Skeljungur hf. Consolidated Financial Statements For the Year Ended 31 December Skeljungur hf. Borgartun Reykjavik. Reg. no.

Transcription

1 Skeljungur hf. Consolidated Financial Statements For the Year Ended 31 December 2015 Skeljungur hf. Borgartun Reykjavik Reg. no

2 Contents Page Endorsement by the Board of Directors and the CEO... Independent Auditors' Report... Consolidated Statement of Comprehensive Income... Consolidated Statement of Financial Position... Consolidated Statement of Changes in Equity... Consolidated Statement of Cash Flows... Notes to the Consolidated Financial Statements Consolidated Financial Statements of Skeljungur hf

3 Endorsement by the Board of Directors and the CEO The Consolidated Financial Statements of Skeljungur hf. (the Company or Skeljungur ) for the financial year 2015 include the Company and its subsidiaries (Group). The Group consists of two main operations Skeljungur and Magn. Skeljungur the Icelandic operations span a range of retail, wholesale and service operations under the brands, Skeljungur, Shell, Orkan and Orkan X. Main activities are import, sale and distribution of oil but also lubricants, chemical products and fertilizer. Skeljungur operates 65 gas stations and 9 oil depots around Iceland. The Company decided not to prolong the retail brand contract with Shell Branding International. That has no effect on it's co-operation with Shell regarding lubricants, aviation and marine services. P/F Magn operates in the Faroe Islands and main activities are import, sale and distribution of oil as well as convenience retail. P/F Magn operates 11 retail outlets. The customer base of the companies span every sectors and large part of both islands populations. At the annual meeting on May 18th 2015 the Board of Directors was authorized to pay out to shareholders ISK 500 million or 50% of the year 2014 profit, before discontinued operations by decreasing the share capital of nominal value of 201,3 million. In the impairment test for 2015, the terminals owned by the company were valued as a separate group of cashgenerating units for the first time. It is the view of the management and the Board of Directors that it is more prudent to test the standalone value of the terminals as if they were operated separately as a CGU. Based on the impairment test results, an impairment of 1,063 million was made in the year According to the Consolidated Statement of Comprehensive Income, total operating revenue amounted to ISK 36,842 million for the Group (2014: 42,768). The Group's net earnings for the year 2015 amounted to ISK million (2014: 570.8). According to the Statement of Financial Position, the Group's total assets amounted to ISK 18,416 million (2014: 21,424). Shareholders' equity amounted to ISK 7,478 million at year end 2015 (2014: 8,097). The Group's equity ratio was 40.6% (2014:37.8%). The Company s share capital amounted to ISK 2,502 million at the end of the year. At year end the share capital is owned by two shareholders, same as at the beginning of the year. The shareholders at year end are: SF IV slhf.... SF IV GP hf.... Share 99,99% 0,01% The Board of Directors refers to the Consolidated Financial Statements regarding allocation of profit and other changes in equity within the fiscal year. A proposal concerning dividend will be submitted at the Annual General Meeting of the Company. The Board of Directors and the CEO of Skeljungur hf. hereby confirm the Consolidated Financial Statements for the year ended 31 December 2015 by means of their signatures. Reykjavik, 22 March 2016 The Board of Directors: CEO: Consolidated Financial Statements of Skeljungur hf

4 Independent Auditors' Report To the Board of Directors and Shareholders of Skeljungur hf. We have audited the accompanying Consolidated Financial Statements of Skeljungur hf., which comprise the consolidated statement of financial position as at 31 December 2015, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information The Board of Directors and CEO s Responsibility for the Financial Statements The Board of Directors and CEO are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Financial Statements give a true and fair view of the financial position of Skeljungur hf. as at 31 December 2015, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Report on the Board of Directors' Report Pursuant to the legal requirement under Article 104, Paragraph 2 of the Icelandic Financial Statements Act No. 3/2006, we confirm that, to the best of our knowledge, the report of the Board of Directors accompanying the Financial Statements includes the information required by the Financial Statements Act if not disclosed elsewhere in the Financial Statements. Reykjavik, 22 March 2016 KPMG ehf. Consolidated Financial Statements of Skeljungur hf

