Shikun & Binui Reports Strong First Quarter With Improvement Across all Operational Parameters

AIRPORT CITY, Israel, May 30, 2019 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the first quarter, ended March 31, 2019.

Tamir Cohen, Chairman of Shikun & Binui: "Shikun & Binui over the years has made ADO a leading company in the real estate market in Berlin, and has managed to realize its successful holdings and generate huge profits. These profits are now invested in new growth engines, of which their initial fruits are already visible in the Company's operations, and will continue to grow in the quarters and years ahead."

Moshe Lahmani, outgoing CEO of Shikun & Binui: "The impressive profit Shikun & Binui presents in the first quarter of 2019 is a continuation of the Company's financial strength over time, which will continue to accompany it for the years ahead."

FINANCIAL HIGHLIGHTS OF THE FIRST QUARTER OF 2019

    --  Revenues for the quarter totaled NIS 1.5 billion, an increase of 9.7%
        compared with the corresponding quarter last year. The increase is
        mainly due to real estate activity in Eastern Europe and Solel Boneh's
        activity in Israel.
    --  The gross margin is 15.9%, compared with 11.5% in the corresponding
        period last year. Gross profit for the period amounted to NIS 236
        million, compared to NIS 156 million in the corresponding quarter last
        year. The improvement in the gross profit and margin was mainly due to
        the improvement in activity in a number of projects in Africa, alongside
        strong results in real estate activity in Eastern Europe.
    --  Net profit totaled NIS 520 million, compared with NIS 27 million in the
        same quarter last year.
    --  Cash flow from operating activities in the first quarter totaled NIS 270
        million, compared with a negative cash flow of NIS 670 million in the
        corresponding quarter last year. The strong cash flow was mainly due to
        an increase in collections at Solel Boneh

CONSTRUCTION

Solel Boneh: Significant volume of new projects won since the beginning of the year, alongside an increase in the scope of execution

    --  Total wins of new projects from the beginning of the year until the
        report date, amounted to approximately NIS 1.8 billion, including
        winning a project for the construction of Highway 60 interchange (at NIS
        520 million), establishment of a campus in Jerusalem (at NIS 700
        million), and more.
    --  There was an increase in the scope of execution in the Tel Aviv light
        rail project, mainly at the stations: Abba Hillel, King Shaul and
        Arlosoroff.

SBI - International Building and Infrastructure Contracting Activities (excluding the US): significant improvement in profitability

    --  A significant improvement in the gross margin, which reached 18.7% in
        the first quarter of 2019, compared with 4% in the corresponding quarter
        last year. The improvement in profitability was mainly due to the
        projects in Nigeria, the reaching of an agreement with the buyer of the
        project in Kenya, and the project for the construction of the airport in
        Uganda.
    --  The toll road project in Colombia: Due to the delays in the agreement,
        the financing provider to the project decided to stop the continuation
        of the debt transfer until Sections 1, 2 and 3 were handed over, and
        reached an agreement regarding the continuation of work in sections 4
        and 5 (in which the work was suspended due to a force majeure). The
        financing providers to the project are in discussions to accept a waiver
        and an arrangement for the continued financing, and in view of the
        above, an appropriate provision was included in the financial
        statements.

US Building and Infrastructure Contracting Activities: Continued expansion of operations and implementation of the expansion strategy in the US

    --  Completion of the acquisition of Infrastructure and Construction
        Contracting in the United States - as part of the Company's strategy to
        expand its operations in the United States. The company engages in the
        field of civil infrastructure contracting, with an emphasis on bridges,
        transportation infrastructure and ongoing work.
    --  A delay in the construction of toll roads in Texas led to a decrease in
        revenues for the quarter compared to the corresponding quarter, last
        year.

Development of the Backlog amounting to NIS 13 billion as of March 31, 2019* (in NIS millions)

*The backlog as of March 31, 2019 does not include additional construction projects which total NIS 1 billion that the Company won, up to or after the reporting date. These include the Bezalel campus in the amount of NIS 330 million, the S1 infrastructure project totaling NIS 220 million, The Rosemary interchange, Highway 60, totaling NIS 150 million, etc., and excluding the execution of those projects carried out during the period up to the date of this report. In addition, the relative decrease in the orders backlog from December 31, 2017 onwards is attributed, among other things, to the effects of the early adoption of IFRS 15.

