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Grupo Elektra Announces 12% Increase in EBITDA to Ps.2,104 Million in 2Q14

—Operating Income grows 16% to Ps.1,427 million in the quarter—

—Consolidated revenue increases 6% to Ps.18,265 million, supported by an 11% expansion of the commercial business—

MEXICO CITY, July 24, 2014 (GLOBE NEWSWIRE) -- Grupo Elektra, S.A.B. de C.V. (BMV: ELEKTRA*; Latibex: XEKT), Latin America's leading specialty retailer and financial services company and the largest non-bank provider of cash advance services in the United States, reported today its financial results for the second quarter of 2014.

Consolidated second quarter results

Consolidated revenue totaled Ps.18,265 million, 6% higher than the Ps.17,249 million of the same period last year. Costs and operating expenses were Ps.16,161 million from Ps.15,372 million for the same period of 2013.

Grupo Elektra reported EBITDA of Ps.2,104 million, 12% above the Ps.1,876 million of the previous year's quarter; EBITDA margin was 12% this period, a percentage point above the second quarter of 2013. Operating income grew 16%, to Ps.1,427 million this period.

The company reported a net loss of Ps.1,114 million, from a net loss of Ps.1,124 million a year ago.

2Q 2013 2Q 2014 Change
Ps. %
Consolidated revenue $ 17,249 $ 18,265 $ 1,017 6%
EBITDA $ 1,876 $ 2,104 $ 228 12%
Net result $ (1,124) $ (1,114) $ 10 1%
Net result per share $ (4.74) $ (4.72) $ (0.02) 1%
Figures in millions of pesos
As of June 30, 2013, Elektra outstanding shares were 237.2 million and as of June 30, 2014, were 235.8 million.

Revenue

Consolidated revenue grew 6%, as a result of increases of 11% in commercial sales and 4% in financial revenues.

Commercial sales, of Ps.5,597 million from Ps.5,045 million last year, increased as a result of strategies that generate growing customer satisfaction through an optimal mix of merchandise on the sales floor, which is offered in the most competitive market conditions by a professional sales force.

The growth of 4% in financial revenues to Ps.12,668 million, compared to Ps.12,204 million last year, is explained mainly by a 5% increase of Banco Azteca Mexico income to Ps.8,830 million, from Ps.8,403 million in the same quarter a year ago.

Costs and expenses

Consolidated costs for the quarter grew 13% to Ps.7,783 million, from Ps.6,880 million the previous year. The change derives from individual increases of 13% in both commercial and financial costs.

The commercial cost grew in line with the performance of revenues of the business. Meanwhile, the increase in financial cost resulted from the creation of loan loss reserves, as well as more interest paid to savers as a result of a strong increase in traditional deposits.

Consolidated operating expenses decreased 1% to Ps.8,378 million in the period, as a result of strategies that generate operating efficiencies during the quarter.

EBITDA and net result

Consolidated EBITDA grew 12% to Ps.2,104 million, compared to Ps.1,876 million a year ago; EBITDA margin for the quarter was 12%, above the 11% of the same period last year.

Operating income was Ps.1,427 million, 16% higher than the Ps.1,225 million of the previous year.

The most significant change below EBITDA was a positive variation of Ps.381 million in other financial results, as a consequence of an improvement in the market value of the underlying assets of financial instruments owned by the company –which does not imply cash flow–compared to last year.

Grupo Elektra reported a net loss of Ps.1,114 million, from a net loss of Ps.1,124 million a year ago.

Consolidated balance sheet

Loan portfolio and deposits

Banco Azteca Mexico, Advance America —the largest non-bank provider of cash advance services in the US— and Banco Azteca Latin America's consolidated gross portfolio as of June 30, 2014, was Ps.77,204 million, compared to Ps.77,085 million from the previous year. Consolidated delinquency rate was 8.1% at the end of the period, the same as a year ago.

The gross portfolio of Banco Azteca Mexico was Ps.63,382 million, compared to Ps.62,892 million a year ago. The delinquency rate of Banco Azteca Mexico at the end of the quarter was 7.9%. The non-performing loan portfolio is reserved 1.35 times. The average term of the credit portfolio for principal credit lines –consumer, personal loans and Tarjeta Azteca– was 61 weeks at the end of the second quarter.

The Advance America loan portfolio was Ps.4,035 million, 11% higher than the Ps.3,638 million a year ago. More dynamism in the operations of the company is expected with the successful launch of title loans in a growing number of points of sale in the U.S.

