Shikun & Binui Ends 2018 With a Marked Improvement in Profitability Metrics

AIRPORT CITY, Israel, March 27, 2019 /PRNewswire/ — Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the fourth quarter and full year, ended December 31, 2018.

FINANCIAL HIGHLIGHTS OF 2018

  • Total revenues of NIS 6.3 billion, a decrease of 1.6% compared to those of 2017. The decrease is due, amongst others, to a decrease in the execution compared with the previous year at Solel Boneh Israel, mainly due to the approaching completion of the Ashalim project. There was also a decline in the real estate development sector in Israel due to a decrease in revenue from the sale of apartments and land.
  • Gross profit margin was 15% compared to 13% in the same period last year. Gross profit for the period amounted to NIS 960 million, compared with NIS 851 million in 2017.
  • Net profit totaled NIS 559 million, compared with NIS 298 million in 2017. The increase was mainly due to a capital gain after tax of NIS 277 million from the sale of the Portfolio of assets (45% of the holdings in Carmelton Project and 40% of the holdings in the Northern Roads Project). It is noted that SBI was impacted by a number of events of a one-time nature, which brought the subsidiary to a loss of US$ 37 million.
  • Cash flow from operations, excluding investments in land amounted to NIS 84 million, and the cash flow from operating activities without neutralizing land investments was NIS 345 million.

1. CONSTRUCTION

Solel Boneh: continued significant execution and expansion of contractor offerings

  • The scope of execution during 2018 was NIS 3.3 billion.
  • The scope of project wins was approximately NIS 3 billion in 2018, including the Tikshoov Project, the Spiral Tower, the Waste Recycling Project, Project BIG Yehud and more.
  • Completion of the acquisition of Menorah Izu Aharon Group and implementation of the assimilation process: a privately-held company engaged in the construction, establishment and maintenance of lighting systems, railway barriers, traffic lights at junctions, electricity and other. The company has 235 employees. The acquisition is in accordance with Shikun & Binui’s strategy to expand its construction offerings and is expected to be complementary and synergistic to its other activities.

International Building and Infrastructure Contracting Activities (excluding the US): the receipt of new projects led to an improvement in revenues in the fourth quarter

  • The scope of execution in 2018 was NIS 1.4 billion.
  • New projects received in 2018:o The expansion of the Road Projects in Nigeria, totaling US$ 326 million;o The construction of a 2.45 km bridge in Nigeria over the Medinawia River for US$ 150 million;o Paving a road in Ethiopia for US$ 120 million;o The receipt of a US$ 104 million highway project in Guatemala;o The construction of a road in Kenya for US$ 30 million;
  • Segment 1 of the Colombia Toll Roads Project was transferred to the customer and the period of operation as stipulated in the Concession Agreement began; The works in sections 2 and 3 are expected to be delayed beyond the determined remedy period. Regarding Segments 4 and 5, a force majeure agreement was signed with the customer, which may result in significant changes to the scope of the project due to the discovery of water springs along the original route. As a result of the delays, the project’s financers have decided to stop the continued further draw-down of funds until a new plan has been approved to move the construction work forward.  In 2017, a provision for an expected loss of US$ 5 million was included in respect of the project. In 2018, an additional provision of US$ 20.5 million was recorded and a provision for impairment was recorded.
  • On November 20, 2018, the Company’s Board of Directors resolved to discontinue its examination of its indirect holdings in SBI International Holdings AG.
  • The Company decided to translate its financial results based on the NAFEX exchange rate beginning in the second quarter of 2018. This is in light of Nigeria’s announcement that it will cease publishing the NIFEX exchange rate beginning in January 2019. In addition, the gap between the NIFEX and NAFEX exchange rates has narrowed, and there has been a reduction in the flow of foreign currency into the Nigerian Central Bank. As a result, the Company recorded a US$ 5 million loss related to exchange rate fluctuations.

US Building and Infrastructure Contracting Activities: Progress in project execution led to an increase in revenues

  • The total execution in 2018 amounted to NIS 485 million, an increase of 140 million over the same period as last year, as a result of progress in the Texas Toll Road project.
  • An agreement to acquire an infrastructure and construction contracting company in the United States – this is part of the Company’s strategy to expand its operations in the United States. The target company engages in the field of civil infrastructure contracting, with an emphasis on bridges, transportation infrastructure and ongoing work. The transaction completion is subject to certain precedent conditions.

