ALON BLUE SQUARE ISRAEL LTD
Alon Blue Square Israel Ltd.
Yehuda van der Walde, CFO
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
August 27, 2015 - Yakum
On June 29, 2015, Mega filed with the court a petition for an arrangement with its creditors as part of completing a reorganizational plan. On July 15, 2015, the arrangement was approved by the court.
The results for the first half and the second quarter of 2015 include the effects of the arrangement and its costs, including closing of supermarket branches, dismissal of employees and goodwill amortizations.
The analysis of results and segment note was restated according to the main subsidiary companies held by the Company according to the new management perspective of the results and its analysis.
The Company's revenues, net of government fees, in the first half of 2015 amounted to NIS
4.8 billion compared to NIS 5.6 billion in the first half of 2014. Operating loss in the first half of 2015 amounted to NIS 462.2 million compared to a profit of NIS 51.1 million in the first half of 2014. Excluding onetime expenses, operating profit amounted to NIS 17.9 million in the first half of 2015 compared to NIS 63.2 million.
Cash flow from operating activities amounted to NIS 182.9 million in the first half of 2015 compared to NIS 334.2 million in the first half of 2014.
1 Restatement of reporting segments
This report includes an overview in accordance with the Company's operating segments. The report is based on the Company's organizational structure, internal reporting, resource allocation and decision making. Upon the appointment of a new CEO who is also the new Chief Operating Decision Maker (CODM) the segment review is performed according to the subsidiary companies so that each segment shows the results of the subsidiary of the Company. The Company presents five reportable segments: Supermarkets - Mega, Commercial and Fueling sites -Dor Alon, Housewares and Textile-Naaman Group, the Real Estate segment-BSRE, plus the Others segment which includes mainly the issuance and clearance of gift certificates by the Company, cellular activities, the company's share in the issuance and clearance activity of credit cards and the logistic center in Beer Tuvia. The segment results as reviewed by the Chief Operating Decision Maker (CODM) include operating income from continuing operations before financial expenses, including the Company's share in earnings of affiliates and without amortizations of excess costs if not included in the reports of the companies, segment results for prior periods have been adjusted to allow comparison of continuing activity respectively to the results in the consolidated report.
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Adjusted EBITDA2amounted to NIS 210.9 million in the first half of 2015 compared to NIS 195.2 million in the first half of 2014. Fueling and Commercial sites segment presents in the first half of 2015, operating profit of NIS 53.7 million and included inventory losses of NIS 7.5 million compared to inventory losses of NIS 4.0 million in the first half of 2014.
Supermarkets segment presents in the first half of 2015 operating loss of NIS 622.0 million compared to a loss of NIS 113.1 million in the first half of 2014. Excluding onetime expenses and the result of branches that were designated for closure, the loss in the first half of the year amounted to NIS 45.0 million.
Real Estate segment presents in the first half of 2015, operating profit of NIS 41.0 million compared to NIS 126.5 million in the first half of 2014.
Houseware and Textile segment presents in the first half of 2015, operating profit of NIS
3.7 million compared to NIS 7.5 million in the first half of 2014. Others segment presents in the first half of 2015, operating loss of NIS 3.9 million compared to a profit of NIS 2.9 million in the first half of 2014.
The net aggregate loss of the Company in the first half of 2015 amounted to NIS 562.3 million compared to a net loss of NIS 40.9 million in the first half of 2014. Excluding other
expenses and revenues, the loss in the first half of 2015 amounted to NIS 82.2 million.2 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 and share in EBITDA of branches which were resolved to cease their operation and accumulated revaluation profits of real estate properties that were realized in the period and capital gains from realizing real estate properties that were self-used. 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 as well as 'Use of Non-GAAP Measures' below.
