INTERIM REPORT AND FINANCIAL STATEMENTS. For the six months ended 30 June 2018

Transcription

1 INTERIM REPORT AND FINANCIAL STATEMENTS For the six months ended 2018

2 Stock code: FEVR FINANCIAL HIGHLIGHTS REVENUE ( M) ADJUSTED EBITDA 1 ( M) CONTENTS H : 104.2m H1 : 71.9m H : 40.6m H : 24.1m +45% 104.2m H : 34.0m H1 : 25.2m H : 12.4m H : 7.2m +35% 34.0m Financial Highlights 1 Chief Executive s Report 2 Consolidated Statement of Comprehensive Income 5 Consolidated Statement of Financial Position 6 Consolidated Statement of Cash Flows 7 Notes to the Consolidated Financial Information 8 REVENUE UP 45% TO 104.2M (H1 : 71.9M) GROSS MARGIN OF 53.2% (H1 : 54.5%) ADJUSTED EBITDA 1 UP 35% TO 34.0M (H1 : 25.2M) NET CASH AT PERIOD END OF 56.4M (H1 : 40.5M) DILUTED EPS UP 36% TO PENCE (H1 : PENCE) INTERIM DIVIDEND UP 40% TO 4.22 PENCE PER SHARE (H1 : 3.01 PENCE) 1 Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share based payment charges and finance costs OPERATIONAL HIGHLIGHTS TRANSITION TO WHOLLY-OWNED OPERATIONS IN THE US ON 1 JUNE 2018 WITH THE FEVER-TREE US TEAM NOW DIRECTLY MANAGING MARKETING, SALES AND DISTRIBUTION EFFORTS FURTHER STRONG GROWTH IN UK, EXTENDING OUR POSITION AS THE NO 1 MIXER BRAND IN THE UK OFF-TRADE * SUCCESSFUL ROLL OUT OF THE REFRESHINGLY LIGHT LOW-CALORIE RANGE IN THE UK NEW DISTRIBUTION AGREEMENT WITH GRUPO DAMM FOR THE SPANISH MARKET FURTHER STRENGTHENING OF THE BOARD WITH THREE NON-EXECUTIVE DIRECTORS APPOINTED DURING THE PERIOD WITH A BREADTH OF RELEVANT BEVERAGE AND INTERNATIONAL EXPERIENCE SUCCESSFUL SPONSORSHIP OF THE INAUGURAL FEVER-TREE CHAMPIONSHIPS AT QUEEN S CLUB, LONDON The first half of 2018 has been one of major progress for Fever-Tree. The Group delivered a strong performance, most notably in the UK, as we continue to drive and lead the evolution of the wider mixer category. Furthermore, our relationships with key customers and spirits partners mean we are increasingly well positioned as the growing move to premiumisation and long mixed drinks continues to develop across the globe. TIM WARRILLOW CEO of Fever-Tree * (IRI Total UK Retail Mixer Market value share - 13 weeks to 17/6/18). POST PERIOD END: AGREEMENT SIGNED WITH SOUTHERN GLAZER S WINE AND SPIRITS ( SGWS ), THE LARGEST NORTH AMERICAN WINE AND SPIRITS DISTRIBUTION COMPANY, TO BE THE GROUP S EXCLUSIVE DISTRIBUTION PARTNER IN THE ON-TRADE CHANNEL ACROSS 29 US STATES EFFECTIVE FROM 1 AUGUST

3 FEVERTREE DRINKS PLC Interim Report and Financial Statements for the six months ended 2018 CHIEF EXECUTIVE S REPORT We have successfully launched our wholly owned US operations with a talented team recruited and now in place. The exclusive distribution agreement with SGWS, the largest North American wine and spirits distribution company, is a significant endorsement and provides a strong platform for Fever-Tree US in 2019 and beyond. TIM WARRILLOW CEO of Fever-Tree The first six months of 2018 saw the Group continue to deliver a strong operational and financial performance. During the period we achieved revenue of 104.2m, representing growth of 45% on the first half of. Gross profit margin was in line with expectations at 53.2%, with the Group delivering an adjusted EBITDA of 34.0m representing a margin of 32.6%. This performance resulted in diluted earnings per share in the six month period of 22.72p (H1 : 16.72p), up 36% on H1. The Group s balance sheet remains strong and we begin the second half of 2018 with net cash of 56.4m (H1 : 40.5m). RESULTS Half year ended 2018 m Half year ended m Reported Movement % Constant Currency Movement % Revenue % 46% Gross Profit % 43% Gross Profit margin 53.2% 54.5% Adjusted EBITDA % 37% Adjusted EBITDA margin 32.6% 35.0% Diluted EPS 22.72p 16.72p 36% Interim Dividend 4.22p 3.01p 40% TERRITORY REVIEW REVENUE BY TERRITORY Half year ended 2018 m Half year ended m Movement % Share of revenue % UK % 56% USA % 14% Continental Europe % 25% RoW % 5% Total % 100% UK The first six months of the year saw the UK deliver another period of exceptional growth, with revenue of 58.0m, up 73% compared to the first half of. The Off-Trade accounted for 50% of UK sales and we have continued to see strong performance driven by underlying rate of sale growth across our major retailers. Our range of flavours and formats continues to resonate with consumers and there is also clear evidence of consumers being attracted to the category for the first time, driving further category growth. The first half has also benefited from the annualisation of prior year distribution gains, as well as some further new distribution gains in the period, providing continued momentum, although we are mindful of the increasingly tough comparators as we move through the remainder of the year. 2

