—Operating profit increases 45% to Ps.1,056 million—
— Net sales grew 4% to Ps.4,328 million—
—The reinvention of TV Azteca, with bold, agile and optimal quality formats,
consolidates the company at the forefront of Mexican broadcast television—
MEXICO CITY, Feb. 21, 2017 (GLOBE NEWSWIRE) -- TV Azteca, S.A.B. de C.V. (BMV:AZTECA) (Latibex:XTZA), one of the two largest producers of Spanish-language television programming in the world, announced today financial results for the fourth quarter and full year 2016.
Fourth quarter results
"Our agile and bold entertainment proposals and the informative formats with the highest quality satisfy increasingly demanding audiences and consolidate TV Azteca at the forefront of broadcast television in Mexico," said Benjamín Salinas, CEO of TV Azteca. "World-class content represented an unparalleled platform to reach the audiences our advertisers are looking for, driving sales for the quarter. Higher revenues, combined with solid production efficiency, resulted in strong EBITDA expansion."
“The positive results will allow strengthening the capital structure of the company,” said Esteban Galíndez, CFO of TV Azteca. “We are currently implementing a strategy to partly amortize the US$300 million notes due 2018, and substitute the remainder for peso denominated liabilities, with the firm intention to reduce the total debt balance, and simultaneously reduce the impact of exchange rate volatility.”
Net sales for the quarter increased 4% to Ps.4,328 million, compared to Ps.4,148 million for the same quarter of last year. Total costs and expenses were down 3% to Ps.2,852 million, from Ps.2,926 million for the same period last year.
As a result, TV Azteca reported a 21% increase in EBITDA to Ps.1,477 million, compared to Ps.1,222 million for last year; EBITDA margin for the quarter was 34%, five percentage points above the prior year. Operating profit increased 45% to Ps.1,056 million.
The company registered a net loss of Ps.181 million, compared to a net loss of Ps.511 million for the same quarter of 2015.
| 4Q 2015 | 4Q 2016 | Change | ||||||||
| Ps. | % | |||||||||
| Net sales | $4,148 | $4,328 | $181 | 4% | ||||||
| EBITDA | $1,222 | $1,477 | $255 | 21% | ||||||
| Operating profit | $727 | $1,056 | $330 | 45% | ||||||
| Net result | $(511) | $(181) | $330 | 65% | ||||||
| Net result per CPO | $(0.17) | $(0.06) | $0.11 | 65% | ||||||
| Figures in millions of pesos. | ||||||||||
| EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. | ||||||||||
| The number of CPOs outstanding as of December 31, 2015 was 2,989 million and as of December 31, 2016 was 2,987 million. | ||||||||||
Net sales
Domestic advertising sales grew 4% to Ps.3,419 million, from Ps.3,291 million a year ago, due to the generation of formats that reached millions of people, who constitute primary market segments for numerous advertisers in Mexico.
In addition, the company registered sales from Azteca America ̶ the company’s wholly-owned broadcast television network focused on the U.S. Hispanic market ̶ of Ps.407 million this quarter, a 40% increase from the Ps.290 million a year ago, in the framework of increasingly successful programming.
Content sales to other countries were Ps.36 million in the period, from Ps.46 million in the previous year; revenue for the quarter resulted from the commercialization of the shows La Otra Cara del Alma and La Mujer de Judas in Africa, and Lo Que Callamos las Mujeres in South America, as well as the sale of TV Azteca content to pay TV channels in the rest of the world.
Revenue from TV Azteca Guatemala and TV Azteca Honduras was Ps.16 million, in contrast to Ps.37 million the previous year.
Sales from Azteca Comunicaciones Colombia ̶ derived from telecommunications services through the fiber-optic network that the company operates in that country ̶ were Ps.258 million, compared to Ps.294 million for the previous year.
Azteca Comunicaciones Peru had revenue of Ps.192 million, from Ps.190 million a year ago. The revenue comes from reimbursements from the Peruvian government for payments made by the company for the construction and maintenance of the Red Dorsal Nacional de Fibra Óptica fiber optic network in that country.
Costs and expenses
Costs and expenses during the quarter decreased 3% as a result of a 5% reduction in production, programming, transmission and telecommunication service costs ̶ to Ps.2,379 million, from Ps.2,510 million in the same period a year ago ̶ together with a 14% increase in selling and administrative expenses to Ps.473 million, compared to Ps.416 million for the previous year.
The reduction in production costs reflects strict budgetary controls, improved production efficiency and flexible alternative content generation, in which co-productions stand out, which allows sharing costs with other producers.
Azteca Comunicaciones Colombia reported costs of Ps.306 million in the quarter, compared to Ps.338 million for the previous year. Costs during the period include rent paid for transmission towers and space to operate telecommunications nodes, as well as the maintenance and operation of the network.
