—Operating profit increases 131% to Ps.475 million—
—Net sales grew 8% to Ps.3,424 million in the period—
—The company reinvents itself with the most innovative content of broadcast television,
and strengthens its position in the media market in Mexico—
—Consistent with its strategic focus,
it plans to reduce its investment in telecommunications in Colombia—
MEXICO CITY, Oct. 27, 2016 (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 third quarter of 2016.
Third quarter results
"The process of reinventing TV Azteca with inspiring, agile, innovative formats, of great quality and close to the audience, resulted in strong demand for advertising on our networks and higher sales in the quarter," said Benjamin Salinas, CEO of TV Azteca. Meanwhile, company CFO Esteban Galindez commented: "Higher revenue, together with strict efficiency criteria for generating content and strong reduction strategies expenses resulted in a major expansion of EBITDA for the period."
“As part of this reinvention, different strategies have been implemented. A year ago we started a profound cultural change in the company, aimed to renew mindsets, increase productivity and put the organization in the best conditions to face the challenges of the future," said Mr. Salinas. "In addition, we have opened our doors to new forms of production, whether co-productions, strategic partnerships or any other format.”
"We aim to concentrate our efforts on the business of broadcast television in Mexico, which looks promising. Therefore, we developed a plan to reduce our investment in the telecommunications business in Colombia as it moves away from our strategic core," added Mr. Salinas.
Net sales for the quarter were Ps.3,424 million, 8% higher than the Ps.3,185 million for the same quarter of last year. Total costs and expenses were Ps.2,612 million, 2% less than the Ps.2,659 million for the same period last year.
As a result, TV Azteca reported EBITDA of Ps.812 million, 55% above the Ps.525 million from last year; EBITDA margin for the quarter was 24%, eight percentage points above previous year. Operating profit increased 131% to Ps.475 million.
The company registered a net loss of Ps.1,906 million, compared to a net loss of Ps.823 million for the same quarter of 2015.
| 3Q 2015 | 3Q 2016 | Change | ||||||||||||||||||
| Ps. | % | |||||||||||||||||||
| Net sales | $ | 3,185 | $ | 3,424 | $ | 239 | 8 | % | ||||||||||||
| EBITDA | $ | 525 | $ | 812 | $ | 287 | 55 | % | ||||||||||||
| Operating profit | $ | 206 | $ | 475 | $ | 269 | 131 | % | ||||||||||||
| Net result | $ | (823 | ) | $ | (1,906 | ) | $ | (1,083 | ) | -132 | % | |||||||||
| Net result per CPO | $ | (0.28 | ) | $ | (0.64 | ) | $ | (0.36 | ) | -132 | % | |||||||||
Figures in millions of pesos.
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
The number of CPOs outstanding as of September 30, 2015 was 2,983 million and as of September 30, 2016 was 2,992 million.
Net sales
Domestic advertising sales grew 3% to Ps.2,743 million, from Ps.2,672 million a year ago, as a result of 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.353 million this quarter, a 15% increase compared to Ps.308 million a year ago.
Content sales to other countries were Ps.33 million in the period, from Ps.47 million in the previous year; revenue for the quarter resulted from the commercialization of the shows Lo Que Callamos las Mujeres in South America, and La Academia Kids in Asia, 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.36 million, in contrast to Ps.15 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.176 million, compared to Ps.81 million for the previous year.
Azteca Comunicaciones Peru had revenue of Ps.83 million, from Ps.62 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 2% as a result of a 1% reduction in production, programming, transmission and telecommunication service costs — to Ps.2,237 million, from Ps.2,258 million in the same period a year ago — together with a 7% reduction in selling and administrative expenses — to Ps.375 million, compared to Ps.402 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.281 million in the quarter, compared to Ps.141 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.51 million in the quarter, in comparison to Ps.110 million a year ago. The costs are mainly related to the construction of the fiber-optic network in that country.
The reduction in selling and administrative expenses reflects lower operational, personnel and travel expenses this quarter.
EBITDA and net results
EBITDA was Ps.812 million, 55% higher than the Ps.525 million for the same period of the prior year.
Operating profit increased 131% to Ps.475 million, from Ps.206 million a year ago.
The most significant variations below EBITDA were the following:
A charge of Ps.1,377 million in the line of impairment of assets that reflect the valuation analysis result of Azteca Comunicaciones Colombia, reflecting the current financial situation of the company.
