Thirty-two Israeli companies filed financial reports on 27 August - an unusually busy filing day.
Four of them received a standalone article here. One is a re-filing of a report I have already covered. And the rest are gathered in this piece.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Figure That Decides How the Day Is Read
Before any comparison between today's companies, two things have to be on the table.
The first - the reports are not denominated in the same currency. 28 of them in shekels, three in dollars - Gilat Am, Qualitau and Priortech - and one in Canadian dollars, Skyline. A number from a dollar report is not directly comparable to a shekel one without conversion, and I do not convert here.
And the second, and the more important - the gross margins of today's filers span an enormous range: from minus 21.2% at Levinsky-Ofer to 68.9% at Qualitau.
This does not mean one is good and the other bad. It means they are in completely different businesses - and that no average of this day means anything at all.
Four That Received Their Own Article
| Revenue · Profit | What is distinctive | |
|---|---|---|
| Lapidot Capital | 4,145.7m · net 187.6m | The day's highest revenue - and 39.8% of the profit to the minority |
| RGA | 153.5m · net 7.9m | Waste collection at a 14.6% margin, 60% of which survives |
| Cilo-Blue | 43.0m · net 76.3m | Operating profit above gross, and net profit 3.15 times pre-tax |
| Aluma | -0.7m · net -7.0m | A negative revenue line - and that is normal at an infrastructure fund |
And One Whose Report Was Already Covered
IBI Investment House appears on today's filing list, but the figures in it are identical to those filed on 20 August - revenue of NIS 479.3 million and net profit of NIS 95.7 million. This is a re-filing of the same report, and it has already been covered in a standalone article and in the daily report for 20 August.
It is counted here among the filings, but not in today's comparisons - a number already measured is not measured twice.
Twenty-Seven Included Here Only
Amounts in millions of units of the reporting currency.
| Company | Revenue · Net | What stands out |
|---|---|---|
| Shufersal | 3,412.0 · 135.0 | The day's largest balance sheet - 14,395m; only 17.0% of gross margin survives |
| Israel Canada | 340.2 · 19.1 | Financing took 80.0% of operating profit - the day's extreme |
| Sano | 537.9 · 76.1 | Gross margin 39.2%, leverage 1.20 - the lowest among the large names |
| T&M | 478.3 · 10.1 | An operating margin of 3.3% on 478m of revenue |
| Tigbur Group | 393.9 · 11.4 | The day's lowest gross margin among the profitable - 7.3% |
| Kafrit | 358.2 · 27.7 | Profit attributable to shareholders exceeds net profit |
| Summit | 285.3 · 40.9 | Operating margin 40.7%, but financing took 50.7% of it |
| Ampa | 200.5 · 84.5 | Survival of 95.6% - the day's highest |
| Ludan | 192.1 · 6.2 | Gross margin 10.2% in engineering, leverage 3.15 |
| Ackerstein Group | 189.6 · 2.3 | A 26.2% gross margin that narrowed to a 1.2% net margin |
| Omer Engineering | 156.5 · 23.7 | 71.9% of gross margin survives - the second-highest survival |
| Israel Canada Hotels | 114.5 · -19.2 | Survival of 2.1% - 46.6m of gross became 1.0m of operating |
| Mishorim | 92.5 · -8.2 | A consolidated net loss - and a 4.4m profit for shareholders |
| Gilat Am [USD] | 78.8 · 3.5 | Net profit larger than pre-tax profit |
| Tzarfati | 77.2 · 4.2 | Financing took 60.8% of operating profit |
| TIA Investments | 42.1 · 3.3 | Only 33.1% of the profit is attributable to shareholders |
| Skyline [CAD] | 25.0 · -11.1 | A small operating loss that became an 11.5m pre-tax loss |
| Qualitau [USD] | 17.9 · 10.8 | The day's highest gross margin - 68.9%; leverage 1.09 |
| Group 107 | 17.8 · -1.0 | A 32.6% gross margin that did not cover the expenses |
| Third Eye | 17.3 · -8.7 | A gross margin of 8.6% against an 8.1m operating loss |
| Priortech [USD] | 13.9 · 7.0 | 67.3% of the profit to shareholders; leverage 1.42 |
| Tondo Smart | 10.8 · -2.7 | The pre-tax loss is smaller than the operating loss |
| Electreon Wireless | 8.7 · -25.0 | The loss is 2.9 times revenue |
| TG! | 6.8 · -6.5 | The loss almost equals revenue; leverage 4.09 |
| Levinsky-Ofer | 4.4 · -4.9 | The only gross margin that is negative - minus 21.2% |
| Bio Meat Foodtech | No revenue · -1.6 | A pre-revenue company; equity of 23.7m |
| Bion 3D | No revenue · -1.6 | The day's smallest balance sheet - NIS 628 thousand |
At Third Eye the earnings per share in the structured file carries a sign inconsistent with the reported loss, so I have omitted it.
