Ruson Sport Agencies Ltd

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Africa Israel Investments Ltd.
Condensed Consolidated Interim Financial Statements
At March 31, 2015
(Unaudited)
Condensed Consolidated Interim Financial Statements
At March 31, 2015
Unaudited
Contents
Page
Auditors’ Review Report
Condensed Consolidated Interim Statements of Financial Position
2
3–4
Condensed Consolidated Interim Statements of Income
5
Condensed Consolidated Interim Statements of Comprehensive Income
6
Condensed Consolidated Interim Statements of Changes in Equity
7–8
Condensed Consolidated Interim Statements of Cash Flows
9 – 11
Notes to the Condensed Consolidated Interim Financial Statements
12 – 50
Review Report of the Independent Auditors to the Shareholders of Africa Israel Investments Ltd.
Introduction
We have reviewed the accompanying financial information of Africa Israel Investments Ltd. and its subsidiaries
(hereinafter – “the Group”) including the condensed consolidated interim statement of financial position as at March 31,
2015 and the condensed consolidated interim statements of income, comprehensive income, changes in equity and cash
flows for the three-month period then ended. The Board of Directors and Management are responsible for the preparation
and presentation of financial information for this interim period in accordance with IAS 34 “Financial Reporting for
Interim Periods”, and are also responsible for the preparation of financial information for this interim period in accordance
with Section D of the Securities Regulations (Periodic and Immediate Reports), 1970. Our responsibility is to express a
conclusion on the financial information for this interim period based on our review.
We did not review the condensed financial information for the interim period of subsidiaries, the assets of which included
in the consolidation constitute about 2% of the total consolidated assets as at March 31, 2015, and the revenues of which
included in the consolidation constitute about 3% of the total consolidated revenues for the three-month period ended on
that date. In addition, we did not review the condensed financial information for the interim period of associated companies
and jointly-controlled entities accounted for using the equity method of accounting, the investment in which totaled about
NIS 161,609 thousand as at March 31, 2015, and the Group’s share in their income, was about NIS 23,625 thousand, for
the three-month period ended on that date. The condensed financial information for the interim period of those companies
was reviewed by other auditors whose review reports thereon were furnished to us and our conclusion, insofar as it relates
to amounts included in respect of those companies, is based on the review reports of the other auditors.
Scope of the Review
We conducted our review in accordance with Review Standard 1, “Review of Financial Information for Interim Periods
Performed by the Independent Auditor of the Entity” of the Institute of Certified Public Accountants in Israel. A review of
financial information for interim periods 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.
Conclusion
Based on our review and on the review reports of other auditors, nothing has come to our attention that causes us to believe
that the above-mentioned financial information was not prepared, in all material respects, in accordance with International
Accounting Standard IAS 34.
In addition to that mentioned in the previous paragraph, based on our review and on the review reports of other auditors,
nothing has come to our attention that causes us to believe that the above-mentioned financial information does not comply,
in all material respects, with the disclosure requirements of Section D of the Securities Regulations (Periodic and
Immediate Reports), 1970.
Without qualifying our above-mentioned opinion, we direct attention to that stated in Note 2D to the financial statements
regarding restatement of the Company’s financial statements as at December 31, 2014, 2013 and 2012 and for each of the
three years ended on those dates, as well as at March 31, 2014 and for the three-month period then ended, in order to
retroactively reflect therein the impact of correction of errors in the amounts of the Company’s assets and liabilities and the
amounts of the Company’s revenues and expenses.
Sincerely,
Somekh Chaikin
Certified Public Accountants (Isr.)
Breitman Almagor Zohar & Co.
Certified Public Accountants (Isr.)
May 31, 2015
2
At March 31
At December 31
2015
2014
2014
(Unaudited)
(Audited)
In Thousands of New Israeli Shekels
Current Assets
Cash and cash equivalents
Short-term investments
Marketable securities
Trade receivables
Other receivables and debit balances, including financial
derivatives
Income taxes receivable
Inventory of buildings held for sale
Other inventories
Assets held for sale
Non-Current Assets
Investments in investee companies accounted for using the
equity method of accounting
Loans to investee companies
Property, plant and equipment
Investment property
Investment property under construction
Long-term loans, investments and other debit balances
Inventory of real estate
Intangible assets
Excess of assets over liabilities in respect of employee benefits
Deferred tax assets
1,340,118
496,999
188,414
1,153,673
1,304,516
320,164
360,698
*1,265,886
1,339,170
790,479
151,245
*1,143,211
439,855
26,043
2,121,901
581,665
32,961
6,381,629
--------------
*646,033
*38,279
1,677,701
*532,855
135,464
6,281,596
--------------
*460,299
*36,395
2,085,093
*553,692
26,849
6,586,433
--------------
519,213
380,871
1,183,334
10,577,856
2,380,754
160,032
1,860,396
148,335
1,502
105,577
17,317,870
--------------
502,298
371,505
1,207,029
11,309,420
2,756,648
77,055
1,695,161
173,190
1,544
*83,294
18,177,144
--------------
488,832
385,091
1,205,502
10,741,698
2,433,715
158,414
1,878,280
148,675
1,477
*104,557
17,546,241
--------------
23,699,499
24,458,740
24,132,674
* Restated – see Note 2D.
The accompanying notes to the condensed consolidated interim financial statements are an integral part thereof.
3
At March 31
At December 31
2015
2014
2014
(Unaudited)
(Audited)
Current Liabilities
Debentures
Short-term credit from banks and others
Contractors and suppliers
Other payables and credit balances, including financial
derivatives
Income taxes payable
Advances from customers
Provisions
Long-Term Liabilities
Debentures
Liabilities to banks
Other liabilities
Excess of losses over investments in investee companies
accounted for using the equity method of accounting
Employee benefits
Liabilities for deferred taxes
Equity
Share capital
Premium on shares
Capital reserves
Retained earnings
Total equity attributable to the Company’s owners
Non-controlling interests
Total equity
217,451
2,781,162
795,733
386,558
4,856,947
855,213
365,966
3,627,956
812,388
571,448
134,886
1,293,641
455,371
6,249,692
--------------
755,075
67,086
*833,486
424,326
8,178,691
--------------
*573,392
*96,613
*1,155,819
457,192
7,089,326
--------------
4,172,424
5,173,985
843,934
3,578,767
3,781,585
695,300
4,118,414
4,597,062
884,407
3,423
19,087
920,824
11,133,677
--------------
3,137
20,769
*994,457
9,074,015
--------------
3,445
19,000
*965,389
10,587,717
--------------
384,867
4,492,059
(2,302,671)
324,919
2,899,174
3,416,956
6,316,130
--------------
380,647
4,191,341
(2,302,854)
*1,163,519
3,432,653
*3,773,381
7,206,034
--------------
384,866
4,492,044
*(2,225,994)
*315,855
2,966,771
*3,488,860
6,455,631
--------------
23,699,499
24,458,740
24,132,674
____________________________
Lev Leviev
Chairman of the Board of Directors
________________________
Avraham Novogrocki
CEO
_________________________
Menashe Sagiv
CFO
Approval date of the financial statements: May 31, 2015
4
Condensed Consolidated Interim Statements of Income
For the
Three Months Ended
Year Ended
March 31
December 31
2015
2014
2014
(Unaudited)
(Audited)
Revenues
Construction and real estate transactions
Rental and operation of properties
Industry
Other activities
Share in income of investee companies accounted for using the
equity method of accounting, net
Increase in fair value of investment property, net
Increase in fair value of investment property under construction,
net
Other income
Cost and expenses
Update of provision for decline in value of inventory of land
and buildings, net
Maintenance, supervision and management of real estate and
properties
Decrease in fair value of investment property under construction,
net
Industry
Other activities
Share in losses of investee companies accounted for using the
equity method of accounting, net
Administrative and general expenses
Amortization of intangible assets and other expenses
Operating income
Financing expenses
Financing income
Financing expenses, net
Operating income (loss) before taxes on income
Tax benefit (taxes on income)
Net income (loss) for the period
Attributable to:
The Company’s owners
Holders of non-controlling interests
665,009
181,954
440,469
9,620
829,390
215,635
*477,017
12,510
2,978,859
862,476
*1,812,460
54,695
31,689
86,458
–
258,241
–
570,737
29,346
6,846
1,451,391
--------------
21,365
11,284
1,825,442
--------------
–
56,232
6,335,459
--------------
630,745
794,462
2,773,938
2,639
1,238
41,149
44,029
75,324
215,580
–
452,180
7,670
–
*447,011
11,422
750,744
*1,738,843
43,479
–
56,758
6,276
1,200,297
-------------251,094
-------------(218,718)
23,872
(194,846)
-------------56,248
(17,711)
38,537
8,636
29,901
38,537
15,061
*276,181
99,302
3,838
69,759
27,113
1,430,167
-------------395,275
-------------(337,650)
27,338
(310,312)
-------------84,963
*(39,169)
45,794
5,954,277
-------------381,182
-------------(1,746,259)
257,726
(1,488,533)
-------------(1,107,351)
*14,905
(1,092,446)
*(440)
*46,234
45,794
*(848,736)
*(243,710)
(1,092,446)
*(0.00)
*(4.41)
Income (loss) per share
Basic and diluted income (loss) per share (in NIS)
0.04
5
Condensed Consolidated Interim Statements of Comprehensive Income
For the
Three Months Ended
Year Ended
March 31
December 31
2015
2014
2014
(Unaudited)
(Audited)
38,537
----------
*45,794
----------
(167,956)
(102,637)
*(1,092,446)
--------------
Components of other comprehensive loss that after the
initial recognition in the statement of comprehensive
income were transferred or will be transferred to the
statement of income
Foreign currency translation differences in respect of
foreign activities
Change in fair value of instruments hedging cash flows,
net of tax
302
Realization of capital reserve in respect of a cash flow hedge
due to sale of investee company
Total other comprehensive loss for the period that after
the initial recognition in the statement of comprehensive
income was transferred or will be transferred to the
statement of income, net of tax
992
–
–
(167,654)
----------
(101,645)
----------
(4,553)
(9,390)
9,624
(4,319)
--------------
Components of other comprehensive loss that will not be
transferred to the statement of income
Re-measurement of defined benefit plan
(499)
Total other comprehensive loss for the period that will not be
transferred to the statement of income, net of tax
–
(981)
Total comprehensive loss for the period
(499)
---------(129,616)
–
---------(55,851)
(981)
-------------(1,097,746)
Total comprehensive loss attributable to:
The Company’s owners
Holders of non-controlling interests
Total comprehensive loss for the period
(68,449)
(61,167)
(129,616)
*(68,642)
*12,791
(55,851)
*(843,318)
*(254,428)
(1,097,746)
6
Attributable to the owners of the Company
Reserve for
Capital
transactions
reserve
with
from
holders of
cash
Other
nonflow
capital
Translation
controlling
Retained
hedges
reserves
adjustments
interests
earnings
Share
capital
Premium
on
shares
Total
Noncontrolling
interests
Total
equity
384,866
4,492,044
(9,188)
24,444
(1,773,972)
*(467,278)
*315,855
2,966,771
*3,488,860
6,455,631
–
–
–
–
–
–
8,636
8,636
29,901
38,537
–
–
28
–
(76,705)
–
(77,085)
(91,068)
(168,153)
–
–
28
–
(76,705)
–
8,228
(68,449)
