Grupo Elektra Announces 15% Growth in Revenue to Ps.31,164 Million in 1Q20

Wednesday, 27. May 2020 00:00

—The company reports EBITDA of Ps.742 million in the period—

21% growth in consolidated deposits, to Ps.160,959 million, generates solid perspectives for the financial business—

—The consolidated gross portfolio increased 13%, to Ps.116,381 million—

MEXICO CITY, May 26, 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 first quarter 2020 financial results.

First Quarter Results

Consolidated revenue was Ps.31,164 million in the period, 15% above the Ps.27,038 million for the same quarter of the previous year. Costs and operating expenses were Ps.30,423 million, from Ps.21,480 million for the same period of 2019.

As a result, Grupo Elektra reported EBITDA of Ps.742 million, in comparison with Ps.5,557 million of the previous year’s quarter. The company registered an operating loss of Ps.1,266 million this quarter, from operating profit of Ps.3,908 million in the same period of 2019.

Net income was Ps.142 million, compared to a net income of Ps.4,663 million a year ago.

 1Q 20191Q 2020Change
   Ps.%
     
Consolidated revenue$27,038$31,164$4,12615%
     
EBITDA  $5,557$742$(4,816)-87%
     
Operating profit
$3,908
$(1,266)
$(5,174)
----
     
Net result     $4,663$142$(4,521)-97%
     
Net result per share$20.40$0.62$(19.78)-97%
     

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of March 31, 2019, Elektra* outstanding shares were 228.6 million and as of March 31, 2020, were 228.7 million.

Revenue

Consolidated revenue increased 15%, as a result of an 16% growth in financial revenues and a 14% increase in commercial sales.

The increase in financial revenue — to Ps.20,396 million, from Ps.17,572 million the previous year — mainly reflects revenue growth of 19% at Banco Azteca Mexico, in the context of a strong rise in the gross portfolio and a notable dynamism in deposits.

The increase in commercial division sales — to Ps.10,768 million, up from Ps.9,466 million last year — largely results from a solid increase in sales of Italika motorcycles — thanks to its innovative, safe models, which provide efficient transportation solutions to a growing number of businesses and families — 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 stores 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.17,814 million, from Ps.10,071 million in the previous year. The growth in costs is mainly explained by an increase of Ps.6,651 million in financial cost, to Ps.10,645 million this period compared to Ps.3,994 million a year ago, which largely reflects the creation of loan loss reserves.

As previously announced, in March an important creditor of Banco Azteca began a bankruptcy process (Chapter 11) in the United States, for which the institution prudently decided to reserve 100% of the amount of the credit, equivalent to Ps.7,243 million. The company will have no future charges derived from this operation.

Commercial business costs grew 18%, to Ps.7,169 million, from Ps.6,077 million, consistent with the increase in commercial revenues.

Sales, administration, and marketing expenses grew 11% to Ps.12,609 million as a result of increases in both personnel and operating expenses. The growth is related to the technology developments to further strengthen the high efficiency standards of digital banking — which currently has more than 8 million users who made more than 264 million transactions in the period from the digital application, with superior levels of comfort, security and time savings — as well as personnel and maintenance expenses related to the company's growing distribution infrastructure, which includes the new Elektra stores, and its Omnichannel sales efforts.

Likewise, an increasingly competitive structure in Afore Azteca had an effect in expenses, which allowed for a 37% increase in assets under management in the period, to Ps.115,177 million pesos as of March 31, 2020, and a 42% increase in customer base to 4.9 million, from 3.5 million a year ago.

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

EBITDA and net result

EBITDA was Ps.742 million, from Ps.5,557 million the previous year. The company reported an operating loss of Ps.1,266 million, from operating profit of Ps.3,908 million in the same quarter of 2019.

The most significant changes below EBITDA were the following:

A foreign exchange gain of Ps.2,529 million this quarter compared to an exchange loss of Ps.108 million a year ago, as a result of the company's net asset monetary position in dollars, together with exchange rate depreciation this quarter, compared with an appreciation a year ago.

A negative variation of Ps.2,602 million in the other financial results line — which reflects a gain of 1% 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 10% gain a year ago.

Congruent with the operating results for the quarter, there was a reduction of Ps.1,397 million in the tax provision in the period.

Grupo Elektra reported net income of Ps.142 million, compared to a net income of Ps.4,663 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 make 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.22,632 million as of March 31, 2020, compared to Ps.22,290 million in the previous year.

The balance of cash and cash equivalents was Ps.4,789 million, from Ps.5,497 million from the previous year.

The company's equity increased 17% to Ps.104,006 million, while the ratio of stockholders' equity to total liabilities was 1.5 times at the close of the quarter.

