FY23
Preliminary Results to 31 December 2023
Good sales and operational
progress resulted in a doubling of EBITDA in the second half of
2023.
Financial Highlights
·
Good underlying sales momentum resulted in revenue
growth of 6% despite macroeconomic headwinds.
·
The US has grown to become our largest
revenue-generating region, with strong growth of 22%.
·
Gross margin of 32%, in-line with expectations,
with a 280bps improvement delivered in the second half of the year
compared to the first half, and further improvements to come in
2024.
·
The Group has started 2024 in-line with
expectations and remain on track to double EBITDA in
FY24.
£m
|
FY23
|
FY22
|
Change
|
Revenue
|
|
|
|
UK
|
114.8
|
116.2
|
(1)%
|
US
|
117.0
|
95.6
|
22%
|
Europe (Fever-Tree brand
revenue)
|
94.6
|
89.2
|
6%
|
Europe total
revenue*
|
105.4
|
101.0
|
4%
|
ROW
|
27.2
|
31.5
|
(14)%
|
Total
|
364.4
|
344.3
|
6%
|
|
|
|
|
Gross profit
|
117.0
|
118.8
|
(2)%
|
Gross margin
|
32.1%
|
34.5%
|
(240)bps
|
|
|
|
|
Adjusted EBITDA[1]
|
30.5
|
39.7
|
(23)%
|
Adjusted EBITDA margin
|
8.4%
|
11.6%
|
(320)bps
|
|
|
|
|
Diluted EPS (pence per
share)
|
13.18
|
21.32
|
(38)%
|
|
|
|
|
Ordinary Dividend (pence per
share)
|
16.64
|
16.31
|
2%
|
|
|
|
|
Net cash
|
59.9
|
95.3
|
(37)%
|
*includes revenue from GDP's portfolio
brands
Strategic highlights
·
The brand continued to strengthen its position
globally, with market share gains in all our key
markets.
o We
remain the clear market leader in the UK, with c.45% value share of
the total mixer market[2].
o In
the US, Fever-Tree has extended its leadership position in the
Ginger Beer and Tonic Water categories.
o In
Europe, the brand is the clear leader of the premium mixer
category, growing its value share during 2023.
o In
the RoW, Fever-Tree remains the number one premium mixer brand in
Australia and has just become the number one Ginger Beer in Canada
by value[3].
·
Innovation remains an important part of our
growth.
o Non-Tonic products comprised c.40% of our global sales during
2023, up from c.25% in 2019.
o Our
Gingers and Flavoured Soda products are growing at pace in the UK,
US and Europe.
o Outside our core mixers, our new Adult Soft Drinks grew by
over 30% in the UK Off-Trade and our Cocktail Mixers have started
well in the UK and the US, with more launches planned in
2024.
FY24 outlook and guidance
The Group remains comfortable with
consensus expectations of c.10% growth for the Fever-Tree brand in
the year ahead, with a continuation of strong double-digit growth
in the US and a return to growth in the UK and Rest of the World,
where we expect to realise the benefit of our new subsidiary set-up
in Australia.
As highlighted in January, we are
reiterating guidance of a c.600bps gross margin improvement during
2024. This is underpinned by improved glass pricing, with fully
hedged energy costs, materially lower trans-Atlantic freight costs,
and the continuation of our programme of optimisation and
procurement initiatives to deliver further operational
efficiencies.
We expect operating expenses to be
c.23% of revenue and, as a result, the Group expects to deliver
Adjusted EBITDA margin in line with previous guidance of
c.15%.
Tim Warrillow, Co-Founder and CEO of
Fever-Tree, commented:
"2023 was a year when the Fever-Tree brand once again grew in
breadth and depth, with market share gains across the globe.
Perhaps the most significant milestone was establishing the US as
our largest region, and with it, extending our market leadership
position in both the US Tonic Water and Ginger Beer
categories.
The
G&T of course remains an integral growth driver for the Group
but 2023 was a year where we saw a step change in our non-Tonic
portfolio. Not only have our Gingers and Sodas continued to see
strong growth but the last 12 months have seen the launch of our
range of Cocktail Mixers alongside the roll out of our Adult Soft
Drink range in the UK.
Taken alongside softening inflationary pressures, the
operational efficiencies we are delivering means I am confident
that we are entering 2024 in a very strong position from an
operational perspective and have an excellent platform for strong
profitable growth going forward."
There will be a live audio webcast
on Tuesday 26th March 2024 at 10:00am GMT which can be
accessed below:
Fever-Tree FY23 Results webcast
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 +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
FGS Global | FeverTree-LON@fgsglobal.com
FY23 Group Performance
Fever-Tree delivered revenue of
£364.4 million, representing an increase of 6% year-on-year. As we
reflect on our financial and operational performance over the last
12 months, it's in the context of the inflationary cost pressures
the business has faced, the adverse weather, and the subdued
consumer sentiment, especially across Europe. Despite this, the
brand is stronger than ever, and we continue to extend our position
as the number one premium mixer brand globally, outperforming our
competitors in all our key markets.
We were voted "Number One Top Selling
Mixer" and "Number One Top Trending Mixer" for the tenth year
running by Drinks International. Another demonstration of the brand
leading the global premium mixer category.
The Group delivered gross margin
in-line with expectations, at 32.1%, which was a 240bps decline
compared to the previous year, reflecting the extremely challenging
inflationary environment. Fever-Tree has of course not been the
only business facing an extremely challenging inflationary
environment but our global footprint, growth profile and
determination to continue to take advantage of the opportunity
ahead of us meant we were perhaps more exposed than many,
especially in relation to trans-Atlantic freight rates and elevated
energy costs linked to glass production. Whilst our ability to
influence the wider macro-economic environment is limited, we
recognised the need to drive operational change and efficiencies
and with it an improvement in margins as the year progressed.
