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ALON HLDG ADR : Alon Holdings Blue Square - Israel Ltd. Announces Financial Results for the First Half and Second Quarter of 2011

08/25/2011 | 05:50am US/Eastern
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ROSH HA'AYIN, Israel, August 25, 2011 /PRNewswire/ --

Highlights: - As a result of the inclusion of the results of Dor Alon, the Company's sales in the first half of 2011 amounted to NIS 6,216 million (U.S. $1,820.2 million) (increase of 73%) and the operating profit amounted to NIS 211 million (U.S. $61.8 million) (increase of 49% compared to the comparable period last year). - In the Supermarket segment the same store sales (SSS) in the first half of 2011 increased by 2.7%[1] compared to the comparable period last year. In the second quarter of 2011 the same store sales increased by 6.7%[1] compared to the comparable quarter last year mainly due to the timing of the Passover holiday. Without the impact of the Passover holiday, the increase in sales in the SSS was 4.0%. - Dor Alon's operating profit increased by 13% in the first half of 2011 compared to the comparable period last year. - In the second quarter BSRE recorded a gain from revaluation of a property in Kiryat Hasharon, Netanya in the amount of NIS 15 million (U.S. $4.4 million). After the balance sheet date, BSRE completed the sale of half of its rights in the property. - During the second quarter the Company and Dor Alon signed an update to the agreement to purchase 49% of Diners. The agreement was consummated on July 1, 2011. The Company recorded in the second quarter of 2011 an income from revaluation of option in the amount of NIS 70 million (U.S. $20.5 million) before taxes. - The net income increased by 88.1% this half year amounted to NIS 109.5 million (U.S. $32.1 million).

KEY FIGURES for the first half and the second quarter compared to the comparable periods last year (the statements of Dor Alon were consolidated for the first time in the fourth quarter of 2010):

        
                                               The             4-6     The
                                1-6    1-6   rate of                 rate of
        Data in NIS (millions)  2010   2010  change  4-6 2010  2011  change
                  Net revenues 3,599  6,216   72.7%   1,769   3,208   81.3%
                  Gross profit 1,027  1,481   44.3%    513     752    46.6%
          Rate of gross profit 28.5%  23.8%     -      29%    23.4%     -
              Operating income
           (before other gains
        and losses and changes
              in fair value of
          investment property)  135    198    46.4%     62     106     71%
             Rate of operating
                        profit  3.8%   3.2%     -      3.5%    3.3%     -
           Financial expenses,
                           net   57     56   (1.7%)     42      15   (64.3%)
            Net income for the
                        period   58    110    88.1%     21      72   242.9%

Results for the First Half of 2011[2]

Gross revenues

Revenues (including government levies) for the first half of 2011 were NIS 7,599.5 million(U.S. $2,225.3 million), compared to NIS 3,599.5 million in the first half of 2010 - an increase of 111.1 %. The main increase in revenues was due to the inclusion of the results of Dor Alon. Dor Alon's revenues in the first half, including government levies of NIS 1,383.9 million (U.S. $405.2 million) amounted to NIS 3,975.0 million (U.S. $1,164.0 million).

Revenues from sales, net

Supermarkets segment revenues - in the first half of 2011 amounted to NIS 3,403.0 million (U.S. $996.5 million) as opposed to NIS 3,364.5 million in the first half of 2010, an increase of 1.1%. The increase in revenues was mainly due to an increase in same stores sales at a rate of 1.7% and due to the net opening of 3 stores this year.

Revenues of the Commercial and Fueling sites segment in the first half of 2011 amounted to NIS 2,576.5 million (U.S. $754.5 million) as compared to NIS 2,070.1 million in the first half of 2010[3], an increase of 24.5%. The main increase stems from increase in the quantitative sales as a result of opening new fueling sites, an increase in sales in the convenience stores and an increase in the price of petrol.

Non-food segment - a decrease in revenues of approximately 1.3% from NIS 224.2 million in the first half of 2010 to NIS 221.4 million (U.S. $64.8 million) in the first half of 2011. The decrease in revenues was mainly due to a decrease in sales to franchisees in the leisure and houseware area due to increased competition in the sector.

Real estate segment -the main increase in revenues of approximately 36.8% in the rental fee income from NIS 10.8 million in the first half of 2010 to NIS 14.7 million (U.S. $4.3 million) in the first half of 2011. The increase in revenues is mainly due to the increase in leased premises.

Gross Profit in the first half of 2011 amounted to approximately NIS 1,481.5 million (U.S. $ 433.8 million) (approximately 23.8% of revenues) compared to gross profit of approximately NIS 1,026.7 million (28.5% of revenues) in the first half of 2010. Excluding the effect of Dor Alon's results, the gross profit increased by NIS 13.4 million (U.S. $4.0 million).

The increase in the gross profit is mainly due to an increase in sales of the supermarkets segment (the gross operating profit amounted to 27.6% in the present half compared to 27.3% in the first half of 2010) and an increase in the revenues of the real estate segment and was partly offset by a decrease in sales and the gross profit rate in the Non-food segment.

Selling, General, and Administrative Expenses in the first half of 2011 amounted to approximately NIS 1,283.7 million (U.S. $ 375.9 million) compared to NIS 891.6 million in the first half of 2010, an increase of 44.0%. Excluding the effect of Dor Alon's results the selling, general and administrative expenses increased by NIS 32.3 million (U.S. $9.5 million). The main increase was recorded in the Supermarkets segment in expenses of same stores and was mainly due to an increase in rental fees affected by the change in CPI and updating lease agreements, increase in municipal taxes and increase in payroll expenses due to an increase in "mega@internet" activity and was partly offset by a decrease in advertising expenses.

Operating profit (before other gains and losses and increase in the fair value of investment property) in the first half of 2011 amounted to approximately NIS 197.8 million (U.S $ 57.9 million) compared to operating income of NIS 135.1 million in the first half of 2010, an increase of 46.4%. Excluding the effect of Dor Alon's results the operating profit (before other gains and losses and changes in fair value of investment property) decreased by NIS 18.9 million (U.S. $5.5 million). The decrease in the operating profit was mainly due to increase in selling, general and administrative expenses in the Supermarkets segment and the decrease in sales in the Non-food segment.

Increase in fair value of investment property In the first half of 2011, the Company recorded profit from the increase in the value of investment property in the amount of NIS 19.4 million (U.S $ 5.7 million) including NIS 17 million (U.S $ 5.0 million) from revaluation of property in Kiryat Hasharon, Netanya, half of which was sold after the balance sheet date, compared to NIS 13.2 million in the first half of 2010.

Other income and expenses, net in the first half of 2011 the Company recorded other expenses, net in the amount of NIS 6.3 million (U.S $ 1.8 million)compared to net expenses of NIS 7.1 million in the first half of 2010. These expenses included costs relating to the relocation of part of BEE group companies to the distribution center in Beer Tuvia and disposal of property and equipment.

