Israeli Companies' 'Going Concern' Warnings Fell During COVID Year, Figures Show

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El Al's Boeing Dreamliner aircraft.
El Al's Boeing Dreamliner aircraft.Credit: Yochai Mossi

The coronavirus pandemic ran roughshod over the Israeli economy last year, but CofaceBDI said on Monday that the rate of publicly traded companies given a “going concern” warning, meaning their auditors had doubts about their survivability and ability to repay debt, actually fell in 2020.

Figures from the business research firm showed that only 6.4% of companies traded on the Tel Aviv Stock Exchange had a going concern warning appended to their financial reports last year, down from 8.9% in 2019.

But Tehila Yanai, CofaceBDI’s CEO, said the decline didn’t reflect an improved economic situation for most businesses in Israel.

“We believe that the main reasons for a drop in the rate of going concern warnings in 2020 was because high-tech companies were thriving and joined by new ones, as well as measures taken by companies due to the coronavirus, including cost-cutting, fundraising and capital injections by owners,” she said.

The rate of high-tech companies dropped to 16% from 28%, in part due to the number of listed companies in the sector growing by 19 during the year.

The numbers are in line with other statistics on failing business during the coronavirus year. Although measures to fight COVID took a big toll on many businesses, especially in retail and face-to-face services, government assistance helped mitigate the impact of lockdowns and other measures taken to fight the pandemic.

An analysis by the company found that one out of every 16 companies traded on the TASE was in danger of collapse during 2020, compared with one out of every 11 the year before. Over the last five years, the rate of going concern warnings has actually declined by 6%, CofaceBDI said.

Among the biggest Israeli companies to get a going concern warning was Delek Group, whose energy business was hit hard by the collapse of world oil prices.

Several companies have been getting warnings for several years including Kadimastem, which is developing treatments for Amyotrophic lateral sclerosis, commonly known as Lou Gehrig’s disease. On Monday, the company said it had raised 22.3 million ($6.8 million) in a private placement with institutional investors Alpha Capital Anstalt and Clover Wolf Capital.

Others with a history of going concern warnings are Arazim Investments, which invests in British real estate, and IceCure Medical, a developer of medical devices to treat cancerous tumors.

While the overall rate of warnings was down, in the real estate sector it rose to 19% from 16% in 2019, CofaceBDI said. Delek’s woes were shared by other energy companies, whose rate of going concern warnings rose to 14% in 2020 from 10% in 2019. The rate for holding companies jumped to 24% from 18%.

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