Festi — Investor Presentation 2020

Feb 27, 2020

Presentation of Q4 2019 results

Eggert Pór Kristófersson, CEO

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Strategic development of Festi hf.

Festi hf. Is a holding company of 5 operating companies, and its primary goal is investment and support service to those operating companies

Daily operations is divided into support service for its subsidiaries on one hand and investment on the other

Main goal of the support service is to facilitate subsidiaries in redemption of value in their daily operations with various services, such as IT, finance including funding and accounting, human resources, real estate operations along with quality and security operations.

Festi hf. is a part of the board of subsidiaries and partakes in monthly directoral meetings and Festi representatives are appointed board members of subsidiaries.

Festi hf. controls the investment development of the group and serves information to the public and investors.

Value
Efficiency
Trust

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Strategic development of Festi hf.

Clear vision

"The goal of Festi hf. is to control investments of the group with value-added means and support subsidiaries in their value redemption with efficient support services."

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Strategic development of support services

Clear vision

"The goal of support services within Festi is to provide subsidiaries with value-added service and support joint value creation within the group for the future"

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ELKO
KRONAN
BAKKINN
väruhötel

FINANCIALS

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CONSOLIDATED HIGHLIGHTS

| ISK 1.766 m
EBITDA Q4 2019 | 35,3%
Equity ratio | 3,68
Return on equity 12M 20 |
| --- | --- | --- |
| ISK 5.369 m
Cash and cash equivalents | 32,9%
EBITDA/Gross profit Q4 2019 | 50,3%
Salaries/Gross profit Q4; |

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CONSOLIDATED OPERATIONS IN Q4

Amounts are in ISK million	Q4 2019	Q4 2018	Change	% Chg.
Gross profit	5.372	4.858	514	10,6%
Lease revenue and operating income	134	370	-236	-63,7%
Salaries and personnel expenses	-2.703	-2.607	-96	3,7%
Other operating expenses	-1.037	-1.092	54	-5,0%
EBITDA	1.766	1.529	237	15,5%
Key Figures
EBITDA/Gross profit	32,9%	31,5%	1,4%	4,5%
Salaries/Gross profit	50,3%	53,7%	-3,4%	-6,3%
Earnings per share	2,18	1,00	1,18	117,6%

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COSOLIDATED OPERATIONS IN 2019

Amounts are in ISK million	12M 2019	12M 2018	Change	% Chg.
Gross profit	20.295	13.704	6.591	48,1%
Lease revenue and operating income	1.749	776	973	125,4%
Salaries and personnel expenses	-9.953	-6.532	3.421	52,4%
Other operating expenses	-4.486	-3.321	1.165	35,1%
EBITDA	7.605	4.628	2.977	64,3%
Key Figures
EBITDA/Gross profit	37,5%	33,8%	3,7%	11,0%
Salaries/Gross profit	49,0%	47,7%	1,4%	2,9%
Earnings per share	8,49	7,44	1,04	14,0%

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HIGHLIGHTS Q4

N1

• Sale of gasoline and diesel decreased by 4.9% in Q4 2019 compared to Q4 2018
• Sale of goods other than fuel increased by 2.2% in Q4 2019 compared to Q4 2018
• Development in world market price of oil had negative impact on gross margin on Q4

KRONAN

• Sale exceeded expectations in Q4 2019
• Margin level less than expected in Q4 2019
• Biggest christmas season in Krónan from opening
• Gréta María Grétarsdóttir CEO of Krónan, received business award of the year from Viðskiptablaðið
• Krónan topped the charts of consumer satisfaction surveys in groceries

ELKO

• Sale and margin exceeded expectations on Q4 2019
• High sales figures for black Friday and surrounding days.
• Strong showing in the christmas season from Elko

• USD/ISK decreased by 2,4% and difference between highest and lowest exchange rate 3,9%
• EUR/ISK increased by 0,4% and difference between highest and lowest exchange rate 4,7%

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Statement of Financial Position (Assets)

Amounts are in ISK million	12M 2019	12M 2018	Change	% Chg.
Goodwill	14.070	14.070	0	0,0%
Other Intangible assets	4.650	4.504	146	3,2%
Property and equipment	31.434	32.419	-985	-3,0%
Leased assets	3.862	0	3.862	-
Investment properties	7.354	8.752	-1.397	-16,0%
Shares in associates	1.952	2.080	-127	-6,1%
Securities	109	12	97	804,4%
Non-current assets	63.704	61.892	1.595	2,6%
Inventories	7.678	7.616	62	0,8%
Trade receivables	3.756	3.685	72	1,9%
Other short-term receivables	737	340	397	116,9%
Cash and cash equivalents	5.369	4.267	1.102	25,8%
Current assets	17.540	15.907	1.633	10,3%
Total assets	81.244	77.799	3.445	4,4%

Current ratio

Inventory turnover

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Equity ratio

Statement of Financial position (equity and liabilities)

Amounts are in ISK million	12M 2019	12M 2018	Change	% Chg.
Equity	28.688	25.970	2.718	10,5%
Payable to credit institutions	29.942	33.593	-3.651	-10,9%
Lease liabilities	3.586	0	3.586	-
Deferred tax liabilities	4.271	3.939	332	8,4%
Non-current liabilities	37.799	37.532	268	0,7%
Payable to credit institutions	3.438	3.721	-283	-7,6%
Lease liabilities	378	0	378	-
Trade payables	6.803	5.654	1.149	20,3%
Other short-term liabilities	4.138	4.922	-784	-15,9%
Current liabilities	14.757	14.297	459	3,2%
Total equity and liabilities	81.244	77.799	3.445	4,4%