(61,167)
(129,616)
–
–
–
–
–
For the three-month
period ended
March 31, 2015
(unaudited)
Balance at
January 1, 2015
Total comprehensive
loss for the period
Net income for the
period
Other comprehensive
loss for the period,
net of tax
Total comprehensive
loss for the period
Transactions with
owners recorded
directly to equity
Issuance of ordinary
shares and options for
ordinary shares, net
Share-based payments
(net of tax)
Exercise of options for
shares of subsidiaries
Dividend paid to holders
of non-controlling
interests
Balance at
March 31, 2015
1
15
(408)
16
–
2,719
16
–
–
–
–
–
–
37
37
–
–
–
–
–
–
799
799
–
–
–
–
–
–
384,867
4,492,059
(9,160)
24,444
(1,850,677)
(467,278)
324,919
2,899,174
3,416,956
6,316,130
380,647
4,191,341
(8,343)
24,444
(1,780,978)
(469,775)
*1,163,860
3,501,196
*3,768,656
7,269,852
–
–
–
–
–
–
*(440)
*46,234
45,794
–
–
243
–
(68,445)
–
–
(68,202)
(33,443)
(101,645)
–
–
243
–
(68,445)
–
(440)
(68,642)
12,791
(55,851)
–
–
–
–
–
–
99
–
–
–
–
–
–
–
–
380,647
4,191,341
(8,100)
24,444
(1,849,423)
(469,775)
1,163,519
3,432,653
–
–
2,756
(793)
(12,663)
6
(12,663)
For the three-month
period ended
March 31, 2014
(unaudited)
Balance at
January 1, 2014
Total comprehensive
income (loss) for the
period
Net income (loss) for
the period
Other comprehensive
loss for the period,
net of tax
Total comprehensive
period
Transactions with
owners recorded
directly to equity
(net of tax)
of non-controlling
interests
Balance at
March 31, 2014
(440)
99
4,699
4,798
(12,765)
(12,765)
3,773,381
7,206,034
7
Attributable to the owners of the Company
Reserve for
Capital
transactions
reserve
with
from
holders of
cash
Other
nonflow
capital
Translation
controlling
Retained
hedges
reserves adjustments
interests
earnings
Share
capital
Premium
on
shares
Total
Noncontrolling
interests
Total
equity
380,647
4,191,341
(8,343)
24,444
(1,780,978)
(469,775)
3,501,196
*3,768,656
7,269,852
–
–
–
–
–
–
*(848,736)
–
–
(845)
–
7,006
–
(743)
–
–
(845)
–
7,006
–
(849,479)
–
–
–
–
–
–
–
–
–
–
304,922
–
–
–
–
*2,182
–
2,182
*20,037
22,219
–
–
–
–
–
398
398
17,776
18,174
–
–
–
–
–
761
761
(761)
–
–
–
–
–
315
315
(303)
–
–
–
–
–
–
–
–
–
4,492,044
(9,188)
24,444
(1,773,972)
For the year ended
December 31, 2014
Balance at
January 1, 2014
Total comprehensive
loss for the year
Loss for the year
Other comprehensive
year, net of tax
Total comprehensive
loss for the year
Transactions with
owners recorded
directly to equity
Conversion of loan into
equity of subsidiary
–
Issuance of ordinary
shares and options for
ordinary shares, net
4,219
Sale of shares of
subsidiary
–
(net of tax)
–
Options for shares of
subsidiaries that
expired
–
Exercise of options for
shares of subsidiaries
–
of non-controlling
interests
–
Acquisition of
non-controlling
interests
–
Balance at
December 31, 2014
384,866
–
300,703
315
(467,278)
*1,163,860
(848,736)
5,418
(843,318)
*(243,710)
(1,092,446)
(10,718)
(5,300)
(254,428)
(1,097,746)
–
–
–
315,855
86
–
315
2,966,771
–
86
304,922
–
12
(57,227)
(57,227)
(4,976)
(4,661)
3,488,860
6,455,631
8
For the
Three Months Ended
Year Ended
March 31
December 31
2015
2014
2014
(Unaudited)
(Audited)
Cash flows from operating activities
38,537
Adjustments:
Share in losses (income) of investee companies accounted for
using the equity method of accounting
Gain from decline in rate of holdings and sale of investee
companies
Depreciation and amortization and decline in value of
property, plant and equipment and intangible assets
Update of provision for decline in value of inventory of land
and buildings
Decline in value of investments, net
Change in fair value of investment property, net
Change in fair value of investment property under
construction, net
Capital losses (gains) on sale of property, plant and equipment
and investment property, net
Loss (gain) on marketable securities, net
Taxes on income recognized in the statement of income
Change in inventory of real estate
Change in inventory of buildings held for sale
Change in other inventories
Change in trade receivables and other receivables and debits
Change in contractors, trade payables and other payables and
credits
Change in advance deposits from customers
Change in provisions and employee benefits
Income taxes paid, net
(31,689)
–
25,420
*(1,092,446)
3,838
15,061
(213)
(5,866)
20,626
114,813
2,639
–
(86,458)
1,238
–
(258,241)
41,149
1,863
(570,737)
(29,346)
(21,365)
750,744
211
2,756
(3,040)
17,711
206,265
(90,061)
(40,856)
(28,088)
11,461
(1,010)
4,798
(632)
*39,169
311,629
**45,011
29,772
*23,030
*(132,851)
(1,530)
18,174
3,812
*(14,905)
1,476,519
**(343,773)
(62,159)
*1,799
*21,861
1,819
137,716
946
(4,432)
158,145
18,908
(11,664)
(822)
*46,914
*353,221
16,049
(23,598)
131,511
-------------
Net cash provided by operating activities
*45,794
275,160
-------------
746,965
-------------
** Retroactive adjustment due to change of accounting policy – see Note 3A.
9
For the
Three Months Ended
Year Ended
March 31
December 31
2015
2014
2014
(Unaudited)
(Audited)
Cash flows from investing activities
Income tax paid on sale of assets and investee companies
Investment in associated and other companies
Provision of loans to associated companies, net
Investment in intangible assets
Proceeds from sale of shares of investee companies and
return of investment
Investment in investment property and investment property
under construction
Investment in property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment property, net
Investment in long-term deposits and loans
Repayment of long-term deposits and loans
Acquisition of marketable securities
Sale of marketable securities
Dividends received
Interest received
Short-term investments, net
–
(1,757)
(1,067)
(3,077)
–
10,938
(50,519)
(206,719)
(14,377)
(68,922)
63
***47,545
17,090 ***145,855
(6,032)
(5,053)
4,017
934
(34,723)
(3,884)
4,598
37,801
5,326
87
8,051
13,707
287,888
(35,739)
215,481
-------------
Net cash provided by (used in) investing activities
(14,928)
(1,924)
(8,243)
***(6,560)
(95,105)
-------------
(18,832)
(15,473)
(29,741)
(18,059)
136,937
(750,603)
(215,248)
48,719
148,485
(99,504)
3,247
(7,815)
247,087
34,459
39,026
(507,215)
(1,004,530)
-------------
*** Reclassified – see Note 2D.
10
For the
Three Months Ended
Year Ended
March 31
December 31
2015
2014
2014
(Unaudited)
(Audited)
Cash flows from financing activities
Interest paid
Dividend paid to holders of non-controlling interests
Acquisition of non-controlling interests
Issuance of capital to the owners of the Company, less
issuance expenses
Issuance of options for debentures
Dividend paid to the shareholders
Proceeds from exercise of options for shares of the Company
and subsidiaries
Proceeds from sale of shares of subsidiary
Repayment of liabilities to sellers of land
Receipt of long-term loans and liabilities and issuance of
debentures
Repayment of long-term loans, debentures and liabilities
Short-term credit, net
(180,703)
–
–
–
–
(9)
22
–
–
(144,251)
–
–
(778,245)
(57,227)
(4,661)
–
–
–
305,927
15,520
–
–
–
**–
12
22,219
**–
326,231
160,517
(483,493) **(119,401)
10,584
(105,916)
3,265,427
**(2,612,409)
52,872
(327,368)
-------------
(209,051)
-------------
19,624
(28,996)
Cash and cash equivalents at beginning of the period
Effect of exchange rate fluctuations on balances of cash and
cash equivalents
1,339,170
1,365,157
1,365,157
(18,676)
(31,645)
22,143
Cash and cash equivalents at the end of the period
1,340,118
1,304,516
1,339,170
Net cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
209,435
------------(48,130)
** Retroactive adjustment due to change of accounting policy – see Note 3A.
11
Notes to the Unaudited Interim Consolidated Financial Statements
At March 31, 2015
Note 1 – General
A.
The Reporting Entity
Africa Israel Investments Ltd. (hereinafter – “the Company”) is an Israeli-resident company
that was incorporated in Israel and its registered address is Derech Hahoresh 4, Yehud. The
Group’s consolidated financial statements as at March 31, 2015, include the financial
statements of the Company and those of its subsidiaries (hereinafter – “the Group”) as well
as the Group’s rights in associated companies and jointly controlled entities. The Company’s
controlling shareholder is Mr. Lev Leviev, who holds the Company directly as well as
through companies he wholly owns and controls.
The Group is engaged in holdings and investments in a variety of sectors in and outside of
Israel. The Company’s securities are registered for trading on the Tel-Aviv Stock Exchange.
B.
Impacts of Global Financial Events on the Group’s Activities
Further to that stated in Note 1B to the Company’s annual financial statements as at
December 31, 2014, in connection with the political conflict broke out between and Ukraine
and Russia in 2014 relating to the Crimean Peninsula, the above-mentioned conflict triggered
sanctions by the United States and other countries against Russia, and vice-versa, a decline in
the foreign investments in Russia and an adverse impact on the exchange rate of the ruble.
As a result of that stated above, there has been a deterioration of the Russian economy.
During 2014 and particularly in the second half of the year, there was a significant drop in
the world oil prices, where fuel is a significant resource for export and production of
revenues in the Russian economy. The exchange rate of the ruble against the U.S. dollar
dropped by about 72% in 2014 and the international rating companies gradually reduced the
Russia’s credit rating.
In light of the devaluation of the Russian ruble, inflationary pressures and instability in the
short run, during 2014 the Central Bank of Russia increased the short-term inter-bank
interest rate from 5.5% to 17%.
It is noted that in the first three months of 2015 there was a devaluation of about 3.9% of the
Russian ruble against the U.S. dollar. Since the date of the statement of financial position
and up to just prior to the approval date of the financial statements, the Russian ruble
strengthened against the U.S. dollar at the rate of about 9%.
Continuation of the above-mentioned events, or an increase in the severity thereof, could
have an adverse effect on various facets of the Group’s activities in Russian and/or data
appearing in the financial statements, among others, as follows:
–
Unfavorable impact on the revenues in all that relating to the activities in Russia due to a
decline in the demand in Russia in the commercial sector and in the residential sector;
–
Increase in the Group’s costs with respect to its activities in Russia;
–
Decrease in the value of the real estate properties as a result of the decrease in the
revenues and/or an increase in the risk premium in the economy and, in turn, an increase
in the discount rate taken into account when determining the value;
12
At March 31, 2015
Note 1 – General (Cont.)
B.
Impacts of Global Financial Events on the Group’s Activities (Cont.)
–
Increase in the financing expenses and/or an adverse impact on the available sources of
financing.
The Company and its outside consultants are continuing to track the economic developments
in Russia, in general, and the real estate market, in particular.
As at the approval date of the statement of financial position, the crisis with respect to the
relationship between the Ukraine and Russia and reduction of the credit rating of Russia did
not have a significant adverse effect on the Group, however, in light of the inability to
predict the continuation of these matters or the manner of their future development and
political and economic intensity, the Company is unable to estimate, at this stage, the future
impact of these matters on the Group.
As at the date of the statement of financial position, the Company had positive consolidated
working capital, in the amount of about NIS 132 million, as a result of signing of new
financing agreements in the period of the report with respect to loans that were expected to
be repaid within twelve months following the date of the statement of financial position.