An increase in the provision for income tax of Ps.80 million, due to the recognition of deferred taxes this period.
Growth of Ps.38 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 reduction of Ps.139 million in the exchange result as a consequence of a lesser peso – US dollar depreciation this quarter, in comparison to the same period of previous year.
TV Azteca registered a net loss of Ps.1,906 million for the quarter, compared to a net loss of Ps.823 million for the same period a year ago.
Debt
As of September 30, 2016, TV Azteca’s outstanding debt — excluding Ps.1,778 million debt due in 2069 — was Ps.15,364 million.
The cash and cash equivalents balance at the end of the quarter totaled Ps.3,837 million, 6% higher from the Ps.3,625 million a year ago. As a result, net debt of the company as of September 30, 2016, excluding debt due in 2069, was Ps.11,527 million at the end of the quarter.
Investment reduction plan in the telecommunications business in Colombia
As reported previously, the Board of TV Azteca asked the CEO for a valuation update and prospects of its telecommunications investments in South America, in order to clarify the long term approach of the company.
The administration requested a valuation analysis 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. Derived from the above, a charge of Ps.1,377 million was made in the impairment of assets line on the income statement of the company this quarter.
It is estimated that Azteca Comunicaciones Colombia must be capitalized with US$100 million to invest in last-mile infrastructure, which could result in a positive performance at EBITDA level in the future. TV Azteca has recently invested US$40 million in the business, thus, the additional capitalization required is US$60 million.
The company has alternative uses of cash in order to focus on the business of broadcast television in Mexico, as well as in meeting future financial obligations.
Derived from this process, TV Azteca intends to invite all shareholders to participate in the capitalization of Azteca Comunicaciones Colombia privately and through the mechanism that TV Azteca establishes for this purpose. The participation from shareholders of TV Azteca in the investment will be up 60% of the telecommunications company, and each shareholder may participate in the investment in proportion to their share in the capital of TV Azteca, or in a greater proportion, for the portions of TV Azteca´s shareholders that do not participate in the capitalization, under the mechanism established for that purpose.
TV Azteca, which has invested US$40 million recently, will remain with a 40% stake. Servicios TPlay, a company of Grupo Salinas, has expressed its interest to cover any amount of the investment that will not be covered by the company´s public shareholders.
In November there will be a shareholders' meeting to address the prospects for the capitalized company, details of its business plan, and sector perspectives, as well as the implementation of investment mechanism and timing of the process.
Fiber-optic network in Peru
In previous months, 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.
As previously announced, in December 2013 TV Azteca won a tender to construct and operate the Red Dorsal Nacional de Fibra Óptica of Peru. The government provided the funds for both the construction and operation through a 20-year concession, and TV Azteca will commercialize the telecommunications services in 339 communities.
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.
Nine month results
Net sales for the first nine months of 2016 were Ps.9,868 million, 13% higher than the Ps.8,712 million for the same period of 2015. Total costs and expenses were Ps.7,657 million, 3% higher than the Ps.7,399 million for the same period of the previous year.
As a result, TV Azteca reported EBITDA of Ps.2,212 million, 68% higher than the Ps.1,313 million from the first nine months a year ago. EBITDA margin was 22% for the ninth-month period, seven percentage points above the previous year. Operating profit grew 207% to Ps. 1,233 million.
The most significant variation below EBITDA was a charge of Ps.1,377 million in the impairment of assets line, as a result of the valuation exercise of Azteca Comunicaciones Colombia.
The company recorded a net loss of Ps.2,995 million, compared to net loss of Ps.2,139 million for the same period of 2015.
| 9M 2015 | 9M 2016 | Change | ||||||||||||||||||
| Ps. | % | |||||||||||||||||||
| Net sales | $ | 8,712 | $ | 9,868 | $ | 1,156 | 13 | % | ||||||||||||
| EBITDA | $ | 1,313 | $ | 2,212 | $ | 899 | 68 | % | ||||||||||||
| Operating profit | $ | 401 | $ | 1,233 | $ | 832 | 207 | % | ||||||||||||
| Net result | $ | (2,139 | ) | $ | (2,995 | ) | $ | (856 | ) | -40 | % | |||||||||
| Net result per CPO | $ | (0.72 | ) | $ | (1.00 | ) | $ | (0.28 | ) | -40 | % | |||||||||
Figures in millions of pesos.