5 Consolidated Statement of Comprehensive Income for the year ended 31 December 2015 Notes Sales... Cost of goods sold... Gross profit... Other income... Salaries and salary related expenses... Sales and distribution expenses... Operating expenses... Earnings before depreciation and financial items... Depreciation and impairment of operating assets... Operating profit... Financial income... Financial expenses... Net financial expenses... Share of profit from associated companies... Profit before income tax... Income tax expense... Profit from continuing operations... Loss from discontinued operations (net of tax)... Profit for the year... Profit from continuing operations attributable to: Owners of the Company... Profit for the year... Profit for the year attributable to: Owners of the Company... Profit for the year... Other comprehensive income that will be reclassifed to profit or loss Foreign operation - foreign currency translation differences... Foreign currency translation differences reclassified to profit and loss... Total comprehensive (loss) income... Total comprehensive (loss) income for the year attributable to: Owners of the Company... Profit for the year... Earnings per share: Earnings per each ISK one of share capital and diluted share capital ( ) ( ) ( ) ( ) 11 ( ) ( ) 12 ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) 0 ( ) ( ) ( ) ,11 0,30 The notes on pages 9-36 are an integral part of these consolidated financial statements. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

6 Consolidated Statement of Financial Position as at 31 December 2015 Assets Goodwill... Other intangible assets... Operating assets... Shares in associated companies... Long term receivables... Non-current assets Notes ,18, Current assets Inventories... Trade receivables... Other receivables... Cash and cash equivalents... Current assets Total assets Equity Share capital Share premium Statutory reserve Reserve for share options... 25, Translation difference of shares in companies... ( ) ( ) Retained earnings Total equity Liabilities Deferred tax liability Loans and borrowings Non-current liabilities Short term borrowings... Trade payables... Current maturities of long-term debt... Current tax liabilities... Other current liabilities... Current liabilities Total liabilities Total equity and liabilities Mortgages The notes on pages 9-36 are an integral part of these consolidated financial statements. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

7 Consolidated Statement of Changes in Equity 31 December 2015 Attributable to owners of the Company Non- Share Share Statutory Reserve Translation Retained controlling Total capital premium reserve share option difference earnings Total interests equity 2014 Shareholders equity Profit for the year... Other comprehensive loss... Total comprehensive income... Transact. with owners of the Company Issued new shares... Contribution to statutory resererve... Equity-settled share-based payments... Non-controlling interests acquired... Paid dividend (ISK per share)... Balance at 31 December ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( 2.358) 0 ( ) ( ) ( ) ( ) Shareholders equity Equity reclassified... Profit for the year... Other comprehensive loss... Total comprehensive income... Transact. with owners of the Company Share Capital decrease... Contribution to statutory resererve... Balance at 31 December ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) The notes on pages 9-36 are an integral part of these consolidated financial statements. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

8 Consolidated Statement of Cash Flows for the year 2015 Cash flows form operating activities: Profit for the year... Notes Adjustments: Depreciation and impairment... Profit from associated companies... Net finance costs... Effect of share options.... (Gain) loss on sale of assets... Tax expense... Changes in: Inventory, decrease... Trade and other receivables, decrease... Trade and other payables, decrease... 16, ( ) ( ) ( 7.730) ( ) ( ) Cash generated from operating activities Interest received Interest paid... ( ) ( ) Taxes paid... ( ) ( ) Net cash from operating activities Cash flows from investing activities: Investment in operating assets ( ) ( ) Proceeds from sale of operating assets Investement in shares in associated companies... ( ) 0 Proceeds from sale of shares in associated companies Dividend from associated companies Other loans, change Cash acquired on consolidation Net cash used in investing activities ( ) ( ) Cash flows from financing activities Share Capital decrease... ( ) 0 Paid dividend... 0 ( ) Installments on long-term debt... ( ) ( ) Short-term borrowing, change Net cash used in financing activities ( ) ( ) Net (decrease) increase in cash and cash equivalents... Effects of movements in exchange rates on cash held... Cash and cash equivalents at the beginning of the year... Cash and cash equivalents at year end... ( ) ( ) ( ) Investing and financing activities not affecting cash: Investment in subsidiary... Share capital increase... 0 ( ) The notes on pages 9-36 are an integral part of these consolidated financial statements. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