However, we were also conscious of remaining resolutely focused on
delivering top line growth and strengthening our market share
across the globe.
There is undeniably a fine balance to
strike between the two and our team has responded and delivered on
both fronts as the year progressed. We saw a marked improvement
during the second half of the year as pressures started to subside
and we began to see the benefits of our proactive steps to drive
operational efficiencies, such as signing a long-term agreement
with a new primary glass supplier in the UK and Europe as well as
taking a measured and consistent approach to our pricing across our
markets. Consequently, the Group doubled EBITDA in H2 versus H1 and
is well-set to continue its margin and profit improvement into 2024
and beyond.
The business has remained focused on
the substantial long-term global opportunity for the brand.
Fever-Tree has increased its distribution and brand awareness in
many of our largest markets, including the US, Italy, France, and
Australia, setting the brand up for further growth. But perhaps the
most significant milestone has been the US becoming our largest
market by revenue. This is testament to the strength of the brand
in the US where we have extended our number one position in both
the Ginger Beer and Tonic categories, as well as broadening our
range into new flavours, formats, and Cocktail Mixers.
The Gin & Tonic serve remains an
integral growth driver for the Group with plenty of white space and
growth opportunities for our Tonic range across our markets but
2023 saw a step change in our non-Tonic portfolio especially in our
more mature markets such as the UK. Not only have our Gingers and
Sodas continued to see strong growth but the last 12 months has
seen the launch of our range of Cocktail Mixers alongside the roll
out of our Adult Soft Drink range. The team has always been
passionate about our innovation whether it be going out to find new
ingredients or talking to our bartenders or spirits partners to
help develop new ideas and our new Cocktail Mixer range is no
different. Not only do they taste fantastic, but they are providing
consumers with an easy way into a category that is becoming more
popular, ensuring the brand is catering to an increasingly broad
range of consumer preferences and drinking occasions.
Strategic update I Brand strength and
market share gains drive growth
Revenue, £m
|
FY23
|
FY22
|
Change
|
Constant
currency
|
UK
|
114.8
|
116.2
|
(1)%
|
|
US
|
117.0
|
95.6
|
22%
|
24%
|
Europe (Fever-Tree brand
revenue)
|
94.6
|
89.2
|
6%
|
4%
|
Europe total revenue*
|
105.4
|
101.0
|
4%
|
2%
|
ROW
|
27.2
|
31.5
|
(14)%
|
(10)%
|
Total
|
364.4
|
344.3
|
6%
|
6%
|
*includes GDP portfolio brand revenue
US I Strong growth ahead of the
market
Fever-Tree grew revenues by 22%
during 2023 to deliver £117m sales (+24% at constant currency) as
the brand continues to drive premium mixing trends. This strong
growth has meant that the US is now our largest revenue-generating
region.
Fever-Tree performed strongly in the
Off-Trade, especially in the Ginger Beer and Tonic categories,
where we now have a notable lead against the competition, with 26%
and 25% value share in these categories respectively. We are also
contributing more than any other brand to the growth of the
Grapefruit and Club Soda categories across the US. Consequently,
Fever-Tree continues to gain share of the total mixer category and
drive premiumisation, with growth of 24% during 2023, over three
times the rate of the total mixer category as we extend our
position as the largest premium mixer brand in the US, with a
greater retail sales value than all the other premium brands
combined[4]. The introduction of our can
format has resonated particularly well with the US consumer and we
saw this format grow by c.100% during the year4,
contributing to over 20% of our sales.
The brand is also increasing its
presence in the On-Trade and is now served in over 35,000 accounts
following significant distribution gains in hotel chains such as
Marriott and Hilton, alongside restaurant groups including TGI
Fridays. We are focused on building long-lasting relationships with
high quality On-Trade accounts and maximising our number of SKUs
per account, as well as the significant number of untapped
accounts, all of which will ensure we continue to drive growth in
this important channel.
The Group is committed to investing
behind the brand across marketing, new product development and
people to capture the growth opportunity in the substantial US
market. Our marketing activities included the use of pop-up bars
across the country as well as collaborating with On-Trade accounts
to drive presence on cocktail menus, while in the Off-Trade
interactive displays are focused on sampling and co-promotional
opportunities with spirit partners.
We continue to support the On-Trade
with "Fever-Tree perfect serve menus" and various merchandise. This
year we also introduced our Summer of Sparkling "Garnish Garden" to
over 100 accounts between May and September, which encouraged
accounts to use premium garnishes to elevate simple long mixed
drinks and feature more Fever-Tree based drinks on cocktail menus,
increasing our breadth of distribution and giving the brand more
visibility, as well as providing consumers with a fantastic
experience.
Our growing awareness and popularity
is being driven by our new product development specifically
targeted at the US consumer. Innovation is based on our
understanding of the US consumer and our expertise in identifying
local drinks trends, with a growing number of successful launches
over the last few years, including our range of Sparkling mixers,
such as Grapefruit which was specifically targeted at the
fast-growing interest in a Tequila based Paloma. In addition, we
continue to broaden our existing core flavour range, as with the
introduction of our Blood Orange Ginger Beer to sit alongside our
existing Ginger Beer offering. In just the same way as with our
Tonic range, it has proved a highly effective way to increase shelf
space and with it stimulate growth by recruiting new consumers and
prompting existing consumers to try something new.
Beyond our core carbonated mixers,
we have extended our range to include Margarita and Bloody Mary
cocktail mixers. The non-carbonated mixer category is larger than
the Tonic and Ginger Beer categories, without a clear leading
national brand, which given Fever-Tree's premium mixing credentials
and proven track record, makes us well-placed to succeed in this
category. We have already seen positive uptake of our new products
and have already secured around 10,000 points of distribution at
retail, with notable distribution in Publix.
