Shikun & Binui Announces Financial Results for the First Half & Second Quarter of 2016

AIRPORT CITY, Israel, Aug. 30, 2016 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the first half and second quarter ended June 30, 2016.

Business highlights:

• Concessions:
  • Financial Closing of Project SH-288 in Texas: On April 29, 2016, the Company completed fundraising for the SH-288 project to build an express lane in Houston, Texas. The Company holds 21.62% of the project's Concessionaire and 50% of its General Contractor. On May 9, 2016, the Financial Closing was completed and the first tranche of capital was drawn. The total value of the project (100%) is expected to reach approximately USD 1 billion.
  • Financial Closing of Colombia Toll Roads Project: On May 25, 2016, Financial Closing was achieved for a project to finance, build, upgrade and maintain toll roads in Colombia. As of the reporting date, the total value of the project is USD 640 million and the Company holds 100% of its Concessionaire and Building Contractor.
  • Sale of the Operating Company of the Hadera Desalination Plant: On March 31, 2016, the Company completed the sale of its holdings in the operating company of the Hadera Desalination Plant, for NIS 78 million. The Company recorded net income of NIS 87 million in respect of the deal.
  • Sale of Part of the Company's Holdings in the Gilboa Pumped Storage Project: On March 29, 2016, the Company signed an agreement to sell 49% of its holdings in the Developer of the Gilboa Pumped Storage project. Upon completion of the deal (which is contingent upon the fulfillment of certain conditions), the Company expects NIS 92 million for its share and to record NIS 20 million in net profit.
• SBI–Shikun & Binui International Infrastructure Contracting:
  • Backlog: As of June 30, 2016, SBI's project backlog totaled NIS 9 billion.
  • Nigeria: During the reporting period, the Nigerian government approved its 2016 budget and its Office of Public Works paid most of the USD 90 million debt (Naira 24 million) which was owed to SBI. After receipt of this payment, the Company renewed work on most of its Nigerian civil projects.
  • On June 20, 2016, the Central Bank of Nigeria cancelled the fixed naira-dollar exchange rate, resulting in significant exchange rate volatility and a devaluation of the naira exchange rate from approximately 200 naira per dollar to approximately 280 naira per dollar (as of June 30, 2016). The effect on SBI's financial results resulted in its posting a net loss of USD 18 million for the second quarter.
• Shikun & Binui Infrastructure Contracting in Israel:
  • Backlog: As of June 30, 2016, the project backlog of the Israel Construction and Infrastructure segment stood at NIS 5.4 billion. It is noted that the backlog does not include NIS 1.2 billion in additional projects that the company recently won but that had not been entered into the backlog as of the end of the second quarter.
• Shikun & Binui Israel Real Estate:
  • Sold approximately 456 housing units during the first six months of the year, see table below.
  • Sale of land from the Hadera Agrobank Project: On June 30, 2016, the Company completed the sale of Shikun & Binui Real Estate's rights in the Hadera Agrobank Project, which resulted in a pre-tax profit of NIS 47 million.
• Shikun & Binui International Real Estate:
  • RED - Sale of Apartments and Purchase of Land: Sold 149 housing units and purchase land with potential for 3,600 housing units, during the first six months of the year.
  • ADO – Public Share Offerings: In January 2016, ADO sold shares raising NIS 83 million, and in April 2016 it carried out a secondary share offering, raising an additional NIS 65 million. As of June 30, 2016, the Company's share of ADO totaled 41.9%.
• Renewable Energy:
  • Ashalim Project: On April 21, 2016, the Company signed an agreement for the exit of Abengoa from the Ashalim Project and increased its total holdings to 67.5%. The Company's holding in the project's Concessionaire and Operator has remained unchanged. On August 2, 2016, the deal was completed after the receipt of the required governmental and lender approvals. The Company believes that these developments will not alter the project's original timetable or its ability to carry out the work.
  • Update of Rating by Ma'alot: On May 17, 2016, Ma'alot updated the Company's rating from IL+ with a negative outlook to ILA with a developing outlook due to its restructuring of the interest of its Series 6, 7 and 8 bonds, upping their interest by 0.25%.
• Sale and delivery of apartments in Israel by consolidated companies
  (Company's share before VAT):

Financial Results for the First Half of 2016:

Revenues: the Group's revenues for the first half of 2016 totaled NIS 2,184 million compared with NIS 2,507 million for the first half of 2015, a decline of NIS 323 million (12.9%). The decrease was due primarily from a reduction in the revenues of the International Construction & Infrastructure segment (NIS 440 million), reflecting the decline in its Nigerian activities (NIS 98 million) and the effect of the devaluation of the naira-dollar exchange rate (approximately USD 7.5 million). After the Nigerian government approved its 2016 budget, it paid most of its outstanding debt to the Company (approximately USD 90 million), and the Company renewed its work on most of its Nigerian civic projects.

