Grupo Elektra Reports 15% Growth in Operating Profit to Ps.3,677 Million in 4Q17

—EBITDA increases 10% to Ps.4,284 million during the period—

—Solid performance in both commercial and financial businesses generates
increase of 15% in consolidated revenues, to Ps.27,087 million—

—Consolidated gross portfolio grows 12%, to Ps.93,652 million—

—Company debt, without consolidating the financial business,
  decreases 18%, to Ps.13,464 million—

MEXICO CITY, Feb. 20, 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 fourth quarter of 2017 and full year 2017.

Consolidated fourth quarter results

Consolidated revenue was Ps.27,087 million in the period, 15% above the Ps.23,508 million for the same quarter of previous year. Costs and operating expenses were Ps.22,803 million, compared to Ps.19,620 million for the same period of 2016.

As a result, Grupo Elektra reported EBITDA of Ps.4,284 million, 10% higher than the Ps.3,887 million of the previous year’s quarter; EBITDA margin was 16% this period.

Operating profit grew 15% to Ps.3,677 million during the quarter, from Ps.3,207 million in same period of 2016.

The company reported net income of Ps.902 million, compared to net income of Ps.2,924 million a year ago.

	4Q 2016		4Q 2017		Change
					Ps.			%
Consolidated revenue	$23,508		$27,087		$3,580			15%
EBITDA	$3,887		$4,284		$397			10%
Operating profit	$3,207		$3,677		$471			15%
Net result	$2,924		$902		$(2,022)			-69%
Net result per share	$12.53		$3.90		$(8.63)			-69%

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of December 31, 2016, Elektra* outstanding shares were 233.3 million and as of December 31, 2017, were 231.3 million.

Revenue

Consolidated revenue increased 15%, as a result of 17% and 13% growth in both financial revenues and commercial sales, respectively.

The increase in commercial division sales  ̶ to Ps.11,119 million compared to Ps.9,801 million last year ̶  reflects strategies that focus on generating optimum value propositions for the customers, through lines of merchandise that best meet their needs, with world-class service and under the most competitive market conditions.
                                                                                                               
In the lasts 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 hundreds of thousands of products are sold, at unparalleled prices, from any device and at all times, and further strengthens the company's business operations.

The increase in financial revenue  ̶ to Ps.15,968 million from Ps.13,706 million from the previous year ̶   reflects mainly a 21% growth in revenue of Banco Azteca Mexico.

Costs and expenses

Consolidated costs for the quarter increased 28% to Ps.11,965 million, from Ps.9,320 million in the previous year, as a result of a 17% increase in commercial costs, in line with the increase in commercial revenue, and 56% 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 deposits at Banco Azteca.

Sales, administration and promotion expenses increased 5% to Ps.10,838 million, as a result of higher operation and maintenance costs. Expenses grew slower than consolidated revenue, reflecting strong strategies that drive the company's operating efficiency.

EBITDA and net result

EBITDA grew 10% to Ps.4,284 million this quarter. Operating income increased 15% to Ps.3,677 million, from Ps.3,207 million for the same quarter of 2016.

The most significant variations below EBITDA were the following:

A growth of Ps.427 million in foreign exchange gains, mainly due to a higher net asset position in dollars, compared to the previous year —resulting from the prepayment of US$230 million of dollar-denominated bonds in the period.

A negative variation of Ps.2,852 million in other financial results —which reflects a 15% reduction this quarter in the market value of the underlying assets of financial instruments held by the company, and that does not imply cash flow— in comparison with a 5% increase a year ago. Congruent with this, the negative variation in this item was partially offset by a decrease in the provision of taxes.

An increase of Ps.485 million in loss from the result of subsidiaries, derived from the recognition of the company's participation in CASA.

An increase of Ps.896 million in the impairment account of intangible assets due to the obsolescence recognition of certain system developments at Advance America this year, compared to income due to partial reversal of the deterioration of brands and licenses registered the previous year.

Grupo Elektra reported net income of Ps.902 million, compared to net income of Ps.2,924 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.

This provides greater clarity about the situation of the different businesses that make up the company, and will allow participants in the 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.13,464 million at the end of 2017, 18% below the Ps.16,410 million of the previous year. The balance of cash and cash equivalents was Ps.15,574 million; as a result, the net cash balance excluding the amount of debt with cost at the end of 2017 was favorable at Ps.2,110 million.

As previously announced, in the period, senior notes for US$230 million due in 2018 were prepaid; through such amortization, the company eliminated dollar-denominated bonds. The transaction reflects the firm strategy of Grupo Elektra to further strengthen its solid capital structure.

