1
ELECTRA LTD.
CONSOLIDATED FINANCIAL INFORMATION
AS OF SEPTEMBER 30, 2019
(UNAUDITED)
(CONVENIENCE TRANSLATION INTO U.S. DOLLARS)
2
ELECTRA LTD. Consolidated Financial Information
As of September 30, 2019
INDEX
Page
Report of the Board of Directors for the Nine Months Ended September 30, 2019 3 – 12
Auditors' Review Report 13
Consolidated Information on Financial Position 14 – 15
Consolidated Information on Profit or Loss 16
Consolidated Information on Comprehensive Income 17
Consolidated Information on Changes in Equity 18 – 22
Consolidated Information on Cash Flows 23 – 25
Notes to the Consolidated Financial information 26 – 42
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
3
THE BOARD OF DIRECTORS OF ELECTRA LTD.
HEREBY PRESENTS THE REPORT ON THE STATE OF THE AFFAIRS
OF THE COMPANY AND ITS CONSOLIDATED COMPANIES ("THE GROUP")
FOR THE PERIODS OF NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2019
1. Description of the corporation and its business environment
As of the time of this report, the Group operates in Israel and abroad in five principal segments: the
construction and infrastructure projects in Israel segment; the construction and infrastructure projects
abroad segment; the services and maintenance segment; the development and construction of
entrepreneurial real estate segment and the concessions segment.
The Group's activity is carried out through the Company and its investee companies. See the section 1
of the report on the description of the entity's business as at December 31, 8201 .
2. Financial position
The following are the main figures that appear in the sections of the information of financial position
(in US$ thousands)
30.09.2019 31.12.2018
Total % Total % %
Current assets 995,203 59.9 1,010,009 68.3 (1.5)
Non-current assets 665,682 40.1 468,657 31.7 42.0
Current liabilities 763,872 46.0 780,037 52.8 (2.1)
Non-current liabilities 590,134 35.5 407,067 27.5 45.0
Equity 306,879 18.5 291,562 19.7 5.3
Total of the statement of financial
position 1,660,885 100.0 1,478,666 100.0 12.3
The Group's assets in the consolidated information of financial position at the end of the period
amounted to approximately US$ 1,661 million, compared to approximately US$ 1,479 million as of
December 31, 2018.
The surplus of the current assets over the current liabilities amounted to approximately US$ 231
million, compared with approximately US$ 230 million as of December 31, 2018 and the current ratio
is 1.30, compared to 1.29 as of December 31, 2018.
3. Equity
As of the reporting date, the equity amounts to approximately US$ 306.9 million, compared with
approximately US$ 291.6 million as of December 31, 2018. The change in equity in the reporting
period derives primarily from the net income for the period in an amount of approximately US$ 58.9
million, less the other comprehensive loss of approximately US$ 17.1 million in the period and a
dividend of approximately US$ 20.1 million to the shareholders in the Company and a dividend of
approximately US$ 7.5 million to the non-controlling interests. See the consolidated statements of
changes in equity in the interim consolidated financial information as of September 30, 2019 for
additional details.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
4
4. Operating results
The following table summarizes the business results by quarter (U.S. Dollars in thousands):
Q 7-9/19 Q 4-6/19 ***) Q 1-3/19 ***) Q 10-12/18***) Q 7-9/18 ***)
Revenues from the performance
of works and the provision of
services 510,223 492,739 473,197 446,684 411,606
Cost of works and services (468,735) (446,922) (435,095) (407,572)*)**) (377,036) *)**)
Gross profit 41,488 45,817 38,102 39,112 34,570
Administrative and general
expenses (18,521) (16,722) (16,971) (13,419) (14,750)
Selling, marketing and other
expenses (3,400) (2,243) (2,041) (3,134) **) (2,379) **)
The Company’s share of profits
(losses) of entities accounted for
at equity, net 1,893 63 2,541 1,480 *) (107) *)
Other income (expenses), net 33,186 90 646 (5,381) *) 1,732
Operating income (EBIT) 54,646 27,005 22,277 18,658 19,066
EBITDA 68,244 40,256 34,792 24,667 24,967
Financing income (expenses), net (5,837) (6,489) (2,854) (2,558) *) (1,947) *)
Income before taxes on income 48,809 20,516 19,423 16,100 17,119
Taxes on income (12,403) (6,035) (5,753) (2,905) (3,535)
Income from continuing operations 36,406 14,481 13,670 13,195 13,584
Operating income (loss) from discontinued operations, net (3,996) (1,004) (669) (855) 45
Net income for the period 32,410 13,477 13,001 12,340 13,629
Attributable to:
Shareholders in the Company 30,830 11,948 11,395 10,818 12,303
Non-controlling interests 1,580 1,529 1,606 1,522 1,326
32,410 13,477 13,001 12,340 13,629
*) Retrospective implementation, see Note 2D to the consolidated financial information.
**) Reclassified.
***) Reclassified, see Note 6Q to the interim consolidated financial information.
5. Revenues from the performance of works and the provision of services
The Group's revenues in the reporting period amounted to approximately US$ 1,476 million, compared
with approximately US$ 1,281 million in the comparative period in the previous year, an increase of
approximately 15%. The increase in the revenues in the reporting period is attributed primarily to the
projects for construction and infrastructure projects abroad segment, the services and maintenance
segment and the Concessions segment. (See the additional details that appear in section 13 below).
The Group's revenues in 2018 amounted to US$ 1,728 million.
The revenues from the performance of works and the provision of services do not include additional
revenues of US$ 81 million (US$ 98 million in the comparative period in the previous year), in respect
of the Group's net share of the revenues of entities, which are accounted for at equity.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
5
6. Gross profit
The gross profit in the reporting period amounted to approximately US$ 125 million, compared with
approximately US$ 107 million in the comparative period in the previous year, an increase of
approximately 17%. The increase in the gross profit in the reporting period related primarily to the
construction and infrastructure projects abroad segment and to the services and maintenance segment.
The gross profit in 2018 amounted to approximately US$ 146 million.
7. Administrative and general expenses
The administrative and general expenses in the reporting period amounted to approximately US$ 52.2
million, compared with approximately US$ 44.2 million in the comparative period in the previous year,
an increase of approximately 18%. The change derived primarily from companies that were initially
consolidated in the reporting period and which were not included in the comparative period in the
previous year.
8. Selling, marketing and other expenses
The selling, marketing and other expenses in the reporting period amounted to approximately US$ 7.7
million, compared with approximately US$ 6.6 million in the comparative period in the previous year.
The increase in selling, marketing and other expenses derives primarily from an increase in Electra
Residential in the reporting period, and also as a result of the recording of expenses in respect of
initially consolidated companies in the reporting period, which were not recorded in the comparative
period in the previous year.
9. The Company's share of the profits of entities accounted for at equity, net
The Company's share of the profits of entities accounted for at equity, net, amounted to US$ 4.5 million
in the reporting period, as compared to US$ 2.5 million in the comparative period in the previous year.
10. Other income (expenses), net
Other income, net amounted to approximately US$ 33.9 million in the reporting period, as compared
with other income, net of approximately US$ 0.8 million in the comparative period in the previous year.
The considerable increase in other income in the reporting period derived from the recording of a pre-
tax gain of approximately US$ 33.3 million from the sale of a subsidiary company's holdings in Negev
Natural Gas Ltd., Negev Natural Gas South Ltd. and Negev Natural Gas Infrastructure Company A.P.C.
Ltd. See Note 6N to the consolidated financial information.
Other expenses, net amounted to approximately US$ 4.5 million in the year 2018.
11. Financing expenses, net
Financing expenses, net amounted to approximately US$ 15.2 million in the reporting period, as
compared with approximately US$ 5.3 million in the comparative period in the previous year. The
increase in the financing expenses, net derived primarily from an increase in financing expenses in
respect of the adjustment of financial liabilities, the recording of financing expenses in respect of the
initial implementation of international Accounting Standard IFRS 16 in the reporting period and a
decrease in financing income in respect of loans that have been extended to entities accounted for at
equity, compared to comparative period in the previous year.
Financing expenses, net amounted to approximately US$ 7.8 million in the year 2018.
12. Net income
The Group’s net income amounted to approximately US$ 58.9 million in the reporting period, as
compared with approximately US$ 39.9 million in the comparative period in the previous year.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
6
13. Report in respect of business segments
A. Revenues:
*) Reclassified, see Note 6Q to the consolidated financial information.
1. Construction and infrastructure projects in Israel
The revenues turnover in the reporting period amounted to approximately US$ 760 million
(approximately 49% of revenues) as compared with US$ 798 million (approximately 59% of
revenues) in the comparative period in the previous year, a decrease of approximately 5%,
which derived primarily from progress in the performance of a number of projects in the
comparative period in the previous year, which have come to an end.
2. Construction and infrastructure projects abroad
The revenues turnover in the reporting period amounted to approximately US$ 240 million
(approximately 15% of revenues) as compared with US$ 75 million (approximately 6% of
revenues) in the comparative period in the previous year, an increase of approximately 220%,
which derived primarily from the revenues of companies that were initially consolidated in the
reporting period and which were not included in the comparative period in the previous year.
3. Services and maintenance
The revenues turnover in the reporting period amounted to approximately US$ 414 million
(approximately 27% of revenues) as compared with US$ 365 million (approximately 27% of
revenues) in the comparative period in the previous year, an increase of approximately 13%,
which derived primarily from an increase in facility management operations as well as from
revenues of a company that was initially consolidated in the reporting period and which was
not included in the comparative period in the previous year.
4. Development & construction of entrepreneurial real estate
The revenues turnover amounted to approximately US$ 91 million in the reporting period
(approximately 6% of revenues), as compared with approximately US$ 86 million
(approximately 7% of revenues) in the comparative period in the previous year, an increase of
approximately 5%.
5. Concessions
The revenues turnover amounted to approximately US$ 43 million in the reporting period
(approximately 3% of revenues), as compared with approximately US$ 17 million in the
comparative period in the previous year (approximately 1% of revenues), an increase of
approximately 150%, which derived from revenues that were recognized in a project for the
initiation, construction and operation of the Electra Campus at Bar Ilan University.
For the period of nine months ended
For the period of three months ended
For the year
ended September 30 September 30 December 31 2019 2018 *) 2019 2018 *) 2018 *) Unaudited Audited US$ thousands
Construction and infrastructure
projects in Israel
760,043 798,248 252,015 249,468 1,077,518
Construction and infrastructure
projects abroad
239,962 74,768 96,765 26,030 107,847
Services and maintenance 413,931 364,824 135,685 121,872 487,903
Development & construction of
entrepreneurial real estate
90,907 86,265 37,020 34,062 114,414
Concessions 43,021 17,210 11,377 5,010 23,179
Consolidation adjustments (71,705) (60,350) (22,639) (24,836) (83,212)
Total 1,476,159 1,280,965 510,223 411,606 1,727,649
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
7
B. Segmental operating income: EBITDA For the period of
nine months ended
For the period of three months ended
For the year
ended September 30 September 30 December 31
2019 2018 **) 2019 2018 **) 2018 **) Unaudited Audited US$ thousands
Construction and infrastructure
projects in Israel
31,797 35,613 9,769 10,235 46,556
Construction and infrastructure
projects abroad
21,690 4,454 7,799 1,449 6,742
Services and maintenance 53,222 43,370 16,692 14,431 58,449
Development & construction of
entrepreneurial real estate
12,777 9,062 *) 4,589 3,252 *) 9,437 *)
Concessions 33,702 400 32,290 1 877
153,188 92,899 71,139 29,368 122,061
Unallocated expenses and
consolidation adjustments
(9,896) (16,528) (2,895) (4,401) (21,023)
Total 143,292 76,371 68,244 24,967 101,038
Operating income (loss) (EBIT) For the period of
nine months ended
For the period of three months ended
For the year
ended September 30 September 30 December 31
2019 2018 **) 2019 2018 **) 2018 **) Unaudited Audited US$ thousands
Construction and infrastructure
projects in Israel
14,517 28,937 3,405 7,993 37,780
Construction and infrastructure
projects abroad
17,389 3,983 6,342 1,280 6,114
Services and maintenance 38,637 36,174 12,000 11,981 48,852
Development & construction of
entrepreneurial real estate
12,775 9,059 *) 4,587 3,251 *) 9,424 *)
Concessions 32,083 (1,337) 31,749 (808) (1,978)
115,401 76,816 58,083 23,697 100,192
Unallocated expenses and
consolidation adjustments
(11,473) (17,159) (3,437) (4,631) (21,877)
Total 103,928 59,657 54,646 19,066 78,315
*) Retrospective implementation, see Note 2D to the consolidated financial information.
