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Festi Interim / Quarterly Report 2019
2195_rns_2019-08-28_c81319da-3826-4840-a0b1-8e03f82bb09f.pdf
Interim / Quarterly Report
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FESTI
Festi hf.
Condensed Consolidated Interim Financial Statements
1 January to 30 June 2019
This is a translation of the Icelandic original. In the event of discrepancies between the Icelandic language version and any translation thereof, the Icelandic language version will prevail.
Festi hf.
Dalvegur 10-14
201 Kópavogur
Reg. No. 540206-2010
Contents
Page
Endorsement and Statement by the Board of Directors and the CEO ... 3
Review Report on Interim Financial Information ... 5
Statement of Income and Comprehensive Income ... 6
Statement of Financial Position ... 7
Statement of Changes in Equity ... 8
Statement of Cash Flows ... 9
Notes ... 10
Operating segments ... 17
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Endorsement by the Board of Directors and the CEO
The condensed consolidated interim financial statements of Festi hf. for the period from 1 January to 30 June 2019 have been prepared in accordance with the International Financial Reporting Standard for interim financial reporting, IAS 34.
The Group
The interim financial statements comprise the operations, financial position and cash flows of Festi hf. and the subsidiaries Ego ehf. and Hlekkur ehf., as well as Hlekkur's subsidiaries, for the first six months of 2019. However, comparative financial information in the statement of income and comprehensive income, the statement of financial position, the statement of changes in equity and the statement of cash flows only comprise the operations of Festi hf. and the subsidiary Ego since Hlekkur and Hlekkur's subsidiaries did not become a part of Festi's Group until 1 September 2018. At the beginning of 2019 operations of gas stations was transferred to a newly formed operational company, N1 ehf., and warehouse activities to Bakkinn Vöruhötel ehf. These operations were previously carried out within the parent company, Festi hf. Both of the aforementioned companies are subsidiaries of Hlekkur. The parent company, Festi hf. still owns the properties related to those activities.
Operations for the period
The Group's operating revenue for the first six months of the year amounted to ISK 40,632 million and increased by 112% compared to the same period of the previous year. According to the statement of income and comprehensive income, profit from the Group's operations for the period amounted to ISK 601 million. However, when taking into account translation difference due to the operation of a foreign associated company the Group's total comprehensive income amounts to ISK 641 million. The Group's equity at the end of the period amounted to ISK 26,610 million including share capital in the amount of ISK 330 million.
Share capital
The Company's share capital amounts to a nominal value of ISK 330 million and one vote is attached to each share. At Festi's Annual General Meeting on 21 March 2019 a proposal from the Board of Directors regarding authorisation to purchase own shares was approved. Accordingly the Board of Directors is authorised on behalf of the Company to purchase up to 10% of its share capital. The authorisation shall be utilised for the purpose of setting up a formal repurchase schedule or to make general offer to shareholders on the Company's purchase of own shares, e.g. by general offering process, on the condition that shareholders will have equal opportunity to take part in such trade. At repurchase the highest permissible payment for each share shall not be higher than the last independent trade or highest available independent purchase offer, in the trade systems where shares are traded, whichever is higher. This authorisation is valid until the Company's Annual General Meeting in 2020, but no longer than to 21 September 2020. The authorisation has not been utilised. At the same time previous authorisations to purchase own shares were revoked.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Endorsement by the Board of Directors and the CEO, contd.:
Shareholders
At the end of the period the Company's shareholders were 765 compared to 915 at the beginning of the year. Following are the Company's 20 biggest shareholders at the end of the period:
| Stefnir | 14,2% |
|---|---|
| Lifeyrissjóður verslunarmanna | 10,1% |
| Gildi - lifeyrissjóður | 8,9% |
| Lifeyrissjóður starfsmanna ríkisins A-, B- og S-division | 8,1% |
| Lansdowne Icav Lansdowne Euro | 6,1% |
| Birta lifeyrissjóður | 5,4% |
| Almenni lifeyrissjóðurinn | 4,8% |
| Stapi lifeyrissjóður | 4,7% |
| Landsbréf | 4,4% |
| Kvika banki hf | 2,6% |
| Stormtré ehf | 2,5% |
| Festa - lifeyrissjóður | 2,5% |
| Sjóvá-Almennar tryggingar hf | 2,5% |
| Lifsverk lifeyrissjóður | 2,1% |
| Söfnunarsjóður lífeyrisrétinda | 1,5% |
| Vátryggingafélag Íslands hf | 1,4% |
| Brekka Retail ehf | 1,3% |
| Frjálsi lífeyrissjóðurinn | 1,2% |
| Júpiter | 1,2% |
| Íslenski lífeyrissjóðurinn-Lífsbraut | 1,2% |
Statement by the Board of Directors and the CEO
The condensed consolidated interim financial statements of Festi hf. for the period from 1 January to 30 June 2019 are prepared in accordance with the International Financial Reporting Standard for interim financial reporting, IAS 34.
