Shikun & Binui Announces Financial Results For the Nine Months and Third Quarter of 2015

AIRPORT CITY, Israel, Nov. 23, 2015 /PRNewswire/ --Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, reported its financial results for the first nine months and third quarter ended September 30, 2015. Management will host a conference call to discuss the results on November 24th at 9:00 EST, 2:00pm UK time and 4:00pm Israel time. To listen to the call, please call one of the following numbers: US: 1-888-281-1167 UK: 0-800-051 8913 Israel: 03-918-0610

Main events during and subsequent to the nine-month period:

• SBI–Shikun & Binui Infrastructure in Israel – Awarded project to build tunnels for the Tel Aviv Light Rail: On May 19, 2015, the Company reported that an international consortium of which it owns a 49% share was awarded a NIS 3.1 billion project to build tunnels and subway stations for the Tel Aviv Light Rail System, a tender that had been offered by NTA (National Transport Authority). The construction is expected to be carried out over a period of six years.
• Shikun & Binui International Real Estate (RED):
  • ADO completed its acquisition of properties in Berlin: On March 31, 2015, ADO completed the purchase of residential properties in Berlin for a total consideration of €400 million, expanding its portfolio to approximately 14,000 residential units.
  • Listing of consolidated ADO shares on the Frankfurt Stock Exchange: On July 22, 2015, ADO listed on the Frankfurt Stock Exchange, raising a total of €415 million, €200 million of which continued to be held by the consolidated company. In its third quarter financial reports, Shikun & Binui recorded NIS 124 million in total income in respect of the listing, NIS 109 million was recorded under Net Income and NIS 15 million was recorded under Profit of Consolidated Companies.
• Financial Transactions: Issuance of Series 8 Bonds: On July 22, 2015, the Company issued CPI-linked debentures totaling NIS 348 million with a fixed interest rate of 3.65% and an average maturity of 7.29 years.
• Shikun & Binui Renewable Energy: Financial Closing of the Ashalim Project: On July 16, 2015, the Company signed a series of agreements for the financing of the Ashalim Project totaling approximately NIS 4 billion, including NIS 3.3 million from Bank Leumi, Bank Hapoalim and other major financial institutions. The agreements are held in equal share by the Shikun & Binui Group and the project's 3^rd Party Concessionaire, its Construction Contractor and its Operational Contractor.
• Retirement of Current CEO & Appointment of New CEO: on October 31, 2015, Mr. Kotler completed his term. On August 16, 2015, the Board of Directors approved the appointment of Mr. Yaron Krisi as the Company's new CEO.
• Sale and delivery of apartments:

• Dividend: on November 22, 2015, the Company's Board of Directors declared a dividend distribution totaling NIS 35 million for the third quarter.  

Financial Results for the First Nine Months of 2015:

Revenues: the Group's revenues for the first nine months of 2015 totaled NIS 3,725 million compared with NIS 4,441 million for the first nine months of 2014, a decline of NIS 716 million (16.1%). The decrease derived primarily from a) the International Construction & Infrastructure segment (NIS 489 million) due to the decline in its activities in Nigeria and Azerbijan and the completion of its work in Uganda and Tanzania; and b) from the Israel Real Estate Development segment (NIS 115 million) due to a reduction in the quantity of apartments delivered during the period compared to the first nine months of 2014, coupled with the parallel period's inclusion of revenues from the sale of non-residential projects, land and buildings that were not repeated in 2015.

Gross profit: the Group's gross profit for the first nine months of 2015 totaled NIS 691.1 million (18.6% of revenues) compared with NIS 750 million (16.9% of revenues) for the first nine months of 2014. The decline is primarily due to the reduced gross profit of the International Construction and Infrastructure segment due to the slowdown of project execution in Nigeria and the completion of projects in Uganda, as mentioned above.

Other income, net: the Group's Other Income, net, for the first nine months of 2015 totaled NIS 47 million compared with Other Expenses, net of NIS 13 million recorded during the first nine months of 2014. The difference reflects the current year's sale of photo-voltaic installations, which generated NIS 23 million in pre-tax profit recognized during the period, and the cancellation of a NIS 9 million provision after the completion of the Group's concession agreement for operating the Pardes Hanna-Karkur Water Authority. This is compared with the NIS 38 million charge that the Group recorded during the first nine months of 2014 for the cancellation of its commitment to list Shikun & Binui Real Estate's shares for public trade.