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Consolidated profit and loss5102 NIS in millions | 5102 NIS in millions | |||
Consolidated profit and loss, NIS in millions | H1 | Q2 | H1 | Q2 |
Revenues from sales, net | 158,4 | 953,2 | ,5,04,5 | 9588,,2 |
Gross profit | 4549,,9 | ,31,3 | 4591,,0 | ,11,9 |
Operating profit (loss) before financing | )1,9,9( | )1,3,,( | ,4,4 | 10,, |
Net income (loss) | ),,9,3( | ),34,8( | )10,2( | )42,4( |
Adjusted EBITDA | 940,2 | 40,,0 | 42,,9 | 440,1 |
5102 | ||
Consolidated profit and loss, NIS in millions | H1 NIS in millions | Q2 NIS in millions |
Revenues from sales, net | 158,4 | 953,2 |
Gross profit | 4549,,9 | ,31,3 |
Operating profit before financing | 45,2 | ,,5 |
Adjusted EBITDA | 940,2 | 40,,0 |
5102 | 5102 | |||
H1 | Q2 | H1 | Q2 | |
Segment results, NIS in millions | NIS in millions | |||
Fueling and Commercial sites (Dor Alon) | ,3,5 | 30,9 | ,,,8 | 38,5 |
Supermarkets (Mega ) | ),99,0( | ),19,0( | )443,4( | )18,1( |
Houseware and Textile (Naaman Group) | 3,5 | )3,,( | 5,, | 4,5 |
Real Estate (BSRE) | 14,0 | )2,8( | 49,,, | 53,9 |
H1.2015 | Q2.2015 | |
Segment results, NIS in millions | NIS in millions | |
Fueling and Commercial sites (Dor Alon) | ,,,3 | 14,2 |
Supermarkets (Mega ) | )1,,0( | )48,0( |
Houseware and Textile (Naaman Group) | 1,0 | )3,1( |
Real Estate (BSRE) | 14,0 | )2,8( |
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Results for the first half of 2015
Gross revenuesRevenues (including government levies) in the first half of 2015 amounted to NIS 6,383.8 million (U.S. $1,693.0 million) as compared to revenues of NIS 7,091.7 million in the comparable period last year, a decrease of 10.0% mainly deriving from decrease in the supermarkets and fueling and commercial sites segments.
Revenues from sales, net Revenues of the Fueling and Commercial Sites segment - amounted in the first half of 2015 to NIS 2,031.6 million (U.S. $539.3 million) as compared to NIS 2,441.2 million in the corresponding period last year, a decrease of 16.8%. The main decrease was due to a decrease in fuel prices and was offset by the increase in fuel quantities sold and increase in the sales turnover of convenience stores. Revenues of the Supermarkets segment- amounted in first half of 2015 to NIS 2,634.3 million (U.S. $690.9 million) as compared to NIS 2,959.7 million in the corresponding period last year, a decrease of 12.0%. Segment revenues include the results of 32 branches designated for closure. The decrease in sales derived mainly from a decrease in selling spaces as a result of closing branches and the reduction of selling spaces and decrease in the sales of same store sales ('SSS') of 4% compared to the corresponding period last year. Revenues of the Houseware and Textile segment - amounted in first half of 2015 to NIS151.6 million (U.S. $40.2 million) compared to NIS 155.1 million in the corresponding period last year, a decrease of 2.3%. The decrease in sales derived from a decrease in sales of houseware and is partly offset by an increase in sales in home textile area.
Revenues of the Real Estate segment - amounted in the first half of 2015 to NIS 116.2 million (U.S $ 30.8 million) compared to NIS 110.3 million in the corresponding period last year, an increase of 5.3%. The increase in revenues mainly derives from leasing new
commercial spaces and offices.
