Coca-Cola HBC Regulatory News (CCH)

Strong execution powers a year of growth

Coca-Cola HBC AG, a growth-focused Consumer Packaged Goods business and strategic bottling partner of The Coca-Cola Company, reports its financial results for the twelve months ended 31 December 2023.

Full-year highlights

· Focused execution of 24/7 strategy delivered 16.9% organic revenue growth1

o  Organic volume growth of 1.7% led by our strategic priority categories, with Sparkling +2.5%, Energy +27.3% and Coffee +31.5%

o  Strong finish to the year with 6.8% organic volume growth in Q4 and improving trends in all three reporting segments

o  Organic revenue per case growth of 15.0%, reflecting the benefits of revenue growth management initiatives throughout the year

o  Reported revenue up 10.7%, with strong organic growth partly offset by FX translation headwinds in Emerging markets

o  Continued value share gains in 2023 in both Non-Alcoholic Ready-To-Drink (NARTD) and Sparkling of 110bps and 80bps respectively

· Strong organic EBIT growth of 17.7% driving good improvement in Return on Invested Capital

o  Comparable EBIT of ?1,083.8 million; Comparable EBIT margins improved 50 basis points on a reported basis to 10.6%, up 10 basis points on an organic basis

o  Comparable gross profit margin up 80 basis points, reflecting easing cost pressures in the second half of the year

o  Disciplined investment in growth capabilities and good operating leverage reduced comparable operating expenses as a percent of revenue by 10 basis points

o  ROIC up 230 basis points to 16.4%

· Double-digit organic revenue and EBIT growth across all segments

o  Established: Organic revenue up 12.3%, led by pricing and mix. Organic EBIT grew 23.0%

o  Developing: Organic revenue up 18.2%, with strong revenue per case expansion. Organic EBIT grew 26.9%

o  Emerging: Organic revenue up 19.9%, with volume growth as well as revenue per case improvement. Organic EBIT grew by 11.7%

· Strong EPS progress, record FCF generation and improved shareholder returns

o  Comparable EPS grew by 21.8% to ?2.08, supported by strong profit delivery and effective management of finance costs

o  Free cash flow increased by 10.3% to a record ?711.8 million

o  Net debt of ?1.6 billion and 1.1x net debt to comparable adjusted EBITDA, reflecting the strength of our balance sheet

o  Launched a two-year share buyback programme of up to ?400 million in November, reflecting the Board's long-term confidence in business performance

o  Board of Directors to propose an ordinary dividend of ?0.93 per share, up 19.2% year on year and representing a 45% payout

· Sustained investment across our strategic priorities

o  Capital expenditure of ?674.9 million, up 14.5%, focused on sustainable growth

o  Acquisition of Finlandia Vodka business from Brown-Forman for ?180 million net consideration paid

o  Accelerated investment in bespoke capabilities, particularly digital initiatives, and our agenda to further strengthen our ability to win in the market

o  Launched Jack Daniel's & Coca-Cola in Poland, Ireland and Hungary

Zoran Bogdanovic, Chief Executive Officer of Coca-Cola HBC AG, commented:

"I am deeply proud of our team as we delivered a third year of double-digit growth and record profits. I would like to thank them for their tireless efforts, and their commitment to our company vision, our customers and consistent focused execution. I would also like to thank our customers and partners for their ongoing support throughout the year.

"2023 was another year of consistent execution of our growth strategy. We delivered volume growth, share gains, improved margins and record levels of free cash flow. As a result, we were able to increase shareholder returns, including the launch of a share buyback programme.

"The power of our 24/7 portfolio, our diversified country footprint and our sustained investment in building bespoke capabilities, driven by data, insights and analytics, are foundations of compounding growth.

"In 2023, we made significant progress towards our Mission 2025 and NetZeroby40 goals, with key milestones including commissioning a new in-house recycled plastic (rPET) production facility in Romania and a new line for returnable and resealable glass bottles in Austria. In December, we also announced that we are establishing a charitable foundation dedicated to supporting local communities where we operate.

"While we expect the macroeconomic and geopolitical environment to remain challenging, we remain confident that we will continue to make progress against our medium-term growth targets."

1For details on APMs refer to 'Alternative Performance Measures' and 'Definitions and reconciliations of APMs' sections.

2Refer to the condensed consolidated income statement.

3Net Profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent.

Business Outlook

We have delivered a stronger-than-expected financial performance in 2023, despite the significant headwinds to our business. While we expect the macroeconomic and geopolitical environment to remain challenging, we have high confidence in our 24/7 portfolio and the opportunities for growth in our diverse markets, amplified by our bespoke capabilities, and above all, the talent of our people. In 2024 we expect to make progress against our medium-term growth targets.

Our guidance for 2024 is:

· Organic revenue growth at a Group level in our 6-7% medium-term target range

· On a comparable basis, COGS per unit case should increase low to mid-single digits through the combined effect of inflation, transactional and translational FX

· Organic EBIT growth in the range of +3% to +9%

Technical 2024 guidance

FX: We expect the impact of translational FX on our Group comparable EBIT to be a ?30-50 million headwind.

Restructuring: We do not expect significant restructuring initiatives to take place.

Tax: We expect our comparable effective tax rate to be towards the top end of our 25% to 27% range.

Finance costs: We expect net finance costs to be between ?50-70 million.

