Accumulated consolidated Net Sales as of December 31, 2017 posted a growth of 0.1%, amounting to $ 17,553.9 million vs $ 17,543.7 million in 2016 amid a challenging economic outlook for consumption in Mexico and also high levels of uncertainty in our target market in the US.

The operations in Mexico were the main driver of the consolidated results, reaching an annual increase of 3.0% in Net Sales. The foregoing was mainly boosted by the origination of loans with a payroll payment discount, both for the acquisition of merchandise and cash arrangements. The objective has been to consolidate a mix of high quality and strengthen the credit origination criteria, thus allowing an advance in the improvement of the customer profile by means of criteria aimed at the specific characteristics of each place, instead of doing in a centralized form, at the same time to pursue the reduction of credit risk. Similarly, the impulse provided to advertising campaigns and discount programs, implemented continuously for durable goods throughout the year, representing a catalyst for the increase in sales.

In the same way, during 2017, continuity was reinforced in the strengthening of the structure and operation of the door-to-door channel.

During 2017 FAMSA USA´s sales posted a 19.2% decrease in pesos, while in U.S. dollars decreased 19.7%, reflecting: i) the increase in the uncertainty of the Hispanic population in E.E.U.U. for strict immigration measures in that country; ii) the climatic effects caused by the concentration of most of our stores in E.E.U.U .; and, iii) to a lesser extent, for the purposes of the appreciation of the peso against the dollar.

Consolidated Same Stores Sales (SSS) recorded an annual increase of 1.7% in 2017. Same Store Sales (SSS) of Famsa México grew 3.7% during fiscal year 2017, providing support for the expansion of this indicator. Same Store Sales (SSS) of Famsa USA, excluding the effect by exchange rate, decreased by 17.0% YoY in 2017.

It is important to mention that the Company adopted in advance IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from contracts with customers", with retrospective effects as of January 1, 2017. It is suggested to consult notes 3 and 5 that are part integral to the audited consolidated financial statements of the Company as of December 31, 2017 that explain the accounting changes derived from these adoptions.

For the full‐year 2017, Consolidated Cost of Sales decreased 0.8% in its annual comparison, totaling Ps.9,650 million. The interest on Deposits posted the largest variation, amounting to Ps.1,376 million for the twelve‐month period ended December 31, 2017, or up 63% versus 2016. This is attributed to the expanded Bank Deposits base, as well as the gradual increase in the average cost of funding throughout the year derived from the rise in the interest reference rate in Mexico.

2017 Consolidated Gross Profit registered a 1.1% growth, reaching Ps.7,904 million, compared to the Ps.7,819 million in 2016. The slight variation recorded in sales, as well as the associated reduction in cost of sales, contributed to this result. It is worth mentioning that the Consolidated Gross Margin expanded by 40 basis points during 2017, reaching 45.0% vs. 44.6% recorded in 2016. The foregoing, despite the higher interest on deposits, which was offset by the efficiencies achieved in the risk management of the Company’s Consolidated Loan Portfolio, recording a decrease in allowances for doubtful receivables in 2017.

For the full‐year. 2017, Consolidated Operating Expenses (sales and administrative expenses) decreased by 3.7% YoY to reach Ps.6,788 million, despite the inflation hike closed at one of its highest levels in recent times (+6.77%). This variation is attributed to the initiatives implemented by the Management, through an operating cost reduction program launched in February 2017, highlighting the savings generated in Famsa USA’s cost structure, in which we seek to align the expenses to the new level of sales in the United States.

The item of Other Income experienced a growth of 30.4% reaching a total of $ 294.1 million. During 2017, the Company entered into three buy- sale agreements for the sale of real estate from third parties. These transactions resulted in a gain on sale of fixed assets for an accumulated amount of Ps. 239.9 million.

Similarly, Operating Expenses, including Other Income (expenses) net, for the full year 2017 totaled Ps. 6,493.4 million, which are comparable to the expenses incurred during 2016 and that amounted Ps. 6,825.1 million, representing an annual decrease variation of 4.9%.

It is important to mention that the Company adopted in advance IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from contracts with customers", with retrospective effects as of January 1, 2017. It is suggested to consult notes 3 and 5 that are part integral to the audited consolidated financial statements of the Company as of December 31, 2017 that explain the accounting changes derived from these adoptions.

