Q3 Revenues Up 6.6% to NIS 1.8B with 26.3% Gross Margin ROSH
HA'AYIN, Israel, November 21 /PRNewswire-FirstCall/ -- Blue
Square-Israel Ltd. (NYSE and TASE: BSI) today announced results for
the third quarter and nine months ended September 30, 2007. All
financial results are reported according to Israeli GAAP (Generally
Accepted Accounting Principles). Further to its announcement dated
August 13, 2007, during the third quarter the Company launched its
"Mega In Town" format designed to bring discount shopping to
neighborhoods. The initiative included the conversion of 104
existing SuperCenter and Mega stores to the new brand, together
with a major media campaign. As a result, the Company recognized
growth in sales in "Mega In Town" stores, along with an increase in
SG&A Expenses associated with the launch. Results for the Third
Quarter Revenues: Revenues for the third quarter of 2007 increased
by 6.6% to NIS 1,823.5 million (U.S. $454.4 million)(a) compared
with NIS 1,710.2 million in the third quarter of 2006. The increase
reflects additional selling space resulting from the opening of
eight new stores during the previous year, and the ongoing
expansion of operations of Bee Group Retail (formerly Kfar
Ha'Shaashuim), including the consolidation of initial revenues of
Vardinon Textile Ltd. (TASE:WRDT) ("Vardinon"), 85.8% of which the
Company acquired in Q2. Gross Profit: Gross profit for the third
quarter of 2007 increased by 7.5% to NIS 480.2 million (U.S. $119.7
million) compared to NIS 446.5 million in the third quarter of
2006. This reflects improved agreements with suppliers and higher
profitability onsales generated by the Company's subsidiary Bee
Group Retail, moderated by a strongly competitive environment and
the impact from the launch of the Mega In Town chain which
increased the proportion of discount sales in the revenue mix.
Gross margin for the period increased to 26.3% from 26.1% in the
third quarter of 2006. Selling, General, and Administrative
Expenses: The Company's Selling, General, and Administrative
expenses for the third quarter of 2007 increased by 13.3% to NIS
411.6 million (U.S. $102.6 million) compared to NIS 363.3 million
in the third quarter of 2006. The increase reflects activities
associated with the successful launch of the Mega In Town chain,
including renovations, advertising, marketing and other expenses,
as well as the opening of eight new stores in the prior year.
Operating Income: Operating income for the third quarter of 2007
was NIS 68.6 million (U.S. $17.1 million) compared to NIS 83.2
million in the third quarter of 2006. The decrease reflects the
quarter's significant Selling, General and Administrative expenses.
As a result, operating margin for the period decreased to 3.8% from
4.9% in the third quarter of 2006. EBITDA (Earnings Before
Interest, Taxes, Depreciation, and Amortization): EBITDA for the
third quarter of 2007 was NIS 101 million (U.S. $25.2 million), a
decrease of 12.8% compared with NIS 116 million in the third
quarter of 2006. EBITDA margin for the period was 5.5% compared
with 6.8% in the third quarter of 2006. Financial Expenses:
Financial expenses for the third quarter of 2007 were NIS 26.2
million (U.S. $6.5 million) compared to NIS 12.2 million in the
third quarter of 2006. The increase derives primarily from the
quarter's 2.5% increase in the "known" price index to which most of
the Company's loans and debentures are linked, compared to the
parallel quarter of 2006, in which the price index increased by
0.2%. Other Income: Other expenses for the third quarter of 2007
were NIS 2.4 million (U.S. $0.6 million), related to disposal of
assets. In the third quarter of 2006, the Company recorded other
income of NIS 48.5 million, which derived primarily from the IPO of
its subsidiary, Blue Square Real Estate Ltd. ("BSRE"). Taxes On
Income: Taxes on income for the third quarter of 2007 were NIS 4.6
million (U.S. $1.1 million) compared to NIS 22.4 million in the
third quarter of 2006. The tax rate for the quarter was 11.4%, due
to a release of a tax provision with regard to the deductibility of
finance expenses in connection with loans taken by the Company for
dividend distributions. The Company released this tax provision
based on recent verdicts by Israel's Supreme Court and the opinion
of the Company's legal counsel. In the third quarter of 2006, the
Company's tax rate was 18.8%, due to capital gains associated with
the IPO of its subsidiary, BSRE, which were not taken into account
in computing tax expenses. Net Income: The Company's net income for
the third quarter of 2007 was NIS 28.6 million (U.S. $7.1 million),
or NIS 0.66 per ADS (U.S.$ 0.16) (NIS 0.66 per fully diluted ADS).
