Síminn — Interim / Quarterly Report 2023

Aug 22, 2023

Síminn

Condensed Consolidated Interim Financial Statements

1 January to 30 June 2023

Síminn hf.

Ármúla 25

108 Reykjavík

Kt. 460207-0880

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Contents

Page

Endorsement and Statement by the Board of Directors and the CEO... 2
Consolidated Income Statement... 3
Consolidated Statement of Financial Position... 4
Consolidated Statement of Changes in Equity... 5
Consolidated Statement of Cash Flows... 6
Notes to the Consolidated Financial Statements... 7 - 12
Quarterly Statements... 13

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

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Endorsement and Statement by the Board of Directors and the CEO

The Condensed Consolidated Interim Financial Statements of Síminn hf. and its subsidiaries (together referred to as "Síminn" or the "Company") for the period 1 January to 30 June 2023 are prepared and presented in accordance with International Financial Reporting Standards (IFRS) for Interim Financial Statements (IAS 34) as adopted by the EU. The Financial Statements are neither audited or reviewed by the Company's auditors.

Net profit for the first six months of the year 2023 amounted to ISK 425 million, compared to profit of ISK 1.251 million for the same period in 2022. Net profit from continued operations amounted to ISK 425 million, compared to profit of ISK 963 million for the same period in 2022. Total sales for the first six months of the year amounted to ISK 12.581 million according to the Income Statement, compared to ISK 12.129 million for the same period in 2022. Total assets as at 30 June 2023 amounted to ISK 32.975 million and total equity amounted to ISK 18.161 million according to the Statement of Financial Position. The Company's equity ratio was 55,1%.

Part of the selling price of Míla ehf. to Ardian, which was announced on September 30, 2022 was in a form of a bond. The bond was sold to a company owned by Ardian for ISK 15.7 billion at the end of January.

The Annual General Meeting of Síminn approved on 9 March 2023 a share capital decrease. On one hand to cancel out own shares which amounted to ISK 185 million in nominal value, and on the other hand a share capital decrease of ISK 1.625 million with a payment to shareholder of ISK 15.7 billion which the Company paid on March 31. In total the share capital therefore decreased from ISK 4.400 million to ISK 2.775 million. The same Annual General Meeting approved a share buyback program allowing buyback for up to ISK 277.5 million in nominal value and a proposal to pay ISK 500 million in dividend to shareholders, the dividend was paid on March 31. Based on the approval of the Annual General Meeting held in 2022 and 2023 the Company has this year purchased own shares for nominal value ISK 134,5 million, market value ISK 1.452 million.

At a Board meeting on 16 May 2023 the Board approved a share option plan for managers for a maximum of ISK 75 million shares. The decision is based on approval from the Annual General Meeting of Síminn from 9 March 2023. A share option plan has also been finalized for all employees of the Company and is based on Article 10 of Act no. 90/2003 on income tax. In total employee purchases can be up to ISK 92,6 million shares. Expensing based on those share option plans have begun.

Statement by the Board of Directors and the CEO

According to the best of our knowledge the Condensed Consolidated Interim Financial Statements of Síminn hf. are prepared and presented in accordance with International Financial Reporting Standards (IFRS) for Interim Financial Statements (IAS 34) as adopted by the EU. It is our opinion that these Condensed Consolidated Interim Financial Statements give a true and fair view of the consolidated financial performance of Síminn hf. for the six months ended 30 June 2023, its assets, liabilities and consolidated financial position as at 30 June 2023 and its consolidated cash flows for the six month period ended 30 June 2023. Further, in our opinion the Condensed Consolidated Interim 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 Condensed Consolidated Interim Financial Statements of Síminn hf. for the period 1 January to 30 June 2023 and confirm them by means of their signatures.

