- 2007: Sales Up 7.2% to NIS 7.0B with 4.3% Operating Margin - ROSH
HA'AYIN, Israel, March 24 /PRNewswire-FirstCall/ -- Blue Square-
Israel Ltd. (NYSE and TASE: BSI) today announced unaudited results
for the fourth quarter and year ended December 31, 2007. All
financial results are reported according to Israeli GAAP (Generally
Accepted Accounting Principles). Results for 2007 ----------------
Revenues: Revenues for 2007 increased by 7.2% to NIS 6,982.3
million (U.S. $1,815.5 million)s (a) compared to NIS 6,515.0
million in 2006. The increase reflects: 1) the addition of 16,322
square meters of selling space resulting from the opening of eight
new stores during the year; 2) the 1.2% rise in Same Store Sales,
which reflects the success of the new Mega In Town format; 3) the
ongoing expansion of operations of Bee Group Retail ("Bee Group")
(formerly Kfar Ha'Shaashuim), including the consolidation during
the year of the revenues of Vardinon Textile Ltd. (TASE:WRDT)
("Vardinon"), which the Company acquired (through its subsidiary,
Bee Group) in the second quarter of 2007, and of Naaman Porcelain
Ltd. (TASE:NAMN) ("Naaman"), which the Company acquired (through
its subsidiary, Bee Group) in the fourth quarter of 2007; and 4)
the consolidation of Eden Briyut Teva Market Ltd. ("Eden Teva"),
which the company acquired in the fourth quarter of 2007, adding
3,100 square meters of selling space in two new branches. Gross
Profit: Gross profit for 2007 increased by 8.9% to NIS 1,852.8
million (U.S. $481.7 million) compared to NIS 1,702.1 million in
2006. Gross margin for the period increased to 26.5% compared to
26.1% in 2006, reflecting improved agreements with suppliers and
the higher profitability of sales generated by the Company's
subsidiary Bee Group Retail, moderated by a strongly competitive
environment and an increased proportion of discount sales in the
revenue mix. Revaluation of Investment Property: In compliance with
Israeli GAAP Accounting Standard No. 16, the Company adjusted the
value of its investment property to reflect their fair market
value. In 2007, the Company recorded non-cash income of NIS 10.5
million (U.S. $2.7 million) in accordance with the Standard.
Selling, General, and Administrative Expenses: Selling, General,
and Administrative expenses in 2007 increased by 11.9% to NIS
1,562.5 million (U.S. $406.3 million) (22.4% of revenues) compared
to NIS 1,396.8 million (21.4% of revenues) in 2006. The increase
derived mainly from the expenses of opening eight new stores, the
marketing activities associated with the launch of the Mega In Town
chain, an increase in employee wages; and expenses linked to the
Israeli CPI such as rent and municipal taxes. In addition, the
expenses increased due to the consolidation, for the first time, of
the companies detailed above. Operating Income: Operating income
for 2007 was NIS 300.7 million (U.S. $78.2 million), a decrease of
1.5% compared to NIS 305.2 million in 2006. The decrease reflects
the period's increased operating expenses, mitigated by higher
revenues and gross profit. Operating margin for the period was 4.3%
compared to 4.7% in 2006. EBITDA (Earnings before Interest, Taxes,
Depreciation, and Amortization): EBITDA for 2007 was NIS 423
million (U.S. $110 million) compared to NIS 436 million in 2006.
EBITDA margin for the period was 6.1% compared to 6.7% in 2006.
Financial Expenses: Financial expenses for 2007 were NIS 54.8
million (U.S. $14.2 million) compared to NIS 42.4 million in 2006.
The increase derived primarily from a rise in the "Known" price
index. Other Income: In 2007, the Company recorded other income of
NIS 3.3 million (U.S. $0.9 million). In 2006 the Company recorded
other income of NIS 78.0 million, consisting primarily of: 1) the
capital gains associated with the IPO of BSRE, the Company's real
estate subsidiary; 2) the sale of a portion of the Company's
holdings in BSIP; and 3) non-cash income recorded in compliance
with Israel Accounting Standard No. 15 - Impairment of Assets.