9 Notes to the Consolidated Financial Statements 1. Reporting entity Skeljungur hf. (the "Company") is an Icelandic limited liability company domiciled in Iceland. The address of the Company s registered office is at Borgartun 26, Reykjavik. The Consolidated Financial Statements of the Company comprise the Company and its subsidiaries, P/F Magn, S-fasteignir ehf., Tollvörugeymsla Skeljungs ehf., Bensínorkan ehf., (together referred to as the Group and individually as Group entities ) and the Group s interest in associates. Skeljungur hf. is an Icelandic oil importing company whose activities span a range of retail and service operations in Iceland. The Company has a network of 65 service stations and 9 oil depots in Iceland. P/F Magn in Faroe Islands has 11 service stations and 3 oil depots around the Faroe Islands. 2. Basis of preparation a. Statement of compliance with International Financial Reporting Standards The Company's financial statements are prepared according to IFRS as adopted by the EU and additional Icelandic disclosure requirements in accordance with the Icelandic Financial Statements Act No. 3/2006. These financial statements were confirmed by the Board of Directors on 22 March b. c. d. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis, with the exception that derivative financial instruments are recognized at fair value. Presentation and functional currency The financial statements are presented in Icelandic krona (ISK), which is the Company's functional currency. All financial information presented in ISK has been rounded to the nearest thousand except when otherwise indicated. Use of estimates and judgments The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimates and judgments made in applying accounting policies that have significant effect on the amounts recognised in the financial statements is in note 15 regarding measurement of the recoverable amounts of cash-generating units containing goodwill. The determination of fair value is based on preconditions, which are dependent on the judgment of management on future events. Actual results can be different from these estimates. e. Determination of fair values A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. - Note 15 - Intangible assets (impairment of goodwill) - Note 17 - Operating assets (impairment of terminals) - Note 22 - Inventories (write-down of inventories) - Note 31 - Financial instruments (impairment of trade receivables) Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

10 3. Significant accounting policies The Group has consistently applied the following accounting policies to all periods presented in these financial statements. a. i) Basis for consolidation Business combinations The Group accounts for business combinations using the acquistion method when control is transferred to the Group. The consideration transferred in the acquistion is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The Group elects on a transaction-by transaction basis whether to measure non-controlling interest at its fair value, or at its proportionate share of the recognised amount of the identifiable net assets, at the acquisition date. ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date on which control ceases. iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated on consolidation. Unrealized gains arising from transactions with associates are eliminated against the investment to the extent of the Company s interest in the associate. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. iv) Associates Associates are those entities in which the Group has significant influence, but not control, over their financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The financial statements include the Group s share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence ceases. Unrealized gains arising from transactions with associates are eliminated against the investment to the extent of the Group s interest in the associate. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

11 3. Significant accounting policies continued: b. Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to Icelandic krona at the foreign exchange rate at the date of the transaction. Assets and liabilities denominated in foreign currencies are translated to Icelandic krona at the foreign exchange rate at the reporting date. Foreign exchange differences arising from translation of assets and liabilites are recognised in the consolidated statement of comprehensive income. Foreign operations Monetary assets and liabilities of subsidiaries with different functional currency than the Company are translated to Icelandic krona at the exchange rate at the reporting date. Transactions are translated at the average exchange rate of the year. Exchange differences arising from the translation to Icelandic krona are recognised as a separate line item in the statement of comprehensive income. The cash flow is translated to Icelandic krona using the average exhange rate of the year. Exchange differences arising from the translation to Icelandic krona are recognised as a separate line item in the statement of cash flow. c. d. (i) Discontinued operations A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with intent to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period. Financial instruments Non-derivative financial assets The Group initially recognizes loans and receivables and bank deposits on the date that they originate. All other financial assets including assets designated at fair value through profit or loss are recognized initially on the trade date, which is the date the Group becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which the risks and rewards of ownership of the financial asset are substantially transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise cash and cash equivalents and trade receivables, other receivables and other loans. Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

