SÍF hf. Prospectus November/December 2004 Share offering m 230 million
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Table of Contents
I Statements and Notice...... 2
Issuer’s Statement 2 Manager’s Statement 2 Auditors’ Statement 2 Notice to Investors 3 Glossary of Terms and Abbreviations 4
II Offering and Listing of Shares ...... 5
III Share Capital and Ownership...... 9
Total Share Capital 9 Issue and Share Rights 10 Ownership 11
IV History of SIF Group ...... 13
V Acquisitions and Divestments...... 15
Acquisition of Labeyrie Group 15 Historical Investments and Divestments 22 Future Investments and Divestments 23
VI The New SIF Group...... 26
Legal and Organisational Structure 26 Board of Directors and Employees 28 Brands and Products 31 Sales by Product group 32 New Product Development 34 Production Facilities 34 Geographical Breakdown 35 Suppliers and Purchasing 36 Operations in Iceland 36 Operations in France 37 Operations in the UK 44 Operations in Spain 46
VII Risk Factors...... 49
VIII Financial Highlights...... 52
APPENDICES
Articles of Association SÍF hf. - Interim Financial Statements 30 September 2004 SÍF hf. - Financial Statements 2003 Íslensk þýðing tilkynningar til fjárfesta og almennra upplýsinga um útboð og skráningu Undertaking to Subscribe and Proxy - Form
1 I STATEMENTS AND NOTICE
Issuer’s Statement
The Board of Directors of SÍF hf., ID-No. 580293-2989, Fornubudir 5, Hafnarfjördur, hereby states that to the best of its knowledge the information contained in this Prospectus is in full accordance with the facts and that no vital information is omitted that could affect the valuation of the Company and its Shares.
Reykjavík, 15 November 2004 On behalf of the Board of Directors of SÍF hf.
Ólafur Ólafsson, Chairman of the Board Jakob Óskar Sigurdsson, Chief Executive Officer ID-No. 230157-5619 ID-No. 280364-2589
Manager’s Statement
Kaupthing Bank hf. – Investment Banking, ID-No. 560882-0419, Borgartún 19, Reykjavík warrants that this Prospectus has been prepared using information which in the opinion of the Manager was necessary in order to give a true view of SÍF hf. and the Company’s Shares and warrants that no facts have been omitted which could affect the evaluation of the issuer and the Shares filed for listing.
The Notice to Investors, details the sources of information used in this prospectus.
Reykjavík, 15 November 2004 On behalf of Kaupthing Bank hf. – Investment Banking
Örvar Kærnested, Executive Director, Investment Banking Division ID–No. 130776-4429
Auditors’ Statement
Deloitte hf. ID-No. 521098-2449, Stórhöfdi 23, Reykjavík, has examined and signed without reservation the Annual Accounts of SÍF hf. and the Consolidated Annual Accounts of SÍF hf. for the years 2001, 2002 and 2003. We confirm that the accounts are in accordance with law and generally accepted accounting standards and give a true and fair view of the Company’s operations and financial position. We have also reviewed the Consolidated Accounts of SÍF hf. at 30 September 2003 for the first nine months of 2003 and the Consolidated Accounts of SÍF hf. at 30 September 2004 for the first nine months of 2004. Our review revealed nothing which gives reason to change the interim accounts. We confirm that the information in this Prospectus is consistent with the accounts that we have audited or reviewed.
Reykjavík, 15 November 2004 On behalf of Deloitte hf.
Halldór Arason, Certified Public Accountant ID-No. 151057-5949
2 Notice to Investors
( íslensk þýðing kafla er í viðauka )
This Prospectus concerns the Offering of new share capital in SÍF hf. and listing on Iceland Stock Exchange. The intention is to raise € 230 million through the issue of new Shares with a maximum nominal value of ISK 5,400,000,000. The new Shares will be listed on the Main List of the Iceland Stock Exchange, where SÍF hf.’s shares are already listed. Kaupthing Bank hf. – Investment Banking is the manager of the Share Offering and listing.
The Offering is made in connection with the Company’s acquisition of Financière de Kiel SAS and Teamcap SAS. Teamcap SAS’s sole purpose is to hold shares in Financière de Kiel SAS and throughout this Prospectus Teamcap SAS is treated as if it were shares in Financière de Kiel SAS and not an independent company. Financière de Kiel SAS is the parent company of Labeyrie SAS, Blini SAS and Farne Salmon and Trout Limited and their subsidiaries, that together form what is called the Labeyrie Group throughout this Prospectus. Kaupthing Bank hf. – Investment Banking is the manager of the Share Offering and listing.
The acquisition by SÍF hf. of Financière de Kiel SAS is conditional on the approval of the French Competition Authorities and subject to completion of the financing before 17 December 2004. The issue of Shares pursuant to this Offering is therefore conditional on the approval of the French Competition Authorities before 17 December 2004. There is no guarantee that the French Competition Authorities will approve the acquisition. SÍF hf. can at its sole discretion decide to submit undertakings or commitments in order to obtain approval for the acquisition should the French Competition Authorities ask SÍF hf. to do so. The proceeds of this Offering will be kept by Kaupthing Bank hf. in an escrow account until the earlier of the ruling of the Competition Authorities or at the latest 17 December 2004. Should the French Competition Authorities approve the acquisition within this period, the proceeds of the Offering will be paid according to this prospectus to SÍF hf., which in turn will issue the Shares to the investor. Should the French Competition Authorities not approve the acquisition within this period, the proceeds will be returned with interest to investors.
References to “the issuer” in this Prospectus shall be construed as referring to SÍF hf., ID-No. 580293-2989. References to “SÍF hf.”, “SIF Group”, “the Group” and “the Company” in this prospectus shall be construed as referring to SÍF hf. and its subsidiaries and associated undertakings and their business at times after the acquisition of Financière de Kiel SAS. Subsequently in the prospectus the reader must conclude from the context whether SIF Group includes Labeyrie Group or not.
References to “Labeyrie Group” in this Prospectus shall be construed as referring to Financière de Kiel SAS and its subsidiaries and associated undertakings and their business, unless otherwise clear from the context.
References to “the manager” in this Prospectus shall be construed as referring to Kaupthing Bank hf. – Investment Banking, ID-No. 560882-0419, unless otherwise clear from the context. References to “Kaupthing Bank” and “the bank” in this prospectus shall be construed as referring to Kaupthing Bank hf., ID-No. 560882-0419, unless otherwise clear from the context.
References to “Iceland Stock Exchange” and “ICEX” in this Prospectus shall be construed as referring to Kauphöll Íslands hf., ID-No. 681298-2829, unless otherwise clear from the context.
The Offering and listing of new Shares of SÍF hf. will proceed pursuant to Icelandic law and regulations. This Prospectus is prepared pursuant to current legislation and government and the Iceland Stock Exchange’s regulations applying to the listing of Shares on the Exchange. This Prospectus is prepared in English. The Iceland Stock Exchange has reviewed the document and approved the publication of the Prospectus in English, with an appendix containing a translation into Icelandic of the “I Notice to Investors” and “II Offering and Listing of Shares”. In the event of an inconsistency between the translation in the Appendix and the English text of the Prospectus, then the English text shall prevail.
This Prospectus has been prepared to provide clear and thorough information on the consolidated Company SÍF hf. as well as Shares issued by the Company. Investors are advised to consider statements from the issuer, the manager and the auditors regarding the Prospectus. Investors are encouraged to acquaint themselves thoroughly with the Prospectus as well as its Appendices. Investors are advised to pay particular attention to the chapter on Risk Factors.
Information provided in the Prospectus is based on premises that are current at the date of publication of the Prospectus. These premises may change from the date the Prospectus is published until the Shares are listed. The Issuer will notify ICEX and publish an annex to the Prospectus should new information of relevance emerge for the evaluation of SÍF hf. or the Company’s Shares during this period. Investors are therefore advised to study all public information from SÍF hf. during this period and to not rely exclusively on information in the Prospectus.
The sources of information used in this Prospectus include the comprehensive due diligence reviews conducted on both Financière de Kiel SAS and its subsidiaries and SÍF hf. and its subsidiaries. The due diligence reviews were conducted by
3 PricewaterhouseCoopers in Paris and Reykjavík (financial and market review), Clifford Chance (legal), Landwell in Reykjavík (legal), Landwell in Paris (tax) and Environ (environmental). Other information in the Prospectus has been drawn from companies’ press releases, annual reports, websites and/or directly from the Company’s management. The sources of information for the due diligence reports include publicly available data, annual reports, management and the Ernst and Young vendor due diligence report conducted on Labeyrie Group in March 2004. Further information for the market analysis in the due diligence reviews was sourced from CIFOG, Conoscan via CIFOG, TNS Secodip, IRI Secodip, Sofres Survey, AC Nielsen, the Portuguese Fishing Ministry, Panorama, Eurostat, The Sea Fish Industry Authority, Defra, Mapa, Spanish Ministry of Agriculture, Alimarket, National Marine Fisheries Service, US Food Marketing System, HM Johnson & Associates and Seafax. Kaupthing Bank hf. has not verified the source material used in the Due Diligence reports.
The Prospectus should by no means be viewed or construed as a promise by the issuer, manager or other parties of future success in operations or return on investments. Investors are reminded that investing in Shares entails risk as the decision to invest is based on expectations and not promises. Investors must first of all rely on their own judgment regarding any decision to invest in SÍF hf.’s shares, bearing in mind the business environment in which the Company operates, anticipated profits, external conditions and the risk inherent in the investment itself. Prospective investors are advised to contact experts such as banks, savings banks and securities firms to assist them in their assessment of the Shares in SÍF hf. as an investment option. Investors are advised to consider their legal status, including taxation issues that may concern the purchase or sale of Shares in SÍF hf.
Kaupthing Bank hf. – Investment Banking is the manager of the Share Offering and listing. Attention is drawn to further interests of Kaupthing Bank hf. as the underwriter of this Share Offering and as the investment bank of SÍF hf. Kaupthing Bank hf. has acted as advisor on SÍF hf.’s acquisition of Labeyrie Group, and is arranging the financing for the acquisition and refinancing of the Group to a total of € 548.7 million. The bank owned a 7.3% share in SÍF hf. on 12 November 2004.
Investors are reminded that SÍF hf. has announced that it will publish its annual accounts for 2004 in week 10 of 2005, between 28 February and 4 March.
Glossary of Terms and Abbreviations
The abbreviations used in this prospectus are listed in the following table.
Term Definition CHR Catering, Hotels and Restaurants EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, dividends and amortisation FDK Financière de Keil SAS FY Financial year end 30 June Labeyrie Group / SIF Group 31 Dec H&SM Hyper and Supermarkets JME Joint marketing efforts Net Revenues Gross sales less conditional and unconditional rebates and JME Net Sales Gross sales less conditional and unconditional rebates P&L Profit and Loss account SFP Sea Food Products SRP (French) Speciality Regional Products p.a. Per Annum CAGR Compounded Annual Growth Rate
4 II OFFERING AND LISTING OF SHARES
( íslensk þýðing kafla er í viðauka )
Issuer and Seller SÍF hf. ID-No. 580293-2989 Headquarters: Fornubúdir 5, 220 Hafnarfjördur, Iceland Telephone number +354 550 8000
Issuer’s Operations SIF Group is a European food producer focused on producing chilled seafood and festive food. The vision of the SIF Group is to be a leader in the sale and marketing of a variety of high quality food products on its key markets. Depending on the market environment the focus is either on own brand or private label. The Company also focuses on being an attractive workplace for qualified and ambitious employees that are forward-looking, reliable and service-minded. According to Article 1.04 of SÍF hf.’s. Articles of Association its object is to undertake trading in seafood products and other food products, to own and operate businesses which operate within the production, sale and distribution of food products and other related operations, real estate management and other operations considered normal for the Company.
SÍF was founded in July 1932 as the Union of Icelandic Fish Producers and incorporated as a limited liability company, SÍF hf., on 1 March 1993. SÍF hf. is registered in Iceland and operates according to Act no. 2/1995 on Public Limited Companies. The Company’s operations are subject to various laws and regulations, such as EU directives on the export and import of seafood products. Several international laws apply to the Company’s operations, including corporate law in the countries in which subsidiaries of SÍF hf. are registered, and laws and regulations on the import of seafood and other food products in the countries in which the Company sells its products.
Manager The manager of the Offering, sale and the listing on ICEX Main List Co-manager of the sale Kaupthing Bank hf. – Investment Banking Kaupthing Bank hf. – Capital Markets ID-No. 560882-0419 ID-No. 560882-0419 Address: Borgartún 19, 105 Reykjavík, Iceland Address: Borgartún 19, 105 Reykjavík, Iceland Telephone number +354 444 6000 Telephone number +354 444 6000
Registration This Prospectus concerns the offering of new share capital in SÍF hf., which will be a maximum of ISK 5,400,000,000 at nominal value and the listing of the shares on the ICEX Main List. ICEX has agreed to the listing. The amount raised in ISK depends on the fluctuations of the euro as € 230 million is the amount to be raised. The date of listing will be announced through the ICEX news system after the intended Offering. The aim is to list the Shares no later than on 21 December 2004.
The total share capital in SÍF hf. before the Share Offering amounts to ISK 1,499,216,526 at nominal value, and same number of shares, all listed on the ICEX Main List. Shares in SÍF hf. have been listed on the ICEX Main List since 20 March 1997. A trading lot in the Shares is 10,000 shares. A trading lot is the minimum number of Shares required for price formation on ICEX. The Company’s ticker symbol in the trading system of ICEX is “SIFI”. SÍF hf. does not have plans to seek listing on other stock exchanges.
Market Making Pursuant to an agreement with SÍF hf., Landsbanki Íslands hf. has acted as a market maker for the Company’s Shares since 1 August 2003. The minimum offer of sale or purchase per day is ISK 0.25 million at nominal value and the maximum amount of total transactions per day is ISK 3.5 million at nominal value. The maximum spread between offers of sale and purchase is 3% until the market maker has reached its maximum daily transaction limit.
SÍF hf. and Kaupthing Bank hf. intend to sign an agreement upon or soon after the share issue whereby Kaupthing Bank hf. will act as a market maker for the Company’s shares. It is intended that the minimum offer of sale or purchase per day and the maximum amount of total transactions per day will be substantially greater and the spread between offers of sale and purchase will not be greater than under the existing market making agreement.
5 Capital increase due to Share Offering At SÍF hf.'s shareholder meeting on 6 November 2004 it was agreed to authorise the Board of Directors of SÍF hf. to increase the share capital by a nominal value of up to ISK 5,400,000,000 by issuing new Shares to be sold in an Offering. The authorisation is valid until 30 June 2005. Shareholder pre-emptive rights were waived.
The Board of Directors resolved at a Board meeting on 14 November 2004 to offer new Shares to investors, with the aim of partly or in full exercising the above mentioned authorisation. The consequent Share Offering is described in this Prospectus.
Purpose and Objective of the Offering The objective of the Offering is to finance SÍF hf.’s acquisition of the Labeyrie Group and refinance SIF Group. The issuer places importance on attracting through the Offering a strong group of institutional investors.
Pre-Condition for the Offering The issue of Shares under this Offering is conditional on the acquisition by SÍF hf. of Financière de Kiel SAS. The acquisition of Financière de Kiel SAS is conditional on the approval of the French Competition Authorities. There is no guarantee that the Competition Authorities will approve the acquisition. SÍF hf. can at its sole discretion decide to submit undertakings or commitments in order to get approval for the acquisition should the French Competition Authorities ask SÍF hf. to do so. The proceeds of this Offering will be kept by Kaupthing Bank hf. in an escrow account until the earlier of the ruling of the Competition Authorities or at the latest 17 December 2004. Should the French Competition Authorities approve the acquisition within this period, the proceeds of the Offering will be paid to SÍF hf. which in turn will issue the Shares to the investor. Should the French Competition Authorities not approve the acquisition within this period, the proceeds plus interest will be returned to investors and deposited into their account as expressed in Undertakings to Subscribe and Proxy in a Prospectus Appendix.
Offered Amount and Price Range New Shares with a market value of € 230 million will be offered at a share price range of ISK 4.5 to 5.5. The maximum number of shares offered will be ISK 5,400,000,000.
Underwriting, Commitment and Lock-up The manager of the Offering has agreed to underwrite the Share Offering in full at a share price of ISK 4.0.
Ker hf., Vátryggingafélag Íslands hf. and Samvinnulífeyrissjódurinn with a combined 31.3% ownership in SÍF hf. have committed to participate in the offer, by indicated orders of market value € 104 million at the same price as agreed for in the share offering. Ker hf. which has thereof committed € 80 million has also committed itself not to sell the shares that it will receive in this offering for at least 12 months from issue of the shares.
Kaupthing Bank hf. has committed to participate in the offer, by indicated order of market value € 71 million at the same price as agreed for in the share offering.
If there is a substantial oversubscription for the uncommitted € 55 million in this Share Offering then part of Kaupthing Bank hf.’s commitment can be reallocated.
Minimum Subscription The minimum amount required to subscribe for Shares in the Offering is ISK 5,000,000 at market value.
Book-building Period, 22–23 November 2004 By a book-building process the manager of the Offering can advise the issuer on a price that best reflects demand for the Shares of the Company. Prior to the book-building period, Kaupthing Bank hf. – Investment Banking will introduce the offer to probable investors and will during the book-building period, investigate their interest in participating in the offer within a price range, stated above. Interested investors can also contact Kaupthing Bank hf. – Capital Markets at Borgartún 19 in Reykjavík or by phone +354 444 6000, to present their indicative orders for SÍF hf.’s Share Offering. The format of indicative orders is not standardized.
The book-building period starts on Monday 22 November, 2004 at 09:00 GMT and finishes on Tuesday 23 November, 2004 at 16:00 GMT. During this period indicative orders will be solicited from investors. After the book is closed no more indicative orders will be accepted. The issuer may decide to shorten or not to go ahead with the book-building period at any time, depending on investor response.
Due to the importance SÍF hf. places on attracting through the Offering a strong group of investors which are willing and able to support the issuer in the future, the issuer’s Board of Directors reserves every right to consider and to disregard indicative orders gathered in the book-building period, fully or partly, without any specific explanation or notification thereof. The Board will in other
6 respects, use as a basis for allocation of investors’ undertakings to subscribe in the offering, factors including the share price and amount in which investors have indicated an interest, how punctually indicative orders are submitted, the dependability and quality of the investors as well as the objective to obtain a strong and sufficiently broad distribution of ownership. If there is a surplus of interest during the book-building period, the Board may also choose to reject a part of the amount in which investors have indicated an interest or allocate differently.
The outcome of the book-building will be published on the ICEX news system before 10:00 GMT 24 November 2004.
Final Amount, Price of the Offer and Exchange rate between ISK and € The final share price and nominal issuance value in the Offering will be decided by the Board at its meeting on 24 November 2004, after having consulted the manager of the Offering on completion of the book-building period. The Board’s decision will be based on the outcome of the book-building procedure and a general evaluation of market conditions. The final share price and nominal issuance value in the Offering will be available in an Appendix to this Prospectus. The Appendix to this Prospectus will be published on the ICEX news system before 10:00 GMT 24 November 2004 and after that be part of this Prospectus.
The market value of the shares sold in this Offering has been set to € 230 million. Shares will be sold in the share price range of ISK 4.5 to 5.5 per share and payment will be made in ISK. The amount to be raised in ISK will depend on the exchange rate to be used since this Offering has been set to € 230 million.
Allocation of Subscription in the offering, 24 November 2004 The Board will decide at its meeting on 24 November 2004 on the allocation of subscriptions to prospective investors. Prospective investors which have given indicative orders during the book-building process and which have not been rejected by the issuer will be notified in regards to their allocation. The manager will notify parties of their allocation on 24 November 2004 before 17:00 GMT on that day.
Undertakings to Subscribe, 24 November 2004 Undertakings to Subscribe in the Offering shall be delivered after the allocation of Subscription and no later than 19:00 GMT on 24 November 2004.
All binding Undertakings to subscribe shall be made on “Undertakings to Subscribe and Proxy” Form for that purpose in a Prospectus Appendix. Investor’s Undertaking gives Kaupthing Bank hf. irrevocable proxy to subscribe the investor according to his subscription if Pre-Conditions for the Offering are met.
Undertakings to Subscribe shall be delivered in an envelope marked “SÍF hf. Share Offering” to the front desk of Kaupthing Bank hf., at Borgartún 19, 105 Reykjavík or by fax on +354-444-6809. Verification of the transmission shall then be received from the manager within the specified period and the original then mailed to the manager of the Offering in an envelope marked according to the above.
Undertakings to Subscribe agreed, 24 November 2004 An Agreement will be reached when the issuer accepts the Undertakings to Subscribe. The issuer will do so on 24 November 2004. The issuer reserves the right to demand payment security from parties undertaking to participate in share subscription that the issuer considers adequate. The issuer reserves the right to reject an Undertaking fully or partly, if investor does not undertake to subscribe for the amount they have been allocated.
Payment and Escrow Investors participating in this Offer must pay, according to Undertaking to Subscribe accepted by the issuer, no later than 16:00 GMT Friday 3 December 2004. Payment shall be made into Kaupthing Bank hf.’s bank account number 300-26-1020, Id. no. 560882- 0419. If payment is not received on the date due it may be collected in a manner provided for by Icelandic law and SÍF hf.’s Articles of Association. Instead of collecting the issuer also reserves the right to unilaterally cancel Undertakings to Subscribe not paid on the date due and reallocate Subscriptions at its discretion.
The proceeds of this Offering will be kept by Kaupthing Bank hf. in an escrow account until the earlier of the ruling of the Competition Authorities or at the latest 17 December 2004. Should the French Competition Authorities approve the acquisition within this period, SÍF hf. will issue the Shares, the proceeds of the Offering will be paid to SÍF hf. which in turn will deliver them to the investors. Should the French Competition Authorities not approve the acquisition before 17 December 2004, the proceeds will be returned to investors with interest from the day on which the proceeds were deposited at a rate which is one week Reykjavík interbank bid rate minus 10 basis points (1 WK Reibid – 10 bpt.).
7 Share Delivery The new Shares will be issued electronically at the Icelandic Securities Depository provided that the Pre-Condition for the Offering has been met. Issued Shares will be delivered to the investors on the same day as they are listed on the ICEX Main List, provided that the Shares have been paid for in the correct manner. Listing is expected to take place no later than Tuesday 21 December 2004.
Further increase in share capital simultaneous to the Share Offering At SÍF hf.’s shareholder meeting on 6 November 2004, shareholders authorised the Board of Directors of SÍF hf. to increase share capital by a nominal value of up to ISK 160,000,000 by issuing new Shares to be sold to employees and parties related to the Company for ISK 4.32 per share. The authorisation is valid until 30 June 2005. Shareholder pre-emptive rights were waived. Payment may be made in the form of other assets than cash. The Board of Directors decided on 14 November 2004 to fully or partly exercising the above mentioned authorisation if the Pre-Conditions for the € 230 million Share Offering are met. The intention of this simultaneous increase in share capital is to buy, for shares in SÍF hf., shares in Teamcap SAS. Teamcap SAS shares are those of the employees of Financière de Kiel SAS and its subsidiary companies. Teamcap SAS, is a holding company for employees’ shares in Financière de Kiel SAS. To this end, the management of Labeyrie Group committed themselves to participating in the simultaneous share increase by buying shares with a market value of € 7,247,500 at the share price of ISK 4.32. The Management of the Labeyrie Group have committed to not sell the Shares that they will receive in this simultaneous increase for at least 24 months from the issue of the Shares.
Cost and cash flow The cost of the increase in share capital, Offering and listing is expected to be about 3.6% of the value of the total Share increase. This mainly includes the manager’s fees and stamp duty (0.5% of the nominal value of the new Share issue). It also includes costs associated with registration at the Icelandic Securities Depository and listing on the ICEX Main List, advertising and printing costs. SÍF hf. will bear these costs in full.
The Share Offering is underwritten, and SÍF hf.’s estimated cash flow from the Share issue is € 221.7 million. A description of the deployment of the cash is to be found in the discussion above of the purpose and objectives of the Offering.
Information The Prospectus along with material cited may be obtained at the following places from the manager of the Offering and Sale and the issuer.
SÍF hf. Address: Fornubúdir 5, 220 Hafnarfjördur, Iceland Telephone number +354 550 8000
Kaupthing Bank hf. – Investment Banking / Kaupthing Bank hf. – Capital Markets Address: Borgartún 19, 105 Reykjavík, Iceland Telephone number: +354 444 6000
The prospectus can also be obtained from Kaupthing Bank hf.’s website: www.kbbanki.is or www.kaupthing.net , and also SÍF hf.’s website: www.sifgroup.com or www.sif.is
8 III SHARE CAPITAL AND OWNERSHIP
Total Share Capital
Total Share Capital The total issued nominal share capital of SÍF hf. is ISK 1,499,216,526. Each share is of a nominal value of ISK 1. All issued share capital has been paid.
Own Shares SÍF hf. holds own shares to a nominal value of ISK 536,734. SÍF hf.’s subsidiary, SIF Iceland Seafood Corp., owns 10,832,871 shares, which are to be used as remuneration to employees of SIF Iceland Seafood Corp. The Annual General Meeting on 19 March 2004 authorized the Company’s Board to buy own shares to a maximum of 10% of the total issued share capital. The purchase price of these shares may be up to 20% above the average bid price of shares in the Company during the two weeks preceding the purchase. The authorization is valid for 18 months. Own shares do not have voting rights.
Authorization for Further Increase of Share Capital for the Warrant Plan for Selected Managers In addition to authorisations described in the chapter “II Offering and Listing of Shares”, the shareholders’ meeting on 6 November 2004 authorized the Company’s Board to increase the Company’s share capital by up to ISK 180,000,000 nominal value with the issue of new shares to employees of the Company or parties related to the Company as a result of an option plan which the Company intends to establish. Price per share and terms of sale shall be in accordance with a separate contract which the Board negotiates with the respective employees or related parties. Shareholders waived their pre-emptive rights. It is the intention of the Board of Directors and the CEO of SIF Group that they will grant equity warrants to selected Managers within SIF Group. The warrants will give the Managers the right to acquire shares in SÍF hf. The number of warrants granted to each individual will be proposed to the Board of the Directors of SÍF hf. for approval, after consultation with the CEO of SIF Group. Part of the authorization will be allocated upon or soon after the acquisition and the balance at the discretion of the Board of Directors. Each warrant will give a right to one new share in the Company. The purchase price of the shares on exercise of the warrants must be the market price of the shares on the date of issue of the warrants. For those warrants issued on the date of the equity Offering, this price will be the price of shares in the Offering. On the date of subscription of the warrants, each Manager is required to pay purchase price for the warrant.
One year after the warrants’ date of issue, 15% of the shares to which the warrants give rise will become exercisable. After the second year from issue a further 15% will become exercisable, followed by a further 15% after three years, 25% after four years and the remainder (30%) after five years.
If a warrant holder leaves SIF Group for any reason, any warrants which remain locked in at that date will be cancelled. All warrants which have ceased to be locked in or which have been exercised for shares remain unaffected.
Development of the Share Capital of SÍF hf. The share capital of SÍF hf. has been increased on two occasions since the beginning of 2001. Both issues were related to the two year employee stock option plan commenced in January 2001. This plan included all permanent employees in Iceland at that time and key employees in other countries. The development of share capital for the years 2001-2004 is shown in the following table.
Development of the Share Capital of SÍF hf. 2001-2004
Date Explanation Increase in nominal value Accumulated nominal value 01 January 2001 ISK 1,478,873,239 06 June 2002 New shares at price of ISK 2.82 per share issued for the employee stock option plan ISK 12,106,361 ISK 1,490,979,600 06 July 2003 New shares at price of ISK 2.82 per share issued for the employee stock option plan ISK 8,236,926 ISK 1,499,216,526
15 November 2004 Total share capital ISK 1,499,216,526
9 Issue and Share Rights
Issue and Share Characteristics The Company’s share capital consists of shares of one Icelandic króna and multiples thereof. Shares are issued electronically at the Icelandic Securities Depository and are registered there under the name of the relevant shareholder. The ticker symbol of the shares at the Iceland Stock Exchange is SIFI. SÍF hf.’s distinction at the Icelandic Securities Depository is also SIFI and the Shares’ ISIN code is IS0000000461.
Rights All the shares of SÍF hf. are of one class and carry equal rights. The Company’s shares carry no special rights and no restrictions are placed on them. Owners of the Company’s share capital have the right to vote at shareholder meetings, the right to receive dividends when declared, enjoy pre-emptive rights to new Shares, unless waived, and the right to a portion of the Company’s assets upon liquidation, all according to share ownership, Statutes and the Company’s articles of association in effect at any given time.
Dividends The decision to pay a dividend shall be made at an Annual General Meeting which shall be held before the end of June each year. Any dividends declared shall be paid to those that are shareholders in the shareholder registry at the Annual General Meeting which decides on the payment of dividends for the previous accounting year. An exception to this is when the dividend is due on a day different from that of the Annual General Meeting. This rule is based on Art. 80 of the Act no. 50/2000 on the Purchase of Liquid Assets, where it says that purchase of shares includes dividend not due prior to the purchase. There are no provisions in the articles of association on the lapse of the right to a dividend that has not been collected and thus these rights lapse after four years according to Act no. 14/1905 on the Lapse of Debts and Other Claim Rights.
SÍF hf. paid a dividend in 2001 and 2002 of 25.3% and 27.2% of profits respectively. The dividend was 0.07 ISK per share for both 2001 and 2002. A dividend was not paid for 2003.
Dividend Policy SÍF hf. aims to pay a dividend to its shareholders in accordance with the provisions of the Icelandic Companies Act. The Company shall, however, pursuant to a € 222,000,000 Term Loan Facility and a € 60,000,000 Revolving Credit Facility, not declare or pay any dividends until full repayment of these facilities (see further following paragraph on Loan Agreement).
Loan Agreement It is expected that before the 17 December 2004 the Company will sign a Facilities Agreement with Kaupthing Bank hf. and Bank of Scotland (“the Banks”) for the purpose of replacing the Company’s existing borrowings and financing the acquisition of the Labeyrie Group. Pursuant to the Facilities Agreement, the Banks are providing a € 222,000,000 Term Loan Facility in three tranches: (i) Tranche A totalling € 110,000,000 amortized over 7 years from draw-down; (ii) Tranche B totalling €56,000,000 subject to a bullet repayment 8 years from draw-down and (iii) Tranche C totalling € 56,000,000 subject to a bullet repayment 9 years from draw-down and a € 60,000,000 Revolving Credit Facility available for 7 years after closing of the transaction. Both Tranche A of the Term Loan Facility and the Revolving Credit Facility carry interest at EURIBOR plus an initial margin of 2.25% (subject to a downward ratchet based on the ratio of Debt/EBITDA). Tranche B and Tranche C of the Term Loan Facility carry interest at EURIBOR plus a fixed margin of 2.75% and 3.25% respectively. The Facilities Agreement prohibits the payment of dividends until full repayment of each of these Facilities. The Facilities Agreement also contains appropriate financial covenants and other ancillary provisions including the right for the Banks to require early repayment upon a change of control. As security for entering into the Facilities Agreement, where legally possible, the Banks are taking charges over the principal trading companies’ assets. In turn those companies will guarantee the obligations of the borrowers to the Banks under the Facilities Agreement. Where possible, legal charges are also being taken over the freehold and long leasehold properties.
Right of Ownership and Transfer There are no limitations on the authorization to transfer shares and shareholders may pledge their shares unless that is prohibited by law. Nevertheless, it should be noted that individual shareholders may have agreed that their shares be subject to certain restrictions. A party acquiring a share in the Company cannot exercise his right as a shareholder unless his name has been registered in the share registry or he has announced and proven his ownership of the share. Only general legislative rules apply to the transfer of shares in SÍF hf. The electronic registration of securities is governed by Act no. 131/1997 and regulation no. 397/2000 which is based on this act.
A printout from the Icelandic Securities Depository (Verdbréfaskráning Íslands hf.) on the ownership of shares in SÍF hf. is considered a valid registration of the shares. The Company shall consider the share registry as full proof of ownership to shares and attached rights. Dividends as well as all announcements shall at any given time be sent to the party registered in the Company’s
10 share registry as owner of the shares in question. The Company is in no way liable if payments or announcements do not reach their recipients because a notification of change of address has been neglected.
Rights to electronic shares must be registered at the Iceland Securities Depository if they are to enjoy legal protection against legal executions and disposal with an agreement. It is forbidden to issue share certificates for registered rights according to an electronic share or endorse them and such transactions are void. Registration of the ownership of an electronic share at the Icelandic Securities Depository, subsequent to a Securities Depository final entry, formally gives a registered owner legal authorization to the rights to which he is registered. Priority of incompatible rights is determined by when a request from the Banks’ Data Central on their registration reaches the Securities Depository.
Taxes The share capital of SÍF hf. is subject to taxes according to laws in effect at any given time.
The Company’s shares are subject to stamp duty and the Company pays stamp duty upon their issue. Stamp duty has been paid on shares that have already been issued.
The Company is obliged to retain PAYE taxes on dividend payments, according to Art. 3, Para. 2 of Act no. 94/1996 on Capital Income Tax. For Icelandic parties other than those exempt from PAYE tax on capital earnings, the PAYE tax is a final taxation. As regards parties living abroad, it must be established whether there is a double taxation agreement with the state where the party in question resides and, if so, it must be established whether there is any taxation payable in addition to that in Iceland.
Profit from the sale of shares in SÍF hf. is taxable in Iceland. As regards parties living abroad, it must be established whether there is a double taxation agreement with the state where the party in question resides and, if so, it should be determined which state has the right of taxation.
