Sephaku : FY 2022 financial results commentary for the 12 months ended 31 March 2022

(Incorporated in the Republic of South Africa) (Registration number: 2005/003306/06) Share code: SEP

ISIN: ZAE000138459 ("SepHold" or "the Company")

Summarised provisional audited financial results

for the year ended

31 March 2022

SepHold hereby reports on the summarised, provisional, audited financial results for the year ended 31 March 2022 ("FY 2022"). SepHold, Métier Mixed Concrete (Pty) Ltd ("Métier" or "the subsidiary") and Dangote Cement SA (Pty) Ltd ("SepCem" or "the associate") are collectively referred to as the group.

The board of directors ("Board") takes full responsibility for the summarised provisional financial information and that it has been correctly extracted from the underlying annual financial statements ("AFS"). The summarised financial information included in this announcement is extracted from audited information but is not itself audited. The full AFS are available on the Company's website, www.sephakuholdings.com.

Any forward-looking information is the Board's responsibility and has not been reviewed or reported on by the Company's external auditors. The group's external auditors, BDO South Africa Incorporated, have audited the underlying AFS issuing an unqualified audit opinion. The independent auditor's report includes a section on key audit matters. The auditor's report does not necessarily report on all the information in this announcement. Shareholders should obtain a copy of the auditor's report within the AFS which is available from the Company's registered office, to understand the nature of the auditor's engagement fully. Alternatively, an electronic copy can be requested at [e-mail].

INVESTOR AUDIO WEBCAST AND CONFERENCE CALL

An audio webcast and conference call to discuss the financial results will be hosted on Thursday, 23 June 2022, at 10:00.

To receive unique access details, all participants must pre-register using the following hyperlink - SepHold FY 2022 webcast registration link.

The results presentation will be available on the Company's website 30 minutes before the event for downloading via the link: http://sephakuholdings.com/investor-centre/presentations/

SALIENT POINTS

Group

• Group consolidated revenue*: R786 million
  (FY 2021: R634 million)
• Net profit after tax: R45 million
  (FY 2021: R20 million)
• Basic earnings per share: 17.52 cents
  (FY 2021: 7.83 cents)
• Headline earnings per share: 17.67 cents
  (FY 2021: 6.09 cents)

Métier

• EBITDA: R75 million

(FY 2021: R55 million)

• EBITDA margin: 9.5%
  (FY 2021: 8.7%)
• Net profit after tax: R30 million
  (FY 2021: R17 million)

SepCem¹

• Sales revenue: R2,6 billion
  (FY 2021: R2,4 billion)
• EBITDA: R375 million
  (FY 2021: R382 million)
• EBITDA margin: 14.6%
  (FY 2021: 15.9%)
• Net profit after tax: R82 million
  (FY 2021: R44 million)
• SepCem 36% equity-accounted profit
  to group: R29 million
  (FY 2021: R16 million)

• The group revenue is all from Métier's operations as the 100% subsidiary of SepHold.

1 SepCem has a December year-end as a subsidiary of Dangote Cement PLC ("DCP"). The FY 2022 figures are for the 12 months ended 31 December 2021, and FY 2021 figures are for the 12 months ended 31 December 2020.

SUMMARISED PROVISIONAL AUDITED FINANCIAL RESULTS

for the year ended 31 March 2022

Remarking on the results, Chief Executive Officer ("CEO")

Neil Crafford-Lazarus said,

"We are pleased to report on the FY 2022 group performance during which Métier and SepCem increased their net profit by double digits. As detailed in the commentary below, the year-on-year ("YoY") improvement in profitability was mainly due to improved revenues and lower finance expenses.

We began calendar year ("CY") 2021 upbeat about demand because of the unprecedented rally for building materials in second half ("H2") 2020 following the pandemic related hard lockdown. Although we were cognisant that this trend would be short-lived, we anticipated that demand would "normalise" towards the end of CY 2021. The YoY growth in the real value of building plans passed at 0.1% in Q4 2020, and 2.1% in Q1 2021, driven by the residential housing sector, implied a positive demand trend for building materials into the year, thereby confirming our view. However, by the beginning of H2 2021, the trend indicators showed an earlier normalisation in building materials retail demand. The building materials volumes were further reduced, albeit marginally, by the July 2021 social protests, mainly in the KZN and Gauteng provinces, characterised by mass looting and destruction of retail

infrastructure. In particular, the violence inflicted on transporters limited access to customers whilst building materials retailers had to either temporarily or permanently close several branches due to the damage caused by the protesters.

