TIDMFEVR
RNS Number : 1838Z
Fevertree Drinks PLC
13 September 2022
Fevertree Drinks plc
FY22 Interim Results to 30 June 2022
FY22 Interim Highlights
-- Strong top line performance with revenue growth of 14% year-on-year
-- Good recovery in the On-Trade channel during the first half,
with consumer demand remaining strong, especially in the US and
Southern European markets
-- As highlighted in July, pricing actions in our more
established markets and improvements in sales mix only partially
mitigated on-going industry-wide inflationary logistics and product
cost headwinds, resulting in a 670bps reduction in gross margin
-- We remain confident in the substantial long-term opportunity,
and therefore continue to invest for growth, increasing expenditure
on the brand, our people and our operations
-- The Group ended the period with a strong balance sheet,
underpinned by cash of GBP100m at period end, following payment of
the GBP50m special dividend announced in March
-- Recommending an interim dividend of 5.63 pence per share, an increase of 2% year-on-year
-- Reiterating guidance from July; FY22 revenue GBP355m -
GBP365m and EBITDA of GBP37.5m - GBP45m
GBPm H1 FY22 H1 FY21 Change
---------------------------- -------- -------- ---------
Revenue
UK 53.5 50.3 6%
US 40.1 36.2 11%
Europe Fever-Tree brand
revenue 46.5 36.7 27%
Europe total* 52.3 41.3 27%
ROW 15.0 14.0 7%
Total* 160.9 141.8 14%
Gross profit 60.1 62.5 (4)%
Gross margin 37.4% 44.1% (670)bps
Adjusted EBITDA [1] 21.9 29.2 (25)%
Adjusted EBITDA margin 13.6% 20.6% (700)bps
Diluted EPS (pence per
share) 12.08 17.44 (31)%
Dividend (pence per share) 5.63 5.52 2%
Cash 100.0 133.2 (25)%
---------------------------- -------- -------- ---------
*includes GDP's portfolio brands
Strategic highlights
-- Despite the challenging global operating environment,
Fever-Tree has continued to extend its premium market-leading
position in the UK, US, Europe and RoW
-- The Group has made significant progress on its strategic
priorities since the start of the year
o We remain the clear market leader in the UK (33% of Group
revenue), delivering revenue growth of 6% despite well-reported
industry challenges
o Positioning the brand for long term success in the US (25% of
Group revenue). US revenue was up 11% in the first half but
underlying demand is significantly higher with reported growth
impacted by Trans-Atlantic shipping challenges and a slower than
expected ramp up in local production on the East Coast of the US.
Our three-year compound annual growth rate at retail in the US is
almost three times the growth rate of the total mixer category. We
will continue to invest to capture the enormous potential we see
for our brand in this market
o Building scale and share across Europe (33% of Group revenue),
with growth of 27% driven by strong performance in Southern Europe
where the brand is seeing significant consumer pull and momentum.
Across Europe the Group drove around a third of total mixer
category growth at retail. As with the US we will continue to
invest in building our scale and potential in these markets
o Positioning the brand for the long term in large growth
markets in the RoW (9% of Group revenue), with growth of 7% but
adjusting for depletions, underlying growth is nearer 15%. Our
immediate focus is on the core markets of Australia and Canada
where the brand is performing well, but we are also focused on
wider opportunities globally as western drinking habits develop
over a longer time horizon
-- More specifically during this six-month period, we are very
pleased to report progress on the following growth initiatives:
o Successful initial trials positioning several Fever-Tree
products as premium Soft Drinks in the UK Off-Trade enabling the
Group to access a significant adjacent opportunity
o Extending into non-carbonated cocktail mixers in the US
through the acquisition of Powell & Mahoney just after period
end to accelerate the brand's entry into this notable new
category
o Important route-to-market evolution in Canada and Japan,
securing heavyweight new distribution partners reflecting the size
of the opportunity in our Rest of the World region
o Continued success with new product launches including a
Limited-Edition Passionfruit & Lime Tonic in the UK
Tim Warrillow, CEO of Fever-Tree, commented
"Fever-Tree has delivered a robust revenue performance in the
first half of 2022, with a particularly strong performance in
Europe as the On-Trade recovered. Demand has been strong in the US
and we have continued to increase our availability on shelf
enabling us to deliver a record month in August, a fantastic
achievement by the team.
Alongside driving topline growth, the business remains extremely
focused on mitigating the industry-wide cost impacts and whilst we
are still highly mindful of the extreme volatility impacting
energy-related and logistics costs, we do expect to see a gradual
decrease in our exposure over the medium term.
The strength of the Fever-Tree brand is providing exciting
opportunities to recruit new consumers and extend into significant
adjacent categories, with the opportunity in premium soft drinks in
the UK and non-carbonated cocktail mixers in the US both extremely
compelling.
The long-term opportunity for the business remains very
significant and we continue to focus on investing in our products,
marketing activities and our team. As the global leader of the
premium mixer category we remain at the centre of the
well-established trends to premiumisation and long-mixed drinks
whilst also perfectly positioned to explore these incremental
opportunities."
