FY21 Interim Results to 30 June 2021

FY21 Interim Highlights

·    Strong sales growth delivered across all Fever-Tree's key markets in the first half of the year with revenue growth of 36% year-on-year

·    Off-Trade sales exceeded expectations across our regions, remaining above pre-COVID levels, with Fever-Tree extending its premium market-leading position in the UK, US, Europe and RoW

·    On-Trade sales have performed well as markets started to recover during the second quarter

·    Strong continued momentum in the US across both channels, with new distribution and product launches supporting growth in sales and brand awareness

·    The Group continues to make good strategic progress:

o  Successful launches of the Premium Soda range in the UK On-Trade, Lime & Yuzu Soda and Distillers Cola in the US, and Rhubarb & Raspberry Tonic across Europe

o  Scaling up US glass bottling capabilities to full production on the West Coast, with East Coast bottling to be commissioned during the second half of the year

o  Continued integration of GDP in Germany following the acquisition last year, which is already contributing well to Fever-Tree's growth in the market

Financial highlights

·    As highlighted in July, gross margins were significantly impacted by on-going global logistics disruption and cost pressures, contributing to a 270bps reduction in gross margin for the first half of the year, notably in relation to elevated trans-Atlantic freight charges and US storage costs. We have taken a number of actions to mitigate these pressures but as stated previously, we expect disruption and elevated logistics costs to continue to impact through the remainder of this financial year and into 2022.

·    Adjusted EBITDA increased by 22.7%. However, the dilution in gross margin, coupled with maintained levels of underlying operating expenditure has resulted in a reduction in adjusted EBITDA margin to 20.6%

·    Net cash of £133.2 million at period end despite investment in working capital as we built inventories to mitigate supply chain disruption

·    Recommending an interim dividend of 5.52 pence per share, an increase of 2% year-on-year

·    Reiterating guidance from July; FY21 revenue £295 - £304m and EBITDA c.20%

Tim Warrillow, CEO of Fever-Tree, commented

"I am pleased to report an excellent sales performance for the first half of the year. Our ambition and confidence in the global opportunity continues to grow and we have been encouraged by the initial re-opening of the On-Trade, the ongoing strength of the Off-Trade with sales exceeding pre-Covid levels across all our regions, as well as the response to our new product launches, all of which is a testament to our increasing brand strength, growing presence, marketing investments, and relationships across the industry.

We believe the Group is emerging from the pandemic in a very strong position. Throughout the last 18 months we have maintained our long-term focus and therefore continued to invest in our team, our innovation and the brand, which was enabled by the financial strength and operational agility of the business. While some material impacts of the pandemic remain, the business is increasingly well placed to deliver our plans for long-term growth.

Looking ahead, the long-term opportunity for Fever-Tree continues to be enhanced by the structural trends we are seeing, including the growing interest in premium mixers and spirits, and the popularity of long mixed drinks. These trends are being supported by our retail and spirit partners, and Fever-Tree's ability to capitalise and drive this opportunity is unmatched by any other premium mixer brand."

There will be live audio webcast on Wednesday 15^th September 2021 at 10:00am BST. The webcast can be accessed via:

https://www.investis-live.com/fever-tree/6125122ac746d50a009e3864/vbhf

For more information please contact:

Investor queries

Ann Hyams, Director of Investor Relations I [email protected] I +44 (0)2045 168 106

Media queries

Oliver Winters, Director of Communications I [email protected] I +44 (0)770 332 9024

Nominated Advisor and Joint Broker - Numis Securities

Garry Levin I Matt Lewis I Hugo Rubinstein I +44 (0)20 7260 1000

Joint Broker - Investec Bank plc

David Flin I Alex Wright I +44 (0)20 7597 5970

Communication advisers - Finsbury Glover Hering

Faeth Birch +44 (0)7768 943 171; Anjali Unnikrishnan +44 (0)7826 534 233; Amanda Healy +44 (0)7795 051 635

Strategic update I Strong performance as restrictions ease

Fever-Tree performed very strongly across all our key markets in the first half of 2021, delivering revenue of £141.8m, an increase of 36% year-on-year (+39% at constant currency). This was despite continued disruption caused by COVID-19, most notably across the On-Trade which continued to be impacted as restrictions remained into the second quarter, with re-openings towards the end of the period.