     
 As of
March 31, 2019
As of
March 31, 2020
Change
    Ps.%
     
Cash and cash equivalents$ 5,497$ 4,789(708)(13%)
Marketable financial instruments39,96838,697(1,271)(3%)
Inventories9,73113,9804,24944%
Accounts receivables36,55851,96915,41242%
Other current assets4,1183,843(275)(7%)
Investments in shares34,49740,0105,51316%
Fixed assets7,0658,1331,06815%
Right of use assets8,3528,8074555%
Other assets2,0031,377(626)(31%)
     
Total assets$ 147,789$ 171,606$ 23,81716%
     
Short-term debt$ 3,922$ 11,516$  7,594194%
Suppliers5,7068,5652,85950%
Other short-term liabilities13,80014,9641,1648%
Long-term debt18,36811,116(7,252)(39%)
Differed taxes8,52711,6583,13137%
Other long-term debt8,9129,78186910%
     
Total liabilities$  59,234$ 67,600$  8,36614%
     
Stakeholder´s equity$  88,555$ 104,006$ 15,45117%
     
Liabilities and equity$ 147,789$ 171,606$ 23,81716%
Figures in millions of pesos.    

Consolidated Balance Sheet

Loan Portfolio and Deposits

Banco Azteca Mexico, Purpose Financial and Banco Azteca Latin America’s consolidated gross portfolio as of March 31, 2020 grew 13% to Ps.116,381 million, from Ps.103,236 million for the previous year. The consolidated delinquency rate was 10.9% at the end of the period, compared to 3.4% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 8% to Ps.95,361 million, from Ps.88,063 million a year ago.

The default rate for the bank at the end of the quarter was 11.9%, in comparison with 2.9% for the previous year. The increase is mainly derived from the loan for Ps.7,243 million that became past-due in the period, and which was fully reserved.

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 first quarter.

Grupo Elektra’s consolidated deposits were Ps.160,959 million, 21% higher than the Ps.133,500 million a year ago. Deposits of Banco Azteca Mexico were Ps.155,443 million, 18% higher than the Ps.131,410 million a year ago. 

As of March 31, 2020, the capitalization index of Banco Azteca Mexico was 18.27%. During the period, Grupo Elektra capitalized Banco Azteca for Ps.7,277 million, in line with the extraordinary amount reserved by the bank this quarter.

Infrastructure

Grupo Elektra currently has 7,238 storefronts, compared to 7,250 units a year ago.

During the last twelve months, 57 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 4,761 storefronts in Mexico at the end of the quarter, 1,781 in the United States, and 696 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.

Acquisition of currency hedging

In subsequent events, in the context of the recent volatility of the exchange rate of the peso to the US dollar, as of May 26, the company has acquired options which give it the right, but not the obligation, to purchase dollars at an exchange rate in pesos for up to US$330 million, which allow it to cover, with a predetermined exchange rate, purchases of merchandise abroad, as well as other liabilities denominated in foreign currency. Depending on the exchange rate volatility and with a prudential approach, the company could increase its exchange rate hedging operations.

The currency hedging gives Grupo Elektra certainty about the amount in pesos of such operations, and allows the adequate supply of merchandise that effectively meets customers needs, in the best conditions.

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), Purpose Financial (havepurpose.com), 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 Grupo Elektra 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
         
         
 1Q19 1Q20 Change
         
Financial income17,572 65% 20,396 65% 2,825 16%
Commercial income9,466 35% 10,768 35% 1,301 14%
Income27,038 100% 31,164 100% 4,126 15%
         
Financial cost3,994 15% 10,645 34% 6,651 100%
Commercial cost6,077 22% 7,169 23% 1,092 18%
Costs10,071 37% 17,814 57% 7,743 77%
         
Gross income16,967 63% 13,350 43% (3,617) -21%
         
Sales, administration and promotion expenses11,409 42% 12,609 40% 1,199 11%
         
EBITDA 5,557 21% 742 2% (4,816) -87%
         
Depreciation and amortization954 4% 1,277 4% 322 34%
         
Depreciation right of use asset691 3% 724 2% 33 5%
         
Other expense, net4 0% 7 0% 3 80%
         
Operating income3,908 14% (1,266) -4% (5,174) ----
         
Comprehensive financial result:        
Interest income308 1% 251 1% (56) -18%
Interest expense(838) -3% (908) -3% (70) -8%
Foreign exchange gain (loss), net(108) 0% 2,529 8% 2,637 ----
Other financial results, net2,990 11% 388 1% (2,602) -87%
 2,351 9% 2,260 7% (92) -4%
         
Participation in the net income of        
CASA and other associated companies26 0% (621) -2% (647) ----
         