Costs related to Azteca Comunicaciones Peru were Ps.227 million in the quarter, in comparison to Ps.58 million a year ago. The increase reflects, to a large extent, the cost of maintaining the network, which was not present the previous year when the network was under construction.
The increase in selling and administrative expenses reflects higher personnel and advisory fee expenses this quarter.
EBITDA and net results
EBITDA of the company was Ps.1,477 million, 21% higher than the Ps.1,222 million for the same period of the prior year. Operating profit increased 45% to Ps.1,056 million, from Ps.727 million a year ago.
The most significant variations below EBITDA were the following:
Growth of Ps.55 million in interest paid due to the exchange rate depreciation effect over the equivalent in pesos of the company’s debt, denominated is US dollars.
A decrease of Ps.72 million in other financial expenses due to lower payments of guarantees. The Peruvian government solicited security deposits from the company a year ago, while the fiber optic network was built in that country.
An increase of Ps.579 million in exchange loss as a result of higher depreciation of the peso against the US dollar in the quarter, in comparison to the same period of previous year.
A reduction of Ps.532 million in the line of impairment of assets that reflect the recognition of lesser value from transmission assets a year ago.
TV Azteca registered a net loss of Ps.181 million for the quarter, compared to a net loss of Ps.511 million for the same period a year ago.
Debt
As of December 31, 2016, TV Azteca’s outstanding debt ̶ excluding Ps.1,892 million debt due in 2069 ̶ was Ps.16,369 million.
The cash and cash equivalents balance at the end of the quarter totaled Ps.4,497 million, 53% higher than the Ps.2,938 million a year ago. As a result, net debt of the company as of December 31, 2016, excluding debt due in 2069, was Ps.11,872 million at the end of the quarter.
Agreement to invest by shareholders in Azteca Comunicaciones Colombia
On December 26, 2016, TV Azteca´s shareholders, directly or indirectly, agreed to provide US$60 million to be invested in Azteca Comunicaciones Colombia ̶ the TV Azteca telecommunications business in that country.
As previously announced, the Board of Directors of TV Azteca asked the CEO to update the valuation and prospects of telecommunications investments in South America in order to clarify the long-term strategic focus of the company.
The conclusion was that Azteca Comunicaciones Colombia required a US$100 million short-term investment to develop last-mile infrastructure and reach a breakeven point, which could result in positive EBITDA going forward. TV Azteca has recently invested US$40 million in the business, thus, the additional capitalization required is US$60 million.
The company indicated it has alternative uses of cash in order to focus on its broadcast television business in Mexico, as well as in meeting future financial obligations.
Derived from this process, during the shareholders meeting of November 16 it was approved that all of the shareholders of TV Azteca who chose, could participate in the capitalization of Azteca Comunicaciones Colombia privately, and through the mechanism that TV Azteca determined for that purpose. Such participation in the investment could be up to 60% of the telecommunications company, and each shareholder could participate in the investment in proportion to their share in the capital of TV Azteca.
The other shareholders agreed to provide US$60 million for such investment, and TV Azteca, which has recently invested US$40 million, will remain with a 40% equity stake of Azteca Comunicaciones Colombia.
As a result, the company will be able to further strengthen its efforts in the broadcast television business, which has encouraging perspectives, and improve its positioning in the Mexican media market.
Fiber-optic network in Peru
As previously announced, Azteca Comunicaciones Perú ̶ a subsidiary of TV Azteca ̶ completed the deployment of the 13,500 kilometers of the Red Dorsal Nacional de Fibra Óptica of the country, which will offer telecommunications services in approximately 80% of Peruvian territory. The government provided the funds for the construction and provides resources for the operation through a 20 year concession, and Azteca will commercialize the telecommunications services in 339 population centers.
TV Azteca’s administration is in the process of updating the valuation and perspectives of its investments in telecommunications in Peru, as previously requested by the Board, in order to determine its consistency with the strategic definition of the company. Based on this analysis TV Azteca will formulate a plan of action regarding these investments.
Twelve month results
Net sales in 2016 were Ps.14,197 million, 10% higher than the Ps.12,859 million in 2015. Total costs and expenses were Ps.10,508 million, 2% higher than the Ps.10,325 million for the previous year.
As a result, TV Azteca reported EBITDA of Ps.3,688 million, 46% higher than the Ps.2,534 million a year ago. EBITDA margin for the year was 26%, six percentage points above the previous year. Operating profit grew 103% to Ps.2,290 million.
The most significant variation below EBITDA was an increase of Ps.845 million in the impairment of assets line, as a result of the valuation exercise of Azteca Comunicaciones Colombia by an independent expert, which yielded a recovery value less than the accounting value of the telecommunications assets of TV Azteca in Colombia.
