FEVERTREE DRINKS PLC
PRELIMINARY RESULTS 2019
AGENDA
1 | Update on COVID-19 |
2 | FY19 Summary & Highlights |
3 | FY19 Financial Review |
4 | FY19 Regional Review |
5Summary
UPDATE ON COVID-19
COVID-19
Current situation
- Lockdown has severely impacted on-traderevenues across most of our regions
- Very strong initial sales in off-trade
- Positive 'stockpiling' effect entering into lockdown
- Sales have remained robust
- Potential moderation as no in-home entertaining occurs
- More people switching to online shopping
- Continue to work closely with our bottling and canning partners to maintain production, and with our logistic partners to ensure finished goods stock is held in separate locations
- Determined to support all employees. Focus on redeployment of staff to maintain efficiency across the business, rather than using furlough schemes
Actions to safeguard and mitigate
- Increased levels of contingency stock and raw materials
Operations | during the early stages of the outbreak |
- Supporting our bottling, canning and logistic partners as they enact contingency plans, such as segregated shift patterns
- Optimising channels and formats
Off-trade | ‒ | Increased distribution to convenience |
‒ | New larger pack format | |
‒ | Upweighting our online presence | |
• | Adjusting promotional plans | |
• Working with our accounts to support them through the | ||
On-trade | extended period without revenue |
- Maintaining good relationships with spirit partners (e.g. joint provision 'bundles' mailed to consumers)
- Putting in place attractive deals for wholesalers and on- trade accounts ready for on-tradere-opening
COVID-19: FY20 SCENARIOS
FY20 impact uncertain
• | Too early to quantify financial impact on full year |
• | Key uncertainties |
Key data points
Revenue breakdown by region, channel, and quarter
‒ Length of time governments impose restrictions |
‒ How restrictions are relaxed (gradual opening of the on-trade |
likely) |
‒ Consumer behaviour changes as restrictions are relaxed |
‒ Structural impact to the on-trade |
‒ Global economic impact |
• On-trade revenue loss: assume zero for the duration of |
lockdown in each region |
Region | % Group | On- | Off- |
revenue FY19 | trade | trade | |
UK | 51% | 50% | 50% |
US | 18% | 30% | 70% |
Europe | 25% | 45% | 55% |
ROW | 6% | 45% | 55% |
Gross margin and Opex
% Group | |
revenue FY19 | |
Q1 | 20% |
Q2 | 25% |
Q3 | 25% |
Q4 | 30% |
• Initial strong performance in off-trade | |
‒ | Sales uplift as consumers increased their frequency of visits and |
basket sizes | |
‒ | Consistently strong performance across regions |
- Gross margin impact from FX movements, elevated inventory costs, changes to channel and regional mix
- High level of variable costs, mostly relating to A&P
- Short-termsavings from lower A&P spend, with the aim of reinvesting these savings later in the year (i.e. no change to level of spend over the year)
COVID-19: FEVER-TREEWELL-POSITIONED TO NAVIGATE UNCERTAINTIES
Diversified revenues
Strong balance sheet
Flexible business
model
Strong & diverse operating model
- Revenues generated from a diversified set of regions, channels and end customers
- All regions have a good mix between on- and off-trade
- The US is particularly weighted to the off-trade
- Strong cash flows
- Debt free
- FY19 cash position £128m
- Asset light, outsourced model
- Low capital expenditure requirement and few fixed costs
- Ability to flex variable costs if needed
- International network of 5 bottlers and 2 canners means we are able to mitigate the impact of short-term disruption at specific sites
- Good levels of contingency stock and other key raw materials
- Numerous and diverse set of on-trade accounts
COVID-19: SUPPORTING OUR PEOPLE AND COMMUNITIES
Supporting our employees
