Hagar — Investor Presentation 2019

Mar 8, 2019

BONUS

BONUS ALLRA LANDSMANNA

Investor Presentation

8th March 2019

*This presentation is translated from the Icelandic investor presentation. Should there be discrepancies

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Merger of Hagar and Olís

• Integration is well underway
• Changed company
• Strong balance sheet and reliable operations
• Many opportunities
• This presentation takes into account that Olís balance sheet is part of the Consolidated Financial Statements for the first 9 months of the operating year, while Olís operations will be included in the consolidated accounts as of 1 December 2018.
• This presentation will highlight the main projects and priorities

Hagar

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Consolidated Highlights

• for the nine months ended 30 November 2018

• Comprehensive income for the period ISK 1.764 m or 3,1% of sales

• Earnings per share ISK 1,60
• Sales for the period ISK 56.255 m
• Gross profit for the period 24,1%.
• EBITDA for the period 3.110 m
• Total assets 52.737 m at the end of the period
• Cash and cash equivalents 773 m at the end of the period
• Equity 23.726 m at the end of the period
• Equity ratio 45,0% at the end of the period

Hagar

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Statement of Comprehensive Income
	Q3 2018/19
01.09-30.11	Q3 2017/18
01.09-30.11	2018/19
01.03-30.11	2017/18
01.03-30.11
Sales	18.521	16.915	56.255	54.084
Cost of goods sold	(14.124)	(12.719)	(42.703)	(40.691)
Gross profit	4.397	4.196	13.552	13.393
Other operating income	55	141	161	244
Salaries and related expenses	(2.107)	(2.014)	(6.112)	(6.012)
Other operating expenses	(1.428)	(1.425)	(4.255)	(4.327)
Non-recurring expenses relating to business combination	(183)	(4)	(236)	(26)
Profit from operating activities before depreciation and amortisation EBITDA)	734	894	3.110	3.272
Depreciation and amortisation	(265)	(366)	(770)	(822)
Profit from operating activities (EBIT)	469	528	2.340	2.450
Net finance expense	(44)	(27)	(120)	(54)
Share of profit of associates	--	--	--	20
Profit before income tax	425	501	2.220	2.416
Income tax	(97)	(100)	(456)	(483)
Comprehensive income for the period	328	401	1.764	1.933

Hagar

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Impact Factors for the first nine months

• Average change in prices and exchange rates

hagar

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Grocery stores	Qty	Number of customers
Change between years %	+1,0%	+1,6%

hagar

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Gross Profit %

Hagar

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Cost Ratios

Salaries & Other operating expenses

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Balance Sheet

	30.11.2018	28.02.2018
Assets
Non-current assets	34.279	20.364
Current assts	18.458	9.020
Total assets	52.737	29.384
Equity and liabilities
Share capital	1.213	1.103
Other equity	22.513	16.854
Total equity	23.726	17.957
Non-current liabilities	7.137	2.935
Current loans and borrowings	8.890	771
Other payables	12.984	7.721
Total liabilities	29.011	11.427
Total equity and liabilities	52.737	29.384

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Cash Flows

	Q3 2018/19	Q3 2017/18	2018/19	2017/18
	01.09-30.11	01.09-30.11	01.03-30.11	01.03-30.11
Net cash provided by operating activities	753	157	1.676	1.453
Net cash used in investing activities	(5.407)	(1.284)	(5.784)	(2.185)
Net cash used in financing activities	5.073	(829)	4.659	(1.510)
Net increase (decrease) in cash and cash equivalents	419	(1.956)	551	(2.242)
Cash and cash equivalents at beginning of the period	354	2.188	222	2.474
Cash and cash equivalents at 30 November	773	232	773	232

Hagar

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Changes in Equity

	Share capital	Share premium	Legal reserve	Restricted reserve	Retained earnings	Total equity
Equity at 1 March 2018	1.103	--	239	3.664	12.951	17.957
Comprehensive income for the period					1.764	1.764
Transferred to legal reserve			64		(64)	--
Dividends paid, 1.024 ISK per share					(1.129)	(1.129)
Issue of ordinary share as consideration for business combination	42	1.901				1.943
Own shares granted as consideration for business combination	69	3.122				3.191
Transferred to restricted reserves				(3)	3	--
Equity at 30 November 2018	1.213	5.023	303	3.661	13.526	23.726

hagar

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Equity

• ISK million -

Hagar

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Sold Assets – Conditions of Settlement with ICA

Location	Operation
Faxafen	Bónus store
Hallveigarstígyur	Bónus store
Smiðjuvegur	Bónus store
Háaleitisbraut	Service station Olís
Vallargrund 3	Service station Olís
Starengi	ÓB station
Kirkjustétt	ÓB station
Knarrarvogur	ÓB station
Stykkishólmur	Olís store

• All assets sold. Sales proceeds ISK 660 million.
• Two Bónus stores already been closed and delivered to new owners. Sales proceeds for all Bónus assets already been paid.
• Olís stations and the last Bónus store will be delivered to new owners in few weeks.
• Olís assets will be paid on delivery.