**) Reclassified, see Note 6Q to the consolidated financial information.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
8
1. Construction and infrastructure projects in Israel
The operating income in the reporting period amounted to approximately US$ 14.5 million
(approximately 13% of segmental operating income) as compared with approximately US$ 28.9
million (approximately 38% of segmental operating income) in the comparative period in the
previous year, a decrease of approximately 50%, which derived primarily as a result of the
recording of profit in respect of the progress in the performance of a number of projects in the
comparative period in the previous year, which have come to an end.
2. Construction and infrastructure projects abroad
The operating income in the reporting period amounted to approximately US$ 17.4 million
(approximately 15% of segmental operating income) as compared with approximately US$ 4.0
million (approximately 5% of segmental operating income) in the comparative period in the
previous year, an increase of approximately 337%, which derived primarily from the profits of
initially consolidated companies in the reporting period, which were not included in the
comparative period in the previous year.
3. Services and maintenance
The operating income in the reporting period amounted to approximately US$ 38.6 million
(approximately 33% of segmental operating income) as compared with approximately US$ 36.2
million (approximately 47% of segmental operating income) in the comparative period in the
previous year, an increase of approximately 7%, which derived primarily from the profits of
initially consolidated company, which was not included in the comparative period in the
previous year, as well as, from an increase in profits in a number of fields of operations in this
segment.
4. Development & construction of entrepreneurial real estate
The operating income in the reporting period amounted to approximately US$ 12.8 million
(approximately 11% of segmental operating income) as compared with operating income of
approximately US$ 9.1 million (approximately 12% of segmental operating income) in the
comparative period in the previous year, an increase of approximately 41%, which derived
primarily from an increase in the company's share of profits of entities accounted for at equity,
compared to comparative period in the previous year.
5. Concessions
The operating income in the reporting period amounted to approximately US$ 32.1 million
(approximately 28% of segmental operating income) as compared with an operating loss of
approximately US$ 1.4 million in the comparative period in the previous year. The considerable
increase in the reporting period derived from the recording of a gain from the sale of a
subsidiary company's holdings in Negev Natural Gas Ltd., Negev Natural Gas South Ltd. and
Negev Natural Gas Infrastructure Company A.P.C. Ltd. See Note 6N to the consolidated
financial information.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
9
14. Orders backlog
The Group's backlog of orders as of September 30, 2019 amounted to approximately US$ 4,131 million,
compared with approximately US$ 3,368 million at the end of 2018. The backlog as of September 30,
2019 includes the Group's share of entities accounted for at equity, in an amount of approximately US$
186 million (December 31, 2018 – approximately US$ 242 million).
September 30, 2019 December 31, 2018
Construction
and
infrastructure
projects in
Israel segment
Construction
and
infrastructure
projects
abroad
segment
Services and
maintenance
segment (*)
Total
Construction
and
infrastructure
projects in
Israel segment
Construction
and
infrastructure
projects
abroad
segment
Services and
maintenance
segment (*)
Total
(In US$ millions)
The distribution of the
orders backlog by
operating segment
Without affiliated
companies
2,635 456 854 3,945 2,090 186 851 3,127
In respect of affiliated
companies
13 5 168 186 52 14 175 241
Total 2,648 461 1,022 4,131 2,142 200 1,026 3,368
The spreading of the
orders backlog
without the Group's
share of affiliated
companies
For performance in 2019 251 79 126 456
For performance in 2020
and thereafter
2,384 377 728 3,489
Total 2,635 456 854 3,945
*) This orders backlog in this segment is comprised primarily of contracts for commitments, which
are generally arranged as service agreements for renewable periods, where the customer has the
right of ending it at any stage. In addition, the backlog includes a backlog relating to the
operation of a BOT projects for long periods and the operation of waste water treatment
facilities, in an amount of approximately US$ 377 million, of which US$ 28 million will be
performed within 12 months from the reporting date.
**) In the fourth quarter of 2018, notification was received of the winning of a project for the
construction of a store and pump project at Menara in an amount of US$ 316 million. This
project is not included in the orders backlog as the Company is waiting for the financial closure
by the commissioner of the works. After the date of the statement of financial position, the
commissioner of the work received a demand for payment from the Israel Lands Authority and
announced that if the amount of the demand is not reduced it will give consideration to
discontinuing the project.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
10
15. Liquidity and sources of finance
The Group's liquid means (cash and cash equivalents and marketable securities) amounted to
approximately US$ 92.8 million as of September 30, 2019, as compared with approximately US$ 162.8
million as of December 31, 2018.
The change in the Group's liquid means in the first nine months of the year 2019 derived, inter alia,
from cash of approximately US$ 33.9 million generated by operating activities (including US$ 5 million
in respect of the purchase and investment in land) as compared with cash of approximately US$ 34
million absorbed by operating activities (including US$ 33 million in respect of the purchase and
investment in land) in the comparative period in the previous year.
The net cash absorbed by investment activities amounted to approximately US$ 80 million in the first
nine months of the year 2019, as compared with net cash of approximately US$ 12 million in the
comparative period in the previous year, and included, primarily, investments of approximately US$ 45
million in the acquisition of initially consolidated companies, the change in an intangible asset for a
concession project in an amount of approximately US$ 65 million , investments of US$ 22 million in
the purchase of fixed assets and intangible assets, a net increase of US$ 7 million in investments,
restricted cash and deposit in trust, net less the consideration from the disposal of investments in
companies accounted for at equity in an amount of approximately US$ 38 million.
The cash absorbed by financing activities amounted to approximately US$ 22 million in the first nine
months of the year 2019, as compared with approximately US$ 29 million in the comparative period in
the previous year and included primarily the repayment of bonds in an amount of approximately US$ 36
million, the repayment of short-term credit from banks and others in a net amount of approximately US$
30 million, the repayment of leasing liabilities in an amount of approximately US$ 19 million, the
payment of a dividend to shareholders in the company and to non-controlling interests in an amount of
approximately US$ 18 million and less the receipt of long-term loans in an amount of approximately
US$ 65 million
16. Disclosure in respect of the forecast cash flows for the repayment of the group's liabilities
As of the time of this report, there are no warning signs, as defined in Regulation 10 (B) 14 of the
Securities Regulations (Periodic and Immediate Reports) – 1970, in existence. In the Company's Board
of Directors' assessment, as at the reporting date, despite the working capital deficit in the separate
financial information that is attributed to the Company, there is nothing therein that indicates a liquidity
problem for the Company. This assessment is based on forecast cash flows.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
11
17. Significant events during and after the reporting period
A. See Note 6 to the interim consolidated financial information as of September 30, 2019.
B. In the period from the date of the information of financial position (September 30, 2019) and up to
a time shortly before the publication of the financial information (November 20, 2019), changes
have occurred in the exchange rates of the currencies in which the Group operates as compared
with the Shekel.
The following are details of the devaluation (revaluation), as aforesaid, (from September 30,
2019 to November 18, 2019):
Currency As a %
US Dollar (0.55)
Euro 0.64
Russian Ruble 0.49
Nigerian Naira (0.52)
Polish Zloty 2.64
Since a significant portion of the Company’s revenue are denoted in foreign currency, the
Company is of the opinion that the changes in the exchange rates as of the time of the publication
of this report, are expected to affect the Group's results and its information of financial position
(and this also includes the shareholders' equity). Together with this, the impact of the exchange
rates on the business results in the fourth quarter of 2019 will be determined in accordance with the
exchange rates that will be in effect during the course of and at the end of the quarter (December
31, 2019).
18. Self-purchase plan
For details regarding the Company’s self-purchase plan, see Section 18 of the Report of the Board of
Directors, which was attached to the Company's Hebrew version of the annual consolidated financial
statements as at December 31, 2018.
For details regarding the self-purchase of shares in the Company, see the consolidated statement of
changes in shareholders' equity in the interim consolidated financial information for the quarter.
19. Directors having accounting and financial expertise
No changes have occurred during the reporting period regarding the determination of the minimum
number of directors having accounting and financial expertise that is required in the Company's Board
of Directors. In February 2019, Ms. Michal Gur was appointed to serve as a (third) additional external
director in the Company, who the Board of Directors also views as having accounting and financial
expertise, in addition to which Mr. Avraham Israeli was also appointed to serve as an additional director
in the Company.
Report of the Board of Directors on the State of the Entity's Affairs
For the Nine Months Ended September 30, 2019 ELECTRA LTD.
12
20. Independent directors
As of the reporting date, the Company has not adopted any provisions in its articles of association in
respect of the number of independent directors within the definition of that term in section 1 of the
Companies Law – 1999.
21. Disclosure in respect of the corporation's Internal Auditor
No significant changes have occurred in the reporting period relation to the details in respect of the
Internal Auditor of the Company as detailed in the Company's periodic report for the year 2018.
22. Donations
Since the time of the publication of the Company's financial statements for the year 2018, there has not
been a significant change in relation to the Company's social involvement and contribution to the
community.
The Board wishes to thank the Company's managers and staff for their contribution.
THE BOARD
Itamar Deutscher Michael Salkind
Chief Executive Officer Chairman of the Board of Directors
November 20, 2019 ________________________________________________________________________________
In this Report of the Board of Directors for the period ended September 30, 2019, the figures in US Dollars
are a convenience translation of the amounts originally reported in new Israeli Shekels at the representative
exchange rate of the New Israeli Shekel against US Dollar on September 30, 2019 (US$ 1.- = NIS 3.482).
13
Kost Forer Gabbay & Kasierer 144 Menachem Begin Blvd., Building A, Tel-Aviv 6492102, Israel
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com
To: Electra LTD.
Financial InformationConvenience Translation of Interim Re:
At your request, we have reviewed the accompanying interim consolidated financial information of Electra
Ltd. ("the Company") as of September 30, 2019 and of the nine months and three months in the period ended
on September 30, 2019 ("the Interim Financial Information"). The Interim Financial Information is the
responsibility of the Company's Board of Directors and management. Our responsibility is to express a
conclusion regarding the Interim Financial Information based on our review.
We did not review the interim financial information of certain subsidiaries, whose assets constitute
approximately 3% of the total consolidated assets as of September 30, 2019 and whose revenues constitute
approximately 1% and approximately 2%, of the total consolidated revenue for periods of the nine months
and three months ended on September 30, 2019, respectively. Furthermore, we did not review the interim
financial information of certain companies accounted for at equity, the investment in which amounted to
approximately 10,822 thousand dollars as of September 30, 2019, and the Company's share of their profits
amounted to approximately 2,864 thousand dollars and approximately 333 thousand dollars for the periods of
nine months and of three months ended on September 30, 2019, respectively. The interim financial
information for those companies were reviewed by other auditors, whose reports have been furnished to us,
and our conclusion, insofar as it relates to amounts included for those companies, is based on the reports of
the other auditors.
