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INI-1015/18

MERCATOR, d.d., Ljubljana

Mercator Group plans include in particular significant deleveraging to ensure further development

Pursuant to the provisions of the Ljubljana Stock Exchange (Ljubljanska borza d.d.) and the relevant legislation, the company Poslovni sistem Mercator d.d., Ljubljana, hereby makes the following announcement:

 

For 2019, Mercator Group is planning above all to further execute its development strategy in which deleveraging remains key. The Business Plan for 2019, approved yesterday by Mercator's Supervisory Board, takes into account the key business facts regarding the Group's operations. For 2019, Mercator Group is budgeting revenue of EUR 2.1 billion and EBITDA at EUR 91 million. The key characteristic of operations and performance in 2019 will be especially growth of all costs in all markets, including costs of energy, material and services, and in particular labour costs, also due to changes in legislation. According to estimates, costs could increase by as much as 3.2%; therefore, it will be very important to continue strict control of all costs in 2019. 

In its strategic plan for the period until 2021, Mercator Group highlights deleveraging as a key goal. In the period from May 2016 to April 2017 when the new Management Board was appointed, the ratio between net debt and normalized EBITDA was at 15.1; for the end of 2019, the Group is planning to bring this ratio down to 4.8. This goal, the accomplishment of which will have highly positive effects on business performance and especially further development of the Group, will be attained especially with monetization projects that the Group will continue in 2019. Mercator Group still owns nearly EUR 1.3 billion worth of real property, not counting the monetization projects already carried out. In 2019, Mercator will actively continue the project of constructing a new logistics and distribution centre in Ljubljana.

The material increase of all types of costs will affect the gross cash flow from operating activities (EBITDA) that is budgeted at around EUR 91 million at the Group level in 2019, which means it is expected to be on a par with the 2017 figure. Mercator Group revenue for 2019 is planned at EUR 2.1 billion. Despite the stringent business conditions and pronounced increase of new sales area operated by competitors in all markets where Mercator is present, Mercator will succeed, with a number of measures, to increase in 2019 its revenue of permanent units in retail (active units in 2018 and 2019) by 2 percentage points, while also increasing the revenue in non-core activities (wholesale and technical consumer goods) by additional 4 percentage points.

Mercator Group's investments for 2019 are budgeted at EUR 35 million, of which nearly 78% will be allocated to investment in Slovenia. Mercator Group is planning to open around 12,000 m2 of new retail area in 2019. Thus, Mercator will continue in the next year to update its stores, while a new concept of assortment that places even more stress on fresh food departments will remain Mercator's fundamental direction towards consumers and its competitive edge. Thus, Mercator will continue to pursue the mission of being the best local retailer in every market of its operations.

 

As of December 20, 2018, 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 5 years.

Poslovni sistem Mercator d. d.
Management Board
Date: 20.12.2018