According to the best of our knowledge, in our opinion the consolidated interim financial statements give a true and fair view of the Group's assets, liabilities and financial position as at 30 June 2019 as well as of its operating profit and changes in cash and cash equivalents during the period 1 January to 30 June 2019.
Furthermore, in our opinion the consolidated interim financial statements and the Endorsement of the Board of Directors and the CEO include a true and fair view of the development and results of the Group's operations, its standing and describes the main risk factors and uncertainty that the Group faces.
The Board of Directors and the CEO of Festi hf. have today discussed the Company's interim consolidated financial statements for the period 1 January to 30 June 2019 and confirm them by means of their signatures.
Kópavogur, 28 August 2019
The Board of Directors of Festi hf.
Margrét Guðmundsdóttir
Chairman of the Board
Björgólfur Jóhannsson
Gúðjón Karl Reynisson
Kristín Guðmundsdóttir
Þórður Már Jóhannesson
CEO
Eggert Þór Kristófersson
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Review Report on Interim Financial Information
To the Board of Directors and Stockholders of Festi hf.
We have reviewed the accompanying Condensed Consolidated Interim Statement of financial position of Festi hf. and its subsidiaries (the "Group") as of 30 June 2019 and the related Condensed Consolidated Interim Income Statement, Condensed Consolidated Interim Statement of Comprehensive Income, Condensed Consolidated Interim Statement of changes in equity and Condensed Consolidated Interim Statement of cash flows for the six-month period then ended and a summary of significant accounting policies and other explanatory notes.
Management's and the Board of directors Responsibility for the Financial Statements
The board of directors and management is responsible for the preparation and fair presentation of this interim financial information in accordance with International Financial Reporting Standards for Interim Financial Reporting, IAS 34, as adopted by the EU and additional requirements in the Icelandic Financial Statement Act.
Auditor's Responsibility
Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements, ISRE 2410. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not give a true and fair view of the financial position of the Group as at 30 June 2019, and of its financial performance and its cash flows for the six-month period then ended in accordance with International Financial Reporting Standards for Interim Financial Reporting, IAS 34, as adopted by the EU and additional requirements in the Icelandic Financial Statement Act.
Confirmation of Endorsement and Statement by the Board of Directors and the CEO
Pursuant to the requirements of Paragraph 2 Article 104 of the Icelandic Act on Financial Statements No. 3/2006, we confirm to the best of our knowledge that the accompanying Endorsement and Statement by the Board of Directors and the CEO includes all information required by the Icelandic Act on Financial Statements that is not disclosed elsewhere in the Condensed Consolidated Interim Financial Statements.
Kopavogur, August 28th 2019.
Deloitte ehf.
Þorsteinn Pétur Guðjónsson
State Authorized Public Accountant
Rúnar Dór Daníelsson
State Authorized Public Accountant
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Statement of Income and Comprehensive income
1 January to 30 June 2019
| | Notes | 2019
1.4.-30.6. | 2018
1.4.-30.6. | 2019
1.1.-30.6. | 2018
1.1.-30.6. |
| --- | --- | --- | --- | --- | --- |
| Sales | 6 | 21.390.870 | 10.931.549 | 39.620.471 | 18.914.736 |
| Cost of goods sold | | (16.342.543) | (8.073.436) | (30.341.311) | (14.067.314) |
| Gross profit | 6 | 5.048.326 | 2.858.113 | 9.279.160 | 4.847.421 |
| Other operating income | | 639.352 | 123.584 | 1.011.454 | 229.088 |
| Salaries and other personnel expenses | | (2.587.889) | (1.237.296) | (4.878.541) | (2.331.470) |
| Sales expenses | | (370.476) | (245.695) | (628.306) | (457.188) |
| Other operating expenses | | (836.910) | (421.731) | (1.562.140) | (810.352) |
| | | (3.795.275) | (1.904.722) | (7.068.986) | (3.599.011) |
| Profit before depreciation, amortisation
and fair value changes | | 1.892.404 | 1.076.975 | 3.221.628 | 1.477.499 |
| Depreciation and amortisation of property and equipment,
leased assets and intangible assets | 7 | (623.476) | (254.368) | (1.344.969) | (502.237) |
| Fair value changes of investment properties | | (72.189) | 0 | (117.281) | 0 |
| Operating profit | | 1.196.740 | 822.607 | 1.759.379 | 975.262 |
| Finance income | | 15.652 | 16.436 | 34.937 | 39.714 |
| Finance expenses | | (653.470) | (107.128) | (1.271.148) | (209.852) |
| Foreign currency difference | | 17.258 | 42.686 | 53.736 | 28.905 |