4 Stock code: FEVR The UK mixer category continues to see rapid transformation and remains the fastest growing category in the carbonated soft drinks sector, with growth of 31% at retail in the 12 months to June This growth continues to be driven by the well-established premiumisation trend across the wider beverage sector as well as the movement to long mixed drinks. Fever-Tree s pioneering approach to flavours and format has been integral to this evolution with the Group reinforcing its position as the category leader, increasing to a 40% value share (IRI). The Group continues to work closely with retailers who are increasingly recognising the importance of the brand to the wider mixer category, providing Fever-Tree with the opportunity for further distribution gains in the first half, limited edition and gifting opportunities as well as secondary space during promotional periods. The first half of the year saw the successful launch of the Group s extended Refreshingly Light range of low calorie mixers. Over 10 years ago, Fever-Tree pioneered the launch of a premium, superior tasting low calorie tonic water that was free from artificial sweeteners. That original light tonic is the Group s bestselling SKU at retail and its ongoing success and popularity illustrates the growing consumer appetite for great tasting, low calorie mixers, which the extended light range further caters for. The Refreshingly Light range has delivered a strong rate of sale performance in the first four months since its introduction with listings achieved across our key retailers in both 500ml and 150ml can formats. Following the success of our Clementine Tonic over the Christmas period, we continue to develop limited edition variants and this summer have launched a Refreshingly Light Cucumber Tonic which has seen a strong rate of sale since its introduction. In the On-Trade channel, continued strong revenue growth was achieved, driven by underlying rate of sale growth as well as an expanding distribution footprint. We continue to work ever more closely in partnership with key wholesalers and national pub groups as clear trends emerge of a move back to wet-led offerings alongside spirits gaining share of throat from beer across the On-Trade. As well as the ongoing success of our gin and tonic menus, branded glassware and additional point of sales support, this summer we launched a G&T garden campaign which has seen 600 bars and pubs across key national accounts being transformed into gin and tonic gardens with Fever-Tree branded materials and an online trade platform supporting the entire campaign. The initial response to the campaign has been positive, driving further awareness of the Group s range of mixers across the On-Trade. The Group s relationships with customers and spirits partners has continued to deepen and develop. Co-promotional activity remains central to the Group s strategy, with further successful collaborations activated during the first half of 2018 across different spirit categories. USA In the first half of a transitional year in the US, we are encouraged to report revenue of 15.1m, growth of 15% versus the first half of, which is growth of 23% on a constant currency basis when taking into account the weakening of the US dollar. Post the period end, the Group signed an exclusive On-Trade distribution agreement with SGWS, the largest North American wine and spirits distribution company. Effective from 1 August 2018, the agreement will see SGWS become the Group s exclusive distribution partner in the On-Trade channel across 29 US states, with Fever-Tree working closely with both SGWS and the major spirits companies within its distribution portfolio. This is a significant endorsement of the brand s strength and will provide a strong platform for the opportunities ahead. SHARE OF REVENUE H UK UK 56% CONTINENTAL EUROPE 25% USA 14% REST OF WORLD 5% HISTORIC SALES BY REGION H H H H CONTINENTAL EUROPE USA REST OF WORLD 3