Grupo Elektra consolidated deposits grew 11%, to Ps.85,027 million, compared to Ps.76,803 million a year ago. Deposits of Banco Azteca Mexico were Ps.79,800 million, 13% higher than the Ps.70,756 million a year ago. Financial products that satisfy clients in the best way, with world class service, resulted in the increase in deposits.

As of June 30, 2014, the capitalization index of Banco Azteca Mexico was 13.9%. The company considers the index to be at a level that optimizes equity profitability.

Debt

Consolidated debt with cost as of June 30, 2014, was Ps.19,173 million, 15% below Ps.22,535 million of the prior year, mainly as a consequence of debt prepayments of Ps.2,172 million of Banco Azteca Mexico this quarter.

Consolidated debt at the close of July 2014 was comprised of Ps.17,273 million of the commercial business, and Ps.1,901 million of the financial business. The balance of cash, cash equivalents and marketable securities for the commercial business was Ps.14,783 million at the end of the period; as a result, net debt for the commercial business was Ps.2,490 million.

Expansion

Grupo Elektra currently has 6,872 points of sale, 5% more than the 6,517 from a year ago; the change comes from the addition of 326 Blockbuster stores at the beginning of 2014.

As previously announced, the company acquired 100% of the shares of Blockbuster Mexico in January, which added points of sale to the distribution network of Grupo Elektra. The Blockbuster stores are located in 108 cities throughout the country, mainly in the B and C demographic areas, which will expand the customer base of the company. In the new locations, Grupo Elektra plans to offer commercial products, in addition to strengthening its current financial services platform, and promote the transformation of the digital entertainment distribution network.

Grupo Elektra has 3,804 points of sale in Mexico, 2,440 in the United States, and 628 in Central and South America. The wide distribution network allows the company to keep its proximity and closeness to clients; granting superior market positioning in the countries where it operates.

Six months results

Total consolidated revenue in the first six months of the year was Ps.35,523 million, 2% higher than the Ps.34,701 million for the same period of 2013, boosted by a 6% growth from the commercial business.

EBITDA was Ps.4,666 million, compared to Ps.4,930 million for the same period a year ago; the EBITDA margin in the first six months of 2014 was 13%. The company registered a consolidated net loss of Ps.1,289 million, compared to a loss of Ps.1,706 million a year ago, mainly due an improvement this period in the market value of underlying financial instruments that the company holds, which doesn't imply cash flow, compared to the prior year.

6M 2013 6M 2014 Change
Ps. %
Consolidated revenue $ 34,701 $ 35,523 $821 2%
EBITDA $ 4,930 $ 4,666 ($264) -5%
Net result $ (1,706) $ (1,289) $417 24%
Net result per share $ (7.19) $ (5.47) $1.72 24%
Figures in millions of pesos
As of June 30, 2013, Elektra outstanding shares were 237.2 million and as of June 30, 2014, were 235.8 million.

Company Profile:

Grupo Elektra (www.grupoelektra.com.mx) is Latin America's leading financial services company and specialty retailer and the largest non-bank provider of cash advance services in the United States. The Group operates over 6,000 points of sale in Mexico, USA, Brazil, Guatemala, Honduras, Peru, Panama and El Salvador.

Grupo Elektra is a Grupo Salinas company (www.gruposalinas.com), a group of dynamic, fast-growing, and technologically advanced companies focused on creating shareholder value, contributing to build the middle class of the countries in which they operate and improving society through excellence. Created by Mexican entrepreneur Ricardo B. Salinas (www.ricardosalinas.com), Grupo Salinas operates as a management development and decision forum for the top leaders of member companies. The companies include Azteca (www.irtvazteca.com), Azteca America (www.aztecaamerica.com), Grupo Elektra (www.grupoelektra.com.mx), Banco Azteca (www.bancoazteca.com.mx), Advance America (www.advanceamerica.net), Afore Azteca (www.aforeazteca.com.mx), Seguros Azteca (www.segurosazteca.com.mx) and Grupo Iusacell (www.iusacell.com.mx). Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. However, the member companies share a common vision, values and strategies for achieving rapid growth, superior results and world-class performance.

Except for historical information, the matters discussed in this press release are forward-looking statements and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Other risks that may affect Grupo Elektra and its subsidiaries are identified in documents sent to securities authorities.