Net income for the third quarter of 2006, including capital gains
associated with the Company's subsidiary, BSRE, was NIS 89.1
million, or NIS 2.27 per ADS (NIS 2.03 per fully diluted ADS). Net
income for the third quarter of 2006, excluding capital gains, was
NIS 40.5 million. Other Operating Data: - The Company's Same Store
Sales for the third quarter of 2007 increased by 0.8%. - During the
third quarter of 2007, the Company opened 2 stores, adding a net
total of 5,650 square meters to the chain. Results for the Nine
Months Revenues: Revenues for the first nine months of 2007
increased by 5.5% to NIS 5,197.8 million (U.S. $1,295.3 million)
compared to NIS 4,924.6 million in the first nine months of 2006.
The growth in sales reflects the factors discussed above, including
an increase in selling space, the contribution of Bee Group Retail
operations and consolidation of Vardinan's revenues for the first
time. Gross Profit: Gross profit for the first nine months of 2007
increased by 7.9% to NIS 1,375.0 million (U.S. $342.6 million)
compared to NIS 1,273.9 million in the first nine months of 2006.
Gross margin for the period increased to 26.5% from 25.9% in the
first nine months of 2006, reflecting the factors described above,
including improved agreements with suppliers and higher
profitability of Bee Group Retail sales, mitigated by greater
competition and an increase in the proportion of discount sales
following the launch of the Mega In Town chain. Selling, General,
and Administrative Expenses: Selling, General, and Administrative
expenses for the first nine months of 2007 increased by 10.8% to
NIS 1,151.7 million (U.S. $287.0 million) (22.2% of revenues)
compared to NIS 1,039.8 million (21.1% of revenues) in the first
nine months of 2006, reflecting the factors described above,
including, activities associated with the launch of the Mega In
Town chain, the opening of eight new stores in the prior year and
an increase in employee wages. Operating Income: Operating income
for the first nine months of 2007 was NIS 223.3 million (U.S. $55.7
million) compared to NIS 234.0 million in the first nine months of
2006, reflecting the period's increased operating expenses,
mitigated by higher revenues and gross profit. Operating margin for
the period was 4.3% compared to 4.8% in the first nine months of
2006. EBITDA (Earnings before Interest, Taxes, Depreciation, and
Amortization): EBITDA for the first nine months of 2007 was NIS 321
million (U.S. $80 million) compared with NIS 332 million in the
first nine months of 2006. EBITDA margin for the period was 6.2%
compared with 6.7% in the first nine months of 2006. Financial
Expenses: Financial expenses for the first nine months of 2007 were
NIS 44.8 million (U.S. $11.2 million) compared to NIS 44.7 million
in the first nine months of 2006. The increase derived primarily
from a rise in the "known" price index mitigated by reduction in
interest expenses due to fewer loans from banks and debentures.
Other Income: In the first nine months of 2007, the Company
recorded other expenses of NIS 2.4 million (U.S. $0.6 million). In
the first nine months of 2006 the Company recorded other income of
NIS 47.9 million, consisting primarily of capital gains associated
with the IPO of BSRE. Taxes on Income: Taxes on income for the
first nine months of 2007 were NIS 45.8 million (U.S. $11.4
million), compared to NIS 60.8 million in the first nine months of
2006. The tax rate for the period was 26.1% compared to 25.6% for
the first nine months of 2006, reflecting the factors discussed
above. Net Income: Net income for the first nine months of 2007 was
NIS 108.3 million (U.S. $27.0 million), or NIS 2.58 per ADS (U.S.
