ALON BLUE SQUARE ISRAEL LTD 
By YAKUM, Israel, Aug. 29, 2013 /PRNewswire/ --
-- Increase of 116% in cash flows from operating activity in the first half
of 2013 and an increase of 165% in this quarter, compared to the
corresponding periods, to NIS 503 million in the first half and NIS 194
million in the quarter.
-- Increase of approximately NIS 370 million in cash and financial assets
compared to the corresponding half and NIS 300 million compared to the
end of 2012.
-- Decrease in financial debt, net of approximately NIS 280 million
compared to December, 2012.
-- Adjusted EBITDA of NIS 191 million in the first half.
-- In the Fueling and commercial sites: An increase of 80% in the net
profit in the first half and 167% in the second quarter compared to the
corresponding periods to NIS 20.8 million in the half and NIS 8.2
million in the quarter.
-- In the Supermarkets segment: An improvement of NIS 14 million in the
operating profit of the segment compared to the previous quarter. The
policy of price reduction while turning commercial spaces more efficient
resulted in an increase in the sales per square meter and a positive
result in same store sales (SSS) in the first half and a planned erosion
of the operating profit. The Company has a new price policy which will
enable the increase of the market share based on the new strategic plan
of the Company.
-- In the Real Estate segment: Continuing improvement in NOI (BSRE presents
this quarter NOI of NIS 54 million). BSRE continues the development and
the betterment of real estate assets under ownership. After the report
date, the financing and financial services agreement was consummated for
the wholesale market project and building permits were received for the
commercial part of the project.
-- In the Non Food segment (from continuing operations): An increase in
revenues in the first half of approximately 9.3% to NIS 174 million
compared to the corresponding period last year. The costs of the
transition of Sheshet stores from franchise to ownership and converting
them to Na'aman stores resulted in onetime costs in the first half
compared to the corresponding period last year.
Segment Profits:
2013 2012
---- ----
Operating Profit in
millions of NIS H1 Q2 Q1 H1
------------------- --- --- --- ---
Fueling and Commercial
sites 69.2 32.7 36.5 78.1
---------------------- ---- ---- ---- ----
Supermarkets 8.0 11 (3.0) 48.3
------------ --- --- ---- ----
Non-Food (from continuing
operations) (2.8) (10.2) 7.4 2.3
------------------------- ---- ----- --- ---
Real Estate 9.6 4.9 4.7 8.4
----------- --- --- --- ---
Adjusted EBITDA 191.3 92.7 98.6 244.3
--------------- ----- ---- ---- -----
Comments of Management
Mr. David Weissman, CEO and Chief Business Officer
"In the first half we put a special emphasis on improving cash flows from operating activity that amounted to NIS 503 million, an increase of 116% compared to the corresponding half. The impressive improvement in cash flows from operating activities mainly derives from actions taken to improve the working capital and reducing customer days and inventories. The decrease in operating profit mainly stems from changes in fair value of investment property between the periods and from implementing Mega's new strategic plan.
YouPhone continues to grow and tens of thousands of new customers join the cellular network that provides its customers the lowest prices in the market with the best service. The establishment costs of the company and customer acquisition costs are included in the Company's operating expenses. By YouPhone, we exercise the synergy between the food, fuel and cellular activities.
Dor Alon continues to present in the first half an improvement in the fueling and commercial sites and an increase in the sold quantities and sales of convenience stores, which was partly offset from an increase in inventory losses.
In the direct marketing segment, in the first half, a decrease was recorded in sales and operating profit due to termination of supply of fuels to the Palestinian Authority.
BSRE continues to present an improvement in its current activity and continues the development and initiation momentum. After the reporting date, a financing and financial services agreement was consummated for the residence company and the mall company in the wholesale market project in a scope of NIS 2.5 billion.
In the Supermarkets segment, Mega is preparing to implement the strategic plan after the holidays, which will include converting some of the branches into a new format, streamlining the supply chain and adjusting the sale spaces. Under the new price policy, in the first half, Mega reduced its prices. Eden Teva Market presented in the last two quarters positive operating profit and a double digit increase in the sales of same store sales (SSS).
In the Non Food segment, Na'aman is in the process of converting Sheshet stores to Na'aman stores while exiting unprofitable stores until the end of 2013. As a result, this quarter included onetime expenses for store conversion and realization of Sheshet inventories that are characterized with lower gross profit.
Diners continues to show good results and recorded in this half a profit of NIS 21 million (our share - NIS 10 million) and strengthens the YOU club with more than one million members."
Results for the first six months of 2013(2)
Gross revenues
Revenues (including government levies) in the first half of 2013 amounted to NIS 7,487.9 million (U.S. $2,069.6 million) as compared to revenues of NIS 7,844.7 million in the comparable period last year, a decrease of 4.5% mainly from Dor Alon.
Revenues from sales, net
Revenues of the Fueling and Commercial sites segment - amounted in the first half of 2013 to NIS 2,605.0 million (U.S. $720.0 million) as compared to NIS 2,917.5 million in the corresponding period last year, a decrease of 10.7%. The main decrease was due decrease in fuel prices and discontinued sales to the Palestinian authority and was partly offset from an increase in sales of convenience stores and increase in the fuel quantities sold.
Revenues of the Supermarkets segment - amounted in the first half of 2013 to NIS 3,223.7 million (U.S. $891.0 million) as compared to NIS 3,279.5 million in the corresponding period last year. The decrease in sales derived from the closing of 9 stores and was partly offset from an increase of 0.5% in the same store sales (SSS) as compared to the corresponding period last year.
Revenues of the Non-Food segment - an increase in revenues by 9.3% from NIS 158.9 million in the first half of 2012 to NIS 173.6 million (U.S. $48.0 million) in the first half of 2013. The increase in revenues is mainly due to an increase in sales in the home activity as a result of the transition from franchise to self-operation and increased marketing activities.
Revenues of the Real Estate segment - an increase in rental income of 26% from NIS 15.3 million in the first half of 2012 to NIS 19.3 million (U.S. $5.3 million) in the current period. The increase in rental income in this period mainly derives from increase in rented spaces to external parties and from CPI increase.
Gross profit in the first half of 2013 amounted to NIS 1,300.6 million (U.S. $359.5 million) (21.5% of revenues) as compared to gross profit of NIS 1,368.6 million (21.5% of revenues) in the comparable period last year. The decrease in the gross profit compared to the corresponding period last year was mainly due to the decrease in the gross profit in the Supermarkets segment.
In the Fueling and Commercial sites segment, gross profit amounted to NIS 386.8 million (U.S. $106.9 million), (14.8% of revenues) compared to NIS 396.6 million in the comparable period last year (13.6% of revenues). The decrease in the gross profit mainly derived from inventory losses following the decrease of fuel prices and was partly offset from the increased profitability of the convenience stores.
In the Supermarkets segment, gross profit amounted to NIS 817.8 million (U.S. $226.0 million), (25.4% of revenues) compared to NIS 882.4 million in the first half of 2012 (26.9% of revenues), a decrease of 7.3%. The decrease in the gross profit is due to the closing of 9 branches and from actions taken by the Company to reduce sale margins.
In the Non Food segment, gross profit amounted to NIS 81.1 million (U.S. $22.4 million), (46.7% of revenues) compared to NIS 78.4 million in the first half of 2012 (49.4% of revenues), an increase of 3.4% that mainly derives from increase in sales, and was partly offset from reduction of the gross profit margin.
Selling, general and administrative expenses in the first half of 2013 amounted to NIS 1,267.1 million (U.S. $350.2 million) (21.0% of revenues), compared to expenses of NIS 1,275.1 million (20.0% of revenues) in the comparable period last year.
In the Fueling and Commercial sites segment, these expenses amounted to NIS 317.6 million (U.S. $87.8 million) compared to NIS 318.5 million in the first half of 2012, a decrease of 0.3%.
In the Supermarkets segment, selling, general and administrative expenses amounted to NIS 809.8 million (U.S. $223.8 million) compared to expenses of NIS 834.1 million in the first half of 2012, a decrease of 2.9% in expenses that mainly derives from efficacy measures and exiting branches.
In the Non Food segment, these expenses amounted to NIS 83.9 million (U.S. $23.2 million) compared to NIS 76.2 million in the first half of 2012, an increase of 10.1% in expenses that mainly derives from the transition from franchise stores to self operated stores in the home activity, an increase in sales and increase in marketing and advertising expenses.
In the Real Estate segment, these expenses amounted to NIS 9.7 million (U.S. $2.7 million) compared to NIS 6.9 million in the first half of 2012.
Operating profit (before other gains and losses and changes in fair value of investment property) in the first half of 2013 amounted to NIS 33.5 million (U.S. $9.3 million) (0.6% of revenues) as compared to NIS 93.5 million (1.5% of revenues) in the comparable period last year, a decrease of 64.2%. The decrease in the operating profit was mainly due to the Supermarkets segment.
