Shikun & Binui Reports Net Profit of NIS 426 Million in the First Nine Months of 2019

AIRPORT CITY, Israel, Nov. 28, 2019 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the third quarter and first nine months of 2019, ended September 30, 2019.

FINANCIAL HIGHLIGHTS OF THE FIRST NINE MONTHS OF 2019

• Revenues in the first nine months of 2019 amounted to NIS 4.7 billion, an increase of 12.4% compared to the corresponding period last year. The increase was mainly due to the real estate activities in Eastern Europe.
• Gross margin was 14% compared to 13.2% in the same period last year. Gross profit for the period was NIS 661 million, compared with NIS 555 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 426 million, compared with NIS 217 million in the same period last year.
• Operating cash flow in the first nine months period (excluding investment in land) amounted to NIS 502 million, compared with negative operating cash flow of NIS 720 million in the corresponding period 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 nine months of 2019, housing sales totaled 1,392 housing units (in 100% terms), amounting to NIS 1.5 billion, of which 806 housing units were in Israel and 586 housing units were in Europe.

Apartment deliveries were 1,347 (in 100% terms) of which 586 were housing units in Israel and 761 were housing units in Europe.

Additional Data on Company's Sale of Apartments (signed contracts) during Reporting Period:

Data Regarding Delivery of Apartments to Customers during Reporting Period:

Israel Real Estate: Significant increase in the volume of transactions signed during the first nine months of 2019 in the Or Yam project

• During the first nine months of the year, transactions for the sale of 860 housing units (in 100% terms) were signed, amounting to NIS 1.2 billion, and this was in line with the success of the Or Yam project.

RED International Real Estate: Significant Increase in Income and Profit Following delivery of 761 Housing during the nine month reporting period

• Revenues in the first nine months of 2019 amounted to NIS 338 million, an increase of NIS 160 million compared to the corresponding period last year, as a result of delivery of 597 housing units (company's share): Warsaw (375 housing units), Prague (106 housing units), and Belgrade (446 units).
• Gross profit in the nine month reporting period amounted to NIS 87 million, compared with NIS 143 million in the corresponding period last year.

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

The Company completed four transactions to sell holdings amounting to 30% of ADO Group shares for NIS 720 million, following which it recorded a pre-tax profit of NIS 476 million, as well as pre-tax profit from a revaluation of the remaining balance of the Company's investment in ADO Group (7.5%) amounting to NIS 143 million.

PROJECT CONTRACTING

Solel Builder: Significant Volume of Wins for New Projects since Beginning of 2019

• Total rights in projects and new works received from the beginning of the year up to the date of this report, amounted to NIS 2.7 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 the United States): Significant improvement in profitability

• A marked improvement in the gross margin was noted, which reached 16.9% in the first nine months of 2019, compared with 9.1% in the same period of last year. The improvement in profitability was mainly due to the projects in Uganda, including the project to establish the airport in Uganda. Net income in this segment in the first nine months was NIS 34 million, compared with a loss of NIS 130 million in the first nine months of 2018.
• Toll Road Project in Colombia: On February 1, 2019, the handover papers for Section 1 were signed, on October 17, 2019, the handover papers for Section 2 were signed and on November 7, 2019, the handover papers for Section 3 were signed.
• The win of a project in Nigeria: In October 2019, the Nigerian government informed SBI that it has won a tender for the construction of a road in south-eastern Nigeria. The project includes construction of 18 km of roads, as well as construction of a number of bridges and interchanges. The start of the project is expected in the second half of 2020 and the construction work is expected to continue for approximately 48 months. The total proceeds expected for this project are approximately US $ 310 million. It should be clarified that as of today's date, a binding contract has not yet been signed between the foreign company and the Nigerian government to carry out the project work and there is no certainty regarding the date of signing of a binding contract, if and whether it will be signed.

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 short-term 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 109 million in the first nine months of 2019.

PROJECTS AND INCOME GENERATING ASSETS

Start of Operation of the Ashalim Mega Project

In April, all approvals were required to operate the Ashalim project. The project includes the total supply of 121 megawatts of electricity, for an operating period ending in 2043. The company's share of the franchisee and operator is 50%.

Tze'elim Photovoltaic Project

In October 2019, all required approvals were obtained to operate the Tze'elim project, a photovoltaic power plant with an installed capacity of 120 MW.

The Company estimates that the gross receipts from electricity sales generated by the facility will amount to approximately NIS 75 million per year and will be spread over an operating period of 20 years*.

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*.

Sale of Genari 2

In June 2019, 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.

Efficiencies

Management continued implementing steps to reduce expenses across the Group.

* Forward-looking information as defined in the Securities Law 1968, which relates to a future event or matter, the materialization of which is uncertain and not under the control of the Company alone. The information is based on estimates and forecasts as of this date, which may also not materialize or otherwise materialize due to undue delays, new information to be received, or changes that will apply to the assumptions of estimates and forecasts and /or as a result of a variety of other operational and logistical factors.

INVESTORS CONFERENCE CALL

Due to the US thanksgiving holiday, Shikun & Binui will not be hosting a conference call in English at this time.

International investors wishing to discuss the results with management are welcome to contact Shikun & Binui's international investor relations team to schedule a call with management.

The Company expects to again provide an international conference call in English following the release of fourth quarter and full year 2019 financial results, next year.

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.

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SOURCE Shikun & Binui Ltd.