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Síminn Annual Report 2020
2203_rns_2021-02-18_1d3c1c20-8745-4c35-aeab-4b67b2fd2cdc.pdf
Annual Report
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Síminn
Consolidated Financial Statements
for the year ended 31 December 2020
Síminn hf.
Ármúla 25
108 Reykjavík
Kt. 460207-0880
Contents
Page
Endorsement and Statement by the Board of Directors and the CEO... 2 - 4
Independent auditors' report... 5 - 8
Consolidated Income Statement... 9
Consolidated Statement of Financial Position... 10
Consolidated Statement of Changes in Equity... 11
Consolidated Statement of Cash Flows... 12
Notes to the Consolidated Financial Statements... 13 - 25
Appendices:
Quarterly Statements... 26
Siminn hf. - Consolidated Financial Statements 2020
Embankment and Statement by the Board of Directors and the CEO
Siminn is a leader in the Icelandic telecommunication market and provides customers with a comprehensive range of products in the field of communications, entertainment and information technology, whether for individuals or companies. In its 115 year history, the Company has built one of the most powerful and secure telecommunication network in the world, both in mobile and fixed line systems. Siminn's position is strong in the telecommunication market and in recent years there has been strong revenue growth in information technology and entertainment.
The financial statements comprise the consolidated financial statements of Siminn hf (the Company) and its subsidiaries, as listed in note 15, for the year 2020.
Operations in the year 2020
Net profit for the year 2020 amounted to ISK 2.916 million, compared to profit of ISK 3.070 million for 2019. Total sales for Siminn hf. for the year amounted to ISK 29.939 million according to the Consolidated Income Statement, compared to ISK 29.071 million for 2019. Revenue growth for the year is mainly due to growth in television services and information technology. Margin decreases between years, which is mainly due to the effect of a weaker exchange rate and fines. Total operating expenses amounted to ISK 25.553 million, compared to ISK 24.157 million in 2019. The reduction in financing cost due to lower interest rates largely offsets the effect of lower margins. Total assets as at 31 December 2020 amounted to ISK 65.206 million and total equity amounted to ISK 37.298 million according to the Statement of Financial Position. The Company's equity ratio was 57,2%. The Company's long-term liabilities amounted to ISK 20.025 million at the end of the year and decrease by ISK 243 million between years. The Company pays monthly installments on a bank loan, but used authorization in the loan agreement to postpone a total of 10 due dates in 2020. The authorization was used in light of the fact that net debt is below the target for leverage.
Due to the Competition Authority's decision on 28 May, the Company expensed ISK 500 million in the second quarter of the year. That decision from the Competition Authority led to a reduction in the Company's EBITDA forecast for 2020, as announced to the Icelandic Stock Exchange on May 28. Siminn appealed the ruling to the Competition Appeals Committee, which published its decision on 13 January 2021, where the committee partially overturned ruling 25/2020 and reduced the Company's fine by ISK 300 million. Siminn subsequently sent out another announcement to the Icelandic Stock Exchange that the Company's performance would increase from the announcement sent out at the end of May. The Company's operations are otherwise in accordance with the original plans.
Siminn hf. and Crayon Group AS signed a binding agreement for the sale of Siminn's subsidiary Sensa ehf. on 2 December to Crayon. It is estimated that the transaction will take place in the first half of 2021, provided that certain conditions are met, incl. approval of the Competition Authority. Following the transaction, Siminn and Crayon will have an extensive collaboration that strengthens Siminn's product range in the corporate market.
At Mila, the number of active fiber-optic connections increased by 8,000 during the year, and at the end of the year, about 35,000 households now have an active fiber-optic connection. About 95,000 homes in the country now have access to fiber optics from Mila. As of 1 January 2021, assets and operations related to mobile phone radio network and IP operations will be transferred from Siminn to Mila.
The impact of the COVID-19 pandemic on the Group's operations, financial position and cash flow in the year is negligible. Demand for the Group's core products has remained strong, but if the recession will last long in the economy, it is unclear what the impact will be. The impact of COVID can be seen in the decline in roaming mobile revenue, which amounted to almost ISK 400 million between the years 2019 and 2020. The importance of roaming income has decreased sharply in recent years due to regulatory changes. On the other hand, various staff costs have shrunk, which is explained by employees' work from home and a sharp decline in foreign travel costs. In some cases, COVID had a positive effect on operations, which was reflected in a temporary increase in projects at the subsidiary Sensa.
The Annual General Meeting of Siminn approved on 12 March 2020 a share capital reduction to cancel own shares. The reduction amounted to ISK 500 million of nominal value. The same General meeting approved a share buyback program allowing buyback up to ISK 875 million of nominal value. In accordance with the Annual General Meeting approval, the Company has purchased own shares nominal value ISK 267 million, for ISK 1.751 million. The Company paid ISK 500 million in dividend to it's shareholders.
Regarding the main risk and uncertainty factors, see Note 26.
Siminn hf. - Consolidated Financial Statements 2020
Endorsement and Statement by the Board of Directors and the CEO
Share capital and articles of association
The number of shareholders at year end 2020 was 873, in the beginning of the year they were 1,027. At year end 2020 the ten largest shareholders were:
| Shares in ISK million | Shares in % | |
|---|---|---|
| Stoðir hf. | 1.300 | 14,86% |
| Lífeyrissjóður verslunarmanna | 1.120 | 12,80% |
| Gildi - lífeyrissjóður | 794 | 9,07% |
| Lífeyrissj.starfsm.rík. A-deild | 765 | 8,74% |
| Stapi lífeyrissjóður | 396 | 4,53% |
| Birta lífeyrissjóður | 349 | 3,99% |
| Brú Lífeyrissjóður starfs sveit | 281 | 3,21% |
| Söfnunarsjóður lífeyrísréttinda | 278 | 3,18% |
| Frjálsi lífeyrissjóðurinn | 218 | 2,49% |
| Íslandsbanki hf. | 218 | 2,49% |
| 5.719 | 65,36% |
At the Company's Annual General Meeting held on March 12, 2020, it was agreed to authorize the Board of Directors to purchase up to 10% of the nominal value of the Company's shares, cf. VIII. section of Act no. 2/1995 on Public Limited Companies. The authorization is valid for up to eighteen months. With the approval of this proposal, the same authorization approved at the Company's Annual General Meeting on March 21, 2019, expired.
