Humble : Annual Report 2023

ANNUAL AND SUSTAINABILITY REPORT 2023

BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT

CONTENT

BUSINESS OVERVIEW

• ABOUT HUMBLE GROUP Humble Group in brief..

• THE YEAR IN BRIEF
  2023 in numbers, financial objectives, selected key figures, and development

• CEO STATEMENT
  A summary of the year characterized by change and maturity.

• STRATEGIC INITIATIVES
  An overview of the strategic actions and projects that we have implemented during the year

• PLATFORM
  Market drivers and fundamental parts of our value offering

10 BUSINESS SEGMENTS

• Future Snacking
• Sustainable Care
• Quality Nutrition
• Nordic Distribution

CORPORATE GOVERNANCE

REPORT

18 CORPORATE GOVERNANCE

1. BOARD OF DIRECTORS
2. EXECUTIVE TEAM
3. THE SHARE

SUSTAINABILITY REPORT

26 2023 HIGHLIGHTS

Sustainability is strongly integrated into Humble Group's purpose and corporate mission.

28 VALUE CHAIN

As an international company, our commitment to a sustainable value chain is central.

30 SUSTAINABILITY GOVERNANCE

Our framework for sustainability governance actively involves various key stakeholders and plays a decisive role in shaping our strategy.

34 SUSTAINABILITY STRATEGY

Healthy people on a healthy planet. That is our vision for the future. Our strategic framework describes how a sustainable FMCG company should operate.

56 THE EU TAXONOMY

ANNUAL REPORT

63 MANAGEMENT ADMINISTRATION REPORT

67 CONSOLIDATED FINANCIAL STATEMENTS & NOTES

115 PARENT COMPANY FINANCIAL STATEMENTS AND NOTES

132 AUDITOR'S REPORT

135 MULTI-YEAR SUMMARY

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES
PLATFORM	BUSINESS SEGMENTS

HUMBLE IN SHORT

Humble Group is a leading FMCG group positioned in the forefront of

functional foods and sustainable products.

The group offers production, distribution and various consumer brands on a global scale. Our strategic presence enables us to grow and build businesses with improved long-term potential.

THE HUMBLE WAY

We believe in conducting business in a responsible, ethical and

sustainable way. We call it "The Humble Way".

<<<<<<<<<<<<<<

Our corporate culture is embodied through our four core values:

INNOVATION - ENTREPRENEURSHIP -

PASSION - INTEGRITY

STRATEGY

Our strategy is built on decentralized governance combined with a vertically-integrated business model. We optimize the collaboration between our portfolio companies and offer central support functions to capitalize on synergies and value-creating activities.

We support our businesses in their innovative space and utilize our expertise in operations, acquisitions and strategic business planning to promote growth within the portfolio.

VISION

Be the leading global FMCG group< which offers sustainable and high-quality products for healthy people and a healthy planet.

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

THE YEAR IN BRIEF

NET SALES

Net sales increase by 47% and amounted to SEK 7,050 million (4,800). The organic growth amounted to 16%. The growth was driven by a continued increased demand for Humble Group's products. An extended distribution, a broader product portfolio and an increased exposure to new markets has also driven positive development in sales during the year.

7 050

NET SALES

SEK MILLION

16%

ORGANIC GROWTH

PROFITABILITY		696		9.9%
Adjusted EBITDA increased by 26% and amounted to
SEK 696 million (551). Profitability was affected by		ADJUSTED EBITDA			ADJUSTED
various challenges such as supply chain challenges.
Inflation and a generally volatile market climate.		SEK MILLION			EBITDA MARGIN
Ongoing investments and marketing efforts put some
additional pressure on the profitability. Our strong
offering in selected categories and commitment to
continue to improve the profitability has been		659		9.3%
showcased from a sustained margin.
			EBITDA			EBITDA
			SEK MILLION			MARGIN
			1,088		20,670
			CASH FLOW			SHAREHOLDERS
			FROM OPERATIONS
			SEK MILLION
	FINANCIAL TARGETS 2025
				TARGET		ACTUAL 2023
	NET SALES PROFORMA, SEK million			16,000			7,951
	ADJUSTED EBITA PROFORMA, SEK million			1,900			608
	LONG TERM FINANCIAL TARGETS
				TARGET		ACTUAL 2023
	ORGANIC GROWTH			15%			16%
	NET INTEST BEARING DEBT / ADJUSTED EBITA PROFORMA			2.5x		2.7x

