INTERIM FINANCIAL STATEMENT Q1 2019 Helgi S. Gunnarsson 11 th April - PowerPoint PPT Presentation

INTERIM FINANCIAL STATEMENT Q1 2019 Helgi S. Gunnarsson 11 th April 2019

OPERATIONS AND RESULTS - 1Q 2019 OPERATIONAL INCOME OPERATIONAL RESULTS OPERATIONAL RESULTS BEFORE 2,397 m.ISK. BEFORE ASSESSMENT CHANGE ASSESSMENT CHANGE / LEASING INCOME 1,607 m.ISK. LEASING INCOME 2,251 m.ISK. 71% ⇧ 37% ⇧ 30% 2.300.000 Amounts in th. ISK. 2.100.000 1.900.000 1.700.000 1.500.000 1.300.000 1.100.000 900.000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2017 2018 2019 Leasing income Operational results before assessment change YIELD OF INVESTMENT PROPERTIES REAL RETURN PROFIT AFTER TAX 1Q 2019 ON EQUITY 1,055 m.ISK. 5,1% ⇩ 28% 10,4%

OPERATIONS AND RESULTS - 1Q 2019 Cont. INVESTMENT PROPERTIES OWNED BY THE GROUP were valued at 130,948 • m.ISK. at the end of the period but additional leasing properties (leasing rights) amounting to 2,583 m.ISK. due to implementation of IFRS 16. • INVESTMENT PROPERTIES at the end of the period were therefore 133,531 m.ISK. and the equity ratio was 32% . • Calculated ASSESSMENT CHANGES of investment properties for the period were 871 m.ISK. • INTEREST BEARING DEBTS were 80,138 m.ISK. at the end of the period compared to 80,488 m.ISK. at end of the year 2018. Leverage as a percentage of investment properties is 61% . • INTEREST EXPENCES in the period were 781 m.ISK. compared to 541 m.ISK. in the year 2018. Of calculated expenses 39 m.ISK. are due leasing obligations. Total financial expenses were 1,160 m.ISK. compared to 857 m.ISK. in the year 2018. • NET CASH from operations amounted to 1,457 m .ISK. in the period. Net Cash at the end of the period was 1,974 m.ISK.

DEVELOPEMENT OF OPERATIONAL COSTS -490.000 25,0% -450.000 24,0% OPERATING COSTS OF INVESTMENT PROPERTIES Amounths in th. ISK. -410.000 23,0% Percentage of lease revenues -370.000 22,0% Costs are in line with plans. Good progress in expense -330.000 management. 21,0% -290.000 Sharp rise in public property valuation in recent years, 20,0% which directly increases property taxation. Lease contract -250.000 19,0% provisions due to property taxation put in force at the turn of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -210.000 18,0% the year. So far no problems have been encountered. 2016 2017 2018 2019 Operating cost of investment properties Ratio of leasing income -120.000 10,00% ADMINISTRATIVE EXPENSES Administrative costs are fully in line with the company's 9,00% -110.000 plans, expense objectives lowered from 5 % to 4.5% for the Amounths in th. ISK. 8,00% Percentage of leasing revenues -100.000 year 2019. 7,00% Increased weight on administrative costs in the first quarter -90.000 6,00% due to statement preparations and the Stock Exchange. -80.000 5,00% -70.000 4,00% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2017 2018 2019 -60.000 3,00% Administrative expenses Ratio of leasing income OBJECTIVES: PROPERTY OPERATING COSTS 20% ADMINISTRATIVE EXPENSES 4,5%

