Activity of the Company

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Activity of the Company
Mercator Objectives
Letter from the President of the Board of Directors
Organizational, Ownership, and Management Structure
Mercator Shares First Year on the Stock Exchange
The Most Important Data
Mercator in 1996
Mercator until the Year 2000
Financial Statements
Management Responsibility for the Financial Statements
Report of the Certified Accountant
1
Activity of the
Company
The Mercator Group Inc. was registered as a joint-stock company in October 1995 with
a share capital of 34,718 Billion SIT. The main line of business of the company is trade.
Mercator also has food processing, agricultural and service operations.
Main financial data
(TSIT)
Sales revenue by branch
of business
1996
1995
Index
106,696,849
816,091
18,313,066
4,258,497
95,865,617
791,748
17,998,225
5,241,041
111
103
102
81
636,088
663,074
96
130,720,591
120,559,705
108
1996
1995
Index
Profit after taxation
Cash flow*
593,523
2,448,637
415,651
2,054,804
143
119
Assets
Equity
No. of employees
73,042,166
56,178,140
9,042
67,764,825
53,559,201
9,967
108
105
91
Trade
Catering
Food Processing
Agriculture
Services
Total
(TSIT)
Financial data
* Calculated as net income and depreciation.
Shares in Sales Revenue by
Branch of Business
1% Catering
Food Processing
Agriculture 3%
14%
82%
Trade
1
Mercator Mission Statement
- To expand Mercatoršs position as the dominant retail dealer in Slovenia;
- To provide the best level of customer satisfaction;
- To maximize shareholderšs value.
Values and Beliefs
Our philosophy is based upon ethical conduct, mutual trust and team work.
To achieve this mission we believe we must excel at:
- anticipating, listening and responding to our customers,
- encouraging creative ideas and innovations,
- developing people,
- working as a team,
- providing inspirational leadership.
Mercator of my Country, Mercator, the
Best Neighbour
The slogan “In Mercator you get everything” was launched in the 1960šs when Mercator started to gain its image as all-Slovenian company. In 1953 the name Mercator was
introduced for the company called “@ivila” that was established by the Slovenian Government in 1949.
The basic characteristic of Mercator’s development until the early 1970 was the integration of small local trade, production, agricultural, and service companies. Each of them,
however had retained its legal independence.
In 1990 Mercator was registered as Mercator Group, established by the transfer of
operating companies capital into the holding company. The privatization of the company
was concluded in 1994 by the public sale of shares. Since April, 1996 Mercator shares
have been quoted on the Ljubljana Stock Exchange.
The system, diversified by lines of business, organization and ownership structure,
needed a new vision and strategy in the market economy which would ensure for Mercator new quality development. This was determined in the Business Plan for the years
1997 - 1999 adopted by the resolution of the Supervisory Board in December 1996.
Mercator’s central objective is the ensurance of a permanent increase of shareholders’
value. Our present and future measures are focused on this objective. They stress
rationalization of trading activity and gradual standardization of all operating functions by
the year 2000. Mercator is also looking for strategic investors who would be prepared to
support the development plans of our production, agricultural and service companies.
By the end of the second millennium Mercator will modernize its retail network and build
new retail shops based on the West European model. With our services, product lines
and competitive prices, we will respond to the requirements of Slovenian consumers
who are keeping pace with consumers in EU countries.
The new Mercator slogans symbolize our objectives.
“The Mercator of my Country” - the all-Slovenian company that increases consumers’ satisfaction all over the country, and, at the same time, a company through
which a significant part of the Slovenian industry and agriculture builds up its market
position.
As “ Mercator, the best neighbour” we are people who accept challenges of
change in order to fulfill the expectations of our consumers, shareholders, business
partners, friends and employees.
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2 3
Letter from the
President of the Board
of Directors
The Mercator Group is on our way to becoming a modern trading company by international and West-European standards. Our production companies are preparing to join
the European Union.
This means:
- Mercator will offer our customers favourably priced and attractive goods in our new,
efficant modern and renovated shops,
- we will assure regular dividends and a good market price of our shares for our shareholders, and
- secure jobs and decent salaries for our employees.
Is this realistic?
There is no other choice. The analyses show that we have three years for our transformation. After that time the international competition will penetrate the Slovenian market.
Thus we have only a short time! If we do not turn this time to our advantage, Mercator
will be condemned to stagnation and decline. This will not justify our honourable past or
serve our shareholders.
Therefore:
- we will build hypermarkets, supermarkets, and support the existing shops except
those that will be restructured or discontinued,
- improve our sales, distribution, and support, and back them with computer
technology,
- train ourselves. We need new shop-assistants for work in the international
competitive company.
In the framework of our new strategic integrations,the production, agricultural, and
service companies are preparing for international competition in Europe.
Our achievements in 1996 were not small. Let me especially mention new sales approaches and activities: refurbishment of shops, new company identity, strategic development solutions for many of our companies, increased efficiency of the financial monitoring of our operations, uniform information system, uniform systemization of job and
salary systems, regulation of Union activity, and more. All along we are improving our
current operations. Our turnover and profits are increasing.
Shareholders, you have understood the challenges Mercator faces on our way. You
understand, too, that the retainment of the profit in 1996 was a wise decision. This will
enable us to pay substantial dividends in 1997.
Customers and other business partners, Mercator’s position on the market has been
strengthened - also due to your awareness that Mercator was improving.
Dear Mercator colleagues, without you Mercator would not be able to improve. On
behalf of the Board of Directors and in my own name - thank you!
Kazimir @ivko Pregl
President of the Board of Directors
3
Organizational, Ownership,
and Management Structure
in 1996
In 1996 the ownership structure of the holding company and of the affiliated companies
began to change. In non-trade companies it was possible for the employees to exchange
the Mercator Group shares for shares of these individual companies and thereby to
become their shareholders.
With the listing of the Mercator shares on the Ljubljana Stock Exchange the ownership
of the Mercator Group became better known. Since organized selling started April
1996 the number of individual shareholders decreased from 63,000 to 35,000 and their
share from 60% to some 46% while the number of institutional shareholders was increased by the same proportion.
