TIDMFEVR
RNS Number : 4170K
Fevertree Drinks PLC
22 April 2020
22(nd) April 2020
Fevertree Drinks plc
( "Fever-Tree" or the "Group")
Preliminary Results
Fever-Tree, the world's leading supplier of premium carbonated
mixers, today announces its Preliminary Results for the year ended
31 December 2019 following the FCA guidance issued on 21 March 2020
requesting public companies to delay the announcement of results
.
2019 2018 Change
Revenue GBP260.5m GBP237.4m +10%
---------- ---------- -------
Gross profit
margin 50.5% 51.8%
---------- ---------- -------
Adj EBITDA* GBP77.0m GBP78.6m (2%)
---------- ---------- -------
Profit After
Tax GBP58.5m GBP61.8m (5%)
---------- ---------- -------
Diluted EPS 50.26p 53.19p (6%)
---------- ---------- -------
Total Dividend 15.08p 14.50p +4%
---------- ---------- -------
Net cash GBP128.3m GBP83.6m +53%
---------- ---------- -------
* Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share based payment charges and finance
costs.
2019 Highlights
Financial
-- Double digit revenue growth, driven largely by strong US growth
-- Challenging UK market lapping exceptional comparators,
especially in the Off-Trade, resulting in a 1% decline in
revenue
-- Gross profit margin of 50.5% (2018: 51.8%)
-- Adjusted EBITDA* of GBP77.0m (2018: GBP78.6m) reflecting
ongoing investment for future growth
-- Profit after tax of GBP58.5m (2018: GBP61.8m)
-- Diluted EPS of 50.26 pence (2018: 53.19 pence)
-- Final dividend of 9.88 pence per share, bringing total
dividend for the year to 15.08 pence per share (2018: 14.50 pence
per share)
-- Very strong balance sheet, debt free with net cash at year
end of GBP128.3m (2018: GBP83.6m)
Operational
-- Retained UK category leadership in both the On and Off-Trade
channels despite a highly competitive UK market
-- Increasing geographic spread, with a very positive
performance in key growth markets including the US, Germany,
Australia and Canada
-- Further building of operational capability in the US, signing
a key first bottling partner in the region
-- Broadening the product portfolio, with good progress in our
ginger range in multiple markets
-- Continued to invest behind the brand for the longer term,
most notably in our growth regions
-- Asset light, outsourced business model providing a low fixed
cost base and significant operational flexibility
Post Period End:
-- Solid start to the new financial year, with Group trading in
the first two months in line with the Board's expectations
-- US pricing initiative announced in January very well received
by On and Off-Trade customers with promising results from initial
trials and new accounts secured
-- While COVID-19 will have a material impact on FY20 trading,
the Group is financially strong and has well balanced revenue
streams diversified across regions, channels and customers.
Tim Warrillow, Co-founder and CEO of Fever-Tree said:
"The Group delivered good growth in 2019 despite a more subdued
UK market, with double-digit growth across our international
regions. We strengthened our global leadership position and in
doing so continued to build a strong platform to deliver long term,
sustainable growth.
We made a solid start to the new financial year, with Group
trading in the first two months in line with the Board's
expectations.The US in particular started the year strongly and we
have been encouraged by the response from our key customers to the
US price optimisation.
Clearly the scale and impact of COVID-19 has posed some
significant challenges across our regions. With regards to our
people, we have a strong close-knit team who are integral to the
success of the business and as such o ur position since the
beginning of this crisis has been to offer support and certainty to
all employees and to this end we have not furloughed anyone. In
fact, those that have some spare capacity we have encouraged to
sign up to support their local communities through initiatives such
as the NHS volunteer army, or indeed redeploy to different
departments across the business. We are determined to come out the
other side as an even stronger business but also one that has made
a difference during the crisis.
With regards to trading, while the On-Trade sector is facing an
extremely challenging period, we have seen strong sales in the
Off-Trade in many of our markets both from the initial buying ahead
of lockdown but also in recent weeks as at home consumption has
remained robust.
While we will not be unaffected by the current situation,
especially in the On-Trade, Fever-Tree is well positioned to manage
our way through this situation. We are a global business with
revenue diversified across regions, channels and customers.
Financially the Group is very secure. We are debt free, with a
strong cash position. The Group's unique asset light, outsourced
business model means we have a low fixed cost base, a small,
dedicated team and the flexibility to manage the current
challenges. The wider long-term trend towards premium spirits and
premium long mixed drinks continues and we are confident the Group
will be well placed once the current period of disruption and
uncertainty ends."
There will be an analyst conference call on Wednesday 22 April
2020 at 10:00 (BST). The call can be accessed by dialling +44 800
358 6377and quoting the confirmation code '4631964'.
Additionally, the presentation can be viewed via a live webcast
using the following link
https://webcasting.brrmedia.co.uk/broadcast/5e73b069f930d97ffc7b9b89
For further information:
Fevertree Drinks plc
Analysts and Investors
Ann Hyams, Director of Investor Relations +44 (0)7435 828 138
Media
Oliver Winters, Communications Director +44 (0)770 332 9024
Numis Securities - Nominated Adviser and Joint Broker +44 (0)20 7260 1000
Garry Levin
Matt Lewis
Hugo Rubinstein
Investec Bank plc - Joint Broker +44 (0)20 7597 5970
David Flin
Alex Wright
David Anderson
Brunswick Group +44 (0) 20 7404 5959
Jonathan Glass
Fiona Micallef-Eynaud
COVID-19 Update
People & Communities
Fever-Tree has always been a small, close knit team and we value
the contribution of every one of our employees and this remains
integral to how we run our business. Our team has adapted well to
remote working and we are in daily contact with all our employees
around the globe, ensuring they have all the support they require
and I am very proud of how they have responded to these
unprecedented times.