Fever-Tree's Off-Trade sales have delivered a consistently strong performance globally, even as the On-Trade started to re-open, with sales well ahead of pre-COVID levels. In the US, Off-Trade sales have continued to accelerate even as we annualise the strong performance from 2020, reflecting the growing traction the brand is gaining in the market.

Fever-Tree continues to value the importance of spirit partnerships for co-promotions and activations around the world. These partnerships have been increasingly supported by spirit companies who are looking to capitalise on the global trend to long mixed drinks, and as the pioneer and global leader of the premium mixer category, we remain very well placed to continue to drive this significant long-term opportunity.

We have continued to make clear progress across our five sustainability branches and have been greatly encouraged by the response and engagement from our customers, consumers, partners, and colleagues to the initiatives that are under way. This has included working with experts to carry out a full cradle-to-grave lifecycle analysis of our greenhouse gas emissions across our range of mixers from which we have set science-based emission reduction targets across all three scopes.

However, we also recognise the need to take action now and therefore, alongside our emission reduction programme, we are investing in nature-based projects where we source our ingredients from to offset our emissions in the near term. Taking these steps means we will shortly be able to show that all our mixers sold in the UK are carbon neutral and in doing so be the first mixer brand to reach this milestone and have set ourselves the ambition to be carbon neutral across all our regions by 2025.

Elsewhere we continue to make progress using our five 'branch' framework, such as Conservation where we have planted London's first Tiny Forest, and Circular Economy, where this week we are one of the founding brands to take part in a reusable packaging initiative with Tesco. These examples are just a small part of the fantastic work our team are doing behind the scenes within this key area of focus for the business.

UK I Sustained Off-Trade momentum as the On-Trade re-opens

Fever-Tree delivered a good performance in the first half of the year, especially given the impacts of the pandemic on the On-Trade continued for most of the period, with revenue of £50.3m, an increase of 4% year-on-year.

The On-Trade, which typically represents half of UK revenue, was closed until mid-April, when outdoor hospitality resumed, and mid-May until indoor hospitality was permitted, with social distancing restrictions remaining in place throughout the period. Performance has been encouraging since the channel was allowed to re-open, with Fever-Tree's On-Trade sales increasing by c.16% year-on-year in the first half, despite being closed and under restrictions for a longer period than in H1 2020. We saw initial signs of pent-up demand and are in a good position to benefit as the channel continues to recover, however, as the period progressed and since the period end, it has become apparent that our initial assumption of a more gradual trajectory is starting to unfold.

Our focus for the On-Trade as it has re-opened has been to promote the Spritz occasion using our new Soda range, as well as celebrating British staycations, with travel likely to remain disrupted for the rest of the year. We have set up a fantastic summer pop-up bar in Covent Garden in the heart of London, which will run from June to October, along with numerous activations at key coastal locations and at major sporting events such as Royal Ascot and The Oval.

The Off-Trade has continued to perform above expectations as the popularity of enjoying long mixed drinks at home has been sustained, with Fever-Tree growing share within the category and delivering sales in-line with 2020 despite lapping the impacts of elevated sales during the initial lockdown period, remaining 24% ahead of 2019. These results highlight the strength of the Fever-Tree brand as we have extended our market-leading position to 38.5%[2], c.1% higher than the same period last year as we grew both our value and volume ahead of the mixer market.

Alongside mixers, the spirits category continued to perform strongly at retail during the first half, growing by 7.6%[3] year-on-year. The success of both the spirit and mixer categories and the movement to long mixed drinks has meant we are increasingly engaging with spirits companies through co-promotions to capitalise on these trends across a number of spirit and mixer occasions, including gin & tonic, whisky & ginger, and vodka & soda. We believe that the lockdown periods have accelerated the popularity of long mixed drinks along with the premiumisation of this category, especially at home, and that Fever-Tree, with our category leadership position, range and relationships, remains uniquely placed to continue to drive these into the future.