Using our strength as a small, close-knit team
Continue to offer support and clarity to all our employees, with no intention to furlough
Focus on redeploying our on-trade team to different departments broadening their knowledge and skill set
Supporting our local communities
Donations to local charitable initiatives across our regions
Supporting key workers
Helping 'Salute the NHS' to provide one million meals to NHS frontline staff over the next three months, donating 60K drinks to be included in meal packs
Partnered with Treats Help in the US to distribute our drinks to hospitals. So far we have donated to 20+ hospitals across the US
Supporting our customers & suppliers
Piloting a scheme in UK called "Protect you Local" to support independent outlets, through a digital voucher-based
fund
Supporting the North American bartender community through donations to the Restaurant Workers' Community Foundation and offering bartenders digital seminars
2019 REVIEW
FY19 SUMMARY & HIGHLIGHTS
1 | Double digit Group revenue growth |
2
3
4
5
Retained category leadership in the UK in both
on-trade and off-trade
Strong performance in the US with 33% revenue
growth and a stronger distribution network
European sales increased 16% as Fever-Tree
drives the growth in the premium mixer category
Continued to invest in the substantial global
opportunity
FINANCIAL REVIEW
FY 2019 HIGHLIGHTS
REVENUE | GROSS PROFIT | ADJUSTED EBITDA | |||||||||||
£260.5M | 10% | £131.5M 7 % | £77.0M | 2% | |||||||||
GP MARGIN | EBITDA MARGIN | ||||||||||||
50.5% | 29.6% | ||||||||||||
DILUTED EPS | NET CASH | TOTAL DIVIDEND | |||||||||||
50.26p | £128.3M | 15.08p | |||||||||||
OPERATING PERFORMANCE
£m | FY 2019 | FY 2018 | Change | |
Revenue | 260.5 | 237.4 | 10% | |
- | UK | 132.7 | 134.1 | (1)% |
- | US | 47.6 | 35.8 | 33% |
- | Europe | 64.4 | 55.5 | 16% |
- | RoW | 15.8 | 12.0 | 32% |
Gross profit | 131.5 | 122.9 | 7% | |
Gross margin | 50.5% | 51.8% | (130)bps | |
Operating expenses | (54.5) | (44.3) | 23% | |
% of sales | 20.9% | 18.7% | 220bps | |
EBITDA | 77.0 | 78.6 | (2)% | |
EBITDA margin | 29.6% | 33.1% | (350)Bps | |
Operating Profit | 72.2 | 75.4 | (4)% | |
Profit Before Tax | 72.5 | 75.6 | (4)% | |
Normalised EPS (pence per share) | 51.08 | 53.40 | (4)% |
- Strong total revenue growth, with good progress in international regions
- More challenging year in the UK offset by 24% growth across international markets
- Acceleration in Europe and the US during H2
- Positive FX impact due to US dollar strengthening
- Adjusting for FX, constant currency growth was
- 28% in the US
- 17% in Europe
- 9% for the Group
- Gross margin retraction was driven mainly by increased glass costs and the impact of storage costs from holding elevated inventory for periods during the year
- Operating expenditure increased ahead of revenue growth as we continued to invest for the future, where we see huge opportunity, especially in the US and Europe
- Total dividend up 4% year-on-year to 15.08 pence per share
Dividend (pence per share) | 15.08 | 14.50 | 4% |
STRONG CASH POSITION
£m | FY 2019 | FY 2018 | |
Working capital: | 54.2 | 57.9 | |
- | Inventories | 20.8 | 28.3 |
- Trade and other receivables | 60.8 | 62.9 | |
- | Derivatives | 0.1 | (0.3) |
- Trade and other payables | (27.5) | (33.0) | |
Working capital as % of LTM revenue | 24.4% | ||
20.8% | |||
£m | FY 2019 | FY 2018 |
EBITDA | 77.0 | 78.6 |
Movement in working capital | 3.0 | (20.2) |
Cash generated from operations | 80.0 | 58.4 |
Operating cash flow conversion | 104% | 74% |
All other movements | (25.7) | |
(41.4) | ||
Net cash flow | 38.6 | 32.7 |
Cash at beginning of period | 57.0 | |
89.7 | ||
Cash at end of period | 128.3 | 89.7 |
- Working capital decreased primarily due to