| Share of profit from associates | | 84.645 | 29.142 | 144.846 | 58.660 |
| Fair value changes of shares
in other companies | | 0 | (2.228) | 0 | (2.443) |
| | | (535.915) | (21.093) | (1.037.629) | (85.017) |
| Profit before income tax | | 660.825 | 801.514 | 721.750 | 890.245 |
| Income tax | 8 | (111.315) | (129.822) | (120.635) | (142.124) |
| Profit for the period | | 549.511 | 671.692 | 601.115 | 748.121 |
| Other comprehensive income | | | | | |
| Items that are or may be reclassified subsequently
to profit or loss: | | | | | |
| Translation difference arising from operations of
associate | | 39.743 | 9.609 | 39.512 | (5.819) |
| Other comprehensive income total | | 39.743 | 9.609 | 39.512 | (5.819) |
| Total comprehensive income for the period | | 589.254 | 681.301 | 640.627 | 742.302 |
| Basic and diluted earnings per share in ISK | | 1,67 | 2,69 | 1,82 | 2,99 |
*The quarter is not reviewed by the Company's auditors
Notes on pages 10 to 16 are an integral part of these consolidated interim financial statements
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Statement of Financial Position as at 30 June 2019
| Notes | 30.06.2019 | 31.12.2018 | |
|---|---|---|---|
| Assets | |||
| Goodwill | 14.070.463 | 14.070.463 | |
| Other intangible assets | 4.579.372 | 4.504.012 | |
| Property and equipment | 31.370.175 | 32.418.877 | |
| Leased assets | 3 | 3.622.806 | 0 |
| Investment properties | 6.944.295 | 8.751.774 | |
| Shares in associates | 2.264.008 | 2.079.666 | |
| Securities | 187.388 | 66.838 | |
| Non-current assets | 63.038.508 | 61.891.630 | |
| Inventories | 8.432.133 | 7.616.386 | |
| Trade receivables | 4.622.335 | 3.718.347 | |
| Other short-term receivables | 401.294 | 305.786 | |
| Cash and cash equivalents | 4.950.283 | 4.266.925 | |
| Current assets | 18.406.044 | 15.907.443 | |
| Total assets | 81.444.552 | 77.799.073 | |
| Equity | |||
| Share capital | 329.574 | 329.574 | |
| Share premium | 13.140.383 | 13.140.383 | |
| Other restricted equity | 5.618.281 | 5.258.048 | |
| Retained earnings | 7.522.235 | 7.241.841 | |
| Equity | 26.610.473 | 25.969.846 | |
| Liabilities | |||
| Payable to credit institutions | 9 | 30.392.815 | 33.593.033 |
| Lease liabilities | 3 | 3.169.292 | 0 |
| Deferred tax liability | 8 | 3.744.992 | 3.938.773 |
| Non-current liabilities | 37.307.098 | 37.531.807 | |
| Current tax | 760.663 | 595.668 | |
| Payable to the Icelandic State | 3.381.957 | 2.306.564 | |
| Payable to credit institutions | 9 | 4.470.547 | 3.720.530 |
| Lease liabilities | 3 | 503.696 | 0 |
| Trade payables | 6.663.325 | 5.654.412 | |
| Other short-term liabilities | 1.746.793 | 2.020.246 | |
| Current liabilities | 17.526.981 | 14.297.421 | |
| Total liabilities | 54.834.079 | 51.829.227 | |
| Total equity and liabilities | 81.444.552 | 77.799.073 |
Notes on pages 10 to 16 are an integral part of these consolidated interim financial statements
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Statement of Changes in Equity 30 June 2019
| Other restricted equity | ||||||||
|---|---|---|---|---|---|---|---|---|
| Share capital | Share premium | Statutory reserve | Revaluation reserve | Unrealised profit of associated companies | Translation reserve | Retained earnings | Total equity | |
| 1 January to 30 June 2019 | ||||||||
| Equity 1.1.2019 | 329.574 | 13.140.383 | 82.393 | 3.654.286 | 1.642.560 | (121.191) | 7.241.841 | 25.969.846 |
| Total comprehensive income for the period | 39.512 | 601.115 | 640.627 | |||||
| Restricted due to subsidiaries and associated companies | 567.527 | (567.527) | 0 | |||||
| Dissolution of revaluation of an associated company | (10.405) | 10.405 | 0 | |||||
| Dissolution of revaluation of property | (236.401) | 236.401 | 0 | |||||
| Equity 30.6.2019 | 329.574 | 13.140.383 | 82.393 | 3.407.480 | 2.210.087 | (81.679) | 7.522.235 | 26.610.473 |
| Other restricted equity total | 5.618.281 | |||||||
| 1 January to 30 June 2018 | ||||||||
| Equity 1.1.2018 | 250.000 | 3.153.857 | 62.500 | 3.846.730 | 376.857 | (154.490) | 6.276.324 | 13.811.779 |
| Total comprehensive income for the period | (5.819) | 748.121 | 742.302 | |||||
| Restricted due to associated companies | (44.440) | 44.440 | 0 | |||||
| Dissolution of revaluation of an associated company | (17.342) | 17.342 | 0 | |||||
| Dissolution of revaluation of property | (78.559) | 78.559 | 0 | |||||
| Equity 30.6.2018 | 250.000 | 3.153.857 | 62.500 | 3.750.810 | 332.417 | (160.308) | 7.164.805 | 14.554.080 |
| Other restricted equity total | 3.985.418 |
Notes on pages 10 to 16 are an integral part of these consolidated interim financial statements
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Statement of Cash Flows 1 January to 30 June 2019
| | Notes | 2019
1.1.-30.6. | 2018
1.1.-30.6. |