In the Fueling and Commercial sites segment, operating profit in this period amounted to NIS 69.2 million (U.S. $19.1 million) compared to operating profit of NIS 78.1 million in the first half of 2012, a decrease of 11.4%. The decrease in operating profit derives from increase in inventory losses, discontinued sales to the Palestinian Authority and was partly offset from an increase of convenience stores.
In the Supermarkets segment, operating profit in the period amounted to NIS 8.0 million (U.S. $2.2 million) compared to operating profit of NIS 48.3 in the first half of 2012, a decrease of 83%. The decrease in operating profit derives from reducing the gross profit rate and from decrease in sales and was partly offset from decrease in selling, general and administrative expenses.
In the Non Food segment, operating loss amounted to NIS 2.8 million (U.S. $0.8 million) as compared to an operating profit of NIS 2.3 million in the first half of 2012. The transfer to operating loss derived from an increase in selling, general and administrative expenses and was partly offset from an increase in sales.
In the Real Estate segment, the operating profit in this period amounted to NIS 9.6 million (U.S. $2.7 million) compared to NIS 8.4 million in the first half of 2012, an increase of 14.3%. The increase in the operating profit derives from increase in rental income and was partly offset from increase in selling, general and administrative expenses.
Changes in fair value of investment property in the first half of 2013 the Company recorded a profit in the amount of NIS 11.2 million (U.S. $3.1 million) compared to a loss of NIS 5.8 million in the corresponding period last year.
The main profit in this period derives from revaluation of Comverse Building in Ra'anana, half of which was realized in the first quarter of 2013.
Other income (expenses), net other expenses in this period amounted to NIS 10.2 million (U.S. $2.8 million) compared to other expenses of NIS 1.6 million in the first half of 2012. Other expenses in the first half of 2013 mainly derived from closing branches.
Share in gains of associates in this period amounted to NIS 2.9 million (U.S. $0.8 million) compared to NIS 74.0 million in the corresponding period last year. In the first half of 2012, associates' gains included a profit of NIS 68 million from revaluation of the Tel Aviv Mall.
Operating profit amounted to NIS 37.4 million (U.S. $10.3 million) (0.6% of revenues) as compared to operating profit of NIS 160.1 million (2.5% of revenues) in the first half of 2012, a decrease of 76.6%. The decrease in operating profit mainly derives from changes in the fair value of investment property between the periods and from implementing Mega's new strategic plan.
Finance costs, net in this period amounted to NIS 128.7 million (U.S. $35.6 million) as compared to net finance costs of NIS 134.1 million in the first half of 2012. The decrease in finance costs, net derives from a decrease in the dollar exchange rate in this period compared to an increase in the exchange rate in the corresponding period last year, decrease in the short and long term interest rates and from a decrease in the scope of the net debt.
Taxes on income tax benefit in this period amounted to NIS 13.5 million (U.S. $3.7 million) as compared to tax benefit of NIS 13.9 million in the first half of 2012.
Income (loss) from continuing operation in this period loss amounted to NIS 77.8 million (U.S. $21.5 million) compared to an income of NIS 39.9 million in the first half of 2012. The loss from continuing operations in the first half of 2013 attributed to the Company's shareholders amounted to NIS 87.5 million (U.S. $24.1 million) or NIS 1.33 per share (U.S. $0.37) and the income from continuing operations attributed to non-controlling interests amounted to NIS 9.7 million (U.S. $2.7 million).
Net loss from discontinued operation in this period amounted to NIS 10 million (U.S. $2.8 million) or NIS 0.15 per share (U.S. $0.04) compared to a loss of NIS 6.7 million in the first half of 2012, which attributed in its entirety to the Company's shareholders, considering changes in fair value as a result of a progress in the sale of activity.
Cash flows for the first half of 2013
Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS 503.5 million (U.S. $139.2 million) in the first half of 2013 compared to NIS 232.8 million from operating activities in the comparable period last year. The main increase derives from a decrease in working capital needs following measures taken to reduce customer days and reduction of inventories in the amount of NIS 298.3 million (U.S. $82.4 million) and from tax refunds in this period of NIS 43.3 million (U.S. $12.0 million) compared to tax refunds of NIS 17.8 million in the corresponding period last year offset by a decrease in operating profit of NIS 60.0 million (U.S. $16.6 million).
Cash flows used in investing activities: Net cash flows used in investing activities amounted to NIS 88.9 million (U.S. $24.6 million) in this period as compared to net cash used in investing activities of NIS 237.1 million in the first half of 2012. Cash flows used in investing activities in this period mainly included the purchase of investment property, property and equipment and intangible assets of total NIS 111.0 million (U.S. $30.7 million), grant of long term loans of NIS 22.8 million (U.S. $6.3 million) and was offset by proceeds from realization of investment property of NIS 51.3 million (U.S. $14.2 million), collection of long term loans of NIS 17.0 million (U.S. $4.7 million), and interest received of NIS 12.9 million (U.S. $3.6 million). In the first half of 2012 the cash flows used in investing activities mainly included the purchase of property and equipment, investment property and intangible assets of NIS 180.1 million, grant of long term loans of NIS 34.9 million and investment in securities in the amount of NIS 133.8 million, net of proceeds from realization of securities in the amount of NIS 109.8 million.
Cash flows used in financing activities: Net cash flows used in financing activities amounted to NIS 157.2 million (U.S. $43.5 million) in this period as compared to net cash flows deriving from financing activities of NIS 143.7 million in the corresponding period last year. The cash flows used in financing activities this period mainly included interest payments of NIS 128.8 million (U.S. $35.6 million), decrease in short term bank credit, net of NIS 121.1 million (U.S. $33.5 million), repayment of debentures of NIS 143.5 million (U.S. $39.7 million) and a dividend payment to non-controlling interests of NIS 15.2 million (U.S. $4.2 million) and was offset by issuance of debentures of NIS 240.2 million (U.S. $66.4 million) and receiving loans of NIS 86.8 million (U.S. $24.0 million). The net cash flows provided by financing activities in the first half of 2012 included mainly the issuance of debentures of NIS 295.6 million, receipt of long term loans of NIS 131.0 million and increase in short term credit, net, in the amount of NIS 112.5 million and was offset by repayment of loans of NIS 186.2 million, repayment of debentures of NIS 92.2 million and from interest payments of NIS 116.3 million.
Results for the second quarter of 2013
Gross revenues
Revenues (including government levies) in the second quarter of 2013 amounted to NIS 3,695.1 million (U.S. $1,021.3 million) as compared to revenues of NIS 4,018.6 million in the comparable quarter last year, a decrease of 8.0% mainly from Dor Alon.
Revenues from sales, net
Revenues of the Fueling and Commercial sites segment - amounted in this quarter to NIS 1,267.5 million (U.S. $350.3 million) as compared to NIS 1,529.9 million in the corresponding quarter last year, a decrease of 17.1%. The main decrease was due to discontinued sales to the Palestinian authority and decrease in fuel prices and was partly offset by an increase in the sales of convenience stores and increase in the fuel quantities sold.
Revenues of the Supermarkets segment - amounted in this quarter to NIS 1,596.1 million (U.S. $441.2 million) as compared to NIS 1,653.5 million in the corresponding quarter last year, a decrease of 3.5%, mainly due to closing 9 losing branches and decrease of 1.0% in the same store sales (SSS) in this quarter compared to the corresponding quarter.
Revenues of the Non-Food segment - amounted in this quarter to NIS 66.7 million (U.S. $18.4 million) compared to NIS 71.3 million in the corresponding quarter last year, a decrease of 6.5%. The decrease in revenues derives from the timing of the Passover holiday that this year was toward the end of the first quarter and last year was at the beginning of the second quarter.
Revenues of the Real Estate segment - an increase in rental income of 22% from NIS 8.1 million in the second quarter of 2012 to NIS 9.9 million (U.S. $2.7 million) in the current quarter. The increase in rental income in this quarter mainly derives from increase in rented spaces to external parties and from CPI increase.
Gross profit in the second quarter of 2013 amounted to NIS 644.0 million (U.S. $178.0 million) (21.8% of revenues) as compared to gross profit of NIS 694.5 million (21.3% of revenues) in the comparable quarter last year. The decrease in the gross profit compared to the corresponding quarter last year was mainly due to the decrease in the gross profit in the Supermarkets segment.
In the Fueling and Commercial sites segment, gross profit amounted to NIS 196.8 million (U.S. $54.4 million), (15.5% of revenues) compared to NIS 212.4 million in the comparable quarter last year (13.9% of revenues), a decrease of 7.3%. The decrease in the gross profit mainly derived from inventory losses resulting from decrease in fuel prices and discontinued sales to the Palestinian Authority.
