Alon Holdings Blue Square - Israel Ltd. Announces Financial Results for the First Half and Second Quarter of 2010
PR Newswire

The Company Presents Continued Improvement in the Business Results and the Operating Indices in the First Half and Second Quarter of 2010

    - The operating profit in the first half of 2010 grew to 3.8% of
      the sales as compared to 3.3% in the comparable half last year.
    - The operating profit in the supermarket segment was 3.9% in the
      first half and 4.2% in the second quarter of 2010.
    - The strategic steps in the bee group including the move to a single
      modern logistics center and the merger of the corporate headquarters
      lead to one-off expenses in the first half.
    - The net income for the first half increased by 16.7%.


    Alon Holdings Blue Square-Israel Ltd. (NYSE and TASE: BSI) today
announced its financial results for the first half and second quarter ended
June, 30, 2010.

    KEY FIGURES


                                      1-6      1-6      Q2      Q2      1-12
    Data in NIS (millions)           2010     2009     2010    2009     2009

    Sales                         3,599.5  3,608.7  1,768.7 1,844.0  7,349.1
    Gross profit                  1,026.7  1,004.8    513.0   501.7  2,058.1
    % Gross profit                   28.5%    27.8%    29.0%   27.2%    28.0%
    Operating income
    (before changes in fair value
    of investment property and
    other gains and losses)         135.1    120.9     62.5    60.7    241.0
    % Operating income
    (before changes in fair value
    of investment property and
    other gains and losses)           3.8%     3.3%     3.5%    3.3%     3.3%
    EBITDA                          226.3    206.2    108.6   103.6    418.4
    % EBITDA                          6.3%     5.7%     6.1%    5.6%     5.7%
    Financial expenses, net          56.7     47.2     42.3    35.2    112.7
    Net income for the period        58.2     49.9     21.1    17.5     97.8

Results for the First Half of 2010[1]

Revenues for the first half of 2010 were NIS 3,599.5 million (U.S.(A) $928.9 million), compared to NIS 3,608.7 million in the first half of 2009 - a decrease of 0.3 %.

Supermarkets segment - an increase in revenues of 0.2% from NIS 3,359.0 million in the first half of 2009 to NIS 3,364.5 million (U.S. $868.3 million) in the first half of 2010. The main reason for the increase was the net opening of 12 stores from the beginning of 2009, with an area of 15,400 square meters, partly offset by a decrease of approximately 2.1% in same store sales (SSS).

Non-food segment - a decrease in revenues of approximately 6.2% from NIS 239.1 million in the first half of 2009 to NIS 224.2 million (U.S. $57.9 million) in the first half of 2010. The decrease in revenues was mainly due to a decrease in the houseware sector offset by an increase in the leisure sector.

Real estate segment - an increase in revenues of approximately 1.1% in the rental fee income from NIS 10.6 million in the first half of 2009 to NIS 10.8 million (U.S. $2.8 million) in the first half of 2010. The increase is due to the increase in the Israeli CPI during the last 12 months.

Gross Profit of the first half of 2010 amounted to approximately NIS 1,026.7 million (U.S. $ 265.0 million) (approximately 28.5% of revenues) compared to gross profit of approximately NIS 1,004.8 million (27.8% of revenues) in the first half of 2009, an increase of NIS 21.9 million (U.S. $ 5.7 million). The increase in the gross profit margin mainly derives from the supermarket segment as a result of the increase in the sales of private label goods, which made up more than 7.5% of sales and an improvement in the terms of trade with suppliers and was partly offset by a decrease in the gross profit in the non-food segment as a result of the decrease in sales in that segment.

Selling, General, and Administrative Expenses for the first half of 2010 amounted to approximately NIS 891.6 million (U.S. $ 230.1 million) (24.8% of revenues) compared to NIS 884.0 million (24.5% of revenues) in the first half of 2009, an increase of 0.9%. The main increase was recorded in the supermarkets segment due to the opening of net 12 new stores from the start of 2009, an increase in advertising and marketing expenses and an increase in rental fees as a result of the change in the Israeli CPI and renewal of rental agreements which was partly offset by a decrease in electricity expenses due to the reduction in the tariffs, efficiency measures and a decrease in wage and salary costs due to efficiency measures. In the real estate segment there was an increase in expenses as a result of the start of construction and development projects, mainly the wholesale market and Seattle.

Operating Income (before other gains and losses and increase in the fair value of investment property) in the first half of 2010 amounted to approximately NIS 135.1 million (U.S $ 34.9 million) (3.8% of revenues) compared to operating income of NIS 120.9 million (3.3% of revenues) in the first half of 2009. The increase in the operating income was due to the increase in the gross profit partly offset by an increase in selling, general and administrative expenses.

Appreciation of Investment Property: In the first half of 2010, the Company recorded gains from the appreciation of investment property in the amount of NIS 13.2 million (U.S $ 3.4 million) compared to NIS 1.7 million in the first half of 2009.

Other Gains and losses, Net: In the first half of 2010 the Company recorded other expenses, net of NIS 7.1 million (U.S. $ 1.8 million), compared to other expenses, net of NIS 0.6 million in the first half of 2009. In the first half of 2010 the other expenses included mainly expenses relating to the transfer of the companies in the BEE group to the new logistics center in Beer Tuvia and the removal of property and equipment in the supermarket segment because of the closure of stores and changing to Windows based cash registers.

Operating Income before financing in the first half of 2010 was NIS 141.1 million (U.S. $ 36.4 million) (3.9% of revenues) compared to operating income of NIS 122.0 million (3.4% of revenues) in the first half of 2009.

Financial Expenses, Net for the first half of 2010 were NIS 56.7 million (U.S. $14.6 million) compared to financial expenses, net of NIS 47.2 million in the first half of 2009, an increase in net financial expenses of NIS 9.5 million (U.S. $ 2.5 million). The increase in net finance expenses mainly derived from a reduction in finance income of NIS 17.9 million (U.S. $ 4.6 million) net of a decrease in finance expenses in the amount of NIS 8.4 million (U.S. $ 2.2 million).

The decrease in finance income mainly derived from a reduction in finance income from hedging transactions on the Israeli CPI of NIS 17.9 million (U.S. $ 4.6 million), a reduction in the income from revaluation of the conversion component of financial instruments in the amount of NIS 6.1 million (U.S. $ 1.6 million) net of an increase in an income from securities in the amount of NIS 7.0 million (U.S. $ 1.8 million). The decrease in finance expenses mainly derived from the revaluation of the conversion component of the Company's debentures and from capitalization of borrowing costs in construction projects.

Taxes on Income for the first half of 2010 were approximately NIS 25.7 million (U.S. $6.6 million) (30.6% effective tax rate compared to a statutory tax rate of 25%) compared to NIS 24.8 million (effective tax rate of 33.2% compared to a statutory tax rate of 26%) in the first half of 2009. The decrease in the effective tax rate is mainly due to the reduction in finance expenses from the revaluation of the conversion component of the Company's convertible debentures for which the Company does not record deferred taxes. The high effective tax rate compared to the statutory rate is due to the recording of deferred taxes at the tax rate expected to apply when the taxes are utilized, which is lower than the statutory rate and from losses in some of the Group companies for which no deferred tax assets were recorded.