4
Mercator SVS, d.d. (7 PC)
100%
Mercator Dolenjska, d.d. (4 PC)
100%
Mercator Degro, d.d.
100%
Mercator Modna hi{a, d.d.
100%
Mercator Trgoavto, d.d.
100%
PC Golovec
Mercator Emba, d.d.
71%
Eta, d.d.
88%
Zmaj~kov butik, d.d.
66%
Mesnine de`ele Kranjske, d.o.o.
90%
Mercator Pekarna Grosuplje, d.d.
51%
Oljarica Kranj, d.d.
45%
Gorenjska mlekarna, d.d.
43%
Mercator Slosad, d.d.
100%
Mercator KG Ko~evje, d.o.o.
90%
Other legal entities 13%
Institutional
Shareholders
PC Savica
PC Grosist
OPC Hladilnica
Production companies
PC Sadje zelenjava
Mercator Agrokombinat, d.o.o.
100%
Mercator Hotel Ilirija, d.o.o.
100%
agricultural companies
catering companies
Mercator Hotel Sremi~, d.o.o.
100%
Mercator Optima, d.o.o.
100%
M banka, d.d.
9,6%
Zavarovalnica Mercator, d.d.
94%
Interspar, d.o.o.
49%
Spar - Mercator, d.o.o.
50%
Spectrum
33%
Unileasing
20%
14 profit centres
Slovenian Compensation Fund 10%
PC Grmada
PC Dolomiti
Mercator K@K Kmetijstvo Kranj, d.o.o. 100%
Ownership structure of the
Mercator Group as of
31 December 1996
trade companies
engineering company
PC Jelka
PC Trgopromet
PC Sevnica
PC
Preskrba Kr{ko
investments
PC
Preskrba Tr`i~
Poslovni sistem Mercator, d.d. ( holding company )
In 1995 the Mercator Group consisted of almost 800 shops and 32 operating companies. With reorganization of the trade companies,as profit centres in the holding company and in affiliated trade companies, the number of legal entities was reduced. This
represented the basis for standardization of all business functions in the holding and
affiliated trade companies.
Ownership of the Mercator Group d.d. in percentage
PC Notranjska
54%
46%
M KGZ Cerknica
M KGZ Litija
M KGZ Ribnica
M KZ Sevnica
M KZ ^rnomelj
M KZ Dobrepolje
M KZ Krka
M KZ Logatec
M KZ Metlika
M KZ Sti~na
M KZ Suha Krajina
M KZ Trebnje
Individual
Shareholders
M KZ Velike La{~e
Authorized investment companies 17%
M Sora @iri
M ZKZ Mozirje
Capital Fund 13%
PC
Nanos -Tehnika
agricultural
co-operatives
PC big shopping
centres
Contractual cooperation:
4
5
Mercator Shares First Year
on the Stock Exchange
Information on the Mercator shares
Capital structure
3,471,840 of
regular registered shares by 10,000 SIT
No. of issued shares
No. of issued shares to be traded
3,471,840
3,471,840
on the open C market as of 31 Dec. 1996
Nominal value of shares on the open C market
as of 31 Dec. 1996 (in TSIT)
Nominal value
of regular registered shares
3,471,840
10,000 SIT
Dividend pay-out for 1995
Trade capitalization on 31 Dec. 1996 (TSIT)
Uniform price on the first selling day
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6
The Most Important
Data
( TSIT )
Sales revenue by branch
1996
1995
Index
106.696.849
95.865.617
111
816.091
18.313.066
4.258.497
636.088
791.748
17.998.225
5.241.041
663.074
103
102
81
96
130.720.591
120.559.705
108
1996
1995
Index
Profit after taxation
Cash flow
Assets
593.523
2.448.637
73.042.166
415.651
2.054.804
67.764.825
143
119
108
Equity
No. of employees
56.178.140
9.042
53.559.201
9.967
105
91
of business
Trade*
Catering
Food Processing
Agriculture
Services
Total
0
13,922,078
3,574 SIT
Lowest price in 1996
Highest price in 1996
3,220 SIT
5,074 SIT
5.500
Movement of price of the Mercator share
5000
( TSIT )
Financial data
4.500
* Sales revenue from trade in the holding and affiliated trade companies for 1995 are adjusted by
the methodology of calculating the turnover of this year when the internal turnover is not expressed.
The data, with exception of sales and no. of employees, refer to the holding company.
4000
In 1996 the sales revenue of the Mercator Group reached 131 Billion SIT, i.e. 8% more
than the year before. The major increase of revenue was achieved in trade (12%), which
in 1996 operated for the first time in the new form. Other branches showed a smaller
growth of sales revenue, while agriculture and the service industry even registered decline.
3.500
3000
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. 11. 12.
month
( mio SIT )
( mio SIT )
16.000
1.800
14.000
1.600
Sales revenues by branches of business
1% Catering
1.400
12.000
Food Processing
1.200
10.000
14%
1.000
Agriculture 3%
8.000
800
6.000
600
82%
4.000
400
2.000
0
200
1.
2.
3.
4.
5.
6.
7.
8.
9. 10. 11. 12.
month
Trade on the Ljubljana Stock Exchange
OTC
BORZNI TRG
6
Trade
Open C market
Stock Exchange
0
1.
2.
3.
4.
5.
6.
7.
8. 9. 10. 11. 12.
month
Trade with Mercator Stock
in 1996
Other financial indices show the improved business operations of the Mercator Group
in 1996. The profit after taxation is higher by 30%, the cash flow by 19%, assets by 8%,
and equity by 5%. The number of employees was reduced by 9%.