The company's equity increased 19% to Ps.70,217 million, while the total liabilities decreased 4% to Ps.37,452 million. The ratio of stockholders' equity to total liabilities is 1.9 times.

																					As of Dec.																					As of Dec.																					Change
																					31, 2016																					31, 2017																					Ps.																					%
Cash & marketable fin. instr. Inventories Other current assets Financial instruments Accounts receivables Investment in shares Fixed assets Other assets																					$17,213 $7,187 $9,018 $18,437 $13,918 $26,813 $3,717 $1,773																					$15,574 $9,225 $19,527 $17,819 $8,540 $30,320 $5,189 $1,474																					$(1,639) $2,038 $10,510 $(618) $(5,378) $3,507 $1,472 $(299)																					-10% 28% 117% 3% -39% 13% 40% -17%
Total assets																					$98,077																					$107,669																					$9,592																					10%
Short-term debt Other short-term liabilities Long-term debt Other long-term liabilities																					$2,876 $15,498 $13,534 $7,093																					$3,217 $18,156 $10,247 $5,833																					$341 $2,658 $(3,287) $(1,260)																					12% 17% -24% -18%
Total liabilities																					$39,001																					$37,452																					$(1,549)																					-4%
Stockholder´s equity																					$59,076																					$70,217																					$11,141																					19%
Liabilities and equity																					$98,077																					$107,669																					$9,592																					10%

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 December 31, 2017 grew 12% to Ps.93,652 million, from Ps.83,477 million for the previous year. Consolidated delinquency rate was 4.7% at the end of the period, compared to 3.4% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 13% to Ps.76,740 million, from Ps.67,743 million a year ago.

The delinquency rate for the bank at the end of the quarter was 4.2%, from 2.6% for the previous year. Past-due loan portfolio is reserved 2.2 times, which reflects a past-due portfolio of Ps.3,238 million, in comparison to allowance for credit risks of Ps.7,230 million in balance, as of December 31, 2017.

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 consolidated deposits were Ps.109,373 million, 4% higher than the Ps.105,124 million a year ago. Deposits of Banco Azteca Mexico were Ps.108,654 million, 7% higher than the Ps.101,718 million a year ago. 

As of December 31, 2017, the estimated capitalization index of Banco Azteca Mexico was 16.7%.

Infrastructure

Grupo Elektra currently has 7,139 points of contact, compared to 7,396 units a year ago. The reduction is a result of strategies to focus on maximizing profitability of such units.

These strategies involve replacing contact points with the most profitable formats. During the year, this resulted in 56 new Elektra stores at strategic points across Mexico, with greater exhibition area, which increase the offer of products and services, and thereby maximize customer shopping experiences.

The company has 4,440 points of contact in Mexico, 2,048 in the United States, and 651 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.

Twelve month results

Total consolidated revenue in 2017 grew 17% to Ps.94,979 million, from Ps.81,242 million for 2016, boosted by 18% and 15% growth in both financial and commercial businesses, respectively.

EBITDA was Ps.16,754 million, 20% higher than the Ps.13,988 million for the same period a year ago; the EBITDA margin for 2017 was 18%, one percentage point above the prior year. Operating profit grew 26% to Ps.14,437 million during the period.

The company reported net income of Ps.15,228 million, compared to Ps.5,334 million a year ago, mainly due an appreciation 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.

