—The company reports EBITDA of Ps.742 million in the period—
— 21% growth in consolidated deposits, to Ps.160,959 million, generates solid perspectives for the financial business—
—The consolidated gross portfolio increased 13%, to Ps.116,381 million—
MEXICO CITY, May 26, 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 first quarter 2020 financial results.
First Quarter Results
Consolidated revenue was Ps.31,164 million in the period, 15% above the Ps.27,038 million for the same quarter of the previous year. Costs and operating expenses were Ps.30,423 million, from Ps.21,480 million for the same period of 2019.
As a result, Grupo Elektra reported EBITDA of Ps.742 million, in comparison with Ps.5,557 million of the previous year’s quarter. The company registered an operating loss of Ps.1,266 million this quarter, from operating profit of Ps.3,908 million in the same period of 2019.
Net income was Ps.142 million, compared to a net income of Ps.4,663 million a year ago.
| 1Q 2019 | 1Q 2020 | Change | |||||
| Ps. | % | ||||||
| Consolidated revenue | $27,038 | $31,164 | $4,126 | 15% | |||
| EBITDA | $5,557 | $742 | $(4,816) | -87% | |||
| Operating profit | $3,908 | $(1,266) | $(5,174) | ---- | |||
| Net result | $4,663 | $142 | $(4,521) | -97% | |||
| Net result per share | $20.40 | $0.62 | $(19.78) | -97% | |||
Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
As of March 31, 2019, Elektra* outstanding shares were 228.6 million and as of March 31, 2020, were 228.7 million.
Revenue
Consolidated revenue increased 15%, as a result of an 16% growth in financial revenues and a 14% increase in commercial sales.
The increase in financial revenue — to Ps.20,396 million, from Ps.17,572 million the previous year — mainly reflects revenue growth of 19% at Banco Azteca Mexico, in the context of a strong rise in the gross portfolio and a notable dynamism in deposits.
The increase in commercial division sales — to Ps.10,768 million, up from Ps.9,466 million last year — largely results from a solid increase in sales of Italika motorcycles — thanks to its innovative, safe models, which provide efficient transportation solutions to a growing number of businesses and families — 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 stores 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.
Costs and expenses
Consolidated costs for the quarter were Ps.17,814 million, from Ps.10,071 million in the previous year. The growth in costs is mainly explained by an increase of Ps.6,651 million in financial cost, to Ps.10,645 million this period compared to Ps.3,994 million a year ago, which largely reflects the creation of loan loss reserves.
As previously announced, in March an important creditor of Banco Azteca began a bankruptcy process (Chapter 11) in the United States, for which the institution prudently decided to reserve 100% of the amount of the credit, equivalent to Ps.7,243 million. The company will have no future charges derived from this operation.
Commercial business costs grew 18%, to Ps.7,169 million, from Ps.6,077 million, consistent with the increase in commercial revenues.
Sales, administration, and marketing expenses grew 11% to Ps.12,609 million as a result of increases in both personnel and operating expenses. The growth is related to the technology developments to further strengthen the high efficiency standards of digital banking — which currently has more than 8 million users who made more than 264 million transactions in the period from the digital application, with superior levels of comfort, security and time savings — as well as personnel and maintenance expenses related to the company's growing distribution infrastructure, which includes the new Elektra stores, and its Omnichannel sales efforts.
Likewise, an increasingly competitive structure in Afore Azteca had an effect in expenses, which allowed for a 37% increase in assets under management in the period, to Ps.115,177 million pesos as of March 31, 2020, and a 42% increase in customer base to 4.9 million, from 3.5 million a year ago.
Despite the firm development of the abovementioned initiatives, expenses grew to a lesser extent than consolidated revenues, reflecting solid strategies that enhance operational efficiency of Grupo Elektra.
EBITDA and net result
EBITDA was Ps.742 million, from Ps.5,557 million the previous year. The company reported an operating loss of Ps.1,266 million, from operating profit of Ps.3,908 million in the same quarter of 2019.
The most significant changes below EBITDA were the following:
A foreign exchange gain of Ps.2,529 million this quarter compared to an exchange loss of Ps.108 million a year ago, as a result of the company's net asset monetary position in dollars, together with exchange rate depreciation this quarter, compared with an appreciation a year ago.
A negative variation of Ps.2,602 million in the other financial results line — which reflects a gain of 1% 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 10% gain a year ago.
Congruent with the operating results for the quarter, there was a reduction of Ps.1,397 million in the tax provision in the period.
Grupo Elektra reported net income of Ps.142 million, compared to a net income of Ps.4,663 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 make 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.22,632 million as of March 31, 2020, compared to Ps.22,290 million in the previous year.
The balance of cash and cash equivalents was Ps.4,789 million, from Ps.5,497 million from the previous year.