Development of the Backlog* (in NIS millions)

*The backlog as of December 31, 2018 does not include additional construction projects which total NIS 1.3 billion that the Company won, up to or after the reporting date. These include an USD 120 million in Roads Project in Ethiopia, two segments of the Southern Michshal Project amounting to NIS 300 million, the Spiral Tower in the amount of NIS 163 million, Halumot Ohr Project amounting to NIS 160 million, Project BIG in Yehud amounting to NIS 133 million, etc., excluding the execution of those projects carried out during the period. The decline in the backlog as compared with its level at December 31, 2017, was due partially from the effect of the early adoption of the IFRS 15 reporting standard.

2. RESIDENTIAL REAL ESTATE DEVELOPMENT

Apartment Sales

  • During 2018, the Company sold 1,325 apartments (at 100% share) totaling ~NIS 1,290 million, including 386 units in Israel and 939 units in Europe.

Additional data regarding the Company’s sale of apartments (signed contracts) during 2018:


Apartment Units Under

Company Management

Including Partner Share

Consolidated

Companies

Companies

Under Joint

Control

Israel




Sales

(NIS millions)

674

562

Number of apartment sale contracts signed

386

321

Average price of apartments sold

(NIS thousands)

1,745

1,751

Europe




Sales

(NIS millions)

616

414

57

Number of apartment sale contracts signed

939

692

60

Average price of apartments sold

(NIS thousands)

656

599

949

Data regarding delivery of apartments to customers during 2018:


Consolidated

Projects

Projects Under

Joint Control

Europe



Revenues from apartments delivered (NIS millions)

329

29

Number of units delivered

688

39

Average price of apartments delivered (NIS thousands)

477

723

  • Real Estate Activities Internationally: a significant increase in revenues following the occupancy of projects in Warsaw, Belgrade, Prague and Bucharest following the continued initiation of projects such as:Occupancy of the G-85 project in Warsaw – the occupancy of 473 housing units and the sale of 97 housing units (at 100% share).o The launch of the Wellport project in Belgrade, Serbia – with a total of 570 housing units (at 100% share), out of which 95 are in execution (phase 1)o Launch of the RPM project in Prague, Czech Republic – totaling 790 housing units (at 100% share) of which 240 are in execution (phase 1)
  • In Israel, significant progress in the municipality planning phase of projects – the filing of the Central Bus Station plan, the approval of the local committee for the Ramat Efal program, the approval of the Bikel program in Ra’anana, Bikur Holim in Jerusalem and the Park neighborhood in Be’er Sheva.o Realization of the company’s share in the IKEA store at a profit of NIS 97 million (before tax);o A significant increase in the city urban renewal stock of apartments o Massive acquisition of future lands in the northern Sharon region (Hadera, Kfar Yona, Or Akiva and more)o The opening of the expansion at the Ir Yamim mall and its refinancing of NIS 140 milliono A transaction to the security forces membership club, Chever, for the sale of over 500 residential units in Or Yam
  • Implementation of the IFRS Standard: According to the IFRS Standard, the Company reports its revenues from apartment sales in Israel over time according to the progress made in the each project’s building and sales processes. The policy for revenue recognition from apartment sales in other countries remains unchanged with respect to the previous policy.

3. PROJECTS & IGAs (INCOME GENERATING ASSETS)

The Company continues to implement the strategy of increasing value and freeing up cash flow for new projects:

  • The company has completed the sale of the Portfolio (45% of its rights in the Carmel Tunnels project and 40% of its rights in the Northern Roads project). The sale generated a profit of NIS 277 million and cash flow of NIS 580 million.
  • Management is in the process for the sales of rights in the Generi 2 Government Campus project. If and when the sale is completed, the company expects to recognize NIS 25-30 million in profit and NIS 70 million in cash flow.
  • Completed the sale of the rights in an IKEA store – the company recorded pre-tax profit of NIS 97 million.
  • Subsequent to the date of this report, agreements were signed between the ADO Group shareholders – four transactions for the sale of ADO Group were completed after the date of the report by the Company, such that in total, the Company sold 30% of the issued and paid-up capital of ADO Group, for a total of NIS 720 million. The Company will record in its financial statements for the first quarter of 2019, a pre-tax profit of NIS 480 million.
  • Following completion of the above transactions, the Company holds 7.5% of the issued and paid-up capital of ADO. These shares are subject to a call option whereby the holder of the option is entitled to purchase the aforementioned shares at a price of NIS 88 per share up until March 10, 2020. These shares (7.5%) are also subject to a right of refusal.