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

SELECTED KEY FIGURES

MSEK (unless otherwise stated)	2023	2022
Net Sales	7,050	4,800
Gross Profit	2,129	1,532
Gross Profit Margin	30%	32%
EBITDA	659	504
Adjusted EBITDA	696	551
EBITA	547	419
Adjusted EBITA	584	466
EBIT	318	257
Adjusted EBIT	355	304
Cash Flow from Operations*	1,088	255
THE SHARE
Number of shareholders**	20,670	24,080
Number of shares before dilatation***	443,544,543	301,274,580
Average number of shares before dilution	377,360,692	284,151,901
Average number of shares after dilution	383,219,322	286,818,625
Net Sales per share (SEK)***	18.68	16.89
Adjusted EBITDA per share***	1.84	1.94
Adjusted EBITA per share***	1.55	1.64
Adjusted EBIT per share***	0.94	1.07
EBIT per share***	0.84	0.90
Net Income per share before and after dilution (SEK)	-0.28	-0.13

• Includes received tax grants of approximately MSEK 260
• At period end

*** Before dilution

QUARTERLY DEVELOPMENT

MSEK

7,050

6,720

6,256

5,520

4,800

4,048

3,079

2,277

											546		576		584
					463		466		492
			370
	307

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

NET SALES, LTM

Q2 2023

Q3 2023

Q4 2023

ADJUSTED EBITA, LTM

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

CEO STATEMENT

A YEAR OF MATURITY, GROWTH AND CONSOLIDATION

It is refreshing to take time to reflect on the past year and summarise the insights we bring with us into future business development and decision making. We entered into 2023 with a turbulent macro-economic climate, surging interest rates, and a rapidly shifting market focus towards debt and the balance sheet. The management and the Board's goal was clear - we had to adapt to the new prerequisites by managing the cash flow and reducing the net debt position to a level that would enable an improved capital structure. After three years of intensively acquiring 47 companies, which was done to build the platform we have today, we had to gradually start consolidating certain businesses to gather the full potential in each segment, and in parallel to that, map out a new strategic direction in order to increase our growth and progression into the next year.

"We have reshaped the company to a more mature growth machine with strong underlying cash flow generation"

Looking behind at the year, I feel proud of the efforts that we together have carried out. We have reshaped the company to a more mature growth machine with a strong underlying cash flow generation. The financial development has been strong, despite certain headwinds comprising higher freight rates, volatility and inflation since 2022. With an organic growth of 16%, and further consolidation of acquisitions, net sales increased to MSEK 7,050 (4,800). Adjusted EBITA improved by 25% to MSEK 584 (466) and we have started to see a rebound in the gross margin during the second half of the year, which is the most important key ratio in the long term to improve the profitability. There is no doubt that the last two years as a consumer goods business, with exposure towards more price sensitive customers and the majority of purchasing being made in foreign currencies, have been challenging. However, I am convinced that we have found our recipe for success and have become a significantly stronger company that now possesses all the attributes in place to continue creating long-term value for our shareholders.

We began the year with the transition into IFRS, which is a natural step to conform with international accounting standards, as well as to prepare the Group for a forthcoming list change. From and outside-in perspective, the transition between standards itself may not seem too remarkable, but to have completed the transition in less than a year, where you have to redo the accounting for over 100 subsidiaries over the last three years, is nothing but an accomplishment in my book. I have my Finance team to thank for that.

