Fever-Tree Drinks plc
FY22 pre-close trading update
Fever-Tree, the world’s leading supplier of premium carbonated mixers, announces a trading update for the year ending 31st December 2022, ahead of reporting its Preliminary Results on 22nd March 2023.
Financial highlights
| Revenue, £m | FY22 | FY21 | Change |
| UK | 116.2 | 118.3 | (2%) |
| US | 95.6 | 77.9 | 23% |
| Europe (Fever-Tree brand revenue) | 89.2 | 78.8 | 13% |
| Europe total revenue* | 101.0 | 88.2 | 15% |
| ROW | 31.5 | 26.7 | 18% |
| Total | 344.3 | 311.1 | 11% |
*includes GDP portfolio brand revenue
Fever-Tree continued to deliver strong top line growth, increasing Group revenue by c.11% year-on-year to c.£344 million. We continue to invest behind and successfully pursue a growing global opportunity, as demonstrated by the c.18% growth achieved across the US, Europe and Rest of the World regions. Alongside this, the steps taken by the business to offset significant global inflationary cost pressures have meant the Group expects to deliver Adjusted EBITDA of c.£39 million, in-line with expectations.
UK
· Overall revenue declined by 2%, but the brand continues to gain distribution and market share, remaining the clear leader of the UK mixer category[1].
· On-Trade revenue increased by c.28% year-on-year, however, the widespread industrial action undertaken across the UK rail network in the run up to Christmas had a notable impact on sales in what is traditionally a very strong trading period.
· In the Off-Trade, whilst the mixer category was annualising tough comparators after a very strong period of sales during lockdowns, the brand has increased volume share from pre-COVID levels[2]. In addition to our core mixers, we have made significant progress expanding into the adult soft drink category, with incremental distribution, very positive initial performance and an ambitious plan for 2023.
US
· Fever-Tree delivered very good growth in 2022, increasing by 23% (13% at constant currency). This positive performance was despite the impact of industry-wide port congestion and logistics disruption, without which the underlying demand for the brand would have translated to an even stronger sales performance during the year, giving us confidence going into 2023.
· We are making good operational progress, continuing to ramp up local US production, as well as onboarding local glass supply.
· We also acquired Powell & Mahoney, a US non-carbonated cocktail mixer brand. This acquisition provides Fever-Tree with a platform to accelerate our entry into this exciting adjacent category in 2023.
Europe
· Revenue grew by 15% (16% at constant currency), driven by a strong performance in Southern Europe, and slightly offset by softening consumer sentiment in Germany.
· Our On-Trade sales across the region accelerated from Q2 onwards following the removal of restrictions and a strong rebound of tourism.
· Fever-Tree continued to perform well in the Off-Trade, remaining the largest premium mixer brand in Europe and the biggest driver of growth and premiumisation in the category.
Rest of the World
· Our momentum continued with growth of 18% (14% at constant currency), with particularly strong sales growth in Australia, where the brand is driving premium mixer growth across a broad range of categories.
· During the year, we made two significant step changes in our route-to-market across the globe by transitioning to a new, more powerful distributor in Canada and signing a partnership agreement with Asahi Breweries in Japan, reflecting the significant long-term growth opportunities in two key international markets.
FY23 outlook and guidance
· Macro-economic volatility and uncertainty remains elevated in 2023. However, as an increasingly diversified global business, we remain confident of delivering strong growth, with momentum continuing across our growth regions, especially the US, and a return to growth in our most established market in the UK.
· As a result, we are introducing a revenue guidance range of £390m to £405m in 2023. This is in line with expectations and represents growth of +13% to +18% across the Group.
· Inflationary cost pressures remain, with further double-digit percentage increases across key input costs including filling fees, ingredients and packaging.
· We continue to take steps to off-set these significant incremental costs. A combination of pricing actions across regions, including the US, cost-saving initiatives and increased local US production would have driven margin improvement this year.
· However, the impact of elevated European energy costs into glass bottle pricing will be material in 2023. Whilst energy pricing has recently reduced, it remains volatile and at least three times higher than 2021 levels, impacting both the cost of raw materials and the direct energy cost in glass manufacture.
· As a glass-led business, with c.80% of our sales mix in glass bottles, we are particularly exposed to this significant headwind. We now estimate that the direct energy component of glass manufacture alone represents a c.£20m additional cost to the business in 2023 compared to our prevailing glass pricing in Q1 2022.
· This premium format remains an integral part of our long-standing market-leading proposition, and as such we are working closely with our glass suppliers to mitigate this cost wherever possible as we progress through the year, whilst any further recalibration of energy pricing towards more normalised levels would allow for significant margin improvement in 2024.
· As a result of the above impacts, most notably the continued impact of elevated European energy pricing on glass, we are working to deliver EBITDA in-line with 2022 and introduce an EBITDA guidance range of £36m to £42m for 2023.
Tim Warrillow, CEO of Fever-Tree commented:
“2022 has seen the Fever-Tree brand continue to gain traction and prominence across the globe resulting in double digit revenue growth and profits in line with expectations. Furthermore, the brand continues to increase its clear global market leadership position and remains the primary driver of this increasingly prominent international drinks category.
Looking ahead to 2023, we remain very confident in delivering strong top line growth, most notably in the US. Whilst the initiatives we are implementing would have driven margin improvement during the year, the energy related cost increases, which are particularly acute across the glass industry, mean we expect to deliver absolute EBITDA in-line with 2022. These temporary additional costs will unwind significantly as the energy price recalibrates and we are resolute in continuing to invest for the longer-term, by introducing new products, expanding into adjacent categories such as adult soft drinks and delivering exciting new marketing campaigns across our regions.”
For more information please contact:
Investor queries
Ann Hyams, Director of Investor Relations I ann.hyams@fever-tree.com I +44 (0)20 4516 8106
Media queries
Oliver Winters, Director of Communications I oliver.winters@fever-tree.com I +44 (0)770 332 9024
Nominated Advisor and Broker – Investec Bank plc
David Flin I Alex Wright I +44 (0)20 7597 5970
Corporate Broker – Morgan Stanley & Co. International plc
Andrew Foster I Jessica Pauley I +44 (0)20 7425 8000
Financial PR advisers – FGS Global
Faeth Birch +44 (0)7768 943 171; Anjali Unnikrishnan +44 (0)7826 534 233
This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the Company is Andy Branchflower