In the Supermarkets segment, gross profit amounted to NIS 410.9 million (U.S. $113.6 million), (25.7% of revenues) compared to NIS 445.8 million in the second quarter of 2012 (27.0% of revenues), a decrease of 7.8%. The decrease in gross profit mainly derives from closing 9 branches and from actions taken by the Company to reduce sale margins.
In the Non Food segment, gross profit amounted to NIS 28.1 million (U.S. $7.8 million), (42.1% of revenues) compared to NIS 32.2 million in the second quarter of 2012 (45.1% of revenues), a decrease of 12.7%. The decrease in gross profit mainly derives from decrease in sales, due to the Passover timing and from erosion of the gross profit margin following "sales campaigns" and increase in costs that were not translated into consumer price increases.
Selling, general and administrative expenses in the second quarter of 2013 amounted to NIS 630.9 million (U.S. $174.4 million) (21.4% of revenues), compared to expenses of NIS 635.8 million (19.5% of revenues) in the comparable quarter last year.
In the Fueling and Commercial sites segment, these expenses amounted to NIS 164.1 million (U.S. $45.4 million) compared to NIS 162.9 million in the second quarter of 2012, an increase of 0.7%.
In the Supermarkets segment, selling, general and administrative expenses amounted to NIS 399.9 million (U.S. $110.5 million) compared to expenses of NIS 414.1 million in the second quarter of 2012, a decrease of 3.4% in expenses that mainly derives from efficacy measures and exiting branches.
In the Non Food segment, selling, general and administrative expenses amounted to NIS 38.3 million (U.S. $10.6 million) compared to NIS 36.9 million in the second quarter of 2012, an increase of 3.8% in expenses that mainly derives from transition from franchise stores to self-operated stores and increase in marketing and advertising expenses.
In the Real Estate segment, selling, general and administrative expenses amounted to NIS 5.0 million (U.S. $1.4 million) compared to NIS 4.0 million in the second quarter of 2012.
Operating profit (before other gains and losses and changes in fair value of investment property) in the second quarter of 2013 amounted to NIS 13.1 million (U.S. $3.6 million) (0.4% of revenues) as compared to NIS 58.7 million (1.8% of revenues) in the comparable quarter last year, a decrease of 77.7%. The decrease in the operating profit was mainly due to decrease in the operating profit in the Supermarkets and Fueling and Commercial Sites segments.
In the Fueling and Commercial sites segment, operating profit in this quarter amounted to NIS 32.7 million (U.S. $9.0 million) compared to operating profit of NIS 49.5 million in the second quarter of 2012, a decrease of 33.9%. The decrease mainly derives from higher inventory losses this quarter and from discontinued sales to the Palestinian Authority.
In the Supermarkets segment, operating profit amounted to NIS 11.0 million (U.S. $3.0 million) compared to operating loss of NIS 3.0 million in the previous quarter, an improvement of NIS 14 million as from the beginning of the new strategic plan impact.
In the Non Food segment, operating loss amounted to NIS 10.2 million (U.S. $2.8 million) as compared to an operating loss of NIS 4.8 million in the second quarter of 2012, an increase of 113%. The increase in operating loss derives from decrease in sales due to holiday timing, erosion of gross profit and increase in selling, general and administrative expenses.
In the Real Estate segment, the operating profit in this quarter amounted to NIS 4.9 million (U.S. $1.4 million) compared to NIS 4.1 million in the second quarter of 2012, an increase of 19.5%. The increase in the operating profit derives from increase in rental income and was partly offset from increase in selling, general and administrative expenses.
Changes in fair value of investment property in this quarter the Company recorded a profit in the amount of NIS 5.7 million (U.S. $1.6 million) compared to a loss of NIS 8.5 million in the second quarter of 2012.
Other income (expenses), net other expenses in this quarter amounted to NIS 4.0 million (U.S. $1.1 million) compared to other expenses of NIS 1.5 million in the second quarter of 2012.
Share in gains of associates in this quarter amounted to NIS 3.3 million (U.S. $0.9 million) compared to NIS 70.6 million in the corresponding quarter last year. Last year, associates' gains included a profit of NIS 68 million from revaluation of the Tel Aviv Mall.
Operating profit in this quarter amounted to NIS 18.2 million (U.S. $5.0 million) (0.6% of revenues) as compared to operating profit of NIS 119.3 million (3.7% of revenues) in the second quarter of 2012, a decrease of 84.7%. The decrease in operating profit mainly stems from changes in the fair value of investment property between the periods and from implementing Mega's new strategic plan.
Finance costs, net in this quarter amounted to NIS 74.9 million (U.S. $20.7 million) as compared to net finance costs of NIS 94.5 million in the second quarter of 2012. The decrease in finance costs, net derives from a decrease in the dollar exchange rate in this quarter compared to an increase in the exchange rate in the corresponding quarter last year, decrease in the short and long term interest rates and from a decrease in the scope of the net debt.
Taxes on income tax benefit in this quarter amounted to NIS 10.9 million (U.S. $3.0 million) as compared to tax benefit of NIS 9.6 million in the second quarter of 2012.
Income (loss) from continuing operation in this quarter loss amounted to NIS 45.9 million (U.S. $12.7 million) compared to an income of NIS 34.4 million in the second quarter of 2012. The loss in this quarter attributed to the Company's shareholders amounted to NIS 47.8 million (U.S. $13.2 million) or NIS 0.73 per share (U.S. $0.2) and the income attributed to non-controlling interests amounted to NIS 2.0 million (U.S. $0.5 million).
Net loss from discontinued operation in this quarter amounted to NIS 8.0 million (U.S. $2.2 million) or NIS 0.12 per share (U.S. $0.03) compared to a loss of NIS 3.3 in the second quarter of 2012, which attributed in its entirety to the Company's shareholders.
Cash flows for the second quarter of 2013
Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS 193.9 million (U.S. $53.6 million) in the second quarter of 2013 compared to NIS 73.2 million from operating activities in the comparable quarter last year. The main increase derives from a decrease in working capital needs in the amount of NIS 169.2 million (U.S. $46.8 million) mainly from measures taken to reduce customer days and reduction of inventories offset by a decrease in operating profit of NIS 45.6 million (U.S. $12.6 million).
Cash flows used in investing activities: Net cash flows used in investing activities amounted to NIS 41.7 million (U.S. $11.5 million) in this quarter as compared to net cash used in investing activities of NIS 85.8 million in the comparable quarter. Cash flows used in investing activities in this quarter mainly included the purchase of investment property, property and equipment and intangible assets of total NIS 60.6 million (U.S. $16.8 million), and was offset by proceeds from realization of investment property of NIS 6.2 million (U.S. $1.7 million), and interest received of NIS 4.2 million (U.S. $1.2 million). In the second quarter of 2012 the cash flows used in investing activities mainly included the purchase of property and equipment, investment property and intangible assets of NIS 83.1 million, grant of long term loans of NIS 11.3 million and investment in securities in the amount of NIS 38.7 million, net of proceeds from realization of securities in the amount of NIS 44.6 million.
Cash flows used in financing activities: Net cash flows used in financing activities amounted to NIS 59.3 million (U.S. $16.4 million) in this quarter as compared to net cash flows deriving from financing activities of NIS 130.5 million in the corresponding quarter last year. The cash flows used in financing activities this quarter mainly included interest payments of NIS 66.3 million (U.S. $18.3 million), repayment of debentures of NIS 141.2 million (U.S. $39.0 million), repayment of long term loans of NIS 60.9 million (U.S. $16.8 million) and a dividend payment to non-controlling interests of NIS 15.2 million (U.S. $4.2 million) and was offset by issuance of debentures of NIS 87.9 million (U.S. $24.3 million) and increase in short term credit of NIS 51.1 million (U.S. $14.1 million). The net cash flows deriving from financing activities in the second quarter of 2012 included mainly the receipt of new loans of NIS 131.0 million, the issuance of debentures of NIS 31.3 million, increase in short term bank credit of NIS 183.9 million and was offset by repayment of loans of NIS 67.3 million, repayment of debentures of NIS 88.4 million and from interest payments of NIS 60.0 million.
Additional Information
1. Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)(3) in the second quarter of 2013 adjusted EBITDA was NIS 92.7 million (U.S. $25.6 million) (3.1% of revenues) compared to NIS 129.5 million (4.0% of revenues) in the second quarter of 2012.
In the first half of 2013 adjusted EBITDA was NIS 191.3 million (U.S. $52.8 million) (3.2% of revenues) compared to NIS 244.3 million (3.8% of revenues) in the comparable period of 2012.
Events during the reporting period
General
a. Effective January 1, 2013, the Company applies IFRS 11 "Joint Arrangements". The application is retrospective. Jointly controlled entities presented in the past in the consolidated statements using the proportionate consolidation method are presented in these financial statements as part of the associates.