There will be live audio webcast on Tuesday 13(th) September
2022 at 10:00am BST. The webcast can be accessed via:
Fever-Tree FY22 Interim Results webcast
For more information please contact:
Investor queries
Ann Hyams, Director of Investor Relations I
ann.hyams@fever-tree.com I +44 (0)2045 168 106
Media queries
Oliver Winters, Director of Communications I
oliver.winters@fever-tree.com I +44 (0)770 332 9024
Nominated Advisor and Joint Broker - Numis Securities
Stuart Dickson I Hugo Rubinstein I +44 (0)20 7260 1000
Joint Broker - Investec Bank plc
David Flin I Alex Wright I +44 (0)20 7597 5970
Financial PR advisers - FGS Global
Faeth Birch +44 (0)7768 943 171;Anjali Unnikrishnan +44 (0)7826
534 233; Carolina Neri +44 (0)7502127516
Strategic update I Strong performance with On-Trade recovering
well
GBPm H1 FY22 H1 FY21 change constant
currency
change
-------------------- -------- -------- ------- ----------
Revenue
UK 53.5 50.3 6% 6%
US 40.1 36.2 11% 9%
Europe Fever-Tree
brand revenue 46.5 36.7 27% 31%
Europe total* 52.3 41.3 27% 31%
ROW 15.0 14.0 7% 5%
Total* 160.9 141.8 14% 14%
-------------------- -------- -------- ------- ----------
Fever-Tree delivered a strong top line performance in the first
half of 2022. Revenue of GBP160.9m was an increase of 14%
year-on-year and was achieved despite the Omicron variant impacting
On-Trade performance at the start of the year, alongside logistics
disruptions impacting our ability to fulfil against the strong
demand we are seeing in the US.
The wider On-Trade market rebounded particularly well in the US
and Southern Europe. In the US On-Trade sales have been
consistently ahead of pre-Covid, 2019 levels [2] , and in Europe
sales have built strongly to surpass 2019 levels, supported by the
return of the tourism industry to Southern Europe. In the UK the
On-Trade has experienced a steadier build, with pre-Covid levels
reached at the start of the second quarter(2) .
Fever-Tree has made significant strategic progress since the
start of the year. This includes the expansion into two adjacent
categories; premium soft drinks in the UK and non-carbonated
cocktail mixers in the US, both of which present significant
long-term opportunities for the brand. Alongside this, within our
core mixers we continue to launch new, innovative products
including a Limited-Edition Passionfruit & Lime Tonic in the
UK, a Blood Orange Ginger Beer in the US, as well as broadening the
distribution of our Premium Soda range across Europe to capitalise
on the growing Spritz occasion.
The Group continues to partner with a range of spirits brands
across the world, with a greater focus on the On-Trade during the
first half of the year as this channel rebuilt and events returned.
In addition, we have made two significant route-to-market changes,
transitioning to Tree of Life in Canada, and Asahi Breweries in
Japan, reflecting the size of the opportunity in those markets.
Alongside driving topline growth, the business remains extremely
focused on mitigating the industry-wide cost impacts, as well as
more specific cost headwinds, such as elevated sea freight costs,
which we will gradually decrease our exposure to through the
increasing localisation of production. We are also mindful of the
challenges facing our customers and consumers due to rising energy
costs and inflation more broadly, but believe we are well-placed
with our strong relationships and affordable premium price-point,
and therefore remain confident of delivering our plan in the second
half of the year.
Doing business in the right way, with our colleagues,
communities, and environment in mind, remains central to everything
we do at Fever-Tree. In the first six months of 2022 we have
focused on our Climate and Conservation branches of our five-branch
sustainability framework.
Having become carbon neutral in the UK last year following a
full cradle-to-grave lifecycle analysis of our greenhouse gas
emissions across, we continue to work towards, and remain committed
to, being carbon neutral globally by 2025 using science-based
emission reduction targets. A great example of how the business is
benefitting operationally, financially and in terms of carbon
reduction is through the localisation of our production in the US,
and in Australia next year. We are also making progress under our
Conservation branch, partnering with All Bar One, one of our
largest On-Trade customers in the UK, to support the rollout and
conservation of the Tiny Forests network being planted across the
UK.
UK I Increasing share and brand awareness
Fever-Tree delivered UK revenue of GBP53.5m in the first half of
the year, an increase of 6% year-on-year.
The On-Trade rebuilt steadily during the period, with
Fever-Tree's On-Trade sales increasing by c.73% year-on-year in the
first half, as we annualised lockdowns and restrictions during the
first half of 2021. The work we did to support our customers during
periods of On-Trade closure over the last two years have put us in
a strong position and we now have over 50% value share of the mixer
category in that channel, which is our highest ever share with an
increase of 3.1% compared to pre-Covid levels [3] .
The return of events this year has created more opportunities
for consumers to enjoy and trial the brand, as well as increasing
the brand's visibility. We have increased our presence with
Fever-Tree bars at a variety of events around the UK, including
Royal Ascot, The Oval and Polo in the Park, enabling us to showcase
new drinks and occasions, including a number of Spritz serves,
which have been performing particularly strongly.
Alongside mixers, the spirits category continued to perform
well, growing its On-Trade sales value by 15.6% and value share by
3.4ppts compared to 2019(3) , with premiumisation trends just as
strong and forecast to continue [4] . Fever-Tree is best placed to
capitalise on the movement to premium long mixed drinks and we are
increasingly engaging with spirits companies through co-promotions
across a number of spirit and mixer occasions, including gin &
tonic, whisky & ginger, and vodka & soda.
In the Off-Trade, the Group was lapping a very strong period of
sales in this channel last year when the On-Trade was closed,
resulting in sales decreasing by 21% compared to H1 2021. Despite
this, Fever-Tree has grown volume share within the category, is in
more UK households than any other mixer brand [5] and remains the
leading premium mixer brand at UK retail, with a rate-of-sale on
shelf seven times higher than the average rate-of-sale of other
premium mixers [6] .
Taking the entire UK mixer market into account, across both
channels, Fever-Tree remains the clear leader of the mixer
category, with c.45% value share, over twenty times the nearest
premium mixer brand, and almost 50% higher than Schweppes [7] .