The Day's Three Extremes
The first extreme - Ampa, and 95.6% survival.
From NIS 119.3 million of gross profit, NIS 114.1 million of operating profit was left. Only NIS 5.2 million was taken out.
That is a ratio you almost never see. At most of the companies I read this season, selling and administrative costs swallow between half and two thirds of the gross margin - see today's Shufersal, where 17.0% survived.
What a ratio like that tells you is that head office is small relative to the assets - and that is a characteristic of companies that manage assets rather than sell products.
The second extreme - Israel Canada Hotels, and 2.1% survival.
From NIS 46.6 million of gross profit, NIS 963 thousand of operating profit was left. Then financing took another NIS 22.0 million, and the pre-tax loss came to NIS 21.0 million.
And this is the pattern that recurred today again and again: financing, not operations, is what decided.
| Financing took, of operating profit | |
|---|---|
| Israel Canada | 80.0% |
| Tzarfati | 60.8% |
| Summit | 50.7% |
| Israel Canada Hotels | Turned a 1.0m profit into a 21.0m loss |
| Skyline | Turned a 0.5m loss into an 11.5m loss |
And that is no coincidence. A high interest rate does not hurt all companies equally - it hurts the leveraged, and those holding long-dated assets against shorter debt. All five on this list are tied to property or hotels.
And the third extreme, and the most interesting - Mishorim, which recorded a loss and a profit in the same report.
Consolidated net profit: minus NIS 8.2 million. Profit attributable to shareholders: plus NIS 4.4 million.
That is, the minority absorbed NIS 12.6 million - more than the entire loss.
This happens when the loss arises at a subsidiary the parent holds partially, while the wholly-owned activity made money. And it echoes what I saw today at Lapidot Capital too - there in the opposite direction, with 39.8% of the profit going to someone else.
The practical conclusion is the same in both cases: the line "net profit" is not the shareholder's line. Anyone reading a consolidated report has to go one line lower.
And Leverage, Which Is the Day's Bottom Line
| The low end | The high end | ||
|---|---|---|---|
| Qualitau | 1.09 | Israel Canada Hotels | 5.82 |
| TIA Investments | 1.12 | Levinsky-Ofer | 4.20 |
| Sano | 1.20 | TG! | 4.09 |
| Electreon | 1.21 | Mishorim | 3.93 |
| Bio Meat Foodtech | 1.27 | Tondo Smart | 3.87 |
And it is worth noting what sits at each end. At the low end: a software company, an investment house, a consumer goods manufacturer and pre-revenue technology companies. At the high end: property and hotel companies, and small businesses that financed growth with debt.
This is not a judgement on any of them - a business holding long-dated physical assets is simply built differently from one selling software. But it does explain why financing decided the result for some of them today and did not touch others.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
A day like this, with 32 filings at once, is the best opportunity to see something hard to see in a single article: how little "net profit" says on its own.
Today we had four companies where the bottom line misleads for completely different reasons: Cilo-Blue, whose net profit is 3.15 times pre-tax profit; Mishorim, whose consolidated loss is a profit for shareholders; Lapidot, where almost 40% of the profit belongs to someone else; and Aluma, whose revenue is negative.
Four different ways in which the same line stops describing what happened in the business.
And what I try to hold onto going through a day like this is a fixed reading order, top to bottom: revenue, gross margin, survival to operating, what financing took, and what is left for the shareholder. Read in that order, each of today's anomalies reveals itself at the stage where it was created - and not as a surprise in the last line.
And what this day added for me is the illustration of how decisive financing currently is. At five companies today, the financing line is what set the sign of the result. And that is no longer an accounting figure - that is the interest-rate environment entering the reports.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
