Geshem Lamishtaken: How Much of the Expected Gross Profit Can Really Turn Into Cash
On paper, Geshem Lamishtaken shows roughly NIS 258 million of expected gross profit across completed unsold inventory and projects under construction. In practice, a large part of the future collections is first earmarked to close working-capital gaps, fund remaining project costs, and pass through closed-lender surplus-release mechanisms.
What The Main Article Already Established, And What This Follow-up Is Isolating
The main article already argued that financing still runs the story. This follow-up isolates the narrower, but more important, question: out of the gross profit the company presents as future embedded value, how much is really on a credible path to becoming accessible cash.
At first glance the numbers look strong. Completed projects whose sales are not yet fully finished carry expected gross profit of NIS 39.7 million. Projects under construction carry another NIS 218.3 million of expected gross profit. Together that is almost NIS 258 million. But that is exactly where the reading has to slow down. This gross profit is not the same thing as free cash. Part of it still sits in inventory that has not been sold, part of it still requires further construction and cost spending, and part of it will reach the lending bank long before it reaches the company.
That is the key point. In this report there is a large gap between accounting or project value and value that is actually accessible. You can see that gap in three separate layers. The first is the schedule of expected collections versus the schedule of revenue recognition. The second is the working-capital release that already happened in 2025. The third is the project-level surplus tables, which show how quickly headline gross profit gets cut down before it becomes surplus that can actually be withdrawn.
The Signed Contracts Already Show That Future Collections Are Not All New Value
The backlog and advances table is where the large headline number starts to shrink. For signed binding sales contracts, the company expects future revenue recognition of NIS 269.8 million, but expected customer advances and collections of NIS 514.9 million. At first pass, that NIS 245.1 million gap looks like very good news. In practice it is almost identical to the year-end net contract-asset position of NIS 246.5 million.
In other words, a very large share of the cash still expected to come in does not represent new value that has not yet been recorded. It mainly represents future collection of revenue that has already been recognized in the accounts. That is not necessarily negative. Under IFRS 15 for residential development it can be perfectly normal. But it is a strong reason not to read the future collection schedule as if all of it sits on top of profit that is still waiting to be booked.
The chart shows how front-loaded the cash expectation is. In the first two quarters of 2026 alone, the company expects NIS 441.4 million of collections against only NIS 191.4 million of revenue recognition, roughly 2.3 times as much. That does not mean the cash is redundant. It means the system is first collecting cash to close a gap that opened when accounting recognition ran ahead of billing and collection.
There is another layer here. In projects under construction, 119 housing units still had no binding sale contract at year-end, and 557 square meters of commercial and office space also remained unsigned. In completed projects whose sales are not yet fully finished, there is still expected gross profit of NIS 39.7 million tied to remaining inventory. So even the gross-profit reservoir itself breaks into two different buckets: profit tied to signed contracts that has not yet been collected, and profit that still depends on future sales happening at all.
| Layer | Amount | What it means |
|---|---|---|
| Expected gross profit in completed projects | NIS 39.7 million | The value only exists if the remaining inventory is actually sold |
| Expected gross profit in projects under construction | NIS 218.3 million | It still requires execution, collection, and surplus release |
| Future revenue to be recognized from signed contracts | NIS 269.8 million | This is what has not yet passed through the top line |
| Expected advances and collections from signed contracts | NIS 514.9 million | A large part of this is closing an already booked recognition gap |
| Net contract assets at year-end 2025 | NIS 246.5 million | This is the balance-sheet gap between recognized revenue and collected cash |
This Is The Right Place To Use An All-in Cash View
If the goal is to understand how much of expected gross profit can really turn into cash, looking only at accounting profit is not enough. Here the right framing is all-in cash flexibility: how much cash actually remains after real cash uses, not just how much accounting profit sits in the project tables.
The 2025 cash-flow statement shows that the company did release working capital, but not in a way that justifies a simple reading that says "the gross profit already became cash." Cash flow from operations was NIS 87.5 million against net income of NIS 15.3 million. That result was driven mainly by a NIS 177.1 million decline in buildings-under-construction inventory. On the other side, the company used NIS 100.5 million through a decline in contract liabilities, meaning erosion in customer advances, and another NIS 19.6 million through higher land inventory.
