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Grupo Elektra Announces 13% EBITDA Growth to Ps.5,442 Million In 4Q19

February 26, 2020 GMT

—Consolidated revenue increases 15% to Ps.33,477 millionas a result of the firm dynamism in both commercial and financial revenues—

—26% growth in consolidated deposits to Ps.154,977 million,generates solid perspectives for the financial division—

—Consolidated gross loan portfolio grows 14% to Ps.110,898 million—

MEXICO CITY, Feb. 25, 2020 (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, today announced fourth quarter 2019 and full year 2019 financial results.

Consolidated Fourth Quarter Results

Consolidated revenue was Ps.33,477 million in the period, 15% above the Ps.29,182 million for the same quarter of the previous year. Costs and operating expenses were Ps.28,035 million, from Ps.24,373 million for the same period of 2018.

As a result, Grupo Elektra reported EBITDA of Ps.5,442 million, in comparison with Ps.4,809 million of the previous year’s quarter; EBITDA margin was 16% for the period.

Operating profit was Ps.3,567 million this quarter, from Ps.3,948 million in the same period of 2018.

On a pro forma basis — without considering the application of IFRS 16 standard, which was adopted as of 2019, as previously detailed — in the fourth quarter of 2019 EBITDA for the period was Ps.4,515 million and operating profit was Ps.3,349 million.

The company reported net income of Ps.1,532 million, compared to net income of Ps.5,913 million a year ago.

4Q 2018 4Q 2019 Change Ps. % -------------------- ------- ------- -------- ----- Consolidated revenue $29,182 $33,477 $4,296 15 % EBITDA $4,809 $5,442 $634 13 % Operating profit $3,948 $3,567 $(381) -10 % Net result $5,913 $1,532 $(4,381) -74 % Net result per share $25.99 $6.71 $(19.28) -74 % -------------------- ------- ------- -------- ----- Figures in millions of pesos EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. As of December 31, 2018, Elektra* outstanding shares were 227.5 million and as of December 31, 2019, were 228.4 million.

Revenues

Consolidated revenue increased 15%, as a result of an 18% growth in commercial sales and a 12% increase in financial revenues.

The increase in commercial division sales — to Ps.13,976 million, up from Ps.11,811 million last year — largely results from a solid increase in sales of Italika motorcycles — thanks to its innovative, safe models, which provide efficient transportation alternatives in fuel use and reduce travel times — as well as notable performance in telephony and appliances, commercialized in the most competitive market conditions.

The commercial business sales have added additional momentum with the launch of a new store format with a larger exhibition space that includes an extensive merchandise and services selection to satisfy an increasing number of customers. Similarly, Omnichannel operations — with the online store www.elektra.com.mx, which sells thousands of products at unparalleled prices from any device and at any time — further strengthens the performance of the division.

The increase in financial revenue — to Ps.19,501 million, from Ps.17,370 million the previous year — mainly reflects revenue growth of 13% at Banco Azteca Mexico, in the context of a strong rise in the gross portfolio and a notable dynamism in deposits.

Costs and expenses

Consolidated costs for the quarter were Ps.14,849 million, from Ps.12,189 million in the previous year, as a result of a 27% increase in financial costs — which reflects the higher interest paid, in the context of solid deposits growth, as well as the creation of loan loss reserves — and the 19% increase in commercial costs, congruent with the increase in commercial income.

Sales, administration, and marketing expenses grew 8% to Ps.13,186 million as a result of increases in both personnel and operating expenses. The growth of expenses is related to the implementation of both marketing and specialized customer service structures — which focuses on substantially boosting bank deposits, as well as the credit portfolio, with strong quality standards, the development of institutional and governmental banking that increases and diversifies Banco Azteca’s top line, and an increasingly competitive structure in Afore Azteca, which allowed a 48% growth in assets under management in the year, to Ps.110,112 million as of December 31, 2019, and increase the client base 44% to 4.5 million, from 3.1 million a year ago.

Likewise, there is an impact on expenses coming from the development of systems to further strengthen the high standards of efficiency of digital banking — which currently has more than seven million users who made more than 670 million transactions during the year from the digital application, with higher levels of comfort, security and time savings — the Omnichannel sales efforts, and the maintenance expenses of the company’s infrastructure, which includes the new Elektra stores.

Despite the firm development of the aforementioned initiatives, expenses grew to a lesser extent than consolidated revenues, reflecting strong strategies that drive the operational efficiency of Grupo Elektra.