The Group has continued to innovate and pioneer the category through the first half of the year. After the successful launch of our Premium Soda range in the Off-Trade last year, we launched them in the On-Trade with our "Summer of the Spritz" campaign, which includes various point-of-sale merchandise, the creation of bespoke menus, and collaborations with our On-Trade customers nationwide. In addition, our Rhubarb & Raspberry Tonic, launched towards the end of last year has already become one of our best-selling flavours at retail and is attracting new, often younger, consumers to the category and the brand.

Overall, Fever-Tree has made good progress in the UK during the first half of 2021. We have been encouraged by our initial performance as the On-Trade re-opens, as well as the sustained strength of our Off-Trade sales. Every action we took last year, from not furloughing anyone, to focusing spend on the Off-Trade while the On-Trade was closed, to launching new flavours and formats has continued to pay dividend as we exit the pandemic. We will exit this period of uncertainty in a much stronger position than when we entered it and are confident about the long-term opportunity in our home market.

US I Strong Off-Trade performance, with promising On-Trade rebound

Fever-Tree performed very strongly in the US over the first half of the year as we continue to build momentum in the region. Despite the impacts of COVID-19, total US revenue for the first half of the year increased by 32% to £36.2m (42% on a constant currency basis).

On-Trade sales in the US continued to be affected in the first half of the year as lockdowns varied by state in length and extent, but typically remained in place well into Q2. However, initial recovery of this channel as restrictions eased has been promising with clear signs of pent-up demand and consumers feeling increasingly comfortable returning to the On-Trade. Consequently, Fever-Tree's On-Trade sales have rebounded quickly, beginning to surpass pre-COVID sales levels by May. We have also continued to win new mandates and distribution with national hotel, bar and restaurant groups, including Hyatt Hotels and Bar Louie, which puts the Group in a strong position as the On-Trade recovers.

Sales in the Off-Trade started the year strongly as On-Trade restrictions continued into 2021 and remained robust as we annualised the stockpiling months of 2020, and as the On-Trade gradually re-opened throughout the period. As a result, our retail sales in H1 increased by 17% year-on-year and over 100% compared to 2019[4]. This comfortably exceeded our expectations for the first half, resulting in an increase in our estimates for US growth this year and ensured we remain the clear premium mixer market leader in retail, which itself is the fastest growing segment in the mixer category.

This strong performance is partly attributable to the increased popularity of making long mixed drinks at home, with spirits taking share from beer and wine during 2020, as well as the positive results of the price optimisation which has encouraged more consumers to try the brand and has driven a higher rate-of-sale on shelf. Furthermore, we continue to win new distribution during the first half of the year across both the liquor and retail channels, with significant new points-of-distribution now in Publix, Walmart and Safeway, including substantial contributions from our new Sparkling Pink Grapefruit Soda.

During the first half of the year, we made two notable new additions to our portfolio of premium mixers. In February we introduced our Sparkling Lime & Yuzu to the market, our second flavoured Soda launch after Sparkling Pink Grapefruit last year to build on our presence within the popular Spritz occasion. This versatile liquid pairs particularly well with vodka to create an elevated vodka lime soda, or with tequila as a "Ranch Water" serve and has already received a very positive reception from the trade and consumers. Following this, in June 2021, we launched our Distillers Cola which is targeted at rum and whiskey drinking occasions and has seen encouraging initial distribution gains and positive customer feedback.

