TIDMFEVR
RNS Number : 7779L
Fevertree Drinks PLC
15 September 2021
September 15, 2021
Fevertree Drinks plc
FY21 Interim Results to 30 June 2021
FY21 Interim Highlights
-- Strong sales growth delivered across all Fever-Tree's key
markets in the first half of the year with revenue growth of 36%
year-on-year
-- Off-Trade sales exceeded expectations across our regions,
remaining above pre-COVID levels, with Fever-Tree extending its
premium market-leading position in the UK, US, Europe and RoW
-- On-Trade sales have performed well as markets started to recover during the second quarter
-- Strong continued momentum in the US across both channels,
with new distribution and product launches supporting growth in
sales and brand awareness
-- The Group continues to make good strategic progress:
o Successful launches of the Premium Soda range in the UK
On-Trade, Lime & Yuzu Soda and Distillers Cola in the US, and
Rhubarb & Raspberry Tonic across Europe
o Scaling up US glass bottling capabilities to full production
on the West Coast, with East Coast bottling to be commissioned
during the second half of the year
o Continued integration of GDP in Germany following the
acquisition last year, which is already contributing well to
Fever-Tree's growth in the market
Financial highlights
GBPm H1 FY21 H1 FY20 Change
------------------------------- -------- -------- ---------
Revenue
UK 50.3 48.3 4%
US 36.2 27.4 32%
Europe like-for-like (excl.
GDP) 36.7 20.5 79%
Europe total* 41.3 20.5 102%
ROW 14.0 8.0 73%
Total like-for-like (excl.
GDP) 137.1 104.2 32%
Total* 141.8 104.2 36%
Gross profit 62.5 48.7 28%
Gross margin 44.1% 46.8% (270)bps
Adjusted EBITDA [1] 29.2 23.8 23%
Adjusted EBITDA margin 20.6% 22.8% (220)bps
Diluted EPS (pence per share) 17.44 14.99 17%
Dividend (pence per share) 5.52 5.41 2%
Net cash 133.2 136.9 (3)%
------------------------------- -------- -------- ---------
-- As highlighted in July, gross margins were significantly
impacted by on-going global logistics disruption and cost
pressures, contributing to a 270bps reduction in gross margin for
the first half of the year, notably in relation to elevated
trans-Atlantic freight charges and US storage costs. We have taken
a number of actions to mitigate these pressures but as stated
previously, we expect disruption and elevated logistics costs to
continue to impact through the remainder of this financial year and
into 2022.
-- Adjusted EBITDA increased by 22.7%. However, the dilution in
gross margin, coupled with maintained levels of underlying
operating expenditure has resulted in a reduction in adjusted
EBITDA margin to 20.6%
-- Net cash of GBP133.2 million at period end despite investment
in working capital as we built inventories to mitigate supply chain
disruption
-- Recommending an interim dividend of 5.52 pence per share, an increase of 2% year-on-year
-- Reiterating guidance from July; FY21 revenue GBP295 - GBP304m and EBITDA c.20%
Tim Warrillow, CEO of Fever-Tree, commented
"I am pleased to report an excellent sales performance for the
first half of the year. Our ambition and confidence in the global
opportunity continues to grow and we have been encouraged by the
initial re-opening of the On-Trade, the ongoing strength of the
Off-Trade with sales exceeding pre-Covid levels across all our
regions, as well as the response to our new product launches, all
of which is a testament to our increasing brand strength, growing
presence, marketing investments, and relationships across the
industry.
We believe the Group is emerging from the pandemic in a very
strong position. Throughout the last 18 months we have maintained
our long-term focus and therefore continued to invest in our team,
our innovation and the brand, which was enabled by the financial
strength and operational agility of the business. While some
material impacts of the pandemic remain, the business is
increasingly well placed to deliver our plans for long-term
growth.
Looking ahead, the long-term opportunity for Fever-Tree
continues to be enhanced by the structural trends we are seeing,
including the growing interest in premium mixers and spirits, and
the popularity of long mixed drinks. These trends are being
supported by our retail and spirit partners, and Fever-Tree's
ability to capitalise and drive this opportunity is unmatched by
any other premium mixer brand."
There will be live audio webcast on Wednesday 15(th) September
2021 at 10:00am BST. The webcast can be accessed via:
https://www.investis-live.com/fever-tree/6125122ac746d50a009e3864/vbhf
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
Garry Levin I Matt Lewis 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
Communication advisers - Finsbury Glover Hering
Faeth Birch +44 (0)7768 943 171; Anjali Unnikrishnan +44 (0)7826
534 233; Amanda Healy +44 (0)7795 051 635
Strategic update I Strong performance as restrictions ease
GBPm H1 FY21 H1 FY20 change constant currency
change
----------------------- -------- -------- ------- ------------------
Revenue
UK 50.3 48.3 4% 4%
US 36.2 27.4 32% 42%
Europe like-for-like
(excl. GDP) 36.7 20.5 79% 81%
Europe total* 41.3 20.5 102% 104%
ROW 14.0 8.0 73% 71%
Total like-for-like
(excl. GDP) 137.1 104.2 32% 34%
Total* 141.8 104.2 36% 39%
----------------------- -------- -------- ------- ------------------
Fever-Tree performed very strongly across all our key markets in
the first half of 2021, delivering revenue of GBP141.8m, an
increase of 36% year-on-year (+39% at constant currency). This was
despite continued disruption caused by COVID-19, most notably
across the On-Trade which continued to be impacted as restrictions
remained into the second quarter, with re-openings towards the end
of the period.
