Financial Performance - Total revenues for the year ended December 31, 2023, were approximately 418,932 thousand ILS, a decrease of 7.7% compared to 453,617 thousand ILS in 2022[25] - Gross profit for 2023 was 37,843 thousand ILS, down from 60,699 thousand ILS in 2022, reflecting a decline of 37.7%[25] - The company reported a total loss for the year of 17,375 thousand ILS, compared to a loss of 1,260 thousand ILS in the previous year, indicating a significant increase in losses[27] - Profit (loss) per share attributable to company shareholders was (0.21) ILS in 2023, compared to (0.02) ILS in 2022[25] - The company reported losses (before tax) of approximately ILS 17 million during the reporting period, compared to a profit of ILS 0.6 million in the corresponding period[91] - The adjusted loss (before tax) for 2023, after accounting for various factors, amounted to approximately ILS 8.6 million, compared to a profit of about ILS 11.8 million in the corresponding period last year[91] Assets and Liabilities - Vehicle inventory as of December 31, 2023, amounted to approximately 183,647 thousand ILS, representing about 60% of total assets[11] - Current liabilities increased to 216,043 thousand ILS in 2023 from 203,706 thousand ILS in 2022, reflecting a rise of 6.6%[22] - Total assets as of December 31, 2023, were 305,316 thousand ILS, slightly up from 303,082 thousand ILS in 2022[19] - The company’s retained loss increased to 68,635 thousand ILS in 2023 from 52,252 thousand ILS in 2022, reflecting a rise of 31.3%[22] - Total equity as of December 31, 2023, was 35,414 thousand ILS, an increase from 35,855 thousand ILS at the end of 2022[34] Cash Flow and Financing - Net cash generated by operating activities for 2023 was 3,142 thousand ILS, a recovery from a net cash used of 98,042 thousand ILS in 2022[34] - Financing expenses for 2023 were 16,831 thousand ILS, compared to 8,935 thousand ILS in 2022, indicating an increase of 88.5%[25] - The company issued equity amounting to 8,879 thousand ILS in 2023, compared to no issuance in 2022, reflecting a strategy to strengthen its capital base[34] - The Company received a state-guaranteed loan of NIS 16 million in January 2024 and is entitled to compensation of approximately NIS 2.07 million for October 2023, with an additional NIS 5.9 million for November-December 2023 pending approval[113] - The Company is negotiating a merger with a NASDAQ-traded company and signed an agreement for a bridging loan of USD 1.4 million, expected to enhance liquidity and equity[114] Inventory and Management - The company invested 3,416 thousand ILS in intangible assets during 2023, up from 923 thousand ILS in 2022, indicating a focus on long-term growth[34] - The company’s inventory increased by 6,551 thousand ILS in 2023, compared to a significant decrease of 97,082 thousand ILS in 2022, indicating a shift in inventory management[37] - The Company implemented inventory management policies, reducing vehicle inventory in Q2 2023 and increasing it in Q3 and Q4 2023 in anticipation of higher demand[103] - The company anticipates an increase in inventory turnover rate due to changes in vehicle demand, particularly for intermediate and small vehicle categories[93] Operational Challenges - The company experienced a decrease in cash and cash equivalents, ending 2023 with 1,552 thousand ILS, down from 2,234 thousand ILS at the beginning of the year[34] - The company reported an increase in trade receivables by 8,733 thousand ILS in 2023, compared to an increase of 9,253 thousand ILS in 2022, suggesting challenges in cash collection[37] - The Company is facing significant delays in delivery dates and increased logistics costs due to disruptions in sailing routes caused by geopolitical tensions[111] - The Group experienced a significant decrease in sales turnover during the fourth quarter of 2023 compared to the same period last year, attributed to branch closures during October and November[107] - The Company has taken measures to reduce current and fixed expenses, including cuts in advertising and personnel-related costs[106] Workforce and Organizational Changes - The Company reduced its workforce by approximately 10% during October and November 2023, with about 30% of employees placed on layoff, all of whom have since returned to work[107] - The Company assessed that the impact of not operating certain branches is immaterial, with most branches operating normally as of November 2023[105] Market and Economic Conditions - The Israeli growth rate in 2023 was 2%, with a decrease in GDP per capita of 0.1% compared to 2022[77] - The inflation rate in Israel for 2023 was approximately 3%, following a 5% increase in the consumer price index from March 2022 to March 2023[69][72] - Moody's downgraded Israel's credit rating to A2 from A1, indicating increased political risks and potential impacts on budgetary stability[118] Mergers and Acquisitions - The merger with Global Automax Ltd. resulted in the company owning 100% of Global Automax shares, enhancing its market position in vehicle import and marketing[56] - The consideration transferred in business combinations includes the fair value of assets and liabilities, with contingent consideration recognized at acquisition date fair value[140] - Non-controlling interests are presented separately within the Group's equity, including their share of net assets and any losses exceeding their equity[143] Accounting Policies - Cash and cash equivalents include highly liquid investments and short-term deposits with maturities not exceeding three months[157] - Inventory is measured at the lower of cost and net realizable value, with specific cost determination for vehicle inventory and average cost for accessories[158] - Income from sales of new vehicles is recognized upon transfer of control, typically at delivery, while income from used vehicles is recognized similarly[162] - Deferred taxes are calculated on temporary differences and reviewed for expected usage at each reporting date[168] - The Group recognizes leased property as a right-of-use asset against a lease liability, with specific depreciation periods for different asset types[172] - Fixed assets are measured at cost, including directly attributable expenses, and significant components are treated separately for depreciation purposes[177] - Profit or loss from the disposal of fixed assets is recognized by comparing net proceeds to book value, recorded in profit and loss[181] - The estimated useful life for leasehold improvements is 8.5-10 years, while computers have a useful life of 15-33 years, mainly at 33%[184] - Office equipment is depreciated over a useful life of 6-33 years, primarily at 25%[184] - Vehicles are depreciated with a useful life of 15-20 years, mainly at 15%[184] - Intangible assets are amortized over their economic useful life, with impairment reviewed whenever indicators exist[189] - Goodwill is measured by the excess of acquisition cost over the fair value of identifiable assets and liabilities at the time of acquisition[190] - Goodwill is allocated to cash-generating units and reviewed annually for impairment[192] - The capitalization of license costs begins in the development phase and stops when the license is achieved[197] - The useful life of a license shall not exceed the term of its contractual rights, and may be shorter based on expected usage[199] - Depreciation of intangible assets is systematically allocated over their useful life, deducted of their residual value[200]
SciSparc .(SPRC) - 2023 Q4 - Annual Report