From the financing standpoint, the Group identifies extreme caution on the part of the banks
in providing credit to the real estate sector, which is expressed both by means of an impact
on their readiness to provide credit to the real estate sector as well as through stricter credit
terms and higher costs. As at the date of the statement of financial position, the Company
was able to obtain financing from banks as stated in connection with development of projects
the construction of which has commenced and it estimates that it will be able to receive
financing for projects scheduled for development in the upcoming year in accordance with its
work plan, as well as to refinance projects the loans of which are scheduled for repayment in
the upcoming year pursuant to the original repayment schedule. Nonetheless, continuation or
worsening of the present crisis could have a significant unfavorable impact on the Group’s
ability to obtain credit for further projects in its activity countries.
The Group is taking action to increase its liquid balances and to decrease its short-term
liabilities, by means of a number of steps:
–
Entering into new financing agreements with respect to a number of loans provided in
connection with rental properties in Europe, in the amount of an additional about
NIS 303 million, which are expected to be repaid within the twelve-month period
following the date of that statement of financial position, with respect to which a
subsidiary, AFI Europe, has commenced contacts with the lenders and expects that it
will sign new agreements prior to the final repayment dates.
–
Extension of the repayment dates of short-term loans taken out to finance construction
of rental properties in Israel and Europe and replacement thereof with long-term loans.
–
Realization of rental properties in countries wherein the Group carries on activities
and/or return of monies through re-financing, and/or sale of investments in investee
companies.
–
Floating of debentures and/or expansion of existing series by the Group companies.
13
At March 31, 2015
B.
Impacts of Global Financial Events on the Group’s Activities (Cont.)
In light of the economic and political uncertainty in some of the Group’s activity countries,
the Group is carefully examining its targets in the real estate sector, and is focusing on the
following items:
–
Projects that are in various stages of execution and that will be completed in 2015-2017.
–
Examination of the “release” of new projects in various different countries with
emphasis on Russia and Eastern Europe. With respect to these projects, the Group’s
policy is to re-examine the commencement date of the project and the infrastructures
available to the Group to begin construction of the project, taking into account the
existence of a number of preconditions, including, assurance of appropriate financing for
each project, analysis of the macro-economic environment and the level of demand,
prior to starting performance, along with the macro market conditions in the various
countries wherein activities are carried on.
–
Concurrently, the Group endeavors to upgrade the lands on which it has not yet
commenced construction, by means of obtaining the approvals required for the said
construction.
The Group examines on an ongoing basis possibilities to continue developing large-scale real
estate and infrastructure projects in and outside of Israel, while taking strict care to disperse
and allocate the resources to a number of projects, in order to reduce the exposure of any
particular project. Continuation of the Group’s business initiation and development will be
executed through use of the Group’s extensive land reserves in and outside of Israel, in the
locations wherein the Group carries on activities, while giving due consideration to the lack
of economic stability.
In general, the Company, as an investments’ company, usually holds its investments for the
long-term. However, where a business opportunity arises or there is an immediate need to
increase liquidity (including in order to reduce liabilities), the Company considers
possibilities for realizing its investments, taking into account, among other things, utilization
of the full potential for improving of the investment, its connection to the core business of
the Company Group and other relevant circumstances.
In addition, the Company expects to increase its liquid resources by means of sale of assets
and investments, raising of equity and debt, and dividends that will be distributed by investee
companies.
Against the background of that stated above, during 2015 the Group has taken a number of
steps, primarily issuance of debentures and realization of properties, aimed at improving its
liquidity position (regarding this matter – see Notes 4A(1), 4A(2)(b), 4A(3)(c), 4B(1), 4B(2),
9E and 9H).
As a result, Company Management believes that the Company will be able to pay its
liabilities as they come due.
14
At March 31, 2015
C.
Irregularities in the financial reports of Africa Industries, the consequences deriving
therefrom on the financial position of Africa Industries and the plans of the
management of Africa Industries in this regard:
On March 18, 2015, the Board of Directors of Africa Industries decided to terminate the
employment of the former CEO of Africa Industries, Mr. Avi Motola (who also served as the
CEO of Negev Ceramics).
On March 29, 2015, Africa Industries reported for the first time with respect to a contact
made to the management of Africa Industries by a party in the Africa Industries Group, in
connection with concerns of irregularities with respect to recording of income of one of the
wholly-owned subsidiaries (indirectly) of Africa Industries, which operates in the area of
home design.
As a result of the above-mentioned contact, the management of Africa Industries started an
immediate examination of the matter, with the assistance of an outside examiner that was
appointed by the Board of Directors of Africa Industries.
Upon conclusion of the examination processes, it became clear that over the course of a
number of years and up to the end of 2014, revenues were improperly recorded early,
duplication of revenues was made, trade receivables included in the financial statements of
companies of the Negev Group for these years were erroneously recorded, and an artificial
increase was recorded of the inventory categories of companies in the Negev Group. That
stated above is in addition to irregularities found in the recording of the revenues of one of
the companies in the Negev Group.
It was further found that the cumulative impact of the errors in the financial statements of
Africa Industries on the equity attributable to the owners of Africa Industries as at
December 31, 2014, amounts to a reduction of about NIS 73 million and the cumulative
impact on the equity attributable to the owners of the Company amounts to about NIS 45
million (this amount is after an adjustment made in the Company’s financial statements in
2014).
In light of the findings of the examination, as stated above, Africa Industries restated its
financial statements for 2014 in order to retroactively reflect therein the impacts of that
stated above, wherein Africa Industries also included, aside from revised data for the period
of the report, revised comparative data for the prior reporting periods wherein misstatements
were included due to the errors referred to above.
Restatement of the financial statements of Africa Industries caused a worsening in some of
the financial covenants it is required to comply with under its financing agreements (some of
which were violated even on the basis of the data prior to the restatement) and
non-compliance with other financial covenants.
The impact of the restatement together with the non-compliance with the financial covenants
caused the management of Africa Industries to act in order to improve the financial positions
of companies in the Africa Industries Group.
15
At March 31, 2015
C.
Irregularities in the financial reports of Africa Industries, the consequences deriving
therefrom on the financial position of Africa Industries and the plans of the
management of Africa Industries in this regard: (Cont.)
The plans of the management of Africa Industries include, among other things: in the area of
home design, the management of Africa Industries is endeavoring, with the assistance of its
financial advisors, to update the business plan and to prepare an updated financing plan on
the basis of which negotiations will be carried on with the financing parties for purposes of
allocating the long-term and short-term bank debt, in such a manner that the Negev Group
will hold signed bank credit frameworks.
In the steel area, Africa Industries is making efforts to correct violations of the bank
covenants through, among other things, reducing the scope of the working capital of the
companies in the Africa Industries Group, and increasing the tangible capital of Packer Plada
Industries Ltd.
In addition to that stated above, Africa Industries is expected to receive cash flows from
some of the companies in the Africa Industries Group and it will consider selling off assets in
order to meet its liabilities.
For this purpose, the management of Africa Industries has commenced examinations in order
to advance transactions for sale of rights of real estate held by Africa Industries in Russia
and in the steel sector in Israel. In addition, in coordination with the financing parties, Africa
Industries has the alternative of selling dormant shares it holds of Africa Industries, in an
amount equal to about 9.5% of the issued share capital of Africa Industries, the value of
which, as at the date of the statement of financial position, amounted to about NIS 33
million.
In the estimation of the Board of Directors and the management of Africa Industries, Africa
Industries has the ability to comply with these plans of its management.
On May 27, 2015, the Company’s Board of Directors approved, that to the extent the plans
of the management of Africa Industries are not realized in the scope and/or at the times
required by Africa Industries, the Company will act, after examination of the matter with the
financing parties and pursuant to the understandings that will be reached with them, to assist
Africa Industries by means of interim financing up to the time that the plans of the
management of Africa Industries are realized. Provision of financing, as stated, will be made
subject to receipt of the approvals required by law.
The Company examined the said adjustments and the impact thereof on the Company’s
financial statements. In light of the findings of the examinations, as stated above, the
Company made, as part of its financial statements as at March 31, 2015, a restatement of the
comparative data for the year ended December 31, 2014 and for the three-month period
ended on March 31, 2014 – see Note 2D.
16
At March 31, 2015
Note 2 – Basis of Preparation of the Financial Statements
A.
Declaration of compliance with International Financial Reporting Standards (IFRS)
The condensed consolidated interim financial statements were prepared in accordance with
IAS 34, “Financial Reporting for Interim Periods” and do not include all of the information
required in complete, annual financial statements. These statements should be read together
with the financial statements for the year ended December 31, 2014 (hereinafter – “the
Annual Financial Statements”). In addition, these financial statements were prepared in
accordance with the provisions of Section D of the Securities Regulations (Periodic and
Immediate Reports) 1970.
The condensed, consolidated, interim financial statements were approved for publication by
the Company’s Board of Directors on May 31, 2015.
B.
Use of estimates and judgment
In preparation of the condensed consolidated interim financial statements in accordance with
IFRS, Company management is required to use judgment when making estimates,
assessments and assumptions that affect implementation of the policies and the amounts of
assets, liabilities, income and expenses. It is clarified that the actual results are likely to be
different from these estimates.
Management’s judgment, at the time of implementing the Group’s accounting policies and
the main assumptions used in the estimates involving uncertainty, are consistent with those
used in the Annual Financial Statements.
C.
Reclassification
In these financial statements, the Company reclassified data in the statement of cash flows
for the three months ended March 31, 2014, in the amount of about NIS 42 million, from
cash flows provided by sale of investment property to cash flows provided by sale of
property, plant and equipment. The reclassification was made as a reclassification within the
category “cash flows from investing activities”.
D.
Restatement
(1) Further to that stated in Note 1C, regarding irregularities in the financial reports of
Africa Industries, the Company restated in these financial statements revised
comparative data with respect to prior reporting periods wherein there were errors as a
result of the above-mentioned misstatements. Set forth below is detail of the revisions:
17
At March 31, 2015
Note 2 – Basis of Preparation of the Financial Statements (Cont.)
D.
Restatement (Cont.)
(1) (Cont.)
Impact of the revision of the statements of financial position
As at March 31, 2014
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Unaudited
Trade receivables
Other receivables and debit balances
Income tax receivable
Other inventory
Deferred tax assets
Deposits from customers
Liability for deferred taxes
Retained earnings
1,330,856
638,330
33,318
544,998
81,115
(832,102)
(994,828)
(1,211,994)
(3,788,189)
(64,970)
7,703
4,961
(12,143)
2,179
(1,384)
371
48,475
14,808
1,265,886
646,033
38,279
532,855
83,294
(833,486)
(994,457)
(1,163,519)
(3,773,381)
As at December 31, 2014
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Trade receivables
Other receivables and debit balances
Income tax receivable
Other inventory
Deferred tax assets
Deposits from customers
Payables and other credits, including
derivative instruments
Liability for deferred taxes
Retained earnings
Capital reserves
18
1,190,034
460,984
31,980
562,698
108,596
(1,153,435)
(46,823)
(685)
4,415
(9,006)
(4,039)
(2,384)
1,143,211
460,299
36,395
553,692
104,557
(1,155,819)
(570,393)
(96,978)
(967,649)
(361,627)
(3,504,785)
2,228,795
(2,999)
365
2,260
45,772
15,925
(2,801)
(573,392)
(96,613)
(965,389)
(315,855)
(3,488,860)
2,225,994
At March 31, 2015
D.
Restatement (Cont.)
(1) (Cont.)
