Almogim in the First Quarter: Contractor Loans Keep Sales Moving as Gross Profit Narrows

Almogim Holdings entered 2026 with more revenue, more active projects and stronger evidence that the central issue has shifted from sourcing projects to the financing quality behind them. First-quarter revenue jumped to NIS 122.7 million, while gross profit fell to NIS 15.1 million and net finance expenses reached NIS 14.9 million, almost the entire gross profit for the period. The sharper point is how sales are being generated: 73% of transactions in the quarter used contractor-loan incentives, and the company already paid NIS 2.4 million of interest to mortgage banks for that mechanism. This supports sales in a difficult residential market and helps projects move forward, at the cost of replacing part of early buyer cash with balance-sheet support. Progress at Shmurat Almogim, through a post-balance-sheet investment agreement and bank financing framework, shows that the company can bring capital to large projects. That progress comes with profit sharing, guarantees, conditions precedent and a debt layer that makes 2026 a proof year: whether sales convert into collection and surplus release, or whether the company keeps funding the pace before customers fund it.

Contractor Loans Have Become Part of the Sales Engine

The company’s business is easy to describe and hard to finance: residential development, planning, betterment and construction, with the group’s construction arm performing work only for group projects. Value is created when land, permits, bank financing, sales, execution and collection advance at the same pace. When one step lags, the balance sheet carries the gap between spending on land and construction and releasing project surplus.

The company continued to sell in the first quarter. Active projects recorded 31 units sold during the period, with another 17 units sold after the balance-sheet date. By the publication date, 16 additional purchase requests had been signed for an estimated aggregate amount of NIS 53.3 million. Demand did not disappear, and the company is still moving inventory in existing projects.

The issue is the sales terms. The prior sales-quality note left open the depth of the company’s dependence on contractor loans. The first quarter gives a much sharper answer: 73% of transactions in the period used favorable financing terms, mainly contractor loans. The company paid NIS 2.4 million of interest to mortgage banks for these transactions, while the accounting effect was a NIS 1.2 million reduction to revenue according to project progress.

Management frames the mechanism as a way to increase sales, improve buyer quality through bank underwriting and bring sales receipts into bank project accounts. That sector logic is real. In Israeli residential development, contractor loans are not unusual when mortgage markets are difficult and rates are high. What makes this disclosure central is the intensity: 73% in one quarter is no longer minor marketing noise. The sales pace must therefore be read together with margin, receivables, buyer advances and finance expenses.

Revenue Rose While Profitability Moved the Other Way

The accounting headline can look positive at first read: revenue rose from NIS 75.4 million in the comparable quarter to NIS 122.7 million, up roughly 63%. The increase came mainly from revenue recognition in BRAVO Ramat Gan, Shamayim Vaaretz Rehovot and Aluma Yavne, meaning projects that have full permits and are advancing in construction.

The same transition into full execution also weighs on profitability. Gross profit fell from NIS 18.4 million to NIS 15.1 million, and the gross margin dropped from about 24.4% to about 12.3%. Net finance expenses rose from NIS 6.4 million to NIS 14.9 million, mainly because in projects with full permits some finance expenses are recognized in profit and loss rather than capitalized into inventory. The quarter therefore shows more than “more activity”. It shows a stage where the cost of financing becomes more visible in the income statement.

The distinction between accounting gross profit and project economic profit matters here. The company defines expected gross profit as excluding part of financing and marketing expenses, while economic profit includes all project costs. In a quarter where net finance expenses are almost equal to total gross profit, that distinction determines how much of the backlog can turn into surplus after time, funding and sales support.

Across active projects, the company presents expected revenue of NIS 2.72 billion and expected gross profit of NIS 455 million, an average gross margin of about 16.7%. The mix is uneven: Neve Tzedek shows an expected gross margin of 32% and Venice Phase A shows 36%, while Shamayim Vaaretz and Shmurat Almogim sit around 11%-12%. When more revenue recognition comes from lower-margin projects and financing turns into current expense, revenue can grow without profit moving in the same direction.

Working Capital and Shmurat Almogim Show Who Funds Growth

The important test in residential development is not only how many apartments were sold. It is who funds the period until delivery. At the end of 2025, one open issue was the jump in receivables from apartment buyers alongside weaker buyer advances. The first quarter shows partial improvement: receivables from apartment buyers fell from NIS 247.3 million at year-end to NIS 224.4 million. That is the right direction, and it supported cash flow in the quarter because part of the receivable balance declined.

