Despite Timing of Passover Holiday, the Success of Mega in Town
Brought Sales Up 7.5% With 27.7% Gross Margin, 5.0% Operating
Margin ROSH HA'AYIN, Israel, May 29 /PRNewswire-FirstCall/ -- Blue
Square-Israel Ltd. (NYSE and TASE: BSI) today announced unaudited
results for the first quarter ended March 31, 2008. NOTE: IFRS -
International Financial Reporting Standard All financial results
reported in this release are presented for the first time in
accordance with International Financial Reporting Standards
("IFRS"). Results for the First Quarter Revenues: Revenues for the
quarter increased by 7.5% to NIS 1,821.2 million (U.S. $512.6
million) (a) compared to NIS 1,693.5 million in the first quarter
of 2007. The increase reflected: 1) the addition of 15,436 square
meters of selling space through the opening of eleven new
supermarkets during the twelve month period; 2) 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") and
Naaman Porcelain Ltd. (TASE:NAMN) ("Naaman") since the second and
the fourth quarter of 2007, respectively; 3) the consolidation
since the fourth quarter of 2007 of Eden Briyut Teva Market Ltd.
("Eden Teva"); and 4) the 1.1% rise in Same Store Sales, which
derived from the quarter's increase in food prices, countered by
the timing of the Passover buying season, which fell entirely in
the second quarter of 2008 but partially in the first quarter of
2007. Gross Profit: Gross profit for the first quarter increased by
13.5% to NIS 503.6 million (U.S. $141.7 million) compared to NIS
443.6 million in the first quarter of 2007. Gross margin for the
period increased to 27.7% compared to 26.2% in the parallel quarter
of 2007, reflecting improved agreements with suppliers; the success
of the Mega In Town format, reducing the weight of hard discount
sales due to the decrease in sales of the Shefa Shuk and Mega
chains; and the higher gross margin of sales generated by the
Company's subsidiary Bee Group Retail. This was moderated by a
strongly competitive environment. Revaluation of Investment
Property: In compliance with the IFRS Accounting Standard, the
Company adjusts the value of its investment property according to
Fair Market Value. As such, in the first quarter of 2008, the
Company recorded non-cash income of NIS 12.7 million (U.S. $3.6
million). Selling, General, and Administrative Expenses: Selling,
General, and Administrative expenses for the quarter increased by
16.9% to NIS 426.1 million (U.S. $119.9 million) (23.4% of
revenues) compared to NIS 364.3 million (21.5% of revenues) in the
first quarter of 2007. The increase derived mainly from the
expenses of opening new stores, and the expenses of the companies
which were consolidated into Blue Square's results of the first
quarter of 2008 but not in the parallel quarter of 2007. In
addition, operating expenses such as rent and municipal taxes
increased due to the increase in the Israeli CPI. Operating Income:
Operating income for the quarter increased by 13.8% to NIS 90.2
million (U.S. $25.4 million) from NIS 79.3 million in the first
quarter of 2007. The increase reflects the period's higher
revenues, gross profit and non-cash income from the revaluation of
investment properties, mitigated somewhat by increased operating
expenses. Operating margin for the period was 5.0% compared to 4.7%
in the first quarter of 2007. Excluding the income derived from the
revaluation of investment property, operating margin for the first
quarter was 4.3%. EBITDA (Earnings before Interest, Taxes,
Depreciation, and Amortization): EBITDA for the quarter was NIS
114.0 million (U.S. $32.1 million) compared to NIS 112.8 million in
the first quarter of 2007. EBITDA margin for the period was 6.3%
compared to 6.7% in the parallel period of 2007. Financial Expenses
(net): Financial expenses (net) for the quarter were NIS 8.2
million (U.S. $2.3 million) compared to NIS 36.7 million in the
first quarter of 2007. This significant decrease reflected the
Company's adoption of the IFRS standard, which mandates the
presentation of financial instruments at Fair Market Value with
changes in value accounted for as financial income or expense.
During the first quarter of 2008, the Company recorded financial
income of approximately NIS 11.3 million (U.S. $3.2 million)
related to the revaluation of its holdings in financial
instruments, compared to the parallel quarter of 2007, in which its
financial expenses connected with financial instruments totaled
approximately NIS 28.7 million. This reduction in financial
expenses was partially mitigated by an increase associated with the
period's changes in the value of its debt attributable to the
increase in Israel's "Known" price index. Taxes on Income: Taxes on
income for the quarter were NIS 15.8 million (U.S. $4.5 million), a
decrease of 30.4% compared to NIS 22.7 million in the first quarter
of 2007. The effective tax rate for the quarter declined to 19.6%
compared to 52.4% for the first quarter of 2007, reflecting the
fact that the Company, in compliance with the IFRS, did not record
tax liability from the revaluation of its financial instruments to
Fair Value. Net Income: Net income for the first quarter of 2008
was NIS 65.0 million (U.S. $18.3 million), an increase of 214.7%
compared to NIS 20.7 million for the first quarter of 2007. The
increase of net income, reflects the significant improvement and
the reduction of financial expenses, as explained above. The
portion of the net profit attributable to shareholders, as
calculated in accordance with the IFRS, was NIS 58.1 million (U.S.
