Grupo Elektra Announces 42% EBITDA Growth to Historical Maximum of Ps.2,813 Million in 2Q12 - Consolidated revenue grows 43% to Ps.17,046 million, supported by 90% increase in financial income -

- Consolidated gross portfolio shows solid growth of 66% to Ps.60,524 million -

- Grupo Elektra has more than 5,800 points of sale in 9 countries, after acquiring Advance America -

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.



    2Q 2011

     2Q 2012

         Change




Ps.

%






Consolidated revenue

$11,897

$17,046

$5,149

43%






EBITDA    

$1,980

$2,813

$833

42%






Net result    

$3,966

$(19,188)

$(23,154)

---






Net result per share

$16.40

$(80.86)

$(97.26)

---







Figures in millions of pesos.

As of June 30, 2011, Elektra* outstanding shares were 241.9 million and the number of shares as of June 30, 2012 was 237.3 million.



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.



       6M 2011

       6M 2012

       Change




Ps.

%






Consolidated revenue

$23,111

$32,154

$9,043

39%






EBITDA    

$4,134

$6,121

$1,988

48%






Net result      

$4,590

$(23,021)

$(27,611)

----






Net result per share

$18.97

$(97.01)

$(115.98)

----


Figures in million of pesos.

As of June 30, 2011, Elektra* outstanding shares were 241.9 million and the number of shares as of June 30, 2012 was 237.3 million.



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.

Investor Relations

Bruno Rangel

Grupo Salinas

Tel. +52 (55) 1720 9167

jrangelk@gruposalinas.com.mx


Carlos Casillas

Grupo Salinas

Tel. +52 (55) 1720 0041

cjcasillas@gruposalinas.com.mx




Press Relations

Jaime Ramos

Grupo Salinas

Tel. +52 (55) 1720-1416

jramosr@gruposalinas.com.mx


Daniel McCosh

Grupo Salinas

Tel. +52 (55) 1720-0059

dmccosh@gruposalinas.com.mx




GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

MILLIONS OF MEXICAN PESOS










2Q11

2Q12

Change








Financial income

5,919

50%

11,260

66%

5,341

90%

Commercial income

5,978

50%

5,786

34%

(192)

-3%

Income

11,897

100%

17,046

100%

5,149

43%








Financial cost

1,183

10%

3,347

20%

2,164

----

Commercial cost

4,141

35%

3,939

23%

(203)

-5%

Costs

5,324

45%

7,285

43%

1,961

37%








Gross income

6,573

55%

9,761

57%

3,188

49%








Sales, administration and promotion expenses

4,592

39%

6,948

41%

2,355

51%

Depreciation and amortization

410

3%

569

3%

158

38%

Operating expenses

5,003

42%

7,516

44%

2,513

50%








Operating income

1,570

13%

2,244

13%

675

43%








EBITDA

1,980

17%

2,813

17%

833

42%








Comprehensive financial result:







    Interest income

426

4%

931

5%

505

----

    Interest expense

(290)

-2%

(492)

-3%

(202)

-70%

    Foreign exchange (loss) gain, net

(147)

-1%

43

0%

190

----

    Other financial results, net

3,992

34%

(29,451)

-173%

(33,444)

----


3,981

33%

(28,970)

-170%

(32,951)

----








Other (expense) income, net

(6)

0%

2

0%

8

----








Participation  in  the  net  income of







CASA and other associated companies

(38)

0%

44

0%

82

----








Income (loss) before income tax

5,507

46%

(26,680)

-157%

(32,186)

----








Income tax

(1,540)

-13%

7,492

44%

9,032

----








Consolidated net income (loss)

3,966

33%

(19,188)

-113%

(23,154)

----








Income of non-controlling participation

-

0%

-

0%

-

0%

Income (loss) of controlling participation

3,966

100%

(19,188)

100%

(23,154)

----
























GRUPO ELEKTRA, S.A.B. DE C.V. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

MILLIONS OF MEXICAN PESOS



6M11

6M12

Change








Financial income

11,341

49%

20,336

63%

8,995

79%

Commercial income

11,770

51%

11,818

37%

48

0%

Income

23,111

100%

32,154

100%

9,043

39%








Financial cost

2,136

9%

5,955

19%

3,819

----

Commercial cost

8,053

35%

8,159

25%

106

1%

Costs

10,188

44%

14,114

44%

3,925

39%








Gross income

12,922

56%

18,040

56%

5,118

40%








Sales, administration and promotion expenses

8,789

38%

11,919

37%

3,130

36%

Depreciation and amortization

859

4%

1,042

3%

183

21%

Operating expenses

9,648

42%

12,961

40%

3,313

34%








Operating Income

3,275

14%

5,079

16%

1,805

55%








EBITDA

4,134

18%

6,121

19%

1,988

48%








Comprehensive financial result:







    Interest income

524

2%

1,034

3%

511

97%

    Interest expense

(594)

-3%

(917)

-3%

(324)

-55%

    Foreign exchange loss, net

(271)

-1%

(299)

-1%

(29)

-11%

    Other financial results, net

3,487

15%

(37,035)

-115%

(40,523)

----


3,147

14%

(37,217)

-116%

(40,364)

----








Other (expense) income, net

(18)

0%

1

0%

20

----








Participation  in  the  net  income expense of







CASA and other associated companies

(19)

