FY21 Preliminary Results to 31 December 2021

FY21 Highlights

·    Fever-Tree delivered revenue growth of 23% (26% at constant currency), growing strongly across all markets, extending its position as the leading global premium mixer brand

·    The Off-Trade performed well, and remained ahead of 2019 levels, even as the On-Trade re-opened, with consumers increasingly enjoying long mixed drinks at home and premiumising their serves

·    Fever-Tree maintained its number one position in the UK retail mixer category, with 39.8% value share^[1]

·    Significant Off-Trade momentum in the US, with the brand growing to become the number one Ginger Beer brand at retail in the US, as well as finishing the year as the number one Tonic brand at retail[2]

·    Good performance across Fever-Tree's European markets, driven by strong Off-Trade sales, a positive return of the On-Trade and importer restocking as the region recovered from On-Trade restrictions

·    Unprecedented global supply chain disruption impacted our gross margin, with a reduction in Adjusted EBITDA margin to 20.2%

·    Significant progress and investment across our sustainability initiatives with all our products sold in the UK now carbon neutral

·    The Group continued to invest for long-term growth:

o  Successful launches of the new Premium Soda range in the UK On-Trade, Sparkling Lime & Yuzu in the US, and Rhubarb & Raspberry Tonic across Europe after its successful launch in the UK

o  Focused on a range of marketing opportunities, including TV adverts in the UK and Spain, pop-up bars in London, New York and Texas, prominent retail displays, and multi-channel co-promotions

o  Began commissioning of our second US bottling line, on the East Coast, which will ramp up to full production during H1 FY22

Financial highlights

·    Net cash increased to £166 million; growth of 16% year-on-year.

·    Proposed full year dividend of 15.99 pence per share, an increase of 2% year-on-year,

·    Recommending a special dividend of 42.90 pence per share, reflecting our financial strength, ongoing cash generation, as well as our confidence in the continued execution of our strategy.

FY22 Guidance

Fever-Tree is performing well in the Off-Trade across our key regions, gaining share within the mixer categories and driving growth of the premium segment. This is supported by the increased popularity of drinking premium long mixed drinks at home, which both retailers and spirits companies are investing behind. As a result, we expect Off-Trade demand to remain at higher levels than pre-pandemic and are well placed to benefit from this sustained shift in consumer behaviour. The On-Trade has continued to recover since the start of the year, and we look forward to a full year of trading through this channel for the first time in over two years. Consequently, we expect to deliver revenue growth of between c.14%-17%, to £355 million - £365 million in FY22.

As highlighted in January, there remains a global backdrop of inflationary pressures against which we are employing a range of mitigating actions. However, commodity prices have increased dramatically in recent weeks because of the terrible events unfolding in Ukraine and this has created significant uncertainty in relation to input costs. As a result, we now expect to deliver an EBITDA range of between £63 million and £66 million for FY22. 

Notwithstanding these near-term cost headwinds, the long-term opportunity looks even more significant than it did a few years ago following the acceleration of supportive consumer trends, and the Group is using its strong balance sheet to remain focused on realising this opportunity with our fantastic team and unrivalled global brand strength.

Tim Warrillow, Co-Founder and CEO of Fever-Tree, commented

"Our fantastic team has delivered a great set of results with impressive revenue growth in all our key markets during another year of uncertainty and disruption. Our growing momentum reflects the brand's increasing presence and popularity around the world, nowhere more so than the US where we finished the year as the No.1 Tonic Water brand by value at US retail. This is a significant achievement and matches the position we have held in the UK, as well as several European markets, for a number of years.

Whilst the tragic situation in Ukraine has resulted in significant uncertainty in relation to our input costs in the short term, the long-term global opportunity for Fever-Tree remains substantial and we are as confident as ever in the brand's ability to capitalise on this. We are excited by the growing interest in the long-mixed drink category from retailers, spirits brands and consumers, especially given the increasing focus on premium segments, which places Fever-Tree, as the largest global premium mixer brand, at the centre of these trends."

There will be live audio webcast on Wednesday 16^th March 2022 at 10:00am GMT. The webcast can be accessed via:

https://www.sunipapictures.com/fever-tree/

For more information please contact:

Investor queries

Ann Hyams, Director of Investor Relations I [email protected] I +44 (0)7435 828 138

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

Financial PR advisers - Finsbury

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

Group performance I Good progress during 2021

The Group performed well throughout another unprecedented year, simultaneously making strategic progress towards our long-term opportunity, as well as delivering a strong set of results for the financial year. The strength of our team, the brand, and our key relationships with customers and suppliers has ensured that we further extended our clear position as the global leading premium mixer brand. We were delighted to be voted "Number One Top Selling Mixer" and "Number One Top Trending Mixer" for the eighth year running by Drinks International as we continue to lead the category.