Operating profit in the first half of 2011 was NIS 210.9 million (U.S. $ 61.8 million) compared to operating profit of NIS 141.1 million in the first half of 2010, an increase of 49.4%. Excluding the effect of Dor Alon's results the operating profit decreased by NIS 11.6 million (U.S. $ 3.4 million).

Financial Expenses, Net for the first half of 2011 were NIS 55.9 million (U.S. $16.4 million) compared to financial expenses, net of NIS 56.7 million in the first half of 2010. Excluding the effect of the results of Dor Alon the finance expenses decreased by NIS 18.9 million (U.S. $5.5 million). The decrease was mainly a result of finance income from the revaluation of the option to purchase shares of Diners in the amount of approximately NIS 101.5 million and capitalization of borrowing costs of projects under construction in the real estate segment and was partly offset by an increase in the Company's indebtedness following the purchase of Dor Alon and the increase of the Israeli CPI (the CPI increased in the first half of 2011 by 2.16% compared to increase of 0.38% in the comparable period last year).

Taxes on Income for the first half of 2011 were approximately NIS 46.8 million (U.S. $13.7 million) (29.9% effective tax rate compared to a statutory tax rate of 24%) compared to NIS 25.7 million (effective tax rate of 30.6% compared to a statutory tax rate of 25%) in the first half of 2010.

Net Income in the first half of 2011 was NIS 109.5 million (U.S. $ 32.1 million) compared to net income of NIS 58.2 million in the comparable period last year. The net income for the first half of 2011 attributable to the equity holders of the company was NIS 94.9 million (U.S. $27.8 million), or NIS 1.44 per share (U.S. $ 0.42), while the portion attributable to the non-controlling interests was NIS 14.5 million (U.S. $4.3 million).

Cash Flows in the First Half of 2011

Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the first half of 2011 amounted to NIS 434.5 million (U.S. $127.2 million) compared to cash flows from operating activities of NIS 85.8 million in the first half of 2010. The inclusion of Dor Alon's results contributed to the cash flow from operating activities in the first half of 2011 the amount of NIS 58.9 million. The increase in cash flows from operating activities is mainly due to a decrease in working capital in the Supermarket segment and from the increase in advances from purchasers of apartments of NIS 95.4 million.

Cash Flows from Investing Activities: Net Cash flows used in investing activities in the first half of 2011 amounted to approximately NIS 300.3 million (U.S. $87.9 million) compared to net cash flows of NIS 376.9 million used in investing activities in the first half of 2010. Cash flows used in investing activities in the first half of 2011 included mainly purchases of property and equipment, investment property and intangible assets, in a total amount of NIS 176.6 million, the grant of short term loans of NIS 62.3 million, mainly to controlling shareholders and investment in restricted deposits in the amount of NIS 95.4 million. Cash flows used in investing activities in the first half of 2010 included mainly purchases of property and equipment, intangible assets, investment property and payments on account of real estate in a total amount of NIS 151.1 million and a net investment in marketable securities of NIS 216.9 million, the grant of a loan of NIS 18.9 million to a proportionally consolidated company.

Cash Flows from Financing Activities: Net Cash flows used in financing activities in the first half of 2011 amounted to NIS 124.9 million (U.S $36.6 million) compared to net cash flow used in financing activities of NIS 58.2 million in the first half of 2010. Cash flows used in financing activities in the first half of 2011 included mainly repayment of bonds in the amount of NIS 138.5 million, repayment of loans in the amount of NIS 126.1 million, and the payment of interest in the amount of NIS 110.3 million, this was offset by an increase in short term bank credit in the amount of NIS 169.9 million and increase in loans received in the amount of NIS 109.5 million. Net Cash flows used in financing activities in the first half of 2010 included mainly repayment of long term loans of NIS 73.4 million, the payment of interest of NIS 58.5 million, payment of dividends of NIS 75 million to the Company's shareholders and NIS 17.6 million to the non-controlling interests and acquisition of treasury shares of NIS 4.3 million. This was offset by an increase in short term credit, net in the amount of NIS 166.3 million.

Comments of Management

Commenting on the financial results, Mr. David Weisman Active Chairman and Chief Business manager - " the results of the first half of the year are characterized by a positive contribution of the organizational change in which the food chain "Mega" and the Fuel chain "Dor Alon" operate under one "umbrella". Another contribution is to the profitability is the exercise of the option into a full holding of 49% in Diners, which among others, strengthens the customers' club YOU having already over 500,000 customers and doing it successfully.

Recently, the ministry of finance and the ministry of infrastructures announced on their intention to reduce the marketing margin of fuels at 20 Agorot per liter.

"Analysis of the price of diesel fuel reveals that in the period from January 2005 to January 2011 the excise tax has increased sharply at a nominal rate of 306.6% or at a real rate of 245.1%" (the research and information center of the Knesset).

This extreme increase in the excise tax in the diesel fuel price is a material component in the cost of fuels and food in Israel in addition to the given situation where the tax rate on fuels amounts to more than 50% of the fuel price in the fueling stations.

These days, out of the public eye, the ministry of finance increases again the excise tax at the beginning of September and announced on a further increase at the beginning of October!.

This action will diminish any competition in the energy sector and ignores the economic project of the ministry of infrastructures that partly supports the increase in marketing margin. We initiate measures against the authorities and intend to take our action to the courts to prevent this irresponsible measure of the ministry of finance".

In regards to the supermarkets and non-food segments, Mr. Zeev Vurembrand, CEO, said: the first half of 2011 was characterized by increased competition in the retail food segment by accelerated opening of commercial spaces and converting branches into cheap formats. Toward the end of the first half, a public protest broke out, which one of its implications is showing in July and August a decline in sales in the supermarkets segment. It is premature to estimate this impact.

In the first half, the scope of commercial spaces did not increase in the supermarkets segment compared with last year, among others, from concluding 4 lease agreements of 4 branches that were transferred to the competitors' operations. We are implementing a strategy of maintaining a market share while taking measures for operating efficiency measures. The multi annual development plan of branches will be reflected in the next two years with the opening of approximately 30 branches in a total area of some 27 thousand sq.m. Most of the branches are in the neighborhood format of Mega in the City. Until the end of 2011, we plan to open stores with a total area of some 10 thousand sq.m.

These days, we are about to complete a novel plan to attract club customers to the credit card channel, where we intend to double the number of customers in this track in two years. This plan will reflect the relative advantages of Alon Holdings Group in Blue Square.

The private brand represents 11% of the total chain's sales and enables to offer a cheaper basket. Today, when we are on the verge of regulatory change as a result of the public protest, we have the knowledge and the experience to lead product development, which will enable to reduce the price for the consumers, on one hand and improve the ability to compete and the profitability of the chain.