Ownership
The number of shareholders in SÍF hf. was 1,071 on 12 Share registry 12 November 2004* November 2004. The ten largest shareholders owned a Shareholder ID-No Nominal Value Ownership total of 77.7% of the Company’s share capital and the Ker hf 500269-4649 219,324,903 14.6% twenty largest shareholders in SÍF hf. owned a total of Sund ehf 580483-0549 138,888,889 9.3% 90.6% of the share capital. The Company has no Kjalar Investments SA 651004-9180 139,334,466 9.3% knowledge of any agreement between shareholders on the Vátryggingafélag Íslands hf 690689-2009 128,888,889 8.6% treatment of votes, but investors are advised to study the Samvinnulífeyrissjódurinn 430269-0389 121,251,390 8.1% relationships between the largest shareholders. Kaupthing Bank hf 560882-0419 110,099,930 7.3% Framleidendur ehf 641094-2509 98,296,206 6.6% About the Largest Shareholders Mundill ehf 601094-2829 85,675,910 5.7% Ker hf., which holds a 14.6% share in SÍF hf., is owned by Arion hf - Custodian 901202-3468 77,558,652 5.2% five holding companies. Two of them are Kjalar ehf. and Sundco ehf 620294-2419 45,172,323 3.0% 10 largest total 1,164,491,558 77.7% Sund ehf. Kjalar ehf. holds 41.6% in Ker ehf. Kjalar ehf. is Íslandsbanki hf 550500-3530 40,665,391 2.7% owned by Ólafur Ólafsson, the Chairman of the Board of Jakob Óskar Sigurdsson 280364-2589 31,850,000 2.1% SÍF hf., and his family. Kjalar ehf. is also the owner of Tryggingamidstödin hf 660269-2079 27,326,774 1.8% Kjalar Investments SA which owns 9.3% of SÍF hf. Ker hf. Nesskip hf 440474-0399 23,338,830 1.6% is a large shareholder in Samskip hf. which is the owner of Landsbankinn Luxemborg SA 691100-9010 20,605,072 1.4% Mundill ehf. which owns 5.7% in SÍF hf. Sund ehf. which Árný Enoksdóttir 110832-2309 11,305,595 0.8% holds 23.5% in Ker hf. is managed by Jón Kristjánsson, a Kristinn Albertsson 060765-5969 10,500,000 0.7% Board Drector of SÍF hf. Sund ehf. and Sundco ehf., also Líftryggingafélag Íslands hf 570990-1449 10,259,259 0.7% managed by Jón Kristjánsson, hold in total a 12.3% share VVÍB hf,sjóður 6 540489-5809 9,818,302 0.7% in SÍF hf. Sund ehf. and Sundco ehf. are owned by Skinney - Þinganes hf 480169-2989 8,616,235 0.6% Gunnthórunn Jónsdóttir and family, including Jón 20 largest total 1,358,777,016 90.6% Kristjánsson. 1051 other shareholders total 128,800,675 8.6% Active share capital 1,487,577,691 99.2% Vátryggingafélag Íslands hf. (VÍS) holds a 8.6% share in SÍF hf. 580293-2989 805,964 0.1% SÍF hf. VÍS is listed on the ICEX Alternative Market but Iceland Seafood Corp 430788-2649 10,832,871 0.7% 82.0% is owned by three shareholders. Kaupthing Bank hf. Total share capital 1,499,216,526 100.0% holds 29.5%, Eignarhaldsfélagid Hesteyri ehf. 26.7% and * including notified trading to be setled between Vátryggingafélag Íslands hf. the seller Eignarhaldsfélagid Samvinnutryggingar svf. 25.8%. and Kristinn Albertsson the buyer for 10,000,000 shares.
11 Eignarhaldsfélagid Hesteyri ehf. is owned by Skinney-Thinganes hf., Fiskidjan Skagfirdingur hf. and VÍS, one third each. Jón Edvald Fridriksson, a Board Director of SÍF hf., is the Chairman of the Board of Eignarhaldsfélagid Hesteyri ehf. The largest shareholders in VÍS have come to an agreement about the future management of the company and have made an offer to acquire the rest of the VÍS shares, before taking the company private. Eignarhaldsfélagid Samvinnutryggingar svf. is a cooperative society.
Samvinnulífeyrissjódurinn holds 8.1% in SÍF hf. Samvinnulífeyrissjódurinn is a pension fund. The Chairman of the Board is Gudmundur Hjaltason, one of the Board Members of SÍF hf.
Kaupthing Bank hf. owns a 7.3% share in SÍF hf. The second largest shareholder of Kaupthing Bank hf. is Egla hf. with a 10.9% share. Ker hf. holds a 73.9% share in Egla hf. Ólafur Ólafsson, the Chairman of the Board of SÍF hf., is the Chairman of the Board of Egla hf. Gudmundur Hjaltason, one of the Board Members of SÍF hf. is a Board Member of Kaupthing Bank hf. Kaupthing Bank hf. is the manager of SÍF hf.’s share Offering and listing on the ICEX Main List. In the Notice to Investors further attention is drawn to the interest of the manager regarding the issuer.
Jakob Óskar Sigurdsson, CEO of SÍF hf., holds a 2.1% share in SÍF hf. His ownership is based on a contract of employment, entered into on 22 June 2004. The purchase of 2.0% is financed by an interest bearing loan from the company. Additionally, Jakob received as a signing bonus a 0.1% share. Should he terminate his employment within 36 months of hiring, he will forfeit the signing bonus shares on a pro rata basis.
Framleidendur ehf. owns 6.6% share in SÍF hf. The largest shareholder of Framleidendur ehf. is Fiskidjan Skagfirdingur hf. with 27% and Skinney-Thinganes hf. 19%, Samskip hf. 17% and Ker hf. 11%. Jón Edvald Fridriksson is the Chairman of the Board and Adalsteinn Ingólfsson is a Member of the Board of Framleidendur ehf. Both are Board Directors in SÍF hf.
Líftryggingafélag Íslands hf. owns a 0.7% share in SÍF hf. Líftrygginarfélag Íslands hf. is owned 75% by VÍS and 25% by Eignarhaldsfélagid Andvaka gt.
According to SÍF hf. interim consolidated financial statements January – September 2004, own shares with a book value of € 2,665 thousand and nominal value of € 498 thousand are included as current assets in the statements of the company. This amount includes a forward contract with Íslandsbanki hf. to purchase shares in SÍF hf. and also shares owned by SIF Iceland Seafood Corp. in SÍF hf.
12 IV HISTORY OF SIF GROUP
SÍF, also known as Union of Icelandic Fish Producers (Sölusamband Islenzkra Fiskframleidenda or SÍF) was founded in July 1932. It was established against a background of trading difficulties for producers, in an effort to ensure reasonable prices for saltfish exports. For that purpose the Company received exclusive license for saltfish exports from Iceland and operated as a producers’ sales organisation. Saltfish exports from Iceland were deregulated in 1992. In March 1993 SIF was incorporated as a limited liability company, “SÍF hlutafélag” abbreviated “SÍF hf.”. SÍF hf. was listed on the Iceland Stock Exchange in March 1997. SIF Group is the synonym for SÍF hf. and its subsidiaries.
SÍF hf.’s first investment outside of Iceland was made in 1990 when it acquired the French saltfish processor Nord Morue SAS. This granted SIF Group access to continental saltfish markets which were firmly protected by tariff barriers at that time. In the following years SIF Group opened sales offices in number of countries, including Spain, Italy, Norway and Greece. SIF Group also established the sales and distribution company Copesco-SIF in Spain, acquired the seafood producer and trader Sans-Souci Seafood Ltd. in Canada and a fishing operator and saltfish processor through SIFTOR Holding A.S. in Norway.
In 1998, SÍF hf. reached a turning point in its evolution when it acquired the French value-added seafood producer Jean Baptiste Delpierre s.a, thereby laying the foundation for the company to expand its product range and create a new marketing approach for the Group. Following its acquisition and the expansion of activities in France, SÍF hf. acquired a controlling interest in Christiansen Partners A.S., a Norwegian salmon sourcing company.
SIF Group’s current position and scale of operations was completed with its merger with Iceland Herring hf. (Íslandssíld hf.) and Iceland Seafood hf. (Íslenskar sjávarafurdir hf.). All three had a high level of trading activity.
SÍF hf. approved a merger with Iceland Herring hf. in March 1999 and the merger took effect as of 1 January 1999. Iceland Herring hf., then Iceland Herring Board (Síldarútvegsnefnd) was established in 1935. The company was engaged in sales and marketing work for the herring salting industry and for decades it was the largest exporter of salted herring in the world. Its Board of Directors was jointly appointed by parliament and the industry. In August 1998 the Herring Board was privatized and converted into a limited liability company.
SÍF hf. approved on the merger with Iceland Seafood hf. on 29 December 1999 and the merger took effect as of 1 January 2000. Iceland Seafood hf. was incorporated in December 1990. The business was formally established as a department within Samband Federation of Cooperative Societies in 1957 under the name Samband Seafood, but before that it had been run within the Samband Federation of Cooperative Societies since 1902. In 1965, Iceland Seafood hf. opened its first processing facility in U.S.A. In the 1980’s, Iceland Seafood hf. opened sales offices in the UK, Germany and France. In 1996 and 1997, SÍF hf. opened sales offices in Japan and Spain and purchased a controlling share in the fresh fish exporter Tros ehf. and Gelmer S.A. in France, a major player in the processing, production and distribution of seafood products.
Another major breakthrough in the Company’s history was in July 2003 when it acquired Lyons Seafoosd Ltd in the UK. Lyons Seafoods Ltd., founded in 1958, specializes in the production of value-added shellfish. Lyons Seafoods Ltd. is one of the leading brand names in chilled seafood on the British market, and has a strong position in frozen seafood. Lyons Seafoods Ltd is also a significant producer of chilled seafood under retailers’ own labels. With this acquisition SIF Group strengthened its position in the market for value-added seafood in one of Europe’s key markets and ensured access to retail distributors.
There was a new turning point in SIF Group’s history in October 2004 when SIF Group signed a share purchase agreement to acquire Financière de Kiel SAS, the holding company for Labeyrie SAS, Blini SAS and Farne Salmon and Trout Ltd. These and their subsidiaries and associated companies together are also known through this Prospectus as the Labeyrie Group. The Labeyrie Group is Europe’s leading producer of branded upmarket and festive food products, including smoked salmon, foie gras, blinis and taramasalata products. The company is headquartered in the South-West of France and operates eight production sites in France, Spain and Scotland. The majority of its products are sold through mass retailers, mainly hyper- and supermarkets. The company focuses on capturing a significant volume share of the market whilst building a premium reference brand associated with quality and innovation.
Emphasising the potential opportunities arising from the acquisition of the Labeyrie Group, the Board of Directors have decided to move operations away from the production of frozen seafood and creating a clearer distinction between trading and production of fish. A letter of intent has been signed for the divestment of SIF Iceland Seafood Corporation. Furthermore, trading in fresh and frozen fish will be moved into a separate entity, IS International ehf. and in the near future the Company intends to reduce its stake below 50% in the trading entity.
13 After the transformation and excluding the trading activities, SIF Group is a European producer of value added chilled seafood and upmarket festive food. SIF Group operates in four European countries, France, Spain, the United Kingdom and Iceland through fourteen production sites. In addition there are production site in North America that the Company intends to sell in the near future. SIF Group’s products include salltfish/bacalao, shellfish, smoked salmon, foie gras, blinis and taramasalata both under private label and its own brand names including Islandia, Skandia, Labeyrie, Blini, Delpierre, Lyons and York. SIF Group brands have a leading position in France, Spain and the United Kingdom, which together form the Company’s core markets. SIF Group currently has operations in eleven countries and has around 3,900 employees.
14 V ACQUISITIONS AND DIVESTMENTS
Acquisition of Labeyrie Group
On 29 October 2004, SIF Group signed a purchase agreement with the shareholders of the French holding company Financière de Kiel (FDK). FDK is the holding company of Labeyrie SAS, Blini SAS, Vensy SAS and Farne Salmon and Trout Ltd. that together form the Labeyrie Group.
SIF Group has agreed to acquire the equity of FDK for € 104.5 million, and will assume FDK’s outstanding debt of € 227.8 million. In conjunction with the acquisition, SIF Group will refinance € 192.1 million of its outstanding debt and acquisition related expenses of € 24.3 million. In total € 548.7 million is to be raised. The Acquisition is financed with new equity amounting of € 237.2 million, of which Labeyrie Group’s Senior Management will provide € 7.2 million through the rollover of their ownership in Teamcap SAS, new debt raised of € 275.5 million and the sale of SÍF hf.’s share in IFPC (Sölumidstöd Hradfrystihúsanna hf.) for € 36.0 million.
Labeyrie was formerly listed on the French stock exchange with SI Finance (Suez Group) owning 61.3% of its shares. In 2002, SI Finance sold its stake to FDK which was indirectly owned by the Swedish private equity fund Industri Kapital AB through Charles XIV, who subsequently took the Company private. At the time of the purchase agreement, Charles XIV owned 74.62% of the shares, the management team directly and through Teamcap SAS owned 19.2% and the balance was held by Suez and others.
Background for the Acquisition The management of SIF Group believe that the acquisition of the Labeyrie Group will strengthen SIF’s position in the value added production business and will create a leading force in premium chilled seafood and festive food. The acquisition of the Labeyrie Group is in line with SIF Group’s acquisition strategy and forms the platform for further acquisitions in the future: Focus on value added production within a market that offers strong growth prospects, preferably in Western Europe. Potential to fit within SIF Group's jigsaw of premium chilled seafood and festive food businesses and to generate significant operating synergies Profitable businesses with strong management that can complement SIF Group's strengths. Brands or private label, where applicable extension geographically or across existing SIF Group’s products offers potential for value uplift.
After the acquisition of the Labeyrie Group, there are a number of valuable avenues of growth for the Company: Labeyrie Group represents a premium brands under which existing SIF Group products could be sold at higher prices. Both management teams have identified the potential for higher margin ready-meals incorporating some of the existing products. A revitalised management team could drive operating cost synergies and a turnaround of the Delpierre brand in France, igniting sales and margin growth. SIF Group has relationships in Asia with a number of suppliers, potentially drawing sourcing synergies to the Labeyrie Group business. The strength of the combined business, coupled with access to capital markets, will increase the potential for SIF Group to achieve further internal and external growth.
Business Overview The Labeyrie Group is Europe’s leading producer of smoked salmon and festive food products, including foie gras, blinis and taramasalata products. The Labeyrie Group's product portfolio is complemented by gastronomic and French traditional products, other smoked fish products and a range of toppings (such as guacamole and other Mediterranean dips and spreads). The Labeyrie Group is headquartered in Saint-Geours-de-Maremne (South-West of France), employs about 2,400 people and operates eight production sites in France, Spain and Scotland.
15 Over the past ten years, the Labeyrie Group's strategy has been to focus on mass retail to capture a significant volume share of the market while building a premium reference brand associated with quality and innovation. The Labeyrie Group’s products are therefore sold mostly through hyper- and supermarkets (H&SM) and have become an essential driver of retailers’ sales and a key contributor to their profitability in their segments.
The Labeyrie Group has gradually established a leadership position on its key markets and in 2003 commanded value market shares in France of 26.0% in smoked salmon, 25.6% in foie gras and 36.0% in blini/tarama products.
While establishing its leadership position on its traditional markets, the Labeyrie Group has also expanded geographically with the aim of replicating the strategy successfully implemented in France. In December 1999, the Labeyrie Group acquired Vensy España SA and became the leader of the Spanish smoked fish market. More recently, the Labeyrie Group acquired Farne Salmon and Trout Ltd. in February 2004, the number two smoked salmon producer in the UK. The Labeyrie Group exports its products to five countries in Europe (Belgium, Luxembourg, Switzerland, Portugal and Italy) in which it has developed leading market positions.
The Labeyrie Group has also demonstrated its ability to substantially leverage its brands, relationships with retailers and marketing expertise to enter new markets. The most recent example was the acquisition of Blini SAS in April 2003, France’s leading producer of blinis, taramasalata and other spreadable products which generated significant value through commercial synergies, brand stretching and industrial rationalization.
History and Developments The key milestones in the history of the Labeyrie Group are outlined below.
Established in 1946 as a supplier of raw duck and salmon products to the restaurant trade. In 1963, it set up its first smoked salmon production operation in St-Geours-de-Maremne (50km north of Biarritz), followed in 1971 by its foie gras facility. In 1986, La Compagnie La Hénin (a Suez Industrie subsidiary) acquired Labeyrie SAS. In 1996, Labeyrie SAS acquired Palmitou SAS, with the objective of controlling the upstream process in foie gras and the overall fattened duck supply chain. Labeyrie SAS subsequently reduced its stake to 49% in 2001. In March 1999, the Labeyrie Group went public through an Initial Public Offering (IPO) on the “Second Marché” of the Paris Stock Exchange. The IPO was followed at the end of the same year by the acquisition of Vensy España SA, one of the leading upmarket smoked salmon producers in Spain with a positioning similar to that of Labeyrie SAS. In the summer of 2001, the Labeyrie Group enlarged its product offering through the acquisition of the blini and taramasalata businesses of Prince Egor. The Labeyrie Group also entered into an agreement with Lur Berri SAS leading to joining forces in the sourcing of ducks of certified origin and in Labeyrie SAS acquiring Pierre Guèraçague SAS from Lur Berri SAS. In March 2002, Industri Kapital AB, through Charles XIV and Financière de Kiel SAS, purchased Suez Industrie’s stake in Labeyrie SAS (representing 61.27% of the capital and 61.32% of the voting rights). In accordance with French take-over regulations, Charles XIV and Financière de Kiel SAS subsequently launched a public tender offer for the Labeyrie Group's outstanding shares and took it private. In April 2003, the Labeyrie Group acquired Blini SAS, France’s leading producer of blinis and taramasalata products. In February 2004, the Labeyrie Group acquired Farne Salmon and Trout Ltd., a Scotland-based smoked salmon producer complementing its existing industrial base and providing it with the number two position in the UK smoked salmon market through Farne Salmon and Trout Ltd’s long-standing relationship with Tesco, the country’s leading food retailer.
Activities of the Labeyrie Group The Labeyrie Group is composed of four operating entities, Labeyrie SAS, Blini SAS, Vensy España SA. and Farne Salmon and Trout Ltd. all operating in the food industry, mainly in France, Spain and the UK.
Labeyrie SAS produces and sells both salmon and foie gras, predominantly in France. Labeyrie SAS products are mainly sold to retailers, the hyper- and supermarket (H&SM) channel represents more than 80% of total sales of Labeyrie SAS and its subsidiaries, with the remaining revenues in FY03 generated through the catering, hotel and restaurant (CHR) segment and exports. In FY01 Labeyrie SAS acquired Pierre Gueracague SAS, a company specialising in foie gras and other French specialty regional products. Pierre Gueracague SAS’s activity was fully integrated in Labeyrie Group’s management accounts as of FY03.
Blini SAS was created in 1981 and specialises in blini, taramasalata, dips and spreads. The company is the market leader in France. It has also developed a wide range of Mediterranean and Mexican dips (Tapenade, Tzatziki, Salmon Tzatziki, Guacamole) and seafood products (Shrimp Cocktail, Eggplant Caviar). Blini SAS sell its products under the brand name Blini and Labeyrie. It also
16 sells certain products under private labels. The H&SM segment accounts for approximately 90% of sales. Labeyrie Group acquired Blini SAS in 2003 and merged it with its subsidiary Tarama SNC. Tarama SNC was created in August 2001 to integrate the taramasalata and blini activities acquired from Prince Egor.
Vensy España SA. is one of the main producers of smoked salmon in Spain and Portugal. Its product offering has progressively been broadened in order to encompass other Labeyrie Group products (e.g. foie gras).
In February 2004, the Labeyrie Group acquired Farne Salmon and Trout Ltd., a Scotland-based smoked salmon producer complementing its existing industrial base and providing it the number two position on the smoked salmon market in the UK.
Key Products Labeyrie Group’s three main activities are French specialty regional products, seafood products and spreads. The French specialty regional product (SRP) segment focuses on foie gras and duck products. The SPR segment generates 35% of Labeyries Group’s revenues. The seafood products segment is predominantly focused on smoked salmon products and generates 54% of Labeyrie Group’s revenues. The spread segment mostly relates to blinis and fish roe spreads such as taramasalata and generates 10% of Labeyrie Group’s revenues.
Labeyrie Group - Sales 2004 - Geographical breakdown Labeyrie Group - Sales 2004 - Product breakdown
Spreads, 10% Spain (Vensy), 13%
UK (Farne), 13%
SRP, 35% Seafood, 54% France (Labeyrie); 74%
Labeyrie Group operates in the smoked salmon market in Spain and in the UK through its subsidiaries Vensy España SA and Farne Salmon and Trout Ltd. respectively the above graph represents the breakdown of sales between Labeyrie SAS (and subsidiaries excluding Vensy España SA), Vensy España SA and Farne Salmon and Trout Ltd. approximating the geographical breakdown of sales. Vensy España SA is one of largest players in the Spanish smoked salmon market and generates 14% of the Group’s revenues. In February 2004, Labeyrie Group acquired Farne Salmon and Trout Ltd, the UK’s second largest smoked salmon producer. As a result Farne Salmon and Trout Ltd. will not have a full impact on Labeyrie Group’s profit and loss account in FY04, but on a full year basis it will account for approximately 14% of Labeyrie Group’s revenues.
Foie Gras Foie gras is made from duck and goose livers. France accounts for approximately 80% of worldwide foie gras production (ca. 21,000 tons).
Over the period 1992 to 2003 the H&SM foie gras market experienced significant growth, especially in the transformed foie gras segment where H&SM market share increased from 50% to 80%. The majority of the market share was gained early in the period or until 1996, although H&SM continued to gain market share at a lower pace thereafter. In the period 2000-2003 the H&SM foie gras market experienced strong growth of 4.1% per year on average, despite relatively flat volumes. Growth has been driven by increasing household penetration, the capture of younger and less affluent consumers, decreasing raw foie gras prices as well as deseasonalisation. Foie gras is however still a highly seasonal product, with 72% of purchases made during the last three months of the calendar year.
The French foie gras market is consolidating but still contains numerous independent and local players. In the H&SM distribution channel, the major brands are Labeyrie Group’s “Labeyrie” followed by “Montfort”, “Larnaudie”, “Delpeyrat” and “Lescaze”. The Labeyrie Group is the market leader in the H&SM segment with a total 2003 value market share of 25.6%, up from 20.4% in 2000. “Montfort”, its nearest competitor, is significantly smaller with a 9.4% value market share. Labeyrie Group further strengthens its leadership during the Christmas period, due to its premium positioning, whilst its share has also grown over time, with a value market share increasing from 22.5% in 2000 to 27.4% in 2003. Private labels enjoy a strong market share, 34.5% and 37.5% in value and volume terms respectively. This segment has been growing at an average annual rate of 3.0% in between 2001-2003. Their share of the market, measured in value terms, has nevertheless decreased as a result of a widening price gap with branded players.
17 According to a consumer survey in 2003, “Labeyrie” has the highest brand awareness in its segment with brand awareness of 88%, far ahead of its competitors in H&SM “Delpeyrat” and “Montfort” with 31% and 17% respectively.
In FY2003, 10.7% of the Group’s foie gras net revenues were generated outside of France mainly in Belgium, Luxembourg, Portugal and Spain, Europe’s second largest market. The fastest growing importing countries are Spain, Switzerland and Belgium and the Labeyrie Group enjoys a leadership position in all of them.
The distribution channels for foie gras products in France are quite fragmented with H&SM accounting for 38% of total value sales, CHR for 27%, mail–order for 13%, cash & carry for 11%, farms for 4%, exports for 4% (mainly to Switzerland, Belgium, Luxembourg and Spain) and specialized outlets for 3%.
Foie Gras - Sales in H&SM in Value - France Foie Gras - Sales in H&SM in Volume - France
4,000 180 3,500 160 140 3,000 120 2,500 100 2,000 80 Tons 1,500 60 1,000 Value (EUR '000,000) (EUR Value 40 20 500 0 0 2000 2001 2002 2003 2000 2001 2002 2003
Evolution of H&SM Market Shares of Foie Gras between 2000 and 2003 in France
Private Label; 36% Labeyrie, 20% Labeyrie, 26%
Private Label; 33%
Other Brands; 22% Other Brands; 20% Lescaze, 3% Lescaze, 4% Montfort, 9% Larnaudie, 3% Montfort, 9% Delpeyrat, 6% Delpeyrat, 4% Larnaudie, 5%
Year 2000 Year 2003
Smoked Salmon Labeyrie Group is Europe’s largest producer of smoked salmon products. The company is the market leader in France and Spain, Europe’s largest and 4th largest smoked salmon market respectively, and the second largest in the UK, Europe’s 3rd largest market.
France The French smoked salmon market is Europe’s largest with 2003 total sales of 20,097 tons and H&SM sales of 13,735 tons. Between 1989 and 2003, the market experienced a period of strong development both in sales and volume with sales value growing at 4.6% p.a. and sales volume growing at 2.7% p.a.
The French smoked salmon market has consolidated following significant corporate activity in the sector over the last few years. In parallel, the “Labeyrie” brand has strengthened its market leadership capitalising on its status as the key reference brand at the expense of smaller national labels. As a result, the Labeyrie Group’s value market share increased from 23.2% in 2000 to 26.0% in 2003 while its volume market share followed the same trend increasing from 18.4% in 2000 to 19.5% in 2003. The company has further strengthened its leadership during the Christmas period with its value market share increasing from 29.4% in 2000 to 31.9% in 2003.
The seasonality in the smoked salmon market is high. Approximately one third of smoked salmon sales are related to the Christmas season, but this is gradually declining as smoked salmon is being increasingly consumed throughout the year. In value, the Christmas period has only increased by 1.2% over the 2001-2003 period compared to 4.3% growth over the rest of the year.
18 In France, smoked salmon is predominantly sold through food retailers with the H&SM channel accounting for 84% of sales volume, while the balance 16% is sold through the CHR channel. Orders through the internet or catalogues still account for only a limited portion of smoked salmon sales.
Smoked Salmon Sales in H&SM in Volume in France Smoked Salmon Sales in H&SM in Value in France
14,000
12,000 300 10,000
8,000 200
Tons 6,000 EUR '000,000 EUR 4,000 100
2,000
0 0 1998 1999 2000 2001 2002 2003 1998 1999 2000 2001 2002 2003
Evolution of H&SM Market Shares of Smoked Salmon between 2000 and 2003 in France
Delpierre Delpierre 6% 4% Labeyrie Labeyrie 23% 26%
Private Label Private Label 36% 43%
Other Brands Other Brands 35% 27%
Year 2000 Year 2003
Spain In 2003, Spain was Europe's third largest smoked fish market (8,000 tons) and fourth largest smoked salmon market (5,900 tons).The supermarket channel has been outgrowing the market with an average annual growth rate of 3.5%.
The Spanish smoked salmon market is relatively fragmented with many independent and local players. The major brands are “Skandia” (Labeyrie Group's brand for the Spanish market) followed by Ahumados Dominguez and Conservas Martiko. Labeyrie Group, through its subsidiary Vensy España SA, is the market leader with a value market share of 20.0% in 2003. Ahumados Dominguez, the company's nearest competitor, is twice as small with a 10.0% value market share. Private label brands have a significant presence in the market with a 51.2% value market share. On the Spanish market, through its “Skandia” brand, the company has duplicated its French strategy of leading the market through innovation, being for example the first player to segment its product offering on the basis of salmon origin.
Evolution of H&SM Market Shares of Smoked Salmon between 2000 and 2003 in Spain
Dominguez Dominguez 9% Vensy 6% Vensy Royal 15% Royal 31% 7% 14% Martiko 6% Martiko 9%
Other Other 25% 5% Private Label Private Label 38% 35%
Year 2000 Year 2003
19 The H&SM channel accounted for 49% of sales volume in 2003, while the balance was sold through the CHR channel. Vensy España SA has a relatively small presence in the CHR segment which is less dynamic and less profitable than the H&SM channel.
United Kingdom In February 2004, the Labeyrie Group entered the UK market through its acquisition of Farne Salmon and Trout Ltd. The company’s key customer is Tesco, the UK’s largest retailer. The UK market is Europe’s third largest smoked salmon market with 6,500 tons sold. As opposed to most European countries, private label products dominate the UK market whilst branded products are less developed. The UK’s smoked salmon producers are closely linked to specific food retailers. In the case of Farne Salmon and Trout Ltd., its key customer is Tesco, the country’s leading chain and fastest growing retailer.
The Blini / Tarama Market The Labeyrie Group became a market leader in the French H&SM blini/tarama market when it acquired Blini SAS in 2003, and merged it with its subsidiary Tarama SNC. Blini SAS focuses on the French H&SM blini/tarama market which is Europe’s second largest after the UK. The market groups blinis (representing an annual volume of approximately 3,900 tons), taramas (approximately 2,200 tons) and other spreadable dips (approximately 2,500 tons).
Over 90% of blini/taramasalata products are sold through the H&SM channel, with only a marginal portion generated through high- end caterers.
In the period 1999-2003, the blini and taramasalata H&SM market segments experienced 1.8% and 1.7% annual growth in value and volume respectively. In 2003 the market experienced strong growth, boosted by a significant price decrease. The market for other spreadable products is still emerging and has experienced 21% growth per annum between the years 2001 and 2003. This growth has mainly been driven by volume growth as a consequence of new eating habits, principally the development of “snacking”, strong demand for “ethnic foods” and product innovation.
The French blini market is highly consolidated with the top four players together with private label commanding 94% of the H&SM market both in value and volume terms. The major players are the Labeyrie Group, with a 36.0% value market share for the year ending in January 2004, private label with 39.0% and Tassos with 14.0% market shares.
Evolution of H&SM Market Shares of Blini between 2000 and 2003 in France
Blini Blini 36% Private Label 33% Private Label 44% 39%
Other 7% Other 6% Tassos Traiteur Tassos Traiteur 13% 3% 14% 5% Year 2000 Year 2003
The French tarama market is also highly consolidated with the top four players together with private label commanding around 90% of the H&SM market both in value and volume terms. The major players are the Labeyrie Group with a 37% value market share for the year ending January 2004, private label with 39.0% and Tassos with a 12.0% market share.
Evolution of H&SM Market Shares of Tarama between 2000 and 2003 in France
Blini Blini Private Label 34% Private Label 37% 44% 39%
Other Tassos Other Tassos 11% 12% 12% 11% 20 Year 2000 Year 2003 The other spreadable products segment is the fastest growing segment in the Labeyrie Group. It is the third largest-branded player with value and volume market shares of 10% and 11% respectively. The company has however been the fastest-growing player in the segment over the last two years. Today, the top three players and private label together command almost 70% of the market. The presence of private label is lower than in the blini and tarama segments with a value and volume market share of respectively 22% and 24%. Blini SAS's two main competitors have 21% and 17% of the market share in value terms and 23% and 17% in volume terms.
Group marketing positioning Labeyrie Group’s management has demonstrated its ability to mitigate the risks associated with this relatively high degree of customer concentration through the strength of the company's brands portfolio in seafood and regional products, making them key references in terms of price, quality and innovation. As a result, the “Labeyrie” brand's weighted distribution rate in the French food retail channels amounts to approximately 90%, well ahead of its nearest competitor at approximately 35%. The Company also has a larger range of products per store than its main competitors (e.g. 5 vs. 2 for branded competitors in the smoked salmon segment). The brand awareness of the company's products generates customer traffic and increasing sales volume in the aisles in which they are displayed for all categories.
The marketing functions of the Labeyrie Group are organized by brand and by product categories. The teams mainly focus on ensuring the consistency and coherence of the positioning of the Labeyrie Group's various brands, organizing promotional activity, monitoring the evolution of the brands’ perception by retailers and end-consumers and identifying changes in consumer behaviour to better position the company's products.
The company’s investments in marketing and promotion have been instrumental in developing and establishing the “Labeyrie” brand name. The company has been able to have a significant impact on the behaviour of end-consumers thanks to a targeted approach (e.g. strong spending during the Christmas season) but also to its ability to advertise for its full product range through the same campaign.
Management and employees Senior management Xavier Govare (46) CEO of the Labeyrie Group and former Chairman of Financière de Kiel SAS. Joined Labeyrie in 1989. Philippe Perrineau (57) CFO of Financière de Kiel SAS. Joined Labeyrie in 2000. Edouard Boin (57) Chairman of Vensy España SA. Joined Labeyrie in 1998. Eric Levet (42) Chairman of Blini SAS. Joined Blini SAS in 1993.
Employees During the year, the number of temporary employees varies significantly with production requirements reaching a trough during the January-March period and its peak in December. As of 31 January 2004, Labeyrie Group had 1,396 employees out of which 1,157 were under long-term contracts and 239 under short-term and temporary contracts. In January Farne Salmon and Trout Ltd. was not part of Labeyrie Group, but as of 1 March 2004, Farne Salmon and Trout Ltd. had 428 employees including 113 under short-term and temporary contracts.
As of 31 December 2003, 69.2% of Labeyrie Group’s total workforce worked for Labeyrie SAS and its subsidiaries in France, 16.7% at Vensy España SA and 14.1% at Blini SAS. The Company’s workforce is relatively young with 45% of long-term employees being less than 35 years old; approximately two-thirds of the permanent staff has been with Labeyrie Group for less than five years
Production facilities The Labeyrie Group operates through eight production sites in France, Spain and UK. The company’s largest production facility and the headquarters of Labeyrie SAS are located in Saint-Geours de Maremne. Here, smoked salmon, foie gras and ready to eat meals are processed. In Hagetmau and Came, the company operates a slaughterhouse and in Troarn, blini and taramasalata production takes place. The St-Geours foie gras facility, has been rebuilt after it was destroyed in a fire in 2001, and now benefits from state of the art production and logistics capabilities. In Spain, Labeyrie Group has seafood production facilities in Linea and in Malaga. In Scotland, the Labeyrie Group operates a smoked salmon and seafood processing facility.
Historical Profit & Loss Statement As illustrated in the table, both sales and net revenues increased over the period (in net revenues joint marketing efforts (JME) costs are withdrawn from the sales). Between FY03 and FY04 net revenues increased, mainly driven by the impact of the Farne Salmon and Trout Ltd. and Blini SAS acquisitions but also through the organic growth experienced by Labeyrie Group. EBITA between FY03
21 and FY04 also improved significantly over the Labeyrie Group - P&L Statement and Budget period, again mainly explained by the full year Year Ending June 30 Actual Actual Actual Budget impact of the Blini SAS acquisition and the EUR '000,000 FY02 FY03 FY04 FY05 03/02 04/03 05/04 increased margin. Labeyrie Group’s management budgeted P&L for FY05 is included in the table Labeyrie Group (1) 215.8 223.7 234.9 253.9 3.7% 5.0% 8.1% below. Vensy 33.4 34.3 36.1 36.5 2.7% 5.2% 1.1% Tarama 4.5 - - - n.a. n.a. n.a. Blini - 10.0 35.3 37.9 n.a. 253.0% 7.4% Farne - - 8.5 41.4 n.a. n.a. n.a. IE -3.6 -2.4 -3.2 -1.8 -33.3% 33.3% -43.8% Historical Investments Net Sales 250.1 265.6 311.6 367.9 6.2% 17.3% 18.1% Labeyrie Group 170.8 171.4 177.9 188.6 0.4% 3.8% 6.0% and Divestments Vensy 31.3 32.0 33.9 33.7 2.2% 5.9% -0.6% Tarama 3.7 - - n.a. n.a. n.a. Blini - 7.0 26.1 27.9 n.a. 272.9% 6.9% SIF Group’s stake Farne - - 8.2 41.4 n.a. n.a. 404.9% IE -3.6 -2.9 -3.2 -1.8 -19.4% 10.3% -43.8% in IFPC Net Revenues 202.2 207.5 242.9 289.8 2.6% 17.1% 19.3% In March 2004 SIF Group purchased a 23.16% stake in Icelandic Freezing Plants Corporation EBITA 23.5 24.0 32.5 32.7 2.1% 35.4% 0.6% (IFPC / Sölumidstöd Hradfrystihúsanna hf.) for % if net revenues 11.6% 11.6% 13.4% 11.3% ISK 2,027 million or ISK 5.85 per share. IFPC is EBITDA 29.2 30.8 40.3 43.1 5.5% 30.8% 6.9% listed on the Iceland Stock Exchange. The % if net revenues 14.4% 14.8% 16.5% 16.5% purchase was financed by long term debt. (1) including P.Gueracague net sales for €m 28.2 and net revenue for €m 27 in FY02. In October 2004, SIF Group sold its 23.16% (1) excluding Tarama net sales for €m 1.9 and net revenue for €m 1.7 stake in IFPC for ISK 3,154 million. As the Group now predominantly focuses on processing in Europe its intention to work for a closer collaboration is no longer in line with SIF Group’s strategy. The Group’s profit on the sale amounted to approximately ISK 1.1 billion.
