Syn — Investor Presentation 2020

Nov 4, 2020

Interim financial statement - Q3 2020

November 4th, 2020

vodafone

VISIT

SPORT

BYLGJAN 989

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Key financial results

Q3 and 9M 2020

Revenue 9M 15,373 m IKR

Q3 2020

5,026 m IKR

EBITDA 9M 4,312 m IKR

Q3 2020

1,593 m IKR

Results 9M -402 m IKR

Q3 2020

8 m IKR

FCF 9M 2,056 m IKR

Q3 2020

458 m IKR

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Income Statement

ISK m	Q3 2020	Q3 2019	% ch.	9M 2020	9M 2019	% ch.
Revenue	5,026	4,878	3%	15,373	14,876	3%
Cost of Sales	-3,399	-3,133	8%	-10,466	-9,491	10%
Gross Profit	1,627	1,745	-7%	4,907	5,385	-9%
Operating expense	-1,485	-1,559	-5%	-4,722	-5,150	-8%
EBITDA	1,593	1,623	-2%	4,312	4,100	5%
EBIT	142	186		185	235
Net financial expense	-169	-295		-792	-810
Effect of associates	23	16		71	844
Income tax	12	22		134	115
Loss / profit	8	-71		-402	384
Gross Margin	32.4%	35.8%		31.9%	36.2%
EBITDA	31.7%	33.3%		28.0%	27.6%
EBIT	2.8%	3.8%		1.2%	1.6%

Key factors impacting Q3 and 9M 2020

• Revenue growth 3% between periods. Growth is mainly due to Endor.
• Gross margin from Endor's operations between 10-12%.
• The weakening of the Icelandic Krona is beginning to have an affect on cost of sales.
• Decrease in salary and related expense is in line with reduction in headcount. The decrease has more effect in operation expense than in cost of sales.
• Other cost reduction measures have resulted in lower operating expense i.e.:
• Housing, office- and vehicle expenses.
• Contractor expense.
• Sales and marketing expense.
• Decrease in interest expense from long term liabilities amounts to 368 m IKR and exchange rate losses increased by 222 m IKR between 9M 2020 and 9M 2019.

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Revenue

ISK m	Q3 2020	Q3 2019	% ch.	9M 2020	9M 2019	% ch.
Media	1,932	1,946	-1%	5,723	6,288	-9%
Broadband	1,134	1,215	-7%	3,442	3,629	-5%
Mobile	929	1,066	-13%	2,674	2,949	-9%
Fixed Line	145	191	-24%	467	615	-24%
Hosting and operating solutions	443	-	-	1,758	0	-
Retail Sales	253	257	-2%	729	780	-7%
Other Revenue	190	203	-6%	580	615	-6%
Total Revenue	5,026	4,878	3%	15,373	14,876	3%

Media

• Advertising revenue decreased 15% between 9M 2020 and 9M 2019, largely due to COVID-19. Revenue from broadcasting distribution has increased between periods. Positive development in revenues from TV subscriptions between quarters during the year. The change in product bundling has had a positive effect.

Broadband

• Revenue from broadband declines between periods, which can be attributed to decreasing number of users. Expectations for growth in the fourth quarter.

Mobile

• Mobile revenue declines between periods, which is mainly due to a 60% decrease in roaming revenue.

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COVID-19 Impact

• Daily business has gone well, and operational adjustment has exceeded expectations. The main focus has been to ensure the safety of employees and customers.
• Revenue from roaming has declined sharply due to travel restrictions, the recession is expected to last throughout the year.
• The situation in the economic environment has affected advertising revenues, but the decline has slowed down since the beginning of the epidemic.
• Further emphasis has been placed on production of domestic content for TV to meet the needs of customers and the impact of the pandemic on foreign content.
• Work regarding cost optimization to counteract the weakening of the Icelandic Krona has continued, which mainly affects the cost of foreign broadcasting license rights and various other license fees.
• Agreements have been reached with all major foreign broadcasting license rights holders in connection with the effects of the pandemic on sports broadcasting license rights.
• COVID-19 will continue to have an impact on the economy, and it will be difficult to predict the impact on retail and corporate markets.

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Statement of Financial Position

ISK m	30.09.2020	31.12.2019	Change	%
Right-of-use assets	5,584	5,828	-244	-4%
Property, plant and equipment	4,300	4,793	-493	-10%
Goodwill	8,832	8,787	45	1%
Other intangible assets	4,433	4,648	-215	-5%
Shares in other companies	1,451	1,383	68	5%
Deferred tax asset	263	97	166	171%
Fixed assets	24,863	25,536	-673	-3%
Broadcasting license rights	1,633	1,814	-181	-10%
Inventories	321	427	-106	-25%
Trade receivables and other short term receivables	3,321	3,567	-246	-7%
Cash and cash equivalents	213	634	-421	-66%
Current assets	5,488	6,442	-954	-15%
Total assets	30,351	31,978	-1,627	-5%

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Statement of Financial Position