We continue to place a lot of emphasis on marketing and investment to grow Fever-Tree's brand awareness with both consumers and the trade, focusing on the Off-Trade and digital execution in the first half of 2021, whilst also re-allocating spend back into the On-Trade as the channel re-opened throughout the half. We were excited to open a new pop-up bar in Texas, following the success of our original pop-up bar which remains in Bryant Park, New York. Both locations give the brand excellent visibility and enable us to provide consumers with a fantastic experience as they enjoy perfectly crafted cocktails using a range of Fever-Tree mixers. In addition to these flagship locations, we have also been working with a number of our On-Trade accounts to create "Fever-Tree perfect serve menus", as well as providing custom signage, menu boards and other products such as outdoor parasols and furniture.

We have increased our collaboration with Spirits partners and have been featured in a number of multi-channel campaigns since the start of the year including a Gin & Tonic co-promotion with Bombay Sapphire, a Spritz co-promotion with Grey Goose, and a Whiskey Ginger co-promotion with Jim Beam. The Grey Goose campaign is an exciting way for both brands to promote the Spritz serve over the summer months using our new Sodas across the On-Trade, Off-Trade, e-commerce and television. And the Jim Beam campaign aims to encourage a generation of new consumers to "Take a break from beer" and enjoy a lower ABV, lower sugar flavoured serve. The programme includes a multi-million television campaign, supported by digital, social and events, alongside retail floor displays, and is a great example of the power of co-promotions to drive a serve.

Whilst we remain in the early stages of the journey, the Group's ambition and confidence in the US opportunity continues to grow. We have been encouraged by the initial re-opening of the On-Trade, as well as our momentum in the Off-Trade, which is a testament to our increasing brand strength, growing presence, marketing investments, new products, and relationships across the industry.

Europe I Strong first half supported by importer restocking

Total European revenue for the first half of the year was up 102% (104% at constant currency). This very strong result includes £4.7million of GDP portfolio brand revenue which was not included in the first half of 2020 and was also supported by a sell-in to importers as they built inventory ahead of summer trading whilst lapping a period of importer destocking in the first half of 2020. Taking these various factors into account, Fever-Tree's underlying growth remained a very impressive c.30%.

The On-Trade has started to recover, albeit slightly more slowly than the UK and the US as vaccines took longer to rollout. And while restrictions were still present in a number of markets at the end of the half, the On-Trade was open to some extent across the region, with a desire to capitalise on the important summer season, especially in Southern Europe which tends to rely more on the On-Trade, as well as the tourism industry.

Fever-Tree continued to perform strongly in the Off-Trade across the region, contributing to just under a third of the total branded mixer category value growth over the last two years[5], well ahead of any other premium brand. We are extending our premium leadership across our markets, with particularly strong performances in Switzerland, Denmark and France where we've grown our market share by over 300bps in the last year[6].

In our Core Markets, including Ireland and Denmark, we have maintained our market leading position and stepped up our co-promotional activity, with notable examples with Smirnoff Vodka in Ireland to promote the Spritz serve, and with Lillet and Hendricks in Denmark using our Indian and Mediterranean Tonics. This year we are increasing our focus on increasing our range and formats to reach new customers by adding breadth to premium mixing, which is already an established category.

In our Next Wave Markets, including Germany, Spain, Italy and Switzerland, we are growing our penetration quickly and still see good opportunities to grow our distribution and build out our range. Our co-promotions in the region encompass a number of serves, including campaigns with Campari in Spain and The Botanist in Germany, promoting our classic Gin & Tonic, along with Jack Daniel's Whiskey in Italy to highlight the versatility of our mixers.

Finally, in Earlier Stage markets, such as France, Sweden and the Netherlands, we are focused on establishing the brand, primarily through the Gin & Tonic serve, with campaigns such as our co-promotions with Tanqueray Gin in Sweden. Through these partnerships, alongside our growing presence at retail and in the On-Trade, we are building brand awareness and importantly driving category growth in these immature mixer markets.

We have continued to invest across the region beyond co-promotions, through broader marketing activities, new product launches, and an ever-growing team with in-country expertise. We executed our first TV campaign in Europe in the Spanish market this Spring, delivering our "3/4" message and focusing on the quality of our ingredients, which has already significantly increased our prompted awareness in Catalunya[7], the main region the campaign was focused on. In Germany, we launched a new format at retail, a larger 750ml premium glass bottle, to align our products more to German purchasing habits, with strong initial results. We also introduced a new Raspberry & Rhubarb Tonic across Europe to leverage on the popularity of pink drink trends, with strong activations across retail driving positive initial results.

