Exhibit 99.1
Part C:
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
The information contained in these financial statements constitutes a translation of the financial statements published by the Company. The Hebrew version was submitted by the Company to the relevant authorities pursuant to Israeli law, and represents the binding version and the only one having legal effect. This translation was prepared for convenience purposes only.
i
Somekh Chaikin
KPMG Millennium Tower
17 Ha-Arbaa Street, PO Box 609
Tel Aviv 6100601, Israel
800068403
Review Report to the Shareholders of
“Bezeq” -The Israel Telecommunication Corporation Ltd.
Introduction
We have reviewed the accompanying financial information of “Bezeq” -The Israel Telecommunication Corporation Ltd. and its subsidiaries (hereinafter – “the Group”) comprising of the condensed consolidated interim statement of financial position as of June 30, 2019 and the related condensed consolidated interim statements of income, comprehensive income, changes in equity and cash flows for the six-month and three-month periods then ended. The Board of Directors and Management are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 “Interim Financial Reporting”, 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 this interim financial information based on our review.
We did not review the condensed interim financial information of a certain consolidated subsidiary whose assets constitute 1 % of the total consolidated assets as of June 30, 2019, and whose revenues constitute 1% of the total consolidated revenues for the six-month and three-month periods then ended. The condensed interim financial information of that company was reviewed by other auditors whose review report thereon was furnished to us, and our conclusion, insofar as it relates to amounts emanating from the financial information of that company, is based solely on the said review report of the other auditors.
Scope of Review
We conducted our review in accordance with Standard on Review Engagements 1, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” of the Institute of Certified Public Accountants in Israel. A review of interim financial information 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 the review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying financial information was not prepared, in all material respects, in accordance with IAS 34.
In addition to that mentioned in the previous paragraph, based on our review and the review report of other auditors, nothing has come to our attention that causes us to believe that the accompanying interim 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 abovementioned conclusion, we draw attention to Note 1.2 which refers to Note 1.2 to the annual consolidated financial statements, regarding the Israel Securities Authority’s (ISA) investigation of the suspicion of committing offenses under the Securities’ Law and Penal Code, in respect to transactions related to the former controlling shareholder, and the transfer of the investigation file to the District Attorney’s Office, and as mentioned in that note regarding the joint investigation by the Securities Authority and the Unit for Combating Economic Crime at Lahav 433 and to the publication of the Attorney General’s decision, by which he is considering charging the former controlling shareholder with criminal charges. As stated in the above note, at this stage, the Company is unable to assess the effects of the investigations, their findings and their results on the Company, and on the financial statements and on the estimates used in the preparation of these financial statements, if any.
In addition, without qualifying our abovementioned conclusion, we draw attention to lawsuits filed against the Group which cannot yet be assessed or the exposure in respect thereof cannot yet be estimated, as set forth in Note 10.
Somekh Chaikin
Certified Public Accountants (Isr.)
August 28, 2019
1
Condensed Consolidated Interim Statements of Financial Position
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||||
| Assets | Note | NIS million | NIS million | NIS million | ||||||||||
| Cash and cash equivalents | 971 | 923 | 890 | |||||||||||
| Investments | 1,944 | 1,676 | 1,404 | |||||||||||
| Trade receivables | 1,744 | 1,822 | 1,773 | |||||||||||
| Other receivables | 288 | 313 | 267 | |||||||||||
| Inventory | 100 | 96 | 97 | |||||||||||
| Total current assets | 5,047 | 4,830 | 4,431 | |||||||||||
| Trade and other receivables | 535 | 447 | 470 | |||||||||||
| Broadcasting rights, net of rights exercised | 59 | 467 | 60 | |||||||||||
| Right-of-use assets | 1,394 | 1,424 | 1,504 | |||||||||||
| Fixed assets | 6,245 | 6,811 | 6,214 | |||||||||||
| Intangible assets | 5.1 | 977 | 2,687 | 1,919 | ||||||||||
| Deferred tax assets | 6 | 12 | 1,035 | 1,205 | ||||||||||
| Deferred expenses and non-current investments | 465 | 530 | 462 | |||||||||||
| Investment property | 7 | - | 130 | 58 | ||||||||||
| Total non-current assets | 9,687 | 13,531 | 11,892 | |||||||||||
| Total assets | 14,734 | 18,361 | 16,323 | |||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
2
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Financial Position (Contd.)
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||||
| �� | (Unaudited) | (Unaudited) | (Audited) | |||||||||||
| Liabilities and equity | Note | NIS million | NIS million | NIS million | ||||||||||
| Debentures, loans and borrowings | 8 | 1,625 | 1,796 | 1,542 | ||||||||||
| Current maturities of liabilities for leases | 434 | 417 | 445 | |||||||||||
| Trade and other payables | 1,427 | 1,583 | 1,690 | |||||||||||
| Employee benefits | 9 | 443 | 369 | 581 | ||||||||||
| Provisions | 10 | 148 | 110 | 175 | ||||||||||
| Current tax liabilities | 20 | - | - | |||||||||||
| Total current liabilities | 4,097 | 4,275 | 4,433 | |||||||||||
| Loans and debentures | 8 | 9,709 | 10,204 | 9,637 | ||||||||||
| Liability for leases | 1,022 | 1,034 | 1,106 | |||||||||||
| Employee benefits | 9 | 487 | 267 | 445 | ||||||||||
| Derivatives and other liabilities | 163 | 210 | 174 | |||||||||||
| Liabilities for deferred taxes | 53 | 74 | 56 | |||||||||||
| Provisions | 39 | 40 | 38 | |||||||||||
| Total non-current liabilities | 11,473 | 11,829 | 11,456 | |||||||||||
| Total liabilities | 15,570 | 16,104 | 15,889 | |||||||||||
| Total equity (deficit) | (836 | ) | 2,257 | 434 | ||||||||||
| Total liabilities and equity | 14,734 | 18,361 | 16,323 | |||||||||||
| Shlomo Rodav | Dudu Mizrahi | Yali Rothenberg | ||
| Chairman of the Board of Directors | CEO | Bezeq Group CFO |
Date of approval of the financial statements: August 28, 2019
The attached notes are an integral part of the condensed consolidated interim financial statements
3
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Income
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Revenues (Note 13) | 4,480 | 4,694 | 2,224 | 2,333 | 9,321 | |||||||||||||||
| Costs of activity | ||||||||||||||||||||
| General and operating expenses (Note 14) | 1,626 | 1,679 | 814 | 838 | 3,379 | |||||||||||||||
| Salaries | 981 | 1,013 | 489 | 503 | 1,992 | |||||||||||||||
| Depreciation, amortization, and impairment losses (Notes 3.1 and 5) | 944 | 1,062 | 478 | 537 | 2,189 | |||||||||||||||
| Other operating expenses (income), net (Note 15) | (439 | ) | 107 | (414 | ) | 84 | 634 | |||||||||||||
| Impairment loss (Note 3.1 and 5) | 951 | - | 951 | - | 1,675 | |||||||||||||||
| Total operating expenses | 4,063 | 3,861 | 2,318 | 1,962 | 9,869 | |||||||||||||||
| Operating profit (loss) | 417 | 833 | (94 | ) | 371 | (548 | ) | |||||||||||||
| Financing expenses (income) | ||||||||||||||||||||
| Financing expenses | 262 | 256 | 149 | 129 | 516 | |||||||||||||||
| Financing income | (27 | ) | (38 | ) | (13 | ) | (19 | ) | (81 | ) | ||||||||||
| Financing expenses, net | 235 | 218 | 136 | 110 | 435 | |||||||||||||||
| Profit (loss) after financing expenses, net | 182 | 615 | (230 | ) | 261 | (983 | ) | |||||||||||||