The Group has continued to invest in marketing during the first
half of the year, with the launch of our new campaign "We'd say
T&G", which included our first national appearance on UK radio
stations, aiming to reach 3/4 of all adults during the summer. Our
investment behind the brand has proved hugely successful, with
Fever-Tree's prompted awareness now as high as 90% amongst spirit
and mixer drinkers, and 44% of consumers who drink spirits and
mixers claim to know the brand "very well", +5ppts year-on-year and
almost 4x higher than the next premium brand [8] .
The first half of 2022 has also seen two exciting adjacencies
being explored.
We have long understood that our products' natural ingredients,
adult flavour profiles and low-calorie options, alongside the
sophistication of our brand, means we are ideally positioned to
extend into the premium soft drink occasion. This has been
underpinned by initial trials we have conducted with a major UK
retailer over the last 12 months, which has seen a small number of
our products placed within the soft drink section of the store. The
results of this trial have been extremely encouraging with our
Ginger Beer SKU rapidly achieving the highest rate of sale for the
single serve format within the category, and the range outselling
many of the long established premium soft competitors.
While at a relatively early stage, we believe the category
presents a significant long-term adjacency for the brand. In the
near term the trial has led to wider, incremental distribution
across many of our major UK retail partners and will see the launch
of a 4x250m can format to support the roll out in the second half.
This will be followed by new flavours and extending into other
channels as we build out the opportunity in the coming years.
The second exciting opportunity has been the launch of our first
airport bar at Edinburgh airport, which opened in May. This has
provided a great way to showcase the brand and increase brand
exposure in a new setting where premium long-mixed Fever-Tree
drinks are served alongside small sharing plates. The bar has been
a big success since opening, with clear consumer demand for the
offering in that setting, demonstrating the potential for an
exciting new platform to increase the brand's visibility that we
can take to other markets globally over time.
Overall, Fever-Tree has made good progress in the UK during the
first half of 2022. We have been encouraged by the brand's
performance in the On-Trade as it recovers, as well as increasing
our volume share in the Off-Trade, and extending our brand
awareness, supported by marketing campaigns, activations and
co-promotions. We have also made important strategic steps into
exciting new adjacencies as we continue to invest for long-term
growth and remain confident about the long-term opportunity in our
home market.
US I Positioning the brand for long-term success
Fever-Tree's revenue for the first half of the year increased by
11% to GBP40.1m (up 9% at constant currency). Demand for the brand
remains strong and was significantly ahead of this result, which
was impacted by inventory restrictions towards the end of the
period caused by disruption and delays in trans-Atlantic shipping
alongside a slower than expected ramp of East Coast production.
Following steps taken to address these challenges, inventory is
recalibrating post period end and our performance is improving,
reflecting the underlying momentum as we refill pipelines with
customers and distributors.
The wider On-Trade channel in the US has rebounded quickly, with
sales surpassing pre-Covid levels from the start of the year.
Fever-Tree's On-Trade sales have also been strong, driven by new
mandates and distribution gains, including more than 1,000 new
points of distribution in Marriott Hotels, along with new accounts
at Disney and Hilton Luxury Hotels. Since the end of 2021
Fever-Tree has increased our number of On-Trade accounts by 20% and
our total points of distribution by 33% as we strengthen our
position as the premium mixer of choice in this channel.
Alongside the significant progress in the On-Trade, the brand
has continued to perform well in the Off-Trade. Our retail sales in
H1 increased by 16% year-on-year and 144% compared to 2019 [9] .
Further, our three-year growth rate (CAGR) is almost three times
the growth rate of the total mixer market and we have grown our
share by 1.6ppts(10) ensuring that we remain the clear premium
mixer market leader in retail, which remains a fast-growing
category.
The growth we are achieving in the US is being driven by our
multi-channel approach to brand-building, our strategic
innovations, and our distribution gains, alongside the supportive
macro trends to long mixed drinks. We continue to place a lot of
emphasis on marketing and investment to grow Fever-Tree's brand
awareness with both consumers and the trade. In the first half of
the year the brand has focused on a range of campaigns across
YouTube, social media, and Hulu with video content highlighting our
ingredients, provenance and "how to" mix. We also continued to
re-allocate spend back into the On-Trade with pop-up bars to
increase brand visibility and provide consumers with a fantastic
experience as they enjoy perfectly crafted cocktails using a range
of Fever-Tree mixers.
Tracking consumer drinking trends enables us to innovate in the
most impactful way, creating mixers to pair with popular,
fast-growing and premiumising spirits. The launch of our Sparkling
Pink Grapefruit mixer exemplifies this, as mixing it with either
Tequila, the fastest growing and most premium spirit, or Vodka, the
largest spirit category, creates a perfect Paloma or Spritz serve.
It's therefore no surprise that Sparkling Pink Grapefruit has been
our fastest growing new product launch, and continues to contribute
c.50% to the total sparkling grapefruit category growth(10) . The
latest exciting addition to the portfolio this month is Blood
Orange Ginger Beer, with the aim of replicating the success we've
had adding flavours to our Tonic range as a way to stimulate growth
by recruiting new consumers and prompting existing consumers to try
something new.
Alongside extending our range of carbonated mixers, we are also
extending into the significant opportunity within the
non-carbonated cocktail mixer category in the US. This segment of
the mixer market is the same size as the Tonic Water and Ginger
Beer markets combined and is growing and premiumising at pace(10) .
We believe Fever-Tree is well-placed to enter this category, given
our established credentials as the US's largest premium mixer, our
proven track-record in innovation to compliment popular spirits,
and our strong customer relationships and route to market.
Consequently, in August 2022 we acquired Powell & Mahoney, a
premium non-carbonated US cocktail mixer brand, with national
retail listings and an asset light business model with an
established production partner. We believe the acquisition will
provide Fever-Tree with the ideal platform to accelerate its entry
into this exciting adjacent category.
