Grupo Elektra Reports 15% Growth in Operating Profit to Ps.3,677 Million in 4Q17

—EBITDA increases 10% to Ps.4,284 million during the period—

—Solid performance in both commercial and financial businesses generates
increase of 15% in consolidated revenues, to Ps.27,087 million—

—Consolidated gross portfolio grows 12%, to Ps.93,652 million—

—Company debt, without consolidating the financial business,
decreases 18%, to Ps.13,464 million—

MEXICO CITY, Feb. 20, 2018 (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 financial results for the fourth quarter of 2017 and full year 2017.

Consolidated fourth quarter results

Consolidated revenue was Ps.27,087 million in the period, 15% above the Ps.23,508 million for the same quarter of previous year. Costs and operating expenses were Ps.22,803 million, compared to Ps.19,620 million for the same period of 2016.

As a result, Grupo Elektra reported EBITDA of Ps.4,284 million, 10% higher than the Ps.3,887 million of the previous year’s quarter; EBITDA margin was 16% this period.

Operating profit grew 15% to Ps.3,677 million during the quarter, from Ps.3,207 million in same period of 2016.

The company reported net income of Ps.902 million, compared to net income of Ps.2,924 million a year ago.

4Q 2016 4Q 2017 Change
Ps.%
Consolidated revenue$23,508$27,087$3,58015%
EBITDA $3,887$4,284$39710%
Operating profit$3,207
$3,677
$471
15%
Net result$2,924$902$(2,022)-69%
Net result per share$12.53$3.90$(8.63)-69%

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of December 31, 2016, Elektra* outstanding shares were 233.3 million and as of December 31, 2017, were 231.3 million.

Revenue

Consolidated revenue increased 15%, as a result of 17% and 13% growth in both financial revenues and commercial sales, respectively.

The increase in commercial division sales ̶ to Ps.11,119 million compared to Ps.9,801 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.

In the lasts quarters, these strategies have an additional boost with the launch of a new, larger store format, which includes a greater selection of goods and services to satisfy a growing number of families. In October, Grupo Elektra also launched its omnichannel strategy, with its online store www.elektra.com.mx, through which hundreds of thousands of products are sold, at unparalleled prices, from any device and at all times, and further strengthens the company's business operations.

The increase in financial revenue ̶ to Ps.15,968 million from Ps.13,706 million from the previous year ̶ reflects mainly a 21% growth in revenue of Banco Azteca Mexico.

Costs and expenses

Consolidated costs for the quarter increased 28% to Ps.11,965 million, from Ps.9,320 million in the previous year, as a result of a 17% increase in commercial costs, in line with the increase in commercial revenue, and 56% 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 5% to Ps.10,838 million, as a result of higher operation and maintenance costs. Expenses grew slower than consolidated revenue, reflecting strong strategies that drive the company's operating efficiency.

EBITDA and net result

EBITDA grew 10% to Ps.4,284 million this quarter. Operating income increased 15% to Ps.3,677 million, from Ps.3,207 million for the same quarter of 2016.

The most significant variations below EBITDA were the following:

A growth of Ps.427 million in foreign exchange gains, mainly due to a higher net asset position in dollars, compared to the previous year —resulting from the prepayment of US$230 million of dollar-denominated bonds in the period.

A negative variation of Ps.2,852 million in other financial results —which reflects a 15% reduction this quarter in the market value of the underlying assets of financial instruments held by the company, and that does not imply cash flow— in comparison with a 5% increase a year ago. Congruent with this, the negative variation in this item was partially offset by a decrease in the provision of taxes.

An increase of Ps.485 million in loss from the result of subsidiaries, derived from the recognition of the company's participation in CASA.

An increase of Ps.896 million in the impairment account of intangible assets due to the obsolescence recognition of certain system developments at Advance America this year, compared to income due to partial reversal of the deterioration of brands and licenses registered the previous year.

Grupo Elektra reported net income of Ps.902 million, compared to net income of Ps.2,924 million a year ago.

Unconsolidated balance sheet

A proforma exercise of the balance sheet of Grupo Elektra is presented, which allows visualizing the non-consolidated financial situation, excluding the net assets of the financial business, whose investment is valued in this case under the equity method.

This presentation shows the debt of the company —without considering the immediate and term deposits of Banco Azteca, which do not constitute debt with cost for Grupo Elektra.

