Universal Motors in the First Quarter: Profit Fell, and Cash Is Already Committed to Acquisitions

Universal Motors entered the first quarter with a question already raised in the previous annual analysis: can the move from car importer to services, leasing and holdings group produce accessible cash, or mainly add new activity layers. The quarter supports the direction, but not cleanly. Revenue rose to NIS 1.447 billion, while net profit attributable to shareholders fell to NIS 49 million, because new-car sales almost disappeared from segment profit and net finance expenses jumped. The service and holding engines are still working: service and parts, leasing, security solutions and Danal absorbed much of the car weakness. The less comfortable part is that the cash balance, which rose to NIS 756 million, is not free surplus, but a cash balance facing acquisitions already underway, a NIS 2.026 billion working-capital deficit and short-term debt funding the transition. That makes 2026 look more like an integration and funding year than a breakout year. The read improves only if Hamagar, Super Parts, Pal and the larger Danal stake start adding recurring profit and cash without increasing dependence on short-term credit again.

Diversification Worked, but New Cars Lost Their Profit

The company is no longer only an importer selling GM, Isuzu, Forthing and Maxus vehicles. It is a broad services group with leasing and rental under Avis, service and parts, vehicle trading, security and technology through G1, and a growing exposure to nursing and human-resources services through Danal. In this model, new-car sales provide volume, leasing and rental provide fleet and financing economics, service and parts should provide recurring profit, and the holdings layer is supposed to add value and a possible dividend stream.

This quarter showed both the advantage of that mix and the weakness it is meant to cover. New-car deliveries fell to 1,457 from 2,065 in the parallel quarter, a drop of about 29%, and the segment moved from NIS 34 million of profit to zero. The company attributes part of the weakness to “Lion’s Roar,” which reduced March new-car deliveries by about 25% versus normal levels, with May activity returning to normal seasonal levels and even above them. But the quarterly result is already clear: new cars did not carry the profit.

Against new cars, leasing still produced NIS 67 million of segment profit, service and parts rose to NIS 22 million, security solutions edged up to NIS 38 million, and the nursing and human-resources segment, shown according to the company’s share in Danal, rose to NIS 31 million. That is mixed-quality growth: revenue grew 3%, but part of the increase came from vehicle trading, Super Parts consolidation and the larger Danal exposure, not from a clean organic profit engine. Net profit attributable to shareholders fell 30% also because net finance expenses rose to NIS 54 million, partly due to a shift from a positive trading-securities revaluation in the parallel quarter to a negative effect this quarter.

Cash Rose Through Funding, Not Free Surplus

The potentially misleading number is cash. It rose from NIS 143 million at the end of 2025 to NIS 756 million at the end of March 2026, and together with short-term investments the group held close to NIS 894 million of cash and marketable securities. But all-in cash flexibility, meaning cash after investments, acquisitions and actual repayments, is less comfortable: operating cash flow was NIS 205 million, almost unchanged from the parallel quarter, while investing activity consumed NIS 273 million. Before new financing, the quarter was already negative by about NIS 68 million.

The cash increase mainly came from NIS 681 million of net financing inflow: net bank credit, long-term loans and commercial paper issuance, alongside loan, bond and lease repayments. So the company did not only generate cash. It raised and recycled funding to open the acquisition year.

The working-capital deficit widened to NIS 2.026 billion from NIS 1.580 billion at the end of 2025. Part of this is sector-native, because the leasing fleet is presented as a noncurrent asset even when part of it will be sold within a year, while the debt funding it is partly shown as current liabilities. Still, the increase in the quarter also came from vehicle purchases for leasing and rental, and from investments in Danal and Pal of about NIS 221 million, with part of the debt funding those investments recorded as current liabilities. The accounting warning sign is therefore not necessarily a liquidity problem, but it does indicate that the right read is active funding, not comfortable surplus cash.

Acquisitions Now Decide the Quality of 2026

The quarter included a further NIS 95 million investment in Danal, G1’s acquisition of 50% of Pal for NIS 125 million, and the acquisition of Super Parts at a purchase cost of NIS 45 million. Super Parts already contributed NIS 7 million to service-and-parts revenue in the quarter, but the purchase-price allocation is still provisional and includes NIS 28 million of goodwill. The operating contribution is still small relative to the price and integration task.

After the balance-sheet date came the heavier part. The Hamagar Parts transaction closed on April 1, 2026: the company acquired 65% of the economic rights and 49% of the voting rights at closing, with another 16% of the voting rights to transfer within up to 24 months. Total consideration is NIS 120.25 million, of which NIS 107.75 million has already been paid. At the same time, Transportation Solutions acquired Hamagar Leasing’s activity, including about 2,500 vehicles and existing lease contracts, for NIS 185 million, and repaid about NIS 166 million of Hamagar Leasing’s bank debt.

Danal also adds a warning flag that is not only about purchase price. After the tender offer completed on May 27, 2026, the company held about 28.01% of Danal’s equity rights and about 27.69% of its voting rights, and the market value of the holding near publication of the financial statements was about NIS 781 million. But Danal estimates that if the new National Insurance nursing tender remains in its current form, the annual operating profit hit to the nursing segment, based on 2025 activity, could be about NIS 45 million. As the stake grows, so does the value-creation option, but the regulatory sensitivity also becomes more important to the group’s accessible-value read.

The nearest proof point is in leasing and parts. Transportation Solutions ended the quarter with NIS 139 million of operating cash flow and NIS 24 million of net profit, compared with NIS 47 million in the parallel quarter, mainly because of the hit to short-term rental, used-car sales and negative securities revaluation. If Hamagar’s fleet increases revenue but erodes resale values, maintenance costs or funding, the addition will look like expensive volume. If it preserves the net-debt-to-fleet ratio and leasing profitability, it will prove that the acquisition strengthens the platform.

Conclusion

The current conclusion is straightforward: the first quarter did not break the company’s services story, but it made it less comfortable. Diversification worked, because leasing, service, security and Danal absorbed part of the new-car weakness. At the same time, profit fell, finance expenses rose, and the large cash balance at the end of March rests on new funding while the major acquisitions are already moving forward after the balance date.

The strongest counter-thesis is that the caution may be too strict. The company has positive operating cash flow, high cash and marketable securities, about NIS 1.9 billion of unused credit lines, comfortable capital ratios and debt ratings that show access to the credit market. That may be enough to pass an integration year without unusual pressure. Still, the next two to four quarters will be decided less by the cash balance on March 31 and more by how quickly the acquisitions add profit and cash, whether leasing absorbs Hamagar’s fleet without margin erosion, and whether Danal can reduce the risk from the nursing tender. If those three things progress together, the first quarter will look like a temporary profit decline on the way to a larger services group. If not, 2026 will look like a year in which Universal bought a lot of activity before proving that the activity releases cash.