"There are financial people, and there’s Formula," venture capital fund Formula Ventures chairman Shai Beilis told "Globes" at the beginning of the month. Beilis explained that "a businessman buys cheap and sells dear. We add to the recipe Formula’s upgrading caability." This statement gains new significance when accompanied by the capital gain of more than NIS 6 million Formula has posted within a month of setting up the fund.
Formula Ventures was founded by Formula, who undertook to invest $12.5 million in it, and a group of investors that undertook to invest a similar sum. The latter includes Shamrock, of the Disney group, which committed itself to investing $6.25 million, Ofer Brothers’ Yozma 2, which committed to investing $3 million, and Poalim Capital Markets together with Ofer Brothers, which committed to $3.25 million.
By the end of Formula Ventures’ first month of activity, Formula had transferred to it investments to a value of $10.55 million, on account of its planned investment, while the rest of the investors injected $4.3 million cash into the fund. The profit Formula posted as a result introducing the investors into the start-up companies it had invested in previously totals NIS 6.3 million.
Even without the new fund Formula, controlled by brothers Dan and Gad Goldstein, has proven company enhancing ability, which last year touched new peaks. The holding company, which controls twelve listed companies (in Tel Aviv and New York, Formula itself being traded in both places) ended 1998 with a profit of NIS 110 million, compared with NIS 74 million in 1997 - a 49% rise.
Sales increased 84% to NIS 1 billion, and operating profit grew 133% to NIS 106 million. Sales soared both as a result of internal growth of the group’s veteran companies, and as a result of mergers and acquisitions. The proportion of sales overseas rose from 34% in 1997 to 39% - growth attributed to the activity of Crystal, Wiztec, and Magic.
The main contributors to Formula’s sales turnover were Sintec (20%), ForSoft (19%), Crystal (16%), and Mashov (12%). The group points to a change in the revenue mix in favor o integrated software solutions, which reached 46% of turnover following the acquisition of control in Mashov Computers.
The improvement in gross profitability (35% of sales turnover), Gad and Dan Goldstein point out, reflects the change in the sales mix - revenue from integrated software solutions, particularly overseas, typically carries a high gross profit margin. Formula attributes the high profitability to the activity of ForSoft, Wiztec, and Crystal, in contrast to the losses occasioned by its holdings in Nikuv and small R&D companies like Comfuture.
Formula enjoyed capital gains of NIS 70 million last year from realization of holdings, compared with NIS 65 million in 1997. These profits derived from the issue of ForSoft on Wall Street, which yielded NIS 63 million, and the transfer of investments to Formula Ventures.
Published by Israel's Business Arena on March 17, 1999