| Share in losses of equity-accounted investees | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (3 | ) | ||||||||||
| Profit (loss) before income tax | 181 | 613 | (231 | ) | 260 | (986 | ) | |||||||||||||
| Taxes on income (see Note 6) | 1,454 | 158 | 1,342 | 65 | 80 | |||||||||||||||
| Profit (loss) for the period | (1,273 | ) | 455 | (1,573 | ) | 195 | (1,066 | ) | ||||||||||||
| Earnings per share (NIS) | ||||||||||||||||||||
| Basic earnings (loss) per share (in NIS) | (0.46 | ) | 0.16 | (0.57 | ) | 0.07 | (0.39 | ) | ||||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
4
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Profit (loss) for the period | (1,273 | ) | 455 | (1,573 | ) | 195 | (1,066 | ) | ||||||||||||
| Remeasurement of a defined benefit plan | (2 | ) | - | - | - | 16 | ||||||||||||||
| Items of other comprehensive income (loss) (net of tax) | 5 | 26 | (10 | ) | 5 | 26 | ||||||||||||||
| Total comprehensive income (loss) for the period | (1,270 | ) | 481 | (1,583 | ) | 200 | (1,024 | ) | ||||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
5
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Changes in Equity (Equity Deficit)
| Share capital | Share premium | Capital reserve for transactions between a corporation and a controlling shareholder | Other reserves | Deficit | Total | |||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | |||||||||||||||||||
| Attributable to shareholders of the Company | ||||||||||||||||||||||||
| Six months ended June 30, 2019 (Unaudited): | ||||||||||||||||||||||||
| Balance as at January 1, 2019 | 3,878 | 384 | 390 | (59 | ) | (4,159 | ) | 434 | ||||||||||||||||
| Loss for the period | - | - | - | - | (1,273 | ) | (1,273 | ) | ||||||||||||||||
| Other comprehensive income (loss) for the period, net of tax | - | - | - | 5 | (2 | ) | 3 | |||||||||||||||||
| Total comprehensive income (loss) for the period | - | - | - | 5 | (1,275 | ) | (1,270 | ) | ||||||||||||||||
| Balance as at June 30, 2019 | 3,878 | 384 | 390 | (54 | ) | (5,434 | ) | (836 | ) | |||||||||||||||
| Six months ended June 30, 2018 (Unaudited): | ||||||||||||||||||||||||
| Balance as at January 1, 2018 | 3,878 | 384 | 390 | (85 | ) | (2,423 | ) | 2,144 | ||||||||||||||||
| Profit for the period | - | - | - | - | 455 | 455 | ||||||||||||||||||
| Other comprehensive income for the period, net of tax | - | - | - | 26 | - | 26 | ||||||||||||||||||
| Total comprehensive income for the period | - | - | - | 26 | 455 | 481 | ||||||||||||||||||
| Transactions with shareholders recognized directly in equity | ||||||||||||||||||||||||
| Dividend to Company shareholders | - | - | - | - | (368 | ) | (368 | ) | ||||||||||||||||
| Balance as at June 30, 2018 | 3,878 | 384 | 390 | (59 | ) | (2,336 | ) | 2,257 | ||||||||||||||||
| Three months ended June 30, 2019 (Unaudited) | ||||||||||||||||||||||||
| Balance as at April 1, 2019 | 3,878 | 384 | 390 | (44 | ) | (3,861 | ) | 747 | ||||||||||||||||
| Loss for the period | - | - | - | - | (1,573 | ) | (1,573 | ) | ||||||||||||||||
| Other comprehensive loss for the period, net of tax | - | - | - | (10 | ) | - | (10 | ) | ||||||||||||||||
| Total comprehensive income for the period | - | - | - | (10 | ) | (1,573 | ) | (1,583 | ) | |||||||||||||||
| Balance as at June 30, 2019 | 3,878 | 384 | 390 | (54 | ) | (5,434 | ) | (836 | ) | |||||||||||||||
| Three months ended June 30, 2018 (Unaudited) | ||||||||||||||||||||||||
| Balance as at April 1, 2018 | 3,878 | 384 | 390 | (64 | ) | (2,163 | ) | 2,425 | ||||||||||||||||
| Profit for the period | - | - | - | - | 195 | 195 | ||||||||||||||||||
| Other comprehensive income for the period, net of tax | - | - | - | 5 | - | 5 | ||||||||||||||||||
| Total comprehensive income for the period | - | - | - | 5 | 195 | 200 | ||||||||||||||||||
| Transactions with shareholders recognized directly in equity | ||||||||||||||||||||||||
| Dividend to Company shareholders | - | - | - | - | (368 | ) | (368 | ) | ||||||||||||||||
| Balance as at June 30, 2018 | 3,878 | 384 | 390 | (59 | ) | (2,336 | ) | 2,257 | ||||||||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
6
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Changes in Equity (Equity Deficit) (Contd.)
| Share capital | Share premium | Capital reserve for transactions between a corporation and a controlling shareholder | Other reserves | Deficit | Total | |||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | |||||||||||||||||||
| Attributable to shareholders of the Company | ||||||||||||||||||||||||
| Year ended December 31, 2018 (Audited) | ||||||||||||||||||||||||
| Balance as at January 1, 2018 | 3,878 | 384 | 390 | (85 | ) | (2,423 | ) | 2,144 | ||||||||||||||||
| Loss in 2018 | - | - | - | - | (1,066 | ) | (1,066 | ) | ||||||||||||||||
| Other comprehensive income for the year, net of tax | - | - | - | 26 | 16 | 42 | ||||||||||||||||||
| Total comprehensive income (loss) for 2018 | - | - | - | 26 | (1,050 | ) | (1,024 | ) | ||||||||||||||||
| Transactions with shareholders recognized directly in equity | ||||||||||||||||||||||||
| Dividend to Company shareholders | - | - | - | - | (686 | ) | (686 | ) | ||||||||||||||||
| Balance as at December 31, 2018 | 3,878 | 384 | 390 | (59 | ) | (4,159 | ) | 434 | ||||||||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
7
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Cash Flows
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||
| Profit (loss) for the period | (1,273 | ) | 455 | (1,573 | ) | 195 | (1,066 | ) | ||||||||||||
| Adjustments: | ||||||||||||||||||||
| Depreciation, amortization, and impairment losses | 944 | 1,062 | 478 | 537 | 2,189 | |||||||||||||||
| Impairment loss of assets | 951 | - | 951 | - | 1,675 | |||||||||||||||
| Share in losses of equity-accounted investees | 1 | 2 | 1 | 1 | 3 | |||||||||||||||
| Financing expenses, net | 224 | 224 | 128 | 113 | 445 | |||||||||||||||
| Capital gain, net | (461 | ) | (6 | ) | (417 | ) | (5 | ) | (15 | ) | ||||||||||
| Taxes on income (see Note 6) | 1,454 | 158 | 1,342 | 65 | 80 | |||||||||||||||
| Change in trade and other receivables | 18 | 134 | 46 | 60 | 241 | |||||||||||||||
| Change in inventory | (9 | ) | 13 | - | 18 | (5 | ) | |||||||||||||
| Change in trade and other payables | (176 | ) | (110 | ) | (185 | ) | (152 | ) | (138 | ) | ||||||||||
| Change in provisions | (27 | ) | 15 | 3 | 7 | 81 | ||||||||||||||
| Change in employee benefits | (98 | ) | 84 | (52 | ) | 77 | 489 | |||||||||||||
| Change in other liabilities | (6 | ) | (16 | ) | 6 | (17 | ) | - | ||||||||||||
| Net income tax paid | (153 | ) | (300 | ) | (104 | ) | (93 | ) | (467 | ) | ||||||||||
| Net cash from operating activities | 1,389 | 1,715 | 624 | 806 | 3,512 | |||||||||||||||
| Cash flow used for investing activities | ||||||||||||||||||||
| Purchase of fixed assets | (551 | ) | (581 | ) | (281 | ) | (308 | ) | (1,216 | ) | ||||||||||
| Investment in intangible assets and deferred expenses | (198 | ) | (206 | ) | (95 | ) | (111 | ) | (390 | ) | ||||||||||
| Investment in bank deposits and securities | (1,780 | ) | (1,934 | ) | (669 | ) | (764 | ) | (2,338 | ) | ||||||||||
| Proceeds from bank deposits and others | 1,237 | 563 | 71 | 488 | 1,244 | |||||||||||||||
| Proceeds from the sale of fixed assets | 49 | 31 | 18 | 23 | 160 | |||||||||||||||
| Receipts on account of sale of the Sakia property | 328 | - | 323 | - | 155 | |||||||||||||||
| Payment of permit fees, betterment tax, and purchase tax for the Sakia property | (149 | ) | (112 | ) | (149 | ) | (112 | ) | (121 | ) | ||||||||||
| Receipt (payment) of betterment tax for the sale of the Sakia property | 5 | (80 | ) | - | (80 | ) | (80 | ) | ||||||||||||
| Miscellaneous | 10 | 8 | 1 | 4 | 34 | |||||||||||||||
| Net cash used in investing activities | (1,049 | ) | (2,311 | ) | (781 | ) | (860 | ) | (2,552 | ) | ||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
8
Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Condensed Consolidated Interim Statements of Cash Flows (Contd.)
