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

/EIN News/ -- —Consolidated revenue increases 15% to Ps.33,477 million
as 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
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
                       
                       
  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 liabilities   17,380   10,063   27,443     16,082   13,496   29,578     2,135 8%
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%

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