Press releases

• Eurocash Group will acquire 100% of the shares of EKO Holding, owner of a chain of more than 250 small supermarkets located mainly in south-western Poland.
• The acquisition of the EKO network will enable the Eurocash Group to develop key competences for improving the competitiveness of Polish independent retail stores, which are the Group's main customers.
• The loss-making EKO network will acquire a strong strategic partner with the know-how and resources necessary to regain sustainable profitability and preserve more than 3,700 jobs.
• Ultimately, the Eurocash Group intends to manage the EKO network in partnership with franchisees from the regions of operation of this network.
• The purchase of EKO Holding depends, among others, on the positive decision of UOKiK.

— We remain true to our mission to support independent retail stores in Poland. The purchase of EKO will enable us to further improve the efficiency of the supply chain for small stores, develop new competencies and increase the scale of our business. Thanks to this, we will be able to support even more effectively the development of our customers, i.e. thousands of Polish independent retailers, who represent the strength of Polish traditional trade, in the face of the relentless aggressive expansion of discount stores — said Jacek Owczarek, member of the board of Eurocash.

The acquisition of EKO Holding, owner of a chain of 253 supermarkets under the EKO and Ledi brands, located mainly in south-western Poland, will strengthen the presence and logistics capabilities of the Eurocash Group in this part of the country. In addition, this investment will allow the Eurocash Group to develop competencies for all its customers — including stores affiliated in franchise chains, especially in the distribution of fresh products, running retail stores and addressing the expectations of final consumers.

Eurocash Group acquires EKO Holding from Pelican Ventures A preliminary agreement for the purchase of 100% of the shares was concluded under certain conditions. To finalize it, the consent of the President of the Office for Competition and Consumer Protection is required.

— The most dangerous competitor of our customers is discount chains. The Eurocash Group is today a partner of thousands of independent stores in Poland, which is why we intend to operate the stores acquired by us as part of a partnership with our franchisees — announced Jacek Owczarek, member of the board of Eurocash. More information on the further development of the EKO network and its integration within the Eurocash Group will be presented after the transaction is finalized.

In recent years, the financial situation of EKO Holding has deteriorated. In 2015, the total sales realized by this network amounted to about PLN 1 billion, but — despite the deep restructuring carried out — it still generated losses. Without attracting an investor, the EKO chain of stores would not be able to cope with the growing competition from discount stores and large-scale chains.

Thanks to Eurocash's investment in the shares of EKO Holding, the loss-making network acquires a strong strategic partner with the know-how and resources necessary to recover sustainable profitability and, as a consequence, preserve the jobs of more than 3.7 thousand people employed in the network.

The acquisition of EKO Holding shares is another element of the Eurocash Group's acquisition policy. The synergy effects that can be realized as a result of this acquisition will give Eurocash Group customers and franchisees new tools to better compete with large format stores.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.

Increased profitability due to higher sales and significant debt reduction

• In the fourth quarter of 2015, revenues from sales of the Eurocash Group, the national leader in the wholesale distribution of food and other fast-moving goods (FMCG), amounted to PLN 5.04 billion and were more than 13% higher than in the same period of 2014. In the whole of last year, consolidated sales increased by 20%, to PLN 20.32 billion.
• The dynamic growth in sales is due, among other things, to the acquisition of Service FMCG (a spin-off from Kolporter) and Inmedio in 2014, as well as improved sales in other key formats and further organic expansion.
• In the fourth quarter of 2015, Eurocash launched 10 new Cash&Carry locations, and in the whole of last year the number of outlets of this format increased by 19 (to 187 at the end of 2015).
• Gross profit on sales generated by the Eurocash Group in the fourth quarter of 2015 amounted to more than PLN 553 million (an increase of 9% compared to the same period in 2014), and in the whole of last year it exceeded PLN 2 billion, which represents an increase of 11% y/y.
• EBITDA, i.e. operating profit plus depreciation, in the last quarter of last year amounted to nearly PLN 185 million (+17% y/y), and cumulatively for the 12 months of 2015 amounted to PLN 476 million (+15% y/y).
• Net operating flows in the fourth quarter of 2015 amounted to PLN 147 million, and in the whole of last year they reached PLN 978 million. This allowed the Eurocash Group to reduce its net debt ratio to 0.37x EBITDA.
• Higher EBITDA and lower financial costs due to debt reduction resulted in a 45% increase in Eurocash Group's net profit in the fourth quarter of last year, to nearly PLN 109 million. Consolidated net profit for the whole of 2015 amounted to more than PLN 230 million, which means an increase of 26% year-on-year.
• Net profit attributable to Eurocash shareholders in the fourth quarter of 2015 amounted to PLN 97 million (+34% y/y), and increasing in the whole of last year PLN 212 million (+18%).

