Willi-Food(WILC) - 2022 Q4 - Annual Report

Financial Performance - Revenues for fiscal year 2022 increased by 9.7% to NIS 498.3 million (USD 141.6 million) from NIS 454.2 million (USD 129.0 million) in fiscal year 2021[174] - Cost of sales for fiscal year 2022 increased by 12.3% to NIS 355.2 million (USD 100.9 million), representing 71.2% of revenues, compared to 69.6% of revenues in fiscal year 2021[176] - Gross profit for fiscal year 2022 increased by 3.4% to NIS 143.1 million (USD 40.7 million), or 28.7% of revenues, down from 30.4% of revenues in fiscal year 2021[177] - Selling expenses for fiscal year 2022 increased by 12.5% to NIS 74.1 million (USD 21.0 million), or 14.9% of revenues, compared to 14.5% of revenues in fiscal year 2021[178] - Net profit for fiscal year 2022 decreased by 7.8% to NIS 41.6 million (USD 11.8 million), or NIS 3.00 (USD 0.86) per share, down from NIS 45.1 million (USD 12.8 million) or NIS 3.25 (USD 0.92) per share in fiscal year 2021[184] Cash and Receivables - As of December 31, 2022, cash and cash equivalents were NIS 150.6 million (USD 42.8 million), down from NIS 195.7 million (USD 55.6 million) as of December 31, 2021[188] - Trade receivables as of December 31, 2022, were NIS 165.8 million (USD 47.1 million), compared to NIS 134.0 million (USD 38.1 million) as of December 31, 2021[193] - The average collection period for trade receivables was 93 days in 2022, slightly up from 92 days in 2021[193] Economic Environment - The annual inflation rate in Israel for the year ended December 31, 2022, was 5.3%, while the revaluation of the NIS against the U.S. Dollar was approximately 13.2%[194] - Israel's GDP is expected to grow by 2.8% in 2023 and 3.5% in 2024, driven by increased private consumption and export activity[201] - The unemployment rate decreased from 7% at the end of 2021 to 4.3% at the end of 2022[202] - The annual inflation rate in Israel was 5.3% in 2022, which is lower than in most developed countries[203] - The government recorded a surplus of 0.6% of GDP in 2022 due to increased tax collection and reduced spending[204] - The interest rate was raised to 3.25% at the end of 2022 and further increased to 4.75% in early 2023[204] Compensation and Governance - The total compensation for Zwi Williger, the Chairman of the Board, was NIS 3.576 million (approximately USD 1.1 million) for the year ended December 31, 2022[220] - The maximum annual measurable bonus for co-chairmen is capped at NIS 2.5 million (approximately USD 0.8 million), contingent on achieving a minimum operating profit of NIS 30 million (approximately USD 9.33 million)[222][224] - The company has not entered into index-linked loans in 2022, indicating a cautious approach to financial risk management[203] - The management services agreements for co-chairmen include a monthly service fee of NIS 100,000 (approximately USD 31.1 thousand)[223] - The Company approved new service terms for co-Chairmen with monthly fees of NIS 108,300 (USD 31.2 thousand) and a minimum average operating profit requirement of NIS 40 million (USD 11.5 million) for profit-related bonuses[231] - The maximum annual bonus for the Chairman/CEO is capped at NIS 2.4 million (USD 690.8 thousand) based on performance metrics tied to average operating profit[233] - The aggregate compensation for directors and officers in fiscal year 2022 was approximately NIS 5.7 million (USD 1.6 million), excluding bonuses of approximately NIS 4.7 million (USD 1.3 million)[240] - The Company's Compensation Policy was re-approved on March 14, 2023, focusing on performance-based compensation and long-term interests[241] Employment and Insurance - As of December 31, 2022, the Company employed a total of 185 persons, including 6 in management, 41 in accounting and importing, 43 in sales and marketing, and 95 in logistics networks[281] - All employees of the Company are party to written employment contracts[282] - The Company has undertaken to indemnify and insure its directors and senior officers against certain liabilities incurred in connection with their duties[258] - An insurance policy for directors and officers was approved by shareholders on March 14, 2023, for a three-year period[262] - The Company decided not to renew the insurance policy for directors and officers for the years 2021-2023[263] - The Company must re-approve its compensation policy every three years[267] - The Company has a pension insurance contribution structure where employees contribute 6% of their insured salary, while the Company contributes between 12.5% and 14.83%[286] - The Company's contributions to the pension fund cover 72% to 100% of its severance liability towards employees, depending on the contribution level[286] Corporate Structure and Compliance - The Company is classified as a "Controlled Company" under Nasdaq rules, exempting it from certain independence requirements[252] - The Company has two external directors, Ms. Einav Brar and Mr. Idan Ben-Shitrit, who were elected for a three-year term and possess financial and professional expertise respectively[256] - The audit committee consists of three independent directors, ensuring oversight of the Company's accounting and reporting practices[244] - The Company’s compensation committee includes external directors and is responsible for recommending compensation policies and terms of service for office holders[249] - The Company’s management company indemnifies it against claims related to employer/employee relations for the co-Chairman and other executives[230] - The terms of service and engagement of the CEO and directors require approval from the compensation committee, board of directors, and shareholders[266] - The Israeli Companies Law requires that a transaction with an office holder or a transaction in which an office holder has a personal interest may not be approved if it is averse to the company's interest[270] - The Company must disclose any personal interest of an office holder in a transaction promptly, no later than the first board meeting discussing the transaction[269] Risks and Challenges - The Company is subject to various risks including payment defaults by principal clients and increasing competition in Israel and other markets[21] - The Company may face challenges in integrating acquisitions and protecting its intellectual property rights[21] - The Company is not obligated to publicly update or revise any forward-looking statements[22]