Hagar : Fjarfestakynning-19.-mai-2020_enska

Investor Presentation

May 19, 2020

Consolidated Highlights

• Comprehensive income for the year is ISK 3.054 m, or 2,6% of sales
• Earnings per share is ISK 2,54
• Sales for the year is ISK 116.357 m
• Gross profit for the year is 22,2%
• EBITDA for the year is ISK 8.890 m
• Total assets are ISK 62.708 m at year end
• Cash and cash equivalents are ISK 2.232 m at year end
• Equity is ISK 24.587 m at year end
• Equity ratio is 39,2% at year end
• EBITDA for the year is consistent with EBITDA budget, ISK 8.750 - 9.200 m

Statement of Comprehensive Income

	Q4 2019/20	Q4 2018/19	2019/20	2018/19
	01.12-29.02	01.12-28.02	01.03-29.02	01.03-28.02
Sales	28.613	27.924	116.357	84.179
Cost of goods sold	(22.179)	(21.469)	(90.551)	(64.172)
Gross profit	6.434	6.455	25.806	20.007
Gross profit %	22,5%	23,1%	22,2%	23,8%
Other operating income	99	179	484	340
Salaries and related expenses	(3.073)	(3.082)	(12.087)	(9.194)
Other operating expenses	(1.306)	(2.172)	(5.313)	(6.663)
Profit from operating activities before
depreciation and amortisation (EBITDA)	2.154	1.380	8.890	4.490
EBITDA %	7,5%	4,9%	7,6%	5,3%
Depreciation and amortisation	(1.045)	(530)	(3.927)	(1.300)
Profit from operating activities (EBIT)	1.109	850	4.963	3.190
Net finance expense	(272)	(175)	(1.327)	(295)
Effect of results of associates	28	(12)	139	(12)
Profit before income tax	865	663	3.775	2.883
Income tax	(160)	(110)	(721)	(566)
Comprehensive income for the period	705	553	3.054	2.317

Operating Segments

	Retail chains		Elimination	Application of
2019/20	and warehouses	Olís	entries	IFRS 16	Total
Sales	80.393	36.847	(883)	--	116.357
Other operating income	442	67	(25)	--	484
Total segment revenue	80.835	36.914	(908)	--	116.841
Total segment operating expenses
(76.015)	(35.082)	908	2.238	(107.951)
Segment EBITDA	4.820	1.832	--	2.238	8.890
Depreciation and amortisation
(1.411)	(796)	--	(1.720)	(3.927)
Effect of reults of associates	--	139	--	--	139
Profit from operating activities (EBIT)	3.409	1.175	--	518	5.102
Net finance expense
(513)	(250)	--	(564)	(1.327)

Income tax	(721)
Profit for the period	3.054

EBITDA BRIDGE

- ISK million -

2.238

1.635

527

8.890

4.490

EBITDA 2018/19	Effect of retail chains and	Effect of Olís	IFRS 16 Impact	EBITDA 2019/20
	warehouses

Sales and EBITDA

- ISK million -

	Sales	EBITDA	EBITDA%
140.000					9,0%
120.000				116.357	8,0%
7,5%			7,6%
7,2%					7,0%
100.000
		5,6%	84.179		6,0%
78.366	80.521
73.895	5,3%
80.000
			5,0%
60.000					4,0%
					3,0%
40.000
					2,0%
20.000					1,0%
5.659	6.024	4.139	4.490	8.890
0					0,0%
2015/16	2016/17	2017/18	2018/19	2019/20

Gross Profit %

25,0%	24,6%	24,8%	24,8%	23,5%	24,1%	24,3%	24,0%	24,4%	24,8%	24,8%	23,8%

22,2%

20,0%

15,0%

10,0%

5,0%

0,0%

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Cost ratios

Salaries & other operating expenses

12,0%
							11,0%	10,9%
10,3%								10,4%
10,0%		9,6% 9,4%	9,3%	9,3%				9,7%
				9,1%
9,2%		9,0%	8,7%	8,7%		8,7%
				8,5%8,2%	8,6%
				8,4%		8,2%	8,3%	7,9%
8,0%								7,9%

6,0%

4,6%

4,0%

2,0%

0,0%

2008/09	2009/10	2010/11	2011/12	2012/13	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20
				Salaries	Other operating expenses

