Shikun & Binui Announces Financial Results For Q3 & First Nine Months of 2014
Ofer Kotler, Shikun & Binui's CEO commented: "The Israeli real estate market is awaiting several important regulatory decisions that will impact the future of many households in Israel. Shikun & Binui, as a leading real estate and infrastructure company in Israel, is ready for any decision that will be made and will continue to build quality projects at the highest standards in all areas in which we are active in Israel and globally."
Tal Raz, Shikun & Binui's CFO said: "In the third quarter of this year, the Group's net profit more than doubled compared with last year. We registered significant revenue growth and we announced a dividend distribution of NIS 65 million to our shareholders. We believe that our strategy will continue to bring us further achievements and value creation also into the future."
Conference Call:
The Company will host an interactive conference call on Tuesday, November 25, at 9:30am Eastern Time. Ofer Kotler, Chief Executive Officer, and Tal Raz, Chief Financial Officer, will host the call and will be available to answer questions after discussing the results.
To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, try the international dial-in number.
At: 9:30am Eastern Time, 6:30am Pacific Time, 2:30pm UK Time, 4:30pm Israel Time
For those unable to participate, the teleconference will be available for replay on the company's website at http://en.shikunbinui.co.il/ beginning 24 hours after the call.
Financial result for the first nine months of 2014:
Revenues: The Group's revenues for the first nine months of 2014 totaled NIS 4,441 million compared with NIS 4,655 million in the first nine months of 2013, a slight decline of 0.5%. The NIS 224 million decreases derived primarily from a NIS 227 million decline in the Israel Real Estate Development segment, due primarily to a decline in proceed received from apartment sales. This is despite the fact that the Company sold 511 apartments during the reporting period compared with 488 apartments in the first nine months of 2013, because the average price of apartments sold was lower: NIS 1.2 million compared with NIS 1.5 million in the first nine months of 2013 due to the change in the mix of apartments sold. In addition, the segment's revenues decreased by NIS 50 million due to the completion of the building phase for some of the buildings of the Student Dormitory project in Tel Aviv and the initiation of their operational phase. Revenues of the International Construction and Infrastructure segment decreased by NIS 166 million (including NIS 89 million due to the erosion of exchange rates) reflecting the completion of projects in Uganda and Tanzania and a slowing rate of activity for the Company's projects in Guatemala, countered partially by the receipt of initial revenues from Togo. Revenues of the Renewable Energy sector declined by NIS 117 million due to a reduced number of photovoltaic installations completed, and revenues of Concessions declined by NIS 58 million due to the completion of the construction phase of the North Road Project and the transition to its operational phase. In contrast, revenues of the Israel Infrastructure and Building segment increased by NIS 213 million, of which NIS 127 million were related to the execution of the BIG project in Ashdod and the Israel Police Training Center project, NIS 21 million to the increased activities of the segment's cement plants, and NIS 65 million to road work activities.
Gross profit: The Group's gross profit for the first nine months of 2014 totaled NIS 750 million (16.9% of revenues) compared with NIS 833 million (17.8% of revenues) in the parallel period of 2013. The decrease derived primarily from a NIS 73 million decline in the gross profit of the Israel Real Estate Development segment associated mainly with housing projects.
General and administrative expenses: The Group's general and administrative expenses in the reporting period increased by NIS 28 million compared with the parallel period of 2013, totaling NIS 280 million. The increase was driven mainly by an increase in executive compensation costs (the granting of blocked shares of stock) totaling NIS 13 million, an increase in the cost of building a visitor's center and the cost of the Company's 90th anniversary event.
Other expenses, net: The Group's other expenses, net, totaled NIS 12.6 million in the reporting period, compared with other income, net, of NIS 116.3 million in the first nine months of 2013. Other income, net for the first nine months of 2013 included NIS 55 million profit from the cancellation of a sale with the Ramat Gan Municipality recorded in the first quarter of 2013 which resulted in a cancellation payment received by the Company, and NIS 63 million profit from the sale of the Company's share in Derech Eretz that was recorded in the third quarter of 2013. In the second quarter, the Company recorded income of NIS 20 million related to the release of a provision taken previously to cover a potential debt after the obligation was cancelled as a result of an arbitration process in the Republic of Benin. This was countered by a NIS 38 million pre-tax expense recorded during the second quarter for the cancellation of the Company's commitment to publicly list the shares of Shikun & Binui Real Estate for trading, which was required by the term of the framework agreement signed with institutional investors as well as the cancellation of the listing itself. In addition, other expenses of the current reporting period include the profit from the sale of companies in the Czech Republic and Hungary.
