Hamat 2025: Where EBITDA Goes Before It Becomes Cash

What This Follow-up Is Isolating

The main article already established that Hamat’s 2025 recovery was real at the operating level, mainly in retail and wholesale, while kitchens and cash still carried open questions. This follow-up does not go back over that ground. It isolates one narrower question: how does a group that reports NIS 149.1 million of EBITDA, NIS 73.6 million of operating profit, and NIS 30.5 million of net income end the year with only NIS 13.2 million of extra cash and just NIS 25.6 million on hand.

This has to be answered through an all-in cash flexibility lens, not through a normalized cash-flow shortcut. The company does not disclose maintenance capex separately, so the right read here is how much cash is left after the real 2025 cash uses: tax, interest, leases, investment, debt paydown, and distributions.

Four points are worth holding upfront:

• Almost NIS 48 million of reported EBITDA is an IFRS 16 accounting effect, almost one-for-one against actual lease-related cash outflow.
• In 2025, working capital did not consume the whole cash flow. It released NIS 10.9 million net. The pressure sits more in the financing structure than in a one-year working-capital deterioration.
• Operating cash flow was good at NIS 105.5 million, but after leases, capex, debt reduction, and dividends, the increase in cash was still modest.
• Even the banking covenants look through the same issue and neutralize the main IFRS 16 effects.

The First Gap: Lease EBITDA Does Not Stay in the Till

The first layer that needs to be stripped out is not working capital at all. It is leases. Hamat reported NIS 149.1 million of EBITDA in 2025. In the same disclosure, it also showed EBITDA excluding IFRS 16 of only NIS 101.1 million. The gap, NIS 48.0 million, is almost one-third of reported EBITDA.

This is not an accounting flaw. It is exactly what IFRS 16 does in a group with many showrooms, logistics centers, and leased operating sites: rent stops appearing as a regular operating expense, moves into depreciation and financing, and lifts EBITDA mechanically. But if the question is how much cash the business really keeps, that layer has to be brought back to earth.

In 2025, Hamat paid NIS 38.2 million of lease principal and another NIS 9.8 million of interest on lease liabilities. Together, that is NIS 48.0 million of cash outflow tied to leases. That number is almost identical to the gap between reported EBITDA and EBITDA excluding IFRS 16. The common reading mistake in Hamat is therefore to treat NIS 149 million as if it were the group’s true cash-producing capacity. In practice, roughly one-third of that number is mostly an accounting reclassification of a very real cash expense.

This point matters even more because the company’s debt agreements look at the business in the same way. The banking covenants set a net financial debt to adjusted EBITDA ceiling of 5, and explicitly neutralize the main IFRS 16 effects. At year-end 2025, that ratio stood at about 2.0. In other words, even at the covenant level, the number the lenders watch is more conservative than the operating headline.

That is why the right headline on Hamat is not “NIS 149 million of EBITDA.” The right headline is: better operating EBITDA, but with almost NIS 48 million of lease burden that has to be put back into the picture before talking about flexibility.

The Second Gap: Working Capital Did Not Burn Cash This Year, but It Still Defines the Tension

The main article was right to flag working capital as a checkpoint. But once 2025 itself is decomposed, the picture is a bit less intuitive. This year, working capital was not the main hole in cash. It actually released cash on a net basis.

That finding matters because it prevents the wrong diagnosis. In 2025, EBITDA did not “disappear” mainly because of an annual working-capital blowout. The squeeze between EBITDA and the cash left over sits first in leases, tax, interest, debt service, and dividends.

But this should not be read too comfortably. Hamat’s working-capital architecture is still tight. Average customer credit stood at about NIS 269 million and 90 days. Average supplier credit stood at about NIS 112 million and 65 days. In addition, the group carried NIS 175.7 million of customer advances and deferred revenue, mainly in retail and kitchens. That is a structure that says one thing clearly: the model is financed by both banks and customers.

That means working capital is less the place where cash was burned in 2025, and more the place that determines how much margin for error the company really has. If orders slow, if collections lengthen, or if customer advances shrink, the pressure will not wait for the profit line. It will show up in cash first.