SIF Group acquires Lyons Seafoods Ltd In July 2003, SIF Group finalized a £14 million agreement for the purchase of the British company Lyons Seafoods Ltd. This purchase was a further step in SIF Group’s strategy to gain a strong position in the market for fully-processed seafood in its key markets, ensure access to retail distribution, build up its portfolio of strong brands and engage in product development. Lyons Seafoods Ltd was founded in 1958 and specializes mainly in the production of fully-processed shellfish, with prawns accounting for a large part of its product line.
The acquisition was financed by a one billion ISK bond issue offering in June 2003, the divestment of a primary seafood processing unit in Boulogne and the sale of its stake in Seaflower Ltd.
SIF France SAS sells a primary seafood processing unit and SIF Group sells its holding in Seaflower Ltd. In July 2003, SIF France SAS sold its seafood processing facilities, premises and other assets in Boulogne sur Mer for € 3.19 million and SIF Group sold its 19.7% holding in the Namibian fishing company Seaflower Ltd. This was in accordance with the policy of the SIF Group, which is to withdraw completely from primary seafood processing to concentrate on marketing and final processing. Capital gains on the sale of assets in Boulogne sur Mer was small and ISK 200 million from the sale of Seaflower Ltd.
SIF France SAS buys machinery and the “York” brand In June 2002, SIF France SAS bought Servifrais’ and Pecheries de Fécamp’s machinery and the “York” brand. Both companies were bankrupt. The companies sold smoked herring and salmon under the York brand. The companies were one of SIF Group’s main competitors. It had 400 employees, manufactured 17,000 tons per year and had approximately € 63 million in turnover.
22 SIF Group sells a vessel to Eimskip In July 2001, SIF Group sold its transport vessel Hvitanes to Hf. Eimskipafélag Íslands. The ship was used to transport salted fish products from Iceland to southern Europe. The two companies signed an agreement regarding Hf. Eimskipafélag Íslands’s transport of salted fish products for SIF Ltd. for the next five years. The sales profit was approximately ISK 120 million.
SIF Group buys a 20% stake and fully acquires Tros ehf. In December 2001, SIF Group agreed to buy 20% stake in Tros ehf. The Group owned an 80% stake in Tros ehf. before the purchase and therefore fully acquired the company. Tros ehf. was the largest exporter of fresh seafood products by air. Tros ehf. manufactures its own seafood products but the majority of the products sold are purchased from other processing plants. The major markets for Tros ehf. are in the USA, UK, Germany and France.
Future Investments and Divestments
In the near future, the Group intends to consolidate its trading activities through a single trading company, IS International ehf. invoicing for all trading operations including Iceland Seafood France, SIF Iceland Seafood GmbH, SIF Iceland Seafood Ltd. and SIF Italia Srl. SIF Group intends to move its trading operations to an independent entity within SIF Group and in the near future it intends to reduce its ownership in the entity to below 50%.
Furthermore, SIF Group has signed a letter of intent outlining terms and conditions regarding a € 55 million divestment of SIF Iceland Seafood Corp. to Sjóvík ehf. SIF Group will retain a up to a 19% share in the acquirer for a reinvestment of up to € 10 million. The divestment is part of the Group’s strategy to increase its focus on the value added processing of European seafood and festive food.
SIF Group’s Trading Operations To increase the Group’s focus, management intends to have one trading unit IS International ehf that will operate independently and to reduce its ownership in this entity. In 2003, the trading operation had revenues of € 206 million in 2003 and accounted for 31% of the Group’s revenues. The gross profit margin is significantly lower in trading compared to production.
The trading operation is a low margin, high volume business. The Company purchases frozen, chilled and salted cod, haddock, salmon etc, and resells the seafood under the Company’s own brands. Marketing and immediacy are the main value drivers in the operations. SIF Group through its trading operation offers its suppliers immediate sale of the seafood and sells the seafood unprocessed partly under its own brand names, which adds value to the product. The main purchasers are retailers, wholesalers and distributors.
Trading - Raw material suppliers Trading - Icelandic seafood exporters
Other, 18% SIF, 23%
Others, 37% Thailand, 3%
China, 4%
Norway, 6% Iceland, 60% IFPC, 19%
USA, 7% Salka, 4% IU, 4% Samherji, 13%
The majority of the raw material suppliers for the Group are located in Iceland, where the company had a 23% market share of fish exports. The trading activity is therefore heavily dependent on fishing quotas, determined by the Ministry of Fisheries. The quotas are fixed for the fishing season going from September each year. The activity also depends on price fluctuations in raw material prices, since revenues are mainly based on a commission on the sales price of the products, and lower prices correspond with lower commissions.
23 There are no written contracts between SIF Group Trading - P&L Statement and its core suppliers in Iceland as each party wishes to leave the potential for ongoing Year Ending December 31 Actual Actual Actual negotiations as the fishing season unwinds. If the EUR '000,000 FY01 FY02 FY03 02/01 03/02 supplier provides more than the trading operations are expected to market, it will have to Sales 254.7 250.9 206.0 -1.5% -17.9% Gross profit 8.4 9.9 10.7 17.9% 8.1% review its approach, taking into account country, EBITDA 6.5 6.4 2.6 -1.5% -59.4% type of product and use to extend its sales EBIT 6.4 6.3 2.5 -1.6% -60.3% potential. In the case of a shortfall the plan would Net Income 5.9 5.9 2.2 0.0% -62.7% be reviewed, including possibilities to hit the spot market or raise prices. Since the company is a major intermediary on the Icelandic market, and since Icelandic fish cannot easily be replaced by Trading - Balance Sheet others on its market, the room for deviations from this particular supply chain is somewhat limited. Year Ending December 31 Actual Actual Actual There is a risk that the cooperation between SIF EUR '000,000 FY02 FY03 30.06.2004 03/02 06.04/03 Group and Icelandic producers may change in the future, particularly through the consolidation of Tangible assets 2.5 2.0 1.9 fish production companies, should one of the Long term assets 0.9 1.6 1.4 competitors absorb a supplier. Fixed Assets 3.3 3.6 3.3 9.1% -8.3%
Sales in trading decreased significantly in FY03 Inventories 35.2 23.3 35.8 as competition increased, unfavourable M&A Trade Receivables 43.7 36.8 50.8 activity occurred and a negative price impact hit Trade Payables -31.1 -25.4 -31.5 Trade Working Capital 47.8 34.7 55.1 -27.4% 58.8% inventories. This also had an impact on the Other receivables 0.6 0.7 0.6 EBITDA margin which decreased from 2.6% in Other payables -2.7 -1.7 -1.2 FY02 to 1.3% in FY03. Net Working Capital 45.6 33.6 54.5
The trading operations require insignificant capital Capital Employed 49.0 37.2 57.9 -24.1% 55.6% investments but the working capital requirements are high. The majority of the difference in the Net financial debt -41.5 29.6 -50.3 trade working capital in FY03 and in the first half of 2004 is the seasonality of the trading Net Assets 38.4 7.6 7.6 -80.2% 0.0% operations, as inventories build up and reach their highest level at the end of October.
SIF IS Corp. SIF Group has signed a letter of intent regarding terms and conditions of a € 55 million divestment of SIF Iceland Seafood Corporation (SIF IS Corp.) to Sjóvík ehf. SIF Group will retain a 19% stake in the acquiror for a reinvestment of up to € 10 million. The divestment is part of the Group’s strategy to increase its focus on the value added processing of European seafood and festive food.
Established in 1951, SIF IS Corp., operates through a modern high capacity processing plant in Newport News (Virginia), built in 1996-1997 and has production capacity of about 40,000 tons. The main products sold by the company are frozen seafood, particularly breaded and battered seafood dishes for the U.S. market.
SIF IS Corp. has signed agreements with approximately 50 brokers in order to promote and sell products to distribution companies, restaurants and institutions. Around 65% of the sales are made through distributors and some products are packed in their brand names, with the rest of sales made directly to CHR under the brands “Long John Silver’s” and ”Popeye’s”.
SIF IS Corp.’s main competitors are the American companies, American Seafood and Trident, the Canadian company FPI and the US subsidiary of IFPC. The US companies are the leaders in the market but they are not fully comparable to SIF IS Corp. as they are fully integrated fishing and processing companies. SIF IS Corp. has a number of key strengths, including a reliable sales force, new production facility, a good location near harbours, technical expertise, an efficient IT system and a non-unionised workforce.
The majority of the company’s sales are under its own labels, but customer labels represent approximately one third of the sales and the company also sells unlabelled products which it does not transform or repack. SIF IS Corp.’s strategy is to increase sales of processed products which offer a much better gross margin. In order to implement their strategy one or two new product ranges are launched each year. The result of this strategy is reflected in the company’s numbers. During the period FY02 to FY04, sales of unprocessed products decreased by an average of 4.1% per year whilst processed products’ sales increased by 8.2%. SIF IS Corp’s strategy was developed where processed seafood has become increasingly popular among customers for its variety and among
24 retailers for saving labour and shrinkage. Breaded fish and fillets also continue to be a favourite product among families with children. Trading - Icelandic seafood exporters SIF IS Corp - Net sales by product
160 160 140 140
120 120 Other 100 SIF IS Corp´s 100 Haddock Customers´ 80 80 Pollock Unlabelled Cod
EUR '000,000 60 60 EUR '000,000 40 40 20 20 0 0 FY01 FY02 FY03 FY01 FY02 FY03
Cod sales experienced a 24.5% growth in value between FY01 and FY02. Sales of unprocessed cod fillets grew by nearly $8 million between those two years. However, since FY02 cod sales decreased by an average of 2.7% per annum and accounted for 47% of SIF IS Corp’s sales in FY04 compared to 49% in FY01. The decrease in cod sales is in line with the market trends. Pollock sales rose 4.3% per annum between FY01 and FY04 and, net sales of pollock accounted for 19% of the total net sales in FY04. Most of the pollock sold is processed and sales growth is in line with SIF IS Corp’s strategy to increase the sales of processed seafood. Catfish has experienced the fastest growth over the period. It is a very popular fish in US regions such as Louisiana, and SIF IS Corp. has been successful in increasing its presence among two national account customers, Airmark and Schwan. Other products comprise 26 products. Overall growth in this SIF IS Corp - P&L Statement segment was mainly driven by flounder and tilapia with a 24% and 38% growth rate over the Year Ending December 31 Actual Actual Actual given period respectively. Within this category, EUR '000,000 FY01 FY02 FY03 02/01 03/02 shrimp, the main seafood consumed in the US, only represents $ 1.4 million but rose by 66% Sales 117.3 135.9 140.5 15.9% 3.4% over the period under review. Gross profit 22.2 25.3 26.3 14.0% 4.0% EBITDA 2.6 4.0 3.9 53.8% -2.5%
EBIT 2.0 3.2 3.1 60.0% -3.1% In FY02, SIF IS Corp. experienced a sharp Net Income 0.1 1.0 1.3 30.0% increase in sales that mainly arose from restructuring of the whole sales and marketing Sales Growth n/a 15.8% 3.4% function, the hiring of 10 additional sales people Gross Profit Margin % 18.9% 18.6% 18.7% and the development of both new unprocessed EBITDA Margin % 2.2% 2.9% 2.8% and processed products. Although the revenues EBIT Margin 1.7% 2.4% 2.2% increased, the gross profit margin decreased, Net Income Margin % 0.1% 0.7% 0.9% primarily because of the mix effect associated with the development of low margin unprocessed Average Headcount 278 295 305 products to the detriment of processed products.
25 VI THE NEW SIF GROUP
The description of the SIF Group in this section is focused on the business of the Group as it is intended to be in the near future, including the Labeyrie Group and excluding both operations that have been defined as trading and the operations in North America. Today SIF Group contains all trading activity and the operation in North America and none of Labeyrie SAS and its subsidiaries and sister companies operation. The Board of SIF Group has decided to place its trading operation in a separate entity, IS International ehf. and in the near future intends to reduce its stake, but there is no guarantee that they will succeed. The Board of SIF Group has decided to sell its U.S. operations and has signed a Letter of Intent with Sjóvík ehf. but there is no guarantee that the SIF Group Board will succeed in selling it. The acquisition of Labeyrie SAS and its subsidiaries and sister companies is conditional to the approval of the French Competition Authorities. There is no guarantee that the Competition Authority will approve the acquisition. SIF Group is a term used for the operation of SÍF hf. and its subsidiaries, subsequently through the Prospectus the reader must conclude from the context if SIF Group includes Labeyrie Group or not.
Legal and Organisational Structure
SIF Group operates subsidiaries in twelve countries. It has subsidiaries in France (Labeyrie SAS, Blini SAS and SIF France SAS), the United Kingdom (Farne Salmon and Trout Ltd. and Lyons Seafoods Ltd.), Spain (SIF Spain SL and the subsidiary of Labeyrie SAS, Vensy España SA), the U.S.A. (Iceland Seafood Corporation), Canada (SIF Canada Ltd.) and Iceland (Tros ehf.). The Group has in addition, distribution and trading entities in Iceland (Saltkaup hf. and a great deal of the operation of the parent company SÍF hf.), France (Iceland Seafood France SAS), United Kingdom (SIF Iceland Seafood Ltd.), Germany (SIF Iceland Seafood GmbH), Norway (Christiansen Partner AS), Greece (SIF Hellas S.A.), Italy (SIF Italia srl.) and Portugal (Vensy Portugal LTDA which is a subsidiary of Vensy España SA). The intention is to put the ownership of SIF Iceland Seafood Ltd., Iceland Seafood SAS, SIF Canada Ltd., SIF Iceland Seafood GmbH, SIF Italia Srl. into IS International ehf., a subsidiary of SÍF hf. which will incorporate the majority of SIF Group’s trading activity.
Financière de Kiel SAS is the parent company of Labeyrie SAS, which in turn is the parent company of Pierre Guèraçague SAS, Gueradis sarl, Labeyrie Norge AS and Vensy España SA (which in turn owns 100% of Vensy Portugal LTDA). Palmitou SAS is an associated company which in turn owns 51% in Lur Berri SAS. Financière de Kiel SAS is also the parent company of Blini SAS and Farne Salmon and Trout Ltd., the latter in turn being the parent company of Thomas Ballantyne Salmon Ltd. These companies together are through this prospectus collectively identified as the Labeyrie Group.
SIF Group’s head office is in Hafnafjördur, Iceland, and five people are employed there, including the CEO and President, Jakob Ó. Sigurdsson. The subsidiaries of SÍF hf. are all operated as independent profit units, while financial synchronization, strategic planning and co-ordination is conducted in Hafnafjördur. Marketing is conducted by the subsidiary in conformity with the market positioning and situation in each region. Sharing marketing information and material is however encouraged and co-ordinated by the headquarters.
The chart shows the subsidiaries and affiliated companies of SÍF hf., as well as the Group’s holdings in the Board of Directors subsidiaries. The chart also separates subsidiaries and affiliates between production and trading, since it is the President and CEO intention of management to move trading in fresh and Jakob Ó Sigurdsson frozen fish into a separate entity, IS International ehf. in which the company intends to reduce its stake in the near future: VP Marketing&Sales Vice President CFO VP Operational Development Örn Vidar Skúlason Kristinn Albertsson Ragnar Gíslason
Directors of Subsidiaries
26 SÍF hf.
UK 100% SIF Iceland Seafood Ltd Trading 40% Icebrit Ltd Associate 100% Farne Salmon and Trout Ltd * Production 100% Thomas Ballantyne Salmon Ltd Production 100% Lyons Seafoods Ltd Production
France 100% Lyons Seafood SA Production 100% SIF France SAS Production 100% Iceland Seafood SAS Trading 100% Blini SAS * Production 100% Labeyrie SAS * Production 100% Pierre Guèraçague SAS Production 100% Gueradis Sárl *** Production 49% Palmitou SAS Associate 51% Lur Berri SAS Production
Spain 100% Vensy Espaňa SA Production 100% SIF Spain Sl Production
Portugal 100% Vensy Portugal LTDA Production
Greece 66.7% SIF Hellas SA Production
Canada 100% SIF Canada Ltd Trading
Germany 100% SIF Iceland Seafood GmbH Trading
Italy 100% SIF Italia Srl Trading
Netherlands 100% Zilia Holding NV Production
Norway 97.5% Christiansen Partner AS Production
Iceland 100% Tros ehf Production 100% IS International ehf Trading 100% Saltkaup hf Production
USA 100% SIF Iceland Seafood Corporation To be sold
* Labeyrie SAS, Blini SAS and Farne Salmon and Trout Ltd. are daughter companies to Financière De Kiel SAS which in turn is a subsidiary to SÍF hf. Financière De Kiel SAS is an investment management company for the Labeyrie Group which was acquired by SÍF hf. and is therefore left out here above.
*** Gueradis Sarl is owned 58% by LAbeyrie SAS and 42% owned by Pierre Guèraçague SAS.
27 Board of Directors and Employees
The total number of SIF Group employees after the acquisition of the Labeyrie Group is around 4,300, decreasing after the proposed divestments to around 3,900 employees in eleven countries. Over the calendar year the number of employees fluctuates significantly, reaching its highest level at the end of the calendar year. Because of these fluctuations, the Group requires over one thousand short term employees in the last three months of the calendar year. SÍF hf. and its subsidiaries had in 2003 on average 1,916 employees compared to 1,537 employees in Projected Geographical Breakdown of the Processing Workforce 2002, the increase being due mainly to the acquisition of Lyons Seafoods Ltd. which employed around 300. The average number of employees in 2002 was 10% lower than in 2001, partly due to Iceland, 2.5% the sale by SIF Group of a vessel to Eimskip hf. in July 2001. In UK, 19% September 2004, Labeyrie Group had around 2,400 employees, compared to 2,648 at year end in December 2003, excluding Farne Salmon and Trout Ltd. which had about 430 employees.
This significant difference is because of the fluctuations in Spain, 9.5% Labeyrie Group’s workforce over the calendar year. In December 2002, the number of employees was 2,437. The increase in 2003 is mainly the result of the acquisition of Blini SAS in 2003, which had 374 employees at the end of 2003. France, 69%
Board of Directors, Senior Management and Auditors Act no. 2/1995 on Public Limited Companies stipulates that the Board of each Icelandic Company shall manage the Company’s general affairs and ensure that the organization and operations run smoothly. According to the articles of association of SÍF hf., the Company’s Board of Directors shall consist of seven persons elected at Annual General Meetings for a one year term. One person shall also be elected as a substitute. The Board elects one of its Members as the Chairman of the Board. The votes by Directors of the Board will decide issues at Board meetings, unless there are alternative instructions contained in SÍF hf.’s Articles of Association or lawful directives. A Board meeting is capable of making decisions when the majority of the Board of Directors attends the meeting. However, an important decision cannot be made unless all the Directors are involved, if that is possible. The Board of Directors hires a General Manager who is the Company’s most senior manager according to law and the Company’s Articles of Association. The General Manager of SÍF hf. bears the title President and Chief Executive Officer (CEO). A Board Director or the CEO can request a Board meeting and the Chairman is then obliged to summon a Board meeting.
The CEO is responsible for SÍF hf.’s daily operations in conformity with the rules which are laid down for him by the Company’s Board of Directors or in accordance with its Articles of Association. The CEO shall ensure that the book-keeping is entered in conformity with laws and customs and that the handling of the Company’s assets is done in a secure manner. The CEO is duty bound to abide by the instructions of the Board of Directors. He is also bound to grant the auditors all information that they request. According to SÍF hf.’s articles of association it is permissible to engage a Director of the Board in the position of CEO. The Company’s headquarters are at Fornubúdir 5, 220 Hafnarfjördur, Iceland.
As a result of significant changes in the ownership of SÍF hf., major changes were made to the composition of the Board of Directors in September 2003. Jón Kristjánsson and Gudmundur Hjaltason came in as new Members replacing Fridrik Jóhannsson and Fridrik Pálsson. Remaining Members were Ólafur Ólafsson, Chairman of the Board, Adalsteinn Ingólfsson, Gudmundur Ásgeirsson, Gunnar Tómasson, Jón Edvald Fridriksson, Magnús Gauti Gautason and Pétur Hafsteinn Pálsson. At the annual general meeting in March 2004 the number of Board Members was reduced from nine to seven, consequently Pétur Hafsteinn Pálsson did not make himself available for re-election and Magnús Gauti Gunnarsson became a substitute Member of the Board.
Board of Directors The following list of Board Members “Occupations:” is not intended to be exhaustive, but details major occupations and/or other occupations which are linked to the ownership or operations of SÍF hf. In references made below to “related parties” that hold Shares in SÍF hf., related parties are defined as linked to a Board Member, where the Board Member needs to have extensive influence over the investments of the related party. The ownership by related parties in SÍF hf. is listed in a separate table.
Ólafur Ólafsson ID-No: 230157-5619, Midhraun 1, 311 Borgarnes Chairman of the Board, elected March 2000 Occupations: Managing Director of Kjalar ehf., Chairman of the Board of Directors of Samskip hf., Kjalar ehf. and Egla hf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: Member of the Board of Ker hf., Chairman of the Board of Directors of Mundill ehf., Owner Kjalar Investments S.A. (through Kjalar ehf.) (see table below)
28 Adalsteinn Ingólfsson, ID-No: 020369-5589, Tjarnarbraut 1, 780 Höfn Member of the Board, elected March 2000 Occupations: Managing Director of Skinney-Thinganes hf., Member of the Board of Eignarhaldsfélagid Hesteyri ehf. and Framleidendur ehf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: Member of the Board of Framleidendur ehf. (see table below)
Gudmundur Hjaltason, ID-No: 241063-5509, Steinagerdi 18, 108 Reykjavík Member of the Board, elected October 2003 Occupations: Managing Director Ker hf. and Egla hf., Chairman of the Board of Samvinnulífeyrissjódurinn, Member of the Board of Sjóvík ehf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: Managing Director of Ker hf., Chairman of the Board of Samvinnulífeyrissjódurinn (see table below)
Gunnar Tómasson, ID-No: 091254-2209, Vesturbraut 8a, 240 Grindavík Member of the Board, elected April 1996 Occupations: Chairman of the Board of Directors and Director of Production and Marketing at Thorbjörn-Fiskanes hf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: -
Jón Kristjánsson, ID-No: 041165-4649, Bollagardar 14, 170 Seltjarnarnes Member of the Board, elected October 2003 Occupations: Chairman of the Board of Directors of Sund ehf., Sundco ehf. and Sjóvík ehf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: Chairman of the Board of Sundco ehf. and Sund ehf. and Member of the Board of Ker hf. and Mundill ehf. (see table below)
Jón E. Fridriksson, ID-No: 231054-2789, Háahlid 7, 550 Saudárkrókur Member of the Board, elected March 2003 Occupation: Managing Director of Fiskidjan Skagstrendingur hf., Chairman of the Board of Eignarhaldsfélagid Hesteyri ehf., Skagstrendingur hf. and Framleidendur ehf. and Member of the Board of Vátryggingafélag Íslands hf. (VÍS hf.) Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: Chairman of the Board of Framleidendur ehf. (see table below)
Gudmundur Ásgeirsson, ID-No: 170939-2479, Bardaströnd 33, 170 Seltjarnarnes Member of the Board, elected May 1997 Occupation: Chairman of the Board of Nesskip hf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 2,461,538 Other related parties: Chairman of the Board of Nesskip hf. (see table below)
Magnús Gauti Gautason, substitute, ID-No: 080850-2989, Sudurbyggd 27, 600 Akureyri Member of the Board, elected March 2000 Occupation: Managing Director of Rekstrarradgjöf Nordurlands ehf. Own holding and holding of spouse and children under 18 years of age in SÍF hf.: 0 Other related parties: -
Related companies 12 November 2004 Members of the Board of Directors currently have no stock options or warrants in SÍF hf. Related party Nominal value Ownership Ker hf 219,324,903 14.6% Remuneration for the Board of Directors for 2003 Sund ehf 138,888,889 9.3% was as follows in € ‘000. Kjalar Investments SA 139,334,466 9.3% Ólafur Ólafsson, Chairman of the Board ...... 18 Samvinnulífeyrissjódurinn 121,251,390 8.1% Fridrik Pálsson, previous Chairman of the Board ...... 70 Framleidendur ehf 98,296,206 6.6% Adalsteinn Ingólfsson, Vice Chairman ...... 12 Mundill ehf 85,675,910 5.7% Eight other Members of the Board ...... 62 Sundco ehf 45,172,323 3.0% Nesskip hf 23,338,830 1.6% Total 871,282,917 58.1%
29 Senior Management The senior management team under the leadership of Jakob Sigurdsson brings together six key people at Group level, merging significant management experience in both international markets and the seafood industry. There are no extraordinary transactions between the Group and the management.
Jakob Sigurdsson, (ID-No: 280364-2589) was appointed CEO and President of the SIF Group in June 2004. Born in 1964, Jakob graduated from Northwestern University in the USA with an MBA in Financial Management and Marketing. From 1995 to 2004, he worked for the multinational Rohm and Haas AFC, rising to the position of General Manager of Rohm and Haas for Europe, the Middle East and Africa. Holdings in SÍF hf. 31,850,000. Holdings of financially related parties: 0 shares.
Kristinn Albertsson, was appointed Senior Vice President and Chief Financial Officer (CFO) In 2000, He graduated in Management and Finance from the University of Iceland and worked for SIF between 1995 and 1999 as Chief Accountant and as Operations Manager between 1999 and 2000. Kristinn Albertsson is also the Managing Director of Smárinn, bókhald og rádgjöf ehf. Holdings in SÍF hf.: 10,500,000 shares. Holdings of financially related parties: 0 shares.
Xavier Govare, CEO of Labeyrie Group, the Group’s largest subsidiary. Xavier joined Labeyrie Group in 1989 as a Manager in charge of Retail Sales and Marketing. His previous positions included Head of Marketing at SPM, a subsidiary of CPC International and Product Manager for Ciba Geigy. Holdings in SÍF hf.: 0 shares. Holdings of financially related parties: 0 shares.
Ragnar Gíslason, Vice President responsible for Business and Development. Ragnar graduated in Audit from the University of Iceland and is a licensed state authorised public accountant. He was a partner of an audit firm between 1984 and 1999 and joined SÍF hf. as Vice President, Business and Development in 1999. Ragnar is still active as a legal auditor. Holdings in SÍF hf.: 1,436,511 shares. Holdings of financially related parties: 0 shares.
Örn Vidar Skúlason, CEO of IS International ehf. and Vice President and Deputy CEO responsible for marketing of SIF Group and the sales operation in Iceland. He graduated with an MBA from the Technical University of Berlin in industrial engineering and worked for Póstur & Sími as Quality Manager between 1994 and 1998. From 1998 to 2000 he became the Vice President of Marketing and Sales at Íslandspóstur hf. He was appointed as the Vice President of Marketing and Sales by SIF Group and a Deputy CEO in 2000 and appointed CEO of IS International ehf. in 2004. Holdings in SÍF hf.: 445,000 shares. Holdings of financially related parties: 0 shares.
Roland Wolfrum, General Manager of SIF France SAS. Roland was appointed as a General Manager of SIF France in September 2004. Roland graduated from ESCP/EAP with a European Masters in Business. From 1991 to 1995, he worked in investment banking at Goldman Sachs and Salomon Brothers. From 1995 until June 2004, he worked at TNT Post Group, first as a Corporate Manager in mergers and acquisitions for 4 years, then as Finance CFO at TNT Express France for 3 years. Holdings in SÍF hf.: 0 shares. Holdings of financially related parties: 0 shares.
Ole Norgaard, CEO of Lyons Seafoods Ltd. Ole was appointed as the Chief Executive of Lyons Seafoods Ltd. in 1997. Ole graduated in 1970 from the Copenhagen School of Economics. From 1976 to 1986 Ole worked for the multinational Borden International rising to the position of Group Vice President. From 1995 to 1996 Ole was the Chief Executive of Needlers Ltd. Holdings in SÍF hf.: 0 shares. Holdings of financially related parties: 0 shares.
Auditors Deloitte hf., Stórhöfda 23, 110 Reykjavík Halldór Arason, Brekkubyggd 48, 210 Gardabær
30 Remuneration and Share Ownership The total salary package for the CEO of the Group will amount to € 250,000 per annum plus a bonus payment of € 50,000 in 2004. The bonus payment is not related to the Group’s performance in 2004 and 2005. The retirement plan of the CEO is as following: In the case of retirement during the first year of employment, the CEO will receive his salary, excluding the bonus payment, over a one year period from retirement. In the case of retirement during the second year of employment, the CEO will receive his salary, excluding the bonus payment, after retirement pro rata for the number of days that he has worked for the Group; and when the CEO has worked for two years or more for the Group, the CEO will receive his salary, excluding the bonus payment, for two years after retirement.
The CEO has a six-month term of notice for his resignation. The CEO is the only employee that has a contractual retirement plan. The CEO received a ISK 129 million loan (at 5% interest p.a.) from the Group to purchase shares in SÍF hf. The CEO is the only employee to whom the Group has granted a loan to purchase shares.
Gunnar Örn Kristjánsson, former President and CEO of SÍF hf. resigned from his position as the Company’s CEO in January 2004. His salary was €336,000 in 2003, to which he is entitled in accordance with his employment contract until August 2007. The total obligation, which includes salary, benefits and salary related expenses amount today to €614,000.
In 2003 the VP Marketing & Sales, Senior Vice President & CFO and VP Operational Development together had € 491,000 in salaries.
The company’s auditing fees were ISK 1.4 million in 2003 for auditing, accounting services ISK 4.9 million and ISK 0.8 million for other services. The company’s auditors are not allowed to own stock in the company.
Selected Managers Warrant Plan It is the intention of the Board of Directors and the President and CEO of SIF Group that they will grant equity warrants to selected Managers within SIF Group. The warrants will give the Managers the right to acquire shares in SÍF hf. The number of warrants granted to each individual will be proposed to the Board of Directors of SÍF hf. for approval, after consultation with the CEO of SIF Group. Part of the authorization will be allocated upon or soon after the acquisition and the balance at the discretion of the Board of Directors. Each warrant will grant a right to one new share in the Company. The purchase price of the shares on exercise of the warrants must be the market price of the shares on the date of issue of the warrants. For those warrants issued on the date of the equity Offering, this price will be the price of shares in the Offering. On the date of subscription of the warrants, each Manager is required to pay purchase price for the warrant.
One year after the warrants’ date of issue, 15% of the shares to which the warrants give rise will become exercisable. After the second year from issue a further 15% will become exercisable, followed by a further 15% after three years, 25% after four years and the remainder (30%) after five years.
If a warrant holder leaves SIF Group for any reason, any warrants which remain locked in at that date will be cancelled. All warrants which have ceased to be locked in or which have been exercised for shares remain unaffected.
Brands and Products
SIF Group’s product strategy is to build a portfolio of brands in value added chilled seafood and festive food, creating key reference brands in terms of price, quality and innovation, in order to achieve greater profitability than competitors. The Company also intends to maintain a significant presence in the production of private label products, both to contribute to the direct and indirect market position of SIF Group’s products and due to private labels being the norm in, for example, the UK. SIF Group’s best-known brands are Labeyrie, Blini, Islandia, Skandia, Lyons, Delpierre and York.
SIF Group’s products belong to upmarket festive and value added seafood market segments. In general, festive foods are defined as foods that are traditionally served in celebrations such as Christmas, New Year etc. With greater prosperity, festive food has become more common through the year, e.g. smoked salmon, foie gras, taramasalata and blinis. Value added seafood is processed fish, roe or shellfish either chilled, frozen, smoked or salted.
SIF Group’s products can be divided into three main categories: French speciality regional products including foie gras and other duck based products. Value added seafood products including bacalao/Saltfish and Smoked fish, shellfish and other value added seafood products. Spread products including blini, taramasalata, and other related products.
31 Sales by Product group
French Speciality Regional Products This category has a current share of about 16% (€ 97m) of the Company’s total ongoing sales, excluding “Trading”, SIF Iceland Seafood Corporation and including 12 months of sales from Farne Salmon and Trout Ltd. Approximately 80% of SIF Group’s sales in French speciality regional products are sold through H&SM. SIF Group’s brand positioning is also strong in this segment and own brands amount to 76% of total sales in the category. Duck is the key ingredient in French speciality regional products. Today Foie gras represents the majority of the sales in the French special regional products category, but other products are raw duck and other related products.
French speciality regional products sales 2004 Spread products sales 2004 For 12 months ending 30 June 2004 For 12 months ending 30 June 2004
Raw and other Magrets and confits Other spreads 32% 17% 35%
Blini 25%
Foie gras Taramasalata 51% 40%
Foie gras is a delicacy of French cuisine, from the liver of a goose or duck that has been fattened by a process of force feeding. Foie gras is either sold as a natural fresh product or transformed. Foie gras is often baked in a crust, as pâté de foie gras, prepared with brandy, seasoning and truffles. Foie gras may also be served in purée form with bread or toast and jelly, with garnishes or pancakes, or in terrines. Labeyrie, Guéraçague and Maïté are SIF Group’s brands in this product subcategory and Labeyrie is the leading brand in France, Belgium, Luxembourg and Switzerland. When frozen, foie gras has a 2 year conservation capacity.
Magrets are a speciality made out of slices of duck breast and Confits are pieces of goose or duck poached and preserved in goose or duck fat.
Raw and other are raw whole ducks and pieces processed or raw. The products are easily sold as linked products to foie gras through the same distribution networks.
Spread Products Spread products account for approximately 5% of the Company’s total ongoing sales (€ 29m). Approximately 90% of SIF Group sales of spread products are sold through H&SM. SIF Group’s brand positioning is also strong in sales of spread products and own brands amount to 75% of total sales in the category. Spread products are generally used as upmarket “pre dinner aperitifs” and also increasingly as a quick meal. In France these products have a premium image within the “snacking” market. The majority of sales in the spread products category are derived from blini and taramasalata. The rest of the segment is made out of spreads such as tzatziki, tapenade, guacamole, humus, etc.