We conducted our review in accordance with Review Standard 1 of the Institute of Certified Public
Accountants in Israel, "Review of Interim Financial Information Performed by the Independent Auditor of
the Entity". A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with generally accepted auditing
standards in Israel and consequently does not enable us to obtain assurance that we would become aware of
all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
The accompanying Interim Financial Information in US Dollars are a convenience translation of the interim
consolidated financial statements as prepared in New Israeli Shekels as the rate of exchange of the Shekel
into US Dollars prevailing on September 30, 2019, as described in note 2F of the Interim Financial
Information.
Based on our review and the reports of the other auditors, we concluded an unqualified conclusion on the
Company's consolidated interim financial statements in our report dated November 20, 2019.
Based on our review and the reports of other auditors, nothing has come to our attention that causes us to
believe that the accompanying Interim Financial Information is not present fairly, in all material respects, the
information contained in it.
Tel-Aviv, Israel KOST FORER GABBAY & KASIERER
November 20, 2019 A Member of Ernst & Young Global
14
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON FINANCIAL POSITION
CONVENIENCE TRANSLATION INTO US DOLLARS
September 30 December 31
2019 2018 2018
Unaudited Audited
U.S. Dollars in thousands
Current assets
Cash and cash equivalents 82,590 52,066 152,534
Investments, restricted cash and deposit in trust 47,985 49,591 41,453
Trade receivables 323,989 279,411 286,925
Other receivables 73,210 51,914 45,719
Income receivable from works under construction contracts 317,829 248,670 271,675
Inventory 32,738 28,202 31,831
Inventory of real estate and rights in real estate 116,862 152,788 *) 146,536 *)
Asset held for sale - - 33,336
995,203 862,642 1,010,009
Non-current assets
Investments in entities accounted for at equity 142,367 167,558 *) 133,245 *)
Other long-term receivables 5,822 4,921 4,345
Fixed assets, net 162,438 68,948 70,724
Goodwill and other intangible assets, net 239,705 172,163 171,673
Intangible asset for a concession project 64,501 29,735 35,347
Receivables for concession arrangement for the provision of
services
21,670 24,340
25,438
Long-term inventories of real estate 18,121 19,226 19,245
Deferred taxes 11,058 5,323 8,640
665,682 492,214 468,657
1,660,885 1,354,856 1,478,666
*( Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the Interim Consolidated Financial information.
15
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON FINANCIAL POSITION
CONVENIENCE TRANSLATION INTO US DOLLARS
September 30 December 31
2019 2018 2018
Unaudited Audited
U.S. Dollars in thousands Current liabilities
Credit from banking entities and others 23,691 23,161 8,251
Loans to finance entrepreneurial real estate 39,044 63,527 67,536
Loan to finance a concession project 3,217 3,217 3,217
Current maturities of bonds 37,109 37,006 37,023
Current maturities of leasing liabilities 22,184 - -
Trade payables 320,055 277,083 350,221
Other payables 186,769 191,899 192,358
Dividend payable to shareholders in the company 9,807 9,503 -
Liabilities in respect of works under construction contracts 121,996 122,785 121,431 763,872 728,181 780,037
Non-current liabilities Liabilities to banking entities 26,362 28,918 26,018
Loan to finance a concession project 72,112 20,492 23,415
Bonds 195,961 170,191 232,390
Leasing liabilities 67,374 - -
Other long-term liabilities 164,415 74,276 69,040
Employee benefit liabilities, net 11,210 10,711 10,867
Deferred taxes 52,700 43,683 45,337
590,134 348,271 407,067
Equity attributed to shareholders in the company
Share capital 33,779 33,768 33,768
Share premium 94,475 92,811 92,811
Capital reserves on translation differences in investee
companies and other reserves, net (109,026) (93,748) (91,620)
Treasury shares (20,672) (18,930) (19,738)
Retained earnings 299,058 254,213 *) 265,031 *)
297,614 268,114 280,252
Non-controlling interests 9,265 10,290 11,310 Total equity 306,879 278,404 291,562
1,660,885 1,354,856 1,478,666
*( Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the Interim Consolidated Financial information.
November 20, 2019
Date of approval of the Michael Salkind Itamar Deutscher Isaac Nissim
financial information
Chairman of the Board of
Directors
Chief Executive Officer
Chief Financial Officer
16
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON PROFIT OR LOSS
CONVENIENCE TRANSLATION INTO US DOLLARS
Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018 ***) 2019 2018 ***) 2018 ***) Unaudited Audited U.S. Dollars in thousands (except per share data)
Revenues from the performance of works and the provision of services
1,476,159 1,280,965 510,223 411,606 1,727,649
Cost of works and services (1,350,752) (1,173,885)*)**) (468,735) (377,036) *)**) (1,581,457)*)**)
Gross profit 125,407 107,080 41,488 34,570 146,192
Administrative and general expenses (52,214) (44,178) (18,521) (14,750) (57,597)
Selling, marketing and other expenses (7,684) (6,575) **) (3,400) (2,379) **) (9,709) **)
Company’s share of the profits(losses) of entities accounted for at equity, net
4,497 2,494 *) 1,893 (107) *) 3,974 *)
Other income (expenses), net 33,922 836 33,186 1,732 (4,545) *)
(21,479) (47,423) 13,158 (15,504) (67,877)
Operating income 103,928 59,657 54,646 19,066 78,315
Financing income 8,663 6,760 3,552 1,455 11,483
Financing expenses (23,843) (12,036) *) (9,389) (3,402) *) (19,317) *)
Financing expenses, net (15,180) (5,276) (5,837) (1,947) (7,834)
Income before taxes on income 88,748 54,381 48,809 17,119 70,481
Taxes on income (24,191) (14,523) (12,403) (3,535) (17,428)
Income from continuing operations 64,557 39,858 36,406 13,584 53,053
Income (loss) from discontinued operations, net
(5,669) 56 (3,996) 45 (799)
Net income 58,888 39,914 32,410 13,629 52,254
Net income attributable to:
Shareholders in the Company 54,173 35,633 30,830 12,303 46,451
Non-controlling interests 4,715 4,281 1,580 1,326 5,803
58,888 39,914 32,410 13,629 52,254
Net earnings (loss) per share attributable to shareholders in the Company (in U.S. Dollars) *)
Basic - Earnings (loss)
From continuing operations 16.53 9.86 9.59 3.40 13.08
From discontinued operations (1.56) 0.01 (1.10) 0.01 (0.22)
Basic net earnings per share 14.97 9.87 8.49 3.41 12.86
Fully diluted - Earnings (loss)
From continuing operations 16.53 9.86 9.40 3.39 13.08
From discontinued operations (1.56) 0.01 (1.05) 0.01 (0.22)
Diluted net earnings per share 14.97 9.87 8.35 3.40 12.86
*( Retrospective implementation, see Note 2D.
**) Reclassified.
***) Reclassified, see note 6Q.
The accompanying notes form an integral part of the Interim Consolidated Financial information.
17
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON COMPREHENSIVE INCOME
CONVENIENCE TRANSLATION INTO US DOLLARS
Nine months ended Three months ended Year ended
September 30 September 30 December 31
2019 2018 2019 2018 2018
Unaudited Audited
U.S. Dollars in thousands
Net income 58,888 39,914 32,410 13,629 52,254
Other comprehensive income (loss)
- (after tax effects)
Amounts that will never be
reclassified to profit or loss:
Gain from the re-measurement of
defined benefit plans, net
- - - - 541
Amounts that will be classified or
reclassified to profit or loss, when
specific conditions are met:
Adjustments deriving from the
translation of the financial
statements of foreign operations,
net
(14,570) (1,786) (7,923) (2,621) (963)
Gain (loss) on hedging transactions,
net
(2,481) 27 (1,295) (259) 526
Other comprehensive income (loss)
(17,051) (1,759) (9,218) (2,880) 104
Total comprehensive income 41,837 38,155 23,192 10,749 52,358
Comprehensive income attributable
to:
Shareholders in the Company
37,205 33,884 21,665 9,426 46,564
Non-controlling interests
4,632 4,271 1,527 1,323 5,794
41,837 38,155 23,192 10,749 52,358
The accompanying notes form an integral part of the Interim Consolidated Financial information.
18
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CHANGES IN EQUITY
CONVENIENCE TRANSLATION INTO US DOLLARS
Attributable to shareholders in the Company
Share capital
Share premium
Retained earnings
Capital reserve for share-based
payment transactions
Capital reserve for
hedging transactions
Capital reserve
on the re- measurement
of defined benefit plans
Adjustments deriving from the
translation of foreign operations
Treasury shares Total
Non-controlling
interests Total equity
Unaudited
U.S. Dollars in thousands
Balance as of January 1, 2019 (Audited) 33,768 92,811 265,031 *) 2,604 616 414 (95,254) (19,738) 280,252 11,310 291,562
Net income - - 54,173 - - - - - 54,173 4,715 58,888
Other comprehensive income (loss):
Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (14,487) - (14,487) (83) (14,570)
Loss on hedging transactions, net - - - - (2,481) - - - (2,481) - (2,481)
Total other comprehensive loss - - - - (2,481) - (14,487) - (16,968) (83) (17,051)
Total comprehensive income (loss) - - 54,173 - (2,481) - (14,487) - 37,205 4,632 41,837
Exercise of option warrants into shares 11 1,664 - (1,664) - - - - 11 - 11
Purchase of treasury shares, net - - - - - - - (934) (934) - (934)
Dividend to non-controlling interests - - - - - - - - - (7,473) (7,473)
Purchase of non-controlling interests - - - - - - - - - 796 796
Cost of share-based payments - - - 1,226 - - - - 1,226 - 1,226
Dividend to shareholders in the Company - - (20,146) - - - - - (20,146) - (20,146)
Balance as of September 30, 2019 33,779 94,475 299,058 2,166 (1,865) 414 (109,741) (20,672) 297,614 9,265 306,879
*( Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the interim consolidated financial information.
19
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CHANGES IN EQUITY
CONVENIENCE TRANSLATION INTO US DOLLARS
Attributable to shareholders in the Company
Share capital
Share premium
Retained earnings *)
Capital reserve for share-based
payment transactions
Capital reserve for
hedging transactions
Capital reserve
on the re- measurement
of defined benefit plans
Adjustments deriving from the
translation of foreign operations
Treasury shares Total
Non-controlling
interests Total equity
Unaudited
U.S. Dollars in thousands Balance as of January 1, 2018
(Audited) 33,754 90,365 241,188 3,725 90 (127) (94,300) (7,682) 267,013 11,461 278,474
Changes following the initial implementation of IFRS 9 (see Note 2B) - - (1,423) - - - - - (1,423) - (1,423)
Balance as of January 1, 2018 following the initial implementation of IFRS 9 33,754 90,365 239,765 3,725 90 (127) (94,300) (7,682) 265,590 11,461 277,051
Net income - - 35,633 - - - - - 35,633 4,281 39,914
Other comprehensive income (loss):
Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (1,776) - (1,776) (10) (1,786)
Gain on hedging transactions, net - - - - 27 - - - 27 - 27
Total other comprehensive income (loss) - - - - 27 - (1,776) - (1,749) (10) (1,759)
Total comprehensive income (loss) - - 35,633 - 27 - (1,776) - 33,884 4,271 38,155
Exercise of option warrants into shares 14 2,446 - (2,446) - - - - 14 - 14
Purchase of treasury shares, net - - - - - - - (11,248) (11,248) - (11,248)
Purchase of non-controlling interest - - (202) - - - - - (202) 296 94
Dividend to non-controlling interests - - - - - - - - - (5,738) (5,738)
Cost of share-based payments - - - 1,059 - - - - 1,059 - 1,059
Dividend to shareholders in the company - - (20,983) - - - - - (20,983) - (20,983)
Balance as of September 30, 2018 33,768 92,811 254,213 2,338 117 (127) (96,076) (18,930) 268,114 10,290 278,404
*( Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the interim consolidated financial statements.