Overall, we have had an extremely
positive year in the US market. The brand has gained further
distribution whilst retaining its strong rate-of-sale, as well as
introducing new products which are quickly becoming a significant
part of our total sales. This success clearly demonstrates our
ability to not only localise and benefit from US drinks trends, but
our ability to execute innovation at speed. To this end we continue
to extend our market-leading position, making us more attractive to
customers and spirit partners, which in turn will help to drive
further growth for the brand.
UK I Brand strength drives continued
share gains
Fever-Tree delivered £114.8m revenue
in the UK, a slight decrease of 1% year-on-year, following a summer
trading period impacted by adverse weather, which was partially
offset by improved trading in the final quarter of the year. The
brand continues to lead the UK mixer category, with 45% value
share, more than 50% larger than Schweppes[5].
The G&T remains the most popular
spirit and mixer serve in the UK, despite the recalibration of the
Gin category in recent years. And importantly, the wider spirits
category continues to grow in popularity and diversity, providing
more opportunities for Fever-Tree to be present on menus as part of
a greater range of serves in the On-Trade, or gain more shelf space
in the Off-Trade. Overall, the UK spirits category continues to
perform well, with Rum and Vodka the stand-out
performers[6], supporting the growing
popularity of our Gingers and Flavoured Sodas, which grew in sales
value by 11% and 31% respectively during the year.
In the Off-Trade, the total value of
the mixer category declined by 5%, driven by the weaker performance
of mainstream brands, whilst premium brands and own label did
relatively better[7]. Fever-Tree remains the
brand of choice for both our customers, the retailers, and
consumers. The brand not only maintained its number one value share
position in the total category, strengthening our position towards
the end of the year, but we remain by far the largest premium
brand, with c.90% of total premium mixer sales in the
Off-Trade7.
Fever-Tree continues to gain value
share of the mixer category in the On-Trade, which remained
impacted by softening consumer sentiment during 2023. We now have
our highest ever share in this channel with over 50% value share,
driven by our strong customer relationships and the co-promotional
programmes we develop with various spirit partners to target a
number of different drinking occasions. Our unrivalled product
range and continued innovation puts us in a strong position to
continue to build on our market-leading position going into
2024.
Innovation remains pivotal to the
strength of the brand. Our ability to excite consumers and capture
the latest trends is central to our ongoing leadership of the
premium mixer category and our ability to extend into adjacencies.
To this end, 2023 has been a strategically important year as we
have launched our new Cocktail Mixers and accelerated the growth of
our Adult Soft Drink range; both of which have significant growth
potential.
We launched our Cocktail Mixer range
during the first half of 2023 and have seen an extremely positive
response from consumers and our customers across the On- and
Off-Trade, winning over 4,000 points of distribution in the UK's
leading retailers, as well as in a number of the largest UK
On-Trade chains, including national brands such as Young's and
Fullers. We are very encouraged by the initial performance of the
range and how it is opening the Fever-Tree brand to an even greater
number of drinking occasions and tapping into the growing consumer
interest in cocktails and other long mixed drinks.
The response to our Adult Soft Drink
range has also been very positive, reaffirming our belief that our
products' natural ingredients, adult flavour profiles and the
sophistication of the brand means we are ideally positioned to
extend into this category. Our products have already gained over
9,000 points of distribution at UK retail and are outperforming
most of the established brands in the category and we believe there
is a significant opportunity to leverage the strength of the
Fever-Tree brand to gain further distribution and market share
within the Adult Soft Drinks category.
The Group continued to invest in
marketing through various channels and platforms, with a focus on a
wide range of products to reflect our increasing portfolio
diversity. For example, we extended our national radio advertising
campaign to include our Ginger Beer and Flavoured Sodas, with a
focus on our Cocktail Mixers during the festive season helping to
drive significant uplift in sales during that important sales
period. We also built on our use of influencers, especially through
digital platforms such as Instagram and podcasts, where we worked
with a number of celebrities to promote the brand through their own
words.
Overall, the strength of the brand
and our unrivalled focus on innovation to create a portfolio that
meets consumer demands and trends ensures that we continue to make
significant strategic progress in the UK. The early success we've
seen in our Cocktail Mixers and Adult Soft Drinks is particularly
encouraging, alongside the fact that we've maintained our
leadership position within our core mixer category. And although we
are not immune to a softer consumer environment, our position as a
premium but affordable product and our innovation expertise which
allows us to capture new consumer trends, positions the brand for
sustained success in our home market.
Europe I Driving premiumisation and
increasing brand awareness
Fever-Tree brand revenue (excluding
the revenue we get from GDP's distributed brands) was £94.6m, an
increase of 6% year-on-year (4% at constant currency). Many of our
markets were impacted by a tough consumer environment in the second
half of the year, particularly in Germany.
Across the European Off-Trade
channel, Fever-Tree maintained c.15% value share of the total mixer
category and the brand continues to drive premiumisation, gaining
2ppts of value share of premium mixers to remain the only premium
mixer with strong distribution and broad consumer appeal across the
region[8]. Fever-Tree is performing
particularly well in our core Tonic and Ginger Beer categories. Our
Tonics have grown at c.9% a year over the last four years,
outpacing the rest of the category by c.50%, and our share of the
Ginger Beer category has grown by 3.6 percentage points over the
last two years, with Fever-Tree growing at 2.5 times the rate of
the total category8.
The On-Trade channel experienced
lower consumer spending this year, but Fever-Tree performed well
within the channel, growing distribution and setting the brand up
for accelerated growth for when the macro environment becomes more
positive. We have seen particularly encouraging results from
diversifying our portfolio and making sure that accounts carry
mixers beyond our Tonics, such as Ginger Beer and Sparkling Pink
Grapefruit.
To this end, the Group has remained
focused on product innovation and launches across Europe that have
focused on versatile liquids, such as Mexican Lime & Yuzu and
Sparkling Pink Grapefruit. Both of these liquids pair with a range
of spirits, but principally Vodka and Tequila, with Spritz serves
and cocktails like the Paloma becoming more popular in recent
years, especially in the summer months.