The company's equity increased 17% to Ps.104,006 million, while the ratio of stockholders' equity to total liabilities was 1.5 times at the close of the quarter.
| As of March 31, 2019 | As of March 31, 2020 | Change | ||
| Ps. | % | |||
| Cash and cash equivalents | $ 5,497 | $ 4,789 | (708) | (13%) |
| Marketable financial instruments | 39,968 | 38,697 | (1,271) | (3%) |
| Inventories | 9,731 | 13,980 | 4,249 | 44% |
| Accounts receivables | 36,558 | 51,969 | 15,412 | 42% |
| Other current assets | 4,118 | 3,843 | (275) | (7%) |
| Investments in shares | 34,497 | 40,010 | 5,513 | 16% |
| Fixed assets | 7,065 | 8,133 | 1,068 | 15% |
| Right of use assets | 8,352 | 8,807 | 455 | 5% |
| Other assets | 2,003 | 1,377 | (626) | (31%) |
| Total assets | $ 147,789 | $ 171,606 | $ 23,817 | 16% |
| Short-term debt | $ 3,922 | $ 11,516 | $ 7,594 | 194% |
| Suppliers | 5,706 | 8,565 | 2,859 | 50% |
| Other short-term liabilities | 13,800 | 14,964 | 1,164 | 8% |
| Long-term debt | 18,368 | 11,116 | (7,252) | (39%) |
| Differed taxes | 8,527 | 11,658 | 3,131 | 37% |
| Other long-term debt | 8,912 | 9,781 | 869 | 10% |
| Total liabilities | $ 59,234 | $ 67,600 | $ 8,366 | 14% |
| Stakeholder´s equity | $ 88,555 | $ 104,006 | $ 15,451 | 17% |
| Liabilities and equity | $ 147,789 | $ 171,606 | $ 23,817 | 16% |
| Figures in millions of pesos. | ||||
Consolidated Balance Sheet
Loan Portfolio and Deposits
Banco Azteca Mexico, Purpose Financial and Banco Azteca Latin America’s consolidated gross portfolio as of March 31, 2020 grew 13% to Ps.116,381 million, from Ps.103,236 million for the previous year. The consolidated delinquency rate was 10.9% at the end of the period, compared to 3.4% in the previous year.
The gross portfolio of Banco Azteca Mexico grew 8% to Ps.95,361 million, from Ps.88,063 million a year ago.
The default rate for the bank at the end of the quarter was 11.9%, in comparison with 2.9% for the previous year. The increase is mainly derived from the loan for Ps.7,243 million that became past-due in the period, and which was fully reserved.
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 first quarter.
Grupo Elektra’s consolidated deposits were Ps.160,959 million, 21% higher than the Ps.133,500 million a year ago. Deposits of Banco Azteca Mexico were Ps.155,443 million, 18% higher than the Ps.131,410 million a year ago.
As of March 31, 2020, the capitalization index of Banco Azteca Mexico was 18.27%. During the period, Grupo Elektra capitalized Banco Azteca for Ps.7,277 million, in line with the extraordinary amount reserved by the bank this quarter.
Infrastructure
Grupo Elektra currently has 7,238 storefronts, compared to 7,250 units a year ago.
During the last twelve months, 57 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 4,761 storefronts in Mexico at the end of the quarter, 1,781 in the United States, and 696 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.
Acquisition of currency hedging
In subsequent events, in the context of the recent volatility of the exchange rate of the peso to the US dollar, as of May 26, the company has acquired options which give it the right, but not the obligation, to purchase dollars at an exchange rate in pesos for up to US$330 million, which allow it to cover, with a predetermined exchange rate, purchases of merchandise abroad, as well as other liabilities denominated in foreign currency. Depending on the exchange rate volatility and with a prudential approach, the company could increase its exchange rate hedging operations.
The currency hedging gives Grupo Elektra certainty about the amount in pesos of such operations, and allows the adequate supply of merchandise that effectively meets customers needs, in the best conditions.
