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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 -- 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$3,58015%
      
EBITDA  $3,887$4,284$39710%
     
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, 201631, 2017Ps.%
     
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 2017Change
   Ps.%
     
Consolidated revenue$81,242$94,979$13,73817%
      
EBITDA  $13,988$16,754$2,766 20%
     
Operating profit$11,422$14,437$3,01526%
     
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
[email protected] 
 Rolando Villarreal
Grupo Elektra, S.A.B. de C.V.
Tel. +52 (55) 1720-9167
[email protected]

Press Relations

Luciano Pascoe
Grupo Salinas
Tel. +52 (55) 1720-1313 ext. 36553
[email protected]
 Daniel McCosh
Grupo Salinas
Tel. +52 (55) 1720-0059
[email protected]


            
 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   99513%   1,05115%   56 6% 
 Salinas y Rocha   501%   471%   (3)-6% 
 Banco Azteca  1,24417%   1,28218%   38 3% 
 Freestanding branches  2,31331%   2,06029%   (253)-11% 
 Total  4,602 62%   4,440 62%   (162)-4% 
           
 Points of sale in Central and South America         
 Elektra   1672%   1652%   (2)-1% 
 Banco Azteca  1672%   1652%   (2)-1% 
 Freestanding branches  3555%   3214%   (34)-10% 
 Total  689 9%   651 9%   (38)-6% 
           
 Points of sale in North America         
 Advance America  2,10528%   2,04829%   (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  50,15277%   57,44580%   7,293 15% 
 Central and South America  8,83814%   8,92812%   90 1% 
 North America  5,9479%   5,7148%   (233)-4% 
 Total employees  64,937 100%   72,087 100%   7,150 11% 
           

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