EBITDA and net result

The EBITDA of the company increased 13% to Ps.5,442 million this quarter. Operating income declined 10% to Ps.3,567 million, from Ps.3,948 million for the same quarter of 2018.

The most significant change below EBITDA was a negative variation of Ps.5,389 million in other financial results, which reflects a 1% depreciation this quarter in the market value of underlying assets of financial instruments held by the company, and does not imply cash flow, in comparison to a 12% increase a year ago.

Congruent with the negative variation of other financial results, a decrease of Ps.2,003 million in the provision of taxes line was registered during the period.

Grupo Elektra reported net income of Ps.1,532 million, compared to a net income of Ps.5,913 million a year ago.

Unconsolidated Balance Sheet

In order to allow the visualization of the non-consolidated financial situation, a pro forma exercise of the balance sheet of Grupo Elektra is presented, excluding the net assets of the financial business, whose investment is valued under the equity method, in this case.

This presentation shows the debt of the company without considering Banco Azteca’s immediate and term deposits, which do not constitute debt with cost for Grupo Elektra. The pro forma balance sheet also does not include the bank’s gross loan portfolio.

This proforma exercise provides greater clarity regarding the businesses that makes up the company and allows financial market participants to estimate the value of the company, considering only the relevant debt for such calculations.

In line with the above, debt with cost was Ps.24,686 million as of December 31, 2019, compared to Ps.21,635 million in the previous year.

The growth in the debt balance is derived mainly from the issuance of Certificados Bursátiles for Ps.2,500 million in the previous quarter, which were issued in order to continue with stimulus to capital investments related to improvement and growth of the distribution infrastructure and operations of the company.

In 2019, 60 new Elektra stores were opened, 39 existing stores were remodelled; in addition, the development of systems that optimize the operation of Banco Azteca and Tiendas Elektra was promoted.

The balance of cash and cash equivalents was Ps.20,450 million, from Ps.21,198 million from the previous year. As a result, net debt as of December 31, 2019, was Ps.4,236 million, in compassion with Ps.437 million a year ago.

The company’s equity increased 16% to Ps.97,797 million, while the ratio of stockholders’ equity to total liabilities was 1.5 times at the close of the quarter.



As of December 31, 2018 As of December 31, 2019 Change Ps. % Cash & marketable fin. instr. $21,198 $20,450 -$748 -4% Inventories $9,375 $11,093 $1,718 18% Other current assets $3,905 $5,478 $1,573 40% Financial instruments $26,599 $25,820 -$779 -3% Accounts receivable $32,122 $49,096 $16,974 53% Investment share $33,168 $34,791 $1,623 5% Fixed assets $7,404 $8,603 $1,199 16% Right of use asset --- $8,340 $8,340 --- Other assets $2,105 $1,406 -$699 -33% Total assets $135,876 $165,076 $29,201 21% ----------------------------- ----------------------- ----------------------- ------- ----- Short-term debt $8,410 $3,426 -$4,985 -59% Short-term Leasing --- $1,399 $1,399 --- Other short-term liabilities $20,580 $19,741 -$839 -4% Long-term debt $13,225 $21,260 $8,035 61% Long-term Leasing --- $7,230 $7,230 --- Other long-term debt $9,088 $14,225 $5,137 57% Total liabilities $51,304 $67,280 $15,976 31% ----------------------------- ----------------------- ----------------------- ------- ----- Stakeholder´s equity $84,572 $97,797 $13,225 16% Liabilities and equity $135,876 $165,076 $29,201 21% ----------------------------- ----------------------- ----------------------- ------- ----- Figures in millions of pesos.

Consolidated Balance Sheet

Loan Portfolio and Deposits

Banco Azteca Mexico, Purpose Financial — corporate name for the Advance America brand — and Banco Azteca Latin America’s consolidated gross portfolio as of December 31, 2019 grew 14% to Ps.110,898 million, from Ps.97,579 million for the previous year. The consolidated delinquency rate was 4.2% at the end of the period, compared to 4.1% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 16% to Ps.93,253 million, from Ps.80,346 million a year ago.

The defaulting rate for the bank at the end of the quarter was 3.7%, in comparison with 3.5% for the previous year. The past-due loan portfolio is reserved 2.27 times, which reflects a past-due portfolio of Ps.3,416 million, in comparison to allowance for credit risks of Ps.7,758 million in the balance sheet, as of December 31, 2019.