Taramasalata is a delicacy of Greek cuisine originally served as part of the Greek Mezze (similar to Spanish Tapas in that many small dishes are served at once instead of a traditional three course meal). Taramasalata which can be described as dip or spread is made from tarama (carp roe, or alternative smoked cod roe or mackerel roe) blended predominantly with bread, onion and olive oil. Taramasalata is served chilled with bread, crisps, crackers, raw vegetables, blinis etc. Blini is SIF Group’s brand in this product subcategory and it is the leading brand according to the Group’s Management in Spain, Portugal, France, Belgium and Luxembourg.
Blini is a speciality of Russian origin. Blini are buckwheat pancakes, sometimes raised with yeast and usually served warm with a variety of spreads, sour cream and caviar or other roe types. Blini is SIF Group’s brand in this product category and it is the leading brand according to the Group’s Management in Spain, Portugal, France, Belgium, Luxembourg and the United Kingdom.
32 Other spreads are mainly spreads and dips such as Tapenade, seafood dip, Tzatiki, Guacomole, Hummus, Eggplant Caviar and Ktipiti, sold mainly under the Blini brand name.
Value Added Seafood Products Value added seafood products account for approximately 80% (€ 495m) of the Company’s total ongoing sales. A large proportion of SIF Group’s sales of value added seafood products are sold through hyper- and supermarkets. Three subcategories today represent the majority of sales in the value added seafood category.
Saltfish/Bacalao is a way of preparing salted white fish, where cod is considered the finest source. Bacalao is the Group’s most Fish products sales 2004 traditional product. Bacalao exports from Iceland were in the early For 12 months ending 30 June 2004 history of SIF Group the sole purpose of the Company, which held an exclusive licence to export saltfish from Iceland. The products, Prawns and other shellfish 13% mainly cod, white ling, tusk and saithe are mainly sold under the SIF Other seafood products brand names ISLANDIA, Delpierre, Armengol and Nord Morue. Frozen 16% Saltfish has developed a strong position in the food cultures of many fish products 18% Latin countries, e.g. Italy, Spain, Portugal and Brazil. SIF Group’s Brands have leading positions according to the Management of the Group in Spain and France.
There are two main product ranges: Wet salted and dried salted. Wet Salted fish or Bacalao salted is a product where the gutted fresh fish is split and salted. A 15% Smoked fish 38% dried salted cod also called “klipfish” is a wet salted fish, which is Thereof smoked salmon 32% dried to around 70-75% of the wet salted weight. SIF Group has since its early days focused its Icelandic export strategy on wet salted fish, to be dried by the factories in Europe, sold to middlemen or sold wet to consumers. SIF Group’s key market for salted fish is Spain and France. In Spain, the focus has been on the premium quality segment. In Spain the majority is sold through traditional distribution channels, but in France wet salted fish is mainly distributed through H&SM and dried salted fish is mainly exported to French overseas territories and Portugal.
Smoked fish is derived from one of the world’s oldest food preservation methods. The tradition for smoking fish for added flavour and imparting a rich brown colour has attained high levels of sophistication in northern Europe. Smoked fish has a festive and upmarket status in some cultures, in particular smoked salmon. Until farmed salmon became widely available, smoked salmon was hard to source and expensive. Smoked salmon sales account for 83% of SIF Group’s smoked fish sales, with the balance being predominantly palometa, trout, ling, mackerel, and herring. Labeyrie, Skandia and Delpierre are SIF Group’s brands in this product subcategory. Around 77% of SIF Group’s sales of smoked salmon products are sold through H&SM. SIF Group holds the leading brands in Spain, Portugal, France, Belgium and Luxembourg and SIF Group holds the second largest market share in the UK, where the large majority of all smoked salmon sales are private label.
Frozen fish products is a sub-segment of both breaded fish and natural portions. In France the majority are breaded, but in other markets such as Spain, natural portions make up the majority of sales, making natural proportions over 60% of total sales. SIF Group has no brand for breaded fish but is a leading supplier in private label for the H&SM segment. The company sells 67% of its volume to H&SM and the rest is sold to the catering industry.
Shellfish is a sub-segment including chilled and frozen prawns, prawn cocktails and scampi. Around 90% of SIF Group’s sales in this sub-segment are prawns and prawn cocktails. Prawns have in recent decades gained popularity, particularly following large scale farming of warm water king and tiger prawns in South East Asia. Prawns are the fastest growing segment in the UK seafood industry. The UK market represents over 90% of SIF Group’s sales of prawns. In line with the underlying UK seafood retail market, the Group predominantly sells its products under private label (around 71%). Of the Group’s sales, 72% are through H&SM, in line with the underlying retail environment in the UK.
Other value added seafood products is a sub-segment that focuses mainly on the production of fresh fish, fillets and fillet portions in Iceland and fresh salmon products from Norway sold through SIF Group’s distribution network.
33 New Product Development
The objective of SIF Group’s new product development is greater sales without losing the premium image of its brands. The main objective is to expand the product range of SIF Group and the added value element of its products, in addition to seeking innovative ways of marketing SIF Group products, perhaps based on the origin of their ingredients, focusing on the democratisation and deseasonalisation of festive food consumption.
SIF Group carries out new product development within each production subsidiary. Each production subsidiary has its own new product development strategy, relating to its regional market. Companies within SIF Group are encouraged to exchange and share their product development.
For the French speciality regional product segment, development has been focused on following the current trend towards the origin of the foie gras product. The frozen “fresh foie gras” is still a small but growing segment as more and more consumers want to prepare foie gras themselves, and freezing allows for better quality than chilled products. In foie gras, there has also been development in packaging and in prepared meals to increase the value of products. Raw duck is highly linked with foie gras production and for that segment new product development has been towards ready meals and other value added alternatives.
New product development within the value added seafood segment has been both in the form of further food processing and ready meals and towards segmentation of the offering by the origination of the seafood. For example, smoked salmon segmentation by origin was introduced by Labeyrie and is becoming a strong purchasing criterion. This development in Irish and Scottish smoked salmon, both at the upper end of the market, has increased Labeyrie’s market share. There is also the development of value added products, particularly in snack products for example salmon cubes for dipping, sold with lemon juice or aromatic herbs, pre-cut or pre-sliced salmon for salads, herring for the growing “snacking” market, small portions, dips, etc.
New product development for the spread products segment is to focus on bringing new combinations and flavours to the market, targeting the phenomenal growth in this sub-segment.
Production Facilities Production facilities Location Specialities Capacity (Tons) SIF Group will, after the sale of North American operations, operate fourteen France manufacturing plants in France, the UK, Wishches Chilled (smoked salmon) 5,000 Spain and Iceland. Fécamp Chilled (smoked herring, mackerel and haddock) 8,000 Wimille Frozen (breaded and frozen fish) 30,000 SIF Group’s sales in France, excluding Jonzac Salted (salted/dried fish) 9,500 the trading operations, are almost Saint-Geours Smoked salmon, foi gras, ready meals 6,700 exclusively of products from SIF Group’s Hagetmau and Came Fresh French regional products (slaughter house) 2.8 million ducks subsidiaries in France. SIF Group sales Troarn Blini, Taramasalata, Spread products 6,200 in the UK are almost exclusively products from the Group’s subsidiaries Spain in the UK, but to some extent include Barcelona Salted 2,000 production from manufacturing plants in Linea de la Conception Smoked Palometa 500 France and Iceland. The majority of SIF Malaga Smoked salmon 2,000 Group’s sales, excluding the trading operations, in the Spanish market are UK processed in Spain. Products made in Warminister (2 prod.facilities) Shellfish (warm and cold water prawns) Iceland are exported to all market areas. Duns Smoked salmon and seafood products 2,400
Iceland Hafnafjördur Salted 3,200 Canada Yarmouth Salted 5,000
USA – To be sold Newport News (Virginia) Frozen (breaded and battered products) 40,000
34 Geographical Breakdown
The focus of the Group has shifted towards the production of chilled seafood and festive food in Europe, with three market areas, the UK, Spain and France, accounting for over 90% of ongoing sales. The partial divestment of the Trading operations to below 50% and the disposal of assets in North America makes historical comparisons of limited value.
Combined net revenue sales of SIF Group and Labeyrie Group 2004 Net sales 2003 based on SIF Group operation going forward
Others; 3% France Iceland; 6% 66% Others 4% Spain Iceland 12% 3%
France Spain 58% 12%
UK UK 21% 15%
Sales for any given year is SIF Group sales according to financial year ending December 31 and for Labeyrie Group the sales according to the financial year ending June 30 the following calendar year.
Trading part of SIF Group, sales 2003 Combined net sales of SIF Group and Labeyrie Group
100% France Others 56% 80% N-America
60% Iceland
Others Spain 40% 3% UK Iceland UK 3% 20% 12% France
N-America Spain 0% 16% 10% 2001A 2002A 2003A Trading company sales are sales of fresh and frozen fish that has not been processed by any of the company’s production facilities. 2001PF 2002PF 2003PF This operation will be moved into a separate entity which the Group intends to reduce its stake in in the near future. Sales for any given year is SIF Group sales according to financial year ending December 31 and for Labeyrie Group the sales according to the financial year ending June 30 the following calendar year.
Trading company sales are sales of fresh and frozen fish that has not been processed by any of the company’s production facilities. This operation will be moved into a separate entity which the company intends to reduce its stake in the near future. “A” is for each year of SIF Group operation as it has been run each year and “PF” stands for SIF Group as the acquisition of Labeyrie Group had been done in the beginning of 2001.
The graphs above show the impact of the acquisition of Labeyrie Group on SIF Group and the impact of the strategy changes which have been initiated. The graphs show the historical geographical breakdown of production and trade, and indicate how the operations will appear in the near future.
The comparison of SIF Group’s operations in 2001 to 2003 and in the near future, demonstrate the increasing importance of markets in France, the UK and Spain, with a reduced proportion of sales coming from Iceland and outside Europe. This is driven by the sale of the subsidiary in the U.S.A. and the partial divestment of the Trading operations which were almost 90% originated from Iceland. When analysing the geographical breakdown of trade it should be noted that this is categorised based on the country where operations are located, as opposed to the location of the customer.
Going forward, the Company’s single most important market is France which is expected to generate approximately 66% of sales and 58% of net revenue after taking into account the acquisition of the Labeyrie Group and other policy changes. The French market consists of all the main product categories of the Company; French speciality regional products, spread products and value added seafood. The second and third most important operational areas are the UK and Spain where operations are mainly concentrated on value added seafood. The UK and Spanish markets are expected to generate approximately 15% and 12% of net sales and 21% and 12% of net revenue for each respective country. These three countries are expected to generate around 90% of the Group’s future operations. The fourth largest operational area is Iceland, which is expected to generate 3% of the Group’s sales and 6% of net revenues. Other countries, including Greece and Norway, will generate less.
35 Suppliers and Purchasing
Labeyrie Group The Company sources its salmon from a handful of selected and regularly audited suppliers from Norway, Scotland and Ireland. The Company currently relies on twelve salmon suppliers. They have been working with the Company for over 20 years on average and must comply with the Company’s quality specifications.
Following the abolition of guaranteed prices, salmon supply prices have decreased significantly (CAGR of -8.4% over the 1988-2001 period). The Company purchases its raw salmon partly on the spot market and partly through long-term contracts.
In order to fully control the origin and pricing of its regional products, the Company's fattened ducks are sourced from associated companies Palmitou SAS and Lur Berri SAS, which both work directly with local breeding farms that are regularly audited to comply with production standards. Supply prices for raw foie gras have decreased over the last five years, but are expected to stabilise. In addition, most producers of foie gras products have secured their sales through long-term supply contracts or vertical integration. The Labeyrie Group negotiates its supply of ducks both in terms of volume and price annually.
One of the main ingredient for Taramasalata is cod roe. Cod roe is sourced from multiple suppliers through flexible purchasing arrangements. Blini SAS is one of the most important purchasers of cod roe in France. The Company's strategy is to maintain a strategic inventory (of approximately 18 months of cod roe) throughout the year, reducing the impact of changes in raw material prices on production costs.
As its products are key reference brands, the Company has consistently been able to pass on any raw material increases to customers.
SIF Group SIF Group buys fish from external producers and quota owners, mostly in Iceland. Just over 60% of raw material sourcing for SIF Group comes from Iceland where almost all major fisheries are suppliers to the Group. SIF Group has established a strong relationship with its Icelandic fish suppliers, but there are no written contracts between SIF and its suppliers. Around 60% of the raw materials for the frozen division of SIF France SAS is supplied from China. The majority of the fish supplied from China is breaded.
Until SIF Group acquired the Labeyrie Group, SIF France SAS was the main producer of smoked salmon within the Group. The salmon purchases of SIF France SAS are essentially made by Christiansen Partners AS in Norway and are at their highest level before the Christmas season. An agreement has been signed with suppliers of Norwegian farmed salmon that ensures that prices paid by SIF Group can never go up or down by more than 1% each week.
Operations in Iceland
Four Icelandic companies belong to SIF Group’s operations in Iceland. They can be divided into production (Tros ehf. and Saltkaup hf.), trading (IS International ehf.) and SÍF hf. (ID-No: 580293-2989, headquartered in Fornubúdir 5, 220 Hafnarfjördur), which is the parent company of the group and a direct holding company to most of the subsidiaries. SÍF hf.’s subsidiaries in Iceland employ in total about 115 and operate one production site in Hafnafjördur and one in Sandgerdi.
To sharpen the focus in the SIF Group’s operations, a distinction has been made between its final-processed production and traditional seafood sales, with the latter being handled by a special subsidiary IS International ehf. SÍF hf.’s traditional seafood sales all over the world will be carried out under the name Iceland Seafood. SÍF hf. and now its subsidiary IS International ehf. is a leading supplier of fresh, frozen and salted seafood from Icelandic producers, using its marketing facilities in Iceland, Britain, France, Germany, Lithuania, Poland, Italy, Spain, Greece, Canada and the USA.
IS International ehf.’s address in Iceland is at the SÍF hf. headquarters at Fornubúdir 5, Hafnafjördur,the CEO of IS International ehf is Örn Vidar Skúlason. IS International ehf. product portfolio includes wet saltfish but the main activity is however trading. The company sources from all major fisheries in Iceland where 68% of the trading activity is originated.
36 Operations in France
Seven French companies form SIF Group’s operations in France, in addition to investments in associates. They can be divided into three production entities plus trading. These are shown below:
Operations in France Labeyrie Blini SIF France Trading Labeyrie SAS Blini SAS Pierre Guèracague SAS Tarama SNC SIF France SAS Iceland Seafood SAS Gueradis Sárl
The Labeyrie production group includes the foie gras producers Pierre Guèraçague SAS and Gueradis sarl, and Labeyrie SAS which focuses on foie gras and smoked salmon. Additionally Palmitou SAS is an associate that owns 51% in Lur Berri, both companies sourcing fattened ducks for foie gras production. Blini SAS (and Tarama SNC that merged with Blini SAS) is focused on spread products that consist of blini, taramasalata and other spreads. SIF France SAS focuses on value added fish products including smoked salmon, frozen breaded and battered fish and bacalao. Pierre Guèraçague SAS, Gueradis sarl and Tarama SNC are all subsidiaries of Labeyrie SAS.
French operation, products and sales Labeyrie Labeyrie SAS is a subsidiary of Financière de Kiel SAS.
SIF Group - Product categories Financière de Kiel SAS Net revenue in France - Pro forma Financière de Kiel SAS is the legal entity that in 29 October 2004 was acquired by SÍF hf.. Financière de Kiel Salted fish French regional SAS is the holding and management company of Labeyrie 9% products SAS, Blini SAS and Farne Salmon and Trout Ltd. and their 27% Frozen fish subsidiary companies. Financière de Kiel SAS was 17% founded when Industy Kapital AB acquired and de-listed Labeyrie SAS from the Paris Stock Exchange. Financière de Kiel SAS acquired the French company Blini SAS (and Smoked herring its holding company Magice SAS) in April 2003 and the UK 6% company Farne Salmon and Trout Ltd. in February 2004. Spreads products Smoked salmon Except for the amortization of deferred acquisition and 8% 33% financing expenses, the only operating expenses included Based on SIF France projected net revenue for 2004 and Labeyrie Group and in the holding company relate to the wages of JP Blini SAS net revenue for the accounting year ended 30 June 2004 Chevallier (former CEO and Chairman). JP Chevallier is expected to resign in the near future.
Financière de Kiel SAS (ID-No: 347 902 587. Registered residence; Zone Artisanale de l’Hippodrome 64520 Came, France) is a 100% owned subsidiary of SÍF hf., of which 5.3% is through the holding company Teamcap SAS, which is wholly owned by SÍF hf.. The total share capital of Financière de Kiel SAS is € 22.9 million and has been paid in full. No dividend was paid last year. SIF Group and Financière de Kiel SAS trade with each other. There are no irregular loan agreements between the two.
Financière de Kiel SAS’ subsidiaries together form the Labeyrie Group.
Labeyrie SAS Labeyrie SAS is 100% owned by Financière de Kiel SAS, which in turn is a 100% owned subsidiary of SÍF hf. Labeyrie SAS, (ID-No: 347 902 587) is headquartered in Saint-Geours-de-Maremne (south-west France) 40235 ST-Vincent-De-Tyrosse, Cedex, France. Labeyrie SAS and its subsidiaries employ about 1,800 people and operate six production sites in France and Spain.
Labeyrie SAS’ product portfolio includes upmarket festive food products in particular smoked salmon and foie gras, complemented by other gastronomic and French traditional products and other smoked fish products. It has a leading position in the smoked salmon market in France, Spain, Portugal, Luxembourg and Belgium and a leading position in the foie gras market in Belgium, Luxembourg, Switzerland and France. The French foie gras market accounts for 85% - 90% of the world sales.
37 Labeyrie SAS is a 100% owned subsidiary of Financière de Kiel SAS. The total share capital of Labeyrie SAS is € 8.4 million and has been paid in full. In 2004 € 13.5 million was paid as a result of the financial year ending on 30 June 2003. Labeyrie SAS and SIF Group may trade with each other. There are no irregular loan agreements between the two.
Blini Blini SAS is a 100% owned subsidiary of Financière de Kiel SAS, which in turn is a 100% owned subsidiary of SÍF hf. Blini SAS (ID- No: 308 448 851). Registered residence, 87 Boulevard Haussmann, 75008 Paris, France employs about 170. It operates a production plant in Troarn in two units for bakery products including blini and spreadable products such as Taramasalata and Tzatziki.
The total share capital of Blini SAS is € 22.5 million and has been paid in full. No dividend was paid last year. Blini SAS and SIF Group may trade with each other. There are no irregular loan agreements between the two.
Blini SAS’ product portfolio includes upmarket festive food products in particular blini, taramasalata and other spreadable products. It has a leading position on the blini and taramasalata market in France, Spain, Portugal, Belgium, and Luxembourg and for blini in the UK.
SIF France SAS SIF France SAS, (ID-No: 444 662 787). Registered residence; 12 rue Solférino, 62200 Boulogne sur mer.
SIF France SAS is the result of the merger of three companies in 2002, SIF France SA, Nord Morue SA and Gelmer Iceland Seafood SAS. On 1 October 2003 Terre Neuvas de Fécamp (TNF) was also merged with SIF France SAS. SIF France SAS is specialised in the transformation and commercialisation of seafood products, primarily herring and salmon but also frozen and salted fish, of which just over half of production is exported. The company operates through four sites: Wimille, Fécamp, Wisches and Jonzac. The strategy of SIF France SAS is to offer a large range of seafood products under the Delpierre, Islandia, Samband and Gelmer brands as well as under private label. SIF France SAS has been driving the retail market position of herring products, both branded and private label, by continuously innovating. It has also focused on optimising salmon production capacity through large volume private label contracts. SIF France SAS has worked on gaining market share and increasing volumes in higher value added frozen products in order to optimise existing production capacity.
SIF France SAS is a 100% owned subsidiary of SÍF hf. The total share capital of SIF France SAS is € 19.5 million and has been paid in full. No dividend was paid last year. SIF Group and SÍF France SAS trade with each other. There are no irregular loan agreements between the two.
Customer Analysis - France Labeyrie and Blini sell their products to all major retailers in France.
Labeyrie’s products are predominantly sold through the H&SM channel that represents 80% of Labeyrie’s sales. Remaining revenues are generated through cash and carry and food service, which represents 12% of sales, and export, which represents 8% of sales.
Within the retail segment, producers in general are concentrated on a few large H&SM. The following graph shows the distribution of gross sales between major customers of Labeyrie. The top five customers account for 73% of retail sales.
Labeyrie retail customers Blini retail customers Net sales calendar year 2003 Net sales calendar year 2003
Others Groupe Carrefour 27% 36% Others Groupe Carrefour 27% 38%
SystémeU SystémeU 6% 6% Auchan Monoprix 7% 6% Casino Galec Auchan Baud 10% 14% 10% 14%
38 Blini’s products are also predominantly sold to retailers, with the H&SM channel representing more than 90% of Blini’s sales. Blini’s five largest customers also account for 73%. As can be seen from the graph, sales are concentrated on a few large H&SM. Limited store coverage on spreadable products other than taramasalata and blini has been hampering growth in that segment. Store coverage for private labels is 63% and 66% for branded products.
SIF France SAS sells 47% of its products through H&SM, whilst restaurants and catering account for 31% of sales and export and others account for 22% of sales. SIF France SAS exports around 50% of the salted fish processed in France. The exports of the Salted division are particularly high to French overseas territories, Portugal, Spain and Brazil. Salted fish for the French market is mainly sold to specialised wholesalers. In the salt fish segment, H&SM sales are estimated to account for only 10% of market sales.
French retailers appear to be aiming at limiting the number of brands by product. It appears that the brand policy of large retailers is to have one or two national brands, such as Labeyrie, on their shelves, one private label and one low cost brand.
SIF France retail customers Labeyrie - Smoked salmon and foie gras Net sales calendar year 2003 Net revenue in France for 2004 financial year
Group Carrefour Others Labeyrie 35% 28% 82%
SystémeU 6%
Intermarché 7% Casino Private label / 2nd brands 15% Leclerc 13% P. Gueraçague 11% 3%
French market and market positioning The Labeyrie Group is one of Europe’s leading producers of branded upmarket and festive food products, including smoked salmon, foie gras, blinis and taramasalata products.
Labeyrie Labeyrie SAS produces branded upmarket and festive food products, including smoked salmon and foie gras, it is complemented by other gastronomic and French traditional products and other smoked fish products.
In France, the Labeyrie brand is used mainly for foie gras and smoked salmon and benefits from very high brand awareness with French consumers.
Over the past ten years, their strategy has been to focus on mass retail to capture a significant volume share of the market while building a premium reference brand associated with quality and innovation. Labeyrie SAS’ products are therefore sold mostly through hyper- and supermarkets and have become the main driver in the branded upmarket and festive food products sector. Labeyrie SAS’ presence in the private label market is limited to France, leveraging on their presence in the French market and utilizing surplus production capacity.
Foie gras Foie gras is a French regional product that is either sold as a natural (48% of the market by value) or transformed product (52%). It is a highly seasonal product with 72% of purchases made during the last three months of the year. France is the largest consumer and producer of foie gras in the world.
Just over one third of French households bought foie gras in 2003. French consumption grew rapidly in the 90’s and peaked in 2000, experiencing small declines in 2001 and 2002. The market grew again in 2003, with the volume above the 2001 level and just below the level in 2000. However, between 2000 and 2003, sales through H&SM continued to grow at a 4.1% compounded annual growth rate (CAGR), mostly due to a favourable product mix change with increased sales of the higher value whole foie gras products instead of foie gras pieces.
39 Duck products are a by product of foie gras. The products are sold via similar distribution channel as foie gras and are lower value added than foie gras. Labeyrie SAS also sells raw duck products.
Labeyrie SAS is mainly positioned at the upper end of the foie gras market with its highly recognised brand Labeyrie. A recent study showed that Labeyrie had 88% brand awareness for foie gras. As part of its brand portfolio strategy, Labeyrie also markets foie gras in the lower end of the market through its subsidiary Pierre Guèraçague SAS under a brand that bears the same name and another recently established brand Maite for high end consumers, in partnership and named after the famous cook Maïté. Labeyrie SAS has in recent years reinforced its market leading position, gaining 1.6 percentage points in market share by value since 2000, mostly from private labels. In 2003, Labeyrie Group had 25.6% market share by value and is the clear market leader with almost three times the market share of the next competitor. It should be noted that because of Labeyrie’s premium market positioning their leadership is greater when the market is analysed by value than it would be if analysed based on volume.
The graph shows that Larnaudie has experienced the fastest growth with an average per annum growth of 15.5% over the past 3 years. The brand has gained 1.2 points in market share, the second best performance in the market after Labeyrie.
Foie gras - Main competitors in France Foie gras - Main competitors in France Market share of values in H&SM 2003 Sales growth 2003 and market share growth 2000-2003
Lanaudie Other 15% 19.8% Labeyrie 10% P. Gueraçague 22.0% growth Sales Labeyrie Private 5% Foie gras H&SM market labels growth: 4.1% Montfort 0% P. Gueraçague -4% -2% 0% 2% 4% 6% 3.6% -5% Market share growth Private labels Lescaze 34.5% Montfort -10% 9.4% Delpeyrat Lanaudie -15% Lescaze Delpeyrat 4.5% Bubble size refers to sales in FY03 2.6% 3.6% X-axes shows sales growth CAGR FY00-FY03 Y-axes shows market share growth FY00-FY03 in % of market share
Smoked salmon France is the largest consumer of smoked salmon in Europe. Smoked salmon has the highest level of market penetration among French households for festive products, being consumed by over 60% of consumers annually, with purchasing acts averaging 3.5 times per year. The smoked salmon market has experienced steady value growth of 4.6% CAGR since 1998. This is mainly attributable to increased purchases throughout the year. Historically, smoked salmon is a festive product, but has become a mass consumption product over the last decade and is mainly available in the self service chilled shelves in H&SM. Today only one third of sales relate to the Christmas period. The French smoked salmon market is dominated by H&SM and hard discount stores which together account for over three quarters of volume sold. Private labels have rapidly increased their market share and now hold 43% of the total smoked salmon retail market. Labeyrie has the highest brand awareness in the smoked salmon market; far ahead of other competitors with 82% brand assisted awareness. Brand awareness for Delpierre is 21%.
The Labeyrie brand is seen as the reference brand in the premium segment. The Labeyrie brand is the leading brand with 26% of the value market share in the H&SM in 2003, but only 19% in volume due to its high price positioning. Competition is mostly from those that are present in the growing private label market. From 2000 to 2003, all the major retailers have launched their own private labels and have also developed exclusive low cost brands, which represent approximately 9% of the market in value. Labeyrie appears to be the only nationwide smoked salmon brand with an 89% penetration by number of stores while Delpierre penetration is 29%. Delpierre’s products are priced as an average brand in the market.
40 Smoked salmon brands - Main competitors in France Smoked salmon brands - Main competitors in France Market share of values in H&SM 2003 excluding hard discount stores Sales growth 2003 and market share growth 2000-2003
Other 15% (market share below 2% Private labels Labeyrie Private including low cost brands) (excluding low cost labels) 10% labels* 27% 43% Sales growth Sales Smoked salmon market 5% growth: 4.8%
0% -10% -6% -2% 2% 6% 10% Other -5% Market share growth Delpierre Delpierre -10% 4% * Excluding low cost labels Labeyrie Bubble size refers to sales in FY03 X-axes shows sales growth CAGR FY00-FY03 26% Y-axes shows market share growth FY00-FY03 in % of market share
In January 2004, there was a salmon scare in France following an article in the US magazine Science where there were claims that the levels of dioxine absorption from farmed salmon were too high. Sales dropped 9% in value and 4.1% in volume in the first 8 months of 2004 compared to the same period in 2003. The timing of the article reduced the impact as it was published just after the high season. Partly as a result of the brand’s high quality positioning, the article did not have as significant an impact on Labeyrie’s sales, which decreased by 3.3% in volume in the first half of 2004 compared to the first half of 2003. The French Health Agency (AFSSA) and the American Food and Drug Administration (FDA) estimate that there is no risk in consuming farmed salmon. The impact has been diminishing and sales in H&SM experienced a 1.5% volume gain in July compared to last year, indicating that this article will not have a long-term effect on smoked salmon sales.
Labeyrie is the leading brand in the H&SM segment, with 80% of Labeyrie’s French smoked salmon sales branded and 20% under retailers’ private labels.
Labeyrie SAS and SIF France SAS have complementary activities in the smoked salmon market. About half of the volume sold through retail is in the branded premium segment that Labeyrie SAS largely focuses on and the other half of the market is composed of low cost and private labels that SIF France SAS focuses on. Labeyrie SAS sells approximately 39% of the volume in the branded premium market and only 4% of the latter. SIF France SAS sells around 8% of the volume in the branded premium market and 30% of the volume in the low cost and the private label market.
Smoked salmon - Main competitors in France Smoked herring - Main competitors in France Market share of volume in H&SM 2003 excluding hard discount stores Market share of value for 52 weeks ending July 2004
Others SIF France 6% 19% Other Ledun 12% Delpierre 8% 36%
Pan Fish Labeyrie 7% 21%
Scab 16% Private labels Fort Filet Mer Alliance and low cost brands * 9% 23% 37% Mére Angot Dutriaux 3% 3%
* SIF France captures most of the private labels activity, with almost 100% market share in the segment
SIF Group - other smoked seafood SIF Group’s brand Delpierre is the largest brand in smoked herring. With its Delpierre brand and its private label activity, SIF Group holds approximately 70% of the smoked herring market in France. SIF Group’s brand Islandia is the largest brand for salted fish.
A quarter of French households buy smoked herring. The smoked herring market is a niche market as its consumers are mostly older people with low to average income levels that live outside large cities. It is a slightly seasonal market, with higher sales in colder months. Overall the smoked herring market by value has remained relatively stable, but market penetration has declined between 1998 and 2003 by 3.1 percentage points. The Delpierre brand has a 37.1% market share and is three times bigger than the next brand on the market. Delpierre is the French specialist producer of smoked herring and is sold in 66% of the French H&SM.
41 The trend towards private label products which has been marked in this sector has benefited SIF France SAS as there are no other significant suppliers in the market.
SIF Group – frozen, breaded and natural fish portions The turnover in the French frozen fish market totals approximately 200,000 tons. Two thirds are sold to food service and the remainder to the retail network. H&SM dominate frozen fish retail sales although their market share has been decreasing since 1998 because of hard discounters. Retail sales of breaded and natural portions in the fish market have grown by an average of 4.8% p.a. in value since 1999 despite relatively flat volume growth. SIF France SAS’ frozen division specialises in the production of basic non branded products for retail brands and the food service industry. SIF France SAS produces both natural portions of raw fish and breaded fish. SIF France SAS frozen fish division sales are almost evenly broken down between natural portions and breaded fish. Since 2001, the division has experienced a steady 6.0% CAGR. Unlike the market in general, SIF France SAS sells 2/3 of its products to H&SM and the remainder to the catering industry. SIF France SAS has no major brands in the frozen market but it is the largest supplier in the private label H&SM breaded market which accounts for almost 90% of H&SM sales. It is also well positioned in freezer centres in the hard discount business. Of volume sold, 18% are exported, mainly to Germany and to the UK. The French market for breaded products and natural portions has been relatively stable in value over the 2001 to 2003 period, with a 0.5% and 2.6% CAGR respectively. SIF France SAS has over the same period experienced 16.1% and 5.9% CAGR respectively.
Natural portions - France Breaded fish - France Market share of volume in H&SM for 52 weeks ending March 2003 Market share of volume in H&SM for 52 weeks ending March 2003
Other brands * Other brands * 11% 11% Findus SIF France * 4% 7% SIF France * 23%
Iglo 34% Findus Private labels * 42% 44% Private labels * 10%
Iglo 14%
* 89% of SIF France sales should in effect belong to private labels and 11% to low cost brands * 94% of SIF France sales should in effect belong to private labels and 6% to low cost brands
SIF Group – dried and salted fish The French dried and salted fish market is a niche market. Consumers of salted fish are mainly the older generations that are more familiar with this type of product as well as other specific populations such as the Portuguese population in France (approximately 1 million people) and French people living in French overseas territories.
The largest competitors in the French market include Portuguese and Norwegian companies. SIF France SAS is the market leader for both wet salted and dried salted products. Moreover, it exports approximately 50% of the production, mostly to French overseas territories, followed by Portugal, Spain and Brazil. Private label penetration is much lower in the salted division’s sales which are shared between the Delpierre and the Islandia brands. The market for salted fish has been declining, as has the volume consumption of dried fish and wet salted fish, by a 2.4% and 6.4% CAGR between 1999 and 2003 respectively.
The wet salted market can be broken down into vacuum pack and bulk. Around 30% is sold in vacuum and the balance is sold in bulk. SIF France SAS is the leader in both segments with 80% volume market share in the vacuum pack sub-segment. Approximately 20% is sold under the Delpierre brand and 60% under private label. SIF France SAS also leads the bulk market with an estimated 40% volume market share.
42 Wet salted fish - Main competitors in France Blini - Main competitors in France Market share of volume 2003 Market share of value in H&SM for 52 weeks ending September 2003
Other Other 15% 6%
Marayeur Blini 8% 32%
Le grand Legeon 8% Private labels 36%
Labeyrie SIF France Sar'Océan 4% 54% 15% Prince Egor Le Traiteur Grec Tassos 4% 5% 13%
Taramasalata - Main competitors in France Other spreads - Main competitors in France Market share of value in H&SM for 52 weeks ending September 2003 Market share of value in H&SM for 52 weeks ending September 2003
Other Other 8% 23% Blini Traiteur grec 35% 21%
Private labels Private labels 37% 22%
Labeyrie Yarden 3% Tassos 3% Prince Egor 17% Le Traiteur Grec Aspasia Tassos 3% Blini Labeyrie 3% 3% 11% 10% 1%
Blini The spreads market has experienced significant growth due to new consumption habits such as snacking and the trend towards aperitif products. The blini and tarama markets are relatively mature and characterised by a relatively small number of players and a strong penetration of private labels with a value growth of 1.8% CAGR in the period from 1999 to 2003. The other spreads market is a young and rapidly growing market. The segment has experienced 21.3% CAGR from 2001 to 2003. This market includes a large variety of sub segments, mainly Mediterranean prepared spreads, such as humus, tzatziki, olive spread etc.
The Labeyrie Group produces a large range of spread products under the Blini brand after acquiring Blini SAS in the financial year ending June 2003. Blini is the leading brand in blinis and taramasalata and the third largest brand in the other spreads market in France. The Blini brand has grown faster than the overall market in all these markets. In the other spreads market the price level for branded products is similar to the price level in private label as the market for other spreads is less concentrated and relatively young. Labeyrie Group’s brands have a 11% market share in this sub-segment. Labeyrie also has a strong presence in private label and in total the management estimates that it holds a 19% value market share and a 30% volume market share.