Impact of the revision of the equity
As at January 1, 2014
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Retained earnings
1,205,103
3,781,255
(41,243)
(12,599)
1,163,860
3,768,656
Impact of the revision of the statements of comprehensive income
For the three months ended March 31, 2014
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Unaudited
Income from industry
Costs and expenses in industry
Taxes on income
Income for the period
Income (loss) attributable to:
The owners of the Company
Earnings per share – in NIS
19
486,217
(447,833)
(38,106)
55,235
(9,200)
822
(1,063)
(9,441)
477,017
(447,011)
(39,169)
45,794
6,792
48,443
0.04
(7,232)
(2,209)
(0.04)
(440)
46,234
0.00
At March 31, 2015
D.
Restatement (Cont.)
(1) (Cont.)
Impact of the revision of the statements of comprehensive income (Cont.)
For the year ended December 31, 2014
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Income from industry
Costs and expenses in industry
Taxes on income
Loss for the period
Loss attributable to:
Loss per share – in NIS
20
1,802,724
(1,731,170)
20,479
(274,638)
(1,087,392)
9,736
(7,673)
(5,574)
(1,543)
(5,054)
1,812,460
(1,738,843)
14,905
(276,181)
(1,092,446)
(844,207)
(243,185)
(4.39)
(4,529)
(525)
(0.02)
(848,736)
(243,710)
(4.41)
At March 31, 2015
D.
Restatement (Cont.)
(2) Set forth below is revised comparative data wherein there were misstatements as a result
of the errors, as stated, that were not included as part of the comparative data in the
Company’s financial statements as at March 31, 2015:
Comparative Data
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Current Assets
Trade receivables
Receivables and other debits, including
Other inventory
Non-Current Assets
Investments in equity-accounted
investees
Investment property
Long-term loans investments and
other debit balances
Intangible assets
Excess of assets over liabilities in
respect of employee benefits
Deferred tax assets
21
1,365,157
287,291
394,531
1,224,988
–
–
–
(55,534)
1,365,157
287,291
394,531
1,169,454
667,108
39,151
1,667,527
568,939
233,025
6,447,717
---------------
7,345
5,455
–
(12,845)
–
(55,579)
---------
674,453
44,606
1,667,527
556,094
233,025
6,392,138
---------------
505,773
380,666
1,197,368
11,124,395
2,880,595
–
–
–
–
–
505,773
380,666
1,197,368
11,124,395
2,880,595
73,661
1,773,634
170,732
–
–
–
73,661
1,773,634
170,732
1,496
80,527
18,188,847
--------------24,636,564
–
3,120
3,120
--------(52,459)
1,496
83,647
18,191,967
--------------24,584,105
At March 31, 2015
D.
Restatement (Cont.)
(2) Set forth below is revised comparative data wherein there were misstatements as a result
of the errors, as stated, that were not included as part of the comparative data in the
Company’s financial statements as at March 31, 2015:
Comparative Data
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Current Liabilities
Debentures
Advance deposit from customers
Provisions
Total current liabilities
Debentures
Other liabilities
Excess of losses over investments in
equity-accounted investee companies
Employee benefits
Deferred tax liabilities
Total long-term liabilities
Equity
Share capital
Premium on shares
Capital reserves
Retained earnings
Total equity attributable to the
owners of the Company
Total equity
Total liabilities and equity
22
388,674
3,835,365
727,615
847,370
81,000
812,875
428,159
7,121,058
--------------3,592,337
4,905,066
709,165
3,234
20,959
961,051
10,191,812
---------------
380,647
4,191,341
(2,234,652)
1,205,103
3,542,439
3,781,255
7,323,694
--------------24,636,564
–
–
–
–
–
1,383
–
1,383
--------–
–
–
–
–
–
–
--------–
–
–
(41,243)
(41,243)
(12,599)
(53,842)
--------(52,459)
388,674
3,835,365
727,615
847,370
81,000
814,258
428,159
7,122,441
--------------3,592,337
4,905,066
709,165
3,234
20,959
961,051
10,191,812
---------------
380,647
4,191,341
(2,234,652)
1,163,860
3,501,196
3,768,656
7,269,852
--------------24,584,105
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Comparative Data
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Current Assets
Trade receivables
Receivables and other debits, including
Other inventory
Non-Current Assets
Investments in equity-accounted
investees
Investment property
Long-term loans investments and
other debit balances
Intangible assets
Excess of assets over liabilities in
respect of employee benefits
Deferred tax assets
23
1,746,507
326,339
335,128
1,245,898
–
–
–
(46,074)
1,746,507
326,339
335,128
1,199,824
561,501
40,111
1,891,011
562,541
531,351
7,240,387
---------------
5,012
4,680
–
12,711
–
(23,671)
---------
566,513
44,791
1,891,011
575,252
531,351
7,216,716
---------------
859,112
793,466
1,055,090
9,919,112
2,896,344
–
–
–
–
–
859,112
793,466
1,055,090
9,919,112
2,896,344
136,440
1,472,360
169,704
–
–
–
136,440
1,472,360
169,704
1,582
63,170
17,366,380
--------------24,606,767
–
1,880
1,880
--------(21,791)
1,582
65,050
17,368,260
--------------24,584,976
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Comparative Data
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Current Liabilities
Debentures
Advance deposit from customers
Provisions
interests
Total current liabilities
Debentures
Other liabilities
Excess of losses over investments in
equity-accounted investee companies
Employee benefits
Deferred tax liabilities
Total long-term liabilities
Equity
Share capital
Premium on shares
Capital reserves
Retained earnings
Total equity attributable to the
owners of the Company
Total equity
Total liabilities and equity
24
640,899
2,460,863
724,399
–
–
–
640,899
2,460,863
724,399
1,227,425
68,489
965,814
352,455
–
–
1,385
–
1,227,425
68,489
967,199
352,455
9,994
6,450,338
---------------
–
1,385
---------
9,994
6,451,723
---------------
3,471,887
5,832,649
537,836
4,270
19,726
778,188
10,644,556
---------------
377,746
3,976,642
(1,866,026)
1,279,728
3,768,090
3,743,783
7,511,873
--------------24,606,767
–
–
–
–
–
–
–
--------–
–
–
(17,753)
(17,753)
(5,423)
(23,176)
--------(21,791)
3,471,887
5,832,649
537,836
4,270
19,726
778,188
10,644,556
---------------
377,746
3,976,642
(1,866,026)
1,261,975
3,750,337
3,738,360
7,488,697
--------------24,584,976
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Comparative Data
As at January 1, 2012
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Retained earnings
2,276,368
4,306,366
25
(9,736)
(2,974)
2,266,632
4,303,392
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Comparative Data
For the Year Ended December 31, 2013
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Revenues
Industry
Other activities
Increase in fair value of investment
property, net
Increase in fair value of investment
property under construction, net
Other income
Costs and Expenses
Update of provision for impairment in
value of inventory of land and
buildings, net
Maintenance, supervision and
management of land and properties
Industry
Other activities
Share in losses of equity-accounted
investee companies, net
Amortization of intangible assets and
other expenses
Operating income
Financing expenses
Financing income
Income before taxes on income
Taxes on income
Net income for the year
Net income (loss) allocable to:
Net income for the year
Loss per share
Basic and diluted loss per share (in NIS)
26
3,193,070
840,704
2,001,010
76,497
384,798
–
–
(9,050)
–
–
3,193,070
840,704
1,991,960
76,497
384,798
220,776
300,183
7,017,038
-------------
–
–
(9,050)
---------
220,776
300,183
7,007,988
-------------
2,928,392
–
2,928,392
50,113
–
50,113
257,592
1,837,835
69,001
24,903
257,192
–
23,633
–
–
–
257,592
1,861,468
69,001
24,903
257,192
98,620
5,523,648
------------1,493,390
------------(1,279,040)
138,282
(1,140,758)
------------352,632
(202,398)
150,234
–
23,633
--------(32,683)
--------–
–
–
--------(32,683)
2,015
(30,668)
98,620
5,547,281
------------1,460,707
------------(1,279,040)
138,282
(1,140,758)
------------319,949
(200,383)
119,566
(74,869)
225,103
150,234
(23,492)
(7,176)
(30,668)
(98,361)
217,927
119,566
(0.45)
(0.14)
(0.59)
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Comparative Data
For the Year Ended December 31, 2012
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Revenues
Industry
Other activities
Share in losses of equity-accounted
investee companies, net
Other income
Costs and Expenses
Update of provision for impairment in
value of inventory of land and
buildings, net
Maintenance, supervision and
management of land and properties
Decrease in fair value of investment
property, net
Decrease in fair value of investment
property under construction, net
Industry
Other activities
Amortization of intangible assets and
other expenses
3,693,364
732,395
2,064,820
65,105
–
–
(21,277)
–
3,693,364
732,395
2,043,543
65,105
81,481
147,577
6,784,742
-------------
–
–
(21,277)
---------
81,481
147,577
6,763,465
-------------
3,446,323
–
3,446,323
266,306
–
266,306
214,254
–
214,254
21,432
–
21,432
835,444
1,930,014
76,775
286,792
–
(7,885)
–
–
835,444
1,922,129
76,775
286,792
Loss before taxes on income
Taxes on income
Loss from continuing operations
Loss from discontinued operations (after tax)
Loss for the year
217,576
7,294,916
------------(510,174)
------------(1,145,165)
361,531
(783,634)
------------(1,293,808)
(72,963)
(1,366,771)
(28,761)
(1,395,532)
–
(7,885)
--------(13,392)
--------–
–
–
--------(13,392)
2,926
(10,466)
–
(10,466)
217,576
7,287,031
------------(523,566)
------------(1,145,165)
361,531
(783,634)
------------(1,307,200)
(70,037)
(1,377,237)
(28,761)
(1,405,998)
Loss allocable to:
Loss for the year
(1,002,627)
(392,905)
(1,395,532)
(8,017)
(2,449)
(10,466)
(1,010,644)
(395,354)
(1,405,998)
(6.89)
(0.05)
(6.94)
Operating income
Financing expenses
Financing income
Loss per share
Basic and diluted loss per share (in NIS)
27
At March 31, 2015
D.
Restatement (Cont.)
(2) (Cont.)
Home Design Segment
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Total revenues from outside parties
849,443
(9,050)
840,393
Revenues from inter-segment sales
38,461
–
38,461
Segment results
Actuarial losses
Segment income before taxes
33,658
(547)
33,111
(32,683)
–
(32,683)
Segment assets – December 31, 2013
Segment liabilities – December 31,
2013
975
(547)
428
1,280,563
(52,459)
1,228,104
1,060,104
1,383
1,061,487
Home Design Segment
As reported
As
Impact
in these
previously
of the
financial
reported
restatement
statements
Audited
Total revenues from outside parties
773,862
(19,885)
753,977
Revenues from inter-segment sales
35,753
(1,392)
34,361
Segment results
Actuarial losses
Segment income before taxes
39,769
(632)
39,137
(13,392)
–
(13,392)
26,377
(632)
25,745
Segment assets – December 31, 2012
Segment liabilities – December 31,
2012
28
962,975
(8,690)
954,285
787,712
(162)
787,550
At March 31, 2015
Note 3 – Significant Accounting Policies
Except as detailed in Section A below, the Group’s accounting policies in these condensed
consolidated interim financial statements are the same as the policies applied in the Annual
Financial Statements.
A.
Retroactive adjustment in respect of change in accounting policy
The Company changed its accounting policy with respect to classification of the cash flows used
for payment of liabilities to sellers of real estate as part of combination transactions in exchange for
transfer of part of the revenues from the venture. Up to December 31, 2014, the cash flows, as
stated, were classified in the statement of cash flows as part of financing activities. Commencing
with the financial statements as at March 15, 2015, the cash flows, as stated, are classified in the
statement of cash flows as part of operating activities. The Company believes that the accounting
policy adopted as part of the said change is more reliable and relevant since combination
transactions in exchange for transfer of part of the revenues reflect acquisition of inventory of real
estate for purposes of the main business activity.