Our progress in the Off-Trade along with the promising recovery of the On-Trade gives us confidence in the opportunity across Europe. The mixer category is growing at pace and Fever-Tree has continued to extend its market-leading position, remaining the only premium mixer brand with significant scale across the region. There are a number of markets that offer real potential and we continue to invest, build meaningful relationships in the trade and with spirit partners, and drive the growth of the premium segment.

RoW I Good progress in key markets

Fever-Tree performed very strongly in the first half of the year in our RoW region, delivering revenue of £14.0 million, which represents a 73% increase compared to H1 2020 (71% at constant currency). Although we benefitted from some phasing year-on-year, our underlying growth across the region was still strong, at c.40%.

In Australia, the Gin & Tonic continues to lead the growth of long mixed drinks, especially at the premium end, driven by Fever-Tree. The premium Tonic category grew by 34% at grocery during H1 and Fever-Tree grew ahead of this at 48%, continuing the strong performance from last year[8]. Fever-Tree's sales through the liquor channel also remained strong, growing share to over 50% in Coles Liquor Group[9]. As well as increasing the brand's presence on shelf, favourable conditions in the On-Trade for the first half of the year meant that Fever-Tree could activate the brand through this important channel. We ran our second Gin & Tonic Festival in Sydney with over three thousand visitors attending and continue to build presence within bars and restaurants as our strong Off-Trade performance from last year starts to translate into the On-Trade.

In Canada, the premium mixer market is continuing to take share of the category, growing at more than four times the rate of the total mixer market in the last 12 months[10], with Fever-Tree growing strongly as consumers increasingly premiumise their long-mixed drinks. We've grown our sales at Canadian retail by 150% over the last two years, with growth coming across all key mixer categories, including through new launches in the Soda & Sparkling category as we expand our portfolio into Spritz occasions. As well as expanding into new categories, Fever-Tree has maintained its position as the largest tonic brand by value in Canadian retail, with approximately a third of the market share[11]. We are confident of continuing to gain new distribution in the Off-Trade, both in terms of number of accounts and facings in-store and are increasingly excited about our prospects in the On-Trade as this important channel gains momentum as it re-opens.

In Asia we have continued to focus on our key city strategy across the region and have entered the South Korean market for the first time, using our Tonics to pair with Soju; a popular local liquor which is seeing strong premiumisation.

Overall, the Group expects to continue to extend its market-leading position across the Rest of the World region, especially in Australia and Canada, and although our comparators for the second half of the year will be tough, we remain excited about the long-term potential for the brand across a broad range of mixer categories, within a number of markets.

Operational review

With the ramping up of production on the West Coast of the US, our global network has now increased to six bottlers and two canners. This footprint is expected to increase further in the latter stages of this year with the commissioning of a new East Coast bottling line in the US.  Despite challenges from the on-going impact of the pandemic, our supply chain team has worked alongside our partners to ensure continuity of production throughout the period and further reinforced both the quality of our relationships and the value of our outsourced operating model.

As is the case across the industry, the Group has been increasingly impacted by considerable disruption to global logistics networks during the first half of the year. Disruption is widespread and on-going, impacting global shipping availability, lead times and pricing as well as HGV driver availability and costs in key markets. In the face of this uncertainty our team has focused on preserving continuity of supply, most notably by increasing shipments to the US and building local inventory, but also working with our main UK logistics partner to manage driver availability during peak periods. Whilst these actions have resulted in increased cost and impacted our margins, they have ensured that we have continued to supply our customers globally throughout this on-going period of disruption, underpinning the strong revenue growth we are reporting.
 

Financial review

The Group has continued to achieve strategic progress in the first half of 2021 whilst navigating the on-going uncertainty and disruption caused by COVID-19.