20
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CHANGES IN EQUITY
CONVENIENCE TRANSLATION INTO US DOLLARS
Attributable to shareholders in the Company
Share capital
Share premium
Retained earnings
Capital reserve for share-based
payment transactions
Capital reserve for
hedging transactions
Capital reserve
on the re- measurement
of defined benefit plans
Adjustments deriving from the
translation of foreign operations
Treasury shares Total
Non-controlling
interests Total equity
Unaudited
U.S. Dollars in thousands
Balance as of July 1, 2019 33,768 92,811 278,036 3,039 (570) 414 (101,871) (19,952) 285,675 10,699 296,374
Net income - - 30,830 - - - - - 30,830 1,580 32,410
Other comprehensive income (loss):
Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (7,870) - (7,870) (53) (7,923)
Loss on hedging transactions, net - - - - (1,295) - - - (1,295) - (1,295)
Total other comprehensive loss - - - - (1,295) - (7,870) - (9,165) (53) (9,218)
Total comprehensive income (loss) - - 30,830 - (1,295) - (7,870) - 21,665 1,527 23,192
Exercise of option warrants into shares 11 1,664 - (1,664) - - - - 11 - 11
Purchase of treasury shares, net - - - - - - - (720) (720) - (720)
Dividend to non-controlling interests - - - - - - - - - (2,961) (2,961)
Cost of share-based payments - - - 791 - - - - 791 - 791
Dividend to shareholders in the company - - (9,808) - - - - - (9,808) - (9,808)
Balance as of September 30, 2019 33,779 94,475 299,058 2,166 (1,865) 414 (109,741) (20,672) 297,614 9,265 306,879
The accompanying notes form an integral part of the interim consolidated financial information.
21
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CHANGES IN EQUITY
CONVENIENCE TRANSLATION INTO US DOLLARS
Attributable to shareholders in the Company
Share capital
Share premium
Retained earnings *)
Capital reserve for share-based
payment transactions
Capital reserve for
hedging transactions
Capital reserve
on the re- measurement
of defined benefit plans
Adjustments deriving from the
translation of foreign operations
Treasury shares Total
Non-controlling
interests Total equity
Unaudited
U.S. Dollars in thousands Balance as of July 1, 2018 33,754 90,365 251,615 4,463 376 (127) (93,458) (9,775) 277,213 8,671 285,884
Net income - - 12,303 - - - - - 12,303 1,326 13,629
Other comprehensive income (loss):
Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (2,618) - (2,618) (3) (2,621)
Loss on hedging transactions, net - - - - (259) - - - (259) - (259)
Total other comprehensive income (loss) - - - - (259) - (2,618) - (2,877) (3) (2,880)
Total comprehensive income (loss) - - 12,303 - (259) - (2,618) - 9,426 1,323 10,749
Exercise of option warrants into shares 14 2,446 - (2,446) - - - - 14 - 14
Purchase of treasury shares, net - - - - - - - (9,155) (9,155) - (9,155)
Purchase of non-controlling interest - - (202) - - - - - (202) 296 94
Cost of share-based payments - - - 321 - - - - 321 - 321
Dividend to shareholders in the company - - (9,503) - - - - - (9,503) - (9,503)
Balance as of September 30, 2018 33,768 92,811 254,213 2,338 117 (127) (96,076) (18,930) 268,114 10,290 278,404
*( Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the interim consolidated financial statements.
22
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CHANGES IN EQUITY
CONVENIENCE TRANSLATION INTO US DOLLARS
Attributable to shareholders in the Company
Share capital
Share premium
Retained earnings *)
Capital reserve for share-based
payment transactions
Capital reserve for
hedging transactions
Capital reserve on
the remeasure-
ment of defined
benefit plans
Adjustments deriving from the
translation of financial statements of foreign operations
Treasury shares Total
Non-controlling
interests Total equity
Audited U.S. Dollars in thousands
Balance as of January 1, 2018 33,754 90,365 241,188 3,725 90 (127) (94,300) (7,682) 267,013 11,461 278,474
Changes following the initial implementation of IFRS 9 - - (1,423) - - - - - (1,423) - (1,423)
Balance as of January 1, 2018 following the initial implementation of IFRS 9 33,754 90,365 239,765 3,725 90 (127) (94,300) (7,682) 265,590 11,461 277,051
Net income - - 46,451 - - - - - 46,451 5,803 52,254
Other comprehensive income (loss):
Gain on the re-measurement of defined benefit plans, net - - - - - 541 - - 541 - 541
Adjustments deriving from the translation of financial statements of foreign operations, net - - - - - - (954) - (954) (9) (963)
Gain on hedging transactions, net - - - - 526 - - - 526 - 526
Total other comprehensive income (loss) - - - - 526 541 (954) - 113 (9) 104
Total comprehensive income (loss) - - 46,451 - 526 541 (954) - 46,564 5,794 52,358
Exercise of option warrants into shares 14 2,446 - (2,446) - - - - 14 - 14
Acquisition of treasury shares - - - - - - - (12,056) (12,056) - (12,056)
Purchase of non-controlling interests - - (202) - - - - - (202) 296 94
Cost of share-based payment - - - 1,325 - - - - 1,325 - 1,325
Dividend to non-controlling interests - - - - - - - - - (6,241) (6,241)
Dividend to shareholders in the company - - (20,983) - - - - - (20,983) - (20,983)
Balance at December 31, 2018 33,768 92,811 265,031 2,604 616 414 (95,254) (19,738) 280,252 11,310 291,562
*) Retrospective implementation, see Note 2D.
The accompanying notes form an integral part of the interim consolidated financial information.
23
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CASH FLOWS
CONVENIENCE TRANSLATION INTO US DOLLARS
Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018****) 2019 2018****) 2018****) Unaudited Audited U.S. Dollars in thousands Cash flows from operating activities: Net income 58,888 39,914 32,410 13,629 52,254
Adjustments to reconcile net income to cash flows from operating activities:
Adjustments to profit and loss items: The Group's share of losses (profits) of
companies accounted for at equity, net
(4,497) (2,494) *) (1,893) 107 *) (3,974) *) Dividend received from companies
accounted for at equity
3,798 2,580 430 - 6,146 Depreciation and amortization 39,364 16,714 13,598 5,901 22,723 Increase (decrease) in employee benefit
liabilities, net
520 516 (32) 59 1,344 Adjustment for discontinued operations 5,669 (56) 3,996 (45) 799 Gain on the disposal of fixed assets and
investments, net
(33,235) (2,215) (32,692) (1,650) (2,339) Decrease (increase) in the value of
marketable securities, net
(576) (73) 41 10 98 Cost of share-based payment 1,226 1,059 791 321 1,325 Deferred taxes, net 4,492 2,123 2,191 601 568 Erosion (revaluation) of long-term
receivables and payables, long-term loans and bonds, net
8,682 1,082 4,193 (336) 806 Gain on the acquisition of a company at an opportunity price
(543) - - - -
Other expenses - 2,161 - - 3,239 *)
Changes in asset and liability items: Increase in trade receivables (9,544) (40,445) (4,578) (25,350) (48,485) Decrease (increase) in other receivables
and in respect of a concession arrangement for the provision of services
(575) (2,856) ***) 8,334 (1,958) ***) (1,236) Decrease (increase) in income receivable
from work under construction contracts
383 (7,578) 16,705 (16,565) (30,356) Decrease (increase) in inventory (1,190) 616 (2,649) 2,943 (2,966) Decrease in inventory of real estate and
rights in real estate **)
31,672 17,481 *) 16,413 7,845 *) 22,075 *) Decrease in trade payables (49,377) (92,235) (7,395) (20,978) (21,197) Decrease in other payables (6,304) (11,795) (13,270) (10,387) (10,703) Increase (decrease) in liabilities in
respect of works under construction contracts
(5,694) 43,924 4,634 25,491 41,331
(15,729) (71,491) 8,817 (33,991) (20,802) Net cash generated (absorbed) by
continuing operating activities (before acquisition of and investment in land)
43,159 (31,577) 41,227 (20,362) 31,452 Acquisition of and investment in land **) (5,001) (33,234) (1,394) (1,000) (33,554)
Net cash generated (absorbed) by continuing operating activities
38,158 (64,811) 39,833 (21,362) (2,102) Net cash absorbed by discontinued
operating activities
(4,295) (1,432) (1,578) (127) (2,937)
Net cash generated (absorbed) by operating activities
33,863 (66,243) 38,255 (21,489) (5,039)
*( Retrospective implementation, see Note 2D. **) The acquisition of and investment in land are presented under inventories of real estate and rights in real estate. ***) Reclassified. ****) Reclassified, see Note 6Q.
The accompanying notes form an integral part of the interim consolidated financial information.
24
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CASH FLOWS
CONVENIENCE TRANSLATION INTO US DOLLARS
Nine months ended Three months ended Year ended September 30 September 30 December 31
2019 2018 2019 2018 2018
Unaudited Audited
U.S. Dollars in thousands
Cash flows from investment activities: Investment in investee companies, net (1,270) (4,265) (3,658) (2,314) (1,824) Decrease (increase) in investments,
restricted cash and deposit in trust, net (6,770) 3,901 2,938 9,705 5,249 Purchase of fixed assets (17,896) (10,030) (5,601) (4,212) (14,710) Purchase of intangible assets (3,825) (1,307) (369) (482) (2,585) Change in intangible asset for a
concession project (44,069) (8,790) (14,275) (3,105) (12,772) Acquisition of operations and initially
consolidated companies (A) (44,956) 682 (912) - 682 Proceeds from the sale of fixed assets 1,954 4,726 614 3,373 5,658 Investment in marketable securities,
net (18) 4,051 3,699 7,917 11,019 Increase in long-term receivables, net (1,122) (588) (77) (2) (955) Consideration from the disposal of
investments in companies accounted for at equity 38,340 - 38,340 - -
Net cash generated (absorbed) by continuing investment activities (79,632) (11,620) 20,699 10,880 (10,238)
Net cash absorbed by discontinued investment activities (282) (20) (252) (5) (44)
Net cash generated (absorbed) by investment activities (79,914) (11,640) 20,447 10,875 (10,282)
Cash flows from financing activities: Issuance of share capital 11 14 11 14 14 Payments of dividends to non-
controlling interests, to shareholders in the company and others (17,812) (19,540) (2,961) - (29,546)
Acquisition of treasury shares, net (935) (11,248) (720) (9,155) (12,056) Issuance of bonds, net - - - - 62,314 Receipt of long term loans 81,986 7,724 15,776 297 10,609 Repayment of loans and other long-
term liabilities (740) (5,120) (325) (1,846) (5,148) Repayment of bonds (36,134) (35,896) - (18,920) (35,896) Short-term credit from banking entities
and others and for the financing of entrepreneurial real estate, net (29,898) 34,982 (49,435) 13,529 17,956
Repayment of leasing liabilities (18,683) - (5,035) - -
Net cash generated (absorbed) by continuing financing activities (22,205) (29,084) (42,689) (16,081) 8,247
Net cash generated by discontinued financing activities 550 72 550 (181) 72
Net cash generated (absorbed) by financing activities (21,655) (29,012) (42,139) (16,262) 8,319
Exchange differences in respect of cash
and cash equivalents (2,238) (323) (1,229) (551) 252
Increase (decrease) in cash and cash equivalents (69,944) (107,218) 15,334 (27,427) (6,750)
Cash and cash equivalents at the beginning of the period 152,534 159,284 67,256 79,493 159,284
Cash and cash equivalents at the end of
the period 82,590 52,066 82,590 52,066 152,534
The accompanying notes form an integral part of the interim consolidated financial information.