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Gross profit
Gross profit in the first half of 2015 amounted to NIS 1,126.2 million (U.S. $298.8 million) (23.2% of revenues) as compared to gross profit of NIS 1,246.0 million (22.2% of revenues) in the comparable period last year, a decrease of 9.6%. The decrease in the gross profit compared to the corresponding period last year was mainly due to the decrease in gross profit in the supermarkets segment. In the Fueling and Commercial Sites segment, gross profit amounted to NIS 399.0 million (U.S. $105.9 million) (19.6% of revenues), compared to NIS 392.1 million in the comparable period last year (16.1% of revenues). The main increase in the gross profit mainly derived from an increase in fuel quantities sold and increase in sales of convenience stores. This increase was offset by higher inventory losses in the first half of the year compared to corresponding period last year in the amount of NIS 7.5 million. In the Supermarkets segment, which include the results of 32 branches designated for closure, gross profit amounted to NIS 621.0 million (U.S. $164.8 million) (23.8% of revenues), compared to NIS 774.3 million in the corresponding period last year (26.2% of revenues), a decrease of 19.8% deriving from a decrease in sales, as aforesaid. In the Houseware and Textile segment, gross profit amounted to NIS 83.4 million (U.S.$22.1 million) (59.8% of revenues), compared to NIS 86.3 million in the corresponding period last year (60.8% of revenues), a decrease of 3.4% which derived from a decrease in sales of housewares and was partly offset from an increase in sales of textile products.
Selling, general and administrative expenses
Selling, general and administrative expenses in the first half of 2015 amounted to NIS
1,130.7 million (U.S. $300.0 million) (23.3% of revenues), compared to expenses of NIS
1,221.5 million (21.8% of revenues) in the comparable period last year, a decrease of 7.4% which mainly derived from decrease in selling general and administrative expenses in the supermarkets segment.
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new fueling and commercial sites and from the updated minimum wages starting from April 1,
2015.
1.8%.
Fair Value of Investment Property
Increase in fair value of investment property in the first half of 2015, the Company recorded a profit in the amount of NIS 12.3 million (U.S. $3.3 million), compared to a profit of NIS 17.3 million in the corresponding period last year. In the real estate segment in the first half of 2015, net impairment loss of NIS 64.7 million (U.S $ 17.2 million) was recorded compared to an increase in value of NIS 10.4 million in the corresponding period last year. The valuations as of June 30, 2015 reflected the possible changes resulting from the creditors' arrangement of Mega and its announcement regarding its exiting from supermarket branches. The total impairment recorded in relation to the assets leased to Mega mainly derived from increasing the discount interest rate in the agreement's term at the rate of 1.5% compared to the discount rate that was used for previous valuations and from possible update of cash flows originating from assets in respect of which Mega may seek to be released of the related lease agreements. In addition, the impairment in the reported period includes the effect of change in revenue flow deriving, on one hand, from decrease in CPI because the Company's lease agreements are CPI linked and on the other hand, from
updating the value of additional rights in some assets.
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Other Expenses, Net
Other expenses, net in the first half of 2015 amounted to NIS 480.1 million (U.S. $127.4 million) compared to other expenses of NIS 12.1 million in the first half of 2014. In the Fueling and Commercial Sites segment, other expenses, net, in this period amounted to NIS 11.7 million (U.S. $3.1 million) as compared to other revenues of NIS 0.5 million in the corresponding period last year. Other expenses in this period mainly included provision for impairment of investment in associate. In the Supermarkets segment, other expenses, net, in this period amounted to NIS 501.0 million (U.S. $132.9 million) as compared to other expenses, net, of NIS 23.1 million in the corresponding period last year. The expenses in this period mainly included a provision for goodwill impairment of NIS 273.0 million (U.S $ 72.4 million), a provision for the impairment of intangible assets of NIS 34.0 million (U.S $ 9.0 million), a provision for the impairment of fixed assets of NIS 51.0 million (U.S $ 13.5 million), onetime expenses relating to Mega's reorganization of NIS 59.9 million (U.S $ 15.9 million) and NIS 55.1 million (U.S $ 14.6 million) for deconsolidation of subsidiaries. In the consolidated report of Alon Blue Square, other expenses amounted to NIS 370.4 million (U.S $ 98.3 million) mainly for goodwill amortization in a lower amount in the consolidated report. In the Houseware and Textile segment, other expenses amounted to NIS 0.3 million (U.S.$0.09 million) as compared to other revenues of NIS 0.1 million in the corresponding period last year.
