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Grupo Elektra Announces 43% Growth in Operating Profit to Ps.3,269 Million in 3Q17

—EBITDA increases 28% to Ps.3,842 million during the period—

—Solid performance in both commercial and financial businesses generates
increase of 16% in consolidated revenues, to Ps.23,092 million—

—Consolidated gross portfolio grows 18%, to Ps.87,874 million—

—Grupo Elektra starts its omnichannel strategy,
with the successful launch of its online store www.elektra.com.mx—

MEXICO CITY, Oct. 24, 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 third quarter of 2017.

Consolidated third quarter results

Consolidated revenue was Ps.23,092 million in the period, 16% above the Ps.19,971 million for the same quarter of previous year. Costs and operating expenses were Ps.19,249 million, compared to Ps.16,975 million for the same period of 2016.

As a result, Grupo Elektra reported EBITDA of Ps.3,842 million, 28% higher than the Ps.2,996 million of the previous year’s quarter; EBITDA margin was 17% this period, two percentage points above the previous year.

Operating profit grew 43% to Ps.3,269 million during the quarter, from Ps.2,285 million in same period of 2016.

The company reported net income of Ps.2,858 million, compared to net income of Ps.1,330 million a year ago.


3Q 2016 3Q 2017 Change
Ps. %
Consolidated revenue$19,971 $23,092 $3,121 16%
EBITDA $2,996 $3,842 $846 28%
Operating profit$2,285 $3,269 $984 43%
Net result$1,330 $2,858 $1,527 115%
Net result per share$5.61 $12.33 $6.72 119%
Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2016, Elektra* outstanding shares were 237.1 million and as of September 30, 2017, were 231.8 million.

Revenue

Consolidated revenue increased 16%, as a result of 18% and 11% growth in both financial revenues and commercial sales, respectively.

The increase in commercial division sales ̶ to Ps.8,260 million compared to Ps.7,426 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. As of this year, these strategies have an additional boost with the launch of a new, larger store format, which includes a greater offer of goods and services to satisfy a growing number of families.

The increase in financial revenue ̶ to Ps.14,831 million from Ps.12,545 million from the previous year ̶ reflect mainly a 27% growth in revenue of Banco Azteca Mexico.

Costs and expenses

Consolidated costs for the quarter increased 21% to Ps.8,957 million, from Ps.7,410 million in the previous year, as a result of a 15% increase in commercial costs, in line with the increase in commercial revenue, and 32% growth in financial cost. The increase in the financial cost results from the creation of loan-loss provisions and higher interest payments, in line with higher market interest rates, as well as increased deposits at Banco Azteca.

Sales, administration and promotion expenses increased 8% to Ps.10,292 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. The expenses grow to a lesser extent than consolidated revenues, reflecting strong strategies that drive the company's operating efficiency.

EBITDA and net result

The Company´s EBITDA grew 28% to Ps.3,842 million this quarter. Operating income increased 43% to Ps.3,269 million, from Ps.2,285 million for the same quarter of 2016.

The most significant change below EBITDA was a positive variation of Ps.1,334 million in other financial results, as a consequence of a larger 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 the previous year.

Grupo Elektra reported net income of Ps.2,858 million, compared to a net income of Ps.1,330 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, 2017 grew 18% to Ps.87,874 million, from Ps.74,341 million for the previous year. Consolidated delinquency rate was 4% at the end of the period, compared to 3.7% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 20% to Ps.71,906 million, from Ps.59,903 million a year ago.

The delinquency rate for the bank at the end of the quarter was 3.4%, from 2.7% of the previous year. Past-due loan portfolio is reserved 2.6 times, which reflects a past-due portfolio of Ps.2,431 million, in comparison to allowance for credit risks of Ps.6,242 million in balance, as of September 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 third quarter.

Grupo Elektra consolidated deposits were Ps.104,814 million, from Ps.101,786 million a year ago. Deposits of Banco Azteca Mexico were Ps.104,180 million, 6% higher than the Ps.97,984 million a year ago.

As of September 30, 2017, the estimated capitalization index of Banco Azteca Mexico was 16.8%.

Debt

Consolidated debt with cost as of September 30, 2017, was Ps.14,098 million, 25% less than the Ps.18,703 million for the prior year.

Consolidated debt was comprised of Ps.13,063 million for the commercial business, and Ps.1,035 million for the financial business. The total balance of cash, cash equivalents and marketable securities for the commercial business was Ps.12,874 million at the end of the period; as a result, the net debt of the commercial business, recorded an amount of Ps.189 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 7,247 points of contact, compared to 7,391 units a year ago. The reduction is a result of strategies to focus on maximizing profitability of such units.

The company has 4,539 points of contact in Mexico, 2,072 in the United States, and 636 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.