7
Sales revenue
1995
No. of empl
1995
( TSIT )
Productivity in
1995
Line of business
Trade
Catering
Industry
Agriculture
Services
106.696.849
6.612
1.613.685
95.865.617
7.181
1.334.990
816.091
18.313.066
4.258.497
636.088
223
1.564
598
45
365.960
1.170.912
712.123
1.413.529
791.748
17.998.225
5.241.041
663.074
239
1.726
771
50
331.275
1.042.771
679.772
1.326.148
Services
Productivity in
1996
Agriculture
No. of employees
1996
Industry
Sales revenue
1996
Trade
Operations
Profit and Loss in Branches and in the Group
Catering
Productivity (sales/employee) of Individual Branches
and in the Group
1.000.000
800.000
600.000
( TSIT )
Profit in 1995
Profit in 1996
Trade
Catering
Industry
975.130
3.729
-146.387
356.247
-83.307
-36.401
Agriculture
Services
-248.723
9.774
157.403
21.709
Grup total
593.523
415.651
400.000
200.000
Group total
130.720.591
9.042
1.445.704
120.559.705
9.967
1.209.589
0
In 1996 the profit of the trade in the Mercator Group grew considerabl as a result of the
growing slower costs in comparison with the increase of sales revenue. The nominal
gross trading profit was increased by 16%, and represents 24.6% of total turnover.
The results of other lines of business in 1996 are lower than in the previous year. The
loss in agriculture and industry has increased. The return on equity of the Group is
0.76%. The return on equity return in trade is 3.8%, in catering 0.8%, in services 6.8%,
while in agriculture and services the return is negative.
-200.000
-400.000
Productivity data show the highest increase of productivity in trade and the lowest in
agriculture and services.
( TSIT )
Profit and Loss in Branches
1996
1995
Productivity in year 1996 and 1995
( TSIT )
0
400.000
800.000
1.200.000
1.600.000
2.000.000
Trade
Catering
Industry
Agriculture
Services
Productivity
1996
1995
Cash Flow* of the Branches and of the Group
3.500.000
3.000.000
2.500.000
Services
Agriculture
Industry
Catering
Trade
Line of business
Trade
Catering
Industry
Agriculture
Services
( TSIT )
Index
Cash flow
1996
Cash flow
1995
3.511.721
2.665.693
132
72.322
828.341
62.121
23.687
59.479
649.753
470.208
34.539
122
127
13
69
4.498.191
3.879.672
116
2.000.000
1.500.000
Grup total
1.000.000
500.000
0
( TSIT )
Cash Flow of the Branches
1996
1995
8
*The cash flow is calculated from the profit, depreciation and provisions by lines of business. The
trade profit does not include the profit sharing of associated companies. Finally the cash flow is
calculated on the basis of the profit of the Group, and depreciation and provisions of all lines of
business.
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Balance Sheet
77% of the Mercator Group assets are financed from its equity capital, 20% from shortterm liabilities and from other long-term liabilities (2%). Within the structure of assets
the fixed assets are 80 % and long-term investments are 41% of all assets. These
investments decreased due to the strategic orientation into trade and disinvestments in
non-trade activities. 36% of assets represent tangible assets which increased due to
renovations, but will decrease as Mercator begins to sell off the unprofitable real property. Due to our new strategic orientation, Mercator’s balance sheet is changing. This
will be even more the case after Mercator receives the credit from the European Bank
for Reconstruction and Development (EBRD). On the assets side, the value of real
property will increase when the new stores will be constructed. On the liability side the
long-term sources of financing will increase.
Assets
Liabilities
100%
Accounts receivable
9.5%
Short-term accounts payable
15%
Other
Inventories
3%
90%
8.5%
80%
0.8%
Long-term accounts payable
4.6%
Short-term liabilities
2%
Long-term liabilities
70%
Long-term investments
41%
60%
50%
40%
77%
30%
Tangible assets
36%
20%
10%
Intangible assets
2%
10
0
Equity capital
7
Mercator in 1996
Important Business Events
With the privatization of the Mercator Group a new development was started. The new
ownership structure and increasingly competitive circumstances on the market required
new and uniform measures for the preservation and strengthening of Mercator’s leading
position in Slovenian trade.
Based on our own knowledge and experience, and supported by British retail experts
(supplied by the “Turnaround Management Programme” financed by Phare), the uniform business plan was adopted in 1996.
The constituent parts of the plan are analyses of Mercator’s internal and external environment, determination of our objectives, values, and convictions as well as long-t e r m
objectives with strategies for their implementation.
Based on a strategy of physical growth and the gradual selling of unprofitable property,
adequate financial projections have been prepared for the acquisition of long-term financial resources.
The major part of financial resources was ensured in the form of a long-term loan by the
consortium of international banks under the leadership of EBRD and the Union Bank of
Switzerland. In December 1996 the corresponding Agreement was signed.
After a long and detailed review of Mercator’s business operations, these international
banks decided to support our extensive development and restructuring project with 140
Million DM in the form of a favourable loan. This is additional confirmation of our
projectšs credibility and realistic expectations. Mercator’s participation on international
financial markets opens new possibilities for optimization of the capital structure.
Besides ensuring long-term financial resources, Mercator has already achieved some
effective results in realization of physical growth and in the selling of unprofitable property.
In 1996, 23 self-service shops were refurbished and 3 self-service shops built. On these
8,000 square metres of new selling area, Mercator can display its well-integrated arrangement of shops, technical and technological equipment, product lines, and its improved standard of services. The refurbishment of all strategically important self-service
shops will be finished in five years.
The investments into new premises and refurbishment of existing shops in 1996 amounted
to 21.5 Million DM, increasing the sale results by more than 6.3 Million DM in the same
year.
In 1996 Mercator bought plots of land in Koper and Ljubljana for two hypermarkets, and
we are preparing everything necessary for construction.
In collaboration with British experts a detailed analysis of individual functional areas in
trade was prepared. A detailed restructuring plan is now being prepared that will enable
the achievement of physical and, above all, organic growth.
In accordance with the decision in 1996 to reduce unprofitable shops, the selling premises were reduced by 3,350 square metres. This resulted in a short-term sales deficit but
in the long run it will favourably influence the profitability of the company.
In the second half of 1996, real property in the amount of 235 Million SIT (book value)
was sold. The sale was organized by the special service of the investment sector. Some
investments were also sold. The sale of minority shares in some associated companies, as well as the divestment of majority shares in affiliated companies in which Mercator has no business interest, will continue in 1997 and in the future.
