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 informs the shareholders and the public of the following:

Mercator Group sales revenue in the first half of 2020 increased by 4.4% compared to the same period of the preceding year, and amounted to EUR 1.06 billion. Mercator Group's retail revenue in the period was up 7.4% and its normalized EBITDA increased by 1.7%. The company Poslovni sistem Mercator d.d., as Mercator Group's largest company, saw its core activity sales revenue increase by 8.2% relative to the same period last year, while its total sales revenue rose by 4.8%. Regardless of the most recent property revaluation that resulted in an increase of equity on the one hand and a decrease in net income on the other, Mercator Group still owns property with a combined total value of EUR 1 billion.

The first half of the 2020 business year was under a strong impact of the COVID-19 epidemic whose effect was felt at several levels. Despite the pronouncedly negative effects of the epidemic, Mercator Group succeeded in sustaining the positive trends especially in its core activity – fast-moving consumer goods retail. With responsible, systematic and above all timely and comprehensive preparation and daily monitoring of execution of all agreed and necessary activities for alleviating the negative effects of the epidemic in all markets, Mercator Group succeeded in securing continuous and sufficient supply and stock of all strategically important products, thus ensuring unimpeded supply to population in all markets of its operations, and especially to ensure uninterrupted and successful operations.

By strictly executing the value creation plan initiatives, Mercator Group successfully offset all negative effects on its regular operations and performance, and wrapped up the period 1–6, 2020, with a normalized EBITDA of EUR 83.4 million, which is 1.7% more than in the same period one year earlier.

Positive result for the period 1–6 are even more commendable if we take into account the various negative effects exerting pressure on business performance, such as higher labour costs, predominantly due to the increase of minimum wage in the Republic of Slovenia, payment of bonuses or allowances for employees based on decisions passed by governments or parliaments during the epidemic, and the measure adopted by the Group management to reward all employees working in extraordinary circumstances of the state of emergency, as well as the increase in other costs, also resulting from the declaration of the epidemic, and the related measures of restrictions and lock-downs in respective markets. Wholesale activity was also negatively affected by the closing down of all hospitality establishments and all public institutes (schools, kindergartens etc.), which are among our customers especially in Mercator Group's wholesale operations. Moreover, Mercator Group also felt the system impact of the epidemic in its manufacturing operations, mostly due to considerable decrease in orders. The same applies to technical consumer goods, due to the temporary lock-down of its stores.

The president of Mercator's Management Board Tomislav Čizmić stressed: »Mercator Group increased its retail revenue and thus successfully offset all negative effects of the epidemic on our business performance. The credit for success of core activity of course goes especially to timely, responsible, systematic and comprehensive preparation for the crisis, and regular, daily monitoring of all key activities at the Mercator Group level. Another key to success in this respect was the transfer or experience from Slovenia, where epidemic was first declared, to all other markets of the Group's operations. During the epidemic, Mercator continuously provided an adequate supply of strategically important products in all markets of its operations in the core activity. I would also like to emphasize that the confirmation of the concentration by the European Commission was an extremely important step towards the transfer of ownership of Mercator to Fortenovo. The strong owner will enable Mercator's further growth and development and support Mercator's strategic projects, including a EUR 130 million investment in a new logistics center in Ljubljana.«

Adjusting for the effect of property revaluation and other impairments to property, plant, and equipment, Mercator Group's comparable net income for the period 1–6, is EUR 86 thousand. This result was achieved despite the increase in labour costs due to higher minimum wage, increase in costs of services from labour-intensive industries, and additional expenses for provision of safety of our customers and employees.

Due to the revaluation of property and impairments to other assets, especially due to the effect of COVID-19, Mercator Group ended the period 1–6 with a negative net income of EUR 69.2 million. It should be underscored that these impairments comply with the International Accounting Standards (IAS 36) and that they did not affect Mercator Group's cash flow or business performance. At the end of June 2020, Mercator Group analyzed whether there were material indicators that could trigger the revaluation of fair value of Mercator's assets. In assessing whether there were indicators requiring reappraisal of fair value, the management reviewed independent sources of information (including the rate of return and changes in the real estate market) and examined the increased uncertainty resulting from the COVID-19 epidemic. As at June 30, 2020, real estate was thus reappraised. It was found that fair value of property, plant, and equipment (fixed assets) was materially different that it had been in 2017, and that this difference was to be recognized in Mercator's business records. Consistently with the International Accounting Standards, revaluation of property on the one hand resulted in an increase of equity (fair value reserve) due to a property value increase of EUR 23.3 million, while on the other hand it had a negative effect of EUR 69.0 million on Mercator Group's operating profit. Net effect of revaluation was a property value decrease of EUR 45.7 million, which accounts for 4.6% of total value of land, buildings, and investment property. After the revaluation, as at June 30, 2020, total value of land, buildings, and investment property amounts to EUR 1 billion, while the negative effect of revaluation on the business performance, consistently with the relevant accounting standards, amounts to EUR 69.0 million. Regardless of property revaluation, Mercator Group remains one of the largest property owners in Slovenia and the region.

Regardless of the epidemic, Mercator Group continued all activities that are key for its further successful development, both immediate and short-run. In this respect, continuation of the construction project for the new logistics and distribution centre in Ljubljana has the highest priority. Mercator Group also continued to expand and update its business network.

This announcement will be published on the company’s website at www.mercatorgroup.si as of September 24, 2020, and will remain published for a period of at least ten years.