As demonstrated above, the Group's ambition and confidence in
the US opportunity continues to grow. We have been encouraged by
our performance in the On-Trade, our momentum in the Off-Trade, and
continue to see new opportunities for growth in this substantial
market.
Europe I Strong first half, building on a well-established
foundation
Our European business delivered a strong first half performance
with revenue for the first half increasing by 27% year-on-year (31%
at constant currency), driven by a strong return of the On-Trade in
our key European markets. The main contributors to this
outperformance have been Italy, France and Spain where increasing
retail distribution has led to market share gains alongside the
strong On-Trade rebound, as well as increasing brand awareness
driven by investment in television marketing campaigns in Spain and
Italy over the past 12 months.
The On-Trade started the year with various restrictions still in
place but accelerated in the second quarter fueled by pent-up
demand and the return of tourism. Consequently, the On-Trade made
up just over 50% of Fever-Tree's European revenues in the first
half of 2022. Both channels have seen good growth compared to
pre-Covid levels, contributing to a total sales growth of over 50%
since 2019.
Fever-Tree continues to perform strongly and drive
premiumisation across Europe. In the Off-Trade, Fever-Tree
contributed to just under a third of the total branded mixer
category value growth across Europe over the last year [10] , well
ahead of any other premium brand. We are extending our premium
leadership across our markets, with particularly strong
performances over the last three years in France and Italy, where
we've grown five times and four times faster than the market
respectively (11) .
We have continued to invest across the region with a range of
marketing activities, from traditional above-the-line campaigns to
On-Trade activations, social media campaigns, and television
adverts. A lot of the focus in our above-the-line campaigns have
been on our new, bright, eye-catching flavours, such as Rhubarb
& Raspberry which command consumer attention and make the brand
instantly visible. We have also continued our good work in the
Off-Trade during covid, with significant retail displays and
co-promotions, both of which have driven more distribution and
sales.
As the On-Trade has returned, we have been able to increase our
marketing activities in this important channel, using large
flagship accounts to increase the brand's presence with Fever-Tree
branded chairs, parasols, glassware and 'Perfect Serve' menus to
ensure the brand is being enjoyed across a range of occasions.
The business has also been investing in online and
television-based campaigns more recently, including our first ever
comprehensive digital and social media campaign in Belgium and The
Netherlands to showcase our ingredient quality and how to create
serves using our "perfect pairings". This activity has been
achieving high levels of engagement and can be used as a blueprint
for similar projects across other markets. In addition, the brand
launched its first ever television advert in Italy, a national
campaign with a 30 second advert focusing on our "3/4" message,
ingredients and quality. We have already seen a significant impact
from this campaign, with a 60% increase in our brand awareness
across the country after the advert aired in May and June [11]
.
The brand continues to make excellent progress across Europe,
with good growth in all our markets over the last three years and
an acceleration in Southern Europe in H1 2022 as the On-Trade
re-opened and tourism returned. We continue to premiumise and drive
growth in the mixer category, extending our market-leading position
and remain the only premium mixer brand with significant scale
across the region. Our strong investment behind the brand is
indicative of our confidence in the opportunity across Europe,
supported by macro trends such as the increasing popularity of long
mixed drinks and premiumisation of the spirit category.
RoW I Good progress in key markets with significant route to
market evolutions
Fever-Tree delivered revenue of GBP15.0 million in our Rest of
the World region in the first half of the year, a 7% increase
compared to H1 2021 (5% at constant currency). We were lapping some
strong comparators from last year but our underlying growth across
the region was slightly stronger, at c.15% when we look at
depletions.
In Australia, Fever-Tree grew by 53% in the Off-Trade over the
last year and is driving all of the growth and premiumisation in
the mixer category. The Tonic category is doing particularly well
as Gin & Tonic continues to lead the growth of long mixed
drinks, especially at the premium end, and Fever-Tree Tonics are
growing four times faster than the wider Tonic category [12] . We
continue to win new shelf space, with more than 2,000 additional
points of distribution secured in Coles in the first half of the
year and our new can format enhancing sales through the recruitment
of new consumers to the brand. As well as increasing the brand's
presence on shelf, we continue to activate the brand in the
On-Trade. Our latest Gin & Tonic Festival was held in Brisbane
after the success of the event in Sydney last year, extending the
brand's presence across the country with consumers and the
trade.
In Canada, consumers are increasingly drinking and premiumising
their long-mixed drinks as both spirit and mixer categories
continue to premiumise. Fever-Tree is helping to drive the growth
and premiumisation of the mixer category, increasing our sales at
over five times the rate of the total mixer category over the last
three years. This growth has come across all key mixer categories,
with Ginger Beer doing particularly well in the first half of 2022
and new launches in the Soda & Sparkling category adding to our
growth as we expand our portfolio into Spritz occasions. As well as
expanding into new categories, Fever-Tree continues to hold
approximately a third of the market share in the Tonic category and
has grown to c.28% of the Ginger Beer category, an increase of
6ppts in the last year [13] .
As we look to the long-term opportunity in Canada, we have also
made a significant step-change in our route-to-market this year by
transitioning to a new much more powerful distributor, Tree of
Life. With over 70 years of experience in the Canadian market, Tree
of Life are well-positioned to support our growth ambitions in the
market, with their strong sales team, broad, multi-channel
coverage, and comprehensive geographic reach.
In Asia we have also made an important change to our
route-to-market. The brand has agreed to take on Asahi Breweries as
our new distribution partner in Japan, with a three-year exclusive
deal starting in January 2023, this move is reflective of Asahi's
belief in the significant future opportunity of the premium mixer
and adult soft drink category and we are excited about working with
a company of their size and influence to go after the opportunity
in this potentially valuable market.
The Group continues to grow strongly in this region, where we
see substantial growth opportunities in a number of markets. We
have extended our premium market-leading position in Australia and
Canada and continue to take steps to position us for longer term
opportunities across markets as the long-mixed drink trend gathers
momentum globally.
