Blue Square-Israel Ltd. (NYSE: BSI) today announced results for the second quarter and six months ended June 30, 2001.
Results of the Quarter
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Revenues for the second quarter of 2001 increased by 5.2% to a record NIS 1,424.1 million(a) (US $341.9 million)(b) from NIS 1,353.2 million in the second quarter of 2000. Revenues for the quarter reflect the contribution of new store branches, as well as the timing of the Passover holiday buying season, which occurred only partially during the second quarter of 2001, as compared to 2000, when the entire Passover holiday season fell during the second quarter. As a result of these factors, together with continued competition in the sector and the opening of new stores by the Company and its competitors, Same Store Sales for the quarter declined by 3.33%, compared to an increase of 2.75% during the second quarter of 2000.
Gross profit for the quarter increased by 4.2% to NIS 384.7 million (US $92.4 million) from NIS 372.0 million in the second quarter of 2000, resulting in gross margins of 27.0%, compared to 27.5% in the second quarter of 2000.
Operating income for the second quarter increased by 9.9% to NIS 83.1 million (US $20.0 million) from NIS 75.6 million in the second quarter of 2000, and operating margin increased to 5.8% from 5.6% for the corresponding period in 2000. The rise in operating margins is due to the success of the Company’s ongoing efficiency program, which continues to reduce Selling, General and Administrative expenses relative to the Company’s revenues.
During the quarter, the Company recorded financing income of NIS 5.0 million (US $1.2 million) compared to financial expense of NIS 0.02 million in the second quarter of 2000. This derives primarily from the reduction of Israel’s prime rate of interest, and decreases in the value of marketable securities that were recorded in the second quarter of 2000.
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By GlobalDataNet income for the second quarter was NIS 44.9 million (US $10.8 million), or NIS 1.17 per ADS (US $0.28), an increase of 20.3% compared to NIS 37.3 million, or NIS 0.97 per ADS, for the second quarter of 2000.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter increased by 11.1% compared to the second quarter of 2000. The EBITDA margin for the second quarter of 2001 rose to 8.4% from 7.9% in the comparable quarter of 2000.
Results of the First Six Months
Revenues for the first half of 2001 were NIS 2,746.5 million (US $659.4 million), an increase of 6.8% compared to NIS 2,572.2 million for the first six months of 2000. Gross margins for the first six months of 2001 rose to 27.6%, compared to 27.4% for the first half of 2000.
The Company’s operating income for the first six months of 2001 increased by 12.3% to NIS 155.3 million (US $37.3 million) from NIS 138.2 million in the first half of 2000. Operating margin for the period rose to 5.7%, compared to 5.4% for the comparable period in 2000, reflecting the monitoring of operating expenses and increased efficiency in all levels of the Company’s operations.
“Other Income” for the first half of 2000 includes a one-time capital gain of approximately NIS 32 million (before taxes) related to the sale of the Company’s holdings in Home Centers.
“Discontinued Operations” for the first half of 2000 includes income of NIS 1.0 million related to the Company’s former holdings in the IKEA chain.
Net income for the first six months of 2001 was NIS 75.7 million (US $18.2 million), or NIS 1.97 per ADS (US $0.47). Excluding the abovementioned one-time capital gain and losses from discontinued operations, net income for the first six months of 2000 was NIS 62.5 million, or NIS 1.63 per ADS. Reported net income for the first half of 2000 was NIS 80.6 million, or NIS 2.10 per ADS.
NOTE: For the convenience of the reader, the Company has attached a pro-forma summary table for the six months ending June 30, 2001 which excludes the affect of the abovementioned one-time factors on the Company’s results of the first half of 2000.
During the first half of 2001, Same Store Sales declined by 1.72%, a substantial improvement over the first half of 2000, when Same Store Sales declined by 6.23%. The Company opened 3 stores and closed 2 during the first half of 2001, adding a net total of 6,900 square meters to the chain. EBITDA for the first six months increased by 14.4%, resulting in an EBITDA margin of 8.4%.
Comments of Management
Commenting on the results, Yoram Dar, Blue Square’s President and Chief Executive Officer, said, “Our solid second quarter results illustrate the stability of the supermarket sector in the face of the continuing market slowdown, as well as the success of our marketing and operating strategies. We are pleased to report continued growth in revenues and profits, along with significant reduction of ongoing operating expenses.”
Mr. Dar continued, “We believe the continued growth of Mega, Blue Square’s greatest success story so far, demonstrates our ability to identify underlying market trends, and to build brands that match the true needs of our customers. Since the end of the first quarter, we have converted three Super Centers to Megas, and opened a new Mega in Rehovot. As such, the Mega chain currently numbers 11 branches, and we expect to open another one by the end of the quarter. At the same time, we continue to make progress in consolidating our other brands.