The Board of Directors proposes a dividend payment to shareholders in 2021 of ISK 500 million. The Board proposes a share capital reduction to cancel own shares of nominal value ISK 267 million plus purchases until 12 February 2021, a total of ISK 316 million nominal value. The Board also proposes authorization to buy up to 10% of issued shares. The Company's board also proposes a reduction in the Company's share capital to a nominal value of ISK 894 million with a payment to shareholders for the amount of 8.000 million. This is done to ensure a more efficient capital structure for the Company following the refinancing of Síminn and Míla as well as the sale of Sensa.
The Company's share capital amounts to ISK 8.750 million, of which the Company owns ISK 267 million. Shareholders are entitled to one vote per share of one ISK.
Corporate Governance
The Board of Directors is focused on practicing good Corporate Governance and that it consists with the Icelandic Corporate Governance guidelines, issued by the Iceland Chamber of Commerce, Nasdag OMX Iceland and the Confederations of Icelandic Employers. The Board of Directors has prepared Corporate Governance Statement in compliance with the Icelandic Corporate Governance guidelines which are described in full in the Corporate Statement in the consolidated financial statements.
The Board of Directors of Siminn has three men and two women and the company fulfills the provisions of the Act on the Gender Role of the Board of Directors. Sylvia Kristín Ólafsdóttir resigned from the Company's board in January due to changes in her own field of work. The company's executive committee consists of four men (80%) and one woman (20%).
Further information on corporate governance is provided in the Corporate Governance Statement section, which is annexed to the Annual Accounts.
Non-Financial Reporting
Non-financial information which are relevant and useful to assess the Company's policies regarding environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues are further discussed in the Non-Financial Reporting in the consolidated financial statements.
Siminn hf. - Consolidated Financial Statements 2020
Endorsement and Statement by the Board of Directors and the CEO
Statement by the Board of Directors and the CEO
According to the best of our knowledge the Consolidated Financial Statements of Síminn hf. are prepared and presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. It is our opinion that these Consolidated Financial Statements give a true and fair view of the consolidated financial performance of Síminn hf. for the year 2020, its assets, liabilities and consolidated financial position as at 31 December 2020 and its consolidated cash flows for the year 2020. Further, in our opinion the Consolidated Financial Statements give a fair view of the development and performance of Síminn's operations and its position and describes the principal risks and uncertainties faced by Síminn hf.
The Board of Directors and the CEO have today discussed the Consolidated Financial Statements of Síminn hf. for the year 2020 and confirm them by means of their signatures.
Reykjavík, 18 Februar 2021.
Board of Directors
Jón Sigurðsson, Chairman
Helga Valfells
Bjarní Þorvarðarson
Kolbeinn Árnason
CEO
Orri Hauksson
Síminn hf. - Consolidated Financial Statements 2020
Independent Auditor's Report
To the Board of Directors and Shareholders of Síminn hf.
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Síminn hf. ("the Group"), which comprise the consolidated statement of financial position as at December 31, 2020, the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at December 31, 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and additional disclosure requirements for listed companies in Iceland.
Our opinion is consistent with the additional report submitted to the Audit Committee and the Board of Directors.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of financial statements in Iceland and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We declare, to the best of our knowledge and belief, that we have not provided any prohibited non-audit services, as referred to in Article 5(1) of the Regulation (EU) 537/2014 and that we remained independent in conducting the audit.
We were first appointed as auditors by the Annual General Meeting on 15 April 2016. We have been re-appointed by resolutions passed by the annual general meeting uninterrupted since then.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Síminn hf. - Consolidated Financial Statements 2020
Independent Auditor's Report, cont.
| Key Audit Matters | How the matter was addressed in the audit |
|---|---|
| Evaluation of goodwill | |
| At year-end 2020, the Group's goodwill amounted to ISK 28,5 million and is the single largest asset of the Company. Goodwill has been allocated between the relevant cash generating units. Goodwill must be tested annually for impairment and also other assets which are not amortized and have an undefined useful life. |
Assessment of value of goodwill is one of key audit matters in audit of the Group's consolidated financial statements due to how large proportion goodwill is of its total assets and that this asset is subject to evaluation by management. Assessment of value of goodwill is based on management's expectations relating to present value of future cash flows of cash generating units.
Information on impairment test performed on the Group's goodwill at year-end is in note 14 and information on significant accounting policies is in note 32.3. | We in cooperation with our valuation specialists evaluated the key assumptions used by management in calculating value of goodwill in each cash generating unit. The audit work included among other things:
• Key assumptions for projected cash flows and operating plans for the next 5 years were evaluated. This work included an evaluation of key assumptions regarding income, operating expenses, contribution margin and investments for the projected period.
• Deviations from prior years' budgets are considered, among other procedures, in our assessment of the projected cash flows and operating plans.
• Key assumptions regarding projected future growth following the projected period were evaluated.
• The calculation model was tested and its functionality evaluated.
• Key assumptions regarding cost of capital (WACC) for each cash generating unit were reviewed and evaluated. WACC was compared to the Group's finance expenses and other market related assumptions.
• We observed the notes to the financial statements and verified that information required in accounting policies were included. |
| Key Audit Matters | How the matter was addressed in the audit |
| Revenue recognition
The Group's revenue recognition systems are complicated and process a large number of transactions in many systems. The main revenues are from mobile and fixed voice, internet and network, IT services and equipment sales. Revenue recognition of the Group is explained in note 32.4.
Revenue recognition is one of key audit matters in the audit of the Group's consolidated financial statements due to the large number of transactions and complicated recognition in the revenue recognition system where supply and price of goods and services changes on a regular basis. | Our audit procedures aimed at evaluating the design, implementation and functionality of automatic controls relating to revenue recognition and by performing relevant substantive audit testing in order to verify the completeness and accuracy in the Group's revenue recognition and that revenue is recognised in the appropriate period. This audit work included among other things:
• The computer and information systems used for revenue recognition were evaluated and the flow between revenue systems and finance system. Furthermore, tests were performed on the specific automatic controls embedded in the process.
• Examination of employee access authorisation in the financial systems.
• Examination of controls in invoicing which are designed to ensure validity and accuracy of issued invoices.
• Analytical tools were utilised in testing sales transactions in order to detect unusual transaction for further examination. |
Siminn hf. - Consolidated Financial Statements 2020
Independent Auditor's Report, cont.
Other information in the annual report
The Board of Directors and CEO are responsible for other information. Other information comprises the annual report, but does not include the consolidated financial statements and our auditor's report thereon. Our opinion on the consolidated financial statements does not cover other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read other information in the annual report when it is available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. The annual report is not available at our reporting date but is expected to be made available to us prior to its publication.