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Cash flow from financing activities | ||||||||||||||||||||
| Issue of debentures and receipt of loans | 500 | 320 | 500 | - | 891 | |||||||||||||||
| Repayment of debentures and loans | (362 | ) | (182 | ) | (362 | ) | (182 | ) | (1,567 | ) | ||||||||||
| Payments of principal and interest for leases | (207 | ) | (221 | ) | (90 | ) | (96 | ) | (422 | ) | ||||||||||
| Interest paid | (190 | ) | (204 | ) | (185 | ) | (199 | ) | (421 | ) | ||||||||||
| Dividends paid | - | (368 | ) | - | (368 | ) | (686 | ) | ||||||||||||
| Miscellaneous | - | (7 | ) | - | (4 | ) | (46 | ) | ||||||||||||
| Net cash used for financing activities | (259 | ) | (662 | ) | (137 | ) | (849 | ) | (2,251 | ) | ||||||||||
| Increase (decrease) in cash and cash equivalents, net | 81 | (1,258 | ) | (294 | ) | (903 | ) | (1,291 | ) | |||||||||||
| Cash and cash equivalents at beginning of period | 890 | 2,181 | 1,265 | 1,826 | 2,181 | |||||||||||||||
| Cash and cash equivalents at end of period | 971 | 923 | 971 | 923 | 890 | |||||||||||||||
The attached notes are an integral part of the condensed consolidated interim financial statements
9
| 1. | General |
| 1.1 | Reporting Entity |
Bezeq – The Israel Telecommunication Corporation Limited (“the Company”) is a company registered in Israel whose shares are traded on the Tel Aviv Stock Exchange. The condensed consolidated financial statements of the Company as at June 30, 2019 include those of the Company and its subsidiaries (jointly referred to as “the Group”). The Group is a principal provider of communication services in Israel (see also Note 17 – Segment Reporting).
| 1.2 | Investigations of the Israel Securities Authority and the Police Force |
For information about the investigations of the Israel Securities Authority and the Police Force, see Note 1.2 to the Annual Financial Statements.
As set out in Note 1.2.3 to the Annual Financial Statements, the Company does not have full information about the investigations, their content, the materials, and the evidence in the possession of the legal authorities. Accordingly, the Company is unable to assess the effects of the investigations, their findings, and their results on the Company, as well as on the financial statements, and on the estimates used in the preparation of these financial statements, if any. Once the constraints on carrying out reviews and controls related to issues that arose in the Investigations are lifted, the review of all matters related to subjects that arose during those Investigations will be completed as required.
| 1.3 | Control in the Company |
On August 8, 2019, B Communications Ltd. (the controlling shareholder, linked, of the Company, which is controlled by Internet Gold - Golden Lines Ltd. (“Internet Gold”) informed the Company that, following the signing of a binding agreement with Searchlight Partners Capital LP (“Searchlight”) and a corporation controlled by the Fuhrer family for the acquisition of shares of Internet Gold at B Communications and another investment in B Communications on June 24, 2019, all the approvals required by the organs of B Communications and the parent company, Internet Gold, for the approval of the transaction have been obtained. B Communications believes that this represents a significant milestone for the advancement and completion of the transaction. In addition, on August 18, 2019, B Communications notified the Company that on the same day, the court approved the creditors’ settlement for the transaction, and that completion of the transaction is still subject to approval from the Ministry of Communications.
| 2. | Basis of Preparation |
| 2.1 | The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting, and Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. |
| 2.2 | The condensed consolidated interim financial statements do not contain all the information required in full annual financial statements, and should be reviewed in the context of the annual financial statements of the Company and its subsidiaries as at December 31, 2018 and the year then ended, and their accompanying notes (“the Annual Financial Statements”). The notes to the condensed interim financial statements include only the material changes that have occurred from the date of the most recent Annual Financial Statements until the date of these consolidated interim financial statements. |
| 2.3 | The condensed consolidated interim financial statements were approved by the Board of Directors on August 28, 2019. |
| 2.4 | Use of estimates and judgments |
The preparation of the condensed consolidated interim financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make judgments and use estimates, assessments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.
10
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
Other than as set out below, the judgments made by management, when applying the Group’s accounting policies and the key assumptions used in assessments that involve uncertainty, are consistent with those applied the preparation of the Annual Financial Statements.
Information about a significant estimate, for which changes in the assessments and assumptions could potentially have a material effect on the financial statements:
| Subject | Principal assumptions | Possible effects | Reference | |||
| Provisions and contingent liabilities, including levies | The Company’s assessments of the estimated payment to the authorities for the levies on the real estate asset in the Sakia property | Change in capital gain for the sale of a real estate asset in the Sakia property | Note 7 |
In addition, see Note 6 on the write-off of the tax asset for the losses of DBS by way of a change in estimate.
| 3. | Reporting Principles and Accounting Policy |
The Group’s accounting policy applied in these condensed consolidated interim financial statements is consistent with the policy applied in the Annual Financial Statements, except as described in this section below.
| 3.1 | Presentation of impairment loss of assets |
An impairment loss arising from a non-recurring adjustment of forecasts for the coming years is classified as other expenses in the statement of income. On the other hand, an impairment loss of assets arising from the continuous adjustment of non-current assets of the Group companies to their fair value, less disposal costs (arising due to the expected negative cash flow and negative operating value of those companies) is classified under the same items as the current expenses for these assets. This classification is more consistent with the presentation method based on the nature of the expense and is more suitable for understanding the Group’s business.
Accordingly, as from the first quarter of 2019, impairment of the broadcasting rights in DBS and Walla is presented under “operating and general expenses”, while impairment of fixed assets and intangible assets is presented under “depreciation, amortization and impairment” in the statement of income.
| 3.2 | Initial application of new standards |
IFRIC 23, Uncertainty Over Income Tax Treatments
As from January 1, 2019, the Group applies the interpretation of IFRIC 23, Uncertainty Over Income Tax Treatments. IFRIC 23 clarifies application of recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. Application of IFRIC 23 did not have a material effect on the Group’s financial statements.
| 4. | Group entities |
| 4.1 | A detailed description of the Group entities appears in Note 14 to the Annual Financial Statements. Below is a description of the material changes that occurred in connection with the Group entities since publication of the Annual Financial Statements. |
| 4.2 | See Note 14.1.2 to the Annual Financial Statements for information about the decision of the Company’s Board of Directors on February 13, 2019 to approve the request of each of the subsidiaries Pelephone, Bezeq International, and DBS to apply to the Ministry of Communications for approval to change the corporate structures. |
| 4.3 | DBS Satellite Services (1998) Ltd. (“DBS”) |
| 4.3.1 | On March 13, 2019, the Company’s Board of Directors approved a resolution of the Board of Directors of DBS to approve an plan for migration from satellite broadcasts to broadcasts over the internet, in a gradual, long-term process that expected to spread over seven years. |
11
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 4.3.2 | As at June 30, 2019, DBS has an equity deficit in the amount of NIS 188 million and a working capital deficit in the amount of NIS 359 million. According to the forecasts of DBS, it expects to continue to accumulate operational losses in the coming years and therefore will be unable to meet its obligations and continue operating as a going concern without the Company’s support. |
Further to Note 14.2.3 to the Annual Financial Statements, on February 13, 2019, the Company provided DBS with a credit facility or capital investments in the amount of NIS 250 million, which DBS can withdraw for a period of 15 months from that date.
In May 19, 2019, the Company’s Board of Directors approved an irrevocable undertaking of the Company to DBS to provide a credit facility or a capital investment of NIS 250 million for a period of 15 months, commencing from April 1, 2019 and until June 30, 2020.
In August 28, 2019, the Company’s Board of Directors approved an irrevocable undertaking of the Company to DBS to provide a credit facility or a capital investment of NIS 250 million for a period of 15 months, commencing from July 1, 2019 and until September 30, 2020.
Insofar as the Company elects to provide credit, the repayment date of the credit will not be earlier than the end of the term of the credit facility. The undertaking of August 28, 2019 will replace the undertakings that were provided in accordance with the resolutions of the Board of Directors on February 13, 2019 and May 19, 2019, as aforesaid (and not in addition to).
In March 2019, the Company invested NIS 70 million and in July 2019 another NIS 50 million, in accordance with the undertakings of February 13, 2019 and May 19, 2019.
The management of DBS believes that the financial resources at its disposal, which include the working capital deficit, the credit facility, and the Company’s capital investments, as set out above, will be adequate for the operations of DBS for the coming year.
| 4.3.3 | See Note 5.2 below for information about the impairment of assets recognized by DBS in the financial statements as at June 30, 2019. |
| 5. | Impairment |
| 5.1 | Impairment in the cellular communications segment |
In view of the review of Pelephone’s performance in the first half of 2019 and its possible implications on the forecasts, and in view of a decrease in expectations of market recovery, partly due to the establishment of a sixth operator in the market, Pelephone identified indications of possible impairment and updated its forecasts for the coming years. As a result, the Company estimated the recoverable amount of the cash-generating cellular communications unit as at June 30, 2019.