Reykjavík, 22 August 2023

Board of Directors

Jón Sigurðsson, Chairman

Sigrún Ragna Ólafsdóttir, vice chairman

Arnar Þór MÁSSON

Bjarni Þórvarðarson

Björk Víðarsdóttir

CEO

Orri Hauksson

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

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Consolidated Income Statement and other comprehensive income for the period 1 January to 30 June 2023

	Notes	2023	2022	2023	2022
		1.4.-30.6.	1.4.-30.6.	1.1.-30.6.	1.1.-30.6.
Net sales	5	6.117	5.898	12.270	11.855
Cost of sales	6	( 4.110)	( 3.597)	( 8.265)	( 7.359)
Gross profit		2.007	2.301	4.005	4.496
Other operating income		166	138	311	274
Operating expenses	7	( 1.811)	( 1.757)	( 3.636)	( 3.514)
Operating profit		362	682	680	1.256
Finance income		124	90	384	290
Finance cost		( 263)	( 252)	( 512)	( 365)
Net exchange rate differences		( 6)	( 3)	( 18)	2
Net financial items	8	( 145)	( 165)	( 146)	( 73)
Profit before tax		217	517	534	1.183
Income tax		( 38)	( 107)	( 109)	( 220)
Profit for the period from continuing operations		179	410	425	963
Profit from discontinued operation, net of tax		0	95	0	288
Profit for the period		179	505	425	1.251
EBITDA		1.410	1.399	2.725	2.726
Earnings per share
Basic earnings per share from continued operations		0,06	0,05	0,13	0,13
Diluted earnings per share from continued operations		0,06	0,05	0,13	0,13

The notes on pages 7 to 12 are an integral part of these consolidated financial statements

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Consolidated Statement of Financial Position as at 30 June 2023

	Notes	30.6.2023	31.12.2022
Assets
Non-current assets
Property, plant and equipment		2.534	2.466
Right-of-use assets		847	941
Intangible assets		21.839	22.122
Other financial assets	9	576	580
Non-current assets		25.796	26.109
Current assets
Inventories	10	1.336	1.212
Accounts receivables	11	2.118	2.045
Loans (Siminn Pay)	12	1.944	1.359
Other assets	13	1.054	1.048
Bonds at fair value	14	0	15.687
Cash and cash equivalents		727	3.721
Current assets		7.179	25.072
Total assets		32.975	51.181
Equity
Share capital		2.679	4.242
Reserves		0	495
Statutory reserve		670	1.061
Other reserve		558	576
Retained earnings		14.254	28.887
Equity		18.161	35.261
Liabilities
Non-current liabilities
Borrowings		5.963	5.956
Lease liabilities		627	731
Payables		0	639
Deferred tax liabilities	15	200	89
Non-current liabilities		6.790	7.415
Current liabilities
Bank loans		1.909	1.929
Accounts payables	16	4.700	4.788
Current maturities of lease liabilities		265	251
Taxes to be paid		180	577
Other liabilities	17	970	960
Current liabilities		8.024	8.505
Total liabilities		14.814	15.920
Total equity and liabilities		32.975	51.181

The notes on pages 7 to 12 are an integral part of these consolidated financial statements

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Consolidated Statement of Changes in Equity 1 January to 30 June 2023

	Share capital	Reserves	Other statutory reserve	Translation- and other reserve	Retained earnings	Total equity
Total equity 1.1.2022	7.314	3.278	154	2.020	18.313	31.079
Net profit for the period					1.251	1.251
Payment of dividends (0,069 per share)				(	500)	( 500)
Buyback of ordinary shares	( 156)	( 1.735)				( 1.891)
Other changes				327	( 327)	0
Total equity 30.6.2022	7.158	1.543	154	2.347	18.737	29.939
Total equity 1.1.2023	4.242	495	1.061	576	28.887	35.261
Net profit for the period					425	425
Payment of dividends (0,119 per share)				(	499)	( 499)
Share capital decrease	( 1.429)		( 357)		( 13.794)	( 15.580)
Buyback of ordinary shares	( 134)	( 495)	( 34)		( 789)	( 1.452)
Other changes				( 18)	18	0
Share option charge					6	6
Total equity 30.6.2023	2.679	0	670	558	14.254	18.161