Operating income, net: the Group's operating profit for the first nine months of 2015 totaled NIS 489.6 million (13.1% of sales), a NIS 51 million increase compared with NIS 438.2 million (9.9% of sales) in the same period of 2014. The increase was due to a NIS 60 million rise in the operating profit of the Israel Real Estate segment (primarily due to the NIS 41 million sale of two real estate assets compared with the aforementioned NIS 38 million of expense recorded in the first half of 2014), a NIS 16 million rise in the operating profit of the Renewable Energy segment (due to the capital gain sale from the sale of photo-voltaic installations), and a NIS 23 million rise in the operating profit of the Water segment (due to the effect of the aforementioned completion of the agreement for the operation of the Pardes Hanna-Karkur Water Authority and the cancellation of the provision). This was countered by the NIS 66 million decrease in operating income recorded by the International Infrastructure & Construction segment due primarily to the segment's NIS 64 million decline in gross profit.

Net financing expenses: the Group's net financing expenses for the first nine months of 2015 totaled NIS 114 million compared with NIS 130 million for the first nine months of 2014. The financing expenses for the Group's long-term debt in the period totaled NIS 193 million compared with NIS 196 million for the parallel period of 2014. The period's financial reports include a NIS 15 million financing expense related to index transactions made to bridge cash flow needs, compared with a NIS 9 million expense from these activities during the first nine months of 2014. In addition, the income statement includes NIS 29 million in financing expense related to the currency exchange rate fluctuations during the period (related to the decline of the Euro/dollar exchange rate and currency devaluations in Nigeria and Ghana) and exchange rate future contracts, compared with NIS 12 million in financing expenses for such transactions during the parallel period of 2014. During the reporting period, the Company recorded NIS 30 million in financing income from the cash flow bridging transactions.

Income from consolidated companies, net: for the first nine months of 2015, the Group recorded NIS 69 million in income from consolidated companies compared with NIS 20 million for the parallel period of 2014, reflecting primarily the NIS 61 million profit generated by the Company's share in the results of ADO. The income includes NIS 109 million raised from the listing of the Company's consolidated shares held by ADO on the Frankfurt Stock Exchange, as well as the sale of consolidated shares that the Group carried out during the third quarter. This income was countered by a NIS 48 million loss related primarily to the effect of the decline of the Euro/shekel exchange rate during the first half of the year on ADO's results. In addition, the Group recorded NIS 26 million income from its share of the profit of consolidated companies in the Concessions segment, compensating for the Group's NIS 16 million loss recorded from its share in the results of Elcon.

Net profit: the Group's net profit for the first nine months of 2015 totaled NIS 367 million compared with NIS 243 million for the first nine months of 2014.

Accounts receivable: the Group's accounts receivable as of September 30, 2015 increased by NIS 362 million compared with its level at December 31, 2014, reflecting an increase in international activities, countered partially by a NIS 11 million decrease in activities in Israel.

Inventory of buildings for sale: the Group's inventory of buildings for sale as at the end of the first nine months of 2015 increased by NIS 249 million compared with its level at December 31, 2014. NIS 206 million of the increase derived from activities within Israel, reflecting primarily (NIS 525 million) the Group's investment in ongoing projects in Rosh Ha'ayin, Hadera, Yokneam, Ramat Gan, Hod Hasharon and others, and NIS 60 million investment in land. In addition, NIS 43 million of the increase derived from the Group's activities outside of Israel, including especially the beginning of construction of projects in Poland.

Debt, Loans and Deposits as of the end of the nine-month period increased by NIS 277 million compared with their level at the end of 2014, reflecting primarily the Group's additional investment in photo-voltaic installations in the Nevatim project (NIS 195 million) and additional investments in Colombia (NIS 78 million). This was countered by a NIS 40 million decline due to the Group's consolidation, for the first time, of Elcon.

The balance of advances received from apartment sales agreements, net, as of the balance sheet date, increased by NIS 202 million compared with its level at the end of 2014, after the removal of advances totaling NIS 552 million for projects recognized during the reporting period from the total (and their addition to the Group's income statement). The sharp increase in advances reflects the significant rise in the number of sales agreements that were signed during the first nine months of the year compared with the parallel period of 2014 (1,012 compared with 585 in the first nine months of 2014).

Long-term debt as at September 30, 2015 totaled NIS 5,550 million, an increase of NIS 312 million compared with its level at December 31, 2014. The increase was due primarily to a NIS 3,019 increase in debentures and loans from financial institutions, raising their total from NIS 4,931 million to NIS 5,240 million. During the reporting period, the Company issued NIS 349 million of long-term debt and carried out an offering of Series 8 debentures raising NIS 348 million, while also increasing its total of long-term loans by NIS 40 million as a result of the first-time consolidation of Elcon into its financial results. This was offset partially by the Company's retirement of long-term loans (NIS 237 million) and debentures (NIS 98 million).

Shareholders' Equity as of September 30, 2015 totaled NIS 1,845 million compared with NIS 1,627 million as at December 31, 2014. The NIS 218 million increase between the periods was due to the net profit recorded by the Company during the first nine months of the year (NIS 367 million), from adjustments made in the translation of the financial reports of international companies held by the Company, which are denominated in dollars and Euros (NIS 17 million), and the increase in the Company's bridge loan (NIS 18 million). This increase was countered partially by the NIS 142 million dividend that was distributed to Company shareholders during the period, and by the distribution of a NIS 49 million dividend that the consolidated company distributed to non-controlling rights owners.

