Grupo Elektra Reports EBITDA of Ps.4,014 Million and Operating Profit of Ps.2,255 Million in 2Q19

Wednesday, 24. July 2019 01:14

—Consolidated revenues increase 14%, to Ps.28,899 million as a result of strong dynamism in both financial and commercial income—

—16% growth in consolidated deposits, up to Ps.140,603 million, creates strong prospects for the financial business—

—The consolidated gross portfolio increases 13%, to Ps.106,956 million—

—Consolidated delinquency rate is reduced from 4.6% to 3.6%—

MEXICO CITY, July 23, 2019 (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 second quarter 2019 financial results.

Consolidated second quarter results

Consolidated revenue was Ps.28,899 million in the period, 14% above the Ps.25,344 million for the same quarter of the previous year. Costs and operating expenses were Ps.24,885 million, compared to Ps.20,746 million for the same period of 2018.

As a result, Grupo Elektra reported EBITDA of Ps.4,014 million, in comparison with Ps.4,599 million of the previous year’s quarter, with an EBITDA margin of 14% for the period.

Operating profit was of Ps.2,255 million this quarter, up from Ps.3,895 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 second quarter of 2019 EBITDA for the period was Ps.3,152 million and operating profit was Ps.2,127 million.

The company reported net income of Ps.5,697 million, compared to net income of Ps.3,678 million a year ago.

   2Q 2018  2Q 2019  Change
   Ps.%
     
Consolidated revenue$25,344$28,899$3,554 14%
EBITDA  $4,599$4,014$(585)-13%
Operating profit$3,895$2,255$(1,640)-42%
Net result $3,678$5,697$2,01955%
Net result per share$16.20$24.94$8.74 54%
     

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2018, Elektra* outstanding shares were 227.1 million and as of June 30, 2019, were 228.4 million.

Revenues

Consolidated revenue increased 14%, as a result of 14% growth in financial revenues and 15% growth in commercial sales.

The increase in financial revenue —to Ps.17,955 million, from Ps.15,798 million the previous year— mainly reflects revenue growth of 20% at Banco Azteca Mexico, in the context of strong growth in the gross portfolio and a notable dynamism in deposits.

The increase in commercial division sales —to Ps.10,944 million, up from Ps.9,547 million last year— largely results from a solid increase in sales of Italika motorcycles, which provide safe transportation alternatives and reduce the travel time for thousands of families and small-businesses. This growth also results from exceptional dynamism in the telephone and electronic lines, which are marketed in the most competitive market conditions.

Elektra’s 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.

Costs and Expenses

Consolidated costs for the quarter were Ps.12,163 million, from Ps.9,819 million in the previous year, as a result of a 26% increase in financial costs, which mainly reflects higher interest paid —in the context of strong growth in deposits— and a 23% increase in commercial costs that results from the promotion of product lines that will generate superior positions in various markets of remarkable dynamism.

Sales, administration, and marketing expenses increased 16% to Ps.12,722 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 customer service structures— which have added specialized personnel that focus on substantially boosting bank deposits, as well as the credit portfolio, with strong quality standards.

Likewise, staff have an impact on expenses, Omnichannel sales efforts, maintenance of distribution infrastructure costs —which include the new Elektra stores— and the development of new technology to further strengthen high standards of digital banking efficiency —which currently has more than five million users and is growing rapidly.

The company anticipates that the development of these initiatives, will further boost the firm performance of the financial and commercial businesses in the future, with solid profitability.

EBITDA and net result

The EBITDA of the company decreased 13% to Ps.4,014 million this quarter. Operating income declined 42% to Ps.2,255 million, from Ps.3,895 million for the same quarter of 2018.

The most significant change below EBITDA was a positive variation of Ps.5,803 million in other financial results, which reflects a 20% appreciation this quarter— compared to a 6% increase a year ago— in the market value of underlying assets of financial instruments held by the company, and does not imply cash flow.

Congruent with the positive variation of other financial results, an increase of Ps.1,050 million in the provision of taxes line registered during the period.

Grupo Elektra reported net income of Ps.5,697 million, compared to a net income of Ps.3,678 million a year ago.

Unconsolidated Balance Sheet

A pro forma exercise of the balance sheet of Grupo Elektra is presented, to allow the visualization of the non-consolidated financial situation— 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 Azrteca’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 make up the company and allows financial market participants to make estimates of the value of the company, considering only the relevant debt for such calculations.

Corresponding with this, debt with cost was Ps.25,384 million as of June 30, 2019, compared to Ps.21,930 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 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.

During the last twelve months, 88 new Elektra stores were opened, 67 existing stores were remodeled, a new Italika motorcycle distribution centre was opened, and investments were made in systems development to optimize Banco Azteca and Tiendas Elektra operations.