RESIDENTIAL REAL ESTATE DEVELOPMENT

In the first quarter of 2019, sales of apartments totaled approximately 786 housing units (in 100% terms) in the amount of approximately NIS 919 million, of which 591 residential units were in Israel and 195 residential units were in Europe.

Additional data regarding the Company's sale of apartments (signed contracts) during the first quarter of 2019:


                                       Apartment Units Under Company
                                        Management Including Partner
                                                    Share            
     Consolidated Companies   Companies Under Joint Control





                                Israel

    ---


       Sales                                                    809                        766

                   (NIS millions)

    ---

        Number of
         apartment sale
         contracts
         signed                                                  591                        578

    ---

        Average price
         of apartments
         sold                                                  1,369                      1,325

                   (NIS thousands)

    ---



                                Europe

    ---


       Sales                                                    110                         71                              14

                   (NIS millions)

    ---

        Number of
         apartment sale
         contracts
         signed                                                  195                        144                              14

    ---

        Average price
         of apartments
         sold                                                    565                        496                           1,022

                   (NIS thousands)

    ---

Data regarding delivery of apartments to customers during the first quarter of 2019:


                               
     Consolidated Projects Projects Under Joint
                                                        Control



                        Europe

    ---

        Revenues from
         apartments
         delivered (NIS
         millions)                                 121                     1

    ---

        Number of units
         delivered                                 235                     1

    ---

        Average price
         of apartments
         delivered (NIS
         thousands)                                516                 1,866

    ---

Real Estate Initiatives in Israel: Significant Increase in the Number of Transactions Signed During the First Quarter in the Or Yam project

    --  During the first quarter, deals were signed for the sale of 578
        residential units totaling NIS 766 million, following the success of the
        Or Yam project.

RED: Real Estate Activities Internationally: Significant increase in revenues and profit following the occupancy of 265 housing units in the quarter

    --  Revenues for the first quarter totaled NIS 145 million, an increase of
        NIS 127 million compared to the corresponding quarter, as a result of
        the occupancy of 265 apartments, mainly in Warsaw (120 units), Belgrade
        (84 units), Prague and Bucharest (61 units).
    --  Gross profit for the quarter amounted to NIS 35 million compared to NIS
        3 million in the corresponding quarter last year.

PROJECTS & IGAs (INCOME GENERATING ASSETS)

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

The Company completed four transactions for the sale of 30% of ADO Group, for a total consideration of NIS 720 million. As a result, it recorded a pre-tax profit of NIS 476 million, as well as a revaluation of the balance of the investment in ADO Group (7.5%) of NIS 109 million.

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

The project is for 121 megawatts, for an operating period ending in 2043.

Road 6 Operating Company Transaction

Subsequent to the date of the current report, it is reported that Keystone REIT (Ltd.) entered into an agreement with regard to the purchase of the operating company (Derech Eretz) from third parties, with part of the holdings being transferred to the Company.

Insofar as the transactions and agreements are executed, the Company is expected to gain control of the operating companies and record an estimated profit of NIS 100 million as a result of revaluation of the investment.

Continued Implementation of steps to reduce leverage

The Company's financial debt as of March 31, 2019 was NIS 8,125 million, compared with a financial debt of NIS 8,410 million as of December 31, 2018. In addition, after the balance sheet date, the Company repaid a further NIS 260 million of debt.

The net financial debt excluding non-recourse debt and excluding liabilities in respect of leasing amounted to NIS 3,164 million at the end of the quarter, compared with NIS 3,980 million at the end of 2018.

On May 26, 2019, following the approval of the remuneration committee and the Board of Directors of the Company, the General Meeting approved the Company's engagement with regard to the terms of service and employment of Mr. Lapidot as CEO of the Company.

MANAGEMENT COMMENT

Tamir Cohen, Chairman of Shikun & Binui: "In the first quarter of 2019, the Group presented an improvement in all operational parameters. Our improvement resulted from increased activity in a variety of projects and improved profitability, but also from the significant deal for the sale of most of the Group's holdings in ADO. Over the years, Shikun & Binui has made ADO a leader in the real estate market in Berlin, and has managed to realize its successful holdings and generate a large profit. These profits are now invested in new growth engines, of which their initial fruits are already visible in the Company's operations, and will continue to grow in the quarters and years ahead. We continue to move forward in Africa, continue to expand in North America, and we will take this momentum to other areas of our activity."

