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Grupo Elektra Announces 32% Growth in Operating Profit to Ps.3,895 Million in 2Q17

—EBITDA increases 25% to Ps.4,493 million during the period—

—Notable performance in both commercial and financial businesses generates
increase of 17% in consolidated revenues, to Ps.22,794 million—

Gross portfolio of Banco Azteca Mexico grows 28%, to Ps.69,850 million,
and its delinquency rate decreases to 2.5%—

MEXICO CITY, July 20, 2017 (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, announced today its financial results for the second quarter of 2017.

Consolidated second quarter results

Consolidated revenue was Ps.22,794 million in the period, 17% above the Ps.19,510 million for the same quarter of previous year. Costs and operating expenses were Ps.18,301 million, compared to Ps.15,909 million for the same period of 2016.

As a result, Grupo Elektra reported EBITDA of Ps.4,493 million, 25% higher than the Ps.3,601 million of the previous year’s quarter; EBITDA margin was 20% this period, two percentage points above the previous year.

Operating profit grew 32% to Ps.3,895 million during the quarter, from Ps.2,952 million in same period of 2016.

The company reported net income of Ps.7,137 million, compared to net loss of Ps.79 million a year ago.

2Q 2016 2Q 2017 Change
Ps.%
Consolidated revenue$19,510$22,794$3,28517%
EBITDA $3,601$4,493$892 25%
Operating profit
$2,952
$3,895
$943
32%
Net result$(79)$7,137$7,216----
Net result per share$(0.33)
$30.78$31.11----
Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of June 30, 2016, Elektra* outstanding shares were 237.9 million and as of June 30, 2017, were 231.9 million.

Revenue

Consolidated revenue increased 17%, as a result of a 17% growth in both financial revenues and commercial sales, respectively.

The increase in commercial division sales ̶ to Ps.8,597 million compared to Ps.7,337 million last year ̶ reflects strategies that focus on generating optimum value propositions for the customers, through lines of merchandise that best meet their needs, with world-class service and under the most competitive market conditions.

The increase in financial revenue ̶ to Ps.14,197 million from Ps.12,172 million from the previous year ̶ reflect mainly a 21% growth in revenue of Banco Azteca Mexico.

Costs and expenses

Consolidated costs for the quarter increased 15% to Ps.8,563 million, from Ps.7,419 million in the previous year, as a result of a 19% increase in commercial costs, in line with the increase in commercial revenue, and 9% growth in financial cost. The increase in financial cost is less than the increase in financial revenue, which reflects a moderate growth in loan-loss provisions, in line with greater strength in asset quality.

Sales, administration and promotion expenses increased 15% to Ps.9,738 million, as a result of higher personnel expenses due to higher compensation plans that encourage productivity; an increase in advertising, which achieves a better positioning of Grupo Elektra brands, and an increase in operating expenses.

EBITDA and net result

The Company´s EBITDA grew 25% to Ps.4,493 million this quarter. Operating income increased 32% to Ps.3,895 million, from Ps.2,952 million for the same quarter of 2016.

The most significant change below EBITDA was a positive variation of Ps.9,407 million in other financial results, as a consequence of a gain this period in the market value of the underlying assets of financial instruments owned by the company –which does not imply cash flow– compared to a reduction of the previous year.

Grupo Elektra reported net income of Ps.7,137 million, compared to a net loss of Ps.79 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 June 30, 2017 grew 24% to Ps.85,050 million, from Ps.68,440 million for the previous year. Consolidated delinquency rate was 3.1% at the end of the period, compared to 3.7% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 28% to Ps.69,850 million, from Ps.54,515 million a year ago.

The delinquency rate for the bank at the end of the quarter was 2.5%, from 2.9% of the previous year. Past-due loan portfolio is reserved 3.2 times, which reflects a past-due portfolio of Ps.1,729 million, in comparison to allowance for credit risks of Ps.5,475 million in balance, as of June 30, 2017.

The average term of the credit portfolio for principal credit lines – consumer, personal loans and Tarjeta Azteca – was 63 weeks at the end of the second quarter.

Grupo Elektra consolidated deposits were Ps.103,896 million, from Ps.102,496 million a year ago. Deposits of Banco Azteca Mexico were Ps.102,538 million, 5% higher than the Ps.97,588 million a year ago.

As of June 30, 2017, the estimated capitalization index of Banco Azteca Mexico was 16.9%.

Debt

Consolidated debt with cost as of June 30, 2017, was Ps.12,935 million, 29% less than the Ps.18,303 million for the prior year.

Consolidated debt was comprised of Ps.11,054 million for the commercial business, and Ps.1,881 million for the financial business. The total balance of cash, cash equivalents and marketable securities for the commercial business was Ps.12,193 million at the end of the period; as a result, the net cash balance of the commercial business, excluding debt with cost, recorded a favourable amount of Ps.1,139 million.

