive of VAT, except for fees related to business combinations. Fees for services other than statutory audit fee applies compensation to statutory auditor in respective fiscal year.


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NOTE 11 – LEASESThe group's convenience business depends on well-located premises. The large number of lease contracts that may be extended, gives the group security for future earnings.

Leases, in which a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

Leases of property, plant and equipment where the group have substantially all the risks and rewards of ownership are classified as financial leases.

Contingent lease primarily consists of sales-based rent.

Through franchise agreements, the group provides available fixtures and premises at the franchisees' disposal in exchange for a franchise fee. According to the provisions in IFRIC 4 and IAS 17, these leases are operational in nature. The franchise fee is dependent on the gross margin of the outlets, and is classified as operating revenues for the group.

PREMISES Outlets Warehouses OfficesNumber owned 391 - 2Number leased 1,931 27 23Total number of premises 2,322 27 25

DESCRIPTION Outlets Warehouses OfficesNumber of contracts that expire within 5 years 1,683 16 13Number of contracts that expire in 5 - 10 years 149 10 9Number of contracts that expire in 10 - 15 years 93 1 1Number of contracts that expire in 15 - 20 years 6 - -Total number of lease contracts 1,931 27 23

Number of contracts with an option for prolongment 724 - 1

Amounts in NOK million Outlets Warehouses OfficesMinimum lease in 2018 -1,154 -7 -27Contingent lease in 2018 -89 -1 -1Total lease expenses in 2018 -1,243 -8 -28

Minimum lease in 2017 -1,064 -3 -24Contingent lease in 2017 -75 -1 -6Total lease expenses in 2017 -1,139 -4 -30

See Note 15 - Property, plant and equipment for more information about book value of financial leases.See Note 23 - Borrowings for more information regarding financial lease liabilities and exposure to changes in interest rates on financial leases.

COMMITMENTS RELATED TO OPERATIONAL LEASES

Amounts in NOK million 2018Due in less than 1 year 803Due in 1 - 5 years 1,728Due in more than 5 years 668Total commitments related to operational leases at 31 December 3,199

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NOTE 12 - NET FINANCIAL ITEMS

INTEREST INCOME (EXPENSE)

Amounts in NOK million 2018 2017Interest income - customers/franchisees 4 5Total interest income 4 5

Interest expense - borrowings from banks -11 -10Interest expense - provisions for other liabilities -3 -3Interest expense - customers/franchisees -5 -5Interest expense - other -2 -2Total interest expense -21 -20

Net interest income (expense) -17 -15

TOTAL FINANCIAL ITEMS

Amounts in NOK million 2018 2017Net interest income (expense) -17 -15Net foreign exchange gains (losses) on financing activities 13 -74Fair value gains on financial instruments - 1Net financial income (expense) -4 -88


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NOTE 13 – INCOME TAXThe tax expense for the period comprises current and deferred tax. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the group operates and generates taxable income.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

INCOME TAX EXPENSE AND TAX PAYABLE

Amounts in NOK million 2018 2017Payable tax on result -104 -97Corrections in payable tax previous years - -Changes in deferred tax 7 -11Total tax on result -97 -108

Current tax on profits for the year 104 97Prepaid taxes -85 -84Effect of group contributions - 12Other -1 -2Tax payable at 31 December 18 23

Tax payable (liabilities) 26 25Prepaid taxes (receivable) -8 -2Net tax payable at 31 December 18 23

RECONCILIATION OF NORWEGIAN NOMINAL STATUTORY TAX RATE TO EFFECTIVE TAX RATE

Amounts in NOK million 2018 2017Profit before income tax 405 481

Nominal tax rate 23% / 24%Effect of foreign tax rate differences 8 9Effect of non-deductible expenses -7 -2Effect of non-taxable income - 4Effect of change in tax rate -4 -3Other -1 -1Total -97 -108

Effective tax rate 24% 22%

The nominal tax rates in the countries in which the group operates are 23 percent in Norway (22 percent from 2019), 22 percent in Sweden, 22 percent in Denmark, 20 percent in Finland, 0 percent in Latvia, 0 percent in Estonia and 15 percent in Lithuania. In Latvia and Estonia, a tax of 20 percent is payable on dividend payments.

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TAX EFFECT OF TEMPORARY DIFFERENCES

Amounts in NOK million 2018 2017Investment property 9 10Property, plant and equipment 49 47Receivables and inventories 5 24Financial instruments and investments - 1Provisions for other liabilities 52 35Liabilities 1 1Taxable profit and loss account 1 2Total deferred tax assets 117 120

Intangible assets 84 84Property, plant and equipment 23 26Provisions for other liabilities 5 -Liabilities - 1Tax loss carried forward 97 90Total deferred tax liability 209 201

Deferred tax assets, not offset within the same taxation authority

117 120Effect of deferred tax assets offset against deferred tax -10 -13Deferred tax assets in the balance sheet at 31 December

107 107

Deferred tax, not offset within the same taxation authority 209 201Effect of deferred tax offset against deferred tax assets -10 -13Deferred tax in the balance sheet at 31 December 199 188

Net deferred tax in the balance sheet at 31 December 92 81

Amounts in NOK million 2018 2017Net deferred tax in the balance sheet at 1 January 81 73Current tax on profits for the year -7 11Effect of group contribution and co-taxation 20 -12Exchange differences/other -2 9Net deferred tax in the balance sheet at 31 December 92 81

INCOME TAX EXPENSES RELATED TO OTHER COMPREHENSIVE INCOME2018 2017

Amounts in NOK millionBefore

taxIncome tax

expense After taxBefore

taxIncome tax

expense After taxCurrency translation differences 18 - 18 - 177Remeasurement of post-employment benefit obligations 3 - 3 - 1Other comprehensive income 21 - 21 - 178

NOTE 13 – INCOME TAX - CONTINUED


32

NOTE 14 – INTANGIBLE ASSETSGoodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the group's interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree at the time of acquisition.

Goodwill is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Capitalised lease rights in Norway are depreciated over their estimated useful life. Capitalised lease rights in Sweden and Denmark are based on an assessment of local law and local market conditions, considered to have undefinable lives. These lease rights are not amortised but tested annually for impairment.

Depreciation on other intangible assets is calculated using the straight-line method.

Amounts in NOK million Rights Goodwill TotalCost price 742 1,915 2,657Accumulated amortisation and impairment charges -336 -166 -502Book value at 1 January 2017 406 1,749 2,155

Additions 22 - 22Disposals - - -Amortisation charges -16 - -16Impairment charges 2 - 2Currency translation differences 31 91 122Book value at 31 December 2017 445 1,840 2,285

Cost price 810 2,012 2,822Accumulated amortisation and impairment charges -365 -172 -537Book value at 31 December 2017 445 1,840 2,285

Additions 26 - 26Disposals -5 - -5Amortisation charges -14 - -14Impairment charges 1 - 1Currency translation differences 3 8 11Book value at 31 December 2018 456 1,848 2,304

Cost price 819 2,017 2,836Accumulated amortisation and impairment charges -363 -169 -532Book value at 31 December 2018 456 1,848 2,304

GOODWILL BY SEGMENTGoodwill is allocated to cash generating units that are expected to benefit from the business combination.

