In 1991, Elco Holdings decided to increase its holdings, and purchased control of Electra (Israel) from Clal. Gershon Salkind, with the controlling interest in Elco, was willing to pay Clal $20 million for 60% of Electra’s shares, in a deal which reflected a $30 million value for Electra, which was going through difficulties at that time, particularly due to heavy losses in its consumer products activities.
Electra, traded today at a value of $130 million, will publish its Q4 ’97 financial reports, in which will proudly show a fifteenth consecutive rise in incoe and net profit, compared to the corresponding quarter in the previous year. From the point of view of volume of activity, Electra, model ’97, is a company whose annual income amounts to NIS 850 million and the bottom line points to a profit of NIS 35 million.
For the record, it should be noted that, in ’91, when Electra ownership was transferred to Elco, its annual revenue turnover stood at $100 million, yet half of this amount stemmed from the losing consumer products activities. Salkind and Shlomo Sherf, who had already taken up his position as general manager, got straight to the point. They decided to transfer the losing business to a separate company in the Elco group, known today as Electra Consumer Products.
Electra itself, following the painful dismissal of hundreds of employees, remained with what it is most closely identified: contractors for infrastructure systems; plumbing systems, central air-conditioning and elevators. Within a short time, Sherf was able to enjoy a transition to profitability, while, across the road at Electra Consumer Products, a similar process took place under the lead of general manager Eliezer Ben Moshe. Today, the company has a revenue turnover of NIS 2 billion, an impressive figure in the opinion of everyone in the Israeli business world.
Electra got stuck with a conservative image in the capital market. Perhaps this was due to Shlomo Sherf himself, who avoids carrying out traumatic measures in the company. Sherf believes in a policy of gradual expansion at Electra, using the theory, to state it in a nutshell, of enlarging the business, but "only in areas you understand".
Just the same, one cannot help but be impressed by Electra’s current activities, which in fact encompass everything that is needed for large building projects, aside from the construction of the shell itself. Through its many subsidiaries, purchased over the last few years, Electra deals in wide-range projects, in all their aspects.
In all, Electra today is a group in itself within Elco Holdings, and within Electra nearly 20 companies or autonomous divisions function independently. Electra is not highly dependent on any of them. The most prominent names of the group are: Kariv Building Systems; Elco Contracting and Services; Kedar Air-Conditioning Systems; Tal Elevators; and the hottest name, Electra Real Estate (Toren), on which we will elaborate later.
While there is a rationale to adding synergetic activities to the various aspects of the construction business, two of Electra’s companies cause some investors to raise their eyebrows. These are Electra Real Estate and Termofax, a Belgian company owned by Electra, whose area of expertise is air-conditioning and plumbing. The Belgian company has been functioning for several years in Belgium only and its annual revenues are between $7-10 million.
The question is how can Electra utilize the relative advantage and good name it enjoys in Israel, in order to increase the volume of projects it will be involved with in Europe. The answer is not simple, but Shlomo Sherf believes that even if business is kept on a low burner, yet adds a positive dimension to Electra’s profitability, that is sufficient.
Electra Real Estate is already a different story. Here we are talking about a company which has already invested in property with a market value of tens of millions of dollars, and Sherf hints that somewhere in his head ideas are turning for the floating of the company on the Stock Exchange, sooner or later. Electra Real Estate expanded its investments greatly, during the past year, but on this occasion, the company does not exactly function in a field complementary to Electra’s businesses.
Shlomo Sherf explains that Electra Real Estate is a "holding for a rainy day", which will focus on income yielding realty. According to him, Electra fortunately does not see that rainy day yet on the horizon, but should that day arrive, the company could compensate for the decrease in its order backlog through the sure revenue from rents.
Electra Real Estate’s most prominent project was done on a combination basis (the company’s part, 60%), in which the company set up a high-tech and business industry project in Matam (Advanced Technologies Center), in Haifa, where the Elron-Elbit group is situated. The project assures Electra an annual income of NIS 10 million, once the project is fully occupied by companies such as NetVision and Qualcomm.
However, Electra’s major penetration into the real estate market took place a month ago, when it purchased an office block in England for STG 8 million ($13 million).
Shlomo Sherf disagrees with the claim that massive investments in real estate places the company in a new and unwanted business arena. "It is true we are the developers in Haifa, competing against professional contractors who provide us our bread and butter. However, if we can carry out the project at high quality for reasonable costs, then why not the whole thing, including the shell?" says Sherf, referring to the first project Electra undertook which included constructing the shell, which until then had been commissioned by external builders and carried out by them.
To date, Electra’s order backlog amounts to NIS 1.15 billion and assures the company 18 months’ work, to the middle of ’99. Sherf is proud of the fact that there is no other company which can present an order backlog as long as that.
And what about the effect on Electra of the economic slowdown in Israel? Sherf does not seem worried. Firstly, the large backlog assures Electra of work up to mid ’99, by which time the economy will have had the opportunity to recover, meaning that
the company will be spared any effect. Also, Sherf does not believe public and business construction will cease in the next few years. "If there is a sharp decline in construction, obviously we will be affected, but my assessment is that there will not be such a decline, and therefore, I permit myself to say that I am optimistic," Sherf says, in his conservative manner.