During the reporting period, the Company also recorded revenue declines from Togo, Ghana and Kenya, countered by increased revenues from Uganda, Guatemala and Colombia. The reporting quarter's 1.18% decline in the average US dollar/shekel exchange rate compared with its level in the first half of 2015 further reduced revenues by NIS 8 million.

For the second quarter of 2016, the Group recorded a NIS 172 million decline in revenues compared to the parallel quarter of 2015, due primarily to the slowdown of its work in Nigeria (USD 42 million), as explained above.

First half 2016 revenues from the Israel Construction & Infrastructure segment declined by NIS 93 million during the quarter, due primarily to a NIS 65 million reduction in revenues from apartments delivered and a NIS 32 million decrease in revenues from work performed on the Tel Aviv Student Dormitory project. During the first half of 2016, the Company delivered 194 apartments compared to 255 during the first half of 2015, but at a higher average price (NIS 1.4 million before VAT for the first half of 2016, compared with NIS 1.3 million before VAT for the first half of 2015). During the second quarter, the Company delivered 57 apartments, compared with 69 apartments in Q2 2015, at an average price of NIS 1.6 million per apartment compared with NIS 1.7 million for Q2 2015.

In addition, revenues from the Renewable Energy segment declined by NIS 102 million during the first half as compared with the first half of 2015, due primarily to a decrease in the pace of construction of photo-voltaic installations. This was countered by the Israel Construction & Infrastructure segment, which posted a NIS 349 million increase in revenues compared with the first half of 2015, NIS 211 million of which represented an increase in road activities due primarily to work on the Tel Aviv Light Rail project, and NIS 91 million of which derived from building activities, including work mainly performed on projects such as the Ashalim project, the Dream Gardens Park project in Petach Tikva and the Generi Government Building project in Jerusalem. 

In addition, the Concessions segment posted a NIS 58 million increase in revenues, including NIS 30 million from activities related to the Generi Government Building in Jerusalem and NIS 28 million from the initiation of construction and operation of the project in Colombia.

Gross profit: the Group's gross profit for the first half of 2016 totaled NIS 277 million (12.7% of revenues) compared with NIS 467 million for the first half of 2015 (18.6% of revenues). The NIS 190 million decline was primarily due to the International Construction and Infrastructure segment (down NIS 158 million), reflecting the events described above. The segment's gross margin decreased to 18% in the reporting period from 25% in the first half of 2015, a period during which the gross profit was especially high due to final project settlements. In addition, the Israel Real Estate segment recorded a NIS 25 million decline in gross profit during the period and a decrease in its gross margin from 22% to 21%. This was countered by the Israel Construction & Infrastructure segment, which posted an NIS 8 million increase in gross profit for the first half and a NIS 13 million increase for the second quarter, due primarily to an increase in the pace of its work for the Tel Aviv Light Rail.  

General & Administrative Expenses: the Group's general and administrative expenses for the first half of 2016 declined by NIS 9 million compared with the first half of 2015. This reflected a NIS 4 million reduction in wages and benefits paid and a NIS 9 million increase in consolidated company expense repayments and consulting costs, countered by a NIS 5 million increase in legal and consulting expenses related to the change of the Ashalim project's partners.

Other Income, net: the Group's Other Income, net, for the first half of 2016 totaled NIS 140.6 million compared with NIS 43.9 million in the first half of 2015, due primarily to the sale of the Hadera Desalination Plant, which generated NIS 87 million in net income. In addition, during the reporting period, the Company cancelled the NIS 40.8 million provision for doubtful debts after receiving payments from the Nigerian government. In the parallel period of 2015, the Company had recorded other income of NIS 23 million (pre-tax) from the sale of photovoltaic installations.