5 FEVERTREE DRINKS PLC Interim Report and Financial Statements for the six months ended 2018 CHIEF EXECUTIVE S REPORT CONTINUED The transition from our US agent to our wholly-owned operation took effect on 1 June 2018, with the Fever-Tree US team now directly managing marketing, sales and distribution across the territory. We now have 32 employees in the US across all aspects of the business and whilst there remains much transition-related work to do in the second half of 2018, we are encouraged that the building blocks for our US operations are being successfully established. Whilst the US premium mixer market remains at a relatively early stage, the trend towards premiumisation across different spirits categories and the increasing focus on provenance and long mixed drinks is accelerating and provides a significant opportunity for the Group, both within our tonics as well as our wider mixer range for dark spirits. CONTINENTAL EUROPE Revenue growth of 17% to 25.8m was achieved in the period, which represented growth of 15% on a constant currency basis. This performance was achieved against tough comparators due to the early phasing of the pre-summer sell-in to our key territories in June. A positive performance was achieved across all territories and we have seen continued strong growth in Germany, Italy, Netherlands, as well as strong momentum in the Nordics and Ireland. Fever-Tree continues to underpin the acceleration and spread of Gin & Tonic across Western Europe, supported by the growing movement towards premium gin being seen in these key territories. In the first half of the year we signed an agreement with Grupo Damm to become our exclusive distributor in the Spanish market, reflecting our ongoing strategic focus on ensuring we have the right distribution partnerships in place to reflect the scale and ambition in each market we operate. We have also put in place senior regional managers across Europe, to work closely with our importers and to further enhance our local insights, reflecting the increasing opportunity we see for premium mixers across Continental Europe. ROW Sales growth of 67% was achieved within the RoW region which continues to represent strong potential for the Group in the medium to longer term. The Group grew well in Australia as its retail presence and market share increased alongside a burgeoning gin category. Canada also performed strongly, most notably in ginger beer as the Moscow Mule trend continues apace. FINANCIAL AND OPERATIONAL GROSS MARGIN AND OPERATING EXPENSES Gross margin is in line with expectation at 53.2% (H1 : 54.5%). Whilst there have been net foreign currency headwinds in the first half of 2018, the Group is becoming more naturally hedged through increased local spend in both Euro and US Dollar, and resultantly it is increasingly well placed to mitigate the impact of future currency fluctuations on margins. Since the introduction of the UK sugar tax in April 2018 the Group has passed through the levy on the sale of our non-light range of products in the UK, and this has had a dilutive impact on our reported gross margin percentage, albeit with no impact on gross margin in cash terms. The Group continues to invest in and underpin the growth opportunities ahead. Notably in the first half of 2018 this included the recruitment of the Fevertree USA local team ahead of the 1 June 2018 transition to wholly-owned operations. As a result, and in line with expectations, underlying operating expenses increased as a proportion of revenue to 20.6% during the period (H1 : 19.6%), resulting in adjusted EBITDA of 34.0m representing a margin of 32.6% (H1 : 35.0%). CASH POSITION AND WORKING CAPITAL The Group held net cash of 56.4m at the period end (H1 : 40.5m), with 62.5m of cash at the bank offset by 6.1m of bank loans. Operating cash flow in the period was 60% of adjusted EBITDA (H1 : 92%). The reduction in operating cash flow conversion is a reflection of increased working capital at period end, following particularly strong sales in the UK and increased stock levels in advance of the remaining summer trading period. The working capital profile and operating cash flow conversion can vary from month to month over the summer period and is not necessarily comparable at the June period end year on year. However, we expect working capital and operating cash flow conversion to return to levels seen historically as we progress through the second half of FEVER-TREE CHAMPIONSHIPS We were delighted to become the official title-sponsor of the prestigious grass tennis tournament held in June at The Queen s Club, London. The Fever-Tree Championships was the Group s inaugural titlesponsorship of a major sporting event and was covered throughout by BBC television, radio and online, by Amazon Prime Video and around the world in more than 40 countries. The feedback from the event has been extremely positive and the partnership with the LTA and Queen s provided the ideal platform to showcase the brand. BOARD The first half of 2018 saw further strengthening of the Group s Board with three non-executive Directors appointed. All three new non-executive Directors have a breadth of relevant beverage and international experience and will bring valuable insight and additional perspective to the Group. DIVIDEND The Directors are pleased to declare an interim dividend of 4.22 pence per share (H1 : 3.01 pence per share). The dividend will be paid on 7 September 2018, to shareholders on the register on 10 August OUTLOOK Given the strong performance in the first half of the year, the Board anticipates that the outcome for the full year will be comfortably ahead of its expectations. 4

6 Stock code: FEVR CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2018 Note 2018 Audited Year ended 31 December Revenue 2 104, , ,171.7 Cost of sales (48,746.6) (32,718.7) (79,073.0) Gross profit 55, , ,098.7 Administrative expenses (22,872.5) (15,155.7) (34,694.9) Adjusted EBITDA* 33, , ,665.1 Depreciation Amortisation (322.3) (182.9) (405.5) (360.0) (360.0) (720.0) Share based payment charges (683.4) (540.6) (1,135.8) Operating profit 32, , ,403.8 Finance costs Finance income Finance expense (43.5) (27.0) (71.9) Profit before tax 32, , ,426.8 Tax expense (6,188.6) (4,631.9) (10,917.8) Profit for the year/period 26, , ,509.0 Items that may be reclassified to profit or loss Foreign currency translation difference of foreign operations Comprehensive income attributable to equity holders of the parent company 26, , ,509.0 Earnings per share for profit attributable to the owners of the parent during the year Basic (pence) Diluted (pence) * Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share based payment charges and finance costs, see Note