25
ELECTRA LIMITED
CONSOLIDATED INFORMATION ON CASH FLOWS
CONVENIENCE TRANSLATION INTO US DOLLARS
Nine months ended Three months ended Year ended
September 30 September 30 December 31
2019 2018 2019 2018 2018
Unaudited Audited
U.S. Dollars in thousands
(A)
Acquisition of initially
consolidated companies
The consolidated company's
assets and liabilities at date of
acquisition:
Working capital, net (excluding
cash and cash equivalents)
(25,966) 9 - - 9
Fixed assets, net (5,742) (40) - - (40)
Intangible assets, net (14,951) (3,673) - - (3,921)
Goodwill (62,802) (4,213) - - (4,610)
Non- current assets (188) - - - -
Deferred taxes 343 997 - - 1,054
Liability for put option and future
dividends for non-controlling
interests
52,042 4,288 - - 4,876
Non- current liabilities 11,366 205 - - 205
Non-controlling interests 796 - - - -
Collection of income receivable
(payment) for cash flows in an
interim period
146 3,109 (912) - 3,109
(44,956) 682 (912) - 682
(B) Additional cash flow
information:*)
Cash paid during the period for:
Interest 9,748 8,026 2,085 4,103 12,622
Taxes on income 16,120 13,711 4,350 2,860 19,233
Cash received during the period
for:
Interest 2,412 4,033 1,023 679 7,161
Taxes on income 2,572 4,121 771 78 4,150
(C) Significant activities, not
involving cash flows:
Dividend payable to shareholders
in the Company
9,807 9,503 9,807 9,503 -
*) Including cash in respect of discontinued operations.
The accompanying notes form an integral part of the interim consolidated financial information.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
26
Note 1 - General
The accompanying Financial Information, is derived from the Hebrew version of the interim
consolidated financial statement as at September 30, 2019 and for the nine months and three month
ended on that date and the accompanying notes thereto (hereinafter - The interim consolidate
financial statement).
These financial information have been prepared in a condensed format as at September 30, 2019 and
for the period of three months ended on that date (hereinafter – The interim consolidated financial
information).
The interim consolidated financial information should be read together with the Company’s Hebrew
version of the annual consolidated financial statement as at December 31, 2018 and for the year
ended on that date and the accompanying notes thereto (hereinafter – The Annual Consolidated
Financial Statement).
Note 2 - Significant accounting policies
A. The format for the preparation of the interim consolidated financial information
The interim consolidated financial information is a translation which is based on The Interim
Consolidated Financial Statements, which have been prepared in accordance with
International Financial Reporting Standard IAS 34 "Financial Reporting for Interim
Periods", and also in accordance with the disclosure requirements in accordance with section
D of the Securities Regulations (Periodic and Immediate Reports) - 1970.
The accounting policies that have been implemented in the preparation of the interim
consolidated financial statements are consistent with those that were implemented in the
preparation of the annual consolidated financial information, except as stated in Notes 2B
and 2C below.
B. Leases
As detailed in Note 2C(1) of the annual consolidated financial statements, regarding the
initial implementation of International Financial Reporting Standard Number 16 – Leases
(hereinafter: "The Standard"), the Group has elected to implement the provisions of the
Standard by way of partial retrospective implementation (without restating the comparative
figures).
The accounting policy that has been implemented as from January 1, 2019 in respect of
leases is as follows:
The Company is treating the contract as a leasing contract where pursuant to the terms of the
contract, the right to control an identified asset is transferred for a period of time for
consideration.
1. The Group as lessee:
For transaction in which the Group is a lessee, it recognizes a right to use asset at the
time of the beginning of the lease against a liability for leasing, which is except for
leasing transactions in which the base asset has a low value, in which the Group has
elected to recognize the leasing payments as an expense in profit or loss on a straight-
line basis over the course of the period of the lease. Within the framework of the
measurement of the liability in respect of leasing, the Group has elected not to
implement the relief that has been provided in the Standard and it has made a
segregation between the leasing component and the non-leasing components, such as
management services, maintenance services and etcetera, which are included in the
same transaction.
In transactions in which an employee is entitled to a vehicle from the Group as part of
their terms of employment, the Group treats the transactions as an employee benefit
pursuant to the provisions of IAS 19 and not as a sub-leasing transaction.
At the time of the beginning of the lease, the liability in respect of a lease includes all
of the leasing payments that have not yet been paid, discounted using the interest rate
that is inherent in the lease, where it can be determined readily or at the Group's
additional interest rate. After the beginning of the lease, the Group measures the
liability in respect of the lease using the effective interest method.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
27
Note 2 – Significant accounting policies (Continued)
B. Leases (Continued)
The accounting policy that has been implemented as from January 1, 2019 in respect of
leases is as follows (Continued):
1. The Group as lessee: (Continued)
A right to use asset at the time of the beginning of the lease is recognized at the level
of the liability in respect of the lease with the addition of the leasing payments that
have been paid at the time of the beginning of the lease or before them and with the
addition of the transaction costs that have been incurred.
The right to use asset is measured under the cost model and amortized over the shorter
of its useful lifetime, or the period of the lease. Where signs of impairment in value
exist, the Group tests for impairment in the right to use asset in accordance with the
provisions of IAS 36.
2. The Group as lessor
The tests for the classification of a lease as finance or as operating is based on the
substance of the agreement and the testing is performed at the time of the commitment
in accordance with the principles that were determined in the Standard:
a. Finance leasing
A leasing transaction in which substantially all of the risks and the benefits that
are connected to the ownership of the leased asset are transferred to the lessee is
classified as a finance lease
Leasing transactions in which the Group is a lessor other than a manufacturer or a
trader
At the time of the beginning of the lease, the leased asset is de-recognized against
which a "receivables for finance leases" asset is recognized in an amount that is
equivalent to the present value of the leasing receipts, discounted at the interest
rate that is inherent in the lease. Any difference whatsoever between the balance
of the leased asset before de-recognition and the balance of the receivables for the
finance lease is recognized in profit or loss.
b. Operating leasing
A leasing transaction in which substantially all of the risks and the benefits that
are connected to the ownership of the leased asset are not transferred is classified
as an operating lease. Leasing receipts are recognized as revenue in profit or loss
on a straight-line over the length of the period of the lease.
3. Index-linked lease payments
At the beginning of the lease, the Group uses the index that exists at the beginning of
the lease for the purpose of calculating the future leasing payments.
In transactions in which the Group is a lessee, changes in the level of the future
leasing payments as a result of a change in the index are capitalized (without changing
the discounting rate that applies to the liability for the lease) to the balance of the right
to use asset and are only reflected as an adjustment of the balance of the liability for
the lease where a change has occurred in the cash flows, which derives from a change
in the index (i.e. from the time at which the adjustment of the leasing payments enters
force).
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
28
Note 2 – Significant accounting policies (Continued)
B. Leases (Continued)
The accounting policy that has been implemented as from January 1, 2019 in respect of
leases is as follows (Continued):
4. Options for the extension and the cancellation of the period of the lease
A lease period that cannot be cancelled also include periods that are covered by an
option to extend the lease where it is reasonably certain that the option to extend will
be exercised and also periods that are covered by an option to cancel the lease, where
it is reasonably certain that the option to cancel will not be exercised.
In a case in which a change has occurred in the expectation regarding the exercise of
the option to extend or the non-exercise of the cancellation option, the Group re-
measures the balance of the liability for the lease in accordance with the updated
period of the lease, in accordance with the updated discount rate on the day on which
the change in the expectation occurs, where the amount of the change is reflected
against the balance of the right to use asset until it is zeroed, beyond which it is
reflected in profit or loss. 5. Amendments to a lease
Where an amendment is made to the terms of a lease, which does not reduce the extent of the lease and which is not treated as a separate leasing transaction, the Group re-measures the balance of the liability for the lease in accordance with the updated terms of the lease, in accordance with the updated discount rate on the day on which the amendment is made, where the amount of the change in the balance of the liability is reflected against the balance of the right to use asset.
Where an amendment is made to the terms of the lease, which leads to a reduction in the extent of the lease, the Group recognizes a gain or a loss deriving from the full or partial de-recognition of the balance of the right to use asset and the liability for the lease. Afterwards, the Group re-measures the balance of the liability for the lease in accordance with the amended terms of the lease, in accordance with the updated discount rate at the time of the amendment and it reflects the amount of the change in the balance of the liability for the lease against the balance of the right to use asset.
C. The initial implementation of new Financial Reporting Standards and Revisions to existing
Accounting Standards
1. Initial implementation of IFRS 16 - Leases:
In January 2016, the IASB published International Financial Reporting Standard 16 – Leases (hereinafter – "The Standard"). The Standard replaces International Accounting Standard 17 (hereinafter - "The old standard"), Interpretation Number 4 of the Interpretations Committee and Interpretation Number 15 of the Standing Interpretations Committee. Pursuant to the Standard, leasing is defined as a contract, or part of a contract, which transfers the right to use an asset for a period of time in consideration for payment.
The following are the main impacts of the Standard:
The Standard requires lessors to recognize all leases in the statement of financial position (apart from certain exceptions, see below). Lessees are to recognize a liability for lease payments against which they are to recognize a right of use asset, in a similar manner to the accounting treatment of a finance lease pursuant to the standard that was cancelled – IAS 17 – Leases. Furthermore, lessees are to recognize interest expenses and depreciation expenses separately.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
29
Note 2 – Significant accounting policies (Continued)
C. The initial implementation of new Financial Reporting Standards and Revisions to existing
Accounting Standards (Continued)
1. Initial implementation of IFRS 16 – Leases (Continued):
Variable lease payments, which are not dependent on an index or an interest rate, which are based on performance or usage, are to be recognized as an expense on the part of a lessee or as income on the part of lessors at the time that they arise.
In the event of a change in variable lease payments, which are index-linked, the lessee is to reassess the liability for the lease, where the impact of the change is to be reflected against the right of use asset.
The standard includes two exceptions in which lessees are entitled to treat leases in accordance with the existing accounting treatment in respect of operating leases, in the case of the leasing of assets with a low monetary value or in the case of leases with a period of up to one year.
The accounting treatment on the part of the lessor remains significantly unchanged as compared with the old standard, i.e. classification as a finance lease or as an operating lease.
The Standard is being initially implemented in these financial statements. As is
permitted under the Standard the Group has elected to adopt the Standard in
accordance with the partial retrospective implementation approach, where:
The balance of the right of use assets are stated at the level of the liability for leasing.
Pursuant to this approach, there is no requirement to restate the comparative figures.
The balance of the liability at the time of the initial implementation of the Standard is
calculated using the Group's additional interest rate as exists as at the time of the
initial implementation.
See Note 2B above for details regarding the accounting policy that is being
implemented as from the time of the initial implementation of the Standard.