Net Income for the first half of 2010 was NIS 58.2 million (U.S. $ 15 million) compared to net income of NIS 49.9 million in the first half of 2009. The increase in the net income in the first half of 2010 compared to the first half of 2009 mainly derives from an increase in operating profit and from an increase in the appreciation of investment property value offset by an increase in finance expenses. The net income for the first half of 2010 attributable to the equity holders of the company was NIS 47.7 million (U.S. $12.3 million), or NIS 1.08 per share (U.S. $ 0.28), while the portion attributable to the non-controlling interests was NIS 10.5 million (U.S. $2.7 million).

Cash Flows in the First Half of 2010

Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the first half of 2010 amounted to NIS 207.5 million (U.S. $53.5 million) before the acquisition of real estate inventories in the amount of NIS 121.7 million (U.S. $31.4 million) in the real estate segment compared to NIS 167.9 million in the first half of 2009. The increase in cash flows from operating activities before acquisition of real estate inventories derives from the improvement in the operating profit and a decrease in tax payments.

Cash Flows from Investing Activities: Net Cash flows used in investing activities in the first half of 2010 amounted to NIS 376.9 million (U.S. $97.3 million) compared to net cash flows of NIS 485.5 million used in investing activities in the first half of 2009. Cash flows used in investing activities in the first half of 2010 included mainly purchases of property and equipment, intangible assets, investment property and payments on account of real estate in a total amount of NIS 151.0 million (U.S. $39.0 million) and a net investment in marketable securities of NIS 216.9 million (U.S. $56.0 million), the grant of a loan of NIS 18.9 million (U.S. $4.9 million) to a proportionally consolidated company offset by interest income of NIS 9.9 million (U.S. $2.5 million). Cash flows used in investing activities in the first half of 2009 included mainly the investment of NIS 470 million in a restricted deposit, the purchase of property and equipment, intangible assets and investment property amounting to NIS 104.9 million net of proceeds of NIS 80.0 million from the realization of the restricted short term deposit and proceeds from the realization of property and equipment and investment property in the amount of NIS 7.2 million.

Cash Flows from Financing Activities: Net Cash flows used in financing activities in the first half of 2010 amounted to NIS 58.2 million (U.S $15.0 million) compared to net cash flow from financing activities of NIS 365.2 million in the corresponding period last year. Cash flows used in financing activities in the first half of 2010 included mainly repayment of long term loans of NIS 73.4 million (U.S $ 18.9 million), the payment of interest of NIS 58.5 million (U.S $ 15.1 million), payment of dividends of NIS 75 million (U.S. $19.4 million) to the Company's shareholders and NIS 17.6 million (U.S. $4.5 million) to the non-controlling interests and acquisition of treasury shares of NIS 4.3 million (U.S. $1.1 million). This was offset by an increase in short term credit, net in the amount of NIS 166.3 million (U.S. $42.9 million). Net Cash flows from financing activities in the first half of 2009 included mainly an increase in short term credit, net of NIS 476.6 million net of the repayment of long term loans of NIS 66.4 million and interest paid of NIS 45.9 million.

Comments of Management

Commenting on the financial results, Mr. Zeev Vurembrand, Alon Holdings Blue Square - Israel's President and CEO, said: The results of the second quarter were affected by the timing of the Passover holiday as compared to the comparable quarter last year. The non-food segment as a whole, and especially the houseware sector, were especially materially affected by this seasonality.

In reviewing the results of the first half, a continuing improvement in operating profits can be identified, which is an outcome, among others of the strategic changes the company has undertaken in the last year and a half. The supermarket segment can point to operating profits of 4.2% of sales and 3.9% in the second quarter and in the first half, respectively.

Eden Teva market's nine stores operated fully during the first half for the first time and continued to lead the healthy supermarket market. In the coming year we will continue the second stage of the development with the opening of approximately five new Eden in Mega stores and the completion of the opening of two stores in Beer Sheva and the YOO Center complex in Tel Aviv. We expect that Eden Teva market will show a break-even operating result in 2010 and operating profits in 2011.

We are still in the process of significant investments in the main IT operating systems. These moves have a long term impact and include installation of new modern cash-registers and upgrading the trading and the chain of delivery management systems.

In the non-food segment there were one-off costs apart from the seasonal impact of the timing of the Passover holiday. The one-off costs resulted from the transfer to the new non-food segment group logistics center and the consolidation of the BEE group center and move to single new offices.

We will continue with the implementation of the main elements of the Company's strategic plan. In our opinion, these steps will lead to an improvement in the business and operating results of the Company in the medium to long term.

Results for the second quarter of the year 2010

Revenues for the second quarter of 2010 were NIS 1,768.7 million (U.S. $456.4 million) compared to revenues of approximately NIS 1,844 million in the comparable quarter last year, a decrease of 4.1 %.

The decrease in the revenues compared to the comparable quarter last year is mainly due to the timing of the Passover holiday, which fell this year on March 29 as compared to April 8 last year. The Passover sales in the Non-Food and Supermarket segment were mainly included in the first quarter this year and last year they were mainly included in the second quarter. The Non-Food segment was affected more strongly by the timing of the holiday.

Supermarket segment - a decrease in revenues of 3.3% from NIS 1,731.4 million in the second quarter of 2009 to NIS 1,674.6 million (U.S $432.2 million) in the current quarter. The decrease in revenues was mainly due to a reduction in same store sales (SSS) at a rate of 5.2% as discussed because of the timing of the Passover holiday and partly offset by the opening of net 7 new stores from the beginning of the second quarter of 2009 with an area of 10,400 square meters.

Non-Food segment - a decrease in revenues of 17.3% from NIS 107.2 million in the second quarter of 2009 to NIS 88.7 million (U.S. $22.9 million) in the current quarter. The decrease mainly derived from the timing of the Passover holiday which affected this segment even more strongly than the Supermarket segment.

Real Estate segment - rental fees from external parties of NIS 5.4 million in the second quarter of 2009 compared to NIS 5.3 million (U.S. $1.4 million) in the current quarter.

Gross Profit of the second quarter of 2010 amounted to approximately NIS 513.0 million (U.S. $ 132.4 million) (approximately 29.0% of revenues) compared to gross profit of approximately NIS 501.7 million (27.2% of revenues) in the comparable quarter of 2009. The increase in the gross profit mainly derives from the same reasons detailed above for the half year results.

Selling, General and Administrative Expenses in the second quarter of 2010 amounted to NIS 450.5 million (U.S. $ 116.3 million) (25.5% of revenues) compared to approximately NIS 441.1 million (23.9% of revenues) in the comparable quarter, an increase of approximately 2.1%. The increase is due to the expenses related to the net increase of new stores and from an increase in the advertising expenses.

Operating Profit (before other gains and losses and increases in the fair value of investment property) in the second quarter of 2010 amounted to NIS 62.5 million (U.S $ 16.1 million) (3.5% of revenues) compared to NIS 60.7 million (3.3% of revenues) in the second quarter of 2009, an increase of 3%.

Increase in the Fair Value of Investment Property - In the second quarter of 2010, the Company recorded gains from appreciation of investment property in the amount of NIS 10.9 million (U.S $ 2.8 million) compared to NIS 1.7 million in the comparable quarter last year.

Other Gains and Losses, Net - In the second quarter of 2010, the Company recorded other expenses, net of NIS 5.9 million (U.S. $ 1.5 million), compared to net expenses of NIS 2.8 million in the comparable quarter. The expenses this quarter included costs of certain companies in the BEE Group related to the transfer of the BEE Group companies to the new logistic center in Beer Tuvia, which is expected to serve the Non-Food segment and the removal of the property and equipment as described above in first half analyses.

