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SAR-26/13

MERCATOR, d.d., Ljubljana

Mercator Group generated in the first half of 2013 nearly EUR 1.4 billion revenue

Pursuant to the Rules and Regulations of the Ljubljana Stock Exchange, d.d, and the relevant legislation, the company Poslovni sistem Mercator, d.d., hereby informs the shareholders and the public of the following:

 

In the period 1-6 2013 Mercator Group generated revenue in the amount of EUR 1,356 million, which is 3.3% below the figure for the first half of last year. Lower revenue is primarily the result of difficult economic conditions and structural changes in shopping habits of consumers due to a decline in purchasing power. Net loss of Mercator Group is declining and was in the first half of the year lower by fifths compared to the loss generated in the equivalent period last year. Savings of Mercator Group in the first half of 2013 amounted to EUR 18.6 million and will exceed planned value by the end of the year.

 

In the period 1-6 2013 Mercator Group generated revenue in the amount of EUR 1,356 million, which is 3.3% below the figure for the first half of last year. Lower revenue is in particular a result of slow economic activity and lower sale of seasonal products due to uncharacteristic weather during the first months of this year's spring. The drop in revenue could be explained with exit from markets of Bulgaria and Albania and partial closure of retail units; also the drop in revenue was realized on our largest market, in Slovenia (3.8%), while the largest drop was realised in Croatia. On the second largest market, in Serbia, revenue rose by 4.2%.

Operating costs were lower by EUR 18.6 million in the first half of 2013 compared to the costs generated in the equivalent period last year. Additional cost rationalization in the area of cost of material and services will be implemented, as well as consolidation of suppliers and complexity of assortment.

We exited form the market of Albania in the end of 2012, while in Bulgaria last retail unit was closed on July 1, 2013. Consistently with the medium-term strategy, activities of companies Intersport, Modiana, and Tehnika (technical consumer goods) in the markets of Serbia, Croatia, and Bosnia and Herzegovina were transferred to the their respective parent companies, and merger of these in Croatia and Serbia.

In real estate management, after stopping the monetization project, we prepared an overview of our real estate portfolio and focused the majority of activities in the dispose of non-core property, and in the expansion our retail network where the payback period for our investments is the shortest. In the period 1-6 2013 we invested EUR 10.2 million, which is 73% less compared to last year.

Mercator Group managed to decrease net financial debt by EUR 17.6 million compared to December 31, 2013, and it now amounts to EUR 990 million. An important step in ensuring a solid basis for negotiations on the long-term Mercator Group financing structure was signing a pre-negotiation agreement by all Mercator Group companies and the creditor banks. With this agreement the maturity of principals of all finance liabilities is postponed until December 31, 2013. The final agreement on the long-term financing structure of Mercator Group is expected to be signed to this date.

Mercator Group results from operating activities in the period 1-6 2013 amounted to EUR 11.3 million. The decrease is a result of lower revenue that could not be entirely offset by the measures implemented to cut operating costs. Despite the lower revenue, positive results from operating activities stands witness to a healthy condition of Mercator's core activity, i.e. fast-moving consumer goods retail. Further implementation of cost rationalization measures allowed us to notably decrease the costs in the period at hand to at least partially compensate for the poorer performance resulting from lower sales. The latter had an impact on negative result for the period 1-6 2013, amounting to EUR -15.1 million.

Mercator Group will continue with the strategy of intensive adaptation of marketing activities to the needs and desires of our customers. Therefore, in the fall, first stores refurbished by the new concept Mercator neighbour will be opened in Slovenia. We will continue with competitive offer of renewed brands and private label products and with the offer of high-quality fresh local products within the project Local produce.

 

Business report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period 1-6 2013 is attached.

 

 

This announcement will be published on the company’s website at www.mercator.si as of August 27, 2013, and will remain posted for a period of at least five years.

Poslovni sistem Mercator, d.d.
Management Board
Date: 27.08.2013