The notes on pages 7 to 12 are an integral part of these consolidated financial statements

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Consolidated Statement of Cash Flow 1 January to 30 June 2023

	Notes	2023	2022	2023	2022
		1.4.-30.6.	1.4.-30.6.	1.1.-30.6.	1.1.-30.6.
Cash flow from operating activities
Operating profit		362	682	680	1.256
Operational items not affecting cash flow:
Depreciation		1.048	717	2.045	1.470
Gain on sale of fixed assets		(5)	0	(5)	(4)
Other items not affecting cash flow		6	0	6	0
		1.411	1.399	2.726	2.722
Changes in current assets and liabilities:
Changes in inventories		(239)	13	(241)	(293)
Changes in operating assets		390	264	(89)	6
Changes in operating liabilities		(168)	(109)	168	768
	Changes in current assets and liabilities	(17)	168	(162)	481
	Cash generated by operation	1.394	1.567	2.564	3.203
Interest income received		124	91	392	179
Interest expenses paid		(248)	(242)	(398)	(355)
Payments of taxes		(236)	(209)	(394)	(348)
	Net cash from operating activities	1.034	1.207	2.164	2.679
Investing activities
Investment in property, plant and equipment		(221)	(271)	(489)	(377)
Investment in intangible assets		(742)	(604)	(2.090)	(757)
Proceeds from sale of property, plant and equipment		10	0	10	4
Changes in other investment		(288)	(50)	(554)	(169)
Sale of bond		0	0	15.685	0
Changes in other investment		0	0	0	152
	Investment activities	(1.241)	(925)	12.562	(1.147)
Financing activities
Dividend paid		0	(500)	(499)	(500)
Buyback of ordinary shares		(809)	(961)	(1.452)	(1.891)
Share capital decrease, payment to shareholders		0	0	(15.580)	0
Payment of long term lease		(66)	(47)	(129)	(93)
Bank loans, decrease		(21)	(1.168)	(21)	(1.186)
	Financing activities	(896)	(2.676)	(17.681)	(3.670)
Decrease in cash and cash equivalents		(1.103)	(2.394)	(2.955)	(2.138)
Effect of exchange rate fluctuations on cash held		(2)	0	(39)	(6)
Cash and cash equivalents at the beginning of the period		1.832	3.759	3.721	3.509
Cash and cash equivalents at the end of the period		727	1.365	727	1.365

The notes on pages 7 to 12 are an integral part of these consolidated financial statements

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Notes to the Consolidated Financial Statements

1. Reporting entity

Síminn hf. (the "Company") is a public limited liability company domiciled in Iceland. The address of the Company's registered office is Ármúli 25, Reykjavík. These condensed consolidated interim financial statements ('interim financial statements') for the six months ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as "Síminn" or the "Company"). The subsidiaries are Síminn Pay ehf. and Radíómiðun ehf.

2. Basis of accounting

2.1. Statement of compliance

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Company's last annual consolidated financial statements as at and for the year ended 31 December 2022. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the last annual financial statements.

The Company'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 interim financial statements were authorised for issue by the Company's board of directors on August 22, 2023.

2.2. Basis of measurement

These interim financial statements have been prepared on the historical cost basis.

2.3. Presentation and functional currency

These interim 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.

2.4. Use of judgements and estimates

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

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 these interim financial statements are the same as those applied in the Company's consolidated financial statements as at and for the year ended 31 December 2022.

