Grupo Elektra Announces Revenues of Ps.28,154 Million and EBITDA of Ps.2,547 Million in 2Q20

—29% growth in deposits of Banco Azteca Mexico to Ps.177,335 million, generates solid prospects for the financial business—

—Ratio of deposits to gross portfolio of 1.9 times, is outstanding in the sector, and consolidates firm growth expectation for the Bank, with optimal funding cost—

 —Capitalization index of Banco Azteca of 15.32%, shows remarkable financial strength—

MEXICO CITY, July 23, 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 second quarter 2020 financial results.

Second Quarter Results

Consolidated revenue was Ps.28,154 million in the period, in comparison with Ps.28,762 million for the same quarter of the previous year. Costs and operating expenses were Ps.25,608 million, from Ps.24,749 million for the same period of 2019.

As a result, EBITDA was Ps.2,547 million, in comparison with Ps.4,014 million of the previous year’s quarter. Operating profit was Ps.438 million this quarter, from Ps.2,255 million in the same period of 2019.

The company reported a net loss of Ps.3,538 million, compared to a net income of Ps.5,697 million a year ago.

	2Q 2019		2Q 2020			Change
						Ps.			%
Consolidated revenue	$28,762		$28,154			$(608)			-2%
EBITDA	$4,014		$2,547			$(1,467)			-37%
Operating result	$2,255		$438			$(1,817)			-81%
Net result	$5,697		$(3,538)			$(9,234)			----
Net result per share	$24.94		$(15.46)			$(40.4)			----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2019, Elektra* outstanding shares were 228.4 million and as of June 30, 2020, were 228.8 million.

Revenue

Consolidated revenue decreased 2%, as a result of a 6% reduction in financial revenues, partially compensated with a 4% increase in commercial sales.

The decrease in financial revenue — to Ps.16,931 million, from Ps.17,934 million the previous year —reflects lower interest earned in the period, in the context of deterioration in economic performance indicators due to the health emergency.

The increase in commercial division sales — to Ps.11,223 million, up from Ps.10,828 million from last year — results largely from an increase in sales of telephony and computing, as well as white appliances and mattresses, which effectively meet the needs of thousands of families and are commercialized in the most competitive market conditions.

The commercial business sales have added additional momentum with the launch of new 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.12,890 million, from Ps.11,980 million the previous year. The growth in costs is explained by an increase in the financial cost, to Ps.5,739 million this period compared to Ps.4,716 million a year ago, largely derived from the creation of loan loss reserves, which was partially offset by lower interest paid, in line with declining market rates.

Commercial business costs decreased 2%, to Ps.7,151 million, from Ps.7,263 million, derived from superior efficiency in the supply chain of merchandise inventories.

Selling, administrative and marketing expenses were reduced marginally, to Ps.12,718 million, mainly as a result of lower advertising and operating expenses — within the framework of firm strategies that promote operating efficiencies — partially offset by higher personnel expenses.

EBITDA and net result

EBITDA was Ps.2,547 million, from Ps.4,014 million the previous year. The company reported an operating profit of Ps.438 million, compared to Ps.2,255 million in the same quarter of 2019.

The most significant changes below EBITDA were the following:

A negative variation of Ps.11,045 million in the other financial results line, which reflects a depreciation of 10% 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 20% gain a year ago.

Congruent with the operating results for the quarter, there was a reduction of Ps.3,929 million in the tax provision in the period.

Grupo Elektra reported net loss of Ps.3,538 million, compared to a net income of Ps.5,697 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.

Congruent with this, the debt with cost was Ps.25,852 million as of June 30, 2020, compared to Ps.24,702 million the previous year. The balance of cash and cash equivalents was Ps.6,124 million, from Ps.5,420 million the previous year.

The company's equity increased 6% to Ps.97,944 million, while the ratio of stockholders' equity to total liabilities was 1.5 times at the close of the quarter.