Operating income: The Group's operating profit for the first nine months of 2014 totaled NIS 438 million, compared with NIS 682 million in the parallel period of 2013. The NIS 244 million decrease reflected a NIS 173 million decline in the operating profit of the Israel Real Estate Development segment, of which NIS 73 million was due to the segment's reduced gross profit and NIS 38 million due to the cancellation of the listing commitment, as explained above, while the operating income of the first nine months of 2014 benefited from the NIS 55 million gain generated from the abovementioned cancellation of the land deal with the Ramat Gan Municipality and the NIS 63.3 million gain from the abovementioned sale of the Company's share in Derech Eretz.
Net financing expenses: The Group's financing expenses, net, in the first nine months of 2014 totaled NIS 130 million, compared with NIS 154 million in the parallel period of 2013. The decrease derived primarily from the moderation in the rise of the Consumer Price Index (CPI) compared with the parallel period of 2013 (which increased by 0.1% compared with 2.01% during the first nine months of 2013), resulting in a NIS 68 million decrease in the costs of CPI-linked credit; a decline in the Prime Rate, which reduced long-term financing costs of unlinked debentures by NIS 6 million, and a NIS 8 million decline in the redemption and exchange of previously-issued series of debentures with other debentures carrying a lower rate of interest. This was countered partially by an increase in debenture interest expense of NIS 6 million as a result of the higher volume of issued debentures.
Taxes on income: The Group's taxes on income during the report period totaled NIS 85 million compared with NIS 144 million in first nine months of 2013. The decrease was primarily due to lower profit which led to NIS 46 million in the tax expense of the Israel Real Estate Development segment. Tax rebates in Nigeria totaling NIS 15 million also contributed to the reduction in tax expense during the reporting period.
Net profit (loss) of consolidated companies: Net profit of consolidated companies for the first nine months of 2014 totaled NIS 20 million compared with a loss of NIS 73 million in the parallel period of 2013, due primarily to the NIS 18 million in profit at the Group's Concessions subsidiaries compared to the NIS 12 million net loss posted by these subsidiaries during the prior year period, and a NIS 5 million provision taken during the current quarter in respect of the revaluation of the Group's Giltz subsidiary, compared with the NIS 35 million loss taken in respect of the Glitz revaluation, the NIS 5 million loss generated by the Group's International Real Estate Development segment and the NIS 23 million loss recorded by the Group's Concessions subsidiaries during the first nine months of 2013.
Net profit: The Group's net profit for the first nine months of 2014 totaled NIS 243 million compared with NIS 311 for the parallel period of 2013, reflecting the factors described above.
Financial results for the third quarter of 2014:
Revenues: The Group's revenues for the third quarter of 2014 totaled NIS 1,544 million compared with NIS 1,289 million for the third quarter of 2013, an increase of 19.8%. The NIS 255 million rise derived primarily from a NIS 199 increase in the Israel Real Estate Development segment, reflecting an increase in the number of apartments sold: 218 during the third quarter compared with 87 in the parallel period of 2013. In addition, the segment recorded a NIS 48 million increase in revenues from non-residential projects associated with the sale of a property in Rishon Letzion. The International Construction and Infrastructure segment recorded a revenue decrease of NIS 11 million, of which NIS 13 million was due to the erosion of currency exchange rates. This was countered by NIS 41 million revenue increase recorded by the Israel Infrastructure and Building segment, related primarily to the BIG project in Ashdod.
Gross profit: The Group's gross profit for the first three months of 2014 totaled NIS 304 million (19.7% of revenues) compared with NIS 211 million (16.4% of revenues) in the parallel period of 2013. The increase derived primarily from a NIS 75 million rise in the gross profit of the Israel Real Estate Development segment, reflecting the abovementioned increase in the number of apartments sold during the period, coupled with an increase of the gross margin of apartments sold during the reporting period (23% compared with 18% in the parallel period of 2013). The International Construction and Infrastructure segment contributed income of NIS 13 million during the reporting period, primarily reflecting activities in Nigeria.
General and administrative expenses: The Group's general and administrative expenses in the third quarter of 2014 increased by NIS 13 million compared with the parallel period of 2013, totaling NIS 97 million. The increase was driven mainly by the abovementioned increase in executive compensation costs (the granting of blocked shares of stock), and by the increase in costs of building the visitor's center and creating the Company's 90th anniversary event. .
Other expenses, net: The Group's other expenses, net, totaled NIS 5 million in the reporting period, compared with other income, net, of NIS 61 million recorded in the third quarter of 2013. In the third quarter of 2013, other income, net included the NIS 63 million profit that was recorded from the sale of the Company's share in Derech Eretz, as mentioned above.