The Company announced the win of a number of new significant projects:

  • Won a tender for an urban waste sorting and treatment plant: In April 2018, Israel’s Tendering Committee awarded Shikun & Binui and G.E.S. (as equal partners) a project to plan, finance, construct and operate an urban waste sorting and treatment plant. The project costs during the construction phase are projected to total NIS 750 million. Solel Boneh holds 50% of the rights of the Construction Contractor and will build the project together with G.E.S. Launch of construction is contingent upon the completion of Financial Closing. The length of the concession period is 29.5 years.
  • Won a Concessions tender for a ICT center campus in Be’er Sheva: In June 2018, the Tendering Committee of the State of Israel announced that with regard to its tender to plan, finance, construct, operate and maintain a 170,000 m2 ICT (information and communications technology) campus in Be’er Sheva under a 25-year framework, it had selected a project company established in equal partnership by the Company and Africa Israel Properties Ltd. as the preferred candidate as part of the defined process in the Concessions agreement. The final approval is conditional upon fulfillment of milestones and conditions set out in the tender.

Energy: at the stage of completion of construction and preparation for operations of about 600 MW in 2019. There is a plan in Israel to reduce the volume of electricity generated from coal from 50% to a few percent in 2030 are expected to lead to the publication of tenders of about 15 GW by 2030 (through privatization of gas power plants, construction of gas, solar and wind power plants).

INVESTORS CONFERENCE CALL

Shikun & Binui will host a conference call on March 27, 2019 starting at 11am 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:                              1-888-281-1167

UK:                              0-800-917-9141

Israel:                           03-918-0650

International:               +972-3-918-0650

At: 11am Eastern Time, 8am Pacific Time, 3pm UK Time, 5pm 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; 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.

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.

 Consolidated Financial Statements                                                                                                                                           

Consolidated Statements of Financial Position as at






December 31


December 31



2018


2017



NIS thousands


NIS thousands






Assets





Cash and cash equivalents


2,491,867


2,029,574

Bank deposits


781,879


657,668

Short-term loans and investments


129,150


63,050

Short-term loans to investee companies


25,001


31,854

Trade receivables – accrued income


2,830,251


2,326,935

Inventory of buildings held for sale


1,587,147


1,395,986

Receivables and debit balances


497,394


498,838

Other investments, including derivatives


376,642


241,641

Current tax assets


39,287


19,692

Inventory


160,518


176,145

Assets classified as held for sale


716,062


105,352

Total current assets


9,635,198


7,546,735






Receivables and contract assets





 in respect of concession arrangements


1,065,753


923,267

Non-current inventory of land (freehold)


938,127


789,699

Non-current inventory of land (leasehold)


705,172


426,609

Investment property, net


862,282


842,943

Land rights


13,422


13,179

Receivables, loans and deposits


211,766


522,795

Investments in equity-accounted investees


403,773


598,512

Loans to investee companies


1,099,937


612,054

Deferred tax assets


299,144


162,932

Property, plant and equipment, net


1,076,317


875,593

Intangible assets, net


364,911


150,238

Total non-current assets


7,040,604


5,917,821






Total assets


16,675,802


13,464,556

Consolidated Financial Statements

Consolidated Statements of Financial Position as at




December 31


December 31



2018


2017



NIS thousands


NIS thousands






Liabilities





Short-term credit from banks and others


1,529,542


1,036,026

Subcontractors and trade payables


1,657,591


1,460,075

Short-term employee benefits


160,792


136,860

Payables and credit balances including derivatives


638,652


616,135

Current tax liabilities


84,623


105,653

Provisions


172,364


246,019

Payables – customer work orders


1,483,675


1,376,856

Advances received from customers


323,684


208,685

Liabilities classified as held for sale


360,954


Total current liabilities


6,411,877


5,186,309






Liabilities to banks and others


3,200,074


2,477,801

Debentures


3,680,283


3,402,211

Employee benefits


46,130


49,843

Deferred tax liabilities


119,665


105,719

Provisions


260,418


102,795

Excess of accumulated losses over cost of investment





 and deferred credit balance in investee companies


97,408


48,130

Total non-current liabilities


7,403,978


6,186,499






Total liabilities


13,815,855


11,372,808






Equity





Total equity attributable to owners





 of the Company


2,531,765


1,849,025

Non-controlling interests


328,182


242,723

Total equity


2,859,947


2,091,748
















Total liabilities and equity


16,675,802


13,464,556

Consolidated Statement of Income



December 31


December 31


December 31


2018


2017


2016


NIS thousands


NIS thousands


NIS thousands







Revenues from work






 performed and sales

6,331,518


6,437,307


5,378,963

Cost of work performed






 and sales

(5,371,928)