Scope: We expect the scope impact from the Finlandia acquisition to be between ?5-10 million

Group Operational Review

Consistent execution of our 24/7 growth strategy has delivered a strong financial performance and significant strategic progress. We have invested strategically in the business, further developed our bespoke capabilities and evolved our culture, our partnerships and our portfolio. As a result, we remain very confident in the differentiated strengths of our business and our ability to sustain high levels of revenue growth into the future. This is well reflected in the progress we have made delivering our strategic pillars.

Leveraging our unique 24/7 portfolio

Full year organic revenue grew by 16.9%, with growth in volumes, price and mix. Reported net sales revenue increased by 10.7%, with adverse FX translation effects partially offsetting strong organic growth across the group.

Volumes increased by 1.7% on an organic basis, led by our strategic priority categories of Sparkling, Energy and Coffee, which offset declines in Stills, as a result of conscious choices to drive profitable growth.

· Sparkling volumes grew by 2.5%. Excluding Russia, where we no longer sell any Coca-Cola Company brands, Trademark Coke brands grew 1.9%.

· Energy volumes grew by 27.3%, the eighth consecutive year of strong double-digit growth, with good results across all segments. In Established and Developing markets, growth was driven by Monster, while growth in Emerging was led by Predator, as well as the successful launch of our Energy portfolio in Egypt.

· Coffee volumes grew 31.5%, with all three segments growing above 20%. We continue to make good progress on out-of-home customer recruitment, adding 5,000 outlets in the year to bring our total to 13,000. Our segmentation strategy is working well and we remain excited about the medium-term opportunity.

· Sports drinks delivered good growth, however Still volumes declined 4.4% as we consciously chose to focus on opportunities for the most profitable revenue growth in the Water category. As a result, Water volumes were 5.9% lower than the prior year, largely reflecting declines in Italy, Poland, Hungary, Czech and Romania.

· Premium Spirits volumes grew by 13.1% on an organic basis, driven by all segments. The acquisition of the Finlandia Vodka business, completed in November 2023, is a unique opportunity with significant geographic overlap in our territories, enhancing our premium spirits credentials and opening incremental mixability opportunities for our NARTD portfolio.

Winning in the marketplace

Organic net sales revenue per case grew by 15.0% in the full year, led by 19.0% growth in the first half, due to pricing actions to mitigate cost inflation in our markets. As cost pressures eased in the second half of the year, organic net sales revenue per case grew 11.1%, largely reflecting the cycling effect of pricing actions taken in the second half of 2022.

Our revenue growth management initiatives, powered by ongoing investment in data, insights and analytics, have allowed us to take more informed pricing decisions and address both affordability and premiumisation, while still improving revenue per case. Affordability remained important in 2023, as many of our markets faced pressures on consumer disposable income. We responded by launching new smaller pack formats, as well as by driving promotional activities with a higher return on investment, and utilising the strength of our 24/7 portfolio to tailor our offer in different markets and for different customer needs.

Our actions to drive premiumisation resulted in positive category and package mix. Category mix benefitted mainly from the increased contribution of Sparkling, Adult Sparkling and Energy, as well as the lower contribution from Water. Package mix improved as we made further strategic progress, increasing single-serve mix by 80 basis points.

As a result of the commercial decisions we have made, we continued to deliver strong share gains in 2023, gaining 110 basis points of value share in NARTD and 80 basis points in Sparkling. This improved performance benefitted from our core focus of driving joint value with customers and the strength of our 24/7 brand portfolio. We were again the number one contributor to retail customers' absolute revenue growth within fast moving consumer goods (FMCG) in Europe, according to Nielsen.

Operating profit, margins and cost control

Comparable gross profit grew by 13.2%, with gross profit margins up 80 basis points to 35.0%. Comparable COGS per case increased 4.7%, mainly reflecting easing inflation in some commodities in the second half of the year, FX translational benefits from the movements in the Nigerian Naira, offset by transactional headwinds.

Comparable operating costs as a percent of revenue decreased by 10 basis points to 24.4%. We benefitted from good operational leverage while investing in growth as revenues accelerated. We increased marketing spend and added route-to-market capabilities, seizing opportunities across our markets while maintaining tight control of non-essential costs.

Comparable EBIT increased by 16.6% on a reported basis to ?1,083.8 million, principally driven by organic growth across our markets, only partially offset by negative foreign currency movements. The comparable EBIT margin was 10.6%, up 50 basis points on a reported basis, benefitting from operational leverage. On an organic basis, comparable EBIT increased by 17.7%, and margins grew 10 basis points.

We saw a negative translational and transactional currency impact in 2023, driven by the depreciation of the Nigerian Naira, Russian Rouble and Egyptian Pound.

Net profit and free cash flow

Comparable net profit of ?764.2 million and comparable basic earnings per share of ?2.078 were 22.3% and 21.8% higher respectively. Reported net profit and reported basic earnings per share of ?636.5 million and ?1.730 were 53.2% and 52.6% higher respectively compared to 2022, reflecting the lower level of non-cash financial charges including impairments.

Comparable taxes amounted to ?277.1 million, representing a comparable tax rate of 27%, at the top end of our guided range of 25% to 27%.

ROIC expanded by 230 basis points to 16.4%, driven by higher profit, partly offset by higher invested capital.

Net finance costs were ?34.4 million lower than the prior year at ?48.3 million, driven mainly by higher finance income as a result of increased interest on cash deposits and stable finance costs on fixed rate borrowings.