Moshe Lahmani, outgoing CEO of Shikun & Binui: "The impressive profit which Shikun & Binui presents in the first quarter of 2019 is a continuation of the Company's long-term financial strength, which will continue to accompany it in the years ahead. The good results of the past year enable us to meet the challenges of the future, ready and firm. The various business units presented excellent results on all levels of activity. Our financial strength is a product of being conservative in the realizing assets and in the financial management of the Group. I leave behind a strong and quality organization with excellent employees and managers, and feel proud to leave against a background of such impressive results."

INVESTORS CONFERENCE CALL

Shikun & Binui will host a conference call on May 30, 2019 starting at 9am 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:

US: 1-888-668-9141
UK: 0-800-917-5108
Israel: 03-918-0610
International: +972-3-918-0610

At: 9am Eastern Time, 6am Pacific Time, 2pm UK Time, 4pm 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

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; and 6) concessions. The Group's activities focus on large, highly complex projects carried out for entities in private and public sectors with a focus on sustainability.

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.


                                    Condensed Consolidated
                                     Interim Statements of
                                     Financial Position as at

    ---





                                                              
     
            Mar-31 
     
            Mar-31  
     
            Dec-31


                                                                           2019               2018                2018



                                                                   (Unaudited)        (Audited)



                                                                  NIS thousands     NIS thousands      NIS thousands





                     Assets


        Cash and cash equivalents                                     2,929,252          1,635,240           2,491,867



       Bank deposits                                                   680,429            547,568             781,879


        Short-term loans and
         investments                                                    149,895             73,193             129,150


        Short-term loans to
         investee companies                                              13,340              4,959              25,001


        Trade receivables - accrued
         income                                                       2,756,319          2,759,388           2,830,251


        Inventory of buildings held
         for sale                                                     1,510,685          1,541,471           1,587,147


        Receivables and debit
         balances                                                       473,825            489,128             497,394


        Other investments, including
         derivatives                                                    617,204            322,507             376,642


        Current tax assets                                               45,160             22,571              39,287



       Inventory                                                       155,681            196,427             160,518


        Assets classified as held
         for sale                                                       384,389            654,472             716,062



                     Total current assets                             9,716,179          8,246,924           9,635,198




        Receivables and contract
         assets


         in respect of concession
          arrangements                                                1,155,885            657,291           1,065,753


        Non-current inventory of
         land (freehold)                                                978,715            807,212             938,127


        Non-current inventory of
         land (leasehold)                                               696,807            664,846             705,172


        Investment property, net                                        926,985            865,211             862,282



       Land rights                                                      13,423             13,248              13,422


        Receivables, loans and
         deposits                                                       207,542            507,036             211,766


        Investments in equity-
         accounted investees                                            437,381            634,538             403,773


        Loans to investee companies                                   1,148,927            501,524           1,099,937


        Deferred tax assets                                             156,859            202,716             299,144


        Property, plant and
         equipment, and right-of-
         use assets, net                                              1,343,512            942,471           1,076,317


        Intangible assets, net                                          372,464            292,392             364,911



                     Total non-current assets                         7,438,500          6,088,485           7,040,604




                     Total assets                                    17,154,679         14,335,409          16,675,802


                                    Condensed Consolidated
                                     Interim Statements of
                                     Financial Position as at
                                     (cont'd)

    ---





                                                                         Mar-31        
      
             Mar-31        
     
              Dec-31


                                                                  2019                       2018                       2018



                                                                         (Unaudited)                  (Audited)



                                                                         NIS thousands              NIS thousands              NIS thousands



                     Liabilities


        Short-term credit from
         banks and others                                      1,367,280                  1,164,185                  1,529,542


        Subcontractors and trade
         payables                                              1,604,975                  1,331,316                  1,657,591


        Short-term employee
         benefits                                                173,736                    138,608                    160,792


        Payables and credit balances
         including derivatives                                   618,176                    555,752                    638,652


        Current tax liabilities                                   97,047                    104,330                     84,623



       Provisions                                               163,906                    259,963                    172,364


        Payables -customer work
         orders                                                1,426,460                  1,471,982                  1,483,675


        Advances received from
         customers                                               495,048                    408,484                    323,684


        Liabilities classified as
         held for sale                                           362,173                    381,290                    360,954



                     Total current liabilities                 6,308,801                  5,815,910                  6,411,877





        Liabilities to banks and
         others                                                3,356,830                  2,629,407                  3,200,074