Operating Profit before financing expenses, net amounted to approximately NIS 67.5 million (U.S. $ 17.4 million) (3.8% of revenues) compared to operating profit of NIS 59.6 million (3.2% of revenues) in the second quarter of 2009.

Financial Expenses, net, for the second quarter of 2010 were NIS 42.3 million (U.S. $10.9 million) compared to financial expenses, net of NIS 35.2 million in the comparable quarter last year. The increase in financial expenses, net in this quarter compared to the same quarter last year was mainly due to changes in the value of hedging contracts of the Israeli CPI, which contributed a gain of NIS 2.6 million (U.S. $0.7 million) in this quarter compared to a gain of NIS 12.7 million in the comparable quarter last year.

The increase in the financial expenses was offset mainly by an increase in financial income from securities which contributed NIS 5.5 million (U.S. $1.4 million) this quarter compared to income of NIS 2.2 million in the comparable period last year.

Taxes on Income for the second quarter of 2010 amounted to NIS 4.1 million (U.S. $1.1 million) (effective tax rate of 16.3% compared to a statutory tax rate of 25%) compared to tax expenses of NIS 6.9 million (effective tax rate of 28.2% compared to a statutory tax rate of 26%) in the corresponding quarter. The low effective tax rate as compared to the statutory rate is due to the provision of deferred tax liabilities during the quarter at the rate of tax that is expected to apply on realization, which is lower than the statutory rate.

Net Profit for the second quarter of 2010 amounted to NIS 21.1 million (U.S. $ 5.4 million) compared to a net income of NIS 17.5 million in the second quarter of 2009. The increase in the net income in this quarter compared to the corresponding quarter last year derived from the increase in operating income and decrease in tax expense as discussed above. The net income for the second quarter of 2010 attributable to equity holders of the Company, was NIS 19.0 million (U.S. $4.9 million), or NIS 0.42 per share (U.S. $ 0.11), while the portion attributable to the non-controlling interests was NIS 2.1 million (U.S. $0.6 million).

Cash Flows in the second quarter of 2010

Cash Flows from Operating Activities: Net cash flows provided by operating activities, before the acquisition of real estate inventories by the real estate segment in the amount of NIS 121.7 million (U.S. $31.4 million) amounted to NIS 186.0 million (U.S. $ 48.0 million) in the second quarter of 2010 compared to NIS 133.4 million in the comparative period last year. The increase in cash flows from operating activities before the acquisition of real estate inventories was mainly due to the increase in the balance of trade payables mainly as a result of the timing of payments.

Cash Flows used in Investing Activities: Net Cash flows used in investing activities in the second quarter of 2010 amounted to NIS 327.5 million (U.S. $84.5 million) compared to net cash flows of NIS 35.5 million from investing activities in the corresponding quarter of the previous year. The cash flows used in investing activities in the second quarter of 2010 mainly included the purchase of property and equipment, intangible assets investment property and payments on account of real estate in a total amount of NIS 112.3 million (U.S. $29.0 million), net investment in marketable securities of NIS 200.7 million (U.S. $51.8 million) and the grant of a loan to a proportionally consolidated company of NIS 18.9 million (U.S. $4.9 million) net of interest received amounting to NIS 4.4 million (U.S. $1.1 million). Cash used in investing activities in the second quarter of 2009 mainly included the proceeds from the realization of a restricted deposit of NIS 80.0 million net of purchases of property and equipment, intangible assets and investment property in a total amount of approximately NIS 52.3 million.

Cash Flows from Financing Activities: Net Cash flows from financing activities amounted to NIS 4.8 million (U.S $ 1.2 million) in the second quarter of 2010 as compared to net cash used in financing activities of NIS 91.0 million in the corresponding period last year. Cash flows from financing activities in the second quarter of 2010 included mainly an increase in short term credit net in the amount of NIS 58.8 million (U.S. $15.1 million) net of the repayment of long term loans amounting to NIS 34.8 million (U.S $ 9.0 million) and interest paid of NIS 19.8 million (U.S. $5.1 million). The cash flows used in financing activities in the second quarter of 2009 included mainly repayment of long term loans of NIS 35.9 million, dividend paid to non-controlling interests of subsidiaries of NIS 6.2 million, interest paid amounting to 10.5 million and a net reduction in short term credit of NIS 52.8 million.

    Additional Information

    1. As of June 30, 2010, the Company operated 206 supermarkets in the
       following formats: Mega In Town -120; Mega Bool - 49; Mega - 11; Shefa
       Shuk - 17; Eden Teva Market - 9.

    2. EBITDA (Earnings before Interest, Taxes, Depreciation, and
       Amortization) [2] in the first half of 2010 was NIS 226.3 million
       (U.S. $ 58.4 million) (6.3 % of revenues) compared to NIS 206.2
       million (5.7% of revenues) in the corresponding period of 2009.

       In the second quarter of 2010 amounted to NIS 108.6 million
       (U.S. $ 28.0 million) (6.1 % of revenues) compared to NIS 103.6
       million (5.6% of revenues) in the corresponding period of last year.

       The Company's board of directors resolved, based on the changes and
       the developments in the Company since 2003, to update the manner of
       calculating the ratio of net debt to EBITDA for dividend distribution.
       As of June 30, 2010, the Company meets the new ratio.

    3. On April 15, 2010, Blue Square Real Estate (BSRE) executed minutes,
       which were contingent upon the approval of the general meeting of BSRE
       shareholders, to enter into agreements to purchase, along with Gindi
       Investments 1 Ltd. and an additional corporation controlled by Moshe
       and Yigal Gindi, leasehold rights in land of 97,460 square meters for
       a period ending August 31, 2099 in part of the wholesale market
       complex in Tel Aviv, from the Tel Aviv Municipality and The Wholesale
       Company for Agricultural Produce in Tel Aviv Ltd. (the sellers) for a
       total consideration of NIS 950 million. The general meeting of BSRE
       approved the transaction on June 2, 2010. The final agreements, which
       were signed on June 3, 2010, were subject to the approval of the
       Minister of the Interior, which was received on July 11, 2010.

    4. On April 26, 2010, Standard & Poors Maalot entered the rating for the
       debentures of the Company of ilA+ into Credit Watch with negative
       outlook, due to the wholesale market transaction of BSRE.

    5. On June 28, 2010 the shareholders' general meeting approved the
       acquisition of Dor Alon Energy Israel (1988) Ltd. (Dor Alon) from its
       controlling shareholder Alon Israel Oil Company Ltd. (Alon). Under
       such acquisition, the Company will acquire from Alon all its holdings,
       approximately 80%, in Dor Alon. In return for the Dor Alon shares,
       the Company will issue 20,327,710 shares to Alon that will
       significantly increase the issued and outstanding share capital of the
       Company in such a way that each Dor Alon share held by Alon will be
       exchanged into 1.8 shares of the Company. According to the outline of
       the acquisition, the Company will pay a dividend distribution in an
       amount of NIS 800 million by way of a capital reduction. The Company
       has filed for approval of the distribution to the district court.
       However, the court has not yet given its decision.

    6. On July 15, 2010, the Company announced that as a result of
       the approval in the shareholders' general meeting of June 28, 2010 and
       the approval of the Register of Companies in Israel the Company's name
       would be changed to "Alon Holdings Blue Square - Israel Ltd".

    7. On August 10, 2010, the Company received a rating of A1 from Midroog
       for the Debentures up to par value NIS 500 million that the Company
       will issue. The rating is subject to a number of conditions which are
       detailed in Midroog's report.

