Skipti hf. - Financial Statement Release

- Annual Results 2008

- Sales increased 19% from the preceding year

•  Sales increased by ISK 6.3 billion from 2007, or 19%. Sales amounted to ISK
   39.0 billion as compared to ISK 32.7 billion in the preceding year. 

•  Earnings before depreciation and financial items (EBITDA) amounted to ISK 9.0
   billion as compared to ISK 9.5 billion for 2007. EBITDA margin was 23%. 

•  Cash from operations amounted to ISK 10.1 billion as compared to ISK 9.0
   billion in 2007. After tax and interest, cash from operations came to ISK 8.4
   billion. 

•  Loss over the period came to ISK 6.4 billion, mainly due to the devaluation
   of the Icelandic krona and impairment of intangible assets. 

•  Exhange loss came to ISK 3.2 billion of the total of ISK 9.5 billion finance
   cost for the year.
•  32% of Skipti's sales derived from international operations.

•  Net interest bearing debts (interest bearing debts, minus deposits) amounted
   to ISK 51.1 billion at the turn of the year, as compared to 50.0 billion in
   the preceding year.
•  Skipti's equity ratio is 28%.


Highlights of  2008

•  Significant changes occurred in the Company's operating environment in the
   second half of the year, as the economic crisis impacted its operations.
   Various actions were taken to secure the Company's results; however, a fall
   in demand is anticipated in the Company's largest markets in the coming
   months. 

•  Síminn continued the development of its long-range GSM system, which will
   offer users a strong high-speed connection throughout the country and on the
   fishing grounds around Iceland. Síminn also participated in the
   Telecommunications Fund's tender for the development of a countrywide
   high-speed network, and a contract has now been signed between the parties.
   The contract ensures a high-speed network for all Icelanders before the end
   of 2010. Almost 1800 households are involved, with the first households
   already being  linked-up. 

•  Skipti´s foreign operations showed strong results in the year. The operation
   of the IT company Sirius IT showed great success in the year and the project
   backlog was good. Síminn's companies in Denmark were merged in early March
   under a new name - Síminn Danmark A/S. 

•  On 19 March 2008, Exista announced a voluntary offer for all shares in Skipti
   hf. The offer amounted to ISK 6.64 per share, which was paid with new Exista
   shares. The offer was valid from 27 March through 26 May, by which time
   Exista had acquired 99.22% of Skipti shares. Following the offer and the
   delisting of the company, outstanding shares were called in. Skipti is now
   100% owned by Exista. 


Brynjólfur Bjarnason, CEO of Skipti hf.

“The past year was an eventful one for Skipti, as it was for other Icelandic
enterprises. The results of the Company's regular operations were favourable,
considering the circumstances. The Company's subsidiaries have been working on
adapting to the changed operating environment created by the events of last
autumn, and it is clear that there are challenging times ahead. The price trend
of the Icelandic króna was extremely unfavourable over the year which explains
a large portion of the Company's losses, notwithstanding hedging measures.
Skipti's income showed good growth, largely from the Company's overseas
operations. The financial position at the turn of the year is good, partly as a
result of the strong cash flow from operations and partly as a result of sales
of assets in the second half of the year. The Company is therefore in good
position to address the challenges ahead.” 


Operating results for the year 2008

Accounting Polices
The Consolidated Financial Statements for the year 2008 are prepared in
accordance with International Financial Reporting Standards as adopted by the
EU. The Consolidated Financial Statements of Skipti hf. for the year 2008
consist of the Consolidated Financial Statements of Skipti hf. and its
subsidiaries.  The Board of Directors and the CEO of Skipti hf. have confirmed
the Consolidated Financial Statements for the year 2008. 

Operation
Sales in 2008 came to ISK 39.013 million, as compared to ISK 32.719 million in 
the preceding year, increasing by 19%. The significant increase is mainly
explained by income from international operations. 