7 FEVERTREE DRINKS PLC Interim Report and Financial Statements for the six months ended 2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 JUNE 2018 Non-current assets 2018 Audited 31 December Property, plant and equipment 1, , ,995.6 Intangible assets 42, , ,410.7 Deferred tax asset 1, ,371.0 Total non-current assets 45, , ,777.3 Current assets Inventories 18, , ,235.7 Trade and other receivables 67, , ,587.0 Derivative financial instruments Cash and cash equivalents 62, , ,959.5 Total current assets 148, , ,012.0 Total assets 194, , ,789.3 Current liabilities Trade and other payables (32,966.6) (23,052.9) (29,948.9) Loans and borrowings (6,075.0) Corporation tax liability (6,177.8) (4,593.6) (5,695.1) Derivative financial instruments (13.1) (152.9) 0.0 Total current liabilities (45,232.5) (27,799.4) (35,644.0) Non-current liabilities Loans and borrowings 0.0 (6,069.0) (6,061.3) Deferred tax liability 0.0 (2,156.1) 0.0 Total non-current liabilities 0.0 (8,225.1) (6,061.3) Total liabilities (45,232.5) (36,024.5) (41,705.3) Net assets 148, , ,084.0 Equity attributable to equity holders of the company Share capital Share premium 53, , ,689.2 Capital Redemption Reserve Translation Reserve Retained earnings 94, , ,013.2 Total equity 148, , ,

8 Stock code: FEVR CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2018 Operating activities 2018 Audited Year ended 31 December Profit before tax 32, , ,426.7 Finance expense Finance income (101.9) (35.8) (94.9) Depreciation of property, plant and equipment Amortisation of intangible assets Share based payments , , , ,665.0 (Increase)/Decrease in trade and other receivables (11,417.4) (8,499.7) (26,405.2) (Increase)/Decrease in inventories (5,253.1) (2,712.0) Increase/(Decrease) in trade and other payables 3, , ,820.6 (13,652.8) (1,957.7) (15,296.6) Cash generated from operations 20, , ,368.4 Income taxes paid (5,874.8) (3,884.5) (9,407.9) Net cash flows from operating activities 14, , ,960.4 Investing activities Purchase of property, plant and equipment (314.2) (272.5) (1,238.0) Interest received Net cash used in investing activities (212.3) (236.7) (1,163.7) Financing activities Interest (paid) (43.5) (27.0) (71.9) Issue of shares Dividends paid (8,826.5) (5,427.8) (8,896.6) Net cash used in financing activities (8,674.8) (5,454.8) (8,800.4) Net increase in cash and cash equivalents 5, , ,996.3 Cash and cash equivalents at beginning of period 56, , ,963.2 Cash and cash equivalents at end of period 62, , ,

9 FEVERTREE DRINKS PLC Interim Report and Financial Statements for the six months ended 2018 NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30 JUNE BASIS OF PREPARATION AND ACCOUNTING POLICIES The interim financial information has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union. The accounts have been prepared in accordance with accounting policies that are consistent with the December Report and Accounts and that are expected to be applied in the Report and Accounts of the year ended 31 December There are new or revised standards or interpretations that apply to the period beginning 1 January 2018 but they do not have a material effect on the financial information for the period ended This report is not prepared in accordance with IAS 34, which is not mandatory. The financial information does not constitute statutory accounts within the meaning of section 435 of the Companies Act Statutory accounts for Fevertree Drinks plc for the year ended 31 December have been delivered to the Registrar of Companies. The auditors 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 Adjusted EBITDA has been calculated consistently with the method applied in the Report and Accounts. Operating profit is adjusted for a number of areas of accounting estimates, including amortisation of the Fever-Tree brand intangible acquired in March 2013, depreciation, and the share based payment charge which recognises the fair value of share options granted. When relevant, exceptional items are also adjusted for. The intention then is for adjusted EBITDA to provide a comparable, year on year indicator of underlying trading and operational performance. 2. REVENUE An analysis of turnover by geographical market is given below: 2018 Year ended 31 December United Kingdom 58, , ,778.2 Continental Europe 25, , ,741.0 United States of America 15, , ,539.5 Rest of the World 5, , , DIVIDENDS 104, , ,171.7 The interim dividend of 4.22 pence per share will be paid on 7 September 2018 to shareholders on the register on 10 August EARNINGS PER SHARE Profit 2018 Year ended 31 December Profit used in calculating basic and diluted EPS 26, , ,509.0 Number of shares Weighted average number of shares for the purpose of basic earnings per share 115,494, ,240, ,256,374 Weighted average number of employee share options outstanding 966,337 1,023, ,112 Weighted average number of shares for the purpose of diluted earnings per share 116,460, ,264, ,236,486 Basic earnings per share (pence) Diluted earnings per share (pence)

10 #MixWithTheBest FEVERTREEMIXERS FEVER-TREE.COM