This provides greater clarity about the situation of the different businesses that make up the company, and will allow participants in the financial markets to make estimates of the value of the company, considering only the relevant debt for such calculations.

Congruent with that, debt with cost was Ps.13,464 million at the end of 2017, 18% below the Ps.16,410 million of the previous year. The balance of cash and cash equivalents was Ps.15,574 million; as a result, the net cash balance excluding the amount of debt with cost at the end of 2017 was favorable at Ps.2,110 million.

As previously announced, in the period, senior notes for US$230 million due in 2018 were prepaid; through such amortization, the company eliminated dollar-denominated bonds. The transaction reflects the firm strategy of Grupo Elektra to further strengthen its solid capital structure.

The company's equity increased 19% to Ps.70,217 million, while the total liabilities decreased 4% to Ps.37,452 million. The ratio of stockholders' equity to total liabilities is 1.9 times.

As of Dec.
As of Dec. Change
31, 201631, 2017Ps.%
Cash & marketable fin. instr.
Inventories
Other current assets
Financial instruments
Accounts receivables
Investment in shares
Fixed assets
Other assets
$17,213
$7,187
$9,018
$18,437
$13,918
$26,813
$3,717
$1,773
$15,574
$9,225
$19,527
$17,819
$8,540
$30,320
$5,189
$1,474
$(1,639)
$2,038
$10,510
$(618)
$(5,378)
$3,507
$1,472
$(299)
-10%
28%
117%
3%
-39%
13%
40%
-17%

Total assets

$98,077

$107,669

$9,592

10%
Short-term debt
Other short-term liabilities
Long-term debt
Other long-term liabilities
$2,876
$15,498
$13,534
$7,093
$3,217
$18,156
$10,247
$5,833
$341
$2,658
$(3,287)
$(1,260)
12%
17%
-24%
-18%

Total liabilities

$39,001

$37,452

$(1,549)

-4%

Stockholder´s equity

$59,076

$70,217

$11,141

19%

Liabilities and equity

$98,077

$107,669

$9,592

10%

Figures in millions of pesos

Consolidated balance sheet

Loan portfolio and deposits

Banco Azteca Mexico, Advance America and Banco Azteca Latin America’s consolidated gross portfolio as of December 31, 2017 grew 12% to Ps.93,652 million, from Ps.83,477 million for the previous year. Consolidated delinquency rate was 4.7% at the end of the period, compared to 3.4% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 13% to Ps.76,740 million, from Ps.67,743 million a year ago.

The delinquency rate for the bank at the end of the quarter was 4.2%, from 2.6% for the previous year. Past-due loan portfolio is reserved 2.2 times, which reflects a past-due portfolio of Ps.3,238 million, in comparison to allowance for credit risks of Ps.7,230 million in balance, as of December 31, 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 fourth quarter.

Grupo Elektra consolidated deposits were Ps.109,373 million, 4% higher than the Ps.105,124 million a year ago. Deposits of Banco Azteca Mexico were Ps.108,654 million, 7% higher than the Ps.101,718 million a year ago.

As of December 31, 2017, the estimated capitalization index of Banco Azteca Mexico was 16.7%.

Infrastructure

Grupo Elektra currently has 7,139 points of contact, compared to 7,396 units a year ago. The reduction is a result of strategies to focus on maximizing profitability of such units.

These strategies involve replacing contact points with the most profitable formats. During the year, this resulted in 56 new Elektra stores at strategic points across Mexico, with greater exhibition area, which increase the offer of products and services, and thereby maximize customer shopping experiences.

The company has 4,440 points of contact in Mexico, 2,048 in the United States, and 651 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.

Twelve month results

Total consolidated revenue in 2017 grew 17% to Ps.94,979 million, from Ps.81,242 million for 2016, boosted by 18% and 15% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.16,754 million, 20% higher than the Ps.13,988 million for the same period a year ago; the EBITDA margin for 2017 was 18%, one percentage point above the prior year. Operating profit grew 26% to Ps.14,437 million during the period.

The company reported net income of Ps.15,228 million, compared to Ps.5,334 million a year ago, mainly due an appreciation this period in the market value of underlying financial instruments that the company holds, which doesn’t imply cash flow, compared to depreciation the prior year.