$16.4 million), or NIS 1.34 per ADS (U.S. $0.38), while the portion
attributable to the share of minority interests was NIS 6.9 million
(U.S. $2.0 million). Other - The Company's Same Store Sales for the
first quarter of 2008 increased by 1.1%. - During the quarter, the
Company opened three supermarkets, adding a net total of 4,235
square meters to the chain. - Since the second half of March 2008,
the media has published reports that certain sectors within
Israel's ultra-Orthodox population segment are considering the
declaration of a boycott against Blue Square's Shefa Shuk chain.
Although the Company is unaware of any such public declaration,
since the end of March 2008, the Company has experienced a
significant decrease in the sales of several Shefa Shuk stores
which appeal to the ultra-Orthodox community and/or are located
within ultra-Orthodox neighborhoods. The decrease in sales in these
stores did not make a material impact on the Company's financial
results for the first quarter of 2008; however it is possible that
changes in the situation may create an effect on the Company as
2008 progresses. Management is currently finalizing alternative
strategies for addressing potential developments. Comments of
Management Commenting on the results, Mr. Zeev Vurembrand, Blue
Square's President and CEO said, "We are pleased to report another
solid quarter, reflecting the continued success of our Mega In Town
brand." "Since I took over as CEO in March 2008, our focus has been
to form a comprehensive strategy for driving the Company's
long-term growth and establishing leadership of Israel's
supermarket and retail markets. Although we have not yet finalized
the plan, we have already begun working on one of its key action
items: the improvement of our flagship Mega brand through
innovative marketing and improvements in the supply chain. As part
of this effort, we will soon be opening our first supermarket
targeting the Arab sector while also launching a variety of
customer loyalty, financial services and other initiatives. For the
medium-to-long term, our goals include the build-out of our 'Bee'
retail brand into a nationwide chain of housewares, textiles,
children/babies and toy stores. In parallel, we will expand Eden
Teva, our organic chain, significantly to build on our early lead
in Israel's emerging market for organic and health food. We believe
the combination of these initiatives will drive continuous growth
and success for Blue Square, enabling us to deliver significant
value to our shareholders over the long term." 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 March 31, 2008: U.S. $1.00 equals NIS 3.553. 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/A and other filings with the Security
and Exchange Commission. Forward-looking statements speak only as
of the date on which they are made and the Company undertakes no
commitment to revise or update any forward-looking statement in
order to reflect events or circumstances after the date any such
statement is made. BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2008 Convenience translation December
31, March 31, March 31, __________________ 2007 2007 2008 2008
__________ __________ __________ __________ Unaudited
_________________________________________________ U.S. NIS dollars
____________________________________ __________ In thousands
_________________________________________________ A s s e t s
CURRENT ASSETS: Cash and cash equivalents 56,410 127,522 53,196
14,972 Short-term investments 199,394 64,831 187,044 52,644
Short-term bank deposit 103,498 531,866 1,834 516 Trade receivables
776,251 766,134 802,856 225,966 Other accounts 74,445 receivable
99,841 251,894 264,514 Income taxes receivable 23,062 19,779 25,013
7,040 Inventories 453,944 441,956 556,592 156,654 _________
_________ _________ _________ 1,712,400 2,203,982 1,891,049 532,237
_________ _________ _________ _________ NON-CURRENT ASSETS:
Long-term receivables 48,289 16,426 2,874 3,612 Embedded derivative
10,500 - 5,250 1,478 Prepaid expenses in respect of operating lease
199,679 204,172 198,181 55,779 Investments in investee companies
4,948 5,386 5,076 1,429 Investment property 315,778 281,149 388,098
109,231 Intangible assets, net 280,420 92,399 287,945 81,043 Fixed
assets, net 1,613,515 1,524,140 1,652,829 462,389 Deferred taxes
36,167 33,252 39,022 10,983 _________ _________ _________ _________
4,221,696 4,360,906 4,470,324 1,258,181 ========= =========
========= ========= BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2008 Convenience translation December
31, March 31, March 31, _________________ 2007 2007 2008 2008
_______ _______ _______ _______ Unaudited
___________________________________________________ U.S. NIS
dollars ________________________________________ _________ In
thousands ____________________________________________________