Responsibilities of the Board of Directors and CEO for the Consolidated Financial Statements
The Board of Directors and CEO are responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union and additional disclosure requirements for listed companies in Iceland, and for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors and CEO are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The Board of Directors and CEO are responsible for overseeing the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Siminn hf. - Consolidated Financial Statements 2020
Independent Auditor’s Report, cont.
-
Conclude on the appropriateness of the Board and CEO’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
-
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
-
Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors and audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors and audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors and audit committee, we determine those matters that were of most significance in the audit of the consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Pursuant to the legal requirement under Article 104, Paragraph 2 of the Icelandic Financial Statements Act No. 3/2006, we confirm that, to the best of our knowledge, the report of the Board of Directors accompanying the consolidated financial statements includes the information required by the Financial Statements Act if not disclosed elsewhere in the consolidated financial statements.
The engagement partner on the audit resulting in this independent auditor’s report is Árni Claessen.
Reykjavik, 18 February 2021
KPMG ehf.
Siminn hf. - Consolidated Financial Statements 2020
Consolidated Income Statement for the year 2020
| Notes | 2020 | 2019 | |
|---|---|---|---|
| Net sales | 5 | 29.396 | 28.309 |
| Cost of sales | 6 | ( 16.492) | ( 14.906) |
| Gross profit | 12.904 | 13.403 | |
| Other operating income | 543 | 762 | |
| Operating expenses | 7 | ( 9.061) | ( 9.251) |
| Operating profit | 4.386 | 4.914 | |
| Finance income | 195 | 196 | |
| Finance cost | ( 843) | ( 1.227) | |
| Net exchange rate differences | ( 54) | ( 14) | |
| Net financial items | 9 | ( 702) | ( 1.045) |
| Profit before tax | 3.684 | 3.869 | |
| Income tax | 10 | ( 768) | ( 799) |
| Profit for the year | 2.916 | 3.070 | |
| EBITDA | 4 | 10.500 | 10.516 |
| Earnings per share | |||
| Basic earnings per share | 11 | 0,34 | 0,34 |
| Diluted earnings per share | 11 | 0,34 | 0,34 |
The notes on pages 13 to 25 are an integral part of these consolidated financial statements
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Consolidated Statement of Financial Position as at 31 December 2020
| Notes | 31.12.2020 | 31.12.2019 | |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 12 | 18.991 | 18.716 |
| Right-of-use assets | 13 | 5.378 | 5.118 |
| Intangible assets | 14 | 32.544 | 34.265 |
| Other financial assets | 16 | 544 | 472 |
| Non-current assets | 57.457 | 58.571 | |
| Current assets | |||
| Inventories | 17 | 1.127 | 1.751 |
| Accounts receivables | 18 | 3.147 | 4.188 |
| Other assets | 19 | 834 | 794 |
| Cash and cash equivalents | 735 | 217 | |
| Assets held for sale | 20 | 1.906 | 0 |
| Current assets | 7.749 | 6.950 | |
| Total assets | 65.206 | 65.521 | |
| Equity | |||
| Share capital | 8.483 | 8.750 | |
| Reserves | 13.041 | 14.525 | |
| Other statutory reserve | 154 | 154 | |
| Other reserve | 674 | 456 | |
| Retained earnings | 14.946 | 12.747 | |
| Equity | 21 | 37.298 | 36.632 |
| Liabilities | |||
| Non-current liabilities | |||
| Borrowings | 22 | 14.289 | 14.481 |
| Lease liabilities | 23 | 5.066 | 4.632 |
| Payables | 0 | 353 | |
| Deferred tax liabilities | 24 | 670 | 802 |
| Non-current liabilities | 20.025 | 20.268 | |
| Current liabilities | |||
| Bank loans | 500 | 600 | |
| Accounts payables | 2.554 | 3.533 | |
| Current maturities of borrowings | 22 | 1.150 | 1.150 |
| Current maturities of lease liabilities | 23 | 513 | 600 |
| Taxes to be paid | 850 | 894 | |
| Other liabilities | 25 | 1.540 | 1.844 |
| Liabilities held for sale | 20 | 776 | 0 |
| Current liabilities | 7.883 | 8.621 | |
| Total liabilities | 27.908 | 28.889 | |
| Total equity and liabilities | 65.206 | 65.521 |
The notes on pages 13 to 25 are an integral part of these consolidated financial statements
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Consolidated Statement of Changes in Equity for the year 2020
| Share capital | Reserves | Other statutory reserve | Trans-lation and other reserve | Retained earnings | Total equity | |
|---|---|---|---|---|---|---|
| Total equity 1.1.2019 | 9.033 | 15.552 | 154 | 456 | 10.007 | 35.202 |
| Net profit for the year | 3.070 | 3.070 | ||||
| Payment of dividends (0,0365434 per share) | ( 330) | ( 330) | ||||
| Buyback of ordinary shares | ( 283) | ( 1.027) | ( 1.310) | |||
| Total equity 31.12.2019 | 8.750 | 14.525 | 154 | 456 | 12.747 | 36.632 |
| Total equity 1.1.2020 | 8.750 | 14.525 | 154 | 456 | 12.747 | 36.632 |
| Net Profit for the year | 2.916 | 2.916 | ||||
| Translation difference on foreign operation | 1 | 1 | ||||
| Payment of dividends (0,057144 per share) | ( 500) | ( 500) | ||||
| Buyback of ordinary shares | ( 267) | ( 1.484) | ( 1.751) | |||
| Other changes | 217 | ( 217) | 0 | |||
| Total equity 31.12.2020 | 8.483 | 13.041 | 154 | 674 | 14.946 | 37.298 |
The notes on pages 13 to 25 are an integral part of these consolidated financial statements
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Consolidated Statement of Cash Flow for the year 2020
| Notes | 2020 | 2019 | |
|---|---|---|---|
| Cash flow from operating activities | |||
| Operating profit | 4.386 | 4.914 | |
| Operational items not affecting cash flow: | |||
| Depreciation | 12-14 | 6.114 | 5.602 |
| Gain on sale of fixed assets | (20) | (170) | |
| 10.480 | 10.346 | ||
| Changes in current assets and liabilities: | |||
| Changes in inventories | 547 | (312) | |
| Changes in operating assets | 589 | 187 | |
| Changes in operating liabilities | (371) | 44 | |
| Changes in current assets and liabilities | 765 | (81) | |
| Cash generated by operation | 11.245 | 10.265 | |
| Interest income received | 195 | 195 | |
| Interest expenses paid | (898) | (1.187) | |
| Payments of taxes | (889) | (766) | |
| Net cash from operating activities | 9.653 | 8.507 | |
| Investing activities | |||
| Investment in property, plant and equipment | 12 | (3.940) | (4.200) |
| Investment in intangible assets | 14 | (1.837) | (2.366) |
| Proceeds from sale of property, plant and equipment | 34 | 233 | |
| Changes in other investment | (192) | (38) | |
| Changes in other investment | (51) | 2 | |
| Investment activities | (5.986) | (6.369) | |
| Financing activities | |||
| Dividend paid | (500) | (330) | |
| Buyback of ordinary shares | 21 | (1.751) | (1.310) |
| Payments of non-current liabilities | 22 | (192) | (1.150) |
| Payment of long term lease | 23 | (587) | (552) |
| Bank loans, increase | (100) | 150 | |
| Financing activities | (3.130) | (3.192) | |
| Increase (decrease) in cash and cash equivalents | 537 | (1.054) | |
| Effect of exchange rate fluctuations on cash held | (19) | 25 | |
| Cash and cash equivalents at the beginning of the year | 217 | 1.246 | |
| Cash and cash equivalents at the end of the year | 735 | 217 |
The notes on pages 13 to 25 are an integral part of these consolidated financial statements
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
1. Reporting entity
Siminn hf. (the "Company") is a public limited liability company domiciled in Iceland. The address of the Company's registered office is Ármúli 25, Reykjavík. The consolidated financial statements for the year 2020 comprise the Company and its subsidiaries (together referred to as "Siminn" or the "Group") and Síminn's interest in associated companies. The Company is listed on Nasdaq OMX Iceland.