The following presents the effect on the financial statements as of December 31, 2012 and June 30, 2012 and for the periods then ended:
The effect on the statement of financial position:
December 31, 2012
(Unaudited)
----------
As previously The effect of As reported after
reported retrospective the application
application of the standard
----------- ---------------
NIS in millions
---------------
Current assets 3,387 (53) 3,334
----- --- -----
Non-current assets
Investments in associates 349 577 926
--- --- ---
Other non-current assets 5,757 (805) 4,952
----- ---- -----
Current liabilities 4,074 (80) 3,994
----- --- -----
Non-current liabilities 3,813 (182) 3,631
----- ---- -----
Equity 1,606 (19) 1,587
===== === =====
June 30, 2012
(Unaudited)
----------
As previously The effect of As reported after
retrospective the application
reported application of the standard
-------- ----------- ---------------
NIS in millions
---------------
Current assets 3,474 (76) 3,398
----- --- -----
Non-current assets
Investments in associates 281 562 843
--- --- ---
Other non-current assets 5,831 (782) 5,049
----- ---- -----
Current liabilities 3,874 (87) 3,787
----- --- -----
Non-current liabilities 4,109 (191) 3,918
----- ---- -----
Equity 1,603 (18) 1,585
===== === =====
Effect on the statement of income:
Year ended December 31, 2012
(Unaudited)
----------
As previously The effect of As reported after
reported retrospective the application
application of the standard
----------- ---------------
NIS in millions
---------------
Revenues, net 12,850 (165) 12,685
Gross profit 2,842 (90) 2,752
Operating profit before changes 184 (11) 173
Share in gains of associates - 87 87
Increase in fair value of 107 (90) 17
investment property, net
Other gains, net 23 (19) 4
--- --- ---
Operating profit after changes 314 (33) 281
Finance expenses, net (246) 7 (239)
Tax benefit (taxes on income) (16) 19 3
Share in gains of associates 12 (12) -
--- --- ---
Net income from continuing operation 64 (19) 45
=== === ===
The main decrease in the profit in 2012 derives from eliminating profit, loss of control in a jointly controlled entity as a result of applying IFRS 11.
Six months ended June 30, 2012
(Unaudited)
----------
As previously The effect of As reported after
reported retrospective the application
application of the standard
----------- ---------------
NIS in millions
---------------
Revenues, net 6,462 (90) 6,372
Gross profit 1,413 (44) 1,369
Operating profit before changes 96 (3) 93
Share in gains of associates - 74 74
Increase in fair value of 84 (90) (6)
investment property, net
Other gains (expenses), net 19 (20) (1)
--- --- ---
Operating profit after changes 199 (39) 160
Finance expenses, net (137) 3 (134)
Tax benefit (9) 23 14
Share in gains of associates 5 (5) -
--- --- ---
Net income from continuing operation 58 (18) 40
=== === ===
Effect on the statement of cash flows:
Year ended December 31, 2012
(Unaudited)
----------
As previously The effect of As reported after
reported retrospective the application
application of the standard
----------- ---------------
NIS in millions
---------------
Net cash provided by operating activity 299 203 502
Net cash used in investing activity (573) 177 (396)
Net cash provided by financing activity 482 (381) 101
--- ---- ---
Increase in cash and cash 208 (1) 207
equivalents
Balance of cash and cash equivalents 74 (22) 52
at the beginning of the year
Balance of cash and cash 282 (23) 259
equivalents at the end of the year
Six months ended June 30, 2012
(Unaudited)
----------
As previously reported The effect of retrospective As reported after
the application
application of the standard
----------- ---------------
NIS in millions
---------------
Net cash provided by operating activity 32 201 233
Net cash used in investing activity (431) 194 (237)
Net cash provided by financing activity 538 (394) 144
--- ---- ---
Increase in cash and cash 139 1 140
equivalents
Balance of cash and cash equivalents 74 (22) 52
at the beginning of the year
Balance of cash and cash 213 (21) 192
equivalents at the end of the period
b. On March 22, 2013, Mrs. Limor Ganot was appointed as co-CEO of the Company. The appointment is in effect from April 1, 2013.
c. On April 24, 2013, the Company changed its name from "Alon Holdings Blue Square Israel Ltd" to "Alon Blue Square Israel Ltd".
d. On May 7, 2013, the Company sold 3.5% of BSRE shares for NIS 49 million. After the sale, the Company holds 74.76% of BSRE's share capital.
e. The Company resolved to merge BEE group into Mega Retail. The merger is expected to be completed in 2013.
Fueling and Commercial sites segment
a. As of June 30, 2013, Dor Alon operated 204 fueling stations and 209 convenience stores in various formats.
b. In March, 2013, Dor Alon declared a dividend of NIS 20 million (U.S $5.5 million). The Company's share is NIS 15.7 million (U.S $4.3 million). The dividend was paid on April 9, 2013.
Supermarkets segment
a. As of June 30, 2013, the Company operated 213 supermarkets divided as follows: Mega In Town - 120; Mega Bool - 66; Zol Beshefa - 15; Eden Teva Market - 21 of which 9 Eden within Mega.
b. As of June 30, 2013, the Company operated branches in a total area of 366,100 sq.m. During the period ending on June 30, 2013, one branch with a total area of 3,600 sq.m was closed, and two branches with a total area of 2,040 sq.m were opened.
Sales per meter amounted in the second quarter of 2013 to NIS 4,342 (U.S. $1,200) compared to NIS 4,284 in the corresponding period last year.
Sales per meter amounted in the first half of 2013 to NIS 8,798 (U.S. $2,432) compared to NIS 8,577 in the corresponding quarter last year.
Non Food segment
a. As of June 30, 2013, the Company operates 135 branches (of which 21 franchised) according to the following breakdown: Na'aman - 42 stores, Vardinon - 45 stores, Sheshet - 30 stores and Dr. Baby - 18 stores. In July 2013, 18 stores of Sheshet were converted to Na'aman stores and the rest of Sheshet stores will continue to operate under the Sheshet Brand name until the end of the lease period and no later than the end of 2013.
b. Discontinued activity - in view of the Company's resolution from December 2012, to realize Kfar Hasha'shuim (Kfar), the results of Kfar are included in the consolidated statement of operations under "Loss from discontinued operation (after tax)".
Following are the operating results of Kfar for the reported periods:
Year ended Six months ended Three months ended
December 31 June 30 June 30
----------- ------- -------
2012 2012 2013 2012 2013
---- ---- ---- ---- ----
NIS in thousands
----------------
Sales 115,214 51,829 61,040 25,318 27,885
Gross
profit 23,308 5,939 13,003 3,446 6,865
Operating
profit
(loss) (12,648) (4,587) (472) (2,214) (497)
Net
loss
included
in
loss
from
discontinued
operations (22,468) (6,679) (10,000) (3,276) (7,982)
======= ====== ======= ====== ======
Real Estate segment
a. Comverse Building
On January 21, 2013, BSRE entered into an agreement for the sale of half of its rights in the property to Harel Investments, Insurance and Financial Services Ltd. (Harel) in return for NIS 51 million and shall bear 50% of the remaining establishment costs. In addition, BSRE is entitled to an additional consideration for building rights of 2,500 sq.m that were not yet utilized and such consideration is to be payable according to the agreement. The agreement further determines that if the building rights in the real estate are increased, Harel shall have the option to purchase 50% of these rights at a consideration to be determined according to the value of the rights. A collaboration agreement was signed between BSRE and Harel. The above consideration reflects the fair value of part of the real estate that was realized and therefore, in the first quarter and in the reported period, the Company recorded gain from change in value of investment property of NIS 5.5 million in addition to a gain that was recorded in 2012 in the amount of NIS 4 million.
b. Cohen Building in Petach Tikva
In November 2012, BSRE granted an option to purchase the property in Petach Tikva subject to various conditions in return for NIS 56 million. On March 6, 2013, the option was exercised and a sale agreement was signed. The purchasers did not complete the first payment according to the date set forth in the sale agreement. An extension was granted to the purchasers to complete the payment and the rest of the payments according to the agreement. As of the report date, it is uncertain whether the purchasers will fulfill their obligations according to the deferred dates and BSRE reserves the right to cancel the agreement and/or to any other remedy pursuant to any law.
c. In March, 2013, BSRE declared a dividend of NIS 50 million (U.S. $13.7 million), the Company's share amounts to NIS 39 million (U.S. $10.7 million). The dividend was paid on April 23, 2013.
d. Wholesale market complex
Financing and financial services agreement
On June 26, 2013, Tel Aviv Lev Towers Ltd. (the residence company) a company held 49.5% by BSRE, and the Tel Aviv Mall Ltd. (the Mall company) a company held 50% by BSRE, (the purchasers) entered into financing agreement with banks according to which the banks will extend financing and credit facilities to the residence company in a total scope of NIS 2 billion for granting guarantees under the sale law to the apartment purchasers and financing and credit lines of up to NIS 450 million to the mall company for completing the construction of the mall basements and foundation. The credit lines are to be paid on March 31, 2016 (the final payment date) and will bear an annual interest of Prime + 2%.