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
2Q13 2Q14 Change
Financial income 12,204 71% 12,668 69% 465 4%
Commercial income 5,045 29% 5,597 31% 552 11%
Income 17,249 100% 18,265 100% 1,017 6%
Financial cost 3,396 20% 3,855 21% 458 13%
Commercial cost 3,484 20% 3,928 22% 444 13%
Costs 6,880 40% 7,783 43% 903 13%
Gross income 10,368 60% 10,483 57% 114 1%
Sales, administration and promotion expenses 8,492 49% 8,378 46% (114) -1%
Depreciation and amortization 651 4% 677 4% 27 4%
Operating expenses 9,143 53% 9,056 50% (87) -1%
Operating income 1,225 7% 1,427 8% 202 16%
EBITDA 1,876 11% 2,104 12% 228 12%
Comprehensive financial result:
Interest income 212 1% 88 0% (125) -59%
Interest expense (380) -2% (387) -2% (7) -2%
Foreign exchange gain, net 191 1% 33 0% (157) -83%
Other financial results, net (2,942) -17% (2,560) -14% 381 13%
(2,918) -17% (2,826) -15% 92 3%
Other expense, net (3) 0% (269) -1% (266) ----
Participation in the net income of
CASA and other associated companies 57 0% 48 0% (9) -16%
Loss before income tax (1,639) -10% (1,620) -9% 19 1%
Income tax 491 3% 507 3% 15 3%
Loss before discontinued operations (1,148) -7% (1,114) -6% 34 3%
Loss from discontinued operations 24 0% - 0% (24) ----
Consolidated net loss (1,124) -7% (1,114) -6% 10 1%
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
6M13 6M14 Change
Financial income 24,568 71% 24,772 70% 204 1%
Commercial income 10,133 29% 10,751 30% 618 6%
Income 34,701 100% 35,523 100% 821 2%
Financial cost 6,549 19% 7,452 21% 903 14%
Commercial cost 7,081 20% 7,391 21% 310 4%
Costs 13,630 39% 14,843 42% 1,213 9%
Gross income 21,071 61% 20,679 58% (392) -2%
Sales, administration and promotion expenses 16,141 47% 16,013 45% (128) -1%
Depreciation and amortization 1,307 4% 1,333 4% 27 2%
Operating expenses 17,448 50% 17,346 49% (101) -1%
Operating Income 3,624 10% 3,333 9% (290) -8%
EBITDA 4,930 14% 4,666 13% (264) -5%
Comprehensive financial result:
Interest income 261 1% 216 1% (45) -17%
Interest expense (799) -2% (765) -2% 35 4%
Foreign exchange (loss) gain, net (177) -1% 117 0% 294 ----
Other financial results, net (5,543) -16% (4,548) -13% 995 18%
(6,259) -18% (4,981) -14% 1,278 20%
Other income (expense), net 6 0% (275) -1% (281) ----
Participation in the net income expense of
CASA and other associated companies 55 0% 11 0% (44) -80%
Loss before income tax (2,574) -7% (1,912) -5% 662 26%
Income tax 855 2% 623 2% (232) -27%
Loss before discontinued operations (1,719) -5% (1,289) -4% 431 25%
Loss from discontinued operations 13 0% - 0% (13) ----
Consolidated net loss (1,706) -5% (1,289) -4% 417 24%
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MILLIONS OF MEXICAN PESOS
Commercial
Business
Financial
Business
Grupo Elektra Commercial
Business
Financial
Business
Grupo Elektra Change
At June 30, 2013 At June 30, 2014
Cash and cash equivalents 2,317 16,300 18,617 2,785 15,644 18,429 (188) -1%
Marketable financial instruments 22,068 14,983 37,051 11,998 24,351 36,349 (703) -2%
Performing loan portfolio 455 51,237 51,692 - 52,773 52,773 1,081 2%
Total past-due loans 273 5,340 5,613 - 5,875 5,875 262 5%
Gross loan portfolio 728 56,577 57,305 - 58,648 58,648 1,343 2%
Allowance for credit risks 273 7,917 8,190 - 8,670 8,670 480 6%
Loan portfolio, net 455 48,660 49,115 - 49,978 49,978 864 2%
Inventories 6,808 6,808 6,390 6,390 (418) -6%
Other current assets 7,721 8,405 16,126 3,654 6,459 10,113 (6,013) -37%