12 d. Financial instruments, continued: (ii) Non-derivative financial liabilities The Group initially recognizes debt securities issued on the date that they originate. All other financial liabilities are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. The Group classifies non-derivative financial liabilities as other financial liabilities. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method. Financial liabilities other than derivatives comprise loans and borrowings and trade and other payables. (iii) Derivative financial instruments Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value in the statement of financial position and changes in fair value are recognized in profit or loss as part of cost of goods sold in the statement of comprehensive income. (iv) Fair value hedges When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss together with changes in the fair value of the hedged item that are attributable to the hedged risk. If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. (v) Share capital Share capital is classified as equity. Incremental costs directly attributable to the issue of share capital are recognised as a deduction from equity, after deducting tax. Treasury shares When share capital recognised as equity is repurchased by the Group, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. When treasury shares are sold the sale is recognised as increase in equity. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

13 e. (i) Intangible assets and goodwill Recognition and measurement Goodwill arises either on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. An impairment test is performed at least annually. Software and customer relationships that are acquired from by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. (ii) Subsequent costs Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. (iii) Amortisation Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the stright-line method over their estimated useful lives, and is recognised in profit or loss. Goodwill is not amortised. The estimated useful lifes for the current and comparative periods are as follows: Software... Customer relationships years 20 years Amortisation methods, useful lifes and residual values are reviewed at each reporting date and adjusted if appropriate. f. (i) Operating assets Recognition and measurement Items of operating assets are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use and capitalized borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of operating asset have different useful lifes, they are accounted for as separate items of operating assets. Gains and losses on disposal of an item of operating assets are determined by comparing the proceeds from disposal with the carrying amount of operating assets, and are recognized on a net basis within other income or other expenses in profit or loss. (ii) Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

14 g. (iii) Operating assets, contd.: Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lifes of each component of an item of operating assets. Land is not depreciated. Operating assets are depreciated from the date they are installed and are ready for use, or in respect of internally constructed assets, from the date the asset is completed and ready for use. The estimated useful lifes for the current and comparative periods are as follows: Oil depots and real estates... Vehicles, machinery and equipment years 4-13 years Depreciation methods, useful lifes and residual values are reviewed at each reporting date and adjusted if appropriate. h. i. j. (i) Leased assets Leases are operating leases and the leased assets are not recognized in the Company's statement of financial position. Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the firstin first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and selling expenses. Impairment Non-derivative financial assets Financial asset not classified as at fair value through profit or loss, including an interest in an equity-accounted investee, are assessed at each reporting date to determine whether there is objective evidence of impariment. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and this loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. In assessing collective impairment the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. (ii) Non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped into the smallest group of assets that generates cash inflows from continuing use that are largely independent of cash inflows of other assets or cash generating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

15 k. (ii) Impairment, contd.: Non-financial assets contd.: The recoverable amount of an asset og CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. i. (i) l. (i) (ii) (iii) Employee benefits Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Revenue Sold goods and services Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the payment received or receivable, net of discounts and refunds. Revenue is recognised in the statement of comprehenive income when a significant portion of the risks and rewards of ownership are transferred to the buyer, it is probable that the consideration will be collected and the cost of sale and possible return of goods can be estimated reliably. Revenue is in general recognised upon delivery of the goods as the risk and rewards are in general transferred to the buyer when delivery occurs. Revenue is measured net of returns, trade discount and volume rebates. Other income Other income comprises commissions, gain on sale of assets, lease income, transportation fees, and other income. Other income is recognised upon delivery of goods or services. Operating lease income Lease income is recognised in the income statment on a straight-line basis over the term of the lease. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