$0.64) (NIS 2.5 per fully diluted ADS) compared to NIS 157.1
million, or NIS 4.02 per ADS (NIS 3.66 per fully diluted ADS), for
the first nine months of 2006. Other Operating Data - The Company's
Same Store Sales for the first nine months of 2007 were unchanged
from those of the comparison period. - During the first nine months
of 2007, the Company opened seven stores, adding a net total of
15,980 square meters to the chain. Dividend On April 12, 2007, the
Company paid a dividend of NIS 60 million. On October 8, 2007, the
Company paid a dividend of NIS 220 million. Strategic Progress -
Mega In Town: On August 13, 2007, the Company launched its "Mega In
Town" format designed to bring discount shopping to the
neighborhood. The initiative included the conversion of 104 of its
existing SuperCenter and Mega stores to the new brand, together
with a major media campaign. - Expansion into the Non-Food Sector:
Subsequent to the end of the quarter, the Company's subsidiary, Bee
Group Retail Ltd., acquired control of Naaman Porcelain Ltd., one
of Israel's major branded houseware retailers (TASE:NAMN). As a
result, Bee Group Retail Ltd. now operates (partially through
franchisees) 234 retail outlets, with activities in the toy,
houseware, gift, baby and textile sectors. - Organic/Health Food:
After the quarter, the Company completed the acquisition of 51% of
Eden Briut Teva Market Ltd., one of Israel's largest retailers of
organic, natural and health food products. Comments of Management
Commenting on the results, Mr. Zeev Kalimi, Blue Square's President
and CEO since October 1, 2007, said, "The third quarter was a
period of continued sales growth and strategic progress for Blue
Square Israel. The launch of our new Mega In Town supermarket is a
major milestone for the Company that we believe is changing the map
of Israeli retail. Although expenses associated with the launch
impacted our profitability during the third quarter, Mega In Town
is progressing well according to our plans and projections and we
continue to fine-tune its operating strategies." Mr. Kalimi
continued, "Our acquisition of Naaman Porcelain (TASE:NAMN) is
another step in our expansion into the Non-Food sector, which
continues with full force. In parallel, our acquisition of a
controlling share of Eden, a pioneering leader of Israel's emerging
health food sector, establishes us as one of the leaders of this
new, high-potential market. By expanding the range of our retail
activities, we will better leverage our know-how and brand assets
in order to create additional value for our shareholders. I am
proud to lead the excellent Blue Square team and excited regarding
our future prospects." Blue Square announces change in Directors:
Blue Square announced today that Mr. Shaul Gliksberg resigned from
his position as a director of Blue Square's Board. Mr. Gliksberg
served as a board member since November 2005. Blue Square expressed
its appreciation and thanks to Mr. Gliksberg for his contribution
to the Company. The Board of Directors appointed Mr. Ron Fainaro as
a director, as of today's date. Mr. Fainaro is Chief Financial
Officer of Africa Israel Ltd., as well as a director of various
Africa Israel subsidiaries. He previously served as Executive Vice
President and CFO of Ectel Ltd. from 2005 to 2007. Prior thereto,
he served as CFO and VP Finance of Tecnomatix Technologies Ltd. (WW
Electronics and Shopfloor Divisions and the America Operation) from
2004 to 2005, and as CFO and VP Finance of Tecnomatix Unicam Inc.
from 2001 to 2003. Mr. Fainaro is a CPA and holds a BA degree in
Accounting from Tel Aviv University and B.Sc. degrees in Physics
and Materials Engineering. IFRS - International Financial Reporting
Standard In July 2006, the Israel Accounting Standards Board
published Accounting Standard No. 29, "Adoption of International
Financial Reporting Standards ("IFRS")" (hereinafter: "the
Standard"). The Standard states that companies subject to the
Securities Law - 1968 and reporting under it are to prepare their
financial statements for the reporting periods commencing January
1, 2008 according to the International Financial Reporting
Standards (IFRS). The opening balance sheet according to IFRS will
be as of January 1, 2007 (the date of the Company's transition to
IFRS). The initial implementation of IFRS will be effected along
with the implementation of IFRS 1, "First Time Adoption of
International Financial Reporting Standards", for the purposes of
the transition. In the financial statements prepared according to
the IFRS regulations in the first year of adoption, the Company is
obliged to show comparative figures for only one year. The Company
is preparing for the adoption of the IFRS standards and has
examined the substantive implications for the Company as a result
of the adoption of these standards. An assessment of the likely
quantitative effects of the transition to reporting under IFRS was
provided by the Company in its press release for the six month
period ended June 30, 2007. The assessment process is expected to
be completed prior to the submission of financial statements for
the period ending December 31, 2007. Also included will be a
comprehensive quantitative clarification audited by the auditing
accountant regarding the effects of said transition. NOTE A:
Convenience Translation to Dollars The convenience translation of
New Israeli Shekel (NIS) into U.S. dollars was made at the rate of
exchange prevailing at September 30, 2007: U.S. $1.00 equals NIS
4.013. The translation was made solely for the convenience of the
reader. Blue Square is a leading retailer in Israel. A pioneer of
modern food retailing in the region, Blue Square currently operates
182 supermarkets under different formats, each offering varying
levels of service and pricing. This press release may contain
forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, with respect to the
Company's business, financial condition, prospects and operating
results. These statements are based on current expectations and
projections that involve a number of risks and uncertainties.
Actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors,
including risk of market acceptance, the effect of economic
conditions, the impact of competitive pricing, supply constraints,
the effect of the Company's accounting policies, as well as certain
other risks and uncertainties which are detailed in the Company's
Annual Report on Form 20-F and other filings with the Security and
Exchange Commission. Forward-looking statements speak only as of
the date on which they are made and the Company undertakes no
commitment to revise or update any forward-looking statement in
order to reflect events or circumstances after the date any such
statement is made. BLUE SQUARE - ISRAEL LTD. CONDENSED CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 2007 Convenience translation
Convenience translation(a) December 31, September 30, September 30,
____________ 2006 2006 2007 2007 ___________ _____ _____
____________ (Audited) (Unaudited) (Unaudited) ___________
_____________ ____________ NIS U.S. dollars
_________________________________________ In thousands
_________________________________________ A s s e t s CURRENT
ASSETS: Cash and cash equivalents 186,454 243,429 459,248 114,440
Marketable securities 65,287 - 146,161 36,422 Short-term bank
deposit 526,459 519,654 201,502 50,212 Trade receivables 672,605 *
747,324 795,535 198,239 Other accounts receivable 119,028 * 295,411
242,750 60,492 Inventories 392,583 403,536 453,832 113,090
_________ _________ _________ _______ Total current assets
1,962,416 2,209,354 2,299,028 572,895 _________ _________ _________
_______ INVESTMENTS AND LONG TERM RECEIVABLES: Investments in
associated companies 4,762 4,189 4,899 1,221 Other long term
receivables 2,618 3,208 2,373 591 _____ _____ _____ _____ 7,380
7,397 7,272 1,812 _____ _____ _____ _____ FIXED ASSETS, NET OF
ACCUMULATED DEPRECIATION * * AND AMORTIZATION * 1,763,733 *
1,725,070 1,787,777 445,496 _________ _________ _________ _______ *
* INVESTMENT PROPERTY*** * 222,057 * 217,124 302,487 75,377
_________ ________ _________ _______ DEFERRED TAXES 16,789 21,315
20,098 5,008 _________ ________ _________ _______ INTANGIBLE ASSETS
AND * * DEFERRED CHARGES, NET * 99,358 * 98,786 119,915 29,882
__________ ________ _________ _______ 4,071,733 4,279,046 4,536,577
1,130,470 __________ _________ _________ _________ * Reclassified.
** Reclassification in respect of retrospective application of
change in accounting policy *** As of September 30, 2007, presented
based on the fair value model and as of September 30, 2006 and
December 31, 2006 presented at cost. BLUE SQUARE - ISRAEL LTD.
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2007
Convenience translation(a) December 31, September 30, September 30,
_______________ 2006 2006 2007 2007 _________ _____ _____ (Audited)
(Unaudited) (Unaudited) _________ _______________ _____________ NIS
U.S. dollars ________________________________________________ In
thousands ________________________________________________
Liabilities and shareholders' equity CURRENT LIABILITIES: Credit
and loans from banks 211,152 247,267 131,458 32,758 Current
maturities of debentures 53,706 55,336 69,841 17,404 Trade payables
* 938,007 1,057,858 1,120,460 279,208 Other accounts payable and
accrued expenses 409,153 511,095 538,514 134,192 Dividend payable -
- 260,000 64,789 Total current _________ _________ _________
________ liabilities 1,612,018 1,871,556 2,120,273 528,351
_________ _________ _________ ________ LONG-TERM LIABILITIES:
Long-term loans from banks and other liabilities, net of current
maturities * 119,574 129,132 212,519 52,958 Debentures, net of
current maturities 827,558 830,564 772,146 192,411 Convertible
debentures, net of current maturities 214,794 218,226 143,350
35,721 Deferred income taxes 30,198 27,787 39,492 9,841 Liability
for employee rights, net of amount funded 35,527 37,168 38,835
9,677 Total long-term _________ _________ _________ _______
liabilities 1,227,651 1,242,877 1,206,342 300,608 _________
_________ _________ _______ MINORITY INTEREST 239,142 230,589
227,087 56,588 _________ _________ _________ _______ SHAREHOLDERS'
EQUITY: Share capital - ordinary shares of NIS 1 par value 53,414
53,347 57,094 14,227 Additional paid-in capital 737,756 735,763