Net impairment losses were ?16.9 million lower, reflecting a ?109.4 million charge in Egypt, more than offset by the non-repeat of the charges taken in 2022.

Capital expenditure increased by ?85.4 million to ?674.9 million as we continued to invest in developing our production facilities, renovating and expanding our cooler footprint, and driving other strategic opportunities that help deliver our sustainability agenda. Capex as a percentage of revenue was 6.6%, towards the low end of our targeted range of 6.5% to 7.5%, reflecting the strong level of revenue growth achieved in the year.

Free cash flow was ?711.8 million, an increase of ?66.7 million compared to the prior year and a record for the business, largely reflecting higher operating profit.

ESG leadership

In 2023 we made good progress on sustainability, which remains an important growth enabler.

A significant focus for us is full packaging circularity. In 2023, Romania became our first country to have all three elements: 100% recycled bottles, in-house rPET production and a newly launched, country-wide Deposit Return Scheme (DRS). By the end of the year a DRS was live in six of our markets: Croatia, Estonia, Latvia, Lithuania, Romania and Slovakia. Our in-house rPET production in Poland, Italy and Romania will cover 50% of our rPET needs in 2024, securing availability and reducing costs.

We have also led on packaging innovation. In Austria we commissioned a new RGB4 line for both 1 litre and new 400ml resealable bottles. We also introduced an industry-leading, innovative solution to replace shrink plastic with 100%-recyclable paper on 1.5 litre PET bottles. 

Turning to other elements of our Mission 2025 framework, we exceeded our goal of having 50% energy-efficient coolers in the market (excluding Egypt - acquired in 2022), with a total of 54% by June 2023 - eighteen months ahead of target. On water stewardship, we now have community projects in twelve water-risk areas where we operate, up from eight last year.

Innovation is critical in creating new technologies and for this reason we became a partner in the $137.7 million Greycroft Coca-Cola System Sustainability Fund, with seven other bottlers and The Coca-Cola Company. Also in 2023, we announced we are establishing a charitable foundation, with an initial donation of ?10 million, dedicated to supporting local communities.

Our 2023 sustainability performance was recognised externally by leading scores from major ESG benchmarks. We were ranked, for the seventh time, as the world's most sustainable beverage company by the 2023 Dow Jones Sustainability Indices, and we were recognised in CDP's A List for leading practices in climate and water security.

4 Returnable Glass Bottle line co-funded by the European Union, NextGenerationEU.

Operational Review by Reporting Segment

Net sales revenue grew by 12.3% and 12.9% on an organic and reported basis respectively, as we experienced positive foreign currency movements from the Swiss Franc.

Organic growth in net sales revenue per case was 15.1%, driven by price increases, weighted to the first half, as well as positive category and package mix. A focus on single-serve activation drove a 3.2 percentage point improvement in single-serve mix.

Established markets volume declined by 2.4%, on strong comparatives, with an improving trend towards the end of the year. Sparkling volumes fell slightly, despite growth in Coke Zero and Adult Sparkling. Energy volumes expanded by mid-teens despite tough comparatives, with good growth in Monster. Stills volumes declined by high-single digits, driven by a low-double digit decline in the Water category, as we made conscious choices to prioritise profitable revenue growth.

· Volumes in Greece grew by 6.9%, despite tough comparatives, driven by strong execution throughout key trading periods, with an extended tourist season. Sparkling expanded mid-single digits driven by Coke Zero, Fanta and Adult Sparkling, while Energy grew mid-teens. Stills grew high-single digits.

· In Italy, volumes declined 8.6%, primarily due to Water. Volume trends improved in Q4, with growth in Sparkling. In the year, Coke Zero volumes grew low-single digits and Coke Zero Sugar Zero Caffeine performed well. Adult Sparkling grew high-single digits, driven by both Kinley and Lurisia. In Water, we made deliberate choices to focus on profitable revenue growth, and as a result volumes declined over 25%. Stills overall declined over 20%, but only low-single digits excluding Water.

· In Ireland, volumes grew by 2.7%. Sparkling volumes were up by low-single digits, driven by Coke Zero, Sprite and Fanta. Energy grew in the mid-twenties, retaining good momentum. Stills were slightly down year-on-year, with a low-single digit decline in Water, partly offset by strong growth in premium water brands.

· In Switzerland, volumes increased by 1.6%. Sparkling volumes grew low-single digits with a strong performance from Adult Sparkling and Coke Zero. Energy volumes grew strongly. Stills volume was down low-single digits, impacted by Ready-to-Drink Tea, despite low-double digit growth in Sport Drinks.

Comparable EBIT in the Established segment increased by 23.0% and 24.1% on an organic and reported basis respectively, to ?381.1 million. Comparable EBIT margin was 11.3%, up 100 basis points on an organic basis, as operational leverage and cost control more than offset COGS inflation.

Net sales revenue grew by 18.2% and 21.5% on an organic and reported basis respectively, as well as positive foreign currency movements from the Polish Zloty and Hungarian Forint.

Organic net sales revenue per case increased by 20.2%, driven by pricing initiatives, and positive category and package mix.

Developing markets volume declined 1.7% on an organic basis, with a better performance in Q4. Sparkling volume declined slightly, while Energy delivered low-teens growth. Stills declined double-digits, as Water and Juice contracted.