2. Basis of accounting
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Icelandic disclosure requirements for consolidated financial statements of listed companies. A summary of significant accounting policies is disclosed in Note 32.
The Group's last annual consolidated financial statements is available on the company's website, www.siminn.is, and in the company news release distribution network of Nasdaq Nordic: www.nasdaqomxnordic.com.
These consolidated financial statements were approved and authorised for issue by the Company's Board of Directors on 18 February 2021.
Basis of measurement
These financial statements have been prepared on the historical cost basis.
Presentation and functional currency
These financial statements are presented in Icelandic Krona (ISK), which is the Company's functional currency. All financial information presented in ISK has been rounded to the nearest million.
Use of judgements and estimates
In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
3. Changes in accounting policies
The accounting policies applied in the consolidated financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2019.
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
4. Operating segments
An overview of operating segments is set forward in same manner as regular reporting to the Board of Directors.
The Company operates within seven segments that sell services and equipment in different markets. The operating segments are as follows:
| Operating segment: | Description: |
|---|---|
| Mobile: | Revenue from mobile services in Iceland and abroad, whether traditional GSM service, satellite service, wholesale mobile service or other mobile service. |
| Fixed voice: | Revenue from fixed voice service, fees and traffic. |
| Internet & network: | Revenue from data service, incl. xDSL service, GPON, Internet, IP net, core network, local loop and access network. |
| TV: | Revenues form TV broadcast (fees, traffic and advertisement), TV distribution and Síminn TV. |
| IT services: | Revenue from hosting and operations, advisor fees, sold service and IT related hardware sales. |
| Equipment sales: | Revenue from sale of telco equipment. |
| Other revenue: | Revenue from i.e. sold telco service and hosting. |
Operating segments 2020
| Mobile | Fixed voice | Internet & network | TV | IT services | Equipment sales | Other revenues | Total | |
|---|---|---|---|---|---|---|---|---|
| Revenue | 5.544 | 1.714 | 8.774 | 6.253 | 4.636 | 2.157 | 861 | 29.939 |
| Expenses | ( 19.439) | |||||||
| EBITDA | 10.500 | |||||||
| Depreciation | ( 6.114) | |||||||
| Net finance cost | ( 702) | |||||||
| Taxes | ( 768) | |||||||
| Net earnings for the period | 2.916 | |||||||
| Capital additions | ( 5.743) | |||||||
| Assets | 65.206 | |||||||
| Liabilities | 27.908 |
Operating segments 2019
| Mobile | Fixed voice | Internet & network | TV | IT services | Equipment sales | Other revenues | Total | |
|---|---|---|---|---|---|---|---|---|
| Revenue | 5.772 | 1.803 | 8.573 | 5.621 | 4.162 | 1.932 | 1.208 | 29.071 |
| Expenses | ( 18.555) | |||||||
| EBITDA | 10.516 | |||||||
| Depreciation | ( 5.602) | |||||||
| Net finance cost | ( 1.045) | |||||||
| Share of earnings of associated companies | 0 | |||||||
| Taxes | ( 799) | |||||||
| Net earnings for the period | 3.070 | |||||||
| Capital additions | ( 6.333) | |||||||
| Assets | 65.521 | |||||||
| Liabilities | 28.889 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
| 5. Net sales | 2020 | 2019 |
|---|---|---|
| Sales of service and goods is specified as follows: | ||
| Sales of service | 24.670 | 24.039 |
| Sales of goods from IT services and telecom | 4.726 | 4.270 |
| 29.396 | 28.309 | |
| No customer comprises more than 10% of net sales. | ||
| 6. Cost of sales | ||
| Cost of sales is specified as follows: | ||
| Salaries and related expenses | 3.311 | 3.385 |
| Cost of service sold | 4.367 | 3.574 |
| Interconnecting fees | 663 | 736 |
| Cost of goods sold | 4.340 | 3.878 |
| Capitalised work | ( 889) | ( 844) |
| Depreciation cost of sold services | 4.700 | 4.177 |
| 16.492 | 14.906 |
Cost of service sold consists of; material costs, service contracts, license fees, purchased services and telecommunications costs.
7. Operating expenses
Operating expenses is specified as follows:
| Salaries and related expenses | 4.340 | 4.531 |
|---|---|---|
| Sales and marketing expenses | 507 | 592 |
| Housing and transportation expenses | 705 | 721 |
| IT-Expenses | 778 | 856 |
| General and administrative expenses * | 1.317 | 1.126 |
| Depreciation operating expenses | 1.414 | 1.425 |
| 9.061 | 9.251 |
- Due to the Competition Authority's decision on 28 May, the Company expensed ISK 500 million in the second quarter of the year. That decision from the Competition Authority led to a reduction in the Company's EBITDA forecast for 2020, as announced to the Icelandic Stock Exchange on May 28. Siminn appealed the ruling to the Competition Appeals Committee, which published its decision on 13 January 2021, where the committee partially overturned ruling 25/2020 and reduced the Company's fine by ISK 300 million.