Bee group completed in the second quarter the relocation of all Bee group companies to the new Non - food distribution center in Beer Tuvia. The results of the second quarter of 2011 included the relocation expenses. In addition the Company prepares to absorb in this distribution center the entire logistic activity of the Non - Food segment of Mega thereby completing the consolidation of this area into one distribution center.

In the past quarter, the Company completed the transfer of Dr. Baby activity of Bee group to Mega Retail, where we intend to develop the Company's activity by opening 20 selling corners in Mega branches all over the country and utilize the exposure of the brand and its products to young families subscribed to the customers club.

Results for the second quarter of the year 2011

Gross Revenues (including government levies)for the second quarter of 2011 were NIS 3,890.0 million(U.S. $1,139.1 million) compared to revenues of approximately NIS 1,768.7 million in the comparable quarter last year, an increase of 119.9 %. The majority of the increase in revenues derives from including the results of Dor Alon. Excluding the effect of Dor Alon's results the revenues this quarter increased by NIS 111.1 million (U.S. $ 32.5 million) compared to the comparable quarter last year.

The increase in the revenues compared to the comparable quarter last year is mainly due to the timing of the Passover holiday, which fell this year on April 19 compared to March 29 last year. The Passover sales in the Non-food and Supermarket segment were mainly included in the second quarter this year whereas last year results were mainly included in the first quarter.

Supermarket segment revenues - an increase in revenues of 5.5% from NIS 1,674.6 million in the second quarter of 2010 to NIS 1,766.5 million (U.S $517.3 million) in the current quarter. The increase in revenues was mainly due to an increase in same store sales (SSS) at a rate of 5.7% was mainly derived from the timing of the Passover holiday, as aforesaid.

Revenues of the Commercial and Fueling sites segment for the second quarter of 2011 amounted to NIS 1,328.3 million (U.S. $388.9 million) as compared to NIS 721.5 million in the comparable quarter of 2010. The increase in revenues derives from the same reasons described in the analysis of the first half of 2011 results.

Non - Food segment revenues - an increase in revenues of 18.7% from NIS 88.7 million in the second quarter of 2010 to NIS 105.3 million (U.S. $30.8 million) in the current quarter. The increase mainly derived from the timing of the Passover holiday.

Real Estate segment revenues - rental fees from external parties of NIS 5.3 million in the second quarter of 2010 compared to NIS 8.4 million (U.S. $2.5 million) in the current quarter due to the increase in leased premises.

Gross Profit of the second quarter of 2011 amounted to approximately NIS 752.0 million (U.S. $ 220.2 million) compared to gross profit of approximately NIS 513.0 million in the comparable quarter of 2010. Excluding the effect of Dor Alon's results, gross profit increased by NIS 16.1 million (U.S. $ 4.7 million). The increase in the gross profit mainly derives from an increase in sales of the Supermarkets segment and Non - food segment and was partly offset by decrease in the gross profit rate mainly in the Supermarkets segments due to the Passover timing (the gross profit rate amounted to 27.2% in the current quarter compared to gross profit rate of 28.2% in the comparable quarter last year).

Selling, General and Administrative Expenses in the second quarter of 2011 amounted to NIS 646.0 million (U.S. $ 189.2 million) compared to approximately NIS 450.5 million in the comparable quarter, an increase of approximately 43.4%. Excluding the effect of Dor Alon's results, selling, general and administrative expenses increased by NIS 14.0 million (U.S. $ 4.1 million), The majority of the increase was recorded in the Supermarkets segment in the same stores expenses and derived mainly from the same reasons described above in the analysis of the first half of 2011 results.

Operating Profit (before other gains and losses and increases in the fair value of investment property) in the second quarter of 2011 amounted to NIS 106.0 million (U.S $ 31.0 million) compared to NIS 62.5 million in the second quarter of 2010, an increase of 69.7%. Excluding the effect of Dor Alon's results, operating profit(before other gains and losses and increases in the fair value of investment property) increased by NIS 2.1 million (U.S $ 0.6 million).

Increase in the Fair Value of Investment Property In the second quarter of 2011, the Company recorded gain from appreciation of investment property in the amount of NIS 16.4 million (U.S $ 4.8 million) including NIS 16 million (U.S $ 4.7 million) from revaluation of property in Kiryat Hasharon in Netanya, half of which was sold after the balance sheet date, compared to NIS 10.9 million in the comparable quarter last year.

Other income and expenses, Net In the second quarter of 2011, the Company recorded other expenses, net of NIS 4.4 million (U.S. $ 1.3 million), compared to net expenses of NIS 5.9 million in the comparable quarter. The expenses this quarter included costs relating to the transfer of certain BEE Group companies to the new logistic center in Beer Tuvia, the disposal of the property and equipment.

Operating Profit amounted to approximately NIS 118.1 million (U.S. $ 34.6 million) compared to operating profit of NIS 67.5 million in the second quarter of 2010. Excluding the effect of Dor Alon's results, Operating Profit increased by NIS 9.1 million (U.S $ 2.7 million). The majority of the increase derives from the increase in sales as a result of the Passover holiday, as described above, and an increase in revenues from Real estate segment due to revaluation gains and was partly offset by an increase in selling, general and administrative expenses.

Financial Expenses, net, for the second quarter of 2011 were NIS 15.2 million (U.S. $4.5 million) compared to financial expenses, net of NIS 42.3 million in the comparable quarter last year. The decrease in financial expenses, net in this quarter compared to the same quarter last year was mainly due to changes in the value of Diners option that contributed this quarter an income of NIS 70 million (U.S. $20.4 million). The decrease in financial expenses was mainly offset from increase of the Company's indebtedness following the purchase of Dor Alon and the increase of the CPI (the CPI increased in the second quarter of 2011 by 1.27% compared to an increase of 1.34% in the comparable period last year).

Taxes on Income for the second quarter of 2011 amounted to NIS 31.1 million (U.S. $9.1 million) (effective tax rate of 30.2% compared to a statutory tax rate of 24%) compared to tax expenses of NIS 4.1 million (effective tax rate of 16.3% compared to a statutory tax rate of 25%) in the corresponding quarter last year.

Net Income for the second quarter of 2011 amounted to NIS 71.8 million (U.S. $ 21.0 million) compared to a net income of NIS 21.1 million in the second quarter of 2010. The increase in the net income in this quarter compared to the corresponding quarter last year derived mainly from including the results of Dor Alon and the effect of Diners option on financial expenses, net and the taxes on income. The net income for the second quarter of 2011 attributable to equity holders of the Company, was NIS 64.9 million (U.S. $19.0 million), or NIS 0.99 per share (U.S. $ 0.29), while the portion attributable to the non-controlling interests was NIS 6.9 million (U.S. $2.0 million).

