Festi : Earning document

Contents

	Page
Endorsement and Statement by the Board of Directors and the CEO	3
Independent Auditors' Report	6
Statement of Profit or Loss and Other Comprehensive Income	10
Statement of Financial Position	11
Statement of Changes in Equity	12
Statement of Cash Flows	13
Notes	14
Appendices - unaudited:
Quarterly Statement	44
Statement of Corporate Governance	46
Non-Financial Information	51

Consolidated Annual Financial Statements of Festi hf. 2022

2

Amounts are in thousands of ISK

Endorsement and Statement by the Board of Directors and the

CEO

Operations of the Group

Festi owns and operates companies which are leading in the food market, fuel and service station market and electronic equipment and smart devices market. Operation of properties, purchase and sale of securities are also part of the operations of the Group.

The parent company Festi ("the Company") owns the subsidiaries Krónan, which operates grocery stores under the names Krónan and Kr, N1, which operates service stations for fuel and electricity sales and various facilities related to lubrication and motor vehicle services, ELKO, which is the largest electronic equipment store in the country, Festi fasteignir, which owns and operates the Group's properties, and Bakkinn vöruhótel, which specialises in warehouse services and distribution.

Board of Directors and Corporate Governance

The Board of Directors of Festi has established rules of procedure whereby it endeavours to comply with the "Guidelines on corporate governance" issued by the Iceland Chamber of Commerce, NASDAQ OMX Iceland and the Confederation of Icelandic Employers on 1 July 2021. The guidelines are accessible on the website www.leidbeiningar.is.

The Board of Directors consists of three males and two females. The Board of Directors reached a termination agreement with the Company's CEO, Eggert Þór Kristófersson, who ended employment at the end of July 2022. It was agreed with Magnús Kr. Ingason, CFO, to act temporarily as the CEO. A new CEO, Ásta S. Fjeldsted, started employment at the beginning of September 2022. She went on maternity leave at the beginning of November 2022 but will be back to work at the end of March 2023. Magnús Kr. Ingason acts as the CEO during that time.

Further information about the Board of Directors and corporate governance can be found in the appendix Statement of Corporate Governance, which accompanies the annual financial statements.

Operations in 2022

The Group´s operating revenue for the year 2022 amounted to ISK 123,785 million (2021: ISK 101,502 million) and increased by 22.5% between years. Operating profit before depreciation, amortisation and changes in value for the year 2022 amounted to ISK 10,020 million (2021: ISK 10,118 million) and decreased by 1.0% between years. According to the statement of profit or loss and other comprehensive income, the profit for the year amounted to ISK 4,082 million (2021: ISK 4,972 million) and total comprehensive income for the year ISK 4,044 million (2021: ISK 6,557 million). The Group´s equity at year-end amounted to ISK 34,460 million (2021: ISK 33,910 million), including share capital in the nominal value of ISK 308 million. Reference is made to the statement of changes in equity regarding changes in equity during the year. The Group´s equity ratio at year-end was 36.9% (2021: 39.4%).

In connection with the publication of its annual financial statements for the year 2021, the Company released on 9 February 2022 an earnings forecast for the year 2022, where projected EBITDA was ISK 9,000 - 9,400 million. The Company increased its earnings forecast three times during the year, last in connection to the publication of the financial results for Q3, to ISK 10,000 - 10,400 million. The actual EBITDA for the year amounted to ISK 10,020 million, which is considerably better than the amount assumed in the first earnings forecast for the year. Increased business activities of all subsidiaries explain the better EBITDA but also optimisation was achieved in various areas, which resulted in lower cost per unit. Furthermore, in the initial forecast it was not assumed an ISK 464 million profit from oil and currency hedges, as well as repayment from the State of overcharged duties, as per Note 32, in total of ISK 432 million, which are recognised in the annual financial statements. On the other hand, the effects of retrospective salary increases in the amount of ISK 200 million were not expected when the last earning forecast of the year was released.

The year was marked by a sharp increase in world market prices for raw materials, which lead to increased turnover and decrease of margin level, especially from the fuel part of the operations. Furthermore, inflation increased in international markets, which lead to rising product prices. Prices are expected to remain high in commodity markets while war rages in Ukraine, along with possible disruptions to supply chains. The full-time equivalent number of employees was 1,269 and the employee gender ratio (male/female) was 60/40. Festi has a strong financial position and the Company is well prepared to address the challenges ahead.

Consolidated Annual Financial Statements of Festi hf. 2022

3

Amounts are in thousands of ISK

Endorsement and Statement by the Board of Directors and the CEO, contd.:

The Company's Board of Directors proposes that a dividend of ISK 3 per share of nominal value be paid during the year 2023 or approximately ISK 923 million.

