Grupo Elektra Announces 12% EBITDA Growth to Ps.4,287 Million in 3Q18

 

—Operating profit increases 7% to Ps.3,508 million in the period—

—Solid performance in both commercial and financial businesses generates 10% growth in consolidated revenue to Ps.25,357 million—

— Firm 19% increase in consolidated deposits to Ps.124,229 million—

—Gross loan portfolio grows 7% to Ps.94,008 million—

MEXICO CITY, Oct. 23, 2018 — 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 third quarter of 2018.

Third quarter results

Consolidated revenue was Ps.25,357 million in the period, 10% above the Ps.23,092 million for the same quarter of the previous year. Costs and operating expenses were Ps.21,070 million, compared to Ps.19,249 million for the same period of 2017.

As a result, Grupo Elektra reported EBITDA of Ps.4,287 million, 12% higher than the Ps.3,842 million of the previous year’s quarter; EBITDA margin was 17% for the period, unchanged from the previous year.

Operating profit was Ps.3,508 million this quarter, 7% higher than the Ps.3,269 million in the same period of 2017.

The company reported net income of Ps.6,443 million, compared to net income of Ps.2,858 million a year ago.

  3Q 2017   3Q 2018   Change
Ps. %
     
Consolidated revenue $23,092 $25,357 $2,265 10%
EBITDA $3,842 $4,287 $444  12%
       
Operating profit $3,269 $3,508 $239 7%
Net result $2,858 $6,443 $3,585 125%
Net result per share $12.33 $28.38 $16.05 130%
Figures in millions of pesos EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.  As of September 30, 2017, Elektra* outstanding shares were 231.8 million and as of September 30, 2018, were 227 million.

Revenue

Consolidated revenue increased 10%, as a result of 13% and 4% growth in both financial revenue and commercial sales, respectively.

The increase in financial revenue —to Ps.16,756 million from Ps.14,831 million the previous year—  reflects mainly revenue growth of 19% at Banco Azteca Mexico.

The increase in commercial division sales —to Ps.8,601 million from Ps.8,260 million last year— results from strategies to generate superior shopping experiences, with merchandise that effectively satisfies the needs of millions of families, optimal customer service, and the most competitive market conditions.

Within the last quarters, commercial strategies have had an additional boost with the launch of a new store format with larger exhibition space, which includes an extensive merchandise and services selection to satisfy an increasing number of customers.  Similarly, Grupo Elektra’s Omni-channel operations, with the online store www.elektra.com.mx, through which thousands of products are sold at unparalleled prices, from any device and at all times, strengthen even further the performance of the company’s commercial business.

Costs and expenses

Consolidated costs for the quarter increased 6% to Ps.9,475 million, from Ps.8,957 million in the previous year, as a result of a 14% increase in financial costs, and a 1% increase in commercial costs. The increase in the financial cost results from higher interest payments, in line with the growing consolidated deposits and higher market interest rates. It also stems from the creation of loan-loss provisions.

Sales, administration and promotion expenses increased 13% to Ps.11,595 million, as a result of higher personnel, operative and maintenance expenditures during the quarter.

EBITDA and net result

EBITDA grew 12% to Ps.4,287 million this quarter. Operating income increased 7% to Ps.3,508 million, from Ps.3,269 million for the same quarter of 2017.

The most significant variation below EBITDA was a positive variation of Ps.5,216 million in other financial results —which reflects a 58% appreciation this quarter in the market value of the underlying assets of financial instruments held by the company, and does not imply cash flow— compared to an 8% increase a year ago.

Congruent with the positive variation of other financial results, an increase of Ps.1,278 million in the provision of taxes was registered during the period.

Grupo Elektra reported net income of Ps.6,443 million, compared to a net profit of Ps.2,858 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. The proforma balance sheet also does not include the bank’s gross loan portfolio.

This provides greater clarity regarding the businesses that make up the company, and allows participants in 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.21,969 million as of September 30, 2018, compared to Ps.13,694 million for the previous year.

During the previous quarter, Certificados Bursátiles were issued for Ps.7,500 million for capital investments largely related to growth and improvement of the company’s distribution infrastructure.

The balance of cash and cash equivalents was Ps.23,800 million; as a result, the net cash balance excluding the amount of debt with cost as of September 30, 2018, was favorable at Ps.1,831 million.