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’s consolidated deposits were Ps.154,977 million, 26% higher than the Ps.123,463 million a year ago. Deposits of Banco Azteca Mexico were Ps.151,184 million, 24% higher than the Ps.122,182 million a year ago.

As of December 31, 2019, the capitalization index of Banco Azteca Mexico was 15.06%.

Infrastructure

Grupo Elektra currently has 7,250 storefronts, compared to 7,269 units a year ago.

In 2019, 60 new Elektra stores were opened at strategic locations throughout Mexico, with larger exhibition areas; which increase the offering of products and services and maximize customer shopping experiences.

The company has 4,781 storefronts in Mexico, 1,826 in the United States, and 643 in Central and South America. The extensive distribution network allows the company to maintain close contact with customers and grants a superior market positioning in the countries where it operates.

Twelve Month Results

Total consolidated revenue in 2019 grew 15% to Ps.119,010 million, from Ps.103,876 million for 2018, boosted by 17% and 13% growth in commercial and financial businesses, respectively.

EBITDA was Ps.19,095 million, 6% higher than the Ps.18,065 million for the same period a year ago; the EBITDA margin for 2019 was 16%. Operating profit decreased 21% to Ps.11,945 million.

The company reported net income of Ps.16,151 million, 10% higher to the net income of Ps.14,742 million a year ago. The change mainly results from a higher appreciation this period in the market value of underlying financial instruments that the company holds, which doesn’t imply cash flow, compared to the prior year

2018 2019 Change Ps. % -------------------- -------- -------- -------- ----- Consolidated revenue $103,876 $119,010 $15,134 15 % EBITDA $18,065 $19,095 $1,030 6 % Operating profit $15,077 $11,945 $(3,133) -21 % Net result $14,742 $16,151 $1,408 10 % Net result per share $64.80 $70.71 $5.91 9 % -------------------- -------- -------- -------- --- - Figures in millions of pesos EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. As of December 31, 2018, Elektra* outstanding shares were 227.5 million and as of December 31, 2019, were 228.4 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, Panama and Peru.

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 Spain’s’ 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 Rolando Villarreal Grupo Salinas Grupo Elektra, S.A.B. de C.V. Tel. +52 (55) 1720-9167 Tel. +52 (55) 1720-9167 jrangelk@gruposalinas.com.mx rvillarreal@gruposalinas.com.mx

Press Relations:Luciano PascoeTel. +52 (55) 1720 1313 ext. 36553 lpascoe@gruposalinas.com.mx

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS MILLIONS OF MEXICAN PESOS 4Q18 4Q19 Change ------------- ------------- ------------- Financial income 17,370 60% 19,501 58% 2,131 12% Commercial income 11,811 40% 13,976 42% 2,165 18% ------- ---- ------- ---- ------- ---- Income 29,182 100% 33,477 100% 4,296 15% Financial cost 4,201 14% 5,335 16% 1,134 27% Commercial cost 7,988 27% 9,514 28% 1,526 19% ------- ---- ------- ---- ------- ---- Costs 12,189 42% 14,849 44% 2,660 22% Gross income 16,993 58% 18,629 56% 1,636 10% ------- ---- ------- ---- ------- ---- Sales, administration and promotion expenses 12,184 42% 13,186 39% 1,002 8% ------- ---- ------- ---- ------- ---- EBITDA 4,809 16% 5,442 16% 634 13% Depreciation and amortization 839 3% 1,143 3% 303 36% Depreciation right of use asset - 0% 744 2% 744 ---- Other expense (income), net 21 0% (11) 0% (32) ---- Operating income 3,948 14% 3,567 11% (381) -10% ------- ---- ------- ---- ------- ---- Comprehensive financial result: Interest income 361 1% 261 1% (99) -28% Interest expense (610) -2% (947) -3% (338) -55% Foreign exchange gain (loss), net 376 1% (415) -1% (791) ---- Other financial results, net 4,925 17% (463) -1% (5,389) ---- ------- ---- ------- ---- ------- ---- 5,052 17% (1,564) -5% (6,616) ---- Participation in the net income of CASA and other associated companies (22) 0% 305 1% 326 ---- ---- Income before income tax 8,979 31% 2,308 7% (6,671) -74% ------- ---- ------- ---- ------- ---- Income tax (2,742) -9% (739) -2% 2,003 73% ---- Income before discontinued operations 6,237 21% 1,569 5% (4,668) -75% ------- ---- ------- ---- ------- ---- Result from discontinued operations (247) -1% (2) 0% 245 99% Impairment of intangible assets (76) 0% (34) 0% 42 55% Consolidated net income 5,913 20% 1,532 5% (4,381) -74% ------- ---- ------- ---- ------- ----