Liabilities and shareholders' equity CURRENT LIABILITIES: Credit
From banks and others 171,010 155,813 167,338 47,098 Current
maturities of convertible debentures 69,859 37,347 70,987 19,979
Trade payables 973,461 997,549 1,024,668 288,395 Other accounts
payable 447,729 563,815 604,671 170,186 Income taxes payable 2,905
359 4,480 1,261 Dividend payable - 60,000 3,945 1,110 __________
__________ _________ ________ 1,664,964 1,814,883 1,876,089 528,089
__________ __________ _________ ________ LONG-TERM LIABILITIES:
Loans from banks 260,134 177,422 248,444 69,925 Convertible
debentures 169,897 303,669 145,688 41,004 Debentures 772,827
827,350 776,684 218,599 Derivatives instruments 9,968 8,005 11,619
3,270 Liabilities in respect of employee benefits, net 35,986
32,854 37,023 10,420 Deferred taxes 60,240 44,197 61,299 17,253
1,309,052 1,393,497 1,280,757 360,471 SHAREHOLDERS' EQUITY: Share
capital - Ordinary shares of NIS 1 par value 57,094 54,996 57,094
16,069 Additional paid-in capital 1,019,348 873,086 1,020,594
287,541 Accumulated deficit (106,833) (17,980) (48,456) (13,931)
_________ _________ _________ _________ 969,609 910,102 1,029,232
289,680 Minority interest 278,071 242,424 284,246 80,002 _________
_________ _________ ________ Total equity 1,247,680 1,152,526
1,313,478 369,681 _________ _________ _________ ________ Total
liabilities and shareholders' equity 4,221,696 4,360,906 4,470,324
1,258,181 ========= ========== ========= ========= BLUE SQUARE -
ISRAEL LTD. INTERIM CONSOLIDATED INCOME STATEMENT FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 2008 Convenience translation for the
three months For the three months ended December 31, ended March
31, March 31, __________________ 2007 2007 2008 2008 _________
________ _______ _________ Unaudited
__________________________________________________ U.S. NIS dollars
_____________________________________ __________ In thousands
__________________________________________________ Revenues from
sales 6,982,228 1,693,456 1,821,158 512,569 Cost of sales 5,129,578
1,249,851 1,317,604 370,843 _________ _________ __________
_________ Gross profit 1,852,650 443,605 503,554 141,726 Net gain
from adjustment of investment property to fair value 10,456 -
12,745 3,587 Selling, general and administrative expenses 1,559,292
364,339 426,067 119,918 _________ ________ _________ ________
Operating income 303,814 79,266 90,232 25,395 Other income 214
(expenses), net (837) (1,253) (353) Finance income 50,279 14,938
29,227 8,226 Finance expenses (107,842) (51,637) (37,471) (10,546)
Equity in earnings of investee companies, net 186 625 127 36
________ ________ ________ _____ Income before taxes 43,406 on
income 245,600 80,862 22,758 Taxes on income 69,779 22,740 15,824
4,454 ________ ________ ________ _____ Net income 175,822 20,666
65,037 18,304 ========== ========== ========= ======= Attributable
to: Equity holders of the parent 143,628 12,483 58,109 16,354
_________ ________ ________ ________ Minority interests 32,194
8,183 6,929 1,950 _________ ________ ________ ________ Net income
per Ordinary share or ADS: Basic 3.39 0.31 1.34 0.38 ________
_______ _______ ______ Fully diluted 3.39 0.31 0.85 0.24 ________
_______ _______ ______ Weighted average number of shares or ADS
used for computation of income per share: Basic 42,355,339
40,460,766 43,372,820 43,372,820 ___________ Fully diluted
45,134,184 45,125,965 44,793,242 44,793,242 ___________ BLUE SQUARE
- ISRAEL LTD. SELECTED OPERATING DATA FOR THE THREE MONTH PERIOD
ENDED MARCH 31, 2008 (UNAUDITED) Convenience translation(a) for the
three For the three months months ended ended March 31, March 31,
____________________ 2007 2008 2008 _________ _________ _________
Unaudited __________________________________ NIS U.S. dollars
_____________________ ____________ Sales (in millions) 1,693.5
1,821.2 512.6 Operating income (in 79.3 90.2 25.5 millions)
Operating income net of revaluation of investment property (in
millions) 79.3 77.5 21.8 EBITDA (in millions) 112.8 114.0 32.1
EBITDA margin 6.7% 6.3% NA Increase in same store sales* 5.1% 1.1%
NA Number of stores at end of NA period 177 188 Stores opened
during the NA period 2 3 Total square meters at end of NA period
331,504 346,940 Square meters added during NA the period, net 8,200
4,235 Sales per square meter 4,969 4,954 1,392 Sales per employee
(in 234 237 66 thousands) * Compared with the same period in the
prior fiscal year. Contact: Blue Square-Israel Ltd. Dror Moran, CFO
Toll-free telephone from U.S. and Canada: 888-572-4698 Telephone
from rest of world: +972-3-928-2220 Fax: +972-3-928-2299 Email:
DATASOURCE: Blue Square Israel Ltd CONTACT: Contact: Blue
Square-Israel Ltd., Dror Moran, CFO, Toll-free telephone from U.S.
and Canada: 888-572-4698, Telephone from rest of world:
+972-3-928-2220, Fax: +972-3-928-2299, Email:
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