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), Purpose Financial (havepurpose.com), 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 Grupo Elektra 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 | |||||||||||
| 1Q19 | 1Q20 | Change | |||||||||
| Financial income | 17,572 | 65% | 20,396 | 65% | 2,825 | 16% | |||||
| Commercial income | 9,466 | 35% | 10,768 | 35% | 1,301 | 14% | |||||
| Income | 27,038 | 100% | 31,164 | 100% | 4,126 | 15% | |||||
| Financial cost | 3,994 | 15% | 10,645 | 34% | 6,651 | 100% | |||||
| Commercial cost | 6,077 | 22% | 7,169 | 23% | 1,092 | 18% | |||||
| Costs | 10,071 | 37% | 17,814 | 57% | 7,743 | 77% | |||||
| Gross income | 16,967 | 63% | 13,350 | 43% | (3,617) | -21% | |||||
| Sales, administration and promotion expenses | 11,409 | 42% | 12,609 | 40% | 1,199 | 11% | |||||
| EBITDA | 5,557 | 21% | 742 | 2% | (4,816) | -87% | |||||
| Depreciation and amortization | 954 | 4% | 1,277 | 4% | 322 | 34% | |||||
| Depreciation right of use asset | 691 | 3% | 724 | 2% | 33 | 5% | |||||
| Other expense, net | 4 | 0% | 7 | 0% | 3 | 80% | |||||
| Operating income | 3,908 | 14% | (1,266) | -4% | (5,174) | ---- | |||||
| Comprehensive financial result: | |||||||||||
| Interest income | 308 | 1% | 251 | 1% | (56) | -18% | |||||
| Interest expense | (838) | -3% | (908) | -3% | (70) | -8% | |||||
| Foreign exchange gain (loss), net | (108) | 0% | 2,529 | 8% | 2,637 | ---- | |||||
| Other financial results, net | 2,990 | 11% | 388 | 1% | (2,602) | -87% | |||||
| 2,351 | 9% | 2,260 | 7% | (92) | -4% | ||||||
| Participation in the net income of | |||||||||||
| CASA and other associated companies | 26 | 0% | (621) | -2% | (647) | ---- | |||||
| Income before income tax | 6,285 | 23% | 373 | 1% | (5,912) | ---- | |||||
| Income tax | (1,623) | -6% | (226) | -1% | 1,397 | 86% | |||||
| Income before discontinued operations | 4,662 | 17% | 147 | 0% | (4,515) | -97% | |||||
| Result from discontinued operations | 1 | 0% | (5) | 0% | (6) | ---- | |||||
| Impairment of intangible assets | - | 0% | - | 0% | - | ---- | |||||
| Consolidated net income | 4,663 | 17% | 142 | 0% | (4,521) | -97% | |||||
| 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 March 31, 2019 | At March 31, 2020 | ||||||||||
| Cash and cash equivalents | 5,497 | 19,624 | 25,120 | 4,789 | 41,994 | 46,783 | 21,663 | 86% | |||
| Marketable financial instruments | 23,357 | 64,595 | 87,952 | 8,305 | 70,180 | 78,485 | (9,467) | -11% | |||
| Performing loan portfolio | - | 69,411 | 69,411 | - | 67,611 | 67,611 | (1,800) | -3% | |||
| Total past-due loans | - | 3,284 | 3,284 | - | 6,664 | 6,664 | 3,380 | 103% | |||
| Gross loan portfolio | - | 72,694 | 72,694 | - | 74,275 | 74,275 | 1,580 | 2% | |||
| Allowance for credit risks | - | 7,551 | 7,551 | - | 9,316 | 9,316 | 1,764 | 23% | |||
| Loan portfolio, net | - | 65,143 | 65,143 | - | 64,959 | 64,959 | (184) | 0% | |||
| Inventories | 9,731 | - | 9,731 | 13,980 | - | 13,980 | 4,249 | 44% | |||
| Other current assets | 24,354 | 9,086 | 33,439 | 15,619 | 28,053 | 43,672 | 10,232 | 31% | |||
| Total current assets | 62,938 | 158,447 | 221,385 | 42,692 | 205,186 | 247,878 | 26,493 | 12% | |||
| Financial instruments | 16,611 | 261 | 16,872 | 30,392 | 313 | 30,706 | 13,833 | 82% | |||
| Performing loan portfolio | - | 30,293 | 30,293 | - | 36,134 | 36,134 | 5,841 | 19% | |||
| Total past-due loans | - | 248 | 248 | - | 5,972 | 5,972 | 5,724 | n.m | |||
| Gross loan portfolio | - | 30,542 | 30,542 | - | 42,106 | 42,106 | 11,565 | 38% | |||
| Allowance for credit risks | - | 1,019 | 1,019 | - | 6,697 | 6,697 | 5,679 | 557% | |||