EBITDA for the Group came to ISK 8.966 million, as compared to 9.493 million in
2007.  The EBITDA ratio is now 23 %, against 28 % a year ago. Skipti has
invested in IT companies and while this market generally yields a lower EBITDA
ratio than telecommunications companies, the investments involved are lower in
the IT sector. Furthermore, Skipti´s telecommunications companies abroad do not
own the networks on which they operate, which results in a lower EBITDA margin
than in the case of companies that own and operate networks. 

Depreciation amounted to ISK 6.354 million, as compared to ISK 4.202 million in
2007. This increase is mainly explained by impairment of intangible assets. 
Loss for the Group came to ISK 6.424 million, as compared to a profit of ISK
3.082 million in 2007.  The loss is mainly due to the devaluation of the
Icelandic krona and impairment of intangible assets. 

Cash Flow
Cash provided by operations came to ISK 10.102 million for the year, as
compared to ISK 9.014 million in the preceding year.
The Group's capital expenditures (CAPEX) amounted to ISK 4.151 million over the
year, as compared to ISK 3.490 million in 2007. 

Balance sheet
The group's total assets at 31st of December 2008 came to ISK 128.657 million,
having increased by ISK 31.016 million, or 32%, from the beginning of the year.
Net interest bearing debt (interest bearing debts, minus deposits) amounted to
ISK 51.1 billion at the turn of the year, as compared to 50.0 billion in the
preceding year. Skipti employed a currency hedging strategy which to a large
extent protected the Company against the depreciation of the Icelandic krona
during the year. In addition, the Company sold assets in the latter half of 
the year which also resulted in debt reduction. The ratio of net interest
bearing debt/EBITDA was 5,7 at the turn of the year, as compared to 5,3 in the
preceding year. 

Equity stood at ISK 36.547 million at the end of 2008, and the equity ratio was
28%. 


Market position and outlook

Síminn's 3G development is in full swing, with the services now extending to
over 80% of the population. Síminn is also working on the installation of
long-range 3G transmitters which will eventually cover an even larger area than
the existing 2G service area. However, the extended coverage is not the
greatest advantage of the system, but rather the possibilities that will be
opened to customers with the new high-speed mobile network. It has always been
an inherent element of Síminn's strategy that the development of its
transmission infrastructure should support the future market needs for
telecommunications services, and 3G is the next step in this development as the
successor to the best available mobile telephone service known today. Síminn
also participated in the Telecommunications Fund's tender for the development
of a countrywide high-speed network, and a contract has now been signed between
the parties. The contract ensures a high-speed network for all Icelanders
before the end of 2010. Almost 1800 households are involved, with the first
households scheduled for link-up within a month. 

Following a call for tenders, Farice hf and Míla ehf reached a ten-year
agreement concerning telecommunications services. According to the Agreement,
Míla will provide telecommunication services to Farice for the latter company's
development of a new submarine cable, Danice, and enlargements of the capacity
of the FARICE-1 cable. The effect of the agreement is that Míla will multiply
its transmission capacity and provide Icelandic telecommunications companies
with opportunities to enlarge their own capacities and at the same time
strengthen their services to customers. Fibre to the Home is a new service
marketed by Míla last year. The service consists in customer access to a fibre
local loop connected to their homes in place of the traditional copper local
loop.  The service will be offered only in new housing developments. Fibre to
the Home gives users increased possibilities of obtaining large bandwidth
services, such as a wide variety of television programming and alert services. 
Skipti took over shares in two telecommunications companies in the Czech
Republic from Exista in the first half of the year. The shares in question
corresponded to 8.25% of a holding company which, on the one hand, owns a 39%
share in T-Mobile Czech Republic (TMCZ) and on the other hand 100% of Ceske
Radiokommunikace (CRa). These shares were sold in the second half of the year.
Skipti explored the possibility of re-investing in these companies, but the
plan was abandoned. 

