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Founder's Letter

Dear Shareholders, 

2014 was a year of mixed results, with some businesses showing improved and even record achievements, while others continued to endure the effects of the still challenging Global economy. 

Overall, Elco Ltd. met and overcame the challenges it faced through its strategic focus on the Group’s core businesses. By unraveling and disposing of non-core assets, we met our obligations and reduced the amount of overall debt. During the past few years our focus has been on generating healthier cash flows and where possible reducing losses including through the disposal of non-core assets. 

While we disposed of our commercial air conditioning business in 2013 through the sale of Airwell, we were forced to show a loss of 10 m Euros during this year as this company went into receivership one year after being sold. During the course of the first quarter of 2015, Elco sold its rights in the real estate of its former transformer manufacturing facility in Ramat HaSharon the operations of which where sold to the Swiss Von Roll Group back in 2008. 

Total revenue for Elco LTD. in 2014 amounted to 6,858 Million NIS, compared to 6,808 NIS million in the previous year. Likewise, gross profits rose slightly, totaling 1,200 NIS million in 2014, compared with 1,349 NIS in 2013. 

Electra Ltd. 


Maintaining a leadership position in its sector 

Electra Ltd., Elco’s comprehensive business unit for property development, contracting, electromechanical systems and facility management services maintained record results throughout 2014. Businesses continued to grow and the company’s presence in Africa 

Electra continues to accentuate its facilities management business and is now embarking on several large scale projects associated with the development and management of strategic infrastructure. In Russia, all approvals for the rezoning of a 240 hectare plot of land in St. Petersburg, for commercial and residential use . 

In 2014 Electra won several large national scale projects. 

At year end, our backlog amounted to a record 8.7 NIS Billion. During 2014 Electra achieved an income of 3,920 NIS million with a net profit of NIS million from ongoing activities. 

Electra Consumer Products (1970) Ltd. 


Change in Management and reorganization 

In spite many operational challenges, Electra Consumer Products (ECP) maintained its leadership position in the Israeli consumer appliances market, focusing on its core businesses of air conditioning products and services and retail of consumer appliances and electronics. ECP also expanded its residential air-conditioning business into the international arena by acquiring the Residential Air Conditioning spin-off from Airwell back in 2012. 

Total turnover for ECP in 2014 amounted to 2,669 NIS million, with a net loss of 24 NIS million from ongoing activities and an additional 42 million charge associated with a deep reorganization within the Group. 

Electra Real Estate 


Continued reduction in size, leverage and complexity 

After the challenging experiences in recent years Electra Real Estate (ERE), retained its focus throughout the year on reducing debt and improving cash flows by selling assets that had realized their full investment potential. The company also reached an agreement with its consortium of Israeli banks on an improved and convenient debt repayment program. 

In Germany ERE underwent some significant write-offs as the value of real estate decreased in that market and the company struggled to fill some vacancies in its assets. The properties and building projects in Canada fared better, while our properties and projects in Israel and the US did well. 

Losses, mostly as a result of decreased value of properties in Germany, were 151 NIS million. 

Shareholder equity is currently at 363 NIS million. 

By the end of the year, ERE’s assets included 33 income-producing properties, spanning some 302,663 square meters. 

Elco Landmark Residential: 


Going from strength to strength 

Elco Landmark Residential (ELR), our investment arm in the South East US multi-family rental market is a joint venture in which we hold a 90% stake. Since establishing this JV in 2008, ELR stuck to its fundamental strategy of purchasing underperforming residential complexes at attractive prices and creating economic value by renovating and increasing levels of rent and occupancy. 

ELR has continued to increase its asset base over the past year as the market enjoys several positive trends including limited new construction, low interest rates, difficulties in obtaining mortgages and favorable demographics. 

In 2014, ELR’s portfolio grew from 8,311 units at the start of the year to 4,738 units at year-end, with occupancy rates averaging 92.2 %. 

In August 2012, Elco Landmark and it’s partners completed a $536.5 million recapitalization deal with Landmark Apartment Trust of America (LAT) that included the contribution of a portfolio of 21 apartment complexes valued at $485 million and containing approximately 6,100 apartment units, in exchange for $187 million of partnership interests in LAT’s operation partnership, and the assumption of $282 million in debt on the properties. As a result of the transaction ELR now holds 37.7% of LAT shares. As of the beginning of 2013, ELR’s management company was sold to ATA at a value of 21$ million. Total net profit for ELR in 2014 from property management activities is 58 NIS million. 



Sincerely yours,

Georg Salkind

Founder and Director

Elco Ltd.