Number of stores

Specialty stores and pharmacies

5

ÓB stations

42

Olís stations

28

Grocery stores

40

0

5

10

15

20

25

30

35

40

45

Balance Sheet

Balance Sheet

	29.02.2020	28.02.2019
Assets
Non-current assets	47.554	34.896
Current assets	15.154	15.955
Total assets	62.708	50.851
Equity and liabilities
Share capital	1.189	1.213
Other equity	23.397	23.066
Capital and reserves attributable to owners of Hagar hf.	24.586	24.279
Non-controlling interest	1	--
Total equity	24.587	24.279
Non-current liabilities	22.362	6.877
Current borrowings	442	7.631
Bank borrowings	1.273	800
Other payables	14.045	11.264
Total liabilities	38.122	26.572

Total equity and liabilities

62.708

50.851

Cash Flows

	Q4 2019/20	Q4 2018/19	2019/20	2018/19
	01.12-29.02	01.12-28.02	01.03-29.02	01.03-28.02
Net cash provided by operating activities	1.153	1.206	9.828	2.882
Net cash used in investing activities	(2.657)	(465)	(5.221)	(6.249)
Net cash (used in) from financing activities	371	(778)	(3.111)	3.881
Net increase (decrease) in cash and cash
equivalents	(1.133)	(37)	1.496	514
Cash and cash equivalents at beginning of the
period	3.365	773	736	222
Cash and cash equivalents at the end of period	2.232	736	2.232	736

Cash Flows 2019/20

- ISK million -

-5.221

9.828

-3.111

					2.232
736
Cash at the beginning of	Net cash from	Net cash used in	Net cash from financing Cash at the end of the
the year	operating activities	investing activities		activities	year

Changes in Equity

							Non
		Share	Legal	Restricted	Retained		controlling
	Share capital	premium	reserve	reserve	earnings	Total	interests	Total equity
Equity at March 1, 2019	1.213	5.023	303	5.092	12.648	24.279	--	24.279
IFRS 16, effects of
implementation					(559)	(559)		(559)
Purchased own share	(24)	(1.006)				(1.030)		(1.030)
Comprehensive income for the
period					3.054	3.054	--	3.054
Transferred from legal reserve			(6)		6	--		--
Non-controlling interests on
acquisition of subsidiary						--	1	1
Dividends paid, 0,955 ISK per
share					(1.159)	(1.159)		(1.159)
Transferred to restricted
reserve				855	(855)	--		--
Equity at February 29, 2020	1.189	4.017	297	5.947	13.136	24.586	1	24.587

Equity

- ISK million -

Equity

Equity ratio

30.000						70,0%
			61,1%
25.000		57,8%				60,0%
					24.587
	55,1%			24.279		50,0%
				47,7%
20.000
					39,2%	40,0%
		17.412	17.957
15.000	16.368
						30,0%
10.000
						20,0%
5.000						10,0%
0						0,0%
	2015/16	2016/17	2017/18	2018/19	2019/20

Refinancing

Bond Issue

• Successful bond issue that ensured the company's refinancing
• Excess demand for Hagar's bonds
• Two bond series were issued, indexed and non-indexed.
• ISK 8.000 m in total
• • ISK 5.500 m indexed with fixed nominal rate of 2,8%
  • ISK 2.500 m non-indexed with fixed nominal rate of 4,65%
• Credit line agreements signed to the amount of ISK 6.000 m
• • Approx. ISK 4.500 m and USD 12,5 m (ISK 1.600 m) at year end

Loans and Borrowings at Year End

	Non-current
Amounts are in ISK million	liabilities	Current liabilities	Total
CPI-linked bond issue	5.270	183	5.453
Non-indexed bond issue	2.500	-	2.500
Non-indexednon-current loans	4.412	259	4.671
Credit line - USD	-	1.273	1.273
Total loans and borrowings	12.182	1.715	13.897
Unused credit lines
Credit line - ISK	-	4.500	4.500
Credit line - USD	-	309	309
Total unused credit lines	0	4.809	4.809
Total loans and credit lines	12.182	6.524	18.706

Borrowings

- ISK million -

		Net interest bearing debt	x EBITDA
14.000					3,0
				2,7
12.000					2,5
				12.289	11.665
10.000
					2,0
8.000
					1,5
6.000
					1,3
					1,0
4.000
			0,7
2.000			2.766		0,5
	0,2
	0,1
0	701	1.279			0,0
	2015/16	2016/17	2017/18	2018/19	2019/20

Key projects of the year

Merger of Hagar and Olís

• The biggest integration projects are associated with organisational changes and housing
• Warehouse operations were the biggest single project
• Purchases for products and services
• Moving and coordination of Olís and Hagkaup offices
• Early savings for housing will be ISK 140-150 m on a early basis
• Integration goals achieved

New Warehouse

• Warehouse for refrigerated and frozen goods in Korngarðar - 4.440 m2
• Will be put into operation in November 2020
• Increased efficiency in warehouse operations and distribution
• Lease payments decrease by approx. ISK 50 m on a early basis, with effect from next operating year

Warehouse operations have been simplified. Aðföng has taken over warehouse operations for Olís, as well as operations for Hýsing and Ferskar kjötvörur.