	2016		2017		Change
					Ps.		%
Consolidated revenue	$81,242		$94,979		$13,738		17%
EBITDA	$13,988		$16,754		$2,766		20%
Operating profit	$11,422		$14,437		$3,015		26%
Net result	$5,334		$15,398		$10,064		----
Net result per share	$22.86		$66.57		$43.71		----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of December 31, 2016, Elektra* outstanding shares were 233.3 million and as of December 31, 2017, were 231.3 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 shareholder value, contributing to build the middle class of the countries in which they operate and improving society through excellence. 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. The companies include TV Azteca (www.tvazteca.com; www.irtvazteca.com), Grupo Elektra (www.elektra.com.mx: 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), Totalplay (www.totalplay.com.mx) and Totalplay Empresarial (totalplayempresarial.com.mx). Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. However, the member companies share 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
			4Q16					4Q17					Change
		Financial income	13,706		58	%		15,968		59	%		2,262		17	%
		Commercial income	9,801		42	%		11,119		41	%		1,318		13	%
		Income	23,508		100	%		27,087		100	%		3,580		15	%
		Financial cost	2,754		12	%		4,293		16	%		1,539		56	%
		Commercial cost	6,566		28	%		7,671		28	%		1,105		17	%
		Costs	9,320		40	%		11,965		44	%		2,644		28	%
		Gross income	14,187		60	%		15,123		56	%		936		7	%
		Sales, administration and promotion expenses	10,300		44	%		10,838		40	%		538		5	%
		EBITDA	3,887		17	%		4,284		16	%		397		10	%
		Depreciation and amortization	742		3	%		626		2	%		(117	)	-16	%
		Other income, net	(62	)	0	%		(19	)	0	%		43		70	%
		Operating income	3,207		14	%		3,677		14	%		471		15	%
		Comprehensive financial result:
		Interest income	181		1	%		300		1	%		119		66	%
		Interest expense	(520	)	-2	%		(352	)	-1	%		168		32	%
		Foreign exchange gain, net	469		2	%		896		3	%		427		91	%
		Other financial results, net	297		1	%		(2,555	)	-9	%		(2,852	)	----
			428		2	%		(1,710	)	-6	%		(2,137	)	----
		Participation  in  the  net  income of
		CASA and other associated companies	(21	)	0	%		(506	)	-2	%		(485	)	----
		Income before income tax	3,614		15	%		1,462		5	%		(2,152	)	-60	%
		Income tax	(1,282	)	-5	%		(209	)	-1	%		1,073		84	%
		Income before discontinued operations	2,332		10	%		1,253		5	%		(1,079	)	-46	%
		Result from discontinued operations	(60	)	0	%		(108	)	0	%		(48	)	-81	%
		Impairment of intangible assets	652		3	%		(243	)	-1	%		(896	)	----
		Consolidated net income	2,924		12	%		902		3	%		(2,022	)	-69	%

 

	GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
	CONSOLIDATED INCOME STATEMENTS
	MILLIONS OF MEXICAN PESOS
			12M16					12M17					Change
		Financial income	50,207		62	%		59,366		63	%		9,159		18	%
		Commercial income	31,035		38	%		35,614		37	%		4,579		15	%
		Income	81,242		100	%		94,979		100	%		13,738		17	%
		Financial cost	10,318		13	%		13,254		14	%		2,936		28	%
		Commercial cost	20,354		25	%		23,989		25	%		3,635		18	%
		Costs	30,671		38	%		37,243		39	%		6,571		21	%
		Gross income	50,570		62	%		57,737		61	%		7,166		14	%
		Sales, administration and promotion expenses	36,582		45	%		40,982		43	%		4,400		12	%
		EBITDA	13,988		17	%		16,754		18	%		2,766		20	%
		Depreciation and amortization	2,617		3	%		2,270		2	%		(347	)	-13	%
		Other (income) expense, net	(51	)	0	%		47		0	%		98		----
		Operating Income	11,422		14	%		14,437		15	%		3,015		26	%
		Comprehensive financial result:
		Interest income	835		1	%		731		1	%		(104	)	-12	%
		Interest expense	(1,527	)	-2	%		(1,493	)	-2	%		33		2	%
		Foreign exchange gain (loss), net	796		1	%		(317	)	0	%		(1,114	)	----
		Other financial results, net	(3,677	)	-5	%		9,297		10	%		12,974		----
			(3,572	)	-4	%		8,217		9	%		11,790		----
		Participation  in  the  net  income of
		CASA and other associated companies	(638	)	-1	%		(526	)	-1	%		112		18	%
		Income before income tax	7,211		9	%		22,128		23	%		14,917		207	%
		Income tax	(2,401	)	-3	%		(6,167	)	-6	%		(3,766	)	-157	%
		Income before discontinued operations	4,810		6	%		15,961		17	%		11,151		232	%
		Result from discontinued operations	(128	)	0	%		(311	)	0	%		(184	)	-144	%
		Impairment of intangible assets	652		1	%		(251	)	0	%		(904	)	----
		Consolidated net income	5,334		7	%		15,398		16	%		10,064		189	%