Our marketing campaigns throughout
the year have been used to promote our increasingly diverse range
of mixers, with a particular focus on Tonics, Ginger Beer and
Sparkling Pink Grapefruit, which cater to the most popular drinking
occasions across the region. For Tonics and Ginger Beer, where we
have strong market shares and good consumer awareness in growing
categories, we have increased our investment in above the line
campaigns, such as billboards in Paris, to drive further awareness
and remain front of mind. We have also continued to invest in TV
advertisements in several markets, all of which showcase our
ingredient quality and versatility beyond the G&T.
The brand has seen encouraging
increases in awareness in markets where our marketing campaigns
have been targeted. In Italy, the Netherlands and France, following
our TV and billboard campaigns, brand awareness among Tonic
drinkers increased by 5% in each market, and in Switzerland our
brand awareness increased by 13% as consumers get to know,
experience, and enjoy the brand across more platforms and
occasions[9].
The brand has made good progress in
Europe this year, extending its market-leading premium position and
launching new products aimed at the latest consumer trends in each
market, supported by our investment in multi-channel marketing
campaigns and co-promotions.
We have also upweighted our
distribution partner in two key markets, France and Greece, where
we have transitioned to larger beverage operators with strong
national account coverage to support our growth ambitions. These
are just two of a number of European markets that are showing
significant potential in the medium- and long-term, which alongside
the positive trends towards spirit growth and premiumisation gives
us further confidence in the opportunity across Europe.
RoW I Setting key markets up for future
growth
Fever-Tree delivered revenues of
£27.2m in our Rest of the World Region, a decrease of 14%
year-on-year (-10% at constant currency). Revenue performance in
the year was temporarily impacted by a one-off inventory buy-back
as part of the transition to our new subsidiary set-up in
Australia. However, now this transition has been completed we
expect to see ongoing good growth from 2024.
Following the set-up of our
subsidiary in Australia, we now have a much greater control over
sales, marketing, and distribution to accelerate the brand's
progress in this attractive market. As part of this change, we have
started to work alongside a new distribution partner, are securing
a local warehouse, and aim to start production with a local bottler
over the next year.
The brand continued to perform well
in the Australian market, maintaining our market-leading premium
share and growing ahead of the total mixer category in the
Off-Trade. We saw particularly strong growth in our Soda and Ginger
Ale mixers, growing at 64% and 24% year-on-year respectively as we
start to diversify our portfolio[10], and we
look forward to 2024 with optimism having set ourselves up to take
full advantage of this market going forward.
In Canada, we have started to see
the benefits of moving to a larger distributor to support our
significant growth ambitions for this market. Their strong coverage
has already enabled Fever-Tree to win over 2,500 new distribution
points at grocery during 2023, with further new listings committed
for 2024 at Canada's leading retailers; Loblaws and Metro. This is
helping to drive significant sales growth in the market and during
2023 Fever-Tree became the largest Ginger Beer brand by value in
Canada[11], a significant achievement
that the brand can build on to drive further growth across a range
of categories.
We are driving awareness of the
brand through sampling at trade and consumer shows to improve
visibility and teach the distributors, customers, and consumers
about the Fever-Tree story. This directly resulted in a number of
new On-Trade listings, as well as extending our visibility more
broadly across the region. The brand also started a new onboard
promotion with Canada's flagship airline, Air Canada, which
included a 30 second video shown on back-of-seat screens to entice
consumers to purchase Fever-Tree as part of their Holiday
celebrations.
Last year, we took the decision to
upgrade our route-to-market in Japan and started to work with Asahi
Breweries as our new distribution partner in January, reflecting
our joint belief in the significant future opportunity of the
premium mixer and adult soft drink category. We made good progress
this year, performing ahead of our initial expectations, and remain
excited about the sizeable opportunity ahead.
Across our Rest of the World region
more broadly, we continue to ensure we have first mover advantage
ahead of the competition. The brand has a good presence in high-end
bars and hotels in cosmopolitan cities across Asia, and we are
developing our relationships with international and local spirits
companies, as well as investing in our own activations and
marketing campaigns. A good example of this is our Fever-Tree &
Friends "bar takeovers" across a number of bars and hotels across
Asia, including Bangkok and Manila to build brand awareness and
loyalty amongst the top tier bar tender community.
Overall, the Group has made good
progress across this broad region, with a number of markets showing
exciting potential for future long-term growth.
Fever-Tree Team
As the Group grows across multiple
geographies, we remain focused on ensuring we have both the
appropriate resource and the correct systems to facilitate this
growth. Reflecting our growth trajectory in Australia, we
established a subsidiary operation in this market during 2023,
building a local team who are based in Sydney and
Melbourne.
We have also made good progress
implementing a programme focused on updating our end-to-end
operational processes, investing in new technology to underpin
this, as well as training and up-skilling our team to ensure we are
equipped to continue to deliver the growth opportunity.
Whilst the business grows in depth,
breadth and complexity, we are focused on maintaining and
championing our entrepreneurial ethos. Ensuring that we maintain an
informal and open structure, and a culture that enables all our
team members to feel that they can make a real difference to the
business, whatever their role or seniority.
Sustainability
Since we launched Fever-Tree's Five
Branches of Sustainability three years ago, we're proud to have
driven action across the ESG spectrum, both directly within our
business and through our global supply chain. In 2023, we made
further progress, across all five branches - Climate, Circular
Economy, Conservation, Communities and Colleagues.
Increased collaboration across our
supply chain, focus on innovative manufacturing practices, as well
as a further transition to renewable energy sources enabled the
Group to deliver a 5% reduction in greenhouse gas emissions related
to our products sold in the UK. As we look ahead to 2024 and
beyond, we will be enhancing our decarbonisation strategy to not
only drive further reductions in our emissions but also define a
transparent net zero roadmap.