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
- Salaries and salary-related expenses
Salaries and salary-related expenses is specified as follows:
| Salaries | 6.275 | 6.476 |
| --- | --- | --- |
| Contributions to pension funds | 821 | 846 |
| Other salary-related expenses | 555 | 594 |
| | 7.651 | 7.916 |
| Average number of full year equivalents | 597 | 647 |
75% of the Group's employees are men and 25% women, which is the same ratio as the year before.
Salaries and related expenses are specified as follows in the income statement:
| Cost of sales | 3.311 | 3.385 |
| --- | --- | --- |
| Operating expenses | 4.340 | 4.531 |
| | 7.651 | 7.916 |
- Financial income and expense
Financial income and finance costs are specified as follow:
Finance income
| Interest income | 191 | 192 |
| --- | --- | --- |
| Dividend received | 4 | 4 |
| | 195 | 196 |
Finance expense
| Interest on borrowings | ( 528) | ( 868) |
| --- | --- | --- |
| Loan write-downs | ( 18) | 0 |
| Interest expense from lease liability | ( 246) | ( 272) |
| Other finance expenses | ( 51) | ( 87) |
| | ( 843) | ( 1.227) |
| Net exchange rate differences | ( 54) | ( 14) |
| --- | --- | --- |
| Net financial items | ( 702) | ( 1.045) |
- Taxes
Income tax is calculated and expensed. Income tax for the year 2020, to be paid 2021, amounts to ISK 829 million. Equalization tax for the year 2020, to be paid 2021, amounts to ISK 21 million. Taxes to be paid at year end are ISK 850 million.
| Reconciliation of effective income tax rate: | 2020 | 2019 | ||
|---|---|---|---|---|
| Profit before tax | 3.684 | 3.869 | ||
| Income tax using the Company's tax rate | 20,0% | ( 737) | 20,0% | ( 774) |
| Non-deductable expenses | 0,8% | ( 30) | 0,3% | ( 11) |
| Non-taxable income | (0,2%) | 6 | 0,0% | 0 |
| Equalization tax | 0,5% | ( 17) | 0,4% | ( 17) |
| Other changes | (0,3%) | 10 | (0,1%) | 3 |
| Effective income tax rate | 20,8% | ( 768) | 20,7% | ( 799) |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
11. Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Parent by the weighted average number of outstanding shares during the year. The calculation of diluted earnings per share is calculated by dividing the net profit attributable to equity holders of the Parent by the weighted average number of outstanding shares with the diluting effects of expected shares in stock options given to employees. No stock option agreementst were active at year end 2020.
| 2020 | 2019 | |
|---|---|---|
| Profit for the year attributable to equity holders of the parent company | 2.916 | 3.070 |
| Share capital in the beginning of the year | 8.750 | 9.033 |
| Effects of trades with own capital | (111) | (325) |
| Weighted average number of shares for the year | 8.639 | 8.708 |
| Basic earnings per share | 0,34 | 0,34 |
| Diluted earnings per share | 0,34 | 0,35 |
12. Operating assets
| Operating assets are specified as follow: | Telecom equipment | Buildings | Other equipment | Total |
|---|---|---|---|---|
| Cost | ||||
| Balance at 1.1.2019 | 41.517 | 1.920 | 2.322 | 45.759 |
| Additions | 3.975 | 74 | 151 | 4.200 |
| Sales and disposals | (76) | (84) | (89) | (249) |
| Balance at 31.12.2019 | 45.416 | 1.910 | 2.384 | 49.710 |
| Regrouped | (457) | (7) | (993) | (1.457) |
| Additions | 3.721 | 49 | 170 | 3.940 |
| Sales and disposals | (663) | (15) | (62) | (740) |
| Balance at 31.12.2020 | 48.017 | 1.937 | 1.499 | 51.453 |
| Depreciation and impairment losses | ||||
| Balance at 1.1.2019 | 25.214 | 911 | 1.575 | 27.700 |
| Depreciation | 3.135 | 87 | 257 | 3.479 |
| Sales and disposals | (76) | (26) | (83) | (185) |
| Balance at 31.12.2019 | 28.273 | 972 | 1.749 | 30.994 |
| Regrouped | (371) | (7) | (873) | (1.251) |
| Depreciation | 3.133 | 91 | 221 | 3.445 |
| Sales and disposals | (654) | (13) | (59) | (726) |
| Balance at 31.12.2020 | 30.381 | 1.043 | 1.038 | 32.462 |
| Carrying amounts | ||||
| At 1.1.2019 | 16.303 | 1.009 | 747 | 18.059 |
| At 31.12.2019 | 17.143 | 938 | 635 | 18.716 |
| At 31.12.2020 | 17.636 | 894 | 461 | 18.991 |
The official real estate valuation of buildings owned by the Company is ISK 1.807 million (2019: ISK 1.784 million) and insurance value ISK 3.674 million (2019: ISK 3.538). Insurance value of other equipment is ISK 17.106 million (2019: ISK 20.681 million). The Company's operating assets are mortgaged to secure debt.
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
12. Operating assets, contd.:
Depreciation of operating asset and intangible assets are specified as follows in the income statement: 2020 2019
Cost of sales 4.700 4.177
Operating expenses 1.414 1.425
Total 6.114 5.602
Useful life is specified as follows:
Telecom equipment 4 - 30 years
Buildings 15 - 33 years
Other equipment 3 - 10 years
13. Right-of-use assets
The Group leases buildings, cars and fiber optics. The leases typically run for a period between 5 - 20 years, with an option to renew the lease after that date. Most leases provide for additional rent payments that are based on changes in local price indices. Previously, these leases were classified as operating leases under. IAS 17.
