Blue Square-Israel Ltd. (NYSE: BSI) today announced results for the second quarter ended June 30, 2000.

Results of the Second Quarter

Revenues for the second quarter of 2000 were NIS 1,343.4 million (US$ 328.9 million)(a), an increase of 12.6% compared to NIS 1,193.4 million(b) for the second quarter of 1999. Second quarter revenues reflect the contribution of the Passover season sales, which occurred during the second quarter of 2000, but during the first quarter of 1999. Gross margins for the second quarter of 2000 rose to 27.9% compared to 27.1% for the second quarter of 1999.

The Company’s second quarter 2000 operating profit was NIS 75.1 million (US$ 18.4 million), an increase of 52% compared to NIS 49.3 million for the second quarter of 1999. The growth in operating profit reflected both the quarter’s increased revenues and the Company’s monitoring control of operating expenses. Operating margins for the period rose to 5.6%, compared to 4.1% for the parallel period in 1999, due in large part to the successful implementation of the Company’s comprehensive efficiency program initiated during the fourth quarter of 1999.

Net profit for the quarter rose by 113% to NIS 37.0 million (US$ 9.1 million), or NIS 0.96 per ADS (US$ 0.24), compared to NIS 17.3 million, or NIS 0.51 per ADS for the second quarter of 1999. Net profit for the second quarter of 1999 was affected by the losses of ID Design, which has since been divested.

During the quarter, same store sales increased by 2.8%, sales per employee increased by 16.4%, and sales per square meter grew by 0.5%.

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Results of the First Six Months

Revenues for the first half of 2000 were NIS 2,553.6 million (US$ 625.3), an increase of 5% compared to NIS 2,432.7 million for the first six months of 1999. Gross margins rose to 28.0% in the first half of 2000 from 27.4% in the first six months of 1999.

The Company’s operating profit for the first six months of 2000 rose 7.4% to NIS 137.2 million (US$ 33.6 million) from NIS 127.7 million in the first half of 1999. Operating margin for the period rose to 5.4%, compared to 5.2% for the parallel period in 1999, reflecting the control of operating expenses and increased efficiency in all levels of the Company’s operations.

During the first quarter of 2000, the Company divested its holdings in Home Centers, resulting in a capital gain of approximately NIS 21 million after tax. The capital gain was accounted for as “Other Income”.

Net profit for the first six months of 2000 rose by 70% to NIS 80.0 million (US$ 19.6 million), or NIS 2.08 per ADS (US$ 0.51), compared to NIS 47.1 million, or NIS 1.20 per ADS for the first half of 1999.

During the first half of 2000, same store sales declined by 6.2% and sales per square meter declined by 5.4%, while sales per employee increased by 4.1%.

Comments of Management

Commenting on the news, Yoram Dar, Blue Square’s President and Chief Executive Officer, said, “Our second quarter and first half results show significant improvement, both year-over-year, and as compared sequentially to the third and fourth quarters of 1999. This improvement is a result of the program initiated in the fourth quarter of 1999, which was designed to lower the Company’s expenses and to increase revenues. The program is based on three parallel efforts: an organization-wide efficiency program, a reorganization of the Logistics Center, and a new flexible approach regarding store formats and locations. We are on track in the program’s implementation, and satisfied with results so far.

“The Israeli Government has recently passed a new law which allows companies which are listed on foreign exchanges, such as the New York Stock Exchange, to be dual-listed on the Tel Aviv Stock Exchange (TASE). We have long awaited this development. The Government should be issuing specific regulations about the process, and after this the Company will consider the process of listing our Blue Square-Israel shares on the TASE. We believe that listing our shares on the TASE will facilitate trading by a larger base of Israeli investors, as well as by European investors who share our time zone, and will result in greater liquidity for all our shareholders.”

Mr. Dar continued, “We continue to expand our operations. During the quarter, we opened two new MEGA large-format discount stores, each of which were converted from Super Center formats. These stores are now among our top performers, with significantly improved sales per square meter and per employee. By the end of 2000, we plan to add two additional MEGA stores, making MEGA a nationwide chain of six stores.