The main impact of the initial implementation of the Standard is in relation to existing
lease contracts in which the Group is the lessee. Pursuant to the Standard, as stated in
Note 2B above, except for exceptions, the Group recognizes a balance of a liability
against a balance of a right to use asset in respect of each lease contract in which it is
the lessee, which is different from the policy that it implemented under the provisions
of the old standard, pursuant to which in a lease contract in which substantially all of
the risks and the benefits that are inherent in the ownership of the leases asset are not
transferred, the leasing payments were recognized as an expense in profit or loss on a
straight line over the period of the lease.
The following are data in relation to the initial implementation of the Standard as at
January 1, 2019 in respect of leasing contracts, which were in force at the time of the
initial implementation:
a. The impact of the initial implementation of the new Standard as at January 1, 2019, was to lead to an increase of US$ 1,691 thousand in other receivable and other long-term receivable, an increase of US$ 94,506 thousand in fixed assets, an increase of US$ 71,584 thousand in long-term leasing liabilities and an increase of US$ 24,613 thousand in current maturities for leading liabilities, without any change in the balance of the Group's shareholders' equity.
b. The Group is assisted by an external appraiser for the purpose of determining the nominal interest rate that is appropriate for discounting the leasing contracts, which is in accordance with the companies' financing risks in accordance with the average lifetimes to maturity of the lease contracts and also in accordance with other economic variables. The weighted average additional interest rate that has been used for discounting the future leasing payments in the calculation of the balance of the liability for leasing at the time of the initial implementation of the Standard was 2.94%.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
30
Note 2 – Significant accounting policies (Continued)
C. The initial implementation of new Financial Reporting Standards and Revisions to existing
Accounting Standards (Continued)
1. Initial implementation of IFRS 16 – Leases (Continued):
c. The adjustment between the amount of the minimal future leasing liabilities as reported in Note 28B(12) to the annual consolidated financial statements and the balance of the leasing liabilities as at January 1, 2019 derives primarily as a result of the impact of the discounting of the future payments at the Group's incremental interest rate at the time of the initial implementation.
d. The relief, which was implemented at the time of the initial implementation of the Standard – the Group has elected to use a uniform discounting rate for lease contracts containing similar characteristics.
2. IAS 28- Investments in Associates and Joint Ventures
In October 2017, the IASB published a revision to International Accounting Standard
28, investments in associates and joint ventures (hereinafter: "The Revision). The
Revision clarifies that the long term rights (such as loans receivable or investments in
preference shares), which form a part of a net investment in an associated company or
joint venture, will be subject firstly to the provisions of IFRS 9 in full (both regarding
the measurement and also regarding the matter of impairment in value) and, thereafter,
the balances of those rights will be subject to the provisions of IAS 28. In light of the
provisions of the Revision, as aforesaid, the implementation of the "layers method", as
has found expression in the Securities Authority's Enforcement Ruling 11-2 is no
longer relevant
The revision is being initially implemented in these financial information. The Group
is implementing the provisions of the Revision retrospectively, without the
restatement of the comparative figures as it implemented the provisions of IFRS 9.
After having examined the implications of the implementation of the Revision, the
Group has reached the conclusion that its implementation does not have a significant
impact on the Group's financial information.
D. Retrospective implementation of a change in policy
Change in accounting policy on the subject of the capitalization of credit costs
In March 2019, the International Financial Reporting Standards Interpretations Committee
("IFRIC") published an interpretation regarding the accounting treatment of credit costs in
projects in which the recognition of income is over time (hereinafter – "The interpretation").
In accordance with the interpretation, it will not be possible to capitalize credit costs to
project in which the recognition of income is over time, as from the time at which the asset
that is the subject of the transaction, is "ready for sale".
In July 2019, the Securities Authority in Israel validated the IFRIC's decision. As a result,
credit costs for projects in which revenues are recognized over time are accrued to inventory
until the time that the building permit is received.
The impact of the implementation of the interpretation is the recognition of credit costs,
which do not qualify for capitalization, as an expense in the statement of profit or loss at the
time that they are incurred instead of the capitalization of the credit costs to inventory and
the recognition of the credit costs through cost of sales at the time at which the costs are
recognized in respect of the project in the statement of profit or loss pursuant to IFRS 15. In
accordance with the interpretation, its implementation constitutes a change in accounting
policy and is executed retrospectively (Including the correction of the comparative figures).
The Group has loans and other liabilities containing certain financial covenants. The Group,
together with its legal counsel has examined the terms of the loan agreements and the other
liabilities in order to estimate the implications, if any, of the changes in the accounting policy
on the expected compliance with its financial covenants.
The Group has reached the conclusion that the change in the accounting policy has not had
an impact on the compliance with the financial covenants.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
31
Note 2 – Significant accounting policies (Continued)
D. Retrospective implementation of a change in policy (Continued)
The impact of the change in the accounting policy on the Group's financial information is
primarily a decrease in the balance of the inventory of real estate and rights in real estate and
a decrease in the balance of the investment in entities that are accounted for at equity.
Furthermore, as a result of the change in the accounting policy, the balance of the retained
earnings as at January 1, 2018 and as at January 1, 2019 has been reduced by the amounts of
US$ 2,466 thousand and of US$ 2,378 thousand, respectively. The impact of the change in
the policy on the financial information for the year 2018, and for the periods of nine months
and of three months ended on September 30, 2018 and on September 30, 2019, is not
material.
E. Details in respect of the Israeli Consumer Prices Index and the exchange rates of various
currencies that are relevant to the group
September 30 December 31 2019 2018 2018
Israeli Consumer Prices Index (in points) *) 225.12 223.77 224.00 Exchange rates (in NIS):
U.S. Dollar 3.48 3.63 3.75
Euro 3.81 4.22 4.29
100 Russian Ruble 5.41 5.53 5.40
100 Nigerian Naira 0.96 1.00 1.04
Polish Zloty 0.87 0.99 1.00 Nine months ended Three months ended Year ended September 30 September 30 December 31 2019 2018 2019 2018 2018
Rate of change in the period (%):
Israeli Consumer
Prices Index 0.50 1.10 (0.70) 0.20 1.20
U.S. Dollar (7.10) 4.61 (2.36) (0.63) 8.10
Euro (11.34) 1.52 (6.32) (0.93) 3.35
Russian Ruble 0.19 (8.13) (4.39) (4.92) (10.37)
Nigerian Naira (7.94) (4.03) (2.77) (5.05) (0.22)
Polish Zloty (12.83) (0.87) (8.92) 1.16 0.24
*) The known index on an average basis of 1993 = 100.
F. Convenience translation
The Interim Consolidate Financial Information in US Dollars is a translation of the statements
as prepared in New Israeli Shekels ("NIS" or "Shekel") at the rate of exchange of the Shekel
for the US Dollar prevailing on September 30, 2019 (NIS 3.482 = US$ 1).
It should be noted that the New Israeli Shekel amounts, on the basis of which the convenience
translation figures were prepared, do not necessarily represent the current cost amounts of the
various elements in the interim consolidated financial statements and, also, that it should not
be construed from the translation into US Dollar figures that the Israeli currency amounts
actually represent, or could be converted into Dollars. This financial information has been
prepared for the convenience of the reader. In the event of any discrepancy between the
contents of this translation and the Hebrew original, the Hebrew original prevails.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
32
Note 3 – Business combinations
A. The Gilston Electrical Contracting Corp, transaction
The Gilston Electrical Contracting Corp. (hereinafter – "Gilston"), is a veteran contracting
company that operates in New York, in the United States, through three divisions: A large
electrical works division (infrastructures and instillations in railway stations, waste water
treatment plants and etcetera), the hospitals division, which provides service works in
hospitals and the public housing buildings division, which provides maintenance and
refurbishment services for buildings used for public housing.
1. The manner of the acquisition
On December 29, 2018, the Company, operating through a wholly owned American
subsidiary company (hereinafter – "The subsidiary company"), signed on a binding
agreement (hereinafter – "The agreement") for the acquisition of 51% of Gilston's share
capital (hereinafter – "The transaction"). The transaction was completed on February 2,
2019 and the consideration was paid, pursuant to the provisions of the agreement.
2. The consideration for the acquisition
In consideration for the shares being sold, the Group paid an amount of approximately
US$ 21.9 million to the sellers in cash at the time of the completion.
3. Option
Within the framework of the commitment, a separation mechanism was set by mean of
a call option that is afforded to the subsidiary company and a put option that is afforded
to the seller of all of the seller's holdings in Gilston (49%), at the end of a period of 5
years after the completion of the transaction, at a price based on an agreed formula.
4. The cost of the acquisition
The Group was assisted by an independent external appraiser for the purpose of
preparing a paper on the allocation of the cost of the acquisition (PPA) for the purpose
of the interim consolidated financial statements. The intangible assets that were
identified in the acquisition are an orders backlog of approximately US$ 5.5 million
(which will be amortized over 4 years), customers contacts of approximately US$ 1.2
million (which will be amortized over 11 years), and goodwill of approximately
US$ 29.7 million. The overall net cost of the acquisition amounted to approximately
US$ 49 million. The allocation of the cost of the acquisition is temporary. The Group
has consolidated Gilston's financial statements since February 2019, and it is presented
under the construction and infrastructures projects abroad segment.
The following is the attribution of the cost of the acquisition at the time of the transfer
of the shares:
Fair value
US$ thousands
Working capital, net 12,042
Fixed assets 1,478
13,520
Long-term liabilities (940)
Identified assets, net 12,580 Goodwill and intangible assets deriving from the acquisition 36,461
Total acquisition cost 49,041
The acquisition cost at the time of the transfer of the shares-
Cash consideration 22,854 Liability for put option and future dividends to non-controlling interests 25,658 Liability for additional acquisition costs 529
Total acquisition cost 49,041
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
33
Note 3 – Business combinations
B. The Hellman Electrical Corp, transaction
The Hellman Electrical Corp. (hereinafter – "Hellman") operates in New York, through three divisions: electrical contracting for heavy construction (transportation, lighting, security, safety and control systems), the datacom division, which provides the planning instillation and maintenance of data transfer infrastructures and the internal division, which includes refurbishments and supplementary works for hospitals, schools, colleges and etcetera.
1. The manner of the acquisition
On December 29, 2018, the Company, operating through a wholly owned American subsidiary company (hereinafter – "The subsidiary company"), signed on a binding agreement for the acquisition of 51% of Hellman's share capital (hereinafter – "The transaction"). The transaction was completed on February 2, 2019 and the consideration was paid, pursuant to the provisions of the agreement.
2. The consideration for the acquisition
In consideration for the shares being sold, the Group paid an amount of approximately US$ 21.4 million to the sellers in cash at the time of the completion.
3. Option
Within the framework of the commitment, a separation mechanism was set by mean of a call option that is afforded to the subsidiary company and a put option that is afforded to the seller of all of the seller's holdings in Hellman (49%), at the end of a period of 5 years after the completion of the transaction, at a price based on an agreed formula.