— Macroeconomic conditions for the FMCG market at the end of 2015 were more favourable than in previous quarters, as the deflationary trend reversed. In the last quarter of last year, we had inflation in the price of food and basic alcoholic beverages at 0.1% y/y, although this slight increase was mainly due to a low comparative base. Over the whole of 2015, prices fell by an average of 1.7%. Due to the continuing price pressure and unabated competition, in particular from discount retailers, the situation in so-called traditional trade is still very demanding — said Jacek Owczarek, Member of the Board and Chief Financial Officer of Eurocash.

— Under these conditions, the Eurocash Group strengthened its market position and recorded a clear increase in sales: by more than 13% in the fourth quarter and by nearly 20% in the whole of 2015. This was mainly due to acquisitions made in 2014. Last year, however, we accelerated our organic expansion in the Cash & Carry format. It was a record year for us in terms of the number of new warehouse openings — in the fourth quarter alone we launched 10 Cash&Carry locations, and in the whole of 2015 we opened 19 outlets in this format — pointed out Jacek Owczarek.

Thanks to positive sales results also in other formats, in particular Eurocash Dystrybucja and Delicatesy Centrum, Eurocash Group sales were higher than a year ago, also after excluding the revenues of the acquired entities (an increase of about 4% y/y).

Higher sales translated into an increase in gross profit on sales in the fourth quarter of 2015 to over PLN 553 million, i.e. 9% year-on-year, and in the whole of last year to PLN 2.02 billion, which means an increase of 11% compared to 2014.

Eurocash Group's EBITDA for the last quarter of 2015 amounted to nearly PLN 185 million, 17% more than in the same period of 2014. Despite a less favorable sales mix, i.e. an increase in the share of cigarettes and tobacco products (after the acquisition of part of Kolporter's business), whose sales are characterized by lower profitability, in the fourth quarter of last year, the EBITDA margin increased to 3.66% compared to 3.54% a year earlier. In the whole of 2015, consolidated EBITDA amounted to almost PLN 476 million, which means an increase of 15% y/y.

The fourth quarter of 2015 was the next in a row in which the Eurocash Group recorded significant positive flows from operating activities — PLN 147 million (compared to PLN 51 million in the fourth quarter of 2014), and in the whole of last year as much as PLN 978 million (PLN 246 million a year earlier).

— As we announced, we continued our efforts to optimize inventory levels, and the cash released in this way allowed us to further significantly reduce our debt. As a result, the Group's net debt at the end of 2015 was at a low level of 0.37x EBITDA, whereas the previous year it still exceeded 2 times the EBITDA result — pointed out Jacek Owczarek.

The higher EBITDA result, combined with lower financing costs as a result of debt reduction, translated into a clear improvement in net profitability. Consolidated net profit increased in the fourth quarter of 2015 to PLN 109 million, i.e. by 45% y/y, and in the whole of last year to PLN 230 million (+26% y/y).

2015 was also a period in which Eurocash was strongly involved in activities supporting the competitiveness of the Group's customers — mainly small and medium-sized independent retail stores (operating independently or as part of franchise or partner networks). — We successfully developed, among others, the concept of Faktoria Win, thanks to which this category of products in an attractive form for consumers returned to independent stores from the so-called traditional market. In 2015, we also organized a nationwide promotional campaign MEGATURNIEJ, which covered almost 10 thousand independent stores, and its element was the TV tournament “Shopping Master”. We believe in the future of traditional trade in Poland and we intend to continue investing in it,” said Jacek Owczarek.

In addition to providing effective solutions for gaining a competitive advantage on the local market and improving the profitability of our stores, Eurocash Group's support also takes another form: — As part of the Academy of Skills developed by us, we trained around 3.5 thousand store owners and employees last year. For talented children of employees of our franchisees, we have funded a special scholarship program — added a member of the board of the Eurocash Group.

Eurocash Group is the largest Polish company engaged in wholesale distribution of food products and marketing support for independent Polish entrepreneurs conducting retail activities. Franchise and partner networks supported by Eurocash bring together more than 14 thousand independent stores operating under brands such as abc, Groszek, Delikatesy Centrum, Lewiatan, Euro Sklep and Gama.