Our position since the beginning of this crisis has been to
offer support and certainty to all of them in terms of their jobs
and we have no intention of furloughing any of our employees
regardless of their role. In fact, we believe in looking at the
opportunities that can come from this, whether this be through
redeploying our On-Trade team to different departments across the
business to broaden their knowledge and skill set or launching new
projects and initiatives as we look to 2021 and beyond. We are
determined to come out the other side as an even stronger business
but also one that has made a difference during the crisis.
As well as a focus on our employees, we are offering support to
communities and groups across our regions. This has included
financial support to local charities in West London where our head
office is based, encouraging staff with some capacity to volunteer
to support good causes such as 'the NHS army' or through donations
to initiatives supporting key workers. In the UK we are supporting
"Salute the NHS" in their mission to provide one million meals to
NHS frontline staff over the next three months and have so far
donated sixty thousand soft drinks to be included in their meal
packs.
Operational
We have established a cross departmental team from across all
our regions to focus and co-ordinate our response to the rapidly
changing situation and the Board is kept up to date with any key
developments.
The Group's unique asset light, outsourced business model
enables agility and flexibility. We are working very closely with
our production partners across the UK and Europe as they have
enacted their own business contingency plans, with our key bottlers
and canners continuing to operate through the crisis with
segregated shift patterns.
In addition we have taken action to ensure our finished goods
stock in the UK is held across separate locations within our
logistics partner's estate, and in the US we hold our stock across
three locations on the West Coast, East Coast and in Texas.
Cash and liquidity
The Group is in a very strong financial position. We are
debt-free, with year end cash of GBP128m, which has further
increased post period end. Alongside this, our strong underlying
cash flow conversion, our low level of capital commitments and low
fixed cost base means that we are in a robust position to withstand
the potential impacts of COVID-19.
Reflecting the financial strength of the business and our
ongoing ability to generate significant cash, we remain committed
to paying a final dividend for FY19 of 9.88p per share, which
brings the total dividend for the year to 15.08p, up 4% on the
prior year.
As well as a low fixed cost base, we have the ability to flex
our variable cost base where required to reflect the changing
channel dynamics and consumer demand as it evolves across our
regions, and we will continue to keep our advertising and promotion
spend under review over the coming months.
On/Off-Trade Channels
The On-Trade channel, which makes up 45% of Group sales,
continues to be challenged across many of our regions. W e are
remaining in close contact with our On-Trade customers, many of
whom have been severely impacted by the crisis. Our focus has been
on offering support as and when it is needed most. This can be
through extending payment terms to help ease near term cashflow
pressure and more recently looking at ways we can support them as
and when the On-Trade begins to reopen.
Within the Off-Trade channel which accounts for 55% of Group
sales, the initial weeks of the crisis were characterised by
periods of very strong sales in many of our key markets as
consumers increased the frequency of their visits and purchased
more per basket as they prepared for the implementation of social
distancing orders.
We continue to work very closely with our key Off-Trade
customers through the crisis and while there has been a degree of
moderation in recent weeks, overall sales in the Off-Trade have
remained strong.
Summary
While COVID-19 will have a material impact on FY20 trading, the
Group is financially strong and has well balanced revenue streams
across regions, channels and customers.
We have modelled a number of possible outcomes which consider,
amongst other things, the overall length of the lockdown in key
regions, trading within the Off-Trade channel during the period, as
well as the rate of normalisation across the On-Trade post
lockdown.
These scenarios give a broad range of outcomes on revenue,
before then considering the related margin impact and approach to
discretionary spend as we move through the year.
Given the level of uncertainty and the dynamic nature of the
situation, it is too early to quantify COVID-19's full impact on
the remainder of the financial year. However, we remain confident
that the Group will be well positioned coming out of this extremely
difficult period and we will continue to deliver our plans for
long-term growth.
Tim Warrillow
Chief Executive
CHAIRMAN'S STATEMENT
Before commenting on the year's performance and the Company's
strategy, it is important to acknowledge the impact being seen
across global markets due to the outbreak of COVID-19. Fever-Tree's
top priority is the health and safety of our employees and we have
been taking precautions, in line with guidance across our markets,
to protect them. While a great deal of uncertainty remains about
the overall impact of the virus, the whole Fever-Tree team will
continue to work closely with our customers, suppliers and our
partners to navigate through this period.
2019 Performance
The financial and operational progress seen in 2019 is testament
to the Group's growing global footprint with revenue growth of 9.7%
to GBP260.5m. The opportunity ahead remains significant and the
Group has multiple long-term growth drivers both within its more
mature markets, where Fever-Tree has established a market
leadership position, as well in a number of regions around the
world where the consumer and trade tailwinds for long mixed drinks
are gathering pace. While it is disappointing that adjusted EBITDA
declined year on year to GBP77.0m (2018: GBP78.6m), this reflects
not only the weaker second half in the UK, but also the fact that
we continued to invest in the opportunity ahead.
The challenging macroeconomic environment in the UK, coupled
with the poor weather seen over the summer, meant that the Group
and the wider category had a more testing year, especially when
taken against the exceptional performance delivered in 2018.
However, Fever-Tree remains in a strong position in its most mature
market. The Group is the market leader across both the On-Trade and
Off-Trade channels, reflecting the ongoing strength of the brand,
with particularly encouraging underlying trading across our
national accounts as well as growing regional footprint in the
On-Trade in 2019.
Fever-Tree USA now has over 40 employees and 2019 was a year of
real progress across the business with the Group reporting revenue
growth of 33.0% in the year and seeing a widening and deepening of
its penetration across both channels while strengthening our
relationships with key customers and spirits companies. There are
encouraging signs that the mixer category is gaining greater
attention from customers and consumers alike and the strategic
steps we are taking, such as repositioning our pricing and format
architecture, will ensure we are best placed to drive the continued
growth of the category.