		As of June 30, 2019		As of June 30, 2020		Change
						Ps.			%
Cash and cash equivalents		$	5,420	$	6,124		704		13	%
Marketable financial instruments			40,226		38,468		(1,758	)	(4	%)
Inventories			9,914		12,091		2,178		22	%
Accounts receivables			44,283		47,300		3,017		7	%
Other current assets			2,868		3,585		717		25	%
Investments in shares			34,601		38,164		3,563		10	%
Fixed assets			7,446		8,017		571		8	%
Right of use assets			8,652		8,604		(48	)	(1	%)
Other assets			2,029		1,836		(193	)	(9	%)
Total assets		$	155,439	$	164,191	$	8,751		6	%
Short-term debt		$	3,834	$	11,444	$	7,610		198	%
Suppliers			7,175		6,578		(597	)	(8	%)
Other short-term liabilities			11,141		13,645		2,504		22	%
Long-term debt			20,868		14,408		(6,459	)	(31	%)
Differed taxes			10,585		10,368		(217	)	(2	%)
Other long-term debt			9,655		9,804		149		2	%
Total liabilities		$	63,257	$	66,247	$	2,990		5	%
Stakeholder´s equity		$	92,182	$	97,944	$	5,762		6	%
Liabilities and equity		$	155,439	$	164,191	$	8,751		6	%
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 June 30, 2020 grew 6% to Ps.113,174 million, from Ps.106,957 million for the previous year. The consolidated delinquency rate was 5% at the end of the period, compared to 3.6% in the previous year.

The gross portfolio of Banco Azteca Mexico grew 3% to Ps.93,595 million, from Ps.90,860 million a year ago. The default rate for the bank at the end of the quarter was 5.3%, in comparison with 3% for the previous year, in the context in which a large number of customers from the Bank chose not to resort to official support plans to differ payments, offered by the sector.

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 second quarter.

Grupo Elektra’s consolidated deposits were Ps.183,746 million, 31% higher than the Ps.140,603 million a year ago. Deposits of Banco Azteca Mexico were Ps.177,335 million, 29% higher than the Ps.137,891 million a year ago. 

The ratio of deposits to gross portfolio of 1.9 times, consolidates the solid growth prospects of the Bank, with optimal funding cost.

The Bank's liquidity coverage ratio — total of eligible liquid assets / total net cash out — was 642%, an outstanding figure in the Mexican banking sector.

The estimated capitalization index of Banco Azteca Mexico was 15.32%, level that shows the remarkable financial strength of the institution.

Infrastructure

Grupo Elektra currently has 7,047 storefronts, compared to 7,157 units a year ago.

During the last twelve months, 35 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 4,762 storefronts in Mexico at the end of the quarter, 1,601 in the United States, and 684 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.

Mauro Aguirre is appointed CFO

Grupo Elektra announced today it appointed Mauro Aguirre Regis as CFO of the company.

Mr. Aguirre has 24 years of experience in strategic positions in Grupo Elektra. He has been Director of Administration and Finance of both, Grupo Elektra and Banco Azteca, and had executive level responsibilities in financial planning and controlling for Mexico and Latin America, where he implemented successful strategies for budget control to maximize the efficient use of resources that positively affect profitability. Mr. Aguirre has also been instrumental in obtaining financial resources that result in a solid capital structure and financial cost optimization.

He previously held senior executive positions in Mexican and world-class multinationals. Mauro Aguirre holds a degree in Accounting from the Universidad Nacional Autónoma de México and holds an MBA in Finance from the Instituto Tecnológico y de Estudios Superiores de Monterrey.

Manuel Delgado Forey, who was the previous CFO of Grupo Elektra, has been appointed Director of Operations of Banco Azteca.