RIGHTSThe group has trademarks related to the acquisition of subsidiaries in 2012. These are R-kioski in Finland, R-kiosk in Estonia and Lietuvos Spauda in Lithuania.

In addition, the group has capitalised lease rights for some individual outlets in Norway, Sweden and Denmark.

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ESTIMATES FOR MEASURING RECOVERABLE AMOUNTThe group use estimates to measure recoverable amounts of cash generating units which have goodwill or intangible assets with indefinitive lives.

In the summary below, goodwill and intangible assets with indefinitive lives, are devided into cash generating units.

Amounts in NOK million WACC Rights Goodwill TotalReitan Convenience Norway 7.8 % - 441 441Reitan Convenience Sweden 6.3 % 88 288 367Reitan Convenience Denmark 7.3 % 67 131 198R-kioski Finland 7.1 % 226 804 1,030Narvesen Latvia 8.8 % - 167 167R-kiosk Estonia 9.2 % 22 11 33Reitan Convenience Lithuania 10.4 % 21 6 27Book value at 31 December 2018

Amounts in NOK million WACC Rights Goodwill TotalReitan Convenience Norway 7.6 % - 441 441Reitan Convenience Sweden 6.5 % 75 292 367Reitan Convenience Denmark 7.5 % 71 130 201R-kioski Finland 7.1 % 223 795 1,018Narvesen Latvia 8.8 % - 166 166R-kiosk Estonia 9.5 % 22 11 33Reitan Convenience Lithuania 10.0 % 21 5 26Book value at 31 December 2017

In impairment tests the recoverable amount is compared with the book value of net assets. The recoverable amount is estimated on the basis of value in use.

Value in use is calculated based on a discounted cash flow model. Future cash flow is estimated based on a three-year prognosis prepared by the management of each cash generated unit. A terminal value is estimated for the period beyond the initial prognosis period. A constant nominal growth rate is assumed, corresponding long-term inflation (2.0 percent per 31 December 2018).

The prognosis of future cash flows is determined on the basis of past performance, expected market development and strategic plans. Expected turnover growth and profit margin are the key parameters.

The discount rate is based on the weighted average cost of capital model (WACC).

Goodwill and intangible assets with indefinite useful lives are mainly related to financially strong companies. A one percentage point change in either WACC or terminal value growth will not cause impairment of significant goodwill or rights.

NOTE 14 – INTANGIBLE ASSETS - CONTINUED


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NOTE 15 – PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at historical cost less depreciation and impairment. Subsequent costs are included in the asset’s carrying amount. Maintenance are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives (estimated lease period for lease rights), as follows:

Buildings 10-40 yearsStore fixtures 3-10 yearsFixtures 3-10 yearsVehicles 4-5 yearsFurniture, fittings and equipment 3-10 yearsIT-equipment 2-5 yearsFuel pumps and tanks 5-20 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Amounts in NOK millionLand, buildings

and plants FixturesMachines

and eq. TotalCost price 509 2,834 1,376 4,719Accumulated depreciation, amortisation and impairment charges -389 -2,127 -1,109 -3,625Book value at 1 January 2017 120 707 267 1,094

Additions 15 214 134 363Reclassifications 4 4 -8 -Disposals - -4 -1 -5Depreciation and amortisation charges -31 -212 -93 -336Impairment charges -1 -3 -4 -8Currency translation differences 7 21 16 44Book value at 31 December 2017 114 727 311 1,152

Cost price 540 2,816 1,507 4,863Accumulated depreciation, amortisation and impairment charges -426 -2,089 -1,196 -3,711Book value at 31 December 2017 114 727 311 1,152

Additions 19 224 90 333Reclassifications 7 -22 15 -Disposals - -2 -3 -5Depreciation and amortisation charges -27 -200 -100 -327Impairment charges -2 -23 -10 -35Currency translation differences 1 -5 2 -2Book value at 31 December 2018 112 699 305 1,116

Cost price 585 2,824 1,549 4,958Accumulated depreciation, amortisation and impairment charges -473 -2,125 -1,244 -3,842Book value at 31 December 2018 112 699 305 1,116

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When testing for impairment, assets should be grouped at the lowest level where it is possible to establish separate cash flows. In Reitan Convenience, the cash generating unit is our individual kiosks/stores. The recoverable amount of a cash generating unit should reflect the value this asset provides to the group. If relevant information is available, this value is calculated as the net present value of cash flow after deduction of investments, and based on a three year prognosis prepared by the management of each cash generating unit.

The prognosis is determined on the basis of past performance and expected market development. Cash flows beyond this period are calculated by means of estimated growth rates. A pre-tax discount rate is applied, reflecting specific risks related to the operations. For units where the net present value of future cash flows are unavailable, the current year's cash flow is used. Kiosks with identified negative cash flows are analysed further. Specific conditions and causes are reviewed and adjusted for. For units with negative cash flows, non-current assets related to the unit will be written down entirely.

INVESTMENTS IN AND SALE OF PROPERTY, PLANT AND EQUIPMENT

Amounts in NOK millionLand, buildings

and plants FixturesMachines

and eq. Total

Investments (cost price)2018 19 224 90 3332017 15 214 134 3632016 17 163 166 346

Disposals and sales2018 - 2 3 52017 - 4 1 52016 - 2 11 13

NOTE 16 - INVESTMENTS IN SUBSIDIARIES

Company nameConsol. method Office location

Share of ownership

Share of voting rights

Reitan Convenience Norway AS Subsidiary Oslo, Norway 100% 100%Scandinavian Fuel Infrastructure Norway AS Subsidiary Oslo, Norway 100% 100%Reitan Convenience Sweden AB Subsidiary Stockholm, Sweden 100% 100%Reitan Convenience Denmark A/S Subsidiary Copenhagen, Denmark 100% 100%Scandinavian Fuel Infrastructure Denmark A/S Subsidiary Copenhagen, Denmark 100% 100%R-Kioski Oy Subsidiary Helsinki, Finland 100% 100%Narvesen Baltija SIA Subsidiary Riga, Latvia 100% 100%Preses Serviss SIA Subsidiary Riga, Latvia 100% 100%R-Kiosk Estonia AS Subsidiary Tallinn, Estonia 100% 100%Lehepunkt OÜ Subsidiary Tallinn, Estonia 100% 100%Reitan Convenience Lithuania UAB Subsidiary Vilnius, Lithuania 100% 100%Press Express UAB Subsidiary Vilnius, Lithuania 100% 100%

Note 2 - Summary of significant accounting policies gives detailed information about the consolidation method which have been used.

NOTE 15 – PROPERTY, PLANT AND EQUIPMENT - CONTINUED


36

NOTE 17 - FINANCIAL INVESTMENTS

Amounts in NOK million 2018 2017Book value at 1 January 160 158Additions/disposals -5 -10Net unrealised gains (loss) - result - -Currency translation differences 1 12Book value at 31 December 156 160

Classified as non-current assets 156 160Classified as current assets - -

The group's financial investments consist mainly of shares in real estate that are made to get access to premises for our operations. These investments are classified as financial assets at fair value through profit or loss. The valuations of the properties are made by both internal and external parties.

The internal valuation is based on value estimates for similar properties, using both benchmarking and local brokers.