“We are now finalizing our strategy for Internet-based retailing. With the goal of opening a world-class website, we are currently perfecting our e-commerce business plan.

“The Company’s major shareholder has recently been the subject of an investigation which has received significant coverage in the Israeli press. On an operational basis, the Company continues to attend to business as usual, with the goal of achieving the greatest possible value for all of its shareholders.”

Mr. Dar concluded, “Overall, we are pleased with our results for the second quarter and first half of 2000. Our plan is delivering the results we originally planned for. We believe our current activities, combined with exciting new initiatives, will lead to continued progress in the year ahead.”

The Company paid an interim cash dividend of $0.25 per share on July 27, 2000. The dividend, net of taxes withheld at source and in compliance with Israel’s foreign currency law, was paid to shareholders of record as of the close of business on July 17, 2000.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 167 supermarkets under different formats, each offering varying levels of service and pricing.

The statements contained in this release which are not historical facts contain forward-looking information with respect to plans, projections, or future performance of the Company, the occurrence of which involve certain risks and uncertainties, 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 filings with the Security and Exchange Commission, particularly the prospectus with respect to its public offering in July,1996.

(a) The convenience translation of the Adjusted New Israeli Shekel (NIS) into US dollars was made at the rate of exchange prevailing at June 30, 2000: US $1.00 equals 4.084 NIS. The translations were made solely for the convenience of the reader.
(b) In accordance with applicable Israeli accounting principles, the Company maintains its accounts and presents its financial statements in New Israeli Shekels (“NIS”) adjusted for changes in the Israeli consumer price index (“CPI”) through the latest balance sheet date (“Adjusted CPI”). The Israeli CPI increased by 0.4% for the six months ended June 30 2000 and 1.6% for the three months ended this day.

                       Blue Square - Israel Ltd.
Condensed Consolidated Statement of Operations
(In thousands, except for per share data)
(unaudited)
Convenience
Translation
into US$
------------
Three Months
June 2000 adjusted NIS Ended
----------------------
Three Months Ended June 30, Six Months Ended June 30,June 30,
2000 1999 2000 1999 2000
--------- ---------- ---------- ---------- ---------

Sales 1,343,421 1,193,390 2,553,587 2,432,717 $328,947
Cost of sales 968,118 870,477 1,839,231 1,765,578 $237,051
--------- ---------- ---------- ---------- ---------
Gross profit 375,303 322,913 714,356 667,139 $91,896

Operation &
administrative
expenses 300,206 273,610 577,113 539,402 $73,508
--------- ---------- ---------- ---------- ---------
Operating income 75,097 49,303 137,243 127,737 $18,388

Financial
(expenses)
income, net (25) 859 (13,893) (16,691) $ (6)
--------- ---------- ---------- ---------- ---------
75,072 50,162 123,350 111,046 $18,382

Amortization of
goodwill (1,542) (1,491) (2,973) (2,922) $ (378)
Other (expenses)
income, net (315) 121 28,857 83 $ (77)
--------- ---------- ---------- ---------- ---------

Income before
taxes
on income 73,215 48,792 149,234 108,207 $17,927
Taxes on income 29,860 19,287 58,749 40,817 $ 7,311
--------- ---------- ---------- ---------- ---------
43,355 29,505 90,485 67,390 $10,616

Equity in
results of
affiliated, net
of taxes 14 400 501 539 $ 3
--------- ---------- ---------- ---------- ---------
43,369 29,905 90,986 67,929 $10,619

Minority
interest in
earnings of
subsidiaries,
net of taxes (6,358) (4,968) (10,941) (10,897) $(1,557)
--------- ---------- ---------- ---------- ---------

Net income
for the
period before
discontinued
operation 37,011 24,937 80,045 57,032 $ 9,062

Discontinued
operations,
net of taxes - (7,589) - (9,926) -
--------- ---------- ---------- ---------- ---------