In 2017, Consolidated EBITDA amounted to Ps.1,824 million, increasing 29.2% compared to the Ps.1,441 million in 2016, above the upper part of the 2017 Guidance range (Ps.1,600 – Ps.1,700 million) announced at the beginning of the year. Additionally, the Consolidated EBITDA margin expanded by 240 bps., reaching 10.4% at year‐end 2017 compared to 8.0% in 2016. Famsa Mexico was the business unit which contributed to the generation of operating efficiencies and recorded a greater dynamism in sales. As for Famsa USA, major adjustments in its operational structure were made throughout 2017, seeking to stabilize its margins at the new level of sales.

Net Financial Income in 2017 were Ps. 660.1 million, amount that represent a decrease of 39.7% vs. 2016, derived from a lower exchange rate of the MXN vs. USD, which resulted in a FX gain of Ps.152 million, vs. the negative figure of Ps.548 million in 2016, this is, a positive variation of 127.8%. On the other hand, financial expenses (“interest paid”) amounted to Ps.1,103 million at year‐end 2017, an increase of 19.0% compared to Ps.927 million in 2016. This increase is aligning with the upward trend in the TIIE (+150 bps.) registered during 2017, as well as the financial expenses incurred as a result of the advance payment of the Company’s Senior Notes due 2020, for a total amount of US$110 million, carried out in September same year.

For the full‐year 2017, Consolidated Net Income totaled Ps.307 million, compared to the positive result of Ps.346 million recorded in 2016.

In 2017, a fiscal reform bill was approved in USA, having a significant impact on Grupo Famsa’s deferred taxes, as the income tax rate decreased from 35.0% to 21.0%. Consequently, when applying this new tax rate to temporary items, the positive effect of the deferred income tax recorded was lower than the estimates for the previous year.

It is important to mention that the Company adopted in advance IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from contracts with customers", with retrospective effects as of January 1, 2017. It is suggested to consult notes 3 and 5 that are part integral to the audited consolidated financial statements of the Company as of December 31, 2017 that explain the accounting changes derived from these adoptions.

The company celebrate an unconditional payment guarantee agreement in 2015, without any reserves, for an amount of Ps. 5,091 million, which was registered in the statement of financial position as collection rights, as part of current assets. The present value of this guarantee as of December 31, 2016 was Ps. 4,905.3 million, while as of December 31, 2017, it amounted to Ps. 4,104.7 million, amount that was reduced through the asset´s monetization (sale of real estate properties) that was carried out during 2017 and whose resources were mostly used for the amortization of short-term liabilities of the Company.

As of December 31, 2017 the consolidated balance of Trade Receivables was Ps.25,200 million, net of allowances for doubtful receivables, 2.7% lower than the balance recorded in 2016.

The Company adopted the IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” in advance and with retrospective effects as of January 1, 2017. Changes in Grupo Famsa’s consolidated financial statements as of January 1, 2017 arising from these standards’ adoptions are described below:

• The IFRS 9 establishes the use of the expected loss model and not the incurred loss model to evaluate the loan portfolio impairment. As of January 1, 2017, the effect of the adoption of this standard was an increase of Ps.3,360 million in allowances for doubtful receivables, charged to retained earnings, before the effects of deferred income taxes.
• The IFRS 15 establishes that the Company must adjust the committed amount of consideration to gauge the effects of the time value of money. The former applies if the payment term agreed upon by the contract parties, explicitly or implicitly, provides the customer a significant financing benefit through the transfer of goods or services to the customer. As of January 1, 2017, the adoption effect for this concept was a decrease in the long‐term customer portfolio for an amount of Ps.1,234 million, charged to retained earnings, before the effects of deferred income taxes.

For more details, see notes 3 and 5, which are an integral part of the Company's audited consolidated financial statements as of December 31, 2017, explaining the accounting changes arising from these adoptions.

The inventory balance at the end of December 2017 were reduced by 4.3% compared to 2016, resulting in Ps.2,445.2 million pesos, mainly due for the maintenance of price by suppliers and to a lesser extent by the appreciation of the peso against the US dollar (United States operation).