“Our continued profitability growth reflects ongoing investments in infrastructure and technology, along with progress in a range of efficiency and marketing initiatives. We continue to streamline the organization, bringing the expenses of every level in line with operations, and to increase the volume of Logistics Center and self-distribution operations. We are now implementing the final stage of our shelf management initiative, with the goal of reducing the number of marginal items carried in our stores.
“Recently, we began ramping up our Private Label program by launching the Leader Price brand throughout all our stores. In the first phase, we introduced a selection of quality cleaning products, produced by a subsidiary of Colgate Palmolive. During the remainder of the year, we will introduce a number of additional Leader Price categories, and expect to begin to experience a marked increase in Private Label sales.”
Mr. Dar concluded, “We are optimistic regarding Blue Square’s future prospects, along with the prospects for Israel’s organized food sector. We believe that Israel’s supermarket sector, though just 52% of the food market today, will continue to move quickly toward Europe’s penetration rate of 75%-80%. We will achieve that growth through continued responsiveness to the needs of our customers, and close attention to the operational details of our organization.”
The Company will hold a teleconference to review and discuss the results on August 15, 2001, at 10:00AM (EDT). The access number from the US or Canada is 800-288-8961. The access number from outside the US and Canada is 612-332-0530. To participate, please call the access number a few minutes before 10:00AM. A taped replay of the teleconference will be available after 11:45AM (EDT) on August 15, 2001, until midnight, August 16, 2001. To access the replay, please call 800-475-6701 from the US or Canada, and 320-365-3844 from outside the US and Canada. The access code for the replay is 595965.
Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 169 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.
(a) In accordance with applicable Israeli accounting principles, the
Company maintains its accounts and presents its financial statements
in New Israeli Shekels adjusted for changes in the Israeli consumer
price index (“CPI”) through the latest balance sheet date (“Adjusted
CPI”). The Israeli CPI increased by 1.6% for the three months ended
June 30, 2001.
(b) The convenience translation of the Adjusted New Israeli Shekel (NIS)
into US dollars was made at the rate of exchange prevailing at
June 30, 2001: US $1.00 equals NIS 4.165. The translation was made
solely for the convenience of the reader.
BLUE SQUARE – ISRAEL LTD.
CONSOLIDATED BALANCE SHEETS
In Adjusted NIS of June 2001
Convenience
translation
(Note 3)
December 31 June 30 June 30
2000 2000 2001 2001
NIS NIS NIS U.S.$
(Audited) (Unaudited) (Unaudited)
In thousands
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,428 785 49,457 11,874
Marketable securities and
Short-term deposits 32,522 71,430 — —
Trade receivables 541,838 541,023 568,427 136,477
Other accounts receivable 37,893 60,832 74,110 17,794
Inventories 295,139 304,448 322,692 77,477
908,820 978,518 1,014,686 243,622
LONG-TERM INVESTMENTS
Investments in affiliate 2,148 1,290 3,550 852
Long-term loans to
proportionately
consolidated entities 17,992(*) 14,736(*) 18,563 4,457
20,140 16,026 22,113 7,602
FIXED ASSETS
Cost 2,880,567(*) 2,768,229(*) 2,996,648 719,483
Less – accumulated depreciation 836,956 776,416 892,302 214,238
2,043,611 1,991,813 2,104,346 505,245
INTANGIBLE ASSETS AND
DEFERRED CHARGES 104,676 113,378 99,189 23,815
3,077,247 3,099,735 3,240,334 779,991
(*) Reclassifed
CONSOLIDATED BALANCE SHEETS
In Adjusted NIS of June 2001
Convenience
translation
December 31 June 30 June 30
2000 2000 2001 2001
NIS NIS NIS U.S.$
(Audited) (Unaudited) (Unaudited)
In thousands
LIABILITIES AND SHAREHOLDERS’
EQUITY
LIABILITIES
CURRENT LIABILITIES
Short-term credit from banks and
others 331,760 314,734 131,470 31,565
Trade payables 690,382 805,516 790,846 189,879
Short-term credit from parent
cooperative 4,708 — — —
Dividend payable — 39,492 — —
Other payables and accrued
expenses 247,911 282,091 327,453 78,620
1,274,761 1,441,833 1,249,769 300,064
LONG-TERM LIABILITIES
Long-term loans from banks and
others 293,251 209,515 460,434 110,549
Debentures 31,919 31,800 7,589 1,822
Deferred taxes 24,637 27,685 26,430 6,346
Accrued severance pay 16,780 14,163 19,312 4,637
366,587 283,163 513,765 123,354
MINORITY INTEREST 143,505 132,535 152,133 36,527
SHAREHOLDERS’ EQUITY
Share capital –
Ordinary share of NIS 1 par
value each –
Authorized: 100,000,000 shares;
Issued and outstanding:
38,400,000 Shares 49,728 49,728 49,728 11,939
Additional paid-in capital 700,838 700,838 706,994 169,746
Retained earnings 541,828 491,638 567,945 136,361
1,292,394 1,242,204 1,324,667 318,046
3,077,247 3,099,735 3,240,334 779,991
BLUE SQUARE – ISRAEL LTD.
