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:

In 2020, Mercator Group's revenue reached EUR 2.170 billion, an increase of 1.6% over the preceding year, while retail revenue rose by 3.7%. In Slovenia, Mercator's most important retail market, revenue growth was even higher at 5.1% relative to 2019. In 2020, Mercator Group's normalized EBITDA amounted to EUR 162.8 million, while the Group's result for 2020, adjusted for non-recurring business events, was EUR 4.7 million. In this regard, it should be noted that the COVID-19 epidemic had a direct negative performance impact of EUR 18.8 million. In 2020, Mercator successfully continued its deleveraging effort, as its net financial debt to normalized EBITDA ratio dropped to 5.2.

"Despite the highly challenging business conditions, Mercator Group succeeded in attaining a number of key strategic goals in 2020. Regardless of the restrictions brought about by the epidemic, we considerably increased our revenue and further cut our leverage or net financial debt that was 5.3% lower than in 2019," stressed the President of the company Management Board Tomislav Čizmić. "Throughout the fight against the epidemic, Mercator Group ensured uninterrupted supply of basic products for the population, while remaining dedicated to revenue growth and focusing on providing competitive prices and a broad offer adapted to the desires and needs of its customers. We can thus claim that Mercator Group operations and performance in 2020 were successful," adds Čizmić.

The 2020 business year was under heavy impact of the coronavirus epidemic. Even before the declaration of the epidemic, Mercator Management Board appointed a crisis task force that included over 100 key employees in all markets of the Group's operations and analyzed six key points on a daily basis: employee safety, customer safety, supply chain safety, revenue growth management, corporate social responsibility, and liquidity management. The crisis task force prepared and analyzed multiple scenarios of operation in the crisis conditions, and adopted a number of preventive measures. After the declaration of epidemic, it executed over 500 crisis management activities. It was of utmost importance that the Mercator Group had ensured even before the declaration of the epidemic additional and adequate amounts of especially the essential food products, and that it analyzed on a daily basis the need for products that saw the highest level of customer demand. It was also of key importance that Mercator had developed and expanded its strategic cooperation with local and regional suppliers even before the crisis. This once again proved a major competitive edge for the Mercator Group.

Due to the revaluation of property and impairments to other assets, as well as because of the effects of the COVID-19 epidemic, Mercator Group's operating income (EBIT) in 2020 was at EUR ‑108.2 million, while result for the period was at EUR ‑156.7 million. The main reason for a lower operating income (EBIT) was the revaluation of property in 2020. Total normalization effects on business results amounted to EUR 161.4 million.

Negative effects on the Group's operations and performance included in particular the restriction of working hours in Slovenia, adoption of the act on closing the stores on Sundays, and measures that included closing down the entire HoReCa sector (hotel accommodations, restaurants, bars etc.) for at least five months, as well as closing of schools, which resulted in a major drop in the revenue of Mercator Group's wholesale operations; this loss of revenue had to be made up for elsewhere. A similar finding applies to the technical consumer goods (Tehnika) segment, since home improvement and electronics stores were closed for over a quarter of 2020. Lockdowns in respective markets resulted in a drop of demand and, as a result, a decrease in Mercator's own manufacturing output. Mercator IP was faced with plummeting demand in the "to-go" or ready-made meal segment, especially on account of closed schools and restrictions on tourism. Indeed, lockdowns resulted in a drop of sales to tourists by 10.5%. The real estate segment also saw pronouncedly negative effects on its performance as our tenants' operations were closed down. All this posed an additional challenge to Mercator Group's business performance.

Epidemiologic measures had a major impact in terms of costs. In 2020, costs of material rose by 4.4% or EUR 26.2 million, as the circumstances required major investments into protection of employees and customers. Labour costs, amounting to nearly EUR 276 thousand, increased at the level of the entire Mercator Group by 8.7% relative to 2019. The increase of labour costs was a result of changes in the minimum wage legislation in all markets of our operations, while in Slovenia, higher labour costs were also a result of payments of aid during the epidemic to all employees, as mandated by the law, and payments of salary bonus due to increased work-related risk during the epidemic for the employees active in operations.

Despite the restrictions brought about by the year 2020 and the declaration of epidemic in all markets, which affected the Mercator Group and the entire economic and social system, Mercator Group continued to develop and update its network, and continued its activities on all key development projects, including, most notably, the project of constructing a new logistics and distribution centre in Ljubljana. Preparations of required bases for decision-making regarding the planned organization, choice of technology, investment optimization, and development of documentation for the launch for formal procedures for obtaining all necessary documentation, continued without impediments, and were further intensified.

Also notable in the 2020 fiscal year were the project of anticipated merger with the Fortenova Group, and the project of refinancing Mercator Group's debts. Mercator Group's Management Board prepared everything necessary for successful completion of procedures of transfer to the Fortenova Group, and especially for refinancing of the existing agreement on restructuring of Mercator Group's financial liabilities.

Thus, Mercator Group entered the year 2021 in solid business condition, ready for new challenges and a new development cycle.

This announcement will be published on the company’s website at www.mercatorgroup.si as of April 26, 2021, and will remain posted for a period of at least ten years.