Bribery probes overshadow Shikun & Binui financials

Shari Arison  photo: Einat Lavron
Shari Arison photo: Einat Lavron

Israeli infrastructures company Shikun & Binui says it cannot estimate the outcomes of investigations by the World Bank and Israel Police.

Infrastructures company Shikun & Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison, has released its financial statements for 2017, which was a highly problematic year for the company. So far this year it has shed more than 26% of its value, taking it to a market cap of NIS 2.3 billion, mainly because of investigations of bribery in Africa, the consequences of which it says it cannot predict, but which certainly have very damaging potential.

In 2017, revenue grew 19.7% to NIS 6.44 billion, but net profit, at NIS 230.9 million, was well below the 2016 figure of NIS 445.8 million.

The decline in net profit was mainly due to a decline in gross profit on infrastructure and construction contracting overseas, and to the fact that in 2016 the company benefitted from the sale of its investment in the operating company at the desalination installation at Hadera and of other projects, and from revaluation gains.

In 2017, shareholders' equity fell slightly, cash flow from regular operations also fell, and working capital rose, while the orders backlog in contracting and construction development fell 17.2% to a current level of NIS 11.8 billion. The company's fourth quarter profit was down 46% on the corresponding quarter to NIS 149.9 million.

As far as the investigation into its activity in Africa is concerned, the company has deposited NIS 250 million in a forfeiture account in order to free its bank accounts. Shikun & Binui also discloses that in February it received notice from the Integrity Vice Presidency (INT) of the World Bank that it intends to carry out an audit procedure of several projects in Kenya. The investigation has begun, and Shikun & Binui has handed over documents in connection with the matter.

"At this stage, the company has no means of estimating the outcome of the World Bank's audit procedures and its resulting exposure," Shikun & Binui states, adding, "The World Bank may impose sanctions, which would mainly be suspension of the company for a specified period from competing in future tenders for projects financed by the World Bank, alongside other possible sanctions in the nature of return of money received from loans granted by the World Bank or repair of damage." At the same time, a police investigation of the bribery allegations is underway in Israel. Among those under investigation are former senior managers in the Shikun & Binui group.

The company also raises the possibility that the investigation may affect some of its credit and loan agreements that have provisions that, in the event of a material adverse impact on group companies, the lenders can apply various sanctions, among them demand for immediate repayment. Shikun & Binui says that in this respect too it cannot estimate its exposure.

Because of the investigations and the uncertainty over their consequences, the company's board has decided not to declare a dividend, and to examine the payment of a dividend in 2018, in accordance with developments.

Published by Globes [online], Israel business news - www.globes-online.com - on April 1, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Shari Arison  photo: Einat Lavron
Shari Arison photo: Einat Lavron
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018