Set forth below is information with respect to the impact of the retroactive adjustment due to the
change in the accounting policy in the statements of cash flows:
For the Three Months Ended
March 31, 2014
Impact
of the
As reported
As
change in
in these
previously
accounting
financial
reported
restatement
statements
Unaudited
282,035
(6,875)
275,160
(215,926)
(6,875)
(222,801)
For the Year Ended
December 31, 2014
Impact
of the
As reported
As
change in
in these
previously
accounting
financial
reported
restatement
statements
Audited
784,579
(37,614)
746,965
171,821
37,614
209,435
29
At March 31, 2015
Note 3 – Significant Accounting Policies (Cont.)
B.
New accounting standards and interpretations not yet adopted
(1) International Financial Reporting Standard IFRS 15, Revenues from Contracts
with Customers (hereinafter – “the Standard”)
Further to that stated in the disclosure with respect to new standards and interpretations
not yet adopted in the “Significant Accounting Policies” note in the annual financial
statements as at December 31, 2014, at this preliminary stage, the Group is not able to
estimate the impact of application of the Standard on its financial position and results of
operations. The Group will examine the impact of application of the Standard’s
provisions on the contracts with its customers and will also examine whether these
provisions will have a significant impact on the timing and manner of recognition of the
revenues from these contracts, which are capable of having a significant impact on the
financial statements.
(2) International Financial Reporting Standard IFRS 9 (2014), Financial Instruments
(hereinafter – “the Standard”)
Further to that stated in the disclosure with respect to new standards and interpretations
not yet adopted in the “Significant Accounting Policies” note in the annual financial
statements as at December 31, 2014, the Group is examining the impacts of application
of the Standard on the financial statements, with no intention of making early adoption.
C.
Exchange rates and linkage basis
(1) Balances in foreign currency, or linked thereto, are included in the financial statements
based on the representative rates of exchange published by Bank of Israel and that were
in effect at the end of the period of the report.
(2) Balances linked to the Consumer Price Index (CPI) are presented in accordance with the
last “known” index at the end of the period of the report (the index for the month
preceding the date of the financial report).
(3) Set forth below is data with respect to the rate of exchange of the euro, the U.S. dollar
and the ruble, and with respect to the Consumer Price Index (CPI):
30
At March 31, 2015
Note 3 – Significant Accounting Policies (Cont.)
C.
Exchange rates and linkage basis (Cont.)
Representative rate of exchange of the
Ruble
Euro
U.S. Dollar
NIS
NIS
NIS
Date of the financial statements:
March 31, 2015
March 31, 2014
December 31, 2014
Rate of change in the period:
Three months ended
March 31, 2015
Three months ended
March 31, 2014
Year ended
December 31, 2014
“Known”
CPI in
Israel
In points
0.068
0.097
0.069
4.273
4.812
4.725
3.980
3.487
3.889
122.34
106.78
124.32
(1.45)
(10.0)
2.34
(1.60)
(7.48)
(0.64)
0.46
(0.68)
(34.30)
(1.20)
12.0
(0.10)
Note 4 – Significant Events during the Period of the Report
A.
Real Estate Activities Outside of Israel
(1) Real estate activities in the United States
In May 2015, a foreign company in the United States in which the Company holds,
indirectly through AFI USA, 50.1% of the shares (hereinafter – “the Seller”), signed an
agreement (hereinafter – “the Agreement”) with a third party that is not related to the
Group (hereinafter – “the Purchaser”) for sale of the balance of its rights in the “Times
Square” building, in New York in the United States (hereinafter – “the Property”), for a
consideration of about NIS 1.1 billion (about US$295 million) (hereinafter – “the
Consideration”).
As part of the Agreement, it was provided that the Purchaser will transfer a “hard”
deposit to the Seller on account of the Consideration, in the amount of US$12.5 million,
which will be deposited in trust on the signing date of the Agreement and, in fact, in
May 2015 the deposit, as stated, was made in the trust account.
The balance the Consideration is to be transferred to the Seller on the closing date of the
transaction (if it is ultimately closed), which is to take place no later than 90 days from
the signing date (hereinafter – “the Closing Date”).
As part of the Agreement, it was provided that the Purchaser has the right to postpone
the Closing Date for two periods of 45 days each. If the Purchaser exercises this right,
the Purchaser is to transfer to the Seller (in trust) additional amounts of US$1.25 million
for each postponement period, which will also constitute a “hard” deposit (on account of
the Consideration) that will not be returned to the Purchaser.
31
At March 31, 2015
Note 4 – Significant Events during the Period of the Report (Cont.)
A.
Real Estate Activities Outside of Israel (Cont.)
(1) Real estate activities in the United States (Cont.)
If and to the extent the transaction is closed, the Company is expected to receive total
net cash flows (after repayment of the loan used to purchase the Property), in the amount
of about NIS 134 million (about US$35 million). The Company is not expected to record
significant income in respect of the transaction.
In respect of the Company’s activities in the United States, a reserve has been
accumulated as part of the equity attributable to the owners of the Company from
translation adjustments of foreign activities, in the amount of about NIS 390 million,
which is expected to be reclassified to the statement of income upon the Closing of the
transaction (if and to the extent the transaction is closed). The said reclassification is not
expected to have an impact on the equity attributable to the owners of the Company.
As at the date of the statement of financial position, the Seller recognized income from
revaluation of the Property to the selling price, in the amount of about NIS 60 million
(the Company’s share – about NIS 30 million).
(2) Real estate activities in Russia
(a)
In the three months ended March 31, 2015, the subsidiary, AFI Development,
through which the Group’s activities are carried on in Russia (hereinafter – “AFI
Development”), recorded an increase in the fair value of investment property and
investment property under construction, in the amount of about U.S.$21.4 million
(about NIS 85 million). The above-mentioned increase in fair value was created as
a result of the weakening of the ruble against the U.S. dollar by about 3.9% in the
said period. The fair values of AFI Development’s investment property and
investment property under construction, in dollar values, compared with
December 31, 2014, remain unchanged.
(b)
During January 2015, a subsidiary of AFI Development, which holds the rights in
the Uzerkovsky 3 project (hereinafter – “the Subsidiary”) signed an agreement for
extension of a loan, in the amount of U.S.$205 million, with the lending bank,
such that the repayment date was postponed from January 2015 to January 2018
(hereinafter – “the Loan” and/or “the Agreement”). In addition, it was determined
that upon the signing, the Subsidiary will repay U.S.$10 million of the loan
principal. Pursuant to the agreement, about 10% of the remaining loan principal is
to be repaid in installments, and about 90% of the loan principal is to be repaid in
January 2018. Financial covenants were also provided in the agreement as
follows:
–
The ratio of the cash-flow revenues of the property on a NOI basis to the
debt payments including principal and interest (DSCR) in the next twelve
months shall be higher than 1.2, and are to be calculated starting from the
fourth quarter of 2015.
–
Minimum LTV ratio – 65% calculated commencing from January 2015.
32
At March 31, 2015
A.
Real Estate Activities Outside of Israel (Cont.)
(2) Real estate activities in Russia (Cont.)
(b)
(Cont.)
Pursuant to the above-mentioned agreement, the Subsidiary repaid US$10 million
of the loan principal, such that as at March 31, 2015, the balance of the loan
principal was US$195 million.
As at the date of the statement of financial position, AFI Development was in
compliance with the financial covenants referred to above.
(3) Real estate activities in Central and Eastern Europe
(a)
During February 2015, AFI Europe, a subsidiary through which the Group’s
activities are carried out in Central and Eastern Europe (hereinafter –
“AFI Europe”), won a tender for acquisition of a building in Warsaw, Poland, for
a consideration of about €2.2 million (hereinafter – “the Acquisition
Transaction”). AFI Europe intends to develop the property for residential and
commercial uses on an aggregate area measuring about 5,000 square meters. The
Acquisition Transaction was completed in March 2015.
(b)
In March 2015, a Polish subsidiary of AFI Europe signed a preliminary agreement
for acquisition of land, for the total amount of about €3,200 thousand, in the City
of Krakow, in Poland, on which an office building project held for rent is planned
to be constructed, on an aggregate area measuring 16,400 square meters. On the
signing date, AFI Europe paid a deposit of €600 thousand. Completion of the
transaction is expected to take place in May 2015. In addition, a conditional
agreement was signed for acquisition of an adjacent land parcel, on which an
office building project held for rent is planned to be constructed, on an aggregate
area measuring 7,950 square meters.
(c)
During March 2015, a subsidiary of AFI Europe in Belgrade, Serbia, signed a
refinancing agreement with the lending bank for Stage A of the project. The
agreement provides that a loan, in the amount of about €16 million is to be repaid,
and in its place the subsidiary will receive a loan in the amount of about €20.7
million, which will be classified as long-term.
(d)
On March 31, 2015, AFI Europe made a valuation of the AFI Park 3 office
building project (located adjacent to the Cotroceni shopping mall in Romania),
due to its completion and reclassification thereof from investment property under
construction to investment property. The valuation was made by an external
independent appraiser. As a result, AFI Europe recorded an increase in the fair
value of investment property, in the amount of about NIS 17.4 million. The
discount rate used for purposes of the valuation was 8%.
33
At March 31, 2015
B.
Africa Israel Properties Ltd. (a subsidiary, hereinafter – “Africa Properties”)
(1) Further to that stated in Note 19E(2)(b)(v) (Note 19D(2)(a)(v)) to the annual financial
statements, during February and March 2015 Africa Properties made an expansion of the
debentures (Series G), whereby Africa Properties raised the gross amount of about
NIS 206 million, against issuance of NIS 220 million par value debentures, bearing
effective interest of 5%-5.5%. The issuance expenses amounted to about NIS 1.7
million.
(2) In January 2015, a subsidiary in Israel (which is wholly-owned by Africa Properties)
signed an option for sale of its share in land in the Lod area to a third party, for a
consideration of about NIS 15.5 million (the share of Africa Properties in the
consideration), which is expected to be received in 2015–2016. In consideration for the
option, Africa Properties received the amount of NIS 750 thousand, which in the case of
execution of the transaction will be offset against the total sale consideration. Africa
Properties does not expect a significant gain or loss upon completion of the transaction.
(3) Further to that stated in Note 5B(5) to the annual financial statements, regarding a rental
residential project, Galilee Yam, in Herzliya, in January 2015, Africa Properties and
Africa Residences (hereinafter together – “the Borrowers”) signed an agreement with an
institutional entity (hereinafter – “the Lender”) for receipt of financing for the planning
and construction of the project (hereinafter – “the Loan Agreement”). The Lender
committed to provide financing for the project, in an aggregate amount of up to about
NIS 300 million, where the loan period was set in such a manner that about 3.25 years
relate to the construction period of the project (hereinafter – “the Construction Period”)
and the final about 21 years relate to the rental period of the project’s residential units
(hereinafter – “the Operation Period”). In addition, it was agreed with respect to
extension of the loan period for an additional period of up to two years, under certain
conditions.
The Loan Agreement provides a number of financial conditions, such as events for
calling the loan for immediate repayment, a right of the Borrowers to withdraw the
additional amount, a right of the Borrowers to distribution of surpluses, a right of the
Borrowers to reduce the Lender’s right of recourse to them, and others. Regarding
events for calling the loan for immediate repayment, financial covenants were provided
with respect to the coverage ratio between the cash flows available for service of the
debt in the twelve-month period preceding the date of the relevant examination and the
total debt service payments in this period (ADSCR); the coverage ratio between the cash
flows available for service of the debt expected up to the final repayment date of the
loan out of the equity based on the weighted-average rate of the interest in respect of the
project loans and the unpaid balance of the project loans on the date of the relevant
examination (LLCR); a future debt coverage ratio; and a minimum rating of the debt by
a rating company. In addition, the Loan Agreement provides mechanisms for correcting
violations of the above-mentioned financial covenants.