(5,586,065)


(4,541,744)







Gross profit

959,590


851,242


837,219







Gain (loss) on sale of






 investment property

125,949


3,217


70,543

Selling and marketing expenses

(40,089)


(40,049)


(32,318)

Administrative and general expenses

(415,472)


(380,824)


(366,479)

Share of profits of equity accounted






 investees (net of tax)

19,141


59,816


81,172

Other operating income

389,504


219,622


451,797

Other operating expenses

(135,578)


(130,028)


(41,762)







Operating profit

903,045


582,996


1,000,172







Financing income

261,136


199,436


182,715

Financing expenses

(530,652)


(422,471)


(566,483)







Net financing expenses

(269,516)


(223,035)


(383,768)







Profit before taxes






 on income

633,529


359,961


616,404

Taxes on income

(74,233)


(61,655)


(136,455)







Profit for the period

559,296


298,306


479,949







Attributable to:






Owners of the Company

494,995


230,927


445,771

Non-controlling interests

64,301


67,379


34,178








559,296


298,306


479,949

Basic earnings per






 share (in NIS)

1.24


0.58


1.12







Diluted earnings per






 share (in NIS)

1.22


0.57


1.12

Consolidated Financial Statements  

Operating Segments



Year ended December 31, 2018


Infrastructures

and

construction

(international)

(excluding

USA)


Infrastructures

and

construction

(Israel)


Infrastructures

and

construction

(USA)


Real estate

development 

(Israel) 


Real estate

development 

(international) 


Concessions


Energy


Other


Adjustments


Consolidated




NIS thousands


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 from work performed and sales

1,355,063


3,284,132


485,278


987,377


499,354


55,910


503,563


45,184


(884,343)


6,331,518

Segment costs

1,326,005


3,190,853


470,342


630,585


409,067


(299,584)


471,490


68,221


(988,097)


5,278,882

Segment results




















Net operating expenses for all segments

29,058


93,279


14,936


356,792


90,287


355,494


32,073


(23,037)


103,754


1,052,636




















(149,591)

Operating profit



















903,045

Net financing income (expenses) allocated




















 to segments

(70,437)


(6,114)


316


(41,659)


(1,856)


24,839


7,988


(7,674)


21,408


(73,189)

Net financing expenses not allocated to




















segments



















(196,327)

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

Additional information:




















Segment assets

4,180,720


2,956,046


124,160


4,096,704


1,559,434


620,612


1,083,260


496,265


(811,183)


14,306,018

Investment and loans to associates

9


28,267



74,013


182,906


800,141


430,284


1,759


11,332


1,528,711

Assets not allocated to segments



















841,073

Total consolidated assets



















16,675,802

Segment liabilities

1,506,032


2,429,300


26,738


2,644,396


1,327,415


792,653


1,330,134


307,380


(1,353,497)


9,010,551

Excess of losses over investment in investees

22,428



48,001


10,900




16,079




97,408

Liabilities not allocated to segments



















4,707,896

Total consolidated liabilities



















13,815,855

Long-term investments in assets

107,215


62,552



52,774


4


103,784


171,157


12,366



509,852

General investments in assets for the long-term



















12,735

Total investments in assets for the




















 long-term – consolidated



















522,587

Depreciation and amortization

121,029


50,697


1,568


20,192


1,097


3,221


16,285


12,447


(2,031)


224,505

General depreciation



















12,474

Total depreciation – consolidated



















236,979

Consolidated Financial Statements  

Operating Segments



Year ended December 31, 2017


Infrastructures

and

construction

(international)

(excluding

USA)


Infrastructures

and

construction

(Israel)


Infrastructures

and 

construction 

(USA) 


Real estate

development 

(Israel) 


Real estate

development 

(international) 


Concessions


Energy


Other


Adjustments


Consolidated




NIS thousands





















External revenues

1,508,804


3,229,094


345,405


1,382,599


247,775


145,359


36,689


37,939


(496,357)


6,437,307

Inter-segment revenues


291,770



76






(291,846)


Total revenues from work performed and sales

1,508,804


3,520,864


345,405


1,382,675


247,775


145,359


36,689


37,939


(788,203)