The mall company may repay the entire credit by an early payment subject to the conditions stated in the financing agreement.
Under the agreement with the banks grounds for immediate payment were determined.
To secure the liability of the residence company, BSRE provided a constant guarantee of NIS 25 million. To secure the liability of the mall company, BSRE provided a constant guarantee of NIS 50 million. In addition, the purchasers committed that the surplus accumulated in the residential project after the full credit repayment, will serve as a collateral to repay the credit of the mall company.
The financing agreement further contains a number of conditions for the entry of the agreement into effect, among others, recording mortgage, liens and a warning note in favor of the banks.
On August 8, 2013, the financing agreements came into force and effect and the residence company repaid a loan provided by a bank, which is one of the financing parties under the agreement, against release of advance receipts from apartment purchasers for the full amount of the loans, which upon entry into force of the financing agreement, were held in deposits.
Building permit
On August 12, a building permit to construct the mall, commercial spaces and the sport center was received.
Sale agreements with apartment purchasers
As of the report date, the residence company entered into commitment for 629 sale agreements with a scope of NIS 1,492 million (including VAT) and received advances of NIS 817 million (including VAT).
Issuance of bonds
a. On January 31, 2013, the bonds series of Dor Alon (Series C and D) were expanded by a private offering of NIS 21 million par value of bonds (Series C) to institutional investors for 97.95% of their par value, reflecting a return of 5.3% and NIS 129 million par value of bonds (Series D) for 103.8% of their par value, reflecting a return of 5.2%.
b. On May 13, 2013, Midroog ratified the P-1 rating with for commercial paper issued by the Company in the amount of NIS 75 million up to NIS 120 million. As of June 30, 2013, the balance of the issued commercial paper is NIS 120 million.
In addition, Midroog announced the ratification of the A2 rating on bonds (series A and C) issued by the Company, while changing the outlook from stable to negative.
c. On May 20, 2013 the bonds series of BSRE (Series D) was expanded by a private offering of NIS 76 million par value of bonds (Series D) to institutional investors for 117.9% of their par value, reflecting a return of 2.8%.
d. On July 10, 2013 the bonds series of the Company (Series C) was expanded by a private offering of NIS 100 million par value of bonds (Series C) to institutional investors for 99.3% of their par value, reflecting a return of 3.9%.
e. On July 11, 2013 the bonds series of BSRE (Series D) was expanded by a private offering of NIS 167 million par value of bonds (Series D) to institutional investors for 117.2% of their par value, reflecting a return of 2.6%.
f. On August 7, 2013, the bonds series of BSRE (Series D) was expanded by a public offering of NIS 33 million par value of bonds (Series D) for 117.8% of their par value, reflecting a return of 2.7%.
Post balance sheet events
a. On August 5, 2013, the Law for Change of National Priorities was published in the Official Gazette (Legislative Amendments to Achieve budget targets for 2013 and 2014) - 2013 (hereinafter - the Law) which enacts, among other things, the following amendments:
- Increase of the corporate tax rate effective with the tax year 2014 and thereafter, the tax rate will increase from 25% to 26.5%.
- Taxation of revaluation gains distributed as dividends - effective August 1, 2013 and subject to enacting the regulations by the minister of finance, should the Company distributes dividend to its shareholders from revaluation gains, the asset in respect of which revaluation gains were recorded and distributed will be viewed as a sold asset as of the distribution date (notional sale) and therefore these revaluation gains are taxable. Revaluation gains defined in the law as surplus that were not taxable by corporate tax, of the type to be determined by the minister of finance and approved by the finance committee of the Knesset and will be calculated cumulatively from the acquisition date of the asset.
Deferred tax balances as of June 30, 2013 do not take into account the expected effects of the law, since its enactment was not substantially completed until the end of the current quarter.
These effects will be reflected in the Company's results for the third quarter of 2013. The Company estimates that based on deferred tax balances as of June 30, 2013, the effect of the law on the Company's deferred tax balances is not expected to be material.
The Company maintains cumulative gains that fall under the definition of revaluation gains, which mainly derive from revaluation of investment properties to fair value. The revaluation gains constitute temporary differences for tax purposes in respect of which, the Company provided deferred taxes, the payment date of which until the change of the law, was upon realization of the asset. Should the Company decide to distribute dividends out of these gains; the impact of the law will result in early tax payment as of the dividend distribution date.
b. The CFO and the YOU club CEO, Mr. Dror Moran, who serves in his position in the Company since 2006, notified the management of his intention to end his position in the Company after 7 years and after 16 years in total in the Group. The Company's CEO, Mr. David Weissman, thanked Mr. Moran for his contribution during his employment term and noted his considerable contribution to the transformation process of the Company from a food retail chain to the largest retail group in Israel while managing the finances and the customer loyalty club in professional manner and by international standards. The Company's management wishes him the best of luck in his future endeavors and hopes that he joins one of the other group companies in an executive position.
NOTE A: Convenience Translation to Dollars
The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at June 30, 2013: U.S. $1.00 equals NIS 3.618. The translation was made solely for the convenience of the reader.
Alon Blue Square Israel Ltd. (hereinafter: "Alon Blue Square") operates in four reportable operating segments and is the largest retail company in the State of Israel. In the Fueling and Commercial Sites segment, Alon Blue Square through its 78.43% subsidiary, which is listed on the Tel Aviv stock exchange ("TASE"), Dor Alon Energy in Israel (1988) Ltd is one of the four largest fuel retail companies in Israel based on the number of petrol stations and a leader in the field of convenience stores operating a chain of 204 petrol stations and 209 convenience stores in different formats in Israel. In its supermarket segment, Alon Blue Square, as a pioneer in the modern food retail, through its 100% subsidiary, Mega Retail Ltd., currently operates 213 supermarkets under different formats, each offering a wide range of food products, "Near Food" products and "Non-Food" products at varying levels of service and pricing. In its "Non-Food" segment, Alon Blue Square, through its 100% subsidiary BEE Group Retail Ltd., operates specialist outlets in self-operation and franchises and offers a wide range of "Non-Food" products as retailer and wholesaler. In the Real Estate segment, Alon Blue Square, through its TASE traded 74.76% subsidiary Blue Square Real Estate Ltd., owns, leases and develops income producing commercial properties and projects. In addition, Alon Blue Square through its 100% subsidiary, Alon Cellular Ltd, operates an MVNO network in Israel and through Diners Club Israel Ltd., an associate held at 49%, which operates in the sector of issuance and clearance of YOU credit cards to the customer club members of the group.
Forward-looking statements
This press release contains forward-looking statements within the meaning of safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, plans or projections about our business, our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events, results, performance, circumstance and achievements to be materially different from any future events, results, performance, circumstance and achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following: the effect of the economic conditions in Israel on the sales in our stores and of our products and on our profitability; our ability to compete effectively against low-priced supermarkets, large fuel companies and our other competitors; enactment of new laws and regulations, including the enactment of recommendations of governmental appointed committees and regulations with respect to the procurement of petroleum products by fuel companies and the price of petroleum products that are subject to regulation; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; fluctuations in the price of petroleum products and increases in excise tax rates imposed on the sale of petroleum products in Israel; risks associated with our dependence on a limited number of key suppliers for products that we sell in our stores; the effect of an increase in the minimum wage in Israel on our operating results; the effect of any actions taken by the Israeli Antitrust Authority on our ability to execute our business strategy and on our profitability; the effect of increases in oil, raw material and product prices in recent years; the effects of damage to our reputation or to the reputation of our store brands due to reports in the media or otherwise; government policies with respect to residential building may have a negative impact on our operations in residential building, and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, risks, uncertainties and factors identified under the heading "Risk Factors" in our annual report on Form 20-F for the year ended December 31, 2012. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for our ongoing obligations to disclose material information under the applicable securities laws, we undertake no obligation to update the forward-looking information contained in this press release.