NOTE 18 – TRADE AND OTHER RECEIVABLESCURRENT RECEIVABLES

Amounts in NOK million 2018 2017Trade receivables 677 822Accrued income 71 57Prepaid expenses 124 118Current receivables, other companies within Reitangruppen 14 14Current receivables, franchisees 100 95Current interest-bearing receivables, franchisees 18 19Other current receivables 65 53Current receivables at 31 December 1,069 1,178

NON-CURRENT RECEIVABLES

Amounts in NOK million 2018 2017Other non-current interest-bearing receivables, franchisees 218 251Other non-current receivables 29 22Non-current receivables at 31 December 247 273

Total receivables at 31 December 1,316 1,451

THE AGEING ANALYSIS OF NON-CURRENT RECEIVABLES IS AS FOLLOWS

Amounts in NOK million 2018 20171 - 2 years 34 292 - 5 years 54 58More than 5 years 159 186Non-current receivables at 31 December 247 273

The interest rate on interest-bearing receivables was 1.64 percent at 31 December 2018.

37

Non-current interest-bearing receivables due in more than five years, mainly consist of start-up loans related to funding of inventories for new franchisees, NOK 145 million as of 31 December 2018 (174 million as of 31 December 2017).

MOVEMENT IN THE GROUP'S PROVISIONS FOR IMPAIRMENT OF TRADE RECEIVABLES

Amounts in NOK million 2018 2017Provisions for receivables at 1 January -87 -76Movement in provisions - -7Currency translation differences 1 -4Provisions for receivables at 31 December -86 -87

AGEING ANALYSIS OF OVERDUE TRADE RECEIVABLES IS AS FOLLOWS

Amounts in NOK million 2018Up to 3 months 30Over 3 months -Overdue receivables at 31 December 30

The group's provisions for trade receivables were NOK 26 million at 31 December 2018 (NOK 24 million at 31 December 2017), of which the group's provisions for bad debts were NOK 26 million at 31 December 2018 (NOK 20 million at 31 December 2016).

BOOK VALUE OF RECEIVABLES AND PROVISIONS

Amounts in NOK million 2018 2017Total receivables 1,402 1,538Provisions for receivables -86 -87Book value at 31 December 1,316 1,451

BOOK VALUE OF THE GROUP'S TRADE AND OTHER RECEIVABLES ARE IN THE FOLLOWING CURRENCIES

Amounts in NOK million 2018 2017NOK 380 434DKK 128 91SEK 149 164EUR 659 762Total receivables at 31 December 1,316 1,451

NOTE 18 – TRADE AND OTHER RECEIVABLES - CONTINUED


38

NOTE 19 – INVENTORIESThe group's inventory consists of purchased finished goods for resale for the company owned stores, the commission based stores in Latvia and Estonia, and the press distribution companies. Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable sales expenses.

Amounts in NOK 2018 2017Finished goods 220 192Total inventories at 31 December 220 192

Provisions for obsolescence -6 -5Book value inventories at 31 December 214 187

PROVISIONS FOR OBSOLESCENCE

Amounts in NOK 2018 2017Provisions for obsolescence at 1 January -5 -4Change in provisions -1 -Currency translation differences - -1Provisions for obsolescence at 31 December -6 -5

NET RECOGNISED LOSS ON INVENTORIES

Amounts in NOK 2018 2017Recognised loss -7 -4Change in provisions -1 -Net recognised loss on inventories -8 -4

Amounts in NOK 2018 2017Inventories held as collateral for debt 10 10

39

NOTE 20 – CASH AND CASH EQUIVALENTSIn the consolidated statement of cash flows, cash and cash equivalents comprise cash at bank and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

Cash and cash equivalents are presented as following in the statements of cash flows:

Amounts in NOK 2018 2017Cash and cash equivalents 513 290Bank overdrafts - -Cash and cash equivalents in statement of cash flows at 31 December 513 290

There were no restricted deposits at 31 December 2018 (NOK 0 million at 31 December 2017).

NOTE 21 - OTHER COMPREHENSIVE INCOME

Amounts in NOK millionCurrency translation

differences

Remeasurement of post-employment

benefit obligations TotalOther comprehensive income at 1 January 2017 327 -37 290

Remeasurement of post-employment benefit obligations - 1 1Currency translation differences 177 - 177Other comprehensive income at 31 December 2017 504 -36 468

Remeasurement of post-employment benefit obligations - 3 3Currency translation differences 18 - 18Other comprehensive income at 31 December 2018 522 -33 489


40

NOTE 22 – LOAN AGREEMENTSReitan Convenience has the following loan agreements as of 31 December 2018:

MULTI-CURRENCY CREDIT FACILITYReitan Convenience AS holds a revolving multi-currency credit facility of NOK 2,000 million. The facility is syndicated to a bank syndicate consisting of six banks. The loan matures in 2023. The drawn amount as of 31 December 2018 is NOK 573 million. (NOK 421 million as of 31 December 2017).

The loan's amount is included in "other bank loan" in note 23 - Borrowings.

Amounts in NOK million 2018 2017Revolving credit 2,000 1,500Total available credit at 31 December 2,000 1,500

Drawn amount in NOK 200 100Drawn amount in DKK (in NOK) 40 53Drawn amount in SEK (in NOK) 194 150Drawn amount in EUR (in NOK) 139 118Total drawn amount at 31 December 573 421

Undrawn credit in credit facility 1,427 1,079

The following financial covenants apply to the revolving credit facility in Reitan Convenience AS:

Time of measurementGross interest-bearing

debt/EBITDA (maximum)Equity share (minimum)

Q4 2018 and later 3.25 25.0 %

The reported ratios were well within the financial covenants as at 31 December 2018.

OVERDRAFT FACILITY AND CASH POOLThe group has a cash pool agreement with DNB in Norway. This agreement includes an overdraft facility of NOK 200 million of which NOK 0 million was drawn as of 31 December 2018 (NOK 0 million as of 31 December 2017).

Reitan Convenience Sweden has an overdraft facility of SEK 50 million in Swedbank, of which SEK 0 million was drawn as of 31 December 2018 (SEK 0 million as of 31 December 2017).

Reitan Convenience Denmark has an overdraft facility of DKK 15 million in Danske Bank, of which DKK 0 million was drawn as of 31 December 2018 (DKK 0 million as of 31 December 2017).

R-Kioski OY in Finland has an overdraft facility of EUR 7 million in Handelsbanken, of which EUR 0 million was drawn as of 31 December 2018 (EUR 0 million as of 31 December 2017). R-Kioski also has an overdraft facility of EUR 0.1 million in Tapiola Bank, of which EUR 0.0 million was drawn as of 31 December 2018 (EUR 0.0 million as of 31 December 2017).

41

NOTE 23 – BORROWINGSBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months from the balance sheet date.

CURRENT AND NON-CURRENT BORROWINGS

Amounts in NOK million 2018 2017Other bank loans 573 421Financial leasing 5 6Non-current borrowings at 31 December 578 427

The fair value of non-current borrowings equals their carrying amount, as the impact of discounting is not significant. All interest rates are floating.