| --- | --- | --- | --- |
| Cash flows from operating activities | | | |
| Profit before depreciation, amortisation and fair value changes | | 3.221.628 | 1.477.499 |
| Operating items not affecting cash flows: | | | |
| Gain on sale of operating assets and investment properties | | (239.916) | (35.050) |
| | | 2.981.712 | 1.442.449 |
| Changes in operating assets and liabilities: | | | |
| Inventories, (increase) | | (815.746) | (1.187.225) |
| Trade and other receivables, increase | | (1.049.497) | (1.367.730) |
| Trade and other payables, increase | | 1.820.626 | 2.261.786 |
| Changes in operating assets and liabilities | | (44.617) | (293.169) |
| Interest received | | 60.177 | 39.707 |
| Interest paid | | (850.153) | (191.573) |
| Income tax payments | | (149.558) | (217.770) |
| Cash flows from operating activities | | 1.997.561 | 779.644 |
| Cash flows from investing activities | | | |
| Purchase of intangible assets | | (289.831) | 0 |
| Purchase of property and equipment | | (639.653) | (473.314) |
| Sale of property and equipment | | 233.661 | 78.014 |
| Purchase of /additions to investment properties | | (52.525) | 0 |
| Sales of investment properties | | 2.507.379 | 0 |
| Purchase of shares in other companies | | (97.500) | 0 |
| Dividends from other companies | | 0 | 120.000 |
| Investing activities | | 1.661.532 | (275.300) |
| Cash flows from financing activities | | | |
| New long-term borrowings | | 13.371.000 | 0 |
| New short-term borrowings | | 1.000.000 | 0 |
| Repayment of loans from credit institutions | | (17.193.105) | 0 |
| Payment of lease liabilities | 3 | (171.924) | 0 |
| Financing activities | | (2.994.029) | 0 |
| Increase in cash and cash equivalents | | 665.064 | 504.343 |
| Currency exchange difference on cash and cash equivalents | | 18.295 | 14.553 |
| Cash and cash equivalents at the beginning of the year | | 4.266.925 | 2.800.082 |
| Cash and cash equivalents at the end of the period | | 4.950.284 | 3.318.979 |
Notes on pages 10 to 16 are an integral part of these consolidated interim financial statements
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes
- Operations of the Group
Festi hf. („the Company“) is an Icelandic limited liability company. The Company's headquarters are located at Dalvegur 10-14, Kópavogur. The main objective of the Group is sale of fuel, goods and service to entities, groceries and related products, electrical appliances and leasing of properties. The consolidated interim financial statements of the Group consists of the Company and its subsidiaries, referred to together as the Group and individually as a Group entity.
- Basis of preparation
Statement of compliance
The consolidated interim financial statements of the Company have been prepared in accordance with the International Financial Reporting Standard for interim financial reporting, IAS 34. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Company for the year ended 31 December 2018.
The Board of Directors of Festi hf. approved the consolidated interim financial statements on 28 August 2019.
Change in classification of operating expenses
As disclosed in the Company's consolidated financial statements for the year 2018 classification of certain operating expenses was changed in 2018 following Festi's acquisition of Hlekkur and its subsidiaries. The amended classification was made to harmonise the classifications of operating expenses in the Group. In these condensed consolidated interim financial statements of the Group comparative figures have been restated in accordance with new classification, which has no impact on net results of the Group, its assets, liabilities, equity or cash flows. The most significant change is that distribution expense is now presented with the line item cost of goods sold, but was previously presented with sales- and distribution expenses.
Changes in presentation of interest payments in the statement of cash flows
Presentation of interest payments in the statement of cash flows has been changed. Interest payments on long-term loans from credit institutions are now presented as part of operating activities but were previously presented among financing activities. Therefore, interest paid among operating activities in the statement of cash flows now include both interest paid on short-term liabilities and long-term liabilities. Furthermore, for the period 1 January to 30 June 2019 this line item also includes interest payments on lease liabilities due to the application of IFRS 16 (see note 3). Presentation of comparative amounts for the previous year has been changed accordingly. Management believes that this change in presentation of interest paid provides a better view with respect to origination and use of cash and cash equivalents in the statement of cash flows.