Revenue of £141.8m (H1 2020: £104.2m), with growth of 36% (39% at constant currency), benefits from the inclusion of £4.7m of GDP portfolio brand revenue (H1 2020: £0m) as well as a strong sell-in to our European and RoW importers as they built inventory in anticipation of a strong summer sales period. Allowing for these factors, this remains a strong result, especially given the On-Trade remained closed or under restrictions for much of the first half across our regions.

The performance is testament to our continued investment in the brand throughout the period of the pandemic, our successful innovation, and the strong progress we are making in the Off-Trade channel across our regions. The On-Trade had reopened globally by the end of the half and we are very well placed to benefit as that channel builds momentum over the remainder of the year.

The Group generated an adjusted EBITDA of £29.2m, a 22.7% increase on the first half of 2020 (H1 2020: £23.8m). Whilst gross margins have been impacted by increased logistics costs and the consolidation of GDP portfolio brand revenue, we have continued to invest behind the brand and have maintained levels of underlying operating expenditure as a proportion of revenue, which has resulted in a retraction in adjusted EBITDA margin to 20.6% (H1 2020: 22.8%).

An increase in working capital, driven by increased inventory levels in the US as we took action to mitigate against logistics disruption, as well as elevated receivables following a strong month of sales in June 2021, has resulted in a reduction in operating cash flow conversion to 22% of adjusted EBITDA (H1 2020: 146%).  As a result of this lower level of operating cash flow conversion, we end the period with cash of £133.2m, a decrease of 3% year-on-year.  We anticipate that the working capital profile will remain elevated but improve as the year progresses.  The Board is recommending an interim of dividend of 5.52 pence per share, an increase of 2% year-on-year.

Gross margin and operating expenses

Gross margin of 44.1% represents a reduction from the 46.8% gross margin reported in the first half of 2020.  The main factors impacting gross margin were:

·    The most significant impact on gross margin has been an increase in logistics costs, resulting from the disruption to global logistics networks that is being experienced across the industry. There have been multiple impacts across regions, including increased UK logistics costs driven by shortages of HGV drivers.  However, the most significant driver of elevated cost has been the shipping of product to the US, both due to increased freight charges but also increased storage charges as we took the decision to build inventory in the US to mitigate the potential impact of on-going disruption. 

·    Following the acquisition of GDP on 1^st July 2020, the 2021 first half results include the consolidation of £4.7m of GDP's portfolio brand revenue, which generates a lower margin than the Group achieves on sales of Fever-Tree products and hence dilutes reported gross margin. Excluding GDP Portfolio brand revenue, the Fever-Tree brand generated a gross margin of 44.8%.

·    There was a marginal impact from net foreign currency headwinds, most notably from the weakening US dollar.

·    There was limited upside from changes in channel and territory mix. The On-Trade channel continued to be impacted by restrictions during the first half of the year, whilst changes in regional mix combined to limited effect.

Despite the current logistics challenges, our focus remains on ensuring we have sufficient inventories and product in market to fulfil demand.  We expect disruption and elevated logistics costs to continue to impact through the remainder of the year and into 2022.  However, from 2022 we expect to increasingly mitigate the impact of elevated US logistics costs through local production, with West Coast production now fully commissioned and East Coast production scheduled for commissioning later this year.  Local production in the US will significantly reduce our exposure to trans-Atlantic freight charges, and allow us to hold lower levels of inventory locally, reducing both storage costs and working capital.

Underlying operating expenses increased by 33.5% in the first half of the year to £33.3m (H1 2020: £24.9m) which reflects a continuation of our approach throughout the period of the pandemic to invest in the opportunity ahead despite the impact of COVID-related restrictions on the On-Trade in the first half.  As a result, underlying operating expenses remain elevated compared to pre-pandemic levels, at 23.5% of Group revenue (H1 2020: 24.0%).