· Poland volumes increased by 1.5%, despite lapping a strong performance in 2022. Sparkling grew by low-single digits, led by double-digit growth in Coke Zero and Sprite, and an encouraging performance from Coke Zero Sugar Zero Caffeine. Energy grew by low-teens and Coffee grew strongly. Stills volumes declined more than 20%, due to deliberate choices made in Water to prioritise profitable revenue growth.

· In Hungary, volumes declined by 5.3%, due to Stills. Encouragingly, we saw a return to volume growth in Q4. In the year, Sparkling grew slightly, despite being impacted by the incremental sugar tax effective July 2022, and Trademark Coke grew mid-single digits. Stills declined high teens, led by Water.

· Volume in the Czech Republic declined 12.6%, on tough comparatives. We saw declines in Sparkling and Stills, albeit with an improved performance in Q4. We actively drove robust price mix to manage cost inflation, particularly in the first half. Energy grew low-double digits and Coffee grew strongly.

Comparable EBIT in the Developing segment increased by 26.9% and 33.6% on an organic and reported basis respectively, to ?153.8 million. Comparable EBIT margin was 7.4%, up 50 basis points on an organic basis, as operational leverage and cost control more than offset COGS inflation.

Net sales revenue grew by 19.9% on an organic basis, or by 5.2% on a reported basis, as currency headwinds from the Nigerian Naira, Egyptian Pound and Russian Rouble offset strong organic growth and the impact of the consolidation of Multon for the first seven months of the year.

Net sales revenue per case grew 15.0% organically, driven by pricing actions taken throughout the year, proactively managing the impact of currency devaluation.

Emerging markets' volume grew by 4.3% organically and 9.2% on a reported basis, which includes the consolidation of Multon. Sparkling volumes grew by mid-single digits and Energy volume grew strong double-digits. Still volumes were broadly unchanged year-on-year.

· Volume in Nigeria grew by 1.8%, with high-single digit growth in Q4. We continued to consciously drive price mix to manage cost inflation and currency devaluations while addressing affordability and gaining both value and volume share. Trademark Coke volumes increased high-single digits and Energy continued to grow strong double-digits. Stills fell low-double digits, due to Water.

· Ukraine volume grew by 17.8%, with good results across the portfolio, on soft comparatives impacted by the war. Sparkling grew high-teens, led by Trademark Coke, Adult Sparkling and Fanta. Energy grew very strongly, and Juice and Ready-to-Drink Tea performed well.

· Volume in Romania declined by 8.3%, reflecting a challenging customer and consumer backdrop for the first nine months of the year. Trends improved in Q4, with volumes returning to growth. Sparkling volumes fell mid-single digits, although we drove low-single digit growth in Coke Zero and strong double-digit growth in Energy and Coffee. Stills declined high-teens.

· Volumes in Serbia increased by 2.2%. Sparkling grew low-single digits, and Energy delivered low-teens growth. Stills grew high-single digits.

· Volumes grew by 4.5% in Egypt on an organic basis, despite some macroeconomic headwinds, benefitting from our significant investment in commercial capabilities over the last two years. Sparkling grew, with a good performance in Coke Zero. We are encouraged by the launch of Energy, both Monster and Fury, which contributed positively to the results. Water grew high-single digits, with a rebound in the second half. Trademark Coke was impacted in Q4 by pushback against some western brands.

· Volumes in Russia grew by 12.1% on an organic basis. Compared to 2021, volumes were down around 30% on an organic basis. The local business continued to perform in line with expectations.

Comparable EBIT in the Emerging segment grew by 11.7% on an organic basis and 8.2% on a reported basis, to ?548.9 million. Operating profit grew strongly, driven by lower non-cash financial charges compared to prior-year period. Comparable EBIT margin was 11.6%, down 80 basis points on an organic basis, but up 30 basis points on a reported basis, reflecting the mix effect from currency headwinds.

Conference call

Coca-Cola HBC's management will host a conference call for investors and analysts on Wednesday, 14 February 2024 at 9:00 am GMT. To join the call, in listen-only mode please join via webcast. If you anticipate asking a question, please click here to register and find dial-in details.

Coca-Cola HBC Group

Coca-Cola HBC is a growth-focused consumer packaged goods business and strategic bottling partner of The Coca-Cola Company. We open up moments that refresh us all, by creating value for our stakeholders and supporting the socio-economic development of the communities in which we operate. With a vision to be the leading 24/7 beverage partner, we offer drinks for all occasions around the clock and work together with our customers to serve 740 million consumers across a broad geographic footprint of 29 countries. Our portfolio is one of the strongest, broadest and most flexible in the beverage industry, with consumer-leading beverage brands in the sparkling, adult sparkling, juice, water, sport, energy, ready-to-drink tea, coffee, and premium spirits categories. These include Coca-Cola, Coca-Cola Zero Sugar, Fanta, Sprite, Schweppes, Kinley, Costa Coffee, Caffè Vergnano, Valser, FuzeTea, Powerade, Cappy, Monster Energy, Finlandia Vodka, The Macallan, Jack Daniel's and Grey Goose. We foster an open and inclusive work environment amongst our 33,000 employees and believe that building a more positive environmental impact is integral to our future growth. We rank among the top sustainability performers in ESG benchmarks such as the Dow Jones Sustainability Indices, CDP, MSCI ESG, FTSE4Good and ISS ESG.

Coca-Cola HBC has a premium listing on the London Stock Exchange (LSE: CCH) and is listed on the Athens Exchange (ATHEX: EEE). For more information, please visit https://www.coca-colahellenic.com.