    8. On July 12, 2010 BSRE completed its capital raising of NIS
       110 million of debentures.

    ---------------------------------

    [1] The Company operates in three segments: Supermarkets, Non-Food and
        Real Estate. Segmental information is included in this report in
        Note 1.

    [2] Use of financial measures that are not in accordance with Generally
        Accepted Accounting Principles

    EBITDA is a measure that is not in accordance with Generally Accepted
    Accounting Principles (Non-GAAP) and is defined as income before
    financial income (expenses) net, other gains (losses) net, changes in
    fair value of investment property, taxes, depreciation and amortization.
    It is presented because it is a measure commonly used in the retail
    industry and is presented as an additional performance measure, since it
    enables comparisons of operating performances between periods and
    companies while neutralizing potential differences resulting from
    changes in capital structures, taxes, age of property and equipment and
    its related depreciation expenses. EBITDA, however, should not be
    considered as an alternative to operating income or income for the year
    as an indicator of our operating performance. Similarly, EBITDA should
    not be considered as an alternative to cash flow from operating
    activities as a measure of liquidity. EBITDA is not a measure of
    financial performance under Generally Accepted Accounting Principles
    (GAAP) and may not be comparable to other similarly titled measures for
    other companies. EBITDA may not be indicative of our historic operating
    results nor is it meant to be predictive of potential future results. A
    reconciliation between our income for the period and EBITDA is presented
    in the attached condensed financial reports.

NOTE A: Convenience Translation to Dollars

The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at June 30, 2010: U.S. $1.00 equals NIS 3.875. The translation was made solely for the convenience of the reader.

Alon Holdings Blue Square - Israel Ltd. (hereinafter: "Alon Holdings") operates in three reporting segments: In its supermarket segment, Alon Holdings is the second largest food retailer in the State of Israel. As pioneer of modern food retailing in the region, Alon Holdings, through its 100% subsidiary, Mega Retail Ltd., currently operates 207 supermarkets under different formats, each offering a wide range of food products, "Near Food" products and "Non-Food" products at varying levels of service and pricing. In its "Non-Food" segment, Alon Holdings, through its 85% subsidiary Bee Group Retail Ltd., operates specialist outlets in self operation and franchises and offers a wide range of "Non-Food" products as retailer and wholesaler. In its Real Estate segment, Alon Holdings, through its TASE traded 78.35% subsidiary Blue Square Real Estate Ltd., owns, leases and develops yield generating commercial properties.

This press release contains forward-looking statements within the meaning of safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, plans or projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events, results, performance, circumstance and achievements to be materially different from any future events, results, performance, circumstance and achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following: the effect of the recession in Israel on the sales in our stores and on our profitability; our ability to compete effectively against discount supermarkets and other competitors; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; risks associated with our dependence on a limited number of key suppliers for products that we sell in our stores; the effect of an increase in the minimum wage in Israel on our operating results; the effect of any actions taken by the Israeli Antitrust Authority on our ability to execute our business strategy and on our profitability; the effect of increases in oil, raw material and product prices in recent years; the effects of damage to our reputation or to the reputation of our store brands due to reports in the media or otherwise; and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, risks, uncertainties and factors identified under the heading "Risk Factors" in our Annual Report on Form 20-F for the year ended December 31, 2009. You are cautioned not to place undue reliance on these forward-looking statements, which are only relevant as of the date of this press release. Except for our ongoing obligations to disclose material information under the applicable securities laws, we undertake no obligation to update the forward-looking information contained in this press release.

                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
              INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                               AS OF JUNE 30, 2010


                                                                Convenience
                                                               translation(A)
                          December 31,         June 30,           June 30,
                                      ------------------------
                              2009        2009         2010         2010
                          ----------- ----------- ------------ --------------
                              Audited                Unaudited
                          ----------- ---------------------------------------
                                            NIS                 U.S. dollars
                          ------------------------------------ --------------
                                              In thousands
                          ---------------------------------------------------
          Assets

    CURRENT ASSETS:
    Cash and cash
    equivalents               612,227     137,241      262,517       67,746
    Short-term bank deposit        67         207            -            -
    Investment in securities  212,912   **188,726      431,786      111,429
    Restricted deposit              -     440,015            -            -
    Trade receivables         809,783     773,892      795,925      205,400
    Other accounts receivable  69,504      96,308       83,406       21,524
    Embedded derivatives        9,690           -        9,051        2,336
    Income taxes receivable    84,274      87,635       69,994       18,063
    Inventories               514,858     527,798      537,341      138,669
                          ----------- ----------- ------------ ------------
                            2,313,315   2,251,822    2,190,020      565,167
                          ----------- ----------- ------------ ------------

    NON-CURRENT ASSETS:
    Property and equipment,
    net                    *1,956,914  *1,935,643    1,975,758      509,873
    Real estate inventories         -           -       83,342       21,508
    Investment property      *421,188 *,**414,743      447,517      115,488
    Intangible assets, net    409,194     404,934      410,593      105,959
    Investments in associates   4,878       4,827        4,302        1,110
    Embedded derivatives       12,691      19,381       13,818        3,566
    Long-term receivables       1,326       1,356      117,605       30,349
    Deferred taxes             45,991      46,504       40,541       10,462
                          ----------- ----------- ------------ ------------
                            2,852,182   2,827,388    3,093,476      798,315
                          ----------- ----------- ------------ ------------
    Total assets            5,165,497   5,079,210    5,283,496    1,363,482
                          =========== =========== ============ ============

    *) Restated, see note 2
    **) Reclassified



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
              INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                               AS OF JUNE 30, 2010


                                                                Convenience
                                                               translation(A)
                          December 31,         June 30,           June 30,
                                      ------------------------
                              2009        2009         2010         2010
                          ----------- ----------- ------------ --------------
                              Audited                Unaudited
                          ----------- ---------------------------------------
                                            NIS                 U.S. dollars
                          ------------------------------------ --------------
                                              In thousands
                          ---------------------------------------------------
    Liabilities and equity

    CURRENT LIABILITIES:
    Credit and loans from
    banks and others          274,598     725,528      427,787      110,397
    Current maturities of
    debentures and
    convertible debentures     76,698      29,064       76,235       19,674
    Trade payables            917,585   1,025,728      960,840      274,959
    Other accounts payable
    and accrued expenses     *494,147    *491,895      499,513      128,904
    Income taxes payable        6,051       3,449           24            6
    Provisions                 51,298      42,457       44,273       11,425
                          ----------- ----------- ------------ ------------
                            1,820,377   2,318,121    2,008,672      518,365
                          ----------- ----------- ------------ ------------

    NON CURRENT LIABILITIES:
    Long-term loans from
    banks, net of current
    maturities                596,721     289,885      541,528      139,749
    Convertible debentures,
    net of current maturities 142,021     128,070      132,334       34,151
    Debentures, net of
    current maturities      1,251,333   1,001,537    1,261,208      325,473
    Derivative financial
    instruments                 7,591       8,725        6,241        1,611
    Liabilities in respect
    of employee benefits,
    net of amount funded       47,249      49,619       47,728       12,317
    Other liabilities         *16,202     *41,280       22,526        5,813
    Deferred taxes            *57,279     *67,428       56,345       14,541
                          ----------- ----------- ------------ ------------
                            2,118,396   1,586,544    2,067,910      533,655
                          ----------- ----------- ------------ ------------
       Total liabilities    3,938,773   3,904,665    4,076,582    1,052,020
                          ----------- ----------- ------------ ------------