We are also proud to have extended
our ten-year partnership with Malaria No More UK to fight one of
the world's oldest and deadliest diseases, whilst continuing to
work with charities closer to home such as Future Frontiers,
offering mentoring to young people in the communities where we
work. Finally, for our Colleagues, Fever-Tree's Diversity, Equity
and Inclusion (DE&I) Committee meets regularly to discuss how
best to foster an inclusive environment. This year we appointed a
DE&I Lead who has established a three-year strategy to drive
progress in this important area.
Summary
It was particularly pleasing to see
the brand deliver market share gains across our regions, ending the
year with our highest ever market share by value in the UK,
increasing our leadership position in the Tonic and Ginger Beer
categories in the US, and becoming the number one Ginger Beer brand
by value in Canada.
The Group also made some important
step changes to our route to market in a number of exciting
regions, including Australia, France and Greece. In addition,
innovation continues to successfully broaden and deepen our
addressable market size, introducing the brand into more drinking
occasions for our consumers.
Our strategic blueprint is well
aligned with the wider category trends, most notably the rising
popularity of spirits ahead of beer and wine, with spirit growth
driven by the premium segment[12], as well as
consumers' growing preference for quality ingredients and
easy-to-make cocktails. Fever-Tree's unrivalled position as the
largest premium mixer brand globally puts us in prime position to
capitalise on these long-term trends and is why we also see
opportunities across many of our markets beyond our core carbonated
mixers and will continue to develop products to cater to trending
categories such as Cocktail Mixers and sophisticated Adult Soft
Drinks, leveraging the power of the brand.
Along with a focus on top line
growth, the proactive steps we have taken during the course of 2023
combined with the softening inflationary environment provide us
with confidence that we have turned the corner on the impact of the
unprecedented challenges in operating environment we have faced,
and we look ahead to a period of strong, sustainable, profitable
growth in 2024 and beyond.
The Group remains well-placed
financially with a cash position at year end of £59.9m and our
asset light, outsourced business model continues to ensure we have
a low fixed cost base and the flexibility to manage any future
challenges.
Finance review
The Group made good progress in 2023
with revenue of £364.4m (2022: £344.3m), delivering growth of
6%. Whilst performance in the UK was impacted by unseasonably
poor summer weather, underlying sales momentum across our key
growth markets remained positive, most notably in the US.
Importantly, brand strength has increased in our key markets, with
market share gains across our regions and we end the year with our
highest ever market share by value in the UK whilst increasing our
leadership position in the Tonic and Ginger Beer categories in the
US.
At the start of 2023, the
inflationary cost pressures the Group faced in 2022 were further
compounded by the impact of elevated European energy costs on glass
costs and other categories. As a result of this, gross margin was
further impacted in the first half of 2023. Proactive actions taken
by the Group, including a wide-ranging efficiency programme and
pricing actions across regions, which alongside the recalibration
in Trans-Atlantic shipping rates increasingly mitigated gross
margin headwinds as the year progressed. As a result, whilst
full year gross margin reduced year-on-year, within this result we
delivered a strong improvement in gross margin in the second half
of the year, which underpins confidence in further gross margin
recovery in 2024 and beyond.
At the end of the first half, a
one-off production issue in the US resulted in the recognition of a
£3.3m provision against inventory. This issue was ring-fenced to
specific production batches, did not impact customer relationships
or our ability to supply the market and at year end we have
recognised a receivable in-line with expected compensation in
relation to this matter. In the second half of the year the
Group took the decision to not renew the contract with our West
Coast bottling partner and instead have contracted with an
additional East Coast bottling partner, whilst the continued
recalibration of Trans-Atlantic shipping rates now allows for UK
production to service the US more profitably than in recent
years. As a result of these actions, the Group remains
confident that we have sufficient capabilities, capacity and
contingencies to service US growth and drive margin recovery over
the coming years.
Underlying operating expenditure
increased to 23.7% of Group revenue (2022: 23.0%) which alongside
the impacts on gross margin resulted in a reduction in EBITDA
margin to 8.4% (2022: 11.6%). The Group generated an adjusted
EBITDA of £30.5m, a reduction of 23% on 2022 (2022: £39.7m).
Working capital increased as a proportion of revenue to 28.5%
(2022: 23.6%), driven by an increase in receivables, reflecting
improved year end trading compared to 2022. Increased working
capital, alongside the lower level of EBITDA achieved, resulted in
a reduction of operating cash flow conversion to 15.2% (2022:
36.2%). Reduced operating cash flow drove a reduction in cash
held to £59.9m (2022: £95.3m), which has subsequently improved post
year end to £74m as the elevated level of year end receivables has
been collected. As a reflection of our confidence in the
on-going financial strength of the Group, the Board is recommending
a final dividend of 10.90 pence per share, bringing the total
dividend for 2023 to 16.64 pence per share, an increase of 2%
year-on-year.
As we look ahead to 2024, despite
on-going macroeconomic and geopolitical volatility, we will
continue to invest behind the brand, and focus on delivering
revenue growth whilst increasing brand strength and market
share. Alongside this, we expect to deliver strong gross
margin recovery as we benefit from improved glass pricing following
our tender process in 2023, continued focus on driving efficiencies
across our network and further pricing actions across key markets.
This combination of brand strength and gross margin recovery will
establish a platform for strong, profitable growth in 2024 and
beyond.
Gross Margin
Gross margin of 32.1% represents a
reduction from the 34.5% gross margin reported in 2022. The
Group was materially affected by the impact of elevated European
energy costs on glass bottle costs, alongside wider inflationary
pressures on underlying product costs. The Group took
proactive steps to mitigate these impacts, including pricing
actions across markets and margin improvement initiatives including
a re-tender of our UK and European glass supply. Alongside
this, Trans-Atlantic freight rates reduced as the year
progressed. Whilst the combination of these factors drove an
improvement in gross margin in the second half of 2023, they were
not sufficient to fully off-set the impact of the significant
headwinds in underlying product costs across the full
year.