43 Operations in the UK
SIF Group owns four subsidiaries in Operations in UK the UK. The operations can be Farne Lyons Trading divided into three entities, of which Farne Salmon and Trout Ltd two are in production and one in Thomas Ballantyne Salmon Ltd Lyons Seafoods Ltd Iceland Seafood Ltd trading.
Farne Salmon and Trout Ltd. and its subsidiary Thomas Ballantyne Salmon Ltd. are almost exclusively involved in the production and processing of smoked salmon products. Lyons Seafoods Ltd. manufactures and sells shellfish products, mainly warm and cold water prawns. SIF Iceland Seafoods Ltd. is a trading company that imports frozen cold water prawns from Iceland for sale to retailers in the UK.
UK operations - products and sales Farne Farne Salmon and Trout Ltd. is a 100% owned subsidiary of Financière de Kiel SAS and the parent company of Thomas Ballantyne Ltd.
Financière de Kiel SAS Financière de Kiel SAS is the legal entity that on 29 October 2004 was acquired by SÍF hf. Further information is provided on Financière de Kiel SAS in the French operations, products and sales chapter.
Farne Salmon and Trout Ltd. Farne Salmon and Trout Ltd., SCO76612, Station Road, Duns, Berwickshire, TD11 3HS.
Farne Salmon and Trout Ltd. is headquartered at the Industrial Estate, Station Road, Duns, Berwickshire, TD11 3HS. Farne Salmon and Trout Ltd. and its subsidiaries employ about 430 people and operate a production site in Duns, Scotland.
Farne Salmon and Trout Ltd. specialises in smoked salmon and smoked salmon based products. The company was acquired in February 2004 by Financière de Kiel SAS to complement its existing industrial base. In the UK, Farne Salmon and Trout Ltd. is the second largest producer on the smoked salmon market.
Farne Salmon and Trout Ltd. is 100% owned subsidiary of Financière de Kiel SAS. The total share capital of Farne Salmon and Trout Ltd. is £7,398,817 and it has been paid in full. No dividend was paid last year. Farne Salmon and Trout Ltd. and SIF Group may trade with each other. There are no irregular loan agreements between the two.
Seafood - Main retailers in UK SIF Group proforma net revenue in UK Market share for 52 weeks ending August 2004 Product categories
Asda Iceland 10% 6% M&S 10% Safeway / Morrison 12% Waitrose Smoked salmon 5% Prawns 70% 15%
Sainsbury Others 17% 20% Added value products * 15% Tesco 20% Proforma is based on Lyons Seafood Ltd projected net sales in the UK for 2004 and Farne Salmon and Trout Ltd net sales in the UK for the accounting year ended 31 March 2004.
* Added value products are about 35% salmon, 15% shellfish based and 50% other fish.
Lyons Seafoods Ltd. Lyons Seafoods Ltd. (ID-No: 02987743) is 100% owned subsidiary of SÍF hf. Lyons Seafoods Ltd. is headquartered in Barrow House, Bishopstrow, Warminster, Wiltshire BA12 9DA. Lyons Seafoods Ltd. and its subsidiaries employ around 260 people and operate production sites in Warminster and Codford.
44 Lyons Seafoods Ltd. was established in 1958 and acquired by SIF Group in July 2003. Lyons Seafoods Ltd. is primarily a processing company. Approximately 85% of sales are generated in processing and the balance in trading. Lyons Seafoods Ltd. specialises in the processing of shellfish products such as warm water prawns. About 88% of its sales are prawns and prawn related products.
Lyons Seafoods Ltd. is 100% owned subsidiary of SÍF hf. The total share capital of Lyons Seafoods Ltd. is £ 129,282.35 and it has been paid in full. No dividend was paid last year. Lyons Seafoods Ltd. and SIF Group may trade with each other. There are no irregular loan agreements between the two.
The UK Customers As opposed to most European countries, private label products dominate the UK market. Producers are in general closely linked to a single food retailer, unlike the situation in other European countries. As a result, Farne Salmon and Trout Ltd. and Lyons Seafoods Ltd. sell to a few, large customers.
Farne Salmon and Trout Ltd. and Lyons Seafoods Ltd. The UK’s smoked salmon producers are closely linked to a specific food retailer. In the case of Farne Salmon and Trout Ltd., its key customer is Tesco, the country’s fastest growing retailer.
Export sales represent approximately one third of total net sales. Farne Salmon and Trout Ltd. has employed the same strategy for its exports to other European countries, focusing on one large retailer in each country. The largest customers in other countries are Albert Heijn in the Netherlands, Migros in Switzerland, Delhaize in Belgium and Casino in France.
Tesco is Farne Salmon and Trout Ltd.’s largest client with ca. 63% of total net sales. Management estimates that Farne Salmon and Trout Ltd. supplies 85% of Tesco’s smoked salmon products. Most retailers source over 80% of the smoked salmon they sell from a single supplier. The company predominantly sells its products under private label.
Over 70% of the sales of Lyons Seafoods Ltd. are under private label, with the Lyons brand used predominantly for sales to the foodservice sector and for exports, which amount to approximately 9% of total net sales. The export market is a commodity market based on short term contracts, where competition is strong from low cost Far East countries.
Lyons Seafoods Ltd. generates the majority of its net sales in the UK from Sainsbury’s, and other leading retailers.
The distribution of seafood in the UK is largely concentrated in the hands of the top 5 retailers who controlled 70% of total seafood spending in 2003/2004. Sainsbury and Tesco are the main seafood retailers in the UK each with a 21% market share. Both have demonstrated strong growth in recent years and account for nearly 40% of total retail seafood spending in 2004.
UK market and market positioning Lyons Seafoods Ltd. specialises in the processing warm water prawns. Lyons Seafoods Ltd. sells approximately 35% of its products under its own brand and is the brand leader since the UK market is almost entirely a private label market. Private label is estimated to account for over 90% of chilled shellfish in the UK but the situation is different in frozen seafood. The company’s main clients are Sainsbury’s, and other leading retailers. In the UK, the prawn market has experienced an 11.4% CAGR between 2002 and 2004. It is highly seasonal and it is estimated that over 60% of volume is sold over the Christmas and Easter periods. The main growth driver has been a wider availability of fresh/chilled products. Although average prices for prawns have been increasing, this conceals significant price decreases for all species of prawns largely offset by a change of mix from lower priced frozen to higher priced chilled prawns.
The smoked salmon market in the UK The smoked salmon market in the UK is Europe’s third largest after France and Germany. The penetration rate has been increasing but it is still at a low level (20%) compared to the French market (64%). In retail, the smoked salmon market has shown steady growth. Over the 52 weeks ending August 2002 and August 2004 the market by value has grown by 8.9%. The impact of the salmon scare (see coverage in the section “operations in France”) was limited and the market has shown year on year volume growth for each month except in February 2004, when the salmon scare was at its peak.
Because of the close relationship between suppliers and retailers of smoked salmon the growth of a supplier like Farne Salmon and Trout Ltd. is closely linked to the progress made by their main retail clients.
45 Smoked salmon - Main retailers in UK Smoked salmon - Main producers sold in UK Market share of value and CAGR 2002-2004 Market share of volume for 2004
Sainsbury 25% Tesco Others 33% 20%
15% M&S Others Pinneys Market share Market Safeway/ 10% 14% Morrison Waitrose
5% Asda Macrae Seafood group 0% Farne 36% -4% 1% 6% 11% 16% 21% 17% CAGR 02-04
Operations in Spain
SIF Group has two subsidiaries in Spain, Vensy España SA. and SIF Spain s.l. Vensy España SA. holds a 100% stake in Vensy Portugal LTDA, which sells Vensy’s products in Portugal. Vensy España SA’s operations are almost entirely focused on smoked fish products and SIF Spain s.l. on saltfish. SIF Group proforma net revenue in Spain Product categories Spanish operations Frozen fish Vensy 18%
Vensy España SA. is 100% owned subsidiary of Labeyrie Salted fish SAS, a subsidiary of Financière de Kiel SAS. 36%
Financière de Kiel SAS and Labeyrie SAS Smoked salmon Financière de Kiel SAS is a legal entity that in 29 October French regional products 30% 2004 was acquired by SÍF hf. Further information is 3% provided on Financière de Kiel SAS and Labeyrie SAS in Other smoked fish 13% the French operation, products and sales chapter.
Vensy España SA Vensy España SA. (ID-No: A-95063962) is headquartered at Poligone del Guadalhorce, Calle Ernest Hemingway s/n, 29196 Malaga.
Vensy España SA. and its subsidiaries employ about 290 people and operate production sites in Malaga and La Linéa.
Vensy España SA. specialises in smoked salmon products, generates around 66% of the company’s net sales in this segment. Vensy España SA. also produces other smoked fish and recently started selling Labeyrie SAS’ French regional products. Vensy was acquired at the end of 1999 by Labeyrie SAS to complement its existing industrial base and to add a strong Spanish brand to the group. Vensy España SA is the leading smoked salmon producer in Spain.
The total share capital of Vensy España SA. is € 8,452,000 and it has been paid in full. No dividend was paid last year. Vensy España SA. and SIF Group may trade with each other. There are no irregular loan agreements between the two.
SIF Spain s.l. SIF Spain s.l. (ID-No. B-59151076) is a 100% owned subsidiary of SÍF hf.. SIF Spain s.l. is headquartered in Mercabarna, Longitudinal 8, Bloque 28, parcela 1, Mercabarna,. SIF Spain s.l. employs about 90 people and operates in Barcelona.
SIF Spain s.l., formerly Union Islandia, was established in October 1996 as a trading company of Icelandic salted fish near Barcelona. Since then, SIF Spain has turned into a wholesale company for both salted and frozen seafood products. Four
46 companies were merged into SIF Spain s.l.: (1) Union Islandia in 2002; (2) Comercial Heredia, acquired by Union Islandia in 1998; (3) Armengol, of which Union Islandia bought 70% in 1999 and the remainder in 2002; and (4) Iceland Seafood Spain which had been a subsidiary of SIF Group from the merger with Iceland Seafood hf.
The production activity of SIF Spain s.l. comprises the cutting and packaging of fish. SIF Spain s.l. is classified as a production entity but it is primarily a trading company as trading generates 81% of sales. SIF Spain s.l. was the second largest entity on the cod market in 2002. The company’s main products are salted cod which represents over 66% of sales, with the remainder being distributed evenly between frozen cod and other frozen fish.
The total share capital of SIF Spain s.l. is € 1,569,571.60 and it has been paid in full. No dividend was paid last year. SIF Spain s.l. and the SIF Group may trade with each other. There are no irregular loan agreements between the two.
SIF Spain and the Group trade with each other. There are no irregular loan agreements between the two.
The Spanish customers In comparison with many other European countries the retail market in Spain is still rather fragmented even though there is a strong trend towards consolidation.
Vensy España SA. and SIF Spain s.l. The retail channel represents 75% of Vensy España SA.’s sales in Spain. The retailer Mercadona is Vensy’s largest customer, representing 31% of net sales in 2003. For the smoked salmon market in general 49% is sold through H&SM and 51% through the food service channel.
Distribution of fish is still very strong through traditional distribution channels, including small retail shops and companies serving restaurants, local wholesalers and distributors, that together distribute 47% of all the seafood in Spain. Vensy España SA. sells its products to approximately 1,300 customers. SIF Spain’s sales through traditional distribution channels represented 70.8% of 2004 net sales on the Spanish market and 94% of net sales made through the traditional distribution channel is salted fish. Although sales to retailers only represented about 8% of net sales in 2004, they have increased by an average of 57% per annum over the period 2001 to 2004. Sales of frozen cod represent almost 100% of net sales to retailers.
The Spanish market and market positioning The Spanish market for smoked salmon is Europe’s fourth largest market, after France, Germany and the UK. The smoked salmon penetration rate however remains low in Spain at circa 35% compared to 64% in France. Consumption is very seasonal with sales through the H&SM channel in December amounting to 40% of total annual H&SM sales.
Vensy España SA. specialises in the production of smoked fish, predominantly smoked salmon. Vensy España SA.’s main brand Skandia is the leading brand for smoked salmon in Spain. Labeyrie Group is duplicating its French strategy of driving the market through the creation of a key reference brand and segmenting the market by presenting smoked salmon by origin. Vensy España SA.’s net sales have experienced a 3.7% CAGR in the period from the beginning of July 2000 to the end of June 2004. Prices have however decreased in the same period because of the development of private label. The Spanish H&SM sector has shown a tendency to substitute private labels for second brands and private label now represents over 50% of the sales in the H&SM segment. Skandia’s sales have grown by 3.1% per year, fuelled by marketing campaigns as well as the brand’s premium image.
Vensy España sales by distribution channel Vensy España sales by main clients Financial year ending June 2004 Financial year ending June 2003
Foodservie 24% Others Other 31% 1%
Alhold H&SM 3% 75% Mercadona 27% Carrefour AlCampo 22% 5% Makro 12%
47 SIF Spain net sales by brand Vensy España net sales by brand Projection for financial year ending December 2004 Financial year ending June 2004
Armengol 26% White label 6% Skandia brand 39% SWC 3% SIF / Private label Islandia 8% 45% Second brand SIF / Banord Private label 17% 12% 44%
SIF Spain s.l. Salted cod, also known as bacalao, accounts for 66% of SIF Spain s.l. revenues, and is a popular and widely sold product in Spain. The market has decreased by 1.5% p.a. since 2001. Frozen cod sales have on the other hand grown by 22.5% p.a. over the same period.
SIF Spain s.l. specialises in salted and frozen fish, mainly cod. The company’s main brand “Islandia”, generates 45% of net sales. Islandia is only used to sell salted cod through the traditional distribution channel, mainly in 25 kg boxes. The majority of Armengol’s sales (84% of sales) are also salted cod, mainly in 5 kg boxes sold through the traditional channel. Frozen cod sold to industrials are sold under the labels SIF (for cod imported from Iceland) and Bannord (for cod imported from China). All Seaflower Whitefish Corporation (SWC) sales were sales of frozen hake.
The Spanish cod market is very fragmented and highly competitive; it is also a regional market with the top five regions, Catalonia, Aragon, Valencia, Murcia and Andalusia accounting for approximately 50% of cod consumption. The quality of the cod is however quite different from one region to another, with Catalonia and the Basque country buying high quality cod whereas Valencia and Andalusia will mostly buy lower quality products. SIF Spain s.l. has a reputation for high quality products, particularly in salted cod. They mainly sell in Catalonia and the Basque country where they have a strong market position.
Main Spanish cod producers SIF Spain net sales by distribution channel Volume 2002 Projection for financial year ending December 2004
Bacalaos Eguillor Industry Others Retail 6% 21% 32% 8% Other Alfoso Romero 1% 6% La Bacaladera 7%
Traditional Copesco 70% 7% Pescafina Bac.El 20% Barquero 7% SIF Spain 15%
48 VII RISK FACTORS
Prior to making any investment decision, all of the information in this document and, in particular, the risks and uncertainties described below should be carefully considered. The risks and uncertainties described below are some of those that may materially affect the Group and any investment made in the Shares. If any of these events occur, the trading price of the Shares could decline. Additional risks and uncertainties that do not currently exist or of which the Group is unaware may also become important factors. These risks and uncertainties could have a material adverse effect on the business, income, profits, assets, liquidity and share price of the Group.
Risks related to the Shares Equity investments involve a variety of risks. Examples of such risk factors that may have a considerable effect on the price of SIF Group’s stock, and thereby on the investment value, are market risk, liquidity risk and counterparty risk. Moreover, it must be kept in mind that shares are a subordinated claim on the assets of companies. This means that in the event of a Company's liquidation, the shareholders receive what is left after all other claims have been met. In many countries, stocks have yielded a better return than bonds measured over long periods of time. Nevertheless, long periods can also be found where the return on shares has been worse than on bonds and even negative. Those who intend to invest in SIF Group should know that there is no guarantee of a return on the investment in the future and investors should bear in mind that even though stocks can provide a good return in general, there is always a risk that an investment in the stock of individual companies will decline in value. It is therefore suggested that those who intend to invest in stocks pay close attention to diversifying their risk. The operating income of SIF Group can be volatile. This may cause revenues for certain periods to fall below expectations and possibly have a negative effect on the Company’s stock. It is indicated to investors that SIF Group operates in a market were reputation of the healthiness of the product are of great importance. The Compay is also undergoing a major transformation. Investment risk in companies operating under such circumstances is generally greater than in companies operating in a more stable environment.
When new shares are issued, the holdings of those who already hold shares in the Company is reduced proportionally, except in the case of bonus shares or if shareholders buy new shares in proportion to their ownership. The purpose of increasing capital is normally to finance projects that are meant to make each part of the Company more valuable in the future, but the project’s risk is greatest at the beginning. Shareholders may therefore be faced with increased risk for their investment alongside the dilution of their shares. It is probable that SIF Group will consider increasing its capital further in the next few years in order to finance the Company’s continuing growth, which may be both internal and external growth. The Board’s present authorization to increase share capital is detailed in Chapter I, Offering and Registration of Shares and Chapter II, Share Capital and Ownership.
The structure of shareholder ownership can also be a risk factor for investors. A lack of leading investors or large concentrations of ownership are examples of circumstances that can have negative effects, among which are liquidity, price formation or shareholder control. Ownership can change rapidly in a short period of time. On 12 November 2004, there were 1071 shareholders in SÍF hf., and general investors held 39% of the shares. General investors are shareholders that hold less than a 10% share and are not among Board Members, key personnel and financially connected parties. One shareholder, Ker hf. owns more than 10%. Ker hf. has a representative on the Company Board.
Legal Risk SIF Group has operations in 11 countries in the value-added production, marketing and sale of seafood products to more than 60 countries worldwide. SIF Group is subject to various legislation, government and municipal regulations and standards in these countries. Consequently, SIF Group’s operations entail considerable regulatory and legal risk.
SIF Group is subject to, amongst other legislation, health, pollution and environmental legislation, government and municipal regulations and standards. SIF Group has to meet requirements based on these legislations, regulations and standards to obtain necessary licenses and certificates in the respective countries, e.g. processing licenses and health certificates. These licenses and certificates may be valid as long as SIF Group meets the legal requirements. They may also be valid for a specific period of time and therefore have to be renewed regularly.
Existing legislation, government and municipal regulations and standards could be amended, the manner in which legislation, regulations and standards are enforced or interpreted could change and new legislation, regulations and standards could be adopted, which could adversely affect SIF Group operations in the respective countries. Violations of legislation, regulations and standards, whether intentional or unintentional, may lead to the revocation of some of the licenses or certificates in the respective countries and/or affect the reputation of SIF Group.
49 SIF Group is exposed to claims from dissatisfied customers and consumers of SIF Group’s products. SIF Group may be subject to claims arising from violations of health, pollution and environmental legislation, government and municipal regulations and standards. SIF Group may also be subject to claims arising from disputes with employees for, among other things, alleged illegal dismissal, discrimination or harassment. These risks may often be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. Liability resulting from any of the foregoing or other claims could have a material adverse effect on the reputation and results of SIF Group’s operations. SIF Group is furthermore party to various litigation which may, depending on the outcome of the respective litigation, have an adverse impact on the Group’s financial situation.
The acquisition of the Labeyrie Group is subject to the French Competition Authorities granting their consent to the acquisition. Should the competition authorities object to the acquisition, it may need to be revoked altogether.
The Group is not exposed to any other risks regarding patents or licenses, industrial, commercial or financial contracts, or new manufacturing processes.
Upon the publication of this Prospectus, SIF Group is not involved in any litigation that may have a considerable effect on the Group’s operations or financial status. Nor is the Bank aware of any such pending litigation or any interference that has or can have a considerable effect on the financial position of SIF Group.
Customer Concentration The Group’s customers are in general, a small number of large, food retail chains in each operating country. If the Group loses one of its largest customers, it could have a significant impact on the Group’s results. However, as the Group’s product range is broad and regionally diversified, the loss of one customer in any one segment will have a less material impact on the Group.
In France, the Group’s single largest customer is the retailer Carrefour that accounted for approximately 1/3 of the net revenues in 2003. The Group’s second largest retailer Galec accounts for approximately 1/9 of net revenues. Other retailers account for less than 10% of net revenues. Five of the Group’s largest customers in France accounted for approximately 2/3 of net revenues in 2003. The environment is similar in the UK and Spain. In the UK, the retailer Sainsbury’s accounts for 45% of Lyons Seafoods Ltd. net sales and the retailer Tesco accounts for 63% of Farne Salmon and Trout Ltd.’s net sales. In Spain, the retailer Mercadona accounts for 1/3 of Vensy España SA’s net sales.
Vensy España SA has a break off agreement with Mercadona S.A, by virtue of which the break off would take place over a period of 3 years. Contracts with other major customers of the Group, namely Carrefour, Tesco, Sainsbury’s and Galec are not documented and are made on an informal basis, with no committed supply agreements other than delivering to ad hoc purchase orders.
Intellectual Property Apart from France, there is little intellectual property associated with the Group. All existing and future trademarks of Labeyrie and Blini are pledged. The Blini trademark could be considered as generic to designate blinis products but its notoriety offers some protection. Most products sold in the UK are under the Group’s customers’ own labels. In the case of retailers’ own labels, it may potentially be easier for a retail chain to change suppliers than if the Group was the sole suppler of a recognised brand. Although know-how and experience exists within the Group, none are regarded as being of either a unique or vital nature to the ongoing business of the Group.
Raw Material The primary ingredients used by the Group are duck and seafood including cod, cod roe, shellfish, herring, Alaska pollock and salmon. Cod, duck and salmon are mainly commodity products, and therefore traded freely and available from a number of different suppliers.
The Group currently relies on over a dozen salmon suppliers. They have been working with the company for long period of tme some of them for over 20 years. The suppliers have to comply with the Group’s quality specifications on an ongoing basis. The Group purchases its raw salmon partly on the spot market and partly through long term or average price contracts limiting therefore its exposure to the risk of significant price increases.
The company’s raw materials for foie gras products are fattened ducks sourced from Palmitou SAS and Lur Berri, which both work directly with local breeding farms. Recently, the breeders of fattened ducks have been consolidating but most of them have secured their procurement through long-term supply contracts or vertical integration.
Cod roe is sourced from multiple suppliers through flexible purchasing arrangements. Blini SAS is one of the most important purchasers of cod roe in France and as such has a direct impact on prices. The Group’s strategy is to maintain an inventory of approximately 18 months of cod roe throughout the year, reducing the impact of changes in raw material prices.
50 Although Cod is a commodity traded freely and available from a number of sources, the Group is exposed to risks regarding suppliers as the Group has sourced its products from specific origins and production methods, that limits the number of suppliers the Group can purchase from in some instances.
Animal Welfare In 1999, a European decision as taken to suppress the individual force feeding of ducks from 31/12/2004 for new workshops and from 31/12/2010 for all workshops. Ducks will have to be kept in larger pens, but the forced feeding can be maintained. The implementation of the law is likely to be postponed for 5 years and solutions have already been found to limit the impact on productivity. This will however have significant capital commitments for the breeders that could lead to higher raw material prices. Further regulation cannot be ruled out. In the same way, animal welfare issues can pose a reputation risk for SIF Group.
EU Import Quotas on Salmon Until May 2003, a minimum import price protected salmon producers in the EU market. Since the restrictions were lifted, the price fell and in August 2004 the minimum price was replaced by temporary quotas for non EU countries until the end of February 2005 to force prices back up towards their pre-May 2003 level. If prices recover to near their pre-May 2003 levels, the Group may not be able to pass this increase on to the retailers and consumers. However, in the past the Group, especially Labeyrie, has managed to pass increased costs forward.
Management Risk The Group’s operations are based on the knowledge, experience and the future vision of key employees, and there is no guarantee that these individuals will continue to work for the Group. The loss of service of any such employee could have a detrimental effect on the combined Group. Labeyrie Group’s senior management has been very successful over the years and its experience will be valuable for SIF Group in the future. The majority of the Labeyrie Group management will continue to work for the SIF Group and will invest € 7.24 million in SÍF hf. shares. The investment has a two year lock up period.
Food Safety If a suspicion arises that a given product or product group is unsafe for consumers, it can lead to significant public discussion and media coverage. An accident in the production of one specific product or at one specific producer can have a wide-ranging effect. It can lead to the image of this or related products being tarnished. For instance, if a single producer of a given type of food were to sell damaged goods, it might affect the general sales of this type of food and lead to onerous litigation. Following an article in the US Science magazine in January 2004, smoked salmon sales dropped across much of Europe in the first half of 2004. In this article it was estimated that a daily consumption of farmed salmon leads to a high level of dioxin absorption. Although the French Health Agency and FDA estimate that there is no risk involved in consuming farmed salmon, French consumers briefly significantly reduced their consumption. Strong results in July 2004 (sales 1.5% higher than in July 2003), indicate that this article may not have a long term effect on smoked salmon sales.
Currency Risk The shares of SIF Group are denominated and traded in ISK while by far the most part of the Group’s revenues and costs are in other currencies, primarily in Euro and GBP. As a consequence fluctuations, can have a significant impact on the Group’s earnings. The Group’s earnings also depend on other exchange rates as the Group also purchases raw materials from countries that are not inside the Euro and the GBP area. The ISK exchange rate may fluctuate significantly without such fluctuations being offset by corresponding changes in the share price of the Group.
Tax Risk The Group pays taxes in a number of countries where it has operations. Any changes in tax legislation in the various countries can influence the financial results of the Group.
Insurance The Group has a general corporate insurance policy. The Group is insured against certain delays, property damage, general liability and environmental liability in accordance with normal practice within the industry. No guarantee can be given that the insurance will cover the claims that may be lodged against the Group. If such claims are legitimate, then they may have a significant negative impact on the Group’s operations, results or financial situation.
51 VIII FINANCIAL HIGHLIGHTS
Key Features of the SIF Group The following overview of the consolidated profit and loss account, balance sheet and cash flow of SÍF hf. is based on the Company’s audited annual accounts for 2001-2003 and the reviewed interim accounts for the period January 2004 September 2004. The consolidated Company’s accounts include, in addition to the parent Company, the activities of its subsidiaries. The main change in the Company’s accounts is the acquisition of Lyons Seafoods Ltd in July 2003. The investment in IFPC (in March 2004) is treated as an associated company. SIF Group already owned an 80% stake in Tros ehf. before it was fully acquired in December 2001.
All amounts are in thousands of euros. The Company’s accounts were in Icelandic króna until the beginning of 2002, when it was changed to euros. The reason for this change in currency of settlement was that the majority of income, expenses and liabilities were in euros. Icelandic companies were authorized to publish their annual accounts in a foreign currency by Act no. 25/2002. In the following overview all amounts in the annual accounts from 2001 are calculated into euros. Calculations into euros for 2001 made by the Company’s auditors were presented as comparative figures in the 2002 annual accounts. In the profit and loss account the average exchange rate is used as a reference whilst in the balance sheet the exchange rate at the end of the relevant year is used. Pursuant to legislation on annual accounts, inflation-adjusted accounting procedures were discontinued at the beginning of 2002.
Profit and Loss Account SIF Group’s sales for the last twelve months (LTM) amounted to € 704.8 million. Over the period the Group’s sales declined by 1.1% CAGR, mainly due to adverse foreign exchange impacts and a reduction in the trading activity, partially offset by the acquisition of Lyons Seafoods Ltd. in July 2003. During the period the Group suffered from the strength of the euro against other currencies, and particularly in 2003 when foreign exchange fluctuations had a € 37.7 million negative impact on the Group’s revenues. In 2003, Lyons Seafoods Ltd. was present for six months of business activity in the accounts, with Lyon Seafoods Ltd. operations fully realised in the LTM account.
The Group’s gross profit decreased by 6.9% CAGR over the period reviewed and the Group’s gross profit margin decreased from 12.8% in 2001 to 10.2% in the LTM, but the margin was at its lowest in 2002 at 8.4%. The Group’s EBITDA margin LTM was 2.3%. The ratio has been in decline since 2003. The EBITDA margin has declined more than the gross profit margin as profits from the sales of operational assets were significant early in the period.
The net financial expenses have decreased significantly over the period reviewed, even though the Group’s interest income has also been declining as the Group has reduced its loans to external fishing and shipping companies. The main financial expenses relate to Iceland, France and the USA, and are mainly composed of interest on long term liabilities and bank loans. The decrease over the period is mainly attributed to Iceland where interest rates have gone down. In 2001 and 2002 the Group experienced significant exchange rate gains related to USD/€ and €/ISK. In 2003 the Group sold its shares in Seaflower Ltd. to Fisco, with a € 2.4 million profit. Investments in associates are very limited, with the Group’s earnings from associates amounting to € 1.4 million in 2003.
In 2004 the Group appointed external auditors to review the operations of SIF France SAS and in accordance with the suggestions set forth by the auditors, the Company’s assets were written down by € 14.1 million. In 2003 the Group experienced three extraordinary costs of € 1.8 million, as sales offices in Brazil and Japan were closed and the CEO of the Group resigned. The minority interest is primarily related to SIF Hellas S.A. in whom the SIF Group owns a 66.7% stake.
Over the period the Group’s net earnings declined from € 5.0 million to € 0.6 million in 2003. LTM net earnings are significantly lower because of the asset write down of € 14.1 million. The Group’s LTM net loss amounted to € 21.2 million. Excluding the asset write down, the LTM net loss was approximately € 7.1 million. Asset write down is detailed later in the chapter when describing the first nine months results for 2004.
A dividend amounting to 7% of the ISK nominal share value was paid out for 2001 and 2002. No dividend was paid for 2003.
52 P&L consolidated (EUR '000) 2001 2002 2003 LTM 2004 Jan-Dec Jan-Dec Jan-Dec Apr-Sep Jan-Sep
Revenue ...... 684,668 699,780 671,241 704,758 511,100 Cost of goods sold ...... (596,970) (641,346) (604,937) (632,685) (456,789) Gross profit 87,698 58,434 66,304 72,073 54,311 - Other revenue ...... 9,023 14,317 4,666 1,798 1,361 Other Operating Cost (75,847) (52,647) (53,495) (57,610) (44,486) EBITDA 20,874 20,104 17,475 16,261 11,186
Amortization of goodwill ...... (8,845) (7,659) (8,405) (9,707) (7,176) Assets written down...... (14,100) (14,100) Operating income (EBIT) 12,029 12,445 9,070 (7,546) (10,090) - Net Financial income and (expenses) total ...... (7,649) (6,987) (5,754) (10,149) (7,912) Net earnings before calculated income tax 4,380 5,458 3,316 (17,695) (18,002)
Calculated income tax ...... 728 (779) (796) (1,698) (1,725) Net earnings after tax 5,108 4,679 2,520 (19,393) (19,727) - Minority interest (120) (105) (129) (103) (101) Discontinued operations - - (1,752) (1,752) - Net earnings 4,988 4,574 639 (21,248) (19,828)
Gross profit margin / Revenue...... 12.81% 8.35% 9.88% 10.23% 10.63% EBITDA / Revenue ...... 3.01% 2.82% 2.59% 2.30% 2.18% Profit / Revenue ...... 0.74% 0.66% 0.37% -2.74% -3.85% Earnings per share ...... 0.34% 0.31% 0.04% -1417.27% -1322.75% Return on equity ...... 10.87% 10.23% 6.22% Dividend Per Share...... 0.09% 0.08% -
Balance Sheet During the observed period the most significant change in the balance sheet occurred when the Group acquired Lyons Seafoods Ltd. for £ 14 million in July 2003 and when it purchased 23.16% stake in IFPC. The acquisition of Lyons Seafoods Ltd. was financed with long-term debt and cash from operations. The purchase of IFPC’s shares was financed by a short-term debt.
Intangible assets consist of goodwill related to the Group’s acquisitions and start up costs regarding the Group’s brands.
The group’s equity ratio was fairly stable around 15% over the first two years over the period reviewed, but in the accounts 09.2004 the ratio decreased to 6.4% mainly because of asset write down.
53 Balance Sheet consolidated (EUR '000) 31.Dec.2001 31.Dec.2002 31.Dec.2003 30.Sep.2004
Intangible assets Long Term Cost ...... 19,938 19,277 24,604 23,298
Tangible assets Fixed assets Buildings and land ...... 34,735 38,413 42,109 42,490 Other operational assets ...... 21,943 25,516 31,763 30,799 56,678 63,929 73,872 73,289 Long-Term Investments Shares in other companies...... 1,754 2,962 2,019 23,706 Bonds and lons...... 3,940 5,277 2,109 4,081 Deferred tax assets...... 5,315 4,012 3,410 1,951 11,009 12,251 7,538 29,738
Total Fixed assets 87,625 95,457 106,014 126,325
Current assets Inventories ...... 92,020 95,554 100,836 114,279 Accounts receivable ...... 87,789 77,883 66,913 75,253 Other receivable ...... 11,282 8,876 18,353 13,316 Prepayments...... - - - 3,234 Cash and cash equivalents ...... 4,429 5,316 3,231 9,636 195,520 187,629 189,333 215,718
Total assets 283,145 283,086 295,347 342,043
Shareholders' equity Share capital ...... 16,182 17,572 17,571 17,710 Premium account of share capital...... 23,652 23,935 23,759 5,473 Statutory reserve...... 478 971 1,035 1,035 Other retained ...... 6,663 3,275 (1,862) (2,498) 46,975 45,753 40,503 21,720
Minority Interest 780 218 280 383
Obligations Pension obligations...... 1,842 1,928 743 910 Deferred tax liabilities...... 895 829 2,004 2,039 Other obligations...... - 1,527 1,462 1,694 2,737 4,284 4,209 4,643
Long term debt Long term debt ...... 60,678 75,700 79,038 98,206 Current maturities of long term debt ...... (6,399) (8,186) (7,728) (7,723) 54,279 67,514 71,310 90,483
Current liabilities Bank loans ...... 114,341 91,678 82,554 123,779 Current maturities of long term debt ...... 6,399 8,186 7,728 7,723 Current liabilities ...... 56,723 64,948 87,748 91,875 Accrued taxes payable ...... 911 505 1,015 1,437 178,374 165,317 179,045 224,814
Stockholders' equity and total liabilities 283,145 283,086 295,347 342,043
Currnet ratio - Current assets / Current liabilities ...... 1.10 1.13 1.06 0.96 Quick ratio ...... 0.58 0.56 0.49 0.45 Equity ratio ...... 16.6% 16.2% 13.7% 6.4% Intrinsic value...... 2.90 2.60 2.31 1.23
54 Cash Flows The largest transactions in the cash flow statements are related to the acquisition of Lyons Seafoods Ltd in July 2003, Tros ehf. in December 2003 and the purchase of a 23.16% stake in IFPC in March 2004. The increase in long term loans in 2003 and 2004 are related to these transactions. In November 2003, the Group issued corporate bonds amounting to ISK 1.0 billion in nominal value, the bonds are repayable in one payment in November 2008. The assets write down of € 14.1 million this year has no impact on the Group’s cash position.