Operational review
The Group continues to expand its global production network,
with ten sites currently providing capacity and flexibility as we
scale globally, with further expansion expected in 2023. While this
has diversified our production volumes away from our core UK
bottler, as we build volumes through regional production networks
we will recapture economies of scale and be in a strong position to
drive improvements in costs per unit. In addition, increasingly
localising our US and Australian production over the next two years
will reduce our exposure to sea freight costs, as well as reducing
our carbon footprint.
The level of disruption and uncertainty remains high, with rapid
shifts in the operational and cost backdrop. Specifically, labour
shortages at our East Coast bottler in the US have impacted our
ramp up, resulting in greater production volumes required from the
UK, and has increased our exposure to sea freight costs in the
short-term. We are working closely with our US bottling partner,
who have reinforced their senior management team in recent weeks
and we have co-authored a detailed operational plan focussed on
recruitment, training and additional shift patterns in order to
increase daily output levels over the remainder of the year.
In addition, glass availability will be restricted across our
suppliers in the second half of the year, which will limit our
opportunity to deliver revenue upside despite the strong demand
we're seeing across our markets. We are working with our suppliers
to secure our 2023 glass requirements against a backdrop of
inflationary cost pressure, driven predominantly by the currently
elevated gas pricing.
Financial review
The Group has continued to make strategic progress in the first
half of 2022, whilst navigating the on-going logistics disruption
and intensifying cost headwinds prevalent across the industry.
Revenue of GBP160.9m (H1 2021: GBP141.8m), with growth of 14%
(14% at constant currency) was a strong performance, with the
On-Trade showing promising signs of recovery and demand remaining
strong, especially in our growth markets.
The Group generated an adjusted EBITDA of GBP22.0m (H1 2021:
GBP29.2m), a 24.7% decrease year-on-year. As anticipated, gross
margins have been impacted by inflationary cost pressures and
continued exposure to elevated Trans-Atlantic freight costs, which
were only partially off-set by an improved channel and regional
mix, and pricing actions taken in our more established markets.
Despite these impacts we continue to invest behind the brand, our
team and our operations as we remain focused on the significant
opportunity ahead. Operating expenditure has been maintained at
23.7% of Group revenue (H1 2021: 23.5%) and as a result, the
impacts on gross margin have translated to a reduction in EBITDA
margin to 13.6% (H1 2021: 20.6%).
Whilst working capital improved, the reduction in EBITDA margin
drove a lower level of operating cash flow conversion, which
alongside the payment of the GBP50m special dividend announced at
the 2021 full year results in March, has resulted in a reduction in
cash held to GBP100.0m (H1 2021: GBP133.2m). The balance sheet
remains strong and the Board is recommending an interim of dividend
of 5.63pence per share, an increase of 2% year-on-year.
GBPm H1 FY22 H1 FY21 Change
-------- --------
Revenue 160.9 141.8 14%
------------------- -------- -------- ---------
Gross profit 60.1 62.5 (4)%
------------------- -------- -------- ---------
Gross margin 37.4% 44.1% (670)bps
------------------- -------- -------- ---------
Adjusted EBITDA 22.0 29.2 (25)%
------------------- -------- -------- ---------
Adjusted EBITDA
margin 13.6% 20.6% (700)bps
------------------- -------- -------- ---------
Operating profit 17.4 25.3 (31)%
------------------- -------- -------- ---------
Profit before tax 17.6 25.3 (30)%
------------------- -------- -------- ---------
Cash 100.0 133.2 (25)%
------------------- -------- -------- ---------
Gross margin
Gross margin of 37.4% represents a reduction from the 44.1%
gross margin reported in the first half of 2021. The main factors
impacting gross margin were:
-- Inflationary cost increases impacting underlying product
costs and logistics costs across regions.
-- Further increases in the underlying cost of sea freight, with
on-going exposure to Trans-Atlantic freight costs as UK-produced
stock is required to underpin US growth until East Coast production
increases to the required levels.
-- Whilst both pricing actions in our established regions and
changes in channel and regional mix drove margin improvement, this
was not sufficient to off-set the impact of the inflationary
headwinds in the first half.
As previously guided, we expect inflationary cost pressures to
have an increased impact in the second half of the year. Whilst
disruption and uncertainty remain elevated across categories, the
most notable impacts are expected to relate to the cost of glass
bottles, where a sustained elevation in gas price is being passed
through by suppliers against a backdrop of limited glass
availability across the Group's suppliers in the UK and Europe.
Alongside this, a slower ramp up of the East Coast bottling line
than planned has necessitated an increased level of UK production
for the US, and a continued exposure to elevated Trans-Atlantic
freight costs in the second half, where underlying charges on key
routes are up c. 50% since the beginning of the year.
Our team is extremely focused on navigating the current
challenges we are facing. In the short term, we are working closely
with our network of suppliers to secure our 2023 requirements, and
with our US bottling partner to ensure the East coast production
line is ramping up to required levels in order to reduce our
exposure to Trans-Atlantic shipping charges in 2023.
We continue to invest in the operational capabilities that will
underpin the growth opportunity. We have made experienced new hires
in our global supply chain team and are working on a substantial
program of activities to mitigate near term inflation, and
crucially, to also set the business up for longer term profitable
growth. These actions can be broadly grouped into four key
areas:
1. Expanding our production footprint: establishing capacity
closer to our key growth markets to minimise transport costs,
optimise our inventory holdings and facilitate quicker reactions to
market dynamics, with a focus on establishing US canning and
Australian bottling during 2023.
2. Optimising our existing footprint: working closely with our
current partners to drive efficiency and effectiveness as we manage
our increasing complexity.