Amounts in NOK million 2018 2017Bank overdraft - -Financial leasing 2 2Current borrowings at 31 December 2 2

Non-current and current borrowings at 31 December 580 429

BOOK VALUE OF ASSETS HELD AS COLLATERAL FOR DEBT

Amounts in NOK million 2018 2017Inventory 10 10Book value of assets held as collateral for debt 10 10

THE LOANS ARE DUE AS FOLLOWS:

Amounts in NOK million 2018 20171 year or less 2 21-2 years 2 4222-3 years 2 23-4 years 1 24-5 years 573 1Non-current borrowings at 31 December 580 429


42

THE EXPOSURE OF THE GROUP'S BORROWINGS TO INTEREST RATE CHANGES AND CONTRACTUAL RE-PRICING DATES AT THE END OF THE REPORTING PERIOD IS AS FOLLOWS:

Amounts in NOK million 2018 20171 year or less 575 4221-2 years 2 22-3 years 2 23-4 years 1 24-5 years - 1Non-current borrowings at 31 December 580 429

BOOK VALUE OF THE GROUP'S BORROWINGS IS IN THE FOLLOWING CURRENCIES:

Amounts in NOK millionCurrency

2018 2018 2017NOK 200 200 100DKK 35 46 61SEK 200 194 150EUR 14 140 118Non-current borrowings at 31 December 580 429

CHANGE IN BOOK VALUE OF THE GROUP'S BORROWINGS IS ALLOCATED AS FOLLOWS:

Amounts in NOK million 2018 2017Book value at 1 January 429 -Net cash effect 149 402Currency translation differences 4 19Financial leasing -2 8Book value at 31 December 580 429

UNDRAWN BORROWING FACILITIES

Amounts in NOK million 2018 2017Due in 1 year or less, floating rates 339 340Due in more than 1 year, floating rates 1,427 1,079Undrawn borrowing facilities at 31 December 1,766 1,419

TRUE INTEREST RATES AT 31 DECEMBER 2018 WERE AS FOLLOWS:

Group NOK DKK SEK EURBank overdraft - - - -Other borrowings from banks 2.0 % 0.8 % 0.8 % 0.8 %Financial leasing - 1.8 % - -Average effective interest rate for current and non-current borrowings

2.0 % 0.9 % 0.8 % 0.8 %

NOTE 23 – BORROWINGS - CONTINUED

43

NOTE 24 – GUARANTEESThe group has guaranteed for its liabilities limited to NOK 24 million as of 31 December 2018 (NOK 67 million as of 31 December 2017). The guarantee is related to purchase from a supplier.

NOTE 25 - NET INTEREST BEARING LIABILITIES

Amounts in NOK million Note 2018 2017Other non-current interest-bearing receivables 18 -218 -251Other current interest-bearing receivables 18 -18 -19Cash and bank deposits 20 -513 -290Non-current borrowings 23 578 427Current borrowings 2 2Net interest-bearing debt at 31 December -169 -131

Amounts in NOK million Note 2018 2017Interest income 12 4 5Interest expenses 12 -21 -20Net interest income (costs) -17 -15


44

NOTE 26 – PROVISIONS FOR OTHER LIABILITIESProvisions for rental obligations, environmental obligations, restructuring costs, legal claims and employee benefits are recognised when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

Amounts in NOK millionRental

liabilitiesRestoration

liabilitiesEnvironm.liabilities Other Total

Book value at 1 January 2018 18 82 41 6 147Used during the year -10 - - -4 -14Unused provisions reversed - -1 - - -1Provisions made in the year 80 1 9 8 98Interest costs - 2 1 - 3Currency translation differences - - - - -Book value at 31 December 2018 88 84 51 10 233

EXPECTED MATURITY STRUCTURE

Amounts in NOK millionRental

liabilitiesRestoration

liabilitiesEnvironm.liabilities Other Total

Due in less than 1 year 27 2 7 1 37Due in 1-2 years 17 5 6 1 29Due in 2-5 years 42 10 7 8 67Due in more than 5 years 2 67 31 - 100Book value at 31 December 2017 88 84 51 10 233

Discount rate - 1.9 % 1.8 % - -

CLASSIFICATION OF TOTAL PROVISIONS

Amounts in NOK million 2018 2017Current 37 15Non-current 196 132Total provisions for other liabilities at 31 December 233 147

Rental liabilities are defined as loss-generating rental contracts. Provisions made in 2018 related to onerous contracts amounted to NOK 80 million.

Rental liabilities include future rental liabilities for premises where store operations are or will be terminated.

Restoration liabilities are liabilities to restore the property and land to its original standard when the activities at the location cease.

Environmental liabilities are related to operations in Scandinavian Fuel Infrastructure (SFI). SFI owns the gas infrastructure, pumps and tanks at 7-Eleven Gas stations in Norway and Denmark. The provisions include expenses related to the removal of contaminants that have arisen as a result of the operations.

45

NOTE 27 – DERIVATIVES FINANCIAL INSTRUMENTSThe group's derivatives are classified as financial assets (liabilities) at fair value through profit or loss.

Changes in fair value on derivatives are immediately recorded in the income statement.

Derivatives related to the financing of the company (including interest rate and currency derivatives) are recognised under net financial items, while other derivatives are recognised under net gains (losses).

Amounts in NOK million 2018 2017Energy derivatives - expire within 1 year - -Interest rate swap - expire within 1 year - -Energy derivatives - expire 1-5 years - 1Interest rate swap - expire 1-5 years - -Total derivatives - asset - 1

Amounts in NOK million 2018 2017Energy derivatives - expire within 1 year - 4Interest rate swap - expire within 1 year - -Energy derivatives - expire 1-5 years - -Interest rate swap - expire 1-5 years - -Total derivatives - liability - 4

Net total derivatives - liability - 3

2018 2017Lowest fixed rate in interest rate swaps at 31 December - 0.250 %Highest fixed rate in interest rate swaps at 31 December - 0.250 %

2018Currency

2018Notional principal amounts of interest rate swaps in NOK - -Notional principal amounts of interest rate swaps in SEK - 100Notional principal amounts of interest rate swaps in EUR - -Total notional principal amounts of interest rate swaps -


46

NOTE 28 – FINANCIAL INSTRUMENTS BY CATEGORYRecognitionAt initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are recognised in profit or loss.

All financial liabilities are recognised initially at fair value and, in case of loans and borrowings and payables, net of directly attributable transaction costs.

Financial assetsThe classification of financial assets depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

The group classifies its financial assets in the following measurement categories: Financial assets at fair value through profit or loss Financial assets at amortised cost

Financial liabilitiesFinancial liabilities are classified, at initial recognition, as:

Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost

Amortised costAfter initial recognition, financial assets and liabilities at amortised cost are subsequently measured using the effective interest rate method.

Amounts in NOK million Note 2018 2017Financial assets at fair value through profit or lossLong-term financial investments 17 156 160Derivatives - assets - 1

Financial assets at amortised costNon-current receivables 18 247 273Trade and other current receivables 18 874 1,003Cash and cash equivalents 20 513 290

Liabilities at fair value through profit or lossDerivatives - liabilities 27 - -4

Financial liabilities at amortised costNon-current borrowings 23 -578 -427Trade and other current liabilities 29 -2,416 -2,410

Total net financial instruments at 31 December -1,204 -1,114

The long-term financial investments are categorised within the fair value hierarchy, level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

47

NOTE 29 – TRADE AND OTHER LIABILITIESTrade payables are recognised initially at fair value and subsequently measured at amortised cost.