Changes of the Group's structure and presentation of operating segments
At the beginning of 2019 operations of gas stations was transferred to the operational company, N1 ehf., and warehouse activities to Bakkinn Vöruhötel ehf. These operations were previously carried out within the parent company, Festi hf. Both of the aforementioned companies are subsidiaries of Hlekkur. The parent company, Festi hf., still owns the properties related to those activities. Following the acquisition of Hlekkur and its subsidiaries on 1 September 2018 a review of the Group's operating segments presentation has been under way. That work has now been finalised and segment information is now more detailed than in the Company's consolidated financial statements for the year 2018. The Group's operating segments are based on internal reporting as presented to the Group's key management personnel.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes, contd.:
2. Basis of preparation, contd.
Other changes from previous accounting policies
IFRS 16 Leases became effective at the beginning of 2019. Reference is made to note 3 for information on the impact of the standard. Due to the method chosen for the adoption of IFRS 16 comparative amounts for the previous year are unchanged.
Except for the aforementioned changes in classification of interest payments, the impact of IFRS 16 and changes of segment reporting, the same accounting policies were applied in these consolidated interim financial statements as in the Group’s consolidated financial statements for the year 2018.
Presentation and functional currency
These consolidated interim financial statements are prepared and presented in Icelandic krona (ISK) which is the Company's functional currency. All amounts are presented in thousand of Icelandic krona unless otherwise stated
Going concern
Management has evaluated the Group's going concern. It is the opinion of management that its operations are ensured and that it is able to meet its obligations in the foreseeable future. Therefore, the interim financial statements are presented on a going concern basis.
Estimates and judgement
The preparation of the consolidated interim financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions, which affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
3. IFRS 16 Leases
General information about IFRS 16
IFRS 16 Leases became effective on 1 January 2019 and replaced IAS 17 Leases and related interpretations.
IFRS 16 introduces a single, on balance sheet model lease accounting model for lessees. As a result, the Group, as a lessee, has recognised leased assets representing its rights to use the underlying assets and lease liabilities representing its obligations to make lease payments. Lessor accounting remains similar to previous accounting policies, i.e. the lessor classifies each lease contract as either a finance lease or an operating lease. The application of IFRS 16 did not have any effect on the Group’s financial statements as a lessor.
Definition of a lease
The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
Impacts on transition
The Group has applied IFRS 16 as from 1 January 2019. The Group adopted the standard using the modified retrospective method, whereas leased assets were recognised in the same amount as lease liabilities, with no effect on equity as at 1 January 2019 and no changes made to comparative amounts for the year 2018. The impact of the standard was that leased assets and lease liabilities in the amount of ISK 3,702 million were recognised in the statement of financial position as at 1 January 2019.
The leased assets and lease liabilities of the Group, as a lessee, are due to leases of buildings and land. When calculating the amounts of leased assets and lease liabilities, lease term was estimated as well as the incremental borrowing rate, since the rate implicit in the lease could not be readily determined.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes, contd.:
3. IFRS 16 Leases, contd.
Estimating the incremental borrowing rate required management to use judgement. In that estimation various factors were taken into account but in particular the type of leased asset and its location and condition and the lease term. Weighted average interest rate was determined as 5.5% - 7.0% for buildings and 5.0% - 7.7% for land.
Management also had to use judgement in determining the lease term, in particular in the case of contracts with no stated lease term and contracts which include extension and / or termination options. The lease term determined can be longer or shorter than the lease term explicitly stated in the contract. The weighted lease term for leases of both buildings and land was determined as 10 years.
The Group's lease contracts for buildings and land were classified as operating leases until 1 Januar 2019 and therefore they were not recognised in the statement of financial position at year-end 2018. As disclosed in note 16 to the Group's financial statements for the year 2018, the obligations due to these lease contracts amounted to ISK 4,992 million at year-end 2018. Upon adoption of IFRS 16 those obligations were discounted and lease liabilities in the amount of ISK 3,702 million recognised in the Group's statement of financial position as at 1 January 2019.
Impacts during the accounting period
Leased assets
Leased assets are initially recognised in the statement of financial position at the lease commencement date and measured at cost. They are subsequently recognised at revalued amount, in accordance with the revaluation model in IAS 16, as are similar assets owned by the Group. Adjustments are made for the impact of depreciation, impairment and the effect of revaluation of lease liabilities, as applicable. Leased assets are presented separately among non-current assets in the statement of financial position.