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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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 six 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, local loop and access network.
TV:	Revenues form TV broadcast (fees, traffic and advertisement), TV distribution and Siminn TV.
Equipment sales:	Revenue from sale of telco equipment.
Other revenue:	Revenue from i.e. sold telco service, IT and finance.
Operating segments 1.1.-30.6.2023
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	Mobile
Revenue	3.105
Expenses
EBITDA
Depreciation
Net finance cost
Taxes
Profit for the period from continuing operations
Profit from discontinued operation, net of tax
Net earnings for the period
Capital additions
Assets 30.6.2023
Liabilities 30.6.2023
Operating segments 1.1.-30.6.2022
	Mobile
Revenue	2.882
Expenses
EBITDA
Depreciation
Net finance cost
Taxes
Profit for the period from continuing operations
Profit from discontinued operation, net of tax
Net earnings for the period
Capital additions
Assets 30.6.2022
Liabilities 30.6.2022

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Notes to the Consolidated Financial Statements

5. Net sales	2023	2022
Sales of service and goods is specified as follows:	1.1.-30.6.	1.1.-30.6.
Sales of service	11.319	10.758
Sales of goods	951	1.097
	12.270	11.855

No customer comprises more than 10% of net sales.

6. Cost of sales

Cost of sales is specified as follows:

Salaries and related expenses	497	429
Cost of service sold	5.060	4.549
Interconnecting fees	336	351
Cost of goods sold	868	1.017
Capitalised work	( 92)	( 99)
Depreciation cost of sold services	1.596	1.112
	8.265	7.359

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	1.794	1.678
Sales and marketing expenses	270	273
Housing and transportation expenses	185	245
IT-Expenses	545	551
General and administrative expenses	392	409
Depreciation operating expenses	450	358
	3.636	3.514

8. Financial income and expense

Financial income and finance costs are specified as follow:

Finance income
Interest income	382	175
Other financial income	0	113
Dividend received	2	2
	384	290
Finance expense
Interest on borrowings	( 363)	( 165)
Interest expense from lease liability	( 25)	( 20)
Loan write-downs	( 65)	( 15)
Other finance expenses	( 59)	( 165)
	( 512)	( 365)
Net exchange rate differences	( 18)	2
Net financial items	( 146)	( 73)

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Notes to the Consolidated Financial Statements

1. Other financial assets
   30.6.2023 31.12.2022
   Other financial assets are specified as follows:

Investment in other companies	8	38
TV programs	323	204
Loans (Siminn Pay)	245	338
Other financial assets total	576	580

1. Inventories
   Inventories are specified as follows:

Finished goods	613	601
TV programs	723	611
Inventory total	1.336	1.212

1. Accounts Receivables
   Accounts receivables are specified as follows:

Accounts receivables	2.190	2.129
Allowances for doubtful accounts	( 72)	( 84)
Accounts receivables total	2.118	2.045

1. Loans (Siminn Pay)
   Loans consist of loans from Company's subsidiary, Siminn Pay ehf. They are loans to individuals, between 1-18 months.

Loans	2.334	1.795
Impairment losses recognised on loans	( 145)	( 98)
Moved to non-current assets	( 245)	( 338)
Loans total	1.944	1.359

1. Other assets
   Other assets are specified as follows:

Prepayments and accrued income	801	705
Other current assets	253	343
Other assets total	1.054	1.048

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Notes to the Consolidated Financial Statements

14. Bonds at fair value	30.6.2023	31.12.2022
Bonds at fair value are specified as follows:
Balance at 1.1.	15.687	0
Bought	0	17.500
Fair value assessment upon receipt	0	( 1.431)
Fair value assessment at year-end 2022	0	( 382)
Bonds sold	( 15.685)	0
Loss of sale	( 2)	0
Bonds at fair value	0	15.687

The security is an unregistered bond of Sunstone II hf. and was sold in January 2023.

15. Deferred tax

Analysis of movements in the net deferred tax balances during the period is as follows:

Deferred tax at the beginning of the year	89	604
Income tax from discontinued operations	0	( 286)
Income tax posted to the income statement	114	345
Taxes to be paid	( 3)	( 562)
Prior year correction	0	( 12)
Deferred tax liability at the end of the period	200	89

16. Payables

Payables are specified as follows:

Payables	3.501	3.281
Accrued expenses	1.199	1.507
Payables total	4.700	4.788

17. Other liabilities

Other liabilities are specified as follows:

Accrued expenses	572	508
Salaries and related expenses	167	242
VAT	231	210
Other liabilities total	970	960

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Notes to the Consolidated Financial Statements

18. Legal proceedings

The Company is currently involved in several legal disputes that relate i.a. to Competition and Media Act.