The balance-sheet ratios tell the same story. Hamat ended 2025 with a NIS 38.0 million working-capital deficit and a current ratio of 0.94. When the company excludes current lease liabilities, that deficit nearly disappears and the current ratio rises to 1.00. That is a good indication that the tension does not come from immediate operating collapse, but from a structure that carries heavy leases and prefers short-term credit to more expensive long-term debt.

The practical implication cuts both ways. On one side, 2025 does not reveal an unusual deterioration in working capital. On the other, the company is still not in a place where working capital can be treated as a technical footnote. It is a structure that requires constant operating discipline.

The Third Gap: What Is Left After the Real Cash Uses

The most useful metric for this question is not EBITDA and not even net profit. The right metric is how much cash remains after the real cash uses of the year. This is where the picture becomes very sharp.

Hamat generated NIS 105.5 million of operating cash flow in 2025. That is a good number, and clearly better than the end-year cash balance alone might suggest. But that is exactly where the real selection process starts.

• Capex and intangible investment: NIS 11.9 million
• Lease principal repayment: NIS 38.2 million
• Net decline in bank debt: NIS 27.2 million
• Dividend paid: NIS 15.0 million

After all of that, the increase in cash was only NIS 13.2 million, and year-end cash stood at NIS 25.6 million.

This is the center of the continuation thesis. The issue is not that Hamat cannot generate operating cash flow. The issue is that almost the entire path from EBITDA to cash is crowded with hard cash uses. Anyone looking only at EBITDA misses the fact that a meaningful part of it is effectively pre-allocated.

It is also worth looking at the layer before operating cash flow. In 2025, the group paid NIS 23.3 million of cash taxes, NIS 16.4 million of interest on bank debt, and another NIS 9.8 million of lease interest. So even before capex, debt reduction, and dividends are considered, there is already a heavy cash-cleaning layer sitting between the operating headline and the cash account.

This is also why the investor presentation can show two correct but different stories at the same time. On slide 25 it shows NIS 248 million of adjusted financial debt, NIS 221 million of net financial debt, and NIS 83 million of net financial debt adjusted for real estate, alongside debt-to-EBITDA of 1.48 and net-debt-adjusted-for-real-estate to EBITDA of 0.55. Those are useful numbers if the purpose is to explain that the balance sheet is not under immediate strain. But they do not answer the question of how much cash actually stays inside the business. When liquid means in that same presentation stand at NIS 27 million, it is clear that asset backing and relative debt comfort are not the same thing as a wide cash buffer.

That is why the analytical frame has to be chosen carefully. If the question is balance-sheet resilience, property value, debt ratios, and asset adjustments all matter. If the question is twelve-month financing freedom, the only frame that really works is the all-in cash bridge. Both are valid. They are just not the same question.

What Has to Happen Next for EBITDA to Turn Into More Cash

The good news is that Hamat does not look like a company locked out of the banks. Net financial debt to adjusted EBITDA sits comfortably inside the covenant range, and tangible equity to tangible assets remains above the required floor. So 2026 is not opening from a financing-distress point.

But for the 2025 operating improvement to become a more convincing cash story, three things need to happen together.

First, EBITDA excluding IFRS 16 has to grow, not only reported EBITDA. If operating profit keeps improving but most of the improvement is absorbed by leases, the headline number will keep looking better than the cash account.

Second, working capital has to stay controlled even if activity in Israel remains soft through part of 2026. In 2025 the group benefited from inventory release and lower receivables and prepaids. If that direction reverses while demand becomes unstable, the pressure will show up quickly.

Third, capital allocation has to be managed more selectively. In 2025 Hamat both reduced debt and paid a dividend. Those are reasonable steps for a group showing better operating results, but they also explain why the increase in cash was so modest. If the company wants to keep reducing debt, maintain distributions, invest, and carry a heavy lease burden at the same time, it will need to show that the 2026 cash base is wider than the 2025 one.

Current thesis: in Hamat’s 2025, EBITDA does not disappear. It gets dismantled quickly into leases, tax, interest, debt paydown, and dividends, which means real flexibility is narrower than the operating headline suggests.

That is exactly what a first-pass reader can miss. The main article already showed that operations look better. This follow-up shows that the cash account has not yet received the same relief.