Special Note Regarding the Information set out herein

Unless otherwise indicated, the condensed consolidated financial statements and the financial and operating data or other information included herein relate to Coca-Cola HBC AG and its subsidiaries ('Coca-Cola HBC' or the 'Company' or 'we' or the 'Group').

Forward-Looking Statements

This document contains forward-looking statements that involve risks and uncertainties. These statements may generally, but not always, be identified by the use of words such as 'believe', 'outlook', 'guidance', 'intend', 'expect', 'anticipate', 'plan', 'target' and similar expressions to identify forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position and results, our outlook for 2024 and future years, business strategy and the effects of the global economic slowdown, the impact of the sovereign debt crisis, currency volatility, our recent acquisitions, and restructuring initiatives on our business and financial condition, our future dealings with The Coca-Cola Company, budgets, projected levels of consumption and production, projected raw material and other costs, estimates of capital expenditure, free cash flow, effective tax rates and plans and objectives of management for future operations, are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect our current expectations and assumptions as to future events and circumstances that may not prove accurate. Our actual results and events could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in the 2022 Integrated Annual Report for Coca-Cola HBC AG and its subsidiaries.

Although we believe that, as of the date of this document, the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we, nor our directors, employees, advisors nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. After the date of the condensed consolidated financial statements included in this document, unless we are required by law or the rules of the UK Financial Conduct Authority to update these forward-looking statements, we will not necessarily update any of these forward-looking statements to conform them either to actual results or to changes in our expectations.

Alternative Performance Measures

The Group uses certain Alternative Performance Measures ('APMs') in making financial, operating and planning decisions as well as in evaluating and reporting its performance. These APMs provide additional insights and understanding to the Group's underlying operating and financial performance, financial condition and cash flow. The APMs should be read in conjunction with and do not replace by any means the directly reconcilable IFRS line items. For more details on APMs please refer to 'Definitions and reconciliations of APMs' section.

5Refer to the 'Alternative Performance Measures' and 'Definitions and reconciliations of APMs' sections.

6Refer to the condensed consolidated income statement.

7Net Profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent.

Net sales revenue grew by 10.7% in 2023 compared to the prior year. These results were primarily driven by pricing initiatives and the consolidation of Multon for the first seven months of the year as well as mix improvements, which were partially offset by adverse foreign currency movements mainly in connection with the Nigerian Naira, the Russian Rouble and the Egyptian Pound. On an organic basis, net sales revenue grew by 16.9% during 2023, compared to the prior year.

Comparable and reported cost of goods sold increased by 9.4% and 9.5% respectively in 2023 compared to the prior year, due to input cost inflation and the consolidation of Multon for the first seven months of the year.

Comparable operating expenses increased by 10.1% in 2023 compared to the prior year, mainly driven by higher selling and administrative expenses. Operating expenses increased by 5.3% in 2023, due to higher selling and administrative expenses as well as the current-year impairment of goodwill predominantly related to the Group's operations in Egypt, which were partially offset by the cycling of prior-year's exceptional items related to Russia-Ukraine conflict and acquisition costs resulting from the change in control of Multon.

Exceptional items related to Russia-Ukraine conflict in the prior year consisted of net impairment losses for property, plant and equipment, equity method investments and goodwill, resulting from the Group's restructuring initiatives in Russia and the deterioration of Russia's macroeconomic environment.

Comparable operating profit grew by 16.6% in 2023, compared to the prior year, primarily reflecting the benefits from top-line growth resulting from pricing initiatives and mix improvements, partially offset by adverse foreign currency movements. Operating profit improved by 35.5% in 2023 compared to the prior year, due to top-line growth resulting from pricing initiatives and mix improvements as well as the cycling of prior-year's exceptional items related to Russia-Ukraine conflict and acquisition costs resulting from the change in control of Multon, partially offset by the current-year impairment of goodwill and adverse foreign currency movements.

Net finance costs decreased by ?34.4 million during 2023 compared to the prior year, mainly driven by higher finance income earned on the Group's cash, cash equivalents and financial assets, partially offset by the increased interest expense from the Green bond issued in September 2022.

On a comparable basis, the effective tax rate was 26.6% for 2023 and 26.4% for 2022. On a reported basis, the effective tax rate was 30.2% for 2023, impacted by the current-year impairment of goodwill, and 33.4% for 2022, respectively. The Group's effective tax rate varies depending on the mix of taxable profits by territory, the non-deductibility of certain expenses, non-taxable income and other one-off tax items across its territories.

Comparable net profit grew by 22.3% compared to the prior year, due to higher operating profitability and lower finance costs, partially offset by higher taxes, while net profit grew by 53.2%, further cycling the impact of prior-year's exceptional items related to Russia-Ukraine conflict and acquisition costs resulting from the change in control of Multon, partially offset by the current-year impairment of goodwill

Total non-current assets decreased by ?170.1 million during 2023, primarily driven by foreign currency translation, which was partially offset by the Group's continued investment in property, plant and equipment. Net current assets decreased by ?645.6 million, while non-current liabilities decreased by ?616.8 million during 2023 respectively, mainly due to the reclassification of the current portion of borrowings from non-current liabilities to current liabilities.

8Refer to the 'Definitions and reconciliations of APMs' section.

Net cash from operating activities increased by 12.3% or ?152.1 million during 2023, compared to the prior year, mainly due to increased operating profitability excluding non-cash charges, partially offset by higher taxes paid.