       Debentures                                             3,676,838                  3,434,637                  3,680,283



       Employee benefits                                         44,554                     50,907                     46,130


        Deferred tax liabilities                                 114,668                    115,939                    119,665



       Provisions                                               241,172                    104,003                    260,418


        Excess of accumulated losses
         over cost of investment


         and deferred credit balance
          in investee companies                                  125,721                     54,704                     97,408



                     Total non-current
                      liabilities                              7,559,783                  6,389,597                  7,403,978





                     Total liabilities                        13,868,584                 12,205,507                 13,815,855





                     Equity


        Total equity attributable to
         owners



        of the Company                                        2,951,978                  1,861,274                  2,531,765


        Non-controlling interests                                334,117                    268,628                    328,182



                     Total equity                              3,286,095                  2,129,902                  2,859,947









                     Total liabilities and equity             17,154,679                 14,335,409                 16,675,802


                                    Condensed Consolidated
                                     Interim Statements of
                                     Income

    ---





                                                                                 
      
            For the


                                                             For the three-month
                                                                 period ended             year ended



                                                           
     
                Mar-31  
      
            Mar-31  
     
            Dec-31


                                                                            2019                 2018                2018



                                                                 (Unaudited)             (Audited)



                                                                   NIS thousands       NIS thousands      NIS thousands





        Revenues from work
         performed and sales                                           1,487,120            1,355,418           6,331,518




        Cost of work performed
         and sales                                                   (1,251,122)         (1,199,428)        (5,371,928)





                     Gross profit                                        235,998              155,990             959,590




        Gain (loss) on sale of
         investment property                                               (310)               2,971             125,949


        Selling and marketing
         expenses                                                       (12,526)            (10,204)           (40,089)


        Administrative and
         general expenses                                               (92,391)            (97,583)          (415,472)


        Share of profits
         (losses) of equity
         accounted


         investees (net of tax)                                         (36,878)               (976)             19,141


        Other operating income                                           614,331                6,484             389,504


        Other operating
         expenses                                                        (4,772)            (11,462)          (135,578)





                     Operating profit                                    703,452               45,220             903,045





        Financing income                                                 123,886              100,609             261,136


        Financing expenses                                             (124,720)            (94,480)          (530,652)





                     Net financing expenses                                (834)               6,129           (269,516)





                     Profit before taxes on
                      income                                             702,618               51,349             633,529


        Taxes on income                                                (183,882)            (24,117)           (74,233)





                     Profit for the period                               518,736               27,232             559,296





                     Attributable to:


        Owners of the Company                                            508,700               17,099             494,995


        Non-controlling
         interests                                                        10,036               10,133              64,301





                                                                         518,736               27,232             559,296





                     Basic earnings per
                      share (inNIS)                                         1.27                 0.04                1.24





                     Diluted earnings per
                      share (inNIS)                                         1.27                 0.04                1.22


                                    Condensed Consolidated
                                     Interim Statements of
                                     Comprehensive Income (Loss)

    ---







                                                                                       
      
            For the


                                                                   For the three-month
                                                                       period ended             year ended



                                                                 
     
                Mar-31  
      
            Mar-31  
     
            Dec-31


                                                                                  2019                 2018                2018



                                                                       (Unaudited)               (Audited)



                                                                         NIS thousands       NIS thousands      NIS thousands





                     Profit for the period                                     518,736               27,232             559,296




                     Other comprehensive income
                      (loss)




                     Other comprehensive income
                      (loss) items that


                      after initial recognition in
                       comprehensive


                      income were or will be
                       transferred to


                      profit or loss




        Foreign currency translation
         differences


         for foreign operations                                              (107,330)              63,607             227,416




        Effective portion of change
         in


         fair value of hedge of
          foreign operation                                                      5,240              (1,880)           (11,240)




        Net change in fair value of
         financial assets at fair
         value


        through other comprehensive
         income, net of tax                                                     18,885             (17,721)             13,398




        Effective portion of change
         in


         fair value of cash flow
          hedge                                                                 14,496                9,511              17,447




                     Other comprehensive loss
                      items that will


                      not be transferred to profit
                       loss




        Re-measurement of defined
         benefit plan, net of tax                                                                                         141





                     Total other comprehensive
                      income (loss)                                           (68,709)              53,517             247,162





                     Total comprehensive income
                      for the period                                           450,027               80,749             806,458





                     Total comprehensive income
                      attributable to:




        Owners of the Company                                                  439,507               70,652             736,807




        Non-controlling interests                                               10,520               10,097              69,651





                     Total comprehensive income
                      for the period                                           450,027               80,749             806,458


                                    Operating Segments

    ---



                                                                                                   
             
                For the three month period ended March 31, 2019 (unaudited)



                                                                                     
         
               Infrastructures


                                                                                            
             
                and


                                                       
         
           Infrastructures   
          
               construction      
              
                Infrastructures


                                                              
         
                and 
         
               (international)                  
              
                and     
              
        Real estate    
     
         Real estate


                                                         
          
           construction     
          
               (excluding         
              
                construction     
              
        development    
     
         development


                                                           
          
             (Israel)       
             
                USA)                
              
                (USA)        
              
        (Israel)        (international)     
     
     Concessions      Energy       Other    
       
     Adjustments    
        
     Consolidated



                                                                                                                       
              
                NIS thousands






       Total external revenues                                              659,724                            321,884                                        78,702                          244,998                 145,085               13,968       72,022       12,005              (61,268)              1,487,120



       Inter-segment revenues                                                97,687                                                                                                              19                                                                                 (97,706)






       Total revenues                                                       757,411                            321,884                                        78,702                          245,017                 145,085               13,968       72,022       12,005             (158,974)              1,487,120






       Segment profit (loss) before



        income tax                                                           22,874                             59,640                                      (32,861)                          46,248                  26,239               37,204       15,077      579,756              (51,559)                702,618







                                                                                                 
             
                For the three month period ended March 31, 2018 (unaudited)



                                                                                     
         
               Infrastructures


                                                                                            
             
                and


                                                       
         
           Infrastructures   
          
               construction      
              
                Infrastructures


                                                              
         
                and 
         
               (international)                  
              
                and     
              
        Real estate    
     
         Real estate


                                                         
          
           construction     
          
               (excluding         
              
                construction     
              
        development    
     
         development


                                                           
          
             (Israel)       
             
                USA)                
              
                (USA)        
              
        (Israel)        (international)     
     
     Concessions      Energy       Other    
       
     Adjustments    
        
     Consolidated



                                                                                                                       
              
                NIS thousands






       Total external revenues                                              666,513                            322,158                                       106,343                          273,998                  18,276               10,764       60,465        9,261             (112,360)              1,355,418



       Inter-segment revenues                                                72,510                                                                                                              19                                                                                 (72,529)






       Total revenues                                                       739,023                            322,158                                       106,343                          274,017                  18,276               10,764       60,465        9,261             (184,889)              1,355,418






       Segment profit (loss) before



        income tax                                                           28,497                             11,807                                        14,793                           59,796                 (9,155)              23,666     (10,850)     (7,764)             (59,441)                 51,349


                                    Operating Segments(cont'd)

    ---







                                                                                                               
              
            For the year ended December 31, 2018 (audited)



                                                                                             
           
             Infrastructures


                                                                                                      
           
                and


                                                               
         
           Infrastructures   
            
             construction   
             
                Infrastructures


                                                                      
         
                and 
           
             (international)              
              
                and     
         
       Real estate    
     
         Real estate


                                                                 
          
           construction     
            
             (excluding     
              
                construction     
         
       development    
     
         development


                                                                   
          
             (Israel)       
            
             USA) (*)        
              
                (USA) (*)        
        
        (Israel)        (international)     
     
     Concessions      Energy       Other    
       
     Adjustments    
        
     Consolidated



                                                                                                                               
          
                NIS thousands






       Total external revenues                                                    1,355,063                          2,850,687                                   485,278                    987,301                 499,354               55,910      503,563       45,184             (450,822)              6,331,518



       Inter-segment revenues                                                                                         433,445                                                                  76                                                                                (433,521)






       Total revenues                                                             1,355,063                          3,284,132                                   485,278                    987,377                 499,354               55,910      503,563       45,184             (884,343)              6,331,518






       Segment profit (loss) before



        income tax                                                                 (41,379)                            87,165                                    15,252                    315,133                  88,431              380,333       40,061     (30,711)            (220,756)                633,529

Contacts

Shikun & Binui
Inbal Uliansky
+972(3)630-1058
inbal_u@shikunbinui.com

External Investor Relations
Ehud Helft
GK Investor Relations
+1-617-418-3096
shikunbinuni@gkir.com

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SOURCE Shikun & Binui Ltd.