2019 was another year of strong growth in Europe with revenue up
16.0%. The Group continued to build its distribution across the
region with key markets including Germany and Spain seeing
significant new listings. Premium gin remains in good growth but
the Group has also seen a strong performance from its ginger range
in a number of markets reflecting the popularity of the "Mule" and
"Highball" serves and the ability of the Group's broader range to
drive further growth. Finally, Fever-Tree remains very much a
global brand with opportunities across the Rest of the World
illustrated by the performance in territories such as Australia and
Canada, both of which delivered very positive results and are
becoming ever more notable markets for the Group.
Strategy
The Board works closely with the founder-led executive
management team and as part of its responsibilities, carries out a
review of the Group's strategy on an annual basis.
While the performance in the UK in the second half was behind
expectations, it should be put into context of not only the wider
macroeconomic conditions and our category leadership position but
also the positive performance delivered across our other regions,
demonstrating the truly global platform the Group continues to
build.
The Board held a three-day session in the US in 2019 dedicated
to US strategy with site visits and presentations from our regional
leadership team. In addition, we have received presentations from
other regional and departmental heads through the year, updating us
on strategy and execution across the Group. The other Board members
and I continue to be deeply impressed not only by the passion and
professionalism of the whole team but also the operational
execution and foundations that have been established as we build a
global beverage business.
The Board
An external evaluation of the Board was carried out for the
first time this year. The report reflected that the Board is
functioning well. The Board is characterised as transparent and
collaborative with a good mix of industry knowledge which has
helped add value to the executive.
Culture
The refusal of our co-founders, Charles and Tim, to compromise
in pursuit of the best remains integral to Fever-Tree's purpose to
this day. This is evident in how we build long-term relationships
throughout our supply chain, source the highest quality ingredients
directly from our key suppliers, ensure we build meaningful
relationships within the communities in which we operate and most
importantly, through our culture which fosters and encourages our
employees to challenge and push the boundaries.
The Board recognises its role in helping to promote our desired
culture throughout the Group. 2019 saw a number of new initiatives
successfully launched, reflecting the growing focus on employee
engagement and development and it remains a key area of focus for
the Board as we move into 2020.
Cash Position
The Group continues to enjoy strong on-going underlying cash
generation and retains a very robust balance sheet, with year-end
cash position of GBP128.3m, an increase of 53.5% (2018: net cash of
GBP83.6m).
The Group intends to retain sufficient cash to allow for
investment against the global opportunity ahead and see our strong
cash position as a competitive advantage over many of our premium
mixer competitors globally. However, where the Board then considers
there to be surplus cash held on the Balance Sheet it will consider
additional distribution to shareholders.
Dividend
The Group remains committed to a progressive dividend policy and
reflecting the confidence in the financial strength of the
business, the Board is pleased recommend a final dividend of 9.88
pence per share in respect of 2019 (2018: 10.28 pence per share)
bringing the total dividend for the year to 15.08 pence per share
(2018: 14.50 pence per share). If approved by shareholders at the
AGM on 4 June 2020 the final dividend will be paid on 12 June 2020
to shareholders on the register on 15 May 2020.
AGM
The AGM is due to take place on Thursday 4 June 2020. In light
of the issues caused by COVID-19, unfortunately shareholders shall
not be permitted to attend the AGM in person this year and shall be
refused entry. However, shareholders shall be able to vote on
resolutions by proxy. The AGM notice provides further information
on voting by proxy and we encourage all shareholders to take
advantage of this functionality. Shareholders are invited to submit
any questions for the Board by sending an email to
agm@fever-tree.com.
Bill Ronald
Chairman
CHIEF EXECUTIVE'S REVIEW
2019 Review
Fever-Tree has made good progress during the year and the Group
began 2020 well placed across our key regions. Notwithstanding the
current challenges related to the impact of COVID-19, we have the
team, relationships, leadership position, portfolio and brand
strength to approach the global opportunity ahead with real
ambition and excitement.
The Group delivered revenue of GBP260.5m, representing growth of
9.7% on 2018. This revenue growth was underpinned by strong
margins, with a gross profit margin of 50.5% and adjusted EBITDA
margin of 29.6%, which translated to profit after tax for the year
of GBP58.5m.
We ended the year with a strong balance sheet and net cash of
GBP128.3m, an increase of 53.5% on last year.
Regional Review
We consider our global sales across four regions, being the UK,
USA, Continental Europe, and Rest of the World ("RoW").
Revenue by Region
Revenue Revenue % change
FY2019 FY2018
GBPm GBPm
United Kingdom 132.7 134.1 -1.1%
United States of America 47.6 35.8 +33.0%
Europe 64.4 55.5 +16.0%
Rest of the World 15.8 12.0 +31.7%
Total 260.5 237.4 +9.7%
======= ======= ========
UK
After several years of exceptional growth which has seen
Fever-Tree establish itself as the UK's no.1 mixer brand, 2019 was
a more challenging year for the Group in the UK, reflecting a
number of headwinds faced by the wider mixer category.
The category lapped some exceptional comparators from 2018,
driven by the summer heatwave, major sporting events and royal
weddings. On top of this the UK experienced unseasonably poor
weather over the summer months in 2019 which was followed by weaker
than expected consumer confidence towards the end of the year. This
all had a notable impact not only on the mixer category but the
wider grocery channel, with our major retail customers seeing a
deceleration in growth in the second half.
As a result, mixer category volumes declined at UK retail in
2019, with our volumes declining in line with the category.
Additionally, and as expected, we saw a de-stock from our retail
customers, which further reduced our sales into them, resulting in
a 7% decline in Off-Trade revenue over the year.