The value in use of the cellular communications cash-generating unit for Bezeq Group was calculated by discounting future cash flows (DCF) based on a five year cash flow forecast as at the end of the current period with the addition of the salvage value. The cash flow forecast is based, among other things, on Pelephone’s performance in recent years and assessments regarding the expected trends in the cellular market in the coming years (competitive dynamics, price level, regulation, and technological developments).
The main assumption underlying the forecast is that competition in the market will continue with high intensity in the short term and that a stable and certain gradual increase in prices will occur in the medium to long term. The revenue forecast is based on assumptions regarding the number of Pelephone subscribers, average revenue per user, and sales of terminal equipment. The expense forecast is based, among other things, on streamlining of fixed expenses (which does not result in a restructuring) and, in particular, on assumptions regarding the extent of the decrease in the number of Pelephone employees and the related wage expenses. The other operating expenses and level of investments were adjusted to the forecasted scope of Pelephone’s operations
12
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
The nominal capital price taken into account for the valuation is 10.3% (after tax) (in 2018, 10.3%). In addition, a permanent growth rate of 2.5% was assumed (in 2018 - 2.5%). The valuation is sensitive to changes in the permanent growth rate and the discount rate. In addition, the valuation is sensitive to the net cash flow in the representative year in general, and to the average revenue per user (ARPU) and number of users at the end of the range of the forecast in particular (a change of NIS 1 in ARPU results in a change in the value of operations amounting to NIS 285 million).
It should be noted that Pelephone has operating losses, therefore the value in use of the cellular communications cash-generating unit is based entirely on Pelephone’s projections for improved profitability in the coming years.
The valuation was prepared by an external appraiser. Based on the valuation as described above, the value of Pelephone’s operations amounted to NIS 1,214 million, compared with the value in the Company’s financial statements in the amount of NIS 2,165 million. Accordingly, the Company recognized a loss from impairment of goodwill attributable to the cellular communications cash-generating unit in the amount of NIS 951 million. The balance of goodwill attributable to the cash-generating cellular communications unit after recognition of impairment is NIS 76 million and the unit’s recoverable amount is the same as its carrying amount.
| 5.2 | Impairment in the multi-channel television segment |
Further to Note 11.4 to the Annual Financial Statements regarding impairment recognized in 2018 for the multi-channel television cash-generating unit, the valuation as at December 31, 2018 presented a value in use that is significantly lower than the carrying amount of DBS. Based on reviews performed by an external appraiser as at June 30, 2019 and March 31, 2019, and according to the assessment of the management of DBS, it was found that there were no changes in the projected financial results of DBS, there were no material changes in market expectations, and no regulatory changes were made. Accordingly, in view of the negative value of the operations as determined in the valuation as at December 31, 2018, DBS amortized the non-current assets as at June 30, 2019, up to the net disposal value of these assets.
Accordingly, in the six- and three-months period ended June 30, 2019, the Group recognized an impairment loss of NIS 207 million, and NIS 119 million, respectively. The impairment loss was attributed to fixed assets, broadcasting rights, and intangible assets, as set out below, and was included in depreciation, amortization, and impairment expenses and in operating and general expenses in the statement of income, as set out in Note 3.1 above.
Attribution of impairment loss to Group assets:
| Impairment loss of assets | ||||||||
| Six months ended June 30, 2019 | Three months ended June 30, 2019 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| NIS million | NIS million | |||||||
| Broadcasting rights - less rights utilized (the expense was presented under operating and general expenses) | 113 | 67 | ||||||
| Fixed assets (the expense was presented under depreciation and impairment expenses) | 68 | 41 | ||||||
| Intangible assets (the expense was presented under depreciation and impairment expenses) | 26 | 11 | ||||||
| Total impairment recognized | 207 | 119 | ||||||
For information about the method used by DBS to measure the fair value (Level 3) of the assets, less disposal costs, see Note 11.4 to the Annual Financial Statements.
| 5.3 | Assessment of indications of impairment in the international communications and internet services segment |
Further to Note 11.6 to the Annual Financial Statements regarding Bezeq International’s impairment assessment, Bezeq International performed a routine assessment for indications of impairment as at June 30, 2019, in accordance with the provisions of IAS 36 and noting the low gap measured on December 31, 2018 between the value of Bezeq International’s operations and the carrying amount of its net operating assets. As at the date of the financial statements, there were no indications of impairment.
13
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 6. | Income tax |
Further to Note 7.5 to the Annual Financial Statements regarding the deferred tax asset for the losses in DBS in the amount of NIS 1,166 million and further to the discussions between the Company and the Israel Securities Authority (ISA) regarding the Company’s application for permission to publish the prospectus, on August 23, 2019, the Company received the response of the ISA’s staff concerning the propriety of the Company’s accounting for recognition of the tax asset, including the staff position that the ISA is formulating on the matter, which addresses the question of whether the Company established the forecast test underlying the ability to continue to recognize the tax asset.
In accordance with the staff position of the ISA which is being formulated, there are difficulties in the Company’s position for recognition of the tax asset and it appears that the ISA is formulating a position whereby the Company has not met the onus required to establish the forecast for use of the tax asset regarding the cumulative existence of three events: cancellation of the structural separation by the Ministry of Communications; extension of the validity of the taxation ruling concerning use of the tax asset each year until cancellation of the structural separation; and the existence of adequate income over time after the date of cancellation of the structural separation of Bezeq and the merger with DBS that will allow use of the tax asset.
As part of the formulating staff position of the ISA, it is noted that the assessment is valid from the 2018 financial statements and onwards, and not for earlier periods. This takes into account that some of the issues related to the structural separation are at the heart of a criminal investigation concerning senior officers of the Company between 2013 and 2017, as set out in Note 1.2 above.
For the purpose of assessing the probability of utilization of the tax asset as at June 30, 2019, the Company considered, among other things, the absence of developments in its discussions with authorities and government agencies, various developments in recent months, and the effect of the passage of time. In view of the aforesaid, the Company’s estimate regarding the probability of utilizing the tax asset is no longer “more likely than not”, and therefore the Company wrote off the tax asset by adjusting the estimate as of the financial statements for the second quarter of 2019.
Accordingly, the Company recognized tax expenses of NIS 1,166 million in the statement of income for the three months ended June 30, 2019.
As aforesaid, in accordance with the formulating staff position of the ISA, the assessment is correct as at the date of the financial statements for 2018 onwards, contrary to the Company’s position according to which the tax asset is no longer recognized as of the financial statements for the period ended June 30, 2019. If the Company’s position is not accepted, there is a possibility that the Company will be required to restate its financial statements for 2018 onwards.
Regarding the petition that the Company filed with the High Court of Justice against the Ministry of Communications for immediate cancellation of the structural separation in the Bezeq Group, despite the Company’s objections, the State received several extensions to file its response to the petition, the most recent of which is until September 5, 2019 .
| 7. | Investment property |
Further to Note 13 to the Annual Financial Statements regarding the Company’s agreement for the sale of a real estate asset in the Sakia property, on May 5, 2019, the transaction was completed and the entire balance of the consideration for the sale of the asset in the amount of NIS 323 million (plus VAT) was received. This completed the receipt of the consideration for the transaction in a total amount of NIS 511 million.
Upon receipt of the balance of the consideration, the Company paid the demand for betterment tax in the amount of NIS 149 million, and in July 2019, it received a refund of half of the amount of the payment, against which it provided a bank guarantee, without this derogating from and/or impairing the steps taken and/or to be taken by the Company to cancel or reduce this fee.
The Company included capital gain of NIS 403 million in its financial statements for the second quarter of 2019. Recognition of the capital gain is based on the Company’s estimates of the amount to be paid to the authorities. It should be noted that if the Company’s estimates do not materialize, the final capital gain will be between NIS 250 million and NIS 450 million.
14
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 8. | Debentures, loans and borrowings |
| 8.1 | In June 2019, the Company raised debt in the amount of NIS 500 million through a private loan from an institutional entity with an average duration of 7.15 years and at a fixed NIS interest rate of 3.6%. The terms of the loan are similar to those of other loans taken by the Company, as set out in Note 15.3 to the Annual Financial Statements. |
| 8.2 | Subsequent to the reporting date, in July 2019, the Company completed a private placement of Debentures (Series 11 and 12) to institutional investors. The debentures were listed for trading on the TACT-Tel Aviv Continuous Institutions Trading system of the Tel Aviv Stock Exchange Ltd. The total consideration (gross) that was received amounted to NIS 889 million, as set out below: |
| Gross consideration (NIS) | Annual weighted interest | Linkage terms | ||||||||
| Series 11 | 427,891,000 | 3.6 | % | Unlinked | ||||||
| Series 12 | 461,740,000 | 2.1 | % | Linked to the increase in the CPI | ||||||
The bond principal will be repaid in five equal payments between 2026 and 2030. The interest is payable twice a year as from December 1, 2019.