The profit of the Mercator Group amounted in 1996 to 593.5 Million SIT and compared
to 1995 it is higher by 30%. With regard to shareholders’ expectations the profit is not
yet satisfactory since the return on equity is only 1,05 %
11
Trade Operations
In 1996 the economic situation in Slovenia was marked by stagnation, and the
economic growth was only 3.5%. The growth of industrial production was 1%, of
which the growth of consumer goods reached 1.6%. Real salaries increased by
4.9%, retail prices increased by 9.7%, and in December 1996 the retail prices were
higher by 8.8% compared to December 1995.
Retail sales in Slovenia increased by 2%, while wholesale increased by 3.4%.
In Mercator’s retail trade - which represents around four fifths of Mercator revenue - the
turnover was increased by 3%. The turnover of the Mercator wholesale increased by
9.8% while retail remained on the level of 1995. This stagnation is the result of Mercator’s long-term strategic decision to close small and unprofitable shops and to invest in
shops with bigger selling areas in order to increase profitability. The results of the temporary closure of shops during refurbishment also limited sales growth.
Mercator’s market share in Slovenia is 17%. The Mercator Group is by far the biggest
trade company. Although the competition on the Slovenian market is relatively strong
and is still increasing, Mercator has a stable position thanks to our sales network that
covers almost the whole territory of Slovenia.
Production, Agriculture and Services
Cost of Administrations
( TSIT )
Movement of sales
Sale per employee
( TSIT )
120.000.000
120.000.000
100.000.000
100.000.000
80.000.000
80.000.000
60.000.000
60.000.000
40.000.000
40.000.000
20.000.000
20.000.000
( TSIT )
2.000.000
1.500.000
1.000.000
5.000
0
0
1996
1995
0
1996
1995
Sale
Cost of Adm
1996
1995
In 1996 trade was declared the basic activity of Mercator. This decision, however, did not
diminish the importance of the planned business policy and objectives of non-trade companies. The Mercator Group covers 14 production, agricultural, and service companies.
The characteristic of all Mercator companies is successful adaptation to a demanding market situation. This is reflected in the business results of individual companies. To achieve
faster adaptation to the new market situation in two companies new management was
appointed.
Agricultural companies that depend greatly on the agricultural policy of the state face
unique callenges.Their unfavourable economic situation comes from the unreasonable
policy of the Agricultural Land Fund of the Republic of Slovenia. These include leases for
agricultural land and price increases for fodder, with simultaneous limitation of milk and
meat prices, and economically unfavourable denationalization of agricultural land.
On the positive side, Oljarica Kranj, the oil factory, obtained the ISO 9001 certificate in
1996 for its business operations. This is the target of all food processing companies.
For all non-trading companies situation analyses were made in 1996. They will serve as
bases for business strategies for future capital connections between the Mercator Group
and individual companies. Mercator has started to look for strategic partners for these
companies in Slovenia and abroad. The purpose of these strategic partnerships is to
align production with market demand and increase the efficiency of labour.
By increasing the sales and reducing the number of employees, the sale per employee
was increased. The administration costs decreased as well.
12
13
Mercator and our Environment
With the development of our new vision, a new company identity for Mercator is being
introduced. The new identity illustrates Mercator’s tradition and vision. All premises
refurbished in 1996 show characteristic red totems and other corresponding markers
suited to the building and to the environment representing Mercator as the best neighbour. The corporate identity won an award at the Biennale of industrial design in 1996 in
Ljubljana.
Communication with different localities and the public is essential in Mercator’s business philosophy and culture.
Mercator’s target public includes customers, shareholders, employees, business
partners, actually all the Slovenian public. Mercator communicates with them
attentively and openly via different media. In 1996 Mercator won the recognition of the Slovenian Stock Exchange for communication with its shareholders. Mercator’s house journal received the highest award of the European
Association of House Journal Editors.
As an all-Slovenian company Mercator participates in humanitarian, cultural, sporting and other national and local projects.
In 1996 Mercator was the sponsor of the national basketball team and
the Zlati abonma concerts of classical music. We sponsored exhibitions of the most eminent Slovenian artists in the Mercator Gallery.
The National and University Library in Ljubljana restored the famous
Mercator Atlas, and the collection of old tapestries in the Ptuj Provincial Museum became richer with the addition of two valuable baroque tapestries. Furthermore, numerous humanitarian organizations
have realized their plans thanks to Mercator support.
Mercator employees work in an open, healthy and safe environment.
The personnel relations and the technical and technological solutions which make this possible, are therefore constituent parts of Mercator development plans. Our product line is permanently enlarged
by user and environment friendly new products. Mercator’s plans and
the equipment of our production companies are environment friendly
and adapted technical and technological solutions for the environment.
Mercator’s activities for the environment will be further harmonized with
European environmental norms. A special team has already been appointed for this purpose.
8
Mercator until the Year
2000
Trade Strategy by 2000
The basic objective of Mercator strategy in the field of retail sale is the upgrading existing capacities by up-to-date and popular hyper- and supermarkets with the top quality
presentation of fresh food. Laser readers will support the system for refilling and
managing stocks on the shelves and controlling the whole supply chain. The upgrading
will include the construction of at least two hypermarkets in areas with a suitable population density, and the addition of 10 to 12 supermarkets or self-service shops. We will
also the refurbish 100 existing shops. 200 smaller, unprofitable shops will be closed.
The efficiency of the trade depends on endeavours which interlink prices, quality, diversity, locations, and services into the readily identifiable range and image of a good shop.
The objective of the Mercator’s strategy is to create points of sale with the characteristics described above. It includes physical elements - the programme of construction
and refurbishment - and organic elements - formation of programmes and techniques
necessary for successful and modern trade.
The basic elements of the organic growth will be the company identity and internal
arrangement of shops, improved product range, marketing strategy, training of the
managerial staff, new strategies in the field of customer services, and information
systems.
A part of Mercatoršs commercial strategy also applies to the e field of the wholesale trade. It is based on the reduction of the 13 existing distribution centres to
7, and on their specialization. The system for managing the supply chain will
contribute vitally to the rationalization of the distribution network.