Depreciation is namely related to tangible fixed assets. Investments in tangible assets are higher than the depreciation over the period. The majority of the investments in tangible assets over the period have been related to the production activity, especially SIF France SAS.
Earnings from associates decreased in 2003 as the Group’s stake in Seaflower Ltd. was sold in July that year.
Statement of Cash Flows consolidated (EUR '000) 2001 2002 2003 2004 Jan-Dec Jan-Dec Jan-Dec Jan-Sep Cash flows from operating activities Net income for the year...... 4,988 4,574 639 (19,828) Asset write down, SIF France...... 14,100 Items not affecting cash Depreciation and amortization ...... 8,845 7,659 8,405 7,176 Profits on sales of assets ...... (1,600) (4,368) (2,804) (463) Earnings from associates...... (261) (1,338) (177) 102 Other calculated items...... (784) 561 (757) 3,081 Working capital provided by operating. activities 11,188 7,088 5,306 4,168 Asset write down, SIF France...... (10,210) Changes in current assets and liabilities...... (24,933) 3,194 17,055 (14,922) (13,745) 10,282 22,361 (20,964)
Cash flows from investing activities Investment in intangible and fixed assets...... (8,289) (8,736) (9,954) (8,907) Sale of fixed assets...... 5,204 5,327 6,946 1,349 Bonds and loans, changes...... (2,095) (329) 1,429 (2,031) Investment in subsidiaries...... - (2,081) (14,707) - Investment in other companies...... (481) (793) - (23,449) (5,661) (6,612) (16,286) (33,038)
Cash flows from financing activities Operational loans, changes...... 15,311 (19,306) (5,203) 40,438 New long term loans...... 5,437 24,780 13,541 26,935 Installments on long term loans...... (4,536) (7,426) (15,079) (7,546) Dividend paid...... - (1,260) (1,242) - Increase in share capitalisation...... - 375 273 - Changes in own shares...... 710 54 (450) 580 16,922 (2,783) (8,160) 60,407
Increase (decrease) in cash and cash equivalents...... (2,484) 887 (2,085) 6,405 Cash and cash equivalents at the beginning of the period...... 7,156 4,429 5,316 3,231 Exchange rate fluctuations...... -243 - - Cash and cash equivalents at the end of the year...... 4,429 5,316 3,231 9,636
Nine month interim report The operational loss for SÍF hf. in the first nine months of the year was € 19,828,000, including a special write down in France for € 14,100,000. The profit for the same period last year was € 2,059,000. Net income before depreciation and financial items (EBITDA), without taking into account the write down in France was € 11,186,000 in the first nine months of the year but was € 12,400,000 for the same period in 2003. Working capital from operations was € 4,168,000 in the first nine months of the year but was € 4,251,000 for the same period in 2003.
55 Total sales revenue increased by 7.0% between the two periods from € 477.6 million in 2003 to € 511.1 million this year. Lyons Seafoods in the UK is now fully included in the Group’s accounts.
The SIF Group’s gross margin increases from 10.16% in the first nine months of last year to 10.63% for the same period this year but was 9.88% for the whole year 2003.
Depreciation is now € 7,176,000 compared to € 5.874,000 for the same period in 2003. The main variance is that Lyons Seafoods is now included in the Group’s accounts.
Net financial expenses are now € 7,810,000 compared to € 3,687,000 for the same period in 2003. This is mainly due to the following two factors: Firstly in the year 2003 the profit from the sale of shares in Seaflower Ltd. was booked under this item. Secondly the leverage has increased with Lyons Seafoods Ltd and ownership in IFPC.
The SIF Group’s sales are in the following currencies: In EUR 42.0%, USD 28.5%, GBP 24.2% and other currencies 5.3%.
France There was a loss from the operation of SIF France in the third quarter as had been anticipated and informed about in the company’s notices. The financial due diligence of SIF France has been finalized. The outcome of this work has resulted in a write down of assets such as buildings and inventory. In addition there is a cost due to resignations during the year and cost from previous year. In total these items amount to € 14.1 million.
Successful operations at Lyons Seafoods Ltd. and in the USA The operation of Iceland Seafood Corp. in the USA has been according to budget in 2004. The company has recently renewed its contracts for next year with some of the company’s customers and the prospects for the coming months are positive. The operation of Lyons Seafoods Ltd. is going well and is exceeding expectations.
The operation in Iceland The sales operation in Iceland was not according to expectations although there was good profit from the operation. This is due to a more difficult competitive environment than had been expected. In Iceland there is a special write down of € 840,000 due to other receivables. The operation of Saltkaup hf. and Tros ehf. was according to budget.
Palm Seafood PF in the Faroe Islands In the six-month results a part of SÍF hf.’s share in the Faroese company Palm Seafood PF was written off but SÍF hf. owns 50% share of the company, the amortization was over € 260,000. SÍF hf.’s ownership is now fully written off and the total amortization is therefore € 350,000.
The Group Pro Forma and Prospects for the year The Groups estimated pro forma P&L account, including Labeyrie Group’s operations and excluding the trading operations and SIF Iceland Seafood Corp, has been prepared for 2004. According to the pro forma accounts the Group expects net revenues to amount to € 632.9 million, gross profit to amount to € 112.9 million and EBITDA to amount to € 56.6 million. This provides a pro forma gross profit margin of 17.8% and a pro forma EBITDA margin of 9.0%.
It should be noted that Labeyrie Group’s financing will be part of SIF Group financing only from the date of final closing of the acquisition, conditional on the approval of the French Competition Authorities and subject to the financing of the acquisition. The days around Christmas and New Year have historically been by far the most profitable days in Labeyrie Group’s operation. This will have positive effect on SIF Group if it closes the acquisition according to this prospectus, but not material since it will only obtain few days.
The fourth quarter has usually been the best quarter for the Group, mainly due to SIF France. The expectations are today that the operation of SIF France will be stable in the fourth quarter and the operation of other companies according to the Group’s budget.
A declaration of intent has been signed to sell SIF’s subsidiary in the USA, Iceland Seafood Corporation. The buyer is Sjóvík ehf. Furthermore, SÍF hf. has sold SÍF hf.’s shares in IFPC.
The profit from the sale of Iceland Seafood Corporation as well as the shares of IFPC is projected to be € 35 million.
56 APPENDIX:
ARTICLES OF ASSOCIATION
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK THE ARTICLES OF ASSOCIATION ARE LOCATED BELOW
TRANSLATED FROM THE ICELANDIC This is an unauthorised translation of the Icelandic original Articles of Association In the event of any discrepancies the original Icelandic version shall prevail
ARTICLES OF ASSOCIATION
FOR
SÍF hf.
1. The Company’s name, domicile and purpose. 2. The Company’s share capital. 3. Constitution. 4. Shareholders’ meetings. 5. The Company’s Board of Directors. 6. The General Manager. 7. Accounts and Auditing. 8. The Company’s own share capital. 9. Amendments to the Company’s Articles of Association. 10. Dissolution of the Company. 11. Other provisions.
Issued in November 2004
ARTICLES OF ASSOCIATION
for the Public Limited Company
SÍF hf.
1. The Company’s name, domicile and object.
1.01 The Company’s name is SÍF hf. 1.02 The Company is a Public Limited Company. 1.03 The Company’s legal domicile and venue are at Hafnarfjordur, Fornubud 5. 1.04 The Company’s purpose is to undertake trading in seafood products and other food products, to own and operate businesses which operate within the production, sale and distribution of food products and other related operations, real estate management and other operations considered normal for the Company. (Accepted at the Annual General Meeting on November 6th 2004).
2. The Company’s share capital.
Share capital - shares 2.01 The Company’s share capital amounts to ISK 1,499,216,526. Share capital is divided into shares of one króna or multiples of that amount. A single share certificate may be issued in respect of the entire share capital of each shareholder in the Company and the same applies to increase of the share capital, cf. Art. 2.02. The Company is duty bound to divide share certificates into smaller units if a substantiated request therefore is presented, such as upon administration of estate. The Board may register its shares in a foreign currency in accordance with the Public Limited Companies Act. Should the Board decide to do this, the Company’s shares shall be converted into euros and the official buying rate of the Seðlabanki Íslands shall be used from the first day of the month that the decision to change the currency is taken, or the last registration date before that day if the rate was not registered on the first of the month. Should this authorization be used, Art. 4.07 changes accordingly and one vote is one Euro cent in shares. (Accepted at the Annual General Meeting on March 22nd 2002). The Board of Directors of the Company is authorised to increase the share capital of the Company by up to ISK 5,400,000,000 nominal value. The current shareholders shall not have pre-emptive rights to the new shares, pursuant to Article 34 of Act no. 2/1995 on Public Limited Companies. No restrictions are imposed upon trading with the new shares. The new shares shall grant rights within the Company as of the date of registration of the increase of share capital. The Board shall decide the tender rate of the new shares, terms of payment, and how this increase will be executed. This authorisation expires on June 30th 2005 to the extent it has not been exercised prior to that date. The new shares shall belong to the same class and carry the same rights as other shares in the Company. (Accepted at the Annual General Meeting on November 6th 2004). The Board of Directors may increase the Company’s share capital by up to ISK 160,000,000 nominal value through the sale of new shares to such sellers of shares in the Labeyrie Group as are also employees of the Group. Price per share shall be 4.32. The current shareholders shall not have pre- emptive rights to the new shares, pursuant to Article 34 of Act no. 2/1995 on Public Limited Companies. No restrictions are imposed upon trading with the new shares. The new shares shall grant rights within the Company as of the date of registration of the increase of share capital. The Board shall decide how this increase will be executed. This authorisation expires on June 30th 2005 to the extent it has not been exercised prior to that date. The new shares shall belong to the same class and carry the same rights as other shares in the Company. The Board of Directors of the Company is authorised to receive valuables for the new shares from the subscribers other than cash given that a valuation of the valuables is present. (Accepted at the Annual General Meeting on November 6th 2004). The Board of Directors may increase the Company’s share capital by up to ISK 180,000,000 nominal value through the sale of new shares to employees of the Company or parties related to the Company pursuant to an option plan which the Company plans to establish. The offering price of the shares and terms of the sale shall be subject to separate contracts concluded by the Board of Directors of the Company with the employees or related parties involved. The current shareholders shall not have pre- emptive rights to the new shares, pursuant to Article 34 of Act no. 2/1995 on Public Limited Companies. No restrictions are imposed upon trading with the new shares. The new shares shall grant rights within the Company as of the date of registration of the increase of share capital. The Board shall decide how this increase will be executed. This authorisation expires on November 6th 2009 to the extent it has not been exercised prior to that date. The new shares shall belong to the same class and carry the same rights as other shares in the Company. (Accepted at the Annual General Meeting on November 6th 2004). If the shareholder does not pay for the respective shares on the due date he shall pay default interest of the debt from the due date until the day of payment, including all collection costs. In addition it is permitted to resort to other measures to meet non-performance applicable by law at any given time Increase of share capital - priority right. 2.02 A shareholders’ meeting alone may approve of increase of the share capital in the Company, irrespective of whether this occurs by means of subscription to new shares or the issue of compensation share certificates.
Shareholders shall have priority right of purchase of an increase in shares in proportion to their registered holdings, but it is permissible to deviate from the present provision in accordance with para. 3, Art. 34 of the Public Limited Companies Act. Share certificates - share register. 2.03 The Company’s share certificates are issued electronically as prescribed in the Public Limited Act about electronic registration of share ownership. 2.04 Toward the Company the Share Register, as prescribed in the Public Limited Act about electronic registration of share ownership, shall be deemed to constitute fully valid proof of ownership right of shares in the Company and dividend at each given time and all notices shall be sent to the party who is at each given time the registered owner of the share certificates concerned in the Company’s register of shares. The Company will not be responsible if payments or notices go astray in transit due to the fact that it has been neglected to notify the Company about a change in residence. Sale of share certificates and change of ownership 2.05 No restrictions are imposed upon shareholders’ right to sell their share certificates. The procedure for change of ownership is as prescribed in the Public Limited Act about electronic registration. Prohibition of the granting of credit. 2.06 The Company is not permitted to grant credit against share certificates in the Company. Shareholders’ rights and duties. 2.07 Shareholders are duty bound, without any special undertaking on their part, to be subject to the Company’s Articles of Association in the present form thereof or as these may subsequently be amended in a lawful manner. Shareholders will, however, not be obligated, neither by means of Company Articles of Association nor by amendments thereof, to increase their holdings in the Company or to be subject to redemption of their shares. Shareholders are not responsible for the Company’s obligations in excess of their share in the Company, unless they accept such responsibility by means of a special legal act. This provision will not be amended or cancelled by any resolutions of a shareholders’ meeting. No special rights attach to any share in the Company.
3. Constitution. 3.01 The administration of the Company is in the hands of: 1. Shareholders’ meetings. 2. The Company’s Board of Directors. 3. The General Manager.
4. Shareholders’ meetings. 4.01 The supreme power in all Company affairs, within the limitations imposed by its Articles of Association and the Law of the land, is in the hands of lawful shareholders’ meetings. Power of Attorney. A shareholder may have representatives attend a shareholders’ meeting on his behalf. A representative shall submit a dated Power of Attorney in writing. Powers of Attorney will not be validly withdrawn toward the Company after these have been presented upon delivery of documentation for a meeting or after the opening of a shareholders’ meeting, whichever occurs earlier. Lawfulness of shareholders’ meetings. A shareholders’ meeting is lawful if it is called legitimately.
Annual General Meeting. 4.02 An Annual General Meeting shall be held before the end of June each year. Annual General Meetings shall be called in the same manner as other shareholders’ meetings in accordance with the provisions of Art. 4.04. Annual General Meeting Agenda. 4.03 The following matters shall be taken for consideration at an Annual General Meeting: 1. Report by the Company’s Board of Directors on its activities during the immediate past year of operations. 2. The Company’s annual accounts for the past year of operations along with Auditors’ comments shall be submitted for confirmation and a decision shall be taken as to the handling of the Company’s profit or loss during the fiscal year. 3. Decision upon remuneration to Directors. 4. Election of the Company’s Board of Directors, cf. Art. 5.01. 5. Election of the Auditors, cf. Art. 7.01. 6. Other matters which have been lawfully submitted or which the meeting has agreed to take for consideration. In case shareholders controlling a minimum of 1/3 of the share capital so require in writing at an Annual General Meeting a decision on item 2 shall be postponed until a continued Annual General Meeting which shall be held at the earliest one month and at the latest two months later. It is not possible to require further respite. The Company’s accounts along with the Auditors’ comments, replies by the Directors and the Auditors’ proposals for decision shall be available at the Company’s office on show for shareholders for 7 days in advance of an Annual General Meeting. Calling of shareholders’ meetings. 4.04 The Company’s Board of Directors shall call shareholders’ meetings when they deem this necessary and also in accordance with a resolution of a meeting or when elected Auditors or shareholders controlling a minimum of 1/10 - a tenth - of the share capital so require in writing and specify the agenda. When a lawful requirement for the holding of a meeting has been presented the Board of Directors shall be duty bound to call a meeting within 14 days as of their receipt of the requirement. In case the Company’s Board of Directors have not called a meeting within that time it is permissible to require that the Register of Limited Companies have the meeting called in accordance with the provisions of Art. 87 of the Public Limited Companies Act. Shareholders’ meetings shall be called by letter, telefax or an advertisement in the media. Annual General Meetings shall be called at a minimum advance notice of two weeks. Other shareholders’ meetings shall be called at a minimum advance notice of one week. The agenda shall be stated in a call to a meeting. Proposals from shareholders. Proposals from shareholders which are to be submitted at a shareholders’ meeting shall have been received by the Board of Directors no later than 7 days in advance of a meeting in order to be taken for debate. In case a motion for amendments to the Company’s Articles of Association is to be taken for consideration at a meeting the main substance of the motion shall be specified in the call to the meeting. Agenda. Each shareholder is entitled to have specific matters taken for consideration at a shareholders’ meeting if he submits a requirement in writing relating thereto to the Company’s Board of Directors at sufficient advance notice to facilitate adoption of the matter to the agenda of the meeting and which shall be available at the Company’s office on view for shareholders along with principal motions which are to be submitted to voting and that shall be no later than 7 days before a meeting. Lawfully submitted supplementary and amendment motions may be presented for voting at the meeting although these have not been available previously on view for shareholders.
Matters which have not been specified in the agenda cannot be taken for final resolution at a shareholders’ meeting without the approval of all the shareholders of the Company, but a resolution thereon may be passed for the guidance of the Company’s Board of Directors. Chairman of a meeting. 4.05 Shareholders’ meetings will be directed by a Chairman to be elected by the meeting and he will nominate a Secretary to the meeting with the approval of the meeting. The Chairman of a meeting shall resolve all items pertaining to the lawfulness of the meeting in accordance with the present Articles of Association and will decide upon the form of debates, the handling of matters at the meeting and the casting of votes. Record of Minutes. 4.06 A special Record of Minutes shall be kept and therein shall be entered all resolutions of meetings and detailed Minutes. When Minutes have been read aloud and approved the Chairman and the Secretary of the meeting shall affix their signatures thereto. Thereupon the Minutes shall constitute complete proof of proceedings at each Company meeting. Weight of votes. 4.07 One vote is attached to each krona (ISK) of share capital. The plurality of votes decides issues at shareholders’ meetings, unless otherwise prescribed in the present Articles of Association or the Law of the land. A motion is ousted on even votes. In case two or more persons obtain an equal number of votes lots shall be drawn to decide the issue. The approval of all shareholders is required in order to conclude matters specified in Art. 94 of the Public Limited Companies Act No. 2/1995, cf., however, Art. 9.01 of the present Articles of Association. Votes shall at all times be cast by written ballot if any attendant at a meeting so requires. The right to attend meetings. 4.08 The right to attend shareholders’ meetings belongs to shareholders, shareholders’ representatives, the Company’s Auditors and General Manager, although he is not a shareholder. The Board of Directors may also invite specialists to attend individual meetings if their opinion or assistance need be sought.
5. The Company’s Board of Directors. 5.1 An Annual General Meeting will annually elect 7 persons to the Company’s Board of Directors and one person as Substitute Director. Their qualifications are subject to Laws. Election of the Board of Directors. 5.02 The election of the Board of Directors will be handled in the following way: Candidates who wish to be elected for the Board of Directors shall notify the Board of Directors of their intentions in writing at least five days in advance of the shareholders’ meeting. Only those who have notified their candidacy in this way are eligible to be elected for the Board of Directors. The election of the Board of Directors is at all times to be in writing in case proposals are presented for more than the number of persons to be elected. In case shareholders controlling a minimum of 1/10 - one tenth - of the share capital so require, proportional or multiplication elections shall be applied upon the election of Directors. A requirement relating thereto shall have been received by the Company’s Board of Directors at least five days in advance of a shareholders’ meeting. In case of even votes lots drawn shall decide the issue. Detailing of Directors’ duties. 5.03 The Board of Directors will elect a Chairman from among their group and will detail duties. Calling of Board meetings. The Chairman will call and direct Board meetings. Extraordinary meetings shall be held at any time he deems this necessary. A meeting shall also always be held if any Director or the General Manager so require.
Lawfulness of Board meetings. A Board meeting is capable of making decisions when it is attended by the majority of Directors. An important decision may, however, not be made without all Directors having been able to deal with the matter if that is possible. The plurality of votes will decide issues, unless there be alternative instructions contained in the present Articles of Association or lawful directives. Directors shall keep a Record of Minutes covering that which occurs at Board meetings and shall confirm these by means of their signatures. 5.04 The Board of Directors wield supreme authority in Company affairs between shareholders’ meetings. Major decisions, such as the purchase and sale of real estate may, however, not be made, unless all the Directors have been able to deal with the matter if that is possible. This also applies to major taking of credit and hypothecation of the Company’s assets. It’s the Board’s duty to set up the operational objectives of the Company based on the main function of the Company and keeping in perspective the Company as well as the shareholders’ interest. The Board’s duty is to engage a General Manager or General Managers, decide upon their wages and terms of engagement, lay down letters of instructions and supervise their work. The Board’s duty is to decide who shall bind the Company. The Board operates according to regulations adopted by the Company Board and based on the Public Limited Companies Act. 5.05 Directors shall have access to the concern’s entire books and documents.
6. General Manager. 6.01 The General Manager will undertake the daily operations of the Company in conformity with the rules which are or will be laid down for him by the Company’s Board of Directors or in accordance with its Articles of Association. Daily operations do not extend to arrangements which are unusual or of a major character. The General Manager shall see to it that the Company’s book-keeping be entered in conformity with Laws and customs and that the handling of the Company’s assets be in a secure manner. 6.02 The General Manager is in duty bound to abide by the entire instructions of the Board of Directors. He shall grant the Auditors all such information as they will request. It is permissible to engage a Director in the position of General Manager.
7. Accounts and Audit. 7.01 The Company’s fiscal year is the calendar year. At an Annual General Meeting a firm of Auditors shall be elected for a term of one year. The Auditors shall audit the Company’s annual accounts in conformity with good auditing practice.
8. The Company’s own share capital. 8.01 The Company is authorized to possess own share capital of up to 10% - ten per cent -. No voting rights attach to share certificates owned by the Company itself. The Company may acquire shares only in accordance with authority from a shareholders’ meeting to the Company’s Board of Directors. Authority for the Company’s Board of Directors to purchase own share capital may not be more than 18 months at a time.
9. Amendments to the Company’s Articles of Association. 9.01 In excess of that permitted by the Act respecting Public Limited Companies the Company’s Articles of Association may be amended only at a lawful shareholders’ meeting of the Company, provided that it be explicitly stated in the call to the meeting that such an amendment be contemplated and its main content be mentioned. The amendment must be voted for by at least 2/3 - two third - of the votes represented at the meeting, If such a meeting is not attended by shareholders controlling a
sufficient proportion of share capital to render the meeting lawful a meeting shall be called anew in the manner stipulated in 4.04. That meeting will resolve the affair under reference by means of two third of the votes, irrespective of attendance at the meeting. Motions respecting reduction of the Company’s share capital shall be handled as amendments to the Statutes. The provisions of the present Articles of Association respecting the voting rights of shareholders and equality between them will, however, not be amended unless passed by 9/10 - nine tenth - of all votes, cf. Art. 94 of the Public Limited Companies Act No. 2/1995.
10. Dissolution of the Company. 10.01 In case it be deemed advisable or necessary to dissolve the Company motions relating thereto will be subject to the same provisions as amendments to the Statutes except for the fact that a decision on dissolution of the Company shall be made by shareholders controlling at least 2/3 - two third - of the Company’s share capital. The same applies to any merging or amalgamation of the Company with other Companies and to the sale of its entire assets. The meeting which approves in a lawful manner of the dissolution of the Company will stipulate how its assets shall be appropriated and how payment of liabilities shall be effected, cf. Section XIII of Act No. 2/1995 respecting Public Limited Companies.
11. Other Provisions. 11.01 Where the provisions of the present Articles of Association do not stipulate proceedings the provisions of Act No. 2/1995 respecting Public Limited Companies shall be abided by.
------The Articles of Association for SIF hf. were approved at the Company’s establishment meeting on February 18th, 1993. Since then amendments have been effected thereto at the following shareholders’ meetings:- At the Annual General Meeting on April 21st, 1995. At the Annual General Meeting on April 26th, 1996. Due to the increases of share capital in 1996. At the Annual General Meeting on April 24th 1998. Decision of the Board of Directors to increase share capital on May 6th 1998. The increase was utilized in part. At the Annual General Meeting on March 31st 1999. A decision made on the Annual General Meeting on March 31st 1999 concerning an authorisation to increase share capital, utilized in part. Decision of the Board of Directors to increase share capital on April 14th 1999. The increase was utilized in full. At a Shareholders’ meeting on December 29th 1999 due to the merger with Iceland Seafood International Plc. At the Annual General Meeting on April 6th 2001. At the Annual General Meeting on March 22nd 2002. Decision of the Board of Directors to increase share capital on May 26th 2003. At the Shareholders’ Meeting on October 15th 2003. At the Annual General Meeting on March 19th 2004. At the Shareholders’ Meeting on November 6th 2004. The foregoing are the Company’s currently applicable Articles of Association.
Reykjavík, 15 November 2004 On behalf of the Board of Directors of SÍF hf.
Gestur Jónsson hrl.
APPENDIX:
SÍF HF. INTERIM FINANCIAL STATEMENTS 30 SEPTEMBER 2004
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK THE INTERIM FINANCIAL STATEMENTS ARE LOCATED BELOW
SIF Ltd.
Interim Consolidated Financial Statements January - September 2004
Contents.
Auditors’ Report...... 2 Statement by the Board of Directors and CEO .. 3 Income Statement...... 4 Balance Sheet ...... 5-6 Statement of Cash Flow ...... 7 Notes ...... 8-13
1 Auditors’ Report
To the Board of Directors and Shareholders of SIF Ltd.
We have assisted in preparing the Interim Financial Statement of SIF Ltd. and subsidiaries for the period January 1 to September 30, 2004. The Interim Consolidated Financial Statements contain the period´s report of the Board of Directors, Income Statement, Balance Sheet, Statement of Cash Flows and Notes to the Interim Financial Statements. These Interim Financial Statements are the responsibility of the Company´s management.
We have organized and prepared our work in accordance with recognized methods for unaudited Financial Statements with an objective to assist SIF Ltd. to have the Interim Consolidated Financial Statement in accordance to law and generally accepted accounting principles in Iceland. The Interim Consolidated Financial Statement is based on financial data of SIF Ltd and subsidiaries and information from the SIF Group’s management. We have taken specific parts of the Interim Consolidated Financial Statement to special consideration and reviewed its presentation.
We have not performed an audit and, accordingly, we do not express an audit opinion.
Presentation of the Interim Consolidated Financial Statement is in accordance to law and generally accepted accounting principles in Iceland and all necessary information that is known to us is presented.
Hafnarfjordur, Oktober 24, 2004
Deloitte Ltd.
State Authorised Public Accountants,
Halldor Arason sign
2 Statement by the Board of Directors and CEO-President
The Interim Consolidated Financial Statements are based on historical cost accounting and are prepared in accordance with law and generally accepted accounting principles in Iceland. The statements are in all material respects consistent with the statements of the preceding year.
It is the opinion of the Board of Directors and CEO-President, that these Interim Consolidated Financial Statements of the SIF Group present all the information necessary to show the financial position of the SIF Group as of September 30, 2004, the operational results for the period from January 1 to September 30, 2004 and the financial developments during this period.
After a thorough review of the financial situation of the subsidiary SIF France s.a.s. the assets of the company have been written down by € 14.100 thousand and that amount has been included as expense in the relevant items in these Interim Financial Statements.
In March SIF Ltd. purchased a 23,16% share in SH Ltd. for € 23.363 thousand and from that time SH Ltd. is accounted for as an investment in an associate. At the end of September SIF Ltd. owned 22,34% share in SH Ltd.
According to the Income Statement, total operating revenue of the Group amounted to € 512.461 thousand. Net loss on operations of the Group during the period amounted to € 19.828 thousand. Total assets of the Group according to the Consolidated Balance Sheet amounted to 342.043 thousand and equity at the end of September was € 21.720 thousand. The equity ratio at the end of September 2004 was 6,35%.
At the end of September 2004, shareholders in SIF Ltd. numbered 1.077. Two shareholders owned more than 10% of share capital: Sund Ltd. with a share of 18,53% and Ker Ltd. with a share of 14,63%.
The members of the Board and CEO-President of SIF Ltd. hereby confirm the Interim Consolidated Financial Statements for the period from January 1 to September 30, 2004 with their signatures.
Hafnarfjordur, Oktober 24, 2004
Board
Olafur Olafsson Chairman of the Board sign
Gudmundur Asgeirsson Adalsteinn Ingolfsson Gudmundur Hjaltason sign sign sign
Gunnar Tomasson Jon Kristjansson Magnús Gauti Gautason sign sign sign
CEO-President
Jakob O. Sigurdsson sign
3 Consolidated Income Statement January - September 2004
2004 2003 2003 Note. Jan.-Sept. Jan.-Sept. Jan.-Dec.
Sales ...... 511.100 477.583 671.241 Cost of goods sold ...... (456.789) (429.041) (604.937) 54.311 48.542 66.304 Commission and other income ...... 1.039 3.785 4.229 Gain on sale of assets ...... 322 444 437 55.672 52.771 70.970 Other expenses ...... (44.486) (40.371) (53.495) Net income before depreciation and financial income ...... 11.186 12.400 17.475 Depreciation ...... 12-14 (7.176) (5.874) (8.405) Write-down of assets - SIF France s.a.s...... 33 (14.100) 0 0
Operating (loss) profit (10.090) 6.526 9.070
Financial income and expense ...... 31 (7.810) (3.687) (5.931) Earnings from associates ...... 8-10 (102) 170 177 Net (loss) income before taxes ...... (18.002) 3.009 3.316
Income tax and net worth taxes ...... 21 (1.725) (823) (796) Net (loss) income after taxes ...... (19.727) 2.186 2.520 Minority interest ...... 6 (101) (127) (129) Discontinued operations ...... 0 0 (1.752)
Net (loss) income for the period 19 (19.828) 2.059 639
Earnings per Share (1,12) 0,12 0,04
All amounts in thousands of EUR 4 Consolidated Balance Sheet
Assets
2004 2003 Note. Sept. 30. Dec. 31. Fixed assets
Intangible assets Long-term cost ...... 12 23.298 24.604 23.298 24.604 Operational assets Buildings and land ...... 42.490 42.109 Other operational assets ...... 30.799 31.763 13 73.289 73.872 Long-term investments Shares in other companies ...... 8-10 23.706 2.019 Bonds and loans ...... 4.081 2.109 Deferred tax assets ...... 15 1.951 3.410 29.738 7.538
Fixed assets 126.325 106.014
Current assets
Inventories Inventories ...... 16 114.279 100.836 114.279 100.836 Receivables Accounts receivable ...... 17 75.253 66.913 Other receivables ...... 20 13.316 16.181 Prepayments ...... 3.234 2.172 91.803 85.266 Bank deposits and cash Bank deposits and cash ...... 9.636 3.231 9.636 3.231
Current assets 215.718 189.333
Total assets 342.043 295.347
All amounts in thousands of EUR 5 September 30, 2004
Shareholders' Equity and Liabilities
2004 2003 Notes. Sept. 30. Dec. 31. Shareholders´ equity
Share capital ...... 18 17.710 17.571 Premium account of share capital ...... 5.473 23.759 Statutory reserve ...... 1.035 1.035 Translation reserves ...... (2.498) (3.167) Retained earnings ...... 0 1.305 Shareholders´ equity 19 21.720 40.503
Minority interest ...... 6 383 280
Obligations
Obligations Deferred tax liabilities ...... 22 910 743 Pension obligations ...... 23 2.039 2.004 Other obligations ...... 24 1.694 1.462 4.643 4.209 Long-term liabilities Long-term liabilities ...... 25 98.206 79.038 Current maturities ...... 26 (7.723) (7.728) 90.483 71.310 Current liabilities Bank loans...... 123.779 82.554 Current maturities of long-term debt...... 26 7.723 7.728 Other current liabilities...... 91.875 87.748 Accrued taxes payable...... 1.437 1.015 224.814 179.045
Liabilities and obligations 320.323 254.844
Total shareholders´ equity and liabilities 342.043 295.347
Leasing, mortgages and commitments ...... 27-30
All amounts in thousands of EUR 6 Consolidated Statement of Cash Flow January - September 2004
2004 2003 2003 Notes. Jan.-Sept. Jan.-Sept. Jan.-Dec. Cash flow from operating activities Net (loss) income for the period ...... (19.828) 2.059 639 Write-down of assets - SIF France s.a.s...... 33 14.100 0 0 Items not affecting cash Depreciation...... 14 7.176 5.874 8.405 (Profit) on sale of assets...... (463) (2.811) (2.804) Loss (earnings) from associates...... 9 102 (170) (177) Other calculated items...... 3.081 (701) (757) Working capital provided by operating activities 4.168 4.251 5.306
Write-down of assets - SIF France s.a.s., without ...... depreciation ...... 33 (10.210) 0 0 Changes in current assets and liabilities (14.922) (14.248) 17.055 Cash provided (to) by operating activities (20.964) (9.997) 22.361
Cash flow from investing activities Investment in fixed operational assets ...... 12,13 (8.907) (6.804) (9.954) Sale of fixed assets ...... 1.349 6.911 6.946 Bonds and loans, changes ...... (2.031) 1.420 1.429 Investment in subsidiaries ...... 0 (14.707) (14.707) Investment in other companies ...... 10 (23.449) (69) 0 Cash flow from investing activities (33.038) (13.249) (16.286)
Cash flow from financing activities Operational loans, changes ...... 40.438 21.700 (5.203) New long-term loans ...... 26.935 11.537 13.541 Installments on long-term loans ...... (7.546) (7.828) (15.079) Dividend paid ...... 0 (1.242) (1.242) Increase in share capitalisation ...... 0 273 273 Changes in own shares ...... 19 580 (448) (450) Cash flow from financing activities 60.407 23.992 (8.160)
Increase (decrease) in cash for the period ...... 6.405 746 (2.085) Cash at beginning of year ...... 3.231 5.316 5.316 Cash at end of period ...... 9.636 6.062 3.231
All amounts in thousands of EUR 7 Notes to the Consolidated Financial Statements
SIF Ltd.
1. SIF Ltd. is a seafood marketing and sales company. The company purchases seafood products for resale and also for further production in the company´s fish processing plants, where seafood products are produced for retail sales, restaurants and catering services.
SIF Ltd. and its subsidiaries operate fish processing plants in France, the United States, Canada, Great Britain, Spain and in Iceland. The company also operates sourcing and sales offices in Great Britain, Germany, Greece, Lithuania, Norway and Italy.
SIF Ltd. has defined the Group’s four core market areas, besides Iceland. They are France, Spain, Great Britain and the United States.
Change in currency
2. In accordance with Icelandic law nr. 25/2002 revising the Accounting Act nr. 145/1994, the Financial Statements Act nr. 144/1994, and the Income Tax and Net worth Tax Act nr. 75/1981, SIF Ltd. has decided to publish the Financial Statements of the Group in Euros. The reason being that the functional currency, or the currency of the environment in which the consolidated company operates is the currency Euro.
According to the aforementioned change in legislation, SIF Ltd. is permitted to publish its accounts in Euros from January 1, 2002.
Accounting Policies
3. The Interim Consolidated Financial Statements are prepared in accordance with law and generally accepted accounting principles in Iceland. In all other material respects the statements are consistent with the statements of the preceding year.
