REG - Fevertree Drinks PLC - Fever-Tree FY22 Interim Results
13/09/2022 07:00
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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 £100m at period end, following payment of the £50m 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 £355m - £365m and
EBITDA of £37.5m - £45m
£m 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 (#_ftn1) 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
(https://www.investis-live.com/fever-tree/63049738edad2c0c008ffef7/sffd)
For more information please contact:
Investor queries
Ann Hyams, Director of Investor Relations I ann.hyams@fever-tree.com
(mailto:ann.hyams@fever-tree.com) I +44 (0)2045 168 106
Media queries
Oliver Winters, Director of Communications I oliver.winters@fever-tree.com
(mailto: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
£m 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 £160.9m 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 (#_ftn2) , 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 £53.5m 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 (#_ftn3) .
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 (#_ftn4)
. 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
(#_ftn5) 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 (#_ftn6) .
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 (#_ftn7) .
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 (#_ftn8) .
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
£40.1m (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 (#_ftn9) . 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
(#_ftn10) , 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
(#_ftn11) .
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 £15.0 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
(#_ftn12) . 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 (#_ftn13) .
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 £160.9m (H1 2021: £141.8m), 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 £22.0m (H1 2021: £29.2m), 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
£50m special dividend announced at the 2021 full year results in March, has
resulted in a reduction in cash held to £100.0m (H1 2021: £133.2m). 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.
£m 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 £38.2m (H1 2021: £33.3m) 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 £22.0m, a 24.7% decrease on the
first half of 2021 (H1 2021: £29.2m). 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 £1.6m (H1 2021: £1.8m) whilst
amortisation remained flat at £0.8m (H1 2021: £0.8m). Share based payments
increased to £2.2m (H1 2021: £1.3m). As a result of these movements,
the 24.7% decrease in adjusted EBITDA translates to a 31.2% decrease in
operating profit to £17.4m (H1 2021: £25.3m).
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 £76.3m (H1 2021: £73.8), 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 £100.0m, 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 £355 million to £365 million for the full year,
with a gross profit margin in a range of 33% to 35%, and an EBITDA range of c.
£37.5 million to £45 million.
Consolidated statement of comprehensive income
For the six months ended 30 June 2022
Notes Unaudited 6 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited year to 31 December 2021
£m £m £m
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 difference of foreign operations (0.1) - -
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 2021
£m £m £m
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 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited year to 31 December 2021
£m £m £m
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 pence per share.
Notes to the consolidated financial information
For the six months ended 30 June 2022
2. Revenue by region
Unaudited 6 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited year to 31 December 2021
£m £m £m
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 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited year to 31 December 2021
£m £m £m
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 116,765,569 116,757,458 116,839,233
share
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 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited year to 31 December 2021
£m £m £m
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 (#_ftnref1) Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share based payment charges and finance costs
2 (#_ftnref2) CGA
3 (#_ftnref3) CGA
4 (#_ftnref4) IWSR
5 (#_ftnref5) Kantar 52 wks to 12/06/22
6 (#_ftnref6) IRI YTD 10/07.22 (Other premium brands: Schweppes 1783;
Fentimans; London Essence; Merchant's Heart; Double Dutch)
7 (#_ftnref7) CGA & IRI 13 weeks to 16/06/2022
8 (#_ftnref8) Savanta Brand Tracking 2021
9 (#_ftnref9) Nielsen
10 (#_ftnref10) Nielsen and IRI data top 10 European markets
11 (#_ftnref11) Attest survey
12 (#_ftnref12) Woolworth & Coles scan data
13 (#_ftnref13) Nielsen 52 weeks to June 2022
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