Síminn hf. - Strong quarter and yet low operational impact of COVID-19 pandemic

Q1 2020

• Síminn‘s revenue amounted to ISK 7,246 million in the first quarter (Q1) of 2020, compared to ISK 6,962 million in the same period 2019. An increase by ISK 284 million or 4.1%.
• EBITDA amounted to ISK 2,735 million in Q1 2020, compared to ISK 2,369 million in the same period of 2019, up by ISK 366 million or 15.4%. The EBITDA ratio was 37.7% in Q1 2020, compared to 34.0% in the same period of 2019. Effects of Siminn Sport support the increase in EBITDA.
• Profit in Q1 2020 amounted to ISK 764 million, compared to ISK 615 million in the same period of 2019. An increase by ISK 149 million og 24.2%.
• Cash generated by operation amounted to ISK 3,734 million in Q1 2020, compared to ISK 2,062 million in the same period of 2019. Net cash from operating activities amounted to ISK 3,396 million in Q1 2020, compared to ISK 1,711 million in the same period 2019.
• Interest bearing debt amounted to ISK 15.8 billion at the end of Q1 of 2020, compared to ISK 16.2 billion at the end of 2019. Net interest-bearing debt amounted to 14.7 billion ISK at the end of Q1 2020 compared to 16.0 at the end of 2019.
• Net financial expenses amounted to ISK 270 million in Q1 2020, compared to ISK 313 million in the same period of 2019. Financial expenses amounted to ISK 256 million, financial income ISK 47 million, and foreign exchange loss ISK 61 million.
• Síminn's equity ratio was 56.9% at the end of Q1 2020 and equity was 37.4 billion.

Orri Hauksson, CEO:

„The operations of the Síminn group overall has been quite successful in recent quarters, and the year began exceptionally well, as we saw an increase in revenue on all fronts. Our TV service, both our new Síminn Sports product, and Síminn's main TV product, Síminn Premium, delivered new subscribers from the previous year. Revenue from mobile subscriptions and our pre-paid service Þrenna increased between years, and data transmission revenue is growing at a modest rate, but fixed line telephone calls continued in their slow downwards process. Sensa had a good quarter, but the company increased its revenue and EBITDA slightly from the previous year. Míla's business was stable as usual.

Customers took advantage of our TV and data services to an extent we have not seen before. Traditional mobile and fixed line calls also increased rapidly as the quarter progressed. It should be borne in mind that increased usage of our services by our customers usually results in a small performance improvement, as the prices for our monthly services are mostly fixed. Prices and revenues in the telco sector generally develop slowly between quarters, but most everything moved in the right direction for us for this period. By the end of the quarter, the capacity and load factor  on the company's television and network systems was at the highest levels we have seen so far, but the systems and services did, however, meet the needs of our customers except in the most exceptional cases. Overall, the first quarter results are good as revenue, EBITDA, net profit and cash flow from operations grew between years.

The effects of the COVID-19 pandemic were manifested in various ways in March. Revenues from foreign tourists almost evaporated in a few weeks, as well as we closed the company's stores due to quarantine of workers. Síminn's service centers are fully operational as telecommuting effort has been successful, thanks to our patient staff both in technology and service, who transformed their homes to serve our customers. In general, Icelanders have been working from home on a large scale over the past six weeks, which at one time changed the needs of our customers and our own methods as we service them in the best possible way.

As with most other companies, the epidemic and the reactions to it will affect the performance and operation of the Siminn Group during the year. Telecommunications, digital entertainment and information technology are certainly not the sectors that are most vulnerable to the current situation, but we do of course feel it when the economy changes as rapidly as it has. As part of the Group's costs and investments are generated in foreign currency, we will feel any effects of currency fluctuations. When the exchange rate changes as quickly as it has, it will take time for domestic retail prices to change accordingly, until that comes to effect, the operation will carry the deficit. The Central Bank of Iceland's interest rate cuts works in the opposite direction and significantly lower our financial costs during the year. Roaming revenue is almost not existent at the moment. The English Premier League was halted in March and no games will be played until late May, which will lower Siminn's subscription revenue in the second quarter. It may still happen that the season will be cancelled without any further matches, although unlikely, in which case we will claim a refund of part of the screening rights. We have already paid for most of the entire English Premier League season, which is between 2019-2022.

Late paying customers have yet to emerge, but Síminn's experience with previous economic shocks is that there is some time lag until delayed collections to gain weight. The Group is not a major supplier of tourism or restaurants in Iceland. Short-term cooling in those sectors does not affect our operations at first, but will noticeably affect us like others. At the Síminn Group, like others, there is uncertainty about how gatherings and travel will develop in the coming weeks and months, but both will affect our income and expenses. Based on our current view on the business, we do not see reason to change our year end outlook, as we feel we have the resources necessary to respond in time to the company's costs and investments.

It should be mentioned that in recent years we have been rather conservative in spending and borrowing. We therefore now enjoy a strong balance sheet and sustainable operations. Cash balance is solid and we have access to credit lines if needed. The Company is below long-term leverage ratio and has therefore exercised an option to postpone payments of loans in 2020 until final maturity. We will therefore continue our operations, at a somewhat changed pace, but do not require a change of course or refinancing. We therefore think we are well prepared to deal with the uncertainty over the next term. "

Further information

Orri Hauksson, CEO, tel. 354 550 6003 ( )

Óskar Hauksson, CFO, tel. 354 550 6003 ( )

Attachments