CURRENT LIABILITIES

Amounts in NOK million 2018 2017Trade payables 1,193 1,207Social security and other taxes 162 167Accrued expenses 252 231Liabilities to franchisees and retailers 991 969Current liabilities, other companies within Reitangruppen 4 9Other current liabilities 66 58Total trade and other liabilities at 31 December 2,668 2,641

NOTE 30 – RELATED PARTIESReitan Convenience AS is owned by Reitan Handel AS. Reitan Handel AS is in turn owned by Reitangruppen AS, which is controlled by the Reitan family.

Reitan Convenience AS has direct and indirect ownership in several companies. The subsidiaries of Reitan Convenience AS are presented in note 16 - Investments in material subsidiaries.

In addition, Reitangruppen AS has ownership interests in several other companies. These companies are related parties for Reitan Convenience AS.

THE GROUP'S TRANSACTIONS WITH RELATED PARTIES:

Amounts in NOK mill 2018 2017Interest income - Parent 11 -Purchase of goods and services - Other related parties -78 -77

RECEIVABLES AND LIABILITIES IN THE BALANCE SHEET RELATED TO TRANSACTIONS WITH RELATED PARTIES:

Amounts in NOK mill 2018 2017Current receivables - Other related parties 14 14Current liabilities - Other related parties 4 9

Current receivables and current liabilities are related to receivables and liabilities arising from the purchase and sale of goods and services. The current receivables and liabilites are non-interest bearing. The receivables are unsecured.


48

NOTE 31 – EVENTS AFTER THE REPORTING PERIODIn September 2018, Reitan Convenience signed a sales purchase agreement for acquisition of Caffeine Roasters, the leading coffee chain in the Baltics. The chain has 60 coffee shops in Lithuania, Latvia and Estonia. The turnover was EUR 10.0 million in 2018.

In February 2019, the Lithuanian competition authorities approved Reitan Convenience’s acquisition of Caffeine Roasters. The transaction will take effect from 28 February 2019. A purchase price allocation will be done in Q1 2019. The difference between purchase price and total assets will be recognized as trademark and goodwill.

49

FINANCIAL STATEMENTREITAN CONVENIENCE AS

Financial statements | Annual Report 2018

50

COMPREHENSIVE INCOME STATEMENTAmounts in NOK million Note 2018 2017

Other income 2 392 507Net other gains (losses) 3 -31 -16Employee benefit expenses 4 -27 -26Other operating expenses 5 -25 -18Operating profit 309 447

Interest income 6, 15 12 11Interest expenses 6, 15 -29 -28Other financial income (expenses) 6 13 -70Net financial income (expenses) -4 -87

Profit before income tax expenses 305 360

Income tax expenses 7 -18 6Profit for the year 287 366

Other comprehensive income:Remeasurement of post-employment benefit obligations 3 1Items that will not be reclassified to profit or loss 3 1

Other comprehensive income for the year, net of tax 3 1

Total comprehensive income for the year 290 367

51

BALANCE SHEET - ASSETSAmounts in NOK million Note 2018 2017

NON-CURRENT ASSETSDeferred income tax assets 7 - 1Intangible assets 8 152 152Investments in subsidiaries 9 2,602 2,598Derivative financial instruments 15 - 1Trade and other receivables 10 391 302Total non-current assets at 31 December 3,145 3,054

CURRENT ASSETSTrade and other receivables 10 398 528Cash and cash equivalents 11 68 37Total current assets at 31 December 466 565

Total assets at 31 December 3,611 3,619


52

BALANCE SHEET - EQUITY AND LIABILITIESAmounts in NOK million Note 2018 2017

EQUITYShare capital 12 3 3Share premium reserve 12 199 199Other paid-in capital 402 402Retained earnings 831 941Total equity at 31 December 1,435 1,545

NON-CURRENT LIABILITIESProvisions for other liabilities 9 4Derivative financial instruments 15 - -Borrowings 13, 14 1,638 1,537Total non-current liabilities at 31 December 1,647 1,541

CURRENT LIABILITIESBorrowings 13, 14 98 20Derivative financial instruments 15 - 4Current income tax liabilities 7 15 12Trade and other payables 16 416 497Total current liabilities at 31 december 529 533

Total liabilities at 31 December 2,176 2,074

Total equity and liabilities at 31 December 3,611 3,619

Oslo, 5 March 2019



53

EQUITYAmounts in NOK million

Share capital and premium

Other paid-in capital

Retained earnings Total equity

Equity at 1 January 2017 202 402 1,074 1,678

Profit for the year - - 366 366Other comprehensive income - - 1 1Total comprehensive income - - 367 367

Dividends - - -562 -562Group contribution - - 62 62Equity at 31 December 2017 202 402 941 1,545

Profit for the year - - 287 287Other comprehensive income - - 3 3Total comprehensive income - - 290 290

Dividends - - -400 -400Equity at 31 December 2018 202 402 831 1,435


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STATEMENT OF CASH FLOWAmounts in NOK million Note 2018 2017

CASH GENERATED FROM OPERATING ACTIVITIESProfit before income tax 305 360Impairment on shares 3 34 20Change in retirement benefit obligations 4 -5 -2Dividend income not received 2 -390 -505Change in fair value of derivatives 15 -3 -4Net financial items exclusive change in fair value of derivatives 6 -1 -68Income tax paid -12 -2Change in trade and other receivables 8 -57Change in trade and other liabilities -1 -75Net cash generated from operations -65 -333

CASH FLOW FROM INVESTING ACTIVITIESPayment (repayment) borrowings (receivables), subsidiaries 10 358 650Payment (repayment) borrowings (receivables), parent company 10 - 79Interest received 6 11 11Dividend received 7 7Net cash used in investing activities 376 747

CASH FLOW FROM FINANCING ACTIVITIESIncrease of borrowings 477 555Repayment of borrowings -248 -298Dividend payments -480 -771Interest paid - borrowings -29 -28Net cash used in financing activities -280 -542

Net increase (decrease) in cash and cash equivalents 31 -128

Cash and cash equivalents at 1 January 11 37 165Exchange gains (losses) on cash and cash equivalents 3 - -Cash and cash equivalents at 31 December 11 68 37

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Notes to the financial statement - ContentNote 1 - Accounting policies 56

Note 2 - Other income 56

Note 3 - Net other gains (losses) 56

Note 4 - Employee benefit expenses and key management compensations 57

Note 5 - Other operating expenses 57

Note 6 - Net financial items 58

Note 7 - Income tax 59

Note 8 - Intangible assets 59

Note 9 - Investments in subsidiaries 60

Note 10 - Trade and other receivables 60

Note 11 - Cash and cash equivalents 61

Note 12 - Share capital premium and shareholders 61

Note 13 - Loan agreements 62

Note 14 - Borrowings 63

Note 15 - Derivative financial instruments 64

Note 16 - Trade and other liabilities 65

Note 17 - Guarantees 65

Note 18 - Related parties 66


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NOTE 1 - ACCOUNTING POLICIESReitan Convenience AS is the group's parent company. The separate financial statements of Reitan Convenience AS have been prepared in accordance with the provisions of simplified IFRS in separate financial statements.