At the same time, it's been exciting to see the acceleration of the trends that have been supporting the brand's growth for many years; namely, the outperformance of spirits relative to wine and beer, the increased popularity of long mixed drinks, and the premiumisation of both the spirit and mixer categories around the World.

The Group delivered revenue of £311.1m, representing a strong increase of 23% year-on-year and almost a 20% increase compared to 2019, the last pre-pandemic financial year. This was an extremely good performance in the context of continued widespread On-Trade closures across our markets in the first half of 2021. When the On-Trade re-opened it recovered strongly, and Fever-Tree maintained or grew its market leading premium mixer position across the UK, US, and Europe, alongside a continuation of robust Off-Trade trading, which has remained well above pre-pandemic levels.

The well-publicised logistics challenges which affected the whole industry during 2021 impacted our margins for the full year, with gross margin reducing to 42.1%. Rest assured managing our cost base is core to our operating model especially considering the current inflationary pressures and supply chain disruption impacts on our margins but also to ensure that we are operating efficiently. We do though believe that it is important to balance our efforts by investing for growth in capabilities, our brand portfolio, NPD and our supply chain, especially in critical markets like the US. As a result, we have continued to invest, with operating expenses at 21.9% of revenue, resulting in an EBITDA of £63.0m, a 10% increase year-on-year, but a slight reduction in margins, to 20.2%, as guided. Profit before tax was £55.6m, an 8% increase compared to 2020, and we ended the year with a strong balance sheet and net cash of £166.2m, an increase of 16% year-on-year.

COVID-19 update

A gradual return to normality in many of our regions throughout the second half of the year was interrupted in the final few weeks in December by the spread of new Covid variants, reminding us that the pandemic is not yet behind us. However, I remain confident in the brand's strong position, with our asset light, outsourced business model continuing to provide the business with the flexibility to react quickly to changing channel dynamics and consumer demand, as well as the resilience to withstand the ongoing challenges.

In many ways, remote working has enabled our teams across the globe to work more closely and connect more frequently, sharing greater insights, learnings, and data across the workforce. We also continued to support our workforce and local communities across our regions, especially in the first half of the year when lockdowns were at their most stringent.

Strategic update I Strong performance driven by proactive actions

*includes GDP portfolio brand revenue

UK I Good Off-Trade performance and On-Trade rebuilding

The Fever-Tree brand further strengthened its position in the UK, growing revenues by 15% year-on-year despite the continuation of tough On-Trade restrictions. We have maintained our market-leading position in the Off-Trade, finishing the year with 39.8%[4] value share of the mixer market at retail, far ahead of all other premium brands combined with a value share of 2.1%⁵. Our strong execution, brand strength and customer loyalty also enabled us to extend our leading share in the On-Trade to 50.9%[5] as it re-opened during the second half of the year.

In another uncertain year, the On-Trade remained closed or under significant restrictions until July. During the period of closures our team continued to engage with, and offer support to the On-Trade, putting us in a strong position as the channel re-opened. This reopening was characterised by an initial release of pent-up demand during the summer months, before a more gradual recovery throughout the second half of the year, building as consumers became more confident and normal working patterns started to resume. By the end of November, sales were around 90% of 2019 levels⁷, before the spread of the Omicron variant impacted consumer behaviour and led to slower sales during the Christmas period. Consequently, On-Trade revenue increased by 59% compared to 2020 but remained at 62% of 2019 levels across the year as a whole.

The brand was able to re-invigorate its presence and marketing in the On-Trade during the summer, with activations across the South Coast of the UK placing particular focus on promoting the Spritz occasion using our new Premium Soda range. Alongside this we established a fantastic summer bar in the heart of Covent Garden from June to October, along with more specific activations at major sporting events such as Royal Ascot and The Oval.

The Spritz occasion is especially popular with younger consumers, who have initially returned more quickly and in higher numbers to the On-Trade than older age groups. Fever-Tree's range of Premium Sodas performed well, with the offer of simple two ingredient cocktails, easy execution and trade-up opportunities resonating with our pub and bar accounts.

While we are mindful of the continued uncertainty surrounding the On-Trade, our brand strength, our well-established and deep relationships with the trade and our unrivalled range of products means we are well placed to continue to build on this market leading position as the channel continues to recover.

