Financial highlights Q4 2020
Orri Hauksson, CEO:
The operating result for the year 2020 was well acceptable. As most people know, major world events marked this unusual year, but the Síminn Group came out well from that reality.
The year started very well for the group, but various operational effects emerged at the end of the first quarter when the epidemic struck. Among other things roaming income largely disappeared and the Group's costs in foreign currency increased in ISK terms. As with most companies in the country, some of the operations became more complex than before and various projects were delayed. All the group's companies responded quickly to new realities, and despite the headwinds, none of them had to take advantage of the resources offered by the state.
The first 5G sites was installed and Síminn had become the largest seller of fiber-optic connections by the middle of the year. Míla's operations were stable through the year's Covid restrictions. Emphasis was placed on ensuring the safe operation of telecommunications infrastructure and responding to changes in use resulting from greatly increased telework. Míla continued its fiber-optic installation, albeit with a slightly slower pace than before. External conditions, e.g. the epidemic of the year, as well as storms and power outages in recent quarters, led to a change in the order of investment projects and certain actions were delayed.
The day-to-day operations and uptime of the Group's telecommunications systems remained very good, even though access restrictions and teleworking changed the way we work. The employees of all the group's companies deserve credit for their agility and selflessness, but for example, Síminn's customer service was moved from one room in Ármúli to more than 60 employees' homes in the southwest corner overnight, without any customers being aware of it. Sensa increased its services during the epidemic and had its best operating year from the beginning. Travel expenses and various other expenses in operations also decreased, in addition to which Síminn accelerated various streamlining measures, which led to operational improvements as the year progressed. Síminn's software development was outsourced to Deloitte in Iceland and Portugal in the middle of the year, which increases the company's responsiveness and service capacity in the long term.
Equipment sales increased in 2020, partly due to the much less travel of Icelanders abroad. However, there is a low margin on revenue from the sale of user equipment. Revenues from telecommunications increased slightly, excluding the revenues related to travel. Revenues from television services increased from the previous year, primarily because Síminn received the right to the English Premier League in the second half of 2019. There was more demand for Síminn's Premium television products than in the previous year. Each subscription home also made better use of Síminn's content offerings than before, as the weekly number of TV shows played regularly hit 1.2 million, which is four times more than three years ago.
Síminn is now further developing the structure of its television operations, in order to increase flexibility and diversity in serving customers. Last year, an agreement was also reached with Gagnaveita Reykjavíkur (GR) to sell the company's services over GR's network. Both changes will take effect in the coming weeks and months.
Síminn was unexpectedly sentenced to pay over 100 m.kr. damages in 2020, due to a fifteen-year-old case. The Competition Authority also fined the company ISK 500 million. in the spring of 2020 due to the company's alleged breaches of the settlement agreement with the authority. Síminn considered the Competition Authority's conclusion to be incorrect and appealed it to the Competition Appeals Committee. Most of the competition Authority's decision was repealed. As a result, the fine was reduced to 200 m.kr. and Síminn received the difference, ISK 300 million, repaid with interest now at the beginning of 2021. Síminn considers the committee's conclusion a step in the right direction, but not the result that the company considers to be legally correct. These issues will no doubt continue to be debated, as they concern the basis of competitive environment in Iceland. Síminn spent tens of millions of ISK on legal and litigation in the disputes, including those that have been canceled. Overall, these disputes had a negative effect on operations, leading to deviations from the original plan.
The year 2020 was used to reassess the Group's strategy, composition and financing. It was decided to accept the offer of the international information technology company Crayon for all Sensa's share capital for ISK 3,250 million. There is a reservation on the approval of the Competition Authority, but a result can be expected before the spring. Síminn will continue to operate in the field of information technology and offer such products to its customers in the corporate market.
Part of Síminn's operations was transferred to Míla at the beginning of 2021 after thorough preparations in the second half of 2020. Míla's activities will increase with the change as the company takes over network operations that were previously under Síminn's control. Míla's EBITDA increases with these changes, while Síminn’s EBITDA decreases by same amount. The EBITDA of both companies will be similar this year, but Míla's operating activities, balance sheet and cash flow will increase with the change as explained in the investor presentation.
The Group has almost finished its refinancing in such a way that Míla will raise its own loan capital. Work on the financing of Míla from Íslandsbanki is in the final stages. At the same time, the parent company is refinancing its loans with Arion Bank. As a result, each company will have its own external financing and therefore no loans between the companies, but the parent company has for years taken care of all the group's financing. With a change in the capital structure within the group and with the sale of Sensa, funds that are not used in regular operations will be released. It is therefore planned to hand over these funds to shareholders following the Annual General Meeting.
Together with a transfer of operations within the Group, this new financial structure is part of a better separation of the different business models that are operated within the group. Thus, Míla will handle infrastructure and network operations in wholesale, while Síminn will provide services to end customers. Míla has now become a larger and more independent company than before, operating on a non-discriminatory basis and at the same unit prices to all the country's telecommunications service providers and its other customers.
The main tasks of 2021 are to bring about a change in the group, determine its composition for the future and sharpen the units' services to their customers. The goal of all these changes is to increase return on equity and to have the happiest customers in Iceland."
Investor meeting 19 February 2021
An investor presentation will be held on Friday 19 February 2021 at 8:30 am. During the meeting, Orri Hauksson CEO and Óskar Hauksson CFO will present the financial results. The meeting will be held in Icelandic. Documents and a recording of the meeting will be available after the meeting on the company’s investor relations website https://www.siminn.is/umsimann/uppgjor and in Nasdaq’s Iceland company news.
The meeting will only be webcasted on: https://www.siminn.is/fjarfestakynning
Orri Hauksson, CEO, tel. 354 550 6003 (firstname.lastname@example.org)
Óskar Hauksson, CFO, tel. 354 550 6003 (email@example.com)