The balance of cash and cash equivalents was Ps.29,117 million, from Ps.24,917 million from previous year. As a result, the net cash balance —excluding the amount of debt with cost as of June 30, 2019— was favorable at Ps.3,733 million, compared to a positive figure of Ps.2,987 million a year ago.

The company's equity increased 31% to Ps.92,182 million, while the ratio of stockholders' equity to total liabilities was 1.5 times at the close of the quarter.

 As of June
30, 2018
As of June
30, 2019
  Change
  Ps.               
%
     
     
Cash & marketable fin. instr.$24,917$29,117$4,200 17%
Inventories$10,462$9,914($549)-5%
Other current assets$2,084$2,868$784 38%
Financial instruments$17,841$16,529($1,312)-7%
Accounts receivables$20,159$44,283$24,124 ---
Investments in shares$31,847$34,601$2,754 9%
Fixed assets$5,833$7,846$2,014 35%
Right of use asset ---$8,252$8,252  
Other assets$1,471$2,029$558 38%
Total assets$114,615
$155,439
$40,825  36%
     
Short-term debt$8,908$4,058($4,850)-54%
Leasing ---$736$736---
Other short-term liabilities$17,057$17,355$2982%
Long-term debt$13,022$21,326$8,30464%
Leasing ---$7,601$7,601---
Other long-term debt$5,131$12,180$7,049---
Total liabilities$44,119
$63,257
$19,138  43%
Stakeholder´s equity$70,496
$92,182
$21,686
31%
Liabilities and equity$114,615
$155,439
$40,824
36%

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 June 30, 2019 grew 13% to Ps.106,956 million, from Ps.94,503 million for the previous year. The consolidated delinquency rate was 3.6% at the end of the period, compared to 4.6% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 17% to Ps.90,860 million, from Ps.77,931 million a year ago.

The delinquency rate for the bank at the end of the quarter was 3%, in comparison with 4.2% for the previous year.  Despite the solid increase of the gross loan portfolio, the balance of the past due loans decreased to Ps.2,761 million, from Ps.3,296 million a year ago, as a result of robust strategies to further strengthen asset quality.

The past-due loan portfolio is reserved 2.6 times, which reflects a past-due portfolio of Ps.2,761 million, in comparison to allowance for credit risks of Ps.7,288 million in the balance sheet as of June 30, 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 second quarter.

Grupo Elektra consolidated deposits were Ps.140,603 million, 16% higher than the Ps.121,090 million a year ago. Deposits of Banco Azteca Mexico were Ps.137,891 million, 16% higher than the Ps.118,489 million a year ago. 

As of June 30, 2019, the capitalization index of Banco Azteca Mexico was 16.53%.

Infrastructure

Grupo Elektra currently has 7,145 storefronts, compared to 7,317 units a year ago. The reduction is mainly due to a decrease in the number of branches of financial services, made in order to optimize the profitability of the financial business infrastructure.

Meanwhile, during the last twelve months, 88 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 4,640 storefronts in Mexico, 1,916 in the United States, and 589 in Central and South America. The extensive distribution network allows the company to maintain close contact with customers, granting superior market positioning in the countries where it operates.

Sale of Banco Azteca El Salvador

During the quarter, the company announced the sale of all of Banco Azteca El Salvador's shares to Grupo Perinversiones, S.A. de C.V.

For 10 years, Banco Azteca El Salvador offered financial services to sectors of society that were ignored by traditional banking, providing enhanced access to banking and credit to large segments of the population that, in turn, helped to boost the development of the country.

Currently, Grupo Elektra focusses its efforts on markets that strengthen its solid business model —with exceptional financial and commercial operations— which allows to  advance the well-being and progress of the communities where it has a presence.

Six months consolidated results

Total consolidated revenue in the first six months of the year grew 13% to Ps.55,800 million, from Ps.49,204 million for the same period of 2018, boosted by 13% and 14% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.9,571million, up 7% compared to Ps.8,983 million last year; EBTIDA margin of the first six months of 2019 was 17%.  Operating profit decreased 19% to Ps.6,192 million in the period.

The company reported net income of Ps.10,360 million, compared to net income of Ps.2,386 million a year ago, mainly due an appreciation this period in the market value of underlying financial instruments that the company holds, which do not imply cash flow, compared to depreciation the prior year.