Applying the simplified version of IFRS to the parent company accounts means that valuation rules and accounting policies applied in the consolidated accounts also apply to the parent company, Reitan Convenience AS. See the group accounting policies for further information. A simplified application of IFRS enables the financial statements and note information to accord with the Accounting Act. The financial statements and notes for the parent company have been organised in accordance with the Accounting Act, with the exception of the comprehensive income statement, which follows IFRS.

1.1 SHARES IN SUBSIDIARIESShares in subsidiaries are entered at cost in Reitan Convenience AS' financial statements.

1.2 DIVIDEND AND GROUP CONTRIBUTIONAccountable entities that prepare separate financial statements according to the regulations of the Accounting Act, section 3-9, may, without prejudice to other provisions in these regulations, enter dividends and group contributions in accordance with other provisions of the Act. This means that any dividends and group contributions given or received by the parent company are entered in the accounts the year before the decision to give or receive such dividend or group contribution is made. This also applies to any tax effects relating to such transactions.

1.3 CASH POOLReitan Convenience AS is owner of a cash pool. The groups net deposits (drawings) in the cash pool are presented in Reitan Convenience AS' financial statements. The subsidiaries' deposits (drawings) are presented as current liabilities (assets).

NOTE 2 - OTHER INCOMEAmounts in NOK million 2018 2017Dividend and group contribution 390 505Other income 2 2Total other income 392 507

NOTE 3 - NET OTHER GAINS (LOSSES)Amounts in NOK million 2018 2017Net unrealised gains (losses) on financial investments -34 -20Net unrealised gains (losses) on energy derivatives 3 4Total other gains (losses) - net -31 -16

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NOTE 4 – EMPLOYEE BENEFIT EXPENSES AND KEY MANAGEMENT COMPENSATION

Amounts in NOK million 2018 2017Wages and salaries -21 -20Social security costs -3 -3Pension costs -3 -3Total employee benefit expenses -27 -26

Average number of fulltime equivalents 5 6

Reitan Convenience AS is required to provide an occupational pension scheme in accordance with the Mandatory Occupational

Pension Act. The company's pension schemes satisfy the requirements of the Act.

CEO AND BOARD COMPENSATIONThe CEO has in 2018 received a total compensation of NOK 14.7 million (NOK 11.5 million at December 2017), of which NOK 11.5 million is salary and other short-term benefits, and NOK 3.2 million is pension costs (payroll tax not included). The CEO has an agreement of compensation after termination of employment. The compensation cannot exceed 2 years' salary including bonus.

The board of directors consists of Odd Reitan (chair), Magnus Reitan (deputy chair) and Kristin S. Genton.

Remuneration for board members in 2018 amounted to TNOK 50 (TNOK 50 at 31 December 2017). The chair has no bonus or special compensation on termination of office.

NOTE 5 - OTHER OPERATING EXPENSESAmounts in NOK million 2018 2017Fees -13 -4Marketing expenses -6 -7Other operating expenses -6 -7Total other operating expenses -25 -18

FEES TO AUDITORS (EXCLUSIVE OF VAT)

Amounts in NOK million 2018 2017Statutory audit -0.4 -0.4Assurance services - -Non-audit services - -Tax advisory services 0.1 -


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NOTE 6 - NET FINANCIAL ITEMS

INTEREST INCOME (EXPENSE)

Amounts in NOK million 2018 2017Interest income - bank deposits 1 1Interest income - loans to related parties 11 10Total interest income 12 11

Interest expenses - borrowings from banks -12 -10Interest expenses - borrowings from related parties -17 -17Interest expenses - other - -1Total interest expenses -29 -28

Net interest income (expenses) -17 -17

TOTAL FINANCIAL ITEMS

Amounts in NOK million 2018 2017Net interest income (expenses) -17 -17Net foreign exchange gains (losses) on financing activities 13 -71Fair value gains on financial instruments - 1Net financial income (expenses) -4 -87

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NOTE 7 - INCOME TAX

INCOME TAX EXPENSE AND TAX PAYABLE

Amounts in NOK million 2018 2017Payable tax on result -15 -Changes in deferred tax -3 6Total tax on result -18 6

Tax payable (liabilities) 15 12Prepaid taxes (receivables) - -Net tax payable at 31 December 15 12

RECONCILIATION OF NORWEGIAN NOMINAL STATUTORY TAX RATE TO EFFECTIVE TAX RATE

Amounts in NOK million 2018 2017Profit before income tax 305 360

Expected income tax expense on profit before income tax -70 -86Effect of non-deductible expenses -10 -5Effect of non-taxable income 62 97Total -18 6

Effective tax rate 6% -2%

DEFERRED TAX AT 31 DECEMBER

Amounts in NOK million 2018 2017Provisions for other liabilities 2 -Financial instruments and investments - -1Net deferred tax in the balance sheet at 31 December 2 -1

Amounts in NOK million 2018 2017Net deferred tax in the balance sheet at 1 January -1 -4Changes in deferred tax / other 3 3Net deferred tax in the balance sheet at 31 December 2 -1

NOTE 8 – INTANGIBLE ASSETSReitan Convenience AS' intangible assets consist of goodwill related to operations in Reitan Convenience Sweden. The book value was NOK 152 million at 31 December 2018 (NOK 152 million at 31 December 2017). See note 14 – Intangible assets in the consolidated financial statement for further information.


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NOTE 9 - INVESTMENTS IN SUBSIDIARIES

Company namePurchase

year Office locationShare of ownership/

voting rightsBook value

2018Book value

2017Reitan Convenience Norway AS 2001 Oslo, Norway 100% 1,000 1,000Reitan Convenience Sweden AB 1997 Stockholm, Sweden 100% 44 44Reitan Convenience Denmark A/S 1997 Copenhagen,

Denmark100% 265 265

R-kioski Oy 2012 Helsinki, Finland 100% 1,097 1,097Narvesen Baltija SIA 1997 Riga, Latvia 100% 114 114R-Kiosk Estonia AS 2012 Tallinn, Estonia 100% 35 33Lehepunkt OÜ 2012 Tallinn, Estonia 100% 10 10Reitan Convenience Lithuania UAB 2012 Vilnius, Lithuania 100% 27 25Press Express UAB 2012 Vilnius, Lithuania 100% 10 10Total investments in subsidiaries at 31 December 2,602 2,598

NOTE 10 - TRADE AND OTHER RECEIVABLES

CURRENT RECEIVABLES

Amounts in NOK million 2018 2017Current receivables, group companies 392 507Other current receivables 6 21Current receivables at 31 December 398 528

NON-CURRENT RECEIVABLES

Amounts in NOK million 2018 2017Non-current receivables, group companies 382 302Other non-current receivables 9 -Non-current receivables at 31 December 391 302

Total receivables at 31 December 789 830

THE AGEING ANALYSIS OF NON-CURRENT RECEIVABLES IS AS FOLLOWS

Amounts in NOK million 2018 20171 - 2 years 2 -2 - 5 years 389 302Non-current receivables at 31 December 391 302

Reitan Convenience AS had no provisions for receivables at 31 December 2018.

