Market Overview

Grupo Elektra Reports EBITDA of Ps.4,630 Million and Operating Profit of Ps.3,921 Million in 2Q18

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     —Solid performance in both commercial and financial businesses generates 11% increase in consolidated revenue to Ps.25,223 million—

—Firm increase of 11%  in gross loan portfolio to Ps.94,503 million—

MEXICO CITY, July 24, 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 second quarter of 2018.

Consolidated second quarter results

Consolidated revenue was Ps.25,223 million in the period, 11% above the Ps.22,794 million for the same quarter of the previous year. Costs and operating expenses were Ps.20,593 million, compared to Ps.18,301 million for the same period of 2017.

As a result, Grupo Elektra reported EBITDA of Ps.4,630 million, 3% higher than the Ps.4,493 million of the previous year's quarter; EBITDA margin was 18% for the period.

Operating profit was of Ps.3,921 million this quarter, from Ps.3,895 million in the same period of 2017.

The company reported net income of Ps.3,678 million, compared to net income of Ps.7,137 million a year ago.

    2Q 2017   2Q 2018   Change
      Ps. %
         
Consolidated revenue $22,794 $25,223 $2,428 11%
         
EBITDA   $4,493 $4,630 $137  3%
         
Operating profit    $3,895 $3,921 $25 1%
           
Net result  $7,137 $3,678 $(3,460) -48%
         
Net result per share $30.78 $16.20 $(14.58) -48%
         

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2017, Elektra* outstanding shares were 231.9 million and as of June 30, 2018, were 227.1 million.

Revenue

Consolidated revenue increased 11%, as a result of 11% and 9% growth in both financial revenues and commercial sales, respectively.

The increase in commercial division sales —to Ps.9,394 million from Ps.8,597 million last year— results from strategies focused on effectively satisfying customer needs with world class merchandise, optimal customer service and the most competitive terms in the market.

In recent 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 thousands of products are sold, at unparalleled prices, from any device and at all times, which further strengthens the company's business operations.

The increase in financial revenue —to Ps.15,829 million from Ps.14,197 million the previous year—  reflects mainly revenue growth of 20% at Banco Azteca Mexico.

Costs and expenses

Consolidated costs for the quarter increased 12% to Ps.9,568 million, from Ps.8,563 million in the previous year, as a result of a 4% increase in commercial costs, and 27% 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 consolidated deposits.

Sales, administration and promotion expenses increased 13% to Ps.11,025 million, as a result of higher personnel and maintenance expenditures, in the context of growing operations in Grupo Elektra.

EBITDA and net result

EBITDA grew 3% to Ps.4,630 million this quarter. Operating income increased 1% to Ps.3,921 million, from Ps.3,895 million for the same quarter of 2017.

The most significant variation below EBITDA was a negative variation of Ps.5,997 million in other financial results —which reflects a 6% 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 a 72% increase a year ago.

Congruent with the negative variation of other financial results, a decrease of Ps.1,406 million in the provision of taxes was registered during the period.

Grupo Elektra reported net income of Ps.3,678 million, compared to a net profit of Ps.7,137 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.21,930 million as of June 30, 2018, compared to Ps.11,864 million for the previous year.

During the 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.24,917 million; as a result, the net cash balance excluding the amount of debt with cost as of June 30, 2018, was favorable at Ps.2,987 million.

The company's equity increased 6% to Ps.70,496 million; while the ratio of stockholders' equity to total liabilities is 1.6 times at the close of the quarter.