The company’s equity increased 10% to Ps.76,921 million; while the ratio of stockholders’ equity to total liabilities was 1.7 times at the close of the quarter.

As of As of Change
September  September  Ps. %
30, 2017 30, 2018
Cash & marketable fin. instr. $12,874 $23,800 $10,926 85%
Inventories $8,858 $10,321 $1,462 17%
Other current assets $1,674 $2,030 $356 21%
Financial instruments $16,283 $16,964 $681 4%
Accounts receivable $28,434 $27,725 -$709 -2%
Investment share $29,492 $32,834 $3,342 11%
Fixed assets $4,489 $6,623 $2,134 48%
Other assets $1,487 $1,372 -$115 -8%
Total assets $103,591 $121,668 $18,077 17%
Short-term debt $3,496 $8,827 $5,330 152%
Other short-term liabilities $13,892 $15,383 $1,491 11%
Long-term debt $10,198 $13,142 $2,944 29%
Other long-term debt $6,326 $7,395 $1,069 17%
Total liabilities $33,912 $44,747 $10,835 32%
Stakeholder´s equity $69,680 $76,921 $7,242 10%
Liabilities and equity $103,591 $121,668 $18,077 17%
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 September 30, 2018 grew 7% to Ps.94,008 million, from Ps.87,874 million for the previous year. The consolidated delinquency rate was 4.9% at the end of the period, compared to 4% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 8% to Ps.77,465 million, from Ps.71,907 million a year ago.

The delinquency rate for the bank at the end of the quarter was 4.5%, from 3.4% for the previous year. The past-due loan portfolio is reserved 2.2 times, which reflects a past-due portfolio of Ps.3,520 million, in comparison to allowance for credit risks of Ps.7,674 million in balance, as of September 30, 2018.

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.124,229 million, 19% higher than the Ps.104,814 million a year ago. Deposits of Banco Azteca Mexico were Ps.120,828 million, 16% higher than the Ps.104,179 million a year ago.

As of September 30, 2018, the estimated capitalization index of Banco Azteca Mexico was 18.73%.

Infrastructure

Grupo Elektra currently has 7,338 points of contact, compared to 7,247 units a year ago.

In the last twelve months, 53 new Elektra stores were opened at strategic locations throughout Mexico, with greater exhibition area, which increases the offer of products and services, maximizing customer shopping experiences.

The company has 4,693 points of contact in Mexico, 2,017 in the United States, and 628 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 10% to Ps.74,476 million, from Ps.67,892 million for the same period of 2017, boosted by 11% and 7% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.13,314 million, 7% higher than the Ps.12,470 million for the same period a year ago; the EBITDA margin in the first nine months of 2018 was 18%. Operating profit grew 4% to Ps.11,148 million during the period.

The company reported net income of Ps.8,829 million, compared to Ps.14,496 million a year ago, mainly due a lesser 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.

9M 2017   9M 2018   Change
Ps. %
Consolidated revenue $67,892 $74,476 $6,584 10%
EBITDA $12,470 $13,314 $844  7%
Operating profit $10,752 $11,148 $396 4%
Net result $14,496 $8,829 $(5,667) -39%
Net result per share $62.54 $38.89 $(23.65) -38%
Figures in millions of pesos EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.  As of September 30, 2017, Elektra* outstanding shares were 231.8 million and as of September 30, 2018, were 227 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: economic value through market innovation and goods and services that improve standards of living; social value to improve community wellbeing; and environmental value by reducing the negative impact of its business activities. 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. These companies include: TV Azteca (www.TVazteca.com; www.irtvazteca.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), Punto Casa de Bolsa (www.puntocasadebolsa.mx), Totalplay (www.totalplay.com.mx) and Totalplay Empresarial (totalplayempresarial.com.mx). TV Azteca and Grupo Elektra trade shares on the Mexican Stock Market and in Spains’ Latibex market. Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. The group of companies shares 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 concepts about the future that involve risks and uncertainty that may cause actual results to differ materially from those projected. Other risks that may affect TV Azteca and its subsidiaries are presented in documents sent to the securities authorities.