34
At March 31, 2015
B.
Africa Israel Properties Ltd. (a subsidiary, hereinafter – “Africa Properties”) (Cont.)
(3) (Cont.)
In order to secure repayment of the loan, a lien will be placed in favor of the Lender on,
among other things, all the rights of the Borrowers in the project’s real estate, all the
rights of the Borrowers in the lease agreements with the tenants in the project (including
the collaterals provided to them by the tenants), all the Borrowers’ rights under the
tender agreements with the State of Israel, all the Borrowers’ rights under the
construction agreement with Danya Cebus, all the Borrowers’ rights vis-à-vis the
project’s operating contractor (to the extent it will be a party that is not the Borrowers
themselves or a party under their control), and all the Borrowers’ rights with reference to
the project’s material documents and of the joint venture. In the valuation performed,
using the extraction method, as at December 31, 2014, the discount rate used by the
appraisers was 6%.
Provision of the loan is subject to compliance with a number of preconditions, mainly,
the accuracy of the representations provided in the Loan Agreement on the withdrawal
date of the loan principal amounts, receipt of the State’s approval with respect to certain
matters relating to the Borrowers’ undertaking with the Lender and to creation of the
required liens in favor of the Lender, and receipt of a rating for the project debt that will
not be lower than a rating of BBB for securing the loan. The last date determined for
fulfillment of the preconditions and provision of the loan is 150 days after the signing
date of the Loan Agreement.
As at the date of the statement of financial position, the loan had not yet been received.
C.
Africa Israel Industries Ltd. (a subsidiary, hereinafter – “Africa Industries”)
(1) On March 18, 2015, it was decided by the Board of Directors of Africa Industries to
conclude the employment of Mr. Avi Motola as the CEO of Africa Industries.
(2) Regarding irregularities in the financial reports of Africa Industries and the
consequences deriving therefrom on the Company’s statement of financial position – see
Note 1C and Note 2D, above.
D.
Africa Israel Residences Ltd. (a subsidiary, hereinafter – “Africa Residences”)
(1) In March 2015, a notice was received from the Israel Lands Administration of a win by
Africa Residences in a tender for an undertaking in a lease contract in connection with
land in the City of Modi’in, on an area measuring about 14 dunams, also known as
Block 5640, Parcels 6 and 38 (hereinafter – “the Land”), for construction of 196
residential units and about 4,000 square meters of commercial areas, for a consideration
of NIS 82 million (not including VAT) plus developments costs, in the amount of about
NIS 39.8 million.
Africa Residences paid the consideration and the developments costs, as stated, from its
own sources and from the proceeds of a bank loan.
35
At March 31, 2015
D.
Africa Israel Residences Ltd. (a subsidiary, hereinafter – “Africa Residences”) (Cont.)
(2) In March 2015, Africa Residences, declared distribution of a dividend, in the amount of
NIS 50 million, which was paid in April 2015 (the Company’s share is about NIS 30
million).
(3) For details regarding an undertaking of Africa Properties and Africa Residences in an
agreement with an institutional entity for receipt of financing for the planning and
construction of a rental residential project in Herzliya – see Note 4B(3) above.
(4) In February 2015, Africa Residences signed an agreement for acquisition of the rights of
a third party that is not related to Africa Residences and/or to the controlling
shareholders thereof, constituting 37.5% of Parcel 26 in Block 6213, which is part of the
Sumail site (hereinafter – “the Site”), for a consideration equivalent to NIS 140.5
million. For details regarding additional rights of the Group in the Site – see Note 4E(2),
below.
E.
Additional information at the level of the Group and the Company
(1) Further to that stated in Note 37E(7) to the annual financial statements, regarding a
request for approval of a derivative claim (hereinafter – “the Request”) that was filed by
a person who claims to hold shares of the Company, commencing from 2008, having a
value of about NIS 1,900 (hereinafter – “the Plaintiff”), against the Company’s Board of
Directors (in the period relevant to the claim, including the Company’s controlling
shareholder, who serves as the Chairman of the Company’s Board of Directors)
(hereinafter – “the Members of the Board of Directors”), in the amount of about NIS 86
million, on April 26, 2015, a decision was rendered by the Supreme Court, which almost
completely accepted the Company’s appeal. The Supreme Court accepted the appeal
regarding the directors in full and completely rejected the request for approval of the
derivative claim against them (with respect to negligence due to the exemption condition
in the debt arrangement and deception as a result of the fact that the transaction was not
brought for approval of the Board of Directors).
Also regarding the claim against the controlling shareholder, Mr. Leviev, the Supreme
Court accepted the appeal in all that relating to the negligence cause of action due to the
exemption condition and provided that it approves the claim, even this very marginally,
only with respect to the causes of action of deception and breach of a trust lacking good
faith, this being in light of fact that they were not sufficiently clarified in the prior court
proceeding. That is, the derivative claim may be tried only against Mr. Leviev, and it is
limited solely to the deception cause of action, such that the Plaintiff must demonstrate
in his claim a relationship of Mr. Leviev to the company being acquired and that
Mr. Leviev unlawfully received monies as a result of the transaction.
(2) Further to that stated in Note 38K(6) to the annual financial statements, regarding
negotiations for sale of its rights in four land parcels and/or residential projects and/or
proximate to residential projects (including sale of shares of companies that have rights,
as stated) (hereinafter – “the Properties”) to Africa Residences, during March 2015, the
Company’s Board of Directors and the Board of Directors of Africa Residences
approved sale of the Company’s rights (40% of the issued and paid-up share capital) in
one of the Properties (Afriram Ltd.) (hereinafter – “Afriram”) and the rights of Africa
Investments in a loan it granted to Afriram, to Africa Residences.
36
At March 31, 2015
E.
Additional information at the level of the Group and the Company (Cont.)
(2) (Cont.)
During April 2015, after receipt of approval of the General Meeting of the shareholders
of Africa Residences, the undertaking was completed, for a consideration in the amount
of about NIS 40.3 million.
(3) In March 2015, Midrug lowered the rating of all of the Company’s debentures from A3
to Baa1 with negative outlooks. As a result of the lowering of the rating of the
debentures (Series ZB), an update was made of the interest rate on the debentures
(Series ZB), such that the forecasted payments on the debentures (Series ZB) reflect the
updated interest rate (an increase from 5.7% to 5.95%) commencing from the beginning
of the next interest period, starting from September 1, 2015.
(4) In January 2015, the Company’s Board of Directors decided to make early repayment of
part of the debentures (Series Z) in the amount of NIS 198.156 million, which was made
on February 1, 2015 (hereinafter – “the Early Repayment Date”), and to make early
repayment of part of the debentures (Series ZA) in the amount of NIS 99.848 million,
which was made on the Early Repayment Date (hereinafter – “the debentures (Series Z)
and (Series ZA)” and “the Early Repayment”, respectively). The Early Repayment, as
stated, reflects advancement of the upcoming principal payment of each of the debenture
series (Series Z) and (Series ZA) (of May 2015), and the source of the Early Repayment
amounts detailed above is the proceeds from issuance of the Company’s debentures
(Series ZB), as detailed in Note 19E(1)(d) (Note 19D(1)(d)), to the annual financial
statements.
(5) In March 2015, 1,386 options were exercised for 1,386 of the Company’s ordinary
shares, in exchange for a consideration of about NIS 16 thousand. The options that were
not exercised expired on March 31, 2015.
37
At March 31, 2015
Note 5 –
Financial Instruments
A.
Financial instruments measured at fair value for disclosure purposes only
The book value of the financial instruments included in the Company’s working capital
categories corresponds to or approximates their fair values.
The fair value of the financial assets and liabilities and their fair values presented in the
statement of financial position are as follows:
At March 31, 2015
(Unaudited)
Non-current liabilities
Long-term loans from banks
Debentures
Other long-term liabilities
At March 31, 2014
(Unaudited)
Thousands of NIS
Book
Fair
value
value
Book
value
Fair
value
5,832,749
4,439,843
857,275
5,954,938
4,063,675
883,970
7,144,679
4,057,920
754,283
160,032
160,025
77,055
Non-current assets
Long-term receivables
At December 31, 2014
(Audited)
Book
value
Fair
value
7,078,995
4,880,477
784,251
6,247,228
4,543,841
949,205
5,947,827
4,135,678
1,045,586
77,260
158,251
159,810
The book value of is before deduction of current maturities and includes accrued interest.
B.
Hierarchy of fair value
The following table presents an analysis of the financial instruments measured at fair value,
using an evaluation method. The various levels were defined as follows:
–
–
–
Level 1: Quoted prices (not adjusted) in an active market for identical instruments.
Level 2: Observed data, direct or indirect, not included in Level 1 above.
Level 3: Data not based on observed market data.
38
At March 31, 2015
Note 5 –
Financial Instruments (Cont.)
B.
Hierarchy of fair value (Cont.)
Level 1
Level 2
Level 3
In Thousands of NIS
Total
March 31, 2015 (Unaudited)
Financial assets held for trade:
Financial liabilities – derivative instruments*
44,285
–
–
44,285
188,414
232,699
–
–
–
–
188,414
232,699
–
(28,560)
–
(28,560)
March 31, 2014 (Unaudited)
Financial assets – derivative instruments
Financial liabilities – derivative instruments*
48,480
–
–
214
–
–
48,480
214
360,698
409,178
–
214
–
–
360,698
409,392
–
(30,523)
–
(30,523)
44,209
–
–
44,209
151,245
195,454
–
–
–
–
151,245
195,454
(29,033)
–
(29,044)
December 31, 2014 (Audited)
Financial assets – derivative instruments*
(11)
* Set forth below is the valuation technique for measurement of the fair value of the liabilities in
respect derivative instruments, as at March 31, 2014 and December 31, 2014, in the amount of
NIS 4,153 thousand and NIS 5,244 thousand, respectively: the fair value was measured on the basis
of discounting the difference between the forward price denominated in the contract and the present
forward price relating to the balance of the period of the contract up to maturity, while using
appropriate market interest rates for similar instruments.
Set forth below is the valuation technique for measurement of the fair value of the liabilities in
respect derivative instruments, as at March 31, 2015, in the amount of NIS 7,597 thousand (as at
March 31, 2014 – NIS 1,625 thousand and December 31, 2014 – NIS 2,519 thousand): the fair value
was measured on the basis of measurement of the forward rates from purposes of converting the cash
flows in euro to cash flows in shekels, finding the net cash flows in shekels, discounting of the net
cash flows in shekels as at the date of the valuation using a risk free interest rate, measurement of the
credit margin of the two parties to the transaction and measurement of the fair value of the exchange
transactions.
Set forth below is the valuation technique for measurement of the fair value of the liabilities in
respect derivative instruments, as at March 31, 2015, in the amount of NIS 20,963 thousand (as at
March 31, 2014 – NIS 24,745 thousand, as at December 31, 2014 – NIS 29,033 thousand): the fair
value was measured on the basis of discounting the difference between the cash flows between the
fixed interest paid and the variable interest expected to be received based on the interest curve on the
date of the report.
