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 announces the following:

In this year's first quarter, Mercator Group increased its normalized EBITDAR (earnings before interest, taxes, depreciation and amortization, and rents) by 1.7% relative to the equivalent period of last year. In the first three months of the year, Mercator Group generated nearly EUR 500 million of sales revenue, while the results from operating activities (EBIT) for the period reached EUR 9.6 million, which is an increase of 5.6% over the same period of the preceding year. By monetizing its real property, Mercator also repaid a considerable portion of its financial debt. This year, Mercator celebrates its 70th anniversary, and in Slovenia, it is still synonymous for local retailer.

Information on performance in this year's and last year's first quarter is not entirely comparable, since a new international accounting standard came into effect on January 1, 2019, which affects the results from operating activities (EBIT). Mercator Group and the company Poslovni sistem Mercator d.d. opted for the modified retrospective approach regarding the International Financial Reporting Standard (IFRS) 16. The new standard defines the principles of recognition, measurement, presentation, and disclosure of rents, and it stipulates that the lessees, or tenants, shall recognize in their financial statements the present value of all future rental payments according to their effective lease agreements. Thus, there is no longer a distinction between operating and financial lease. Most other large enterprises with a large portfolio of leased commercial real estate decided for a similar approach. Comparable net financial debt to normalized EBITDA ratio was thus decreased from 7.2x as at the end of 2018 to 6.1x as at March 31, 2019. Hence, Mercator Group is successfully pursuing its strategy that includes reduction of the Group's debt as a key aspect.

Sales revenue in the first quarter at the Mercator Group level is consistent with the budget; however, it is 3.1% lower than in the equivalent period of last year, mostly due to different timing of Easter that was celebrated in March last year, but in April this year; and due to opening of new retail area by our competitors in Serbia at the end of last year.

In the first quarter, revenue of the company Poslovni sistem Mercator d.d. increased over the same period of last year, mostly due to successful execution of its Value Creation Plan that is focused on differentiation of offer and further development of Mercator's key competitive advantages. In the market of Montenegro, Mercator was also successful in its optimization efforts; the greatest revenue growth, however, was recorded in the market of Bosnia and Herzegovina, which is mostly a result of partner relations with suppliers and successful implementation of the best practices from other markets.

In addition to solid financial statements for the first quarter and successful monetization, it is also important for Mercator that it launched the call for bids for developing the project documentation for its new logistics and distribution centre (LDC) in Ljubljana. The process will be completed presumably by the end of June 2019 with the selection of the building designer for the new LDC.

In late May, Mercator Group companies and VTB Bank (Europe) SE signed the contract documentation for refinancing of the Mercator Group's super-senior facility. By signing the contract documentation, VTB has expressed its solid support and confidence in the success of the Mercator Group's operations. Refinanced super-senior facility, amounting to EUR 80 million, at considerably better terms, is an important part of the pursuit of Mercator's long-term strategy.

Still ahead in this year for Mercator is the gradual transfer of the healthy cores of Agrokor Group companies to the new company Fortenova grupa d.d. Prerequisites for the transfer of the company Poslovni sistem Mercator d.d. to the new company Fortenova grupa d.d. include above all consent (waiver) by Mercator's creditor banks.

As of May 31, 2019, this announcement will also be posted on the company website at www.mercatorgroup.si where it shall remain for a period of no less than 5 years.