Investor Relations:

Bruno Rangel Grupo Salinas Tel. +52 (55) 1720-9167 [email protected] Rolando Villarreal Grupo Elektra, S.A.B. de C.V. Tel. +52 (55) 1720-9167 [email protected]

Press Relations

Luciano Pascoe Grupo Salinas Tel. +52 (55) 1720-1313 ext. 36553 [email protected]   Daniel McCosh Grupo Salinas Tel. +52 (55) 1720-0059 [email protected]
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
         
     
3Q17   3Q18   Change
   
Financial income 14,831 64%   16,756 66%   1,925 13%
Commercial income 8,260 36%   8,601 34%   341 4%
Income   23,092 100%     25,357 100%   2,265 10%
Financial cost 3,434 15% 3,898 15% 464 14%
Commercial cost 5,524 24% 5,577 22% 53 1%
Costs 8,957 39% 9,475 37% 518 6%
Gross income 14,134 61% 15,882 63% 1,748 12%
Sales, administration and promotion expenses 10,292 45%   11,595 46% 1,303 13%
       
EBITDA  3,842 17% 4,287 17% 444 12%
       
Depreciation and amortization 570 2% 797 3% 226 40%
Other expense (income), net 3 0% (18) 0% (20) —-
       
Operating income 3,269 14% 3,508 14% 239 7%
       
Comprehensive financial result:    
Interest income 154 1% 199 1% 45 29%
Interest expense (346) -1% (577) -2% (231) -67%
Foreign exchange (loss) gain, net 117 1% (600) -2% (716) —-
Other financial results, net 1,372 6% 6,587 26% 5,216 380%
1,297 6% 5,610 22% 4,313 333%
Participation  in  the  net  income of
CASA and other associated companies (78) 0% 78 0% 156 —-
Income before income tax 4,488 19% 9,196 36% 4,708 105%
Income tax (1,470) -6% (2,748) -11% (1,278) -87%
Income before discontinued operations 3,018 13% 6,448 25% 3,429 114%
Result from discontinued operations (160) -1% (5) 0% 156 97%
Impairment of intangible assets 0% 0% —-
Consolidated net income  2,858 12%   6,443 25%   3,585 125%
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
         
     
9M17   9M18   Change
   
Financial income 43,397 64%   48,171 65%   4,774 11%
Commercial income 24,495 36%   26,305 35%   1,810 7%
Income 67,892 100%   74,476 100%   6,584 10%
Financial cost 8,961 13% 10,967 15% 2,006 22%
Commercial cost 16,317 24% 16,901 23% 583 4%
Costs 25,278 37% 27,868 37% 2,589 10%
Gross income 42,614 63% 46,608 63% 3,994 9%
Sales, administration and promotion expenses 30,144 44% 33,294 45% 3,150 10%
       
EBITDA  12,470 18% 13,314 18% 844 7%
       
Depreciation and amortization 1,644 2% 2,177 3% 532 32%
       
Other expense, net 74 0% (10) 0% (84) —-
       
Operating Income 10,752 16% 11,148 15% 396 4%
       
Comprehensive financial result:    
Interest income 431 1% 515 1% 84 20%
Interest expense (1,142) -2% (1,414) -2% (272) -24%
Foreign exchange (loss) gain, net (1,214) -2% (452) -1% 762 63%
Other financial results, net 11,852 17% 2,845 4% (9,007) -76%
9,927 15% 1,495 2% (8,432) -85%
Participation  in  the  net  income of
CASA and other associated companies (21) 0% (167) 0% (146) —-
Income before income tax 20,658 30% 12,476 17% (8,182) -40%
Income tax (5,958) -9% (3,641) -5% 2,317 39%
Income before discontinued operations 14,700 22% 8,835 12% (5,865) -40%
Result from discontinued operations (204) 0% (6) 0% 198 97%
Impairment of intangible assets 0% 0% —-
Consolidated net income  14,496 21%   8,829 12%   (5,667) -39%
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, 2017   At September 30, 2018    
Cash and cash equivalents 2,577 17,879 20,456 4,937 17,512 22,450 1,993 10%
Marketable financial instruments 10,297 47,062 57,359 18,863 66,662 85,525 28,166 49%
Performing loan portfolio 58,599 58,599 59,429 59,429 830 1%
Total past-due loans 3,344 3,344 4,332 4,332 988 30%
Gross loan portfolio 61,943 61,943 63,761 63,761 1,818 3%
Allowance for credit risks 7,806 7,806 8,564 8,564 758 10%
Loan portfolio, net 54,137 54,137 55,197 55,197 1,060 2%
Inventories 8,879 8,879 10,382 10,382 1,503 17%
Other current assets 8,027 8,072 16,099 8,850 8,777 17,627 1,527 9%
Total current assets   29,780   127,150   156,930   43,031   148,148   191,179 34,249 22%
 