BOOK VALUES OF TRADE AND OTHER RECEIVABLES ARE IN THE FOLLOWING CURRENCIES

Amounts in NOK million 2018 2017NOK 461 427SEK 218 250DKK 33 33EUR 77 120Total receivables at 31 December 789 830

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NOTE 11 - CASH AND CASH EQUIVALENTSAmounts in NOK million 2018 2017Cash and cash equivalents 68 37Bank overdrafts - -Cash and cash equivalents in statement of cash flows at 31 December 68 37

There were no restricted deposits at 31 December 2018 (NOK 0 million at 31 December 2017).

NOTE 12 - SHARE CAPITAL, PREMIUM AND SHAREHOLDERS

SHARE CAPITAL AND PREMIUM

Amounts in NOK 2018 2017Share capital 2,500,000 2,500,000Share premium 199,530,000 199,530,000Share capital and premium at 31 December 202,030,000 202,030,000

The share capital consists of 2,000 shares of NOK 1,250 each. All shares are owned by Reitan Handel AS.


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Reitan Convenience AS has the following loan agreements as of 31 December 2018:

MULTI-CURRENCY CREDIT FACILITYReitan Convenience AS holds a revolving multi-currency credit facility of NOK 2,000 million. The facility is syndicated to a bank syndicate consisting of six banks. The loan matures in 2023. The drawn amount as of 31 December 2018 is NOK 573 million. (NOK 421 million as of 31 December 2017).

The loan's amount is included in "other bank loan" in note 14 - Borrowings.

Amounts in NOK million 2018 2017Revolving credit 2,000 1,500Total available credit at 31 December 2,000 1,500

Drawn amount in NOK 200 100Drawn amount in DKK (in NOK) 40 53Drawn amount in SEK (in NOK) 194 150Drawn amount in EUR (in NOK) 139 118Total drawn amount at 31 December 573 421

Undrawn credit in revolving credit facility 1,427 1,079

The following financial covenants apply to the revolving credit facility in Reitan Convenience AS:

Time of measurementGross interest-bearing

debt/EBITDA (maximum)Equity share (minimum)

Q4 2018 and later 3.25 25.0 %

The reported ratios were well within the financial covenants as at 31 December 2018.

Guarantees related to the revolving credit facility are described in more detail in note 17 - Guarantees.

INTER-COMPANY LOANSAs of 31 December 2018, Reitan Convenience AS had NOK 1,065 million in long-term interest-bearing debt in subsidiaries (NOK 1,116 million per 31 December 2017), which has been eliminated in the group. The calculation of interest on these loans is determined based on Reitan Convenience AS' action plan for down payment determined at the time of signing. The loans mature in 2023.

OVERDRAFT FACILITY AND CASH POOLThe group has a cash pool agreement with DNB in Norway. This agreement includes an overdraft facility of NOK 200 million. Reitan Convenience AS is the owner of the cash pool. The group's net deposits (drawings) in the cash pool have been presented in Reitan Convenience AS' financial statements. The subsidiaries' deposits (drawings) are presented as current liabilities (assets) in Reitan Convenience AS' financial statements. As of 31 December 2018, the total deposits in the cash pool amounted to NOK 66 million (Total deposits of NOK 35 million as of 31 December 2017).

The participants in the cash pool have provided surety to the bank as collateral for Reitan Convenience AS' liabilities according to the cash pool agreement.

Cash in the group account systems and total overdraft are presented in note 11 - Cash and cash equivalents.

NOTE 13 – LOAN AGREEMENTS

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NOTE 14 – BORROWINGSCURRENT AND NON-CURRENT BORROWINGS

Amounts in NOK million 2018 2017

Other bank loan 573 421Borrowing from group companies 1,065 1,116Non-current borrowings at 31 December 1,638 1,537

The fair value of non-current borrowings equals their carrying amount, as the impact of discounting is not significant. All interest rates are floating.

Amounts in NOK million 2018 2017

Borrowings from group companies 98 20Current borrowings at 31 December 98 20

Non-current and current borrowings at 31 December 1,736 1,557

THE LOANS ARE DUE AS FOLLOWS:

Amounts in NOK million 2018 20171 year or less 98 201-2 years - 4212-3 years - -3-4 years - -4-5 years 1,638 1,116Non-current and current borrowings at 31 December 1,736 1,557

THE EXPOSURE THE BORROWINGS HAVE TO INTEREST RATE CHANGES AND CONTRACTUAL RE-PRICING DATES AT THE END OF THE REPORTING PERIOD IS AS FOLLOWS:

Amounts in NOK million 2018 20171 year or less 1,736 1,5571-2 years - -2-3 years - -3-4 years - -4-5 years - -5 years or later - -Non-current and current borrowings at 31 December 1,736 1,557

BOOK VALUE OF THE BORROWINGS IN CURRENCIES:

Amounts in NOK millionCurrency

2018 2018 2017NOK 298 298 120DKK 89 118 138SEK 1,135 1,101 1,109EUR 22 219 190Non-current and current borrowings at 31 December 1,736 1,557


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UNDRAWN BORROWING FACILITIES

Amounts in NOK million 2018 2017Due in 1 year or less, floating rates 200 200Due in more than 1 year, floating rates 1,427 1,079Undrawn borrowing facilities at 31 December 1,627 1,279

TRUE INTEREST RATES AT 31 DECEMBER 2018 WERE AS FOLLOWS:

NOK DKK SEK EUROther borrowings from banks 2.0 % 0.8 % 0.8 % 0.8 %Borrowings from group companies 2.9 % 1.8 % 1.8 % 1.6 %Average effective interest rate for current and non-current borrowings

1.9 % 1.5 % 1.6 % 1.2 %

NOTE 15 - DERIVATIVE FINANCIAL INSTRUMENTSThe group's derivatives are classified as financial assets (liabilities) at fair value through profit or loss.Amounts in NOK million 2018 2017Energy derivatives - expire within 1 year - -Interest rate swap - expire within 1 year - -Energy derivatives - expire 1-5 years - 1Interest rate swap - expire 1-5 years - -Total derivatives - asset - 1

Amounts in NOK million 2018 2017Energy derivatives - expire within 1 year - 4Interest rate swap - expire within 1 year - -Energy derivatives - expire 1-5 years - -Interest rate swap - expire 1-5 years - -Total derivatives - liability - 4

Net total derivatives - liability - 3

2018 2017Lowest fixed rate in interest rate swaps at 31 December - 0.250 %Highest fixed rate in interest rate swaps at 31 December - 0.250 %

2018Currency

2018Notional principal amounts of interest rate swaps in NOK - -Notional principal amounts of interest rate swaps in SEK - 100Notional principal amounts of interest rate swaps in EUR - -Total notional principal amounts of interest rate swaps -

NOTE 14 – BORROWINGS - CONTINUED

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NOTE 16 - TRADE AND OTHER LIABILITIES

CURRENT LIABILITIES

Amounts in NOK million 2018 2017Trade payables 4 3Social security and other taxes 5 12Accrued expenses 4 1Current liabilities, group companies 3 1Current liabilities, parent company 400 480Total trade and other payables at 31 December 416 497

NOTE 17 – GUARANTEESCOMPANY GUARANTEES FOR GROUP COMPANIES

Amounts in NOK million 2018 2017Guarantees for rent 190 192Guarantees for suppliers 56 57Guarantees for financial institutions - -Company guarantees for group companies at 31 December 246 249

COMPANY GUARANTEES FOR EXTERNAL PARTIES

Amounts in NOK million 2018 2017Guarantees for obligation 24 67Company guarantees for external parties at 31 December 24 67

BANK GUARANTEES

Amounts in NOK million 2018 2017Guarantees for tax 6 6Guarantees for energy derivatives - 1Bank guarantees at 31 December 6 7

THE SUBSIDIARIES JOINT GUARANTEE FOR PARENT COMPANY LIABILITIESReitan Convenience Norway AS, Reitan Convenience Sweden AB, Reitan Convenience Denmark A/S and R-kioski Oy have jointly and severally guaranteed for Reitan Convenience AS' liability related to the multi-currency credit facility of NOK 2,000 million until the facility expires in 2023.

