Distell : Summarised Consolidated Annual Financial Statement and Notice to Shareholders 2022

Creating memorable moments. Crafting a better future.

	SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 2022 AND
	NOTICE OF ANNUAL GENERAL MEETING
B
Summary Consolidated Financial Statements 2022 and Notice of Annual General Meeting

CONTENTS

IFC WHO WE ARE

IFC OUR VISION, OUR PURPOSE, OUR VALUES

01 SALIENT FEATURES

02 COMMENTARY

SUMMARY CONSOLIDATED

FINANCIAL STATEMENTS

06 Summary consolidated statement of financial position

07 Summary consolidated income statement

08 Summary consolidated statement of comprehensive income

1. Summary consolidated statement of changes in equity
2. Summary consolidated statement of cash flows
3. Notes to the summary consolidated financial statements

18 NOTICE TO SHAREHOLDERS OF AN ANNUAL GENERAL MEETING

IBC ADMINISTRATION

WHO WE ARE

Distell is a business with deep roots in South Africa and a growing African and international presence. We are Africa's leading producer and marketer of ciders, ready-to-drink (RTD) beverages, spirits and wines, enjoyed responsibly by people across the world. Our brand portfolio offers consumers a choice for every occasion and provides unique moments of social enjoyment. The value we create enriches the lives of our employees, shareholders and the communities in which we live and work.

OUR VISION

Making a difference by creating shared value in our chosen markets. We aim to build the Distell of tomorrow, while helping to regenerate economies and communities, and allowing the environment to thrive.

OUR PURPOSE

Creating memorable moments, crafting a better future. Our purpose captures the customer and consumer experience associated with our award- winning brands. It recognises our role as a corporate citizen and our obligation to act responsibly and pursue excellence in everything we do.

OUR VALUES

Our values reflect what we stand for as an organisation and act as guiding principles. At the foundation of these values is a total commitment to our consumers and customers, characterised by an unwavering passion to serve their needs with integrity and excellence.

Customer and consumer focus:

We are passionate about our customers and consumers.

Excellence:

We are committed to excellence in everything we do.

One Distell:

We win by collaborating with integrity, honesty and respect.

www.distell.co.za

SALIENT FEATURES

Group revenue

20,8%

on 17,6% higher volumes

EBITDA

20,8%

Reported

EBITDA

25,4%

Normalised and adjusted for forex1,2

Domestic revenue

24,4%

on 18,7% higher volumes, driven by premium RTD and spirits growth

International revenue

7,9%

on 9,4% higher volumes

Excise duty

26,9%

to R10,5 billion

Headline earnings

36,8%

Reported

Headline earnings

34,8%

Normalised and adjusted for forex1,2

Africa revenue

16,0%

alongside volume growth of 19,9% outside SACU3 despite prolonged channel closures and export challenges

Return on invested capital (ROIC)

370bps

Dividend payments remain suspended due to the Heineken transaction

Notes:

1. Normalised headline earnings and earnings before interest, tax, depreciation and amortisation (EBITDA) refers to adjustments for the: (a) profit or loss on disposal of property, plant and equipment (PPE), investments, subsidiaries and intangible assets; reversal of impairment of investments; and
   (b) retrenchment, legal disputes and regulatory and acquisition-related costs related to the Heineken transaction.
2. Foreign currencies and abnormal transactions affect the Group's performance. Where relevant in this report, adjusted non-IFRS measures are presented. These adjusted measures represent pro forma financial information. A reconciliation of the pro forma financial information to the equivalent IFRS metrics is provided in note 12 to the summary consolidated financial statements.
3. SACU = the Southern African Customs Union

("Distell" or "the Group" or "the Company")

Summary Consolidated Financial Statements 2022 and Notice of Annual General Meeting	01

COMMENTARY

OPERATING PERFORMANCE

Group revenue increased by 20,8% to R34,1 billion on 17,6% higher volumes, significantly ahead of pre-COVID FY2019 levels. Revenue excluding excise duty was up by 18,3%. Impressive revenue growth was achieved against a backdrop of rising commodity cost pressures, global supply chain disruptions, an increase in the cost of imported goods, and glass shortages in our domestic market caused by rampant demand for Savanna cider and core spirits brands. The Group still faced challenges associated with COVID-19 (the pandemic), mainly in the first half of the financial year.