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Key Projects

• New Bónus store opened in Skeifan 11 on 1 December 2018. The store has been well received.
• New Bónus store will open in Garðatorg, Garðabæ, in few weeks.
• Bónus in Mosfellsbær will move to a new and better location before the end of Q2.
• New ÓB station will open in Vík í Mýrdal in the spring.

hagar

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Integration Projects

• Estimated synergy ISK 600 million
• Financing
• Olís headquarters move to Skútvogur 5
• Restructuring of warehouse operations
• Streamlining and synergy in core business and support service departments
• Development projects
• Purchasing
• Distribution
• Agreement regarding credit card fees
• Operational factors and services

hagar

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Olís Brands

Vinur við veginn

hagar

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Emphasis on Core Business

• Warehouse operations strengthened and streamlined
• More emphasis in core business
• More emphasis in the wholesale market through Stórkaup og Rekstrarland
• Less emphasis in Hagkaup on clothing
• Borgarnes closes in April
• Clothing departments scaled down or closed
• Core departments strengthened and expanded
• Útilíf. Operations are doing well. Investors are interested. Will be considered.

hagar

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Warehouse Operations - Highlights

• Aðfőng operation in Skútvogur 5, 7 and 9
• Olís inventory and distribution brought under operation of Aðfőng, excl. fuels
• Olís inventory in Súðarvogur 2(4.200 m²) and Vatnagörðum 10 (1.100 m²) brought under operation of Aðfőng
• Olís cost of warehousing mostly reduced
• Hýsing merges with Aðfőng, warehousing in clothing scaled down

hagar

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Warehouse Operations - Highlights

• More efficient purchasing
• More efficient distribution
• More efficient operations
• Streamlined operations

hagar

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Warehouse Operations

• New 4.100 m² warehouse for refrigerated and frozen goods in Korngarðar
• Estimated building cost ISK 1.500-1.600 million
• The land in Korngarðar is owned by Hagar

hagar

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Refinancing

• All long-term debt of Hagar and subsidiaries is being refinanced
• Meetings have been held where ideas have been presented by Hagar regarding the loan composition
• Comparison of offers will be submitted to the Board of Hagar
• The current interest-bearing debt of Hagar is refinanced, in addition to which the refinancing entails increased authorizations in the form of credit lines to meet seasonal fluctuations in working capital, real estate development projects and other investment opportunities.
• Total scope of the refinancing amounts ISK 20 billion
  thereof ISK 13 billion net interest-bearing debt on 30 November 2018

hagar

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Agreement on Daily Settlement of Credit Cards

• Negotiations on a new agreement for Hagar and subsidiaries in the final stages
• Debit and credit cards
• The arrangement will be coordinated for Hagar and subsidiaries and the settlement of credit cards will occur daily
• The agreement provides more favorable terms on transaction handling
• The daily settlement will reduce financial commitment in working capital by over ISK 3 billion on average

hagar

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Property and Land owned by Hagar

	M² in property	Capital Area	Rural Area	Property valuation 2019
Hagar	27.939	21.117	6.822	4,9 ma
Olís og DGV	16.046	5.290	10.755	3,4 ma
Total	43.985	26.407	17.577	8,3 ma

hagar

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Property and Land owned by Hagar

	Size of land in m²
Hagar	97.793
Olís og DGV	235.505
Total	333.298

• Opportunities, cf.
• Development projects, Stekkjarbakki etc.
• Klettagarðar, 14.000 m² land, 22.000 m² construction rights

hagar

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Development Projects

• Stekkjarbakki, Reykjavík
• Lundur, Kópavogur
• Sæbraut, Reykjavík
• Fjallkonuvegur, Reykjavík
• Ánanaust, Reykjavík

hagar

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Stekkjarbakki

• Conversation with the City council
• Fully owned by Hagar
• Location near the BRT network
• Development ideas
• Bónus store
• ÓB station
• Up to 400 apartments
• Composition of apartments according to Reykjavík policy recarding compact neighbourhood development

hagar

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Self-service registers

• Pleased costumers
• Increased performance
• Efficient during peak time
• Usage 34%-52% of total number of sales
• Already set up in 7 Bónus stores and 2 Hagkaup stores
• Increased by 5 Bónus stores and 4 Hagkaups stores this year

hagar

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Reykjavík Pharmacy

• Hagar has signed a contract for the purchase of 90% of shares in Reykjavík Pharmacy
• The agreement is subject to the approval of the Icelandic Competition Authority

hagar

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20 30 been successful

hagar

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Key points

• Labor markets are creating uncertainty and turbulence
• Dividend policy unchanged
• Effect of lease agreements on the balance sheet, IFRS 16, will be published in Q4
• A bill has been proposed that authorizes the sale of non-prescription medicine in stores

hagar

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dli

hagar

Thanks for your audience