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
The number of CPOs outstanding as of September 30, 2015 was 2,983 million and as of September 30, 2016 was 2,992 million.
Company Profile
TV Azteca is one of the two largest producers of Spanish-language television programming in the world, operating two national television networks in Mexico, Azteca Trece and Azteca 7, through more than 300 owned and operated stations across the country. TV Azteca affiliates include Azteca US, 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 US (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 September 30 of 2015 and 2016 ) | |||||||||||||||||||||
| Third Quarter of : | |||||||||||||||||||||
| 2015 | 2016 | ||||||||||||||||||||
| Change | |||||||||||||||||||||
| Net revenue | Ps | 3,185 | 100 | % | Ps | 3,424 | 100 | % | Ps | 239 | 8 | % | |||||||||
| Programming, production and transmission costs | 2,258 | 71 | % | 2,237 | 65 | % | (21 | ) | -1 | % | |||||||||||
| Selling and administrative expenses | 402 | 13 | % | 375 | 11 | % | (26 | ) | -7 | % | |||||||||||
| Total costs and expenses | 2,659 | 84 | % | 2,612 | 76 | % | (48 | ) | -2 | % | |||||||||||
| EBITDA | 525 | 16 | % | 812 | 24 | % | 287 | 55 | % | ||||||||||||
| Depreciation and amortization | 196 | 212 | 16 | ||||||||||||||||||
| Other expense -Net | 124 | 126 | 2 | ||||||||||||||||||
| Operating profit | 206 | 6 | % | 475 | 14 | % | 269 | 131 | % | ||||||||||||
| Equity in income from affiliates | (23 | ) | 9 | 32 | |||||||||||||||||
| Comprehensive financing result: | |||||||||||||||||||||
| Interest expense | (325 | ) | (362 | ) | (38 | ) | |||||||||||||||
| Other financing expense | (18 | ) | (48 | ) | (31 | ) | |||||||||||||||
| Interest income | 24 | 26 | 2 | ||||||||||||||||||
| Exchange loss -Net | (537 | ) | (398 | ) | 139 | ||||||||||||||||
| (856 | ) | (783 | ) | 73 | |||||||||||||||||
| Income before the following provision | (673 | ) | -21 | % | (300 | ) | -9 | % | 373 | 55 | % | ||||||||||
| Provision for income tax | (150 | ) | (230 | ) | (80 | ) | |||||||||||||||
| Income from continuing operations | (823 | ) | (530 | ) | 293 | 36 | % | ||||||||||||||
| Impairment of assets | - | (1,377 | ) | (1,377 | ) | ||||||||||||||||
| Net income | Ps | (823 | ) | Ps | (1,906 | ) | Ps | (1,083 | ) | ||||||||||||
| Non-controlling share in net income | Ps | (6 | ) | Ps | (7 | ) | Ps | (0 | ) | ||||||||||||
| Controlling share in net income | Ps | (817 | ) | -26 | % | Ps | (1,900 | ) | -55 | % | Ps | (1,083 | ) | -133 | % | ||||||
| TV AZTECA, S.A.B. DE C.V. AND SUBSIDIARIES | |||||||||||||||||||||
| CONSOLIDATED RESULTS OF OPERATIONS | |||||||||||||||||||||
| (Millions of Mexican pesos of September 30 of 2015 and 2016 ) | |||||||||||||||||||||
| Period ended September 30, | |||||||||||||||||||||
| 2015 | 2016 | ||||||||||||||||||||
| Change | |||||||||||||||||||||
| Net revenue | Ps | 8,712 | 100 | % | Ps | 9,868 | 100 | % | Ps | 1,156 | 13 | % | |||||||||
| Programming, production and transmission costs | 6,210 | 71 | % | 6,610 | 67 | % | 400 | 6 | % | ||||||||||||
| Selling and administrative expenses | 1,189 | 14 | % | 1,047 | 11 | % | (142 | ) | -12 | % | |||||||||||
| Total costs and expenses | 7,399 | 85 | % | 7,657 | 78 | % | 258 | 3 | % | ||||||||||||