| Right-of-use assets are specified as follows: | Telecom equipment | Buildings | Other equipment | Total |
|---|---|---|---|---|
| Cost | ||||
| Balance at 1.1.2019 | 156 | 5.350 | 61 | 5.567 |
| Additions | 13 | 41 | 30 | 84 |
| Remeasurements | 4 | 126 | 1 | 131 |
| Balance at 31.12.2019 | 173 | 5.517 | 92 | 5.782 |
| Additions | 0 | 766 | 61 | 827 |
| Cancelled leases | 0 | ( 80) | ( 20) | ( 100) |
| Adjustments for indexed leases | 5 | 169 | 7 | 181 |
| Balance at 31.12.2020 | 178 | 6.372 | 140 | 6.690 |
| Depreciation | ||||
| Balance at 1.1.2019 | 0 | 0 | 0 | 0 |
| Depreciation | 11 | 615 | 38 | 664 |
| Balance at 31.12.2019 | 11 | 615 | 38 | 664 |
| Depreciation | 11 | 612 | 52 | 675 |
| Disposals | 0 | ( 11) | ( 16) | ( 27) |
| Balance at 31.12.2020 | 22 | 1.216 | 74 | 1.312 |
| Carrying amounts | ||||
| At 1.1.2019 | 156 | 5.350 | 61 | 5.567 |
| At 31.12.2019 | 162 | 4.902 | 54 | 5.118 |
| At 31.12.2020 | 156 | 5.156 | 66 | 5.378 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
14. Intangible assets
Intangible assets are specified as follow:
| Goodwill | Software | Other intangibles | Total | |
|---|---|---|---|---|
| Cost | ||||
| Balance at 1.1.2019 | 55.185 | 4.606 | 3.480 | 63.271 |
| Additions | 0 | 497 | 2.753 | 3.250 |
| Sales and disposals | 0 | ( 28) | 0 | ( 28) |
| Balance at 31.12.2019 | 55.185 | 5.075 | 6.233 | 66.493 |
| Regrouped | ( 1.079) | ( 66) | ( 10) | ( 1.155) |
| Additions | 51 | 379 | 928 | 1.358 |
| Sales and disposals | ( 2) | ( 119) | 0 | ( 121) |
| Balance at 31.12.2020 | 54.155 | 5.269 | 7.151 | 66.575 |
| Amortisation and impairment losses | ||||
| Balance at 1.1.2019 | 26.682 | 3.136 | 980 | 30.798 |
| Depreciation | 0 | 415 | 1.043 | 1.458 |
| Sales and disposals | 0 | ( 28) | 0 | ( 28) |
| Balance at 31.12.2019 | 26.682 | 3.523 | 2.023 | 32.228 |
| Regrouped | ( 7) | ( 62) | ( 1) | ( 70) |
| Depreciation | 0 | 437 | 1.557 | 1.994 |
| Sales and disposals | ( 2) | ( 119) | 0 | ( 121) |
| Balance at 31.12.2020 | 26.673 | 3.779 | 3.579 | 34.031 |
| Carrying amounts | ||||
| At 1.1.2019 | 28.503 | 1.470 | 2.500 | 32.473 |
| At 31.12.2019 | 28.503 | 1.552 | 4.210 | 34.265 |
| At 31.12.2020 | 27.482 | 1.490 | 3.572 | 32.544 |
Useful life is specified as follows:
Software 2 - 7 years
Other intangibles 2 - 15 years
The Company's software is mortgaged to secure debt.
14.1. Annual test for impairment
Goodwill and other intangible assets that have indefinite life are tested for impairment at each reporting date. In performing the annual impairment test of goodwill, an assessment is made as to whether the individual units of the company (cash-generating units) to which goodwill relates will be able to generate sufficient positive net cash flows in the future to support the value of goodwill, trademarks with an indefinite useful life and other net assets of the entity.
For the purpose of impairment testing, goodwill is allocated to units which represent the level the goodwill is monitored for internal management purposes. The total carrying vale of goodwill was allocated to each cash generated unit (CGU) as follows:
| 2020 | 2019 | |
|---|---|---|
| Goodwill S/minh hf. | 19.734 | 19.733 |
| Goodwill Mila ehf. | 7.718 | 7.718 |
| Goodwill Sensa ehf., IT services | 0 | 1.022 |
| Goodwill Radiómiðun ehf., telecommunication | 30 | 30 |
| 27.482 | 28.503 | |
| Trademark classified as Other Intangibles | 1.589 | 1.589 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
14.1. Annual test for impairment, contd.:
Siminn hf. and Crayon Group AS have signed a binding agreement on the sale of Siminn's subsidiary Sensa ehf. to Crayon. The goodwill of Sensa ehf. is now classified as an asset held for sale, see in Note 20. Sensa's expected sale price less costs is higher than the asset base and therefore there is no need to perform an impairment test on th company's goodwill.
The recoverable amounts of cash-generating units was based on their value in use and were determined by discounting the future cash flows generated from the continuing use of the CGU. Cash flows were projected based on actual operating results and a five year business plan. Cash flows beyond the forecast period were extrapolated using a constant nominal growth rate which management believes is consistent with the long-term average growth rate for the markets in which Siminn operates. Discount rates which reflect the risk-free interest rate with the addition of specific risks related to equity and liabilities are used to calculate recoverable amounts.
The forecast period used to calculate recoverable amount of Mila has been shortened from ten years to five year. The development of infrastructure that has taken place in recent years has come a long way and the remainder of that project will largely fall into place over the next five years. The company's cash flow will reach equilibrium at that time. Management therefore believes that there is no longer need for a longer forecast period than five year.
Measurement of trademarks is based on expected future cash flows for the trademarks on the basis of key assumptions about expected useful life and relief from royalty rate and a theoretically calculated tax effect. A discount rate is used which reflects the risk-free interest rate with the addition of specific and estimated future risks associated with the particular trademark.
The value in use were based number of key assumptions which represents the managements assessment of future trends in the market and are based on both external and internal sources. The key assumptions used for value in use calculations are as follows:
| 2020 | 2019 | |
|---|---|---|
| Siminn | ||
| Long term growth rate | 1,8% | 2,5% |
| Weighted average revenue growth 2020-2024 / 2019-2023 | 0,7% | 1,3% |
| EBITDA average growth 2020-2024 / 2019-2023 | 2,1% | 3,5% |
| WACC | 7,0% | 7,2% |
| Debt ratio | 62,9% | 55,4% |
| Finance cost rate | 4,4% | 4,2% |
| Mila | ||
| Long term growth rate | 2,0% | 2,5% |
| Weighted average revenue growth 2020-2029 / 2019-2028 | 1,1% | 2,1% |
| EBITDA average growth 2020-2029 / 2019-2028 | 1,3% | 2,1% |
| WACC | 6,8% | 7,0% |
| Debt ratio | 62,9% | 55,4% |
| Finance cost rate | 4,4% | 4,2% |
| Radiómõun | ||
| Long term growth rate | 2,5% | 2,5% |
| Weighted average revenue growth 2020-2024 / 2019-2023 | 2,8% | 3,1% |
| EBITDA average growth 2020-2024 / 2019-2023 | 6,7% | 7,5% |
| WACC | 13,1% | 13,4% |
| Debt ratio | 27,5% | 28,1% |
| Finance cost rate | 5,9% | 5,4% |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
14.1. Annual test for impairment, contd.:
The recoverable amounts of the cash-generating units were estimated to be higher than carrying amounts and no impairment was required.