Leased assets from the beginning to the end of the period are specified as follows:
| Buildings | Land | Total | |
|---|---|---|---|
| Carrying amount at 1 January 2019 | 3.158.939 | 543.122 | 3.702.061 |
| Impact of revaluation of lease liabilities | 118.318 | 65 | 118.383 |
| Depreciation of the period | ( 170.044) | ( 27.593) | ( 197.637) |
| Carrying amount at 30 June 2019 | 3.107.213 | 515.594 | 3.622.806 |
Lease liabilities
Lease liabilities are initially recognised in the statement of financial position at the lease commencement date and measured at the present value of the lease payments that are not paid at that date, discounted at the Group's incremental borrowing rate.
Subsequent to initial recognition the carrying amount of lease liabilities is increased by interest expense and decreased by lease payments made. Furthermore, the carrying amount is remeasured when there is a change in future lease payments arising from an index interest or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether it is reasonably certain that a purchase or extension option will be exercised or a termination option not exercised. Lease payments are split into interest expense element and payment of principal element. In general, the interest expense element of the lease payments decreases during the lease term. Lease liabilities are presented separately in the statement of financial position and split into non-current and current portion.
Condensed Consolidated Interim Financial Statements of Festi hf. January to June 2019
Amounts are in ISK thousand
Notes, contd.:
3. IFRS 16 Leases, contd.
Lease liabilities from the beginning to the end of the period are specified as follows:
| Lease liabilities at 1 January 2019 | 2.702.061 |
|---|---|
| Interest expense | 97.447 |
| Payment of lease liabilities during the period | ( 254.401) |
| Reassessment due to indexation of lease payments | 61.285 |
| Lease payment increases | 66.596 |
| Lease liabilities at 31 June 2019 | 2.672.988 |
Impact on the income statement
Due to the recognition of lease contracts in accordance with IFRS 16 the Group has recognised depreciation in the amount of ISK 197 million and interest expense in the amount of ISK 97 million. Due to application of IFRS 16, in the first quarter of 2019 EBITDA for the period is ISK 254 million higher than it would have been under previous accounting policies.
4. Group entities
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated interim financial statements.
Entities in the Group
The consolidated financial statements include the following entities. All subsidiaries are directly or indirectly owned by the parent company, Festi.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes, contd.:
4. Group entities, contd.
| Company | Activity |
|---|---|
| Festi hf. | Festi hf. is a holding company that specialises in running companies that are leading in the retail and fuel markets in Iceland. Festi's role is to support its operational companies in fulfilling customers' needs so as to enable them to continue to be at the forefront in providing goods and services across the country. Festi provides its subsidiaries with supporting services, such as financial, operating and business development services. |
| Ego ehf. | Ego ehf. is an investment company designed to hold the Company's investments and future developments in that field. |
| Hlekkur ehf. | Hlekkur ehf. is a holding company specialising in investments in convenience stores and other companies related to retail. |
| N1 ehf. | N1 ehf. operates the Company's gas stations. The company operates 29 service stations throughout Iceland whose business is restaurant operations, fuel sales, and sale of various convenience goods. N1 also operates 55 self-service gas stations, 11 repair shops and 5 stores. |
| Krónan ehf. | Krónan ehf. is a retail company that operates convenience stores in Iceland. The company operates stores under the brand names of Krónan, Kr., Kjarval and Nóatún in the capital region as well as in other areas of the country. |
| Elko ehf. | The company is an electronics retail store which operates stores in the capital region, at Keflavík Airport as well as an online shop. |
| Festi fasteignir ehf. | The company leases non-residential real estate. |
| Bakkinn vöruhótel ehf. | Bakkinn vöruhótel ehf. specialises in product storage, packing, labeling and distribution of products for Group's entities and customers that elect to outsource their warehouse activities, partially or in full. |
5. Operating segments
An operating segment is a component of the Group that engages in business activity from which it may earn revenue and incur expenses, including revenue and expenses relating to transactions with other segments of the Group. Segments are determined by the Company's CEO, which regularly reviews the Group's segments so as to decide upon how assets are allocated as well as to monitor their financial performance.
Operating results of segments, their assets and liabilities consist of items directly attributable to individual segments as well as those items which can be allocated in a logical way.
Capital expenditure of segments consist of the total cost of acquisition of operating and intangible assets.
Transactions between segments are priced on an arm's-length basis.