From an operational side of things, we have had a solid improvement and taken large steps towards becoming a more efficient Group where we can utilize our platform to capitalize on additional synergies. By integrating the M&A Team as part of the Operations Team, we have achieved better progress in implementing our strategic initiatives. During the year, we have transitioned to generating a strong positive operative cash flow amounting to MSEK 1,086 (255), changed the capital structure, consolidated and integrated eight businesses in total, divested ten properties, and divested a loss-making business. Apart from that, we have several other ongoing initiatives which aim to sharpen the businesses further, which among other projects include shared distribution, move of production lines, combined Group procurement projects, coordination of the supply chain, and many other efficiency improvement initiatives.. Furthermore, , we have launched our own growth and innovation catalyst, "Humble Incubator", from which we have already started to see the result of the preparations made during the year.

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

Regarding digitalization and sustainability, we have taken a number of strategic investments to ensure a better future. We have grown the Group's self-developed BI platform to cover almost all Humble business, with real time follow-up and supplier mapping. This is something that will benefit us well in both business development, as well as in the transition to CSRD reporting and other regulations. The sustainability team has welcomed new talents, and we have several central initiatives ongoing where we are working towards faster adaptation and transformation towards health and sustainability across all our subsidiaries. New opportunities are continuously arising, and even though we have come a long way, there is a lot more both we and other FMCG market players can do to help the human and the planet. It is a gigantic industry, and we all have to take responsibility.

2023 set the foundation for an exciting development over the next few years, and I feel excited over what the future might bring. We have never in the Group's history had more business opportunities, innovations and strategic initiatives in our pipeline, activities that together will speed up our progress towards becoming an even more global company and increase our mark in the retail store. Conclusively, I would like to thank all the shareholders and employees who are with us and believe in Humble, as well as our long-term vision to become the leading modern FMCG market player. The journey has only begun.

Simon Petrén

CEO HUMBLE GROUP AB (PUBL)

"We have never in the Group's history had more business

opportunities, innovations and strategic initiatives in our pipeline"

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

STRATEGIC INITIATIVES

HIGH COMMITMENT TO LONG-TERM VALUE CREATION

A significant part of the year has been dedicated to executing a number of value-creating project initiatives. These projects were initiated with the aim to optimize parts of the operations, create better conditions for growth through increased capacity and expansion of Humble Group's production capability, reduce risk exposure in loss-making portfolio companies, and increase the ongoing cash flow thereby freeing up capital for other investments, with the intent of creating long-term value for our shareholders.

FINANCIAL TRANSACTIONS

CAPITAL STRUCTURE

Conducted a new share issue of SEK 850 million and refinanced bonds through bank loans of SEK 1,650 million. This has led to reduced interest costs and contributes to improved cash flow for the group. Strengthening the balance sheet has been a priority for the group given a changing interest rate climate.

DISPOSAL OF PROPERTIES

Conducted property sales through a so-called"sale-leaseback". The transaction creates space for increased focus on core operations, results in a capital gain, and frees up capital for Humble Group to invest in other value-creating activities.

OPERATIONAL PROJECTS

ESTABLISHMENT OF NEW, AND EXPANSION OF EXISTING, FACTORIES

• Invested in a beverage production line with the potential to become a leading Nordic contract manufacturer for internal, as well as external, beverage brands.
• Invested in a bar production line in Australia. This was done with the aim of meeting part of the Body Science demand for a rapidly growing product item, and a continued goal to establish Humble Group as a competitive player in the local market.
• Invested in new bar production lines in Sweden and Portugal to meet a significantly increased demand.

DIVESTMENT OF BAYN PRODUCTION

Divestment of loss-making operations at acquisition value. Expected to contribute to improved results for the group. The production of products for the internal brands that were produced at Bayn Production will be ensured internally.

CASH FLOW OPTIMIZATION

Identified, and executed on, a number of measures to optimize working capital binding in the group's subsidiaries, particularly with respect to inventory binding and accounts receivable.