Share in gains of associates in the first half of 2015 amounted to NIS 10.1 million (U.S. $2.7 million) compared to a profit of NIS 21.4 million in the corresponding period last year. The main decrease in this period derived from updating the value of the land with the progress of
construction rate of the Tel Aviv Mall in the wholesale market in the corresponding period.
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Operating Profit (Loss) before Financing
Operating loss before financing in the first half of 2015 amounted to NIS 462.2 million (U.S.$122.6 million) (9.5% of revenues) as compared to operating profit of NIS 51.1 million (0.9% of revenues) in the corresponding period last year. The decrease into operating loss mainly derived from the increase in operating loss in the Supermarkets segment.
In the Fueling and Commercial Sites segment, operating profit before financing amounted to NIS 53.7 million (U.S. $14.2 million) (2.6% of revenues) as compared to NIS 66.8 million in the corresponding period last year, a decrease of 19.6%. The main decrease in operating profit derived mainly from the decrease in revenues and increase in selling general and administrative expenses. In the Supermarkets segment, operating loss before financing, including the results of branches designated for closure, amounted to NIS 622.0 million (U.S. $165.0 million) (23.9% of revenues) as compared to operating loss of NIS 113.1 million in the first half of 2014. Operating loss before financing net of the results of 32 branches designated for closure amounted to NIS 45.0 million (U.S. $11.9 million) compared to a loss of NIS 88.0 million in the corresponding period last year, a decrease of 48.8% (see Non-GAAP reconciliation). In the Houseware and Textile segment, operating profit before financing amounted to NIS3.7 million (U.S. $1.0 million) (2.7% of revenues) as compared to operating profit of NIS 7.5 million in the corresponding period last year. The decrease in operating profit derived from decrease in sales and gross profit.
In the Real Estate segment, operating profit amounted to NIS 41.0 million (U.S. $10.9 million) (108.9% of revenues) as compared to operating profit of NIS 126.6 million in the corresponding period last year, a decrease of 67.6%, which derived from impairment of investment property this year compared to an increase in value in the corresponding period last year and from a decrease in the earnings of associates in the first half of the year compared to the corresponding period last year. Finance costs, net in first half of 2015 amounted to NIS 54.5 million (U.S. $14.5 million) as compared to net finance costs of NIS 95.5 million in the corresponding period last year. The decrease in finance costs, net derives mainly from effect of the CPI on the Company's financial liabilities part of which are CPI linked and from decrease in the prime interest rate. In the first half of 2015, the known CPI decreased by 0.5% compared to a decrease of 0.2% in the
corresponding period last year.
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$2.37) and the income attributed to non-controlling interests amounted to NIS 26.2 million
(U.S. $6.9 million).
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Cash flows for the first half of 2015
Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS182.9 million (U.S. $48.5 million) in the first half of 2015 compared to net cash flow provided by operating activities of NIS 334.2 million in the comparable period last year. The main decrease in cash flow provided by operating activities derived from decrease in working capital in the amount of NIS
199.7 million (U.S. $53.0 million), and from taxes paid in the amount of NIS 23.6 million (U.S. $6.2 million) in the period compared to tax receipts of NIS 3.7 million in the corresponding period last year.