Cash Flows in the second quarter of 2011

Cash Flows from Operating Activities: Net cash flows provided by operating activities, amounted to NIS 218.4 million (U.S. $ 63.9 million) in the second quarter of 2011 compared to NIS 64.3 million in the comparative quarter last year. The increase in cash flows from operating activities was mainly due to the increase in the pre-tax income and decrease in the purchases of real estate inventories.

Cash Flows from Investing Activities: Net Cash flows used in investing activities in the second quarter of 2011 amounted to NIS 83.9 million (U.S. $24.6 million) compared to net cash flows of NIS 327.5 million from investing activities in the corresponding quarter of the previous year. The cash flows used in investing activities in the second quarter of 2011 mainly included the purchase of property and equipment, intangible assets investment property of NIS 85.8 million (U.S. $25.1 million), investments in restricted deposits of NIS 8.1 million (U.S. $2.4 million), and investment in short term deposits, net in the amount of NIS 3.2 million (U.S. $0.9 million) and was offset by interest received amounting to NIS 7.7 million (U.S. $2.2 million). Cash used in investing activities in the second quarter of 2010 mainly included the purchase of property and equipment, intangible assets investment property and payments on account of real estate in a total amount of NIS 112.3 million and net investment in marketable securities of NIS 200.7 million.

Cash Flows used in Financing Activities: Net Cash flows from financing activities amounted to NIS 135.1 million (U.S $ 39.6 million) in the second quarter of 2011 as compared to net cash from financing activities of NIS 4.8 million in the corresponding quarter last year. Cash flows from financing activities in the second quarter of 2011 included mainly repayment of bonds of NIS 136.3 million (U.S. $39.9 million), repayment of long term loans of NIS 66.6 million (U.S. $19.5 million) and interest paid of NIS 54.6 million (U.S. $16.0 million), net of long term loans received of NIS 107.0 million (U.S. $31.3 million), change in short term credit of NIS 32.7 million (U.S. $9.6 million). Cash flows from financing activities in the second quarter of 2010 included mainly an increase in short term credit net in the amount of NIS 58.6 million net of the repayment of long term loans amounting to NIS 34.8 million and interest paid of NIS 19.8 million.

Additional Information 1. As of June 30, 2011, the Company operated 209 supermarkets divided as follows: Mega In Town -118; Mega Bool - 62; Mega - 6; Shefa Shuk - 12; Eden Teva Market - 15 of which 4 Eden within Mega. Dor Alon operated - 193 fueling stations and 191 convenience stores and in the non-food segment, the Company operated 263 branches (some franchised). 2. EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)[4] in the first half of 2011 was NIS 335.5 million (U.S. $ 98.3 million) (5.4% of revenues) compared to NIS 226.3 million (6.3% of revenues) in the first half of 2010. EBITDA in the second quarter of 2011 was NIS 174.7 million (U.S. $ 51.2 million) (5.4 % of revenues) compared to NIS 108.6 million (6.1% of revenues) in the corresponding quarter of 2010. 3. Diners Transaction In May 2011, Alon Holdings and Dor Alon (thereafter - the buyers) and Cal (thereafter - Cal) signed an update of the agreement to purchase 49% of Diners held by Cal at the exchange for a loan granted by Cal to the buyers. In July, the Company completed the conditions and the buyers paid the loan in the amount of NIS 36 million which Cal granted them. Alon Holdings and Dor Alon handled in their financial statements the agreement to buy Diners as option for purchasing srock options and recorded in the second quarter income before taxes of approximately NIS 70 million.

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, 2011: U.S. $1.00 equals NIS 3.415. The translation was made solely for the convenience of the reader. Alon Holdings Blue Square- Israel Ltd. (hereinafter: "Alon Holdings") is the leading retail company in the State of Israel and operates in four reporting segments: In its supermarket segment, Alon Holdings, through its 100% subsidiary, Mega Retail Ltd., currently operates 209 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 Holdings, 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 Commercial and Fueling Sites segment, through its 78.38% 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. Dor Alon operates a chain of 193 petrol stations and 191 convenience stores in different formats in Israel. In its Real Estate segment, Alon Holdings, through its TASE traded 78.26% subsidiary Blue Square Real Estate Ltd., owns, leases and develops yield generating commercial properties and projects.

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 and 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 recession in Israel on the sales in our stores and on our profitability; our ability to compete effectively against low-priced supermarkets and other competitors; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; 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; 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, 2010. 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 HOLDINGS BLUE SQUARE - ISRAEL LTD.
                 INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                  AS OF JUNE 30, 2011

        
                                                                    Convenience
                                                                  translation(A)
                                    December 31,          June 30,      June 30,
                                           2010       2010       2011      2011
                                        Audited               Unaudited
                                                      NIS           U.S. dollars
                                                  In thousands    
        Assets
        CURRENT ASSETS:
        Cash and cash equivalents        125,956    262,517    125,637     36,790
        Investment in securities         310,237    431,786    291,867     85,466
        Short-term deposits               98,084          -     95,203     27,878
        Trade receivables              1,731,747    795,925  1,794,772    525,555
        Other accounts receivable        162,599     83,406    299,299     87,643
        Derivative financial
        instruments                            -      9,051          -          -
        Assets classified as held for
        sale                                   -          -     54,210     15,874
        Income taxes receivable           64,094     69,994     89,374     26,171
        Inventories                      680,296    537,341    684,983    200,581
                                       3,173,013  2,190,020  3,435,345  1,005,958
        NON-CURRENT ASSETS:
        Investments in associates          6,012      4,302      7,376      2,160
        Derivative financial
        instruments                       56,078     13,818    159,328     46,655
        Real estate inventories           83,337     83,342     86,498     25,329
        Payments on account of real
        estate                           164,132          -    174,529     51,107
        Investments in securities         30,327          -     29,128      8,529
        Loans receivable, net of
        current maturities               176,043          -    143,068     41,894
        Property and equipment, net    2,928,515  1,975,758  2,936,440    859,865
        Investment property              546,870    447,517    536,438    157,083
        Intangible assets, net         1,486,744    410,593  1,468,148    429,912
        Other long-term receivables       47,098    117,605    152,008     44,512
        Deferred taxes                    66,018     40,541     68,401     20,030
                                       5,591,174  3,093,476  5,761,362  1,687,076
        Total assets                   8,764,187  5,283,496  9,196,707  2,693,034
     

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                 INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                  AS OF JUNE 30, 2011

        
                                                                     Convenience
                                                                   translation(A)
                                                                       June 30,
                                    December
                                       31,              June 30,
                                       2010        2010       2011           2011
                                                    NIS              U.S. dollars
                                    Audited              Unaudited
                                                  In thousands
         