Income before income tax6,285 23% 373 1% (5,912) ----
         
Income tax(1,623) -6% (226) -1% 1,397 86%
         
Income before discontinued operations4,662 17% 147 0% (4,515) -97%
         
Result from discontinued operations1 0% (5) 0% (6) ----
         
Impairment of intangible assets- 0% - 0% - ----
         
Consolidated net income 4,663 17% 142 0% (4,521) -97%
         


 
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 March 31, 2019 At March 31, 2020  
           
Cash and cash equivalents5,49719,62425,120 4,78941,99446,783 21,663 86%
           
Marketable financial instruments23,35764,59587,952 8,30570,18078,485 (9,467) -11%
           
Performing loan portfolio-69,41169,411 -67,61167,611 (1,800) -3%
Total past-due loans-3,2843,284 -6,6646,664 3,380 103%
Gross loan portfolio-72,69472,694 -74,27574,275 1,580 2%
           
Allowance for credit risks-7,5517,551 -9,3169,316 1,764 23%
           
Loan portfolio, net-65,14365,143 -64,95964,959 (184) 0%
           
Inventories9,731-9,731 13,980-13,980 4,249 44%
           
Other current assets24,3549,08633,439 15,61928,05343,672 10,232 31%
           
Total current assets62,938158,447221,385 42,692205,186247,878 26,493 12%
           
Financial instruments16,61126116,872 30,39231330,706 13,833 82%
           
Performing loan portfolio-30,29330,293 -36,13436,134 5,841 19%
Total past-due loans-248248 -5,9725,972 5,724 n.m
Gross loan portfolio-30,54230,542 -42,10642,106 11,565 38%
           
Allowance for credit risks-1,0191,019 -6,6976,697 5,679 557%
           
Loan portfolio-29,52329,523 -35,40935,409 5,886 20%
           
Other non-current assets3,8591884,047 25,78118925,970 21,923 542%
Investment in shares2,076-2,076 1,429-1,429 (648) -31%
Property, furniture, equipment and          
  investment in stores, net7,0655,04012,105 8,1337,81715,951 3,846 32%
Intangible assets6176,6397,256 6588,1578,815 1,559 21%
Right of use asset8,3522,24510,597 8,8072,26211,069 472 4%
Other assets1,3864551,841 7196831,402 (439) -24%
TOTAL ASSETS102,905202,799305,704 118,611260,017378,628 72,924 24%
           
           
Demand and term deposits-133,500133,500 -160,959160,959 27,459 21%
Creditors from repurchase agreements-10,41010,410 -16,00216,002 5,592 54%
Short-term debt3,9221434,065 11,30394312,246 8,181 201%
Leasing1,2387511,989 1,7271,0992,826 836 42%
Short-term liabilities with cost5,160144,803149,964 13,030179,002192,032 42,068 28%
           
Suppliers and other short-term liabilities15,88610,62626,512 19,09026,17245,263 18,751 71%
Short-term liabilities without cost15,88610,62626,512 19,09026,17245,263 18,751 71%
           
Total short-term liabilities21,046155,429176,475 32,120205,174237,294 60,819 34%
           
Long-term debt16,2292,50418,733 11,0621,95113,013 (5,720) -31%
Leasing7,4481,4588,906 7,6531,2028,855 (51) -1%
Long-term liabilities with cost23,6763,96227,638 18,7153,15321,867 (5,771) -21%
           
Long-term liabilities without cost9,9913,04413,035 13,7861,67415,460 2,425 19%
           
Total long-term liabilities33,6677,00640,673 32,5014,82737,328 (3,346) -8%
           
TOTAL LIABILITIES54,714162,435217,149 64,621210,001274,622 57,473 26%
           
TOTAL STOCKHOLDERS' EQUITY48,19140,36488,555 53,99150,015104,006 15,451 17%
           
           
LIABILITIES + EQUITY102,905202,799305,704 118,611260,017378,628 72,924 24%
           

 

 INFRASTRUCTURE   
         
 1Q19 1Q20 Change
         
Points of sale in Mexico        
Elektra1,14216% 1,13516% (7)-1%
Salinas y Rocha381% 381% -0%
Banco Azteca1,83825% 1,83425% (4)0%
Freestanding branches1,76324% 1,75424% (9)-1%
Total4,78166% 4,76166% (20)0%
         
Points of sale in Central and South America        
Elektra1722% 1983% 2615%
Banco Azteca3785% 4026% 246%
Freestanding branches931% 961% 33%
Total6439% 69610% 538%
         
Points of sale in North America        
Purpose Financial1,82625% 1,78125% (45)-2%
Total1,82625% 1,78125% (45)-2%
         
TOTAL7,250100% 7,238100% (12)0%
         
         
         
Floor space (m²)1,761100% 1,771100% 101%
         
         
Employees        
Mexico70,93683% 71,56083% 6241%
Central and South America8,86910% 9,64611% 7779%
North America5,5837% 4,8126% (771)-14%
Total employees85,388100% 86,018100% 6301%

 

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