Fever-Tree's Off-Trade sales have delivered a consistently
strong performance globally, even as the On-Trade started to
re-open, with sales well ahead of pre-COVID levels. In the US,
Off-Trade sales have continued to accelerate even as we annualise
the strong performance from 2020, reflecting the growing traction
the brand is gaining in the market.
Fever-Tree continues to value the importance of spirit
partnerships for co-promotions and activations around the world.
These partnerships have been increasingly supported by spirit
companies who are looking to capitalise on the global trend to long
mixed drinks, and as the pioneer and global leader of the premium
mixer category, we remain very well placed to continue to drive
this significant long-term opportunity.
We have continued to make clear progress across our five
sustainability branches and have been greatly encouraged by the
response and engagement from our customers, consumers, partners,
and colleagues to the initiatives that are under way. This has
included working with experts to carry out a full cradle-to-grave
lifecycle analysis of our greenhouse gas emissions across our range
of mixers from which we have set science-based emission reduction
targets across all three scopes.
However, we also recognise the need to take action now and
therefore, alongside our emission reduction programme, we are
investing in nature-based projects where we source our ingredients
from to offset our emissions in the near term. Taking these steps
means we will shortly be able to show that all our mixers sold in
the UK are carbon neutral and in doing so be the first mixer brand
to reach this milestone and have set ourselves the ambition to be
carbon neutral across all our regions by 2025.
Elsewhere we continue to make progress using our five 'branch'
framework, such as Conservation where we have planted London's
first Tiny Forest, and Circular Economy, where this week we are one
of the founding brands to take part in a reusable packaging
initiative with Tesco. These examples are just a small part of the
fantastic work our team are doing behind the scenes within this key
area of focus for the business.
UK I Sustained Off-Trade momentum as the On-Trade re-opens
Fever-Tree delivered a good performance in the first half of the
year, especially given the impacts of the pandemic on the On-Trade
continued for most of the period, with revenue of GBP50.3m, an
increase of 4% year-on-year.
The On-Trade, which typically represents half of UK revenue, was
closed until mid-April, when outdoor hospitality resumed, and
mid-May until indoor hospitality was permitted, with social
distancing restrictions remaining in place throughout the period.
Performance has been encouraging since the channel was allowed to
re-open, with Fever-Tree's On-Trade sales increasing by c.16%
year-on-year in the first half, despite being closed and under
restrictions for a longer period than in H1 2020. We saw initial
signs of pent-up demand and are in a good position to benefit as
the channel continues to recover, however, as the period progressed
and since the period end, it has become apparent that our initial
assumption of a more gradual trajectory is starting to unfold.
Our focus for the On-Trade as it has re-opened has been to
promote the Spritz occasion using our new Soda range, as well as
celebrating British staycations, with travel likely to remain
disrupted for the rest of the year. We have set up a fantastic
summer pop-up bar in Covent Garden in the heart of London, which
will run from June to October, along with numerous activations at
key coastal locations and at major sporting events such as Royal
Ascot and The Oval.
The Off-Trade has continued to perform above expectations as the
popularity of enjoying long mixed drinks at home has been
sustained, with Fever-Tree growing share within the category and
delivering sales in-line with 2020 despite lapping the impacts of
elevated sales during the initial lockdown period, remaining 24%
ahead of 2019. These results highlight the strength of the
Fever-Tree brand as we have extended our market-leading position to
38.5% [2] , c.1% higher than the same period last year as we grew
both our value and volume ahead of the mixer market.
Alongside mixers, the spirits category continued to perform
strongly at retail during the first half, growing by 7.6% [3]
year-on-year. The success of both the spirit and mixer categories
and the movement to long mixed drinks has meant we are increasingly
engaging with spirits companies through co-promotions to capitalise
on these trends across a number of spirit and mixer occasions,
including gin & tonic, whisky & ginger, and vodka &
soda. We believe that the lockdown periods have accelerated the
popularity of long mixed drinks along with the premiumisation of
this category, especially at home, and that Fever-Tree, with our
category leadership position, range and relationships, remains
uniquely placed to continue to drive these into the future.
The Group has continued to innovate and pioneer the category
through the first half of the year. After the successful launch of
our Premium Soda range in the Off-Trade last year, we launched them
in the On-Trade with our "Summer of the Spritz" campaign, which
includes various point-of-sale merchandise, the creation of bespoke
menus, and collaborations with our On-Trade customers nationwide.
In addition, our Rhubarb & Raspberry Tonic, launched towards
the end of last year has already become one of our best-selling
flavours at retail and is attracting new, often younger, consumers
to the category and the brand.