    EQUITY:
    Equity attributable to
    equity holders of the
    Company
    Ordinary shares of
    NIS 1 par value            57,438      57,438       58,443       15,082
    Additional paid-in
    capital                 1,030,259   1,030,259    1,056,986      272,771
    Other reserves              5,676       8,183        8,024        2,071
    Accumulated deficit      *(61,049)  *(105,796)    (103,740)     (26,772)
                           ----------- ----------- ------------ ------------
                            1,032,324     990,084    1,019,713      263,152

    Non-controlling
    interests                *194,400    *184,461      187,201       48,310
                           ----------- ----------- ------------ ------------

    Total equity            1,226,724   1,174,545    1,206,914      311,462
                           ----------- ----------- ------------ ------------

    Total liabilities and
    equity                  5,165,497   5,079,210    5,283,496    1,363,482
                           =========== =========== ============ ============

    *) Restated, see note 2




                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2010


                                                            For the
                                      Year ended           Six months
                                      December 31,        Ended June 30,
                                                   --------------------------
                                         2009          2009           2010
                                     ------------  ------------  ------------
                                        Audited             Unaudited
                                     ------------  --------------------------
                                                        NIS
                                     ----------------------------------------
                               In thousands (except share and per share data)
                               ----------------------------------------------

    Revenues                           7,349,076     3,608,739     3,599,487
    Cost of sales                      5,291,012     2,603,905     2,572,775
                                     ------------  ------------  ------------

    Gross profit                       2,058,064     1,004,834     1,026,712

    Selling, general and
    administrative expenses            1,817,099       883,981       891,642
                                     ------------  ------------  ------------

    Operating profit before
    other gains and losses and
    changes in fair value of
    investment property                  240,965       120,853       135,070

    Other gains                            4,699         4,464         1,419
    Other losses                         (32,803)       (5,102)       (8,528)
    Changes in fair value of
    investment property, net              20,775         1,740        13,187
                                     ------------  ------------  ------------
    Operating profit                     233,636       121,955       141,148

    Finance income                        64,780        37,995        20,078
    Finance expenses                    (177,454)      (85,222)      (76,786)
    Share in losses of associates            (37)          (88)         (576)
                                     ------------  ------------  ------------

    Income before taxes on
    income                               120,925        74,640        83,863
    Taxes on income                       23,124        24,780        25,656
                                     ------------  ------------  ------------

    Net income                            97,801        49,860        58,207
                                     ============  ============  ============

    Attributable to:
    Equity holders of the Company         77,163        39,606        47,725
                                     ------------  ------------  ------------
    Non-controlling interests             20,638        10,254        10,482
                                     ------------  ------------  ------------

    Net income per Ordinary
    share or ADS attributed to
    Company shareholders:
    Basic                                   1.77          0.91          1.08
                                     ------------  ------------  ------------
    Fully diluted                           1.77          0.91          1.06
                                     ------------  ------------  ------------

    Weighted average number of
    shares or ADSs used for
    computation of income per
    share:
    Basic                             43,558,614    43,397,543    44,282,052
                                     ------------  ------------  ------------
    Fully diluted                     43,558,614    43,397,543    44,834,944
                                     ------------  ------------  ------------

    (continued)

                                                                Convenience
                                                               translation(A)
                                               For the            for the
                                             Three months        six months
                                            Ended June 30,     ended June 30,
                                     --------------------------
                                         2009          2010        2010
                                     -------------------------- -------------
                                              Unaudited           Unaudited
                                     -------------------------- -------------
                                                 NIS             U.S. dollars
                                     -------------------------- -------------
                               In thousands (except share and per share data)
                               ----------------------------------------------

    Revenues                           1,843,951     1,768,663       928,900
    Cost of sales                      1,342,204     1,255,705       663,942
                                     ------------  ------------  ------------

    Gross profit                         501,747       512,958       264,958

    Selling, general and
    administrative expenses              441,062       450,472       230,101
                                     ------------  ------------  ------------

    Operating profit before other gains
    and losses and changes in fair
    value of investment property          60,685        62,486        34,857

    Other gains                            1,739           463           366
    Other losses                          (4,539)       (6,341)       (2,201)
    Changes in fair value of investment
    property, net                          1,740        10,913         3,403
                                     ------------  ------------  ------------
    Operating profit                      59,625        67,521        36,425

    Finance income                        27,016        14,764         5,181
    Finance expenses                     (62,246)      (57,050)      (19,814)
    Share in losses of associates             (4)            -          (149)
                                     ------------  ------------  ------------

    Income before taxes on income         24,391        25,236        21,643
    Taxes on income                        6,879         4,123         6,621
                                     ------------  ------------  ------------

    Net income                            17,512        21,113        15,022
                                     ============  ============  ============

    Attributable to:
    Equity holders of the Company         13,071        18,969        12,317
    Non-controlling interests              4,441         2,144         2,705
                                     ------------  ------------  ------------

    Net income per Ordinary
    share or ADS attributed to
    Company shareholders:
    Basic                                   0.30          0.43          0.28
                                     ------------  ------------  ------------
    Fully diluted                           0.30          0.42          0.27
                                     ------------  ------------  ------------

    Weighted average number of shares
    or ADSs used for computation of
    income per share:
    Basic                             43,421,996    44,589,741    44,282,052
                                     ------------  ------------  ------------
    Fully diluted                     43,421,996    44,975,642    44,834,944
                                     ------------  ------------  ------------




                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
            FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2010

                                                                  Convenience
                                                                  translation
                                                                      (A)
                     Year                                           for the
                     ended       For the             For the       six months
                   December     Six months         Three months       ended
                      31,      ended June 30,      ended June 30     June 30,
                     2009      2009      2010      2009      2010      2010
                  --------- --------- --------- --------- --------- ---------
                   Audited                Unaudited                 Unaudited
                  --------- --------------------------------------- ---------
                                                                       U.S.
                                         NIS                         dollars
                  ------------------------------------------------- ---------
                                          In thousands
                  -----------------------------------------------------------
    CASH FLOWS
    FROM
    OPERATING
    ACTIVITIES:
    Net cash
    provided by
    operating
    activities(a)  298,445   202,666    93,834   153,045    88,029    24,217
    Income tax
    paid, net      (38,101)  (34,775)   (7,972)  (19,642)  (23,684)   (2,057)
                  --------- --------- --------- --------- --------- ---------
    Net cash
    provided by
    operating
    activities     260,344   167,891    85,862   133,403    64,345    22,160
                  --------- --------- --------- --------- --------- ---------