3. Procurement: leveraging our global scale, widening and
on-shoring our supplier base, such as sourcing glass locally in the
US, and ensuring our contracts are calibrated for both the current
disruptive environment and our longer term growth as we scale
through our regionalised production footprint.
4. Technology: underpinning all of the above is a wide-ranging
programme to embed technology across our global operations that
will give us best in class ways of working, data and insights to
manage near term disruption, as well as underpinning our future
growth.
Operating expenditure
Underlying operating expenses increased by 14.5% in the first
half of the year to GBP38.2m (H1 2021: GBP33.3m) and remained
broadly consistent with the prior year at 23.7% of Group revenue
(H1 2021: 23.5%)
We continue to invest behind the brand, including a radio
advertising campaign in the UK and first national television
advertising in Italy, where we are seeing strong growth. Our
marketing spend in the first half of the year was 10.2% of
Fever-Tree brand revenue (H1 2021: 9.9%) and we expect it to remain
at this level for the remainder of the year. Staff costs and other
overheads increased by 13.8% and remained consistent at 13.9% of
Group revenue in the first half of the year (H1 2021: 13.9%).
The Group generated an adjusted EBITDA of GBP22.0m, a 24.7%
decrease on the first half of 2021 (H1 2021: GBP29.2m). The
dilution in gross margin, due mainly to inflationary cost pressures
and continued exposure to elevated Trans-Atlantic freight charges,
coupled with maintained levels of underlying operating expenditure
as a proportion of revenue, has resulted in a retraction in
adjusted EBITDA margin to 13.6% (H1 2021: 20.6%).
Depreciation reduced marginally to GBP1.6m (H1 2021: GBP1.8m)
whilst amortisation remained flat at GBP0.8m (H1 2021: GBP0.8m).
Share based payments increased to GBP2.2m (H1 2021: GBP1.3m). As a
result of these movements, the 24.7% decrease in adjusted EBITDA
translates to a 31.2% decrease in operating profit to GBP17.4m (H1
2021: GBP25.3m).
Tax
The effective tax rate in the first half of 2022 was 19.8% (H1
2021: 19.5%) and was in line with expectations.
Earnings per share
The basic earnings per share for the period are 12.10 pence (H1
2021: 17.47 pence) and the diluted earnings per share for the
period are 12.08 pence (H1 2021: 17.44 pence), a decrease of
30.7%.
In order to compare earnings per share period on period,
earnings have been adjusted to exclude amortisation and the UK
statutory tax rates have been applied (disregarding other tax
adjusting items). On this basis, normalised earnings per share for
the first half of 2022 are 12.87 pence (2021: 18.14 pence), a
decrease of 29.1%.
Balance sheet and working capital
Working capital increased marginally to GBP76.3m (H1 2021:
GBP73.8), improving to 23.1% of last twelve months' revenue (H1
2021: 25.5%). Period end receivables increased at a slower rate
than revenue growth and recoverability has remained strong, with a
comparable ageing profile year on year. Whilst inventory levels
increased in line with revenue, period end inventory is more
weighted to goods in-transit to the US compared to goods in
warehouse, reflecting the inventory pinch points experienced in the
US towards the end of the period as UK-produced goods were held on
vessels unable to enter congested US ports.
Whilst working capital has improved, the reduction in EBITDA
margin has resulted in cash generated from operations reducing to
6% of adjusted EBITDA (H1 2021: 22%). We expect working capital to
further reduce in the second half of the year and drive improvement
in operating cash flow conversion.
Cash and Dividend
The Group's cash position reduced in the first half of the year
as a result of paying the special dividend announced at the 2021
full year results in March, alongside a reduction in operating cash
flow conversion. The Group continues to retain a strong cash
position of GBP100.0m, and this not only underpins our confidence
in navigating the challenging operating environment but also allows
us to continue to focus on making the correct strategic choices for
the long-term health of the Fever-Tree brand and success of the
business.
As a reflection of our confidence in the financial strength of
the Group the Directors are pleased to declare an interim dividend
of 5.63 pence per share, 2% ahead of the 2021 interim dividend. The
dividend will be paid on 21 October 2022, to shareholders on the
register on 30 September 2022.
Post period event
In August the Group completed the acquisition of Powell &
Mahoney LLC ("P&M"), a premium non-carbonated cocktail mixer
company based in the US for a deal value of $5.9m. P&M operate
an outsourced business model, and the Group will inherit a strong
relationship with a local US bottler alongside a well-established
footprint of listings within US retail. The acquisition will
provide the platform for the Group to accelerate its entry into the
non-carbonated cocktail mixer category in the US, with exciting
Fever-Tree innovation to announce in due course.
FY22 Outlook and Guidance
Fever-Tree remains committed to investing in the substantial
future opportunity for the brand across our regions, enabled by the
Group's strong balance sheet and conviction in our ability to
deliver long-term sustainable growth.
We continue to operate within an exceptionally challenging
environment and our team remains focused on balancing the
mitigation of on-going cost challenges whilst prioritising
continuity of supply. Uncertainty and the risk of disruption
remains elevated, whilst wider inflationary cost pressures,
especially with respect to underlying energy pricing, will continue
to impact our business as well as impacting our suppliers,
production partners, customers and consumers.
Whilst we acknowledge this elevated uncertainty, our performance
has remained in line with the revised guidance provided in July,
and so are reiterating our revenue guidance range of GBP355 million
to GBP365 million for the full year, with a gross profit margin in
a range of 33% to 35%, and an EBITDA range of c. GBP37.5 million to
GBP45 million.