Overall, Fever-Tree has made good progress in the UK during the
first half of 2021. We have been encouraged by our initial
performance as the On-Trade re-opens, as well as the sustained
strength of our Off-Trade sales. Every action we took last year,
from not furloughing anyone, to focusing spend on the Off-Trade
while the On-Trade was closed, to launching new flavours and
formats has continued to pay dividend as we exit the pandemic. We
will exit this period of uncertainty in a much stronger position
than when we entered it and are confident about the long-term
opportunity in our home market.
US I Strong Off-Trade performance, with promising On-Trade
rebound
Fever-Tree performed very strongly in the US over the first half
of the year as we continue to build momentum in the region. Despite
the impacts of COVID-19, total US revenue for the first half of the
year increased by 32% to GBP36.2m (42% on a constant currency
basis).
On-Trade sales in the US continued to be affected in the first
half of the year as lockdowns varied by state in length and extent,
but typically remained in place well into Q2. However, initial
recovery of this channel as restrictions eased has been promising
with clear signs of pent-up demand and consumers feeling
increasingly comfortable returning to the On-Trade. Consequently,
Fever-Tree's On-Trade sales have rebounded quickly, beginning to
surpass pre-COVID sales levels by May. We have also continued to
win new mandates and distribution with national hotel, bar and
restaurant groups, including Hyatt Hotels and Bar Louie, which puts
the Group in a strong position as the On-Trade recovers.
Sales in the Off-Trade started the year strongly as On-Trade
restrictions continued into 2021 and remained robust as we
annualised the stockpiling months of 2020, and as the On-Trade
gradually re-opened throughout the period. As a result, our retail
sales in H1 increased by 17% year-on-year and over 100% compared to
2019 [4] . This comfortably exceeded our expectations for the first
half, resulting in an increase in our estimates for US growth this
year and ensured we remain the clear premium mixer market leader in
retail, which itself is the fastest growing segment in the mixer
category.
This strong performance is partly attributable to the increased
popularity of making long mixed drinks at home, with spirits taking
share from beer and wine during 2020, as well as the positive
results of the price optimisation which has encouraged more
consumers to try the brand and has driven a higher rate-of-sale on
shelf. Furthermore, we continue to win new distribution during the
first half of the year across both the liquor and retail channels,
with significant new points-of-distribution now in Publix, Walmart
and Safeway, including substantial contributions from our new
Sparkling Pink Grapefruit Soda.
During the first half of the year, we made two notable new
additions to our portfolio of premium mixers. In February we
introduced our Sparkling Lime & Yuzu to the market, our second
flavoured Soda launch after Sparkling Pink Grapefruit last year to
build on our presence within the popular Spritz occasion. This
versatile liquid pairs particularly well with vodka to create an
elevated vodka lime soda, or with tequila as a "Ranch Water" serve
and has already received a very positive reception from the trade
and consumers. Following this, in June 2021, we launched our
Distillers Cola which is targeted at rum and whiskey drinking
occasions and has seen encouraging initial distribution gains and
positive customer feedback.
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, focusing on the Off-Trade and digital execution in
the first half of 2021, whilst also re-allocating spend back into
the On-Trade as the channel re-opened throughout the half. We were
excited to open a new pop-up bar in Texas, following the success of
our original pop-up bar which remains in Bryant Park, New York.
Both locations give the brand excellent visibility and enable us to
provide consumers with a fantastic experience as they enjoy
perfectly crafted cocktails using a range of Fever-Tree mixers. In
addition to these flagship locations, we have also been working
with a number of our On-Trade accounts to create "Fever-Tree
perfect serve menus", as well as providing custom signage, menu
boards and other products such as outdoor parasols and
furniture.
We have increased our collaboration with Spirits partners and
have been featured in a number of multi-channel campaigns since the
start of the year including a Gin & Tonic co-promotion with
Bombay Sapphire, a Spritz co-promotion with Grey Goose, and a
Whiskey Ginger co-promotion with Jim Beam. The Grey Goose campaign
is an exciting way for both brands to promote the Spritz serve over
the summer months using our new Sodas across the On-Trade,
Off-Trade, e-commerce and television. And the Jim Beam campaign
aims to encourage a generation of new consumers to "Take a break
from beer" and enjoy a lower ABV, lower sugar flavoured serve. The
programme includes a multi-million television campaign, supported
by digital, social and events, alongside retail floor displays, and
is a great example of the power of co-promotions to drive a
serve.
Whilst we remain in the early stages of the journey, the Group's
ambition and confidence in the US opportunity continues to grow. We
have been encouraged by the initial re-opening of the On-Trade, as
well as our momentum in the Off-Trade, which is a testament to our
increasing brand strength, growing presence, marketing investments,
new products, and relationships across the industry.
Europe I Strong first half supported by importer restocking
Total European revenue for the first half of the year was up
102% (104% at constant currency). This very strong result includes
GBP4.7million of GDP portfolio brand revenue which was not included
in the first half of 2020 and was also supported by a sell-in to
importers as they built inventory ahead of summer trading whilst
lapping a period of importer destocking in the first half of 2020.