Early in the year, Skjárinn stopped producing its own television programming
and improved its operations and products through partnerships with Icelandic
film companies. The weakening of the Icelandic króna, unhealthy competition
from the public sector and sharp cuts in the advertising market following the
collapse of the banks had a significant impact on Skjárinn's operation in the
year.  There was uncertainty about the future of the television station
SkjárEinn despite good ratings, with 80% of Icelanders aged 12-80 watching
SkjárEinn programming every week over the year.  The use of the Skjábíó
pay-per-view service showed improvement and subscription fees from the
SkjárHeimur channel distribution exceeded the projected budget for the year,
which partly offset the reduced revenues from the advertising market.  The
competitive position of the privately owned media is extremely difficult as a
result of the position occupied by the State run national broadcasting network
with its generous taxpayer subsidy.  Attempts were made last year to correct
this environment by limiting the scope available to the National Broadcasting
Service in the advertising market.  Unfortunately it did not prove possible to
complete this work before year-end, with the result that there is still great
uncertainty as regards the future of Skjárinn. 

Já's operations were in line with the budget last year.  Já published the 2008
telephone directory in late May in an unusual form; it was produced in
collaboration with the writer Hugleikur Dagsson, who published his new story,"Garðarshólmi" inside the telephone directory. The directory had its best
reception since it was first issued, with about 100,000 copies picked up by
users in the first three days.  Customer satisfaction with 118 information
services reached its highest peak since the start of measurements in the course
of the year, and the popularity of the Já.is website continued to grow; the
number of individual weekly users grew by 23% over the year the number of hits
increased by 39%. 

On-Waves, a Síminn subsidiary, specialises in offering mobile telephone
services aboard ocean liners and ferries as well as cargo vessels. These
operations are enjoying strong growth and in the course of the year the company
signed numerous contracts for GSM services aboard ocean liners. 
Síminn's companies in Denmark, Business Phone and Ventelo, were merged in early
March under a new name - Síminn Danmark A/S. The objective of the merger is to
take better advantage of the strengths of both companies and benefit from
synergies resulting from the companies' similar operations. The company
currently has a staff of 75 and offers universal telecommunication services to
small and medium-sized enterprises in Denmark. There are over 6,500 companies
doing business with Síminn Danmark. 

The operation of Sirius IT was very successful during the year. The company now
enjoys a favourable backlog, and last year the company concluded a number of
large business contracts with new and existing customers.  Sirius IT's
customers include a number of public entities, government agencies,
municipalities and pension funds.  They also include large private companies,
mostly in various service sectors, such as energy companies, security
providers, insurance services and the media.  The core of Sirius IT's
operations consists mainly in the maintenance and operation of large
information systems which typically form the basis of the operations of the
customers in question. In general, the operating prospects for Sirius are quite
favourable. 

Early in March, the executive committee on privatisation of the Slovenian
Government announced that the telecommunications company Telekom Slovenije
would not be sold for the time being. Skipti was one of two bidders for the
company.
On 19 March, Exista announced a voluntary bid for all the shares in Skipti hf.
The bid was ISK 6.64 per share, to be paid with new shares in Exista. The offer
period extended from 27 March to 26 May, and by the end of the period Exista
had acquired 99.22% of the shares. Following the acquisition and de-listing of
Skipti, the outstanding shares were called in, and Skipti is now 100% owned by
Exista. 

There is some uncertainty regarding the outlook of economic affairs in the near
future. Demand has fallen, and it is reasonable to expect that this trend will
continue. Skipti hf and its subsidiaries have responded to the new
circumstances by taking various actions designed to achieve even greater
efficiency. In 2008 extensive measures were taken to streamline the Company's
operations. These measures, which are all designed to prepare the Company for
the uncertainty ahead, have already resulted in lower costs and a clearer
strategy for the future. 


Further information:
Brynjólfur Bjarnason, CEO
Tel: +354 550-6003
Pétur Þ. Óskarsson, VP Corporate Communication
Tel: +354 863-6075

About Skipti hf.
Skipti is a holding company engaged in the operation of enterprises in the
telecommunications and IT industry. The Group comprises Síminn, Míla, Já,
Skjárinn, Sensa, Tæknivörur, On-Waves, Radiomiðun and Staki. Overseas
subsidiaries are the telecommunications company Aerofone in the United Kingdom,
Síminn Danmark in Denmark and the information technology company Sirius IT,
which has operations in Norway, Sweden and Denmark.

Attachments:

skipti 31 12 2008.pdf

key figures.xls