    CASH FLOWS
    FROM INVESTING
    ACTIVITIES:
    Purchase of
    property and
    equipment     (203,889)  (99,424)  (80,590)  (46,092)  (49,329)  (20,797)
    Proceeds
    from sale of
    property and
    equipment        2,581     1,537        52     1,036        52        13
    Purchase of
    investment
    property        (9,435)   (3,307)   (3,641)     (978)   (3,299)     (940)
    Payments on
    account of real
    estate for
    investment
    property             -         -   (53,466)        -   (53,466)  (13,798)
    Proceeds
    from sale of
    investment
    property         5,700     5,700         -         -         -         -
    Investment in
    restricted
    deposit       (470,000) (470,000)        -         -         -         -
    Proceeds from
    collection of
    restricted
    deposit        470,000    79,985         -    79,985         -         -
    Purchase of
    intangible
    assets         (20,738)   (4,405)  (13,341)   (5,181)   (6,222)   (3,443)
    Proceeds from
    collection of
    short-term
    bank deposits,
    net                139         -        67         -         -        17
    Proceeds
    from sale of
    securities     101,867    57,179   116,340    22,976    71,891    30,023
    Investment in
    securities    (113,966)  (54,339) (333,292)  (20,946) (272,606)  (86,011)
    Acquisition of
    subsidiaries(b) (4,789)   (4,789)        -         -         -         -
    Grant of loans
    to jointly
    controlled
    companies            -         -   (18,933)        -   (18,933)   (4,886)
    Interest
    received        11,948     6,330     9,860     4,747     4,439     2,544
                  --------- --------- --------- --------- --------- ---------
    Net cash
    provided by
    (used in)
    investing
    activities    (230,582) (485,533) (376,944)   35,547  (327,473)  (97,278)
                  --------- --------- --------- --------- --------- ---------

    CASH FLOWS
    FROM
    FINANCING
    ACTIVITIES:
    Repayment of
    convertible
    debentures    (13,297)         -       (27)                (27)       (7)
    Dividend
    paid to
    shareholders         -         -   (75,000)        -         -    (19355)
    Issuance of
    debentures     294,280         -         -         -         -         -
    Dividend
    paid to non-
    controlling
    interests      (16,491)  (10,534)  (17,619)   (6,181)   (3,321)   (4,547)
    Purchase of
    non-controlling
    interests      *(8,020)  *(6,607)        -         -         -         -
    Purchase of
    Company's
    shares by
    the Company          -         -    (4,295)        -         -    (1,108)
    Proceeds from
    realization of
    investment
    in
    subsidiary     *10,912   *10,074         -   *10,074         -         -
    Receipt of
    long-term
    loans          387,700     6,500     4,500     2,500     4,500     1,161
    Repayment of
    long-term
    loans         (139,060)  (66,389)  (73,409)  (35,901)  (34,773)  (18,944)
    Repayment of
    long term
    credit from
    trade
    payables        (1,740)     (870)     (870)     (435)     (435)     (225)
    Proceeds from
    exercise of
    options in a
    subsidiary       2,306     2,306         -     2,306         -         -
    Short-term
    credit from
    banks and
    others, net     76,144   476,575   166,273   (52,843)   58,583    42,909
    Proceeds from
    exercise of
    options              -         -       716         -        86       185
    Interest paid  (93,900)  (45,879)  (58,486)  (10,495)  (19,840)  (15,093)
                  --------- --------- --------- --------- --------- ---------
    Net cash
    provided by
    (used in)
    financing
    activities     498,834   365,176   (58,217)  (90,975)    4,773   (15,024)
                  --------- --------- --------- --------- --------- ---------
    INCREASE
    (DECREASE) IN
    CASH AND CASH
    EQUIVALENTS
    AND BANK
    OVERDRAFTS     528,596    47,534  (349,299)   77,975  (258,355)  (90,142)
    BALANCE OF
    CASH AND CASH
    EQUIVALENTS
    AND BANK
    OVERDRAFTS
    AT BEGINNING
    OF PERIOD       83,138    83,138   611,734    52,697   520,790   157,867
    Exchange gains
    on cash and cash
    equivalents          -         -        82         -        82        21
                  --------- --------- --------- --------- --------- ---------
    BALANCE OF
    CASH AND CASH
    EQUIVALENTS
    AND BANK
    OVERDRAFTS
    AT END OF
    PERIOD         611,734   130,672   262,517   130,672   262,517    67,746
                  ========= ========= ========= ========= ========= =========

    * Restated



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
            FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2010

                                                                  Convenience
                                                                  translation
                                                                      (A)
                     Year                                           for the
                     ended       For the             For the       six months
                   December     Six months         Three months       ended
                      31,      ended June 30,      ended June 30     June 30,
                     2009      2009      2010      2009      2010      2010
                  --------- --------- --------- --------- --------- ---------
                   Audited                Unaudited                 Unaudited
                  --------- --------------------------------------- ---------
                                                                       U.S.
                                         NIS                         dollars
                  ------------------------------------------------- ---------
                                          In thousands
                  -----------------------------------------------------------

    (a) Net cash
        provided by
        operating
        activities:

    Income before
    taxes on
    income         120,925    74,640    83,863    24,391    25,236    21,643

    Adjustments for:
    Depreciation
    and
    amortization   165,248    79,766    87,291    39,992    44,086    22,527
    Increase in
    fair value of
    investment
    property, net  (20,775)   (1,740)  (13,187)   (1,740)  (10,913)   (3,403)
    Share in
    losses of
    associates          37        88       576         4         -       149
    Share based
    payment         12,166     5,619     3,901     2,933     2,000     1,007
    Loss from
    sale and
    disposal of
    property and
    equipment, net   3,299         7       867       365       719       224
    Provision for
    impairment of
    property and
    equipment, net  19,981     2,189       369     2,189       245        95
    Loss (gain)
    from changes
    in fair
    value of
    derivative
    financial
    instruments    (21,250)  (17,952)      556   (15,396)   (2,468)      143
    Linkage
    differences
    on monetary
    assets,
    debentures,
    loans and
    other long term
    liabilities     52,347    16,358    10,626    23,668    22,690     2,742
    Capital loss
    (gain) from
    changes in
    holdings in
    subsidiaries       911    (1,022)        -     1,522         -         -
    Accrued
    severance
    pay, net           144      (292)      206      (304)   (1,128)       53
    Decrease
    (increase)
    in value of
    investment
    in securities,
    deposits and
    long-term
    receivables,
    net             (4,468)    7,064    (1,567)    4,768    (2,195)     (404)
    Interest
    paid, net       81,952    39,550    48,626     5,748    15,401    12,549

    Changes in
    operating
    assets and
    liabilities:
    Investment
    in real
    estate
    inventories          -         -   (82,485)        -   (82,485)  (21,286)
    Payments on
    account of
    real estate
    inventories          -         -   (39,188)        -   (39,188)  (10,113)
    Decrease
    (increase)
    in trade
    receivables
    and other
    accounts
    receivable     (65,468)  (56,412)   (6,733)  290,230   301,282    (1,737)
    Decreased
    (increase) in
    inventories    (17,224)  (30,155)  (22,483)   53,814    13,607    (5,802)
    Increase
    (decrease)
    in trade
    payables and
    other accounts
    payable        (29,380)   84,958    22,595  (279,139) (198,858)    5,830
                  --------- --------- --------- --------- --------- ---------
                   298,445   202,666    93,834   153,045    88,029    24,217
                  ========= ========= ========= ========= ========= =========



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
            FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2010


                                                                  Convenience
                                                                  translation
                                                                      (A)
                     Year                                           for the
                     ended       For the             For the       six months
                   December     Six months         Three months       ended
                      31,      ended June 30,      ended June 30     June 30,
                  --------- ------------------- --------- --------- ---------
                     2009      2009      2010      2009      2010      2010
                  --------- --------- --------- --------- --------- ---------
                   Audited                Unaudited                 Unaudited
                  --------- --------------------------------------- ---------
                                                                       U.S.
                                         NIS                         dollars
                  ------------------------------------------------- ---------
                                          In thousands
                  -----------------------------------------------------------

    (b) Acquisition of
        subsidiaries:

    Assets and
    liabilities at date
    of acquisition:
    Working capital
    (excluding cash
    and cash
    equivalents)     2,350     2,350         -         -         -         -
    Property and
    equipment, net    (297)     (297)        -         -         -         -
    Deferred taxes,
    net               (453)     (453)        -         -         -         -
    Intangible
    assets          (6,389)   (6,389)        -         -         -         -
                  --------- --------- --------- --------- --------- ---------
                    (4,789)   (4,789)        -         -         -         -
                  ========= ========= ========= ========= ========= =========

    (c) Supplementary
        information on
        investing and
        financing activities
        not involving cash
        flows:

    Conversion of
    convertible
    debentures of
    the company     12,198    12,198    12,394    12,198         -     3,198
                  ========= ========= ========= ========= ========= =========
    Restricted
    deposit against
    receipt of a
    short term loan      -    50,000         -    50,000         -         -
                  ========= ========= ========= ========= ========= =========
    Purchasing property
    and equipment on
    credit             174    10,153    12,338    10,153    12,338     3,184
                  ========= ========= ========= ========= ========= =========



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
                             SELECTED OPERATING DATA
             FOR THE SIX AND THREE MONTH PERIOD ENDED JUNE 30, 2010
                                   (UNAUDITED)



                                                                Convenience
                                                               translation(A)
                                For the six     For the three  for the three
                                months ended     months ended   months ended
                                   June 30         June 30        June 30
                               --------------- ---------------
                                 2009    2010    2009    2010       2010
                               ------- ------- ------- ------- --------------
                                             NIS                    U.S.$
                               ------------------------------- --------------

    Sales (in millions)         3,609   3,600   1,844   1,769            456

    Operating profit before
    other gains and losses
    and changes in fair value
    of investment property
    (in millions)                 121     135      61      62             16

    EBITDA (in millions)          206     226     104     109             28

    EBITDA margin                 5.7%    6.3%    5.6%    6.1%            NA

    Decrease in same store
    sales (S.S.S)                (6.8%)  (2.1%)  (6.1%)  (5.2%)           NA

    Number of stores at end
    of period                     200     206     200     206             NA
    Stores opened during the
    period                          7       4       2       1             NA
    Stores closed during the
    period                          1       1       1       1             NA

    Total square meters
    selling area at end of
    period                    362,300 369,900 362,300 369,900             NA

    Square meters added
    (decreased) during the
    period, net                 7,800   4,900   2,800   (800)             NA

    Sales per square meter      9,366   9,102   4,624   4,525          1,167

    Sales per employee (in
    thousands)                    484     498     244     242             62



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
             RECONCILIATION BETWEEN PROFIT FOR THE PERIOD TO EBITDA
                FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2010
                                   (UNAUDITED)


                                                                  Convenience
                                                                  translation
                                                                      (A)
                     Year                                           for the
                     ended       For the             For the       six months
                   December     Six months         Three months       ended
                      31,      ended June 30,      ended June 30     June 30,
                  --------- ------------------- --------- ---------
                     2009      2009      2010      2009      2010      2010
                  --------- --------------------------------------- ---------
                                                                       U.S.
                                         NIS                         dollars
                  ------------------------------------------------- ---------
                                          In thousands
                  -----------------------------------------------------------

     Net income
     for the
     period         97,801    49,860    58,207    17,512    21,114    15,022
                  --------- --------- --------- --------- --------- ---------
     Taxes on
     income         23,124    24,780    25,656     6,879     4,123     6,621
     Finance
     expenses, net 112,674    47,227    56,708    35,230    42,286    14,633
     Share in
     losses of
     associates         37        88       576         4         -       149
     Other losses,
     net            28,104       638     7,109     2,800     5,878     1,835
     Increase in
     fair value of
     investment
     property      (20,775)   (1,740)  (13,187)   (1,740)  (10,913)   (3,403)
     Depreciation
     and
     amortization  165,248    79,766    87,291    39,992    44,086    22,527
     Share based
     payment        12,166     5,619     3,901     2,933     2,000     1,007
                  --------- --------- --------- --------- --------- ---------
     EBITDA        418,379   206,238   226,261   103,610   108,574    58,389
                  ========= ========= ========= ========= ========= =========



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
          FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2010 (UNAUDITED)


    Note 1 - Segment reporting

    The Company includes segment information according to IFRS 8. The
    Company presents three reportable segments: Supermarkets, Non-Food
    (Retail and Wholesale) and Real estate.

    Company's three operating segments consist of the following:

    (1) Supermarkets - The Company operates the second largest food retail
        chain in Israel. Through its subsidiary, Mega Retail Ltd. ("Mega
        Retail"), which operates Supermarket branches, the Company offers a
        wide range of food and beverage products and "Non-Food" items, such
        as houseware, toys, small electrical appliances, computers and
        computer accessories, entertainment and leisure products and textile
        products and "Near-Food" products, such as health and beauty aids,
        products for infants, cosmetics and hygiene products. As of June 30,
        2010, Mega Retail operated 206 supermarkets. This segment also
        includes properties owned through Blue Square Real Estate
        ("BSRE"), in connection with the supermarket operation of our stores
        (including warehouses and offices).

    (2) Non-Food (Retail and Wholesale) -Through our subsidiary, Bee Group
        Retail Ltd. ("Bee Group"), Bee group operates as retailer and
        wholesaler in the Non-Food segment. As of June 30, 2010, Bee Group
        operated 270 non-food Retail outlets, mostly through franchisees,
        with specialties in houseware and home textile, toys, leisure, and
        infant.

    (3) Real Estate - Through our subsidiary BSRE the Company is engaged in
        the yield generation from investment properties: mainly commercial
        centers, logistics centers and offices and land for the purpose of
        capital appreciation and deriving long-term yield.



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
          FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2010 (UNAUDITED)

    Note 1 - Segment reporting (continued):

    Segment analysis for the first half and the second quarter ended June 30,
    2010:

                                 Six months ended June 30, 2010
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                                        NIS in thousands
                   ----------------------------------------------------------

    Segment sales    3,364,527    224,206    10,754           -    3,599,487
    Inter segment
    sales                    -     27,610         -     (27,610)           -
                     ---------- ---------- --------- ----------- ------------
    Depreciation
    and amortization    80,278      7,013         -           -       87,291
    Operating profit
    before other gains
    and losses net and
    changes in fair
    value of investment
    property           130,234     12,792     4,343         (85)     147,284
    Rate of operating
    profit before
    other gains and
    losses net and
    changes in fair
    value of investment
    property               3.9%       5.1%     40.4%          -          4.1%
    Segment profit     126,333      9,583    17,531         (85)     153,362
    Unallocated
    corporate expenses                                               (12,214)
                                                                 ------------
    Operating profit                                                 141,148
                                                                 ============


                                 Six months ended June 30, 2009
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                                        NIS in thousands
                   ----------------------------------------------------------
    Segment sales    3,358,964    239,134    10,641           -    3,608,739
    Inter segment
    sales                    -     31,125         -     (31,125)           -
                     ---------- ---------- --------- ----------- ------------
    Depreciation
    and amortization    70,502      9,264         -           -       79,766
    Operating profit
    before other
    gains and
    losses net
    and changes
    in fair value
    of investment
    property           101,262     22,588     5,831        (324)     129,357
    Rate of operating
    profit before
    other gains and
    losses net and
    changes in fair
    value of
    investment
    property               3.0%       8.4%     54.8%          -          3.6%
    Segment profit     101,546     18,584     7,571        (324)     127,377