In performing impairment test, management has to evaluate certain assumptions that are used performing the test. Those assumptions always include some uncertainty that can have effect on the outcome of test if those assumptions prove to be wrong. Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of any cash generating unit to exceed its recoverable amount.
| 15. Subsidiaries | Principle place of operation | Ownership | |
|---|---|---|---|
| 2020 | 2019 | ||
| Mila ehf. | Iceland | 100,0% | 100,0% |
| Radiómiðun ehf. | Iceland | 100,0% | 100,0% |
| Sensa ehf. | Iceland | 100,0% | 100,0% |
| Sensa IT Aps | Denmark | 100,0% | 100,0% |
| Farsímagreiðslur ehf. | Iceland | 100,0% | 100,0% |
In December, Síminn hf. and Crayon Group AS signed a binding agreement on the sale of Síminn's subsidiary Sensa ehf. to Crayon. It is estimated that the transaction will take place in the first half of 2021, provided that certain conditions are met, incl. approval of the Competition Authority.
| 16. Other financial assets | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other financial assets are specified as follows: | ||
| Investment in other companies | 54 | 47 |
| TV programs for screening | 209 | 143 |
| Prepaid expense | 12 | 40 |
| Non-current receivables | 269 | 242 |
| Other financial assets total | 544 | 472 |
17. Inventories
Inventories are specified as follows:
| Finished goods | 698 | 1.232 |
|---|---|---|
| TV programs for screening | 429 | 519 |
| Inventory total | 1.127 | 1.751 |
Cost of goods sold amounted to ISK 4.340 million (2019: 3.878 million). All finished goods has been pledged as security against borrowings.
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
| 18. Accounts Receivables | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Accounts receivables are specified as follows: | ||
| Accounts receivables | 3.280 | 4.345 |
| Allowances for doubtful accounts | ( 133) | ( 157) |
| Accounts receivables total | 3.147 | 4.188 |
| Movement in the allowance for doubtful accounts | ||
| Balance at the beginning of the year | ( 158) | ( 195) |
| Impairment losses recognised on receivables | ( 54) | ( 32) |
| Amount written off as uncollectable | 72 | 70 |
| Assets held for sale | 7 | 0 |
| Balance at the end of the year | ( 133) | ( 157) |
In determining the recoverability of an account receivable, the Company considers any change in the credit quality of the accounts receivables from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. See more information in note 26.
19. Other assets
Other assets are specified as follows:
| Prepayments and accrued income | 389 | 613 |
|---|---|---|
| Other current assets | 445 | 181 |
| Other assets total | 834 | 794 |
20. Assets held for sale
In December, Síminn hf. and Crayon Group AS signed a binding agreement on the sale of Síminn's subsidiary Sensa ehf. to Crayon. It is estimated that the transaction will take place in the first half of 2021, provided that certain conditions are met, incl. approval of the Competition Authority. Selling price is ISK 3.250 million. The aim of the sale is to expand cooperation with the Crayon Group as a whole and provide companies with a more comprehensive telecommunications and IT service in one package, as well as reducing the company's operating costs. Sensa is classified under IT in segment reports. Due to the planned sale, the assets and liabilities of Sensa ehf. are therefore classified as assets and liabilities for sale in the financial statements.
| 31.12.2020 | |
|---|---|
| Goodwill | 1.072 |
| Operating assets | 219 |
| Inventories | 84 |
| Accounts receivables | 508 |
| Deferred tax asset | 23 |
| Assets held for sale | 1.906 |
| Current liabilities | 776 |
| Liabilities held for sale | 776 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
21. Equity
21.1. Share capital
The Company's share capital amounts to ISK 8.750 million (2019: ISK 9.250 million) according to its Articles of Association. Shareholders are entitled to one vote per share of one ISK. All shares are paid in full. The Company held own shares in the amount of ISK 2167 million at year end 2020.
21.2. Reserves
Reserves include the difference of; payments that the Group received in selling, bying and issuing own capital; and the nominal amount of issued capital.
21.3. Other statutory reserve
Other statutory reserves is a statutory reserve based on legal requirements of the Icelandic Financial Statements Act No. 3/2006.
21.4. Translation and other reserve
Translation and other reserve is as follows:
| Trans-lation difference | Other reserve | Total | |
|---|---|---|---|
| Balance at 1.1. 2019 | 453 | 588 | 1.041 |
| Changes in the year | 0 | ( 585) | ( 585) |
| Balance at 31.12.2019 | 453 | 3 | 456 |
| Balance at 1.1. 2020 | 453 | 3 | 456 |
| Changes in the year | 0 | 217 | 217 |
| Translation difference | 1 | 0 | 1 |
| Balance at 31.12.2020 | 454 | 220 | 674 |
22. Non-current liabilities
Borrowings are specified as follows:
| 2020 | 2019 | |||
|---|---|---|---|---|
| Average interest rates | Balance | Average interest rates | Balance | |
| Loans in ISK | 3,29% | 15.429 | 5,26% | 15.621 |
| Finance lease liabilities | 10 | 10 | ||
| Current maturities | ( 1.150) | ( 1.150) | ||
| 14.289 | 14.481 | |||
| Changes in borrowings during the year are as follows: | 2020 | 2019 | ||
| Balance at 1.1. | 15.631 | 16.781 | ||
| Repayment of borrowings | ( 192) | ( 1.150) | ||
| 15.439 | 15.631 |
Aggregated annual maturities are as follows:
| Within 12 months | 1.150 | 1.150 |
|---|---|---|
| 12 - 24 months | 1.150 | 1.150 |
| 24 - 36 months | 1.150 | 1.150 |
| 36 - 48 months | 1.150 | 1.150 |
| 48 - 60 months | 1.150 | 1.150 |
| More than 60 months | 9.689 | 9.881 |
| Total borrowings, including current maturities | 15.439 | 15.631 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
23. Lease liabilities
Changes in lease liabilities during the year are as follows:
| Telecom equipment | Buildings | Other equipment | Total | |
|---|---|---|---|---|
| Lease liabilities 1.1. 2019 | 156 | 5.350 | 61 | 5.567 |
| Repayment of lease liabilities | (7) | (506) | (39) | (552) |
| Additions | 13 | 41 | 32 | 86 |
| Remeasurements | 4 | 126 | 1 | 131 |
| Lease liabilities 31.12. 2019 | 166 | 5.011 | 55 | 5.232 |
| Repayment of lease liabilities | (8) | (531) | (48) | (587) |
| Additions | 0 | 766 | 61 | 827 |
| Disposals | 0 | (68) | (6) | (74) |
| Remeasurements | 5 | 169 | 7 | 181 |
| Lease liabilities 31.12. 2020 | 163 | 5.347 | 69 | 5.579 |
Maturity analysis is as follows: 2020 2019
| Within 12 months | 513 | 600 |
|---|---|---|
| 12 - 24 months | 503 | 336 |
| 24 - 36 months | 514 | 324 |
| 36 - 48 months | 529 | 341 |
| 48 - 60 months | 558 | 351 |
| More than 60 months | 2.962 | 3.280 |
| Lease liabilities, including current maturities | 5.579 | 5.232 |
Extension options
Most of the Group’s property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.