4. The cost of the acquisition
The Group was assisted by an independent external appraiser for the purpose of preparing a paper on the allocation of the cost of the acquisition (PPA) for the purpose of the interim consolidated financial statements. The intangible assets that were identified in the acquisition are an orders backlog of approximately US$ 2.0 million (which will be amortized over 3 years), customers contacts of approximately US$ 3.0 million (which will be amortized over 11 years), a non-competition agreement of approximately US$ 2.9 million (which will be amortized over 10 years) and goodwill of approximately US$ 32.4 million. The overall net cost of the acquisition amounted to approximately US$ 49.1 million. The allocation of the cost of the acquisition is temporary. The Group has consolidated Hellman's financial statements since February 2019, and it is presented under the construction and infrastructures projects abroad segment and in the services and maintenance segment. The following is the attribution of the cost of the acquisition at the time of the transfer of the shares: Fair value
US$ thousands
Working capital, net *) 14,802
Deferred taxes 325
Fixed assets 4,069
19,196
Long-term liabilities (10,423)
Identified assets, net 8,773
Goodwill and intangible assets deriving from the acquisition 40,320
Total acquisition cost 49,093
The acquisition cost at the time of the transfer of the shares
Cash consideration 22,293
Liability for put option and future dividends to non-controlling
interests 26,271
Liability for additional acquisition costs 529
Total acquisition cost 49,093
*) Including commitments to departmental managers, some of which derive from a
change in control.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
34
Note 4 - Operating segments
A. General:
As stated in the annual consolidated financial statements as at December 31, 2018, the Group
operates in a number of segments, as follows:
1. The construction and infrastructure projects in Israel.
2. The construction and infrastructure project abroad.
3. Services and maintenance.
4. The development and construction of entrepreneurial real estate.
5. Concessions.
For further information see Note 1 A to The annual consolidated financial statements.
B. The reporting of operating segments:
For the nine months ended September 30, 2019
Construction
and
infrastructure
projects
in Israel
Construction
and
infrastructure
projects
abroad
Services
and
maintenance
Development &
construction of
entrepreneurial real estate
Concessions Adjustments
Total
Unaudited
U.S. Dollars (in thousands(
Revenues 760,043 239,962 413,931 90,907 43,021 (71,705) 1,476,159
Inter-segmental
revenues (66,075) - (5,630) - - 71,705 -
Total external
revenues 693,968 239,962 408,301 90,907 43,021 - 1,476,159
Segmental income 14,517 17,389 38,637 12,775 32,083 837 116,238
Less – unallocated
expenses:
Administrative and
general expenses (11,668)
Selling and marketing (268)
Others (374)
, netFinancing (15,180)
Income before taxes
on income 88,748
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
35
Note 4 – Operating segments - (Continued)
B. The reporting of operating segments: - (Continued)
For the nine months ended September 30, 2018 **)
Construction
and
infrastructure
projects
in Israel
Construction
and
infrastructure
projects
abroad
Services
and
maintenance
Development &
construction of
entrepreneurial real estate
Concessions Adjustments
Total
Unaudited
U.S. Dollars (in thousands(
Revenues 798,248 74,768 364,824 86,265 17,210 (60,350) 1,280,965
Inter-segmental revenues (55,268) - (5,082) - - 60,350 -
Total external revenues 742,980 74,768 359,742 86,265 17,210 - 1,280,965
Segmental income (loss) 28,937 3,983 36,174 9,059 *) (1,337) (2,826) 73,990
Less – unallocated expenses:
Administrative and general expenses (12,005)
Selling and marketing (166)
Others (2,162)
, netFinancing (5,276) *)
Income before taxes on income 54,381
*) Retrospective implementation, see Note 2D.
**) Reclassified, see Note 6Q.
For the three months ended September 30, 2019
Construction
and
infrastructure
projects
in Israel
Construction
and
infrastructure
projects
abroad
Services
and
maintenance
Development &
construction of
entrepreneurial real estate
Concessions Adjustments
Total
Unaudited
U.S. Dollars (in thousands(
Revenues 252,015 96,765 135,685 37,020 11,377 (22,639) 510,223
Inter-segmental revenues (21,302) - (1,337) - - 22,639 -
Total external revenues 230,713 96,765 134,348 37,020 11,377 - 510,223
Segmental income 3,405 6,342 12,000 4,587 31,749 526 58,609
Less – unallocated expenses:
Administrative and general expenses (3,861)
Selling and marketing (102)
, netFinancing (5,837)
Income before taxes on income 48,809
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
36
Note 4 – Operating segments - (Continued)
B. The reporting of operating segments: - (Continued)
For the three months ended September 30, 2018 **)
Construction
and
infrastructure
projects
in Israel
Construction
and
infrastructure
projects
abroad
Services
and
maintenance
Development &
construction of
entrepreneurial real estate
Concessions Adjustments
Total
Unaudited
U.S. Dollars (in thousands(
Revenues 249,468 26,030 121,872 34,062 5,010 (24,836) 411,606
Inter-segmental
revenues (22,808) - (2,028) - - 24,836 -
Total external
revenues 226,660 26,030 119,844 34,062 5,010 - 411,606
Segmental income
(loss) 7,993 1,280 11,981 3,251 *) (808) (442) 23,255
Less – unallocated
expenses:
Administrative and
general expenses (4,127)
Selling and marketing (62)
, netFinancing (1,947) *)
Income before taxes
on income 17,119
For the year ended December 31, 2018 **)
Construction
and
infrastructure
projects
in Israel
Construction
and
infrastructure
projects
abroad
Services
and
maintenance
Development &
construction of
entrepreneurial real estate Concessions Adjustments Total
Audited
U.S. Dollars (in thousands(
Revenues 1,077,518 107,847 487,903 114,414 23,179 (83,212) 1,727,649 Inter-segmental revenues (76,991) - (6,221) - - 83,212 -
Total external revenues 1,000,527 107,847 481,682 114,414 23,179 - 1,727,649
Segmental income (loss) 37,780 6,114 48,852 9,424 *) (1,978) (2,074) 98,118
Less – unallocated
expenses:
Administrative and
general expenses (15,359)
Selling and marketing
expenses (219)
Others (4,225)
Financing, net (7,834) *)
Income before taxes on
income 70,481
*) Retrospective implementation, see Note 2D.
**) Reclassified, see Note 6Q.
.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
37
Note 5 – Financial instruments
The following are the carrying values in the accounting records and the fair values of financial
instruments, which are not presented at their fair value in the financial information:
As of September 30 As of December 31
2019 2018 2018
Carrying
value
Fair value Carrying
value
Fair value Carrying
value
Fair value
Unaudited Audited
U.S. Dollars (in thousands( Loans from banking entities and
others – at fixed interest *)
In NIS – Index linked 202 201 316 325 287 295
In NIS – Unlinked 30,229 30,422 29,132 28,999 28,921 29,514
Bonds **)
Bonds (Series C) –
Index linked 35,251 37,004 52,562 55,973 52,010 54,636
Bonds (Series D and E) –
Unlinked 197,405 216,250 152,789 162,483 214,670 222,245
Total 263,087 283,877 234,799 247,780 295,888 306,690
*) The fair value of the long-term loans that bear fixed rate interest is based on a calculation of
the present value of the cash flows in accordance with the generally accepted interest rate for
similar loans with similar characteristics, excluding the deferred expenses in respect of the
recruitment of loans.
**) The fair value of marketable bonds is based on quoted prices in an active market as of the
date of the statement of financial position.
Note 6 - Significant events in the reporting period and thereafter
A. On January 13, 2019, the Company, operating through a subsidiary company, signed on an
agreement for the establishment of an office campus for Amdocs Israel in Ra'anana, in which
the activity of Amdocs' employees in Israel will be concentrated. The campus will contain 4
office buildings, areas for landscaping and 3 underground levels. The overall consideration
that is expected from the performance of the works amounts to US$ 95 million.
B. On January 22, 2019, Electra Elco C&S Ltd., a wholly owned subsidiary company of the
Company and Electra Infrastructures Ltd., a consolidated company, received notification that
their joint winning of a tender for the performance of civil engineering works, instillation and
running in of equipment, pipelines, electricity, devices and control system within the
framework of the Dan Region Sewage Treatment Works (Stage 3) had been approved. The
overall consideration that is expected from the performance of the works amounts to US$ 174
million.
C. On February 2, 2019, transactions were completed for the acquisition of 51% of the share
capital of Gilson Electrical Contracting Corp. and 51% of the share capital of Hellman Electric
Corp., which are veteran contracting companies in the electrical works field in New York City
in the United States. See Note 3 for additional details.
D. On March 3, 2019, Maalot S&P ratified a rating of AA-/Stable for the Company and for the
bonds (Series D and E). On September 22, 2019 Maalot S&P lowered the rating for the
Company and for the bonds (Series D and E) to a rating of A+/Stable, as a result of an increase
in the leveraging rate.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
38
Note 6 - Significant events in the reporting period and thereafter (Continued)
E. On March 13, 2019, within the context of an investigation by the Competition Authority, a
search was conducted in the offices of the Company's elevators division, documents and
computer media were collected from the Company and employees were questioned. To the
best of the Company's knowledge, the investigation deals with suspicions of transgressions of
the Economic Competition Law and additional transgressions under the Penal Code.
F. On March 27, 2019, the Company's Board of Directors approved the distribution of a dividend
in an amount US$ 10.3 million (approximately US$ 2.86 a share), which was paid on April 18,
2019.
G. The Planetograd project
1. The transfer of ownership over an additional parcel
Further to what is stated in Note 13C (1) to the annual consolidated financial statements,
in the reporting period, the ownership of an additional parcel in the first block was
transferred and the purchaser handed over two autonomous bank guarantees to the seller
as collateral for the consideration for an additional parcel in the first block (Parcel 56),
in an overall amount of approximately 811 million Rubles (approximately US$ 12.9
million in terms of 100%). Against the delivery of the said bank guarantees, the
mortgage that had been recorded on that parcel in support of the seller was removed.
The purchaser has begun marketing apartments in the parcel.
2. Legal proceedings
Further to what is stated in Note 13C(1) to the annual consolidated financial statements,
regarding legal proceedings in relation to the validity of Morgal's PPT, in the reporting
period, in accordance with partial information that appears on the Russian courts'
website, the petitioners have submitted an additional petition in the Supreme Court in
Moscow regarding the abovementioned ruling by the Supreme Court in Moscow. In the
reporting period, the Supreme Court dismissed the said petition by the petitioners.
3. In the reporting period, negotiations were held between the purchaser and the seller
(hereinafter: "The parties"), for the making of changed in the agreements between the
parties. This was done both against the background of the delay that was caused for the
project as a result of legal proceedings that have been conducted in the last two years
against the PPT and the building permits that have been given for the project and also
against the background of the change in the legislation in Russia, which restricts the
possibilities for entrepreneurs there to make use of the purchasers of apartments' monies
for the purpose of constructing the project other than by means of trust accounts
(accounts in which monies can only be released upon the completion of the construction
and the receipt of approval for occupation).
The abovementioned negotiation is still being conducted and this includes the
examination of the relevant financing and collateral aspects opposite the banks in
Russia.
However, already in the reporting period, it has been agreed between the parties that
Morgal will purchase approximately 430 apartments that will be built in the project in
parcels 56, 62 and 63. The timing of the payment by Morgal for the abovementioned
apartments has been set at the time of the handing over of the apartments in two and a
half years' time. The purchase agreement includes a unilateral option to cancel, which
has been granted to Morgal, pursuant to which Morgal is entitled to give notification of
the cancellation of the agreements for the purchase of the said apartments and to bind
the sellers to sign on the cancellation agreements at any time, where immediately upon
the notification on Morgal's part of its operation of the cancellation option it will be
exempt from the duty to pay for the said apartments. In the reporting period, Morgal
exercised the abovementioned cancellation option in relation to 250 apartments in
parcel 56 (out of the abovementioned 430 apartments) and the commitment between the
parties in relation to their purchase was cancelled by agreement.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
39
Note 6 - Significant events in the reporting period and thereafter (Continued)
G. (Continued)
4. Carrying value in the accounting records
As at the reporting date, Morgal has conducted an examination of the value in use of the
land in Russian, by means of an independent external appraiser. In light of the results of
the said examination, Morgal has reached the conclusion that the value of the land
amounts to approximately 9.02 billion Rubles.