Acquisition of currency hedging

In the context of the recent volatility of the peso exchange rate to the US dollar, the company has acquired options which give it the right, but not the obligation, to purchase dollars at a peso exchange rate, for up to an additional US$170 million, which allow to cover, with a predetermined exchange rate, purchases of merchandise from abroad, as well as other liabilities denominated in foreign currency. Subsequently, as of July 21, the company has also contracted forwards for US$148 million. Depending on the volatility of the exchange rate and in a prudential way, the company could increase its exchange protection 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.

Six months consolidated results

Total consolidated revenue in the first six months of the year grew 6% to Ps.59,318 million, from Ps.55,800 million for the same period of 2019, boosted by an 8% and a 5% growth in both commercial and financial businesses, respectively.

EBITDA was Ps.3,288 million, in comparison to Ps.9,571 million last year. The company reported operating loss of Ps.828 million from operating profit of Ps.6,162 million a year ago. During the first six months of 2020 a net loss of Ps.3,396 million was registered, compared with a net income of Ps.10,360 million a year ago.

	6M 2019		6M 2020			Change
						Ps.			%
Consolidated revenue	$55,800		$59,318			$3,519			6%
EBITDA	$9,571		$3,288			$(6,283)			-66%
Operating result	$6,162		$(828)			$(6,991)			----
Net result	$10,360		$(3,396)			$(13,755)			----
Net result per share	$45.36		$(14.84)			$(60.20)			----

Figures in millions of pesos
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.       
As of June 30, 2019, Elektra* outstanding shares were 228.4 million and as of June 30, 2020, were 228.8 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, 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. [phone] [e-mail]		Rolando Villarreal Grupo Elektra, S.A.B. de C.V. Tel. [phone] [e-mail]
Press Relations: Luciano Pascoe Tel. [phone] ext. 36553

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
		2Q19					2Q20					Change
	Financial income	17,934		62	%		16,931		60	%		(1,003	)	-6	%
	Commercial income	10,828		38	%		11,223		40	%		395		4	%
	Income	28,762		100	%		28,154		100	%		(608	)	-2	%
	Financial cost	4,716		16	%		5,739		20	%		1,023		22	%
	Commercial cost	7,263		25	%		7,151		25	%		(113	)	-2	%
	Costs	11,980		42	%		12,890		46	%		910		8	%
	Gross income	16,782		58	%		15,264		54	%		(1,518	)	-9	%
	Sales, administration and promotion expenses	12,769		44	%		12,718		45	%		(51	)	0	%
	EBITDA	4,014		14	%		2,547		9	%		(1,467	)	-37	%
	Depreciation and amortization	1,028		4	%		1,351		5	%		323		31	%
	Depreciation right of use asset	737		3	%		765		3	%		28		4	%
	Other expense, net	(6	)	0	%		(7	)	0	%		(1	)	-18	%
	Operating income	2,255		8	%		438		2	%		(1,817	)	-81	%
	Comprehensive financial result:
	Interest income	324		1	%		320		1	%		(4	)	-1	%
	Interest expense	(922	)	-3	%		(989	)	-4	%		(67	)	-7	%
	Foreign exchange gain (loss), net	(88	)	0	%		(68	)	0	%		21		23	%
	Other financial results, net	6,417		22	%		(4,629	)	-16	%		(11,045	)	----
		5,730		20	%		(5,366	)	-19	%		(11,096	)	----
	Participation  in  the  net  income of
	CASA and other associated companies	(84	)	0	%		(139	)	0	%		(55	)	-66	%
	Income before income tax	7,901		27	%		(5,067	)	-18	%		(12,968	)	----
	Income tax	(2,367	)	-8	%		1,562		6	%		3,929		----
	Income before discontinued operations	5,534		19	%		(3,505	)	-12	%		(9,038	)	----
	Result from discontinued operations	163		1	%		9		0	%		(154	)	-95	%
	Impairment of intangible assets	-		0	%		(42	)	0	%		(42	)	-100	%
	Consolidated net income	5,697		20	%		(3,538	)	-13	%		(9,234	)	----

GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
MILLIONS OF MEXICAN PESOS
		6M19					6M20					Change
	Financial income	35,506		64	%		37,328		63	%		1,822		5	%
	Commercial income	20,294		36	%		21,991		37	%		1,696		8	%
	Income	55,800		100	%		59,318		100	%		3,519		6	%
	Financial cost	8,683		16	%		16,351		28	%		7,668		88	%
	Commercial cost	13,341		24	%		14,320		24	%		979		7	%
	Costs	22,024		39	%		30,671		52	%		8,647		39	%
	Gross income	33,775		61	%		28,647		48	%		(5,129	)	-15	%
	Sales, administration and promotion expenses	24,205		43	%		25,359		43	%		1,154		5	%
	EBITDA	9,571		17	%		3,288		6	%		(6,283	)	-66	%
	Depreciation and amortization	1,983		4	%		2,628		4	%		645		33	%
	Depreciation right of use asset	1,428		3	%		1,489		3	%		61		4	%
	Other expense, net	(2	)	0	%		(0	)	0	%		2		90	%
	Operating income	6,162		11	%		(828	)	-1	%		(6,991	)	----
	Comprehensive financial result:
	Interest income	631		1	%		571		1	%		(60	)	-10	%
	Interest expense	(1,760	)	-3	%		(1,898	)	-3	%		(138	)	-8	%
	Foreign exchange gain (loss), net	(196	)	0	%		2,461		4	%		2,657		----
	Other financial results, net	9,406		17	%		(4,241	)	-7	%		(13,647	)	----
		8,082		14	%		(3,106	)	-5	%		(11,188	)	----
	Participation  in  the  net  income of
	CASA and other associated companies	(58	)	0	%		(760	)	-1	%		(702	)	-100	%
	Income before income tax	14,186		25	%		(4,694	)	-8	%		(18,880	)	----
	Income tax	(3,990	)	-7	%		1,336		2	%		5,326		----
	Income before discontinued operations	10,196		18	%		(3,358	)	-6	%		(13,554	)	----
	Result from discontinued operations	164		0	%		4		0	%		(160	)	----
	Impairment of intangible assets	-		0	%		(42	)	0	%		(42	)	-100	%
	Consolidated net income	10,360		19	%		(3,396	)	-6	%		(13,755	)	----