Taking these various factors into account, Fever-Tree's underlying
growth remained a very impressive c.30%.
The On-Trade has started to recover, albeit slightly more slowly
than the UK and the US as vaccines took longer to rollout. And
while restrictions were still present in a number of markets at the
end of the half, the On-Trade was open to some extent across the
region, with a desire to capitalise on the important summer season,
especially in Southern Europe which tends to rely more on the
On-Trade, as well as the tourism industry.
Fever-Tree continued to perform strongly in the Off-Trade across
the region, contributing to just under a third of the total branded
mixer category value growth over the last two years [5] , well
ahead of any other premium brand. We are extending our premium
leadership across our markets, with particularly strong
performances in Switzerland, Denmark and France where we've grown
our market share by over 300bps in the last year [6] .
In our Core Markets, including Ireland and Denmark, we have
maintained our market leading position and stepped up our
co-promotional activity, with notable examples with Smirnoff Vodka
in Ireland to promote the Spritz serve, and with Lillet and
Hendricks in Denmark using our Indian and Mediterranean Tonics.
This year we are increasing our focus on increasing our range and
formats to reach new customers by adding breadth to premium mixing,
which is already an established category.
In our Next Wave Markets, including Germany, Spain, Italy and
Switzerland, we are growing our penetration quickly and still see
good opportunities to grow our distribution and build out our
range. Our co-promotions in the region encompass a number of
serves, including campaigns with Campari in Spain and The Botanist
in Germany, promoting our classic Gin & Tonic, along with Jack
Daniel's Whiskey in Italy to highlight the versatility of our
mixers.
Finally, in Earlier Stage markets, such as France, Sweden and
the Netherlands, we are focused on establishing the brand,
primarily through the Gin & Tonic serve, with campaigns such as
our co-promotions with Tanqueray Gin in Sweden. Through these
partnerships, alongside our growing presence at retail and in the
On-Trade, we are building brand awareness and importantly driving
category growth in these immature mixer markets.
We have continued to invest across the region beyond
co-promotions, through broader marketing activities, new product
launches, and an ever-growing team with in-country expertise. We
executed our first TV campaign in Europe in the Spanish market this
Spring, delivering our "3/4" message and focusing on the quality of
our ingredients, which has already significantly increased our
prompted awareness in Catalunya [7] , the main region the campaign
was focused on. In Germany, we launched a new format at retail, a
larger 750ml premium glass bottle, to align our products more to
German purchasing habits, with strong initial results. We also
introduced a new Raspberry & Rhubarb Tonic across Europe to
leverage on the popularity of pink drink trends, with strong
activations across retail driving positive initial results.
Our progress in the Off-Trade along with the promising recovery
of the On-Trade gives us confidence in the opportunity across
Europe. The mixer category is growing at pace and Fever-Tree has
continued to extend its market-leading position, remaining the only
premium mixer brand with significant scale across the region. There
are a number of markets that offer real potential and we continue
to invest, build meaningful relationships in the trade and with
spirit partners, and drive the growth of the premium segment.
RoW I Good progress in key markets
Fever-Tree performed very strongly in the first half of the year
in our RoW region, delivering revenue of GBP14.0 million, which
represents a 73% increase compared to H1 2020 (71% at constant
currency). Although we benefitted from some phasing year-on-year,
our underlying growth across the region was still strong, at
c.40%.
In Australia, the Gin & Tonic continues to lead the growth
of long mixed drinks, especially at the premium end, driven by
Fever-Tree. The premium Tonic category grew by 34% at grocery
during H1 and Fever-Tree grew ahead of this at 48%, continuing the
strong performance from last year [8] . Fever-Tree's sales through
the liquor channel also remained strong, growing share to over 50%
in Coles Liquor Group [9] . As well as increasing the brand's
presence on shelf, favourable conditions in the On-Trade for the
first half of the year meant that Fever-Tree could activate the
brand through this important channel. We ran our second Gin &
Tonic Festival in Sydney with over three thousand visitors
attending and continue to build presence within bars and
restaurants as our strong Off-Trade performance from last year
starts to translate into the On-Trade.
In Canada, the premium mixer market is continuing to take share
of the category, growing at more than four times the rate of the
total mixer market in the last 12 months [10] , with Fever-Tree
growing strongly as consumers increasingly premiumise their
long-mixed drinks. We've grown our sales at Canadian retail by 150%
over the last two years, with growth coming across all key mixer
categories, including through new launches in the Soda &
Sparkling category as we expand our portfolio into Spritz
occasions. As well as expanding into new categories, Fever-Tree has
maintained its position as the largest tonic brand by value in
Canadian retail, with approximately a third of the market share
[11] . We are confident of continuing to gain new distribution in
the Off-Trade, both in terms of number of accounts and facings
in-store and are increasingly excited about our prospects in the
On-Trade as this important channel gains momentum as it
re-opens.
In Asia we have continued to focus on our key city strategy
across the region and have entered the South Korean market for the
first time, using our Tonics to pair with Soju; a popular local
liquor which is seeing strong premiumisation.