Taxes on Income: Taxes on income for 2007 were NIS 68.5 million
(U.S. $17.8 million), a decrease of 29.1% compared to NIS 96.7
million in 2006. The tax rate for the year was 27.5% compared to
28.4% for 2006, reflecting the decline of the corporate tax rate
during the period from 29% to 27% and inflation's effect on the
Israeli tax calculation. Net Income: Excluding the capital gains
and other income for all periods as explained above, net income for
2007 increased by 5.0% compared to 2006. Net income for 2007 was
NIS 150.2 million (U.S. $39.1 million), or NIS 3.55 per ADS (U.S.
$0.92) (NIS 3.42 per fully diluted ADS), compared to NIS 213.9
million, or NIS 5.46 per ADS (NIS 4.92 per fully diluted ADS), for
2006. Other Operating Data -------------------- -- The Company's
Same Store Sales for 2007 increased by 1.2%. -- During 2007, the
Company opened ten supermarkets, adding a net total of 19,401
square meters to the chain. -- During the fourth quarter, the
Company acquired 51% of Eden Briyut Teva Market Ltd., one of
Israel's largest retailers of organic, natural and health food
products. -- The Company's subsidiary, Bee Group Retail Ltd.,
operates 232 retail outlets with activities in the toy, housewares,
gift, baby and textile sectors. Dividends --------- On April 12,
2007, the Company paid a dividend of NIS 60 million. On October 8,
2007, the Company paid a dividend of NIS 220 million. Employee
Share Option Plan -------------------------- At their most recent
meetings, Blue Square's Board of Directors and its Compensation
Committee and Audit Committee approved the granting of options to
approximately 300 Blue Square officers and managers ( including
store managers) under Blue Square's recently adopted Share Option
Plan. As part of this approval, the Board of Directors and its
Audit Committee revised the option package granted to Blue Square's
President and Chief Executive Officer, Mr. Zeev Vurembrand,
approving a grant of 800,000 options to Mr. Vurembrand according to
his employment agreement at an exercise price to be determined
equal to the average of the Company's share's closing price for the
30 trading days prior to the date of grant. Results for the Fourth
Quarter ------------------------------ Revenues: Revenues for the
fourth quarter of 2007 increased by 12.2% to NIS 1,784.5 million
(U.S. $464.0 million) compared with NIS 1,590.4 million in the
fourth quarter of 2006. The increase reflects the quarter's strong
4.8% rise in Same Store Sales, together with the addition of the
selling space of eight stores during the previous twelve months,
and the consolidation, for the first time, of the sales of
Vardinon, Naaman and Eden Teva. Gross Profit: Gross profit for the
fourth quarter of 2007 increased by 11.6% to NIS 477.8 million
(U.S. $124.2 million) compared to NIS 428.2 million in the fourth
quarter of 2006. This reflects the factors discussed above,
including improved agreements with suppliers and the higher
profitability of Bee Group Retail sales, moderated by a strongly
competitive environment and the increased proportion of discount
sales. Gross margin for the period decreased slightly to 26.8% from
26.9% in the fourth quarter of 2006. Revaluation of Investment
Property: see above Selling, General, and Administrative Expenses:
The Company's Selling, General, and Administrative expenses for the
fourth quarter of 2007 increased by 15.1% to NIS 410.8 million
(U.S. $106.8 million) compared to NIS 357.0 million in the fourth
quarter of 2006. The increase reflects activities associated with
the successful launch of the Mega In Town chain, including
renovations, advertising, marketing and other expenses; the opening
of eight new stores during the year; and the consolidation of
Vardinon, Naaman and Eden Teva for the first time. Operating
Income: Operating income for the fourth quarter of 2007 increased
by 8.7% to NIS 77.4 million (U.S. $20.1 million) compared to NIS
71.2 million in the fourth quarter of 2006. The increase reflects
the quarter's stronger sales and gross profit together with the
non-cash contribution of the revaluation of the Company's
investment property, moderated by the increase in Selling, General
and Administrative expenses. Operating margin for the period was
4.3% compared to 4.5% in the fourth quarter of 2006. EBITDA
(Earnings Before Interest, Taxes, Depreciation, and Amortization):
EBITDA for the fourth quarter of 2007 was NIS 102.5 million (U.S.