Each operating company within the Group is a separate segment (see note 4 on companies in the Group) but the segment real estate consists of real estate operations of Festi hf. and Festi fasteignir ehf. Segment reporting is presented on page 16.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes, contd.:
6. Sales and gross profit
| Total sales are specified as follows: | 2019 | 2018 |
|---|---|---|
| 1.1.-30.6. | 1.1.-30.6. | |
| Fuel | 11.987.534 | 13.584.177 |
| Other goods | 27.632.936 | 5.330.558 |
| 39.620.471 | 18.914.736 | |
| Breakdown of sales by the Group’s customers | ||
| Fishing industry | 1.756.726 | 1.986.200 |
| Transportation | 834.606 | 2.716.606 |
| Contractors | 1.288.649 | 1.184.673 |
| Foreign sale | 1.171.225 | 1.259.938 |
| Other industries and individuals | 34.569.265 | 11.767.318 |
| Total | 39.620.471 | 18.914.735 |
| Gross profit | ||
| Fuel | 2.336.210 | 2.500.875 |
| Other goods | 6.942.951 | 2.346.547 |
| Total gross profit | 9.279.160 | 4.847.421 |
7. Depreciation and amortisation
Depreciation and amortisation in the statement of income is specified as follows:
| Property and equipment | 931.512 | 483.619 |
|---|---|---|
| Leased assets | 204.406 | 0 |
| Intangible assets | 209.050 | 18.619 |
| Total depreciation and amortisation | 1.344.969 | 502.237 |
8. Income tax
Income tax in the statement of income is specified as follows:
| 2019 | 2018 | ||
|---|---|---|---|
| 1.1.-30.6. | 1.1.-30.6. | ||
| Profit before tax | 721.750 | 890.245 | |
| Income tax based on current tax rate | 20,0% | (144.350) | (178.049) |
| Non-taxable income of shares | 4,0% | (28.969) | 11.428 |
| Other changes | (7,3%) | 52.684 | 24.496 |
| Effective income tax rate | 16,7% | (120.635) | 16,0% |
Deferred tax liability
Deferred tax liability is specified as follows by individual items at the end of the period:
| 30.6.2019 | 31.12.2018 | |
|---|---|---|
| Property and equipment and investment properties | 2.970.429 | 3.123.132 |
| Intangible assets | 841.240 | 807.850 |
| Other items | (66.677) | 7.791 |
| Deferred tax liability | 3.744.992 | 3.938.773 |
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Notes, contd.:
9. Payable to credit institutions
Interest bearing liabilities are specified as follows:
| 30.6.2019 | 31.12.2018 | |||
|---|---|---|---|---|
| Interest rate | Carrying amount | Interest rate | Carrying amount | |
| Non-indexed loan on floating interests | 5,3% | 9.106.110 | 5,1% | 13.474.500 |
| Indexed loan on fixed interests | 0 | 3,9% | 11.610.538 | |
| Indexed loan on floating interest | 3,3% | 21.286.705 | 3,8% | 8.507.995 |
| Long-term portion total | 30.392.815 | 33.593.033 | ||
| Current maturities of long-term loans | 1.470.547 | 1.720.530 | ||
| Short-term loan | 5,3% | 3.000.000 | 5,3% | 2.000.000 |
| Current portion total | 4.470.547 | 3.720.530 | ||
| Payable to credit institutions total | 34.863.362 | 37.313.563 | ||
| Maturities of loans are specified as follows: | 30.6.2019 | 31.12.2018 | ||
| Next 12 months | 1.470.547 | 1.720.530 | ||
| Next 12-24 months | 1.470.547 | 1.733.483 | ||
| Next 24-36 months | 1.470.547 | 1.744.282 | ||
| Next 36-48 months | 1.470.547 | 1.692.671 | ||
| Next 48-60 months | 1.470.547 | 1.101.644 | ||
| Subsequent | 24.510.628 | 27.321.027 | ||
| Payable to credit institutions total | 31.863.362 | 35.313.563 |
In May 2019 the long-term loans of the subsidiary Festi fasteignir ehf. and Hlekkur ehf. were refinanced. Older long-term loans in the amount of ISK 15,300 million were repaid but new loans taken in the amount of ISK 13,500 million.