Omnichannel startegy

In October, Grupo Elektra launched its omnichannel strategy, with its online store www.elektra.com.mx, through which hundreds of thousands of products are commercialized, at unparalleled prices, from any device and at all times. Through the online store, the customer can receive the merchandise, safely and expeditiously in a maximum of five days, at any point of delivery.

Elektra.com.mx has an extended catalog of merchandise, access to credit, a new exclusive distribution center for e-commerce, strategically located, and more than 1,000 stores in Mexico as customer service centers, payment points and product delivery.

Grupo Elektra offers a world-class online shopping experience to a growing market, and positions itself optimally in the preference of millions of consumers for cutting-edge forms of merchandise purchase.

Nine months consolidated results

Total consolidated revenue in the first nine months of the year grew 18% to Ps.67,892 million, from Ps.57,734 million for the same period of 2016, boosted by 19% and 15% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.12,470 million, 23% higher than the Ps.10,101 million for the same period a year ago; the EBITDA margin in the first nine months of 2017 was 18%, one percentage point above the prior year. Operating profit grew 31% to Ps.10,760 million during the period.

The company reported net income of Ps.14,496 million, compared to Ps.2,410 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.


9M 2016 9M 2017 Change
Ps. %
Consolidated revenue$57,734 $67,892 $10,158 18%
EBITDA $10,101 $12,470 $2,369 23%
Operating profit$8,215 $10,760 $2,545 31%
Net result$2,410 $14,496 $12,086 ----
Net result per share$10.16 $62.54 $52.38 ----
Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of September 30, 2016, Elektra* outstanding shares were 237.1 million and as of September 30, 2017, were 231.8 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.

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


GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
3T16 3T17 Change
Financial income12,545 63% 14,831 64% 2,286 18%
Commercial income7,426 37% 8,260 36% 834 11%
Income 19,971 100% 23,092 100% 3,121 16%
Financial cost2,596 13% 3,434 15% 838 32%
Commercial cost4,814 24% 5,524 24% 710 15%
Costs 7,410 37% 8,957 39% 1,548 21%
Gross income 12,561 63% 14,134 61% 1,573 13%
Sales, administration and promotion expenses 9,565 48% 10,292 45% 727 8%
EBITDA 2,996 15% 3,842 17% 846 28%
Depreciation and amortization692 3% 570 2% (122) -18%
Other expense, net19 0% 3 0% (16) -86%
Operating income 2,285 11% 3,269 14% 984 43%
Comprehensive financial result:
Interest income251 1% 154 1% (97) -39%
Interest expense(345) -2% (346) -1% (1) 0%
Foreign exchange gain (loss), net154 1% 117 1% (38) -24%
Other financial results, net37 0% 1,372 6% 1,334 ----
98 0% 1,297 6% 1,198 ----
Participation in the net income of
CASA and other associated companies(402) -2% (78) 0% 324 81%
(Loss) income before income tax 1,981 10% 4,488 19% 2,507 ----
Income tax(682) -3% (1,470) -6% (788) -116%
(Loss) income before discontinued operations 1,299 7% 3,018 13% 1,719 -132%
Result from discontinued operations31 0% (160) -1% (191) ----
Impairment of intangible assets- 0% - 0% - ----
Consolidated net (loss) income 1,330 7% 2,858 12% 1,527 115%

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
9M16 9M17 Change
Financial income36,501 63% 43,397 64% 6,897 19%
Commercial income21,234 37% 24,495 36% 3,261 15%
Income 57,734 100% 67,892 100% 10,158 18%
Financial cost7,564 13% 8,961 13% 1,397 18%
Commercial cost13,788 24% 16,317 24% 2,530 18%
Costs 21,351 37% 25,278 37% 3,927 18%
Gross income 36,383 63% 42,614 63% 6,231 17%
Sales, administration and promotion expenses 26,282 46% 30,144 44% 3,862 15%
EBITDA 10,101 17% 12,470 18% 2,369 23%
Depreciation and amortization1,875 3% 1,644 2% (231) -12%
Other (income) expense, net11 0% 66 0% 55 ----
Operating Income 8,215 14% 10,760 16% 2,545 31%
Comprehensive financial result:
Interest income647 1% 431 1% (216) -33%
Interest expense(1,007) -2% (1,142) -2% (135) -13%
Foreign exchange gain (loss), net327 1% (1,214) -2% (1,541) ----
Other financial results, net(3,967) -7% 11,852 17% 15,819 ----
(4,000) -7% 9,927 15% 13,927 ----
Participation in the net income of
CASA and other associated companies(618) -1% (21) 0% 597 97%
Income before income tax 3,597 6% 20,666 30% 17,069 ----
Income tax(1,119) -2% (5,958) -9% (4,839) ----
Income before discontinued operations 2,478 4% 14,708 22% 12,230 ----
Result from discontinued operations(68) 0% (204) 0% (136) -199%
Impairment of intangible assets- 0% (8) 0% (8) ----
Consolidated net income 2,410 4% 14,496 21% 12,086 ----