- Decreased in inventory levels at year end, reflecting improved operational efficiencies and elevated levels held at the previous year end
- Improvement in collection of trade receivables
- Working capital improvements resulted in operating cash flow conversion of 103%
- This resulted in a strong FY19 net cash position of £128.3m, up 53% year-on-year
CAPITAL ALLOCATION
1 | Invest in the global opportunity |
- Hold sufficient cash to upweight investment and take advantage of opportunities to accelerate growth
- Retain ability to upweight marketing spend across growth regions at the appropriate stage
2 | Assessment of M&A opportunities |
- Remain vigilant to opportunities that would further assist with the delivery of our strategy
3 Consider additional distribution to shareholders
- Consider additional distribution to shareholders where the Board considers surplus cash is held
REGIONAL REVIEW
UK
UK 2019 HIGHLIGHTS
On-trade
- Good performance against tough 2018 comparators
- c.45,000 accounts with good regional growth
- Strong growth within national Groups
- Extended our leadership position in the mixer category
Off-trade
- Performed in-line with category, which lapped strong summer 2018 comparators and faced macro headwinds in H2
- Strong performance with extended Ginger range
- Positive co-promotional activities
- Maintained leadership position in the mixer category with 40% value share*
Revenue: £132.7m
*IRI Total UK Retail Mixer Market value share, 13 weeks to 19 Dec 2019
UK - STRATEGIC PROGRESS & OBJECTIVES
Portfolio management &
Innovation
- Leverage category leadership position
- Continue to grow our range of mixers to target new drink occasions
- Attract new consumers to the brand through various long mixed drink serves such as whisky & ginger
- 2020 launch of a premium soda range
Distribution
- Focus on both core range and secondary growth drivers
- Continue to gain distribution in on- trade, especially regionally
- Clear opportunities to gain further distribution
Marketing
- Focus on reaffirming our key points of difference
- Drive awareness and trial
- Develop point-of-sale presence across both the on-trade and off-trade
Supported through our strong partnerships with a range of spirits companies
USA
US 2019 HIGHLIGHTS
Strong overall performance:
Revenue +33% YoY
Deepening relationships with key customers and
partnerships with spirits brands
Significant distribution landed through the year across all
channels
Accounted for two-thirds* of premium mixer growth
Revenue: £47.6m
*Nielsen 2019
FEVER-TREE USA HAS BEEN UNDER TRANSITION:
NOW POISED TO CAPITALIZE ON STRONG FOUNDATIONS
2018 H1
2018 H2 | 2019 | |
Changing the Business
Model
- Open Fever-Tree USA
- Build a team across all functions to work alongside our global team
Strengthen Network
- Optimize route-to- market through national partnership with SGWS across the on-trade and off-trade
Building Out the Foundations
- Expanding distribution across channels - number of accounts and points of distribution per account
- Activate marketing agenda through brand activation events, awards, media articles and social media presence
Grew >20% over transition year as we | Accelerated growth and became the | |
established a leading position in the premium | #1 driver of growth in tonic and | |
mixer market | ginger beer overall categories | |
20
2020 - TAILORING OUR APPROACH TO THE US CONSUMER AND MARKET
LEVERAGE STRONG FOUNDATIONS & RELATIONSHIPS
OPTIMIZE PRICE | ALIGN INNOVATION & ACTIVATION | DRIVE TRIAL & AWARENESS | ||
& FORMATS | WITH US HABITS | |||
• | Ensure relevance for the US market based | • | Align the portfolio to 4 core drinking |
on consumer behavior trends key | occasions | ||
• | Thorough testing and engaging | • | Strategy to drive growth in each occasion |
- Implementation from 1st Feb 2020