At the beginning of the quarter ended on 31 March 2022, a renewed optimism in construction activity was recorded based on the prevailing strong commodity cycle, which was largely expected to increase infrastructure demand. The sentiment was soon dampened by the deceleration in global growth and concerns related to the potential negative effects of the Russian - Ukrainian war. Therefore, as we began FY 2023, we recognised the headwinds against macroeconomic growth in general and our industry. We remain vigilant in managing costs and agile in our sales approach to support profitability and maintain our market share, respectively.

Finally, as the pandemic migrates to an epidemic, we have remained diligent in implementing appropriate health and safety protocols to mitigate workplace infections. We successfully implemented vaccination campaigns in all group entities during the year, resulting in inoculation rates of 100% at SepHold, 75% at Métier and 71% at SepCem. We will continue to operate within the COVID-19 protocols into the foreseeable future."

Summarised provisional audited financial results for the twelve months ended 31 March012022

COMMENTARY

MÉTIER

Sales volumes

Total sales volumes increased by 18% YoY, albeit from the anomalously low comparative base due to the pandemic related restrictions in FY 2021. Although Métier recorded an increase, the volumes achieved by the subsidiary were essentially flat YoY considering the ten months of active trading in FY 2021. Management estimated the mixed-concrete sector demand to be slightly below pre-COVID-19 levels by year-end, emphasising the ongoing challenge of supplying ready-mixed concrete to a stagnant market.

Métier established its first plant at Bellville in the Western Cape provinceand started supplying customers in September 2021. The subsidiary achieved targeted volumes by December 2021 at good profit margins in this province. Métier intends to gradually enhance its reputation in this market to ensure that the brand is well accepted.

The operations in the KZN province experienced unique challenges namely, the disruption of construction projects by the business forums, and the floods in the quarter ended March 2022. The demand in KZN reverted to pre-COVID-19 levels during the year characterised by increased competition from independent ready-mix producers resulting in flat sales volumes. Métier focussed on achieving an optimal product mix that would result in raw material and transport cost savings.

The Gauteng-based operations experienced aggressive pricing tactics from vertically integrated competitors as demand declined. The sales were 10% below volumes achieved in FY 2021, mainly due to the continued low demand in the province. Management focussed on efficiently securing inputs, tightly managing logistics costs, and implementing effective sales management to improve profit margins. As in the KZN market, Métier successfully implemented price increases in the fourth quarter ended March 2022 in the Gauteng market.

Overall, integrated ready-mixed producers continued to close plants in KZN and Gauteng but were immediately replaced by highly competitive independent ready-mix producers with lower cost bases. Nonetheless, Métier's competitive edge based on its renowned service excellence, deep product knowledge and professionalism has positioned the subsidiary well to retain or grow its market share in the three provinces.

Revenue and profitability

Métier's revenue increased by 24% YoY to R786 million (FY 2021: R634 million) due to the increased sales volumes and pricing. Increasing inflation-related input costs in the quarter ended 31 March 2022 resulted in all major mixed concrete producers, including the subsidiary, implementing significant price increases. The flat gross margin of 38% YoY demonstrates management's ability to control input costs to support profitability. Consequently, the EBITDA increased by 36% to R75 million (FY 2021: R55 million), and EBIT increased by 45% from R33 million to R48 million. The operating expenses increased by 16% from the anomalously low base in the comparative period due to cost-saving initiatives. The EBITDA and EBIT margins increased to 9.6% (FY 2021: 8.7%) and 6.2% (FY 2021: 5.2%), respectively. Net profit after tax increased by 76%, from R17 million to R30 million, due to the higher revenue and the lower finance expense resulting from a decreasing debt balance.

Although the price increases applied in March 2022 were sustained, the expanding inflation, significant fuel price increases and rising interest rates are expected to cause downward pressure on profitability in FY 2023 as input costs and operating expenses increase. Métier's hybrid logistics model and its strong relations with outsourced transporters enable the subsidiary to control its transport expense better. In addition, Métier has established a portfolio of competitively priced suppliers for key inputs. To further mitigate against a sharp decline in profitability, the subsidiary increased prices in June 2022.