16 m. (i) (ii) n. Expenses Cost of goods sold Cost of goods sold consists of the purchase price of sold inventories together with the related transportation cost, excise tax and duties. Lease payments Payments under operating leases are recognized in the statement of comprehensive income on a straight-line basis over the term of the lease. Finance income and finance expenses Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Finance costs comprises interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, and impairment losses recognized on financial assets other than trade receivables. Foreign currency gains and losses are reported on a net basis. o. Income tax Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income, in which case the income tax is recognised in those items. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. p. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS equals to basic EPS as the Company has not issued convertible notes, and share options were granted at year-end and have no effect on earnings per share. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

17 q. r. Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group s other components. All operating segments operating results are reviewed regularly by the Group s management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. It is the Group management's opinion is that the Group is only one operating segment. There are two geographical segments. New standards and interpretations The Group has adopted all international financial reporting standards, interpretations and amendments to standards that have been endorsed by the EU, are relevant for the Group and are effective for the financial year The international Accounting Standards Board has issued a few new standards that have not become effective and are yet to be endorsed by the EU. The Group has not assessed the impact of those standards, if endorsed by the EU, on it's financial statements in the future. The standards that are considered to have some potential impact on the Group's financial statements in the future are IFRS 15, revenue from contracts with customers and IFRS 16, leases. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

18 4. Changes in the Group At the end of February 2015, Skeljungur sold its subsidiary Birgðastöðin Miðsandi ehf. to Atlantic tank storage ehf. As the subsidiary's operation is insignificant in the first two months, Birgðastöðin Miðsandi ehf. is not part of the company's consolidated financial statements from January The sale had the following effect on the Group's financial statements at 1 January 2015: Operating assets... Deferred tax asset... Trade and other receivables... Cash and cash equivalents... Current liabilities... Net assets... Book value of the shares in the Company at the beginning of the year... Share increase during the year... Satisfied by cash... Gain on sale of subsidiary... Realized translation difference... Effect of sale of subsidiary recognized in the income statement... ( ( ( ( ( ( ) ) 7.214) 208) ) ) Geographic information The geographic information below shows the Group by the companies' countries of domicile. Year 2015 Income Statement Iceland Faroe Islands Total Revenue Gross profit EBITDA EBIT Financial Position Non-current assets... Current assets... Total assets... Long term liabilities... Current liabilities... Total liabilities Year 2014 Income Statement Iceland Faroe Islands Total Revenue Gross profit EBITDA EBIT Financial Position Non-current assets... Current assets... Total assets Long term liabilities Current liabilities Total liabilities Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

19 6. Discontinued operation At the end of July 2014 Skeljungur hf. leased the convenience retail portion of twelve gas stations to Tíu-ellefu ehf. Tíu-ellefu rents the premises and is responsible for customer service inside the stores. The effect is that the number of Skeljungur's employees decreased by 120, and the expected annual turnover was affected by ISK 1.8 billion. In the income statement 2014 comparison the discontiuned operation is shown in a single line, including revenue less expenses, depreciation and tax. Loss from discontinued operations specifies as follows: a) Results of discontinued operations Note Revenue Expenses... 0 ( ) Results from operating activities... 0 ( ) Income tax... Results from operating activities, net of tax... Basic and diluted loss per share ( ) 0 ( 0,17) Depreciation of assets from discontinued operations are included in expenses in the amount of ISK 121.2million in the year b) Cash flows from discontinued operations Net cash used in operating activities... Net cash flow for the year... 0 ( ) 0 ( ) 7. Sales Sales are specified as follows: Fuel... Other goods... Total sales Cost of goods sold Cost of goods sold is specified as follows: Fuel... Other goods... Total cost of goods sold Other income Other income is specified as follows: Rental income... Commission... Transportation fees... Gain on sale of operating assets... Other income... Other income total Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