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2013
(UNAUDITED)
Convenience
translation
December 31, June 30, June 30,
-------- --------
2012* 2012* 2013 2013
---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 261,674 193,346 524,828 145,060
Investment in securities 325,313 315,407 360,270 99,577
Short-term bank deposits 96,146 100,353 95,533 26,405
Trade receivables 1,415,828 1,672,318 1,306,080 360,995
Other accounts receivable including current maturities of loans receivable 271,258 336,976 294,515 81,403
Derivative financial instruments - 1,409 - -
Assets classified as held for sale 94,216 - 45,600 12,604
Assets of disposal groups classified as held for sale 133,915 - 127,517 35,245
Income taxes receivable 90,882 101,106 28,525 7,884
Inventories 644,809 677,560 576,442 159,326
------- ------- ------- -------
3,334,041 3,398,475 3,359,310 928,499
--------- --------- --------- -------
NON-CURRENT ASSETS:
Investments in associates 926,645 843,413 949,806 262,522
Derivative financial instruments 1,790 270 3,401 940
Real estate inventories 106,064 106,927 106,557 29,452
Investments in securities 48,609 37,480 50,794 14,039
Loans receivable, net of current maturities 200,294 189,301 196,871 54,414
Property and equipment, net 2,651,678 2,752,445 2,578,213 712,607
Investment property 539,466 504,627 603,010 166,669
Intangible assets, net 1,256,611 1,307,217 1,230,702 340,161
Other long-term receivables 33,251 35,458 35,735 9,877
Deferred taxes 114,805 115,063 146,212 40,412
------- ------- ------- ------
5,879,213 5,892,201 5,901,301 1,631,093
--------- --------- --------- ---------
Total assets 9,213,254 9,290,676 9,260,611 2,559,592
========= ========= ========= =========
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2013
(UNAUDITED)
Convenience
translation
December 31, June 30, June 30,
------------ --------
2012* 2012* 2013 2013
---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Credit and loans from banks and others 1,129,526 1,102,066 1,007,909 278,582
Current maturities of debentures and convertible debentures 556,188 258,539 590,234 163,138
Current maturities of long-term loans from banks 247,581 255,157 253,612 70,097
Trade payables 1,228,013 1,324,173 1,353,150 374,005
Other accounts payable and accrued expenses 628,915 735,445 644,094 178,025
Customers' deposits 28,011 27,696 28,455 7,865
Derivative financial instruments 17,566 9,377 8,414 2,326
Income taxes payable 10,124 4,632 4,552 1,258
Provisions 60,578 70,495 57,697 15,947
Liabilities of disposal groups classified as held for sale 87,794 - 88,284 24,400
------ --- ------ ------
3,994,296 3,787,580 4,036,401 1,115,643
--------- --------- --------- ---------
NON CURRENT LIABILITIES:
Long-term loans from banks and others, net of current maturities 1,134,436 1,233,988 1,107,182 306,020
Convertible debentures, net of current maturities 90,402 119,771 90,578 25,035
Debentures, net of current maturities 2,048,829 2,218,311 2,133,100 589,580
Other liabilities 142,016 152,022 139,826 38,647
Derivative financial instruments 6,382 9,204 3,510 970
Liabilities in respect of employee benefits, net of amounts funded 69,457 59,460 69,484 19,205
Deferred taxes 139,887 125,704 155,476 42,973
------- ------- ------- ------
3,631,409 3,918,460 3,699,156 1,022,430
--------- --------- --------- ---------
Total liabilities 7,625,705 7,706,040 7,735,557 2,138,073
--------- --------- --------- ---------
EQUITY:
Ordinary shares of NIS 1 par value 79,881 79,881 79,881 22,079
Additional paid-in capital 1,219,279 1,219,279 1,219,279 337,004
Other reserves 9,245 (13,093) 28,444 7,862
Accumulated deficit (129,666) (90,614) (227,333) (62,834)
-------- ------- -------- -------
1,178,739 1,195,453 1,100,271 304,111
Non-controlling interests 408,810 389,183 424,783 117,408
------- ------- ------- -------
Total equity 1,587,549 1,584,636 1,525,054 421,519
--------- --------- --------- -------
Total liabilities and equity 9,213,254 9,290,676 9,260,611 2,559,592
========= ========= ========= =========
* Retroactive application, see events during the reporting period
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Convenience
translation for
Year ended Six months Three months the six months
December 31, ended June 30, ended June 30, ended June 30,
------------ --------------
2012* 2012* 2013 2012* 2013 2013
---- ---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands (except per share data)
-----------------------------------
Revenues 15,640,331 7,844,747 7,487,944 4,018,572 3,695,142 2,069,636
Less - government levies 2,955,154 1,473,242 1,448,577 755,385 745,043 400,381
--------- --------- --------- ------- ------- -------
Net revenues 12,685,177 6,371,505 6,039,367 3,263,187 2,950,099 1,669,255
Cost of sales 9,932,721 5,002,893 4,738,764 2,568,736 2,306,088 1,309,774
--------- --------- --------- --------- --------- ---------
Gross profit 2,752,456 1,368,612 1,300,603 694,451 644,011 359,481
Selling, general and administrative expenses 2,579,770 1,275,138 1,267,112 635,753 630,888 350,226
--------- --------- --------- ------- ------- -------
Operating profit before other gains and losses 172,686 93,474 33,491 58,698 13,123 9,255
and changes in fair value of investment property
Other gains 19,941 520 111 520 81 31
Other losses (15,663) (2,098) (10,347) (2,026) (4,043) (2,860)
Increase in fair value of investment property, net 16,874 (5,804) 11,246 (8,489) 5,687 3,108
Share in gains of associates 87,060 73,992 2,919 70,612 3,308 807
------ ------ ----- ------ ----- ---
Operating profit 280,898 160,084 37,420 119,315 18,156 10,341
Finance income 83,002 43,528 37,117 22,464 20,328 10,259
Finance expenses (321,930) (177,632) (165,852) (116,985) (95,213) (45,841)
-------- -------- -------- -------- ------- -------
Finance expenses, net (238,928) (134,104) (128,735) (94,521) (74,885) (35,582)
-------- -------- -------- ------- ------- -------
Income before taxes on income 41,970 25,980 (91,315) 24,794 (56,729) (25,241)
Taxes on income (2,863) (13,940) (13,508) (9,559) (10,870) (3,734)
------ ------- ------- ------ ------- ------
Net income (loss) from continued operations 44,833 39,920 (77,807) 34,353 (45,859) (21,507)
Net loss from discontinued operation 22,468 6,679 10,000 3,276 7,982 2,764
------ ----- ------ ----- ----- -----
22,365 33,241 (87,807) 31,077 (53,841) (24,271)
====== ====== ======= ====== ======= =======
Attributable to:
Equity holders of the Company (17,907) 8,422 (97,513) 15,251 (55,858) (26,954)
------- ----- ------- ------ ------- -------
Non-controlling interests 40,272 24,819 9,706 15,826 2,017 2,683
------ ------ ----- ------ ----- -----
Earnings per ordinary share or ADS attributable to equity holders of the company
Basic and fully diluted
Continuing operations 0.07 0.23 (1.33) 0.28 (0.73) (0.37)
Discontinued operations (0.34) (0.10) (0.15) (0.05) (0.12) (0.04)
----- ----- ----- ----- ----- -----
(0.27) 0.13 (1.48) 0.23 (0.85) (0.41)
===== ==== ===== ==== ===== =====
Weighted average number of shares or ADSs used for computation of earnings per share:
Basic and fully diluted 65,954 65,954 65,954 65,954 65,954 65,954
====== ====== ====== ====== ====== ======
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Convenience
translation
Year ended Six months ended Three months ended for the six
months ended
December 31, June 30, June 30, June 30,
--------- ---------
2012* 2012* 2013 2012* 2013 2013
---- ---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before taxes on income from continuing operations 41,970 25,980 (91,315) 24,794 (56,729) (25,241)
Net loss from discontinued operation (17,468) (6,679) (10,000) (3,276) (7,982) (2,764)
Income tax (paid) received, net 18,714 17,827 43,303 27,845 475 11,969
Adjustments for cash generated from operations 458,957 195,693 561,509 23,848 258,158 155,198
------- ------- ------- ------ ------- -------
Net cash provided by operating activities 502,173 232,821 503,497 73,211 193,922 139,162
------- ------- ------- ------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (164,458) (108,282) (55,764) (34,754) (31,572) (15,413)
Purchase of investment property (64,546) (36,681) (46,558) (29,632) (25,696) (12,868)
Purchase of intangible assets (43,392) (35,207) (8,704) (18,701) (3,370) (2,406)
Proceeds from collection of (investment in) short-term bank deposits 5,166 959 613 (4,022) 7,954 169
Proceeds from sale of property and equipment 20,139 1,770 2,174 1,332 360 601
Proceeds from sale of investment property 3,610 3,610 51,279 3,610 6,189 14,173
Proceeds from sale of marketable securities 150,945 109,807 84,163 44,561 50,083 14,279
Investment in marketable securities (178,149) (133,885) (115,822) (38,694) (48,153) (23,030)
Investment and loans to associates (124,879) (23,555) (7,366) (9,610) (5,134) (2,036)
Grant of long term loans (37,585) (34,863) (22,840) (11,280) (5) (6,313)
Collection of long-term loans 13,524 10,423 16,996 7,249 3,483 4,698
Interest received 24,349 8,774 12,905 4,159 4,171 3,567
------ ----- ------ ----- ----- -----