Management of customer credit risk

Métier's executive management continuously monitors exposure to credit risk and customers' creditworthiness. The subsidiary continued to apply stringent credit approval processes to mitigate the risk of financial loss from defaults. The proliferation of medium-sized construction companies with cashflow management challenges increased the risk necessitating a preference for customers with proven and consistent payment behaviour. As of 31 March 2022, the loss allowance for trade and other receivables was reduced to R791,000 (FY 2021: R1,9 million) due to an R1,1 million provision reversal on settled trade receivables. Detailed disclosure on debtor management can be read on pages 38 to 40 in the AFS.

02Sephaku Holdings Limited

Bank debt management

Métier focussed on reducing the amortising loan facility resulting in a capital balance of R48 million on 31 March 2022 (FY 2021: R71 million). The facility bears an interest rate of three-month Johannesburg Inter-bank Average Rate (JIBAR) plus 4.25%. The facility is repayable in varying instalments, with the final balloon payment scheduled for 15 April 2023. The subsidiary's management continues to comply with the debt obligations and is confident that it will repay its instalments as scheduled for FY 2023. Detailed disclosure on the bank debt can be read on page 17 below.

SEPCEM

Sales volume

SepCem's sales volumes declined by 1% YoY for the twelve months ended 31 December 2021, mainly due to the unplanned kiln outages during the H2 2021. From the end of the third quarter into the beginning of the fourth quarter CY 2021, SepCem had two unplanned plant outages. In both incidences, management was able to identify a long-term solution to mitigate future unplanned outages. For further details, shareholders are referred to SENS announcements released on 12 October 2021 and 20 October 2021.

The competition heightened during the year due to the recovery of the cement producers who had experienced major technical plant challenges in CY 2020 limiting their ability to supply the market. Furthermore, blender activity also normalised in CY 2021 compared to their subdued presence in May and June 2020 caused by the acute shortage of extenders which had severely hampered their production.

In addition, approximately 1,1 million tonnes of cement were imported in CY 2021 (CY 2020: 990Kt), further intensifying competition. Approximately eighty-three percent of the volumes entered the country via the Durban port, and sixty-three percent were imported from Vietnam. The cement industry's application for a safeguard tariff from the International Trade Administration Commission of South Africa has continued to stall. A positive outcome would meaningfully improve the performance of the building materials sector that not only contributes to the fiscus but provides employment opportunities to numerous job seekers in South Africa.

Revenue and profitability

SepCem's revenue increased by 7% to R2,6 billion (FY 2021: R2,4 billion) due to higher pricing. The resultant EBITDA was 2%

lower at R375,4 million (FY 2021: R381,6 million) at a margin of 14.6% (FY 2021: 15.9%). The decrease in EBITDA was mainly due to the insourcing of clinker in Q1 2021 caused by a shortage at SepCem. The operating profit remained flat at R219,4 million, mainly due to the lower depreciation expense in the period under review. In the same vein, the lower finance expense due to a lower debt balance resulted in an 85% increase in net profit after tax from R44,4 million to R81,9 million. The SepCem 36% equity-accounted profit in the group FY 2022 profit and loss statement is R28,9 million compared to R15,9 million in FY 2021.

Debt management

The total bank debt repayment for the twelve months ended December 2021 was R427 million, comprising interest of R74 million and capital of R353 million resulting in a capital balance of R666 million. By 2 May 2022, the outstanding capital balance was R528 million, following total capital repayment of R138 million in two instalments. The DCP shareholder loan that accrues interest at JIBAR plus 4% capitalised against the loan had a balance of R627 million by 31 December 2021.

Management concluded negotiations with the lenders to convert the project loan bullet instalment of R377 million due in November 2022 into a three-year term loan of R400 million at a rate of JIBAR plus 3.25%. In addition, SepCem secured a R200 million working capital facility at a rate of prime minus 0.5% from one of the original major lenders.

SEPHOLD

Update on the dual executive role

In January 2022, the SepHold Audit and Risk Committee ("ARC") successfully motivated for Neil Crafford-Lazarus to continue the dual CEO and FD roles until 31 December 2022. The motivation was the fulfilment of arequisite assessment report to the JSE on the prevailing economic conditions to warrant the continuation of the dual role for a further year.

Summarised provisional audited financial results for the twelve months ended 31 March032022