4. The items of the Income Statements of foreign subsidiaries, reporting in other currencies than Euro, are translated to Euro at the average exchange rate of the operating period, and Balance Sheet items other than stockholders’ equity are translated to Euro at the exchange rate at the end of the period.
5. Other accounting policies relating to individual items in the Interim Consolidated Financial Statements are listed in the following notes.
The Group
6. The Interim Consolidated Financial Statements incorporate the financial statements of SIF hf. the parent company and its subsidiaries. The Interim Consolidated Financial Statements have been prepared using the purchase method of consolidation accounting. When ownership in subsidiaries is less than 100%, the minority interest in the subsidiaries' income or loss and shareholders equity is accounted for in the calculation of the consolidated income or loss and the consolidated shareholders equity. One of the purposes of Consolidated Financial Statements is to show only the net external sales, expenses, assets and liabilities of the consolidated entities as a whole. Hence, intercompany transactions have been eliminated within the consolidated businesses in the presentation of the Interim Consolidated Financial Statements.
All amounts in thousands of EUR 8 Notes to the Consolidated Financial Statements
7. The Consolidated Financial Statements of SIF Ltd. pertain to the following subsidiaries: Share SIF Iceland Seafood Corporation USA...... 100% SIF Canada Ltd. Canada...... 100% SIF France s.a.s. France...... 100% Iceland Seafood s.a.s. France...... 100% SIF Norway a.s. Norway...... 100% SIF Iceland Seafood Ltd. UK...... 100% Lyons Seafoods Ltd. UK...... 100% SIF Iceland Seafood GmbH Germany...... 100% SIF Spain s.l. Spain...... 100% SIF Italia s.a. Italy...... 100% Zilia Holding n.v. Holland...... 100% Saltkaup Ltd. Iceland...... 100% Tros ehf. Iceland...... 100% Christiansen Partner a.s. Norway...... 98% SIF Hellas s.a. Greece...... 66%
Investments in associates
8. An associate is an enterprise over which SIF Ltd. is in a position to exercise influence, but not control through participation in the financial and operating policy decisions of the investee. Investments in associates are accounted for by the equity method of accounting, whereby the Company's share of the associated companies' profit or loss of the year is incorporated in the Consolidated Financial Statements. The Company's share in associated companies' equity is accounted for as Investments in associates in the Balance Sheet.
9. SIF Ltd. associated companies are, Palm Seafood p.f. in the Faroe Islands, in which a 50% share is held, Icebrit Ltd. of the UK, in which a 40% share is held and SH Ltd. in Iceland, in which a 23,16% share is held from the beginning of March 2004. The effect of the associated companies on the operations of the Company is € 102 thousand and this amount is accounted for as loss in the Consolidated Income Statement.
10. SIF Ltd. purchased in the beginning of March a 23,16% share in SH Ltd. in Iceland from Islandsbanki Ltd. and from that time SH Ltd. is accounted for as an investment in an associate. The price per share was 5,85 and the purchase price of the investment amounted to € 23.363 thousand. Goodwill arising from the purchase of SH Ltd. is to be amortized over the next ten years.
Long-term cost
11. Goodwill on shares which SIF Ltd. has bought in subsidiaries is accounted for as long-term cost. Goodwill corresponds to the difference between the purchase price and the Company's share in the book value of the equity of the subsidiaries. Start- up cost of the Company´s brands and software cost are also entered as long-term cost. The depreciation ratio of long term- cost is 4-20%.
12. The book value of long-term cost is as follow: Long-term cost 01.01.2004...... 24.604 Additions during the period...... 306 Exchange rate differences...... 53 Depreciation during the period...... (1.665) Long-term cost 09.30.2004...... 23.298
All amounts in thousands of EUR 9 Notes to the Consolidated Financial Statements
Fixed operational assets
13. Fixed operational assets and depreciation for the period are as follows: Buildings Other assets Total
Total value 01.01.2004...... 50.849 52.989 103.838 Previously depreciated...... (8.740) (21.226) (29.966) Book value 01.01.2004...... 42.109 31.763 73.872 Additions during the period...... 2.562 6.039 8.601 Revalued during the period...... 1.259 (1.259) 0 Exchange rate differences...... 501 262 763 Sales and disposals during the period...... (194) (352) (546) Depreciation during the period...... (3.747) (5.654) (9.401) Book value 09.30.2004...... 42.490 30.799 73.289
Annual depreciation ratio...... 2-6% 8-30%
Insurance value of buildings amounts to € 83.585 thousand and insurance value of other assets amounts to € 73.224 thousand January 1, 2004.
14. Depreciation according to Income Statement: Depreciation of fixed operational assets...... 9.401 Depreciation of long-term cost...... 1.665 Write-down of operational assets in SIF France s.a.s. (note 33.)...... (3.890) Depreciation in Income Statement...... 7.176
Deferred tax assets
15. Long-term investments include a deferred tax asset due to operating losses of SIF Ltd. subsidiaries. The inclusion of tax carry-forwards among assets is according to generally accepted accounting principles. The main item is a tax carry-forward of SIF Iceland Seafood Corp. in the USA.
Inventories
16. Product inventories are valued at cost price or market price, whichever is lower, and purchased goods at purchase price or market price, whichever is lower.
Accounts receivable
17. Accounts receivable are stated at nominal price, including interest, changes in exchange rates and a necessary reduction related to possible bad debts. This reduction is not a final write-off but an allowance account to meet possible losses.
All amounts in thousands of EUR 10 Notes to the Consolidated Financial Statements
Shareholders´equity
18. Capital stock is as follows: Ratio Nominal value
Total capital stock at the end of September 2004...... 100,00% 17.714 Treasury stock at the end of September 2004...... -0,02% (4) 99,98% 17.710
Issued capital stock at the end of September 2004 amounted to ISK 1.499,2 million (€ 17.714 thousand).
19. Shareholders´equity specifies as follows: Capital Premium Statutory Translation Other stock account reserve reserves equity
Shareholders´ equity 1.1.2004...... 17.571 23.759 1.035 (3.167) 1.305 Translation adjustment and other changes...... 669 (204) Changes in own shares...... 139 441 Loss for the period...... (19.828) Transfer from premium account...... (18.727) 18.727 Balance per 09.30.2004...... 17.710 5.473 1.035 (2.498) 0
20. Treasury stock, with a book value of € 2.665 thousand and nominal value of € 498 thousand are included as current assets in the statements of the company. This amount includes a forward contract with Islandsbanki Ltd. to purchase stock in SIF Ltd. and also stock owned by SIF Iceland Seafood Corp. in SIF Ltd. In August, SIF Ltd. transferred own shares in the nominal amount € 341 thousand to the Company's Managing Director (MD). The purchase price was 4,3 per share. Additionally, the MD received as a signing bonus € 21 thousand shares. Should the MD terminate his employment within 36 mounths of hiring, the MD will forfeit the signing bonus shares on a prorated basis.
Taxation
21. The income tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The consolidated company's current tax liability is calculated using the tax rates for each country.
Obligations
22. According to the Balance Sheet, the Group´s income tax liability at the end of September was € 910 thousand. The deferred income tax liability largely represents the timing difference in calculating taxable net earnings for income tax purposes and for accounting purposes, because expenses are generally entered earlier for income tax purposes than in the Financial Statements.
23. The SIF Group has contractual pension obligations. On the basis of actuarial calculations, it is estimated that the present net value of the obligations of the Group is € 2.039 thousand.
24. The SIF Group has other obligations amounting to € 1.694 thousands at the end of September. A major part of these obligations are from the subsidiary SIF France s.a.s.
All amounts in thousands of EUR 11 Notes to the Consolidated Financial Statements
Long-term liabilities
25. Long-term liabilities in currencies other than euro, are recorded at the exchange rate at the end of the period. Long-term liabilities classified by currency, are shown in the following schedule in € thousands:
2004 2003 Sept. 30. Dec. 31. Long-term debts in foreign currencies: Loans in EURO...... 74.630 66.026 Loans in GBP...... 11.674 0 Loans in USD...... 10.583 10.953 Loans in ISK...... 690 823 Loan in other currencies...... 629 1.236 98.206 79.038 Current maturities...... (7.723) (7.728) 90.483 71.310
26. Annual maturities of long-term liabilities at the end of September 2004 are as follows:
In 2004/2005...... 7.723 7.728 In 2005/2006...... 8.881 7.870 In 2006/2007...... 8.491 6.989 In 2007/2008...... 8.019 6.893 In 2008/2009...... 18.698 17.776 Later...... 46.394 31.782 98.206 79.038
Leasing
27. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risk and reward of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets at their cost value at the date of acquisition. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
28. An operational lease agreement has been made for production machinery and equipment at the SIF Iceland Seafood Corp. processing plant in the USA. At the end of the year 2003, the total outstanding balance for the contract period amounted to € 2.882 thousand, of which € 2.122 thousand are due in the year 2004. SIF France s.a.s. has made four operational lease agreements for machinery and equipment, with an outstanding balance of € 6.838 thousand at the year-end 2003. Payments due in the year 2004 amount to € 2.260 thousand. These agreements are not entered in the Balance Sheet.
Mortgages and commitments
29. Loans with an outstanding balance of € 16.214 thousand at the end of the year 2003 were secured with mortgages and pledges against assets of the SIF Group. The Parent Company is liable for loans granted to subsidiaries in the amount of € 43.475 thousand at the end of September 2004.
30. SIF Ltd. has made forward contracts to reduce risk in interest and currency rate changes. Obligations related to these contracts are entered in the Interim Consolidated Financial Statements at market value at the end of September 2004.
All amounts in thousands of EUR 12 Notes to the Consolidated Financial Statements
Other matters
31. Financial income and expenses are as follows: 2004 2003 2003 Jan.-Sept. Jan.-Sept. Jan.-Dec.
Financial income and exchange rate fluctuation...... 422 538 878 Financial expenses and exchange rate fluctuation...... (7.329) (6.592) (9.176) (Loss) gain from sales of shares in other companies...... (903) 2.367 2.367 (7.810) (3.687) (5.931)
32. Quarterly statements:
2004 2004 2004 2003 2003 July.-Sept. April-June Jan.-March Okt.-Des. July-Sept.
Net sales...... 165.955 161.707 183.438 193.658 156.206 Cost of goods sold...... (147.556) (146.136) (163.097) (175.896) (140.406) Gross profit...... 18.399 15.571 20.341 17.762 15.800
Net income before...... depreciation and financial items...... 2.593 2.218 6.375 5.075 3.477
Write-down of assets - SIF France .... (14.100)
(Loss) net income for the period...... (17.164) (3.371) 707 (1.420) (1.255)
33. After a thorough review of the financial situation of the subsidiary SIF France s.a.s. the assets of the company have been written down by € 14.100 thousand and that amount has been included as expense in these Interim Financial Statements.
International Financial Reporting Standards
34. In accordance with regulation on the publication of financial statements of listed companies on the Icelandic Stock Exchange, SIF Ltd. will adjust its financial reporting in accordance with International Financial Reporting Standards. The regulation applies to financial statements published after January 1, 2005. The company is in the process af adopting these standards, and the effect of changes on the company's equity is as yet not apparent.
All amounts in thousands of EUR 13 APPENDIX:
SÍF HF. FINANCIAL STATEMENTS 2003
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK THE FINANCIAL STATEMENTS ARE LOCATED BELOW
SIF Ltd.
Consolidated Financial Statements 2003
SIF Ltd. Fornubudum 5 220 Hafnarfjordur Iceland kt. 580293-2989
SIF Ltd.
Consolidated Financial Statements 2003
Contents.
Auditors’ Report...... 2 Statement by the Board of Directors and CEO .. 3 Income Statement...... 4 Balance Sheet ...... 5-6 Statement of Cash Flow ...... 7 Notes … ...... 8-14
1 Auditor’s Report
To the Board of Directors and Shareholders of SIF Ltd.
We have audited the accompanying Consolidated Balance Sheet of SIF Ltd. and subsidiaries as of December 31, 2003, and the related Consolidated Statement of Income and Cash Flow for the year then ended. These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. The Financial Statements of the foreign subsidiaries of SIF Ltd. were audited by other auditors.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our own audit and the audit reports on the Financial Statement of the foreign subsidiaries of SIF Ltd, the Consolidated Financial Statements give a true and fair view of the financial position of SIF Ltd. and subsidiaries as of December 31, 2003 and of the results of their operations and their cash flows for the year then ended in accordance with generally accepted accounting principles applied on a consistent basis.
Hafnarfjordur, March 3, 2004
Deloitte hf.
Halldor Arason, State Authorized Public Accountant sign
Dagbjartur Einarsson, Elected Company Examiner sign
2 Statement by the Board of Directors and CEO-President
The Consolidated Financial Statements are based on historical cost accounting and are prepared in accordance with law and generally accepted accounting principles in Iceland. The statements are in all material respects consistent with the statements of the preceding year. The statements are presented in Euros.
It is the opinion of the Board of Directors and CEO-President, that these Consolidated Financial Statements of the SIF Group present all the information necessary to show the financial position of the SIF Group on Desember 31, 2003, the operational result for the year and financial developments during the year 2003.
In July the purchase of the company Lyons Seafoods Ltd. was finalized. Lyons Seafoods is a leader in chilled seafood products in Britian and its annual turnover is estimated at about EUR 87 million. In September, SIF France s.a.s., a subsidiary of SIF Ltd., purchased a company in France, Terre Neuvas De FeCamp s.a.s. and the companies were consolidated as of the end of September 2003. Terre Neuvas is involved primarily in salting and smoking seafood products and the company´s products have been sold through SIF France, and thereby the consolidation has an insubstantial effect on the Group´s turnover.
SIF Ltd. has discontinued the operations of subsidiaries in Japan and Brazil. The company has also sold its shares in the Namibian company Seaflower Whitefish Ltd.
According to the Income Statement, total operating revenue of the Group amounted to € 675.470 thousand. Net profit on operations of the Group during the year amounted to € 639 thousand. Total assets of the Group according to the Consolidated Balance Sheet amounted to € 295.347 thousand and equity at year-end was € 40.503 thousand. The equity ratio at the year- end 2003 was 13,7%.
At the year-end 2003, shareholders in SIF Ltd. numbered 1.243. Three shareholders owned more than 10% of share capital: Sund Ltd. with a share of 18,53%, Ker Ltd. with a share of 14,63% and KB banki Ltd. with a share of 13,80%.
The Board does not recommend payment of dividend to shareholders in 2004. In other respect, reference is made to the Consolidated Financial Statements regarding changes in Shareholders’ Equity.
The members of the Board and CEO-President of SIF Ltd. hereby confirm the Consolidated Financial Statements for the year 2003 with their signatures.
Hafnarfjordur, March 3, 2004
Board
Olafur Olafsson Chairman of the Board Sign
Gudmundur Asgeirsson Aðalsteinn Ingolfsson Gudmundur Hjaltason sign sign sign
Gunnar Tomasson Jon Edvald Fridriksson Jon Kristjansson sign sign sign
Magnus Gauti Gautason Petur Hafsteinn Palsson sign sign
CEO-President
Orn Vidar Skulason sign
3 Consolidated Income Statement for the year 2003
2003 2002 Note. Jan.-Dec. Jan.-Dec.
Sales ...... 671.241 699.780 Cost of goods sold ...... (604.937) (641.346) 66.304 58.434 Commission and other income ...... 4.229 9.949 Gain on sale of assets ...... 437 4.368 70.970 72.751 Other expenses ...... (53.495) (52.647) Net income before depreciation and financial items ...... 17.475 20.104 Depreciation ...... 12-14 (8.405) (7.659)
Operating profit 9.070 12.445
Financial income and expense ...... 11,35 (5.931) (8.325) Earnings from associates ...... 10,11 177 1.338 Net income before taxes ...... 3.316 5.458
Income tax and net worth taxes ...... 21 (796) (779) Net income after taxes ...... 2.520 4.679 Minority interest ...... 6 (129) (105) Discontinued operations ...... 9 (1.752) 0
Net income for the year 19 639 4.574
Earnings per Share 0,04 0,26
All amounts in thousands of EUR 4 Consolidated Balance Sheet
Assets
2003 2002 Note. Dec. 31. Dec. 31. Fixed assets
Intangible assets Long-term cost ...... 12 24.604 19.277 24.604 19.277 Operational assets Buildings and land ...... 42.109 38.413 Other operational assets ...... 31.763 25.516 13 73.872 63.929 Long-term investments Shares in other companies ...... 10,11 2.019 2.962 Bonds and loans ...... 2.109 5.277 Deferred tax assets ...... 15 3.410 4.012 7.538 12.251
Fixed assets 106.014 95.457
Current assets
Inventories Inventories ...... 16 100.836 95.554 100.836 95.554 Receivables Accounts receivable ...... 17 66.913 77.883 Other receivables ...... 20 16.181 7.056 Prepayments ...... 2.172 1.820 85.266 86.759 Bank deposits and cash Bank deposits and cash ...... 3.231 5.316 3.231 5.316
Current assets 189.333 187.629
Total assets 295.347 283.086
All amounts in thousands of EUR 5 December 31, 2003
Shareholders´ Equity and Liabilities
2003 2002 Notes. Dec. 31. Dec. 31. Shareholders´ equity
Share capital ...... 18 17.571 17.572 Premium account of share capital ...... 23.759 23.935 Statutory reserve ...... 1.035 971 Translation reserves ...... (3.167) 0 Retained earnings ...... 1.305 3.275 Shareholders´ equity 19 40.503 45.753
Minority interest ...... 6 280 218
Obligations
Obligations Deferred tax liabilities ...... 22 743 829 Pension obligations ...... 23 2.004 1.928 Other obligations ...... 24 1.462 1.527 4.209 4.284 Long-term liabilities Long-term liabilities ...... 25 79.038 75.700 Current maturities ...... 26 (7.728) (8.186) 71.310 67.514 Current liabilities Bank loans...... 82.554 91.678 Current maturities of long-term debt...... 26 7.728 8.186 Other current liabilities...... 87.748 64.948 Accrued taxes payable...... 1.015 505 179.045 165.317
Liabilities and obligations 254.844 237.333
Total shareholders´ equity and liabilities 295.347 283.086
Mortages and commitments ...... 27-30
All amounts in thousands of EUR 6 Consolidated Statement of Cash Flow for the year 2003
2003 2002 Notes. Jan.-Dec. Jan.-Dec. Cash flow from operating activities Net income for the year ...... 639 4.574 Items not affecting cash Depreciation...... 14 8.405 7.659 Profit on sale of assets...... 11 (2.804) (4.368) Earnings from associates...... 10,11 (177) (1.338) Other calculated items...... (757) 561 Working capital provided by operating activities 5.306 7.088
Changes in current assets and liabilities 17.055 3.194 Cash provided by operating activities 22.361 10.282
Cash flow from investing activities Investment in fixed operational assets ...... 13 (9.954) (8.736) Sale of fixed assets ...... 6.946 5.327 Bonds and loans, changes ...... 1.429 (329) Investment in subsidiaries ...... 7 (14.707) (2.081) Investment in other companies ...... 0 (793) Cash flow from investing activities (16.286) (6.612)
Cash flow from financing activities Operational loans, changes ...... (5.203) (19.306) New long-term loans ...... 13.541 24.780 Installments on long-term loans ...... (15.079) (7.426) Dividend paid ...... 19 (1.242) (1.260) Increase in share capitalisation ...... 19 273 375 Changes in own shares ...... 19 (450) 54 Cash flow from financing activities (8.160) (2.783)
(Decrease) increase in cash for the period ...... (2.085) 887 Cash at beginning of year ...... 5.316 4.429 Cash at end of year ...... 3.231 5.316
All amounts in thousands of EUR 7 Notes to the Consolidated Financial Statements
SIF Ltd.
1. SIF Ltd. is a seafood marketing and sales company. The company purchases seafood products for resale and also for further production in the company´s fish processing plants, where seafood products are produced for retail sales, restaurants and catering services.
SIF Ltd. and its subsidiaries operate fish processing plants in France, the United States, Canada, Spain and in Iceland. The company also operates sourcing and sales offices in Great Britain, Germany, Greece, Lithuania, Norway and Italy. During the year, SIF Ltd. discontinued the operations of subsidiaries in Japan and Brasil.
SIF Ltd. has defined the Group’s four core market areas. Besides Iceland, they are France, Spain, Great Britain and the United States.
Change in currency
2. In accordance with Icelandic law nr. 25/2002 revising the Accounting Act nr. 14/1994, the Financial Statements Act nr. 144/1994, and the Income Tax and Net worth Tax Act nr. 75/1981, SIF Ltd. has decided to publish the Financial Statements of the Group in Euros. The reason being that the functional currency, or the currency of the environment in which the consolidated company operates is the currency Euro.
According to the aforementioned change in legislation, SIF Ltd. is permitted to publish its accounts in Euros from January 1, 2002.
Accounting Policies
3. The Consolidated Financial Statements are prepared in accordance with law and generally accepted accounting principles in Iceland. In all other material respects the statements are consistent with the statements of the preceding year.
4. The items of the Income Statements of foreign subsidiaries, reporting in other currencies than Euro, are translated to Euro at the average exchange rate of the operating period, and Balance Sheet items other than stockholders’ equity are translated to Euro at the exchange rate at the end of the period.
5. Other accounting policies relating to individual items in the Consolidated Financial Statements are listed in the following notes.
The Group
6. The Consolidated Financial Statements incorporate the financial statements of SIF hf. the parent company and its subsidiaries. Consolidated Financial Statements have been prepared using the purchase method of consolidation accounting. When ownership in subsidiaries is less than 100%, the minority interest in the subsidiaries' income or loss and shareholders equity is accounted for in the calculation of the consolidated income or loss and the consolidated shareholders equity. One of the purposes of Consolidated Financial Statements is to show only the net external sales, expenses, assets and liabilities of the consolidated entities as a whole. Hence, intercompany transactions have been eliminated within the consolidated businesses in the presentation of the Consolidated Financial Statements.
All amounts in thousands of EUR 8 Notes to the Consolidated Financial Statements
7. In July the purchase of the company Lyons Seafoods Ltd. was finalized and the operations of the company are included in the consolidated accounts as of July 20. In September, SIF France s.a.s., a subsidiary of SIF Ltd. purchased a company in France, Terre Neuvas De FeCamp s.a.s. and the companies were consolidated as of the end of September 2003. The effect of this purchase on the Consolidated Balance Sheet is as follows:
Intangible assets...... 3.955 Operational assets...... 14.456 Inventories...... 15.242 Accounts receivable...... 8.406 Other assets...... 3.486 Current liabilities...... (24.700) Long-term liabilities...... (6.138) Investment in subsidiaries...... 14.707
8. The Consolidated Financial Statements of SIF Ltd. pertain to the following subsidiaries: Share SIF Iceland Seafood Corporation USA...... 100% SIF Canada Ltd. Canada...... 100% SIF France s.a.s. France...... 100% Iceland Seafood s.a.s. France...... 100% SIF Norway a.s. Norway...... 100% SIF Iceland Seafood Ltd. UK...... 100% Lyons Seafoods Ltd. UK...... 100% SIF Iceland Seafood GmbH Germany...... 100% SIF Spain s.l. Spain...... 100% SIF Italia s.a. Italy...... 100% SIF Iceland Seafood Japan k.k. Japan...... 100% Zilia Holding n.v. Holland...... 100% Saltkaup Ltd. Iceland...... 100% Norðurhaf ehf. Iceland...... 100% Tros ehf. Iceland...... 100% Isalda Ltd. Iceland...... 100% Saltskip Ltd. Iceland...... 100% Christiansen Partner a.s. Norway...... 98% SIF Hellas s.a. Greece...... 66%
9. SIF Ltd has discontinued the operations of subsidiaries in Japan and Brasil. During the year 2004 there will be no operations of the subsidiaries Saltskip Ltd., Nordurhaf Ltd., and Isalda Ltd.
Investments in associates
10. An associate is an enterprise over which SIF Ltd. is in a position to exercise significant influence, but not control through participation in the financial and operating policy decisions of the investee. Investments in associates are accounted for by the equity method of accounting, whereby the Company's share of the associated companies' profit or loss of the year is incorporated in the Consolidated Financial Statements. The Company's share in associated companies' equity is accounted for as Investments in associates in the Balance Sheet.
11. SIF associated companies are, Palm Seafood p.f. in the Faroe Islands, in which a 50% share is held, Icebrit Ltd. of the UK, in which a 40% share is held and Seaflower Whitefish Corp. in Namibia, in which a 19,7% share was held until the end of June 2003 by SIF Ltd.'s subsidiary Isalda Ltd. The effect of the associated companies on the operations of the Company is € 177 thousand and this amount is accounted for as income in the Consolidated Income Statement.
All amounts in thousands of EUR 9 Notes to the Consolidated Financial Statements
In June, Isalda Ltd. sold its shares in Seaflower Whitefish to the Namibian development company, Fiscor, which is owned by the Namibian government. The profit from the sale amounted to € 2.030 thousand after taxes wheras € 2.367 thousand is accounted for as financial income and € 337 thousand is accounted for as an increase in calculated income tax for the year.
Long-term cost
12. Premium on shares which SIF Ltd. has bought in subsidiaries is accounted for as long-term cost. Premium corresponds to the difference between the purchase price and the Company's share in the book value of the equity of the subsidiaries. Start-up cost of the Company´s brands are also entered as long-term cost. The depreciation ratio of long term-cost is 4- 20%. The book value of long-term cost is as follow:
Long-term cost 01.01.2003...... 19.277 Acquired on acquistion of subsidiary...... 3.955 Additions and changes during the year...... 3.915 Exchange rate differences...... (283) Depreciation during the year...... (2.260) Long-term cost 12.31.2003...... 24.604
Fixed operational assets
13. Fixed operational assets and depreciation for the period are as follows:
Buildings Other assets Total
Total value 01.01.2003...... 44.128 37.078 81.206 Previously depreciated...... (5.716) (11.561) (17.277) Book value 01.01.2003...... 38.412 25.517 63.929 Acquired on acquistion of subsidiary...... 6.991 7.465 14.456 Additions during the year...... 3.015 6.939 9.954 Exchange rate differences...... (1.786) (429) (2.215) Sales, disposals and others changes during the year...... (2.469) (3.638) (6.107) Depreciation during the year...... (2.054) (4.091) (6.145) Book value 12.31.2003...... 42.109 31.763 73.872
Annual depreciation ratio...... 2-6% 8-30%
At the end of June, SIF France s.a.s. sold its seafood facilities in Boulogne Sur Mer and other assets in France for € 2.520 thousand.
Insurance value of buildings amounts to € 83.585 thousand and insurance value of other assets amounts to € 73.224 thousand January 1, 2004.
14. Depreciation according to Income Statement:
Depreciation of fixed operational assets...... 6.145 Depreciation of long-term cost...... 2.260 Depreciation in Income Statement...... 8.405
All amounts in thousands of EUR 10 Notes to the Consolidated Financial Statements
Deferred tax assets
15. Long-term investments include a deferred tax asset due to operating losses of SIF Ltd. subsidiaries. The inclusion of tax carry-forwards among assets is according to generally accepted accounting principles. The main item is a tax carry- forward of SIF Iceland Seafood Corp. in the USA.
Inventories
16. Product inventories are valued at cost price or market price, whichever is lower, and purchased goods at purchase price or market price, whichever is lower.
Accounts receivable
17. Accounts receivable are stated at nominal price, including interest, changes in exchange rates and a necessary reduction related to possible bad debts. This reduction is not a final write-off but an allowance account to meet possible losses.
Shareholders´equity
18. Capital stock is as follows: Ratio Nominal value
Total capital stock at the year-end...... 100,00% 17.714 Treasury stock at the year-end...... -0,81% (143) 99,19% 17.571
Issued capital stock at year-end amounted to ISK 1.499,2 million (€ 17.714 thousand) and during the year 2003 the company's capital stock was increased by ISK 8,2 million (€ 273 thousand) to fulfill employee stock option contracts.
19. Shareholders´equity specifies as follows: Capital Premium Statutory Translation Other stock account reserve reserves equity
Shareholders´ equity 1.1.2003...... 17.572 23.935 971 3.275 Translation adjustment and other changes...... (3.167) (1.303) Increase in capital stock...... 97 176 Changes in own shares...... (98) (352) Dividend paid...... (1.242) Net income for the year...... 639 Transferred to statutory reserve.... 64 (64) Balance per 12.31.2003...... 17.571 23.759 1.035 (3.167) 1.305
20. Treasury stock, with a book value of € 3.687 thousand and nominal value of € 779 thousand are included as current assets in the statements of the company. This amount includes a forward contract with Islandsbanki Ltd. as of March 15, 2004 to purchase stock in SIF Ltd. and also stock owned by SIF Iceland Seafood Corp. in SIF Ltd. The stock is to be sold in the near future.
All amounts in thousands of EUR 11 Notes to the Consolidated Financial Statements
Taxation
21. The income tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The consolidated company's current tax liability is calculated using the tax rates for each country.
Obligations
22. According to the Balance Sheet, the Group´s income tax liability at the year-end was € 743 thousand. The deferred income tax liability largely represents the timing difference in calculating taxable net earnings for income tax purposes and for accounting purposes, because expenses are generally entered earlier for income tax purposes than in the Financial Statements.
23. The SIF Group has contractual pension obligations. On the basis of actuarial calculations, it is estimated that the present net value of the obligations of the Group is € 2.004 thousand.
24. The SIF Group has other obligations amounting to € 1.462 thousands at year-end. A major part of these obligations are from the subsidiary SIF France s.a.s. During the year, a part of the obligations that were recognized in the financial statements of SIF France s.a.s. were settled, and in these statements the settlement of obligations amounting to € 825 thousands is accounted for as income in the Consolidated Income Statement..
Long-term liabilities
25. Long-term liabilities in currencies other than euro, are recorded at the exchange rate at the end of the period. Long- term liabilities classified by currency, are shown in the following schedule in € thousands:
2003 2002 Dec. 31. Dec. 31. Long-term debts in foreign currencies: Loans in EURO...... 66.026 59.177 Loans in USD...... 10.953 13.854 Loans in ISK...... 823 1.118 Loan in other currencies...... 1.236 1.551 79.038 75.700 Current maturities...... (7.728) (8.186) Long-term liabilities as of Desember 31, 2003...... 71.310 67.514
26. Annual maturities of long-term liabilities at the end of 2003 are as follows:
In 2004...... 7.728 In 2005...... 7.870 In 2006...... 6.989 In 2007...... 6.893 In 2008...... 17.776 Later...... 31.782 79.038
All amounts in thousands of EUR 12 Notes to the Consolidated Financial Statements
Leasing
27. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risk and reward of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets at their cost value at the date of acquisition. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
28. An operational lease agreement has been made for production machinery and equipment at the SIF Iceland Seafood Corp. processing plant in the USA. At the end of the year 2003, the total outstanding balance for the contract period amounted to € 2.882 thousand, of which € 2.122 thousand are due in the year 2004. SIF France s.a.s. has made four operational lease agreements for machinery and equipment, with an outstanding balance of € 6.838 thousand at the year- end 2003. Payments due in the year 2004 amount to € 2.260 thousand. These agreements are not entered in the Balance Sheet.
Mortgages and commitments
29. Loans with an outstanding balance of € 16.214 thousand at the end of the year 2003 were secured with mortgages and pledges against assets of the SIF Group. The Parent Company is liable for loans granted to subsidiaries in the amount of € 33.688 thousand.
30. SIF Ltd. has made forward contracts to reduce risk in interest and currency rate changes. Obligations related to these contracts are entered in the Consolidated Financial Statements at market value at the end of Desember 2003.
Salaries
31. Wages and related expenses are as follows: 2003 2002
Wages...... 44.779 39.211 Related expenses...... 11.335 10.372 56.114 49.583
Average number of employees...... 1.916 1.537
32. Management salaries, benefits, share options and shares owned: Salaries, Share Shares owned benefits options at year end Olafur Olafsson, Chairman of the Board...... 18 0 0 Fridrík Palsson, previous Chairman of the Board...... 70 0 0 Adalsteinn Ingolfsson, Vice Chairman...... 12 0 0 Eight other members of the Board...... 62 0 28 Gunnar Orn Kristjansson, President and CEO...... 336 5 22 Three other Executives...... 491 21 15 989 26 65
33. Gunnar Orn Kirstjansson, President and CEO of SIF Ltd. resigned from his position as the company's CEO in January 2004. According to employment contract, Gunnar is entitled to salary until August 2007. The total obligation, which includes salary, benefits and salary related expenses amounts to € 936 thousands and this amount is recognized in the financial statements of the company in the year 2003.
All amounts in thousands of EUR 13 Notes to the Consolidated Financial Statements
Other matters
34. Fees to Auditors 2003
Audit of financial statements...... 279 Review of interim financial statements...... 122 Other services...... 158 559
The amount includes payments to elected auditors of all twenty companies within the consolidation.
35. Financial income and expenses are as follows: 2003 2002 Jan.-Dec. Jan.-Dec.
Financial income and exchange rate fluctuation...... 878 3.288 Financial expenses and exchange rate fluctuation...... (9.176) (11.613) Gain from sales of shares in other companies...... 2.367 0 (5.931) (8.325)
International Financial Reporting Standards
36. In accordance with regulation on the publication of financial statements of listed companies on the Icelandic Stock Exchange, SIF Ltd. will adjust ist financial reporting in accordance with International Financial Reporting Standards. The regulation applies to financial statements published after January 1, 2005. The company is in the process af adopting these standards, and the effect of changes on the company's equity is as yet not apparent.
All amounts in thousands of EUR 14 APPENDIX:
ÍSLENSK ÞÝÐING TILKYNNINGAR TIL FJÁRFESTA OG ALMENNRA UPPLÝSINGA UM ÚTBOÐ OG SKRÁNINGU
HÉR Á EFTIR FER ÞÝÐING Á KÖFLUNUM ”NOTICE TO INVESTORS” OG ”II OFFERING AND LISTING OF SHARES” Í ÚTBOÐS- OG SKRÁNINGARLÝSINGU HÉR AÐ FRAMAN. EF EITTHVERT ÓSAMRÆMI REYNIST MILLI ENSKA TEXTANS Í LÝSINGUNNI OG ÍSLENSKRAR ÞÝÐINGAR Í VIÐAUKA HENNAR, ÞÁ SKAL ENSKI TEXTINN RÁÐA.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK THE TRANSLATION (“ÞÝÐING”) IS LOCATED BELOW
Tilkynning til fjárfesta
Útboðs- og skráningarlýsing þessi varðar útboð á nýju hlutafé í SÍF hf. og skráningu þess í Kauphöll Íslands hf. Gert er ráð fyrir að útboðið muni afla SÍF hf. 230 milljónum evra með útgáfu 5.400.000.000 hluta að hámarki. Hinir nýju hlutir verða skráðir á Aðallista Kauphallar Íslands hf. þar sem áður útgefnir hlutir SÍF hf. eru skráðir fyrir. Fyrirtækjaráðgjöf Kaupþings Búnaðarbanka hf. er umsjónaraðili útboðs og skráningar.