		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 June 30, 2019				At June 30, 2020
	Cash and cash equivalents	5,420	21,599	27,019		6,124	31,838	37,962		10,943		41	%
	Marketable financial instruments	23,697	74,100	97,797		8,468	102,321	110,789		12,991		13	%
	Performing loan portfolio	-	76,616	76,616		-	64,150	64,150		(12,467	)	-16	%
	Total past-due loans	-	3,682	3,682		-	4,615	4,615		934		25	%
	Gross loan portfolio	-	80,298	80,298		-	68,765	68,765		(11,533	)	-14	%
	Allowance for credit risks	-	8,481	8,481		-	7,358	7,358		(1,122	)	-13	%
	Loan portfolio, net	-	71,818	71,818		-	61,407	61,407		(10,411	)	-14	%
	Inventories	9,914	-	9,914		12,091	-	12,091		2,178		22	%
	Other current assets	28,840	12,617	41,458		15,251	14,474	29,725		(11,733	)	-28	%
	Total current assets	67,872	180,133	248,005		41,934	210,040	251,974		3,969		2	%
	Financial instruments	16,529	271	16,800		30,001	137	30,138		13,337		79	%
	Performing loan portfolio	-	26,506	26,506		-	43,348	43,348		16,842		64	%
	Total past-due loans	-	153	153		-	1,061	1,061		908		594	%
	Gross loan portfolio	-	26,659	26,659		-	44,409	44,409		17,750		67	%
	Allowance for credit risks	-	677	677		-	1,420	1,420		743		110	%
	Loan portfolio	-	25,982	25,982		-	42,989	42,989		17,007		65	%
	Other non-current assets	6,026	440	6,466		21,403	187	21,590		15,124		234	%
	Investment in shares	1,772	-	1,772		1,230	-	1,230		(542	)	-31	%
	Property, furniture, equipment and
	investment in stores, net	7,446	5,360	12,806		8,017	8,075	16,092		3,286		26	%
	Intangible assets	678	6,677	7,355		633	8,104	8,737		1,383		19	%
	Right of use asset	8,652	2,012	10,664		8,604	1,980	10,584		(80	)	-1	%
	Other assets	1,351	505	1,856		1,203	8,194	9,397		7,541		406	%
	TOTAL ASSETS	110,326	221,380	331,706		113,026	279,706	392,731		61,025		18	%
	Demand and term deposits	-	140,603	140,603		-	183,746	183,746		43,144		31	%
	Creditors from repurchase agreements	-	13,904	13,904		-	19,605	19,605		5,701		41	%
	Short-term debt	3,718	62	3,780		11,215	1,187	12,402		8,622		228	%
	Leasing	961	851	1,812		1,935	1,096	3,031		1,219		67	%
	Short-term liabilities with cost	4,679	155,419	160,098		13,150	205,634	218,784		58,686		37	%
	Suppliers and other short-term liabilities	15,821	18,945	34,766		16,716	21,725	38,441		3,675		11	%
	Short-term liabilities without cost	15,821	18,945	34,766		16,716	21,725	38,441		3,675		11	%
	Total short-term liabilities	20,500	174,364	194,864		29,866	227,359	257,225		62,361		32	%
	Long-term debt	18,844	2,336	21,180		14,370	22	14,392		(6,788	)	-32	%
	Leasing	8,060	1,122	9,182		7,536	1,051	8,587		(595	)	-6	%
	Long-term liabilities with cost	26,904	3,458	30,362		21,906	1,073	22,979		(7,383	)	-24	%
	Long-term liabilities without cost	12,180	2,118	14,298		12,636	1,948	14,584		285		2	%
	Total long-term liabilities	39,084	5,576	44,660		34,542	3,020	37,563		(7,098	)	-16	%
	TOTAL LIABILITIES	59,584	179,940	239,524		64,408	230,379	294,787		55,264		23	%
	TOTAL STOCKHOLDERS' EQUITY	50,742	41,440	92,182		48,618	49,326	97,944		5,762		6	%
	LIABILITIES + EQUITY	110,326	221,380	331,706		113,026	279,706	392,731		61,025		18	%

	INFRASTRUCTURE
	2Q19				2Q20				Change
Points of sale in Mexico
Elektra	1,117	16	%		1,140	16	%		23		2	%
Salinas y Rocha	38	1	%		37	1	%		(1	)	-3	%
Banco Azteca	1,807	25	%		1,840	26	%		33		2	%
Freestanding branches	1,678	23	%		1,745	25	%		67		4	%
Total	4,640	65	%		4,762	68	%		122		3	%
Points of sale in Central and South America
Elektra	168	2	%		195	3	%		27		16	%
Banco Azteca	338	5	%		398	6	%		60		18	%
Freestanding branches	95	1	%		91	1	%		(4	)	-4	%
Total	601	8	%		684	10	%		83		14	%
Points of sale in North America
Purpose Financial	1,916	27	%		1,601	23	%		(315	)	-16	%
Total	1,916	27	%		1,601	23	%		(315	)	-16	%
TOTAL	7,157	100	%		7,047	100	%		(110	)	-2	%
Floor space (m²)	1,703	100	%		1,532	100	%		(171	)	-10	%
Employees
Mexico	73,149	83	%		66,259	84	%		(6,890	)	-9	%
Central and South America	9,093	10	%		8,387	11	%		(706	)	-8	%
North America	5,392	6	%		3,791	5	%		(1,601	)	-30	%
Total employees	87,634	100	%		78,437	100	%		(9,197	)	-10	%