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS MILLIONS OF MEXICAN PESOS 12M18 12M19 Change ------------- ------------- ------------- Financial income 65,429 63% 74,015 62% 8,585 13% Commercial income 38,447 37% 44,996 38% 6,549 17% ------- ---- ------- ---- ------- ---- Income 103,876 100% 119,010 100% 15,134 15% Financial cost 15,426 15% 19,597 16% 4,171 27% Commercial cost 25,219 24% 30,155 25% 4,935 20% ------- ---- ------- ---- ------- ---- Costs 40,646 39% 49,752 42% 9,106 22% Gross income 63,230 61% 69,258 58% 6,028 10% ------- ---- ------- ---- ------- ---- Sales, administration and promotion expenses 45,165 43% 50,163 42% 4,998 11% ------- ---- ------- ---- ------- ---- EBITDA 18,065 17% 19,095 16% 1,030 6% Depreciation and amortization 2,998 3% 4,248 4% 1,251 42% Depreciation right of use asset - 0% 2,901 2% 2,901 ---- Other (income) expense, net (10) 0% 0 0% 10 ---- Operating Income 15,077 15% 11,945 10% (3,133) -21% ------- ---- ------- ---- ------- ---- Comprehensive financial result: Interest income 876 1% 1,250 1% 374 43% Interest expense (2,023) -2% (3,630) -3% (1,607) -79% Foreign exchange loss, net (76) 0% (425) 0% (349) ---- Other financial results, net 7,770 7% 13,339 11% 5,569 -72% ------- ---- ------- ---- ------- ---- 6,547 6% 10,534 9% 3,986 -61% Participation in the net income of CASA and other associated companies (188) 0% 303 0% 492 ---- ---- Income before income tax 21,436 21% 22,782 19% 1,345 6% ------- ---- ------- ---- ------- ---- Income tax (6,371) -6% (6,738) -6% (367) -6% ---- Income before discontinued operations 15,065 15% 16,043 13% 978 6% ------- ---- ------- ---- ------- ---- Result from discontinued operations (247) 0% 160 0% 406 ---- Impairment of intangible assets (76) 0% (52) 0% 24 32% Consolidated net income 14,742 14% 16,151 14% 1,408 10% ------- ---- ------- ---- ------- ----