Efnt er til útboðsins í tengslum við yfirtöku SÍF hf. á Financière de Kiel SAS og Teamcap SAS. Eini tilgangur Teamcap SAS er eignarhald hlutabréfa í Financière de Kiel SAS. Í útboðs- og skráningarlýsingu þessari er farið með Teamcap SAS sem hluta af Financière de Kiel SAS en ekki sem sjálfstætt félag. Financière de Kiel SAS er móðufélag Labeyrie SAS, Blini SAS, Farne Salmon and Trout Limited og dótturfyrirtækja þeirra, sem saman mynda samstæðu sem nefnd er Labeyrie Group í þessari útboðs- og skráningarlýsingu.
Yfirtakan er gerð með fyrirvara um samþykki franskra samkeppnisyfirvalda og að fjármögnun kaupanna verði lokið fyrir 17. desember 2004. Það er því gert að skilyrði fyrir útgáfu nýrra hluta vegna útboðsins að samþykki franskra samkeppnisyfirvalda liggi fyrir innan þeirra tímamarka. Engin trygging er fyrir því að frönsk samkeppnisyfirvöld samþykki yfirtökuna. SÍF hf. getur án samráðs skuldbundið sig til aðgerða til að koma til móts við frönsk samkeppnisyfirvöld, óski yfirvöldin þess. Andvirði útboðsins verður greitt á geymslureikning og verður í vörslu Kaupþings Búnaðarbanka hf. uns úrskurður franskra samkeppnisyfirvalda liggur fyrir eða þar til í síðasta lagi 17. desember 2004. Ef frönsk samkeppnisyfirvöld samþykkja yfirtökuna fyrir tilskilinn frest verður andvirðið greitt til SÍF hf. sem á móti mun gefa út hina nýju hluti og afhenda fjárfestum. Ef frönsk samkeppnisyfirvöld samþykkja ekki yfirtökuna fyrir tilskilinn frest verður andvirði útboðsins endurgreitt með vöxtum til fjárfesta.
Þegar vísað er til “útgefandans” (e. “the issuer”) í útboðs- og skráningarlýsingunni er átt við SÍF hf. kt. 580293-2989. Þegar að vísað er til “SÍF hf.”, “SIF Group”, “samstæðunnar” (e. “the Group”) og “félagsins” (e. “the Company”) er átt við SÍF hf. og dótturfyrirtæki þess og rekstur þeirrar samstæðu eftir yfirtökuna á Financière de Kiel, nema annað sé augljóst frá samhengi textans.
Þegar vísað er til “Labeyrie Group” í útboðs- og skráningarlýsingunni er átt við Financière de Kiel SAS. og dótturfyrirtæki þess og rekstur þeirrar samstæðu nema annað sé augljóst frá samhengi textans.
Þegar vísað er til “umsjónaraðila” (e. “the manager”) í útboðs- og skráningarlýsingunni er átt við Fyrirtækjaráðgjöf Kaupþings Búnaðarbanka hf., kt. 560882-0419, nema annað sé augljóst frá samhengi textans.
Þegar að vísað er til “Kauphallar Íslands” (e. “Iceland Stock Exchange”) og “ICEX” í útboðs- og skráningarlýsingunni er átt við Kauphöll Íslands hf., kt. 681298-2829, nema að annað sé augljóst frá samhengi textans.
Hlutafjárútboð SÍF hf. og skráning hlutafjáraukningar fer fram samkvæmt íslenskum lögum og reglum. Útboðs- og skráningarlýsing þessi er unnin í samræmi við gildandi lög og reglugerðir ásamt reglum Kauphallar Íslands hf. sem gilda um skráningu í kauphöllinni. Útboðs- og skráningarlýsingin er útbúin á ensku. Kauphöll Íslands hf. hefur yfirfarið lýsinguna og samþykkt útgáfu hennar á ensku, með birtingu viðauka (e. “Appendix”) sem inniheldur íslenska þýðingu á köflunum “Tilkynning til hluthafa” (e. “Notice to investors”) og “II Útboð og skráning hluta” (e. “II Offering and listing of shares”). Ef eitthvert ósamræmi reynist milli enska textans í lýsingunni og íslenskrar þýðingar í viðauka hennar, þá skal enski textinn ráða.
Við gerð útboðs- og skráningarlýsingarinnar var leitast við að veita á skýran og greinargóðan hátt upplýsingar um samstæðu SÍF hf. og hlutabréf útgefin af félaginu. Fjárfestum er bent á að skoða yfirlýsingar útgefanda, umsjónaraðila og endurskoðenda varðandi lýsinguna. Fjárfestar eru hvattir til að kynna sér efni lýsingarinnar af kostgæfni sem og viðauka hennar. Sérstaklega er bent á umfjöllun í kafla um áhættuþætti (e. Risk factors).
Upplýsingar sem veittar eru í skráningarlýsingunni byggjast á forsendum sem eru fyrir hendi á útgáfudegi hennar. Þessar forsendur geta breyst eftir útgáfudag hennar og þar til bréfin hafa verið skráð. SÍF hf. mun tilkynna Kauphöll Íslands hf. og birta viðauka við útboðs- og skráningarlýsinguna ef fram koma nýjar upplýsingar sem geta skipt máli við mat á SÍF hf. eða hlutabréfum félagsins á umræddu tímabili. Fjárfestum er því ráðlagt að kynna sér allar opinberar upplýsingar frá SÍF hf. á tímabilinu en treysta ekki eingöngu á upplýsingar í útboðs- og skráningarlýsingunni.
Heimildir upplýsinga í útboðs- og skráningarlýsingunni eru m.a. viðamiklum áreiðanleikakönnunum sem unnar voru á samstæðu Financière de Kiel SAS og samstæðu SÍF hf. Áreiðanleikakannanirnar voru unnar af PricewaterhouseCoopers í París og Reykjavík (fjárhagur og markaðsmál), Clifford Chance (lögfræðileg könnun), Landwell í Reykjavík (lögfræðileg könnun), Landwell í París (skattamál), Environ (umhverfismál). Aðrar upplýsingar í skráningarlýsingunni eru úr fréttatilkynningum félaganna, ársskýrslum,
vefsíðum og/eða fengnar beint frá stjórnendum SÍF hf. Heimildir áreiðanleikakannana eru m.a. opinber gögn, ársskýrslur, stjórnendur og viðamikil áreiðanleikakönnun Earnst and Young á Labeyrie Group í mars 2004. Vegna markaðsgreiningar í áreiðanleikakönnun voru frekari upplýsingar sóttar til CIFOG, Conoscan via CIFOG, TNS Secodip, IRI Secodip, Sofres Survey, AC Nielsen, the Portuguese Fishing Ministry, Panorama, Eurostat, The Sea Fish Industry Authority, Defra, Mapa, Spanish Ministry of Agriculture, Alimarket, National Marine Fisheries Service, US Food Marketing System, HM Johnson & Associates and Seafax. Kaupþing Búnaðarbanki hf. hefur ekki sannreynt frumgögn áreiðanleikakannana.
Útboðs- og skráningarlýsingu þessa má undir engum kringumstæðum skoða eða túlka sem loforð af hálfu útgefanda, umsjónaraðila eða annarra um árangur í rekstri eða um ávöxtun fjármuna. Fjárfestar eru minntir á að hlutabréfakaup eru í eðli sínu áhættufjárfesting sem byggist á væntingum en ekki loforðum. Fjárfestar verða fyrst og fremst að treysta eigin dómgreind vegna fjárfestingar í hlutabréfum SÍF hf. og taka tillit til starfsumhverfis félagsins, hagnaðarvonar, ytri aðstæðna og þeirrar áhættu sem felst í fjárfestingunni sjálfri. Fjárfestum er ráðlagt að leita ráðgjafar sérfræðinga, svo sem hjá bönkum, sparisjóðum og verðbréfafyrirtækjum, til aðstoðar við mat á hlutabréfum SÍF hf. sem fjárfestingarkosti. Fjárfestum er ráðlagt að kynna sér lagalega stöðu sína, þar á meðal skattaleg atriði sem kunna að varða kaup eða sölu á hlutabréfum í SÍF hf.
Fyrirtækjaráðgjöf Kaupþings Búnaðarbanka hf. er umsjónaraðili hlutafjárútboðsins og skráningar. Athygli er vakin á frekari hagsmunum Kaupþings Búnaðarbanka hf. þar sem hann sölutryggir útboðið og er fjárfestingarbanki SÍF hf. Kaupþing Búnaðarbanki hf. hefur verið ráðgjafi SÍF hf. við yfirtökuna á Labeyrie Group auk þess að annast fjármögnun yfirtökunnar og endurfjármögnun samstæðunnar sem nemur samtals 548,7 milljónum evra. Bankinn átti 7,3% hlut í SÍF hf. þann 12 nóvember 2004.
Fjárfestar eru minntir á að SIF hf. hefur tilkynnt að félagið mun birta ársuppgjör fyrir 2004 í tíundu viku 2005, eða milli 28. febrúar og 4. mars.
II ÚTBOÐ OG SKRÁNING HLUTA
Útgefandi og seljandi SÍF hf. Kt. 580293-2989 Höfðuðstöðvar: Fornubúðir 5, 220 Hafnarfjörður, Ísland Sími: +354 550 8000
Starfsemi útgefanda SIF Group er Evrópskur matvælaframleiðandi sem einbeitir sér að framleiðslu kældra sjávarafurða og veislumatvæla. Framtíðarmarkmið SIF Group er að vera leiðandi í sölu og markaðssetningu á úrvali hágæða matvöru á sínum lykilmörkuðum. Áhersla er ýmist á eigin vörumerki eða á sölu undir merkjum smásöluaðila og ræðst það af markaðsumhverfi. Félagið vill vera áhugaverður vinnustaður fyrir hæfileikaríkt og metnaðarfullt starfsfólk sem er framsýnt, áreiðanlegt og þjónustulundað. Tilgangur SÍF hf. er, samkvæmt grein 1.04 í samþykktum félagsins, að annast verslun með sjávarafurðir og aðrar matvörur, að eiga og reka fyrirtæki sem hafa með höndum framleiðslu, sölu og dreifingu á matvælum og annan skyldan atvinnurekstur, rekstur fasteigna og annað sem eðlilegt er að félagið hafi með höndum.
SÍF hf. var stofnað í júlí 1932 sem Samband Íslenskra Fiskframleiðanda og var breytt í hlutafélagið SÍF hf. þann 1. mars 1993. SÍF hf. er skráð á Íslandi og starfar í samræmi við hlutafélagalög nr. 2/1995. Starfsemi félagsins fellur undir ýmis lög og reglur, svo sem tilskipanir Evrópusambandsins um útflutning og innflutning á sjávarafurðum. Alþjóðleg lög varða starfsemi félagsins, þar á meðal lög og reglugerðir um fyrirtæki í þeim löndum sem dótturfyrirtæki SÍF hf. eru skráð og lög og reglugerðir um innflutning sjávarafurða og annarra matvæla til þeirra landa sem félagið selur vörur sínar til.
Umsjónaraðili Umsjónaraðili útboðsins og skráningar á Aðallista Kauphallar Íslands hf. Annar söluaðili hlutafjár Kaupþing-Búnaðarbanki hf. – Fyrirtækjaráðgjöf Kaupþing Búnaðarbanki hf. – Markaðsviðskipti Kt. 560882-0419 Kt. 560882-0419 Heimilisfang: Borgartún 19, 105 Reykjavík, Ísland Heimilisfang: Borgartún 19, 105 Reykjavík, Ísland Símanúmer +354 444 6000 Símanúmer +354 444 6000
Skráning Útboðs- og skráningarlýsing þessi varðar útboð á nýjum hlutum í SÍF hf. að hámarki 5.400.000.000 krónur að nafnverði og skráningu þeirra á Aðallista Kauphallar Íslands hf. Kauphöll Íslands hf. hefur samþykkt skráninguna. Andvirði útboðsins í krónum talið ræðst af gengi íslensku krónunnar gagnvart evru þar sem með útboðinu er fyrirhugað að safna 230 milljónum evra. Dagsetning skráningar hinna nýju hluta verður tilkynnt á fréttavef Kauphallar Íslands hf. að útboði loknu en stefnt er að skráningu í síðasta lagi þann 21. desember 2004.
Heildarhlutafé SÍF hf. fyrir hlutafjárútboðið er samtals að nafnverði 1.499.216.526 krónur sem skiptist í jafnmarga hluti og er allt skráð á Aðallista Kauphallar Íslands hf. Hlutabréf SÍF hf. hafa verið skráð á Aðallista Kauphallar Íslands hf. frá 20. mars 1997. Viðskiptalota bréfanna er 10.000 hlutir. Viðskiptalota er minnsti fjöldi hluta sem þarf fyrir þátttöku í verðmyndun í viðskiptakerfi Kauphallar Íslands hf. Auðkenni hlutabréfa félagsins í viðskiptakerfi Kauphallar Íslands hf. er “SIFI”. Ekki er stefnt að skráningu í annarri kauphöll.
Viðskiptavakt Landsbanki íslands hf. hefur, samkvæmt samningi við SÍF hf., annast viðskiptavakt á bréfum félagsins frá 1. ágúst 2003. Lágmark kaup- eða sölutilboða er 250 þúsund krónur að nafnverði og hámark heildarviðskipta á dag er 3,5 milljónir króna að nafnverði. Munur á kaup- og sölutilboðum er að hámarki 3% þar til að viðskiptavaktin hefur náð hámarki heildarviðskipta dagsins.
Eftir útgáfu hinna nýju hluta stefna SÍF hf. og Kaupþing Búnaðarbanki hf. að því að skrifa undir samning um viðskiptavakt með bréf SÍF hf. Stefnt er að því að lágmark kaup- og sölutilboða á dag og hámark heildarviðskipta á dag verði töluvert hærri en samningur um núverandi viðskiptavakt segir til um og að munur kaup og sölutilboða verði ekki hærri en samkvæmt þeim samningi.
Hlutafjáraukning vegna útboðs Á hluthafafundi SÍF hf. þann 6. nóvember 2004 var stjórn SÍF hf. veitt heimild til að auka hlutafé félagsins um allt að 5.400.000.000 krónur að nafnverði með sölu nýrra hluta í útboði. Heimildin gildir til 30. júní 2004. Hluthafar féllu frá forgangsrétti. Stjórn félagsins ákvað þann 14. nóvember 2004 að bjóða fjárfestum nýja hluti með það að markmiði að nýta ofangreinda heimild að hluta eða heild. Í kjölfarið fer fram hlutafjárútboð sem lýst er í þessari útboðs- og skráningarlýsingu.
Tilgangur og markmið útboðsins Tilgangur útboðsins er að fjármagna yfirtöku SÍF hf. á Labeyrie Group og að endurfjármagna SIF Group. Útgefandinn leggur áherslu á að ná í útboðinu til sterks hóps stofnana- og fagfjárfesta.
Fyrirvari hlutafjáraukningar Yfirtaka SÍF hf. á Financière de Kiel SAS er gerð með fyrirvara um samþykki franskra samkeppnisyfirvalda og að fjármögnun kaupanna verði lokið fyrir 17. desember 2004. Það er því gert að skilyrði fyrir útgáfu nýrra hluta vegna útboðsins að samþykki franskra samkeppnisyfirvalda liggi fyrir innan þeirra tímamarka. Engin trygging er fyrir því að frönsk samkeppnisyfirvöld samþykki yfirtökuna. SÍF hf. getur án samráðs skuldbundið sig til aðgerða til að koma til móts við frönsk samkeppnisyfirvöld, óski yfirvöldin þess. Andvirði útboðsins verður greitt á geymslureikning og verður í vörslu Kaupþings Búnaðarbanka hf. uns úrskurður franskra samkeppnisyfirvalda liggur fyrir eða til 17. desember í síðasta lagi. Ef frönsk samkeppnisyfirvöld samþykkja yfirtökuna fyrir tilskilinn frest verður andvirðið greitt til SÍF hf. sem á móti mun gefa út hina nýju hluti og afhenda fjárfestum. Ef frönsk samkeppnisyfirvöld samþykkja ekki yfirtökuna fyrir tilskilinn frest verður andvirði útboðsins endurgreitt með vöxtum til fjárfesta.
Stærð útboðs og verðbil Nýtt hlutafé að markaðsvirði 230 milljónir evra verður boðið á verðbilinu 4,5 til 5,5 krónur á hlut. Að hámarki mun útboðið nema 5.400.000.000 hlutum.
Sölutrygging, skuldbindingar og söluhömlur Umsjónaraðili útboðsins hefur samþykkt að sölutryggja allt útboðið á verðinu 4,0 krónur á hlut.
Ker hf., Vátryggingarfélag Íslands hf., Samvinnulífeyrissjóðurinn sem saman eiga 31,3% hlut í SÍF hf. hafa skuldbundið sig til að taka þátt í útboðinu með viljayfirlýsingu um kaup að markaðsvirði 104 milljónir evra á því útboðsgengi sem ákveðið verður. Þar af er skuldbinding Kers hf. 80 milljónir evra og hefur Ker hf. einnig skuldbundið sig til að selja ekki þá hluti sem það kaupir í útboðinu í næstu 12 mánuði eftir útgáfu þeirra.
Kaupþing Búnaðarbanki hf. hefur skuldbundið sig til þátttöku í útboðinu með viljayfirlýsingu um kaup að markaðsvirði 71 milljón evra á því útboðsgengi sem ákveðið verður.
Komi til verulegrar eftirspurnar umfram þær 55 milljónir evra sem eftir standa af heildarandvirði útboðsins eftir ofangreindar skuldbindingar, þá getur komið til skerðingar á skuldbundnum hlut Kaupþings Búnaðarbanka hf.
Lágmarksáskrift Í útboðinu getur fjárfestir að lágmarki skráð sig fyrir 5.000.000 krónum að kaupverði.
Söfnun viljayfirlýsinga, 22.-23. nóvember 2004 Umsjónaraðili getur með söfnun viljayfirlýsinga veitt útgefanda ráðgjöf um ákvörðun útboðsgengis sem endurspeglar sem best markaðsvirði félagsins og ákvörðun um hvort hækka eigi útboðsfjárhæð. Áður en kemur að söfnun viljayfirlýsinga mun Fyrirtækjaráðgjöf Kaupþings Búnaðarbanka hf. kynna útboðið fyrir mögulegum fjárfestum og á söfnunartímabili viljayfirlýsinga kanna áhuga fjárfesta til að skuldbinda sig til áskriftar í væntanlegu hlutafjárútboði á því verðbili sem nefnt er að ofan. Áhugasömum fjárfestum er einnig bent á að hafa samband við Markaðsviðskipti Kaupþings Búnaðarbanka hf. að Borgartúni 19 í Reykjavík eða í síma +354 444 6000, ætli þeir að leggja fram viljayfirlýsingar til þátttöku í fyrirhuguðu hlutafjárútboði. Form viljayfirlýsinganna er ekki staðlað.
Skráning viljayfirlýsinga hefst mánudaginn 22. nóvember 2004 klukkan 09.00 og lýkur skráningu þriðjudaginn 23. nóvember 2004 klukkan 16.00. Ekki verður tekið á móti viljayfirlýsingum eftir að skráningartímabili lýkur. Útgefandi getur hvenær sem er ákveðið að stytta skráningartímabil eða sleppa því, allt eftir viðbrögðum fjárfesta.
Vegna þess hve SÍF hf. er mikilvægt að fá í hluthafahópinn aðila sem hafa burði og vilja til að styðja við félagið í framtíðinni áskilur stjórn félagsins sér allan rétt til að taka til greina eða virða að vettugi þær viljayfirlýsingar sem berast á söfnunartímabilinu, að öllu leyti eða að hluta, án þess að gefa sérstaka skýringu þar á eða tilkynna sérstaklega. Stjórnin mun að öðru leyti leggja til grundvallar ákvörðun um úthlutun áskriftarskuldbindinga, samkvæmt eigin mati, það gengi og þá fjárhæð sem fjárfestar eru reiðubúnir að skrá sig fyrir, hversu tímanlega viljayfirlýsingar berast, áreiðanleika og gæði fjárfesta og það markmið að ná fram sterkri og hæfilega
dreifðri eignaraðild. Komi fram umfram áhugi á söfnunartímabilinu er stjórn einnig heimilt að hafna hluta fjárhæða í viljayfirlýsingum eða úthluta með öðrum hætti.
Niðurstaða söfnunartímabilsins verður tilkynnt í fréttakerfi Kauphallar Íslands fyrir kl. 10.00 miðvikudaginn 24. nóvember 2004.
Útboðsgengi, heildarfjárhæð og gengi krónu gagnvart evru Útboðsgengi og heildarnafnverð útboðsins ákveður stjórn SÍF hf. þann 24. nóvember 2004 eftir að hafa ráðfært sig við umsjónaraðila útboðsins þegar söfnun viljayfirlýsinga er lokið. Ákvörðun stjórnar mun taka mið af þeim viljayfirlýsingum sem berast á söfnunartímabili viljayfirlýsinga og af almennum markaðsaðstæðum.
Ákveðið hefur verið að markaðsvirði hlutafjárútboðsins nemi 230 milljónum evra. Hlutabréfin verða seld á verðbilinu 4,5 til 5,5 krónur á hlut og greiðsla þeirra verður í íslenskum krónum. Andvirði útboðsins í krónum talið ræðst af gengi íslensku krónunnar gagnvart evru þar sem með útboðinu er fyrirhugað að safna 230 milljónum evra.
Endanlegt útboðsgengi, heildarnafnverð útboðsins og viðmiðunargengi krónu gagnvart evru verður tilkynnt með viðauka við útboðs- og skráningarlýsinguna. Viðaukinn verður birtur í fréttakerfi Kauphallar Íslands hf. fyrir klukkan 10.00 þann 24. nóvember 2004 og mun fylgja útboðs- og skráningarlýsingunni eftir þann tíma.
Úthlutun áskrifta í hlutafjárútboðinu, 24 nóvember 2004 Stjórn SÍF hf. ákveður miðvikudaginn 24. nóvember 2004 hvernig áskriftum í fyrirhuguðu útboði verður úthlutað. Úthlutunin eftir að niðurstaða söfnunartímabilsins liggur fyrir. Þeir fjárfestar sem gefa viljayfirlýsingar um þátttöku í útboðinu og sem ekki verður hafnað af stjórn munu fá tilkynningu um úthlutun. Umsjónaraðili mun tilkynna fjárfestum um úthlutun áskrifta þann 24. nóvember 2004 fyrir klukkan 17.00.
Skuldbindingar til áskrifta, 24 nóvember 2004 Skuldbindingum til áskrifta skal skilað eftir úthlutun áskrifta og eigi síðar en klukkan 19.00 þann 24. nóvember 2004.
Allar skuldbindingar til áskrifta skulu gerðar á þar til gerð eyðublöð í viðauka útboðs- og skráningarlýsingar sem bera heitið “Skuldbinding til áskriftar og umboð” (e. Undertaking to Subscribe and Proxy). Með skuldbindingunni veitir fjárfestir Kaupþingi Búnaðarbanka hf. fullt og ótakmarkað umboð til að skrá áskrift viðkomandi í fyrirhuguðu útboði ef skilyrði útboðsins er uppfyllt.
Skuldbindingar til áskrifta skulu afhentar í umslagi merktu “SÍF hf. - Hlutafjárútboð” í afgreiðslu Kaupþings Búnaðarbanka hf. að Borgartúni 19 í Reykjavík eða senda með faxi merktu samkvæmt framansögðu í faxnúmer +354 444 6809 og skal þá staðfesting á móttöku fengin frá umsjónaraðilaum móttöku fyrir tilskilinn frest og frumrit póstlagt til umsjónaraðila í umslagi merktu samkvæmt framansögðu.
Áskriftarskuldbindingar samþykktar, 24 nóvember 2004 Samningur kemst á milli útgefanda og fjárfestis þegar útgefandi samþykkir áskriftarskuldbindinguna. Það mun hann gera 24. nóvember 2004. Útgefandi áskilur sér rétt til að krefjast þess að fjárfestir leggi fram tryggingu fyrir greiðslu sem útgefandi metur fullnægjandi. Útgefandi áskilur sér rétt til að hafna skuldbindingu að fullu eða hluta ef fjárfestir skuldbindur sig til áskriftar fyrir annarri fjárhæð en úthlutun hans segir til um.
Greiðsla og geymslureikningur Fjárfestum sem skuldbinda sig til áskrifta í útboðinu sem útgefandi samþykkis ber að greiða í samræmi við áskriftarskuldbindingu eigi síðar en klukkan 16.00 föstudaginn 3. desember 2004. Greiðslu ber að inna af hendi til Kaupþings Búnaðarbanka hf. á reikning 300- 26-1020, kt. 560882-0419. Berist greiðsla ekki á gjalddaga má innheimta skuldina með þeim hætti sem lög og samþykktir SÍF hf. heimila. Í stað þess að grípa til innheimtuaðgerða áskilur útgefandi sér einnig rétt til að fella einhliða úr gildi áskriftarskuldbindingar sem ekki eru greiddar á gjalddaga og endurúthluta áskrift að eigin vali.
Andvirði útboðsins verður haldið á geymslureikningi í vörslu Kaupþings Búnaðarbanka hf. þar til úrskurður franskra samkeppnisyfirvalda liggur fyrir, en þó ekki lengur en til 17. desember 2004. Ef frönsk samkeppnisyfirvöld samþykkja yfirtökuna fyrir 17. desember 2004 verður andvirðið greitt til SÍF hf. sem á móti mun gefa út nýtt hlutafé og afhenda þátttakendum í útboðinu. Ef frönsk samkeppnisyfirvöld samþykkja ekki yfirtökuna fyrir 17. desember verður andvirði útboðsins endurgreitt ásamt vöxtum til fjárfesta. Vextir eru reiknaðir frá greiðsludegi fjárfestis til endurgreiðsludags. Vextir eru 1WK Reibid – 10 bpt, það er tilboðsvextir á íslenskum millibankamarkaði til einnar viku í senn að frádregnu 0,1%.
Afhending hlutabréfa Nýir hlutir verða gefnir út á rafrænu formi hjá Verðbréfaskráningu Íslands hf. að því gefnu að skilyrði hlutafjárútboðsins hafi verið uppfyllt. Útgefnir hlutirnir verða afhentir kaupendum sama dag og þeir verða skráðir á Aðallista Kauphallar Íslands hf. að því gefnu að SÍF hf. hafi borist greiðsla með réttum hætti. Gert er ráð fyrir að skráningin verði eigi síðar en þriðjudaginn 21. desember 2004.
Frekari hlutfjárhækkun samhliða hlutafjárútboði Á hluthafafundi SÍF hf. 6. nóvember 2004 veittu hluthafar stjórn félagsins heimild til að hækka hlutafé félagsins um allt að 160.000.000 krónur að nafnverði með útgáfu nýrra hluta sem yrðu seldir á genginu 4,32 krónur fyrir hlut til starfsmanna og annarra aðila sem tengjast rekstri félagsins. Heimildin gildir til 30. júní 2005. Hluthafar féllu frá forgangsrétti. Greiðsla er heimil í öðru formi en peningum. Stjórn SÍF hf. ákvað þann 14. nóvember 2004 að nýta þessa heimild að hluta eða öllu leyti ef skilyrði framangreinds hlutafjárútboðs að fjárhæð 230 milljónir evra verður uppfyllt. Tilgangur þessarar samhliða hlutafjáraukningar er að greiða með hlutum í SÍF hf. fyrir hluti í Teamcap SAS. Síðarnefndu hlutirnir eru í eigu starfsmanna Financière de Kiel SAS og dótturfyrirtækja þess. Teamcap SAS er eignarhaldsfélag um hlut starfsmanna í Financière de Kiel SAS. Stjórnendur Labeyrie Group hafa skuldbundið sig til að kaupa nýja hluti í SÍF hf. að andvirði 7.247.500 evrur á genginu 4,32 krónur fyrir hlut samkvæmt þessari samhliða hlutafjáraukningu. Stjórnendur Labeyrie Group hafa skuldbundið sig til þess að selja ekki hlutina fyrstu 24 mánuðina eftir útgáfu þeirra.
Kostnaður og fjárstreymi Kostnaður hlutafjáraukningar, útboðs og skráningar er áætlaður um 3,6% af heildarandvirði hlutafjáraukningar. Þar er einkum um að ræða þóknun til umsjónaraðila og stimpilgjald til ríkissjóðs (0,5% af nafnverði hlutafjáraukningar). Einnig er um að ræða kostnað við útgáfu hjá Verðbréfaskráningu Íslands hf. og skráningu hjá Kauphöll Íslands hf., auglýsinga- og prentunarkostnað. Kostnaðurinn fellur að fullu á SÍF hf.
Útboðið er sölutryggt og er áætlað að fjárstreymi SÍF hf. vegna útboðsins verði um 221,7 milljónir evra. Lýsing á ráðstöfun fjármagnsins er að finna hér að framan í kaflanum “Tilgangur og markmið útboðsins”.
Ekki er um að ræða fjárstreymi til SÍF af hlutafjárhækkun samhliða útboði.
Upplýsingar Útboðs- og skráningarlýsingu ásamt þeim gögnum sem vitnað er til má nálgast hjá umsjónaraðila, söluaðila og útgefanda.
SÍF hf. Heimilisfang: Fornubúðir 5, 220 Hafnarfjörður, Ísland Sími: +354 550 8000
Kaupþing Búnaðarbanki hf. – Fyrirtækjaráðgjöf / Kaupþing – Búnaðarbanki hf. – Markaðsviðskipti Heimilisfang: Borgartún 19, 105 Reykjavík, Ísland Sími: +354 444 6000
Útboðs- og skráningarlýsinguna má einnig nálgast á vefsíðu Kaupþings Búnaðarbanka hf., www.kbbanki.is eða www.kaupthing.net, sem og á heimasíðu SÍF hf., www.sif.is eða www.sifgroup.com
APPENDIX:
UNDERTAKING TO SUBSCRIBE AND PROXY FORM
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK THE FORM IS LOCATED BELOW
Undertaking to Subscribe and Proxy Form SÍF hf. – Share Offering - November/December 2004 The undersigned (hereinafter referred to as the investor, bidder or parties that have undertaken to subscribe) hereby undertakes to subscribe for share capital in the Share Offering of SÍF hf. (hereinafter also referred to as the issuer), ID-No. 580293-2989, Fornubúdir 5, 220 Hafnafjördur, Iceland, for the amount specified below and at the price specified below, in accordance with the terms specified below. This undertaking to subscribe represents an offer by the investor and is binding for that party. However, the undertaking to subscribe is not binding for the Issuer until the Board of Directors (BoD) of the Issuer has approved the undertaking.
Nominal value (ISK) X Price = Purchase value (ISK)
Please complete with CAPITAL LETTERS
Name of the bidder ID-No.
Legal domicile, postal code and city
Fax number E-mail address
The Investor declares that he has familiarized himself with the terms and other aspects of the Prospectus of SÍF hf., including the right of the Issuer to refuse undertakings to subscribe in full or in part, if the Investor does not undertake to subscribe for the allocated amount in the offering which he has been allocated according to the book building period and process. Parties who have expressed an interest in participating in the offering by means of a declaration thereon and who have not been refused by the Issuer shall be allocated a specific amount according to a decision of the BoD of the Issuer, no later than 24 Nov. 2004. The Prospectus of the Issuer is considered part of this undertaking to subscribe list. The Investor declares that he has familiarized himself with the terms and other aspects of the Prospectus of SÍF hf. including the Pre-Condition for the Offering, payment into an escrow account and proxy to Kaupthing Bank hf. to subscribe for the shares on behalf of the investor if the Pre-Conditions are met.
The Investor confirms that he has the necessary knowledge of business and finance to be able to assess the investments which he has committed to subscribe for and to assess the risk involved in such investments. The undersigned has specifically familiarized himself with the risk involved in buying the Issuer’s shares.
No verbal agreements are valid between the Issuer and the Investor concerning the rights of the Investor in this undertaking to subscribe, and the Investor undertakes to subscribe for share capital from the Issuer, only on the basis of information contained in the prospectus and not other information which the Investor may have received, e.g. from the Issuer or the underwriter of the offering.
Any dispute arising from this undertaking to subscribe may be heard before Reykjavík District Court (Héradsdómur Reykjavík). This undertaking to subscribe is governed by Icelandic law.
An Investor signing on behalf of legal entities guarantees that he is authorized to obligate the legal entity in this undertaking to subscribe.
This subscription form must be signed and have reached Kaupthing Bank hf.’s, fax no. +354 444 6809, Borgartún 19, 105 Reykjavík before 7:00 p.m. GMT on Wednesday 24 November 2004, and confirmation of its receipt shall be sent by Kaupthing Bank hf. to the Investor before 8:00 p.m. GMT on the same day.
If the undertaking to subscribe by the Investor is approved then the committed amount shall be paid to Kaupthing Bank hf. no later than 4:00 p.m. (GMT) on 3 December into account number 300-26-1020, Id. no. 560882-0419. If payment is not made on the due date, the debt may be collected in accordance with the law and the company’s Articles of Association. Instead of resorting to collection measures, the Issuer also reserves the right to invalidate unilaterally subscriptions which have not been paid by the due date and to allocate the subscription at the Issuer’s discretion.
In the event that Pre-Conditions are not met and subsequently the payment including interest shall be deposited into the investors account, the following investor’s account shall be used:
Account number: ______- ______- ______
The shares which the Investor subscribes for and then acquires will be delivered to the buyer with a provisional confirmation of ownership after the condition for the Offering has been met. The shares will be electronically registered at the Icelandic Securities Depository two days after the Pre- Conditions are met. If the Pre-Conditions are met on the last possible day then the shares will be electronically registered at the Icelandic Securities Depository on 21 December 2004.
The Investor hereby gives irrevocable proxy to Kaupthing Bank hf. to subscribe in SÍF hf.’s Share Offering, for the amount the investor has specified according to this Undertaking to Subscribe and Proxy Form and according to the terms and other aspects of the Prospectus of SÍF hf. of November/December 2004.
Place and date On behalf of Undertaker to Subscribe
This Prospectus concerns the Offering of new share capital in SÍF hf., which is expected to raise m 230 million through the issue of new Shares with a maximum nominal value of ISK 5.4 billion. The Offering is made in connection with the Company’s acquisition of Financière de Kiel SAS. Financière de Kiel SAS is the parent company of Labeyrie SAS, Blini SAS and Farne Salmon and Trout Limited and their subsidiaries, that together form the Labeyrie Group.
SÍF hf. shares are listed on the Main List of the Iceland Stock Exchange.
Kaupthing Bank hf. – Investment Banking is the manager of the Share Offering and listing.