Against a backdrop of continued
macroeconomic and geopolitical uncertainty, we continue to focus on
margin improvement initiatives which will establish a resilient
platform for profitable growth over the medium term. These
actions can be broadly grouped into four key areas:
1. Expanding our
production footprint: establishing capacity closer to our key
growth markets to minimise transport costs, optimise our inventory
holdings and facilitate quicker reactions to market
dynamics.
§ In 2023 we
established an additional East Coast US bottling relationship,
signed an agreement for local bottling in Australia to begin in
late 2024 and signed an agreement with our secondary UK bottler to
also provide canning capacity for the Group.
2. Optimising our
existing footprint: working closely with our current partners to
drive efficiency and effectiveness as we manage our increasing
complexity.
§ In 2023 we
have worked in partnership with our primary UK bottling partner to
increase volume and run size to unlock improved pricing in
2024.
3. Procurement:
leveraging our global scale, widening and onshoring our supplier
base and ensuring our contracts are calibrated for both the current
disruptive environment and our longer-term growth as we scale
through our regionalised production footprint.
§ In 2023 we
successfully conducted a re-tender for our UK and European glass
volumes.
§ A more
strategic relationship with the new primary glass supplier to the
Group will allow greater visibility and involvement in energy
hedging going forward. A partial recalibration of European
energy pricing has allowed for an improved hedged energy position
for 2024 compared to 2023.
§ The
partnership will also provide opportunities to partner on viable
carbon reduction initiatives in the future whilst allowing for
transparent and improved glass bottle pricing for 2024.
4. Technology:
underpinning all of the above is a wide-ranging programme to embed
technology across our global operations that will give us best in
class ways of working, data and insights to manage near term
disruption, as well as underpinning our future growth.
§ This
programme of work will provide the foundation for driving further
efficiency, cost saving and working capital improvements in 2024
and beyond.
We are confident that the benefit of
the actions taken in 2023, along with a focus on further
profit-driving initiatives in 2024, including continued execution
of our pricing strategy across key markets, will drive a
significant improvement in gross margin in 2024 and allow for
further recovery in 2025 and beyond.
Operating expenditure
Underlying operating expenses
increased by 9.4% in 2023 to £86.5m (2022: £79.1m), increasing to
23.7% as a proportion of Group revenue (2022: 23.0%)
Our marketing spend was 9.2% of
Fever-Tree brand revenue (2022: 9.8%) as we continue to invest
behind the brand, whilst staff costs and other overheads increased
to 14.8% of Group revenue (2022: 13.5%), with head count increasing
as we established a subsidiary operation in Australia.
The Group generated an adjusted
EBITDA of £30.5m, a 23.3% decrease from 2022 (2022: £39.7m).
The dilution in gross margin, coupled with marginally increased
levels of underlying operating expenditure as a proportion of
revenue, has resulted in a retraction in adjusted EBITDA margin to
8.4% (2022: 11.6%). It is notable within this result that
adjusted EBITDA doubled in the second half of 2023, underpinning
confidence in continued margin recovery in 2024.
Depreciation charges increased to
£6.3m (2022: £4.3m), reflecting a full year of depreciation of the
US warehousing right-of-use assets recognised in 2022 under IFRS
16. Amortisation charges remained in line at £1.7m (2022:
£1.5m) whilst share based payments reduced to £1.7m (2022: £3.3m),
reflecting a revaluation of the achievability of long-term
incentives currently issued to the Executive Directors. As a
result of these movements, the 23.3% decrease in adjusted EBITDA
translates to a 32.0% decrease in operating profit to £20.8m (2022:
£30.6m).
Tax
The effective tax rate in 2023 was
30.6% (2022: 19.7%), this includes an adjustment in respect of a
prior period arising from an intercompany reclassification between
tax jurisdictions. Excluding this adjustment the underlying
effective tax rate for 2023 was 25.1%, which was in-line with
expectations.
Earnings Per Share
The basic earnings per share for the
year are 13.20 pence (2022: 21.36 pence) and the diluted earnings
per share for the year are 13.18 pence (2022: 21.32
pence).
In order to compare earnings per
share year on year, earnings have been adjusted to exclude
amortisation and the UK statutory tax rates in force at the
year-end have been applied (disregarding other tax adjusting
items). On this basis, normalised earnings per share for 2023 are
15.37 pence per share and for 2022 were 22.59 pence per share, a
decrease of 32.0%.
Balance sheet and working
capital
Inventory levels increased to £67.6m
(2022: £60.1m), driven by an increased value of finished goods
held, reflecting the significant inflationary impacts on product
costs in 2023, rather than an increased quantity.
Trade and other receivables
increased ahead of revenue growth to £91.5m (2022: £72.4m).
This increase reflects an uplift in year-end trading year-on-year,
driven by both strong underlying growth in some markets and phasing
of orders in other markets. The ageing profile of trade
receivables has remained consistent year-on-year, and whilst we
recognise that the current macroeconomic environment continues to
contribute to an elevated level of credit risk, our strong
relationships and proactive engagement with customers alongside
appropriate levels of credit insurance position us well to continue
to manage the on-going credit risk. The movement in trade and
other receivables was partially offset by a marginal increase in
trade and other payables to £55.3m (2022: £51.3m).
As a result of the above movements,
most notably the increase in trade receivables, working capital
increased by £22.6m to £103.8m (2022: £81.2m), and 28.5% of revenue
(2022: 23.6%). The increase in working capital, alongside the
23.3% reduction in EBITDA resulted in cash generated from
operations decreasing to 15.2% (2022: 36.2%).