The less comfortable point is that buyer advances fell from NIS 39.2 million to NIS 30.9 million, versus NIS 63.6 million at the end of the comparable quarter. The ratio between receivables and advances therefore did not really improve. It widened versus year-end 2025.

Operating cash flow was negative NIS 58.8 million. The main pressure came from the Be’er Yaakov land purchase and investments in projects under construction, so it would be wrong to assign the full gap to contractor loans or receivables. The cash conclusion is still clear: activity is growing, but it is not yet producing internal surplus cash that funds itself.

The most important post-balance-sheet event is Shmurat Almogim in Haifa. The project includes 406 units, of which 325 are under the target-price program and 81 are free-market units. In the project table it is still early: marketing has not started, engineering completion is 1%, expected revenue is NIS 737.4 million and expected gross profit is NIS 90.6 million, a 12% margin. Expected surplus to be withdrawn is presented at NIS 137 million by 2029, subject to construction and sales progress.

After the balance-sheet date, the company signed a framework investment agreement with a financial institution. The institution is expected to provide up to NIS 46 million as a shareholder loan, representing 50% of the equity required for the project and 100% of the equity required for the relevant partnership. In return, it will receive 60% of the partnership’s equity rights, reflecting 30% of the project’s profits on a look-through basis. The agreement also includes about NIS 39 million of pre-permit expenses, including pre-financing interest, to be paid to the company as the holder of partnership rights.

A few weeks later, a bank financing agreement was also signed for Shmurat Almogim. The Sales Law guarantee framework is up to NIS 747 million, including other guarantees of up to NIS 5 million, and the loan framework for part of construction costs is about NIS 229 million. Drawn credit will bear prime plus a margin of up to 0.5%, and final maturity is no later than June 30, 2029. The credit is still subject to customary conditions, including permits and approvals, minimum equity investment, agreed pre-sales and guarantees, including a company guarantee.

This is real pipeline progress. It also brings the discussion back to the shareholder layer: the project can be large and profitable, while part of the economics is already shared with a partner and part of the risk remains through guarantees and conditions. Shmurat Almogim is an example of how the company opens large projects through external capital, bank credit and priority waterfalls, not through already released surplus cash.

The prior funding-stack note argued that the company can continue growing through layered financing, while growth is still not self-funded. The first quarter reinforces that view. Financing activity provided NIS 110.1 million net, mainly from the Series L expansion of NIS 58.6 million net and net project loan inflows of NIS 93.6 million, offset by NIS 41.7 million of bond repayments.

At the parent-company level, liquidity is tighter than the consolidated balance sheet suggests. The parent ended the quarter with NIS 6.6 million of cash, NIS 4.2 million of short-term investments and NIS 53.7 million of restricted deposits, alongside NIS 402.5 million of loans to subsidiaries. Against that, current bond maturities were NIS 151.3 million and non-current bonds were NIS 320.7 million. This is not an immediate covenant-stress picture: the company complies with its covenants, bond-defined equity is about NIS 371 million and the equity-to-balance-sheet ratio is about 20.4%. It is a structure where project cash flow, refinancing and surplus release must keep working together.

The NIS 5 million dividend paid in April illustrates that caution. Management initially intended to recommend a NIS 10 million distribution and then recommended only half that amount because of market conditions and security-related uncertainty. For a company reporting a quarterly loss and negative operating cash flow, the distribution is not the main problem because of its modest size. It does show that capital is still being managed cautiously, rather than through a message of excess free cash.

Conclusion

The first quarter does not break the company’s story, and it does not prove that growth already stands on independent cash-flow footing. It narrows the interpretation range. Sales continued, the pipeline advanced, and Shmurat Almogim received a financing structure that raises execution probability. At the same time, 73% of transactions with contractor loans, lower gross profit and finance expenses that almost erased it show that growth still requires balance-sheet support, buyer financing incentives and open credit markets.

The current read is that the development business is progressing operationally, but growth quality will improve only if the next quarters show lower dependence on contractor loans, a narrower receivables-to-advances ratio and actual surplus release from active projects. The thesis strengthens if Or Yam, Shamayim Vaaretz, Aluma and Shmurat Almogim keep selling without wider financing incentives, and if surplus release arrives before the parent needs another debt layer. It weakens if revenue keeps rising while margin erodes, buyer receivables stay high and external funding remains the main source supporting the pace. In the near term, the market is likely to focus less on the revenue jump and more on whether those sales turn into cash rather than receivables.