While this performance was behind our expectations, we retained
our category leadership position within mixers, holding our volume
share and ending the year with 40% value share (IRI - Total UK
Retail Mixer Market value share - 13 weeks to 29/12/19), testament
to the brand's ongoing strength at retail. None of the competitors
in the premium segment have had discernible impact on the category
despite the significant incremental shelf space and the high levels
of promotional activity they undertook during 2019, with their
total category share remaining flat.
In the On-Trade, despite the channel seeing a slower end to the
year versus 2018, we delivered an encouraging performance with
growth of 5% in 2019. We performed well across our national pub
groups and continued to gain distribution, particularly regionally,
strengthening our position as the clear mixer of choice across the
channel. There remains white space to broaden and deepen our
footprint as we continue to focus on delivering value for our
customers alongside driving awareness with consumers.
Turning to innovation, our Spiced Orange and Smoky Ginger Ales
both gained increased distribution across the On-Trade, reflecting
a growing interest amongst our customers for our broader range of
mixers. Alongside this our 500ml Spiced Orange Ginger Ale was
listed in the Off-Trade during the second half of 2019 and was one
of our best performing products over the Christmas period.
Looking ahead, we have recently launched a new range of premium
flavoured sodas. Using the same expertise applied to craft our
tonic waters and gingers, the four flavours have been developed to
perfectly pair with a variety of different premium spirits from
vodkas and gins through to vermouths and Italian bitters. With the
desire for longer, lighter yet simple drinks becoming ever more
pronounced amongst health-conscious consumers, the new range had an
extremely positive reception from our key customers. While the roll
out across the On-Trade has been understandably delayed due to the
current shut down, the range has gained Off-Trade listings and is
an exciting addition to our broader range of mixers.
The Group continued to work closely with a broad range of
spirits companies both large and small throughout the year. We
undertook a number of successful co-promotional activities in the
Off-Trade, notably at Easter and Christmas, across our range of
tonics and broader ginger range. In addition, our pioneering
approach to marketing and brand awareness continued with our
G&T Gardens, long mixed drink menus and event activations,
including the second year of the Fever-Tree Championships, all
designed to support our On and Off-Trade partners in stimulating
consumer awareness and trialling. Finally, our gifting has once
again proved extremely popular with increased level of activations
in the UK for our Christmas crackers which were also made available
in certain European markets for the first time.
Our long-term relationship with our retail partners remains very
positive and these relationships, alongside our category leadership
position, remains a key strength in the current challenging times.
While a lot of focus is currently on the short term category
management, we are also working closely with our partners on
revenue growth management plans for 2020 and are confident in our
ability to continue to outperform the premium competition. Our
On-Trade business is robust and, notwithstanding the challenging
months ahead for the whole sector, we will continue to invest in
the category and support our partners. We continued to win new
accounts in 2019 and have identified clear opportunities to gain
further distribution across the UK in the year ahead.
While the UK gin category saw a year of more moderate growth
when compared to 2018, it is important to remember that it is a now
a GBP2.5bn category, firmly established as the second biggest
spirits category in the UK. It remains a key focus for spirits
companies and continues to be invested in and supported by both the
On and Off-Trade.
The gin & tonic will of course remain a fundamental part of
our UK strategy; however, there is a growing focus across both
channels and amongst our spirits partners on the wider long mixed
drink occasion. As well as building on the relationships already
established, our strategy remains focused on our best in class
innovation, such as our recently launched soda range, and marketing
expertise to ensure we have not only the right flavours and formats
but are driving awareness to support this broader move.
US
Our US business performed strongly in 2019 with sales
accelerating in the second half across all channels. Fever-Tree is
now the 4th largest mixer brand overall in the US, driving 2/3rds
of the premium category growth. Fever Tree remains the clear
premium market leader, over two and half times the size of our
nearest competitor. Although the mixer category still remains
relatively underdeveloped in the US, it is one of the fastest
growing categories in soft drinks.
In the On-Trade we have built on our partnership with Southern
Glazers Wines and Spirits ("SGWS"), with our distribution growth
accelerating in 2019. We have enjoyed success with our national
accounts and secured a number of new mandates across hotels,
casinos, bars and restaurant groups. In addition, the integration
of Union Beer as our distributor in New York has gone well,
enabling us to tackle this complex market, whilst accelerating
distribution and increasing activation.
In the Off-Trade, we continued to perform strongly across our
total account base, embedding the strong distribution gains across
the likes of Kroger, Safeway, Target and Publix. In addition,
regional chains and liquor stores also saw strong growth driven by
new distribution and increased brand activation, with expanded
point of sale materials and spirits partnerships securing
accelerated rate of sale.
Within the portfolio, we have seen growth across our full range
of mixers, targeting multiple drinks occasions, from the mule
(Ginger beer), to highballs (Ginger Ale) and spritzes (Club Soda),
alongside the emergence of the premium gin & tonic, albeit at
an early stage. We remain excited about the longer-term opportunity
for our gingers range in the US, with innovation playing a key
role. In addition, we are currently launching our Sparkling Pink
Grapefruit, a low-calorie soda ideally suited for the Paloma
occasion. The early signs are very encouraging, reflecting the
continued focus and growth of tequila across the trade.
2019 saw a further step up in investment in the brand in the US
with multiple activations across the country, focused on building
brand advocacy amongst the trade through key trade shows and
targeted PR and sponsorships as well as driving trial and awareness
with consumers.
When we took over our US operations in June 2018, we made it
clear that our priorities were building the right team, ensuring we
secured the ideal route to market, developing the relationships
with key On and Off-Trade partners, widening and deepening our
distribution footprint and then driving sales and awareness. I have
been very encouraged with how the US team has delivered to this
strategy thus far and we are establishing strong foundations from
which to capitalise on the opportunity ahead. Given this progress,
and as announced in January 2020, we firmly believe it is the right
time to execute on the next stage of our strategy through a
repositioning of our pricing and format architecture in the US.