Consolidated statement of comprehensive income
For the six months ended 30 June 2022
Notes Unaudited 6 Unaudited 6 Audited
months to 30 months to 30 year to
June 2022 June 2021 31 December
GBPm GBPm 2021
GBPm
Revenue 2 160.9 141.8 311.1
Cost of sales (100.8) (79.3) (180.2)
============== ============== =============
Gross profit 60.1 62.5 130.9
Administrative expenses (42.7) (37.2) (75.3)
Adjusted EBITDA 1 22.0 29.2 63.0
Depreciation (1.6) (1.8) (3.2)
Amortisation (0.8) (0.8) (1.5)
Share based payment charges (2.2) (1.3) (2.7)
================================ ====== ============== ============== =============
Operating profit 17.4 25.3 55.6
Finance costs
Finance income 0.3 0.1 0.3
Finance expense (0.1) (0.1) (0.3)
Profit before tax 17.6 25.3 55.6
Tax expense (3.5) (4.9) (11.0)
============== ============== =============
Profit for the year /
period 14.1 20.4 44.6
Items that may be reclassified
to profit or loss
Foreign currency translation (0.1) - -
difference of foreign
operations
Effective portion of
cash flow hedges (1.6) (0.6) (1.3)
Related Tax 0.3 - 0.3
============== ============== =============
(1.4) (0.6) (1.0)
Comprehensive income
attributable to equity
holders of the parent
company 12.7 19.8 43.6
Earnings per share for
profit attributable to
the owners of the parent
during the year
Basic (pence) 4 12.10 17.47 38.29
Diluted (pence) 4 12.08 17.44 38.19
Consolidated statement of financial position
30 June 2022
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December
GBPm GBPm 2021
GBPm
Non-current assets
Property, plant & equipment 9.2 9.9 9.6
Intangible assets 48.4 48.0 47.7
Deferred tax asset 3.0 3.0 2.8
Other financial assets - - -
============== ============== =============
Total non-current assets 60.6 60.9 60.1
============== ============== =============
Current assets
Inventories 53.3 47.8 36.2
Trade and other receivables 77.5 70.7 70.3
Derivative financial
instruments - - 0.9
Corporation tax asset 3.1 - 2.4
Cash and cash equivalents 100.0 133.2 166.2
============== ============== =============
Total current assets 233.9 251.7 276.0
============== ============== =============
Total assets 294.5 312.6 336.1
============== ============== =============
Current liabilities
Trade and other payables (54.4) (44.7) (49.4)
Loans and other borrowing (0.1) (0.1) (0.1)
Derivative financial
instruments (1.1) (0.4) -
Corporation tax liability - (3.2) (0.6)
Lease liabilities (0.7) (0.9) (0.7)
============== ============== =============
Total current liabilities (56.3) (49.3) (50.8)
============== ============== =============
Non-current liabilities
Deferred tax liability (1.6) (1.1) (1.6)
Lease liabilities (1.9) (0.7) (2.1)
============== ============== =============
Total non-current liabilities (3.5) (1.8) (3.7)
============== ============== =============
Total liabilities (59.8) (51.1) (54.5)
============== ============== =============
Net assets 234.7 261.5 281.6
============== ============== =============
Equity attributable to
equity holders of the
company
Share capital 0.3 0.3 0.3
Share premium 54.8 54.8 54.8
Capital Redemption Reserve 0.1 0.1 0.1
Cash Flow Hedge Reserve (1.1) 0.2 (0.2)
Translation Reserve (0.3) (0.2) (0.2)
Retained earnings 180.9 206.3 226.8
Total equity 234.7 261.5 281.6
============== ============== =============
Consolidated statement of cash flows
For the six months ended 30 June 2022
Unaudited 6 Unaudited Audited year
months to 30 6 months to to 31 December
June 2022 30 June 2021 2021
GBPm GBPm GBPm
Operating activities
Profit before tax 17.6 25.3 55.6
Finance expense 0.1 0.1 0.3
Finance income (0.3) (0.1) (0.3)
Depreciation of property,
plant & equipment 1.6 1.8 3.2
Amortisation of intangible
assets 0.8 0.8 1.5
Share based payments 2.2 1.3 2.7
Impairment loses on receivables
and inventories 0.1 - 3.8
Gain on disposal of fixed
asset - - 0.1
============== ============== ================
22.1 29.2 66.9
(Increase)/ Decrease in trade
and other receivables (10.2) (12.0) (14.6)
(Increase)/ Decrease in inventories (19.6) (9.3) 0.5
Increase/ (Decrease) in trade
and other payables 6.0 (1.4) 7.7
Increase/(decrease) in derivative
asset/liability 3.2 - (2.8)
(20.6) (22.7) (9.2)
Cash generated from operations 1.5 6.5 57.7
============== ============== ================
Income tax paid (5.5) (2.4) (10.9)
Net cash flows from operating
activities (4.0) 4.1 46.8
============== ============== ================
Investing activities
Purchase of property, plant
and equipment (1.1) (2.5) (3.6)
Interest received 0.3 0.1 0.3
Investment in intangible
assets (1.2) - (1.0)
Acquisition of subsidiary, - - -
net of cash acquired
============== ============== ================
Net cash used in investing
activities (2.0) (2.4) (4.3)
============== ============== ================
Financing activities
Interest paid (0.1) (0.1) (0.2)
Dividends paid (62.2) (11.9) (18.4)
Repayment of loan - - (0.1)
Payment of lease liabilities (0.4) (0.2) (0.6)
Net cash used in financing
activities (62.7) (12.2) (19.3)
============== ============== ================
Net increase/ (decrease)
in cash and cash equivalents (68.7) (10.5) 23.2
Cash and cash equivalents
at beginning of period 166.2 143.1 143.1
Effect of movement in exchange
rates on cash held 2.5 0.6 (0.1)
============== ============== ================
Cash and cash equivalents
at end of period 100.0 133.2 166.2
============== ============== ================
Notes to the consolidated financial information
For the six months ended 30 June 2022
1. Basis of preparation and accounting policies
The principal accounting policies adopted in the preparation of
the interim financial information are unchanged from those applied
in the Group's financial statements for the year ended 31 December
2021 which had been prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006. The accounting policies applied herein are
consistent with those expected to be applied in the financial
statements for the year ended 31 December 2022.