The company recorded a net loss of Ps.3,157 million, compared to net loss of Ps.2,634 million in 2015.
| 2015 | 2016 | Change | |||||||||
| Ps. | % | ||||||||||
| Net sales | $12,859 | $14,197 | $1,337 | 10% | |||||||
| EBITDA | $2,534 | $3,688 | $1,154 | 46% | |||||||
| Operating profit | $1,128 | $2,290 | $1,162 | 103% | |||||||
| Net result | $(2,634) | $(3,157) | $(523) | -20% | |||||||
| Net result per CPO | $(0.88) | $(1.06) | $(0.18) | -20% | |||||||
| Figures in millions of pesos. | |||||||||||
| EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. | |||||||||||
| The number of CPOs outstanding as of December 31, 2015 was 2,989 million and as of December 31, 2016 was 2,987 million. | |||||||||||
Company Profile
TV Azteca is one of the two largest producers of Spanish-language television programming in the world, operating three national television networks in Mexico, Azteca Trece, Azteca 7 and Proyecto 40, through more than 300 owned and operated stations across the country. TV Azteca affiliates include Azteca America, a broadcast television network focused on the rapidly growing U.S. Hispanic market, and Azteca Web, an Internet company for North American Spanish speakers.
TV Azteca 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), Azteca America (us.azteca.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 Enlace TP (enlacetp.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.
Except for historical information, the matters discussed in this press release are forward-looking statements and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Other risks that may affect TV Azteca and its subsidiaries are identified in documents sent to securities authorities.
| TV AZTECA, S.A.B. DE C.V. AND SUBSIDIARIES | |||||||||||||||
| CONSOLIDATED RESULTS OF OPERATIONS | |||||||||||||||
| (Millions of Mexican pesos of December 31 of 2015 and 2016 ) | |||||||||||||||
| Fourth Quarter of : | |||||||||||||||
| 2015 | 2016 | ||||||||||||||
| Change | |||||||||||||||
| Net revenue | Ps | 4,148 | 100 | % | Ps | 4,328 | 100 | % | Ps | 181 | 4 | % | |||
| Programming, production and transmission costs | 2,510 | 61 | % | 2,379 | 55 | % | (131 | ) | -5 | % | |||||
| Selling and administrative expenses | 416 | 10 | % | 473 | 11 | % | 57 | 14 | % | ||||||
| Total costs and expenses | 2,926 | 71 | % | 2,852 | 66 | % | (74 | ) | -3 | % | |||||
| EBITDA | 1,222 | 29 | % | 1,477 | 34 | % | 255 | 21 | % | ||||||
| Depreciation and amortization | 367 | 297 | (70 | ) | |||||||||||
| Other expense -Net | 128 | 123 | (5 | ) | |||||||||||
| Operating profit | 727 | 18 | % | 1,056 | 24 | % | 330 | 45 | % | ||||||
| Equity in income from affiliates | (4 | ) | 8 | 12 | |||||||||||
| Comprehensive financing result: | |||||||||||||||
| Interest expense | (329 | ) | (384 | ) | (55 | ) | |||||||||
| Other financing expense | (123 | ) | (51 | ) | 72 | ||||||||||
| Interest income | 20 | 23 | 2 | ||||||||||||
| Exchange loss -Net | (171 | ) | (751 | ) | (579 | ) | |||||||||
| (602 | ) | (1,162 | ) | (560 | ) | ||||||||||
| Income before the following provision | 120 | 3 | % | (98 | ) | -2 | % | (218 | ) | 182 | % | ||||
| Provision for income tax | (96 | ) | (80 | ) | 16 | ||||||||||
| Profit (Loss) from continuing operations | 24 | (178 | ) | (202 | ) | 848 | % | ||||||||
| Impairment of assets | (532 | ) | - | 532 | |||||||||||
| Net income | Ps | (508 | ) | Ps | (178 | ) | Ps | 330 | |||||||
| Non-controlling share in net profit | Ps | 3 | Ps | 3 | Ps | (0 | ) | ||||||||
| Controlling share in net profit | Ps | (511 | ) | -12 | % | Ps | (181 | ) | -4 | % | Ps | 330 | 65 | % | |
| CONSOLIDATED RESULTS OF OPERATIONS | |||||||||||||||