OPERATIONS AND PROSPECTS • The leasing revenues for the period are in line with plans • Revenues from Smáralind have grown 10% from 1Q/18 to 1Q/19. Operational expenses in Smáralind Quarterly Overwiev 1Q 2019 4Q 2018 are at an equilibrium and about 8% lower than for the same period last year. The last new retail spaces (Weekday and Monk) were handed over to the lessees in April and will open this spring, the Leasing revenues 2,251 2,306 restructuring phase is therefore over. Revenues, Operations in properties 146 138 • Revenue growth in Egilshöll from 1Q/18 to 1Q/19 is over 14%. Operational expenses are at an equilibrium and at pair with last year. Total revenues 2,397 2,444 • Commercial properties in general: Excluding new property portfolios incorporated into the group last year, the revenues growth is broadly 5% between the years, i.e. 1Q/18 to 1Q/19. Operational expenses for this portfolio have, by and large, followed the price index excluding property taxation that has risen Operational costs of investtment properties -484 -466 9% between the years. • Management and operations of supporting functions “Operations in properties” is excellent and Operational costs in properties -193 -235 remarkable results have been achieved. Administrative expenses -113 -99 • The company has established objectives to strengthen environmental awareness considerably in all operational functions. This includes financial and marketing opportunities. • Demand for commercial space is excellent . The extensive emphasis on leasing to public entities and Gross profit before assessment 1,607 1,644 strong lessees has proven reasonably beneficial. changes • The leasing ratio of the portfolio is now 97% . Assessment changes of investem. • Defaulting is minimal. WOW leased 1,800 m 2 at Höfðatorg on a limited lease contract, losses due to 871 978 properties this contract are minor. Results from operations 2,478 2,622

Effect of using IFRS 16 for the financial statement Lots for • Accounting Standard IFRS 16 has been implemented. Please refer to item 8 in the grpoup’s quarterly statement for explanation regarding the impact. The main elements are the buildings building Total following: Leasing properties Status 1.1.2019 ........................................................................................................... 1,988 587 2,575 The entries LEASING PROPERTIES and LEASING DEBTS are due to contracts the • Changes due to revaluation of leasing debts.............................................................. 0 28 28 Assessmernt changes............................................................................................ group leases from third parties, such as lots for the group’s buildings and buildings for 0 ( 20) ( 20) Status 31.3.2019 ......................................................................................................... 1,988 595 2,583 forward leasing. The leasing properties 01.01.2019 is the same as leasing debts, or 2,575 m.ISK. Implementation of IFRS does therefore not affect the equity of the Leasing properties group as of 01.01.2019. Status 1.1.2019 ........................................................................................................... 1,988 587 2.575 Revaluation due to indexation of lease payments..................................................... 0 28 28 LEASING PROPERTIES in the group books due to these lease agreements, are • Leasing debts payments............................................................................................... 0 ( 20) ( 20) booked as INVESTMENT PROPERIES and evaluated at market valued. Next years payments of leasing debts Booked among other short term debts .................................................................. 0 ( 85) ( 85) Status 31.3.2019 ......................................................................................................... • LEASING DEBTS are evaluated as present worth of leasing income series at the 1,988 510 2,498 beginning, unpaid at starting date. Present worth of leasing income is calculated Amounts in Income Statement based on interest rate the group pays on new loans. Assessment change..................................................................................................... 0 ( 20) ( 20) Leasing debts interests..................................................................................... ( 33) ( 6) ( 39) By implementing IFRS 16 the total assets of the company increase at the beginning • Amounts in Income Statement, total........................................................................ ( 33) ( 26) ( 59) of the period, i.e. 01.01.2019 by 2,575 m.ISK. The group’s EQUITY RATIO drops from 31,6% to 31,0%. But is now at the end of the period 32%. Amounts in Cash Flow Paied interests of leasing debts............................................................................. ( 33) ( 6) ( 39) Paymnent of leasing debts........................................................................................... By applying IFRS 16 the leasing payments, the amount of 59 m.ISK. is booked as 0 ( 20) ( 20) • Amounts in Cash Flow, total................................................................................. ( 33) ( 26) ( 59) assessment change and interest expenses instead of operational costs of investment properties. This raises the operational revenues before assessment change (EBITDA) as a percentage of leasing revenues by 2,6 percentage points, compared to if the standard had not been employed.