Iceland - comment

Iceland released its Q2 results, which were slightly below expectations, driven by slightly lower prices, increased marketing and timing of lease payments. The Company makes the point that most of the shortfall has already been recovered in Q3.  Leverage continues to fall to just above 4.0x on an IFRS16 and FRS 102 basis.  This is reflected in recent rating action where Iceland was upgraded to B2 from B3 in August.  

The outlook remains bullish, and with further store expansion and improving top-line sales, the Company are guiding to reduce both Gross and Net debt over the next 12-18 months.  

We still own Iceland bonds but with the recent 3 months compression in yields from 9.5% to 6.5% the trade is coming to an end.