0%

75

0%

93

----








Income (loss) before income tax

6,385

28%

(32,062)

-100%

(38,446)

----








Income tax

(1,795)

-8%

9,041

28%

10,836

----








Consolidated net income (loss)

4,590

20%

(23,021)

-72%

(27,610)

----








Income of non-controlling participation

-

0%

-

0%

-

0%

Income (loss) of controlling participation

4,590

100%

(23,021)

100%

(27,610)

----
























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, 2011

At June 30, 2012











Cash and cash equivalents

975

12,698

13,673

1,789

14,516

16,305

2,632

19%










Marketable financial instruments

14,064

19,223

33,287

12,464

13,449

25,913

(7,374)

-22%










Performing loan portfolio

325

25,889

26,214

426

42,296

42,722

16,509

63%

Total past-due loans

132

1,013

1,146

267

2,757

3,023

1,878

164%

Gross loan portfolio

458

26,902

27,359

693

45,053

45,746

18,386

67%










Allowance for credit risks

141

1,868

2,009

267

5,515

5,781

3,772

188%










Loan portfolio, net

317

25,033

25,350

426

39,538

39,964

14,614

58%










Inventories

5,640


5,640

6,723


6,723

1,083

19%










Other current assets

2,032

4,795

6,827

5,885

5,322

11,207

4,380

64%










Total current assets

23,028

61,749

84,777

27,288

72,825

100,113

15,336

18%










Financial instruments

12,775


12,775

10,751


10,751

(2,025)

-16%










Performing loan portfolio



8,914

8,914


14,248

14,248

5,333

60%

Total past-due loans


120

120


531

531

410

340%

Loan portfolio

-

9,035

9,035

-

14,778

14,778

5,744

64%










Other non-current assets

13,101


13,101

8,086


8,086

(5,015)

----










Investment in shares

2,962

19

2,980

2,533

15

2,547

(433)

-15%

Property, furniture, equipment and









 investment in stores, net

4,415

1,361

5,776

4,192

2,415

6,607

832

14%

Other Assets

1,180

2

1,182

1,091

7,028

8,119

6,937

587%










TOTAL ASSETS

57,460

72,166

129,626

53,940

97,061

151,001

21,375

16%



















Demand and term deposits


50,293

50,293


60,018

60,018

9,725

19%

Creditors from repurchase agreements


7,243

7,243


5,019

5,019

(2,224)

-31%

Short-term debt

6,589

205

6,794

5,492

882

6,374

(420)

-6%

Financial leasing

20


20

13


13

(7)

-35%

Short-term liabilities with cost

6,609

57,741

64,351

5,505

65,918

71,424

7,073

11%










Suppliers and other short-term liabilities

7,385

3,619

11,004

7,247

5,050

12,298

1,293

12%

Short-term liabilities without cost

7,385

3,619

11,004

7,247

5,050

12,298

1,293

12%










Total short-term liabilities

13,994

61,361

75,355

12,753

70,969

83,721

8,366

11%










Long-term debt

4,490

1,104

5,594

13,749

1,129

14,878

9,284

----

Financial leasing

13


13

29


29

16

----

Long-term liabilities with cost

4,502

1,104

5,607

13,778

1,129

14,907

9,300

----










Long-term liabilities without cost

7,059

411

7,471

8,338

1,756

10,095

2,624

----










Total long-term liabilities

11,562

1,516

13,077

22,116

2,886

25,002

11,924

----










TOTAL LIABILITIES

25,556

62,876

88,432

34,869

73,854

108,723

20,291

23%










TOTAL STOCKHOLDERS' EQUITY

31,904

9,290

41,194

19,071

23,207

42,278

1,084

3%



















LIABILITIES + EQUITY

57,460

72,166

129,626

53,940

97,061

151,001

21,375

16%


















INFRASTRUCTURE











2Q11

2Q12

Change








Points of sale in Mexico







Elektra (1)

933

40%

961

16%

28

3%

Salinas y Rocha (1)

55

2%

55

1%

-

0%

Freestanding branches (2)

875

38%

1,825

31%

950

----

Total

1,863

80%

2,841

48%

978

52%








Points of sale in Central and South America







Elektra (3)

207

9%

233

4%

26

13%

Freestanding branches

251

11%

326

6%

75

30%

Total

458

20%

559

10%

101

22%








Points of sale in North America







Advance America

-

-

2,471

42%

2,471

----

Total

-

-

2,471

42%

2,471

----








TOTAL

2,321

100%

5,871

100%

3,550

----















(1) Each store has a Banco Azteca branch.

(2) In 2Q12, includes 45 Bodegas de Remate that continues operating only financial services.

(3) In 2Q12, only 206 Central and South America Elektra's store have a Banco Azteca branch.






















Floor space (m2)







Elektra Mexico

818,735

72%

831,862

67%

13,127

2%

Elektra Central and South America

158,333

14%

164,482

13%

6,149

4%

Salinas y Rocha

59,614

5%

58,995

5%

(619)

-1%

Freestanding branches

99,803

9%

188,825

15%

89,022

89%

TOTAL

1,136,485

100%

1,244,164

100%

107,679

9%






















Employees







Mexico

35,701

84%

52,979

76%

17,278

48%

Central and South America

6,996

16%

10,275

15%

3,279

47%

North America

-

-

6,143

9%

6,143

----

Total employees

42,697

100%

69,397

100%

26,700

63%



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



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