Shikun & Binui Reports Results of the First Half of 2019 With NIS 486 Million in Net Profit

AIRPORT CITY, Israel, Aug. 21, 2019 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the second quarter and first half, ended June 30, 2019.

FINANCIAL HIGHLIGHTS OF THE FIRST HALF OF 2019

• Revenues in the first half of 2019 amounted to NIS 3.1 billion, an increase of 13.3% compared to the corresponding half last year. The increase was mainly due to real estate activity in Eastern Europe.
  
  
• Gross margin was approximately 14.9% compared to 11.9% in the same period last year. Gross profit for the period was NIS 463 million, compared with NIS 325 million in the same period last year. The improvement in the gross profit and the margins was due to the improvements in the operations in Africa, alongside significant apartment deliveries within the residential real estate operations in Eastern Europe.
  
  
• Net profit amounted to approximately NIS 486 million, compared with NIS 203 million in the same period last year.
  
  
• Cash flow from operations in the first half (excluding investment in land) amounted to NIS 509 million, compared with negative operating cash flow of NIS 505 million in the corresponding half last year. The positive cash flow is primarily due to an increase in the volume of collections at SBI and collections received at the real estate segment in Israel.

REAL ESTATE ACTIVITIES 

In the first half of 2019, housing sales totaled 1,089 housing units (in 100% terms), amounting to NIS 1.2 billion, of which 709 housing units were in Israel and 380 housing units were in Europe

Apartment deliveries were 1,013 (in 100% terms), of which 421 were housing units in Israel and 592 were housing units in Europe.

Additional Data on Company's Sale of Apartments (signed contracts) during First Half of 2019:

Data Regarding Delivery of Apartments to Customers during First Half of 2019:

Israel Real Estate: Significant increase in the volume of transactions signed during the first half of the Or Yam project

• During the first half of the year, transactions for the sale of 709 housing units were signed, amounting to NIS 1 billion, following the success of the Or Yam project.

RED International Real Estate: Significant Increase in Income and Profit Following delivery of 592 Housing during the first half of the year

• Revenues in the first half amounted to NIS 298 million, an increase of NIS 223 million compared to the corresponding half last year, as a result of delivery of 592 housing units mainly in Warsaw (351 housing units), Belgrade (113 housing units), Prague and Bucharest (128 units).
• Gross profit in the first half amounted to NIS 80 million, compared with NIS 9 million in the corresponding half last year.

Successful realization of most of the Group's shares in ADO

The company completed four transactions to sell 30% of ADO Group shares for approximately NIS 720 million, following which it recorded a pre-tax profit of NIS 480 million, as well as pre-tax profit from revaluation of the remaining balance of the Company's investment in ADO Group (7.5%) amounting to approximately NIS 59 million.

PROJECT CONTRACTING

Solel Boneh: Significant volume of wins for new projects since the beginning of the year

• Total rights in projects and new works received from the beginning of the year up to the date of the current report, amounted to NIS 2.2 billion. These include winning the road construction project and extending bridges as part of the construction of the Eastern Railway, construction of two other sections of the Southern Barrier, construction of the Bezalel Campus in Jerusalem, foundation works in the Tel Aviv Spiral Tower and others.

SBI International Infrastructure and Construction (excluding US): Significant improvement in profitability

• A marked improvement in the gross margin was noted, which reached 17.9% in the first half of 2019, compared with 9.6% in the first half of last year. The improvement in profitability was mainly due to projects in Nigeria, projects in Uganda as well as the project to establish the airport in Uganda. Net profit amounted to approximately NIS 38 million, compared with net loss of NIS (73) million in the same period last year.
• Toll Road Project in Colombia: On February 1, 2019, the Section 1 delivery document was signed with no penalty. With the receipt of the section by the customer, the operating period commenced as stipulated in the franchise agreement, under which the franchisee will begin to receive revenue from available payments and fees, in accordance with the agreement.
      
  
  Due to the delays in the schedule in the agreement, the financers decided to suspend the continued financing until the handovers of sections 2 and 3, and reached agreement on the continuing of work on sections 4 and 5 (in which the works were delayed due to a force majeure). However, the franchisee and the financiers are in discussions regarding the receipt of a waiver and arranging for continued financing to establish sections 4 and 5. Given the above, an appropriate provision has been made and included in the financial statements.

SBA US Infrastructure and Construction Contracting: Continued to broaden operations and implement US expansion strategy

• Completion of the acquisition of US Infrastructure and Construction Contracting Company: On April 16, 2019, the transaction was completed as part of the Company's strategy to expand its operations in the United States. The company is engaged in civil infrastructure contracting with an emphasis on bridges, transport infrastructure and marine works.
• Project SH-288: There was a delay within the project for building the toll road in Texas. Consequently, the update to the expected completion of the project resulted in a loss of NIS 53 million in the first half of 2019.

PROJECTS AND INCOME GENERATING ASSETS

In April, all approvals were required to operate the Ashalim project

The project totals the supply of 121 megawatts of electricity, for an operating period ending in 2043.

Road 6 Operating Company (Derech Eretz) Transaction

In May, Keystone REIT Ltd. entered into an agreement for the acquisition of the Road 6 Operating Company (Derech Eretz) from third parties with some of the holdings expected to be transferred to the Shikun & Binui.

As the transactions and agreements are executed, the Company is expected to increase its control of the Road 6 Operating Company and record an estimated profit of NIS 100 million as a result of the investment revaluation.

Genari 2 Transaction

In June, the sale of the Genari 2 project was completed, a BOT project with a construction cost of NIS 515 million for the planning, construction, maintenance and financing of the new Jerusalem Government Campus. Net proceeds from the transaction amounted to NIS 79 million and a profit after tax of NIS 34 million.

Continued takes steps to reduces financial leverage

The Company's financial debt as at June 30, 2019 was NIS 8.0 billion, compared with NIS 8.4 billion as of December 31, 2018.

Net financial debt, excluding non-recourse loans, was NIS 3.5 billion at the end of June, compared with NIS 4.0 billion at the end of 2018.

Streamlining

Management continued implementing steps to reduce expenses across the Group.

On May 26, 2019, following the approval of the Compensation Committee and the Board of Directors of the Company, the Company approved the engagement of Mr. Lapidot's terms and employment as the Company's CEO. Mr. Lapidot began his term on June 2, 2019.

INVESTORS CONFERENCE CALL

Shikun & Binui will host a conference call in English for investors on August 21, 2019 starting at 10:30am Eastern Time to discuss the financial results. Management will also be available to answer investor's questions, after presenting the results.

To participate, please call one of the following teleconferencing numbers:

At: 10:30am Eastern Time, 7:30am Pacific Time, 3:30pm UK Time, 5:30pm 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.

ABOUT THE SHIKUN & BINUI GROUP

Shikun & Binui is Israel's leading infrastructure and real estate company – a global corporation that operates through its subsidiaries in Israel and across the world. Active in more than 20 countries on four continents, Shikun & Binui is involved in various fields, including infrastructure, real estate development, water, energy, and concessions.

SAFE HARBOR STATEMENT

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.

CONTACTS

SOURCE Shikun & Binui Ltd.

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