The Off-Trade has continued to perform above expectations as the popularity of enjoying long mixed drinks at home has been sustained even as the On-Trade has re-opened. The Off-Trade was characterised by particularly strong demand in the first quarter, when the On-Trade was completely closed and encouragingly, as the On-Trade recovered in the second half, we maintained double digit growth in the Off-Trade compared to pre-pandemic levels. Across the year, Fever-Tree's Off-Trade sales increased by 20% compared to 2019, but were broadly in-line with 2020 when we experienced more prolonged periods of lockdown. Crucially, our UK household penetration has increased to 15.4%[6] since 2019 which means the brand is in more people's fridges than ever before.

The spirits category also performed well at retail during the year, continuing to grow ahead of wine and beer compared to pre-COVID levels, with premium and flavoured spirits stand-out performers. This not only supported the growing popularity of our new Soda range, but also underpinned significant progress for our Gingers range which performed well from an increasing distribution base, with an 87% sales increase compared to pre-COVID.

The Group has continued to innovate and pioneer the category, capturing the latest consumer trends, and building on our premium mixer credentials. We launched a new Limited-Edition Damson & Sloe Berry Tonic for Autumn / Winter, combining seasonal flavours with a rich purple colour to great effect. The product was not only designed to capitalise on consumer trends towards flavoured tonics and eye-catching liquids, but as a limited edition, also served to excite the category and bring incremental value through additional sales.

Overall, I'm pleased with the progress the brand has made in the UK during the year. We have been encouraged by our performance as the On-Trade re-opens, as well as the sustained strength of our Off-Trade sales. We have maintained or increased our value share and number one position in the Off-Trade and On-Trade respectively and continue to invest to drive our brand awareness and excite the category with new products.

Notwithstanding the on-going uncertainty around On-Trade trading, every action we took last year, from not furloughing any of our team, to focusing spend on the Off-Trade while the On-Trade was closed which included a repetition of our successful national television advertising campaign, to launching new flavours and formats, has continued to pay dividends as we start to enter a new normal. Importantly, our confidence in the long-term opportunity only increases as we see both spirit and mixer categories continuing to grow and premiumise, and consequently more consumers enjoying premium long mixed drinks both at home and in pubs, bars and restaurants. Fever-Tree is uniquely placed to drive growth under these supportive market trends, with our enviable category leadership position, our broad and innovative portfolio, and the strength of our relationships with suppliers and customers.

US I Fever-Tree growing strongly, outperforming the mixer category in the Off-Trade

Fever-Tree had another strong performance in the US, with revenue growth ahead of expectations at 33% to £77.9m (41% on a constant currency basis). We have seen continued growth in both premium spirits and premium mixers in the US, and our market leading position and strong momentum gives us great confidence in the opportunity for Fever-Tree within the market.

Our On-Trade sales in the US were initially affected by closures and restrictions which varied by State in length and extent, resulting in challenging conditions in this channel during the first half of the year. We saw strong initial sales as States re-opened and it was clear that consumers were excited to get back out to bars and restaurants.

We have also continued to secure new distribution in the On-Trade, with notable new agreements with Hilton Luxury Hotels, as well as multiple other restaurant, bar and casino accounts across the country. Our focus on high quality On-Trade accounts, successful introduction of new products, and relationships with our On-Trade customers, as well as our strong partnership with Southern Glazer's Wines and Spirits ("SGWS"), ensured that our monthly On-Trade sales started to surpass pre-COVID levels as early as April and remained strong for the rest of the year.

Alongside the positive re-opening of the On-Trade, Fever-Tree has maintained its outperformance in the Off-Trade, with value growth of 24% compared to 2020, and 97% compared to 2019[7]. Within the portfolio we have seen strong growth across our full range of mixers, targeting multiple drinks occasions, from the mule (Ginger Beer) to tonics (Tonic Water) and spritzes (Soda & Sparkling).

Fever-Tree remains the largest premium mixer brand in the US and continues to be the number one value contributor to the total Ginger Beer and Tonic Water markets at retail. We had several significant achievements this year, growing to become the number one Ginger Beer and the number one Tonic brand by value in the US, surpassing Goslings and Schweppes respectively. These milestones are a fantastic demonstration of the growing strength of the brand and our important role in driving long mixed drinking trends in the US.

Our success during the year has been based on our growing rate-of-sale, far ahead of other mixer brands, which has incentivised our retail customers to give us more shelf space, increasing our distribution and depth within each account. Our new Sparkling products, Pink Grapefruit and Lime & Yuzu have helped to drive this growth, as well as the introduction of our can format in more flavours than ever before.

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. We have focused on creating "Fever-Tree perfect serve menus", as well as providing custom signage, menu boards and other products such as outdoor parasols and furniture to the On-Trade, and 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.