$26.5 million) compared with NIS 104 million in the fourth quarter
of 2006. EBITDA margin for the period was 5.7% compared with 6.6%
in the fourth quarter of 2006. Financial Expenses (Income): In the
fourth quarter of 2007, the Company recorded financial expenses
(net) of NIS 10.0 million (U.S. $2.6 million), while in the fourth
quarter of 2006 it recorded financial income of NIS 2.4 million.
The difference derives primarily from the "Known" CPI Index to
which most of the Company's loans and debentures are linked, which
was unchanged during the period, compared to the fourth quarter of
2006, in which the "Known" CPI index decreased by 1.72%. In
addition, financial income decreased due to a reduction in the
balance of the Company's income-generating cash and cash
equivalents. Other Income: In the fourth quarter of 2007, the
Company recorded other income of NIS 5.8 million (U.S. $1.5
million), reflecting non-cash income recorded in compliance with
Israeli Accounting Standard No. 15 - Impairment of Assets following
the Company's review of the carrying value of its assets. In the
fourth quarter of 2006, the Company recorded other income of NIS
30.1 million, which included non-cash income recorded in compliance
with Israeli Accounting Standard No. 15 - Impairment of Assets, and
from the sale to the public of 0.7% of the shares of the Company's
BSIP subsidiary. Taxes On Income: Taxes on income for the fourth
quarter of 2007 were NIS 22.6 million (U.S. $5.9 million), a
decrease of 37.0% compared to NIS 35.9 million in the fourth
quarter of 2006. The tax rate for the quarter was 30.9% compared to
34.6% in the fourth quarter of 2006, reflecting the decline of the
corporate tax rate during the period from 29% to 27% and
inflation's effect on the Israeli tax calculation. Net Income:
Excluding Other Income for all periods as explained above, net
income for the fourth quarter of 2007 increased by 16.2% compared
to the fourth quarter of 2006. Net income for the fourth quarter of
2007 was NIS 42.0 million (U.S. $11.0 million), or NIS 0.97 per ADS
(U.S.$ 0.25) (NIS 0.92 per fully diluted ADS). Net income for the
fourth quarter of 2006, was NIS 56.8 million, or NIS 1.43 per ADS
(NIS 1.26 per fully diluted ADS). Other Operating Data: -- The
Company's Same Store Sales for the fourth quarter of 2007 increased
by 4.8%. -- During the fourth quarter of 2007, the Company added
three stores (including two Eden Teva branches), adding a net total
of 3,421 square meters to the chain. Comments of Management
---------------------- Commenting on the results, Mr. Zeev
Vurembrand, Blue Square's President and CEO since March 2, 2008,
said, "2007 was a year of expansion and diversification which has
taken our business to a new level. On the supermarket front, the
Company's bold launch of the Mega In Town neighborhood discount
format has been a success, delivering top-line and bottom-line
performance that has exceeded our plans and expectations. In
parallel, the Company's continued build-out of our premier Mega and
Shefa chains, together with its strong move into the
premium-organic sector through the acquisition of Eden Teva
Markets, has strengthened our leadership position. On the Non- Food
front, during 2007 we acquired Naaman Porcelain and Vardinon
Textile (both through Bee Group), and intend to launch three
large-format housewares stores under our new 'Bee' brand." Mr.
Vurembrand continued, "In the year ahead, the entire organization
is focused on achieving the next level of growth for our business.
To motivate all of our forces towards achieving this goal, the
Board of Directors has recently approved the grant of options to
approximately 300 of our store managers, officers and other
employees, a means by which we are directly linking compensation
with results. Our specific plans for 2008 include the opening of
8-10 supermarkets nationwide, the expansion of our Eden Teva chain,
and the continued development of each of our strong brands, all
while continuing to focus on customer satisfaction and efficiency.