Strategy of the Non-trade Companies
In 1996 all non-trade companies were systematically analyzed with the purpose of deciding on the future of each of them from the strategic, marketing, and financial point of
view. The basic strategy will be oriented towards the selling of Mercator’s interests in
these companies. For some of them the selling process has already started.
14
15
Financial Statements
Profit and Loss Statement for the period 1 January to
31 December 1996 (The Holding Company)
Revenue and/or expenses
A. Sales
Sale of services on domestic market
Sale of services on foreign markets
Sale of products on domestic and foreign
markets
Sale of goods on domestic market
Income from other long-term securities and
loans
B. Cost of sales
Production costs
Purchase price of sold goods and material
C. Gross profit
^. Administrative expenses
D. Distribution costs
E. Other operating expenses
F. Operating income
1996
TSIT
1995
66.346.017
59.138.402
2.239.419
246.898
2.683.405
81.315
63.383.952
56.454.997
9
Balance Sheet as of 31 December 1996
Assets
Assets
Fixed Assets
companies
I. Minority interests
J. Interest and similar income
58.231.216
55.146.014
1.241.456
1.593.747
1.
2.
3.
4.
1.084.538
81.173
2.013
73.732
1.495.227
37.463
2.376
56.160
0
2.521
B. Tangible assets
1. Land
26.231.160
2.711.221
21.762.371
2.441.561
2.
3.
4.
5.
6.
18.257.328
1.703.485
1.228.355
14.512
10.089
16.206.191
1.534.000
1.016.623
13.338
6.438
2.294.546
11.624
258.216
286.004
30.221.543
31.785.345
Goodwill
Long-term deferred expenses
Substantive rights
Other long-term accrued income
5. Payments on account
394.433
50.055.129
45.045.097
117.724
49.937.405
45.045.097
16.290.888
14.093.305
2.376.138
13.075.973
3.934.975
10.794.380
18.482
857.259
Buildings
Plant and machinery
Other equipment
Farms
Other tangible assets
7. Tangible assets in progress
8. Payments on account
-636.050
D. Capital adjustments
655.170
804.044
21.172
83.715
1.038.246
1.190
4.517
1.129.189
K. Write-off of financial assets
862.648
304.507
L. Interest and similar expense
1.253.600
1.044.428
M. Result from ordinary operations
539.314
-46.045
400.662
346.453
666.217
204.521
593.523
415.651
N. Extraordinary income
O. Extraordinary expense
P. Extraordinary result
R. Taxes on income
S. Net income/net loss
16
TSIT
31.12.95
A. Intangible assets
C. Long-term investments
G. Income from investment from affiliated
companies
H. Income from investment from associated
31.12.96
0
0
593.523
415.651
537.057
4.551
14.810.950
12.618.811
6.109.023
39.020
5.844.968
4.667.511
49.645
4.553.756
3. Advance payments inventories
4. Work-in-process
170.414
54.621
52.034
12.076
F. Long-term accounts receivable
145.802
138.243
6.955.993
539.557
285.467
775.108
5.801.980
1.000.955
693.870
316.252
73.042.166
67.764.825
Current assets
E. Inventories
1. Raw materials and supplies
2. Finished goods and trading stock
G.
H.
I.
J.
Short-term accounts receivable
Short-term investments
Cash at bank and in hand
Prepayments and accrued income
Total assets
17
Explanation of Accounting Statements
Explanation of Assets
Intangible long-term assets
1 January 1996
TSIT
31 December
Purchased and/or revalued value
Long-term deferred costs
Goodwill
Substantive rights
Other intangible assets
Advance for intangible long-term assets
Balance Sheet as of 31 December 1996
Liabilities
Total
31.12.96
TSIT
31.12.95
A. Capital
56.715.197
53.559.201
1.
2.
3.
4.
Subscribed capital
Share premium account
Reserves
Profit or loss brought forward
33.442.400
34.726.537
3.084.688
418.575
3.202.385
18.895
5. Revaluation reserve
6. Profit or loss brought forward
19.176.011
593.523
15.195.733
415.651
1.406.126
316.026
3.383.077
11.202.867
2.178.575
970.545
2.134.459
8.812.395
18.873
76.216
73.042.166
67.764.825
4.851.716
7.017.707
Liabilities
37.463
1.495.227
2.376
56.160
2.521
81.173
1.084.538
2.013
73.732
1.593.747
1.241.456
Due to high depreciation the intangible long-term assets, mainly representing goodwill,
are decreased.
Liabilities
B. Provisions for liabilities and charges
C.
D.
E.
F.
Long-term liabilities due to banks
Long-term accounts payable, trade
Short-term liabilities due to banks
Short-term accounts payable, trade
G. Accruals and deferred income
Total liabilities
Non-balance posts
Tangible assets
1 January 1996
TSIT
31 December
Purchased and/or revalued value
Land
Buildings
Shop equipment
Other equipment
Plantations
33.434
Other tangible assets
Tangible assets in progress
Advances for tangible fixet assets
Total
2.441.561
2.711.221
16.206.191
1.534.000
1.016.623
13.338
18.257.328
1.703.485
1.228.355
14.512
6.438
258.216
286.004
10.089
2.294.546
11.624
21.762.371
26.231.160
Important tangible assets are land, buildings, shop equipment, and tangible assets in
progress. Apart from revaluation their value is increased due to investments into new
shops and refurbishment of the existing ones.
Long-term investments
TSIT
31. Dec 1995
31. Dec 1996
Structure in %
26.416.591
3.091.953
88.916
87,41
10,23
0,29
28.888.248
1.351.170
198.988
226.672
5.789
165.826
225.796
0,75
0,02
0,55
0,75
203.655
258.498
884.786
30.221.543
100,00
31,785.345
1996
Long-term investments into affiliated companies
Long-term investments into associated companies
Long-term investments into other companies
Long-term
Long-term
Long-term
Long-term
Total
18
loans for affiliated companies
loans for associated companies
loans for other companies
deposits
19
Capital Adjustment
The decrease of capital investments into associated companies is the result of the exchange of Mercator Group shares for shares of affiliated companies and their loss in 1996.