Overall, the Group expects to continue to extend its
market-leading position across the Rest of the World region,
especially in Australia and Canada, and although our comparators
for the second half of the year will be tough, we remain excited
about the long-term potential for the brand across a broad range of
mixer categories, within a number of markets.
Operational review
With the ramping up of production on the West Coast of the US,
our global network has now increased to six bottlers and two
canners. This footprint is expected to increase further in the
latter stages of this year with the commissioning of a new East
Coast bottling line in the US. Despite challenges from the on-going
impact of the pandemic, our supply chain team has worked alongside
our partners to ensure continuity of production throughout the
period and further reinforced both the quality of our relationships
and the value of our outsourced operating model.
As is the case across the industry, the Group has been
increasingly impacted by considerable disruption to global
logistics networks during the first half of the year. Disruption is
widespread and on-going, impacting global shipping availability,
lead times and pricing as well as HGV driver availability and costs
in key markets. In the face of this uncertainty our team has
focused on preserving continuity of supply, most notably by
increasing shipments to the US and building local inventory, but
also working with our main UK logistics partner to manage driver
availability during peak periods. Whilst these actions have
resulted in increased cost and impacted our margins, they have
ensured that we have continued to supply our customers globally
throughout this on-going period of disruption, underpinning the
strong revenue growth we are reporting.
Financial review
The Group has continued to achieve strategic progress in the
first half of 2021 whilst navigating the on-going uncertainty and
disruption caused by COVID-19.
Revenue of GBP141.8m (H1 2020: GBP104.2m), with growth of 36%
(39% at constant currency), benefits from the inclusion of GBP4.7m
of GDP portfolio brand revenue (H1 2020: GBP0m) as well as a strong
sell-in to our European and RoW importers as they built inventory
in anticipation of a strong summer sales period. Allowing for these
factors, this remains a strong result, especially given the
On-Trade remained closed or under restrictions for much of the
first half across our regions.
The performance is testament to our continued investment in the
brand throughout the period of the pandemic, our successful
innovation, and the strong progress we are making in the Off-Trade
channel across our regions. The On-Trade had reopened globally by
the end of the half and we are very well placed to benefit as that
channel builds momentum over the remainder of the year.
The Group generated an adjusted EBITDA of GBP29.2m, a 22.7%
increase on the first half of 2020 (H1 2020: GBP23.8m). Whilst
gross margins have been impacted by increased logistics costs and
the consolidation of GDP portfolio brand revenue, we have continued
to invest behind the brand and have maintained levels of underlying
operating expenditure as a proportion of revenue, which has
resulted in a retraction in adjusted EBITDA margin to 20.6% (H1
2020: 22.8%).
An increase in working capital, driven by increased inventory
levels in the US as we took action to mitigate against logistics
disruption, as well as elevated receivables following a strong
month of sales in June 2021, has resulted in a reduction in
operating cash flow conversion to 22% of adjusted EBITDA (H1 2020:
146%). As a result of this lower level of operating cash flow
conversion, we end the period with cash of GBP133.2m, a decrease of
3% year-on-year. We anticipate that the working capital profile
will remain elevated but improve as the year progresses. The Board
is recommending an interim of dividend of 5.52 pence per share, an
increase of 2% year-on-year.
GBPm H1 FY21 H1 FY20 Change
-------- --------
Revenue 141.8 104.2 36%
------------------- -------- -------- ---------
Gross profit 62.5 48.7 28%
------------------- -------- -------- ---------
Gross margin 44.1% 46.8% (270)bps
------------------- -------- -------- ---------
Adjusted EBITDA 29.2 23.8 23%
------------------- -------- -------- ---------
Adjusted EBITDA
margin 20.6% 22.8% (220)bps
------------------- -------- -------- ---------
Operating profit 25.3 21.4 18%
------------------- -------- -------- ---------
Profit before tax 25.3 21.7 17%
------------------- -------- -------- ---------
Cash 133.2 136.9 (3)%
------------------- -------- -------- ---------
Gross margin and operating expenses
Gross margin of 44.1% represents a reduction from the 46.8%
gross margin reported in the first half of 2020. The main factors
impacting gross margin were:
-- The most significant impact on gross margin has been an
increase in logistics costs, resulting from the disruption to
global logistics networks that is being experienced across the
industry. There have been multiple impacts across regions,
including increased UK logistics costs driven by shortages of HGV
drivers. However, the most significant driver of elevated cost has
been the shipping of product to the US, both due to increased
freight charges but also increased storage charges as we took the
decision to build inventory in the US to mitigate the potential
impact of on-going disruption.
-- Following the acquisition of GDP on 1(st) July 2020, the 2021
first half results include the consolidation of GBP4.7m of GDP's
portfolio brand revenue, which generates a lower margin than the
Group achieves on sales of Fever-Tree products and hence dilutes
reported gross margin. Excluding GDP Portfolio brand revenue, the
Fever-Tree brand generated a gross margin of 44.8%.
-- There was a marginal impact from net foreign currency
headwinds, most notably from the weakening US dollar.
-- There was limited upside from changes in channel and
territory mix. The On-Trade channel continued to be impacted by
restrictions during the first half of the year, whilst changes in
regional mix combined to limited effect.