ISK m	30.09.2020	31.12.2019	Change	%
Equity	8,392	8,798	-406	-5%
Interest bearing debt	9,613	10,898	-1,285	-12%
Lease liabilities	4,779	5,390	-611	-11%
Other liabilities	152	252	-100	-40%
Deferred tax liabilities	13	9	4	44%
Non-current liabilities	14,557	16,549	-1,992	-12%
Interest bearing debt	992	689	303	44%
Lease liabilities	1,318	938	380	41%
Accounts payable and other current liabilities	5,092	5,004	88	2%
Current liabilities	7,402	6,631	771	12%
Total equity and liabilities	30,351	31,978	-1,627	-5%
Interest bearing debt	16,702	17,915
Net interest bearing debt	16,489	17,281
Equity ratio	27.7%	27.5%

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Statement of Financial Position - Key ratios

Equity Ratio

Current Ratio*

Net Interest bearing debt

• Current assets / accounts payable and other short term liabilities

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Cash Flow

Cash flow Q3 2020

Cash flow 9M 2020

ISK m	Q3 2020	Q3 2019	% ch.	9M 2020	9M 2019	% ch.
Cash generated by operations before interest and tax	1,208	1,544	-22%	4,401	4,163	6%
Investment activites*	-750	-1,109	-32%	-2,345	-3,050	-23%
Free Cash Flow	458	435	5%	2,056	1,113	85%

• Excluding net investment in share in other companies

Figures are in ISK million

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Sales of passive mobile infrastructure

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Infrastructure split

• Public discussion regarding division of infrastructure started just over a year ago.
• The separation of passive and active infrastructure began in the United States about 20 years ago.
• Emerges in Europe around 5-10 years ago.
• Work began in March with guidance from Vodafone Group and their subsidiary in passive infrastructure, Vantage Tower.
• Extensive experience has been gained in negotiating deals such as these at Vodafone and throughout Europe.
• Initial informal talks began this spring, four strong participants.
• An exclusivity agreement signed on October 23rd, aimed at concluding contracts this year.

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Sale of passive infrastructure

• Different versions in Europe, whether a safety, heating or electrical system is included when creating a special TowerCo.
• The plan is to sell around 200 of just over 600 telecom sites to TowerCo.
• In comparison Vantage has 1,200 sites locations in Ireland with a population of 5 million.
• Long-term leases/service agreements are usually made, and accounting treatment depends on the final agreements.
• The sale of the passive infrastructure is assumed to have little or no effect on EBITDA margin.

Asset	Owner
1 Active radio transmission equipment	Vodafone
2 Antennae & cables (fibre / feeders)	Vodafone
3 Physical tower, masts & pole	TowerCo
4 Foundation & fencing	TowerCo
5 Contractual right to occupy site area	TowerCo
6 Power equipment	Vodafone
7 Cooling system	TowerCo
Asset	Owner
---	---
8 Surveillance systems	TowerCo
9 Access facilities	TowerCo
10 Outdoor cabinet	Vodafone
11 Shelter / service rooms	TowerCo
12 Emergency equipment	TowerCo
13 Cable routing (duct)	TowerCo
14 Mounting equipment	TowerCo

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Landline systems* throughout the country

• Vodafone operates fiber-optic system throughout the country.
• Fiber optics are the basis of Vodafone's fixed line and mobile network.
• Vodafone has equipment on over 800 sites in Iceland.
• Optimization potentials through joint ventures.

*The system is not part of current infrastructure sale discussion

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Television and radio distribution*

• Vodafone owns the only nationwide television and radio distribution system.
• HD digital television broadcasts reach to 99.9% of the population.
• Vodafone has a nationwide IPTV system, only two such systems exist in the country.

*The system is not part of current infrastructure sale discussion

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Disclaimer

The information in this presentation are based on sources that Sýn hf. deem reliable at the time of publication. However, it is not possible to secure fully that they are completely faultless.

All information in the presentation are the property of Sýn hf. It is prohibited to copy, amend or distribute in any manner, partly or fully, the presentation and the information therein.

The presentation is only for information purposes and not to be used as basis for decision making on part of recipients. Recipients shall not in any manner interpret the content therein as promise or guidance. Sýn hf. is not obliged to provide the recipients with further information nor to amend or correct should the information it is based on change.

Any statement in this presentation that cites future prospects is solely for guidance purposes, based on current evolution, information and projections. Future guidance of the company are subject to numerous risk and uncertainties that can result in being substantially different from the content of this presentation. External factors, such as access to finance, legislation, regulatory actions and otherwise can thus have substantial effects.

Sýn hf. will not update future guidance of the company due to situations that will occur afterwards. Sýn hf. suggest that recipients of the presentation should not trust statements therein at a later stage as they are only relevant at the day of the publication. Subject to this provision, all guidance on future prospects are fully reliable.

The recipients of the presentation acknowledge that they are subject to aforementioned disclaimers and limitations.

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sjma

Thank You!

vodafone

74

visir

74 SPORT

BYLGJAN 989

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