Domestic revenues increased by 24,4%, with volumes up by 18,7%. This was during a period with 47 more trading days compared to the comparable period in the previous year (prior period). All three categories grew revenues by double digits. The growth momentum continued in the premium cider and ready-to-drink (RTD) segment led by Savanna, Hunter's and Bernini. Various spirits brands grew impressively with stand-out performances recorded by key gin, vodka, liqueur and whisky brands as a result of increased in-home consumption trends and brand innovation. The resilient growth in the wine category was driven by Drostdy-Hof, J.C. Le Roux sparkling wine and 4th Street. We continue to expand our e-commerce and digital sales channels where revenue grew by 65%. The expansion of our digital programmes resulted in the launch of more customised offerings to our customers and our brands are also benefitting from more digital engagement with our targeted consumers.

In African markets, outside South Africa, revenue increased by 14,4% on 16,3% higher sales volumes. Volumes in Botswana, Lesotho, Namibia and Eswatini (BLNE) countries recovered in the second six months of the financial year to grow by 11,9% for the financial year compared to a 1,4% volume decline in the first half of the year. Focus markets on the continent, outside the Southern African Customs Union, grew revenue by 16,0%. This was largely driven by Mozambique, Zambia, Tanzania and Nigeria as a result of our ongoing route-to-market (RTM) investments, increasing our customer footprint by 48% in the period. Excellent growth was achieved by key cider and RTD brands, growing volumes by 32,4%, with Hunter's and Savanna being established as the top two cider and RTD brands in our key markets. Spirits revenue growth is led by Amarula and County Brandy, while 4th Street, Tassenberg and Drostdy-Hof continue their excellent momentum in wines. In Kenya, the development of

a new production facility in the Tatu City special economic zone is well on track to be completed in 2023, and will assist in eliminating current constraints by doubling capacity in the near future. The Africa region contributed 64,9% to foreign revenue, with its contribution to Group revenue comprising 16,3% in the current period.

Revenue in international markets outside Africa increased by 7,9% alongside volume growth of 9,4%, primarily driven by single malts and Amarula. This growth was achieved despite one of its largest revenue-contributing regions, Taiwan, experiencing COVID-19-relatedon-consumption channel closures for extended periods during the trading period. However, volumes recovered and continue on a positive trajectory. South African port disruptions also had an adverse effect on wine exports that affected performance in the period. Premium spirits continue to perform strongly across key markets, particularly with single malt brands growing over 20% in revenue, alongside the growth of Amarula in key markets. Global travel retail delivered a resilient performance despite ongoing travel disruptions. We accelerated digital adoption in all spheres of business and saw continued increases from online sales channels of 56%.

Operating costs rose by 20,2%, driven by the current abnormal inflationary increase in overall costs of goods sold (+22,6%) and excise taxes (+26,9%) due to product sales mix and rate increases, leading to a minimal reduction in gross profit margins. Advertising and promotion investments increased by 19,1% over the prior year as we continued to support our focus brands in our categories together with key brand innovations. These activities assisted us to increase market share in key segments. Administration and other costs increased by

R696,1 million to R2,0 billion, partly due to an increase in the short-term incentive (STI) bonus provision for employees, increased investment in digital transformation initiatives and regulatory and acquisition costs related to the Heineken transaction.

Other gains and losses reflected a net gain of R134,8 million (2021: R259,4 million). The gain in the current period included insurance proceeds of R165,2 million, of which R75,0 million relates to COVID-19 loss of income claims submitted in the previous financial year. The remainder relates to proceeds for the damages suffered during the civil unrest that broke out in South Africa's KwaZulu-Natal and Gauteng provinces from 9 to 17 July 2021. The direct costs of the unrest for Distell amounted to R96,0 million. The prior period gains mainly related to the profit on the sale of the Alto and Plaisir de Merle wine farms.

