Altshuler Shaham Pension and Provident published its second-quarter report. One line in it is ordered in an unexpected way.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Quarter
| NIS millions | The quarter | Share of the top line |
|---|---|---|
| Top line | 217.1 | |
| Operating profit | 33.6 | 15.5% |
| Pre-tax profit | 32.6 | 15.0% |
| Net profit | 20.7 | 9.5% |
| Attributable to shareholders | 22.1 | |
| Non-controlling interests | -1.4 | |
| Basic earnings per share | NIS 0.12 | |
| Balance sheet total | 1,718.1 | |
| Shareholders' equity | 628.6 |
The gross profit line does not appear in the structured filing, and is therefore not presented here.
Profit to Shareholders Larger Than Net Profit
Net profit is NIS 20.7 million, and the amount attributable to shareholders is NIS 22.1 million.
And that looks like an error until you understand the mechanism.
When a company consolidates subsidiaries it does not wholly own, it sets aside the partners' share as a separate line. In a profitable quarter that line reduces what reaches the shareholder.
And when some of those subsidiaries made a loss, it does the opposite: the minority absorbs part of the loss, and so what remains for the shareholder is larger than the consolidated profit.
Here the minority absorbed about NIS 1.4 million.
And this is the phenomenon that recurred four times this week: at Shikun & Binui, at Rani Zim, at Novolog - and at Alony-Hetz, where it even reversed the sign: the company as a whole lost money, the minority made money, and shareholders absorbed a loss larger than the consolidated one.
The practical conclusion, and it is the same every time: the line relevant to the shareholder is "attributable to shareholders" - whether it is larger than net profit or smaller.
And Financing: Only 3.1%
From NIS 33.6 million of operating profit, NIS 32.6 million was left before tax. NIS 1.1 million was taken out.
And that is a particularly low figure, consistent with the structure of an entity that manages other people's money: the assets it manages are not on its own balance sheet, and so it is not required to fund them.
What is on the balance sheet is its own equity and its operating infrastructure - NIS 1,718.1 million of assets on equity of NIS 628.6 million, a ratio of 2.7 to one.
And the Tax: 36.4%
NIS 32.6 million before tax and NIS 20.7 million after - that is, tax of NIS 11.9 million, an effective rate of 36.4%.
And that is the third today in this range, after Analyst at 37.1% and IBI at 32.9%.
The pattern is too consistent among Israeli financial institutions to be coincidental, and it is generally explained by profit tax - an additional levy applying to certain financial institutions.
The structured filing does not detail the tax reconciliation, so I do not assert it.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What I take from today, after reading four financial institutions, is that they share a signature.
A relatively high operating margin, low leverage, almost no financing expense - and a tax rate of 33% to 37%. Four companies, the same pattern.
And what that means in practice is that in this sector, tax is the largest expense below the operating line. Not financing, not depreciation - tax. And that differs from every other sector we read this week.
And what distinguishes this report is actually its last line: the minority absorbed a loss. That is a sign that there is activity in the group that is not wholly owned and that was not profitable this quarter - and the structured filing does not reveal which.
And what I would look for in the full accounts is assets under management and the average management fee rate. At an entity like this, those are the two figures that determine income - and they are not in the structured quarterly filing at all.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
