Shikun & Binui Reports Strong First Quarter With Improvement Across all Operational Parameters

An increase of 10% in revenues to NIS 1.5 billion

A jump in net profit to NIS 519 million

Improving gross margin: 15.9% in the quarter, compared with 11.5% in Q1 last year

A strong operating cash flow of NIS 270 million

The Board of Directors decided on the distribution of a dividend of NIS 60 million

AIRPORT CITY, Israel, May 30, 2019 /PRNewswire/ -- Shikun & Binui Ltd. (TASE: SKBN.TA), a global construction and infrastructure company headquartered in Israel, today reported its financial results for the first quarter, ended March 31, 2019.

Tamir Cohen, Chairman of Shikun & Binui: "Shikun & Binui over the years has made ADO a leading company in the real estate market in Berlin, and has managed to realize its successful holdings and generate huge profits. These profits are now invested in new growth engines, of which their initial fruits are already visible in the Company's operations, and will continue to grow in the quarters and years ahead."

Moshe Lahmani, outgoing CEO of Shikun & Binui: "The impressive profit Shikun & Binui presents in the first quarter of 2019 is a continuation of the Company's financial strength over time, which will continue to accompany it for the years ahead."

FINANCIAL HIGHLIGHTS OF THE FIRST QUARTER OF 2019

• Revenues for the quarter totaled NIS 1.5 billion, an increase of 9.7% compared with the corresponding quarter last year. The increase is mainly due to real estate activity in Eastern Europe and Solel Boneh's activity in Israel.
• The gross margin is 15.9%, compared with 11.5% in the corresponding period last year. Gross profit for the period amounted to NIS 236 million, compared to NIS 156 million in the corresponding quarter last year. The improvement in the gross profit and margin was mainly due to the improvement in activity in a number of projects in Africa, alongside strong results in real estate activity in Eastern Europe.
• Net profit totaled NIS 520 million, compared with NIS 27 million in the same quarter last year.
• Cash flow from operating activities in the first quarter totaled NIS 270 million, compared with a negative cash flow of NIS 670 million in the corresponding quarter last year. The strong cash flow was mainly due to an increase in collections at Solel Boneh

CONSTRUCTION

Solel Boneh: Significant volume of new projects won since the beginning of the year, alongside an increase in the scope of execution

• Total wins of new projects from the beginning of the year until the report date, amounted to approximately NIS 1.8 billion, including winning a project for the construction of Highway 60 interchange (at NIS 520 million), establishment of a campus in Jerusalem (at NIS 700 million), and more.
• There was an increase in the scope of execution in the Tel Aviv light rail project, mainly at the stations: Abba Hillel, King Shaul and Arlosoroff.

SBI - International Building and Infrastructure Contracting Activities (excluding the US): significant improvement in profitability

• A significant improvement in the gross margin, which reached 18.7% in the first quarter of 2019, compared with 4% in the corresponding quarter last year. The improvement in profitability was mainly due to the projects in Nigeria, the reaching of an agreement with the buyer of the project in Kenya, and the project for the construction of the airport in Uganda.
• The toll road project in Colombia: Due to the delays in the agreement, the financing provider to the project decided to stop the continuation of the debt transfer until Sections 1, 2 and 3 were handed over, and reached an agreement regarding the continuation of work in sections 4 and 5 (in which the work was suspended due to a force majeure). The financing providers to the project are in discussions to accept a waiver and an arrangement for the continued financing, and in view of the above, an appropriate provision was included in the financial statements.

US Building and Infrastructure Contracting Activities: Continued expansion of operations and implementation of the expansion strategy in the US

• Completion of the acquisition of Infrastructure and Construction Contracting in the United States - as part of the Company's strategy to expand its operations in the United States. The company engages in the field of civil infrastructure contracting, with an emphasis on bridges, transportation infrastructure and ongoing work.
• A delay in the construction of toll roads in Texas led to a decrease in revenues for the quarter compared to the corresponding quarter, last year.

Development of the Backlog amounting to NIS 13 billion as of March 31, 2019* (in NIS millions)

*The backlog as of March 31, 2019 does not include additional construction projects which total NIS 1 billion that the Company won, up to or after the reporting date. These include the Bezalel campus in the amount of NIS 330 million, the S1 infrastructure project totaling NIS 220 million, The Rosemary interchange, Highway 60, totaling NIS 150 million, etc., and excluding the execution of those projects carried out during the period up to the date of this report. In addition, the relative decrease in the orders backlog from December 31, 2017 onwards is attributed, among other things, to the effects of the early adoption of IFRS 15.

RESIDENTIAL REAL ESTATE DEVELOPMENT

In the first quarter of 2019, sales of apartments totaled approximately 786 housing units (in 100% terms) in the amount of approximately NIS 919 million, of which 591 residential units were in Israel and 195 residential units were in Europe.

Additional data regarding the Company's sale of apartments (signed contracts) during the first quarter of 2019:

Data regarding delivery of apartments to customers during the first quarter of 2019:

Real Estate Initiatives in Israel: Significant Increase in the Number of Transactions Signed During the First Quarter in the Or Yam project

• During the first quarter, deals were signed for the sale of 578 residential units totaling NIS 766 million, following the success of the Or Yam project.

RED: Real Estate Activities Internationally: Significant increase in revenues and profit following the occupancy of 265 housing units in the quarter

• Revenues for the first quarter totaled NIS 145 million, an increase of NIS 127 million compared to the corresponding quarter, as a result of the occupancy of 265 apartments, mainly in Warsaw (120 units), Belgrade (84 units), Prague and Bucharest (61 units).
• Gross profit for the quarter amounted to NIS 35 million compared to NIS 3 million in the corresponding quarter last year.