We continue to invest behind the brand, with TV advertising campaigns in the UK and Spain, widespread co-promotional activities across our regions and upweighted investment in the On-Trade as restrictions eased through the period.  Our marketing spend in the first half of the year was 9.9% of Fever-Tree brand revenue (H1 2020: 8.0%) and will be more evenly balanced between halves compared to 2020, when investment was back-weighted during the year.

Staff costs and other overheads increased by18.2% and represented13.9% of Group revenue in the first half of the year (H1 2020: 16.0%).  Following significant increases to headcount made in 2020, we have undertaken a lower level of recruitment in the first half of 2021, with the increase in expenditure driven by the annualisation of those new hires made in 2020 alongside the consolidation of GDP staff and operations.

The Group generated an adjusted EBITDA of £29.2m, a 22.7% increase on the first half of 2020 (H1 2020: £23.8m).  The dilution in gross margin, due mainly to elevated logistics costs and the consolidation of GDP portfolio brand revenue, coupled with maintained levels of underlying operating expenditure as a proportion of revenue, has resulted in a retraction in adjusted EBITDA margin to 20.6% (H1 2020: 22.8%).

Depreciation increased to £1.8m (2020: £1.2m) whilst Amortisation increased to £0.8m (2020: £0.4m), reflecting the acquisition of GDP.  Finally, share based payments increased to £1.3m (2020: £0.8m).  As a result of these movements, the 22.7% increase in adjusted EBITDA translates to a 18.0% increase in operating profit to £25.3m (H1 2020: £21.4m). 

Tax

The effective tax rate in the first half of 2021 was 19.5% (H1 2020: 19.4%) and was in line with expectations.

Earnings per share

The basic earnings per share for the period are 17.47 pence (H1 2020: 15.06 pence) and the diluted earnings per share for the period are 17.44 pence (H1 2020: 14.99 pence), an increase of 16.3%. 

In order to compare earnings per share period on period, 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 the first half of 2021 are 18.14 pence (2020: 15.38 pence), an increase of 17.9%. 

Balance sheet and working capital 

Working capital increased to £73.8m (H1 2020: £43.7m), driven by elevated inventory and receivables levels.  The change in working capital profile reflects the different circumstances surrounding the 2020 and 2021 half years. 

In June 2020, there remained considerable uncertainty in relation to COVID-19, sales were at lower levels and many markets remained under restrictions or in lockdown, hence inventories and debtor levels were relatively low and working capital reduced to historically low levels, which allowed for high operating cash flow conversion. 

As of June 2021, a very different set of circumstances existed, with restrictions lifted across regions and greater certainty and confidence in Q3 trading levels compared to the prior year.  June 2021 sales were extremely strong, notably as our European and RoW importers built their own inventories ahead of the Summer selling period, which elevated the period end receivables.  Alongside this, in response to uncertainties in relation to the availability and lead time of trans-Atlantic shipping we took the decision to build inventory levels in the US in the first half of the year, to ensure we were well stocked ahead of the significant summer sales period in a key growth market. 

The investment in working capital in the period has resulted in cash generated from operations reducing to 22% of adjusted EBITDA (H1 2020: 146%).  We expect working capital to reduce in the second half of the year and therefore the operating cash flow conversion to improve, however, we expect working capital to remain elevated compared to 2020 as we continue to navigate the current period of global logistics disruption.

Cash

The Group continues to retain a strong cash position, however, as a result of the investment in working capital in the first half of the year and therefore a lower level of operating cash flow conversion, cash at period end has reduced to £133.2m, a decrease of 2.7% from June 2020.  

Capital Allocation Framework and Dividend

The Group's Capital Allocation framework remains unchanged. Our financial strength and cash position has allowed us to maintain our long-term focus despite the uncertainty relating to the impacts of COVID-19. As such, we will continue to retain sufficient cash to allow for investment against the Global opportunity, will remain vigilant with regards to M&A opportunities and beyond that will consider additional distributions to shareholders where the Board considers there to be surplus cash held on the Balance Sheet.