| EBITDA | 1,313 | 15 | % | 2,212 | 22 | % | 899 | 68 | % | ||||||||||||
| Depreciation and amortization | 543 | 628 | 84 | ||||||||||||||||||
| Other expense -Net | 368 | 350 | (18 | ) | |||||||||||||||||
| Operating profit | 401 | 5 | % | 1,233 | 12 | % | 832 | 207 | % | ||||||||||||
| Equity in income from affiliates | (9 | ) | 15 | 25 | |||||||||||||||||
| Comprehensive financing result: | |||||||||||||||||||||
| Interest expense | (928 | ) | (1,051 | ) | (123 | ) | |||||||||||||||
| Other financing expense | (55 | ) | (119 | ) | (64 | ) | |||||||||||||||
| Interest income | 87 | 69 | (19 | ) | |||||||||||||||||
| Exchange Gain -Net | (1,016 | ) | (901 | ) | 115 | ||||||||||||||||
| (1,912 | ) | (2,002 | ) | (91 | ) | ||||||||||||||||
| Income before the following provision | (1,520 | ) | -17 | % | (754 | ) | -8 | % | 766 | 50 | % | ||||||||||
| Provision for income tax | (619 | ) | (865 | ) | (245 | ) | |||||||||||||||
| Income from continuing operations | (2,139 | ) | (1,618 | ) | 521 | 24 | % | ||||||||||||||
| Impairment of assets | - | (1,377 | ) | (1,377 | ) | ||||||||||||||||
| Net income | Ps | (2,139 | ) | Ps | (2,995 | ) | Ps | (856 | ) | ||||||||||||
| Non-controlling share in net income | Ps | (17 | ) | Ps | (20 | ) | Ps | (3 | ) | ||||||||||||
| Controlling share in net income | Ps | (2,122 | ) | -24 | % | Ps | (2,975 | ) | -30 | % | Ps | (853 | ) | -40 | % | ||||||
| TV AZTECA, S.A.B. DE C.V. AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||
| (Millions of Mexican pesos of September 30 of 2015 and 2016) | |||||||||||||
| At September 30 | |||||||||||||
| 2015 | 2016 | ||||||||||||
| Change | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | Ps | 3,625 | Ps | 3,837 | Ps | 212 | |||||||
| Accounts receivable | 6,829 | 7,835 | 1,006 | ||||||||||
| Other current assets | 4,093 | 4,479 | 386 | ||||||||||
| Total current assets | 14,547 | 16,151 | 1,604 | 11 | % | ||||||||
| Accounts receivable | 298 | 88 | (210 | ) | |||||||||
| Exhibition rights | 2,577 | 2,874 | 297 | ||||||||||
| Property, plant and equipment-Net | 4,196 | 3,902 | (294 | ) | |||||||||
| Television concessions-Net | 9,847 | 10,472 | 625 | ||||||||||
| Other assets | 3,439 | 1,623 | (1,816 | ) | |||||||||
| Deferred income tax asset | 2,680 | 2,899 | 219 | ||||||||||
| Total long term assets | 23,037 | 21,858 | (1,179 | ) | -5 | % | |||||||
| Total assets | Ps | 37,584 | Ps | 38,009 | Ps | 425 | 1 | % | |||||
| Current liabilities: | |||||||||||||
| Other current liabilities | 5,618 | 6,070 | 452 | ||||||||||
| Total current liabilities | 5,618 | 6,070 | 452 | 8 | % | ||||||||
| Long-term debt: | |||||||||||||
| Long-term debt | 13,345 | 15,364 | 2,019 | ||||||||||
| Total long-term debt | 13,345 | 15,364 | 2,019 | 15 | % | ||||||||
| Other long term liabilities: | |||||||||||||
| Advertising advances | 6,532 | 8,126 | 1,594 | ||||||||||
| American Tower Corporation (due 2069) | 1,551 | 1,778 | 227 | ||||||||||
| Deferred income tax | 910 | 630 | (280 | ) | |||||||||
| Total other long-term liabilities | 8,993 | 10,534 | 1,541 | 17 | % | ||||||||
| Total liabilities | 27,956 | 31,968 | 4,012 | 14 | % | ||||||||
| Total stockholders' equity | 9,628 | 6,041 | (3,587 | ) | -37 | % | |||||||
| Total liabilities and equity | Ps | 37,584 | Ps | 38,009 | Ps | 425 | 1 | % | |||||