Hagar Q1 2025/26 presentation: profit jumps 37%, SMS acquisition boosts results

Introduction & Market Context

Icelandic retail conglomerate Hagar hf. (ICE:HAGA) reported a strong start to its fiscal year 2025/26, with first-quarter profit jumping 37.1% year-over-year. The company presented its results on June 26, 2025, highlighting improved performance across its diverse portfolio of retail, grocery, and fuel businesses in Iceland and the Faroe Islands.

The company’s shares closed at 99.25 ISK on the presentation day, up 2.77% or 2.75 ISK. The stock has been trading in a 52-week range of 78.5 to 111 ISK, suggesting investors have been responding positively to the company’s growth trajectory.

Hagar’s performance comes against a backdrop of relatively stable economic conditions in Iceland, with inflation at 3.8% in May 2025, a strengthening Icelandic króna against the US dollar, and declining oil prices – all factors that management identified as beneficial to the company’s operations.

Quarterly Performance Highlights

Hagar reported substantial improvements across all key financial metrics for Q1 2025/26, with results exceeding management expectations. The integration of P/F SMS, which became part of the Hagar group in Q4 2024/25, contributed significantly to the year-over-year growth.

As shown in the following key performance indicators:

Sales reached 48.1 billion ISK, representing a 9.2% increase compared to the same period last year. EBITDA grew even more impressively at 25.9% to reach 4.0 billion ISK. The company’s bottom line showed the strongest improvement, with profit rising 37.1% to 1.2 billion ISK.

Profitability metrics also improved substantially, with gross profit margin expanding by 2.5 percentage points to 24.1%, while the salary and cost ratio decreased by 1.7 percentage points to 16.4%. The company maintained a solid financial position with an equity ratio of 36.7%, up 1.1 percentage points from the previous year.

Detailed Financial Analysis

The detailed income statement reveals the drivers behind Hagar’s improved performance:

Gross profit increased by 21.8% to 11.6 billion ISK, outpacing the 9.2% growth in sales. This margin expansion was attributed to the integration of SMS and lower oil prices, while the gross profit margin in grocery stores remained stable.

Operating expenses increased proportionally with the business expansion, with wages and payroll-related expenses up 21.7% and other operating expenses rising 22.8%. Despite these increases, the company managed to improve its EBITDA margin, demonstrating effective cost management.

The profit margin trend over recent years shows consistent improvement:

Cash flow generation remained strong, with 5.4 billion ISK in cash flow from operations, a 38.8% increase from the previous year. This robust cash generation supported the company’s investment activities of 1.3 billion ISK while still allowing for a significant increase in cash reserves.

Hagar maintained a strong balance sheet with total assets of 108.2 billion ISK and equity of 39.7 billion ISK as of May 31, 2025. The company’s financial position improved with a 3% increase in equity compared to February 28, 2025.

Key financial ratios demonstrate Hagar’s improving financial health, with return on equity reaching 25.3% and the equity ratio at 36.7%:

Segment Performance

Hagar’s operations are divided into three main segments: Stores and Warehouses in Iceland, Olís (fuel retail), and Stores and Warehouses in the Faroe Islands.

The Stores and Warehouses segment in Iceland, which includes Bónus, Hagkaup, and other retail operations, delivered a strong performance:

This segment generated 33.6 billion ISK in revenue, up 6.9% year-over-year, with segment profit increasing by 19.2% to 1.7 billion ISK. The profit margin for this segment improved to 5.1% from 4.6% in the previous year.

Bónus, Hagar’s discount grocery chain, reported a 7.2% increase in revenue to 24 billion ISK, driven by a 7% rise in store visits. The company attributed this growth to its strong business model, expanded product selection including a new line of ready-to-eat meals, and successful weekly promotions.

Hagkaup, the company’s premium grocery and department store chain, saw sales increase by 9% to 6.4 billion ISK, with improved store attendance and expansion of its online store. The chain’s party products performed particularly well, with sales increasing by more than 60%.

The Olís segment showed mixed results:

While revenue decreased by 13.1% to 11.4 billion ISK due to lower global oil prices, EBITDA increased by 4% to 798 million ISK. The company noted that despite selling fewer liters of fuel, the performance of its service stations continued to strengthen.

The newly integrated Stores and Warehouses segment in the Faroe Islands contributed significantly to overall results:

This segment generated 3.8 billion ISK in revenue with an impressive EBITDA margin of 13.9% and segment profit of 183 million ISK (4.8% of revenue). The company noted that SMS stores showed consistent performance across all main operating divisions.

Forward-Looking Statements

Hagar’s management expressed optimism about the company’s outlook, stating that operations have started well this year with generally positive prospects. The company benefits from a favorable economic environment and operating conditions.

The earnings per share have continued to increase, reaching 5.84 ISK for the trailing twelve months:

Excluding one-time fair value changes in the Faroe Islands following the acquisition, earnings per share increased by more than 22% compared to the same period last year.

The company’s share price has shown positive momentum, with major shareholders including several Icelandic pension funds:

With its diversified portfolio of retail operations in both Iceland and the Faroe Islands, strong financial performance, and solid balance sheet, Hagar appears well-positioned to continue its growth trajectory through the remainder of fiscal year 2025/26.

Full presentation:

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