Bónus leads the convenience market

• About a year ago, three Bónus stores were sold in accordance with an agreement with the Icelandic Competition Authority.
• Since then, Bónus has opened two new stores
• Increase in sales in Bónus is 12% from January 2020 to March 2020, in spite of fewer stores
• Increase in customers
• The cheapest option for consumers
• The same price all around Iceland
• Received Terra's environmental award in 2020

New Olís station opened in Varmahlíð and service center renewed New ÓB station opened in Vík í Mýrdal in September 2019

New ÓB station opened at Sjafnargata in Akureyri in February 2020

Deployment of self-service solutions

has been extremely successful

• Deployment finished in 14 Bónus stores and 7 Hagkaup stores, total of 21 stores
• Deployment planned in 7 Bónus stores and 1 Hagkaup store during this operating year
• Increased performance during peak hours
• Increased operational efficiency
• Less lines and instant service
• Pleased customers
• High ratio of handlings goes through self- service machines
• Different between stores and ranges from 35-60%

New real estates owned by Hagar

• Eiðistorg in Seltjarnarnes where Hagkaup is located, total 4.211 m2 (Q4 2019-2020)
• Bjarkarholt in Mosfellsbær. Bónus store that is total 1.660 m2 (Q4 2019-2020)
• Hagkaup store in Akureyri, total 2.173 m2 (Q2 2020-2021)
• In addition, construction of a new warehouse for refrigerated and frozen goods will finish in November 2020, total 4.440 m2
• The properties are not pledged

Reykjavíkur Apótek became a part of the group in September 2019 New pharmacy opened in Skeifan in February 2020

Further development ahead

Reykjavíkur Apótek in Skeifan

Mjöll Frigg became a part of the group in January 2020 An important part of the restructuring of warehouses, mainly due to bottling and mixing

Great increase in sales for Mjöll Frigg products due to COVID-19

Hagkaup.is back to business

Online store with groceries the first step Hagkaup celebrated its 60th anniversary in 2019

Útilíf online store was opened for business

in the operating year

• Alcohol sales have been successful
• Aðföng operates the project through Vínföng
• Prodicted sales during this operating year is approx. ISK 750 m
• Now, approx. 113 brands
• Good products for a good price
• Fifth largest in beer of 44 sales agents
• Fourth largest in red wine of 44 sales agents

Environmental and Social Projects

Carbon offset and a contract with

Klappir Grænar lausnir

• The goal is to achieve measurable results in environmental affairs and sustainability
• Bónus was the first chain store to offset its carbon footprint
• Olís in good cooperation with The Soil Conservation Service in Iceland
• This operating year, all companies within Hagar will offset its carbon footprint
• For the first time, Hagar will publish its
  CSR report according to Nasdaq's ESG reporting guide, concurrently with Hagar's annual report before the AGM

2020

Companies within the group are very active in supporting various community projects

Development Projects

• Full-blownproposals were handed to the negotiation committee of Reykjavík in June 2019.
• The proposals are in full accordance with the city's policy of decreasing the number of gas stations, the compact neighbourhood development and "the merchant on the corner"
• The proposals take into account commercial, residential and energy sales / gas pumps on the sites that the company has prioritized.
• Prioritized projects are:
• • Stekkjarbakki
  • Fjallkonuvegur
  • Ánanaust
  • Skúlagata
  • Egilsgata
  • In addition Lundur in Kópavogur

COVID-19

COVID-19

• No infections within grocery stores
• Frontline workers are heroes
• Good collaboration with authorites
• Product supply ensured
• Great work within stores and warehouses
• Great increase in sales with groceries but cost addition
• Great sales decrease at Olís
• Considerable decrease in clothing stores

Q1 2020/21 - The effect of COVID-19 and more

• Hagar has not issued an EBITDA budget for the operating year of 2020-21
• There is still great uncertainty about the effect COVID-19 will have on operations during a new operating year
• In total, the financial impact is negative for the first quarter of 2020-21
• In spite of great uncertainty, projected EBITDA in Q1 is between ISK 800-1.100 m
• Deviation in operating results are mostly due to Olís
• Primary factors of influence in Q1 are:
• • COVID-19
  • Drop in oil prices
  • Devaluation of the Icelandic krona
  • Increase in cost price from domestic and foreign suppliers
  • One-timecost
• It is the evaluation of management that the effect of COVID-19 will mostly be visible during Q1 and have emerged largely as of May
• Gross profit is lower now compared to the previous year and historically low due to above-mentioned factors

Thank you