During 2017, Bank Deposits increased, in a double digit, reaching an 18.7% YoY, representing Ps.24,994.2 million, dispersed in around 1.2 million active accounts as a result of the execution of various commercial campaigns aimed at promoting the opening of new accounts, and following the acceptance of our portfolio of financial services offered in our extensive branch network. Those initiatives maintained the success in clients of acquisition and origination, focused strongly on those who belong to the formal sector of the economy. Given the above, in the year a 64.0% share of clients from the formal sector of the economy was reached, which increased by 3 percentage points from the 61.0% recorded in the same period of 2016.

At the end of 2017, 73.5% of Grupo Famsa's funding came from Bank Deposits compared to 67.8% in 2016.

On the other hand, Interest on Banking Deposits in 2017 totaled $ 1,376.0 million, that is, an increase of 63.0% YoY, derived mainly from the growth in the balance in Bank Deposits and the increase in the benchmark interest rate in Mexico. The average funding rate was 6.5% at the end of 2017, higher by 200 pbs. against that registered in 2016.

Net Debt at the end of 2017, excluding Banking Deposits, totaled $ 7,382.8 million, a 13.1% decrease compared to $ 8,497.1 million in 2016, mainly as a result of the application of the resources obtained in the monetization of assets for $ 1,127.0 million driven in 2017, and whose resources obtained were destined mostly to the payment of short-term liabilities. Likewise, the appreciation of the peso against the dollar registered in the period and the 9.3% increase in the cash and cash equivalents account, which went from $ 1,503.6 million in 2016 to $ 1,643.1 million in 2017.

Additionally, in July 2017, a new credit facility was contracted with Bancomext, in terms of semi-annual amortizations of 10-year capital, with which the early redemption of US $ 110 million of the senior notes due in 2020 was carried out. As a whole, the shares significantly improved the financial leverage and the maturity profile of the Company, as well as contributing to reduce Grupo Famsa's exposure to exchange rate fluctuations, reducing its liabilities in dollars, from 55.6% in December 2016 to 34.5% in December 2017.

Given the above, the balance of the Gross Debt as of December 31, 2017, excluding Bank Deposits, were reduced by 9.7% compared to 2016.

The shareholders' equity amounted to Ps.7,255 million as of December 31, 2017, showing a decrease of 12.8% when compared to the balance at year‐end 2016, mainly due to the decrease in retained earnings associated to the early adoption of IFRS 9 and IFRS 15.

The changes in the Grupo Famsa’s consolidated financial statements resulting from these standards’ adoption as of January 1, 2017, represented an adjustment of Ps.2,853 million. Each of these effects are described below in greater detail:

1. The IFRS 9 establishes the use of the expected loss model and not the incurred loss model to evaluate the loan portfolio impairment. As of January 1, 2017, the effect of the adoption of this standard was an increase of Ps.3,360 million in allowances for doubtful receivables, charged to retained earnings, before the effects of deferred income taxes.
2. The IFRS 15 establishes that the Company must adjust the committed amount of consideration to gauge the effects of the time value of money. The former applies if the payment term agreed upon by the contract parties, explicitly or implicitly, provides the customer a significant financing benefit through the transfer of goods or services to the customer. As of January 1, 2017, the adoption effect for this concept was a decrease in the long‐term customer portfolio for an amount of Ps.1,234 million, charged to retained earnings, before the effects of deferred income taxes.
3. The IFRS 15 establishes that certain incremental costs in which the Company incurs to obtain contracts with customers must recognized as a deferred asset. As a result of the foregoing, the Company has identified certain fees paid to sellers for loan origination as incremental costs subject to capitalize. As of January 1, 2017, the effect of the capitalization of these incremental costs was a Ps.518 million charge to other non‐current assets with a credit to retained earnings, before the effects of deferred income taxes.
4. The net effect of deferred income taxes associated to the changes described lines above as of January 1, 2017, represented a Ps.1,223 million charge to deferred income taxes with a credit to retained earnings.

For more details, see notes 3 and 5, which are an integral part of the Company's audited consolidated financial statements as of December 31, 2017, explaining the accounting changes arising from these adoptions.