Síminn — Investor Presentation 2023

Aug 22, 2023

Investor Presentation

Q2 2023

Orri Hauksson and Oskar Hauksson
22 August 2023

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Highlights in Q2 and 1H 2023

	Q2 2023	1H 2023
Revenue	6.283 m.kr.
Q2 2022: 6.036 m.kr.	12.581 m.kr.
1H 2022: 12.129 m.kr.
EBITDA	1.410 m.kr.
Q2 2022: 1.399 m.kr.	2.725 m.kr.
1H 2022: 2.726 m.kr.
EBITDA %	22,4%
Q2 2022: 23,2%	21,7%
1H 2022: 22,5%
EBIT	362 m.kr.
Q2 2022: 682 m.kr.	680 m.kr.
1H 2022: 1.256 m.kr.
CAPEX	953 m.kr.
Q2 2022: 875 m.kr.	2.569 m.kr.
1H 2022: 1.130 m.kr.
NIBD / 12M EBITDA*	Cash	Cash generated by operation
0,98x
Q4 2022: 0,58x	727 m.kr.
Q4 2022: 3.721 m.kr.	55,1%
Q4 2022: 68,9%

• Without 200 m.kr. cancellation of competition fine in in Q4 2022.

Net-intrest bearing debt includes lease liabilities minus cash and loans at Siminn Pay

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30

Operation

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Income Statement

Income statement	Q2			1H
	2023	2022	%	2023	2022	%
Net sales	6.283	6.036	4,1%	12.581	12.129	3,7%
Cost of sales	(4.110)	(3.597)	14,3%	(8.265)	(7.359)	12,3%
Operating expenses	(1.811)	(1.757)	3,1%	(3.636)	(3.514)	3,5%
EBIT	362	682	-46,9%	680	1.256	-45,9%
Net financial items	(145)	(165)	-12,1%	(146)	(73)	100,0%
Income tax	(38)	(107)	-64,5%	(109)	(220)	-50,5%
Net profit from continuing operation	179	410	-56,3%	425	963	-55,9%
Discontinued operation	0	95	-100,0%	0	288	-100,0%
Net profit	179	505	-64,6%	425	1.251	-66,0%
EBITDA	1.410	1.399	0,8%	2.725	2.726	0,0%
EPS from continuing operation	0,06	0,05	20,0%	0,13	0,13	0,0%

* EBITDA and EBIT in the graphs are without a 200 m.kr. repayment of competition fine in Q4 2022.

EBIT

Strong revenue growth due to, amongst other things, a change in product mix

• 12% year-on-year growth in TV services
• Data revenue increases by more than 6%
• Mobile revenues increase by roughly 8%
• Notable decrease in product sales

EBITDA increases slightly between years

• Costs without depreciation increased by almost 5% between years. A larger proportion of Siminn's cost is indexed than before
• EBITDA margin fluctuates within the year and will increase in the latter half of this year

Operating profit decreases due to increased amortization of sports rights and investments in TV content for Siminn Premium TV

Siminn Pay's loan growth was just under ISK 300 million in the quarter

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Revenue by segments

Segments	Q2				1H
	2023	2022	Change	%	2023	2022	Change	%
Mobile	1.592	1.469	123	8,4%	3.105	2.882	223	7,7%
Fixed voice	269	367	-98	-26,7%	548	745	-197	-26,4%
Internet & network	1.989	1.870	119	6,4%	3.955	3.728	227	6,1%
TV	1.795	1.601	194	12,1%	3.633	3.274	359	11,0%
Equipment sales	406	492	-86	-17,5%	878	941	-63	-6,7%
Other revenue	232	237	-5	-2,1%	462	559	-97	-17,4%
Total revenue	6.283	6.036	247	4,1%	12.581	12.129	452	3,7%

Mobile

Internet & network

TV

Other segments

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53

EBITDA unchanged from last year

There was a change in product mix this year and our offering appeals to a wider range of clients than before

• A foundation for the important autumn sales period

Excluding the non-margin one-off items related to the sale of equipment to Mila in Q1 2022, Síminn's revenue increased by ISK 541 million (4.5%) between periods

Revenue growth is strongest in TV services, or 11% between years

• Advertising revenue increased by 7% between years

Nearly 8% increase in mobile revenues, about half due to increase in roaming revenue

• In contrast, bulk SMS are down by 60%. These were COVID-related revenues

Interest income rises considerably, among other things, due to increased lending at Síminn Pay and higher interest rates

• Policy rates for the period averaged 4% higher than a year before

Total costs excluding depreciation increased by 4.8% between years

• Increased costs from telecommunications suppliers, as inflation is high, and the cost is partially indexed
• Wages increase between years due to wage inflation and employee turnover

Depreciation increases by ISK 575 million between years, or just under 40%, due to investments in TV content and broadcasting rights with amortization period of 2-3 years

All Síminn's financing is with floating interest rates, therefore interest expenses increase between periods