		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 December 30, 2016				At December 30, 2017
	Cash and cash equivalents	2,586	21,526	24,112		4,174	21,433	25,607		1,495		6	%
	Marketable financial instruments	14,628	41,770	56,398		11,400	44,282	55,682		(716	)	-1	%
	Performing loan portfolio	-	55,129	55,129		-	61,727	61,727		6,598		12	%
	Total past-due loans	-	2,704	2,704		-	4,133	4,133		1,429		53	%
	Gross loan portfolio	-	57,833	57,833		-	65,860	65,860		8,027		14	%
	Allowance for credit risks	-	6,847	6,847		-	8,243	8,243		1,396		20	%
	Loan portfolio, net	-	50,986	50,986		-	57,617	57,617		6,630		13	%
	Inventories	7,208	-	7,208		9,257	-	9,257		2,049		28	%
	Other current assets	7,355	9,692	17,048		7,654	9,638	17,292		244		1	%
	Total current assets	31,776	123,975	155,751		32,485	132,970	165,454		9,703		6	%
	Financial instruments	18,437	337	18,775		17,819	324	18,144		(631	)	-3	%
	Performing loan portfolio	-	25,530	25,530		-	27,513	27,513		1,983		8	%
	Total past-due loans	-	114	114		-	279	279		165		144	%
	Gross loan portfolio	-	25,644	25,644		-	27,792	27,792		2,148		8	%
	Allowance for credit risks	-	-	-		-	734	734		734		n.a.
	Loan portfolio	-	25,644	25,644		-	27,058	27,058		1,414		6	%
	Other non-current assets	-	672	672		5,099	672	5,771		5,099		----
	Investment in shares	2,727	-	2,727		2,125	-	2,125		(602	)	-22	%
	Property, furniture, equipment and
	investment in stores, net	3,717	2,888	6,605		5,189	3,165	8,354		1,750		26	%
	Intangible assets	664	6,934	7,598		661	6,700	7,361		(236	)	-3	%
	Other assets	1,109	348	1,457		813	270	1,083		(374	)	-26	%
	TOTAL ASSETS	58,431	160,799	219,229		64,191	171,159	235,351		16,121		7	%
	Demand and term deposits	-	105,124	105,124		-	109,373	109,373		4,249		4	%
	Creditors from repurchase agreements	-	4,200	4,200		-	7,122	7,122		2,922		70	%
	Short-term debt	2,876	411	3,287		3,217	615	3,832		545		----
	Short-term liabilities with cost	2,876	109,735	112,611		3,217	117,110	120,326		7,716		7	%
	Suppliers and other short-term liabilities	12,353	8,321	20,675		15,334	9,699	25,033		4,358		21	%
	Short-term liabilities without cost	12,353	8,321	20,675		15,334	9,699	25,033		4,358		21	%
	Total short-term liabilities	15,229	118,056	133,285		18,550	126,809	145,359		12,074		9	%
	Long-term debt	12,903	2,089	14,992		9,659	1,025	10,684		(4,308	)	-29	%
	Long-term liabilities with cost	12,903	2,089	14,992		9,659	1,025	10,684		(4,308	)	-29	%
	Long-term liabilities without cost	7,093	4,783	11,877		5,833	3,257	9,090		(2,786	)	-23	%
	Total long-term liabilities	19,997	6,872	26,869		15,493	4,282	19,775		(7,094	)	-26	%
	TOTAL LIABILITIES	35,226	124,927	160,154		34,043	131,091	165,134		4,980		3	%
	TOTAL STOCKHOLDERS' EQUITY	23,205	35,871	59,076		30,149	40,068	70,217		11,141		19	%
	LIABILITIES + EQUITY	58,431	160,799	219,229		64,191	171,159	235,351		16,121		7	%

		INFRASTRUCTURE
		4Q16				4Q17				Change
	Points of sale in Mexico
	Elektra	995	13	%		1,051	15	%		56		6	%
	Salinas y Rocha	50	1	%		47	1	%		(3	)	-6	%
	Banco Azteca	1,244	17	%		1,282	18	%		38		3	%
	Freestanding branches	2,313	31	%		2,060	29	%		(253	)	-11	%
	Total	4,602	62	%		4,440	62	%		(162	)	-4	%
	Points of sale in Central and South America
	Elektra	167	2	%		165	2	%		(2	)	-1	%
	Banco Azteca	167	2	%		165	2	%		(2	)	-1	%
	Freestanding branches	355	5	%		321	4	%		(34	)	-10	%
	Total	689	9	%		651	9	%		(38	)	-6	%
	Points of sale in North America
	Advance America	2,105	28	%		2,048	29	%		(57	)	-3	%
	Total	2,105	28	%		2,048	29	%		(57	)	-3	%
	TOTAL	7,396	100	%		7,139	100	%		(257	)	-3	%
	Floor space (m²)	1,500	100	%		1,592	100	%		92		6	%
	Employees
	Mexico	50,152	77	%		57,445	80	%		7,293		15	%
	Central and South America	8,838	14	%		8,928	12	%		90		1	%
	North America	5,947	9	%		5,714	8	%		(233	)	-4	%
	Total employees	64,937	100	%		72,087	100	%		7,150		11	%