0QIS N1 Hf

Key findings

• Profit for Q3 was ISK 1,816 million, 21.2% of margin and increased by 16.2% from previous year.
• Merchandise sales amounted to ISK 37,334 million, as compared to ISK 35,146 million the previous year, up by 6.2% between years.
• Gross margin on goods and services sales amounted to ISK 8,575 million, up by ISK 1,511 million, or 21.4% between years.
• Margin level was 23.0%, up 0.3 p.p. from last quarter and 2.9 p.p. from Q3 2022.
• Wages and personnel costs increased by 11.2% between years, while full-time equivalent positions increased by 86, or 6.5% between years, due to the opening of new stores and the acquisition of IFC last year.
• EBITDA amounted to ISK 3,905 million, as compared to ISK 3,067 million in Q3 2022, an increase of 27.3%. With one-off items excluded from income and expenses incurred in the preceding year, the improvement is 40.2 % between years.
• Equity amounted to ISK 35,084 million and the equity ratio was 36.1% at the end of Q3 2023.
• Net cash from operations amounted to ISK 3,383 million, or 39.5% of gross margin, as compared to ISK 1,318 million in the preceding year.
• The company's EBITDA forecast for 2023 is increased by ISK 600 million and is now ISK 10,400-10,800 million.

Good operating results in 3Q 2023.

Ásta S. Fjeldsted, CEO of Festi:

"The third quarter is largest in the Group's operations in terms of product sales and overall business. Efforts to improve margins and reduce operating costs are showing results. Sales increased by 6.2% between years, margin increased by 21.4% and operating profit (EBITDA) increased by 27.3% between years. The number of transactions grew by 9.6%, the number of goods sold by 8.9% and the number of litres of fuel sold increased by 7.1% between years.

Gross margin on goods and services sales amounted to ISK 1,511 million during the quarter, up by 21.4% between years. The margin level for the quarter was 23.0%, up 0.3 p.p. from last quarter and by 2.9 p.p. from the year before. Gross margin on daily goods increased by ISK 640 million, or 17.7% between years, due to increased turnover in Krónan’s and N1’s retail outlets. Margin on energy sales increases by ISK 911m, largely due to increased fuel sales and more positive developments of international fuel prices compared to previous years. The gross margin on electronics sales at ELKO remained almost constant between years, and the gross margin on other goods and service sales decreased by 3.8% between years. Salaries and personnel costs increased by ISK 369 million, or 11.2% between years. Full-time equivalent positions increased by 86, or by 6.5%, due to Krónan’s new store in Akureyri, new workshop N1 in Klettagarðar and due to Icelandic Food Company, which joined the group from last year. Other operating expenses increased by 2.5% between years, but great emphasis has been placed on reducing all operating costs in the current challenging operating environment. The company's cash flow is very strong, with cash flow from operations amounting to ISK 3,383 million, an increase of ISK 2,065 million from the previous year.

One of the key factors in the Group's success at any given time is the efficient operation of Bakkinn warehouses, where customers request increased service and flexibility, as well as efficiency, reliability, and speed of deliveries during high season. To sharpen the future development and operation of the warehouses, Eva Guðrún Torfadóttir has been hired as Bakkinn Managing Director, previously held the position of CEO of Festi. Eva Gudrun is an engineer and former consultant at Implement Consulting Group in Denmark and will start work at the beginning of next year, taking a seat on the Executive Board of Festi.

Festi signed a purchase agreement on July 13th to acquire the entire share capital of Lyfja hf., which operates 45 pharmacies and branches around Iceland as well as an online store and a mobile app. Lyfja and its subsidiaries employ 380 people. The hope is that the Competition Authority’s decision on the merger will be made known in the first half of next year.

The outlook for the business is good, but the world continues to be uncertain due to the war in Ukraine and unrest in the Middle East. Large fluctuations in commodity markets affect operations, as well as continued high levels of inflation and interest rates. Krónan opened its improved store at Grandi at the end of September after approximately a month of closing, with an emphasis on improving the customer experience and increasing the selection of ready-to-eat dishes, where you can now find the restaurants Tokyo Sushi, WokOn and Rotissiere, to name a few. The reception has been tremendously positive and promising for upcoming festivals; Halloween and Christmas. N1 has introduced new self-service fuel pumps at service stations across the country as well as new EV charging points to meet customers' demands for cardless payments and support the energy transition. This has increased product sales at service centres in recent months. There is also growth in the tyre business through the N1 app. It will be exciting to see how the number of tourists develops in the coming quarters, but it is no secret that it strengthens sales, even though they are strongest in the summer season. Soon the so-called "fifth quarter" will arrive, often referred to as November discount days. These days grow in sales year by year, and many people take the opportunity to shop for Christmas presents before December begins. ELKO has been actively involved from the beginning and as before, there will be several exciting offers available in the company's stores before the Christmas festival kicks off. The question on everyone’s mind in the ELKO team is which electronics will be the most popular Christmas gift this year?", says Ásta S. Fjeldsted, CEO of Festi.

Attachments

• Festi hf - Consolidated Statements for 2023 Q3
• Festi hf - Company announcement Q3 2023

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