H. Further to what is stated in Note 13D(4) to the annual consolidated financial statements, which
deals with a store and pump project on the Gilboa, in the reporting period there was a fire at
one of the main transformers at the project site. The construction contractor's management
(hereinafter: "The Partnership") and the management of P.S.P. Investments Ltd. (hereinafter:
"The concession holder") estimate that as a result of the fire and the repair of the transformer,
there will be a delay of several months in the timetables that are expected for the completion
and handing over of the project. In the Company's and the management of the Partnership's
assessment, based inter alia on the opinion of the legal advisors, the Partnership and its sub-
contractors (inter alia the Company's wholly owned subsidiary company) have insurance cover
that is virtually certainly expected to provide a full financial response for the additional costs
deriving from this event as from the time at which the insurance event occurred.
I. On May 20, 2019, the Securities Authority decided to extend the period of validity for the
offering of securities pursuant to the Company's shelf prospectus until May 29, 2020.
J. Further to what is stated in Note 12 to the annual consolidated financial statements as at
December 31, 2018, regarding a commitment by a subsidiary company of the Company
(hereinafter: "The subsidiary company") with a third party, under a memorandum of
understanding that is conditional upon a crucial condition, for the sale of all of its holdings in
Midtown Ltd. (hereinafter: "Midtown") in consideration for an amount of approximately
US$ 17.3 million (which constitutes the balance of the investment in Midtown as at the time
of the signing of the memorandum of understanding), the transaction was completed on June
11, 2019. Upon the completion of the transaction, the subsidiary company does not have any
holdings whatsoever in Midtown.
The consideration is payable in two payments – an amount of US$ 8.6 million with the
addition of VAT (if it applies) will be payable to the subsidiary company no later than at the
end of a period of two years from the time of the signing of the memorandum of
understanding, whereas the balance of the consideration will be payable to the subsidiary
company no later than at the end of a period of three years from the time of the signing of the
memorandum of understanding.
K. In their separate meetings on June 25, 2019, the Company's Remuneration Committee and its
Board of Directors approved a plan for the allocation of 133,0000 non-marketable option
warrants to the Company's CEO (hereinafter – "The option warrants"), pursuant to Section 102
of the Income Tax Ordinance (New Version) - 1961, on the capital gains path with a trustee.
The option warrants will vest in four equal annual tranches as from the end of a period of one
year from the time of the grant and up to the end of a period of four years from the said time,
respectively, and will expire nine months from the time of the start of the exercise of each
tranche, except for the options from the first tranche, which will expire at the end of one year
and nine months from the time that they vest. The exercise price for each option is US$ 308.7.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
40
Note 6 - Significant events in the reporting period and thereafter (Continued)
K. (Continued)
In their separate meetings on August 4, 2019, the Company's Remuneration Committee and its
Board of Directors decided to approve the allocation of option warrants and the updating of
the Company's remuneration policy, despite the opposition of the general meeting of the
Company's shareholders to the approval of the allocation of the option warrants and the
updating of the Company's remuneration policy, insofar as relates to the granting of option
warrants to the CEO, which was done in accordance with the provisions of Sections
272(C1)(1)(c) and 267A(c) of the Companies Law – 1999. The economic value of the overall
benefit granted amounts to approximately US$ 5,129 thousand.
L. On September 30, 2019, Midroog ratified a rating of A1/Stables for the bonds (Series C and
D).
M. On July 25, 2019, Electra Infrastructures Ltd, a consolidated company of the Company,
received notification that approval had been given for its winning of a tender for works
relating to the addition of a lane on Road 20 (The Ayalon Highway) within the context of
Section 2 of the Expressways project. The total consideration that is expected in respect of the
performance of the works amounts to approximately US$ 121 million.
N. On August 26, 2019, Electra Elco C&S Ltd. (hereinafter:" The seller"), a wholly owned
subsidiary company of the Company, and Generation Capital Ltd. (hereinafter: "The
purchaser") signed on a binding agreement for the sale of all of the seller's holdings in the
companies Negev Natural Gas Ltd., Natural Gas South Ltd. and Natural Gas Infrastructure
Company – E.P.C. Ltd. (hereinafter: "The companies being sold), which constitute 33.33% of
the issued and paid up share capital in each of the companies being sold.
The sale agreement contains representations and indemnification mechanism for damages that
may be caused as a result of the breach of the representations that are set forth in the sale
agreement, subject to restrictions, grounds, minimum and maximum amounts and the periods
that are set in the sale agreement. Furthermore, within the framework of the sale transaction,
the purchaser replaces the seller in the shareholders' agreements in the companies being sold,
and it takes on the seller's commitments as a shareholder vis-à-vis the financers, including the
guarantees for the loans that the companies being sold have taken up, the extent of which (the
purchaser's share in the guarantees) amounts to approximately US$ 7.3 million, as of the time
of the signing of the binding agreement.
The sale transaction was completed on September 26, 2019. The overall consideration in
respect of the sale of the seller's holdings in the companies being sold amounted to
approximately US$ 38.3 million,
At the time of the completion of the transaction, the Group derived overall cash flows of
approximately US$ 38.3 million and a pre-tax gain of approximately US$ 33.3 million.
O. On August 28, 2019, the Company's Board of Directors approved the distribution of a
dividend in an amount of approximately US$ 9.8 million (approximately US$ 2.69 per share),
which was paid on October 3, 2019.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
41
Note 6 - Significant events in the reporting period and thereafter (Continued)
P. On August 28, 2019, the Company's Board of Directors decided to approve a private issue of
7,029 non-marketable and non-transferable option warrants, which are exercisable into regular
shares of par value US$ 0.29 each in the Company, without consideration, to an offeree which
is an officer in the Company but who is not a director or the CEO, pursuant to the private
offering regulations and subject to the conditions of the "2016 option warrants allocation plan"
of the company, which was adopted by the Company's Board of Directors on March 28, 2016.
The options were granted to the offeree through a trustee, pursuant to Section 102 of the
Income Tax Ordinance (New Version) – 1961 on the capital gains path with a trustee.
Q. On August 28, 2019, the Board of Directors of a subsidiary company of the Company decided
to discontinue the operations in the cellular and telecommunications field in a subsidiary
company, which had been presented in the construction and infrastructure projects in Israel
segment and in the services and maintenance segment. In light of this, the results of those
operations have been classified as discontinued operations as from the third quarter of 2019,
from which the Group incurred a loss of approximately US$ 5.7 million in the 9 months
ending September 30, 2019 (US$ 4 in the 3 months ending September 30, 2019).
R. In August 2019, an update was signed to the plan for the allocation of option warrants for the
CEO of two subsidiary companies that are wholly owned by the Company (hereinafter: "The
CEO), and this further to the options allocation plan and the updating thereof in 2012, 2014
and 2016, under the following terms: option warrants were allocated in each of the companies
in a quantity constituting 5% of the issued share capital of each company (hereinafter, together
– the option warrants).
The option warrants will be exercisable in three equal annual tranches, as from the end of a
period of one year and nine months from the determining date and up to the end of a period of
three years and nine months from the determining time. Against the exercise of the option
warrants, the CEO will be allocated shares whose value will be equivalent to the amount of the
monetary benefit, which will be calculated in accordance with the difference between "the
future share price" and the exercise price, within the definition of that term (a cashless
transaction mechanism), and this in consideration for the payment of their par value. Despite
the aforesaid, if at the exercise time the subsidiary companies will be private companies (or
alternatively if no event involving a change in control or a private allocation, as defined in the
agreement, has taken place, monetary consideration will be allocated to the CEO, as follows:
(1) For the first subsidiary company – monetary consideration that is equivalent to 5% of
the total increase that occurs in the shareholders' equity between January 1, 2020 and
the time of the exercise (at the end of a period of three years, commencing on January 1,
2020), including the adjustments that will occur in the shareholders' equity of the
subsidiary company, in accordance with the provisions of the plan.
(2) For the second subsidiary company – monetary consideration at the level of the
difference between the value of the subsidiary company at the time of the exercise, in
accordance with an agreed mechanism that is based on the EBITDA multiplied by 5,
calculated on the basis of the subsidiary company's average EBITDA over a period of
three years for the relevant period, divided by the number of option warrants that have
been offered to the offeree with the addition of 2.5% multiplied by the cumulative net
income/ loss for the three years commencing on January 1, 2020 and until the end of a
period of three years from that time and all this in accordance with the relevant
quarterly and/or annual consolidated financial statements.
The grant is subject to the provisions of Section 3I of the Income Tax Ordinance. The
grant is being treated as a liability and revalued to fair value in each period as from the
financial statements for the year 2019. The value of the option amounted to
approximately US$ 2.07 million at the time of the grant.
ELECTRA LIMITED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
CONVENIENCE TRANSLATION INTO US DOLLARS
42
Note 6 - Significant events in the reporting period and thereafter (Continued)
R. (Continued)
(2) (Continued)
Furthermore, within the framework of the 2019 update, a ceiling was set for payments
to the CEO to the three relevant years in relation to the generality of the management
services, the annual bonuses and the monetary considerations and/or alternatively the
exercise value of the option warrants, as stated in Sections (1) and (2) above.
S. Arbitration proceedings are being conducted between Mabat Lanegev Construction
(hereinafter: "The construction contractor") and Mabat Lanegev Operations Ltd. (hereinafter:
"The operating contractor"), affiliated companies in which there are holdings of 30% and of
21.5%, respectively, and the State of Israel – the Ministry of Defense (hereinafter: "The
state"), which was started in accordance with the mechanism for the settlement of disputes,
which is set in Appendix L to the concession agreement in relation to the IDF's training
complex in the Negev (hereinafter: "The project"). On June 30, 2019, an arbitration meeting
was held within the context of which the arbitrators gave instructions that all of the statements
of claim were to be submitted as one item and they set timings for the submission of the
statements of claim and evidence and on October 3, 2019, the parties' statements of claim were
submitted to the arbitrators.
The parties have made mutual claims, which include monetary claims in connection with the
construction and operating periods, including prima facie claims of breaches of the terms of
the concession. After the managers of the affiliated companies, with the assistance of their
legal advisors, have examined the array of the parties' claims, the managements' assessment is
that the chances that the State's claims will be accepted are low. Accordingly, no provisions
have been recorded in the financial statements of the construction contractor and of the
operating company.
T. On September 10, 2019, Electra Infrastructures Ltd., a consolidated company of the Company,
received notification that its win in a tender held by Israeli Railways for the execution of
infrastructure, bridging and tunneling works for the 431rail track, had been approved. The
total consideration that is expected in respect of the performance of the works is
approximately US$ 111 million.
U. On October 2, 2019, an additional US$ 43 million par value of bonds (series E) was issued for
overall gross consideration of approximately US$ 48 million. The total par value of the bonds
(Series E) in circulation following the expansion amounts to approximately US$ 106 million
V. On October 28, 2019, Electra Construction Ltd., a wholly owned subsidiary of the Company,
signed on an agreement for the construction of the Landmark project on the Sharona site in
Tel-Aviv, within the framer of which the subsidiary company will build two towers of
approximately 40 stories each, containing two commercial stories and 6 underground levels,
with an overall area of approximately 240,000 Sq.m. The total consideration that is expected
in respect of the performance of the works amounts to approximately US$ 205 million. On
November 12, 2019, the subsidiary company committed itself under a joint project agreement
with Danya Cebus Ltd. (hereinafter: "Danya Cebus"), pursuant to which the subsidiary
company and Danya Cebus will be attributes 50% of the rights and the liabilities, for the
purpose of the performance of the project, and this under "back to back" terms, to the
agreement that was signed between the subsidiary company and the commissioner of the
works.
/ 409 -א 171340,
Top Related