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Grupo Elektra Announces 14% Growth in Operating Profit to Ps.2,311 Million in 3Q16

—EBITDA increases 11% to Ps.2,975 million in the period—

—Continued dynamism in both commercial and financial businesses generates 8% increase in consolidated revenues to Ps.19,971 million—

—Notable reduction in the delinquency rate of Banco Azteca Mexico; decreases more than four percentage points to 2.7%—

MEXICO CITY, Oct. 27, 2016 (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 third quarter of 2016.

Consolidated third quarter results

Consolidated revenue was Ps.19,971 million, 8% above the Ps.18,470 million for the same quarter of last year. Costs and operating expenses were Ps.16,996 million, compared to Ps.15,798 million for the same period of 2015.

As a result, Grupo Elektra reported EBITDA of Ps.2,975 million, 11% higher than the Ps.2,672 million of the previous year’s quarter; EBITDA margin was 15% this period, one percentage point above the previous year.

Operating profit grew 14% to Ps.2,311 million during the quarter, from Ps.2,030 million in same period of 2015.

The company reported net income of Ps.1,330 million, compared to a net loss of Ps.1,220 million a year ago.

3Q 2015 3Q 2016 Change
Ps.%
Consolidated revenue$18,470 $19,971 $1,501 8%
EBITDA $2,672 $2,975 $303 11%
Operating profit
$
2,030
$
2,311
$
280
14
%
Net result $(1,220)$1,330 $2,550 -----
Net result per share$(5.19)$5.61 $10.80 -----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2015, Elektra outstanding shares were 234.9 million and as of September 30, 2016, were 237.1 million.

Revenue

Consolidated revenue increased 8%, as a result of growth of 13% and 5% in commercial sales and financial revenues, respectively.

The increase in sales from the commercial division — to Ps.7,426 million compared to Ps.6,549 million last year — reflects strategies that generate growing customer satisfaction through an optimal mix of merchandise on the sales floor, offered by a highly trained sales force under the most competitive market conditions.

The increase in financial revenue — to Ps.12,545 million from Ps.11,921 million from the previous year — results mainly from a 7% growth in revenue of Advance America, together with a 2% increase in revenue from Banco Azteca Mexico during the period.

Costs and expenses

Consolidated costs for the quarter decreased 3% to Ps.7,410 million, from Ps.6,624 million in the previous year, as a result of a 22% decrease in financial cost — largely driven by a reduction in provisions for loan losses, along with increased strength in asset quality — and an 12% increase in commercial costs, in line with the performance of commercial revenue.

Sales, administration and promotion expenses increased 17% to Ps.9,586 million, as a result of higher personnel expenses—from higher compensation schemes that encourage productivity—increase in advertising—which achieves a better positioning of Grupo Elektra´s brands—and an increase in operating expenses.

EBITDA and net result

Consolidated EBITDA grew 11% to Ps.2,975 million this quarter.

Operating income increased 14% to Ps.2,311 million, from Ps.2,030 million for the same quarter of 2015.

The most significant change below EBITDA was a positive variation of Ps.3,335 million in other financial results, as a consequence of a gain in the market value of the underlying assets of financial instruments owned by the company – which does not imply cash flow – compared with a reduction in value of previous year.

Grupo Elektra reported a net income of Ps.1,330 million, compared to a net loss of Ps.1,220 million a year ago.

Consolidated balance sheet

Loan portfolio and deposits

Banco Azteca Mexico, Advance America and Banco Azteca Latin America’s consolidated gross portfolio as of September 30, 2016 grew 10% to Ps.74,341 million, from Ps.67,646 million from the previous year. Consolidated delinquency rate was 3.7% at the end of the period, compared to 7.7% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 15% to Ps.59,903 million, from Ps.52,273 million a year ago.

The delinquency rate of the bank at the end of the quarter was 2.7%, more than four percentage points lower than the 7.1% from the previous year. 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 third quarter.

The Advance America loan portfolio was Ps.5,391 million, 2% higher than the Ps.5,309 million a year ago.

Grupo Elektra consolidated deposits increased 5% to Ps.103,236 million, from Ps.98,598 million a year ago. Deposits of Banco Azteca Mexico were Ps.97,984 million, 7% higher than the Ps.91,927 million a year ago.

As of September 30, 2016, the estimated capitalization index of Banco Azteca Mexico was 16.56%.

Debt

Consolidated debt with cost as of September 30, 2016, was Ps.18,730 million, from Ps.19,812 million for the prior year.

Consolidated debt was comprised of Ps.16,274 million for the commercial business, and Ps.2,456 million for the financial business. The total balance of cash, cash equivalents and marketable securities for the commercial business was Ps.15,208 million at the end of the period; as a result, the net cash commercial balance — excluding debt with cost — is favorable at Ps.1,066 million.

Infrastructure

Grupo Elektra currently has 7,391 points of sale, compared to 8,339 units a year ago. The reduction results from strategies that focus on maximizing the profitability of the units.