24. Deferred tax
31.12.2020 31.12.2019
Analysis of movements in the net deferred tax balances during the period is as follows:
| Deferred tax at the beginning of the year | 802 | 898 |
|---|---|---|
| Changes due to sale | 9 | 0 |
| Income tax posted to the income statement | 693 | 778 |
| Taxes to be paid | (829) | (874) |
| Prior year correction | (5) | 0 |
| Deferred tax liability at the end of the period | 670 | 802 |
The deferred tax liability is allocated as follows:
| Property and equipment | (344) | (323) |
|---|---|---|
| Intangible assets | (345) | (473) |
| Current assets | (20) | (33) |
| Leases | 31 | 23 |
| Hedge reserve | 8 | 4 |
| (670) | (802) |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Notes to the Consolidated Financial Statements
| 25. Other liabilities | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other liabilities are specified as follows: | ||
| Accrued expenses | 737 | 888 |
| Salaries and related expenses | 313 | 327 |
| VAT | 479 | 618 |
| Other | 11 | 11 |
| Other liabilities total | 1.540 | 1.844 |
28. Legal proceedings
The Company is currently involved in several legal disputes that relate i.a. to Competition and Media Act. Síminn and Vodafone have been in a dispute regarding distribution of media content. The Competition Authority and Post- and Telecommunication Authority ruled that Síminn breached against media act no. 10/2018 and fined Síminn. The fine, 9 million ISK has already been paid. The Company believes that its actions are fully compliant with the relevant Acts and appealed the decision to the District Court of Reykjavík. The Reykjavík District Court ruled on the matter and partially annulled the Decision and lowered the fine to 7 million ISK. After the initial Decisions of the PTA Vodafone filed a claim against Síminn for compensation of 1.9 billion ISK. Síminn rejected the claim and pointed out that in Vodafone claim there are no arguments for compensation, nor an attempt to prove the alleged loss. Síminn believes there is no base for the claim from Vodafone and the District Court dismissed the case due the failure to state the reasoning for the case. Vodafone later filed a motion to appoint two Court appointed Assessors and has filed a case against Síminn before the District Court and claimed damages of 125 million ISK. Síminn has rejected this claim and will file its written arguments soon. Gagnaveita Reykjavíkur filed a claim against Síminn of 1.3 billion ISK. Síminn has rejected the claim and has pointed out that in the claim there are no arguments to conclude that conditions for liability damages existed. Síminn believes there is no base for the claim.
IHM has sued Síminn for 337 million ISK plus interest for unpaid expenses from 2009. Síminn has rejected this claim and filed its written arguments.
Despite the uncertain nature of the outcome of these cases, it is the management opinion that the cases will not result in substantial financial cost. In those cases where the Company might be forced to pay damages, the cost is estimated by the management and recognised in the financial statement.
The Competition Authority reached a decision that Síminn had infringed Competition Authority Decision no. 6/2015 and 20/2015 and fined Síminn for 500 million ISK, which the Company has already paid. Síminn appealed the Decision to the Competition Appeal committee in order to have the CA decision annulled. The CAC annulled that part of the CA decision that related to alleged
31. Subsequent event
There are no subsequent events to report.
33. Standard issued but not yet effective
A number of new standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements.
- COVID-19-Related Rent Concessions (Amendment to IFRS 16).
- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
- Reference to Conceptual Framework (Amendments to IFRS 3).
- Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
- IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts.
Notes 26, 27, 29, 30 and 32 are not translated into English.
Simin hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK
Quarterly Statements - unaudited
Summary of the Company's operating results by quarters:
| 1 F 2020 | 2 F 2020 | 3 F 2020 | 4 F 2020 | Samtals | |
|---|---|---|---|---|---|
| Net sales | 7.120 | 7.169 | 7.119 | 7.988 | 29.396 |
| Cost of sales | ( 3.802) | ( 4.118) | ( 3.819) | ( 4.753) | ( 16.492) |
| Gross profit | 3.318 | 3.051 | 3.300 | 3.235 | 12.904 |
| Other operating income | 126 | 107 | 106 | 204 | 543 |
| Operating expenses | ( 2.214) | ( 2.743) | ( 1.997) | ( 2.107) | ( 9.061) |
| Operating profit | 1.230 | 415 | 1.409 | 1.332 | 4.386 |
| Net financial items | ( 270) | ( 178) | ( 149) | ( 105) | ( 702) |
| Profit before tax | 960 | 237 | 1.260 | 1.227 | 3.684 |
| Income tax | ( 196) | ( 154) | ( 246) | ( 172) | ( 768) |
| Profit for the year | 764 | 83 | 1.014 | 1.055 | 2.916 |
| EBITDA | 2.735 | 1.938 | 2.933 | 2.894 | 10.500 |
| 1 F 2019 | 2 F 2019 | 3 F 2019 | 4 F 2019 | Samtals | |
| --- | --- | --- | --- | --- | --- |
| Net sales | 6.773 | 6.808 | 6.958 | 7.770 | 28.309 |
| Cost of sales | ( 3.425) | ( 3.591) | ( 3.523) | ( 4.367) | ( 14.906) |
| Gross profit | 3.348 | 3.217 | 3.435 | 3.403 | 13.403 |
| Other operating income | 189 | 307 | 140 | 126 | 762 |
| Operating expenses | ( 2.430) | ( 2.246) | ( 2.208) | ( 2.367) | ( 9.251) |
| Operating profit | 1.107 | 1.278 | 1.367 | 1.162 | 4.914 |
| Net financial items | ( 313) | ( 269) | ( 232) | ( 231) | ( 1.045) |
| Profit before tax | 794 | 1.009 | 1.135 | 931 | 3.869 |
| Income tax | ( 179) | ( 211) | ( 238) | ( 171) | ( 799) |
| Profit for the year | 615 | 798 | 897 | 760 | 3.070 |
| EBITDA | 2.369 | 2.602 | 2.817 | 2.728 | 10.516 |
Siminn hf. - Consolidated Financial Statements 2020
All amounts are in millions of ISK