   6M 2018  6M 2019  Change
   Ps.%
     
Consolidated revenue$49,204$55,800 $6,596  13%
EBITDA  $8,983$9,571 $588  7%
Operating profit$7,629$6,162 ($1,466)-19%
Net result $2,386$10,360 $7,973  ---
Net result per share$10.51$45.36 $34.85  ---
     

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2018, Elektra* outstanding shares were 227.1 million and as of June 30, 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
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
Tel. +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
           
           
  2Q18 2Q19 Change 
           
 Financial income  15,798 62%   17,955 62%   2,157 14% 
 Commercial income  9,547 38%   10,944 38%   1,398 15% 
 Income  25,344  100%   28,899  100%   3,554 14% 
           
 Financial cost  3,806 15%   4,784 17%   978 26% 
 Commercial cost  6,013 24%   7,379 26%   1,366 23% 
 Costs  9,819  39%   12,163  42%   2,344 24% 
           
 Gross income  15,526  61%   16,736  58%   1,210 8% 
           
 Sales, administration and promotion expenses  10,927  43%   12,722  44%   1,795 16% 
           
 EBITDA   4,599  18%   4,014  14%   (585)-13% 
           
 Depreciation and amortization  707 3%   1,031 4%   324 46% 
           
 Depreciation right of use asset  - 0%   734 3%   734 ---- 
           
 Other income, net  (3)0%   (6)0%   (3)-84% 
           
 Operating income  3,895  15%   2,255  8%   (1,640)-42% 
           
 Comprehensive financial result:         
   Interest income  188 1%   324 1%   136 72% 
   Interest expense  (491)-2%   (922)-3%   (431)-88% 
   Foreign exchange gain (loss), net  982 4%   (88)0%   (1,071)-109% 
   Other financial results, net  614 2%   6,417 22%   5,803 ---- 
    1,294  5%   5,730  20%   4,437 ---- 
           
 Participation  in  the  net  income of         
 CASA and other associated companies  (218)-1%   (84)0%   134 61% 
           
 Income before income tax  4,970  20%   7,901  27%   2,930 59% 
           
 Income tax  (1,317)-5%   (2,367)-8%   (1,050)-80% 
           
 Income before discontinued operations  3,653  14%   5,534  19%   1,881 51% 
           
 Result from discontinued operations   25 0%   163 1%   138 ---- 
           
 Impairment of intangible assets  - 0%   - 0%   - ---- 
           
 Consolidated net income   3,678  15%   5,697  20%   2,019 55% 
           

 

           
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
           
           
  6M18 6M19 Change 
           
 Financial income  31,348 64%   35,506 64%   4,157 13% 
 Commercial income  17,856 36%   20,294 36%   2,438 14% 
 Income  49,204  100%   55,800  100%   6,596 13% 
           
 Financial cost  7,246 15%   8,757 16%   1,511 21% 
 Commercial cost  11,476 23%   13,341 24%   1,865 16% 
 Costs  18,722  38%   22,097  40%   3,376 18% 
           
 Gross income  30,482  62%   33,702  60%   3,220 11% 
           
 Sales, administration and promotion expenses  21,499  44%   24,131  43%   2,632 12% 
           
 EBITDA   8,983  18%   9,571  17%   588 7% 
           
 Depreciation and amortization  1,368 3%   1,986 4%   617 45% 
           
 Depreciation right of use asset  - 0%   1,425 3%   1,425 ---- 
           
 Other income, net  (14)0%   (2)0%   12 84% 
           
 Operating Income  7,629  16%   6,162  11%   (1,466)-19% 
           
 Comprehensive financial result:         
   Interest income  316 1%   631 1%   315 100% 
   Interest expense  (837)-2%   (1,760)-3%   (923)-110% 
   Foreign exchange gain (loss), net  148 0%   (196)0%   (344)---- 
   Other financial results, net  (3,743)-8%   9,406 17%   13,149 ---- 
    (4,115)-8%   8,082  14%   12,197 ---- 
           
 Participation  in  the  net  income of         
 CASA and other associated companies  (245)0%   (58)0%   186 76% 
           
 Income before income tax  3,269  7%   14,186  25%   10,917 ---- 
           
 Income tax  (886)-2%   (3,990)-7%   (3,104)---- 
           
 Income before discontinued operations  2,383  5%   10,196  18%   7,813 ---- 
           
 Result from discontinued operations   3 0%   164 0%   161 ---- 
           
 Impairment of intangible assets  - 0%   - 0%   - ---- 
           
 Consolidated net income   2,386  5%   10,360  19%   7,973 ---- 
           

 

            
  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, 2018 At June 30, 2019  
            
 Cash and cash equivalents  6,268  19,745  26,013   5,420  21,599  27,019   1,006 4%
            
 Marketable financial instruments  18,649  56,585  75,235   23,697  74,100  97,797   22,563 30%
            
 Performing loan portfolio  -  61,210  61,210   -  76,616  76,616   15,407 25%
 Total past-due loans  -  4,051  4,051   -  3,682  3,682   (370)-9%
 Gross loan portfolio  -  65,261  65,261   -  80,298  80,298   15,037 23%
            