Despite the current logistics challenges, our focus remains on
ensuring we have sufficient inventories and product in market to
fulfil demand. We expect disruption and elevated logistics costs to
continue to impact through the remainder of the year and into 2022.
However, from 2022 we expect to increasingly mitigate the impact of
elevated US logistics costs through local production, with West
Coast production now fully commissioned and East Coast production
scheduled for commissioning later this year. Local production in
the US will significantly reduce our exposure to trans-Atlantic
freight charges, and allow us to hold lower levels of inventory
locally, reducing both storage costs and working capital.
Underlying operating expenses increased by 33.5% in the first
half of the year to GBP33.3m (H1 2020: GBP24.9m) which reflects a
continuation of our approach throughout the period of the pandemic
to invest in the opportunity ahead despite the impact of
COVID-related restrictions on the On-Trade in the first half. As a
result, underlying operating expenses remain elevated compared to
pre-pandemic levels, at 23.5% of Group revenue (H1 2020:
24.0%).
We continue to invest behind the brand, with TV advertising
campaigns in the UK and Spain, widespread co-promotional activities
across our regions and upweighted investment in the On-Trade as
restrictions eased through the period. Our marketing spend in the
first half of the year was 9.9% of Fever-Tree brand revenue (H1
2020: 8.0%) and will be more evenly balanced between halves
compared to 2020, when investment was back-weighted during the
year.
Staff costs and other overheads increased by18.2% and
represented13.9% of Group revenue in the first half of the year (H1
2020: 16.0%). Following significant increases to headcount made in
2020, we have undertaken a lower level of recruitment in the first
half of 2021, with the increase in expenditure driven by the
annualisation of those new hires made in 2020 alongside the
consolidation of GDP staff and operations.
The Group generated an adjusted EBITDA of GBP29.2m, a 22.7%
increase on the first half of 2020 (H1 2020: GBP23.8m). The
dilution in gross margin, due mainly to elevated logistics costs
and the consolidation of GDP portfolio brand revenue, coupled with
maintained levels of underlying operating expenditure as a
proportion of revenue, has resulted in a retraction in adjusted
EBITDA margin to 20.6% (H1 2020: 22.8%).
Depreciation increased to GBP1.8m (2020: GBP1.2m) whilst
Amortisation increased to GBP0.8m (2020: GBP0.4m), reflecting the
acquisition of GDP. Finally, share based payments increased to
GBP1.3m (2020: GBP0.8m). As a result of these movements, the 22.7%
increase in adjusted EBITDA translates to a 18.0% increase in
operating profit to GBP25.3m (H1 2020: GBP21.4m).
Tax
The effective tax rate in the first half of 2021 was 19.5% (H1
2020: 19.4%) and was in line with expectations.
Earnings per share
The basic earnings per share for the period are 17.47 pence (H1
2020: 15.06 pence) and the diluted earnings per share for the
period are 17.44 pence (H1 2020: 14.99 pence), an increase of
16.3%.
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 2021 are 18.14 pence (2020: 15.38 pence), an
increase of 17.9%.
Balance sheet and working capital
Working capital increased to GBP73.8m (H1 2020: GBP43.7m),
driven by elevated inventory and receivables levels. The change in
working capital profile reflects the different circumstances
surrounding the 2020 and 2021 half years.
In June 2020, there remained considerable uncertainty in
relation to COVID-19, sales were at lower levels and many markets
remained under restrictions or in lockdown, hence inventories and
debtor levels were relatively low and working capital reduced to
historically low levels, which allowed for high operating cash flow
conversion.
As of June 2021, a very different set of circumstances existed,
with restrictions lifted across regions and greater certainty and
confidence in Q3 trading levels compared to the prior year. June
2021 sales were extremely strong, notably as our European and RoW
importers built their own inventories ahead of the Summer selling
period, which elevated the period end receivables. Alongside this,
in response to uncertainties in relation to the availability and
lead time of trans-Atlantic shipping we took the decision to build
inventory levels in the US in the first half of the year, to ensure
we were well stocked ahead of the significant summer sales period
in a key growth market.
The investment in working capital in the period has resulted in
cash generated from operations reducing to 22% of adjusted EBITDA
(H1 2020: 146%). We expect working capital to reduce in the second
half of the year and therefore the operating cash flow conversion
to improve, however, we expect working capital to remain elevated
compared to 2020 as we continue to navigate the current period of
global logistics disruption.
Cash
The Group continues to retain a strong cash position, however,
as a result of the investment in working capital in the first half
of the year and therefore a lower level of operating cash flow
conversion, cash at period end has reduced to GBP133.2m, a decrease
of 2.7% from June 2020.
Capital Allocation Framework and Dividend
The Group's Capital Allocation framework remains unchanged. Our
financial strength and cash position has allowed us to maintain our
long-term focus despite the uncertainty relating to the impacts of
COVID-19. As such, we will continue to retain sufficient cash to
allow for investment against the Global opportunity, will remain
vigilant with regards to M&A opportunities and beyond that will
consider additional distributions to shareholders where the Board
considers there to be surplus cash held on the Balance Sheet.