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MILLIONS OF MEXICAN PESOS Commercial Financial Grupo Commercial Financial Grupo Business Business Elektra Business Business Elektra Change ---------- --------- ------- ---------- --------- ------- ------------ At December 31, 2018 At December 31, 2019 Cash and cash equivalents 8,407 17,776 26,183 4,379 21,635 26,014 (169) -1% Marketable financial instruments 22,645 56,382 79,027 16,071 79,964 96,035 17,008 22% Performing loan portfolio - 63,229 63,229 - 73,150 73,150 9,921 16% Total past-due loans - 3,694 3,694 - 4,117 4,117 423 11% ---------- --------- ------- ---------- --------- ------- ------- ---- Gross loan portfolio - 66,923 66,923 - 77,267 77,267 10,344 15% Allowance for credit risks - 8,025 8,025 - 8,602 8,602 577 7% ---------- --------- ------- ---------- --------- ------- ------- ---- Loan portfolio, net - 58,898 58,898 - 68,665 68,665 9,767 17% Inventories 9,375 - 9,375 11,093 - 11,093 1,718 18% Other current assets 20,462 10,132 30,594 14,548 8,231 22,780 (7,814) -26% Total current assets 60,890 143,187 204,077 46,091 178,496 224,586 20,509 10% Financial instruments 16,745 282 17,027 25,820 266 26,086 9,059 53% Performing loan portfolio - 30,397 30,397 - 33,059 33,059 2,662 9% Total past-due loans - 259 259 - 572 572 312 120% ---------- --------- ------- ---------- --------- ------- ------- ---- Gross loan portfolio - 30,656 30,656 - 33,631 33,631 2,975 10% Allowance for credit risks - 760 760 - 1,455 1,455 695 91% ---------- --------- ------- ---------- --------- ------- ------- ---- Loan portfolio - 29,896 29,896 - 32,176 32,176 2,279 8% Other non-current assets 2,836 188 3,023 27,598 189 27,787 24,764 819% Investment in shares 1,933 - 1,933 2,050 - 2,050 116 6% Property, furniture, equipment and investment in stores, net 7,404 4,918 12,323 8,603 7,243 15,847 3,524 29% Intangible assets 633 6,694 7,327 697 6,714 7,412 84 1% Right of use asset - - - 8,340 2,050 10,390 10,390 ---- Other assets 1,472 310 1,782 709 586 1,294 (488) -27% TOTAL ASSETS 91,913 185,476 277,389 119,908 227,720 347,628 70,239 25% ---------- --------- ------- ---------- --------- ------- ------- ---- Demand and term deposits - 123,463 123,463 - 154,977 154,977 31,514 26% Creditors from repurchase agreements - 6,237 6,237 - 13,536 13,536 7,299 117% Short-term debt 8,410 63 8,473 3,370 245 3,615 (4,858) -57% Leasing - - - 1,399 936 2,335 2,335 ---- ---------- --------- ------- ---------- --------- ------- ------- ---- Short-term liabilities with cost 8,410 129,763 138,174 4,769 169,694 174,463 36,289 26% Suppliers and other short-term 17,380 10,063 27,443 16,082 13,496 29,578 2,135 8% liabilities ---------- --------- ---------- --------- ------- ---- Short-term liabilities without cost 17,380 10,063 27,443 16,082 13,496 29,578 2,135 8% Total short-term liabilities 25,790 139,827 165,617 20,851 183,191 204,041 38,425 23% Long-term debt 12,478 2,586 15,065 19,312 2,020 21,332 6,267 42% Leasing - - - 7,230 1,103 8,333 8,333 ---- ---------- --------- ------- ---------- --------- ------- ------- ---- Long-term liabilities with cost 12,478 2,586 15,065 26,542 3,122 29,664 14,600 97% ------- ---- Long-term liabilities without cost 9,088 3,048 12,136 14,225 1,900 16,125 3,989 33% Total long-term liabilities 21,566 5,634 27,201 40,767 5,022 45,790 18,589 68% TOTAL LIABILITIES 47,356 145,461 192,817 61,618 188,213 249,831 57,014 30% ---------- --------- ------- ---------- --------- ------- ------- ---- TOTAL STOCKHOLDERS’ EQUITY 44,557 40,015 84,572 58,290 39,507 97,797 13,225 16% ---------- --------- ------- ---------- --------- ------- ------- ---- LIABILITIES + EQUITY 91,913 185,476 277,389 119,908 227,720 347,628 70,239 25% ---------- --------- ------- ---------- --------- ------- ------- ----

INFRASTRUCTURE 4Q18 4Q19 Change ------------ ------------ ----------- Points of sale in Mexico Elektra 1,113 15% 1,142 16% 29 3% Salinas y Rocha 44 1% 38 1% (6) -14% Banco Azteca 1,809 25% 1,838 25% 29 2% Freestanding branches 1,652 23% 1,763 24% 111 7% ------ ---- ------ ---- ----- ---- Total 4,618 64% 4,781 66% 163 4% Points of sale in Central and South America Elektra 171 2% 172 2% 1 1% Banco Azteca 385 5% 378 5% (7) -2% Freestanding branches 95 1% 93 1% (2) -2% ------ ---- ------ ---- ----- ---- Total 651 9% 643 9% (8) -1% Points of sale in North America Purpose Financial 2,000 28% 1,826 25% (174) -9% ------ ---- ------ ---- ----- ---- Total 2,000 28% 1,826 25% (174) -9% ----- TOTAL 7,269 100% 7,250 100% (19) 0% ------------------------------------------- ------ ---- ------ ---- ----- ---- Floor space (m²) 1,703 100% 1,761 100% 58 3% ------------------------------------------- ------ ---- ------ ---- ----- ---- Employees Mexico 64,620 82% 74,154 83% 9,534 15% Central and South America 8,655 11% 9,671 11% 1,016 12% North America 5,685 7% 5,058 6% (627) -11% ------ ---- ------ ---- ----- ---- Total employees 78,960 100% 88,883 100% 9,923 13%