Reitan Convenience AS is, together with Reitan Convenience Norway AS and Scandinavian Fuel Infrastructure Norway AS, registered in the Norwegian Value Added Tax Register as one taxable person. All companies in the joint registration are jointly liable for the payment of VAT. As of December 2018, the VAT payment liability was NOK 26 million, and Reitan Convenience AS had a receivable VAT of NOK 1 million.


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NOTE 18 – RELATED PARTIESReitan Convenience AS is owned by Reitan Handel AS, see note 12 - Share capital, premium and shareholders. Reitan Handel AS is in turn owned by Reitangruppen AS, which is controlled by the Reitan family. In this note, both transactions with Reitan Handel AS and Reitangruppen AS will be presented under the category "Parent".

Reitan Convenience AS has direct and indirect ownership in several companies. The subsidiaries of Reitan Convenience AS are presented in note 9 - Investments in subsidiaries. In addition, Reitangruppen AS has ownership interests in several other companies. These companies are related parties for Reitan Convenience AS. Reitan Convenience AS has provided loans to subsidiaries. The interest rate is determined by Reitan Convenience AS' average borrowing rate for loans with similar risk. The same interest rate is applied on loans from subsidiaries to Reitan Convenience AS.

RECEIVABLES

Amounts in NOK mill 2018 2017Non-current receivables - Subsidiaries 382 302Current receivables - Subsidiaries 392 507Total receivables at 31 December 774 809

Reitan Convenience AS has prepared its financial statements according to the regulations of the Accounting Act, section 3-9 and may, without prejudice to other provisions in these regulations, enter dividends and group contributions in accordance with other provisions of the Act. The proposed dividends from subsidiaries recognised by the parent company as of 31 December, are pending approval by the annual general meetings, and have been classified as current receivables until such approval has been granted. As of 31 December 2018, the amount recognised is NOK 390 million (NOK 505 million as of 31 December 2017).

LIABILITIES

Amounts in NOK mill 2018 2017Non-current liabilities - Subsidiaries 1,065 1,116Current liabilities - Parent 400 480Current liabilities - Subsidiaries 101 22Total liabilities at 31 December 1,566 1,618

The proposed dividends to shareholders that are pending approval by the annual general meeting, have been recognised as of 31 December, and have been classified as current liabilities until such approval is given. As of 31 December 2018, the amount recognised is NOK 400 million (NOK 480 million as of 31 December 2017).

Reitan Convenience AS is the owner of the cash pool in Norway. See note 13 - Loan agreements for more information. The group's net deposits (borrowings) in this cash pool are presented in Reitan Convenience AS' accounts. Subsidiaries' deposits (drawings) are presented as liabilities (assets) in Reitan Convenience AS' accounts.

TRANSACTIONS

Amounts in NOK mill 2018 2017Interest income (expenses) - Subsidiaries -6 -7Sales of goods and services - Subsidiaries 2 2Purchase of goods and services - Subsidiaries - -Purchase of goods and services - Other related parties -3 -3Net gains (losses) - Subsidiaries -34 -20

GUARANTEES

Amounts in NOK mill 2018 2017Company guarentees for subsidiaries 246 249

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Annual Report 2018

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Annual Report 2018

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DEFINITION OF KEY FIGURES

Turnover including franchisee turnover Sale of goods and agent income from sale of services in franchisedand company owned convenience stores, together with external distributionof press products

Operating revenue Franchise fee, turnover from company owned stores, and externaldistribution of press products

Growth in turnover Percentage growth of turnover from last year. Measured as averageweighted growth in local currencies

Operating margin Operating profit in percent of turnover

EBITDA Earnings before interest, taxes, depreciation and amortisation

Cash flow margin EBITDA in percent of turnover

Return on total assets Profit before net interest cost (income), taxes and gain (loss) on disposalof operations in percent of average total assets

Return on equity Profit for the year in percent of average equity

Return on capital employed Operating profit and interest income (excl. interest element in interestrate swap) in percent of average total assets, less non-interest-bearingliabilities

Equity ratio Equity in percent of total assets

Net interest-bearing debt Interest-bearing debt less interest-bearing receivables and liquidcapital

Liquid capital Total cash and bank deposits

Net investment Investments in property, plant and equipment (acquisition cost), lessdisposal of property, plant and equipment

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Address list

Reitan ConvenienceJohannes Sangnes, CEOGladengveien 2P.O.Box 6219 EtterstadN-0603 OsloTel: +47 22 57 30 00

Narvesen LatviaKatrine Judovica, CEOAiviekstes street 5LV-1003 RigaTel: +37 16 70 74 20 2

Press ExpressVigintas Bartasevicius, CEOM. Slezeviciaus 7LT-06326, VilniusTel: +37 05 23 04 40 2

Reitan Convenience NorwayKenneth Olsen, CEOGladengveien 2P.O.Box 6219 EtterstadN-0603 OsloTel: +47 22 57 30 00

R-kiosk EstoniaTiia Ilves, CEOPõikmäe 2, Tänassilma külaEE-76 406 Saku valdTel: +37 26 33 60 80

Scandinavian Fuel Infrastructure NorwayKenneth Olsen, CEOGladengveien 2P.O.Box 6219 EtterstadN-0603 OsloTel: +47 81 50 09 09

Reitan Convenience SwedenMariette Kristenson , CEOStrandbergsgatan 61Box 30 185S-104 25 StockholmTel: +46 85 87 49 00 0

Reitan Convenience LithuaniaVigintas Bartasevicius, CEOLaisvės pr.58, VilniusLT-5120 VilniusTel: +37 05 24 01 50 2

Scandinavian Fuel Infrastructure DenmarkJanne Månsson, CEOBuddingevej 195DK-2860 SøborgTel: +45 39 47 84 84

Reitan Convenience DenmarkJesper Østergaard, CEOBuddingevej 195DK-2860 SøborgTel: +45 39 47 84 84

Preses ServissJanis Vaivods, CEOAiviekstes street 5LV-1003 RigaTel: +37 12 92 86 15 8

Internetwww.reitanconvenience.no

R-kioski FinlandTeemu Rissanen, CEOKoivuvaarankuja 2FI-01640 VantaaTel: +35 80 20 55 44 00 0

LehepunktTiia Ilves, CEOPõikmäe 2, Tänassilma külaEE-76 406 Saku valdTel: +37 26 33 60 80

Documents

REITAN CONVENIENCE - Reitangruppen€¦ · Reitan Convenience has a strong market position in the convenience market in seven countries, across the Nordics and Baltics. We hold a