Síminn — Investor Presentation 2018

Aug 28, 2018

Q2 2018 Results

Orri Hauksson og Oskar Hauksson

29 August 2018

---

Highlights in Q2 2018

| FINANCE | EBITDA
2.216 m.kr. | EBITDA ratio
31,0% | Cash
183 m.kr. |
| --- | --- | --- | --- |
| | Net debt / EBITDA
2,02 | CAPEX
1.106 m.kr. | Equity ratio
60,8% |
| | EBITDA trailing twelve months | | |

HIGHLIGHTS

• EBITDA amount and margin increases
• Margin from roaming services decreases due to effects of RLH
• Net profit increases between periods
• The co-operation with GR will reduce unit prices
• Dividend and share buyback amounted to ISK 1.553 m.kr. in Q2 – Share buyback completed

---

Q2 2018 - Results

---

Income statement Q2 2018

	Q2 2018	Q2 2017	Change	Change in %
Net sales	6.921	7.145	(224)	-3,1%
Cost of sales	(3.610)	(3.687)	77	-2,1%
Gross profit	3.311	3.458	(147)	-4,3%
Gross profit ratio	47,8%	48,4%
Other operating income	232	109	123	112,8%
Operating expenses	(2.280)	(2.289)	9	-0,4%
Operating profit	1.263	1.278	(15)	-1,2%
Operating profit/Net sales	18,2%	17,9%
Finance income	52	134	(82)	-61,2%
Finance cost	(240)	(390)	150	-38,5%
Net exchange rate differences	(2)	(2)	0	0,0%
Net financial items	(190)	(258)	68	-26,4%
Income tax	(220)	(230)	10	-4,3%
Net profit	853	790	63	8,0%
Depreciation and amortisation	(953)	(913)	(40)	4,4%
EBITDA	2.216	2.191	25	1,1%
EBITDA ratio	31,0%	30,2%
EBIT	1.263	1.278	(15)	-1,2%
EBIT ratio	17,7%	17,6%

---

Revenue by segments Q2 2018

	Q2 2018	Q2 2017	Change	Change %
Mobile	1.497	1.622	( 125)	-7,7%
Fixed voice	463	514	( 51)	-9,9%
Internet & network	2.364	2.113	251	11,9%
TV	1.142	1.019	123	12,1%
IT services *	880	1.289	( 409)	-31,7%
Equipment sales	549	432	117	27,1%
Other revenue	258	265	( 7)	-2,6%
Total revenue	7.153	7.254	( 101)	-1,4%
Adjusted for disc. operations *	7.153	7.174	( 21)	-0,3%

*Sensa DK Aps was sold in end of 2017

---

Cash flow Q2 2018

	Q2 2018	Q2 2017
Cash flow from operating activities
Operating profit	1.263	1.278
Operational items not affecting cash flow:
Depreciation and amortisation	953	913
Other items not affecting cash flow	(98)	12
	2.118	2.203
Changes in current assets and liabilities	0	(217)
Cash generated by operation	2.118	1.986
Net interest expenses paid during the period	(193)	(115)
Payments of taxes during the period	(157)	(7)
Net cash from operating activities	1.768	1.864
Investing activities
Net investment in property, plant and equipments	(1.106)	(1.417)
Other investment	(26)	14
Investing activities	(1.132)	(1.403)
Financing activities
Dividend paid	(311)	(275)
Buyback of ordinary shares	(1.242)	(321)
Payments of non-current liabilities	(288)	(230)
Bank loans, increase	575	0
Financing activities	(1.266)	(826)
Decrease in cash and cash equivalents	(630)	(365)
Translation effects on cash	8	(4)
Cash and cash equivalents at the beginning of the period	805	4.265
Cash and cash equivalents at the end of the period	183	3.896

Cash generated by operation

Net cash from operating activities

---

1H 2018 - Results

---

Income statement 1H 2018

	1H 2018	1H 2017	Change	Change in %
Net sales	13.677	13.747	(70)	-0,5%
Cost of sales	(6.912)	(6.933)	21	-0,3%
Gross profit	6.765	6.814	(49)	-0,7%
Gross profit ratio	49,5%	49,6%
Other operating income	350	230	120	52,2%
Operating expenses	(4.555)	(4.579)	24	-0,5%
Operating profit	2.560	2.465	95	3,9%
Operating profit/Net sales	18,7%	17,9%
Finance income	104	269	(165)	-61,3%
Finance cost	(481)	(742)	261	-35,2%
Net exchange rate differences	5	8	(3)	-37,5%
Net financial items	(372)	(465)	93	-20,0%
Income tax	(448)	(436)	(12)	2,8%
Net profit	1.740	1.564	176	11,3%
Depreciation and amortisation	(1.887)	(1.825)	(62)	3,4%
EBITDA	4.447	4.290	157	3,7%
EBITDA ratio	31,7%	30,7%
EBIT	2.560	2.465	95	3,9%
EBIT ratio	18,3%	17,6%

---

Revenue by segments 1H 2018

	1H 2018	1H 2017	Change	Change %
Mobile	3.038	3.204	(166)	-5,2%
Fixed voice	961	1.060	(99)	-9,3%
Internet & network	4.624	4.185	439	10,5%
TV	2.309	2.025	284	14,0%
IT services *	1.582	2.189	(607)	-27,7%
Equipment sales	976	803	173	21,5%
Other revenue	537	511	26	5,1%
Total revenue	14.027	13.977	50	0,4%
**Adjusted for disc. operations ***	14.027	13.806	221	1,6%