Cash flow: During the first nine months of 2015, the Group had negative cash flow from ongoing activities of NIS 285.5 million, compared with NIS 120.8 million in positive cash flow during the first nine months of 2014, a NIS 406 million change. Most of this sum reflected the International Infrastructure & Construction segment's increase in accounts receivable (NIS 371 million) and from the Israel Real Estate segment's NIS 160 million investment in its apartment inventory, which were recorded during the third quarter. Note that these two segments are currently working on a number of milestone EPC (Engineering, Procurement, Construction) projects which are sometimes characterized by a lag between the rate of project execution and the rate of payment. The Company's Board of Directors believes that the quarter's negative cash flow is not indicative of liquidity challenges.

Cash and cash equivalents: as of September 30, 2015, the Group's cash and cash equivalents totaled NIS 1,672.7 million, and its unused bank credit lines totaled NIS 1,098 million.

Order backlog: as of September 30, 2015, the company's order backlog totaled NIS 14.1 billion, a NIS 3 billion increase compared with December 31, 2014. Of this backlog, NIS 8.5 billion is in respect of international activities, compared with NIS 8.1 billion in respect of international activities as of December 31, 2014. The backlog does not include projects that had not yet reached financial closure as of the report date. After the reporting period, the Company completed the financial closing of the Generi 2 project, which will add NIS 400 million to the order backlog as of the end of the fourth quarter.

Financial Highlights By Segment (NIS millions)

International Construction and Infrastructure segment:
Revenues for the first nine months of 2015 for the International Infrastructure and Construction segment totaled NIS 1,503.7 million compared with NIS 1,992.4 million for the first nine months of 2014. The NIS 489 million decrease reflected the completion of work in Uganda and Tanzania, a slowdown in the rate of work in Nigeria primarily due to uncertainty in the government's investment plans following the elections that took place earlier this year, and a slowdown in Azerbijan due to contractor work delays. This was countered by an increase in revenues from Togo due to the winning of a roads project. The effect of changes in the average dollar exchange rate during the reporting period increased the period's revenues by NIS 157 million (the average dollar exchange rate during the period rose by 11.6%, similar to its rise during the first nine months of 2014).

Revenues for the third quarter of 2015 for the International Infrastructure and Construction segment declined by NIS 246 million compared with the third quarter of 20124, primarily due to the aforementioned slowdown of work in Nigeria and Azerbijan and the completion of work in Uganda. The contribution of changes in the average dollar exchange rate during the quarter totaled NIS 35 million (the average dollar exchange rate during the period rose by 9.5%, compared with its average level during the third quarter of 2014).

The segment's gross profit for the third quarter of 2015 totaled NIS 381.9 million (25.4% of the segment's revenues) compared with NIS 446 million (22.4% of the segment's revenues) for the third quarter of 2014, a NIS 64 million decrease. Excluding the effect of the change in the dollar exchange rate between the two periods, the decline in the segment's gross profit would have been NIS 104 million. The decrease in the gross profit derived primarily from the slowdown in projects in Nigeria, as discussed above, and in the execution of projects in Uganda: last year, a number of projects in Uganda were completed, resulting in the recording of a relatively high level of revenues, whereas during the reporting period, work was initiated on two new projects with a relatively low work component to date.

The segment's operating profit for the first nine months of 2015 totaled NIS 288.6 million (19.2% of segment revenues) compared with NIS 354.8 million (17.8% of segment revenues) for the first nine months of 2014, reflecting the decline in gross profit, as explained above.

Israel Real Estate Segment:
Segment revenues for the first nine months of 2015 totaled NIS 681.8 million compared with NIS 796.8 million for the first nine months of 2014, a NIS 115 million decrease that reflected primarily a decline in revenues from the sale of apartments during the period (NIS 49 million). During the reporting period, the number of apartments delivered declined compared with the parallel period of 2014 (379 compared with 511 in the first nine half of 2014, company's share), but at a higher average price (NIS 1.5 million before VAT, compared with NIS 1.2 million before VAT for the first nine months of 2014). In addition, revenues for the first nine months of 2014 included a NIS 29 million contribution from the sale of land in Zichron Yaakov, while revenues from the reporting period reflected a NIS 5 million decline due to the completion of work on the Tel Aviv Student Dormitories, countered by NIS 6 million in revenues from property rentals and management fees.