Capital Expenditure
Due to the structure of the Group's
business model, capital expenditure requirements remain low, with
additions of £9.8m in the year (2022: £7.1m). The additions in the
year included continued investment in reusable packaging in
Germany. Intangible assets include additions of £7.0m in the year
(2022: £2.5m), relating to the global operations technology
programme alongside an innovation-related project.
Cash Position
The working capital increase at
year end, which alongside the retraction in EBITDA margin in 2023
resulted in a reduced level of cash generated from operations which
contributed to a reduction in cash at year end to £59.9m (2022:
£95.3m). Despite this reduction, the Group continues to retain a
strong cash position, and we expect a good recovery in cash
position in 2024 as working capital recalibrates and EBITDA margins
improve. To this end, our cash position has improved post year end
to £74m as the elevated level of year end receivables has been
collected.
Our strong balance sheet is a
competitive advantage over many of our premium mixer competitors
globally. It provides the platform to remain agile and invest
behind opportunities as they arise and has allowed the Group to
remain focused on driving strategic progress whilst navigating the
challenges and disruption in the external environment in recent
years.
The Group's capital allocation
framework remains unchanged. We intend to retain sufficient cash to
allow for investment against the opportunity ahead and primarily
foresee this investment taking the form of operational expenditure,
including upweighted marketing spend across our growth regions at
the appropriate stage, whilst we also intend to retain sufficient
cash reserves to allow us to upweight and accelerate investment in
key markets.
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 considers there to
be surplus cash held on the Balance Sheet it will consider
additional distribution to shareholders, as demonstrated
historically by the payment of a £50m special dividend in
2022.
Dividend
The Group remains committed to a
progressive dividend policy and as such, the Board is recommending
a final dividend of 10.90 pence per share in respect of 2023 (2022:
10.68 pence per share) bringing the total dividend for the year to
16.64 pence per share (2022: 16.31 pence per share). If approved by
shareholders at the AGM on 6 June 2024 the final dividend will be
paid on 21 June 2024 to shareholders on the register on 17 May
2024.
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.
Progress against these key
indicators was closely monitored during the year. Due to the
on-going challenges posed by macroeconomic volatility, targeted
performance was adjusted accordingly as the year progressed. Group
revenue growth was strong but marginally behind expectations,
whilst the gross margin and adjusted EBITDA margin were both down
year on year and behind the Board's expectations.
Revenue growth %
Group revenue growth was +5.8% in
2023 (2022: +10.7%).
Gross margin %
The Group achieved a gross margin of
32.1% in 2023 (2022: 34.5%).
Adjusted EBITDA margin
%
The Group achieved an adjusted
EBITDA margin of 8.4% in 2023 (2022: 11.6%).
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE
YEAR ENDED 31 DECEMBER 2023
|
2023
£m
|
2022
£m
|
Revenue
|
364.4
|
344.3
|
Cost of sales
|
(247.4)
|
(225.5)
|
Gross profit
|
117.0
|
118.8
|
|
|
|
Administrative expenses
|
(96.2)
|
(88.2)
|
|
|
|
Adjusted EBITDA
|
30.5
|
39.7
|
Depreciation
|
(6.3)
|
(4.3)
|
Amortisation
|
(1.7)
|
(1.5)
|
Share based payment charges
|
(1.7)
|
(3.3)
|
|
|
|
Operating profit
|
20.8
|
30.6
|
Finance income
|
2.0
|
0.8
|
Finance expense
|
(0.6)
|
(0.4)
|
|
|
|
Profit before tax
|
22.2
|
31.0
|
|
|
|
Tax expense
|
(6.8)
|
(6.1)
|
Profit for the year
|
15.4
|
24.9
|
Items that may be reclassified to profit or loss
Foreign currency translation
difference of foreign operations
|
-
|
(0.1)
|
Effective portion of cash flow
hedges
|
0.3
|
(0.3)
|
Related tax
|
-
|
-
|
Total other comprehensive income
|
0.3
|
(0.4)
|
Total comprehensive income for the year
|
15.7
|
24.5
|
Earnings per share
Basic (pence)
|
13.20
|
21.36
|
Diluted (pence)
|
13.18
|
21.32
|
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AT 31
DECEMBER 2023
At 31 December 2023
|
2023
£m
|
2022
£m
|
Non-current assets
|
|
|
Property, plant and equipment
|
23.7
|
25.6
|
Intangible assets
|
58.2
|
53.2
|
Deferred tax asset
|
1.7
|
1.9
|
Other non-current assets
|
4.3
|
1.8
|
Total non-current assets
|
87.9
|
82.5
|
Current assets
|
|
|
Inventories
|
67.6
|
60.1
|
Trade and other receivables
|
91.5
|
72.4
|
Derivative financial instruments
|
0.6
|
-
|
Corporation tax asset
|
6.2
|
1.3
|
Cash and cash equivalents
|
59.9
|
95.3
|
Total current assets
|
225.8
|
229.1
|
|
|
|
Total assets
|
313.7
|
311.6
|
Current liabilities
|
|
|
Trade and other payables
|
(55.3)
|
(51.3)
|
Derivative financial instruments
|
-
|
(1.8)
|
Lease liabilities
|
(3.4)
|
(3.4)
|
Corporation tax liability
|
(2.1)
|
(0.8)
|
Total current liabilities
|
(60.8)
|
(57.3)
|
Non-current liabilities
|
|
|
Other payables
|
(0.3)
|
-
|
Lease liabilities
|
(11.8)
|
(13.5)
|
Deferred tax liability
|
(3.0)
|
(1.6)
|
Total non-current liabilities
|
(15.1)
|
(15.1)
|
Total liabilities
|
(75.9)
|
(72.4)
|
Net
assets
|
237.8
|
239.2
|
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)
|
(0.5)
|
Translation reserve
|
(0.3)
|
(0.3)
|
Retained earnings
|
183.1
|
184.8
|
Total equity
|
237.8
|
239.2
|
|
|
