Earlier this morning, Petrol published an announcement on the Ljubljana Stock Exchange providing further clarification regarding the divergence between the Management Board and the Supervisory Board as regards the execution of the Company strategy.

The divergence between the Management Board (MB) and the Supervisory Board (SB) of Petrol, Ljubljana as regards the execution of the strategy relates to proposals made by the MB that would lead, if approved, to significant departure from the Strategic Business Plan for the period 2018 – 2022.

The SB further states that the MB never provided the SB with any credible materials on which a decision could have been based. The SB states that they have requested on several occasions for such materials to be prepared as the materials provided contained errors of several hundred million in cash flow calculations and in the amount of debt required to finance the investments. The SB deemed the materials provided by the MB to be misleading and was unable to take any decisions based on them. The SB further states that the materials, which were not approved but would lead, if approved, to significant departure from the Strategic Business Plan for the period 2018 – 2022, were discussed by the SB and the MB at several SB meetings in October 2019.

The SB called, on several occasions, for additional explanations to be provided by the MB and for the materials to be revised in order to be able to carry out a thorough examination of all aspects of such considerable departures from the strategy. The significant departure from the strategy relates both to the amount and the dynamic of investments required in the future as well as to the amount and the type of sources of finance needed to carry out the investments.

As the SB expressed doubts as to the accuracy and credibility of the calculation of the required sources and types of finance, the materials were indeed revised several times, but did not reflect the comments made by the SB and its requests for additional clarification and revisions. In this respect, the SB deems that the materials contained misleading information as the envisaged amount and type of debt (including a more expensive, subordinated debt) were deeply erroneous. The importance of the dynamic and amount of the envisaged investments as well as the related risks were also highlighted by Standard & Poor’s in their credit rating justification, pointing out a key risk of making large investments (of EUR 521m, according to the strategy) mostly outside the Company’s core activities in the coming years.

In 9M 2019, the Group recorded a 6% decrease in sales, an increase in EBITDA of 9% and an increase in net profit of 25%.

In the first nine months of 2019, sales amounted to EUR 507.4m, representing a decrease of 6% YoY. However, the figures in 2019 no longer include the revenues generated by Blicnet, which was sold in 2018. If we were to adjust the sales for the Blicnet effect, sales were down 4% YoY. The mentioned decrease could be attributed to revenues from mobile merchandise on the end-user market, revenues from the fixed segment of the end-user market and revenues on the wholesale market were all being down in 9M 2019.

Operating expenses amounted to EUR 475.5m, which is a decrease of 8%, while when excluding the Blicnet effect, they are down 6% YoY. Such a decrease could mostly be attributed to lower costs of services, which were down by 16% or EUR 37.1m. This was primarily the result of changes in the recognition of costs arising from leases, which in accordance with the new accounting standard are no longer disclosed as costs of services.

Going further down the P&L, EBITDA amounted to EUR 166.2m, which is an increase of 9% or 11% when adjusting for the effect of Blicnet. Consequently, EBITDA margin went up by 4.3 p.p., amounting to 32.5%. Operating profit amounted to EUR 35.9m, representing an increase of 29% or (adjusted) 33%.

In the first nine months of 2019, Telekom Slovenije witnessed a net profit of EUR 29.4m, which is an increase of 25% or (adjusted) 28%.

Telekom Slovenije Performance (9M 2018 vs 9M 2019) (EUR m)

Besides the sale of Blicnet, it is worth noting that the company has launched the activities to sell off their 100% share in their Kosovo subsidiary IPKO Telecommunications in July 2019.

The company stated that this is in accordance with Telekom Slovenije Group’s strategy for the 2019–2023 period, which also includes the possibility of further consolidation through expansion or disinvestment in the markets where Telekom Slovenije Group operates.

As a reminder, Kosovo represents the company’s second-largest market, where the company observed a poor P&L performance in 9M 2019, resulting in operating revenues of EUR 46.55m (-15% YoY) EBITDA of EUR 23m (-1% YoY) and a net loss of EUR -0.62m.

Key objectives for 2019:

• Operating revenues: EUR 711.9m ( -3% YoY)
• EBITDA: EUR 216.0m (+16% YoY)
• Net operating profit: EUR 30.3m (-9% YoY)
• CAPEX: EUR 211.9m (+58% YoY)

INA agreed on the extension of the maturity for 1 additional year with all participating lenders under the unchanged conditions.

INA published an announcement on the Zagreb Stock Exchange stating that they have signed a 1-year extension of the USD 300m revolving credit facility.

The mentioned agreement was signed with 7 bank groups in December 2018. The facility was arranged as a club deal with a three-year tenor and 2 one-year extension options. INA agreed on the extension of the maturity for 1 additional year with all participating lenders under the unchanged conditions. The company states that the extension of this facility further ensures stable financial support for INA operations and future investment activities.