As previously announced, during the last twelve months, Grupo Elektra paid in advance its senior notes of US$550 million due in 2018.

To cover the payments, Grupo Elektra issued three certificates in local currency for a total of Ps.6,000 million, and used cash generated by the company, within the framework of solid financial performance.

Through these amortizations, the company ceased to hold dollar-denominated bonds, and the debt transactions reflect Grupo Elektra's firm strategy to further strengthen its strong capital structure.

Infrastructure

Grupo Elektra currently has 7,181 points of contact, compared to 7,492 units a year ago. The reduction is a result of strategies to focus on maximizing profitability of such units.

The company has 4,423 points of contact in Mexico, 2,086 in the United States, and 672 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.

Six months consolidated results

Total consolidated revenue in the first six months of the year grew 19% to Ps.44,801 million, from Ps.37,763 million for the same period of 2016, boosted by 19% and 18% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.8,628 million, 21% higher than the Ps.7,105 million for the same period a year ago; the EBITDA margin in the first six months of 2017 was 19%. Operating profit grew 26% to Ps.7,491 million during the period.

The company reported net income of Ps.11,638 million, compared to Ps.1,080 million a year ago, mainly due an appreciation this quarter in the market value of underlying financial instruments that the company holds, which doesn’t imply cash flow, compared to depreciation the prior year.

6M 2016 6M 2017 Change
Ps.%
Consolidated revenue$37,763$44,801$7,03719%
EBITDA $7,105$8,628$1,523 21%
Operating profit
$5,930
$7,491
$1,560
26%
Net result $1,080$11,638$10,559----
Net result per share$4.54$50.19$45.65----
Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of June 30, 2016, Elektra* outstanding shares were 237.9 million and as of June 30, 2017, were 231.9 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 building 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 America (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
2Q16 2Q17 Change
Financial income 12,172 62% 14,197 62% 2,025 17%
Commercial income 7,337 38% 8,597 38% 1,260 17%
Income 19,510 100% 22,794 100% 3,285 17%
Financial cost 2,673 14% 2,926 13% 253 9%
Commercial cost 4,746 24% 5,637 25% 891 19%
Costs 7,419 38% 8,563 38% 1,144 15%
Gross income 12,091 62% 14,232 62% 2,140 18%
Sales, administration and promotion expenses 8,490 44% 9,738 43% 1,248 15%
EBITDA 3,601 18% 4,493 20% 892 25%
Depreciation and amortization 642 3% 537 2% (105)-16%
Other expense, net 7 0% 61 0% 54 ----
Operating income 2,952 15% 3,895 17% 943 32%
Comprehensive financial result:
Interest income 162 1% 135 1% (27)-17%
Interest expense (334)-2% (327)-1% 6 2%
Foreign exchange gain (loss), net 116 1% (394)-2% (511)----
Other financial results, net (2,796)-14% 6,611 29% 9,407 ----
(2,852)-15% 6,024 26% 8,876 ----
Participation in the net income of
CASA and other associated companies (145)-1% (8)0% 137 ----
(Loss) income before income tax (45)0% 9,911 43% 9,956 ----
Income tax 14 0% (2,728)-12% (2,742)----
(Loss) income before discontinued operations (31)0% 7,183 32% 7,214 ----
Result from discontinued operations (48)0% (45)0% 3 6%
Impairment of intangible assets - 0% - 0% - ----
Consolidated net (loss) income (79)0% 7,137 31% 7,216 ----

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
6M16 6M17 Change
Financial income 23,956 63% 28,566 64% 4,610 19%
Commercial income 13,808 37% 16,234 36% 2,427 18%
Income 37,763 100% 44,801 100% 7,037 19%
Financial cost 4,968 13% 5,527 12% 559 11%
Commercial cost 8,974 24% 10,794 24% 1,820 20%
Costs 13,941 37% 16,321 36% 2,380 17%
Gross income 23,822 63% 28,480 64% 4,658 20%
Sales, administration and promotion expenses 16,717 44% 19,852 44% 3,135 19%
EBITDA 7,105 19% 8,628 19% 1,523 21%
Depreciation and amortization 1,182 3% 1,074 2% (109)-9%
Other (income) expense, net (8)0% 63 0% 71 ----
Operating Income 5,930 16% 7,491 17% 1,560 26%
Comprehensive financial result:
Interest income 395 1% 276 1% (119)-30%
Interest expense (662)-2% (796)-2% (134)-20%
Foreign exchange gain (loss), net 172 0% (1,330)-3% (1,503)----
Other financial results, net (4,004)-11% 10,480 23% 14,484 ----
(4,098)-11% 8,630 19% 12,729 ----
Participation in the net income of
CASA and other associated companies (216)-1% 57 0% 273 ----
Income before income tax 1,616 4% 16,178 36% 14,562 ----
Income tax (438)-1% (4,489)-10% (4,051)----
Income before discontinued operations 1,179 3% 11,689 26% 10,511 ----
Result from discontinued operations (99)0% (43)0% 56 56%
Impairment of intangible assets - 0% (8)0% (8)----
Consolidated net income 1,080 3% 11,638 26% 10,559 ----