           Liabilities and equity
        CURRENT LIABILITIES:
        Credit and loans from banks
        and others                     470,284    308,866    632,273    185,145
        Current maturities of
        debentures and convertible
        debentures                     202,769     76,235    140,980     41,283
        Current maturities of
        long-term loans from banks     297,771    118,920    338,039     98,987
        Trade payables               1,342,763    960,840  1,432,815    419,565
        Other accounts payable and
        accrued expenses               686,447    499,513    793,308    232,303
        Customers' deposits             30,405          -     28,265      8,277
        Derivative financial
        instruments                      7,700          -      6,724      1,969
        Income taxes payable             7,431         24      2,253        660
        Provisions                      71,870     44,274     73,042     21,389
                                     3,117,440  2,008,672  3,447,699  1,009,578
        NON CURRENT LIABILITIES:
        Long-term loans from banks
        and others, net of current
        maturities                   1,399,159    541,528  1,362,958    399,109
        Convertible debentures, net
        of current maturities          117,801    132,334    119,101     34,876
        Debentures, net of current
        maturities                   2,183,093  1,261,208  2,140,119    626,682
        Other liabilities              199,983     22,526    266,159     77,938
        Derivative financial
        instruments                      9,151      6,241     11,328      3,317
        Liabilities in respect of
        employee benefits, net of
        amounts funded                  51,492     47,728     52,809     15,464
        Deferred taxes                 103,929     56,345    137,892     40,378
                                     4,064,608  2,067,910  4,090,366  1,197,764
             Total liabilities       7,182,048  4,076,582  7,538,065  2,207,342
        EQUITY:
        Equity attributable to
        equity holders of the
        Company:
        Ordinary shares of NIS 1 par
        value                           79,712     58,443     79,878     23,390
        Additional paid-in capital   1,218,409  1,056,986  1,219,282    357,037
        Other reserves                (12,539)      8,024   (22,355)    (6,546)
        Accumulated earnings
        (deficit)                     (85,760)  (103,740)      6,945      2,033
                                     1,199,822  1,019,713  1,283,750    375,914
        Non - controlling interests    382,317    187,201    374,892    109,778
        Total equity                 1,582,139  1,206,914  1,658,642    489,692
        Total liabilities and equity 8,764,187  5,283,496  9,196,707  2,693,034
     

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011

        
                                                    For the
                                 Year ended        six months
                                  December      ended June 30
                                     31,         
                                    2010        2010       2011
                                   Audited           Unaudited
                                                  NIS
                                     In thousands (except per share
                                                 data)
        Revenues                   9,227,453  3,599,487  7,599,468
        Less - government levies     723,709          -  1,383,885
        Net revenues               8,503,744  3,599,487  6,215,583
        Cost of sales              6,192,352  2,572,775  4,734,112
        Gross profit               2,311,392  1,026,712  1,481,471
        Selling, general and
        administrative expenses    2,069,970    891,642  1,283,690
        Operating profit before
        other gains and losses
        and changes in fair
        value of investment
        property                     241,422    135,070    197,781
        Other gains                    3,258      1,419      1,000
        Other losses                (28,188)    (8,528)    (7,284)
        Changes in fair value of
        investment property, net      32,917     13,187     19,445
        Operating profit             249,409    141,148    210,942
        Finance income                85,852     20,077    131,314
        Finance expenses           (235,847)   (76,786)  (187,265)
        Finance expenses, net      (149,995)   (56,709)   (55,951)
        Share of loss of
        associates                     (518)      (576)      1,317
        Income before taxes on
        income                        98,896     83,863    156,308
        Taxes on income               36,287     25,656     46,805
        Net income                    62,609     58,207    109,503
        Attributable to:
        Equity holders of the
        Company                       47,839     47,725     94,947
        Non - controlling
        interests                     14,770     10,482     14,556
        Earnings per ordinary
        share or ADS attributed
        to equity holders of the
        Company
        Basic                           0.96       0.91       1.44
        Fully diluted                   0.96       0.91       1.41
        Weighted average number
        of shares or ADSs used
        for computation of
        income per share:
        Basic                         49,590     44,282     65,925
        Fully diluted                 48,814     44,835     66,395

TABLE CONT'D

        
                                                          Convenience
                                                          translation
                                         For the          (A) for the
                                       three months       six months
                                      ended June 30,       ended June
                                                              30,
                                   2010         2011         2011
                                     Unaudited
                                        NIS             U.S. dollars
                                   In thousands (except per share data)
        Revenues                 1,768,663      3,890,000   2,225,320
        Less - government levies         -        681,536     405,237
        Net revenues             1,768,663      3,208,464   1,820,083
        Cost of sales            1,255,705      2,456,471   1,386,270
        Gross profit               512,958        751,993     433,813
        Selling, general and
        administrative expenses    450,472        645,959     375,898
        Operating profit before
        other gains and losses
        and changes in fair
        value of investment
        property                    62,486        106,034      57,915
        Other gains                    463              -         293
        Other losses               (6,341)        (4,375)     (2,133)
        Changes in fair value of
        investment property, net    10,913         16,390       5,694
        Operating profit            67,521        118,049      61,769
        Finance income              14,769         86,313      38,452
        Finance expenses          (57,050)      (101,523)    (54,836)
        Finance expenses, net     (42,281)       (15,210)    (16,384)
        Share of loss of
        associates                     (4)            104         386
        Income before taxes on
        income                      25,236        102,943      45,771
        Taxes on income              4,123         31,114      13,706
        Net income                  21,113         71,829      32,065
        Attributable to:
        Equity holders of the
        Company                     18,969         64,959      27,803
        Non - controlling
        interests                    2,144          6,870       4,262
        Earnings per ordinary
        share or ADS attributed
        to equity holders of the
        Company
        Basic                         0.43           0.99        0.42
        Fully diluted                 0.42           0.95        0.41
        Weighted average number
        of shares or ADSs used
        for computation of
        income per share:
        Basic                       44,590         66,947      65,925
        Fully diluted               44,976         66,253      66,395
     

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                     INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011