Operating income: The Group's operating profit for the third quarter of 2014 totaled NIS 196 million compared with NIS 189 million in the parallel period of 2013, an increase of NIS 7 million due to the factors explained above.
Net financing expenses: The Group's financing expenses, net in the third quarter of 2014 totaled NIS 47 million compared with NIS 59 million in the third quarter of 2013. Financing expenses for the reporting period included NIS 78 million of interest paid on long-term credit, countered partially by interest income of NIS 12 million from loans granted to consolidated subsidiaries and NIS 14 million in income from customers and franchise agreements.
Taxes on income: The Group's taxes on income during the third quarter of 2014 totaled NIS 35 million compared with NIS 26 million in third quarter of 2013. The increase reflected a NIS 14 million rise in the tax expense of the Israel Real Estate Development segment due to its expanded profit during the reporting period.
Net profit (loss) of consolidated companies: Net profit of consolidated companies for the third quarter of 2014 totaled NIS 18 million, a sum derived primarily from the profit of the Group's Concessions subsidiaries and consolidated companies involved in the generation of electricity in Spain. This compares to a net loss of NIS 45 million during the parallel period of 2013.
Net profit: The Group's net profit for the third quarter of 2014 totaled NIS 131 million compared with NIS 59 million for the parallel period of 2013, reflecting the factors described above.
Israel Real Estate Development:
Revenues of the Israel Real Estate Development segment for the first nine months of 2014 totaled NIS 797 million compared with NIS 1,024 million in the parallel period of 2013, a decrease that was primarily due to a decline in apartment sale revenues. Despite an increase in the number of apartments sold during the reporting period to 511 from 488 during the first nine months of 2013 (Company's share), a change in the mix of apartments sold led to a decrease in the average price per apartment to NIS 1.2 million from NIS 1.5 million in the first nine months of 2013. In addition, income from the execution of the Tel Aviv Student Dormitory project declined by NIS 50 million due to the completion of the construction phase and the transition to the operational phase, and income from the sale on non-residential projects declined by NIS 37 million compared with the third quarter of 2013, a period that included the income from the sale of half of the company's rights in the 7th Avenue Mall in Beer Sheva and its rights in a shopping center in Ramat Aviv. The segment's gross profit for the reporting period totaled NIS 186 million (23% of sales) compared with NIS 259 million (25% of sales) in the first nine months of 2013. The decrease reflects the difference in the mix of apartments sold during the period. The segment's operating profit for the reporting period, during which the segment recorded NIS 38 million in operating expenses related to the cancellation of its commitment to publicly list the shares of Shikun & Binui Real Estate, totaled NIS 90 million compared with NIS 263 million in the first nine months of 2013, a period during which the Company recorded NIS 55 million of one-time income related to the cancellation of the land sale agreement with the municipality of Ramat Gan.
During the third quarter of 2014, the segment's revenues totaled NIS 383 million compared with NIS 184 million in the third quarter of 2013, an increase of NIS 199 million that derived from an increase in the number of apartments sold during the period (218 units compared with 87 units during the third quarter, Company's share). In addition, the segment recorded a NIS 48 million increase in revenues from the sale of non-residential projects compared to the third quarter of 2013 due to the sale of a project in Rishon Letzion. The segment's gross profit for the third quarter totaled NIS 107 million (28% of sales) compared with NIS 33 million (18% of sales) in the third quarter of 2013, an increase that reflects the higher number of apartments sold during the period, as explained above. The segment's operating profit for the quarter totaled NIS 86 million compared with NIS 30 million in the third quarter of 2013.
International infrastructure and construction:
Revenues for the International Infrastructure and Construction segment for the first nine months of 2014 totaled NIS 1,992 million compared with NIS 2,158 million in the first nine months of 2013. The NIS 166 decrease reflected primarily a NIS 89 million decline from the erosion of the dollar exchange rate, which decreased by 4.3% in the period compared to its average value in the first nine months of 2013, as well as by the completion of projects in Uganda and Tanzania and the slowing of the project in Guatemala. In the third quarter of 2013, the decline of revenues due to the erosion of the dollar exchange rate totaled NIS 13 million. This was countered partially by the receipt of initial revenues from Togo as a result of the segment's winning of a roads project there, and by an increase in revenues from Kenya as a result of the winning of an arbitration process. The segment's gross profit for the quarter totaled NIS 446 million compared with NIS 434 million in the first nine months of 2013, with the gross margin rising from 20% to 22%, an improvement due primarily to the projects in Nigeria and Kenya. Currency effects on the segment's gross profit totaled NIS 21 million. The segment's operating profit totaled 355 million (18% of sales) compared with NIS 329 million (15.2% of sales) in the first nine months of 2013. During the Third quarter, the segment recorded income of NIS 20 million related to the cancellation of a provision after the conclusion of the arbitration process for a project in the Republic of Benin. During the reporting period, the segment was awarded two new hydraulic projects in Guatemala.