Foreign currency translation losses amounted to R1,2 million (2021: R226,8 million).

Net finance costs declined 50,4% to R144,4 million due to the decrease in borrowings and the increase in cash and cash equivalents.

Distell's share of equity-accounted earnings increased by 61,5% to R183,8 million, driven by an improvement in performance by African Distillers Limited (Zimbabwe) and Best Global Brands Limited (Angola).

02 Summary Consolidated Financial Statements 2022 and Notice of Annual General Meeting

OPERATING PERFORMANCE CONTINUED

Reported EBITDA increased by 20,8% to R4,6 billion. Normalised EBITDA, which mainly excludes the items referred to in note 12 to the summary consolidated financial statements, increased by 28,3%. Normalised EBITDA, excluding foreign currency translation movements, increased by 25,4%.

The effective tax rate increased from 25,1% to 29,7%, mainly due to non-taxable income relating to the sale of the premium wine assets and the reversal of the TD Spirits impairment in the prior period.

Headline earnings and headline earnings per share increased by 36,8% to R2,3 billion and by 36,7% to 1 051,8 cents, respectively. Excluding the currency conversion movements and the items referred to in note 12 to the summary consolidated financial statements, normalised headline earnings increased by 34,8%.

INVESTMENT AND FUNDING

Total assets increased by 14,1% to R29,4 billion.

Investment in net working capital increased by 2,5% to R5,8 billion. Inventories increased by 7,0% to R9,2 billion. Bulk spirits in maturation decreased by 3,6%. Investment in bottled stock and packaging material increased by 10,6%. Trade and other receivables increased by 40,1% due to higher sales in the last two months of the current period compared to the prior period, while trade and other payables increased by 29,3%.

Capital expenditure for the current period increased by 75,5% to R1,5 billion (2021: R877,8 million) as the Group resumed its measured investment behind growth initiatives. Of this, R881,5 million was spent on the replacement of assets while a further R658,9 million was allocated to the significant expansion of capacity, particularly to Savanna, international Scotch whisky and new Kenyan manufacturing facilities.

The Group generated cash from operating activities (including working capital) of R3,4 billion (2021: R4,1 billion). Excluding working capital, net

cash generation was up 16,5%. Investment in working capital reflects a cash outflow of R0,4 billion (2021: R0,8 billion inflow), partly due to an increase in trade receivables as a result of substantially higher sales in the last two months of the current period compared to the prior period. A further R55,0 million (2021: R405,0 million) cash was received when surplus plan assets used to fund the South African post-retirement medical liability were repaid to the Group. Share-based payment liabilities of R148,8 million were settled in cash as the Group is precluded from utilising ordinary shares to settle these liabilities as a condition of the Heineken transaction.

Net debt at the end of the current period was only R0,3 billion (2021: R2,2 billion). The Group is highly cash generative, with a strong balance sheet

and a much-improved debt to debt-plus-equity ratio of only 1,8% (2021: 14,1%) and a debt-to-equity ratio of 1,8% (2021: 16,4%) at the end of the current period. As the Group's southern African operations were in a surplus cash position on 30 June 2022, it comfortably met its debt covenants relating to its South African medium-term debt with a debt to EBITDA measurement of -0,1:1 (2021: 0,53:1) compared to the covenant of less than 2,75:1. The Group repaid R1,2 billion of its South African medium-term debt, which was due in April 2022. Debt of R1,3 billion relating to the Scotch whisky business was refinanced in February 2022 for a minimum period of five years.

HEINEKEN INTERNATIONAL B.V. TRANSACTION

The process of obtaining regulatory approvals relating to the Heineken International B.V. transaction in all the relevant jurisdictions continues. At present, all indications are that the implementation of the transaction can still occur before the end of 2022. An updated timetable, indicating all relevant dates, will be communicated to shareholders as soon as greater certainty on finalisation of the relevant regulatory processes is received.

Parties continue to engage proactively with regulatory authorities. More information can be found on: www.distell.co.za/Investor-Centre/heineken-deal-site/.

Summary Consolidated Financial Statements 2022 and Notice of Annual General Meeting	03