Bell Equipment : Provisional Audited Results for the year ended 31 December 2021

STRONG RELIABLE MACHINES STRONG RELIABLE SUPPORT

2021

BELL EQUIPMENT LIMITED PROVISIONAL AUDITED RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2021

Joint report by the chairman and chief executive

Overview

Bell Equipment ended the 2021 financial year positioned considerably stronger than the previous year in many respects. This was largely due to the commitment and resilience of our global team which collectively put their full weight behind our strategy and focused on sales, efficiency improvement, working capital management and cost-containment initiatives.

The group stood firm, believing in our initiatives and our long term future, resisting any retrenchment drive. We kept connected with our people and communicated with our customers, recognising that they are our most important capital and that they needed our support. Customer support has traditionally been one of our mainstays so when production and sales volumes dropped in 2020, we acknowledged that we have an established customer base relying on Bell support and technical backup. This stood us in good stead when the market started rebounding in 2021.

Sadly, we lost four employees to COVID-19 and our condolences and thoughts remain with their families and loved ones. As a business, we strived to navigate COVID-19 with a responsible approach to policies to minimise the impact on the business while looking after our people and our customers. To further ensure sustainability, the group has continued its investment in IP and its focus on dealer development and strong alliances with other global manufacturers and as a result has emerged looking forward to buoyant market conditions in 2022 with a strong order book and recovered profitability for shareholders.

During 2021 we experienced increased demand for our equipment in most markets. Investment in infrastructure and government stimulus packages benefited developed markets, particularly in the northern hemisphere. Improved commodity prices and demand also resulted in some improvement in certain African markets.

The group managed supply chain challenges and logistics issues - largely brought about by COVID-19 on the global supply chain - as best we could. Civil unrest in KwaZulu-Natal and Gauteng in July 2021 exacerbated the situation and forced the closure of the Richards Bay factory and several sales branches for the duration. Bell recognises the challenges being faced in South Africa and is well positioned to ensure the future sustainability of the group through our strategy as a global manufacturer and our ongoing investment in people and IT to remain relevant and resilient.

North America, traditionally the world's largest ADT market, came back strongly in 2021, most noticeably in the residential construction and rental sectors. This trend looks set to continue into 2022. Bell's investment in developing the tracked carrier market and securing supplementary applications for this product as an alternative to the suppressed oil and gas sector, was converted into sales.

The Canadian ADT market saw a moderate increase in sales. While the distributor network was able to reduce its equipment inventory, Bell market share remains unsatisfactory. The possibility of supplying the tracked carrier into this market will be investigated in 2022.

Despite the ongoing pandemic Europe showed strong signs of recovery driven by infrastructure development. Bell UK had a record year reporting revenue of over R1 billion for the firsttime and was supported by the single largest order to a single customer. The long-awaited High Speed Railway (HS2) project commenced, and the first trucks were delivered for this project, with demand ramping up in 2022.

The German economy was more stable during 2021 and the market ended on an all-time high. Orders at the end of December 2021 were roughly double compared to the previous financial year. Similarly, Bell France had a good year and managed to achieve budget forecasts and recover margin despite the arrival of a new ADT competitor in that country. During 2022 the operation will focus on reorganising its dealer model to strengthen its position.

South East Asia has been depressed for the past two years but a consignment of large ADTs was shipped to Indonesia in late 2021, signalling an uptick in that market. Agriculture and forestry in the region remain price sensitive and a competitive space but the distribution network showed demand for loaders and loggers with a higher volume planned for shipment to Thailand in 2022. The first ever Matriarch slew loader was sold into Sri Lanka and additional machines will be shipped to this market in the first half of 2022.

New Zealand was also hard hit by lockdowns and a local recession in 2021, with the market only absorbing F-series loggers and the first Matriarch LogPro for the country. The group anticipates a rebound in 2022.

By comparison Australia, in which market share losses were experienced over the past few years, recovered well due to a refocus and consolidation by our dealer in that region. Sales volumes increased and the distributor network experienced notable success with the newly designed Versatruck water tankers. In 2022 these water tankers will be exported as a complete OEM product with pumps and accessories. The first F-series tri-wheelers were also shipped to Australia in 2021 where they have found a market due to the rollover protection structure (ROPS) and falling object protective structure (FOPS) certification and updated ergonomics.