Capital expenditure increased by 14.5% in 2023, compared to the prior year. In 2023, capital expenditure amounted to ?674.9 million of which 53% was related to investment in production equipment and facilities and 17% to the acquisition of marketing equipment. In 2022, capital expenditure amounted to ?589.5 million of which 53% was related to investment in production equipment and facilities and 20% to the acquisition of marketing equipment.

In 2023, free cash flow increased by 10.3% or ?66.7 million, compared to the prior-year period, driven by the increased cash from operating activities, partially offset by increased capital expenditure.

Definitions and reconciliations of Alternative Performance Measures ("APMs")

1. Comparable APMs9

In discussing the performance of the Group, "comparable" measures are used. In 2023, the Group updated the definitions of items which are deducted from the directly reconcilable IFRS measures to calculate comparable APMs, to include impairment of goodwill and indefinite-lived intangible assets. This update was performed to provide more relevant information on the Group's ongoing operating and financial performance, considering also reporting by its peer group and had no impact on the comparative figures disclosed.

More specifically, comparable measures are calculated by deducting from the directly reconcilable IFRS measures the impact of the Group's restructuring costs, the mark-to-market valuation of the commodity hedging activity, the acquisition, integration and divestment-related costs, the impairment of goodwill and indefinite-lived intangible assets, the Russia-Ukraine conflict impact and certain other tax items, which are collectively considered as items impacting comparability, due to their nature. More specifically the following items are considered as items that impact comparability:

1) Restructuring costs

Restructuring costs comprise costs arising from significant changes in the way the Group conducts business, such as significant supply chain infrastructure changes, outsourcing of activities and centralisation of processes. These costs are included within the income statement line 'Operating expenses'; however, they are excluded from the comparable results so that the users can obtain a better understanding of the Group's operating and financial performance achieved from underlying activity. Restructuring costs resulting from initiatives driven by the Russia-Ukraine conflict are presented under the 'Russia-Ukraine conflict impact' item, to provide users complete information on the financial implications of the conflict.

2) Commodity hedging

The Group has entered into certain commodity derivative transactions in order to hedge its exposure to commodity price risk.

Although these transactions are economic hedging activities that aim to manage our exposure to sugar, aluminium, gas oil and plastics price volatility, hedge accounting has not been applied in all cases. In addition, the Group recognises certain derivatives embedded within commodity purchase contracts that have been accounted for as stand-alone derivatives and do not qualify for hedge accounting. The fair value gains or losses on the derivatives and embedded derivatives are immediately recognised in the income statement in the cost of goods sold and operating expenses line items. The Group's comparable results exclude the gains or losses resulting from the mark-to-market valuation of these derivatives to which hedge accounting has not been applied (primarily plastics) and embedded derivatives. These gains or losses are reflected in the comparable results in the period when the underlying transactions occur, to match the profit or loss to that of the corresponding underlying transactions. We believe this adjustment provides useful information related to the impact of our economic risk management activities.

3) Acquisition, integration and divestment-related costs or gains

Acquisition costs comprise costs incurred to effect a business combination such as finder's fees, advisory, legal, accounting, valuation and other professional or consulting fees as well as changes in the fair value of contingent consideration recognised in the income statement. They also include any gain from bargain purchase arising from business combinations, as well as any gain or loss recognised in the income statement from the remeasurement to fair value of previously held interests and the reclassification to the income statement of items of other comprehensive income resulting from step acquisitions. Integration costs comprise direct incremental costs necessary for the acquiree to operate within the Group. Divestment-related costs comprise transaction expenses, including advisory, consulting, and other professional fees to effect the disposal of a subsidiary or equity method investment, any impairment losses or write-downs to fair value less costs to sell recognised in the income statement upon classification as held for sale and any relevant disposal gains or losses or reversals of impairment recognised in the income statement upon disposal. These costs or gains are included within the income statement line 'Operating expenses', however, to the extent that they relate to business combinations or divestments that have been completed or are expected to be completed, they are excluded from the comparable results so that the users can obtain a better understanding of the Group's operating and financial performance achieved from underlying activity.

4) Impairment of goodwill and indefinite-lived intangible assets

Impairment losses recognised for goodwill and indefinite-lived intangible assets as well as reversals of impairment losses recognised for indefinite-lived intangible assets, are included within the income statement line 'Operating expenses'; however are excluded from comparable results so that the users can obtain a better understanding of the Group's ongoing operating and financial performance.

5) Russia-Ukraine conflict impact

As a result of the conflict between Russia and Ukraine, the Group recognised net impairment losses for property, plant and equipment, intangible assets and equity method investments as well as restructuring costs, in connection with the new business model in Russia and adverse changes to the economic environment. The Group also recognised incremental allowance for expected credit losses and write-offs of inventory and property, plant and equipment resulting from the Russia-Ukraine conflict. The aforementioned net impairment losses are included within the income statement line 'Exceptional items related to Russia-Ukraine conflict' so as to provide users with enhanced visibility over these items considering their materiality, while remaining costs are included within 'Operating expenses' and 'Cost of goods sold' lines of the income statement accordingly. Net impairment losses and other costs directly attributable to the Russia-Ukraine conflict are excluded from the comparable results so that the users can obtain a better understanding of the Group's operating and financial performance from underlying activity.

6) Other tax items

Other tax items represent the tax impact of (a) changes in income tax rates affecting the opening balance of deferred tax arising during the year and (b) certain tax-related matters selected based on their nature. Both (a) and (b) are excluded from comparable after-tax results so that the users can obtain a better understanding of the Group's underlying financial performance.