The increase of long-term investments covers: revaluation (2,129 TSIT) and profits of
affiliated companies (trade 496,119 TSIT, catering 3,158 TSIT, and services 9,773 TSIT).
In 1996 the Mercator Group acquired 263,009 of its own shares, of which 126,700
shares were acquired by decrease of investment into affiliated companies and by exchanging the Mercator shares for shares of affiliated companies. 136,309 shares were
repurchased on the stock market.
Inventories
Inventories represent assets to the value of 6,109,023 TSIT, i.e. increase by 31% in
comparison to 1995.
The inventories of trade goods are inventories in wholesale warehouses in the amount
of 2,688,045 TSIT and inventories in retail warehouses in the amount of 3,156,923 TSIT.
Survey of Investments into Affiliated Companies in Slovenia
Long-term Operating Debts
Long-term operating debts amount to the total of 145,802 TSIT, of which 93% are debts
of affiliated companies.
TSIT
Company
Share in company Investments in books
Popravek nalo•‘b
value of investments 31. Dec 96
capital (%)
PSM 31. Dec. 96
31. Dec 1996
100
1.550.028
-249.359
1.300.669
M Degro
M Emba
Eta
M Hotel Ilirija
100
71,12
88,37
100
2.732.397
868.484
1.426.-443
1.209.626
154.443
16.412
41.816
22.168
2.886.840
884.896
1.468.259
1.231.794
M Kmetijsko gospodarstvo
M Kmetijstvo Kranj
Zmaj~kov butik
M Modna hi{a Maribor
89,99
100
66,66
100
3.092.369
1.680.085
317.601
440.550
236
400
12.126
27.318
3.092.605
1.680.485
329.727
467.868
M
M
M
M
Optima
Pekarna Grosuplje
Slosad
Sremi~
100
51,01
100
100
170.435
399.601
10.472
827.374
11.525
51.227
-10.472
-18.439
181.960
450.828
808.935
M Trgoavto
M Ra~unalni{ke storitve
M SVS
M Dolenjska
53,95
60,85
100
100
908.665
7.809
7.394.368
1.504.035
40.482
-1.752
240.496
31.779
949.147
6.057
7.634.864
1.535.814
Mesnine de‘ele Kranjske
90,56
1.529.967
-254.991
1.274.976
26.070.309
115.415
26.185.724
M Agrokombinat Kr{ko
Total
Long-term Investments into Affiliated Companies Abroad
Short-term Operating Debts
TSIT
31. Dec 1995
31. Dec 1996
Struktura v %
1996
Short-term debts towards affiliated comp.
1.318.424
18,95
1.210.970
Short-term debts towards associated comp.
Short-term debts towards other comp.
Short-term consumer credits
Other short-term debts
Short-term debts from investments
623.679
4.106.851
163.034
161.814
404.593
8,97
59,04
2.34
2,33
5,82
283.474
3.567.598
61.759
304.019
231.837
177.598
2,55
142.323
6.955.993
100,00
5.801.980
Short-term guarantees
Total
In 1996 debts adjustments amounted to 136,238 TSIT. The total amount of these adjustments is 329,503 TSIT. Adjustments were formed for debts overdue by 150 days and
more.
The adjustments of debts abroad did not change in 1996. They amount to 496,046 TSIT.
The adjustments refer to debts older than 1 year.
TSIT
- Intermercator Klagenfurt
- Black Sea Odesa
- Podol Kijev
- Praga Exim
79.493
101.865
49.234
274
Short-term Investments
Short-term investments represent 539.557 TSIT, 49% of which are loans to affiliated
companies, 40% loans to associated companies, and 11% loans to other companies.
Cash at Bank and in Hand
Total
230.866
Cash at bank and in hand includes cash and cheques in the amount of 782 TSIT, and
cash at bank in the amount of 284.685 TSIT.
Long-term Investments into Associated Companies in Slovenia and Abroad
Prepayments and Accrued Income
- M Neboti~nik
- Oljarica
777.850
663.347
-
358.711
207.068
339.390
335.681
Gorenjska mlekarna
Zavarovalnica Mercator
Spar Mercator, Ljubljana
Interspar, Ljubljana
- M banka
- other companies
Skupaj
20
Prepayments and accrued income are short-term deferred costs and expenses in the
amount of 13.108 TSIT, and uncalculated revenue in the amount of 762.000 TSIT.
170.685
239.220
3.091.953
21
Short-term debts from financing activities amount to 3,383,077 TSIT. In comparison to
1995 they are higher by 59%. They will decrease with the EBRD loan.
Liabilities
Short-term Debts from Operating Activities
Capital
TSIT
Short-term debts from operating activities amount to 11.202.294 TSIT. Major debts (82
%) are the debts of the Mercator Group to external suppliers. In comparison with 1995
these debts increased by 24%.
31. Dec 95
Increase
Decrease
Revaluation
31. Dec 1996
Capital
34.726.537
-
1.284.137
-
33.442.400
Accruals and Deferred Income
Reserves
Profit brought forward
Reval. adjustments of total capital
Undistributed profit of current year
3.202.384
18.895
15.195.733
415.651
415.651
593.523
117.697
15.971
732.170
415.651
4.712.449
-
3.084.688
418.575
19.176.011
593.523
The major part of accruals and deferred income in the amount of 18,873 TSIT represent
debts from uncashed vouchers in the amount of 13,344 TSIT.
53.559.200
1.009.174
2.565.626
4.712.449
56.715.197
Total
The non-balance post amounts to 4,851,716 TSIT. The highest amounts represent guarantees (3,231,291 TSIT), mortgages (660,112 TSIT) and consignment goods (358,889
TSIT).
Explanation to the Income Statement
The decrease of capital by 8,641 TSIT is the result of the harmonization of capital of
associated companies with investments. At the time of incorporation of M Ro`nik into
the holding company, the latter redeemed the investment of M Dolenjska into M Ro`nik
and consolidated the investment with the capital.