Cash flows from investing activities: Net cash flows provided by investing activities amounted to NIS251.7 million (U.S. $66.8 million) in the first half 2015 as compared to net cash flows used in investing activities of NIS 136.9 million in the first half last year. Cash flows provided by investing activities in this period mainly included the proceeds from realization of property and equipment of NIS 87.9 million (U.S. $23.3 million), proceeds from realization of marketable securities in the amount of NIS
218.1 million (U.S. $ 57.9 million) repayment of loans granted to interested parties and others of NIS
141.4 million (U.S. $ 37.5 million), proceeds from sale of associate of NIS 19.4 million (U.S. $ 5.1 million) and interest received of NIS 6.2 million (U.S. $ 1.6 million) offset by the purchase of investment property, property and equipment and intangible assets of total NIS 93.8 million (U.S. $24.9 million), funding deconsolidated subsidiaries of NIS 29.4 million (U.S. $ 7.8 million) and investment in marketable securities of NIS 94.2 million (U.S. $ 25.0 million) . In the first half of 2014 the cash flows used in investing activities mainly included the purchase of property and equipment, investment property, and intangible assets of NIS 158.3 million, grant of long term loans of NIS 40.8 million, net of proceeds from marketable securities in the amount of NIS 45.3 million, and interest received of NIS
8.9 million.
Cash flows from financing activities: Net cash flows used in financing activities amounted to NIS314.0 million (U.S. $83.3 million) in the first half 2015 as compared to net cash flows used in financing activities of NIS 51.9 million in the corresponding period last year. The cash flows used in financing activities this period mainly included repayment of long term loans of NIS 170.7 million (U.S. $45.3 million), repayment of bonds of NIS 142.9 million (U.S. $37.9 million), repayment of commercial paper of NIS 111.2 million (U.S. $29.5 million), decrease in short- term credit from banks and others of NIS 100.8 million (U.S. $26.7 million) and interest payments of NIS 95.0 million (U.S. $25.2 million), and dividend payment to non-controlling interests of NIS 36.2 million (U.S. $9.6 million), and were offset by receiving long term loans of NIS 190.0 million (U.S. $50.4 million), and purchase of shares in subsidiaries by non- controlling interest in the amount of NIS 88.5 million (U.S. $23.5 million).
The net cash flows used in financing activities in the first half of 2014 included mainly repayment of long term loans of NIS 107.2 million, bond repayments of NIS 144.6 million, interest payments of NIS
112.4 million and a payment of dividend to non-controlling interest of NIS 40.3 million, and was offset
by receipt of long term loan of NIS 223.0 million and issuing bonds of NIS 154.4 million.
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Results for the second quarter of 2015
Gross revenues
Revenues (including government levies) in the second quarter of 2015 amounted to NIS
3,150.6 million (U.S. $835.9 million) as compared to revenues of NIS 3,643.2 million in the comparable quarter last year, a decrease of 13.5% mainly deriving from decreases in sales in the supermarkets segment.
1,064.3 million (U.S. $282.4 million) as compared to NIS 1,247.0 million in the corresponding quarter last year, a decrease of 14.7%. The main decrease was due to a decrease in fuel prices and was partly offset by the increase in fuel quantities sold and increase in the sales turnover of convenience stores.
Revenues of the Supermarkets segment- which include the results of 32 branches designated for closure amounted in this quarter to NIS 1,213.3 million (U.S. $321.8 million) as compared to NIS 1,535.0 million in the corresponding quarter last year, a decrease of 21%. The decrease in sales derived mainly from a decrease in the sales of SSS of 9.6% compared to the corresponding quarter last year and from the closing of branches. Revenues of the Houseware and Textile segment - amounted in this quarter to NIS 61.8 million (U.S. $16.4 million) compared to NIS 74.7 million in the corresponding quarter last year, a decrease of 17.3%. The decrease in sales derived from the timing of the holiday that this year occured at the beginning of April whereas last year it occurred in the middle of April. Revenues of the Real Estate segment - increase in rental income of 4.5% from NIS 56.0 million in the second quarter of 2014 to NIS 58.5 million (U.S $ 15.5 million) in the current quarter. The increase in revenues in this quarter mainly derived from the leasing of new commercial spaces and offices and from an increase in CPI compared to corresponding period
last year.
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