We continued to put a great emphasis on collaborating with spirits partners, using the power of co-promotions to drive different serves, and have been featured in a number of multi-channel campaigns during the year. This included a co-promotion with Grey Goose, which promoted the Spritz serve over the summer months using our new Sodas, and a Whiskey Ginger co-promotion with Jim Beam which aimed to encourage a generation of new consumers to "Take a break from beer" and enjoy a lower ABV, lower sugar serve.

We believe some of the uplift in at-home consumption during lockdowns will remain as consumers have enjoyed experimenting with long mixed drinks at home. This is helping to drive the acceleration of premiumisation trends we have been seeing for a number of years as consumers have purchased more premium drinks at home over the last 18 months and are now less willing to compromise when they go back to the On-Trade. Encouragingly, consumers have been increasingly choosing spirits over wine and beer, with vodka and tequila gaining share ahead of other categories. This is particularly pleasing to see as our two new Sparkling launches, Pink Grapefruit and Lime & Yuzu have been specifically created to mix with these two spirits.

In summary, Fever-Tree's strong performance, innovation directed at specific US consumer habits, focus on influential co-promotional campaigns, and growing rate-of-sale, along with the increasing interest in premium long mixed drinks is enabling us to increase our presence across the grocery, liquor and On-Trade channels. We are extending our market-leading position, with further marketing activations, growing presence and greater consumer awareness ensuring that we will continue this strong momentum into 2022 and beyond.

Europe I Extending market leadership across the region

Total European revenue increased by 35% to £88.2m (40% on a constant currency basis), including £9.6m of GDP portfolio brand revenue. This strong performance was ahead of expectation and driven by Fever-Tree's increasing value across the region, a strong Off-Trade performance, a positive rebuild in the On-Trade, and some importer restocking during the first half of the year.

The On-Trade was materially impacted by closures during the first half of the year, with vaccine rollouts and consequent recovery taking slightly longer than the UK and US. However, the impetus to capture the final weeks of the summer tourist season, especially across Southern Europe, led to a very positive end to the Summer with record months in a number of markets.

Fever-Tree continues to drive growth of the premium mixer category at retail in Europe, gaining share and contributing to about a third of the total category's growth during the year, well ahead of any other premium brand, and second only to Schweppes. We now hold 15.3% of the retail branded mixer value share, a 3.6% increase compared to 2019[8].

Most pleasingly, our focus on category management has helped to build a distinct mixer category for the first time in European retail, enabling retailers to place more emphasis on how visible it is, how it's marketed to consumers and the resources that are allocated to the space. We are therefore encouraged about the whole category's growth, as well as Fever-Tree's role in driving this at the premium end, which should ensure the Off-Trade continues its strong performance even as the On-Trade gets back to pre-COVID levels.

This year we launched our Rhubarb & Raspberry Tonic across key European markets, with very promising initial sales growth. The flavour has already become one of our most popular Tonic flavours across the region, leveraging the trend towards bright, pink and sweeter mixers. We are also particularly excited about our Mediterranean Tonic and our Ginger Beer mixers, the former of which is now our most popular Tonic across a number of European markets, and the latter is growing strongly to extend our range beyond Tonics to other popular serves.

Co-promotions remain a focus of our marketing strategy and this year we have moved from a more local, to a regional approach, driving consistent initiatives across multiple markets, whilst continuing to adapt to local preferences. A great example of this is various co-promotions in over ten countries we have executed with the Aperitivo brand Lillet, where we have focused on consumer trends towards earlier and lighter drinking occasions, as well as giving us the opportunity to provide for occasions beyond the G&T.

In addition, we have invested in broader marketing activities, such as our first television campaign in Spain, delivering our "3/4" message and focusing on the quality of our ingredients, which significantly increased our prompted awareness in Catalunya, the main region the campaign was focused on. We have also introduced new flavours and formats, such as our Rhubarb & Raspberry Tonic, and a new 750ml glass bottle in Germany, aligning to German consumers' purchasing preferences.

Our progress in the Off-Trade along with the promising recovery of the On-Trade gives us confidence in the opportunity across Europe. The Off-Trade has been less impacted by the re-opening of the On-Trade than anticipated, with a strong net positive sales impact as both channels gain in strength. 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 Supportive trends and strategic progress driving growth

We have made good progress in our Rest of the World region with revenue growth of 6% to £26.7m, against tough comparators from the second half of last year.