Financial instruments 16,283 288 16,571 16,964 262 17,226 654 4%
Performing loan portfolio 25,779 25,779 29,972 29,972 4,194 16%
Total past-due loans 153 153 274 274 122 80%
Gross loan portfolio 25,931 25,931 30,247 30,247 4,315 17%
Allowance for credit risks 694 694 694 n.a.
Loan portfolio 25,931 25,931 29,553 29,553 3,621 14%
 
Other non-current assets 8,437 672 9,109 8,833 658 9,491 382 4%
 
Investment in shares 2,632 2,632 1,909 1,909 (723) -27%
Property, furniture, equipment and
investment in stores, net 4,489 3,004 7,493 6,623 4,075 10,698 3,205 43%
Intangible assets 669 6,159 6,828 622 6,364 6,986 158 2%
Other assets 818 412 1,231 750 322 1,071 (159) -13%
TOTAL ASSETS   63,108   163,617   226,725   78,732   189,382   268,114 41,388 18%
 
Demand and term deposits 104,814 104,814 124,229 124,229 19,415 19%
Creditors from repurchase agreements 5,367 5,367 7,103 7,103 1,736 32%
Short-term debt 3,496 58 3,554 8,827 508 9,335 5,781 163%
Short-term liabilities with cost 3,496 110,239 113,735 8,827 131,840 140,666 26,932 24%
 
Suppliers and other short-term liabilities 12,713 10,405 23,118 14,892 11,475 26,367 3,249 14%
Short-term liabilities without cost 12,713 10,405 23,118 14,892 11,475 26,367 3,249 14%
Total short-term liabilities   16,210   120,644   136,853   23,719   143,314   167,033 30,180 22%
             
Long-term debt 9,567 977 10,544 12,341 2,128 14,469 3,925 37%
Long-term liabilities with cost 9,567 977 10,544 12,341 2,128 14,469 3,925 37%
Long-term liabilities without cost 6,326 3,323 9,649 7,395 2,295 9,691 42 0%
     
Total long-term liabilities   15,893   4,300   20,193   19,736   4,423   24,159 3,967 20%
TOTAL LIABILITIES   32,103   124,943   157,046   43,455 147,738   191,193 34,147 22%
TOTAL STOCKHOLDERS’ EQUITY   31,006   38,674   69,680   35,277   41,644   76,921 7,242 10%
 
 
LIABILITIES + EQUITY   63,108   163,617   226,725   78,732   189,382   268,114 41,388 18%
INFRASTRUCTURE
                 
3Q17   3Q18   Change
               
Points of sale in Mexico    
Elektra 1,020 14% 1,073 15% 53 5%
Salinas y Rocha 48 1% 45 1% (3) -6%
Banco Azteca 1,259 17% 1,268 17% 9 1%
Freestanding branches 2,212 31% 2,307 31% 95 4%
Total   4,539 63%   4,693 64% 154 3%
     
Points of sale in Central and South America
Elektra 163 2% 167 2% 4 2%
Banco Azteca 163 2% 167 2% 4 2%
Freestanding branches 310 4% 294 4% (16) -5%
Total   636 9%   628 9% (8) -1%
     
Points of sale in North America    
Advance America 2,072 29% 2,017 27% (55) -3%
Total   2,072 29%   2,017 27% (55) -3%
 
TOTAL   7,247 100% 7,338 100% 91 1%
   
   
 
         
Floor space (m²)   1,527 100%   1,635 100% 108 7%
         
     
     
Employees    
Mexico 53,755 79% 63,681 81% 9,926 18%
Central and South America 8,707 13% 9,059 12% 352 4%
North America 5,754 8% 5,676 7% (78) -1%
Total employees   68,216 100%   78,416 100% 10,200 15%

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