9Comparable APMs refer to comparable COGS, comparable gross profit, comparable operating expenses, comparable EBIT, comparable EBIT margin, comparable Adjusted EBITDA, comparable profit before tax, comparable tax, comparable net profit and comparable EPS

The Group discloses comparable performance measures to enable users to focus on the underlying performance of the business on a basis which is common to both periods for which these measures are presented. The reconciliation of comparable measures to the directly related measures calculated in accordance with IFRS is as follows:

Reconciliation of comparable financial indicators (numbers in ? million except per share data)

10 Net Profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent.

2. Organic APMs

Organic growth

Organic growth enables users to focus on the operating performance of the business on a basis which is not affected by changes in foreign currency exchange rates from year to year or changes in the Group's scope of consolidation ('consolidation perimeter') i.e. acquisitions, divestments and reorganisations resulting in equity method accounting. Thus, organic growth is designed to assist users in better understanding the Group's underlying performance.

More specifically, the following items are adjusted from the Group's volume, net sales revenue and comparable EBIT in order to derive organic growth metrics:

(a) Foreign Currency impact

Foreign Currency impact in the organic growth calculation reflects the adjustment of prior-year net sales revenue and comparable EBIT metrics for the impact of changes in exchange rates applicable to the current year.

(b) Consolidation perimeter impact

Current year volume, net sales revenue and comparable EBIT metrics, are each adjusted for the impact of changes in the consolidation perimeter. More specifically adjustments are performed as follows:

i. Acquisitions:

For current year acquisitions, the results generated in the current year by the acquired entities are not included in the organic growth calculation. For prior year acquisitions, the results generated in the current year over the period during which the acquired entities were not consolidated in the prior year, are not included in the organic growth calculation.

For current year step acquisitions where the Group obtains control of a) entities over which it previously held either joint control or significant influence and which were accounted for under the equity method, or b) entities which were carried at fair value either through profit or loss or other comprehensive income, the results generated in the current year by the relevant entities over the period during which these entities are consolidated, are not included in the organic growth calculation. For such step acquisitions of entities previously accounted for under the equity method the share of results for the respective period described above, is included in the organic growth calculation of the current year. For such step acquisitions of entities previously accounted for at fair value through profit or loss any fair value gains or losses for the respective period described above, are included in the organic growth calculation. For such step acquisitions in the prior year, the results generated in the current year by the relevant entities over the period during which these entities were not consolidated in the prior year, are not included in the organic growth calculation. However, the share of results or gains or losses from fair value changes of the respective entities, based on their accounting treatment prior to the step acquisition, for the current-year period during which these entities were not consolidated in the prior year are included in the organic growth calculation.

ii. Divestments:

For current year divestments, the results generated in the prior year by the divested entities over the period during which the divested entities are no longer consolidated in the current year, are included in the current year's results for the purpose of the organic growth calculation. For prior-year divestments, the results generated in the prior year by the divested entities over the period during which the divested entities were consolidated, are included in the current year's results for the purpose of the organic growth calculation.

iii. Reorganisations resulting in equity method accounting:

For current year reorganisations where the Group maintains either joint control or significant influence over the relevant entities so that they are reclassified from subsidiaries or joint operations to joint ventures or associates and accounted for under the equity method, the results generated in the current year by the relevant entities over the period during which these entities are no longer consolidated, are included in the current year's results for the purpose of the organic growth calculation. For such reorganisations in the prior year, the results generated in the current year by the relevant entities over the period during which these entities were consolidated in the prior year, are included in the current year's results for the purpose of the organic growth calculation. In addition, the share of results in the current year of the relevant entities, for the respective period as described above, is excluded from the organic growth calculation for such reorganisations.

The calculations of the organic growth and the reconciliation to the most directly related measures calculated in accordance with IFRS are presented in the below tables. Organic growth (%) is calculated by dividing the amount in the row titled 'Organic movement' by the amount in the associated row titled '2022 reported' or, where presented, '2022 adjusted'. Organic growth for comparable EBIT margin is the organic movement expressed in basis points.

Reconciliation of organic measures

11 Certain differences in calculations are due to rounding.

3. Other APMs

Adjusted EBITDA

Adjusted EBITDA is calculated by adding back to operating profit the depreciation and net impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the net impairment of equity method investments, the employee share option and performance share costs and items, if any, reported in line 'Other non-cash items' of the condensed consolidated cash flow statement. Adjusted EBITDA is intended to provide useful information to analyse the Group's operating performance excluding the impact of operating non-cash items as defined above. The Group also uses comparable Adjusted EBITDA, which is calculated by deducting from Adjusted EBITDA the impact of: the Group's restructuring costs, the acquisition, integration and divestment-related costs, the mark-to-market valuation of the commodity hedging activity and the impact from the Russia-Ukraine conflict. Comparable Adjusted EBITDA is intended to measure the level of financial leverage of the Group by comparing comparable Adjusted EBITDA to Net debt.

Adjusted EBITDA and comparable Adjusted EBITDA are not measures of profitability and liquidity under IFRS and have limitations, some of which are as follows: Adjusted EBITDA and comparable Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; Adjusted EBITDA and comparable Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future, and Adjusted EBITDA and comparable Adjusted EBITDA do not reflect any cash requirements for such replacements. Because of these limitations, Adjusted EBITDA and comparable Adjusted EBITDA should not be considered as measures of discretionary cash available to us and should be used only as supplementary APMs.

