Iceland - Preview - Focus should be on Q2 outlook as Q1 already guided at FY results

All,

Iceland Report their numbers tomorrow for Q1 with a call to follow at 1pm. Given previous guidance, we don’t expect much surprises for the actual results for Q1 with Sales c. £700m and EBITDA c.£20m. Focus however will remain on the outlook with difficult like for like sales numbers for Q2 versus prior year (World Cup, heatwave etc). We expect the Company to purchase and cancel a portion of the outstanding £45m FRN 2020 notes.

Q1 is a 12 week period ending 21st June. The Company reported their full year numbers on the 13th June, so were in week 11 of 12 week period when they gave guidance for Q1 2020. Company stated sales should be up 3% and EBITDA flat versus Q1 FY19.

Our model shows 3.1% growth in sales to £704m and EBITDA of £21m versus £20m last year.

Other area to note will be the front loaded CAPEX for the year. Guidance is £70m for the year versus our model of 82m but expect 2/3rds in the first half, with our model showing £28m in Q1 CAPEX.

Working Capital should be flat given mid month quarter end, but expect the Company to purchase and cancel a portion of their 2020 FRN bonds, we expect £10m to be repurchased in the quarter. This might be delayed as the Company will front load its CAPEX program, but any notes purchased should be viewed positively.

With the front loaded CAPEX and repurchase of notes, the Company would reduce its cash balance to £73m - lower than its 2.0x Interest Cover the Company seeks to maintain.

Please don’t hesitate to call/email with any questions.

Tomas