Top Group: What the Outsourcing Segment Really Earns, and What It Does to Cash Flow
Top Group’s outsourcing activity generated NIS 78.3 million of revenue in 2025, but only NIS 1.656 million of segment result, while its main operating arm runs with external working-capital funding entitled to 50% of measured profit. The real question is therefore not whether the segment adds volume, but how much cash and shareholder value actually remain after it does.
How much of outsourcing actually remains
The main article already framed outsourcing as a volume and relationship engine, not as Top Group’s core value engine. This follow-up isolates the next layer underneath that conclusion: how much profit really stays inside this segment, and what it does to the group’s cash.
The answer is sharper than the headline suggests. In 2025 outsourcing generated NIS 78.3 million of revenue, but only NIS 1.656 million of segment result. That was 26.8% of group revenue and only 5.6% of total segment result. Even after some improvement versus 2024, the segment still ran at only a 2.1% segment margin. That is not the kind of profit base that can comfortably absorb a lot of credit, a lot of overhead, or much operating friction.
The second layer is that this is not only a low-margin segment. It is also a segment that appears to operate with negative allocated capital. In 2025 it carried NIS 18.523 million of allocated assets against NIS 23.438 million of allocated liabilities. The picture was almost identical in 2024. In other words, outsourcing is not just generating little profit relative to its turnover. It is doing so on a structure that needs financing.
The third layer matters directly to shareholders. The main outsourcing arm, Top Software, runs under an external agreement for operating and working-capital support. The service provider advances funds to the activity, Top Software transfers all customer receipts to that provider twice a month, and since the 2014 amendment the provider is entitled to 50% of the activity’s measured profit. This is not a normal funding charge. It is an ongoing sharing-out of a large part of the profit in the segment’s main operating vehicle.
A lot of turnover, very little profit
The last two years make the gap hard to dismiss as noise:
| Year | Outsourcing revenue | Segment result | Segment margin | Share of group revenue | Share of segment result | Net allocated capital |
|---|---|---|---|---|---|---|
| 2024 | NIS 76.051 million | NIS 1.412 million | 1.9% | 28.3% | 5.6% | minus NIS 4.860 million |
| 2025 | NIS 78.336 million | NIS 1.656 million | 2.1% | 26.8% | 5.6% | minus NIS 4.915 million |
These numbers matter more than the growth headline. Outsourcing revenue grew 3.0% in 2025, and segment result grew 17.3%. That is an improvement. Even so, the segment still ends up in almost the same place economically: a little more than a quarter of turnover, and just over 5% of segment profit.
The contrast with the other segments makes the read even clearer. In 2025 the segment-result margin was 16.0% in owned software, 9.3% in software representation, and only 2.1% in outsourcing. So outsourcing is not merely less profitable. It belongs to a very different economic tier.
That also explains why management explicitly says it does not view outsourcing as a strategic activity, even while continuing to expand it. The logic is straightforward. The segment adds positive contribution before fixed overhead, provides presence in staffing tenders and technology labor channels, and likely helps maintain relationships with large customers. But it does not look like the place where most of the group’s value is being built.
Working capital: long customer credit sitting on a short margin
This is where the story becomes genuinely cash-driven. At the group level, working capital at year-end 2025 was only NIS 783 thousand. That is a very small buffer relative to the scale of activity. The more important table, though, is the one on credit days: average customer credit stood at NIS 122.760 million over 130 days, while average supplier credit stood at NIS 33.431 million over 65 days.
The implication is simple. Customers pay slowly, suppliers finance only part of that cycle, and the average gap between the two sides is about NIS 89.3 million. The same credit-day structure existed in 2024 as well, 130 days on customers and 65 on suppliers. So this does not look like a year-end distortion. It looks like an operating model.
In a software business with owned products, a structure like this can sometimes be absorbed through a higher margin, maintenance income, or recurring economics. Outsourcing is different. When the segment margin is only 2.1%, credit gaps and funding needs eat a larger share of the economics. That means the right question is not only whether outsourcing is profitable in the segment table. It is how much of that profit remains after the activity has been financed.
Top Software: the funding exists, but it eats half the profit
This is the part most readers will miss if they stop at the segment table. Outsourcing is carried out through two companies, but mainly through Top Software. That is exactly where the agreement sits that explains how the segment is able to function with this working-capital structure.
Since 2012 Top Software has operated under an agreement for management, operations, and working-capital financing from a third party unrelated to the group. Under that agreement, the service provider advances funds for the activity, without collateral and with no stated amount cap as of the report date, and those funds are transferred on two agreed dates each month. In return, Top Software transfers all customer receipts to that provider on those same two agreed monthly dates.
The critical point is the profit mechanism. The original agreement had a variable formula, but since the October 2014 amendment the provider’s compensation has stood at 50% of the activity’s measured profit. If the activity is not profitable, the provider gets no compensation. If it is loss-making, the provider is also not required to indemnify Top Software or absorb those losses. The agreement remains in force through June 2029.
This is an asymmetric structure. It solves Top Software’s working-capital bottleneck, but it also pushes half of the measured profit from the main outsourcing engine outside the group, without shifting the downside in a weak scenario. That is why it is not enough to say that the activity is profitable before fixed overhead. At the shareholder layer, part of that profit is not staying inside the company anyway.
This is also where the group’s stance on outsourcing becomes easier to understand. The segment adds turnover, customer access, and tender presence. The funding agreement lets the company keep it running without loading the entire working-capital burden onto internal cash. But the price is that the economics left for shareholders are materially thinner than the revenue line suggests.
Bottom line
Outsourcing at Top Group is not a mistake, but it is not a hidden jewel either. It gives the group scale, access to large customers, and positive contribution before fixed overhead. Between the revenue line and shareholder value, however, sit three meaningful frictions: a 2.1% segment margin, a credit structure of 130 customer days against 65 supplier days, and a Top Software agreement that trades part of the funding pressure for a 50% share of measured profit.
That is why the answer to what outsourcing is really worth is less than the revenue line suggests, but more than zero. It is a supporting service engine, not a central value engine. As long as the software segments keep growing faster and generating most of the profit, the group can afford to keep this layer. If outsourcing grows in weight without a visible improvement in margin and cash conversion, it will continue to look more like a volume engine than a value engine.
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