Whilst we have performed strongly in 2019, our detailed analysis
and successful trials have shown that there is a clear opportunity
to unlock a greater opportunity in the US, opening up the brand to
a broader audience, more consumption occasions and further
distribution. This move will ensure we are positioned at an
affordable premium price as well as broadening range on shelf
through a range of diverse formats.
While the initiative will take time to be fully rolled out, the
early results have been encouraging. Implementation of the new
pricing with a number of Off-Trade customers has resulted in a
significant uplift in the rate of sale, in line, or in some cases
ahead of, the pricing elasticity studies we carried out. Our
On-Trade distribution partners such as SGWS are very supportive of
the steps we are taking, and we have already seen promising new
account wins resulting from the initiative.
This approach is aligned with how we successfully built the
brand in the UK and as such is a natural next step in the
development of our US business. Alongside the strong network and
relationships we are building with our On-Trade and Off-Trade
partners, this is positioning us to deliver long-term volume and
profit growth.
Europe
Sales in Europe accelerated in the second half of 2019 with a
good performance across our key territories. The premiumisation
trend is gaining momentum in many countries across the region and
Fever-Tree is outperforming its premium competitors and driving the
growth of the category.
The region continues to offer multiple opportunities for the
Group across a number of different countries. In our more
established markets such as Benelux, Ireland and Denmark, the last
12 months have seen the Group maintain its no. 1 premium position
and reinforce its relationships across the On and Off-Trade. While
we remain focused on the gin & tonic movement, these markets
also offer opportunities to drive further distribution across our
wider range of mixers, most notably our gingers, as we leverage our
brand strength and category leadership position.
There are also a number of markets that offer significant growth
opportunities and where the Group has made very good progress in
the last 12 months. Our relationship with Grupo Damm in Spain has
continued to strengthen, resulting in an encouraging uplift in
listings across the On-Trade as well as significant brand
activation through events in gastronomy, culture, and sport and
through major trade partners. Notable success included our Vermouth
& Tonic campaign in Madrid in Summer 2019 as major vermouth
players begin to signal their interest in the long mixed drink.
Germany is another market that saw good growth in 2019, with
national and regional listings with major retailers ReWe, Edeka,
and Kaufland secured, providing good momentum in the second
half.
In Italy, 2019 provided a great opportunity to further the
growth of our tonics, especially our Mediterranean tonic, as gin
& tonic trial begins to build momentum. Closer partnership with
major national wholesalers has allowed us to develop our routes to
market and build upon our notable ginger success now evident across
all of Italy.
Our dedicated European team has been supplemented during the
year and we have regional expertise and focus across Northern and
Southern Europe as well as the Nordics and Ireland. This is
complemented by in-market Fever-Tree marketing personnel, ensuring
best in class marketing execution and co-promotional activities
with both global and local spirits brands.
We entered our first European market 15 years ago and I look at
the markets where we have established a market leading position as
a great blueprint for what can be achieved across the region.
Fever-Tree is the only premium brand with the scale, distribution
footprint and track record across Europe and this gives us a clear
advantage over our premium competitors who are in decline in many
of these countries. Clearly the impact of COVID-19 will be felt
widely across the region in the year ahead but there remains a
significant group of markets that offer real potential as we look
to the medium to longer term. This is underpinned by the size of
the premium spirits market in Europe that remains in strong growth.
We have built an excellent platform in Europe and plan to continue
to invest in the opportunity.
Rest of the World
The premium mixed drinks trend continues to spread around the
world with Fever-Tree's global market leadership position growing
alongside it and we have made excellent progress during 2019 in a
number of key markets.
Australasia
The region delivered a very strong performance in 2019. Growth
was driven through increased rate of sale as well as further
distribution wins. We ended the year with good momentum reflecting
excellent trading over the Christmas period, most notably in
Australia. Fever-Tree launched and hosted the inaugural G&T
festival in Sydney in November which saw over 5,000 tickets sold
and the brand work alongside over 80 local and global spirits
brands. As well as providing numerous sampling opportunities, it
provided an ideal platform to showcase the strength and quality of
the brand to customers and consumers alike.
We are the clear premium category leader, responsible for the
majority of the growth of the wider category. The growth of the
spirits category is being driven by premium and craft brands,
especially within gin which has doubled in size in the last two
years. The supportive trends, growing brand awareness and
distribution whitespace mean we are well positioned as we move into
2020. This market is growing in size and has real potential for the
brand in the years ahead.
Canada
Alongside Australia and New Zealand, Canada continues to be an
exciting market, being typically one tenth of the size of the US
market across the broader drinks category. We have already
established a strong position within the premium mixer category and
2019 was a year of further operational progress. We are adding
further resource to this market and are working closely with our
distributors to optimise our route to market.
Our Off-Trade business performed especially strongly with
further distribution gains within national retailers.
Notwithstanding near term COVID-19 related challenges, there
remains significant potential to increase our presence within the
On-Trade and liquor channels, both of which will be a key focus in
2020.
Other
Our outsourced business model and first mover advantage have
enabled the brand to establish a very promising position across the
globe. Asia remains a region with long term potential and scale for
Fever-Tree and 2019 saw the appointment of our first Regional
Director for Asia. We are already established in the premium
On-Trade in a number of markets across the region and have a clear
strategy focused on key cities and countries as we look to build
and enhance our distribution network while working closely with
spirits companies on the long-mixed drink opportunity.
Operational Review
Reflecting the Group's growing global footprint, we have
continued to expand our outsourced production capabilities during
the period with the appointment of a new bottling partner in
Belgium to service our Northern European markets.