Although a small market for the group, the Bell distribution network in South America showed good results in mining and construction. Forestry and agriculture performed consistently, and new routes to market are being investigated for the Matriarch range as part of our strategy to develop the brand as a lower cost mechanisation solution for medium sized timber and whole stalk cane loading.

Performance in African markets was varied. Following the dissolution of Bell Namibia at the end of 2020, the new in-country dealer has bedded down, showing pleasing growth in machine and parts sales, thus validating the migration to an independent dealer model.

The ADT population in Ghana grew well and the first Matriarch skogger and FastFell arrived in-country. Another unit of each will follow in 2022. The Democratic Republic of Congo likewise performed well, taking delivery of new Bell 27 000l water tankers.

The Kenyan sugar industry has picked up and as a result the delivery of Bell cane and Matriarch slew loaders has been well received. Changes to the country's timber regulations have had a positive impact on business opportunities. Neighbouring

Tanzania enjoyed a strong year in mining and construction as well as agriculture and forestry where new series V tractors, Matriarch slew loaders and cane loaders were placed on a new sugar estate.

Supply chain constraints and meeting machine delivery dates were major concerns across all regions. These challenges are expected to continue into 2022 but Bell has showed commitment to meeting customer needs, understanding that the only way the group can grow is with their support.

Financial

The group bounced back from a loss in 2020 to profit after tax of R294 million in 2021. This was driven by improved market conditions especially in the northern hemisphere and a strong recovery in sales which were 20% up on 2020. Increased production volumes at both the South African and German factories resulted in higher recovery of costs, positively impacting on the bottom line. Effective management of working capital meant a lower level of borrowings and a significant reduction in interest costs on working capital funding and this together with strong cost containment contributed further to the improved financial performance.

Operations and product development

There was fantastic energy throughout the group during 2021 with the introduction of several new products. The tracked carrier was officially launched in the USA in February and has elicited positive customer feedback.

The series V haulage tractor, the latest version of an old stalwart, has been marketed as our 'best ever' and has been duly met with an overwhelming response from our customers throughout Africa. Production will double in 2022 due to order book demand.

The two new low profile ADT models for underground mining, launched at the end of 2021, are penetrating this market segment well. Both models feature an 'autonomous ready' platform that is easily configurable for remote operation. Given this success, the group expects to play a larger role in underground mining going forward. Machines have been deployed in Zambia and Tanzania, among other countries, where, similarly, they are performing well.

Following from our collaboration with Indurad and Voestalpine in the autonomous field since early 2020, Bell Equipment has been working with American safety and automation technology developer, Pronto AI, which officially launched its product at MINEXPO 2021 in Las Vegas in September.

The group is excited by these developments as autonomous vehicle operation is aligned with the Fourth Industrial Revolution's objective of achieving higher levels of automation for greater process and energy efficiencies and cost reduction. We believe it will also deliver safer vehicle behaviour by reducing the instances of human error and negate the impact of whole-body vibration on operators in the workplace.

A continuous investment in technology has seen the introduction of a global preowned equipment website that is performing above expectation. It enables customers from around the world to shop all the preowned equipment available from Bell and our participating dealers from one user friendly and convenient website.

The implementation of a user-friendly SalesForce CRM for the Bell owned South African dealership digitised a manual, paper based sales process to provide greater visibility, analysis and management of customer interaction. Further investment in the deployment of CRM to other Bell owned dealer operations is planned for 2022.

Continued development using the Microsoft platform enabled the digitisation of several manual processes in the group, which has contributed to increased efficiency and visibility of internal processes. This development will continue in 2022.

The ALC increased stockholding significantly and continues to be a valuable supply link for North America and the overseas Bell warehouses. Two companies were appointed as ADT and tracked carrier dealers to service the Mississippi, West Tennessee and Louisiana regions. There will be a planned focus on autonomous ADT awareness in this region for 2022.