The point is not that the company failed to convert profit into cash. The point is that the 2025 cash release already happened to a large extent through inventory reduction, not through building a fresh cushion of customer advances. That is also clear in the balance sheet. Buildings under construction fell from NIS 591.3 million to NIS 434.6 million, but contract liabilities also fell sharply, from NIS 165.8 million to NIS 65.4 million. At the same time, contract assets barely moved, at NIS 311.8 million at the end of 2025 versus NIS 308.7 million a year earlier.
That is the heart of the read. If inventory fell but customer advances also thinned, the company did turn part of the activity into cash, but it did not rebuild the same pace of buyer-funded financing at the same time. Restricted cash and deposits also fell by NIS 56.2 million to NIS 42.5 million, so part of the release did come out of closed project accounts and into the system, but a material amount still remains outside fully flexible cash.
And once the full cash picture is completed, it becomes clear why gross profit still does not equal accessible cash. In 2025 the company reported NIS 39.6 million of positive investing cash flow, mainly because restricted cash and deposits fell by NIS 56.3 million. But financing cash flow consumed NIS 111.3 million, including NIS 51.5 million of interest paid, NIS 98.5 million of net repayment of bank and other credit, and NIS 32.0 million of bond repayment, only partly offset by NIS 73.7 million of net bond proceeds. So even after positive operating cash flow, the increase in cash was only NIS 15.8 million.
At The Project Level, Gross Profit Already Takes A Sharp Haircut Before It Becomes Withdrawable Surplus
The filing is especially useful here because it does not stop at gross profit in the two major projects. It actually shows the path by which that number gets reduced before it reaches the surplus account.
In Ono Center, expected gross profit stands at NIS 114.0 million. After the difference between accounting gross profit and expected economic profit of the project, mainly financing, marketing, and selling costs, expected economic profit falls to NIS 92.9 million. From there the path narrows further. After mezzanine repayment, the Worldstone loan, tenant-compensation adjustments, and amounts already withdrawn, the expected surplus still available for withdrawal at the report date drops to only NIS 30.5 million, with the company's share at NIS 26.6 million.
In Square in Kiryat Motzkin, the picture is somewhat better, but the message is the same. Expected gross profit stands at NIS 78.4 million, expected economic profit falls to NIS 56.0 million after financing, marketing, and selling costs, and the expected surplus still available for withdrawal at the report date is NIS 37.2 million. There too, full surplus release is conditioned on project completion, Form 4 occupancy approval, and full repayment of bank credit, while early release requires prior written bank consent.
That gap matters more than the headline. It shows that gross profit is only a midpoint. Before the company sees accessible cash, the number has to pass through costs that sit outside cost of sales, through the financing structure, through mezzanine debt or profit-sharing mechanisms, and through closed-lender release conditions. Ono Center makes that especially visible. Even if the future collection schedule looks supportive, the company's share in still-withdrawable surplus at the report date is far smaller than the headline gross-profit number.
Bottom Line
The right way to read the backlog is not "how much profit is still left," but "what part is already contracted, what part has already been recognized before collection, and what part can actually leave the project account."
That leaves three real tests for 2026 through 2028. The first is collection: whether the payment schedule, especially the large step-up in Q2 2026, actually arrives on time. The second is working capital: whether the large gap between expected collections and revenue recognition really translates into a decline in contract assets without another erosion in the customer-advance cushion. The third is surplus release: whether the major projects finish execution and satisfy lender conditions in a way that lets the company pull cash out, not just present projected profit.
That is why the thesis here is quite narrow. Geshem Lamishtaken's expected gross profit is real as project value, but only a limited share of it already looks like accessible cash. One part is still waiting for sales, another part has already been booked before it was collected, and a third part still has to pass through banks, interest, and surplus-distribution mechanisms before it becomes money the company can actually use.
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