In November we announced the signing of a US bottling partner.
Based on the West Coast, it is expected to come online in 2020 and
is a further step in building out our operational capability in the
region.
People
We have continued to build on the fantastic team that are
already in place with further hires including a Chief Marketing
Officer and Strategy and Planning Director as well as key regional
hires including a Regional Director for Asia.
While we have continued to grow, we remain entrepreneurial at
heart and work hard to ensure we have a culture that enables all
our team, regardless of location, department or level to feel they
can make real difference to the business.
Summary
While the UK has had a more challenging year in 2019, the last
12 months have seen Fever-Tree strengthen its global leadership
position and in doing so establish a strong platform to deliver
further growth.
While certain, longer established markets are becoming more
mature, we have built a very strong position within them. We have
long-standing relationships across the On and Off-Trade as well as
with spirits partners and continue to work in tandem to drive
further growth in the category. While our tonic range will continue
to remain at the centre of our offering, reflecting the ongoing and
evolving popularity of gin, our wider range of gingers and new
products such as our sodas provide exciting secondary growth
drivers, enabling the Group to sit across a number of spirits
categories, such as whisky, rum, vodka and tequila, all of which
are seeing good growth at the premium end.
It is the long-standing success in these markets that provide us
with the case studies and platform to increasingly turn towards the
global opportunity ahead with real confidence. There are many
markets where the opportunity for the Group, while potentially even
more significant, is at an earlier stage. It is these markets where
we are able and willing to invest ahead in terms of people, route
to market, portfolio and marketing to ensure we are ideally
positioned to realise the opportunity.
Outlook
Notwithstanding tough comparators in the UK, we made a solid
start to the new financial year, with trading in the first two
months in line with expectations. The US in particular performed
ahead of expectations as the momentum in the second half of 2019
continued.
Given the level of uncertainty and the dynamic nature of the
situation, it is too early to quantify Covid-19's full impact on
the remainder of the financial year. While we will not be
unaffected by the current situation, especially in the On-Trade, we
are a global business with revenue diversified across regions,
channels and customers.
Financially the Group is well placed. We are debt free, with a
cash position of GBP128m underpinned by very strong cash flows. The
Group's unique asset light, outsourced business model means we have
a low fixed cost base, a small, dedicated team and the flexibility
to manage the current challenges. The wider long-term trend towards
premium spirits and premium long mixed drinks continues and we are
confident the Group will be well placed once the current period of
disruption and uncertainty ends.
Tim Warrillow
Chief Executive
FINANCIAL REVIEW
REVENUE
As described in the Chief Executive's report, although the Group
saw a 1.1% retraction in UK revenue, the Group performed well
across its international markets, with good growth delivered across
the US, Europe and RoW regions. As a result, despite the retraction
in the UK, overall Group revenue grew by 9.7% from GBP237.4m in
2018 to GBP260.5m.
GROSS MARGIN AND OPERATING EXPENSES
Gross margins decreased in the year to 50.5% (2018: 51.8%). The
strengthening USD and the move to the agency model in Germany
provided some upside; however, a number of other factors combined
to reduce the overall gross margin. This included another year of
significant underlying increases in the market price for glass
bottles. Alongside this, the deceleration in UK growth through the
year, coupled with uncertainty over the timing and nature of the
UK's exit from the EU, resulted in elevated levels of inventory
being held for much of the year, with a resultant increase in
storage costs relative to revenue. We expect a further decrease in
the gross margin in 2020 as we project changes to the pricing
architecture in the US.
Underlying operating expenses are defined as all operating
expenditure exclusive of depreciation, amortisation and share based
payment charges and the proportion of this expenditure relative to
revenue is seen as an effective indicator of changes in underlying
operating activity year on year.
On an absolute basis, underlying operating expenses increased by
GBP10.2m, up 23.0%, reflecting a commitment to continue to invest
against the longer-term opportunity despite the headwinds
encountered in the UK in 2019.
The majority of this incremental investment was in marketing
spend, which increased by GBP7.7m, up 36.7%, reflecting upweighted
investment in the US and European regions. As a result, Group
marketing spend increased to 11.0% of revenue in 2019 (2018: 8.8%
of revenue).
We remain a lean organisation but have continued to invest in
our team to support our growth. Total salary costs increased by
GBP1.0m, up 7.5%, reflecting a full year's cost of the Fever-Tree
US team, alongside new senior hires made during the year, as noted
in the Chief Executive's report. This was also complemented by a
strengthening of our operational teams, notably our supply chain
resource which has increased alongside the broadening of our
international bottling footprint. Offsetting these investments was
a reduction year on year in the level of pay-out of
performance-related bonuses.
Other overheads increased by GBP1.5m to GBP11.5m; due to this,
as well as the incremental marketing and staff spends, and lower
than expected revenue in the latter stages of the year, underlying
operating expenses as a proportion of revenue increased to 20.9%
(2018: 18.7%).
With gross margin decreasing and increased levels of investment
within our key growth regions of the US and Europe, the Group's
adjusted EBITDA margin decreased to 29.6% (2018: 33.1%) with
adjusted EBITDA declining by 2.0% to GBP77.0m (2018: GBP78.6m).
Whilst a decline in adjusted EBITDA is a disappointing result for
the year, it reflects the decision to remain committed to investing
behind our growth regions despite the deceleration seen in UK
growth as the year progressed and reflects our outlook and belief
in the significant global opportunity ahead for the Group.
Amortisation costs were flat year on year at GBP0.7m, and Share
Based Payment expenses increased marginally, by 5.6% to GBP1.9m.