2016 2017Change
Ps.%
Consolidated revenue$81,242$94,979$13,73817%
EBITDA $13,988$16,754$2,766 20%
Operating profit$11,422$14,437$3,01526%
Net result$5,334$15,398$10,064----
Net result per share$22.86$66.57$43.71----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of December 31, 2016, Elektra* outstanding shares were 233.3 million and as of December 31, 2017, were 231.3 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), 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 Totalplay Empresarial (totalplayempresarial.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.

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


GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
4Q16 4Q17 Change
Financial income 13,706 58% 15,968 59% 2,262 17%
Commercial income 9,801 42% 11,119 41% 1,318 13%
Income 23,508 100% 27,087 100% 3,580 15%
Financial cost 2,754 12% 4,293 16% 1,539 56%
Commercial cost 6,566 28% 7,671 28% 1,105 17%
Costs 9,320 40% 11,965 44% 2,644 28%
Gross income 14,187 60% 15,123 56% 936 7%
Sales, administration and promotion expenses 10,300 44% 10,838 40% 538 5%
EBITDA 3,887 17% 4,284 16% 397 10%
Depreciation and amortization 742 3% 626 2% (117)-16%
Other income, net (62)0% (19)0% 43 70%
Operating income 3,207 14% 3,677 14% 471 15%
Comprehensive financial result:
Interest income 181 1% 300 1% 119 66%
Interest expense (520)-2% (352)-1% 168 32%
Foreign exchange gain, net 469 2% 896 3% 427 91%
Other financial results, net 297 1% (2,555)-9% (2,852)----
428 2% (1,710)-6% (2,137)----
Participation in the net income of
CASA and other associated companies (21)0% (506)-2% (485)----
Income before income tax 3,614 15% 1,462 5% (2,152)-60%
Income tax (1,282)-5% (209)-1% 1,073 84%
Income before discontinued operations 2,332 10% 1,253 5% (1,079)-46%
Result from discontinued operations (60)0% (108)0% (48)-81%
Impairment of intangible assets 652 3% (243)-1% (896)----
Consolidated net income 2,924 12% 902 3% (2,022)-69%

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
12M16 12M17 Change
Financial income 50,207 62% 59,366 63% 9,159 18%
Commercial income 31,035 38% 35,614 37% 4,579 15%
Income 81,242 100% 94,979 100% 13,738 17%
Financial cost 10,318 13% 13,254 14% 2,936 28%
Commercial cost 20,354 25% 23,989 25% 3,635 18%
Costs 30,671 38% 37,243 39% 6,571 21%
Gross income 50,570 62% 57,737 61% 7,166 14%
Sales, administration and promotion expenses 36,582 45% 40,982 43% 4,400 12%
EBITDA 13,988 17% 16,754 18% 2,766 20%
Depreciation and amortization 2,617 3% 2,270 2% (347)-13%
Other (income) expense, net (51)0% 47 0% 98 ----
Operating Income 11,422 14% 14,437 15% 3,015 26%
Comprehensive financial result:
Interest income 835 1% 731 1% (104)-12%
Interest expense (1,527)-2% (1,493)-2% 33 2%
Foreign exchange gain (loss), net 796 1% (317)0% (1,114)----
Other financial results, net (3,677)-5% 9,297 10% 12,974 ----
(3,572)-4% 8,217 9% 11,790 ----
Participation in the net income of
CASA and other associated companies (638)-1% (526)-1% 112 18%
Income before income tax 7,211 9% 22,128 23% 14,917 207%
Income tax (2,401)-3% (6,167)-6% (3,766)-157%
Income before discontinued operations 4,810 6% 15,961 17% 11,151 232%
Result from discontinued operations (128)0% (311)0% (184)-144%
Impairment of intangible assets 652 1% (251)0% (904)----
Consolidated net income 5,334 7% 15,398 16% 10,064 189%