*Sensa DK Aps was sold in end of 2017

■ Other revenue
■ Equipment sales
■ IT services
■ TV
■ Internet & network
■ Fixed voice
■ Mobile

---

Balance sheet

	30.6.2018	31.12.2017
Assets
Non-current assets
Property, plant and equipment	17.490	17.024
Goodwill	31.487	31.435
Intangible assets	3.267	3.226
Other non-current assets	732	658
Non-current assets	52.976	52.343
Current assets
Inventories	1.855	2.345
Accounts receivables	4.249	4.470
Other current assets	779	736
Cash and cash equivalents	183	718
Current assets	7.066	8.269
Total assets	60.042	60.612
Equity and liabilities
Equity
Total equity	36.480	36.281
Non-current liabilities
Borrowings	16.205	16.781
Deferred tax liabilities	809	817
Non-current liabilities	17.014	17.598
Current liabilities
Bank loans	575	500
Accounts payables	2.470	2.950
Current maturities of borrowings	1.150	1.150
Other current liabilities	2.353	2.133
Current liabilities	6.548	6.733
Total equity and liabilities	60.042	60.612

Equity ratio

Equity ratio

Net interest bearing debt

Net debt to EBITDA

---

Cash flow 1H 2018

	1H 2018	1H 2017
Cash flow from operating activities
Operating profit	2.560	2.465
Operational items not affecting cash flow:
Depreciation and amortisation	1.887	1.825
Other items not affecting cash flow	(92)	21
	4.355	4.311
Changes in current assets and liabilities	153	102
Cash generated by operation	4.508	4.413
Net interest expenses paid during the period	(384)	(437)
Payments of taxes during the period	(313)	(16)
Net cash from operating activities	3.811	3.960
Investing activities
Net investment in property, plant and equipments	(2.288)	(2.464)
Other investment	2	21
Investing activities	(2.286)	(2.443)
Financing activities
Dividend paid	(311)	(275)
Buyback of ordinary shares	(1.242)	(321)
Payments of non-current liabilities	(575)	(688)
Bank loans, increase	75	0
Financing activities	(2.053)	(1.284)
(Decrease) increase in cash and cash equivalents	(528)	233
Translation effects on cash	(7)	(4)
Cash and cash equivalents at the beginning of the period	718	3.667
Cash and cash equivalents at the end of the period	183	3.896

Cash generated by operation

Net cash from operating activities

---

CAPEX development

---

Operations in 1H 2018

Profit and EBITDA Increase Between Periods

• Revenue from sale of services were growing in the first half of year but equipment sales decline
• Sale of IT equipment was the reason for the decline whereas sale of telecom equipment grew
• Ongoing cost reduction results in lower cost YoY
• The effects of RLH had impact on performance in Q2
• Revenue similar to Q2 2017 but expenses were higher due to sharp increase in data usage
• Focus is on improving margins from the service with e.g. review of roaming contracts
• Wholesale revenue with a slight decrease since H1 2017. The decline will increase in H2
• Healthy increase in Data and TV services revenue
• The mobile product Prenna is showing significant growth - Over 15.000 subscribers
• Míla with a stronger EBITDA performance in H1 compared to last year
• Refinancing in 2017 results in lower interest expenses

---

Operations in 1H 2018

Highlights from H1

• The fiber rollout project at Míla is progressing well
• The co-operation with GR will reduce unit prices

• Over 20% of Síminn's internet subscribers connect with fiber

• New businesses are progressing

• "Heimilispakki" (Home package) and 10x well received
• Síminn TV now available to everyone

• Síminn Pay – New products will be launched during the fall

• Digitalization at Síminn

• Improving customer experience
• The results are showing with e.g. fewer calls to service centers
• The aim is significant cost reduction

---

Guidance for 2018

Unchanged guidance

---

Highlights

---

1.500 homes added to Mila’s fiber network in Reykjanesbær and Selfoss

---

sensa

Hybrid IT platform
Outlook positive for H2

---

---

Ordinary People

---

LOGI BERGMANN

---

❤

Appendix

---

Business segments

• 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) both retail and wholesale.
• Internet & network: Revenue from data service both wholesale and retail, incl. xDSL service, GPON, Internet, IP net, core network, local loop and access network.
• TV: Revenue from TV broadcast and distribution and Síminn TV (fees, traffic and advertisement).
• IT services: Revenue from hosting and operations, advisor fees and 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.

---

Disclaimer

Information contained in this presentation is based on sources that Síminn hf. ("Síminn" or the "company") considers reliable at each time. Its accuracy or completeness can however not be guaranteed. This report contains forward-looking statements that reflect the management's current views with respect to certain future events and potential financial performance. Although the management believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The forward looking information contained in this presentation applies only as at the date of this presentation.

Síminn does not undertake any obligation to provide recipients of this presentation with any further information on the company or to make amendments or changes to this publication should inaccuracies or errors be discovered or opinions or information change. Other than as required by applicable laws and regulation.

This presentation is solely for information purposes and is not intended to form part of or be the basis of any decision making by its recipients. Nothing in this presentation should be construed as a promise or recommendation.

Statements contained in this presentation that refer to the company's estimated or anticipated future results or future activities are forward looking statements which reflect the company's current analysis of existing trends, information and plans. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially depending on factors such as the availability of resources, the timing and effect of regulatory actions and other factors.

By the receipt of this presentation the recipient acknowledges and accepts the aforesaid disclaimer and restrictions.

---