There was a more marked increase in depreciation to GBP2.2m (2018:
GBP0.7m). The increase of GBP1.5m is a reflection of IFRS 16
adjustments related to our office leases (which impact 2019 but not
the 2018 comparatives) as well as the depreciation of reusable
packaging in Germany, reflecting the strong growth in that market
and the capitalisation of glass bottles this year, alongside the
re-usable crates that hold them. As a result of these increases in
depreciation charges, the 2.0% decline in adjusted EBITDA
translates to a 4.2% decrease in operating profit to GBP72.2m
(2018: GBP75.4m). Net finance income of GBP0.3m resulted in profit
before tax of GBP72.5m, a decrease of 4.1% (2018: GBP75.6m).
TAX
The effective tax rate in 2019 was 19.3% (2018: 18.3%), which
was in line with expectations. The 2018 effective tax rate was
reduced by a combination of both a current tax adjustment relating
to the prior year and a deferred tax adjustment following the
exercise of a significant value of staff share options, which
combined to reduce the 2018 effective tax rate.
EARNINGS PER SHARE
The basic earnings per share for the year are 50.46 pence (2018:
53.38 pence) and the diluted earnings per share for the year are
50.26 pence (2018: 53.19 pence).
In order to compare earnings per share year on year, 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 2019 are 51.08
pence per share and for 2018 were 53.40 pence per share, a decrease
of 4.5%.
WORKING CAPITAL
Working capital decreased by GBP3.7m during 2019 to GBP54.2m.
This was due to a GBP7.5m reduction in inventory levels at year end
compared to 2018, which was a reflection of both improved
operational efficiencies and lower volume pre-year end production
runs in 2019 lapping an elevated level of inventory at the 2018
year end, which was being held as a contingency against a potential
no-deal exit from the EU in January 2019. There was a further
GBP2.1m reduction in trade and other receivables, the result of
continued improvement in the recovery of trade debtors in 2019 as
well as the settlement of GBP2.2m of trade debtors following the
move to the agency model in Germany. Against these improvements in
working capital, trade and other payables reduced by GBP5.5m, which
was largely a reflection of lower levels of December production
year on year. Working capital management will remain an area of
focus in 2020.
Due to the improvement in working capital, cash generated from
operations has improved to 103.9% of adjusted EBITDA (2018:
74.3%)
CAPITAL EXPITURE
Due to the Group's outsourced business model, capital
expenditure requirements remain low. Despite this, 2019 saw an
increase in capital expenditure, with additions of GBP6.4m (2018:
GBP1.3m). The additions in the year included the capitalisation of
the leases of the head office in London and the US offices in New
York in accordance with IFRS 16, alongside continued investment in
reusable packaging within Germany, reflecting the on-going strong
growth in that territory and the capitalisation this year of glass
bottles, alongside the reusable crates that hold them.
CASH POSITION
The Group delivers strong margins, with efficient operating cash
flow conversion and, due to the outsourced business model, has
modest capital expenditure requirements. As such, the Group retains
a very robust balance sheet, and having repaid GBP6.1m of bank
loans during 2019, ended the year with GBP128.3m of cash, an
increase of 53.5% (2018: net cash of GBP83.6m).
CAPITAL ALLOCATION FRAMEWORK
The Group intends to retain sufficient cash to allow for
investment against the Global opportunity ahead and see our strong
cash position as a competitive advantage over many of our premium
mixer competitors globally. We primarily foresee this investment
taking the form of operational expenditure, including upweighted
marketing spend across our growth regions at the appropriate stage,
and we intend to retain sufficient cash reserves to allow us to
take advantage of opportunities to upweight and accelerate
investment as they arise. Whilst not a priority or essential
component of the Group's plans, we also remain vigilant with
regards to M&A opportunities that would further assist with the
delivery of our strategy. Where the Board then considers there to
be surplus cash held on the Balance Sheet it will consider
additional distribution to shareholders.
DIVID
The Group remains committed to a progressive dividend policy and
as such, the Board is recommending a final dividend of 9.88 pence
per share in respect of 2019 (2018: 10.28 pence per share) bringing
the total dividend for the year to 15.08 pence per share (2018:
14.50 pence per share). If approved by shareholders at the AGM on 4
June 2020 the final dividend will be paid on 12 June 2020 to
shareholders on the register on 15 May 2020.
PERFORMANCE INDICATORS
The Group monitors its performance through a number of key
indicators. These are formulated at Board meetings and reviewed at
both an operational and Board level. Following weaker than expected
trading in the final period of the year, the final result for 2019
reflected performance against these indicators which was behind
Board expectations.
Revenue growth %
Group revenue growth was 9.7% in 2019 (2018: 39.5%).
Gross margin %
The Group achieved a gross margin of 50.5% in 2019 (2018:
51.8%).
Adjusted EBITDA margin %
The Group achieved an adjusted EBITDA margin of 29.6% in 2019
(2018: 33.1%).