INTEGRATION / CONSOLIDATION

Conducted several integrations and/or consolidations of subsidiaries. Integrations were carried out where management identified material synergies such as business optimization and cost efficiencies between the companies.

HUMBLE INCUBATOR

Establishment of a central group function that focuses on efficiently delivering products under new brands from factory to customer, which will contribute to reduced working capital and improved overall flows in the supply chain, while contributing to a potentially strengthened gross margin.

FREIGHT CONTRACT

Initiated a group-wide initiative for centralization of freight contracts. The investment is carried out in line with Humble Group's goal to improve the gross margin.

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

PLATFORM: AN ECOSYSTEM FOR GROWTH

MARKET

The FMCG market is undergoing a rapid transformation, driven by several macro forces. Through a diverse portfolio of brands with sustainability at the heart of the business model, Humble Group is well placed to expand its footprint in the evolving global market.

TECHNOLOGY &	RESOURCE PRESSURE	SHIFTING
INNOVATION	Increasing need to	CONSUMER DEMANDS
Technology as a driver for	embrace circular models	Growing demand for
foodtech sector		sustainable solutions

HEALTH &		LONG-TERM
WELLBEING		SUSTAINABILITY
Awareness of health and	MACRO	Sustainability drives
wellbeing increases demand for	change in our industry
FORCES
healthy products

CHANGING	POLITICAL	CONSUMER
LIFESTYLES	& ECONOMIC SHIFTS	DEMOGRAPHICS
Diversifying values and lifestyles	The power shifts in the global economy	Consumers demanding committed
shifting towards higher	and the geopolitical landscape	brands with sustainable & natural
requirements for personal health		products
and environment

DEVELOPMENT OF PRODUCT PORTFOLIO AND CUSTOMER BASE

ACTIVE PRODUCTS - LTM Q4 2023

37 154

+30%

33,305

28,562

ACTIVE CUSTOMERS - LTM Q4 2023

17 546

+10%

16,486

15,904

2021	2022	2023	2021	2022	2023
HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023			8

BUSINESS OVERVIEW	CORPORATE GOVERNANCE REPORT	SUSTAINABILITY REPORT	ANNUAL REPORT
ABOUT HUMBLE GROUP	THE YEAR IN BRIEF	CEO STATEMENT	STRATEGIC INITIATIVES	PLATFORM	BUSINESS SEGMENTS

PLATFORM: AN ECOSYSTEM FOR GROWTH

DECENTRALIZED BUSINESS MODEL WITH INTEGRATED APPROACH

Humble Group applies a decentralized business model where local decision-making meets central support functions. We support our subsidiaries by providing financing solutions to ensure economic stability and growth, assist with integrated analysis functions, and thereby identify opportunities and areas for improvement for the operations. We also drive group-wide initiatives that strengthen the entire organization and carry out acquisitions that complement and enhance our operations.

We develop our companies across the entire value chain by supporting our brands with product development, which promotes innovation and the development of competitive products, creates efficient distribution channels that provide access to new key markets, and ensures quality and solution-oriented production.

The integrated approach between central functions and maintained entrepreneurship where local decision-making forms the basis for the independent business creates a dynamic ecosystem, where we can utilize synergies that strengthen both our subsidiaries and Humble Group as a whole.

ENTREPRENEURSHIP

Decentralized governance model that protects local decision-making, culture, and entrepreneurship

CENTRAL FUNCTIONS	GROWTH
FINANCE	PRODUCT DEVELOPMENT
Invests in our subsidiaries for growth and	Utilization of product development teams
provides efficient financing solutions
BUSINESS INTELLIGENCE	SOURCING
Integrated analysis and basis for well-informed	Local and flexible production
decisions based on data
GROUP-WIDE INITIATIVES	DISTRIBUTION
Cost optimization and business model	Access to key markets and channels through a
streamlining through integration and
broad distribution network
consolidation
M&A
Complementary acquisitions for expansion and
new synergy opportunities

HUMBLE GROUP | ANNUAL & SUSTAINABILITY REPORT 2023

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