As a reflection of our confidence in the financial strength of
the Group the Directors are pleased to declare an interim dividend
of 5.52 pence per share, 2% ahead of the 2020 interim dividend. The
dividend will be paid on 22 October 2021, to shareholders on the
register on 1 October 2021.
FY21 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.
The On-Trade restrictions and closures resulting from the
pandemic are subsiding in most of our key markets and we are seeing
the benefits of our continued investment in our strong
relationships with our partners in that channel. Even as the
On-Trade has reopened, we have continued to see good momentum in
the Off-Trade driven by increased adoption of long mixed drinking
at home as spirits continue to take share from beer and wine and
increased support from retailer and spirit partners. Consequently,
we have further strengthened our market share across our regions
which, along with supportive industry trends and the return of the
On-Trade, gives us confidence in the Group's position as we look
ahead.
As a result of the strong first half, we are reiterating our
increased revenue guidance of GBP295m - GBP304m for the full year.
We continue to work through the significant logistics disruption
which is affecting the whole industry as the year progresses. The
situation is dynamic and whilst uncertainty remains as to the
longevity and intensity of the disruption, we continue to manage
these challenges and anticipate gross margins of c.43%, delivering
an EBITDA margin of c.20% for 2021.
Whilst we are very focused on mitigation efforts over the medium
term, we believe logistic cost headwinds will continue alongside
input cost increases on product costs, and anticipate only a
marginal improvement in EBITDA margin next year. We remain very
confident of continued strong sales momentum across our regions and
will continue to invest in the business to capitalise on the
longer-term structural growth opportunity ahead of us.
Consolidated statement of comprehensive income
For the six months ended 30 June 2021
(unaudited)
(unaudited) 6 months Audited year
6 months to to 30 June to 31 December
30 June 2021 2020 2020
Notes GBPm GBPm GBPm
Revenue 2 141.8 104.2 252.1
Cost of sales (79.3) (55.5) (135.8)
============== ============ ================
Gross profit 62.5 48.7 116.3
Administrative expenses (37.2) (27.3) (65.0)
Adjusted EBITDA 1 29.2 23.8 57.0
Depreciation (1.8) (1.2) (2.7)
Amortisation (0.8) (0.4) (1.1)
Share based payment charges (1.3) (0.8) (1.9)
=================================== ====== ============== ============ ================
Operating profit 25.3 21.4 51.3
Finance costs
Finance income 0.1 0.3 0.5
Finance expense (0.1) - (0.2)
Profit before tax 25.3 21.7 51.6
Tax expense (4.9) (4.2) (9.9)
============== ============ ================
Profit for the year / period 20.4 17.5 41.7
Items that may be reclassified
to profit or loss
Foreign currency translation
difference of foreign operations - 0.1 (0.2)
Effective portion of cash
flow hedges (0.6) (1.4) 0.6
============== ============ ================
(0.6) (1.3) 0.4
Comprehensive income attributable
to equity holders of the parent
company 19.8 16.2 42.1
Earnings per share for profit
attributable to the owners
of the parent during the year
Basic (pence) 4 17.47 15.06 35.86
Diluted (pence) 4 17.44 14.99 35.76
Consolidated statement of financial position
30 June 2021
(unaudited) (unaudited) Audited
30 June 31 December
30 June 2021 2020 2020
Notes GBPm GBPm GBPm
Non-current assets
Property, plant & equipment 9.9 6.3 7.5
Intangible assets 48.0 40.6 48.8
Deferred tax asset 3.0 0.8 1.9
Other financial assets - 2.3 -
============== ============ =============
Total non-current assets 60.9 50.0 58.2
============== ============ =============
Current assets
Inventories 47.8 23.6 38.7
Trade and other receivables 70.7 50.1 56.0
Derivative financial instruments - - 1.3
Corporation tax asset - 4.4 1.1
Cash and cash equivalents 133.2 136.9 143.1
============== ============ =============
Total current assets 251.7 215.0 240.2
============== ============ =============
Total assets 312.6 265.0 298.4
============== ============ =============
Current liabilities
Trade and other payables (44.7) (30.0) (42.4)
Loans and other borrowing (0.1) - (0.1)
Derivative financial instruments (0.4) (1.8) -
Corporation tax liability (3.2) - -
Deferred tax liability - - (1.5)
============== ============ =============
Lease liabilities (0.9) (0.6) (0.7)
============== ============ =============
Total current liabilities (49.3) (32.4) (44.7)
============== ============ =============
Non-current liabilities
Deferred tax liability (1.1) - -
Lease liabilities (0.7) (1.0) (1.1)
============== ============ =============
Total non-current liabilities (1.8) (1.0) (1.1)
============== ============ =============
Total liabilities (51.1) (33.4) (45.8)
============== ============ =============
Net assets 261.5 231.6 252.6
============== ============ =============
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 0.2 (1.2) 0.8
Translation Reserve (0.2) 0.1 (0.2)
Retained earnings 206.3 177.5 196.8
Total equity 261.5 231.6 252.6