| |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE
YEAR ENDED 31 DECEMBER 2023
|
2023
£m
|
2022
£m
|
Operating activities
|
|
|
Profit before tax
|
22.2
|
31.0
|
Finance expense
|
0.6
|
0.4
|
Finance income
|
(2.0)
|
(0.8)
|
Depreciation of property, plant
& equipment
|
6.3
|
4.3
|
Amortisation of intangible
assets
|
1.7
|
1.5
|
Share based payments
|
1.7
|
3.3
|
Increase/(decrease) in impairment
losses on receivables and inventories net of
recoveries
|
0.5
|
(3.1)
|
Net exchange difference
|
3.2
|
-
|
|
34.2
|
36.6
|
Increase in trade and other
receivables
|
(22.3)
|
(1.6)
|
Increase in inventories
|
(10.0)
|
(23.5)
|
Decrease in trade and other
payables
|
4.8
|
0.5
|
(Increase)/Decrease in derivative
asset/liability
|
(2.1)
|
2.4
|
|
(29.6)
|
(22.2)
|
Cash generated from operations
|
4.6
|
14.4
|
Income taxes paid
|
(8.4)
|
(5.9)
|
Net
cash flows (used in)/generated from operating activities
|
(3.8)
|
8.5
|
Investing activities
|
|
|
Purchase of property, plant and
equipment
|
(2.6)
|
(4.6)
|
Interest received
|
2.0
|
0.8
|
Investment in intangible
assets
|
(7.0)
|
(2.5)
|
Acquisition of subsidiary, net of
cash acquired
|
-
|
(3.7)
|
Net
cash used in investing activities
|
(7.6)
|
(10.0)
|
Financing activities
|
|
|
Interest paid
|
(0.1)
|
(0.1)
|
Dividends paid
|
(19.1)
|
(68.8)
|
Payment of lease liabilities
|
(4.0)
|
(1.8)
|
Net
cash used in financing activities
|
(23.2)
|
(70.7)
|
Net decrease in cash and cash
equivalents
|
(34.6)
|
(72.2)
|
Cash and cash equivalents at
beginning of period
|
95.3
|
166.2
|
Effect of movements in exchange
rates on cash held
|
(0.8)
|
1.3
|
Cash and cash equivalents at end of period
|
59.9
|
95.3
|
Note to the Consolidated
Financial Statements
1.
Basis of Preparation
The financial information contained
in this results announcement has been prepared on the basis of the
accounting policies set out in the statutory financial statements
for the year ended 31 December 2023. Whilst the financial
information included in this announcement has been computed in
accordance with the recognition and measurement requirements of UK
adopted international accounting standards, this announcement does
not itself contain sufficient disclosures to comply with UK adopted
international accounting standards.
The financial information set out
above does not constitute the company's statutory accounts for 2023
or 2022. Statutory accounts for the years ended 31 December 2023
and 31 December 2022 have been reported on by the Independent
Auditor. The Independent Auditor's Report on the Annual Report and
Financial Statements for 2023 and 2022 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 2022 have
been filed with the Registrar of Companies. The statutory accounts
for the year ended 31 December 2023 will be delivered to the
Registrar in due course.
2.
Revenue
An analysis of turnover by
geographical market is given below:
|
2023
£m
|
2022
£m
|
United Kingdom
|
114.8
|
116.2
|
United States of America
|
117.0
|
95.6
|
Europe
|
105.4
|
101.0
|
Rest of the World
|
27.2
|
31.5
|
|
364.4
|
344.3
|
3.
Earnings per share
|
2023
£m
|
2022
£m
|
Profit
Profit used in calculating basic and
diluted EPS
|
15.4
|
24.9
|
Number of shares
Weighted average number of shares
for the purpose of basic earnings per share
Weighted average number of dilutive
employee share options outstanding
|
116,632,907
197,351
|
116,556,818
222,486
|
Weighted average number of shares
for the purpose of diluted earnings per share
|
116,830,258
|
116,779,304
|
Basic earnings per share (pence)
|
13.20
|
21.36
|
Diluted earnings per share (pence)
|
13.18
|
21.32
|
4.
Dividends
Dividends paid:
|
2023
|
2022
|
In respect of the prior financial
year
Pence per share
|
10.68
|
53.57
|
Total
|
£12,449,001
|
£62,202,735
|
In respect of the period ended 30
June
Pence per share
|
5.74
|
5.63
|
Total
|
£6,697,301
|
£6,562,527
|
|
£19,146,302
|
£68,765,262
|
The Directors are proposing a final
dividend of 10.90 pence per share, totaling £12,718,845 for 2023.
This dividend has not been accrued in the consolidated statement of
financial position.
5.
Adjusted EBITDA
Analysis within this results
announcement refers to adjusted EBITDA. The Group believes adjusted
EBITDA to be a key indicator of underlying operational performance,
adjusting operating profit for several non-cash items and other
items deemed not to have an impact on the sustained operating
performance of the business. As a consequence of these adjustments,
the Group believes that adjusted EBITDA represents normalised
operating profits. Adjusted EBITDA for the year ended 31 December
2023 is operating profit of £20.8m before depreciation of £6.3m,
amortisation of £1.7m and share based payment charges of £1.7m.
Adjusted EBITDA is an appropriate measure since it represents to
users a normalised, comparable operating profit, excluding the
effects of the accounting estimates, non-cash items and
non-recurring items as mentioned above. The definition for adjusted
EBITDA as defined above is consistent with the definition applied
in previous years. This measure is not defined in the International
Financial Reporting Standards, which forms the basis of the
financial information included in this results announcement. Since
this is an indicator specific to the Group's operational structure,
it may not be comparable to adjusted metrics used by other
companies. Adjusted EBITDA is not intended to be a substitute
for metrics determined in accordance with International Financial
Reporting Standards.