As I take over as Blue Square's CEO, I am excited regarding the
opportunities ahead and confident in the ability of this leading
group to achieve our goals." IFRS - International Financial
Reporting Standard
------------------------------------------------- In July 2006, the
Israel Accounting Standards Board published Accounting Standard No.
29, "Adoption of International Financial Reporting Standards
("IFRS")" (hereinafter: "the Standard"). The Standard states that
companies subject to the Securities Law - 1968 are to prepare their
financial statements for the reporting periods commencing January
1, 2008 according to the International Financial Reporting
Standards (IFRS). The opening balance sheet according to IFRS will
be as of January 1, 2007 (the date of the Company's transition to
IFRS). The initial implementation of IFRS will be effected along
with the implementation of IFRS 1, "First Time Adoption of
International Financial Reporting Standards," for the purposes of
the transition. In the financial statements prepared according to
the IFRS regulations in the first year of adoption, the Company is
obliged to show comparative figures for only one year. The Company
is preparing for the adoption of the IFRS standards and has
examined the substantive implications for the Company as a result
of the adoption of these standards. The determination of the
quantitative effect of the transition to reporting under IFRS is
expected to be completed during the next few months. The effect
will be detailed within the notes of the Company's audited
financial statements as of December 31, 2007. Potential Boycott of
Blue Square Stores By Certain Ultra-Orthodox
-----------------------------------------------------------------
Communities ----------- During the past few days, Blue Square has
learned from articles in the local press that certain sectors
within Israel's ultra-Orthodox Jewish population segment are
considering mounting a boycott against Blue Square's stores. The
proposed boycott is in response to the fact that Israel's AM:PM
convenience stores, a network of stores operated under Dor-Alon
Energy, a publicly-traded company controlled by Blue Square's
controlling shareholder, is open for business on Saturday, the
Jewish Sabbath. None of Blue Square's stores are open for business
on Saturday, and several of its Shefa Shuk stores are designed to
appeal directly to the ultra-Orthodox sector. At this point, no
effect on sales has been noticed. However, if the boycott
materializes, it might have an adverse effect on sales. The Company
is at this point to assess whether such a boycott will materialize
and, if it does, the exact effect that it might have on Blue
Square's business. NOTE A: Convenience Translation to Dollars The
convenience translation of New Israeli Shekel (NIS) into U.S.
dollars was made at the rate of exchange prevailing at December 31,
2007: U.S. $1.00 equals NIS 3.846. The translation was made solely
for the convenience of the reader. Blue Square is a leading
retailer in Israel. A pioneer of modern food retailing in the
region, Blue Square currently operates 188 supermarkets under
different formats, each offering varying levels of service and
pricing. This press release may contain forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act
of 1995, with respect to the Company's business, financial
condition, prospects and operating results. These statements are
based on current expectations and projections that involve a number
of risks and uncertainties. Actual results could differ materially
from those anticipated in these forward-looking statements as a
result of various factors, including risk of market acceptance, the
effect of economic conditions, the impact of competitive pricing,
supply constraints, the effect of the Company's accounting
policies, as well as certain other risks and uncertainties which
are detailed in the Company's Annual Report on Form 20-F and other