39
At March 31, 2015
Note 6 –
Associated Companies and Jointly Controlled Entities Accounted for using the Equity
Method of Accounting
Condensed information regarding significant associated companies and jointly held entities
accounted for using the equity method of accounting, without adjustment for the rates of
ownership held by the Group
(1) Condensed information with respect to the financial position
Rate
of
ownership/
participation
in income
Current
assets
(1)
As at March 31, 2015 (Unaudited)
The Time Building Company
Africa Hotels
50.10%
50.00%
17,026
67,872
1,174,100
707,710
(14,682)
(235,225)
(855,700)
(411,442)
As at March 31, 2014 (Unaudited)
Africa Hotels
50.10%
50.00%
16,685
73,054
984,588
739,672
(16,587)
(156,521)
(749,705)
(511,457)
As at December 31, 2014 (Audited)
Africa Hotels
50.10%
50.00%
22,972
72,459
1,096,511
710,146
(15,614)
(229,820)
(836,135)
(417,310)
NonCurrent
current
liabilities
assets
(2)
In thousands of NIS
Noncurrent
liabilities
(3)
(1) Of which cash and cash equivalents, as at March 31, 2015, in the amount of NIS 9,167 thousand
(March 31, 2014 – NIS 13,155 thousand; December 31, 2014 – NIS 10,683 thousand).
(2) Of which current financial liabilities, not including trade payables, other payables and other
provisions, as at March 31, 2015, in the amount of NIS 154,161 thousand (March 31, 2014 –
NIS 72,120 thousand; December 31, 2014 – NIS 150,897 thousand).
(3) Of which non-current financial liabilities except for trade and other payables and other provisions
as at March 31, 2015, in the amount of NIS 1,226,378 thousand (March 31, 2014 – NIS 1,226,871
thousand; December 31, 2014 – NIS 1,213,136 thousand).
40
At March 31, 2015
Note 6 –
Associated Companies and Jointly Controlled Entities Accounted for using the Equity
Method of Accounting (Cont.)
Condensed information regarding significant associated companies and jointly held entities
accounted for using the equity method of accounting, without adjustment for the rates of
ownership held by the Group (Cont.)
(2) Condensed information with respect to the results of operations
Rate
of
ownership/
participation
in
income
Income
Other
(loss)
comprefrom
hensive
continuing
income
Revenues
operations
(loss)
In thousands of NIS
For the three months ended
March 31, 2015 (unaudited)
Times Building
Africa Hotels
50.10%
50.00%
73,791
79,918
46,997
(9,550)
For the three months ended
March 31, 2014 (unaudited)
Times Building
Africa Hotels
50.10%
50.00%
13,886
79,781
(4,847)
(6,790)
For the year ended
December 31, 2014 (audited)
Times Building
Africa Hotels
50.10%
50.00%
45,128
358,634
(20,441)
(17,016)
–
2,990
–
(295)
–
658
Total
other
comprehensive
income
(loss)
(1), (2),
(3), (4)
46,997
(6,560)
(4,847)
(7,085)
(20,441)
(16,358)
(1) Of which depreciation and amortization in the amount of NIS 23,315 thousand, NIS 15,875
thousand and NIS 68,209 thousand, for the three-month period ended March 31, 2015, for the
three-month period ended March 31, 2014 and for the year ended December 31, 2014,
respectively.
(2) Of which interest income in the amount of NIS 1 thousand, NIS 75 thousand and NIS 183
thousand, for the three-month period ended March 31, 2015, for the three-month period ended
March 31, 2014 and for the year ended December 31, 2014, respectively.
(3) Of which interest expenses in the amount of NIS 16,547 thousand, NIS 16,177 thousand and
NIS 59,986 thousand, for the three-month period ended March 31, 2015, for the three-month
period ended March 31, 2014 and for the year ended December 31, 2014, respectively.
(4) Of which tax expenses in the amount of NIS 138 thousand, NIS 162 thousand and NIS 1,922
thousand, for the three-month period ended March 31, 2015, for the three-month period ended
March 31, 2014 and for the year ended December 31, 2014, respectively.
41
At March 31, 2015
Note 7 – Information regarding Activity Segments
The basis for the segment breakdown and the basis for measurement of the income (loss) of the
segments is the same as that presented in Note 39, Activity Segments, in the Annual Financial
Statements. The accounting principles of activity segments are the same as that presented in Note 3,
Significant Accounting Principles, in the Annual Financial Statements.
Pursuant to that stated above, as at the date of the statement of financial position, the Group has
eight reportable segments, as detailed below, which constitute strategic business units. These
strategic business units include a variety of product and service activities that are managed
separately.
Set forth below are the Group’s reportable segments, as at the date of the statement of financial
position:
A.
Development of real estate for residences in Israel – initiation of projects intended for
residences in Israel by means of locating lands, acquisition thereof, construction of the
buildings and sale of the units.
B.
Rental properties in Israel – initiation, construction (including by means of renovation and/or
refurbishing), rental and operation of the buildings, mainly intended for industry, offices and
commercial uses in Israel.
C.
Development of real estate in Central and Eastern Europe – development of real estate
designated for residential purposes, as well as initiation, construction, rental and operation of
buildings, intended mainly for industry, offices and commercial use in Central and Eastern
Europe.
D.
Development of real estate and rental properties in the Commonwealth of Nations –
development of real estate designated for residential purposes, as well as initiation,
construction, rental and operation of buildings, intended mainly for offices and commercial
use in the Commonwealth of Nations.
E.
Construction contracting – performance of construction for residential and non-residential
purposes.
F.
Infrastructures – activities as concessionaire or performance contractor for traffic
infrastructures, such as, highways, railroad tracks and bridges. The activities in the
infrastructures’ area are carried out mainly for the government sector. The segment includes
an investee company accounted for using the equity method of accounting, which includes
activities in the infrastructures area that are executed by means of the PPP (Private Public
Partnership) method wherein the private sector executes, finances and operates the project
(for example projects of the BOT and PFI types).
G.
Steel products in Israel – includes processing and marketing tin and steel products, profiles
and pipelines, trade in aluminum and nierusta, protection against corrosion, running of steel
poles, trade in special steel and steel tools, manufacture and marketing of incubators,
communications’ encasements and steel lighting stanchions.
42
At March 31, 2015
Note 7 – Information regarding Activity Segments (Cont.)
H.
Home design – this products group includes import, marketing and sale of ceramic and
porcelain products, along with end products, plus manufacture of porcelain tiles and
coverings and additional products for residential construction, renovation and design for
casual customers, residential projects, contractors, merchants and foreign customers.
Other activities include operation of hotels and management of investment portfolios. These
activities are not recognized as reportable segments.
Information regarding the activities of the reportable segments is presented in the following table.
The segment’s income is from outside parties before allocation of the increase in the fair value of
investment property, other income and equity income. The segment’s performance was measured
based on the segment’s income before equity in earnings of investees and taxes on income and after
allocation of financing expenses. Inter-segment pricing was determined based on prices of
transactions in the ordinary course of business.
In light of completion of the sale of a significant part of the assets and activities relating to
development of real estate and rental properties in the United States in recent years, which is an
activity segment, the activities in the United States no longer constitute a reportable activity
segment, commencing with the financial statements as at December 31, 2014. In light of that stated
above, the Company reclassified in the Note on activity segments detailed below, the development
of real estate and rental properties in the United States activities to other segments for the
three-month periods ended March 31, 2015 and March 31, 2014 and for the year ended
December 31, 2014.
Set forth below is data regarding the development of real estate and rental properties in the United
States segment that was reclassified in the financial statements to other segments:
For the three
months ended
March 31
2014
(Unaudited)
NIS Thousands
Total revenues from outside sources
Segment results
Equity losses
Loss of segment before taxes
32,646
(2,036)
(2,460)
(4,496)
At March 31
2014
(Unaudited)
NIS Thousands
Segment assets
Segment liabilities
318,353
71,637
43
At March 31, 2015
InfrastructConstrure
uction
contrcontrHome
Other
acting
acting
Steel
design* segments
In thousands of New Israeli Shekels
Commonwealth
of
Nations
Central
and
Eastern
Europe
Rental
property
in
Israel
Residential
property
in
Israel
96,291
72,808
24,783
114,859
90,612
457,230
250,552
184,997
–
–
–
–
–
95,180
17,069
33,135
42,594
15,715
26,466
13,458
(1,065)
481
2,365
6,312
(655)
933
33,616
44,959
22,027
25,811
Segment assets as at
March 31,2015
8,484,295
5,483,662
2,065,578
Segment liabilities as at
March 31,2015
3,378,542
2,871,325
Total income from
outside parties
Income from
inter-segment sales
Segment results
Equity income (loss)
Segment income
(loss) before taxes
Intersegment
Unallocated
amounts
84,838
–
–
(79,918)
1,297,052
4,553
266
(117,068)
–
–
–
1,555
(34,001)
(16,055)
(12,843)
(54,555)
10,155
24,559
–
142
61
23,988
–
4,484
(6,422)
31,689
14,391
(1,065)
1,697
(33,940)
7,933
(12,843)
(50,071)
3,733
56,248
3,069,347
111,541
469,862
1,258,469
1,327,716
1,212,534
(131,242) 1,123,319
1,893,857
2,600,529
167,140
706,223
989,402
1,232,006
944,543
(110,713) 3,325,910
InfrastructConstrure
uction
contrcontrHome
Other
acting
acting
Steel
design* segments
Commonwealth
of
Nations
Central
and
Eastern
Europe
Rental
property
in
Israel
Residential
property
in
Israel
128,194
191,082
22,002
111,517
120,232
451,656
263,833
*204,875
–
–
–
–
–
78,897
18,180
103,615
33,259
9,346
11,102
5,296
2,331
(2,252)
(1,753)
2,991
(516)
9
101,363
31,506
12,337
10,586
Segment assets as at
March 31,2014
9,458,703
6,294,549
1,676,142
Segment liabilities as at
March 31,2014
3,511,712
3,502,339
1,581,163
Total income from
outside parties
Income from
inter-segment sales
Segment results
Segment income
(loss) before taxes
Adjustments
to
consolidated
Consolidated
(775,582)
(615,395)
Adjustments
to
consolidated
23,699,499
17,383,369
Intersegment
Unallocated
amounts
120,736
–
206
(79,781)
1,534,552
7,695
898
(105,670)
–
–
–
8,857
*(2,081)
(14,373)
(7,528)
(68,769)
*7,746
88,801
–
206
*136
(1,504)
–
4,241
(5,396)
(3,838)
5,305
2,331
9,063
(1,945)
(15,877)
(7,528)
(64,528)
2,350
84,963
2,600,855
156,252
542,908
1,336,049
*
1,268,075
1,455,248
(249,686)
732,371
(812,726)
24,458,740
2,192,516
155,731
717,539
1,064,101
*
1,106,568
1,067,637
(265,699) 3,259,979
(640,880)
17,252,706
* Reclassified – see Note 2D.
44
Consolidated
At March 31, 2015
Commonwealth
of
Nations
Total income from
outside parties
Central
and
Eastern
Europe
Rental
property
in
Israel
Residential
property
in
Israel
Infrastructure
contracting
Construction
contrHome
Other
acting
Steel
design* segments
514,680
458,735
94,000
555,193
–
–
–
–
–
426,877
69,780
28,737
(1,191,457)
363,602
40,122
86,982
24,785
24,875
(19,719)
(35,811)
(49,644)
(16,877)
(4,681)
5,428
(2,141)
1,342
–
123
(195)
(6,183)
(1,208,334)
358,921
45,550
84,841
26,127
24,875
(19,596)
(36,006)
(55,827)
Segment assets
at 12/31/2014
8,361,644 5,981,341 1,904,798 3,014,884
Segment liabilities
at 12/31/2014
3,370,576 3,183,002 1,713,377 2,513,385
Income from
inter-segment sales
Segment results
Segment income (loss)
before taxes
451,540 1,654,009 1,000,906
782,236
555,205
Intersegment
–
Unallocated
amounts
Adjustments
to
consolidated
620 (358,634)
Consolidated
5,708,490
–
–
–
(21,877) (334,977)
20,829
(1,092,290)
26,085
(17,962)
(15,061)
(21,877) (308,892)
2,867
(1,107,351)
172,645
419,266 1,311,227 1,346,676 1,240,567 (246,589) 1,408,820 (782,605)
24,132,674
150,820
709,082 1,042,504 1,218,343
* Reclassified – see Note 2D.