The company has 4,546 points of sale in Mexico, 2,165 in the United States, and 680 in Central and South America. The extensive distribution network allows the company to maintain close contact with clients, granting superior market positioning in the countries where it operates.

Nine months consolidated results

Total consolidated revenue in the first nine months of the year grew 4% to Ps.57,928 million, from Ps.55,503 million for the same period of 2015, boosted mainly by 12% growth in the commercial business.

EBITDA was Ps.9,830 million, 23% higher than the Ps.8,004 million for the same period a year ago; the EBITDA margin in the first nine months of 2016 was 17%, three percentage points above the prior year. Operating profit grew 33% to Ps.8,145 million during the period.

The company registered consolidated net income of Ps.2,410 million, compared to a loss of Ps.5,922 million a year ago, mainly due a smaller reduction in the market value of underlying financial instruments that the company holds, which doesn’t imply cash flow, compared to the prior year.

9M 2015 9M 2016 Change
Ps.%
Consolidated revenue$55,503 $57,928 $2,425 4%
EBITDA $8,004 $9,830 $1,825 23%
Operating profit
$
6,130
$
8,145
$
2,015
33
%
Net result $(5,922)$2,410 $8,332 ----
Net result per share$(25.21)$10.16 $35.37 ----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2015, Elektra outstanding shares were 234.9 million and as of September 30, 2016, were 237.1 million.

Company Profile:

Grupo Elektra 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 more than 7,000 points of contact in Mexico, the United States, 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 TV Azteca (www.tvazteca.com; www.irtvazteca.com), Azteca US (us.azteca.com), Grupo Elektra (www.elektra.com.mx: 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), Totalplay (www.totalplay.com.mx) and Enlace TP (enlacetp.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
3Q15 3Q16 Change
Financial income 11,921 65% 12,545 63% 624 5%
Commercial income 6,549 35% 7,426 37% 877 13%
Income 18,470 100% 19,971 100% 1,501 8%
Financial cost 3,342 18% 2,596 13% (746) -22%
Commercial cost 4,282 23% 4,814 24% 532 12%
Costs 7,624 41% 7,410 37% (214) -3%
Gross income 10,846 59% 12,561 63% 1,715 16%
Sales, administration and promotion expenses 8,174 44% 9,586 48% 1,412 17%
EBITDA 2,672 14% 2,975 15% 303 11%
Depreciation and amortization 649 4% 692 3% 43 7%
Other expense (income), net (7) 0% (28) 0% (21) -292%
Operating Income 2,030 11% 2,311 12% 280 14%
Comprehensive financial result:
Interest income 71 0% 258 1% 188 -266%
Interest expense (355) -2% (345) -2% 10 3%
Foreign exchange gain, net 89 0% 154 1% 66 -74%
Other financial results, net (3,305) -18% 30 0% 3,335 ----
(3,500) -19% 98 0% 3,599 103%
Participation in the net income of CASA and other associated companies (117) -1% (402) -2% (286) -245%
(Loss) income before income tax (1,587) -9% 2,007 10% 3,593 ----
Income tax 453 2% (682) -3% (1,135) ----
(Loss) income before discontinued operations (1,133) -6% 1,325 7% 2,458 ----
Result from discontinued operations (86) 0% 5 0% 92 ----
Consolidated net (loss) income (1,220) -7% 1,330 7% 2,550 ----

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
9M15 9M16 Change
Financial income 36,305 65% 36,501 63% 196 1%
Commercial income 19,199 35% 21,428 37% 2,229 12%
Income 55,503 100% 57,928 100% 2,425 4%
Financial cost 11,677 21% 7,564 13% (4,113) -35%
Commercial cost 12,898 23% 14,058 24% 1,161 9%
Costs 24,574 44% 21,622 37% (2,952) -12%
Gross income 30,929 56% 36,306 63% 5,378 17%
Sales, administration and promotion expenses 22,925 41% 26,477 46% 3,552 15%
EBITDA 8,004 14% 9,830 17% 1,825 23%
Depreciation and amortization 1,875 3% 1,881 3% 5 0%
Other expense (income), net (0) 0% (195) 0% (195) ----
Operating Income 6,130 11% 8,145 14% 2,015 33%
Comprehensive financial result:
Interest income 269 0% 654 1% 385 143%
Interest expense (1,079) -2% (1,007) -2% 73 7%
Foreign exchange gain, net 167 0% 326 1% 160 96%
Other financial results, net (13,116) -24% (3,974) -7% 9,142 70%
(13,760) -25% (4,001) -7% 9,759 71%
Participation in the net income of
CASA and other associated companies (378) -1% (618) -1% (240) -63%
(Loss) income before income tax (8,008) -14% 3,526 6% 11,535 ----
Income tax 2,296 4% (1,119) -2% (3,415) ----
(Loss) income before discontinued operations (5,713) -10% 2,407 4% 8,120 ----
Result from discontinued operations (210) 0% 3 0% 213 ----
Consolidated net (loss) income (5,922) -11% 2,410 4% 8,332 ----


GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MILLIONS OF MEXICAN PESOS
Commercial BusinessFinancial BusinessGrupo Elektra Commercial BusinessFinancial BusinessGrupo Elektra Change
At September 30, 2015 At September 30, 2016
Cash and cash equivalents 2,117 18,284 20,401 2,719 19,494 22,214 1,812 9%
Marketable financial instruments 19,996 54,297 74,293 12,489 52,001 64,490 (9,803) -13%
Performing loan portfolio - 45,105 45,105 - 51,188 51,188 6,084 13%
Total past-due loans - 4,927 4,927 - 2,663 2,663 (2,264) -46%
Gross loan portfolio - 50,032 50,032 - 53,852 53,852 3,820 8%
Allowance for credit risks - 8,055 8,055 - 6,693 6,693 (1,362) -17%
Loan portfolio, net - 41,977 41,977 - 47,159 47,159 5,182 12%
Inventories 6,287 - 6,287 7,705 - 7,705 1,419 23%
Other current assets 3,552 8,390 11,942 6,526 8,908 15,434 3,492 29%
Total current assets 31,951 122,948 154,899 29,440 127,562 157,002 2,103 1%
Financial instruments 4,252 292 4,543 17,672 306 17,978 13,435 296%
Performing loan portfolio - 17,367 17,367 - 20,406 20,406 3,039 17%
Total past-due loans - 248 248 - 84 84 (164) -66%
Loan portfolio - 17,614 17,614 - 20,489 20,489 2,875 16%
Other non-current assets - 912 912 - 567 567 (345) -38%
Investment in shares 3,938 - 3,938 2,736 - 2,736 (1,202) -31%
Property, furniture, equipment and
investment in stores, net 3,912 2,825 6,737 3,542 2,762 6,304 (433) -6%
Intangible assets 544 8,180 8,724 624 5,891 6,515 (2,209) -25%
Other assets 1,115 385 1,501 599 568 1,167 (334) -22%
TOTAL ASSETS 45,713 153,156 198,868 54,612 158,147 212,759 13,891 7%
Demand and term deposits - 98,598 98,598 - 103,236 103,236 4,637 5%
Creditors from repurchase agreements - 5,034 5,034 - 4,718 4,718 (316) -6%
Short-term debt 7,624 817 8,442 55 414 469 (7,973) -94%
Short-term liabilities with cost 7,624 104,450 112,074 55 108,367 108,423 (3,652) -3%
Suppliers and other short-term liabilities 9,770 8,491 18,261 13,803 7,453 21,256 2,995 16%
Short-term liabilities without cost 9,770 8,491 18,261 13,803 7,453 21,256 2,995 16%
Total short-term liabilities 17,395 112,940 130,335 13,858 115,821 129,679 (656) -1%
Long-term debt 10,247 1,123 11,370 16,219 2,042 18,261 6,891 61%
Long-term liabilities with cost 10,247 1,123 11,370 16,219 2,042 18,261 6,891 61%
Long-term liabilities without cost 2,980 3,693 6,673 5,601 4,060 9,662 2,988 45%
Total long-term liabilities 13,227 4,816 18,043 21,820 6,103 27,922 9,880 55%
TOTAL LIABILITIES 30,621 117,756 148,378 35,678 121,923 157,601 9,224 6%
TOTAL STOCKHOLDERS' EQUITY 15,091 35,400 50,491 18,934 36,224 55,158 4,667 9%
LIABILITIES + EQUITY 45,713 153,156 198,868 54,612 158,147 212,759 13,891 7%

INFRASTRUCTURE
3Q15 3Q16 Change
Points of sale in Mexico
Elektra 1,002 12% 978 13% (24) -2%
Salinas y Rocha 52 1% 50 1% (2) -4%
Banco Azteca 1,257 15% 1,228 17% (29) -2%
Freestanding branches 2,649 32% 2,290 31% (359) -14%
B-Store 247 3% - 0% (247) -100%
Total 5,207 62% 4,546 62% (661) -13%
Points of sale in Central and South America
Elektra 198 2% 167 2% (31) -16%
Banco Azteca 198 2% 167 2% (31) -16%
Freestanding branches 372 4% 346 5% (26) -7%
Total 768 9% 680 9% (88) -11%
Points of sale in North America
Advance America 2,364 28% 2,165 29% (199) -8%
Total 2,364 28% 2,165 29% (199) -8%
TOTAL 8,339 100% 7,391 100% (948) -11%
Floor space (m²) 1,610 100% 1,484 100% (126) -8%
Employees
Mexico 50,658 76% 49,353 77% (1,305) -3%
Central and South America 9,427 14% 8,784 14% (643) -7%
North America 6,667 10% 6,007 9% (660) -10%
Total employees 66,752 100% 64,144 100% (2,608) -4%


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.mx

Source: Grupo Elektra SAB de CV