The Company intends to continue to take steps to list the debentures for trading on the TASE, subject to the law, the publication of a prospectus, and the receipt of the required permits. If the Debentures (Series 11 and 12) are listed on the main list of the TASE, the interest rate payable on the principle of the debentures as from their listing date on the main list, will decrease by 0.4%.
The terms of the debentures are similar to the terms of the debentures from the Company’s existing series (Series 6, 7, 9, and 10) as set out in Note 15.3 to the Annual Financial Statements. The consideration of the issuance is earmarked for refinancing the Company’s debt.
| 8.3 | In July 2019, the Company prematurely repaid the bank loan of NIS 438 million bearing variable interest. |
| 9. | Employee benefits |
| 9.1 | On March 14, 2019, DBS signed a collective arrangement with the Histadrut Federation of Labor and the employees’ representatives regarding retrenchment and synergy procedures, commencing on June 1, 2019 until December 31, 2021 (“the Arrangement”). According to the arrangement, in the Arrangement years, DBS will be entitled to terminate the employment of up to 325 employees. In addition, according to the Arrangement, DBS may also retrench by not recruiting employees to replace employees whose employment has terminated. Following the Arrangement and the submission of the efficiency plan outline to the employees’ representatives, DBS recognized expenses of NIS 45 million, mainly severance benefits. The expenses were included under other operating expenses in the statement of income for the first quarter of 2019. |
| 9.2 | On July 11, 2019, Bezeq International signed a collective agreement with the Histadrut General Federation of Labor, which includes streamlining and synergy processes for the period from July 11, 2019 to December 31, 2021. Under to the agreement, Bezeq International may retrench up to 325 employees (of which 150 are permanent employees, some as part of voluntary early retirement), in addition to the option of not hiring employees to replace the employees who are terminating their employment. The agreement also includes a one-time bonus for employees who are not included in the retirement plan. The estimated cost of the agreement is NIS 60 million, assuming full exercise of the rights of Bezeq International to retrenchment and the fulfillment of conditions for providing additional financial benefits to the employees. |
| 10. | Contingent liabilities |
During the normal course of business, legal claims were filed against Group companies or there are pending claims against the Group (“in this section: “Legal Claims”).
In the opinion of the managements of the Group companies, based, among other things, on legal opinions as to the likelihood of success of the Legal Claims, the financial statements include adequate provisions of NIS 142 million, where provisions are required to cover the exposure arising from such Legal Claims.
15
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
In the opinion of the managements of the Group companies, the additional exposure (beyond these provisions) as at June 30, 2019 for claims filed against Group companies on various matters and which are unlikely to be realized, amounted to NIS 4.6 billion. There is also additional exposure of NIS 4.5 billion for claims, the chances of which cannot yet be assessed.
In addition, motions for certification of class actions have been filed against the Group companies, for which the Group has additional exposure beyond the aforesaid, since the exact amount of the claim is not stated in the claim.
The amounts of the additional exposure in this note are linked to the CPI and are stated net of interest.
For updates subsequent to the reporting date, see section 10.4 below.
| 10.1 | Following is a detailed description of the Group’s contingent liabilities as at June 30, 2019, classified into groups with similar characteristics: |
| Claims group | Nature of the claims | Balance of provisions | Additional exposure | Exposure for claims that cannot yet be assessed | ||||||||||
| NIS million | ||||||||||||||
| Customer claims | Mainly motions for certification of class actions concerning contentions of unlawful collection of payment and impairment of the service provided by the Group companies. | 125 | 4,492 | 630 | (1) | |||||||||
| Claims by enterprises and companies | Claims alleging liability of the Group companies in respect of their activities and/or the investments made in various projects. | - | - | 3,833 | (3)(2) | |||||||||
| Claims of employees and former employees of Group companies | Mainly individual lawsuits filed by employees and former employees of the Group, regarding various payments. | - | 3 | - | ||||||||||
| Claims by the State and authorities | Various claims by the State of Israel, government institutions and authorities (“the Authorities”). These are mainly procedures related to regulations relevant to the Group companies and financial disputes concerning monies paid by the Group companies to the Authorities (including property taxes). See also Note 7. | 17 | 21 | - | ||||||||||
| Supplier and communication provider claims | Legal claims for compensation for alleged damage as a result of the supply of the service and/or the product. | - | 63 | 16 | ||||||||||
| Claims for punitive damages, real estate and infrastructure | Claims for alleged physical damage or damage to property caused by Group companies and in relation to real estate and infrastructure. The additional amount of exposure for punitive damages does not include claims for which the insurance coverage is not disputed. | - | 67 | - | ||||||||||
| Total legal claims against the Company and subsidiaries | 142 | 4,646 | 4,479 | |||||||||||
| (1) | Including exposure in the amount of NIS 300 million against a subsidiary and against four additional defendants. |
| (2) | Including exposure of NIS 2 billion for a motion for certification as a class action filed by a shareholder against the Company and officers in the Company, referring to alleged reporting omissions by the Company regarding the wholesale market and the reduction of interconnect fees, which the plaintiff estimates at NIS 1.1 billion or NIS 2 billion (depending on the method used to calculate the damage). On August 27, 2018, the court certified the claim as a class action. On October 28, 2018, the Company filed a motion for a rehearing of the certification ruling. Subsequently, the court decided to stay the proceedings until a ruling is made on the motion for a rehearing. |
16
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
In the hearing on May 22, 2019 of the motion filed by the Company for another hearing, the Court proposed transferring the case to mediation. The plaintiff rejected the proposal. On July 18, 2019, a hearing was held to complete the parties’ arguments in the motion for a re-hearing application and the ruling will be handed down at a later stage.
| (3) | Two motions for certification of a class action amounting to a total of NIS 1.8 billion, filed in June 2017 against the Company, officers in the Group and companies in the group of the Company’s controlling shareholders regarding the transaction for the Company’s acquisition of DBS shares from Eurocom DBS Ltd. In accordance with the court’s decision, a joint motion is expected to be filed instead of these two motions. The proceedings are stayed in view of the investigation (as described in Note 1.2) and at the request of the Attorney General, until October 31, 2019. |
| 10.2 | Further to Note 19.3 to the Annual Financial Statements, regarding a class action filed in the United States against B Communications, Ltd., the controlling shareholder of the Company, and its officers, to which DBS and officers (both past and present) in DBS and in the Company were added, as well as motions filed by the defendants for the dismissal in limine of the motion and the claim, on March 28, 2019, the Company was notified of the ruling of the US court on that date, which accepted the petitions of DBS and of the officers (both past and present) in DBS and in the Company, and dismissed the case in limine due to the absence of jurisdiction against them. |
| 10.3 | For further proceedings against the Group companies and officers, see Notes 19.2 and 19.4 to the Annual Financial Statements (at this stage, the proceedings are stayed until October 31, 2019), and Note 19.5. |
| 10.4 | Subsequent to the financial statements, claims with exposure of NIS 127 million and two claims without a monetary estimate came to an end. |
| 11. | Agreements |
Further to Notes 20.1 and 20.2 to the Annual Financial Statements, since Space Communications Ltd. (“Spacecom”) did not enter into an agreement which entered into force with a satellite manufacturer for the construction of the Amos 8 satellite by June 5, 2019, DBS has the option of notifying Spacecom of the termination of the agreement between the parties and the agreement will come to an end on February 26, 2021. If DBS does not exercise the opt out option, and Amos 8 does not start operations by February 1, 2022, then the satellite agreement will terminate at the end of the life of Amos 3, which Spacecom estimates to be on January 31, 2026.