This report is not prepared in accordance with IAS 34. The
financial information does not constitute statutory accounts within
the meaning of section 435 of the Companies Act 2006. Statutory
accounts for Fevertree Drinks plc for the year ended 31 December
2021 have been delivered to the Registrar of Companies. The
auditor's report on those accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under Section 498 (2) or (3) of the Companies Act
2006.
Adjusted EBITDA has been calculated consistently with the method
applied in the financial statements for the year ended 31 December
2021. Operating profit is adjusted for a number of non-cash items,
including amortisation, depreciation, and the share-based payment
charge which recognises the fair value of share options granted.
The intention is for Adjusted EBITDA to provide a comparable,
year-on-year indicator of underlying trading and operational
performance. Adjusted EBITDA is an appropriate measure since it
represents to users a normalised, comparable operating profit,
excluding the effects of the accounting estimates and non-cash
items mentioned above. The definition for adjusted EBITDA as
defined above is consistent with the definition applied in previous
years. This measure is not defined in the International Financial
Reporting Standards. Since this is an indicator specific to the
Group's operational structure, it may not be comparable to adjusted
metrics used by other companies.
The impact of COVID-19 and the ongoing instability in Ukraine
has also been reflected in the Directors' assessment of the going
concern basis of preparation for the Group financial statements.
This has been considered by modelling the impact on the Group's
cashflow for the period to the end of December 2023. In completing
this exercise, the Directors established there were no plausible
scenarios that would result in the Group no longer continuing as a
going concern.
The Directors have therefore concluded that the Group has
adequate resources to continue in operational existence for at
least the 12 months following the publication of the interim
financial statements, that it is appropriate to continue to adopt
the going concern basis of preparation in the financial statements,
that there is not a material uncertainty in relation to going
concern and that there is no significant judgement involved in
making that assessment. This strong financial position has
underpinned the Directors' decision to pay an interim dividend of
5.63 p ence per share.
Notes to the consolidated financial information
For the six months ended 30 June 2022
2. Revenue by region
Unaudited Unaudited Audited
6 months to 6 months to year to 31
30 June 2022 30 June 2021 December
GBPm GBPm 2021
GBPm
United Kingdom 53.5 50.3 118.3
United States of America 40.1 36.2 77.9
Europe 52.3 41.3 88.2
Rest of the World 15.0 14.0 26.7
============== ============== ============
Group 160.9 141.8 311.1
============== ============== ============
3. Dividend
The interim dividend of 5.63 pence per share will be paid on 21
October 2022 to shareholders on the register on 30 September
2022.
4. Earnings per share
Unaudited 6 Unaudited Audited
months to 30 6 months to year to
June 2022 30 June 2021 31 December
GBPm GBPm 2021
GBPm
Profit
Profit used to calculate
basic and diluted EPS 14.1 20.4 44.6
============== ============== =============
Number of shares
Weighted average number
of shares for the purpose
of basic earnings per share 116,551,449 116,525,784 116,536,876
Weighted average number
of employee share options
outstanding 214,120 231,674 302,357
Weighted average number
of shares for the purpose
of diluted earnings per share 116,765,569 116,757,458 116,839,233
Basic earnings per share
(pence) 12.10 17.47 38.29
============== ============== =============
Diluted earnings per share
(pence) 12.08 17.44 38.19
============== ============== =============
Notes to the consolidated financial information
For the six months ended 30 June 2022
4. Earnings per share (continued)
Normalised EPS Unaudited 6 Unaudited Audited
months to 30 6 months to year to
June 2022 30 June 2021 31 December
GBPm GBPm 2021
GBPm
Profit
Reported profit before tax 17.6 25.3 55.6
============== ============== =============
Add back:
Amortisation 0.8 0.8 1.5
============== ============== =============
Adjusted profit before tax 18.4 26.1 57.1
Tax - assume standard rate
(19%) (3.5) (5.0) (10.8)
============== ============== =============
Normalised earnings 15.0 21.1 46.3
============== ============== =============
Number of shares 116,551,449 116,525,784 116,536,876
Normalised earnings per
share (pence) 12.87 18.14 39.70
============== ============== =============
Normalised EPS is an Alternative Performance Measure in which
earnings have been adjusted to exclude amortisation and the UK
statutory tax rates have been applied (disregarding other tax
adjusting items).
5. Events after the reporting period
On 1 August, the Group acquired 100% of the share capital of
Powell & Mahoney LLC ("P&M"), a premium non-carbonated
cocktail mixer company based in the US. The total consideration for
the acquisition comprises $0.7m cash, and c.$5.2m additional
funding to settle existing debt within P&M at the acquisition
date.
Initial acquisition accounting under IFRS 3 is on-going and will
be disclosed in the Group's financial statements for the year-ended
31 December 2022.
[1] Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share based payment charges and finance
costs
[2] CGA
[3] CGA
[4] IWSR
[5] Kantar 52 wks to 12/06/22
[6] IRI YTD 10/07.22 (Other premium brands: Schweppes 1783;
Fentimans; London Essence; Merchant's Heart; Double Dutch)
[7] CGA & IRI 13 weeks to 16/06/2022
[8] Savanta Brand Tracking 2021
[9] Nielsen
[10] Nielsen and IRI data top 10 European markets
[11] Attest survey
[12] Woolworth & Coles scan data
[13] Nielsen 52 weeks to June 2022
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END
IR UUUKRUKUKAAR
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