845,173 210,609 Retained earnings: Dividend declared subsequent to
balance sheet date 60,000 - - - Unappropriated 141,752 144,914
80,608 20,087 _______ _______ _______ _______ 992,922 934,024
982,875 244,923 Total shareholders' equity 4,071,733 4,279,046
4,536,577 1,130,470 _________ _________ _________ _________ *
Reclassified. BLUE SQUARE - ISRAEL LTD. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE AND THREE MONTH PERIODS ENDED
SEPTEMBER 30, 2007 Convenience translation(a) for the three months
Year Nine months ended Three months ended ended ended September 30,
September 30, September 30, _________________ __________________
December 2006 2007 2006 2007 2007 31 ________ _______ ________
________ __________ 2006 (Audited) (Unaudited) (Unaudited)
__________ _______________________________________ _____________
NIS U.S. dollars _____________ In thousands (except share and per
share data)
_________________________________________________________________
Sales 6,515,035 4,924,630 5,197,837 1,710,242 1,823,522 454,404
Cost of sales 4,812,952 3,650,770 3,822,798 1,263,716 1,343,356
334,751 __________ _________ _________ _________ _________ _______
Gross profit 1,702,083 1,273,860 1,375,039 446,526 480,166 119,653
Selling, general and administrative expenses 1,396,877 1,039,837
1,151,714 363,304 411,575 102,560 _________ _________ _________
_________ _________ ________ Operating income 305,206 234,023
223,325 83,222 68,591 17,093 Financial expenses, net 42,368 44,720
44,795 12,189 26,238 6,538 _________ _________ _________ _________
_________ _________ 262,838 189,303 178,530 71,033 42,353 10,555
Other income (expenses), net 78,022 47,917 (2,415) 48,535 (2,352)
(586) _________ _________ _________ _________ _________ _________
Income before taxes on income 340,860 237,220 176,115 119,568
40,001 9,969 Taxes on income 96,660 60,799 45,886 22,424 4,552
1,134 _________ _________ _________ _________ _________ _________
Income after taxes on income 244,200 176,421 130,229 97,144 35,449
8,835 Share in profits (losses) of associated companies, net 1,284
712 137 229 (262) (65) Minority interest in profits of
subsidiaries, net 31,573 20,060 22,108 8,281 6,579 1,640 _________
_________ _________ _________ _________ ________ Net income for the
period 213,911 157,073 108,258 89,092 28,608 7,130 _________
_________ _________ _________ _________ ________ Net income per
Ordinary share or ADS: Basic 5.46 4.02 2.58 2.27 0.66 0.16
_________ _________ _________ _________ _________ ________ Fully
diluted 4.92 3.66 2.47 2.03 0.66 0.16 _________ _________ _________
_________ _________ ________ Weighted average number of shares or
ADS used for computation of income per share: Basic 39,207,214
39,044,588 42,012,451 39,232,544 43,362,460 43,362,460 __________
__________ __________ __________ __________ _________ Fully diluted
44,939,831 44,939,784 45,247,831 44,939,784 44,988,066 44,988,066
__________ __________ __________ __________ __________ _________
BLUE SQUARE - ISRAEL LTD. SELECTED OPERATING DATA Convenience
translation(a) For the nine For the three for the three months
ended months ended months ended September 30 September 30 September
30 ____________ ____________ ____________ 2006 2007 2006 2007 2007
NIS NIS NIS NIS U.S.$ ____ ____ ____ ____ ___________ (Unaudited)
(Unaudited) _____________________________________________ Sales (in
millions) 4,925 5,198 1,710 1,824 454 Operating income (in
millions) 234 223 83 69 17 EBITDA (in millions) 332 321 116 101 25
EBITDA margin 6.7% 6.2% 6.8% 5.5% NA Increase in same store sales*
5.7% 0.0% 2.7% 0.8% NA Number of stores at end of period 174 182
174 182 NA Stores opened during the period 6 7 3 2 NA Stores closed
during the period - - - - NA Total square meters at end of period
322,165 339,280 322,165 339,280 NA Square meters added during the
period, net 10,094 15,980 3,833 5,650 NA Sales per square meter
14,969 14,929 5,094 5,112 1,274 Sales per employee (in thousands)
712 711 234 236 59 * Compared with the same period in the prior
fiscal year. Contact: 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:
DATASOURCE: Blue Square Israel Ltd CONTACT: 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:
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