- Continued in-store and in-bar activations
- New focus on the on-line space with Google and Amazon
- Effective targeting and instant results obtained
OPTIMISING PRICE
H2 2019 | February 2020 | |
Understanding Consumer Behaviors
Optimizing Fever-Tree Strategy
Key Stakeholder Engagement
Implementation
DETAILED PRICING ANALYSIS
Elasticity Assessment
Detailed elasticity analysis of weekly volume performance at price points across key retailers
Consumer Research
Bespoke consumer research with panel of ~10k online mixer consumers testing their willingness to purchase products at different price-points
Retailer Trials
Number of trials testing comparative velocities per
store at new price points across the US
Volume | Intention to |
(Units/ | purchase |
week) |
R² = 0.85
Price ($/Unit)
Current | Suggested | ||
price | price | ||
Ginger Beer | |||
Tonic Water | |||
Club Soda | |||
Ginger Ale | |||
High | Price | Low |
- Velocity Increase at
New Pricing
Top 5 SKUs
24
OPTIMISING FORMATS
An affordable premium position has been achieved in the UK | New formats create opportunities | |
• Different entry price points are enabled through the use of different | ||
UK format evolution | formats, which can unlock significant volume uplift | |
UK sales, £m | |||||||||
45 | |||||||||
40 | |||||||||
£2.99 | £1.70 | £4.00 | $5.99 / $4.99 | $2.99/ $2.49 | 35 | ||||
30 | |||||||||
500ML Glass | |||||||||
25 | 8X150ML Cans | ||||||||
20 | 4X200ML Glass | ||||||||
Mainstream | 15 | ||||||||
competitor | |||||||||
equivalent | 10 | ||||||||
£1.19 | £4.00 | $4.29 | $1.20 | Q414 | Q415 | Q416 | Q417 | Q418 |
ALIGN INNOVATION TO US DRINKING HABITS
• On Trade Pricing enables "Four Drinks" strategy
• Targeting drinks occasions to ensuring we become the #1 mixer brand by value
• Grapefruit launch is tailored to the tequila mixer opportunity in the US
FEVER-TREE
CLASSIC
PALOMA
FEVER-TREE
GRAPEFRUIT
SPRITZ
EUROPE
EUROPE - 2019 HIGHLIGHTS
Good performance across key territories:
Revenue +16% YoY
Positive momentum in the premium gin category
Widening distribution in both on- and off-trade
Continued to evolve and strengthen route-to-market
sales and distribution partners
Revenue: £64.4m
EUROPE - STRATEGIC FOCUS
"Core Markets" | "Next Wave" | |
Leverage strength of the Brand | Broadening and deepening | |
and category leadership | penetration | |
• Multiple growth drivers remain | • Whitespace in on- and off-trade | |
• Range and format extensions | • Gin & Tonic in strong growth | |
• Growing focus on Ginger range | • Building relationships with key | |
partners | ||
"Earlier Stage"
Build distribution and route-to-
market
- Ensure right RTM by market
- Increase headcount where appropriate
Upweighted brand activation across the region
ROW
ROW - 2019 HIGHLIGHTS
Strong performance across key territories:
Revenue +32% YoY
Australia
Canada
Asia
Growth driven by increased RoS and further distribution wins in a strong growth market
Distribution gains with national retailers led to
a very strong off-trade performance
Successfully upweighted presence in the region
with a focus on key cities
Revenue: £15.8m
SUMMARY
SUMMARY
FEVER-TREE IS WELL POSITIONED
LEADERSHIP | TRACK RECORD | MULTIPLE GROWTH | ||
& FIRST MOVER | DRIVERS | |||
Clear No.1 Global | ||||
Proven category leader | Across categories & | |||
Premium Mixer Brand | ||||
across multiple markets | regions | |||
RELATIONSHIPS | BUSINESS MODEL | |
Unrivalled Relationships | Outsourced, asset light, | |
& Partnerships | cash generative | |
Tel. 0207 349 4922
186-188 Shepherds Bush Road, London W6 7NL
info@fever-tree.com
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Disclaimer
Fevertree Drinks plc published this content on 22 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2020 08:12:01 UTC