Net turnover
PThe prevailing part of the gross turnover in the amount of 67,746 TSIT was earned by
the sale of trade goods (92%).
Net turnover amounts to 66,346,017 TSIT. In comparison with 1995 it increased by
12%: the revenue from sale of goods increased by 13%, and revenue from selling services decreased by 5%.
The costs of quantities sold amount to 50,055,129 TSIT and are higher by 11%. The
gross sales profit (difference between sale and purchase value of goods) amounts to
16,290,888 TSIT, and increased by 16 % compared to the previous year.
Exchange of Shares of the Holding Company for Shares of Affiliated
Companies
The decrease by 127,600 shares as of 31 December 1996 at price 16,781 SIT amounts
to 2,141,334 TSIT.
Previous number of shares
Decrease
New number of shares
Non-balance Post
3.471.840
- 127.600
3.344.240
1996
TSIT
Share in %
Costs of material
1.478.310
9,47
Costs of services
Adjustments of current assets
Costs of depreciation
Costs of labour
3.160.860
308.033
1.855.114
8.495.114
20,25
1,97
11,88
54,41
314.948
15.612.379
2,02
100,00
Costs
Long-term Debts from Investing Activities
Long-term debts from investing activities represent 1,406,126 TSIT, 54% of which are
bank loans and 46% loans from other companies. The long-term debts in 1996 decreased with regard to 1995 due to higher short-term debts. The long-term debts from
investing activities will increase essentially with the loan from EBRD.
Other costs
Costs total
Changes of value of finished goods
and semi-products
Total
TSIT
Short-term Debts from Investing Activities
Short-term
Short-term
Short-term
Short-term
loans
loans
loans
loans
from
from
from
from
affiliated companies
associated comp.
other companies
banks
Short-term loans for bonds
Total
22
31. Dec 1996
Structure in %
31. Dec 1995
582.935
277.093
668.344
1.680.895
17,23
8,19
19,76
49,69
236.110
219.421
215.190
1.462.997
173.810
5,14
741
3.383.077
100,00
2.134.459
42.544
15.569.835
Important costs are labour (54 %) services (20%), and depreciation (12%). In comparison with 1995, the costs of material (18%), costs of depreciation (13%) , and costs of
labour (8%) increased most. Among other costs, the costs for redundancies (152 Mio
SIT) are rather high.
23
Income from Investments in affiliated Companies
TSIT
Long-term investments in affiliated companies
115.415
Trade
M SVS
M Dolenjska
240.496
31.779
M Degro
M Modna hi{a
M Trgoavto
154.443
27.318
40.482
Trade total
494.518
Catering
M Hotel ilirija
M Sremi~
Catering total
22.168
-18.439
Expenses from Participating Interest
Among expenses from participating interest that amount to 2,116,248 TSIT, the majority
part is represented by adjustments and write-offs of long-term investments:
-
800,680 TSIT due to the loss of affiliated companies (see table above),
adjustments of investments value: into other companies 42,656 TSIT (of which 38,439
TSIT in Kovinotehna Celje).
3.729
Adjustments and Write-offs of Short-term Investments
Food Processing
M Emba
Eta
Gorenjska mlekarna
Zmaj~kov butik
Mesnine de‘ele Kranjske
Oljarica
Pekarna Grosuplje
M Slosad
Food processing total
16.412
41.816
0
12.126
-254.991
0
51.227
-10.472
-143.882
Interest expenses represent in total 806,728 TSIT. Cash discounts amount to 14,264
TSIT. Expenses arising from exchange rate differences (155,609 TSIT) refer mostly to
trade creditors (140,025 TSIT) and expenses from financing activities.
The revaluation deficit in the amount of 276,999 TSIT arose from higher revaluation of
liabilities than of assets.
Extraordinary Revenue
The extraordinary revenue (400,662 TSIT) includes: profit from selling of fixed assets
(123,982 TSIT), revenue from previous years (51,949 TSIT), written-off debts from previous years (92,606 TSIT), adjustments of inventory values (17,819 TSIT), dissolution of
long-term provisions (33,428 TSIT), and transfer of extensive costs from the purchase
of trade goods (40,139 TSIT).
Agriculture
M Agrokombinat
-249.359
M KG Ko~evje
M Kmetijstvo Kranj
236
400
Agriculture total
-248.723
Extraordinary Expense
The largest part of the extraordinary expense (346.453 TSIT) represents expenses referring to business operations with other companies in previous years. They amount to
200,606 TSIT.
