Grupo Elektra Announces 42% EBITDA Growth to Historical Maximum of Ps.2,813 Million in 2Q12

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MEXICO CITY, July 25, 2012 /PRNewswire/ -- Grupo Elektra, S.A.B. de C.V. (BMV: ELEKTRA*; Latibex: XEKT), Latin America's leading financial services company and specialty retailer in Latin America and the largest non-bank provider of cash advance services in the United States, reported today its financial results for the second quarter of 2012.

"The remarkable dynamism in consolidated revenue and our solid execution translated into a historical maximum in EBITDA for a second quarter," commented Grupo Elektra and Banco Azteca CEO, Carlos Septien. "The superior consolidated revenue is the result of an outstanding growth of 90% in financial income, in the context of remarkable strength in the loan portfolio, as well as the consolidation of Advance America in our results."

"The strong positive trend of the financial business translates into a continuously  growing weight of that business in the results of Grupo Elektra, and it has an encouraging perspective in all the countries in which we operate," added Mr. Septien.

Consolidated second quarter results

Consolidated income was Ps.17,046 million, up 43% from Ps.11,897 million for the same quarter last year.  Costs and operating expenses were Ps.14,233 million, compared to Ps.9,916 million in the same period of 2011.

Grupo Elektra reported EBITDA of Ps.2,813 million, 42% higher than the Ps.1,980 million for the same period of last year. The EBITDA margin was 17% this quarter,  unchanged from last year.  The company registered a net loss of Ps.19,188 million, compared to a net profit of Ps.3,966 million a year ago.

Income

Consolidated income grew 43%, as a result of a remarkable 90% growth in financial income and a 3% decrease in commercial sales.

The growth in financial income —to Ps.11,260 million, from Ps. 5,919 million last year— mainly results from the dynamism in Banco Azteca Mexico's income, which grew 64% to Ps.7,993 million from Ps.4,878 million, as a consequence mainly of the expansion of personal loans, credits from Micronegocio Azteca and Presta Prenda.

Advance America contributed to the increase of financial income with Ps.1,674 million, resulting from the consolidation of the company's results in Grupo Elektra's financial statements, from April 23 to June 30 of this year. As previously announced, Grupo Elektra acquired Advance America —the largest non-bank provider of cash advance services in the US—on April 23.

The reduction in commercial income is in the context of a reorganization of merchandise sales, seeking to generate outstanding sales in the future, mainly through credit.

Costs and expenses

Consolidated costs for the quarter were Ps.7,285 million, compared to Ps.5,324 million from a year ago. The change mainly derives from an increase in costs from Banco Azteca Mexico, to Ps.2,427 million, compared to Ps.914 million from the previous year, related to the growth in loan-loss reserves; congruent with the rise of the loan portfolio, as well as the growth in interest paid to savers—in the context of attracting more traditional deposits and savings. Advance America contributed with Ps.534 million in costs during the period.

Operating expenses were Ps.6,948 million, compared to Ps.4,592 million for the same period a year ago. The change results mainly from increases in personnel expenses derived from hiring of personnel focused on growth and on improving customer service, which will translate into improved dynamism going forward.  The increase also reflects the consolidation of expenses from Advance America this period.

EBITDA and net result

Consolidated EBITDA was Ps.2,813 million, 42% higher compared to Ps.1,980 million reported a year ago; the EBITDA margin for the quarter was 17%.

The most significant change below EBITDA was a negative variation of Ps.33,444 million in other financial income, as a result of the valuation of financial instruments owned by the company —which does not imply cash flow— that was less favorable this quarter, compared to last year. That change was partially offset by a Ps.9,032 million decrease in tax provision.

Grupo Elektra reported net loss of Ps.19,188 million, compared to net income of Ps.3,966 million a year ago.

Consolidated Balance

Loan portfolio and deposits

Banco Azteca Mexico, Advance America, and Banco Azteca and Elektrafin Latin America's consolidated gross portfolio, as of June 30, 2012, was Ps.60,524 million, 66% higher than Ps.36,394 million a year ago, resulting from the growing preference of our clients for our credit products, which directly improve their quality of life. Consolidated delinquency rate was 5.9% at the end of the period.