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 December 30, 2016 At December 30, 2017
Cash and cash equivalents 2,586 21,526 24,112 4,174 21,433 25,607 1,495 6%
Marketable financial instruments 14,628 41,770 56,398 11,400 44,282 55,682 (716)-1%
Performing loan portfolio - 55,129 55,129 - 61,727 61,727 6,598 12%
Total past-due loans - 2,704 2,704 - 4,133 4,133 1,429 53%
Gross loan portfolio - 57,833 57,833 - 65,860 65,860 8,027 14%
Allowance for credit risks - 6,847 6,847 - 8,243 8,243 1,396 20%
Loan portfolio, net - 50,986 50,986 - 57,617 57,617 6,630 13%
Inventories 7,208 - 7,208 9,257 - 9,257 2,049 28%
Other current assets 7,355 9,692 17,048 7,654 9,638 17,292 244 1%
Total current assets 31,776 123,975 155,751 32,485 132,970 165,454 9,703 6%
Financial instruments 18,437 337 18,775 17,819 324 18,144 (631)-3%
Performing loan portfolio - 25,530 25,530 - 27,513 27,513 1,983 8%
Total past-due loans - 114 114 - 279 279 165 144%
Gross loan portfolio - 25,644 25,644 - 27,792 27,792 2,148 8%
Allowance for credit risks - - - - 734 734 734 n.a.
Loan portfolio - 25,644 25,644 - 27,058 27,058 1,414 6%
Other non-current assets - 672 672 5,099 672 5,771 5,099 ----
Investment in shares 2,727 - 2,727 2,125 - 2,125 (602)-22%
Property, furniture, equipment and
investment in stores, net 3,717 2,888 6,605 5,189 3,165 8,354 1,750 26%
Intangible assets 664 6,934 7,598 661 6,700 7,361 (236)-3%
Other assets 1,109 348 1,457 813 270 1,083 (374)-26%
TOTAL ASSETS 58,431 160,799 219,229 64,191 171,159 235,351 16,121 7%
Demand and term deposits - 105,124 105,124 - 109,373 109,373 4,249 4%
Creditors from repurchase agreements - 4,200 4,200 - 7,122 7,122 2,922 70%
Short-term debt 2,876 411 3,287 3,217 615 3,832 545 ----
Short-term liabilities with cost 2,876 109,735 112,611 3,217 117,110 120,326 7,716 7%
Suppliers and other short-term liabilities 12,353 8,321 20,675 15,334 9,699 25,033 4,358 21%
Short-term liabilities without cost 12,353 8,321 20,675 15,334 9,699 25,033 4,358 21%
Total short-term liabilities 15,229 118,056 133,285 18,550 126,809 145,359 12,074 9%
Long-term debt 12,903 2,089 14,992 9,659 1,025 10,684 (4,308)-29%
Long-term liabilities with cost 12,903 2,089 14,992 9,659 1,025 10,684 (4,308)-29%
Long-term liabilities without cost 7,093 4,783 11,877 5,833 3,257 9,090 (2,786)-23%
Total long-term liabilities 19,997 6,872 26,869 15,493 4,282 19,775 (7,094)-26%
TOTAL LIABILITIES 35,226 124,927 160,154 34,043 131,091 165,134 4,980 3%
TOTAL STOCKHOLDERS' EQUITY 23,205 35,871 59,076 30,149 40,068 70,217 11,141 19%
LIABILITIES + EQUITY 58,431 160,799 219,229 64,191 171,159 235,351 16,121 7%


INFRASTRUCTURE
4Q16 4Q17 Change
Points of sale in Mexico
Elektra 99513% 1,05115% 56 6%
Salinas y Rocha 501% 471% (3)-6%
Banco Azteca 1,24417% 1,28218% 38 3%
Freestanding branches 2,31331% 2,06029% (253)-11%
Total 4,602 62% 4,440 62% (162)-4%
Points of sale in Central and South America
Elektra 1672% 1652% (2)-1%
Banco Azteca 1672% 1652% (2)-1%
Freestanding branches 3555% 3214% (34)-10%
Total 689 9% 651 9% (38)-6%
Points of sale in North America
Advance America 2,10528% 2,04829% (57)-3%
Total 2,105 28% 2,048 29% (57)-3%
TOTAL 7,396 100% 7,139 100% (257)-3%
Floor space (m²) 1,500 100% 1,592 100% 92 6%
Employees
Mexico 50,15277% 57,44580% 7,293 15%
Central and South America 8,83814% 8,92812% 90 1%
North America 5,9479% 5,7148% (233)-4%
Total employees 64,937 100% 72,087 100% 7,150 11%

Source: Grupo Elektra SAB de CV