Fevertree Drinks plc FY22 Interim Results to 30 June 2022

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

*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

• We remain the clear market leader in the UK (33% of Group revenue), delivering revenue growth of 6% despite well-reported industry challenges
• 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
• 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
• 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:

• 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
• 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
• 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
• 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.”