45
3,494 (528,888)
–
987,989 (227,386) 3,631,476 (616,125) 17,677,043
At March 31, 2015
Note 8 – Financial Covenants
As at the date of the statement of financial position, all the Group companies were in compliance
with the financial covenants in accordance with the financing agreements, to which they are parties,
except for that stated below:
AFI USA
As at the date of the statement of financial position, AFI USA, was not in compliance with a
financial covenant provided in the bank loan agreement for a foreign company in the United States
that is held (indirectly through AFI USA) at the rate of about 50.1% and is accounted for using the
equity method of accounting – a minimum required cash balance in AFI USA of at least U.S.$5
million (and upon existence of certain criteria, AFI USA will be required to have a minimum cash
balance of at least U.S.$10 million).
As at the approval date of the statement of financial position, a contact from the lending bank had
not been received.
Since the investment is accounted for using the equity method of accounting, the reclassification
has no impact on the Company’s statement of financial position.
Africa Industries
Africa Industries has commitments to comply with the following financial covenants:
(1)
Loans from institutional entities
Africa Industries has a commitment to comply with financial covenants provided as part of
the loan agreement, the main ones of which are:
(a)
The ratio of the shareholders’ equity based on the consolidated financial statements of
the subsidiary of Africa Industries, Negev Ceramics Ltd. (hereinafter – “the Financial
Statements of Negev” and “Negev”, respectively), shall not be less than 13%.
(b)
The ratio of the total debt of Africa Industries to the EBITDA of Negev shall not
exceed 6. Examination of the said ratio will be made initially on the basis of the
annual financial statements of Africa Industries as at December 31, 2014.
(c)
The minimum shareholders’ equity (solo) of Africa Industries shall not drop below
NIS 330 million.
As at the date of the statement of financial position, Africa Industries is not in compliance
with the financial covenants detailed in subsections (a), (b) and (c). As a result, the loan was
classified as a current liability in the statement of financial position of Africa Industries.
Regarding non-compliance by Africa Industries with the financial covenants, as stated,
Africa Industries is carrying on contacts with the lenders in order to receive a waiver letter.
46
At March 31, 2015
Note 8 – Financial Covenants (Cont.)
Africa Industries (Cont.)
(2)
Loan from bank
In order to secure credit received from a bank (hereinafter – “the Bank”), received by Africa
Industries, as well as credit received by its investee companies, and for which Africa
Industries is a guarantor, including a long-term loan taken out be a wholly-owned partnership
of Africa Industries, the repayment date of which is October 31, 2016, Africa Industries
committed to comply with the following financial covenants:
(a)
The tangible shareholders’ equity of Africa Industries, based on the consolidated
financial statements of Africa Industries, shall not drop below 15%.
(b)
The tangible shareholders’ equity of Africa Industries shall not drop below NIS 240
million linked to the Consumer Price Index (CPI).
(c)
The ratio of the combined tangible shareholders’ equity of Negev, Packer Plada
Industries Ltd. (hereinafter – “Packer Plada”) and Packer Structural Iron (Registered
Partnership) (hereinafter – “the Partnership”), on the basis of the shareholders’ equity
of Negev, Packer Plada and the Partnership as it appears in the financial statements of
each of them, and the debts and liabilities of Africa Industries less cash and cash
equivalents based on the separate-company (solo) financial statements of Africa
Industries shall not be less than a ratio of 1.5.
As at the date of the statement of financial position, Africa Industries is not in compliance
with the financial covenants detailed in subsections (a) and (b) and is in compliance with the
financial covenant detailed in subsection (c) (hereinafter – “the Ratio of the Tangible
Shareholders’ Equity”), due to reclassification of the loan as a current liability in the
statement of financial position of Africa Industries.
Regarding non-compliance by Africa Industries with the financial covenant, as stated, Africa
Industries is carrying on contacts with the lenders in order to receive a waiver letter.
(3)
A subsidiary of Africa Industries (hereinafter – “the Subsidiary”) has commitments to banks,
mainly a commitment to maintain tangible shareholders’ equity to the total assets of not less
than 22% (hereinafter – “the Tangible Equity Ratio”) and for minimum shareholders’ equity
of not less than NIS 120 million. Regarding some of the banks, the Subsidiary is not in
compliance with the commitment to maintain a ratio of tangible shareholders’ equity, this
being due to a different definition of the said ratio.
As a result, the Subsidiary’s loans were reclassified as current liabilities in the statement of
financial position of Africa Industries.
47
At March 31, 2015
Note 9 – Events Occurring Subsequent to the Date of the Statement of Financial Position
A.
Further to that stated in Note 31E(3) to the Company’s annual financial statements for 2014,
in connection with tax assessments received by Africa Properties in respect of the years 2008
through 2010 and tax assessments received by a wholly-owned subsidiary of Africa
Properties in respect of the years 2009 and 2011, and regarding the appeals filed by Africa
Properties with reference to the said tax assessments received by Africa Properties, on
May 11, 2015, Payment Orders were received in the Offices of Africa Properties relating to
the said tax assessments received by Africa Properties in respect of the years 2008
through 2010 and relating to the said tax assessment of the subsidiary for 2011, in the
aggregate amount of about NIS 280 million (including linkage differences and interest).
Africa Properties and its subsidiary disagree with the positions of the Taxes Authority and
believe that they have good arguments against these positions, this being based on, among
other things, the position of their legal advisors. Africa Properties and its subsidiary intend to
submit notices of appeal with respect to the Payment Orders pursuant to the provisions of
law.
It is noted that regarding some of the issues relevant to the tax assessments, Africa Properties
has already included appropriate provisions in its consolidated financial statements while
regarding the other issues provisions have not been recorded – all of this being based on
opinions of the legal advisors of Africa Properties and its subsidiary.
B.
During April 2015, an agreement was signed between a German subsidiary of AFI Europe
and a third party (hereinafter – “the Purchaser”), whereby AFI Europe will sell to the
Purchaser its ownership rights in a rental property located in the City of Aakon in Germany,
in exchange for a consideration of about €5,700 thousand. Completion of the
above-mentioned transaction is subject to a number of preconditions in accordance with the
provisions of the agreement. Africa Properties recognized revaluation income of €473
thousand (about NIS 2 million) in accordance with the sale price. In addition, the property
was reclassified to the category “assets of a disposal group held for sale”.
C.
Regarding completion of the undertaking of Africa Residences in an agreement for
acquisition of all of the Company’s holdings in Afriram, along with the Company’s rights in
a loan the Company granted to Afriram, subsequent to the date of the statement of financial
position – see Note 4E(2).
D.
Further to that stated in Note 5C(6) to the Company’s annual financial statements for 2014,
during April 2015 Africa Residences reached agreements with Shoval Eyal for joint
cooperation in connection with filing of a claim against Israel Lands Administration for
enforcement of the option and/or compensation in respect of its expenses.
E.
On May 21, 2015, a public tender was made whereby Africa Residences raised, pursuant to a
shelf prospectus, a gross amount of about NIS 193 million against issuance of NIS 193
million par value debentures (Series C). The principal of the debentures is to be repaid in six
unequal annual payments, on March 31 of each of the years 2017 through 2022. The
debentures are not linked and bear interest at the annual rate of 3.9%, which is to be repaid in
semi-annual payments on every September 30 and every March 31 of the years 2015
through 2022. The debentures are not secured by a lien.
48
At March 31, 2015
Note 9 – Events Occurring Subsequent to the Date of the Statement of Financial Position (Cont.)
F.
Regarding an undertaking of a foreign subsidiary in the United States, in which the Company
holds, indirectly, through AFI USA, 50.1% of the shares, with a third party, for sale of the
balance of the rights in the “Times Square” building, in New York in the United States – see
Note 4A(1).
G.
Regarding a derivative claim filed by a person that holds, so he contends, shares of the
Company commencing from 2008 having a value of about NIS 1,900 against the members of
the Company’s Board of Directors – see Note 4E(1).
H.
The Company and the other shareholder (hereinafter – “the Partner”) (in equal shares) in
Rennanot Initiations and Investments Ltd. (hereinafter – “Rennanot”) and Rennanot (the
Company, the Partner and Rennanot will be referred to hereinafter together as – “the
Parties”) reached agreements among themselves in connection with cancellation of an
agreement they entered into in 1996, relating to the investment of the Company and
Rennanot in execution of a residential project in Kibbutz Galilee Yam (this agreement,
together with the summaries prepared between the parties from time to time, with respect to
execution of this project, will be referred to hereinafter as – “the Joint Cooperation
Agreement”), and with reference to reciprocal return of amounts and properties that were
transferred between the Company and Rennanot as part of the Joint Cooperation Agreement.
For purposes of arranging the terms of the separation and cancellation of the Joint
Cooperation Agreement, the Parties entered into a transaction cancellation agreement
(hereinafter – “the Cancellation Agreement”) wherein it was provided, among other things,
that the Company is to return to Rennanot the shares issued to it under the Joint Cooperation
Agreement, and Rennanot and/or the Partner is/are to return to the Company various amounts
the Company expended under the Joint Cooperation Agreement (including a shareholders’
loan the Company provided to Rennanot), in the aggregate amount of NIS 66 million
(hereinafter – “the Return Amounts”) (plus VAT, if applicable), and they will see to
cancellation of the financial guarantee the Company provided to the bank financing the
activities of Rennanot, in order to secure the Rennanot’s liabilities to the bank.
Completion of the Cancellation Agreement is scheduled to take place after receipt of court
approval for reduction of the capital of Rennanot, by means of acquisition of its own shares
(a “buy-back”), this being in respect of the payment against return of the Company’s
holdings in Rennanot to Rennanot (hereinafter – “the Capital Reduction Agreement”) – but
no later than the end of 45 days from the signing date of the Cancellation Agreement
(hereinafter – “the Final Date for Completion”). It is clarified that approval for reduction of
the capital of Rennanot does not constitute a precondition for completion of the Cancellation
Agreement, and it was agreed between the parties that if and to the extent approval for
reduction of the capital is not received up to the Final Date for Completion, the payment in
respect of return of the Company’s holdings in Rennanot, to Rennanot, will be paid directly
by the Partner.
At the time of the signing of the Cancellation Agreement, amounts were paid to the
Company in an amount equal to the Return Amounts (part of which as a short-term loan,
which Rennanot made to the Company, in an amount equal to part of the Return Amounts, in
respect of which a request will be submitted for receipt of approval for the capital reduction,
as described above), and the Company deposited a transfer note, in respect of the Company’s
holdings in Rennanot.
49
At March 31, 2015
Note 9 – Events Occurring Subsequent to the Date of the Statement of Financial Position (Cont.)
H.
(Cont.)
As a result of cancellation of the Joint Cooperation Agreement, as described above, the
Company will receive cash flows, in the amount of about NIS 66 million, as free cash flows,
and after completion of the transaction, capital gain is expected to be recorded in its financial
statements, in the amount of about NIS 40 million.
On May 29, 2015, the Cancellation Agreement was signed and the Company received about
NIS 66 million.
50

Ruson Sport Agencies Ltd

Transcription

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