Free cash flow

Free cash flow is an APM used by the Group and defined as cash generated by operating activities after payments for purchases of property, plant and equipment net of proceeds from sales of property, plant and equipment and including principal repayments of lease obligations. Free cash flow is intended to measure the cash generation from the Group's business, based on operating activities, including the efficient use of working capital and taking into account its net payments for purchases of property, plant and equipment. The Group considers the purchase and disposal of property, plant and equipment as ultimately non?discretionary since ongoing investment in plant, machinery, technology and marketing equipment, including coolers, is required to support the day-to-day operations and the Group's growth prospects. The Group presents free cash flow because it believes the measure assists users of the financial statements in understanding the Group's cash generating performance as well as availability for interest payment, dividend distribution and own retention. The free cash flow measure is used by management for its own planning and reporting purposes since it provides information on operating cash flows, working capital changes and net capital expenditure that local managers are most directly able to influence.

Free cash flow is not a measure of cash generation under IFRS and has limitations, some of which are as follows: free cash flow does not represent the Group's residual cash flow available for discretionary expenditures since the Group has debt payment obligations that are not deducted from the measure; free cash flow does not deduct cash flows used by the Group in other investing and financing activities and free cash flow does not deduct certain items settled in cash. Other companies in the industry in which the Group operates may calculate free cash flow differently, limiting its usefulness as a comparative measure.

Capital expenditure

Capital expenditure is defined as payments for purchases of property, plant and equipment plus principal repayments of lease obligations less proceeds from sales of property, plant and equipment. The Group uses capital expenditure as an APM to ensure that the cash spending is in line with its overall strategy for the use of cash.

The following table illustrates how Adjusted EBITDA, Free Cash Flow and Capital Expenditure are calculated:

12Other non-cash items included in operating profit for 2022 relate to the net loss recognised in the income statement from the remeasurement to fair value of the previously held interest, the reclassification to the income statement of items of other comprehensive income and the gain from bargain purchase arising due to the change in control of Multon Z.A.O. group of companies ('Multon'), For more details, refer to Note 24 of the Group's 2022 Integrated Annual Report.

13Payments for purchases of property, plant and equipment for 2023 include ?12.3 million (2022: ?8.4 million) relating to repayment of borrowings undertaken to finance the purchase of production equipment by the Group's subsidiary in Nigeria, classified as 'Repayments of borrowings' in the condensed consolidated cash flow statement.

Net debt

Net debt is an APM used by management to evaluate the Group's capital structure and leverage. Net debt is defined as current borrowings plus non-current borrowings less cash and cash equivalents and financial assets (time deposits and money market funds), as illustrated below:

Return on invested capital ('ROIC')

ROIC is an APM used by management to assess the return obtained from the Group's asset base and is defined as the percentage of comparable net profit excluding net finance costs divided by the five-quarter average capital invested in the business ('capital employed'). Capital employed is defined as the average net debt and shareholders' equity attributable to the owners of the parent, as illustrated below. The Group presents ROIC because it believes the measure assists users of the financial statements in understanding the Group's capital efficiency.

14Tax shield is calculated as comparable effective tax rate times finance costs, net as illustrated below:

15Comparable effective tax rate is calculated as comparable tax divided by comparable profit before tax, as illustrated below:

16Five-quarter average net debt and equity attributable to owners of the parent are calculated as presented below:

*Certain differences in calculations are due to rounding.

Condensed consolidated financial statements for the six months and the year ended

31 December 2023

Condensed consolidated income statement (unaudited)

Condensed consolidated statement of comprehensive income (unaudited)

Condensed consolidated income statement (unaudited)

Condensed consolidated statement of comprehensive income (unaudited)

Condensed consolidated balance sheet (unaudited)

Condensed consolidated statement of changes in equity (unaudited)

1The amount included in other reserves of ?41.5 million represents the cash flow hedge reserve, including cost of hedging, transferred to inventories of ?51.4 million gain, and the deferred tax expense thereof amounting to ?9.9 million.

2The amount included in the exchange equalisation reserve of ?64.2 million loss for 2022 represents the exchange loss attributable to owners of the parent, mainly related to the Egyptian Pound, including ?34.8 million gain relating to the share of other comprehensive income of equity method investments and ?144.6 million gain relating to reclassification of share of other comprehensive income of equity method investments to the income statement arising from business combination.

The amount of other comprehensive income, net of tax included in other reserves of ?27.1 million gain for 2022 consists of cash flow hedges gain of ?31.1 million, share of other comprehensive income of equity method investments of ?0.6 million loss, valuation losses of ?0.1 million on equity investments at fair value through other comprehensive income, ?0.6 million gain relating to reclassification of share of other comprehensive income of equity method investments to the income statement arising from business combination, and the deferred tax expense thereof amounting to ?3.9 million.

The amount of ?443.2 million gain attributable to owners of the parent for 2022 comprises profit for the year, net of tax of ?415.4 million, actuarial gains of ?26.0 million and the deferred tax income thereof amounting to ?1.8 million.

The amount of ?8.8 million losses included in non-controlling interests for 2022, represents the exchange loss attributable to non-controlling interests of ?9.0 million, and the share of non-controlling interests in profit for the year, net of tax of ?0.2 million.

Condensed consolidated statement of changes in equity (unaudited)