    Unallocated
    corporate
    expenses                                                          (8,504)
    Gains due to
    decrease in
    holdings                                                           3,082
                                                                 ------------
    Operating profit                                                 121,955
                                                                 ============



                                 Three months ended June 30, 2010
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                                        NIS in thousands
                   ----------------------------------------------------------

    Segment sales    1,674,632     88,691     5,340           -    1,768,663
    Inter segment
    sales                    -     10,855         -     (10,855)           -
    Depreciation
    and amortization    39,888      4,198         -           -       44,086
    Operating profit
    (loss) before
    other gains and
    losses net and
    changes in fair
    value of
    investment
    property            70,617     (5,713)    3,373       1,138       69,415
    Rate of operating
    profit before other
    gains and losses
    net and changes
    in fair value of
    investment
    property               4.2%     (5.7%)     63.2%          -          3.9%
    Segment profit      67,971     (8,946)   14,287       1,138       74,450
    Unallocated
    corporate expenses                                                (6,929)
                                                                 ------------
    Operating profit                                                  67,521
                                                                 ============



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
          FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2010 (UNAUDITED)

    Note 1 - Segment reporting (continued):


                                 Three months ended June 30, 2009
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                                        NIS in thousands
                   ----------------------------------------------------------

    Segment sales    1,731,387    107,203     5,361           -    1,843,951
    Inter segment
    sales                    -     10,316         -     (10,316)           -
    Depreciation
    and amortization    33,850      6,142         -           -       39,992
    Operating profit
    before other
    gains and losses
    net and changes
    in fair value of
    investment
    property            56,734      4,369     3,426          38       64,567
    Rate of operating
    profit before
    other gains and
    losses net and
    changes in fair
    value of investment
    property               3.3%       3.7%     63.9%          -          3.5%
    Segment profit      57,099        666     5,166          38       62,969
    Unallocated
    corporate expenses                                                (3,882)
    Gains due to
    decrease in
    holdings                                                             538
                                                                 ------------
    Operating profit                                                  59,625
                                                                 ============



                                   Year ended December 31, 2009
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                                        NIS in thousands
                   ----------------------------------------------------------

    Segment sales    6,863,020    464,266    21,790           -    7,349,076
    Inter segment
    sales                    -     58,874         -     (58,874)           -
    Depreciation
    and amortization   153,347     11,901         -           -      165,248
    Operating
    profit
    before other
    gains and
    losses net
    and changes
    in fair
    value of
    investment
    property           211,120     34,321    12,145         720      258,306
    Rate of operating
    profit before
    other gains and
    losses net and
    changes in fair
    value of investment
    property               3.1%       6.6%     55.7%          -          3.5%
    Segment profit     190,882     23,245    32,920         720      247,767
    Unallocated
    corporate expenses                                               (17,341)
    Gains due to
    decrease in holdings                                               3,210
                                                                 ------------
    Operating profit                                                 233,636
                                                                 ============



                                 Six months ended June 30, 2010
                   ----------------------------------------------------------
                                 Non-food    Real                    Total
                   Supermarkets   Retail    estate   Adjustments Consolidated
                   ------------ ---------- --------- ----------- ------------
                      Convenience translation to U.S. dollar in thousands
                   ----------------------------------------------------------

    Segment sales      868,265     57,860     2,775           -      928,900
    Inter segment
    sales                    -      7,125         -      (7,125)           -
    Depreciation
    and
    amortization        20,717      1,810         -           -       22,527
    Operating
    profit before
    other gains
    and losses net
    and changes in
    fair value of
    investment
    property            33,609      3,301     1,121         (22)      38,009
    Rate of
    operating
    profit before
    other gains
    and losses net
    and changes in
    fair value of
    investment
    property               3.9%       5.1%     40.4%          -          4.1%
    Segment profit      32,602      2,473     4,524         (22)      39,577
    Unallocated
    corporate expenses                                                (3,152)
                                                                 ------------
    Operating profit                                                  36,425
                                                                 ============



                     ALON HOLDINGS BLUE SQUARE - ISRAEL LTD.
                      (FORMERLY BLUE SQUARE - ISRAEL LTD.)
          FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2010 (UNAUDITED)

    Note 2: Effect of initial adoption of the new standards in the
    reported period

Effective January 1, 2010, an amendment to IAS 17 came into effect dealing with leases, classification of land and buildings ("the amendment")

The amendment represents part of the annual improvement project of the IASB which was published in April 2009. The amendment cancels the specific directives relating to the classification of land leases, by canceling the inconsistency with the general directives for classifying leases. Under the amendment, the unequivocal determination included in the past in IAS 17, under which a lease of land in which the ownership is not expected to be transferred to the lessee at the end of the lease period will be classified as operating lease was omitted. Under the amendment, the Company will assess the land classification as financial lease or operating lease under the general directives in IAS 17 for classifying leases. The amendment is applicable retroactively for annual periods beginning January 1, 2010 or thereafter. The Company applies the above amendment to IAS 17 effective January 1, 2010 retroactively.

The following is the effect of the change in the accounting policy due to the initial adoption of the amendment to IAS 17 on the comparative figures presented in the financial information for the interim period:

                                                             As reported in
                               As previously  The effect of    the interim
                                  reported     retroactive      financial
                                             implementation    information
                               ------------- -------------- ----------------
                                            NIS in thousands

    Statement of financial
    position as of June 30,
    2009
    The effect on assets and
    liabilities:
    Prepaid expenses for
    operating leases                190,605       (190,605)               -
                               ============= ============== ================
    Property and equipment, net   1,739,071        196,572        1,935,643
                               ============= ============== ================
    Investment property             420,386         (5,643)         414,743
                               ============= ============== ================
    Liabilities to Israel
    Land Administration(*)            5,643         (5,643)               -
                               ============= ============== ================
    Deferred taxes                   66,354          1,074           67,428
                               ============= ============== ================

    The effect on equity:
    Shareholders equity
    attributed to the
    company's shareholders :
    Accumulated deficit            (109,711)         3,915         (105,796)
                               ============= ============== ================
    Non-controlling interests       183,482            979          184,461
                               ============= ============== ================
    Total equity                  1,169,652          4,893        1,174,545
                               ============= ============== ================

    Statement of financial
    position as of December
    31, 2009
    The effect on assets and
    liabilities:
    Prepaid expenses for
    operating leases                193,228       (193,228)               -
    Property and equipment, net   1,757,718        199,196        1,956,914
                               ============= ============== ================
    Investment property             424,936         (3,748)         421,188
                               ============= ============== ================
    Liabilities to Israel
    Land Administration(*)            3,748         (3,748)               -
                               ============= ============== ================
    Deferred taxes                   56,205          1,074           57,279
                               ============= ============== ================

    The effect on equity:
    Shareholders equity
    attributed to the
    company's shareholders :
    Accumulated deficit             (64,964)         3,915          (61,049)
                               ============= ============== ================
    Non-controlling interests       193,421            979          194,400
                               ============= ============== ================
    Total equity                  1,221,831          4,893        1,226,724
                               ============= ============== ================

    (*) Included in "Other accounts payable and accrued expenses" and "Other
        non current liabilities".

    Contact:

    Alon Holdings Blue Square-Israel Ltd.
    Dror Moran, CFO
    Toll-free telephone from U.S. and Canada: +1-888-572-4698
    Telephone from rest of world: +972-3-928-2220
    Fax: 972-3-928-2299
    Email: cfo@bsi.co.il

SOURCE Alon Holdings Blue Square Israel Ltd

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