The Competition Authority concluded in its interim decision no. 30/2023 that Síminn was obliged to renew its agreement with Nova hf. for wholesale of Síminn Sport to Nova which expired in May 2023. Síminn is of the opinion that the interim decision of the Competition Authority is without legal foundation and has appealed the decision to the Competition Appeals Committee.

The status of the following legal cases has not changed since the publication of the 2022 financial statements.

Síminn and Sýn hf. have been in a dispute regarding distribution of media content. The Competition Authority and Post- and Telecommunication Authority (now Electronic Communication Office) 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 Reykjavik District Court ruled on the matter and partially annulled the decision and lowered the fine to 7 million ISK. Síminn, Sýn and the PTA filed brought the case to the National Court, which confirmed the PTA decisions and increased the fine to 9 mkr. Síminn appealed the judgment to the Supreme Court which set the National Court and District Court judgment aside and referred the case back to the District Court for lawful proceedings. After the initial decisions of the PTA Sýn hf. filed a claim against Síminn for compensation of 1.9 billion ISK. Síminn rejected the claim and pointed out that in Sýn hf. 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 Sýn hf. and the District Court dismissed the case due the failure to state the reasoning for the case. Sýn hf. 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 has filed its written. Sýn also filed a claim against Síminn of ISK 270 million, Síminn has submitted a statement in which the claim was rejected.

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.

PTA and Sýn have sued Síminn before the District Court of Reykjavík in order to have the ruling of the Committee for Electronic Communications and Postal Affairs, annulment, whereby the Committee annulled the PTA decision no 27/2019 where the PTA imposed a fine of 9 million ISK on Síminn. Síminn will demand that the ruling of the Committee shall be confirmed.

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 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 infringement of Decision no 6/2015 and lowered the fine down to 200 million ISK. Síminn has filed a lawsuit before the Reykjavik District Court with a claim for annulment of the part of the ruling of the Competition Appeals Committee which concerned an alleged infringement of the Competition Authority's decision no. 20/2015. The Competition Authority has also filed a lawsuit before the Reykjavik District Court. In October 2022 the District Court annulled the Competition Authority's decision whereby the Authority was obliged to repay Síminn the remaining 200 million ISK plus interest. The Competition Authority as appealed the decision to the National Court. The Company is, as before, of the opinion that the arrangements for the sale of the Company's services are fully in accordance with the Competition Act and the decisions that the Company has made on the basis of the Competition Act.

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.

19. Events after reporting date

There are no subsequent events to report.

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK

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Quarterly Statements

Summary of the Company's operating results by quarters:

	Q1 2023	Q2 2023	Total
Net sales	6.153	6.117	12.270
Cost of sales	(4.155)	(4.110)	(8.265)
Gross profit	1.998	2.007	4.005
Other operating income	145	166	311
Operating expenses	(1.825)	(1.811)	(3.636)
Operating profit	318	362	680
Net financial items	(1)	(145)	(146)
Profit before tax	317	217	534
Income tax	(71)	(38)	(109)
Profit for the period	246	179	425
EBITDA	1.315	1.410	2.725
	Q1 2022	Q2 2022	Q3 2022
---	---	---	---
Net sales	5.957	5.898	6.016
Cost of sales	(3.762)	(3.597)	(3.681)
Gross profit	2.195	2.301	2.335
Other operating income	136	138	194
Operating expenses	(1.757)	(1.757)	(1.543)
Operating profit	574	682	986
Net financial items	92	(165)	(84)
Profit from discontinued operation, net of tax	193	95	35.628
Profit before tax	859	612	36.530
Income tax	(113)	(107)	(184)
Profit for the period	746	505	36.346
EBITDA	1.327	1.399	1.790

Siminn hf. - Condensed Consolidated Interim Financial Statements 30 June 2023

All amounts are in millions of ISK