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

In the first half of 2017, Mercator Group successfully pursued its revised business strategy. Mercator Group's profit exceeded the figure in the first half of 2017 from the same period of the year before by a factor of 2.67, amounting to EUR 10.4 million. Mercator Group EBITDA increased to EUR 58.3 million in the first half of 2017, improved performance is also evident in higher EBITDA margin which rose by as much as 11.0% relative to the same period prior year, or by 15.0% adjusted for divested activities.

Measures have already yielded results

Mercator successfully continues to execute its measures for business performance, such as introduction of a new store concept, refurbishment of many stores, improvement of competitiveness of our services, and adaptation of our sales assortment. Mercator Group remains focused on its core activity, sale of fast-moving consumer goods, and further improvement of profitability, which remains its key goal. Successful pursuit of measures is already evident in the business performance for the first half of 2017.

Improved performance efficiency

Mercator Group's profit exceeded the figure in the first half of 2017 from the same period of the year before by a factor of 2.67, amounting to EUR 10.4 million; in the same period of the year before, it was at EUR 3.9 million. Mercator Group EBITDA was at EUR 58.3 million in the first half of 2017. In the corresponding period of the preceding year, it amounted to EUR 57.1 million or EUR 52.0 million if the divested operations are not accounted for. Performance improvement is also evident in higher EBITDA margin which rose by 11.0% relative to the same period of the year before, or by 15.0% adjusted for divested activities. Moreover, EBITDA was higher for the company Poslovni sistem Mercator, d.d., amounting to EUR 35.2 million, or EUR 3.5 million more than in the equivalent period prior year. For this reason, EBITDA margin is higher by 17.4% relative to the same period of the year before. The drop of revenue in respective markets was primarily a result of divestment of non-core operations of Modiana and Intersport in 2016, optimization of wholesale channels, and closing down of some stores based on a decision of the country's regulator in Serbia.

Positive trends

Core activity had a positive effect on the Mercator Group revenue. In the markets of Slovenia and Montenegro, our revenue from sales of goods was higher relative to the same period last year. In the Serbian market, retail revenue was lower, especially due to closing down of the units in compliance with the market regulator's decision; however, the current trends are positive. Mercator's business performance is stable. Mercator remains a regular and reliable payer to partners and suppliers. Management Board  of the company Poslovni sistem Mercator, d.d., is also active in the field of minimizing the risks associated with the position of Agrokor in Croatia.

Accelerated retail network updates

Mercator is intensely adapting to the rapid changes in the market, primarily through the diversification of sales formats. Thus, the year 2017 will be marked by modernizing of the retail network and focusing on consumers. In the first half of the year the biggest Mercator's acquisition in the field of investment in the retail network was the newly built Trade Centre Bled with a supermarket and additional premises to be leased out to third parties.

Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period 1–6, 2017 is attached herewith.

As of August 31, 2017, this announcement will also be posted on the company website at www.mercatorgroup.si where it shall remain available for a period of no less than 10 years.