        
                                   Year              For the
                                   ended           six months
                                 December        ended June 30,
                                    31,          
                                   2010      2010          2011
                                   Audited        Unaudited
                                             NIS
                                         In thousands
        CASH FLOWS FROM
        OPERATING ACTIVITIES:
        Income before taxes on
        income                      98,896    83,863        156,308
        Income tax (paid)
        received, net                5,741   (7,972)       (40,626)
        Cash provided by
        operating activities (a)   101,192     9,971        318,828
        Net cash provided by
        operating activities       205,829    85,862        434,510
        CASH FLOWS FROM
        INVESTING ACTIVITIES:
        Purchase of property and
        equipment                (193,474)  (80,590)      (135,312)
        Purchase of investment
        property                  (20,720)   (3,641)       (32,859)
        Purchase of intangible
        assets                    (34,133)  (13,341)        (8,476)
        Proceeds from collection
        of short-term deposits
        and other receivables,
        net                         12,401        67          2,881
        Proceeds from sale of
        property and equipment       1,306        52         11,383
        Investment in restricted
        deposits                         -         -       (95,406)
        Proceeds from sale of
        marketable securities      373,040   116,340         48,424
        Investment in marketable
        securities               (365,091) (333,292)       (46,800)
        Acquisition of
        subsidiaries                87,219         -              -
        Grant of loans to
        jointly controlled
        companies                 (31,442)  (18,933)              -
        Grant of loans to main
        shareholder                      -         -       (62,342)
        Payments on account of
        real estate               (76,884)  (53,466)              -
        Collection of long-term
        loans receivable             1,565         -          5,114
        Interest received           18,331     9,860         13,082
        Net cash provided by
        (used in) investing
        activities               (227,882) (376,944)      (300,311)
     

        
                         ALON HOLDINGS BLUE SQUARE - ISRAEL LTD
                     INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011

        
                                    
                                     Year ended    For the
                                     December 31,  six months ended June 30,
                                        2010      2010       2011
                                    Audited           Unaudited
                                                   NIS
                                              In thousands 
        CASH FLOWS FROM FINANCING
        ACTIVITIES:
        Purchase of treasury shares    (4,295)   (4,295)    (4,035)
        Dividend paid to Company
        shareholders                 (875,000)  (75,000)          -
        Dividend paid to non-
        controlling interests         (17,619)  (17,619)   (16,821)
        Repayment of debentures        (2,155)      (27)  (138,559)
        Transactions with
        non-controlling interests
        without loss of control         17,195         -          -
        Issuance of debentures         205,035         -          -
        Receipt of long-term loans     470,600     4,500    109,547
        Repayment of long-term
        loans                        (165,014)  (73,409)  (126,110)
        Repayment of long term
        credit from payables           (1,740)     (870)      (870)
        Short-term credit from
        banks and others, net         (52,404)   166,273    169,990
        Receipt of loans from
        controlling shareholders        90,000         -          -
        Proceeds from exercise of
        options in the Company and
        a subsidiary                       759       716        140
        Acquisition of shares from
        non-controlling interests     (24,557)         -    (7,927)
        Settlement of forward
        contracts                       21,248         -          -
        Interest paid                (147,532)  (58,486)  (110,348)
        Net cash provided by (used
        in) financing activities     (485,479)  (58,217)  (124,993)
        INCREASE (DECREASE) IN CASH
        AND CASH EQUIVALENTS AND
        BANK OVERDRAFTS              (507,532) (349,299)      9,206
        Translation differences on
        cash and cash equivalents         (71)        82        (2)
        BALANCE OF CASH AND CASH
        EQUIVALENTS AND BANK
        OVERDRAFTS AT BEGINNING OF
        PERIOD                         611,734   611,734    104,131
        BALANCE OF CASH AND CASH
        EQUIVALENTS AND BANK
        OVERDRAFTS AT END OF PERIOD    104,131   262,517    113,335
     

TABLE CONT'D

        
                                                             Convenience
                                                            translation(A)
                                            For the            for the
                                         three months         six months
                                         ended June 30      ended June 30,
                                         2010        2011           2011
                                                    Unaudited
                                                NIS           U.S. dollars
                                                  In thousands 
        CASH FLOWS FROM FINANCING
        ACTIVITIES:
        Purchase of treasury shares         -          (82)        (1,182)
        Dividend paid to Company
        shareholders                        -             -              -
        Dividend paid to non-
        controlling interests         (3,321)      (16,821)        (4,926)
        Repayment of debentures          (27)     (136,254)       (40,574)
        Transactions with
        non-controlling interests
        without loss of control             -             -              -
        Issuance of debentures              -             -              -
        Receipt of long-term loans      4,500       107,000         32,078
        Repayment of long-term
        loans                        (34,773)      (66,551)       (36,928)
        Repayment of long term
        credit from payables            (435)         (435)          (255)
        Short-term credit from
        banks and others, net          58,583        32,669         49,777
        Receipt of loans from
        controlling shareholders            -             -              -
        Proceeds from exercise of
        options in the Company and
        a subsidiary                       86            16             41
        Acquisition of shares from
        non-controlling interests           -             -        (2,321)
        Settlement of forward
        contracts                           -             -              -
        Interest paid                (19,840)      (54,637)      ( 32,313)
        Net cash provided by (used
        in) financing activities        4,773     (135,095)      ( 36,603)
        INCREASE (DECREASE) IN CASH
        AND CASH EQUIVALENTS AND
        BANK OVERDRAFTS             (258,355)         (537)          2,696
        Translation differences on
        cash and cash equivalents          82            10              -
        BALANCE OF CASH AND CASH
        EQUIVALENTS AND BANK
        OVERDRAFTS AT BEGINNING OF
        PERIOD                        520,790       113,862         30,492
        BALANCE OF CASH AND CASH
        EQUIVALENTS AND BANK
        OVERDRAFTS AT END OF PERIOD   262,517       113,335         33,188
     

        
                         ALON HOLDINGS BLUE SQUARE - ISRAEL LTD
                     INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011

        
                                    Year ended
                                   December 31,         For the
                                                       six months
                                                      ended June 30,
                                           2010      2010      2011
                                         Audited        Unaudited
                                                  NIS
                                             In thousands
            Net cash provided by
        (a) operating activities:
            Adjustments for:
            Depreciation and
            amortization                  206,945   87,291   135,872
            Increase in fair value of
            investment property, net     (32,917) (13,187)  (19,445)
            Share in gains (losses)
            of associates net of dividends  
            paid                              518      576     (880)
            Share based payment             6,834    3,901     1,878
            Loss from sale and disposal
            of property and equipment,
            net                             5,962      867       612
            Provision for impairment of
            property and equipment, net       946      369     1,305
            Loss (gain) from changes in
            fair value of derivative
            financial instruments         (8,029)      556 (103,525)
            Linkage differences on
            monetary assets, debentures,
            loans and other long term
            liabilities                    57,626   10,626    69,427
            Employee benefit liability,
            net                             2,371      206     1,318
            Decrease (increase) in value
            of investment in securities,
            deposits and long-term
            receivables, net             (15,013)  (1,567)     2,353
            Interest paid, net            118,311   48,626    84,109
            Changes in operating assets
            and liabilities:
            Investment in real estate
            inventories                  (87,092) (82,485)   (4,100)
            Payments on account of real
            estate inventories           (71,564) (39,188)   (3,674)
            Decrease (increase) in trade
            receivables and other
            accounts receivable          (53,264)  (6,733) (136,030)
            Decrease (increase) in
            inventories                  (49,910) (22,483)   (4,687)
            Increase in advances from
            purchasers of apartments           -        -    95,406
            Increase (decrease) in trade
            payables and other accounts
            payable                        19,468   22,596   198,889
                                          101,192    9,971   318,828
     