• The base prospectus Síminn has for corporate notes was fully utilized in 1H this year but on average lower during the same period last year

Increased lending calls for increased bad-debt provision

• ISK 65 million expensed in 1H – actual losses much lower

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39

Balance Sheet and Cash Flow

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Balance Sheet

Assets	30.06.2023	31.12.2022
Property, plant and equipment	2.534	2.466
Right-of-use assets	847	941
Intangible assets	21.839	22.122
Other non-current assets	576	580
Non-current assets	25.796	26.109
Inventories	1.336	1.212
Accounts receivables	2.118	2.045
Loans (Siminn Pay)	1.944	1.359
Other current assets	1.054	1.048
Corporate bond	0	15.687
Cash and cash equivalents	727	3.721
Current assets	7.179	25.072
Total assets	32.975	51.181

Net interest bearing debt with lease liabilities and Pay

Equity ratio

Equity and liabilities	30.06.2023	31.12.2022
Total equity	18.161	35.261
Total equity	18.161	35.261
Borrowings	5.963	5.956
Finance lease	627	731
Accounts payables	0	639
Deferred tax liabilities	200	89
Non-current liabilities	6.790	7.415
Bank loans	1.909	1.929
Accounts payables	4.700	4.788
Current maturities of borrowings	265	251
Other current liabilities	1.150	1.537
Current liabilities	8.024	8.505
Total equity and liabilities	32.975	51.181

Net interest bearing debt with lease liabilities to EBITDA*

Return on Equity*

Net interest-bearing debt includes loans at Siminn Pay. Lease commitments included from 2019.

*Without administrative fines in 2020 and 2022.

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Cash Flow

Cash Flow	1H 2023	1H 2022	Q2 2023	Q2 2022
Cash flow from operating activities
Operating profit	680	1.256	362	682
Operational items not affecting cash flow:
Depreciation	2.045	1.470	1.048	717
Gain on sale of fixed assets	1	(4)	1	0
	2.726	2.722	1.411	1.399
Changes in current assets and liabilities	(162)	481	(17)	168
Cash generated by operation	2.564	3.203	1.394	1.567
Net interest expenses paid during the period	(6)	(176)	(124)	(151)
Payments of taxes during the period	(394)	(348)	(236)	(209)
Net cash from operating activities	2.164	2.679	1.034	1.207
Investing activities
Net investment in property, plant and equipments	(2.569)	(1.130)	(953)	(875)
Consumer Loans Siminn Pay	(554)	(17)	(288)	(50)
Sale of bond	15.685	0	0	0
Investing activities	12.562	(1.147)	(1.241)	(925)
Financing activities
Dividend paid	(499)	(500)	0	(500)
Purchase of own shares	(1.452)	(1.891)	(809)	(961)
Share capital reduction	(15.580)	0	0	0
Payment of long term lease	(129)	(93)	(66)	(47)
Net Financing activities	(21)	(1.186)	(21)	(1.168)
Financing activities	(17.681)	(3.670)	(896)	(2.676)
Changes in cash and cash equivalents	(2.955)	(2.138)	(1.103)	(2.394)
Translation effects on cash	(39)	(6)	(2)	0
Cash and cash equivalents at the beginning of the year	3.721	3.509	1.832	3.759
Cash and cash equivalents at the end of the period	727	1.365	727	1.365

On 29 January, sale of a bond that Siminn received as a part of the proceeds from Mila's sale last year was finalized

A total of ISK 16,2 billion were paid to shareholders on 31 March

• ISK 15,7 billion in capital reduction and ISK 500 million in dividends

The equity ratio is now 55,1%

The cash balance decreases due to dividends in Q2 and payment of broadcasting rights in Q1.

Siminn completed the sale of a new bond issue for 1,5 m.kr. on 23 June but the proceeds from the sale were paid to Siminn on 3 July

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CAPEX

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CAPEX

Investment in TV content and broadcasting rights is front-loaded

• Almost 70% of the year's investment in TV content rights is generated in the first half of the year
• The 2nd payment for broadcasting right of the English Premier League was in Q1 2023, but nothing was paid for the right in 2022
• The bulk of the contract with HBO was due in the first half of the year

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Highlights

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Collaboration between Síminn and HSI on distribution of the handball league

Síminn has collaborated with the Icelandic Handball Association (HSI) on the distribution of Icelandic handball to spectators all over the country

HSI is the first Icelandic sports federation to sell broadcasting directly to its customers

HSI will install automatic broadcasting equipment in all competition venues and can then stream live from all events that take place there

The events will then be accessible linearly and non-linearly on Síminn TV platform, which handles all technical operations, billing and collection

In addition, one game will be selected weekly which will be shown live on Síminn TV station for free

Síminn expects a lot from this collaboration, as it is a development project that can potentially benefit more sports federations in the coming years

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Síminn Pay

Síminn Pay's loan growth continues

• Léttkort (Credit card) drives the credit increase, with 80% of new loans due to Léttkort and 20% from other loan products