============== ============ =============
Consolidated statement of cash flows
For the six months ended 30 June 2021
(unaudited) (unaudited)
6 months 6 months Audited year
to 30 June to 30 June to 31 December
2021 2020 2020
Notes GBPm GBPm GBPm
Operating activities
Profit before tax 25.3 21.7 51.6
Finance expense 0.1 - 0.2
Finance income (0.1) (0.3) (0.5)
Depreciation of property, plant
& equipment 1.8 1.2 2.7
Amortisation of intangible
assets 0.8 0.4 1.1
Share based payments 1.3 0.8 1.9
============ ============ ================
29.2 23.8 57.0
(Increase)/ Decrease in trade
and other receivables (12.0) 11.1 4.0
(Increase)/ Decrease in inventories (9.3) (2.7) (17.2)
Increase/ (Decrease) in trade
and other payables (1.4) 2.5 10.8
(22.7) 10.9 (2.4)
Cash generated from operations 6.5 34.7 54.6
============ ============ ================
Income tax paid (2.4) (14.1) (16.5)
============ ============ ================
Net cash flows from operating
activities 4.1 20.6 38.1
============ ============ ================
Investing activities
Purchase of property, plant
and equipment (2.5) (0.5) (2.6)
Interest received 0.1 0.3 0.5
Acquisition of subsidiary,
net of cash acquired - - (1.7)
============ ============ ================
Net cash used in investing
activities (2.4) (0.2) (3.8)
============ ============ ================
Financing activities
Interest paid (0.1) - (0.2)
Dividends paid (11.9) (11.5) (17.8)
Repayment of loan - - (0.9)
Payment of lease liabilities (0.2) (0.3) (0.7)
Net cash used in financing
activities (12.2) (11.8) (19.6)
============ ============ ================
Net increase / (decrease) in
cash and cash equivalents (10.5) 8.6 14.7
Cash and cash equivalents at
beginning of period 143.1 128.3 128.3
============ ============ ================
Effect of movement in exchange
rates on cash held 0.6 - 0.1
Cash and cash equivalents at
end of period 133.2 136.9 143.1
============ ============ ================
Notes to the consolidated financial information
For the six months ended 30 June 2021
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
2020 which had been prepared in the 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 2021.
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
2020 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
2020. 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.
The impact of COVID-19 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 2022. 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
5.52 pence per share.
Notes to the consolidated financial information
For the six months ended 30 June 2021
2. Revenue by region
(unaudited) (unaudited)
6 months 6 months Audited year
to 30 June to 30 June to 31 December
2021 2020 2020
GBPm GBPm GBPm
United Kingdom 50.3 48.3 103.3
United States of America 36.2 27.4 58.5
Europe 41.3 20.5 65.3
Rest of the World 14.0 8.0 25.0
============ ============ ================
Group 141.8 104.2 252.1
============ ============ ================
3. Dividend
The interim dividend of 5.52 pence per share will be paid on 22
October 2021 to shareholders on the register on 1 October 2021.
4. Earnings per share
(unaudited) (unaudited)
6 months 6 months Audited year
to 30 June to 30 June to 31 December
2021 2020 2020
GBPm GBPm GBPm
Profit
Profit used to calculate basic
and diluted EPS 20.4 17.5 41.7
Number of shares
Weighted average number of
shares for the purpose of basic
earnings per share 116,525,784 116,139,794 116,277,921
Weighted average number of
employee share options outstanding 231,674 482,873 335,590
Weighted average number of
shares for the purpose of diluted
earnings per share 116,757,458 116,622,667 116,613,511
Basic earnings per share (pence) 17.47 15.06 35.86
============ ============ ================
Diluted earnings per share
(pence) 17.44 14.99 35.76
============ ============ ================
Notes to the consolidated financial information
For the six months ended 30 June 2021
4. Earnings per share (continued)
Normalised EPS (unaudited) (unaudited)
6 months 6 months Audited year
to 30 June to 30 June to 31 December
2021 2020 2020
GBPm GBPm GBPm
Profit
Reported profit before tax 25.3 21.7 51.6
Add back:
Amortisation 0.8 0.4 1.1
Adjusted profit before tax 26.1 22.1 52.7
Tax - assume standard rate
(19%) (5.0) (4.2) (10.0)
Normalised earnings 21.1 17.9 42.7
Number of shares 116,525,784 116,139,794 116,277,921
Normalised earnings per share
(pence) 18.14 15.38 36.72
============ ============ ================
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).
[1] Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share based payment charges and finance
costs
[2] IRI 13 weeks to 13 June
[3] IRI 24 weeks to 19 June 2021
[4] Nielsen 24 weeks to 19(th) June 2021
[5] Nielsen and IRI data top 10 European markets (BE, NL, FR,
SP, IT, DE, AT, CH, DK, ROI)
[6] Nielsen H1 2021
[7] Kantar Brand Health (awareness)
[8] Woolworth & Coles scan data
[9] Coles Liquor scan data
[10] Nielsen 52 weeks to 19 June 2021
[11] Nielsen 52 weeks to 19 June 2021
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END
IR BRGDCGDBDGBS
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