TABLE CONT'D

        
                                                               Convenience
                                                              translation(A)
                                                For the          for the
                                             three months       six months
                                            ended June 30     ended June 30
                                            2010       2011      2011
                                         Unaudited
                                              NIS           U.S. dollars
                                                 In thousands
            Net cash provided by
        (a) operating activities:
            Adjustments for:
            Depreciation and
            amortization                    44,086    67,934   39,787
            Increase in fair value of
            investment property, net      (10,913)  (16,390)  (5,694)
            Share in losses of
            associates                           -     (104)    (258)
            Share based payment              2,000       764      550
            Loss from sale and disposal
            of property and equipment,
            net                                719     1,259      179
            Provision for impairment of
            property and equipment, net        245       928      382
            Loss (gain) from changes in
            fair value of derivative
            financial instruments          (2,468)  (77,328) (30,315)
            Linkage differences on
            monetary assets, debentures,
            loans and other long term
            liabilities                     22,690    41,077   20,330
            Employee benefit liability,
            net                            (1,128)       545      386
            Decrease (increase) in value
            of investment in securities,
            deposits and long-term
            receivables, net               (2,195)       873      689
            Interest paid, net              15,401    39,649   24,629
            Changes in operating assets
            and liabilities:
            Investment in real estate
            inventories                   (82,485)   (2,117)  (1,201)
            Payments on account of real
            estate inventories            (39,188)   (2,609)  (1,076)
            Decrease (increase) in trade
            receivables and other
            accounts receivable            301,282   187,684   39,833
            Decrease (increase) in
            inventories                     13,607    66,869  (1,373)
            Increase in advances from
            purchasers of apartments             -     9,314   27,937
            Increase (decrease) in trade
            payables and other accounts
            payable                      (198,860) (181,861)   58,242
                                            62,793   136,487   93,361
     

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                     INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011

        
                                                                      Convenience
                                                                    translation(A)
                                Year       For the         For the        for the
                                ended     six months     three months  six months
                              December
                                 31,    ended June 30,   ended June 30  ended June 
                                                                               30,
                                2010     2010     2011   2010      2011      2011
                               Audited                     Unaudited
                                            NIS                     U.S. dollars
                                                   In thousands
            Supplementary
            information on
            investing and
            financing
            activities not
            involving cash
        (b) flows:
            Issuance of shares
            upon conversion of
            convertible
            debentures of the
            Company              43,895  12,394      901      -      901      264
            Purchase of
            property and
            equipment and
            investment
            properties on
            credit               37,084  12,338 (11,432) 12,338  (5,562)  (3,347)
            Advances from
            customers
            deposited in
            restricted use
            deposit              22,428       - (21,673)      -    (316)  (6,346)
            Issue of shares
            against
            acquisition of
            shares in
            subsidiary          965,770       -        -      -       -        -

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                                SELECTED OPERATING DATA
                 FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2011
                                      (UNAUDITED)

        
                                                                     Convenience
                                                                    translation(A)
                                                                    for the three
                                     For the six     For the three   months ended
                                     months ended    months ended
                                       June 30,        June 30,        June 30,
                                     2010    2011    2010    2011        2011
                                                 NIS                    U.S.$
        Gross revenues (in
        millions)                     3,600 7,599     1,769   3,890     1,139
        Net revenues (in millions)    3,600 6,216     1,769   3,209       939
        Operating profit before
        other gains and losses and
        changes in fair value of
        investment property (in
        millions)                       135   198        62     106        31
        EBITDA (in millions)            226   336       109     175        51
        EBITDA margin                   6.3%  5.4%      6.1%    5.4%       N.A
        Decrease in same store
        sales (S.S.S)                 (2.1%)  1.7%     (5.2%)   5.7%       N.A
        Number of stores at end of
        period                          206   209       206     209        N.A
        Stores opened during the
        period                            4     4         1       -        N.A
        Stores closed during the
        period                            1     1         1       -        N.A
        Total square meters
        selling area at end of
        period                      369,900 369,600 369,900 369,600        N.A
        Square meters added
        (reduced) during the
        period, net*                  4,900  3,400     (200)       -       N.A
        Sales per square meter        9,248  9,160    4,591    4,824     1,413
        Sales per employee (in
        thousands)                      497    481      249      252        74
        Openings - square meters      6,400  4,150    1,200       -        N.A
        Closings - square meters     (1,500)  (750)  (1,400)      -        N.A
        Net openings                  4,900  3,400     (200)      -        N.A

        
                        ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
               RECONCILIATION BETWEEN NET INCOME FOR THE PERIOD TO EBITDA
                FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011
                                      (UNAUDITED)

        
                                                                     Convenience
                                                                   translation(A)
                                          For the       For the        for the
                                Year
                               ended    six months    three months    six months
                              December  ended June
                                31,         30,      ended June 30 ended June 30,
                                2010    2010   2011   2010    2011       2011
                                               NIS                   U.S. dollars
                                          In thousands
        
         Net income for
         the period         62,609   58,207  109,503   21,113   71,829    32,065
         Taxes on income    36,287   25,656   46,805   4,123    31,114    13,706
         Finance expenses,
         net               149,995   56,709   55,951   42,281   15,216    16,384
         Share in losses
         of associates         518      576   (1,317)       4     (104)     (386)
         Other losses, net  24,930    7,109    6,284    5,878    4,375     1,840
         Increase in fair
         value of
         investment
         property          (32,917) (13,187) (19,445) (10,913) (16,390)  (5,694)
         Depreciation and
         amortization      206,945   87,291  135,872   44,086   67,934    39,787
         Share based
         payment            6,834    3,901    1,878    2,000     764       550
         EBITDA            455,201  226,262  335,531  108,572  174,732    98,252

        
                          ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                  FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011
                                        (UNAUDITED)

Note 1 - Segment reporting The Company includes segment information according to IFRS 8. The Company's chief operating decision maker reviews the Company's internal reports in order to evaluate performance and allocate resources. Company's management has set the operating segments based on the internal reports. The Company presents four reportable segments: Supermarkets, Commercial and fueling sites, Non-food (Retail and Wholesale) and Real estate. The Company's four operating segments consist of the following: 1. 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, 2011, Mega Retail operated 209 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). 2. Commercial and fueling 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 commercial and fueling 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 total operating profit. 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, 2011, the company operated 263 non-food retail outlets, mostly through franchisees, with specialties in houseware and home textile, toys, leisure, and infant. 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. ALON HOLDINGS BLUE SQUARE - ISRAEL LTD. FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011 (UNAUDITED) Note 1 - Segment reporting (continued):

