REG - Fevertree Drinks PLC - HY pre-close trading update

Fevertree DrinksAnnouncement

15/07/2022 07:00

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RNS Number : 5709S  Fevertree Drinks PLC  15 July 2022

July 15, 2022

Fever-Tree Drinks plc

FY22 Interim Pre-Close Trading update

 

Fever-Tree, the world's leading supplier of premium carbonated mixers,
announces a trading update for the first six months of FY22 ending 30(th) June
2022, ahead of reporting its Interim Results on 13(th) September 2022.

Financial highlights
 Revenue, £m                         FY22 H1  FY21 H1  Change  Constant Currency Change
   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*                     52.4     41.3     27%     31%
   ROW                               15.0     14.0     7%      5%
 Total*                              160.9    141.8    14%     14%

*includes revenue from GDP's portfolio brands

 

Fever-Tree delivered a solid first half revenue performance as the On-Trade
showed promising signs of recovery and as a result the Group is maintaining
its revenue guidance range of £355 million to £365 million for the full
year.

The impact of logistics and cost headwinds prevalent across the industry have
significantly worsened in recent months, and we now anticipate gross margins
of c.37% and an EBITDA margin of c.14% for the first half. We expect this to
continue to impact the business during the second half, resulting in a revised
EBITDA guidance of between £37.5 million and £45 million for the full year.

Consumer demand remains strong and we are focused on driving a number of
initiatives to prioritise availability whilst also mitigating the on-going
impact of the current logistics and cost headwinds.

UK

Fever-Tree's UK revenue grew by 6% in the first half of 2022. The On-Trade was
impacted by the Omicron variant at the start of the period, before momentum
built as the half progressed. Year-on-year growth of 73% for this channel was
in-line with our expectations and we have further extended our category
leading position. We have a strong summer promotional programme in place,
focusing on our Premium Soda range to drive the increasingly popular Spritz
occasion alongside our well-established Tonic offerings.

Fever-Tree's Off-Trade sales declined by 21% in the first half of the year as
we lapped a lockdown period in 2021, mirroring a re-balancing of the whole
category as some sales shift back to the On-Trade. Whilst the first half was
softer than expected, encouragingly the brand has increased its volume share
at grocery during H1 and we look forward to our typically strong summer and
Christmas trading periods, supported by exciting promotions and activations
across retailers.

US

Demand for Fever-Tree in the US remains very strong. An 11% revenue increase
year-on-year (9% at constant currency) was encouraging against the challenging
backdrop of port congestion and labour shortages which culminated in inventory
shortages impacting sales towards the end of the period.

Fever-Tree's Off-Trade sales have increased by 144% compared to pre-Covid
levels in 2019 1  (#_ftn1) which demonstrates the significant growth of the
brand in the US over the last three years. Our Sparkling Pink Grapefruit in
particular continues to perform well, demonstrating the broad category appeal
of the brand and its ability to drive growth across a number of popular mixing
categories.

We have also been encouraged by the performance of the On-Trade where we have
outperformed sales from the comparable period in 2019, which alongside the
increased distribution we have won across a number of national accounts, gives
us further confidence for the rest of the year and beyond.

We are taking significant steps to rebuild inventory levels and given the high
level of demand from both customers and consumers we remain confident of
delivering a strong full year revenue performance.

Europe

Total European revenue for the first half of the year was up 27% (31% at
constant currency). This is a very strong performance given the comparators
from the prior year, supported by the return of the On-Trade and primarily
driven by our key Southern European markets.

The Group continues to make good progress in the Off-Trade and we are
confident that our prevailing brand strength and unmatched regional presence,
along with the well-established market trends towards premiumisation across
Europe, positions us well as we look to the opportunity ahead.

ROW

We are making good progress in our Rest of the World region, growing revenue
by 7% year-on-year against strong comparatives, with underlying growth of 15%
across the region. We continue to extend our market leading position in our
largest two markets, Australia and Canada, and remain excited about our
long-term potential to expand further in both the Off-Trade and On-Trade.

In Australia, we are driving category growth and increasing our share at
National Grocery, and in Canada, we are transitioning to a new larger local
distributor and look forward to driving the opportunity further over the
coming years.

FY22 outlook

We are maintaining our revenue guidance range of £355 million to £365
million for the full year.

In the last eight weeks we have seen rapid shifts in the operational and cost
backdrop. As a result, our outlook has materially changed with regards to
three specific areas:

·    Labour shortages have impacted our US East Coast production ramp up,
resulting in greater UK production required to fulfil against the strong
demand in the US, and with it, more exposure to sea freight with rates
increasing by up to 50% since the start of the year on key routes

·    Glass availability has become severely restricted, which has limited
the opportunity to deliver upside to revenue despite strong demand

·    Further, industry-wide cost pressures have increased, most notably
glass costs, where we will see double digit increases for H2 alongside
continued logistics cost increases and disruption

The result of this exceptionally challenging environment, alongside some
limited sales mix and FX hedging impacts, is that we expect a further 400bps
to 600bps of margin dilution and as such expect gross margin in a range of 33%
to 35%.

We are focused on mitigating these cost impacts whilst also prioritising
continuity of supply. Demand remains strong across our key regions, and we are
confident that a number of significant cost impacts, including our exposure to
sea freight, will be transitory in nature. As such, we will continue to invest
in the business to drive the long-term opportunity through marketing
expenditure, people and innovation, and expect operational expenditure of
c.22.5% of revenue, resulting in an EBITDA range of c.£37.5 million - c.£45
million for FY22.

Tim Warrillow, CEO of Fever-Tree commented:

"Fever-Tree has delivered a solid revenue performance in the first half of
2022, with a particularly strong performance in Europe and demand continuing
to build in the US. Whilst we are seeing positive top line performance and
expect to deliver good revenue growth for the full year, the challenging
logistical and cost headwinds we highlighted previously have significantly
worsened in recent months and we now expect them to notably impact our full
year margins.

The business is working on a large number of initiatives, and more closely
than ever with suppliers throughout our supply chain, to mitigate the
transitory headwinds and at the same time ensure we can satisfy the strong
demand we are seeing in our growth regions.

Despite the current challenges of the volatile logistical and cost
environment, we continue to make good progress across our regions. The strong
and growing consumer demand for the brand, our exciting pipeline of
innovation, and the growing interest in long-mixed drinks, gives us more
confidence than ever in the long-term opportunity."

There will be a conference call with Management on Friday 15th July 2022 at
8:00am BST. The call can be accessed via:

Fever-Tree Pre-Close Conference Call
(https://event.loopup.com/SelfRegistration/registration.aspx?booking=1BXd1vIOtZszdjNgl27598fOBuRhwKa7JiliVMK06fE=&b=2389e96d-457b-46a8-bebb-fec356d5b031)

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)20 4516 8106

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 - Finsbury

Faeth Birch +44 (0)7768 943 171; Anjali Unnikrishnan +44 (0)7826 534 233;
Carolina Neri +44 (0)7502 127 516

 

 1  (#_ftnref1) Nielsen 26 weeks to 18 June 2022

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