Average net interest bearing liabilities — Average net interest bearing liabilities / EBITDA

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CONSOLIDATED STATEMENT OF CASH FLOWS

Amounts are in ISK million	12M 2019	12M 2018	Change	% Chg.
Cash at the beginning of the year	4.267	2.800	1.467	52,4%
Cash flows from operating activities	5.556	3.825	1.731	45,3%
Investing activities	478	-13.734	14.212	-103,5%
Financing activities	-4.961	11.343	-16.304	-143,7%
FX difference on cash	29	33	-4	-12,5%
Cash at the end of the period	5.369	4.267	1.102	25,8%

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OPERATING SEGMENTS OF THE GROUP

Amounts are in ISK million	N1	Krónan	Elko	Other	Total
Operating revenue outside of group	38.108	36.227	11.126	1.280	86.741
Other revenue within group	37	128	13	5.662	5.839
Total segment revenue	38.145	36.355	11.139	6.942	92.581
Total operating expenses of segments	-36.319	-34.409	-10.599	-3.648	-84.975
Segment EBITDA	1.826	1.945	540	3.294	7.605
Segment depreciation and amortisation	-703	-776	-195	-1.024	-2.698
Fair value changes of investment properties	0	0	0	291	291
Operating result of segments	1.123	1.170	345	2.561	5.198
Financial expenses	64	-165	-27	-2.026	-2.153
Share of profit from associates	0	0	0	325	325
Income tax expense	-240	-178	-53	-104	-575
Profit	947	827	266	756	2.796
Segment assets	15.816	17.593	6.165	41.670	81.244
Segment investments	522	634	126	976	2.258
Segment debts	5.494	7.706	4.356	35.000	52.556

Segment EBITDA

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REAL ESTATE OPERATIONS OF THE GROUP

Properties, key figures	Q4 2019
NOI*	ISK 860 m
NOI ratio	88%
Utization ratio	97%
LTV**	61%
Number of Festi's properties	89
Total square meters	102 thousand m²
Own use	81%
Leased to third parties	19%

• Net operating income
  ** Loan-to-value ratio

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SHARE PRICE DEVELOPMENT

Shareholders (10 largest)
| Lifeyrissjöður verslunarmanna | 10,6% |
| --- | --- |
| Gildi - lifeyrissjöður | 9,8% |
| Lifeyrissjöður starfsmanna rikisins A-, B- og S-division | 9,1% |
| Stefnir | 7,2% |
| Lansdowne Icav Lansdowne Euro | 6,0% |
| Stapi lifeyrissjöður | 5,7% |
| Birta lifeyrissjöður | 5,5% |
| Almenni lifeyrissjöðurinn | 4,8% |
| Festa - lifeyrissjöður | 3,1% |
| Sjóvá-Almennar tryggingar hf. | 2,8% |

Market information
| Issued shares | 330 M |
| --- | --- |
| Market cap at the end of September 2019 | ISK 42.680 M |
| Market cap at the end of September 2018 | ISK 28.875 M |
| Number of shareholders | 796 |
| Annual return 2019 | 12,85% |

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POSITION AND OUTLOOK

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POSITION AND OUTLOOK

Financial forecast

• EBITDA estimate Festi expected to be in range of 7.700 – 8.000 m.kr. 2020, excluding expenses related to the acquisition of Hlekkur, which has already been realised

Assumptions:

• Estimated that slow economic growth 2020 and increased unemployment negatively impacts operating companies within the group
• Less Capelin activities than anticipated in financial forecast
• Turmoil in the oil market and ISK exchange rate can lead to fluctuations of gross margin and working capital
• ISK Exchange rate can cause fluctuations in operations of Festi’s subsidiaries
• Tourism growth marginal

Highlights:

• Finished integrating support services of the group
• Investment in Dropp ehf. https://www.dropp.is/
• Investment in IMF ehf.
• Ongoing work on decreasing operating expenses

Investments:

• Annual consolidated investments of approximately ISK 1,930 million
• New ELKO store in Akureyri
• New Krónan store in Norðurhella
• Policy in a real estate company aimed at reducing square footage and improved utilization of capital

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DISCLAIMER

• All information in this presentation is based on sources which Festi hf. considers reliable at the time of publication, but it cannot be guaranteed that the information is infallible.
• All information in this presentation is owned by Festi hf. It is not permitted to copy, change or distribute in any way information from this presentation, in part or in its entirety.
• This presentation is only intended for information purposes and is not part of, or a basis for, any decisions made by the recipient. Recipients should not interpret information in this presentation as a promise or as instructions. Festi hf. is not obliged to provide recipients of this presentation with further information about the company or to make changes or corrections to the presentation if information upon which it is based changes.
• The company's future outlook is dependent on a number of risks and uncertainties which may have the effect that the actual result in the future is considerably different to the scenario described in this presentation. This includes factors such as exchange rates, the global price of fuel, the availability of funding, new legislation coming into effect and the impact of regulators, etc.
• Festi hf. wishes to point out that recipients of the presentation should not rely on statements contained within in the future since they are only applicable on the date of publication of the presentation. All statements concerning the company's future prospects are entirely valid with respect to this proviso.
• By receiving this presentation the recipient agrees that they are bound by the above provisos and limitations.

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