Continued development of Léttkort

• Cardholders can now receive Icelandair frequent flyer points where cardholders manage their points collection
• Collaboration with VÍS on the sale of travel insurance in the app where customers can buy and cancel their insurance at any time
• More new developments to be introduced in the coming months

Electronic order book

• Electronic orders are popular, ensuring security, transparency and management of audits by companies
• Has been used in transactions for over of ISK 2.5 billion

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Funding

Siminn's goal is to have mixed financing, i.e., bank financing and market financing

After a few years absence from the bond market, Siminn started issuing corporate notes in 2021

• The limit in the base prospectus for the corporate notes was ISK 2 billion
• Investor reception has been positive, and margins have been decreasing with each issue

The next step in market financing was taken at the end of Q2, where a 3-year bonds amounting to ISK 1.5 billion were issued and sold

• The shares were sold in a private placement
• The interest was 1M REIBOR + 1,3% margin

If market conditions are favorable, Siminn will consider further issuance in the autumn

Siminn has access to ISK 5 billion in undrawn credit lines and investment capacity is therefore substantial

EM Corporate notes	Issued (M.ISK)	Interest	6M REIBOR	Margin
June 2021	1,540	2,75%	1,75%	1,00%
March 2022	340	4,75%	3,89%	0,86%
October 2022	1,100	7,20%	6,56%	0,64%
November 2022	900	7,20%	6,68%	0,52%
April 2023	1,100	8,87%	8,39%	0,48%
May 2023	900	9,80%	9,51%	0,29%

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36

Shareholders

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Shareholders

Shareholders 11.8.2023	Position	% O/S
Stoðir hf.	461.194.170	16,62%
Lifeyrissj.starfsm.rík. A-deild	253.771.439	9,14%
Lifeyrissjóður verzlunarmanna	215.422.187	7,76%
Brú Lifeyrissjóður starfs sveit	214.577.095	7,73%
Íslandsbanki hf,safnskráning 2	165.358.279	5,96%
Gildi - lífeyrissjóður	149.446.085	5,39%
Birta lífeyrissjóður	106.467.528	3,84%
Stapi lífeyrissjóður	102.451.623	3,69%
Söfnunarsjóður lífeyrísréttinda	94.830.504	3,42%
Stefnir - Innlend hlutabréf hs.	82.616.129	2,98%
Top 10 shareholders	1.846.135.039	66,53%
Other Shareholders	806.810.054	29,07%
Shares outstanding	2.652.945.093	95,60%
Own shares	122.054.907	4,40%
Total number of shares	2.775.000.000	100%

• Stoðir hf.
• Lifeyrissj.starfsm.rík. A-deild
• Lifeyrissjóður verzlunarmanna
• Brú Lifeyrissjóður starfs sveit
• Íslandsbanki hf,safnskráning 2
• Gildi - lífeyrissjóður
• Birta lífeyrissjóður
• Stapi lífeyrissjóður
• Söfnunarsjóður lífeyrísréttinda
• Stefnír - Innlend hlutabréf hs.
• Other Shareholders
• Own shares

Dividends, share buy-backs and reduction of share capital

• ISK 500 million was paid in dividend on 31 March 2023
• On the same day, the company's share capital was reduced by ISK 1,440 million with ISK 15.7 billion payment to shareholders
• On 21 March, the implementation of a buy-back program of ISK 1 billion was announced. It ended on July 17.
• On 18 July, a new program of ISK 1 billion was announced and purchases have begun
• Share buy-backs in 1H 2023 amounted to ISK 1,468 million

There were 1,068 shareholders at the end of Q2 2023

Síminn's shares have declined 2.8% year-to-date and 3.7% over the past 12 months

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Outlook for 2023

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Unchanged guidance for 2023

The expectation is that the broader product range will result in strong sales in the autumn and looking forward

• Síminn's supply of high-quality TV content has never been better, and we believe that despite production problems due to strikes, demand will hold up

Investments in TV content and rights may decline faster than expected, whereas such a change may cause some increase in operating costs in return – but the scale is not yet known

EBITDA guidance for the year remains unchanged

CAPEX guidance remains unchanged, but as mentioned earlier, there is some uncertainty about exactly how much the impact will be on reduced availability of foreign TV content in the autumn

• Excluding cost of mobile frequency licenses

EBITDA

ISK 5.9 – 6.3 billion

CAPEX

ISK 3.6 – 3.9 billion*

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Appendix

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Business segments

Mobile: Revenue from mobile services in Iceland and abroad, whether conventional GSM services, satellite services or other mobile services.

Fixed voice: Revenue from fixed voice services for (fees and traffic).

Internet & network: Revenue from data service, including xDSL services, GPON, Internet, IP networks, local loops and access networks.

TV: Distribution of TV, subscriptions, fees and advertising on Siminn TV.

Equipment sales: Revenue from sale of telco equipment.

Other revenue: Revenues related to telecommunications, information technology and finance.

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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 restriction

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Síminn