Mercator Group Reports Profit in the First Quarter Despite Numerous Constraints

In accordance with the Rules and Regulations of the Ljubljana Stock Exchange and applicable laws, the company Poslovni sistem Mercator d.d. Ljubljana hereby informs shareholders and the public of the following:

In the first quarter of 2021, the normalized EBITDA of the Mercator Group increased by 7.4 percent, reaching 47.3 million euros for the period. The Group ended the first quarter with a net profit of 3.1 million euros, which is an increase of 183.9 percent compared to the equivalent period of the previous year. This confirms its clear development strategy and success despite all the constraints due to the COVID-19 epidemic.  Retail revenue, the core business of Mercator, increased by as much as 8.9 percent in the first quarter compared to the same period in 2019, before the coronavirus pandemic.

– Positive trends are the result of the successful implementation of our business strategy and all initiatives that have led to the achievement of our business goals. In recent years, we have managed to renew 60 percent of our retail network and have invested significantly in our services, prices, and personalized offers. The growth of our market share is a result of these efforts. Along with successful results in terms of EBITDA and net profit, the Mercator Group has also further reduced its financial leverage, as net financial debt decreased by 5.5 percent compared to the previous year. We have also continued with planned investments in the first quarter, which will further ensure the successful development of the Group – emphasized Tomislav Čizmić, CEO of Mercator.

The impact of the COVID-19 epidemic continued during the first quarter of 2021. The Mercator Group and all its companies successfully adapted to all measures taken by governments in all significant markets of the Group’s operations. During the adaptation, the Group continued to follow its key responsibilities (ensuring safety for employees and customers, responsibility for the supply chain), and business results indicate that the Group successfully fulfilled its responsibility for uninterrupted and efficient operations. Successful results are certainly also a result of the efforts and motivation of employees who invest a lot of knowledge, experience, and effort into their work. During the crisis period, the Mercator Group also responsibly provided job security, not only within the company but also along the supply chain.

Sales and Rental

Revenue from sales and rentals of the Mercator Group amounted to 507.8 million euros, a decrease of 4.3 percent. In the same period last year, revenue growth was exceptionally high due to the first wave of the COVID-19 epidemic (total revenue growth of 10.8 percent and revenue from sales growth of 14.1 percent), while part of the revenue decline is due to measures adopted by governments in the region aimed at curbing the epidemic in 2021 (closure of technical consumer goods businesses M Tehnika, closure of schools, restaurants, accommodation industry) resulting in a decline in Mercator’s wholesale revenue. In comparison, retail revenues, or revenues from the Group’s core business, increased by as much as 8.9 percent during this period compared to 2019.

The Mercator Group continued with planned activities such as the construction of a new logistics-distribution center in Ljubljana, expansion of the business network, and monetization of real estate. Thus, the Supervisory Board approved the key terms of sale and leaseback of five commercial properties of Mercator (land with existing non-functional buildings) and 22 existing commercial properties, thereby approving the project for the construction of new commercial properties that will have a positive effect on the level of debt and particularly contribute to increasing the share of retail space in Slovenia.

Integration into the Fortenova Group

At the end of the first quarter of 2021, key activities related to the integration of Mercator into the Fortenova Group were taking place. Thus, at the end of March, Sberbank transferred 1,123,803 shares or 18.53 percent of the total share capital of Mercator from Sberbank to Fortenova Group TopCo.

In early March 2021, the Supervisory Board of Mercator approved a financial arrangement with the Fortenova Group for the restructuring of Mercator’s financial obligations maturing in June 2021. This also satisfied the last key prerequisite for the transfer of Mercator’s shares from Agrokor to the Fortenova Group.

At the end of March 2021, Mercator signed an amended and supplemented agreement with VTB Europe regarding the maturity of priority debt of 80 million euros. This amendment included a three-month extension of the repayment period to provide a stable framework for completing the debt refinancing agreement at a broader Group level. The amendment also provided a framework for extending the maturity until September 2021 and for an additional 20 million euros of existing priority debt.

Thus, all conditions for the transition of the Mercator Group to the Fortenova Group have been met, which would provide Mercator with a stable and financially successful owner who will ensure the further successful development of the Mercator Group.

{embed_digitalno_izdanje}{/embed_digitalno_izdanje}