Omer Engineering: How Much of 2025 Came From the Sites, and How Much From Revaluation and Estimates
Omer Engineering ended 2025 with ILS 101.6 million in net profit, but the increase did not come from site execution alone. ILS 33.3 million before tax came from investment-property fair value gains, and the residential segment's margin jump was explicitly tied to budget and cost-to-complete updates.
The main article argued that 2026 would be the real proof year for Omer's sites, backlog conversion, and deployment of the new equity. This follow-up isolates the question that matters most for 2025 earnings quality: how much of the year's profit really came from the sites, and how much came from investment-property revaluation and project estimates.
The short answer is fairly sharp. The sites did not drive the increase in the bottom line. Group revenue fell 6.3% to ILS 660.0 million, gross profit fell 12.1% to ILS 129.8 million, and execution-segment gross profit fell 23.4% to ILS 110.6 million. Yet profit before tax rose by ILS 21.3 million and net profit rose by ILS 15.7 million. That gap was closed by two other lines: investment-property revaluation, and a margin reset in residential development.
This is where the analysis has to separate what can be measured cleanly from what the filing leaves as direction rather than a precise number. The revaluation piece is exact: ILS 33.3 million before tax. The estimate-driven piece in residential development is not cleanly separable, because the company does not disclose how many shekels came from genuine operating outperformance and how many came from releasing assumptions. But it does say explicitly that the margin improvement came, among other things, from a budget update in Be'er Sheva phase A and lower remaining costs to completion in the Shimaya project.
What Can Be Isolated, and What Cannot
| Item | 2024 | 2025 | Change | What We Actually Know |
|---|---|---|---|---|
| Profit before tax | 110.4 | 131.6 | 21.3 | Full reported number |
| Investment-property fair value gain or loss | (11.7) | 33.3 | 45.1 | Clean, explicit accounting line |
| Residential development gross profit | 2.0 | 16.7 | 14.7 | Visible swing, but not a pure estimate-only number |
| Execution gross profit | 144.5 | 110.6 | (33.9) | Visible, operational deterioration |
That bridge gets to the heart of the issue. The entire rise in reported profit came despite a sharp deterioration in the execution layer, the part of the business that is closest to actual site activity. A reader who looks only at net profit could read 2025 as an operating acceleration year. It was not. It was a year in which accounting lines and estimate-sensitive margins did a large part of the work.
ILS 33.3 Million Came From Revaluation
This is the cleanest leg of the split. The consolidated statement of comprehensive income shows a fair value gain of ILS 33.3 million on investment property in 2025, after a fair value loss of ILS 11.7 million in 2024. In other words, the swing from a loss to a gain contributed ILS 45.1 million to profit before tax.
The more important test is not just how much was booked, but what profit would have looked like without it. Excluding the revaluation line, profit before tax in 2025 would have been only ILS 98.3 million. In 2024, excluding the fair value loss, profit before tax would have been ILS 122.1 million. Put differently, on a before-revaluation basis, profit before tax actually fell by almost 19.5%.
That is not a cosmetic adjustment. It flips the reading of the year. In the directors' discussion, the company explicitly ties the main revaluation driver to its rights in the Hod Hasharon land, following the deposit of a plan that changes the land use from agricultural to residential. Note 12 reinforces that read from two angles: of the ILS 33.3 million fair value gain, ILS 28.7 million came from investment property under construction, while only ILS 4.6 million came from already-yielding assets. The same note also shows the Hod Hasharon land rights at ILS 73.5 million at year-end 2025, versus ILS 48.0 million a year earlier.
That matters because the gain did not mainly come from a step-up in NOI or from a large wave of newly stabilized assets. It came mostly from value changes inside the development and land layer. That is perfectly legitimate accounting, but it is not the same thing as profit generated by active sites, unit deliveries, or rent that has already become cash.
Where The Estimates Entered The Residential Segment
If revaluation is the accounting leg of 2025, residential development is the estimate-driven leg. The filing does not give a clean number for "how much came from estimates," but it leaves the right forensic markers.
In residential development, revenue fell 5.7% to ILS 73.2 million, yet gross profit jumped to ILS 16.7 million from just ILS 2.0 million in 2024. Gross margin rose to 23% from 3%. That kind of jump needs an explanation, and the company gives one: profitability improved, among other things, because of a budget update in the Be'er Sheva phase A project, which reduced expected costs and increased the margin recognized in the period, and because the Shimaya project moved into its final stages, lowering the estimate of costs still required to complete it.
That point has to be framed carefully. This is not necessarily an accounting red flag. Under percentage-of-completion accounting, lower expected costs to complete should flow into profit. But from an earnings-quality perspective, that is still a very different animal from growth driven by new volume, more deliveries, or a faster pace of real site activity. It is profit produced through an updated cost and completion ratio, not through a surge in activity.
Note 9 also fits that reading. Shimaya in Herzliya fell to ILS 11.0 million of inventory from ILS 24.8 million and is already in advanced construction stages, with 29 units sold by the reporting date and 4 more sold shortly afterward. That is exactly the kind of project where cost-to-complete estimates become much sharper near the end. Be'er Sheva phase A, by contrast, rose to ILS 35.1 million of inventory from ILS 29.0 million, while phases B and C were still at a permit stage with execution expected to start in 2026. So 2025 looks more like a year of margin updates on existing projects than a year of broad new volume expansion in the segment.
What cannot be said honestly is just as important. The filing does not let us determine how much of the ILS 16.7 million residential gross profit came from better execution and how much came from releasing estimates. The company says "among other things," not "entirely." So a precise shekel split between field performance and estimate release simply does not exist in the document. What can be said with confidence is that the residential profit swing was materially estimate-sensitive, because it appeared in a year of lower segment revenue and because management explained it through budget and cost-to-complete updates.
What Really Came From The Field
To answer the headline question, we have to go back to the sites themselves. Here the message is straightforward: the field remained Omer's largest profit engine, but it was not the engine of earnings growth in 2025.
Execution still generated the bulk of group gross profit at ILS 110.6 million. But on a year-over-year basis it moved backward, not forward: segment revenue fell to ILS 592.2 million from ILS 646.4 million, and gross profit fell by ILS 33.9 million. At group level, total gross profit fell by ILS 17.9 million. So if we isolate the part of the business that is closest to actual site activity, 2025 was a weaker year.
That sharpens the main article's core idea. 2025 did not prove that the sites were already pulling profit higher. It produced a higher reported result because of a large fair-value swing and because residential project margins were reset upward. The active sites still produced substantial absolute profit, but they did not explain the improvement in the bottom line.
The fairest way to state the split is this:
| Source | What Can Be Said With Confidence |
|---|---|
| Investment-property revaluation | ILS 33.3 million before tax, explicit and largely tied to assets still in the development and land layer |
| Residential estimate updates | A material contributor to the margin jump, but not separately quantified in shekels inside the filing |
| Execution sites | Still the largest gross-profit source, but in 2025 they explained relative weakness, not the reported improvement |
Bottom Line
If you want one clean number, it is ILS 33.3 million before tax from investment-property revaluation. If you want the estimate effect, the filing makes it visible but does not put a separate price tag on it. So the honest answer is asymmetric: the revaluation component can be measured exactly, while the estimate component can be clearly identified but not cleanly quantified.
The analytical implication is clear. 2025 was a year in which reported profit rose, but the quality of that increase leaned less on the sites and more on revaluation and margin updates in residential development. The next test for Omer is not whether it can print another high accounting profit on paper. It is whether the same profitability can show up in 2026 through execution pace, deliveries, and cash.
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