As a reflection of our confidence in the financial strength of the Group the Directors are pleased to declare an interim dividend of 5.52 pence per share, 2% ahead of the 2020 interim dividend. The dividend will be paid on 22 October 2021, to shareholders on the register on 1 October 2021.

FY21 Guidance

Fever-Tree remains committed to investing in the substantial future opportunity for the brand across our regions, enabled by the Group's strong balance sheet and conviction in our ability to deliver long-term sustainable growth.

The On-Trade restrictions and closures resulting from the pandemic are subsiding in most of our key markets and we are seeing the benefits of our continued investment in our strong relationships with our partners in that channel. Even as the On-Trade has reopened, we have continued to see good momentum in the Off-Trade driven by increased adoption of long mixed drinking at home as spirits continue to take share from beer and wine and increased support from retailer and spirit partners. Consequently, we have further strengthened our market share across our regions which, along with supportive industry trends and the return of the On-Trade, gives us confidence in the Group's position as we look ahead.

As a result of the strong first half, we are reiterating our increased revenue guidance of £295m - £304m for the full year. We continue to work through the significant logistics disruption which is affecting the whole industry as the year progresses. The situation is dynamic and whilst uncertainty remains as to the longevity and intensity of the disruption, we continue to manage these challenges and anticipate gross margins of c.43%, delivering an EBITDA margin of c.20% for 2021.

Whilst we are very focused on mitigation efforts over the medium term, we believe logistic cost headwinds will continue alongside input cost increases on product costs, and anticipate only a marginal improvement in EBITDA margin next year. We remain very confident of continued strong sales momentum across our regions and will continue to invest in the business to capitalise on the longer-term structural growth opportunity ahead of us.

Consolidated statement of comprehensive income

For the six months ended 30 June 2021

Consolidated statement of financial position

30 June 2021

Consolidated statement of cash flows

For the six months ended 30 June 2021

Notes to the consolidated financial information

For the six months ended 30 June 2021

1.   Basis of preparation and accounting policies

The principal accounting policies adopted in the preparation of the interim financial information are unchanged from those applied in the Group's financial statements for the year ended 31 December 2020 which had been prepared in the accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. The accounting policies applied herein are consistent with those expected to be applied in the financial statements for the year ended 31 December 2021.

This report is not prepared in accordance with IAS 34. The financial information does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts for Fevertree Drinks plc for the year ended 31 December 2020 have been delivered to the Registrar of Companies. The auditor's 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 2006.

Adjusted EBITDA has been calculated consistently with the method applied in the financial statements for the year ended 31 December 2020. Operating profit is adjusted for a number of non-cash items, including amortisation, depreciation, and the share-based payment charge which recognises the fair value of share options granted. The intention is for Adjusted EBITDA to provide a comparable, year-on-year indicator of underlying trading and operational performance. 

The impact of COVID-19 has also been reflected in the Directors' assessment of the going concern basis of preparation for the Group financial statements. This has been considered by modelling the impact on the Group's cashflow for the period to the end of December 2022.  In completing this exercise, the Directors established there were no plausible scenarios that would result in the Group no longer continuing as a going concern.

The Directors have therefore concluded that the Group has adequate resources to continue in operational existence for at least the 12 months following the publication of the interim financial statements, that it is appropriate to continue to adopt the going concern basis of preparation in the financial statements, that there is not a material uncertainty in relation to going concern and that there is no significant judgement involved in making that assessment. This strong financial position has underpinned the Directors' decision to pay an interim dividend of 5.52 pence per share.

Notes to the consolidated financial information

For the six months ended 30 June 2021

2.   Revenue by region

3.   Dividend

The interim dividend of 5.52 pence per share will be paid on 22 October 2021 to shareholders on the register on 1 October 2021.

4.   Earnings per share

Notes to the consolidated financial information

For the six months ended 30 June 2021

4.   Earnings per share (continued)

Normalised EPS is an Alternative Performance Measure in which earnings have been adjusted to exclude amortisation and the UK statutory tax rates have been applied (disregarding other tax adjusting items).