It should be emphasized that the total amount of agreement that was presented for the space segments under Note 20.1, as presented in the Annual Financial Statements, is NIS 822 million, and a total of NIS 236 million of this amount will not be exercised if the satellite agreement ends on January 31, 2026, as aforesaid.
| 12. | Equity |
| 12.1 | Further to Note 22.1 to the Annual Financial Statements regarding the approval of the Board of Directors to convene a general meeting to approve an increase in the Company’s registered share capital, on April 8, 2019, the Board of Directors of the Company resolved to remove the issue of ah increase in the registered share capital from the agenda of the general meeting, due to discussions with shareholders and the response to their requests. |
| 12.2 | For further information, see Note 22.2.1 to the Annual Financial Statements regarding the resolution of the Board of Directors of the Company on March 27, 2019 to cancel the Company’s dividend distribution policy. |
17
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 13. | Revenues |
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Domestic fixed-line communication (Bezeq Fixed-Line) | ||||||||||||||||||||
| Internet - infrastructure | 754 | 766 | 377 | 386 | 1,525 | |||||||||||||||
| Fixed-line telephony | 522 | 580 | 259 | 286 | 1,130 | |||||||||||||||
| Transmission and data communication | 380 | 387 | 186 | 191 | 769 | |||||||||||||||
| Cloud and digital services | 139 | 128 | 68 | 66 | 260 | |||||||||||||||
| Other services | 109 | 111 | 51 | 57 | 199 | |||||||||||||||
| 1,904 | 1,972 | 941 | 986 | 3,883 | ||||||||||||||||
| Cellular telephony - Pelephone | ||||||||||||||||||||
| Cellular services and terminal equipment | 827 | 848 | 420 | 428 | 1,713 | |||||||||||||||
| Sale of terminal equipment | 302 | 352 | 140 | 164 | 688 | |||||||||||||||
| 1,129 | 1,200 | 560 | 592 | 2,401 | ||||||||||||||||
| Multi-channel television - DBS | 680 | 750 | 337 | 375 | 1,473 | |||||||||||||||
| International communications, ISP, and NEP services - Bezeq International | 653 | 664 | 330 | 325 | 1,338 | |||||||||||||||
| Others | 114 | 108 | 56 | 55 | 226 | |||||||||||||||
| 4,480 | 4,694 | 2,224 | 2,333 | 9,321 | ||||||||||||||||
18
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 14. | General and operating expenses |
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Terminal equipment and materials | 357 | 360 | 173 | 171 | 737 | |||||||||||||||
| Interconnectivity and payments to domestic and international operators | 383 | 388 | 194 | 196 | 789 | |||||||||||||||
| Maintenance of buildings and sites | 133 | 139 | 65 | 68 | 286 | |||||||||||||||
| Marketing and general | 241 | 291 | 118 | 146 | 555 | |||||||||||||||
| Consumption and impairment of content (see Note 3.1) | 336 | 325 | 176 | 169 | 653 | |||||||||||||||
| Services and maintenance by sub-contractors | 138 | 139 | 68 | 68 | 277 | |||||||||||||||
| Vehicle maintenance | 38 | 37 | 20 | 20 | 82 | |||||||||||||||
| 1,626 | 1,679 | 814 | 838 | 3,379 | ||||||||||||||||
| 15. | Other operating expenses (income), net |
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Capital gain (mainly from the sale of real estate (see also Note 7) | (461 | ) | (6 | ) | (417 | ) | (5 | ) | (1 | ) | ||||||||||
| Expenses (income) for severance pay in voluntary redundancy | (24 | ) | 93 | 1 | 81 | 559 | ||||||||||||||
| Provision for claims | 1 | 20 | 2 | 8 | 91 | |||||||||||||||
| Expenses for severance due to the efficiency agreement in DBS (see Note 9.1) | 45 | - | - | - | - | |||||||||||||||
| Profit from sale of an associate | - | - | - | - | (14 | ) | ||||||||||||||
| Others | - | - | - | - | (1 | ) | ||||||||||||||
| Total operating expenses (income), net | (439 | ) | 107 | (414 | ) | 84 | 634 | |||||||||||||
19
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 16. | Financial instruments |
| 16.1 | Fair value |
| 16.1.1 | Financial instruments at fair value for disclosure purposes only |
The table below shows the differences between the carrying amount and the fair value of financial liabilities. The methods used to estimate the fair values of financial instruments are described in Note 31.8 to the Annual Financial Statements.
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||||||||||||||
| Carrying amount (including accrued interest) | Fair value | Carrying amount (including accrued interest) | Fair value | Carrying amount (including accrued interest) | Fair value | |||||||||||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Loans from banks and institutions (unlinked) | 4,490 | 4,659 | 4,689 | 4,839 | 4,235 | 4,324 | ||||||||||||||||||
| Debentures issued to the public (CPI-linked) | 3,492 | 3,672 | 4,096 | 4,293 | 3,464 | 3,602 | ||||||||||||||||||
| Debentures issued to the public (unlinked) | 2,209 | 2,293 | 1,646 | 1,658 | 2,215 | 2,214 | ||||||||||||||||||
| Debentures issued to financial institutions (CPI-linked) | 8 | 8 | 13 | 13 | 8 | 8 | ||||||||||||||||||
| Debentures issued to financial institutions (unlinked) | 151 | 157 | 252 | 268 | 202 | 211 | ||||||||||||||||||
| 10,350 | 10,789 | 10,696 | 11,071 | 10,124 | 10,359 | |||||||||||||||||||
| 16.1.2 | Fair value hierarchy |
The table below presents an analysis of the financial instruments measured at fair value, with details of the evaluation method. The methods used to estimate the fair value are described in Note 31.7 to the Annual Financial Statements.
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||
| NIS million | NIS million | NIS million | ||||||||||
| Level 1: Investment in marketable securities at fair value through profit or loss | 546 | 9 | 18 | |||||||||
| Level 2: forward contracts | (131 | ) | (157 | ) | (135 | ) | ||||||
| Level 3: contingent consideration for a business combination | - | 25 | - | |||||||||
20
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17. | Segment Reporting |
| 17.1 | Operating segments |
| Six months ended June 30, 2019 (Unaudited): | ||||||||||||||||||||||||||||
| Domestic fixed-line communication | Cellular communications* | International communications and internet services | Multi-channel television** | Other | Adjustments | Consolidated | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Revenues from external sources | 1,903 | 1,129 | 653 | 680 | 115 | - | 4,480 | |||||||||||||||||||||
| Inter-segment revenues | 160 | 19 | 27 | - | 4 | (210 | ) | - | ||||||||||||||||||||
| Total revenues | 2,063 | 1,148 | 680 | 680 | 119 | (210 | ) | 4,480 | ||||||||||||||||||||
| Depreciation and amortization | 411 | 312 | 92 | 159 | 6 | (36 | ) | 944 | ||||||||||||||||||||
| Segment results– operating profit (loss) | 1,406 | (18 | ) | 52 | (67 | ) | (2 | ) | (954 | ) | 417 | |||||||||||||||||
| Financing expenses | 259 | 8 | 8 | 9 | - | (22 | ) | 262 | ||||||||||||||||||||
| Financing income | (12 | ) | (31 | ) | (1 | ) | (2 | ) | - | 19 | (27 | ) | ||||||||||||||||
| Total financing expenses (income), net | 247 | (23 | ) | 7 | 7 | - | (3 | ) | 235 | |||||||||||||||||||
| Segment profit (loss) after financing expenses, net | 1,159 | 5 | 45 | (74 | ) | (2 | ) | (951 | ) | 182 | ||||||||||||||||||
| Share in losses of associates | - | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||
| Segment profit (loss) before income tax | 1,159 | 5 | 45 | (74 | ) | (3 | ) | (951 | ) | 181 | ||||||||||||||||||
| Income tax | 276 | 1 | 10 | 1 | - | 1,166 | *** | 1,454 | ||||||||||||||||||||
| Segment results– net profit (loss) | 883 | 4 | 35 | (75 | ) | (3 | ) | (2,117 | ) | (1,273 | ) | |||||||||||||||||
| * | The impairment loss in the cellular communications segment described in Note 5.1 is presented under adjustments. |
| ** | Results of the multi-channel television segment are presented net of the impairment loss set out in Note 5.2. The impairment loss is presented as part of the adjustments. This is in accordance with the manner in which the Group’s chief operating decision maker evaluates the performance of the segment and makes decisions regarding the allocation of resources to the segment. In addition, see Note 18.3 for condensed selected information from the financial statements of DBS. |
| *** | See Note 6 for information about the write-off of the tax assets for the losses of DBS. |
21
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17.1 | Operating Segments (contd.) |
| Six months ended June 30, 2018 (Unaudited): | ||||||||||||||||||||||||||||
| Domestic fixed-line communication | Cellular communications | International communications and internet services | Multi-channel television | Other | Adjustments | Consolidated | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Revenues from external sources | 1,972 | 1,200 | 663 | 750 | 109 | - | 4,694 | |||||||||||||||||||||
| Inter-segment revenues | 155 | 21 | 25 | - | 7 | (208 | ) | - | ||||||||||||||||||||