CONSOLIDATED STATEMENTS OF INCOME
In Adjusted NIS of June 2001
For the For the three Convenience
six months ended months ended translation
June 30 June 30 For the
three months
ended
June 30
2000 2001 2000 2001 2001
NIS NIS NIS NIS U.S.$
(Unaudited) (Unaudited)
Sales 2,572,202 2,746,483 1,353,214 1,424,093 341,919
Cost of
sales 1,866,723(*) 1,989,752 981,250(*) 1,039,376 249,550
Gross
profit 705,479 756,731 371,964 384,717 92,369
Selling,
general and
administrative
expenses 567,236(*) 601,438 296,319(*) 301,608 72,415
Operating
income 138,243 155,293 75,645 83,109 19,954
Financing income
(expenses),
net (13,994) (5,969) (25) 4,991 1,198
124,249 149,324 75,620 88,100 21,152
Amortization
of goodwill (2,995) (2,501) (1,554) (1,235) (297)
Other income
(expenses),
net 30,074(*) (3,554) 178(*) (2,089) (502)
Income before
taxes on
income 151,328 143,269 74,244 84,776 20,353
Taxes on
income 59,177 56,590 30,078 33,524 8,048
Income after
taxes on
income 92,151 86,679 44,166 51,252 12,305
Equity in net
earnings of
affiliates 505 1,655 14 1,119 269
Minority
interest (11,020) (12,618) (6,404) (7,518) (1,805)
Income from
continuing
operations 81,636 75,716 37,776 44,853 10,769
Loss from
discontinued
operations (1,007)(*) — (495)(*) — —
Net income 80,629 75,716 37,281 44,853 10,769
Earnings (loss)
per Ordinary
Share or ADS:
From continuing
operations 2.13 1.97 0.98 1.17 0.28
From discontinued
operations (0.03) — (0.01) — —
Net income 2.10 1.97 0.97 1.17 0.28
Weighted average
number of shares
or ADS outstanding
during the
period 38,400,000 38,400,000 38,400,000 38,400,000 38,400,000
(*) Reclassified
BLUE SQUARE – ISRAEL LTD.
PRO-FORMA SUMMARY TABLE (EXCLUDING ONE-TIME ITEMS)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(in thousands, adjusted to the NIS of June 2001)
Convenience
translation
For the six
months ended
For the six months ended June 30
June 30
2000 2001 2001
NIS NIS U.S.$
(Unaudited) (Unaudited) (Unaudited)
Sales 2,572,202 2,746,483 341,919
Cost of sales 1,866,723(*) 1,989,752 249,550
Gross profit 705,479 756,731 92,369
Selling, general
and administrative
expenses 567,236(*) 601,438 72,415
Operating income 138,243 155,293 19,954
Financing income
(expenses), net (13,994) (5,969) 1,198
124,249 149,324 21,152
Amortization
of goodwill (2,995) (2,501) (297)
Other income
(expenses), net 1,283 (3,554) (502)
Income before taxes
on income 122,537 143,269 20,353
Taxes on
income 49,460 56,590 8,048
Income after
taxes on income 73,077 86,679 12,305
Equity in net
earnings of
affiliates 505 1,655 269
Minority
interest (11,020) (12,618) (1,805)
Net income 62,562 75,716 10,769
Earnings (loss) per
Ordinary Share or
ADS 1.63 1.97 0.28
Weighted average
number of shares
or ADS outstanding
during the
period 38,400,000 38,400,000 38,400,000
(*) Reclassified
BLUE SQUARE – ISRAEL LTD.
SELECTED OPERATING DATA
(adjusted to the NIS of June 2001)
Convenience
Translation
into US$
Three months
Six months ended Three months ended Ended
June 30, June 30, June 30,
2000 2001 2000 2001 2001
Sales (in millions) 2,572 2,746 1,353 1,424 $ 342
Operating income (in
millions) 138 155 76 83 $ 20
Number of stores (at end of
period) 167 169 167 169 na
Stores opened during the
period 4 3 2 1 na
Stores closed during the
period 2 2 2 0 na
Total square meters (at end
of period) 249,600 264,900 249,600 264,900 na
Sq. meters added during
the period 10,600 6,900 8,300 1,200 na
Same store sales -6.23% -1.72% 2.75% -3.33% na
Sales per sq. mtr. (in
thousands) 10,515 10,454 5,438 5,392 $1,295
Sales per employee (in
thousands) 360 359 192 184 $ 44
EBITDA (in millions) 201 230 108 120 $ 29
EBITDA Margin 7.8% 8.4% 7.9% 8.4% na
* EBITDA is defined as operating income before depreciation and
amortization
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