        
                                              Non - food
                                              Retail and
                            Supermarkets      wholesale      Real estate
                                         NIS in thousands
        Six months ended June
        30, 2011:
        Net segment revenues  3,402,999       221,374             14,713
        Inter segment
        revenues              -                20,367               -
        Depreciation and
        amortization             80,181         6,871               -
        Operating profit
        (loss) before other
        gains
        and losses net and
        changes in fair value
        of investment
        property                117,601        (1,622)             6,303
        Segment profit          116,288        (6,527)            25,749
        Unallocated corporate
        expenses
        Financial expenses,
        net
        Share in losses of
        associates,
        net
        Income before taxes
        on income
     

TABLE CONT'D

        
                               Commercial
                               and fueling               Total
                                  sites      Adjustments consolidated
                                         NIS in thousands
        Six months ended June 30,
        2011:
        Net segment revenues       2,576,497               6,215,583
        Inter segment revenues     14,608      (34,975)    -
        Depreciation and
        amortization               45,818      3,002       135,872
        Operating profit (loss)
        before other gains
        and losses net and changes
        in fair value
        of investment property     100,973     (13,818)    209,437
        Segment profit             100,908     (13,818)    222,600
        Unallocated corporate
        expenses
        Financial expenses, net                            (11,658)
        Share in losses of
        associates,                                        (55,951)
        net                                                1,317
        Income before taxes on
        income                                             156,308
     

TABLE CONT'D

        
                                    Commercial
                                   and fueling                   Total
                                      sites     Adjustments      consolidated
        Six months ended June 30,            NIS in thousands
        2010:                                
        Net segment revenues            -          -                3,599,487
        Inter segment revenues          -       (27,610)                 -
        Depreciation and
        amortization                    -          -                   87,291
        Operating profit before
        other gains and losses net
        and changes in fair value
        of investment
        property                        -           (85)             147,284
        Segment profit                  -           (85)             153,362
        Unallocated corporate
        expenses                                                     (12,214)
        Financial expenses, net                                      (56,709)
        Share in losses of
        associates, net                                                 (576)
        Income before taxes on
        income                                                        83,863
     

TABLE CONT'D

        
                                    Commercial
                                   and fueling               Total
                                      sites     Adjustments  consolidated
                                           NIS in thousands
        Three months ended June
        30, 2011:
        Net segment revenues       1,328,257           -       3,208,464
        Inter segment revenues         7,125      (17,676)          -
        Depreciation and
        amortization                  23,576          562         67,934
        Operating profit (loss)
        before other gains
        and losses net and changes
        in fair value
        of investment property        50,644       (6,352)       111,750
        Segment profit                50,579       (6,336)       123,765
        Unallocated corporate
        expenses                                                  (5,716)
        Financial expenses, net                                  (15,210)
        Share in losses of
        associates, net                                              104
        Income before taxes on
        income                                                   102,943
     

        
                      ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
              FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2011
                                    (UNAUDITED)

        
                                               Non -
                                               food
                                              Retail
                                                and
                                Supermarkets wholesale Real estate
        Three months ended June
        30, 2010:                          NIS in thousands
        Net segment revenues    1,674,632    88,691    5,340
        Inter segment sales          -       10,855      -
        Depreciation and
        amortization              39,888      4,198      -
        Operating profit (loss)
        before other gains and
        losses net and changes
        in fair value of
        investment property       70,617     (5,713)   3,373
        Segment profit            67,971     (8,946)  14,287
        Unallocated corporate
        expenses
        Financial expenses, net
        Share in losses of
        associates, net
        Income before taxes on
        income
     

TABLE CONT'D

        
                                Commercial
                                and fueling
                                   sites    Adjustments Total Consolidated
        Three months ended June
        30, 2010:                       NIS in thousands
        Net segment revenues         -           -           1,768,663
        Inter segment sales          -           (10,855)        -
        Depreciation and
        amortization                 -           -             44,086
        Operating profit (loss)
        before other gains and
        losses net and changes
        in fair value of
        investment property          -             1,138       69,415
        Segment profit               -             1,138       74,450
        Unallocated corporate
        expenses                                               (6,929)
        Financial expenses, net                               (42,281)
        Share in losses of
        associates, net                                            (4)
        Income before taxes on
        income                                                 25,236
     

TABLE CONT'D

        
                                Commercial
                                and fueling
                                   sites      Adjustments   Total Consolidated
                                          NIS in thousands
        Year ended December 31,
        2010:
        Net segment revenues       1,144,981         -           8,503,744
        Inter segment revenues         8,339   (51,783)                  -
        Depreciation and
        amortization                  27,328     1,441             206,945
        Operating profit (loss)
        before other gains and
        losses net and changes
        in fair value of
        investment property           42,936    (9,424)            263,422
        Segment profit                39,335    (9,424)            271,409
        Unallocated corporate
        expenses                                                   (22,000)
        Financial expenses, net                                   (149,995)
        Share in losses of
        associates, net                                               (518)
        Income before taxes on
        income                                                      98,896
     

TABLE CONT'D

        
                             Commercial
                                and
                              fueling
                               sites     Adjustments   Total Consolidated
                                     Convenience translation
        Six months ended               to U.S dollar in
        June 30, 2011:                   thousands
        Net segment revenues    754,465       -            1,820,083
        Inter segment
        revenues                  4,277    (10,241)            -
        Depreciation and
        amortization             13,417        879            39,787
        Operating profit
        (loss) before other
        gains and losses net
        and changes in fair
        value of investment
        property                 29,567     (4,046)           61,329
        Segment profit           29,548     (4,046)           65,183
        Unallocated
        corporate expenses                                    (3,414)
        Financial expenses,
        net                                                  (16,384)
        Share of losses of
        associates, net                                          386
        Income before taxes
        on income                                             45,771
     

1. Gross sales in stores that operated fully in both periods. 2. The Company operates in four segments: Supermarkets, Commercial and fueling sites, Non Food retail and wholesale and Real Estate. Segmental information is included in this report below. 3. The results of Dor Alon were included effective October 3, 2010 in the results of Alon Holdings. The data for the first half of 2010 were included in this report in order to enable analysis and trends of the segment performance. 4. Use of financial measures that are not in accordance with Generally Accepted Accounting Principles 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, depreciation and amortization. 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. 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. 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 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 EBITDA which is presented in this press release.

            Contact:
        Alon Holdings Blue Square-Israel Ltd.
        Dror Moran, CFO
        Toll-free telephone from U.S. and Canada:  888-572-4698
        Telephone from rest of world: +972-3-928-2220
        Fax: +972-3-928-2299
        Email: cfo@bsi.co.il

.

SOURCE Alon Holdings Blue Square Israel Ltd

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