G1: How much of 2025 profit actually stayed free in cash?
G1 finished 2025 with ILS 41.3 million of net profit and ILS 58.0 million of operating cash flow, but after lease cash, CAPEX, minority buyouts, and dividends, very little cash was actually left free. At the parent-company layer the picture is even tighter, because distributions leaned heavily on ILS 27.7 million that came up from Policity.
What This Follow-up Isolates
The main article already made the core point: G1's profit improved faster than its cash became genuinely available. This follow-up isolates only the cash bridge. Not the broader Fal strategy, not the segment mix, and not the full profitability story, but one narrower question: how much of 2025 cash generation was still free after the uses of cash that already happened in practice.
The first number looks good. Net profit in 2025 was ILS 41.3 million, and operating cash flow reached ILS 58.0 million. If the analysis stops there, cash conversion looks healthy. That is only half the picture. To understand whether profit actually stayed free, the accounting bridge has to be separated from the economic bridge: lease cash, reported CAPEX, minority buyouts, dividends, interest, and short-term debt paydown.
That distinction matters more than usual at G1 because the company sits across three different cash layers: operating cash generated by the group, cash consumed by leases and capital-allocation moves, and cash that moves up to the parent from Policity. Only the combination of all three shows what really remained.
Profit Did Turn Into Operating Cash, But Not Cleanly
At the consolidated level, ILS 41.3 million of net profit became ILS 58.0 million of cash flow from operations. That bridge was carried mainly by ILS 32.4 million of depreciation and amortization, ILS 8.9 million of net finance expense, ILS 11.6 million of income tax expense, and ILS 4.5 million of employee-benefit liabilities. Against that, the group's share in earnings of equity-accounted investees reduced the bridge by ILS 4.4 million.
The pressure starts in working capital. During 2025, trade receivables and accrued income increased by ILS 35.4 million, inventory rose by ILS 7.7 million, and only part of that drag was offset by an ILS 18.1 million increase in suppliers and service providers. In total, balance-sheet movements absorbed ILS 22.9 million of operating cash, and another ILS 13.6 million went out in net taxes. So yes, operating cash flow was positive, but it was not the result of suddenly cleaner collections. It was positive despite a meaningful working-capital pull.
That also shows up in the receivables note. Net customer balances rose to ILS 257.4 million from ILS 222.0 million, while the credit-loss allowance increased to ILS 7.0 million from ILS 5.8 million. That does not mean collections have broken down. It does mean part of 2025 growth was financed through the balance sheet.
The implication is that 2025 profit did become operating cash, but not through a clean conversion path. It relied on meaningful non-cash add-backs and then gave part of that back through working capital. Anyone measuring earnings quality here only through the profit-to-CFO ratio will get a picture that is too flattering.
Where The Cash Got Used Up
This is where two cash frames have to be separated. The narrower frame asks how much the business produced before capital-allocation choices. The wider frame asks how much cash was actually left after all real uses.
Under the narrower frame, the picture is reasonable. Starting from ILS 58.0 million of operating cash flow, and after ILS 5.7 million of reported property, equipment, and intangible investment, there is still ILS 52.2 million before lease cash. But for G1 that is not a sensible stopping point, because leases are not noise. Total negative cash flow for leases reached ILS 26.5 million in 2025. That is total lease-related cash outflow, not just lease principal. After lease cash and reported CAPEX, only ILS 25.7 million remains.
That number still looks serviceable until the minority layer is added. In 2025, ILS 14.5 million went out for purchasing shares from non-controlling holders, ILS 2.7 million for repaying a loan from non-controlling holders, ILS 2.1 million for dividends paid to non-controlling interests, and another ILS 0.7 million for contingent and deferred consideration. In other words, almost ILS 20.0 million of the year's cash flow was directed toward cleaning up the ownership structure and paying for legacy deal obligations.
After that, only about ILS 5.7 million remains, and that is still before dividends to common shareholders, interest paid, and short-term bank deleveraging. This is the heart of the read. At the business layer, 2025 was not a no-cash year. At the layer of cash that remained free after obligations already exercised in practice, the margin was extremely thin.
| Cash bridge | 2025 | What it means |
|---|---|---|
| Net profit | ILS 41.3 million | The accounting starting point |
| Operating cash flow | ILS 58.0 million | The bridge is wider because of depreciation, finance, and tax |
| After lease cash and reported CAPEX | ILS 25.7 million | The upper bound of cash generation based on disclosed numbers |
| After minority buyouts, minority loan repayment, minority dividends, and contingent consideration | ILS 5.7 million | Almost all of the cushion is gone before common shareholders |
| After common dividends, interest, and short-term bank debt paydown | ILS 41.2 million negative | On an all-in basis, 2025 did not leave spare cash |
It is also worth noting what did not hit 2025 cash directly. During the year, an amendment to the Mizug Plus shareholders' agreement allowed a future put exercise to be settled in shares rather than only in cash. As a result, roughly ILS 35.3 million was reclassified from liability to equity. From a cash perspective, that made 2025 easier because the pressure moved away from immediate cash settlement. Economically, the friction did not disappear. It changed form, from immediate cash pressure to potential dilution.
The Parent-Company Layer: Why Policity Matters
This is the part that is easy to miss if the reader stays only with the consolidated statements. At the parent-company level, operating cash flow was just ILS 11.3 million. That is far below consolidated CFO, and it is also below the ILS 19.7 million of dividends paid to G1 shareholders during the year.
What bridged the gap? Mainly Policity. The equity-accounted investment returned ILS 20.45 million during 2025 through loan principal, linkage, and interest, and also paid an ILS 7.25 million dividend. Together, that is ILS 27.7 million that moved up from the investment to the parent. This is not a technical footnote. It is the source that explains how the parent could support a relatively generous distribution layer while its own operating cash generation was much smaller.
But even that needs a more careful read. The loan to Policity carries 7% interest, and repayment of principal and interest is subordinated to Policity's senior debt. So the 2025 upstream was real cash, but it sits below senior debt in the structure. That is exactly why it should not be treated as a permanent substitute for the group's own recurring cash generation.
At the parent-company layer, financing cash flow in 2025 was negative ILS 31.8 million, and year-end cash stood at only ILS 0.5 million. That is a sharper picture than the consolidated one. On a consolidated basis, the group ended the year with ILS 8.1 million of cash and cash equivalents. At the parent-company layer, almost no cushion was left.
That is why the key question for 2026 is not simply whether G1 can keep reporting respectable net profit. The more important question is whether the cash-consuming layers visible in 2025 will ease, and whether cash flowing up from Policity remains a bonus rather than becoming a core funding requirement for shareholder distributions.
Why This Matters Now
The most important number here is not that operating cash flow fell to ILS 58.0 million. The number that really matters is that after leases, CAPEX, minority transactions, interest, dividends, and short-term bank deleveraging, almost no margin for error was left. At year-end 2025, the company still had ILS 23.4 million of short-term bank debt and ILS 27.2 million of contractual lease cash due within a year. That does not describe a distressed balance sheet. It does explain why every shekel of collections, every shekel of Policity upstream, and every investment overrun matters far more than the headline net-profit line.
Bottom line: 2025 profit was not fake, but it did not stay free. The business generated operating cash, yet almost half of it was absorbed by lease cash, and almost all of the remainder was consumed by minority transactions, distributions, and debt service. At the parent-company layer the picture is tighter still, because shareholder distributions relied materially on Policity. That makes 2026 less a profit test than a real-cash test: can G1 convert more of its earnings into cash that is actually left to it?
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