Net cash used in investing activities (395,276) (237,130) (88,924) (85,782) (41,690) (24,579)
-------- -------- ------- ------- ------- -------
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Convenience
translation
Year ended Six months ended Three months ended for the six months ended
December 31, June 30, June 30, June 30,
--------- ---------
2012* 2012* 2013 2012* 2013 2013
---- ---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend paid to non-controlling interests - - (15,218) - (15,218) (4,206)
Issuance of debentures 504,136 295,567 240,180 31,325 87,917 66,385
Repayment of debentures (209,321) (92,156) (143,534) (88,361) (141,157) (39,672)
Receipt of long-term loans 226,478 131,014 86,853 131,014 46,200 24,006
Repayment of long-term loans (342,314) (186,294) (114,678) (67,281) (60,871) (31,697)
Short-term credit from banks and others 177,795 112,583 (121,059) 183,884 51,097 (33,460)
Transactions with non-controlling interests in subsidiary without loss of control (467) (682) 48,711 - 48,711 13,464
Settlement of forward contracts (2,808) - (9,717) - (9,717) (2,686)
Interest paid (252,955) (116,342) (128,801) (60,034) (66,306) (35,600)
-------- -------- -------- ------- ------- -------
Net cash provided by (used in) financing activities 100,544 143,690 (157,263) 130,547 (59,344) (43,466)
------- ------- -------- ------- ------- -------
207,441 139,381 257,310 117,976 92,888 71,117
INCREASE IN CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS
Translation differences on cash and cash equivalents (1) 23 (1) 27 1 -
BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS AT BEGINNING OF PERIOD 51,605 51,605 259,045 73,006 423,465 71,599
------ ------ ------- ------ ------- ------
BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF PERIOD 259,045 191,009 516,354 191,009 516,354 142,716
======= ======= ======= ======= ======= =======
(Continued - 2)
ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Convenience
translation
for the six
Year ended Six months Three months months ended
December 31, ended June 30, ended June 30, June 30,
------------ ---------------
2012* 2012* 2013 2012* 2013 2013
---- ---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
(a) Net cash provided by operating activities:
Adjustments for:
Depreciation and amortization 278,514 133,576 135,109 66,174 67,827 37,344
Increase in fair value of investment property, net (16,874) 5,804 (11,246) 8,489 (5,687) (3,108)
Share in profit of associates (87,060) (73,992) (2,919) (70,612) (3,308) (807)
Dividend received 41,544 13,550 4,519 13,550 400 1,249
Share based payment (493) 727 (151) 264 - (42)
Loss (gain) from sale and disposal of property and equipment, net (14,684) 1,221 5,732 1,000 5,579 1,584
Provision for impairment of property and equipment, net - - 6,412 - 6,412 1,772
Gain from changes in fair value of derivative financial instruments (1,437) 1,161 (3,437) 3,518 133 (950)
Linkage differences on monetary assets, debentures, loans and other long term liabilities 29,208 22,510 21,633 20,505 19,770 5,979
Employee benefit liability, net 2,246 (1,580) 68 502 (131) 19
Decrease (increase) in value of investment in securities, deposits and long-term receivables, net 1,622 (2,395) (644) (11,368) (557) (178)
Interest paid, net 227,186 102,376 115,434 52,676 59,408 31,905
Changes in operating assets and liabilities:
Investment in real estate inventories (380) (4,598) (1,022) (3,775) (467) (282)
Decrease (increase) in trade receivables and other accounts 67,550 (134,016) 68,574 252,396 402,475 18,953
Increase (decrease) in trade payables and other accounts payable (56,025) 141,706 154,726 (405,783) (327,995) 42,766
Decrease (increase) in inventories (11,960) (10,357) 68,721 96,312 34,299 18,994
-------- ------- ------ ------ ------ ------
458,957 195,693 561,509 23,848 258,158 155,198
======= ======= ======= ====== ======= =======
(b) Supplementary information on investing and financing activities not involving cash flows:
Purchase of property and equipment on credit 27,866 8,879 14,255 3,949 14,255 3,940
====== ===== ===== ===== ===== =====
Realization of property and equipment 11,000 - - - - -
====== === === === === ===
ALON BLUE SQUARE ISRAEL LTD.
NET LIABILITIES
(UNAUIDITED)
Convenience
translation
December 31, June 30, June 30,
---------
2012* 2012* 2013 2013
---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
Alon Blue Square*
----------------
Cash
and
cash
equivalence 2,039 900 4,414 1,220
Investment
in
securities 68,429 67,025 68,674 18,981
------ ------ ------ ------
Total
assets 70,468 67,925 73,088 20,201
====== ====== ====== ======
Short
term
and
Long-
term
debt:
Short
term
loans
from
banks 259,735 119,986 262,182 72,466
Commercial
papers 87,837 12,287 132,611 36,653
Long
term
loans
from
banks 156,639 173,714 157,756 43,603
Debentures 177,095 265,051 182,811 50,528
------- ------- ------- ------
Total
long-
term
debt 681,306 571,038 735,360 203,250
======= ======= ======= =======
Equity:
Equity
attributable
to
equity
holders
of
the
company: 1,178,739 1,195,453 1,100,271 304,111
--------- --------- --------- -------
Total
debt,
net (610,838) (503,113) (662,272) (183,049)
======== ======== ======== ========
* Net of grant of loans or loans received from subsidiaries
ALON BLUE SQUARE ISRAEL LTD.
RECONCILIATION BETWEEN NET INCOME FOR THE PERIOD AND ADJUSTED EBITDA
FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Convenience
translation
Year ended Six months Three months for the six months ended
December 31, ended June 30, ended June 30, June 30,
------------ ---------------
2012* 2012* 2013 2012* 2013 2013
---- ---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands In thousands
------------ ------------
Net income
(loss) from
continuing
operations 44,833 39,920 (77,807) 34,353 (45,859) (21,507)
Tax benefit (2,863) (13,940) (13,508) (9,559) (10,870) (3,734)
Share in gains
of associates (87,060) (73,992) (2,919) (70,612) (3,308) (807)
Share in
adjusted EBITDA
of equity
accounted
investees 35,972 16,507 22,843 4,412 11,743 6,314
Finance
expenses, net 238,928 134,104 128,735 94,521 74,885 35,582
Other losses,
net (4,278) 1,578 10,236 1,506 3,962 2,829
Changes in fair
value of
investment
property (16,874) 5,804 (11,246) 8,489 (5,687) (3,108)
Depreciation and
amortization 278,514 133,576 135,109 66,174 67,827 37,344
Share based
payment (493) 727 (151) 264 - (42)
---- --- ---- --- --- ---
Adjusted EBITDA 486,679 244,284 191,292 129,548 92,693 52,871
======= ======= ======= ======= ====== ======
ALON BLUE SQUARE ISRAEL LTD.
FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Note 1 - Segment reporting
The Company includes segment information according to IFRS 8. The reporting is based on the Company's organizational structure, the internal reporting, the allocation of resources and the decision-making process. The Company presents four reporting segments: Supermarkets, Fueling and Commercial sites, Non-Food Retail and Wholesale, Real Estate in addition to other segment which includes mainly Cellular activity and the Company's share in the issuance and clearance activity of credit cards. The segments' results include the operating profit before financial expenses from continuing operations, including the company's share in gains (losses) of associates. The segments' results for prior periods were adjusted[4] in order to reflect the segment's results and the adjustment to the results in the consolidated report for those periods from continuing operations.
The Company's operating segments consist of the following:
(1) Fueling and commercial sites - Through its subsidiary Dor-Alon the Company is engaged in the development, construction and operation of vehicle fueling stations, adjacent commercial centers and independent convenience stores, marketing of fuel products and other products through the fueling stations and convenience stores and direct marketing of distillates to customers. The fueling and commercial sites segment is presented according to the published financial statements of Dor-Alon, with reclassification of credit card fees and with the amortization of the excess of cost arising at the time of acquisition allocated to the reconciliation between the operating profit of the segment and the consolidated operating profit.
(2) Supermarkets - The Company operates the second largest food retail chain in Israel. Through its subsidiary, Mega Retail Ltd. ("Mega Retail"), which operates Supermarket branches, the Company offers a wide range of food and beverage products and "Non-food" items, such as houseware, toys, small electrical appliances, computers and computer accessories, entertainment and leisure products and textile products and "Near-Food" products, such as health and beauty aids, products for infants, cosmetics and hygiene products. As of June 30, 2013, Mega Retail operated 213 supermarkets. This segment also includes properties owned through Blue Square Real Estate ("BSRE"), in connection with the supermarket operation of Mega Retail's stores (including warehouses and offices).