The most significant driver of the dynamic trend of the consolidated gross portfolio was 59% growth in the gross portfolio of Banco Azteca Mexico, to Ps. 50,625 million from Ps.31,936 million.  Advance America's gross portfolio as of June 30, 2012 was Ps.3,335 million.

The delinquency rate of the bank at the end of the quarter was 5.2%. The non-performing loan portfolio is reserved 1.7 times, unchanged compared to the previous year.

At the end of the quarter, Banco Azteca Mexico had a total of 13.7 million active credit accounts, 29% above the 10.6 million from the previous year.  The large customer base is an important strength of the bank that further reduces credit risk. The average term of the credit portfolio for principal credit lines —consumer, personal loans and Tarjeta Azteca— was 59 weeks at the end of the second quarter.

Consolidated deposits, as of June 30, 2012, were Ps.60,018 million, 19% above Ps.50,293 million of last year.

Banco Azteca Mexico recorded deposits of Ps.58,695 million, 10% above last year's balance. The number of the Bank's active savings and deposit accounts was 14.8 million, a 24% increase compared to 11.9 million accounts at the end of the same period a year ago.

As of June 30, 2012, the estimated capitalization index of Banco Azteca Mexico was 12.4%. The company considers the index to be at a level that optimizes equity profitability.

Debt

As of June 30, 2012, consolidated total debt with cost was Ps.21,294 million, of which Ps.19,283 million correspond to the commercial business, and Ps.2,011 million to the financial business.

Cash, cash equivalents and investments of the commercial business were Ps.14,253 million at the end of the period; resulting in net debt of Ps.5,030 million of the commercial business.  

Expansion

Grupo Elektra currently has 5,871 points of sale, compared to 2,321 a year ago. This change is mainly due to the acquisition of Advance America during the quarter, adding 2,471 points of sale to the company. In addition, 1,025 Financial Services Stores were opened—as part of the company's actions to further strengthen this business segment—as well as 54 Elektra stores.

There are 2,841 points of sale in Mexico, 2,471 in the US, and 559 in Central and South America.  The company's large distribution network allows us to stay close to customers and provides superior market positioning in Mexico, the US, and Latin America.

Civil Lawsuit

On June 25, Grupo Elektra filed a lawsuit against the Bolsa Mexicana de Valores (BMV) stock exchange and its president and CEO, Luis Tellez, protesting among other things the declaration of illicitness of the new methodology to determine the Índice de Precios y Cotizaciones (IPyC) index published April 11, 2012 and the damages and harm derived from: i) the change to the said methodology and ii) the lack of suspension of the trading of Grupo Elektra shares, given an extraordinary reduction in the price of the shares.

On June 29 of the same year, the Juez Sexto de lo Civil del Tribunal Superior de Justicia del Distrito Federal (Sixth Judge of the Federal District Superior Civil Court) decreed as a precautionary measure in favor of the issuer the suspension of application of the methodology to determine the IPyC published on April 11, 2012, with all of the effects that  its application could carry. The civil action is in an initial stage for which the company cannot predict its result.

Six month results

Total consolidated revenue in the first six months of 2012 was Ps.32,154 million, 39% higher than Ps.23,111 million a year ago.  The company reported EBITDA of Ps.6,121 million, 48% above the Ps.4,134 million for the same period a year ago; the EBITDA margin in the first six months of 2012 was 19%, compared to 18% in the prior year.  The company registered consolidated net loss of Ps.23,021 million, compared to profit of Ps.4,590 million a year ago, mainly due to a depreciation this period in the market value of underlying financial instruments that the company holds, which doesn't imply cash flow, compared to appreciation in the prior year.

Company Profile:

Grupo Elektra (www.grupoelektra.com.mx) is Latin America's leading financial services company focused on the mass market. The Group operates over 5,800 points of sale in Mexico, Brazil, Guatemala, Honduras, Peru, Panama, El Salvador and Argentina.  Grupo Elektra also sells and markets its consumer finance, banking and financial products and services through Banco Azteca branches located in Mexico, Brazil, Panama, Guatemala, Honduras, Peru 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 Azteca (www.irtvazteca.com), Azteca America (www.aztecaamerica.com), Grupo Elektra (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) and Grupo Iusacell (www.iusacell.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.

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 Grupo Elektra and its subsidiaries are identified in documents sent to securities authorities.

SOURCE Grupo Elektra, S.A.B. de C.V.