Intercure Ltd. — FY2022 Form 20-F Summary
Business context and reporting period. This annual report, filed May 1, 2023, covers the fiscal year ended December 31, 2022; it is not a quarterly filing. Intercure is an Israel-based medical-cannabis producer and distributor, with pharmacy and trading-house operations and smaller biomed investments. Financial statements are audited IFRS statements, reported in NIS; amounts below are NIS millions unless stated otherwise. Q4 figures are unaudited quarterly data included in the annual filing.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | 388.7 | 219.7 |
| Gross income before biological fair-value effects | 159.0; 40.9% margin | 96.0; 43.7% margin |
| IFRS gross profit | 155.1 | 91.1 |
| Operating profit | 50.6 | 28.2 |
| Profit attributable to Intercure shareholders | 44.8 | 4.7 |
| Basic / diluted earnings per share | NIS 0.99 / NIS 0.99 | NIS 0.12 / NIS 0.11 |
| Adjusted EBITDA | 77.4; 19.9% of revenue | 51.7 |
| Net cash from operating activities | 51.3 | 30.1 |
- Revenue rose 77% year over year, attributed to market demand, pharmacy expansion and new product SKUs. Adjusted EBITDA rose 50%. Gross margin before fair-value effects declined about 2.8 percentage points; management cited discounting of lower- and mid-quality inventory in the market, while prices for leading products remained firmer.
- Q4 revenue was 105.6, up approximately 33% from Q4 2021 (79.7) and about 5% from Q3 2022. Q4 adjusted EBITDA was 17.1 versus 19.4 in Q4 2021 and 19.7 in Q3 2022; Q4 gross profit was 37.5.
- Cash and cash equivalents at year-end were 232.6, plus restricted cash of 13.9. The filing’s highlights report 246 million including restricted cash. Current assets were 507.5 versus current liabilities of 312.7 (current ratio approximately 1.62).
- Bank borrowings were 226.6 at year-end: 126.9 current and 99.7 long-term, versus 82.4 total in 2021. Lease liabilities were 27.5 including current and non-current portions. Management reported compliance with financial covenants. Cash exceeded bank borrowings by about 6.0, before considering restricted cash and other obligations.
- Investing activities used 142.5, including 95.2 in loans granted, 20.0 lent to a business partner and 19.7 of capital expenditure. Financing activities provided 120.4, including substantial new bank borrowing. Cash increased by 29.2 before exchange-rate effects.
- Inventory increased to 120.1 from 62.3; trade receivables rose to 36.9 from 17.4. Other receivables reached 97.4, including loans and advances linked to acquisitions or transactions that did not close. The company recorded an 11.7 impairment provision against these exposures.
Material changes, outlook and risks
- Growth included acquisitions and expansion of pharmacy and trading operations; acquired subsidiaries contributed 22.5 of 2022 revenue during their consolidation period. The company reported 28 pharmacy/store locations in its highlights, with 20 actively dispensing medical cannabis; other sections give differing location counts.
- Management provided no specific numerical revenue or earnings guidance. It intends to grow its Israeli business and pursue regulated international markets, but said expansion, production increases and distribution depend on demand, permits, import/export rules and partner execution. International partnerships had not yet generated broad product distribution; certain agreements were being reassessed or potentially discontinued.
- Southern Israel facilities were operating at an initial scale, with stated annual output of 7 tonnes; higher capacity requires further development and regulatory approvals. The company cited current operational capacity of up to 10 tonnes annually across its owned facilities, with substantially greater potential capacity subject to expansion and approvals.
- Clinical research was delayed by COVID-19. A Phase 3 autism study’s recruitment was stopped, and the company was considering ending or canceling parts of its clinical program. It said trial outcomes are not required for current sales but limit efficacy claims.
- Key regulatory dependencies include maintaining Israeli cannabis licenses and permits, obtaining export/import approvals, and permits for pharmacy operations. CBD remained controlled in Israel at the report date, leaving related planned activity uncertain. Land-use permits for the northern and southern facilities were subject to renewal and regulatory approval.
- Notable litigation and contingencies include a cannabis-labeling class-action application alleging damages of about 686 million, for which the company said the outcome could not be assessed and recorded no provision; a separate 2023 class-action application alleging prohibited cannabis advertising; and disputes involving Cann Pharmaceutical/Better, Geffen, Cannolam minority shareholders and a cannabis-growing counterparty. The earlier Regenera-related class action was withdrawn without payment by the company.
- The Better acquisition agreement terminated after closing conditions were not met; Intercure sued to recover amounts it says are owed. Other unusual exposures include NIS 64.4 million of net loans to non-related parties, including amounts associated with failed or disputed transactions, and an approximately 8 million claim against Umana Pharmacies. Their recovery is uncertain.
- Principal risks include cannabis regulation and licensing, competitive price pressure, international market access, agricultural and supply risks, partner performance, inflation and interest rates, foreign exchange exposure, and political or security developments in Israel. The filing says operating cash flow was positive in 2020–2022 but cautions that future profitability and cash generation are not assured.
Most important facts for investors to verify
- Whether revenue and margins can be sustained amid price competition, and how much growth reflects acquired operations versus organic performance.
- Recoverability and timing of collection for acquisition-related loans, advances and receivables, including the 11.7 impairment and amounts under dispute.
- Bank-loan maturities, interest-rate exposure, covenant headroom and cash availability after restricted balances and working-capital needs.
- Actual pharmacy count and dispensing status, international partnership activity, and the approvals needed to expand production or begin exports.
- Developments and potential financial impact of the labeling, advertising, Better, Geffen, Cannolam and other legal matters.
- The filing’s non-IFRS Adjusted EBITDA reconciliation and the impact of biological-asset fair-value accounting and acquisition-related items on reported performance.
Reporting note: The auditor gave an unqualified opinion on the IFRS financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022; the auditor did not provide an internal-control attestation because Intercure qualified for the emerging-growth-company exemption.