(3) Non-Food (Retail and Wholesale) - Mostly through its subsidiary, BEE Group Retail Ltd. ("BEE Group"), the Company is engaged in non-food retail and wholesale activities. As of June 30, 2013, the Company operated 135 non-food retail outlets, some through franchisees, with specialties in houseware and home textile, toys, leisure, and infant. This segment also includes properties owned through Blue Square Real Estate ("BSRE") which are used by the segment.
(4) Real Estate - Through its subsidiary BSRE the Company is engaged in generating yield from commercial centers, logistics centers and offices, land for the purpose of capital appreciation and deriving long-term yield as well as in the development of the "Wholesale Market" residency project.
(5) Others - Alon Blue Square through its 100% subsidiary, Alon Cellular Ltd, operates an MVNO network in Israel and through Diners Club Israel Ltd., an associate held at 49%, which operates in the sector of issuance and clearance of YOU credit cards to the customer club members of the group.
ALON BLUE SQUARE ISRAEL LTD.
FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Note 1 - Segment reporting (continued):
Three months ended June 30, 2013
--------------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total consolidated
---------------------------- ------------ -------- ----------- ------ ----------- ------------------
NIS in thousands
----------------
Net segment revenues 1,267,522 1,596,061 66,702 9,900 9,914 - 2,950,099
Inter segment revenues 9,503 - 5,599 - - (15,102) -
Gross profit (loss) 196,785 410,936 28,118 9,900 (1,654) (74) 644,011
Depreciation and amortization 21,947 40,035 2,990 - 1,103 1,752 67,827
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 32,684 11,001 (10,198) 4,881 (9,252) (8,400) 20,716
Segment profit 34,847 8,934 (9,944) 6,260 (3,531) (10,817) 25,749
Unallocated corporate expenses (7,593)
Financial expenses, net (74,885)
-------
Loss before taxes on income (56,729)
=======
Three months ended June 30, 2012
--------------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total consolidated
---------------------------- ------------ -------- ----------- ------ ----------- ------------------
NIS in thousands
----------------
Net segment revenues 1,529,890 1,653,511 71,318 8,087 381 - 3,263,187
Inter segment revenues 8,557 - 5,090 - - (13,647) -
Gross profit (loss) 212,399 445,816 32,176 8,087 (4,027) - 694,451
Depreciation and amortization 21,603 40,260 2,775 - - 1,536 66,174
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 49,542 31,736 (4,751) 4,054 (7,038) (9,064) 64,479
Segment profit 50,122 30,717 (5,529) 64,692 (3,269) (11,637) 125,096
Unallocated corporate expenses (5,781)
Financial expenses, net (94,521)
-------
Income before taxes on income 24,794
======
ALON BLUE SQUARE ISRAEL LTD.
FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Note 1 - Segment reporting (continued):
Six months ended June 30, 2013
------------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total
consolidated
---------------------------- ------------ -------- ----------- ------ ----------- -------------
NIS in thousands
----------------
Net segment revenues 2,604,972 3,223,686 173,649 19,347 17,713 - 6,039,367
Inter segment revenues 16,514 - 12,463 - - (28,977) -
Gross profit (loss) 386,821 817,792 81,149 19,347 (4,736) 230 1,300,603
Depreciation and amortization 43,426 79,976 5,930 - 2,266 3,511 135,109
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 69,247 7,951 (2,753) 9,611 (21,583) (16,772) 45,701
Segment profit 71,958 799 (3,605) 13,234 (10,352) (22,404) 49,630
Unallocated corporate expenses (12,210)
Financial expenses, net (128,735)
--------
Loss before taxes on income (91,315)
=======
Six months ended June 30, 2012
------------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total
consolidated
---------------------------- ------------ -------- ----------- ------ ----------- -------------
NIS in thousands
----------------
Net segment revenues 2,917,456 3,279,529 158,885 15,254 381 - 6,371,505
Inter segment revenues 17,235 - 17,217 - - (34,452) -
Gross profit (loss) 396,564 882,393 78,429 15,254 (4,028) - 1,368,612
Depreciation and amortization 42,869 82,207 5,427 - - 3,073 133,576
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 78,080 48,267 2,279 8,392 (10,719) (20,202) 106,097
Segment profit 79,683 46,976 1,475 70,694 (580) (25,541) 172,707
Unallocated corporate expenses (12,623)
Financial expenses, net (134,104)
--------
Income before taxes on income 25,980
======
ALON BLUE SQUARE ISRAEL LTD.
FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2013
(UNAUDITED)
Note 1 - Segment reporting (continued):
Year ended December 31, 2012
----------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total consolidated
---------------------------- ------------ -------- ----------- ------ ----------- ------------------
NIS in thousands
----------------
Net segment revenues 5,773,398 6,552,909 321,116 30,569 7,185 - 12,685,177
Inter segment revenues 41,197 - 29,458 - - (70,655) -
Gross profit (loss) 796,994 1,788,614 148,348 30,569 (11,570) (499) 2,752,456
Depreciation and amortization 87,808 167,464 11,438 - 2,099 9,705 278,514
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 145,527 126,231 (12,072) 17,197 (33,628) (46,301) 196,954
Segment profit 149,534 137,036 (15,450) 99,302 (9,887) (55,369) 305,166
Unallocated corporate expenses (24,268)
Financial expenses, net (238,928)
--------
Income before taxes on income 41,970
======
Six months ended June 30, 2013
------------------------------
Fueling and Commercial sites Supermarkets Non-Food Real Estate Others Adjustments Total consolidated
---------------------------- ------------ -------- ----------- ------ ----------- ------------------
U.S. dollars in thousands
-------------------------
Net segment revenues 720,003 891,013 47,996 5,347 4,896 - 1,669,255
Inter segment revenues 4,564 - 3,445 - - (8,009) -
Gross profit (loss) 106,916 226,034 22,429 5,347 (1,309) 64 359,481
Depreciation and amortization 12,003 22,105 1,639 - 626 971 37,344
Operating profit (loss) before other gains and losses
net, share in gains (losses) of associates and
changes in fair value of investment property 19,140 2,198 (761) 2,656 (5,965) (4,638) 12,630
Segment profit 19,889 221 (996) 3,658 (2,861) (6,195) 13,716
Unallocated corporate expenses (3,375)
Financial expenses, net (35,582)
-------
Loss before taxes on income (25,241)
=======
(1) Effective January 1, 2013, the Company applies IFRS 11 "Joint Arrangements" (IFRS 11 or the Standard). IFRS 11 is to be applied retrospectively in financial statements for annual periods such that comparative figures are restated. According to the Standard, investments in jointly controlled entities (Joint ventures) are no longer to be proportionately consolidated but rather the company's investments in these ventures should be presented according to the equity method of accounting. Investments in joint operations shall continue to be consolidated under the proportionate consolidation method in the Company's consolidated financial statements. For the effect of the adoption as of June 30, 2013 and December 31, 2012, and for the periods ending on those dates on the assets, liabilities, equity, results and cash flows of the Company, see further details in this report below.
(2) The Company operates in four reportable segments: Fueling and Commercial sites, Supermarkets, Non Food retail and wholesale and Real Estate. Segmental information is included in this report below.
(3) Use of financial measures that are not in accordance with Generally Accepted Accounting Principles
Adjusted EBITDA is a measure that is not in accordance with Generally Accepted Accounting Principles (Non-GAAP) and is defined as income before financial income (expenses) net, other gains (losses) net, changes in fair value of investment property, taxes, share in gains of associates, depreciation and amortization in addition to share in adjusted EBITDA of equity accounted investees. It is an accepted ratio in the retail industry. It is presented as an additional performance measure, since it enables comparisons of operating performances between periods and companies while
neutralizing potential differences resulting from changes in capital structures, taxes, age of property and equipment and its related depreciation expenses. Adjusted EBITDA, however, should not be related to as a single measure or as an alternative to operating income, another performance indicator and to cash flow information, which are prepared using Generally Accepted Accounting Principles (GAAP) as indicators of profit or liquidity. Adjusted EBITDA does not take the costs of servicing debt and other liabilities into account, including capital expenditures and therefore it does not necessarily indicate the amounts that may be available to the use of the company and in addition Adjusted EBITDA should not be compared to other indicators with similar names reported by other companies because of differences in the calculation of these indicators. See the reconciliation between our net income and Adjusted EBITDA which is presented in this press release.
(4 )The adjustments include retrospective applications of IFRS 11 "Joint Arrangements" (the Company's share in previously consolidated companies by the proportionate method in the Company's consolidated financial statements and their results are presented now under the Company's share in gains (losses) of associates and are included in this report in segment results)
Contact:
Alon Blue Square Israel Ltd.
Limor Ganot, co-CEO
Yehuda van der Walde, CAO
Toll-free telephone from U.S. and Canada: 888-572-4698
Telephone from rest of world: 972-9-961-8504
Fax: 972-9-961-8636
Email: cfo@bsi.co.il
SOURCE Alon Holdings Blue Square - Israel Ltd.