Revenues for the third quarter of 2015 decreased by NIS 125 million due primarily to a decline apartment sales during the period (approximately NIS 60 million). During the quarter, the company delivered 124 apartments compared with 217 during the parallel period of 2014, but at a significantly higher average price (NIS 1.7 million before VAT, compared with NIS 1.3 million before VAT for the third quarter of 2014). In addition, the company recorded a NIS 3 million increase in revenues from the execution of projects in Hod Hasharon, and a NIS 1 million increase in rent and property management fees.

The segment's gross profit for the first nine months of 2015 totaled NIS 169.5 million (24.9% of segment sales) compared with NIS 185.8 million (23.3% of segment sales) for the first nine months of 2014, a decline of NIS 16 million that derived primarily from the decrease in the gross profit of non-residential projects, land sales and property sales (NIS 33 million), countered partially by a rise in the gross profit for sales of residential projects (NIS 20 million). During the third quarter, the company recorded a NIS 31 million decrease due primarily to a decline in the gross margin of the sales of non-residential properties, land and properties (NIS 30 million), countered partially by a rise in the gross margin of the sale of residential projects (NIS 4 million).

The segment's operating profit for the first nine months of 2015 totaled NIS 149.8 million compared to NIS 90.2 million in the first nine months of 2014, a NIS 60 million increase that derived primarily from the sale of two assets during the period for NIS 41 million, compared with a NIS 38 million expense recorded during the parallel period of 2014 due to the cancellation of the segment's listing on the Tel Aviv Stock Exchange, as discussed above.

Israel Construction and Infrastructure segment:
Revenues for the first nine months of 2015 for the Israel Construction and Infrastructure segment totaled NIS 1,414 million compared with NIS 1,609.3 million for the first nine months of 2014. The NIS 195 million decrease derived from a NIS 180 million decline in building activities (due to the completion of the Police Department Training Center and the Tel Aviv Court Building) and a NIS 38 million decrease in revenues from the Concrete & Prefabricated Building Division, countered by a NIS 20 million increase in the activities of the segment's Roads Division.

Revenues for the third quarter of 2015 for the Israel Construction and Infrastructure segment increased by NIS 55 million to NIS 557.5 million from NIS 502.9 million in the third quarter of 2014, due primarily to an increase in building activities (NIS 38 million) and in revenues from the Concrete & Prefabricated Building Division (NIS 10 million).

The segment's gross profit for the first nine months of 2015 totaled NIS 86.6 million (6.1% of revenues) compared with NIS 88.6 million (5.5% of revenues) in the first nine months of 2014. The segment's operating profit for the first nine months of 2015 totaled NIS 32.9 million (2.3% of segment sales) compared with NIS 32.4 million (2.0% of segment sales) for the first nine months of 2014.

Renewable Energy segment:
Revenues of the Renewable Energy segment for the first nine months of 2015 totaled NIS 148.5 million compared with NIS 90.3 million in the first nine months of 2014, a NIS 58 million increase that was due primarily to a rise in the number of land-based and rooftop photo-voltaic installations built (primarily for the installation of the 18 megawatt Nevatim project).

The segment's gross profit for the first nine months of 2015 totaled NIS 27.9 million (18.8% of sales) compared with NIS 29.9 million (33% of sales) for the first nine months of 2014, while the operating profit for the period totaled NIS 27.6 million compared with NIS 12.1 million for the parallel period of 2014. The increase reflected primarily a NIS 23 million capital gain from the sale of photo-voltaic installations in Israel.

Concessions segment:
For the Concessions segment, revenues for the first nine months of 2015 totaled NIS 138.4 million, the majority of which were associated with the North Roads Upgrade and Maintenance Project and from the Government Office Building Project, compared with NIS 40.5 million recorded during the first nine months of 2014. The NIS 98 million increase derived from the construction of the Government Office Project in Jerusalem. Revenues for the third quarter of 2015 totaled NIS 62.3 million compared with NIS 13.5 million in the third quarter of 2014.

The segment's gross profit for the first nine months of 2015 totaled NIS 10.7 million compared with NIS 11.3 million in the first nine months of 2014. The segment generated an operating loss of NIS 0.8 million for the first nine months of 2015 compared with a NIS 1.2 million operating profit in the first nine months of 2014.

International Real Estate segment:
Revenues of the International Real Estate Segment for the first nine months of 2015 totaled NIS 19.3 million compared with NIS 6.6 million in the first nine months of 2014, a NIS 13 million increase reflecting primarily from NIS 11 million in revenues from the delivery of 34 apartments in the project in Poland, for which sales began in the fourth quarter of 2014.

The segment's gross profit for the first nine months of 2015 totaled NIS 3.8 million compared to NIS 1.3 million in the first nine months of 2014, an improvement due primarily to the sale of apartments from the project in Poland, as mentioned above. The segment's operating loss for the first nine months of 2015 totaled NIS 5.5 million compared to NIS 7.4 million in the first nine months of 2014.

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.