Net income
for the
period 37,011 17,348 80,045 47,106 $ 9,062
========= ========== ========== ========== =========

Basic and
diluted
earnings per
ordinary share
or per
ADS from
continued
operations 0.96 0.70 2.08 1.46 $ 0.24

Basic and
diluted
earnings per
ordinary share
or per
ADS from
discontinued
operations - (0.19) - (0.26) -

Basic and
diluted
earnings per
ordinary share
or per ADS 0.96 0.51 2.08 1.20 $ 0.24
--------- ---------- ---------- ---------- ---------

Weighted average
no. of shares
outstanding
during
the period 38,400,000 38,400,000 38,400,000 38,400,000 38,400,000
========= ========== ========== ========== ==========

Blue Square - Israel Ltd.
Condensed Consolidated Balance Sheet
(In thousands, adjusted to the NIS of June 2000)

Convenience
Translation
into US$
-------------
June 30, December 31, June 30,
2000 1999 2000
------------- ------------- -------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 779 9,561 191
Marketable securities and
short-term deposits 70,912 71,209 17,363
Trade receivable 537,108 527,501 131,515
Other accounts receivable
and prepaid expenses 60,393 54,481 14,788
Inventories 302,244 304,164 74,007
------------- ------------- -------------
971,436 966,916 237,864
------------- ------------- -------------
Long-term Investments
Investments in affiliates 1,282 68,172 314
Long-term loan to jointly
controlled entities 17,458 10,174 4,274
------------- ------------- -------------
18,740 78,346 4,588
------------- ------------- -------------

Fixed assets 2,745,368 2,594,285 672,225
Cost 770,798 733,161 188,736
------------- ------------- -------------
Less -accumulated
depreciation 1,974,570 1,861,124 483,489
------------- ------------- -------------

Intangible assets and
deferred charges, net 112,558 117,771 27,561
------------- ------------- -------------

Total Assets 3,077,304 3,024,157 753,502
============= ============= -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Credit from banks and
others 312,456 369,046 76,507
Trade payables 799,687 712,266 195,810
Short term loan from
parent corporation - 130,413 -
Declared dividend 39,206 - 9,600
Other accounts payable 280,050 219,071 68,572
------------- ------------- -------------
1,431,399 1,430,796 350,489
------------- ------------- -------------

Long-term liabilities net
of current maturities
Long-term loans from banks
and others 207,999 188,304 50,930
Debentures 31,570 55,792 7,730
Deferred taxes 27,485 24,124 6,730
Accrued severance pay, net 14,060 12,110 3,443
------------- ------------- -------------
281,114 280,330 68,833
------------- ------------- -------------

Minority interest 131,577 120,656 32,218
------------- ------------- -------------

Shareholders` equity
Share capital 49,368 49,368 12,088
Additional paid in capital 695,766 695,766 170,364
Retained earnings 488,080 447,241 119,510
------------- ------------- -------------
1,233,214 1,192,375 301,962
------------- ------------- -------------

3,077,304 3,024,157 753,502
============= ============= =============

Blue Square - Israel Ltd.
Selected Operating Data
-----------------------
(in thousands, adjusted to the NIS of June 2000)

Convenience
Translation
into US$
-----------
Three months
Ended
Three months ended June 30, Six months ended June 30, June 30,
2000 1999 2000 1999 2000
--------- -------- -------- -------- -----------

Sales
(in
millions) 1,343 1,193 2,554 2,433 329

Operating
income
(in
millions) 75 49 137 128 18

Number
of stores
(at end
of period) 167 160 167 160 na

Total
square
meters
(at end
of period) 249,600 224,700 249,600 224,700 na

Same
store
sales 2.8% 6.4% -6.2% 7.4% na

Sales per
sq. mtr. 5,397 5,371 10,440 11,037 1,321

Sales per
employee
(in
thousands) 206 177 382 367 50

EBITDA
(in millions) 109 81 200 185 27

EBITDA Margin 8.1% 6.8% 7.8% 7.6% na

(a) EBITDA is defined as operating income before depreciation and
amortization