In our home market, 2021 was characterised by a consolidation of our alliance partners, led by the agreement reached in 2020 with John Deere that saw BESSA migrate to a non-exclusive dealer of Bell branded Deere construction products in March 2021 and ceasing to represent Deere forestry products. The manufacturing agreement with John Deere relating to TLBs and wheel loaders was also terminated.

In February the market reacted favourably to the announcement of BESSA's appointment as the South African distributor for the full range of JCB construction equipment with effect from 1 May 2021. Our team is congratulated on rising to the challenge of expediting the rollout of this mammoth project to ensure readiness in terms of parts inventory and stockholding and the training of sales and support staff.

As part of the consolidation process, and with the introduction of the JCB range of compaction equipment, BESSA has relinquished the Bomag dealership after a beneficial 12-year partnership and support of the machine population has been successfully transferred to the new dealer.

South Africa remains a tough environment with low business confidence, but the JCB product is proving to be a good fit for our business and has invigorated our offering to the South African market. We believe our JCB, Kobelco and Finlay partnerships will stand us in good stead into the future.

Sustainability

The group remains committed to South Africa as a local manufacturer and is confident of the opportunities available to us, but it is vital to our business that our customers around the world trust in our ability to support them regardless of local, regional or global events.

To safeguard the long term sustainability of the group, a growth plan is in place to ensure that Bell ADTs, as our higher volume products sold predominantly into northern hemisphere markets, are less exposed to the risks presented by the volatility of the South African landscape going forward.

Consequently, over time more aspects of ADT manufacturing will shift to the northern hemisphere. This will enable the group to better protect and grow our South African base and increasingly focus on manufacturing the group's growing range of lower volume products.

To achieve this objective additional facilities, people and IT, both locally and abroad, will be required.

The group has invested in the Rise with SAP platform and will migrate its existing instances of SAP for the hubs of the GLC, ELC, ALC and Eisenach-Kindel onto this solution during 2022. The incorporation of the ALC on the Bell SAP platform forms the foundation for online parts functionality and allows for streamlining of processing between the hubs as well as greater visibility into groupwide inventory.

This project will underpin the replacement of our legacy system for the Richards Bay factory in 2023, a mammoth project that will promote long-term sustainability in South Africa. Thereafter, in 2025, BESSA and all the dealer business management businesses will be migrated. Bell operations in Eswatini, Zambia and the UK will also migrate to the solution to provide enhanced reporting, with everything in one place and in one system.

Corporate Governance

Our commitment to being a good corporate citizen pervades our total approach to the business and we endeavour to act in a responsible, ethical, balanced and commercially sensible manner.

We are ever conscious of the impact on the environment and have made pleasing progress, as detailed in our stakeholder relations report, as we continue to measure and mitigate these risks.

Bell is committed to the highest standards of corporate governance. Details of governance structures and the extent to which we apply relevant principles of corporate governance, including King IV™ and regulatory requirements, are provided in this report.

In addition to changes to our strategic partnership with John Deere mentioned earlier in this report, IA Bell & Company successfully acquired John Deere's 31,37% shareholding in the company in September 2021.

Following the acquisition of the John Deere shares, IA Bell & Company was unsuccessful in its subsequent corporate action to buy out minority shareholders and delist the company. Although a shareholder matter, this was a distraction during 2021 and impacted on the group's operating environment.

In September 2021 it was reported in the media that the Financial Sector Conduct Authority (FSCA) had registered two investigations in respect of Bell. Bell provided specified information and documentation to the FSCA following a written request and was informed on 2 February 2022 that the FSCA had decided to close both investigations and no legal action would be taken in this matter.

The JSE also notified Bell Equipment that they had closed their earlier investigation of Bell in July 2021, and confirmed having issued its closing letter to the complainants advising that the JSE had not identified any breach of the Listings Requirements by Bell based on the issues raised by the complainants in their complaints to the JSE.

Transformation

Following the successful conclusion of BBBEE transactions, which took effect on 1 January 2020, both BECSA and BESSA remain

51% black owned, and have improved BEE scorecards that position the group more competitively in the local market, in line with our commitment to our transformation responsibilities.