| Loan portfolio | - | 29,523 | 29,523 | - | 35,409 | 35,409 | 5,886 | 20% | |||
| Other non-current assets | 3,859 | 188 | 4,047 | 25,781 | 189 | 25,970 | 21,923 | 542% | |||
| Investment in shares | 2,076 | - | 2,076 | 1,429 | - | 1,429 | (648) | -31% | |||
| Property, furniture, equipment and | |||||||||||
| investment in stores, net | 7,065 | 5,040 | 12,105 | 8,133 | 7,817 | 15,951 | 3,846 | 32% | |||
| Intangible assets | 617 | 6,639 | 7,256 | 658 | 8,157 | 8,815 | 1,559 | 21% | |||
| Right of use asset | 8,352 | 2,245 | 10,597 | 8,807 | 2,262 | 11,069 | 472 | 4% | |||
| Other assets | 1,386 | 455 | 1,841 | 719 | 683 | 1,402 | (439) | -24% | |||
| TOTAL ASSETS | 102,905 | 202,799 | 305,704 | 118,611 | 260,017 | 378,628 | 72,924 | 24% | |||
| Demand and term deposits | - | 133,500 | 133,500 | - | 160,959 | 160,959 | 27,459 | 21% | |||
| Creditors from repurchase agreements | - | 10,410 | 10,410 | - | 16,002 | 16,002 | 5,592 | 54% | |||
| Short-term debt | 3,922 | 143 | 4,065 | 11,303 | 943 | 12,246 | 8,181 | 201% | |||
| Leasing | 1,238 | 751 | 1,989 | 1,727 | 1,099 | 2,826 | 836 | 42% | |||
| Short-term liabilities with cost | 5,160 | 144,803 | 149,964 | 13,030 | 179,002 | 192,032 | 42,068 | 28% | |||
| Suppliers and other short-term liabilities | 15,886 | 10,626 | 26,512 | 19,090 | 26,172 | 45,263 | 18,751 | 71% | |||
| Short-term liabilities without cost | 15,886 | 10,626 | 26,512 | 19,090 | 26,172 | 45,263 | 18,751 | 71% | |||
| Total short-term liabilities | 21,046 | 155,429 | 176,475 | 32,120 | 205,174 | 237,294 | 60,819 | 34% | |||
| Long-term debt | 16,229 | 2,504 | 18,733 | 11,062 | 1,951 | 13,013 | (5,720) | -31% | |||
| Leasing | 7,448 | 1,458 | 8,906 | 7,653 | 1,202 | 8,855 | (51) | -1% | |||
| Long-term liabilities with cost | 23,676 | 3,962 | 27,638 | 18,715 | 3,153 | 21,867 | (5,771) | -21% | |||
| Long-term liabilities without cost | 9,991 | 3,044 | 13,035 | 13,786 | 1,674 | 15,460 | 2,425 | 19% | |||
| Total long-term liabilities | 33,667 | 7,006 | 40,673 | 32,501 | 4,827 | 37,328 | (3,346) | -8% | |||
| TOTAL LIABILITIES | 54,714 | 162,435 | 217,149 | 64,621 | 210,001 | 274,622 | 57,473 | 26% | |||
| TOTAL STOCKHOLDERS' EQUITY | 48,191 | 40,364 | 88,555 | 53,991 | 50,015 | 104,006 | 15,451 | 17% | |||
| LIABILITIES + EQUITY | 102,905 | 202,799 | 305,704 | 118,611 | 260,017 | 378,628 | 72,924 | 24% | |||
| INFRASTRUCTURE | ||||||||
| 1Q19 | 1Q20 | Change | ||||||
| Points of sale in Mexico | ||||||||
| Elektra | 1,142 | 16% | 1,135 | 16% | (7) | -1% | ||
| Salinas y Rocha | 38 | 1% | 38 | 1% | - | 0% | ||
| Banco Azteca | 1,838 | 25% | 1,834 | 25% | (4) | 0% | ||
| Freestanding branches | 1,763 | 24% | 1,754 | 24% | (9) | -1% | ||
| Total | 4,781 | 66% | 4,761 | 66% | (20) | 0% | ||
| Points of sale in Central and South America | ||||||||
| Elektra | 172 | 2% | 198 | 3% | 26 | 15% | ||
| Banco Azteca | 378 | 5% | 402 | 6% | 24 | 6% | ||
| Freestanding branches | 93 | 1% | 96 | 1% | 3 | 3% | ||
| Total | 643 | 9% | 696 | 10% | 53 | 8% | ||
| Points of sale in North America | ||||||||
| Purpose Financial | 1,826 | 25% | 1,781 | 25% | (45) | -2% | ||
| Total | 1,826 | 25% | 1,781 | 25% | (45) | -2% | ||
| TOTAL | 7,250 | 100% | 7,238 | 100% | (12) | 0% | ||
| Floor space (m²) | 1,761 | 100% | 1,771 | 100% | 10 | 1% | ||
| Employees | ||||||||
| Mexico | 70,936 | 83% | 71,560 | 83% | 624 | 1% | ||
| Central and South America | 8,869 | 10% | 9,646 | 11% | 777 | 9% | ||
| North America | 5,583 | 7% | 4,812 | 6% | (771) | -14% | ||
| Total employees | 85,388 | 100% | 86,018 | 100% | 630 | 1% | ||