20 10. Salaries and salary related expenses Salaries and salary related expenses are specified as follows: Salaries... Contribution to pension funds... Salary-related expenses... Salaries and salary-related expenses in discontinued operations... Salaries and salary-related expenses total... Average number of full-time employees during the year... Full-time-equivalent positions at year end ( ) Salaries paid to the Board of Directors, the CEO and six Directors of Skeljungur amounted to ISK million for the year. (2014: ISK 172,2 milllion, six Directors). Contribution to pension fund amounted to ISK 14.2 million for the year (2014: ISK 12.6 milliion). Salaries paid to the Board of Directors, the CEO and four Directors of Magn P/F amounted to DKK 6.7 million for the year (ISK million). Contribution to pension funds amounted to DKK 510 thousand (ISK 10 million). 11. Sales and distribution expenses Sales and distribution expenses are specified as follows: Distribution expenses... Marketing expenses... Maintenance expenses... Total sales and distribution expenses Other operating expenses Other operating expenses are specified as follows: Office and administrative expenses... Maintenance expenses... Computer costs... Total other operating expenses Financial income and expenses Financial income is specified as follows: Interest income on bank accounts... Interest income from bonds... Interest income on receivables... Financial income total... Financial expences are specified as follows: Interest expenses... Currency exchange loss... Financial expenses total... Net financial expenses ( ) ( ) Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

21 14. Income tax Expensed income tax is specified as follows: Income tax payable... Deferred income tax... Expensed income tax ( ) ( ) Effective income tax is specified as follows: Profit before income tax... Income tax using the corporate tax rate... Effects of tax rates in foreign jurisdictions.. Non deductible expenses... Effects from shares in companies... Other items... Effective income tax rate ,00% ( ) 20,00% ( ) ( 5,29%) ( 1,21%) ,21% ( 623) 0,08% ( 1.000) ( 10,89%) ,85% ( ) 2,29% ( 6.672) ( 1,86%) ,33% ( ) 19,85% ( ) 15. Intangible assets Goodwill is specified as follows: Goodwill 1 January... Acquisition of goodwill in business combination... Translation difference... Goodwill 31 December ( ) ( ) Impairment testing for CGUs goodwill At year end 2015 the goodwill of Skeljungur hf. was tested for impairment. The impairment test is based on discounted future cash flows. The pre-tax discount rate applied was based on the weighted average cost of capital, i.e. the cost of debt and equity. If fair value of goodwill (discounted cash flows) is lower than carrying amount the difference is expensed. The impairment test on the goodwill resulting in the business combination with P/F Magn was based on the acquisition price of the shares in the beginning of the year Magn amortisizes goodwill in its separate financial statements according to Faroese GAAP, but in the Consolidated Financial Statements, goodwill has been restated and the amortisation reversed from 1 January No impairment is made on goodwill. The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management s assessment of future trends in the relevant industries and have been based on historical data. Discount rate (WACC)... Future growth rate (nominal)... Budgeted EBITDA growth rate (average of next five years) ,14% 12,75% 2,0% 1,5% 0,4% 5,3% The discount rate was a post-tax measure estimated based on the historical industry average weighted-average cost of capital, with a possible debt leveraging of 60% at a market interest rate of 7.58% Cash flows were projected based on next year's business plans and future growth for the next four years prepared by management and confirmed by the Board of Director. The future growth rate was determined based on management s estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make. Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand

22 16. Other intangible assets Other intangible assets are specified as follows: Other intangible assets in the beginning of the year... Additions during the year... Amortisation for the year... Translation difference... Other intangible assets 31 December... Amortisation ratio... Customer relationships Software Total ( ) ( ) ( ) ( ) ( ) ( ) % 10% 17. Operating assets Operating assets and their depreciation are specified as follows: Cost Balance 1 January Aquired from business combination... Additions during the year... Disposals... Translation difference... Balance 31 December Reclassified... Subidiary sold... Additions during the year... Disposals... Translation difference... Balance 31 December Depreciation Depreciated 1 January Depreciation for the year... Sold during the year... Translation difference... Balance 31 December Subsidiary sold... Depreciation for the year... Impairment of assets... Sold during the year... Translation difference... Balance 31 December Book value 1 January Book value 31 December Book value 31 December Depreciation ratios... Estimated useful life... Terminals Other assets Total ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( 3.834) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( 1.763) ( ) ( ) ( ) ( ) ( ) ( ) ( ) % 8-25% years 4-13 years Consolidated Financial Statements of Skeljungur hf All amounts are in ISK thousand