Importantly the score also secures access to government backed initiatives. Bell has valued the support from government in terms of the APDP, a production incentive scheme administered by DTIC. The APDP was replaced, effective 1 July 2021, by a revised programme, APDP II. Bell was successful in its application for access to this new scheme, which, similar to the APDP, is also a production incentive aimed at promoting employment and value add in the motor industry but has additional requirements, mainly in terms of BBBEE. The programme will remain in place until 2035.

Bell was likewise successful in its application to participate in the AIS administered by DTIC and designed to grow and develop the automotive sector through investment in new and/or replacement models and components that will increase plant production volumes, sustain employment and continue to strengthen the automotive value chain.

We continue to engage with government at various levels to encourage a better understanding of the assistance they are able to provide through implemented policy to help us grow and to support the local economy.

Future Outlook

Our Russian business represents a small portion of our global business, (approximately 3% of group revenue in 2021) and machines destined for that country in 2022 can readily be absorbed by other markets. We are monitoring developments carefully and wish for a quick resolution of the situation, which has the potential to be devastating on the global economy.

Elsewhere our focus in 2022 will be on striving towards a greater level of pre-COVID normality and as a group we are embracing vaccinations to achieve this. We look forward to once again interacting with customers and dealers at trade shows and plan to exhibit at Hillhead in the UK in June and at Bauma Munich in Germany in October. At Bauma the group will showcase the Bell tracked carrier to gauge market perception and opportunities in Europe for this product.

The Bell customer experience is a key focus, with many projects in progress that will provide digital tools to increase the ease of doing business with Bell. Our dedicated digital technology team is focused on changing the way we work, implementing digital processes, improving functional processes, and designing and implementing new architecture and tools to help our customers, as well as making it easier for our own people and dealers who need to support our customers. We are excited about this journey of creating and maintaining new and better integrated solutions for our customers through the process of digital transformation.

We will likewise continue with our investment in IP and innovation in an ever-changing environment. We have noted that only stage V equipment has been employed on the HS2 project in the UK, which represents significant volume for Bell. This is in line with global trends for cleaner fuels and lower emissions and we are carefully tracking developments to ensure we bring solutions to market when needed to stay relevant.

All said, we are far more confident about global infrastructure spend and the recovery of the economic sectors our diverse

equipment supports, than in the past three or four years. We are hopeful of a resolve in Ukraine and that a spill over into the rest of Europe will be avoided.

Dividends

Recognising the improvement in the financial results and liquidity, the board has declared a final dividend of 50 cents per share.

Board Changes

John Barton resigned as a non-executive director, lead independent director, chairman and member of the nominations committee, and as member of the remuneration committee, audit committee and risk and sustainability committee, all with effect from 16 February 2022.

Changes to functions of the following independent non-executive directors and the compositions of the board committees were made with immediate effect and as a result:

• • Hennie van der Merwe was appointed as the lead independent non-executive director and chairman of the nominations committee;

• • Mamokete Ramathe was appointed as a member of the nominations committee; and

• • Rajendran Naidu was appointed as a member of the remuneration committee.

Furthermore the board has appointed two independent non-executive directors, Usha Maharaj and Markus Geyer, with effect from 1 April 2022. We welcome our new non-executive directors to the board and look forward to their contribution.

Appreciation

The past few years have been incredibly tough and testing, but we are grateful to our Bell employees for their grit and commitment, which has allowed the group to emerge stronger and even more resilient. We thank our executive management for their hands on leadership and motivation and implementing the strategies that have successfully steered the group through a prolonged trough.

We remember and honour those staff members whom we lost to the virus and trust that 2022 will bring us closer to the end of the pandemic.

Our appreciation goes to our fellow board members for their guidance and commitment. Special thanks to our outgoing lead independent director, John Barton, for his insight and experience, and we wish him everything of the best in his future endeavours.

As always, we are incredibly appreciative of our extended family of customers and dealers across the globe, who continue to work in the group, invest in our products and entrust us with the ongoing support of their Bell machines. Everything we do is aimed at making your business as successful as it can be.