Services
M Optima
M Ra~unalni{ke storitve
11.525
-1.752
Services total
9.773
Zavarovalnica Mercator
Long-term investments in associated companies
0
21.172
Long-term investments in other companies
Long-term investments in Slovenia total
Long-term investments abroad
Total
24
83.715
220.302
4.742
225.044
25
Income and number of employees in affiliated companies of the
Mercator Group
Finished Investments in 1996 - Refurbishment of Outlets
Profit centre
Valute (SIT)
Start of works
Opening date
company
Company
Selling area
(sqm)
Income in TSIT
No. of employees
Income by
employee
68.597.450
18.795.340
4.010
1.188
17.107
15.821
Nanos Postojna
Preskrba Kr{ko
Jelka Ribnica
176.672.411
267.220.190
145.251.539
20.01.1996
04.04.1996
19.06.1996
03.06.1996
24.06.1996
23.08.1996
550
1217
540
6.952.327
7.053.459
1.308.452
7.050.169
487
513
106
308
14.276
13.749
12.344
22.890
Golovec
Dolomiti
Golovec
Sadje zelenjava
37.889.621
150.346.140
65.738.654
23.241.866
20.05.1996
18.06.1996
02.07.1996
02.09.1996
12.06.1996
10.09.1996
08.08.1996
25.10.1996
313,5
405
550
80
109.757.197
6.612
16.600
620.156
244.887
148
75
4.190
3.265
Grmada
Sevnica
Rudar Idrija
Nanos Postojna
12.239.213
80.953.164
105.442.712
110.058.169
27.06.1996
08.10.1996
23.09.1996
16.09.1996
09.11.1996
18.12.1996
17.12.1996
28.11.1996
477
336
419
380
865.043
223
3.879
M Emba
Eta
1.247.301
2.809.556
106
363
11.767
7.740
M Dolenjska
M Degro
Potro{nik Lenart
Potro{nik Lenart
62.570.309
21.989.469
64.028.932
1.715.083
06.05.1996
15.01.1996
15.04.1996
11.09.1996
10.05.1996
15.05.1996
16.06.1996
14.09.1996
359
1550
1769
1769
Gorenjska mlekarna
Zmaj~kov butik
Mesnine de‘ele Kranjske
Oljarica
4.150.764
931.520
5.204.586
2.577.851
129
155
509
91
32.176
6.010
10.225
28.328
Zarja Ormo‘
Zarja Ormo‘
Mip Ptuj
Mip Ptuj
7.389.604
46.253.286
4.968.617
21.108.749
08.06.1996
08.07.1996
03.06.1996
16.06.1996
24.06.1996
20.08.1996
14.06.1996
26.06.1996
224
427
2413
240
Pekarna Grosuplje
M Slosad
1.080.611
897.127
123
88
8.785
10.195
18.899.316
1.564
12.084
Mip Ptuj
Mip Ptuj
Mip Ptuj
Univerzal Lendava
10.027.113
19.305.184
17.326.809
8.031.753
13.07.1996
02.11.1996
11.11.1996
15.03.1996
22.07.1996
08.11.1996
06.12.1996
09.05.1996
170
284
126
1300
Univerzal Lendava
Univerzal Lendava
Savica
Golovec
17.099.001
43.228.728
64.305.265
126.380.420
14.11.1996
21.08.1996
21.10.1996
15.08.1996
24.12.1996
02.10.1996
13.12.1996
16.12.1996
100
265
243,4
311,4
Golovec
M Dolenjska
PreskrbaTr‘i~
394.617.318
154.595.465
77.668.208
22.07.1996
16.09.1996
15.04..1996
24.01.1997
29.11.1996
26.08..1996
751,3
366,0
227,0
Trade
Holding company Ljubljana
M SVS
M
M
M
M
Dolenjska
Degro
Modna Hi{a
Trgoavto
Trade total
Catering
M Hotel Ilirija
M Sremi~
Catering total
Industry
Industry total
Agriculture
M Agrokombinat
M KG Ko~evje
M Kmetijstvo Kranj
1.147.018
2.415.792
1.319.427
93
321
184
12.334
7.526
7.171
Agriculture total
4.882.237
598
8.164
620.083
68.315
31
14
20.003
4.880
688.398
45
15.298
135.092.191
9.042
14.941
Service
M Optima
M Ra~unalni{ke storitve
Service total
Group total
Total
2.337.722.664
N.B. Income includes: income from selling goods, income from participation of profits, income from
investments, and income from extraordinary operations.
26
27
Management Responsibility
for the Financial
Statements
The Accounting Statements express the true and fair picture of the financial situation of
the Mercator Group. The accounts have been properly prepared in accordance with the
Slovenian Accounting Standards and with the provisions of internal acts of the Group.
Ljubljana, 12 May 1997
10
President of the Board:
Deputy President:
Member of the Board finances:
Kazimir @ivko Pregl, dipl. oec. mag. Alojz Klemen~i~, dipl. oec. Brane Gaji~, dipl. oec.
Member of the Board trade:
Sa{a Ger`ina, dipl. oec.
11
Report of the Certified
Accountant
intended for the
Shareholders Meeting of the Mercator Group d.d.
The Statement of Accounts of the Mercator Group, Ljubljana, and the corresponding
Income Statement and Cash Flow Statement for the business year ended on the same
day were audited as of 31 December 1996. We read the Management’s Business Report as of 31 December 1996. The Management is responsible for the accounting statements here presented. It is our responsibility to give our opinion about them.
The Statements were audited in accordance with the basic auditing principles and international auditing standards. Pursuant to these principles and standards we were obliged
to plan the audit so as to obtain reasonable assurance that the accounting statements
do not include any substantially incorrect statements. Within the frame of the audit we
sought for evidence to support the amounts and disclosures in accounting statements.
In our opinion the accounting statements of paragraph one hereto represent a true and
fair picture of the financial status of the Mercator Group, Ljubljana as of 31 December
1996, its operating results and the movements of its cash flows in the year ending on
that date in accordance with the Slovenian Accounting Standards. The Management
Report corresponds to the audited accounting statements.
Ljubljana, 24 April 1997
Director
Franc Prodnik
Certified Accountant
28
Blanka Jera{a
Certified Accountant
29
Poslovni sistem Mercator, d.d.
Trade Companies
Catering companies
Food Processing Companies
Poslovni sistem Mercator, d.d.,
Ljubljana (obvladujo~a dru`ba)
Mercator Hotel Ilirija, d.o.o., Ljubljana
Mercator Emba, d.d., Ljubljana
Mercator Sremi~, d.o.o., Ljubljana
ETA, d.d., Kamnik
Mercator SVS, d.d. , Ptuj
Mercator Dolenjska, d.d., Novo
mesto
Mercator Degro, d.d., Portoro`
Trgoavto, d.d., Koper
Mercator Modna hi{a, d.d., Maribor
Agricultural Companies
Mercator Agrokombinat, d.o.o., Kr{ko
Zmaj~kov butik, d.d., Ljubljana
Engineering Company
Mercator Optima, d.o.o., Ljubljana
Mesnine de`ele Kranjske, d.d.,
Ljubljana
Gorenjska mlekarna, d.d., Kranj
Tovarna olja "Oljarica", d.d., Kranj
Mercator Pekarna Grosuplje, d.d.,
Grosuplje
Mercator Slosad, d.d., Ho~e pri
Mariboru
Mercator Kmetijsko gospodarstvo,
d.o.o., Ko~evje
Production: Poslovni sistem Mercator. Design: Bojana Fajmut, Photo: Franci Virant. Prepress: Camera d.o.o. Print: Lotos d.o.o.
Mercator K@K Kmetijstvo, d.o.o., Kranj