10. Ratios
The Group's key ratios are specified as follows:
| 2019 | 2018 | |
|---|---|---|
| Statement of income | 1.1.-30.6. | 1.1.-30.6. |
| Turnover rate of inventories at the end of the period: | ||
| Utilisation of goods / weighted average inventories | 7,87 | 7,94 |
| Sales days in trade receivables: | ||
| Weighted average trade receivables / goods and services sold | 18 | 30 |
| Profit before depreciation, amortisation and finance items / gross profit | 34,7% | 30,5% |
| Salaries and salary related expenses / gross profit | 52,6% | 48,1% |
| Sales and distribution cost / gross profit | 6,8% | 9,4% |
| Other operating expenses / gross profit | 16,8% | 16,7% |
| Statement of financial position | 30.6.2019 | 31.12.2018 |
| Current ratio: current assets / current liabilities | 1,05 | 1,11 |
| Liquidity ratio: (current assets - inventories) / current liabilities | 0,57 | 0,58 |
| Leverage: Net interest bearing liabilities / EBITDA | 4,42 | 3,52 |
| Equity ratio: Equity / total capital | 32,7% | 33,4% |
| Return on equity: Return of the year / weighted average equity | 4,6% | 11,0% |
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Operating segments
| N1 | Kronan | ELKO | Real estate | Other | Total | Elimination entries | Application of IFRS 16 * | According to the interim financial statements | |
|---|---|---|---|---|---|---|---|---|---|
| First half 2019 | |||||||||
| Sales | 17.375.557 | 17.458.001 | 4.818.603 | 0 | 0 | 39.652.162 | (31.691) | 0 | 39.620.471 |
| Other operating income | 129.674 | 69.499 | 535 | 1.946.121 | 1.408.928 | 3.554.756 | (2.543.302) | 0 | 1.011.454 |
| Total segment revenue | 17.505.230 | 17.527.500 | 4.819.138 | 1.946.121 | 1.408.928 | 43.206.918 | (2.574.993) | 0 | 40.631.925 |
| Total segment operating expenses | (16.940.221) | (16.890.233) | (4.754.254) | (362.313) | (1.523.305) | (40.470.326) | 2.805.629 | 254.401 | (37.410.297) |
| Segment EBITDA | 565.009 | 637.267 | 64.884 | 1.583.808 | (114.377) | 2.736.592 | 230.636 | 254.401 | 3.221.628 |
| Depreciation and amortisation | (307.830) | (255.771) | (82.658) | (398.198) | (96.105) | (1.140.562) | 0 | (204.406) | (1.344.969) |
| Fair value change of investment properties | 0 | 0 | 0 | (117.281) | 0 | (117.281) | 0 | 0 | (117.281) |
| Share of profit from associates | 0 | 0 | 0 | 0 | 144.846 | 144.846 | 0 | 0 | 144.846 |
| Operating profit for segments | 257.180 | 381.496 | (17.773) | 1.068.329 | (65.636) | 1.623.595 | 230.636 | 49.995 | 1.904.225 |
| Net finance expenses | (1.182.474) | ||||||||
| Income tax | (120.635) | ||||||||
| Profit for the period | 601.114 | ||||||||
| 30 June 2019 | |||||||||
| Segment assets | 18.402.964 | 9.654.528 | 3.390.382 | 37.119.550 | 13.699.033 | 82.266.457 | (6.492.862) | 2.622.806 | 78.396.402 |
| Unallocated assets | 2.048.150 | ||||||||
| Total assets | 80.444.552 | ||||||||
| Unallocated liabilities | 54.834.079 | ||||||||
| Capital expenditure | 178.855 | 338.776 | 49.770 | 448.525 | 70.562 | 1.086.489 | (104.480) | 0 | 982.009 |
| Depreciation and amortisation | (307.830) | (255.771) | (82.658) | (398.198) | (96.105) | (1.140.562) | 0 | (204.406) | (1.344.969) |
- Segment information reviewed by management does not take into account the rules of IFRS 16.
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand
Operating segments, contd.:
| N1 | Krónan | ELKO | Real estate | Other | Total | Elimination entries | Application of IFRS 16 | According to the interim financial statements | |
|---|---|---|---|---|---|---|---|---|---|
| First half 2018 | |||||||||
| Sales | 18.914.736 | 18.914.736 | 18.914.736 | ||||||
| Other operating income | 229.088 | 1.028.762 | 1.257.850 | (1.028.762) | 229.088 | ||||
| Total segment revenue | 19.143.824 | 0 | 0 | 1.028.762 | 0 | 20.172.586 | (1.028.762) | 0 | 19.143.824 |
| Total segment operating expenses | (18.480.753) | (214.335) | (18.695.088) | 1.028.762 | (17.666.326) | ||||
| Segment EBITDA | 663.071 | 0 | 0 | 814.427 | 0 | 1.477.498 | 0 | 0 | 1.477.499 |
| Depreciation and amortisation | (206.551) | (295.686) | (502.237) | (502.237) | |||||
| Share of profit from associates | 58.660 | 0 | 58.660 | 58.660 | |||||
| Operating profit for segments | 515.180 | 0 | 0 | 518.741 | 0 | 1.033.921 | 0 | 0 | 1.033.921 |
| Net finance expenses | (143.677) | ||||||||
| Income tax | (142.124) | ||||||||
| Profit for the period | 748.120 | ||||||||
| 30 June 2018 | |||||||||
| Segment assets | 12.453.827 | 14.865.300 | 27.319.127 | 27.319.127 | |||||
| Unallocated assets | 3.318.979 | ||||||||
| Total assets | 30.638.106 | ||||||||
| Unallocated liabilities | 16.084.026 | ||||||||
| Capital expenditure | 286.491 | 186.823 | 473.314 | 473.314 | |||||
| Depreciation and amortisation | (206.551) | (295.686) | (502.237) | (502.237) |
Condensed Consolidated Interim Financial Statements of Festi hf.
January to June 2019
Amounts are in ISK thousand