| Total revenues | 2,127 | 1,221 | 688 | 750 | 116 | (208 | ) | 4,694 | ||||||||||||||||||||
| Depreciation and amortization | 415 | 317 | 88 | 158 | 11 | 73 | 1,062 | |||||||||||||||||||||
| Segment results– operating profit (loss) | 860 | 4 | 64 | (18 | ) | (13 | ) | (64 | ) | 833 | ||||||||||||||||||
| Financing expenses | 254 | 10 | 8 | 15 | 1 | (32 | ) | 256 | ||||||||||||||||||||
| Financing income | (14 | ) | (27 | ) | (1 | ) | (25 | ) | - | 29 | (38 | ) | ||||||||||||||||
| Total financing expenses (income), net | 240 | (17 | ) | 7 | (10 | ) | 1 | (3 | ) | 218 | ||||||||||||||||||
| Segment profit (loss) after financing expenses, net | 620 | 21 | 57 | (8 | ) | (14 | ) | (61 | ) | 615 | ||||||||||||||||||
| Share in losses of associates | - | - | - | - | (2 | ) | - | (2 | ) | |||||||||||||||||||
| Segment profit (loss) before income tax | 620 | 21 | 57 | (8 | ) | (16 | ) | (61 | ) | 613 | ||||||||||||||||||
| Income tax | 155 | 5 | 13 | 1 | - | (16 | ) | 158 | ||||||||||||||||||||
| Segment results– net profit (loss) | 465 | 16 | 44 | (9 | ) | (16 | ) | (45 | ) | 455 | ||||||||||||||||||
22
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17.1 | Operating Segments (contd.) |
| Three months ended June 30, 2019 (Unaudited): | ||||||||||||||||||||||||||||
| Domestic fixed-line communication | Cellular communications* | International communications and internet services | Multi-channel television ** | Other | Adjustments | Consolidated | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Revenues from external sources | 940 | 560 | 330 | 337 | 57 | - | 2,224 | |||||||||||||||||||||
| Inter-segment revenues | 80 | 10 | 9 | - | 1 | (100 | ) | - | ||||||||||||||||||||
| Total revenues | 1,020 | 570 | 339 | 337 | 58 | (100 | ) | 2,224 | ||||||||||||||||||||
| Depreciation and amortization | 204 | 156 | 46 | 81 | 4 | (13 | ) | 478 | ||||||||||||||||||||
| Segment results– operating profit (loss) | 875 | (8 | ) | 18 | (8 | ) | (3 | ) | (968 | ) | (94 | ) | ||||||||||||||||
| Financing expenses | 148 | 5 | 5 | 4 | - | (13 | ) | 149 | ||||||||||||||||||||
| Financing income | (7 | ) | (15 | ) | - | (2 | ) | - | 11 | (13 | ) | |||||||||||||||||
| Total financing expenses (income), net | 141 | (10 | ) | 5 | 2 | - | (2 | ) | 136 | |||||||||||||||||||
| Segment profit (loss) after financing expenses, net | 734 | 2 | 13 | (10 | ) | (3 | ) | (966 | ) | (230 | ) | |||||||||||||||||
| Share in losses of associates | - | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||
| Segment profit (loss) before income tax | 734 | 2 | 13 | (10 | ) | (4 | ) | (966 | ) | (231 | ) | |||||||||||||||||
| Income tax | 172 | - | 3 | 1 | - | 1,166 | *** | 1,342 | ||||||||||||||||||||
| Segment results– net profit (loss) | 562 | 2 | 10 | (11 | ) | (4 | ) | (2,132 | ) | (1,573 | ) | |||||||||||||||||
| * | The impairment loss in the cellular communications segment described in Note 5.1 is presented under adjustments. |
| ** | Results of the multi-channel television segment are presented net of the impairment loss set out in Note 5.2, Impairment Loss, is presented as part of the adjustments. This is in accordance with the manner in which the Group’s chief operating decision maker evaluates the performance of the segment and makes decisions regarding the allocation of resources to the segment. In addition, see Note 18.3 for condensed selected information from the financial statements of DBS. |
| *** | See Note 6 for information about the write-off of the tax assets for the losses of DBS. |
23
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17.1 | Operating Segments (contd.) |
| Three months ended June 30, 2018 (Unaudited): | ||||||||||||||||||||||||||||
| Domestic fixed-line communication | Cellular communications | International communications and internet services | Multi-channel television | Other | Adjustments | Consolidated | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Revenues from external sources | 986 | 592 | 325 | 375 | 55 | - | 2,333 | |||||||||||||||||||||
| Inter-segment revenues | 78 | 10 | 11 | - | 4 | (103 | ) | - | ||||||||||||||||||||
| Total revenues | 1,064 | 602 | 336 | 375 | 59 | (103 | ) | 2,333 | ||||||||||||||||||||
| Depreciation and amortization | 211 | 159 | 45 | 79 | 5 | 38 | 537 | |||||||||||||||||||||
| Segment results– operating profit (loss) | 387 | 2 | 30 | (17 | ) | (5 | ) | (26 | ) | 371 | ||||||||||||||||||
| Financing expenses | 127 | 7 | 4 | 4 | 1 | (14 | ) | 129 | ||||||||||||||||||||
| Financing income | (8 | ) | (13 | ) | - | (11 | ) | 1 | 12 | (19 | ) | |||||||||||||||||
| Total financing expenses (income), net | 119 | (6 | ) | 4 | (7 | ) | 2 | (2 | ) | 110 | ||||||||||||||||||
| Segment profit (loss) after financing expenses, net | 268 | 8 | 26 | (10 | ) | (7 | ) | (24 | ) | 261 | ||||||||||||||||||
| Share in losses of associates | - | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||
| Segment profit (loss) before income tax | 268 | 8 | 26 | (10 | ) | (8 | ) | (24 | ) | 260 | ||||||||||||||||||
| Income tax | 66 | 1 | 6 | - | - | (8 | ) | 65 | ||||||||||||||||||||
| Segment results– net profit (loss) | 202 | 7 | 20 | (10 | ) | (8 | ) | (16 | ) | 195 | ||||||||||||||||||
24
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17.1 | Operating Segments (contd.) |
| Year ended December 31, 2018 (Audited) | ||||||||||||||||||||||||||||
| Domestic fixed-line communication | Cellular communications | International communications and internet services | Multi-channel television* | Other | Adjustments | Consolidated | ||||||||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||||||||
| Revenues from external sources | 3,883 | 2,401 | 1,338 | 1,473 | 226 | - | 9,321 | |||||||||||||||||||||
| Inter-segment revenues | 313 | 42 | 53 | - | 15 | (423 | ) | - | ||||||||||||||||||||
| Total revenues | 4,196 | 2,443 | 1,391 | 1,473 | 241 | (423 | ) | 9,321 | ||||||||||||||||||||
| Depreciation and amortization | 850 | 655 | 194 | 323 | 21 | 146 | 2,189 | |||||||||||||||||||||
| Segment results– operating profit (loss) | 1,224 | (2 | ) | 116 | (56 | ) | (36 | ) | (1,794 | ) | (548 | ) | ||||||||||||||||
| Financing expenses | 502 | 22 | 16 | 16 | - | (40 | ) | 516 | ||||||||||||||||||||
| Financing income | (32 | ) | (56 | ) | (1 | ) | (27 | ) | - | 35 | (81 | ) | ||||||||||||||||
| Total financing expenses (income), net | 470 | (34 | ) | 15 | (11 | ) | - | (5 | ) | 435 | ||||||||||||||||||
| Segment profit (loss) after financing expenses, net | 754 | 32 | 101 | (45 | ) | (36 | ) | (1,789 | ) | (983 | ) | |||||||||||||||||
| Share in profits (losses) of associates | - | - | 1 | - | (4 | ) | - | (3 | ) | |||||||||||||||||||
| Segment profit (loss) before income tax | 754 | 32 | 102 | (45 | ) | (40 | ) | (1,789 | ) | (986 | ) | |||||||||||||||||
| Income tax | 187 | 8 | 25 | 3 | - | (143 | ) | 80 | ||||||||||||||||||||
| Segment results– net profit (loss) | 567 | 24 | 77 | (48 | ) | (40 | ) | (1,646 | ) | (1,066 | ) | |||||||||||||||||
| * | Results of the multi-channel television segment are presented net of the impairment loss set out in Note 11.4 to the Annual Financial Statements. The impairment loss is presented as part of the adjustments. In addition, see Note 18.3 for condensed selected information from the financial statements of DBS. |
25
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 17.2 | Adjustment of profit or loss for reporting segments |
| Six months ended June 30 | Three months ended June 30 | Year ended December 31 | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Operating profit for reporting segments | 1,373 | 910 | 877 | 402 | 1,282 | |||||||||||||||
| Financing expenses, net | (235 | ) | (218 | ) | (136 | ) | (110 | ) | (435 | ) | ||||||||||
| Adjustments for the multi-channel television segment | (3 | ) | - | (17 | ) | - | - | |||||||||||||
| Loss for operations classified in other categories and other adjustments | (2 | ) | (13 | ) | (3 | ) | (5 | ) | (36 | ) | ||||||||||
| Share in losses of associates | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (3 | ) | ||||||||||
| Impairment loss of assets | (951 | ) | - | (951 | ) | - | (1,638 | ) | ||||||||||||
| Amortization of surplus cost for intangible assets | - | (64 | ) | - | (26 | ) | (156 | ) | ||||||||||||
| Profit (loss) before taxes on income | 181 | 613 | (231 | ) | 260 | (986 | ) | |||||||||||||
26
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 18. | Condensed Financial Statements of Pelephone, Bezeq International, and DBS |
In the fourth quarter of 2018, Pelephone, Bezeq International, and DBS decided to change the presentation method in the statement of income to a classification method based on the nature of the expense, similar to the method used in the Group’s reports. The comparative figures for the six- and three-months period ended June 30, 2018 were reclassified according to the new classification method.