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, 2016 At June 30, 2017
Cash and cash equivalents 2,011 18,899 20,911 2,770 18,008 20,778 (132)-1%
Marketable financial instruments 21,471 53,850 75,321 9,423 46,917 56,340 (18,981)-25%
Performing loan portfolio - 48,196 48,196 - 56,515 56,515 8,319 17%
Total past-due loans - 2,473 2,473 - 2,563 2,563 90 4%
Gross loan portfolio - 50,669 50,669 - 59,077 59,077 8,409 17%
Allowance for credit risks - 6,426 6,426 - 6,960 6,960 534 8%
Loan portfolio, net - 44,243 44,243 - 52,117 52,117 7,875 18%
Inventories 7,059 - 7,059 8,000 - 8,000 942 13%
Other current assets 6,955 8,007 14,962 7,067 7,170 14,237 (725)-5%
Total current assets 37,495 124,999 162,494 27,260 124,212 151,473 (11,021)-7%
Financial instruments 8,390 292 8,682 16,202 291 16,493 7,810 90%
Performing loan portfolio - 17,686 17,686 - 25,857 25,857 8,172 46%
Total past-due loans - 85 85 - 116 116 30 36%
Loan portfolio - 17,771 17,771 - 25,973 25,973 8,202 46%
Other non-current assets - 764 764 7,200 672 7,872 7,108 930%
Investment in shares 3,036 - 3,036 2,712 - 2,712 (325)-11%
Property, furniture, equipment and
investment in stores, net 3,767 2,660 6,427 4,104 2,744 6,848 421 7%
Intangible assets 611 5,619 6,229 686 6,097 6,784 555 9%
Other assets 1,116 571 1,687 804 405 1,210 (477)-28%
TOTAL ASSETS 54,416 152,675 207,090 58,968 160,395 219,363 12,273 6%
Demand and term deposits - 102,496 102,496 - 103,896 103,896 1,400 1%
Creditors from repurchase agreements - 3,818 3,818 - 5,785 5,785 1,966 52%
Short-term debt 66 534 599 3,278 971 4,249 3,650 609%
Short-term liabilities with cost 66 106,848 106,914 3,278 110,652 113,930 7,016 7%
Suppliers and other short-term liabilities 16,814 6,483 23,298 12,900 8,561 21,461 (1,837)-8%
Short-term liabilities without cost 16,814 6,483 23,298 12,900 8,561 21,461 (1,837)-8%
Total short-term liabilities 16,880 113,331 130,211 16,178 119,213 135,391 5,180 4%
Long-term debt 15,917 1,787 17,704 7,776 910 8,686 (9,017)-51%
Long-term liabilities with cost 15,917 1,787 17,704 7,776 910 8,686 (9,017)-51%
Long-term liabilities without cost 1,977 3,903 5,879 5,351 3,296 8,647 2,768 47%
Total long-term liabilities 17,893 5,690 23,583 13,127 4,206 17,333 (6,250)-27%
TOTAL LIABILITIES 34,773 119,021 153,794 29,305 123,419 152,724 (1,070)-1%
TOTAL STOCKHOLDERS' EQUITY 19,642 33,654 53,296 29,663 36,976 66,639 13,343 25%
LIABILITIES + EQUITY 54,416 152,675 207,090 58,968 160,395 219,363 12,273 6%

INFRASTRUCTURE
2Q16 2Q17 Change
Points of sale in Mexico
Elektra 96913% 1,01114% 42 4%
Salinas y Rocha 511% 481% (3)-6%
Banco Azteca 1,22116% 1,25117% 30 2%
Freestanding branches 2,31431% 2,11329% (201)-9%
Total 4,555 61% 4,423 62% (132)-3%
Points of sale in Central and South America
Elektra 1933% 1642% (29)-15%
Banco Azteca 1933% 1642% (29)-15%
Freestanding branches 3435% 3445% 1 0%
Total 729 10% 672 9% (57)-8%
Points of sale in North America
Advance America 2,20829% 2,08629% (122)-6%
Total 2,208 29% 2,086 29% (122)-6%
TOTAL 7,492 100% 7,181 100% (311)-4%
Floor space (m²) 1,483 100% 1,512 100% 29 2%
Employees
Mexico 47,41576% 50,88178% 3,466 7%
Central and South America 8,57614% 8,73013% 154 2%
North America 6,21910% 5,8189% (401)-6%
Total employees 62,210 100% 65,429 100% 3,219 5%

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@elektra.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