Israel Infrastructure and Construction:
Revenues of the Israel Infrastructure and Construction segment for the first nine months of 2014 totaled NIS 1,609 million compared with NIS 1,396 million in the parallel period of 2013, a NIS 213 million increase that derived primarily from an expansion of the segment's project execution activities, especially due to execution of the BIG project in Ashdod and Police Instruction Center (NIS 127 million) and from an increase in the scope of the segment's road segment activities (NIS 65 million) as well as in the activities of its cement and prefabricated building plants (NIS 21 million). The segment's gross profit for the reporting period totaled NIS 89 million compared with NIS 85 million in the parallel period of 2013. The segment's operating profit totaled NIS 33 million (2% of revenues) compared with NIS 41 million (2.9% of revenues) in the first nine months of 2013. During the reporting period, the segment, together with its partners, was awarded a NIS 270 million project for building three railroad segments for Israel's new 'Red Line' (Company's share), and a NIS 300 million project for building the Operations & Maintenance Depot for the light rail's Red Line, which is expected to be carried out in the next few years.
Renewable energy:
Revenues of the Renewable Energy segment for the first nine months of 2014 totaled NIS 90 million compared with 207 NIS million in the first nine months of 2013, a NIS 117 million decline that was primarily due to a reduction in the number of photovoltaic facilities built. The installations are accounted for as "financial assets" whose construction expenses are recorded as revenues. During the parallel period of 2013, the Company built PV installations at a relatively faster rate. The segment's gross profit for the reporting period totaled NIS 30 million compared with NIS 42 million in the first nine months of 2013. The segment's operating profit for the reporting period totaled NIS 12 million compared with NIS 17 million for the parallel period of 2013, a decrease which derived from the factors explained above.
Concessions:
For the Concessions segment, revenues for the reporting period totaled NIS 41 million compared with NIS 99 million in the first nine months of 2013, a decline of NIS 58 million related primarily to the completion of the construction phase of the BOT North Road Upgrade and Maintenance Project and its transition to the operational phase. The segment's gross profit for the reporting period totaled NIS 12 million compared with NIS 13 million for the first nine months of 2013, and the segment's operating profit totaled NIS 1 million compared with NIS 5 million in the parallel period first of 2013.
About the Shikun & Binui Group
The Shikun & Binui Group is a global construction and infrastructure company that operates in Israel and internationally in seven segments: 1) infrastructure and construction contracting outside of Israel; 2) infrastructure and construction contracting within Israel; 3) real estate development within Israel; 4) real estate development outside of Israel; 5) renewable energy; 6) concessions; and 7) water. The Group's activities focus on large, highly complex projects carried out for entities in private and public sectors with a focus on sustainability.
This summary announcement was prepared solely for the convenience of the reader and does not replace Shikun & Binui Ltd.'s (hereafter – "the Company") full report. The information contained in this announcement is, by its nature, incomplete. All of its contents are provided as a supplement to the Company's report, and are subject to the declarations therein stated. This announcement includes forecasts, assessments, estimates and other information relating to the Company or its subsidiaries, or to other parties or to future events and matters, the extent of whose realization is not certain and is not under the sole control of the Company (forward-looking information, as defined in the Securities Law-1968). The key facts and data serving as the basis for this information are facts and data, among others, related to the current status of the Company and its businesses, facts and data relating to the current status of the operating segments in which the Company engages in its areas of operation, and other macroeconomic facts and data known to the Company on the preparation date of this presentation.
It is understood that forward-looking information does not constitute a fact and is based solely on subjective assessments. Forward-looking information is uncertain and for the most part, is not under the Company's control. The realization or non-realization of the forward-looking information will be influenced, among others, by the risk factors that characterize the Company's operations, as well as developments in the general environment and external factors that impact the Company's operations. The Company's future results and achievements could differ significantly from those presented in this presentation. The Company is not obligated to update or modify the said forecast or assessment, and is not obligated to update this announcement. This announcement does not constitute an offer to purchase the Company's securities or an invitation to receive such offers. An investment in securities in general, and in the Company in particular, carries risk. One must take into account that past data do not necessarily indicate future performance.