Total current assets 39,369 88,348 127,718 24,828 96,432 121,260 (6,458) -5%
Financial instruments - - - 9,814 222 10,037 10,037 ----
Performing loan portfolio - 19,183 19,183 18,210 18,210 (973) -5%
Total past-due loans - 597 597 345 345 (251) -42%
Loan portfolio - 19,780 19,780 - 18,556 18,556 (1,224) -6%
Other non-current assets 754 0 754 2,418 1 2,418 1,664 ----
Investment in shares 3,950 - 3,950 4,420 - 4,420 470 12%
Property, furniture, equipment and
investment in stores, net 4,576 2,890 7,466 4,816 2,839 7,654 188 3%
Intangible assets 626 6,595 7,221 629 6,537 7,166 (55) -1%
Other assets 736 191 927 659 682 1,341 413 45%
TOTAL ASSETS 50,011 117,805 167,816 47,584 125,268 172,852 5,036 3%
Demand and term deposits 76,803 76,803 85,027 85,027 8,225 11%
Creditors from repurchase agreements 2,314 2,314 2,792 2,792 478 21%
Short-term debt 3,608 3,325 6,933 3,783 493 4,275 (2,658) -38%
Short-term liabilities with cost 3,608 82,442 86,050 3,783 88,312 92,095 6,045 7%
Suppliers and other short-term liabilities 6,487 7,194 13,681 9,751 6,130 15,881 2,200 16%
Short-term liabilities without cost 6,487 7,194 13,681 9,751 6,130 15,881 2,200 16%
Total short-term liabilities 10,095 89,637 99,732 13,534 94,442 107,976 8,245 8%
Long-term debt 14,495 1,107 15,602 13,490 1,408 14,898 (704) -5%
Long-term liabilities with cost 14,495 1,107 15,602 13,490 1,408 14,898 (704) -5%
Long-term liabilities without cost 7,771 1,245 9,016 4,578 1,294 5,872 (3,144) -35%
Total long-term liabilities 22,265 2,352 24,617 18,068 2,702 20,770 (3,848) -16%
TOTAL LIABILITIES 32,360 91,989 124,349 31,602 97,144 128,746 4,397 4%
TOTAL STOCKHOLDERS' EQUITY 17,651 25,816 43,467 15,982 28,124 44,106 639 1%
LIABILITIES + EQUITY 50,011 117,805 167,816 47,584 125,268 172,852 5,036 3%
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
INFRASTRUCTURE
2Q13 2Q14 Change
Points of sale in Mexico
Elektra (1) 968 15% 993 14% 25 3%
Salinas y Rocha (1) 55 1% 55 1% -- 0%
Freestanding branches 2,342 36% 2,430 35% 88 4%
Blockbuster -- 0% 326 5% 326 100%
Total 3,365 52% 3,804 55% 439 13%
Points of sale in Central and South America
Elektra (1) 214 3% 215 3% 1 0%
Freestanding branches 452 7% 413 6% (39) -9%
Total 666 10% 628 9% (38) -6%
Points of sale in North America
Advance America 2,486 38% 2,440 36% (46) -2%
Total 2,486 38% 2,440 36% (46) -2%
TOTAL 6,517 100% 6,872 100% 355 5%
(1) Each store has a Banco Azteca branch.
Floor space (m²)
Elektra Mexico 836,625 51% 845,412 49% 8,787 1%
Elektra Central and South America 154,619 9% 151,891 9% (2,728) -2%
Salinas y Rocha 58,995 4% 58,995 3% - 0%
Freestanding branches 245,960 15% 240,234 14% (5,727) -2%
Advance America 340,623 21% 334,320 19% (6,303) -2%
Blockbuster - 0% 109,664 6% 109,664 100%
TOTAL 1,636,821 100% 1,740,514 100% 103,693 6%
Employees
Mexico 58,578 76% 62,242 77% 3,664 6%
Central and South America 12,566 16% 11,324 14% (1,242) -10%
North America 6,329 8% 6,848 9% 519 8%
Total employees 77,473 100% 80,414 100% 2,941 4%

CONTACT: Investor Relations: Bruno Rangel Grupo Salinas Tel. +52 (55) 1720-9167 jrangelk@gruposalinas.com.mx Rolando Villarreal Grupo Elektra S.A.B. de C.V. Tel. +52 (55) 1720-9167 rvillarreal@gruposalinas.com.mx Press Relations: Luciano Pascoe Grupo Salinas Tel. +52 (55) 1720 1313 ext. 36553 lpascoe@gruposalinas.com.mx Daniel McCosh Grupo Salinas Tel. +52 (55) 1720-0059 dmccosh@gruposalinas.com.mxSource:Grupo Elektra SAB de CV