  As of June
30, 2017
As of June
30, 2018
  Change
  Ps.  %
         
         
Cash & marketable fin. instr. $12,193 $24,917 $12,724 104%
         
Inventories $7,980 $10,462 $2,482 31%
         
Other current assets $2,065 $2,084 $20 1%
         
Financial instruments $16,202 $17,841 $1,639 10%
         
Accounts receivable $25,844 $20,159 ($5,685) -22%
         
Investment share $28,415 $31,847 $3,432 12%
         
Fixed assets $4,104 $5,833 $1,729 42%
         
Other assets $1,490 $1,471 ($19) -1%
         
Total assets $98,292
$114,615
$16,323
17%
         
Short-term debt $3,278 $8,908 $5,630 172%
         
Other short-term liabilities $14,617 $17,057 $2,440 17%
         
Long-term debt $8,406 $13,022 $4,616 55%
         
Other long-term debt $5,351 $5,131 ($220) -4%
                                   
Total liabilities $31,653
$44,119
$12,466
39%
                                   
Stakeholders' equity $66,639
$70,496
$3,857
6%
                                      
Liabilities and equity $98,292
$114,615
$16,323
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 June 30, 2018 grew 11% to Ps.94,503 million, from Ps.85,050 million for the previous year. The consolidated delinquency rate was 4.6% at the end of the period, compared to 3.1% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 12% to Ps.77,931 million, from Ps.69,850 million a year ago.

The delinquency rate for the bank at the end of the quarter was 4.2%, from 2.5% for the previous year. The past-due loan portfolio is reserved 2.3 times, which reflects a past-due portfolio of Ps.3,296 million, in comparison to allowance for credit risks of Ps.7,447 million in balance, as of June 30, 2018.

The average term of the credit portfolio for principal credit lines —consumer, personal loans and Tarjeta Azteca— was 62 weeks at the end of the second quarter.

Grupo Elektra consolidated deposits were Ps.121,090 million, 17% higher than the Ps.103,896 million a year ago. Deposits of Banco Azteca Mexico were Ps.118,489 million, 16% higher than the Ps.102,538 million a year ago. 

As of June 30, 2018, the estimated capitalization index of Banco Azteca Mexico was 17.97%.

Infrastructure

Grupo Elektra currently has 7,317 points of contact, compared to 7,181 units a year ago.

In the last twelve months, 52 new Elektra stores were opened at strategic points across Mexico, with greater exhibition area, which increases the offer of products and services, and thereby maximizes customer shopping experiences.

The company has 4,672 points of contact in Mexico, 2,018 in the United States, and 627 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.

Six months consolidated results

Total consolidated revenue in the first six months of the year grew 10% to Ps.49,119 million, from Ps.44,801 million for the same period of 2017, boosted by 10% and 9% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.9,028 million, 5% higher than the Ps.8,628 million for the same period a year ago; the EBITDA margin in the first six months of 2018 was 18%. Operating profit grew 2% to Ps.7,640 million during the period.

The company reported net income of Ps.2,386 million, compared to Ps.11,638 million a year ago, mainly due a depreciation 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.

    6M 2017   6M 2018   Change
      Ps. %
         
Consolidated revenue $44,801 $49,119 $4,318 10%
         
EBITDA   $8,628 $9,028 $400  5%
         
Operating profit
$7,483 $7,640 $158 2%
         
Net result  $11,638 $2,386 $(9,252) -79%
         
Net result per share $50.19 $10.51 $39.68 -79%
         

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2017, Elektra* outstanding shares were 231.9 million and as of June 30, 2018, were 227.1 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 create social capabilities to improve the communities' conditions; and environmental value, by reducing the negative impact related to 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 (http://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.

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              
                           
                           
    2Q17
  2Q18   Change
 
                           
  Financial income   14,197   62%     15,829 63%     1,632   11%    
  Commercial income   8,597   38%     9,394 37%     797   9%    
  Income   22,794   100%     25,223 100%     2,428   11%    
                           
  Financial cost   2,926   13%     3,707 15%     781   27%    
  Commercial cost   5,637   25%     5,861 23%     224   4%    
  Costs   8,563   38%     9,568 38%     1,005   12%    
                           
  Gross income   14,232   62%     15,655 62%     1,424   10%    
                           
  Sales, administration and promotion expenses   9,738   43%     11,025 44%     1,287   13%    
                           
  EBITDA    4,493   20%     4,630 18%     137   3%    
                           
  Depreciation and amortization   537   2%     713 3%     176   33%    
                           
  Other expense (income), net   61   0%     (3) 0%     (64)   ----    
                           
  Operating income   3,895   17%     3,921 16%     25   1%    
                           
  Comprehensive financial result:                        
    Interest income   135   1%     188 1%     53   40%    
    Interest expense   (327)   -1%     (491) -2%     (164)   -50%    
    Foreign exchange (loss) gain, net   (394)   -2%     982 4%     1,377   ----    
    Other financial results, net   6,611   29%     614 2%     (5,997)   -91%    
      6,024   26%     1,294 5%     (4,730)   -79%    
                           