Operating Income, net: the Group's operating profit for the first half of 2016 totaled NIS 283 million (12.9% of sales) compared with NIS 360 million (14.3% of sales) for the first half of 2015, a NIS 77 million decrease. This reflected a NIS 105 million decline of the International Infrastructure & Construction segment; a NIS 20 million decline of the Israel Real Estate Development segment; and a NIS 26 million decline in the Renewable Energy segment (while in the first half of 2015, it had recorded a NIS 23 million capital gain from the sale of photovoltaic installations), countered by a NIS 106 million increase recorded by the Concessions segment, reflecting the capital gain generated by the sale of its holdings in the Hadera desalination plant (as described above in Other Income, Net).

Financing Expenses, Net: the Group's net financing expenses for the first half of 2016 totaled NIS 286 million, compared with NIS 194 million for the first half of 2015. Financing expenses for the reporting period included currency exchange provisions and forward deals totaling NIS 122 million, primarily related to currency devaluations in Nigeria and Uganda, compared with NIS 37 million in the first half of 2015.

NIS 12 million of the increase was due to a rise in the expense of financing the Group's long-term credit (which totaled NIS 130 million). NIS 3 million of the increase was due to the effect of changes in the CPI, which declined by 0.4% during the first half of 2016 compared with 0.5% during the parallel period last year. NIS 9 million of the increase was related to an increase in the Group's total outstanding credit due to a bond issue and an increase in the Group's long-term loans.

Financing Income, Net: the Group's financing income for the first half of 2016 totaled NIS 81 million compared with NIS 85.5 million in the first half of 2015.

Financing Costs, Net: the Group's net financing costs during the first half of 2016 totaled NIS 205 million compared with NIS 109.5 million in the first half of 2015.

Pre-Tax Profit: the Group's pre-tax profit for the first half of 2016 totaled NIS 99.3 million compared with NIS 196.4 million for the first half of 2015.

Taxes on Income: the Group's taxes on income for the first half of 2016 totaled NIS 38 million compared with NIS 43.5 million for the first half of 2015. The decline was due primarily from a NIS 23 million reduction in the taxes paid by SBI International Construction & Infrastructure because of its decline in profits during the period. This was countered by a NIS 17 million increase in taxes paid during the period by the Israel Construction & Infrastructure segment, due primarily to the deferred tax assets during which it had recorded during the first half of 2015.

Net Profit: the Group's net profit during the first half of 2016 totaled NIS 61 million compared with NIS 153 million for the first half of 2015. The decline was due to the factors explained above. For the second quarter of 2016, the Group recorded a net loss of NIS 31.4 million compared with a net profit of NIS 37.2 million in the second quarter of 2015.

Balance Sheet Highlights:

Cash and Cash Equivalents: the Group's Cash and Cash Equivalents as of June 30, 2016 totaled NIS 1,498 million, a NIS 389 million decline compared with its level on December 31, 2015. The decrease reflected a NIS 542 million decline in activities in Israel, countered partially by a NIS 153 million increase in international activities.

Accounts receivable: the Group's Accounts Receivable as of June 30, 2016 totaled NIS 1,865 million, a NIS 89 million increase compared with its level at December 31, 2015, including NIS 248 million from Israel activities (a NIS 109 million rise for the Israel Real Estate segment, primarily due to the sale of land for the Hadera Agrobank project, and a NIS 139 million increase in the Israel Building and Infrastructure segment), countered by a NIS 159 million decline in international activities (part of the decline is due to accounting adjustments totaling NIS 21 million). As mentioned above, following the approval of Nigeria's 2016 budget, the Group received payments totaling USD 90 million from the Nigerian government during the reporting period. As of June 30, 2016, the balance of Accounts Receivable due from Nigeria totaled USD 68 million, compared with USD 119 million at the end of 2015. As of June 30, 2016, the balance of advances received from the Nigerian government totaled USD 66 million compared with USD 55 million as of December 31, 2015.

Inventory of Buildings for Sale: the Group's inventory of buildings for sale as of June 30, 2016 increased by NIS 357 million compared with its level at the end of 2015. NIS 322 million of the increase was due to activities within Israel, while NIS 35 million was due to international activities. Most of the increase (NIS 442 million) reflected investment in projects in Rosh Ha'ayin, Ramat Gan, Pardes Chana, Netanya, Hadera, Petach Tikva and Hod Hasharon, and by land activities totaling NIS 74 million. The increase was countered by the period's delivery of NIS 218 million worth of apartments, especially from projects in Hod Hasharon, Hadera, Netanya and Tirat Hacarmel. The increase in inventory of buildings from international activities derived from investments made in residential projects in Poland.