PROJECTS & IGAs (INCOME GENERATING ASSETS)

Successful Realization of most of the Group's shares in ADO

The Company completed four transactions for the sale of 30% of ADO Group, for a total consideration of NIS 720 million. As a result, it recorded a pre-tax profit of NIS 476 million, as well as a revaluation of the balance of the investment in ADO Group (7.5%) of NIS 109 million.

In April, all the approvals required to operate the Ashalim project were received

The project is for 121 megawatts, for an operating period ending in 2043.

Road 6 Operating Company Transaction

Subsequent to the date of the current report, it is reported that Keystone REIT (Ltd.) entered into an agreement with regard to the purchase of the operating company (Derech Eretz) from third parties, with part of the holdings being transferred to the Company.

Insofar as the transactions and agreements are executed, the Company is expected to gain control of the operating companies and record an estimated profit of NIS 100 million as a result of revaluation of the investment.

Continued Implementation of steps to reduce leverage

The Company's financial debt as of March 31, 2019 was NIS 8,125 million, compared with a financial debt of NIS 8,410 million as of December 31, 2018. In addition, after the balance sheet date, the Company repaid a further NIS 260 million of debt.

The net financial debt excluding non-recourse debt and excluding liabilities in respect of leasing amounted to NIS 3,164 million at the end of the quarter, compared with NIS 3,980 million at the end of 2018.

On May 26, 2019, following the approval of the remuneration committee and the Board of Directors of the Company, the General Meeting approved the Company's engagement with regard to the terms of service and employment of Mr. Lapidot as CEO of the Company.

MANAGEMENT COMMENT

Tamir Cohen, Chairman of Shikun & Binui: "In the first quarter of 2019, the Group presented an improvement in all operational parameters. Our improvement resulted from increased activity in a variety of projects and improved profitability, but also from the significant deal for the sale of most of the Group's holdings in ADO. Over the years, Shikun & Binui has made ADO a leader in the real estate market in Berlin, and has managed to realize its successful holdings and generate a large profit. These profits are now invested in new growth engines, of which their initial fruits are already visible in the Company's operations, and will continue to grow in the quarters and years ahead. We continue to move forward in Africa, continue to expand in North America, and we will take this momentum to other areas of our activity."

Moshe Lahmani, outgoing CEO of Shikun & Binui: "The impressive profit which Shikun & Binui presents in the first quarter of 2019 is a continuation of the Company's long-term financial strength, which will continue to accompany it in the years ahead. The good results of the past year enable us to meet the challenges of the future, ready and firm. The various business units presented excellent results on all levels of activity. Our financial strength is a product of being conservative in the realizing assets and in the financial management of the Group. I leave behind a strong and quality organization with excellent employees and managers, and feel proud to leave against a background of such impressive results."

INVESTORS CONFERENCE CALL

Shikun & Binui will host a conference call on May 30, 2019 starting at 9am Eastern Time to discuss the financial results. Management will also be available to answer investor's questions, after presenting the results.

To participate, please call one of the following teleconferencing numbers:

US:                              1-888-668-9141
UK:                              0-800-917-5108
Israel:                           03-918-0610
International:                +972-3-918-0610

At: 9am Eastern Time, 6am Pacific Time, 2pm UK Time, 4pm Israel Time

For those unable to participate, the teleconference will be available for replay on the company's website at http://en.shikunbinui.co.il/ beginning 24 hours after the call.

ABOUT THE SHIKUN & BINUI GROUP

The Shikun & Binui Group is a global construction and infrastructure company that operates in Israel and internationally in seven segments: 1) infrastructure and construction contracting outside of Israel; 2) infrastructure and construction contracting within Israel; 3) real estate development within Israel; 4) real estate development outside of Israel; 5) renewable energy; and 6) concessions. The Group's activities focus on large, highly complex projects carried out for entities in private and public sectors with a focus on sustainability.

SAFE HARBOR STATEMENT

This summary announcement was prepared solely for the convenience of the reader and does not replace Shikun & Binui Ltd.'s (hereafter – "the Company") full report. The information contained in this announcement is, by its nature, incomplete. All of its contents are provided as a supplement to the Company's report, and are subject to the declarations therein stated. This announcement includes forecasts, assessments, estimates and other information relating to the Company or its subsidiaries, or to other parties or to future events and matters, the extent of whose realization is not certain and is not under the sole control of the Company (forward-looking information, as defined in the Securities Law-1968). The key facts and data serving as the basis for this information are facts and data, among others, related to the current status of the Company and its businesses, facts and data relating to the current status of the operating segments in which the Company engages in its areas of operation, and other macroeconomic facts and data known to the Company on the preparation date of this presentation.

It is understood that forward-looking information does not constitute a fact and is based solely on subjective assessments. Forward-looking information is uncertain and for the most part, is not under the Company's control. The realization or non-realization of the forward-looking information will be influenced, among others, by the risk factors that characterize the Company's operations, as well as developments in the general environment and external factors that impact the Company's operations. The Company's future results and achievements could differ significantly from those presented in this presentation. The Company is not obligated to update or modify the said forecast or assessment, and is not obligated to update this announcement. This announcement does not constitute an offer to purchase the Company's securities or an invitation to receive such offers.  An investment in securities in general, and in the Company in particular, carries risk. One must take into account that past data do not necessarily indicate future performance.

Contacts

Shikun & Binui
Inbal Uliansky
+972(3)630-1058
inbal_u@shikunbinui.com  

External Investor Relations
Ehud Helft
GK Investor Relations
+1-617-418-3096
shikunbinuni@gkir.com