6,437,307

Segment costs

1,418,035


3,397,633


300,022


1,080,708


171,682


66,398


37,789


138,995


(930,985)


5,680,277

Segment results




















Net operating expenses for all segments

90,769


123,231


45,383


301,967


76,093


78,961


(1,100)


(101,056)


142,782


757,030

Operating profit



















(174,034)

Net financing income (expenses) allocated



















582,996

 to segments

(5,658)


(8,628)


(450)


(27,275)


(28,382)


41,470


8,077


(8,409)


(35,176)


(64,431)

Net financing expenses not allocated to




















segments



















(158,604)

Segment profit (loss) before income tax

85,111


114,603


44,933


274,692


47,711


120,431


6,977


(109,465)


(225,032)


359,961

Additional information:




















Segment assets

3,885,086


2,586,918


34,722


3,678,622


1,164,247


527,631


521,311


202,121


(764,322)


11,836,336

Investment and loans to associates

9


22,364



115,367


249,980


700,895


4,043


281,857



1,374,515

Assets not allocated to segments



















253,705

Total consolidated assets



















13,464,556

Segment liabilities

1,258,243


2,128,444


12,526


2,492,016


1,077,656


694,223


397,521


270,530


(1,083,551)


7,247,608

Excess of losses over investment in investees

18,122



10,169


10,231




4,968




43,490

Liabilities not allocated to segments



















4,081,710

Total consolidated liabilities



















11,372,808

Long-term investments in assets

32,247


48,510



68,696


1,950


607


6,263


23,133



181,406

General investments in assets for the long-term



















10,451

Total investments in assets for the




















 long-term – consolidated



















191,857

Depreciation and amortization

134,144


49,897


1,264


18,881


5,118



15,037


95,622


(438)


319,525

General depreciation



















11,788

Total depreciation – consolidated



















331,313

Consolidated Financial Statements  

Operating Segments


Year ended December 31, 2016


Infrastructures

and

construction

(international)

(excluding

USA)


Infrastructures

and

construction

(Israel)


Infrastructures

and

construction

(USA)


Real estate

development

(Israel) 


Real estate

development 

(international)


Concessions


Energy


Other


Adjustments


Consolidated




NIS thousands

External revenues

1,336,215


2,324,394


153,497


1,278,810


146,254


427,383


44,679


40,259


(372,528)


5,378,963

Inter-segment revenues

142,574


444,259



76






(586,909)


Total revenues from work performed and sales

1,478,789


2,768,653


153,497


1,278,886


146,254


427,383


44,679


40,259


(959,437)


5,378,963

Segment costs

1,163,973


2,685,902


148,904


978,106


126,888


91,155


4,492


80,205


(1,074,171)


4,205,454

Segment results

314,816


82,751


4,593


300,780


19,366


336,228


40,187


(39,946)


114,734


1,173,509

Net operating expenses for all segments



















(173,337)

Operating profit



















1,000,172

Net financing income (expenses) allocated

(162,075)


(144)


(4)


(3,628)


(21,498)


18,965


(17,995)


(6,766)


(26,019)


(219,164)

 to segments




















Net financing expenses not allocated to




















segments



















(164,604)

Segment profit (loss) before income tax

152,741


82,607


4,589


297,152


(2,132)


355,193


22,192


(46,712)


(249,226)


616,404

Additional information:




















Segment assets

4,329,653


2,829,745


9,862


4,842,449


877,053


1,057,995


313,365


301,671


(727,944)


13,833,849

Investment and loans to associates

9


49,257


23,820


112,294


153,323


599,010


8,775


307,741



1,254,229

Assets not allocated to segments



















89,972

Total consolidated assets



















15,178,050

Segment liabilities

1,441,179


2,316,586


58


3,887,424


769,551


1,115,350


196,740


384,871


(1,041,509)


9,070,250

Excess of losses over investment in investees

17,572




9,689



2,059


1,120




30,440

Liabilities not allocated to segments



















4,006,219

Total consolidated liabilities



















13,106,909

Long-term investments in assets

39,389


48,488



50,279


1,298


82,132


3,302


69,043



293,931

General investments in assets for the long-term



















9,644

Total investments in assets for the




















 long-term – consolidated



















303,575

Depreciation and amortization

160,642


42,233


205


18,877


5,060



10,661


24,924


(472)


262,130

General depreciation



















10,467

Total depreciation – consolidated



















272,597

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

SOURCE Shikun & Binui Ltd.

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