| 18.1 | Pelephone Communications Ltd. |
Selected data from the statement of financial position
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||
| NIS million | NIS million | NIS million | ||||||||||
| Current assets | 973 | 931 | 913 | |||||||||
| Non-current assets | 3,146 | 3,171 | 3,211 | |||||||||
| Total assets | 4,119 | 4,102 | 4,124 | |||||||||
| Current liabilities | 638 | 655 | 619 | |||||||||
| Long-term liabilities | 778 | 741 | 806 | |||||||||
| Total liabilities | 1,416 | 1,396 | 1,425 | |||||||||
| Equity | 2,703 | 2,706 | 2,699 | |||||||||
| Total liabilities and equity | 4,119 | 4,102 | 4,124 | |||||||||
Selected data from the statement of income
| Six months ended June 30 | Three months ended June 30 | Year ended December 31, | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Revenues from services | 846 | 869 | 430 | 438 | 1,755 | |||||||||||||||
| Revenues from sales of terminal equipment | 302 | 352 | 140 | 164 | 688 | |||||||||||||||
| Total revenues from services and sales | 1,148 | 1,221 | 570 | 602 | 2,443 | |||||||||||||||
| Costs of activity | ||||||||||||||||||||
| General and operating expenses | 662 | 703 | 324 | 345 | 1,402 | |||||||||||||||
| Wages | 189 | 195 | 95 | 95 | 379 | |||||||||||||||
| Depreciation and amortization | 312 | 317 | 156 | 159 | 655 | |||||||||||||||
| Total operating expenses | 1,163 | 1,215 | 575 | 599 | 2,436 | |||||||||||||||
| Other operating expenses, net | 3 | 2 | 3 | 1 | 9 | |||||||||||||||
| Operating profit (loss) | (18 | ) | 4 | (8 | ) | 2 | (2 | ) | ||||||||||||
| Financing expenses (income) | ||||||||||||||||||||
| Financing expenses | 8 | 10 | 5 | 7 | 22 | |||||||||||||||
| Financing income | (31 | ) | (27 | ) | (15 | ) | (13 | ) | (56 | ) | ||||||||||
| Financing income, net | (23 | ) | (17 | ) | (10 | ) | (6 | ) | (34 | ) | ||||||||||
| Profit before income tax | 5 | 21 | 2 | 8 | 32 | |||||||||||||||
| Income tax | 1 | 5 | - | 1 | 8 | |||||||||||||||
| Profit for the period | 4 | 16 | 2 | 7 | 24 | |||||||||||||||
27
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 18.2 | Bezeq International Ltd. |
Selected data from the statement of financial position
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||
| NIS million | NIS million | NIS million | ||||||||||
| Current assets | 446 | 434 | 513 | |||||||||
| Non-current assets | 812 | 890 | 831 | |||||||||
| Total assets | 1,258 | 1,324 | 1,344 | |||||||||
| Current liabilities | 297 | 302 | 345 | |||||||||
| Long-term liabilities | 149 | 236 | 222 | |||||||||
| Total liabilities | 446 | 538 | 567 | |||||||||
| Equity | 812 | 786 | 777 | |||||||||
| Total liabilities and equity | 1,258 | 1,324 | 1,344 | |||||||||
Selected data from the statement of income
| Six months ended June 30 | Three months ended June 30 | Year ended December 31, | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Revenues | 680 | 688 | 339 | 336 | 1,391 | |||||||||||||||
| Costs of activity | ||||||||||||||||||||
| General and operating expenses | 388 | 377 | 194 | 187 | 776 | |||||||||||||||
| Wages | 133 | 158 | 66 | 75 | 297 | |||||||||||||||
| Depreciation and amortization | 92 | 88 | 46 | 45 | 194 | |||||||||||||||
| Other expenses, net | 15 | 1 | 15 | (1 | ) | 8 | ||||||||||||||
| Total operating expenses | 628 | 624 | 321 | 306 | 1,275 | |||||||||||||||
| Operating profit | 52 | 64 | 18 | 30 | 116 | |||||||||||||||
| Financing expenses (income) | ||||||||||||||||||||
| Financing expenses | 8 | 8 | 5 | 4 | 16 | |||||||||||||||
| Financing income | (1 | ) | (1 | ) | - | - | (1 | ) | ||||||||||||
| Financing expenses, net | 7 | 7 | 5 | 4 | 15 | |||||||||||||||
| Share in the profits of equity-accounted investees accounted investees | - | - | - | - | 1 | |||||||||||||||
| Profit before income tax | 45 | 57 | 13 | 26 | 102 | |||||||||||||||
| Income tax | 10 | 13 | 3 | 6 | 25 | |||||||||||||||
| Profit for the period | 35 | 44 | 10 | 20 | 77 | |||||||||||||||
28
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 18.3 | DBS Satellite Services (1998) Ltd. |
Selected data from the statement of financial position
| June 30, 2019 | June 30, 2018 | December 31, 2018 | ||||||||||
| (Unaudited) | (Unaudited) | (Audited) | ||||||||||
| NIS million | NIS million | NIS million | ||||||||||
| Current assets | 193 | 251 | 220 | |||||||||
| Non-current assets | 290 | 1,324 | 286 | |||||||||
| Total assets | 483 | 1,575 | 506 | |||||||||
| Current liabilities | 552 | 644 | 575 | |||||||||
| Long-term liabilities | 119 | 170 | 112 | |||||||||
| Total liabilities | 671 | 814 | 687 | |||||||||
| Capital (capital deficit) | (188 | ) | 761 | (181 | ) | |||||||
| Total liabilities and equity | 483 | 1,575 | 506 | |||||||||
Selected data from the statement of income
| Six months ended June 30 | Three months ended June 30 | Year ended December 31, | ||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | ||||||||||||||||
| NIS million | NIS million | NIS million | NIS million | NIS million | ||||||||||||||||
| Revenues | 680 | 750 | 337 | 375 | 1,473 | |||||||||||||||
| Costs of activity | ||||||||||||||||||||
| Operating expenses, general, and impairment | 482 | 483 | 248 | 246 | 956 | |||||||||||||||
| Depreciation, amortization, and impairment losses | 123 | 158 | 68 | 79 | 323 | |||||||||||||||
| Wages | 110 | 118 | 54 | 60 | 233 | |||||||||||||||
| Other operating expenses (income), net | 34 | 9 | (9 | ) | 7 | 17 | ||||||||||||||
| Impairment loss | - | - | - | - | 1,100 | |||||||||||||||
| Total operating expenses | 749 | 768 | 361 | 392 | 2,629 | |||||||||||||||
| Operating loss | (69 | ) | (18 | ) | (24 | ) | (17 | ) | (1,156 | ) | ||||||||||
| Financing expenses (income) | ||||||||||||||||||||
| Financing expenses | 9 | 13 | 4 | 3 | 15 | |||||||||||||||
| Financing income | (2 | ) | (25 | ) | (2 | ) | (11 | ) | (27 | ) | ||||||||||
| Financing expenses for shareholder loans | - | 2 | - | 1 | 1 | |||||||||||||||
| Financing expenses (income), net | 7 | (10 | ) | 2 | (7 | ) | (11 | ) | ||||||||||||
| Loss before income tax | (76 | ) | (8 | ) | (26 | ) | (10 | ) | (1,145 | ) | ||||||||||
| Income tax expenses | 1 | 1 | 1 | - | 3 | |||||||||||||||
| Loss for the period | (77 | ) | (9 | ) | (27 | ) | (10 | ) | (1,148 | ) | ||||||||||
29
Notes to the Condensed Consolidated Interim Financial Statements as at June 30, 2019 (Unaudited)
| 19. | Additional Subsequent Material Events |
Further to Note 33.3 to the Annual Financial Statements regarding the resolution of the Company’s Board of Directors on March 27, 2019 to apply for a permit to publish a prospectus for completion, which is based on the Company’s financial statements as at December 31, 2018, since the discussions with the Israel Securities Authority have not been completed, the application for a permit is for the publication of a prospectus for completion that will be based on the Company’s financial statements at a later date after completion of the discussions with the ISA. At this stage, as set out in Note 8.2 above, the Company has executed a private placement of debentures and it intends to continue to take steps to list the debentures for trading on the TASE, subject to the law, the publication of a prospectus, and the receipt of the required permits.
30