filings with the Security and Exchange Commission. Forward-looking
statements speak only as of the date on which they are made and the
Company undertakes no commitment to revise or update any forward-
looking statement in order to reflect events or circumstances after
the date any such statement is made. CONTACT Blue Square-Israel
Ltd. Dror Moran, CFO Toll-free telephone from U.S. and Canada:
888-572-4698 Telephone from rest of world: 972-3-928-2220 Fax:
972-3-928-2299 Email: BLUE SQUARE - ISRAEL LTD. CONDENSED
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2007 (UNAUDITED)
Convenience translation(a) December 31, December 31,
--------------------- -------------- 2006 2007 2007 ------ ------
------ NIS U.S. dollars --------------------- --------------
Unaudited Unaudited --------------------- -------------- In
thousands ------------------------------------- Assets CURRENT
ASSETS: Cash and cash equivalents 186,454 56,410 14,667 Marketable
securities 65,287 199,394 51,845 Short-term bank deposit 526,459
103,498 26,911 Trade receivables 672,605 776,251 201,833 Other
accounts receivable 119,028 139,650 36,310 Inventories *377,561
453,655 117,955 ----------- ----------- ----------- Total current
assets 1,947,394 1,728,858 449,521 ----------- -----------
----------- INVESTMENTS AND LONG TERM RECEIVABLES: Investments in
associated companies 4,762 4,948 1,287 Other long-term receivables
2,618 48,289 12,556 ----------- ----------- ----------- 7,380
53,237 13,843 ----------- ----------- ----------- FIXED ASSETS, NET
OF ACCUMULATED DEPRECIATION AND AMORTIZATION **1,778,755 1,860,203
483,672 ----------- ----------- ----------- INVESTMENT PROPERTY
**222,057 315,778 82,106 ----------- ----------- -----------
DEFERRED TAXES 16,789 22,301 5,798 ----------- -----------
----------- INTANGIBLE ASSETS AND DEFERRED CHARGES, NET OF
ACCUMULATED AMORTIZATION 99,358 251,994 65,521 ------------
------------ ----------- 4,071,733 4,232,371 1,100,461 ------------
------------ ------------ * Reclassified ** Reclassification in
respect of retrospective application of change in accounting
policy. *** As of December 31, 2007, presented based on the fair
value model and as of December 31, 2006 presented at cost. BLUE
SQUARE - ISRAEL LTD. CONDENSED CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 2007 (UNAUDITED) Convenience translation(a) December
31, December 31, --------------------- -------------- 2006 2007
2007 ------ ------ ------ NIS U.S. dollars ---------------------
-------------- Unaudited Unaudited ---------------------
-------------- In thousands -------------------------------------
Liabilities and shareholders' equity CURRENT LIABILITIES: Credit
and loans from banks 211,152 137,864 35,846 Current maturities of
debentures 53,706 69,859 18,164 Trade payables *938,007 973,461
253,111 Other accounts payable and accrued expenses 409,153 447,230
116,284 ------------ ------------ ------------- Total current
liabilities 1,612,018 1,628,414 423,405 ------------ ------------
------------- LONG-TERM LIABILITIES: Long-term loans from banks,
net of current maturities *119,574 293,280 76,256 Debentures, net
of current maturities 827,558 772,827 200,943 Convertible
debentures, net of current maturities 214,794 143,158 37,223
Deferred income taxes 30,198 51,638 13,426 Liability for employee
rights, net of amount funded 35,527 43,909 11,417 ------------
------------ ------------- Total long-term liabilities 1,227,651
1,304,812 339,265 ------------ ------------ -------------
CONTINGENT LIABILITIES AND COMMITMENTS Total liabilities 2,839,669
2,933,226 762,670 ------------ ----------- ------------- MINORITY
INTEREST 239,142 274,311 71,324 ------------ ------------
------------- SHAREHOLDERS' EQUITY: Share capital - Ordinary shares
of NIS 1 par value - Authorized: 100,000,000 shares as of December
31, 2007 and 2006; Issued and outstanding 43,372,819 and 39,692,983
shares as of December 31, 2007 and 2006, respectively 53,414 57,094