 Allowance for credit risks  -  8,321  8,321   -  8,481  8,481   159 2%
            
 Loan portfolio, net -  56,940  56,940   -  71,818  71,818   14,878 26%
            
 Inventories  10,513  -  10,513   9,914  -  9,914   (600)-6%
            
 Other current assets   7,903  9,607  17,511   28,840  12,617  41,458   23,947 137%
            
 Total current assets  43,334   142,877   186,211    67,872   180,133   248,005    61,794 33%
            
 Financial instruments  17,841  316  18,157   16,529  271  16,800   (1,357)-7%
            
 Performing loan portfolio  -  28,990  28,990   -  26,506  26,506   (2,484)-9%
 Total past-due loans  -  253  253   -  153  153   (100)-40%
 Gross loan portfolio -  29,242  29,242   -  26,659  26,659   (2,583)-9%
            
 Allowance for credit risks  -  746  746   -  677  677   (69)-9%
            
 Loan portfolio  -  28,496  28,496   -  25,982  25,982   (2,515)-9%
            
 Other non-current assets   1,693  648  2,342   6,026  440  6,466   4,124 176%
 Investment in shares  1,881  -  1,881   1,772  -  1,772   (109)-6%
 Property, furniture, equipment and          
   investment in stores, net  5,833  3,675  9,508   7,846  5,360  13,207   3,699 39%
 Intangible assets  662  6,673  7,336   678  6,677  7,355   19 0%
 Right of use asset  -  -  -   8,252  2,012  10,263   10,263 ----
 Other assets  809  331  1,141   1,351  505  1,856   715 63%
 TOTAL ASSETS  72,054   183,018   255,072    110,326   221,380   331,706    76,634 30%
            
            
 Demand and term deposits  -  121,090  121,090   -  140,603  140,603   19,512 16%
 Creditors from repurchase agreements  -  4,609  4,609   -  13,904  13,904   9,295 202%
 Short-term debt  8,908  528  9,436   3,943  62  4,004   (5,432)-58%
 Leasing  -  -  -   736  851  1,587   1,587 ----
 Short-term liabilities with cost  8,908  126,227  135,136   4,679  155,419  160,098   24,963 18%
            
 Suppliers and other short-term liabilities  15,950  11,112  27,062   15,821  18,945  34,766   7,703 28%
 Short-term liabilities without cost  15,950  11,112  27,062   15,821  18,945  34,766   7,703 28%
            
 Total short-term liabilities  24,858   137,339   162,198    20,500   174,364   194,864    32,666 20%
            
 Long-term debt  12,434  1,865  14,299   19,303  2,336  21,639   7,340 51%
 Leasing  -  -  -   7,601  1,122  8,723   8,723 ----
 Long-term liabilities with cost  12,434  1,865  14,299   26,904  3,458  30,362   16,063 112%
            
 Long-term liabilities without cost  5,132  2,948  8,079   12,180  2,118  14,298   6,219 77%
            
 Total long-term liabilities  17,566   4,812   22,378    39,084   5,576   44,660    22,282 100%
            
 TOTAL LIABILITIES  42,425   142,152   184,576    59,584   179,940   239,524    54,948 30%
            
 TOTAL STOCKHOLDERS' EQUITY  29,629   40,866   70,496    50,742   41,440   92,182    21,686 31%
            
            
 LIABILITIES + EQUITY  72,054   183,018   255,072    110,326   221,380   331,706    76,634 30%
            

 

          
  INFRASTRUCTURE   
          
  2Q18 2Q19 Change
          
 Points of sale in Mexico        
 Elektra   1,06315%   1,11716%   54 5%
 Salinas y Rocha   461%   381%   (8)-17%
 Banco Azteca  1,25917%   1,30218%   43 3%
 Freestanding branches  2,30431%   2,18331%   (121)-5%
 Total  4,672 64%   4,640 65%   (32)-1%
          
 Points of sale in Central and South America        
 Elektra   1652%   1682%   3 2%
 Banco Azteca  1652%   1682%   3 2%
 Freestanding branches  2974%   2534%   (44)-15%
 Total  627 9%   589 8%   (38)-6%
          
 Points of sale in North America        
 Advance America  2,01828%   1,91627%   (102)-5%
 Total  2,018 28%   1,916 27%   (102)-5%
          
 TOTAL  7,317 100%   7,145 100%   (172)-2%
          
          
          
          
 Floor space (m²)  1,614 100%   1,703 100%   89 5%
          
          
          
 Employees        
 Mexico  59,75880%   73,14983%   13,391 22%
 Central and South America  8,92112%   9,09310%   172 2%
 North America  5,6598%   5,3926%   (267)-5%
 Total employees  74,338 100%   87,634 100%   13,296 18%

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