Land Inventory: the value of the Group's Land Inventory as of June 30, 2016 increased by NIS 282 million from its level at December 31, 2015, a NIS 106 million increase reflecting the Group's investments in Israel (NIS 152 million investments in land in Rishon LeZion, countered by the reclassification of NIS 74 million of land in Tzur Hadassah and Pardes Hanna due to the beginning of building activities) and its NIS 176 million investment in international activities (purchase of land for building residential apartments, primarily in Poland and Serbia).

Obligations Related to Concessions Agreements: the total of the Group's obligations related to concessions agreements as of June 30, 2016 increased by NIS 177 million compared with its level at December 31, 2015, This was due primarily to the reclassification of its NIS 149 million investment in photovoltaic installations from Debt, Loans and Deposits to Long-Term Assets due to the completion of the construction of the Nevatim project and its connection to the electrical grid in June 2016.

Investments and Loans Made in Subsidiaries: the value of the Group's investments and loans made in subsidiaries as of June 30, 2016 totaled NIS 1,085 million, down NIS 124 million as compared with its level at the end of 2015. This was primarily due to a NIS 148 million repayment of a loan made by ADO after completing a successful offering of shares.

Short-term Bank Debt: the balance of the Group's short-term bank debt as of June 30, 2016 increased by NIS 196 million compared to its level at the end of 2015, reflecting NIS 58 million in short-term loans and a NIS 136 million rise in the volume current maturities of long-term debt. 

Advances Received from Apartment Sales Agreements, net: the balance of advances received from apartment sales agreements, net, as of the balance sheet date, increased by NIS 377 million compared with its level at the end of 2015, even after recognizing NIS 253 million of the previous balance for apartments delivered during the reporting period. The sharp increase was due to the receipt of deposits from customers in line with their payment schedules for apartments that have not yet been delivered.

Provisions: the total amount of the Group's provisions as at June 30, 2016 declined by NIS 100 million, mainly due to lower provisions in international activities (including a reduction in the provisions taken for warranty and guarantee periods from Nigerian projects due to the decline in the Group's project volume in the region).

Long-term Debt: the balance of the Group's long-term debt as at June 30, 2016 totaled NIS 6,178 million, a NIS 213 million decline compared with its level at December 31, 2015. The decrease was due primarily to a NIS 248 million decline in debentures and loans from financial institutions, reducing their total from NIS 6,093 million to NIS 5,844 million. During the reporting period, the Company retired long-term loans totaling NIS 259 million and debentures totaling NIS 157 million. In addition, the Group recorded a NIS 136 million reduction in the balance of its long-term credit, reflecting an increase in the volume of the current maturities of these loans, as described above. This was countered by the Group's securing of NIS 304 million in new long-term loans.

Shareholders' Equity: the Company's Shareholders' Equity as of June 30, 2016 totaled NIS 1,746 million compared with NIS 1,838 million as at December 31, 2015. The NIS 92 million decrease between the periods was primarily due to adjustments made in the financial reports of international subsidiaries, whose financial reports are denominated in Euros and dollars, to reflect fluctuations of the dollar/shekel and euro/shekel rates (NIS 45 million), and the NIS 54 million dividend that was distributed to Company shareholders during the period.

Cash flow: during the first half of 2016, the Group recorded NIS 312 million in cash flow from ongoing activities compared with NIS 314.3 million during the first half of 2015. The main factors that affected the cash flow included an increase in Accounts Receivable from the Israel Construction and Infrastructure segment (NIS 154 million), increased investment in apartments and land in Israel (NIS 284 million) and in international markets (NIS 222 million).

During the second quarter of 2016, the Group reported positive cash flow totaling NIS 51.9 million compared with a negative cash flow of NIS 115.1 million during the second quarter of 2015. The positive change reflected the payments received during the period from the Nigerian government.

Order Backlog: as of June 30, 2016, the Group's order backlog totaled NIS 14.4 billion compared with NIS 13.7 billion at the end of 2015. Of this backlog, NIS 9.0 billion is in respect of international activities, compared with NIS 8.6 billion at the end of 2015.

Financial Highlights By Segment (NIS millions)

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.

IR Contacts:

Company
Inbal Uliansky
+972-(3)6301058
[email protected]

External IR
Ehud Helft
GK Investor Relations
+1-617-418-3096
[email protected]

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.

SOURCE Shikun & Binui Ltd.