14,845 Additional paid-in capital 737,756 845,168 219,752 Dividend
declared subsequent to balance sheet date 60,000 - - Unappropriated
141,752 122,572 31,870 ------------ ----------- ------------- Total
shareholders' equity 992,922 1,024,834 266,467 ------------
------------ ------------- 4,071,733 4,232,371 1,100,461
------------ ------------ ------------- * Reclassified. BLUE SQUARE
- ISRAEL LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE TWELVE AND THREE MONTH PERIODS ENDED DECEMBER 31, 2007
(UNAUDITED) Convenience translation(a) for the Year Three months
three months ended December 31, ended December 31, December 31,
--------------- --------------- ------------- 2006 2007 2006 2007
2007 ------ ------ ------ ------ ------ Audited Unaudited Unaudited
Unaudited Unaudited --------- ----------- --------- ---------
---------- NIS U.S. Dollars
------------------------------------------ ------------ In
thousands (except share and per share data)
------------------------------------------------------- Sales
6,515,035 6,982,350 1,590,405 1,784,513 463,992 Cost of sales
4,812,952 5,129,520 1,162,182 1,306,722 339,761 ---------
---------- --------- --------- -------- Gross profit 1,702,083
1,852,830 428,223 477,791 124,231 Revaluation of Investment
property - 10,456 - 10,456 2,719 Selling, general and
administrative expenses 1,396,877 1,562,555 357,040 410,841 106,823
--------- --------- ------- ------- ------- Operating income
305,206 300,731 71,183 77,406 20,127 Financial income (expenses),
net (42,368) (54,798) 2,352 (10,003) (2,601) -------- --------
----- -------- ------- 262,838 245,933 73,535 67,403 17,526 Other
income, net 78,022 3,355 30,105 5,770 1,500 ------ ----- ------
----- ----- Income before taxes on income 340,860 249,288 103,640
73,173 19,026 Taxes on income 96,660 68,495 35,861 22,609 5,879
------ ------ ------ ------ ----- Income after taxes on income
244,200 180,793 67,779 50,564 13,147 Share in profits of associated
companies, net 1,284 186 572 49 13 Minority interest in profits of
subsidiaries, net 31,573 30,757 11,513 8,649 2,249 ------ ------
------ ----- ----- Net income 213,911 150,222 56,838 41,964 10,911
------- ------- ------ ------ ------ Net income per ordinary share
or ADS: Basic 5.46 3.55 1.43 0.97 0.25 ---- ---- ---- ---- ----
Fully diluted 4.92 3.42 1.26 0.92 0.24 ---- ---- ---- ---- ----
Weighted average number of shares or ADS used for computation of
income per share or ADS: Basic 39,207,214 42,355,339 39,690,815
43,372,819 43,372,819 ---------- ---------- ---------- ---------
---------- Fully diluted 44,939,831 45,134,184 44,939,831
44,793,242 44,793,242 ---------- ---------- ---------- ----------
---------- BLUE SQUARE - ISRAEL LTD. SELECTED OPERATING DATA FOR
THE YEAR AND THREE MONTH PERIODS ENDED DECEMBER 31, 2007
(UNAUDITED) Convenience translation(a) for the three For the year
For the three months months ended ended ended December 31 December
31 December 31 ----------------- ------------------ 2006 2007 2006
2007 2007 NIS NIS NIS NIS U.S.$ ------ ------ ------ ------
----------- Unaudited Unaudited
------------------------------------- ------------ Sales (in
millions) 6,515 6,982 1,590 1,785 464 Operating income (in
millions) 305 301 71 77 20 EBITDA (in millions) 436 423 104 102 26
EBITDA margin 6.7% 6.1% 6.6% 5.7% NA Increase in same store sales*
5.3% 1.2% 4.5% 4.8% NA Number of stores at end of period 175 185
175 185 NA Stores opened during the period 7 10 1 3 NA Total square
meters at end of period 323,304 342,705 323,304 342,705 Square
meters added during the period, net 11,304 19,401 1,139 3,421 NA
Sales per square meter 19,739 19,905 4,773 4,977 1,291 Sales per
employee (in thousands) 938 937 227 234 61 * Compared with the same
period in the prior fiscal year. DATASOURCE: Blue Square-Israel
Ltd. CONTACT: Dror Moran, CFO of Blue Square-Israel Ltd., Toll-free
telephone from U.S. and Canada, +1-888-572-4698, Telephone from
rest of world, +1-972-3-928-2220, Fax, +1-972-3-928-2299,
Copyright