Shareholders

The Company´s shareholders at the end of the year were 1,268, compared to 1,037 at the beginning of the year and thus their number increased by 231 during the year. Following are the Company's 20 largest shareholders at year-end:

			Share	Change
		Share capital	capital	from
	in thousands of ISK	in %	2021 in %
Lífeyrissjóður starfsmanna ríkisins, A- og B-deild	........................................ 42,055	13.7%	-1.0%
Lífeyrissjóður verzlunarmanna	33,280	10.8%	0.2%
Gildi - lífeyrissjóður	29,640	9.6%	-0.2%
Brú Lífeyrissjóður starfsmanna sveitarfélaga	27,004	8.8%	2.3%
Birta lífeyrissjóður	21,826	7.1%	1.2%
Almenni lífeyrissjóðurinn	14,404	4.7%	-0.1%
Stapi lífeyrissjóður	14,217	4.6%	-0.1%
Festa - lífeyrissjóður	12,592	4.1%	1.5%
Frjálsi lífeyrissjóðurinn	11,279	3.7%	0.1%
Söfnunarsjóður lífeyrisréttinda	9,263	3.0%	0.1%
Lífeyrissjóður starfsmanna Reykjavíkurborgar	7,346	2.4%	0.6%
Lífsverk lífeyrissjóður	7,119	2.3%	-0.2%
Vanguard	6,752	2.2%	2.2%
Stormtré ehf	6,101	2.0%	0.1%
Kjálkanes ehf	6,000	2.0%	0.4%
Sjávarsýn ehf	5,503	1.8%	0.1%
Brekka Retail ehf	5,000	1.6%	0.0%
Íslandssjóðir	4,924	1.6%	-0.6%
Landsbréf	3,327	1.1%	-1.3%
Sjóvá-Almennar tryggingar hf	2,909	0.9%	-0.4%
		270,541	88.0%	4.8%
Other shareholders	36,959	12.0%	-4.8%
		307,500	100.0%

Share capital and Articles of Association

The Company's listed share capital amounted to ISK 313 million at the end of the year and it was decreased by ISK 11 million during the year by redemption of treasury shares. Outstanding at year-end 2022 were ISK 308 million shares (2021: ISK 316 million) and the Company owned 5,000 thousand own shares at year end. All share capital is in one class and all shareholders enjoy the same rights. At the Company's Annual General Meeting on 22 March 2022 it was agreed to authorise the Company to repurchase up to 10% of the nominal amount of outstanding shares in accordance with Chapter VIII of the Act no. 2/1995 on Limited Liability Companies. The Company purchased a total of 8,618 thousand shares during the year, about 2.7% of total share capital as part of the Company's dividend policy, see Note 23. The authorisation is valid for up to 18 months. By approving this proposal, a similar authorisation was cancelled, which was approved at the Company's Annual General Meeting on 23 March 2021 (as per Note 23). An extension for this authorisation will be requested at the Company's Annual General Meeting next March.

Those who intend to run for election for the Board of Directors of the Company must notify so in writing to the Board of Directors with at least five day notice before the beginning of the Annual General Meeting. The Company's Articles of Association can only be amended with the approval of 2/3 of votes cast in a lawfully called shareholders' meeting, provided that the intended amendment is thoroughly mentioned in the agenda for the meeting and what it consists of.

Consolidated Annual Financial Statements of Festi hf. 2022

4

Amounts are in thousands of ISK

Endorsement and Statement by the Board of Directors and the CEO, contd.:

Non-financial information

Festi hf. is a public interest entity. According to the Act on Annual Accounts, the Company shall provide information necessary to assess its development, scope, position and influence in relation to environmental, social and personnel matters, its human rights policies, how it counteracts corruption and briberies in addition to a concise description of its business model, and more. In order to describe the current status of its social responsibilities the Company has for the past few years issued a report on non-financial parameters in accordance with Nasdaq´s ESG guidelines. The publication of the report is among other things, in order to enable Festi to assess its standing on these matters as a Group, based on an accepted methodology. The policies and results of the Company with respect to these matters are described in the appendix to the annual financial statements on non-financial information.

Statement by the Board of Directors and the CEO

The Company's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and, as applicable, additional requirements of the Act on Annual Accounts.

According to the best of our knowledge, in our opinion the consolidated annual financial statements give a true and fair view of the operating performance of the Group for the year 2022, its assets, liabilities and financial position as at 31 December 2022, and changes in cash and cash equivalents during the year 2022.

Furthermore, in our opinion the consolidated annual financial statements and the endorsement and statement of the Board of Directors and the CEO give a true and fair view of the development and results of the Group´s operations, its standing and describes the main risk factors and uncertainty that the Group faces.

The Board of Directors and the CEO of Festi hf. have today discussed the Company's consolidated annual financial statements for the year 2022 and confirm them by means of their signatures. The Board of Directors and the CEO propose that the Annual General Meeting of the Company approves the consolidated annual financial statements.

Kópavogur, 8 February 2023.

Board of Directors of Festi hf.

Guðjón Karl Reynisson, Chairman

Sigurlína Ingvarsdóttir, Vice-Chairman

Hjörleifur Pálsson

Magnús Júlíusson

Margrét Guðmundsdóttir

CEO

Magnús Kr. Ingason

Consolidated Annual Financial Statements of Festi hf. 2022

5

Amounts are in thousands of ISK