  Participation  in  the  net  income of                        
  CASA and other associated companies   (8)   0%     (218 -1%     (210)   ----    
                           
  Income before income tax   9,911   43%     4,996 20%     (4,915)   -50%    
                           
  Income tax   (2,728)   -12%     (1,323) -5%     1,406   52%    
                           
  Income before discontinued operations   7,183   32%     3,674 15%     (3,509)   -49%    
                           
  Result from discontinued operations    (45)   0%     4 0%     50   ----    
                           
  Impairment of intangible assets   -    0%     -  0%     -   ----    
                           
  Consolidated net income    7,137   31%     3,678 15%     (3,460)   -48%    
                           


                             
GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES        
CONSOLIDATED INCOME STATEMENTS        
MILLIONS OF MEXICAN PESOS        
                                 
                                 
    6M17
  6M18
  Change   
                                 
  Financial income   28,566   64%       31,415   64%       2,849   10%    
  Commercial income   16,234   36%       17,704   36%       1,469   9%    
  Income   44,801   100%       49,119   100%       4,318   10%    
                                 
  Financial cost   5,527   12%       7,069   14%       1,542   28%    
  Commercial cost   10,794   24%       11,324   23%       530   5%    
  Costs   16,321   36%       18,393   37%       2,072   13%    
                                 
  Gross income   28,480   64%       30,726   63%       2,246   8%    
                                 
  Sales, administration and promotion expenses   19,852   44%       21,699   44%       1,846   9%    
                                 
  EBITDA    8,628   19%       9,028   18%       400   5%    
                                 
  Depreciation and amortization   1,074   2%       1,380   3%       306   29%    
                                 
  Other expense, net   71   0%       7   0%       (64)   -90%    
                                 
  Operating Income   7,483   17%       7,640   16%       158   2%    
                                 
  Comprehensive financial result:                              
    Interest income   276   1%       316   1%       40   14%    
    Interest expense   (796)   -2%       (837)   -2%       (41)   -5%    
    Foreign exchange (loss) gain, net   (1,330)   -3%       148   0%       1,478   ----    
    Other financial results, net   10,480   23%       (3,743)   -8%       (14,223)   ----    
      8,630   19%       (4,115)   -8%       (12,746)   ----    
                                 
  Participation  in  the  net  income of                              
  CASA and other associated companies   57   0%       (245)   0%       (302)   ----    
                                 
  Income before income tax   16,170   36%       3,280   7%       (12,890)   -80%    
                                 
  Income tax   (4,489)   -10%       (893)   -2%       3,595   80%    
                                 
  Income before discontinued operations   11,681   26%       2,387   5%       (9,294)   -80%    
                                 
  Result from discontinued operations    (43)   0%       (1)   0%       43   98%    
                                 
  Impairment of intangible assets   -    0%       -    0%       -   ----    
                                 
  Consolidated net income    11,638   26%       2,386   5%       (9,252)   -79%    
                                 


 

                       
    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, 2017   At June 30, 2018    
                       
  Cash and cash equivalents   2,770   18,008   20,778     6,268   19,745   26,013     5,235 25%
                       
  Marketable financial instruments   9,423   46,917   56,340     18,649   56,585   75,235     18,894 34%
                       
  Performing loan portfolio   -    56,515   56,515     -    61,210   61,210     4,695 8%
  Total past-due loans   -    2,563   2,563     -    4,051   4,051     1,489 58%
  Gross loan portfolio   -    59,077   59,077     -    65,261   65,261     6,184 10%
                       
  Allowance for credit risks   -    6,960   6,960     -    8,321   8,321     1,361 20%
                       
  Loan portfolio, net   -    52,117   52,117     -    56,940   56,940     4,822 9%
                       
  Inventories   8,000   -   8,000     10,513   -   10,513     2,513 31%
                       
  Other current assets    7,067   7,170   14,237     7,903   9,607   17,511     3,274 23%
                       
  Total current assets   27,260   124,212   151,473     43,334   142,877   186,211     34,739 23%
                       
  Financial instruments   16,202   291   16,493     17,841   316   18,157     1,665 10%
                       
  Performing loan portfolio   -    25,857   25,857     -    28,990   28,990     3,132 12%
  Total past-due loans   -    116   116     -    253   253     137 118%
  Gross loan portfolio   -    25,973   25,973     -    29,242   29,242     3,269 13%
                       
  Allowance for credit risks   -    -    -      -    746   746     746 n.a.
                       