| (Millions of Mexican pesos of December 31 of 2015 and 2016) | |||||||||||||||
| Period ended December 31, | |||||||||||||||
| 2015 | 2016 | ||||||||||||||
| Change | |||||||||||||||
| Net revenue | Ps | 12,859 | 100 | % | Ps | 14,197 | 100 | % | Ps | 1,337 | 10 | % | |||
| Programming, production and transmission costs | 8,720 | 68 | % | 8,989 | 63 | % | 269 | 3 | % | ||||||
| Selling and administrative expenses | 1,605 | 12 | % | 1,520 | 11 | % | (86 | ) | -5 | % | |||||
| Total costs and expenses | 10,325 | 80 | % | 10,508 | 74 | % | 183 | 2 | % | ||||||
| EBITDA | 2,534 | 20 | % | 3,688 | 26 | % | 1,154 | 46 | % | ||||||
| Depreciation and amortization | 910 | 925 | 15 | ||||||||||||
| Other expense -Net | 496 | 474 | (23 | ) | |||||||||||
| Operating profit | 1,128 | 9 | % | 2,290 | 16 | % | 1,162 | 103 | % | ||||||
| Equity in income from affiliates | (13 | ) | 23 | 37 | |||||||||||
| Comprehensive financing result: | |||||||||||||||
| Interest expense | (1,256 | ) | (1,435 | ) | (179 | ) | |||||||||
| Other financing expense | (178 | ) | (170 | ) | 9 | ||||||||||
| Interest income | 107 | 91 | (16 | ) | |||||||||||
| Exchange Gain -Net | (1,187 | ) | (1,651 | ) | (464 | ) | |||||||||
| (2,514 | ) | (3,165 | ) | (650 | ) | ||||||||||
| Income before the following provision | (1,400 | ) | -11 | % | (852 | ) | -6 | % | 548 | 39 | % | ||||
| Provision for income tax | (716 | ) | (945 | ) | (229 | ) | |||||||||
| Profit (Loss) from continuing operations | (2,116 | ) | (1,796 | ) | 319 | 15 | % | ||||||||
| Impairment of assets | (532 | ) | (1,377 | ) | (845 | ) | |||||||||
| Net income | Ps | (2,648 | ) | Ps | (3,173 | ) | Ps | (525 | ) | ||||||
| Non-controlling share in net profit | Ps | (14 | ) | Ps | (16 | ) | Ps | (3 | ) | ||||||
| Controlling share in net profit | Ps | (2,634 | ) | -20 | % | Ps | (3,157 | ) | -22 | % | Ps | (523 | ) | -20 | % |
| TV AZTECA, S.A.B. DE C.V. AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (Millions of Mexican pesos of December 31 of 2015 and 2016) | |||||||||||
| At December 31 | |||||||||||
| 2015 | 2016 | ||||||||||
| Change | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | Ps | 2,938 | Ps | 4,497 | Ps | 1,559 | |||||
| Accounts receivable | 7,076 | 7,683 | 607 | ||||||||
| Other current assets | 4,313 | 4,593 | 280 | ||||||||
| Total current assets | 14,327 | 16,773 | 2,446 | 17 | % | ||||||
| Accounts receivable | 165 | - | (165 | ) | |||||||
| Exhibition rights | 2,382 | 3,230 | 848 | ||||||||
| Property, plant and equipment-Net | 4,192 | 4,111 | (81 | ) | |||||||
| Television concessions-Net | 9,934 | 10,785 | 851 | ||||||||
| Other assets | 3,155 | 1,782 | (1,373 | ) | |||||||
| Deferred income tax asset | 2,524 | 2,250 | (274 | ) | |||||||
| Total long term assets | 22,352 | 22,158 | (194 | ) | -1 | % | |||||
| Total assets | Ps | 36,679 | Ps | 38,931 | Ps | 2,252 | 6 | % | |||
| Current liabilities: | |||||||||||
| Other current liabilities | Ps | 5,052 | Ps | 6,131 | Ps | 1,079 | |||||
| Total current liabilities | 5,052 | 6,131 | 1,079 | 21 | % | ||||||
| Long-term debt: | |||||||||||
| Long-term debt | 13,630 | 16,369 | 2,739 | ||||||||
| Total long-term debt | 13,630 | 16,369 | 2,739 | 20 | % | ||||||
| Other long term liabilities: | |||||||||||
| Advertising advances | 6,858 | 7,745 | 887 | ||||||||
| American Tower Corporation (due 2069) | 1,583 | 1,892 | 309 | ||||||||
| Deferred income tax | 1,041 | 547 | (494 | ) | |||||||
| Total other long-term liabilities | 9,482 | 10,184 | 702 | 7 | % | ||||||
| Total liabilities | 28,164 | 32,684 | 4,520 | 16 | % | ||||||
| Total stockholders' equity | 8,515 | 6,247 | (2,268 | ) | -27 | % | |||||
| Total liabilities and equity | Ps | 36,679 | Ps | 38,931 | Ps | 2,252 | 6 | % | |||