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 September 30, 2016 At September 30, 2017
Cash and cash equivalents2,719 19,494 22,214 2,577 17,879 20,456 (1,757) -8%
Marketable financial instruments12,489 52,001 64,490 10,297 47,062 57,359 (7,131) -11%
Performing loan portfolio- 51,188 51,188 - 58,599 58,599 7,411 14%
Total past-due loans- 2,663 2,663 - 3,344 3,344 681 26%
Gross loan portfolio- 53,852 53,852 - 61,943 61,943 8,091 15%
Allowance for credit risks- 6,693 6,693 - 7,806 7,806 1,113 17%
Loan portfolio, net- 47,159 47,159 - 54,137 54,137 6,978 15%
Inventories7,705 - 7,705 8,879 - 8,879 1,173 15%
Other current assets6,440 8,995 15,434 8,027 8,072 16,099 665 4%
Total current assets 29,354 127,648 157,002 29,780 127,150 156,930 (72) 0%
Financial instruments17,672 306 17,978 16,283 288 16,571 (1,407) -8%
Performing loan portfolio- 20,406 20,406 - 25,779 25,779 5,373 26%
Total past-due loans- 84 84 - 153 153 69 83%
Loan portfolio- 20,489 20,489 - 25,931 25,931 5,442 27%
Other non-current assets- 567 567 8,437 672 9,109 8,542 ----
Investment in shares2,736 - 2,736 2,632 - 2,632 (104) -4%
Property, furniture, equipment and
investment in stores, net3,674 2,630 6,304 4,489 3,004 7,493 1,189 19%
Intangible assets627 5,888 6,515 669 6,159 6,828 313 5%
Other assets1,005 163 1,167 818 412 1,231 64 5%
TOTAL ASSETS 55,067 157,693 212,759 63,108 163,617 226,725 13,966 7%
Demand and term deposits- 101,786 101,786 - 104,814 104,814 3,028 3%
Creditors from repurchase agreements - 6,168 6,168 - 5,367 5,367 (801) -13%
Short-term debt55 414 469 3,496 58 3,554 3,085 ----
Short-term liabilities with cost55 108,367 108,423 3,496 110,239 113,735 5,312 5%
Suppliers and other short-term liabilities13,585 7,672 21,256 12,713 10,405 23,118 1,862 9%
Short-term liabilities without cost13,585 7,672 21,256 12,713 10,405 23,118 1,862 9%
Total short-term liabilities 13,640 116,039 129,679 16,210 120,644 136,853 7,174 6%
Long-term debt16,219 2,042 18,261 9,567 977 10,544 (7,717) -42%
Long-term liabilities with cost16,219 2,042 18,261 9,567 977 10,544 (7,717) -42%
Long-term liabilities without cost5,839 3,823 9,662 6,326 3,323 9,649 (13) 0%
Total long-term liabilities 22,057 5,865 27,922 15,893 4,300 20,193 (7,730) -28%
TOTAL LIABILITIES 35,697 121,904 157,601 32,103 124,943 157,046 (555) 0%
TOTAL STOCKHOLDERS' EQUITY 19,369 35,789 55,158 31,006 38,674 69,680 14,522 26%
LIABILITIES + EQUITY 55,067 157,693 212,759 63,108 163,617 226,725 13,966 7%

INFRASTRUCTURE
3Q16 3Q17 Change
Points of sale in Mexico
Elektra 978 13% 1,020 14% 42 4%
Salinas y Rocha 50 1% 48 1% (2) -4%
Banco Azteca 1,228 17% 1,259 17% 31 3%
Freestanding branches 2,290 31% 2,212 31% (78) -3%
Total 4,546 62% 4,539 63% (7) 0%
Points of sale in Central and South America
Elektra 167 2% 163 2% (4) -2%
Banco Azteca 167 2% 163 2% (4) -2%
Freestanding branches 346 5% 310 4% (36) -10%
Total 680 9% 636 9% (44) -6%
Points of sale in North America
Advance America 2,165 29% 2,072 29% (93) -4%
Total 2,165 29% 2,072 29% (93) -4%
TOTAL 7,391 100% 7,247 100% (144) -2%
Floor space (m²) 1,484 100% 1,527 100% 43 3%
Employees
Mexico 49,353 77% 53,755 79% 4,402 9%
Central and South America 8,784 14% 8,707 13% (77) -1%
North America 6,007 9% 5,754 8% (253) -4%
Total employees 64,144 100% 68,216 100% 4,072 6%

Source: Grupo Elektra SAB de CV