  Loan portfolio   -    25,973   25,973     -    28,496   28,496     2,523 10%
                       
  Other non-current assets    7,200   672   7,872     1,693   648   2,342     (5,530) -70%
                       
  Investment in shares   2,712   -    2,712     1,881   -    1,881     (831) -31%
  Property, furniture, equipment and                    
    investment in stores, net   4,104   2,744   6,848     5,833   3,675   9,508     2,660 39%
  Intangible assets   686   6,097   6,784     662   6,673   7,336     552 8%
  Other assets   804   405   1,210     809   331   1,141     (69) -6%
  TOTAL ASSETS   58,968   160,395   219,363     72,054   183,018   255,072     35,709 16%
                       
                       
  Demand and term deposits   -   103,896   103,896     -   121,090   121,090     17,194 17%
  Creditors from repurchase agreements   -   5,785   5,785     -   4,609   4,609     (1,176) -20%
  Short-term debt   3,278   971   4,249     8,908   528   9,436     5,187 122%
  Short-term liabilities with cost   3,278   110,652   113,930     8,908   126,227   135,136     21,206 19%
                       
  Suppliers and other short-term liabilities   12,900   8,561   21,461     15,950   11,112   27,062     5,601 26%
  Short-term liabilities without cost   12,900   8,561   21,461     15,950   11,112   27,062     5,601 26%
                       
  Total short-term liabilities   16,178   119,213   135,391     24,858   137,339   162,198     26,807 20%
                       
  Long-term debt   7,776   910   8,686     12,434   1,865   14,299     5,613 65%
  Long-term liabilities with cost   7,776   910   8,686     12,434   1,865   14,299     5,613 65%
                       
  Long-term liabilities without cost   5,351   3,296   8,647     5,132   2,948   8,079     (568) -7%
                       
  Total long-term liabilities   13,127   4,206   17,333     17,566   4,812   22,378     5,045 29%
                       
  TOTAL LIABILITIES   29,305   123,419   152,724     42,425   142,152   184,576     31,852 21%
                       
  TOTAL STOCKHOLDERS' EQUITY   29,663   36,976   66,639     29,629   40,866   70,496     3,857 6%
                       
                       
  LIABILITIES + EQUITY   58,968   160,395   219,363     72,054   183,018   255,072     35,709 16%
                       

 


 

                       
    INFRASTRUCTURE          
                       
    2Q17   2Q18   Change    
                       
  Points of sale in Mexico                    
  Elektra    1,011 14%     1,063 15%     52   5%  
  Salinas y Rocha    48 1%     46 1%     (2)   -4%  
  Banco Azteca   1,251 17%     1,259 17%     8   1%  
  Freestanding branches   2,113 29%     2,304 31%     191   9%  
  Total   4,423 62%     4,672 64%     249   6%  
                       
  Points of sale in Central and South America                    
  Elektra    164 2%     165 2%     1   1%  
  Banco Azteca   164 2%     165 2%     1   1%  
  Freestanding branches   344 5%     297 4%     (47)   -14%  
  Total   672 9%     627 9%     (45)   -7%  
                       
  Points of sale in North America                    
  Advance America   2,086 29%     2,018 28%     (68)   -3%  
  Total   2,086 29%     2,018 28%     (68)   -3%  
                       
  TOTAL   7,181 100%     7,317 100%     136   2%  
                       
                       
                       
                       
  Floor space (m²)   1,512 100%     1,614 100%     103   7%  
                       
                       
                       
  Employees                    
  Mexico   50,881 78%     59,758 80%     8,877   17%  
  Central and South America   8,730 13%     8,921 12%     191   2%  
  North America   5,818 9%     5,659 8%     (159)   -3%  
  Total employees   65,429 100%     74,338 100%     8,909   14%  
                       

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