Andrew Branchflower
Chief Financial Officer
Fevertree Drinks plc
Consolidated statement of profit or loss and other comprehensive
income
For the year ended 31 December 2019
2019 2018
GBPm GBPm
Revenue 260.5 237.4
Cost of sales (129.0) (114.5)
Gross profit 131.5 122.9
Administrative expenses (59.3) (47.5)
Adjusted EBITDA 77.0 78.6
Depreciation (2.2) (0.7)
Amortisation (0.7) (0.7)
Share based payment charges (1.9) (1.8)
Operating profit 72.2 75.4
Finance costs
Finance income 0.5 0.3
Finance expense (0.2) (0.1)
Profit before tax 72.5 75.6
Tax expense (14.0) (13.8)
Profit for the year 58.5 61.8
Items that may be reclassified
to profit or loss
Foreign currency translation
difference of foreign operations 0.1 (0.1)
Effective portion of cash flow
hedges 0.2 -
-------- --------
Total other comprehensive income 0.3 (0.1)
-------- --------
Total comprehensive income for
the year 58.8 61.7
-------- --------
Earnings per share
Basic (pence) 50.46 53.38
Diluted (pence) 50.26 53.19
Fevertree Drinks plc
Consolidated statement of financial position
At 31 December 2019 2019 2018
GBP'000 GBPm
Non-current assets
Property, plant and equipment 6.9 2.7
Intangible assets 41.0 41.7
Deferred tax asset 0.5 -
Other financial assets 2.1 -
Total non-current assets 50.5 44.4
-------- -------
Current assets
Inventories 20.8 28.3
Trade and other receivables 60.8 62.9
Derivative financial instruments 0.1 -
Cash and cash equivalents 128.3 89.7
Total current assets 210.0 180.9
-------- -------
Total assets 260.5 225.3
-------- -------
Current liabilities
Trade and other payables (27.5) (33.0)
Loans and borrowings - (6.1)
Corporation tax liability (5.1) (2.5)
Derivative financial instruments - (0.3)
Lease liability (0.6) -
-------- -------
Total current liabilities (33.2) (41.9)
-------- -------
Non-current liabilities
Lease liability (1.2) -
Deferred tax liability - (0.2)
Total non-current liabilities (1.2) (0.2)
-------- -------
Total liabilities (34.4) (42.1)
-------- -------
Net assets 226.1 183.2
-------- -------
Equity attributable to equity holders
of the company
Share capital 0.3 0.3
Share premium 54.8 54.8
Capital redemption reserve 0.1 0.1
Cash flow hedge reserve 0.2 -
Translation reserve - (0.1)
Retained earnings 170.7 128.1
Total equity 226.1 183.2
-------- -------
Fevertree Drinks plc
Consolidated statement of cash flows
For the year ended 31 December 2019
2019 2018
GBPm GBPm
Operating activities
Profit before tax 72.5 75.6
Finance expense 0.2 0.1
Finance income (0.5) (0.3)
Depreciation of property, plant and equipment 2.2 0.7
Amortisation of intangible assets 0.7 0.7
Share based payments 1.9 1.8
77.0 78.6
Decrease/(Increase) in trade and other
receivables 1.3 (7.3)
Decrease/(Increase) in inventories 5.7 (16.4)
(Decrease)/Increase in trade and other
payables (4.0) 3.5
------- -------
3.0 (20.2)
------- -------
Cash generated from operations 80.0 58.4
------- -------
Income taxes paid (12.0) (12.7)
------- -------
Net cash flows from operating activities 68.0 45.7
------- -------
Investing activities
Purchase of property, plant and equipment (2.6) (1.5)
Interest received 0.5 0.3
Net cash used in investing activities (2.1) (1.2)
------- -------
Financing activities
Interest paid (0.2) (0.1)
Issue of shares - 1.1
Dividends paid (18.0) (13.7)
Repayment of loan (6.1) -
Issue of other financial assets (2.2) -
Payment of lease liabilities (0.5) -
------- -------
Net cash used in financing activities (27.0) (12.7)
------- -------
Net increase in cash and cash equivalents 38.9 31.8
Cash and cash equivalents at beginning
of period 89.7 57.0
------- -------
Effect of movements in exchange rates
on cash held (0.3) 0.9
Cash and cash equivalents at end of period 128.3 89.7
------- -------
1. Basis of preparation
The financial information presented in this preliminary
announcement has been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") and as adopted by the EU and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The principal accounting policies adopted in the preparation
of the financial information in this preliminary announcement are
unchanged from those used in the company's financial statements for
the year ended 31 December 2018 except for those relating to IFRS
16 Leases and are consistent with those that the company has
applied in its financial statements for the year ended 31 December
2019.
The financial information set out above does not constitute the
company's statutory accounts for 2019 or 2018. Statutory accounts
for the years ended 31 December 2019 and 31 December 2018 have been
reported on by the Independent Auditor. The Independent Auditor's
Report on the Annual Report and Financial Statements for 2019 and
2018 was unqualified, did not draw attention to any matters by way
of emphasis, and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006. Statutory accounts for the year ended 31
December 2018 have been filed with the Registrar of Companies. The
statutory accounts for the year ended 31 December 2019 will be
delivered to the Registrar in due course.
2. Revenue
An analysis of turnover by geographical
market is given below:
2019 2018
GBPm GBPm
United Kingdom 132.7 134.1
United States of America 47.6 35.8
Europe 64.4 55.5
Rest of the World 15.8 12.0
260.5 237.4
====== ======
3. Dividends
In the financial year ended 31 December 2019 dividends were paid
with a value of GBP17,976,649 (being GBP11,937,872 at 10.28 pence
per share in respect of the year ended 31 December 2018, and
GBP6,038,778 at 5.20 pence per share in respect of the six months
ended 30 June 2019). Dividends of GBP13,725,191 (11.86 pence per
share) were paid in the prior year. The Directors are proposing a
final dividend of 9.88 pence per share - GBP11,473,762. This
dividend has not been accrued in the consolidated statement of
financial position.
4. Earnings per share
2019 2018
GBPm GBPm
Profit
Profit used in calculating basic and diluted
EPS 58.5 61.8
Number of shares
Weighted average number of shares for the
purpose of
basic earnings per share 116,126,293 115,734,845
Weighted average number of dilutive employee
share options outstanding 448,508 396,350
------------ ------------
Weighted average number of shares for the
purpose of
diluted earnings per share 116,574,801 116,131,195
------------ ------------
Basic earnings per share (pence) 50.46 53.38
------------ ------------
Diluted earnings per share (pence) 50.26 53.19
------------ ------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EANLFALSEEFA
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April 22, 2020 02:00 ET (06:00 GMT)
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