In Australia, spirits are taking share of throat from beer and wine and the category continues to premiumise which, in turn, is driving demand for premium mixers. Fever-Tree remains the clear leader in premium mixers, contributing more to the total mixer category growth at grocery than any other brand[9], with especially strong sales in Tonics. A fantastic demonstration of how the brand has been driving the premiumisation of the mixer category is that since our launch of larger format (500ml) Tonics in Woolworths (in December 2020), the average selling price of large format Tonics has grown by almost 30%. Fever-Tree has also gained national distribution with Premium Sodas and Gingers as we seek to be the premium mixer of choice across Australia's most popular and trending drinks serves, and this has helped to drive our strong value growth of 52% in grocery during 2021.

In Canada, the mixer market continues to premiumise, with the premium segment outpacing the mainstream segment to reach 10% of the total mixer category. Fever-Tree remained not only the largest premium mixer brand by value at Canadian retail, but also largest Tonic brand by value, ahead of Schweppes, with 32% share. In addition, Ginger Beer performed incredibly well, growing by almost 40%[10] through new distribution with key retailers and expansion into our can format. Diversifying our range of mixers is a core part of our strategy for long-term success and this year we introduced our Sparkling Pink Grapefruit which has been our most successful new flavour launch in the Canadian market, capitalising on the popularity of the Paloma and Spritz Occasions. We look forward with confidence in this market as we continue to gain share, innovate, expand our distribution, and increase our rate-of-sale.

Asia remains a region with long-term potential for Fever-Tree. We have entered three new markets this year and continue to re-evaluate our distribution partners across the region to ensure we are with the right partner for the next stage of our development. We have also extended our pan-Asia deal with Accor, the largest hotel group in the region, for three years, remaining their preferred premium mixer partner across Asia, as well as continuing to develop our relationships with the international and local spirits companies, including Bacardi, Campari and Diageo.

Operational Review 

Our team have continued to work very closely with our partners throughout our supply chain to help mitigate against the impacts of the global pandemic, including the increased level of supply chain disruption that impacted the entire industry this year.

Disruption was widespread, impacting global shipping availability, lead times and pricing, as well as HGV driver availability and costs in key markets. Consequently, we maintained higher stock levels of key ingredients and our team focused on preserving continuity of supply, most notably by increasing shipments to the US and building local inventory in the first half of the year, 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.

The Group worked with our production partner in the US to successfully commission and ramp up production on our new line on the West Coast of the US. In addition, we began commissioning a new line on the East Coast at the end of the period and will be ramping up production there over the first half of 2022. These are exciting strategic developments for the Group, adding further capacity and flexibility to our network and setting us up to realise our substantial ambition in the US market with local bottling capability.

With both US bottling lines in place, we operate across seven bottling sites and three canning sites globally. This increasingly local production network will underpin our growth ambitions in both Europe and the US, will mitigate some of our exposure to elevated logistics costs, and will help to reduce the carbon emissions associated with our supply chain operations.

The long-term opportunity 

Fever-Tree's long-term strategy remains unchanged and continues to be underpinned by strong global trends towards premium long mixed drinking, with the brand's excellent track record against the competition making us best placed to execute against this. Both the popularity of long mixed drinks and the premiumisation of the spirit and mixer categories have accelerated over the last two years, increasing our confidence in the future growth potential for Fever-Tree.

The value of the global spirits market has been growing over the last five years and premium spirits, which deliver authenticity, engagement and quality for consumers, have been driving this growth. The value of the most premium segments within Fever-Tree's top 15 markets have grown by more than 50% over the last five years and now comprise approximately 40% of the category, compared to just under a third in 2015, significantly outperforming the standard and value segments[11].

The advent of the well-crafted premium mixer, pioneered and led by Fever-Tree, allows these premium spirits to be consumed simply, in a long refreshing manner that is suited to today's consumer, and across a wider range of occasions both at home and in the On-Trade.

Consequently, the mixer categories across all our key markets are growing and premiumising. In the UK, Europe and the US the mixer categories have all grown by over 10% CAGR over the last two to three years, with the premium segments once again outpacing mainstream.

Our excitement stems from the fact that Fever-Tree not only sits at the heart of this fast-growing global movement to premium long mixed drinks but is the primary driver of growth of mixer categories across the world which is resulting in the premium long mixed drink becoming increasingly important to the serve strategies of major spirits brands, especially in the US.

During the pandemic the trend to long mixed drinks has accelerated in the Off-Trade as consumers enjoyed long mixed drinks at home as a form of entertainment and a treat at the end of the working day, with much of this elevated demand remaining even as the On-Trade reopened across the world. Consequently, we believe that not only will the elevated Off-Trade demand be sustained to some extent, but also that the higher level of adoption of premium spirits and mixers in the Off-Trade will encourage premiumisation in the On-Trade as consumers have become accustomed to high quality long mixed drinks.

What is unique is that Fever-Tree sits at the heart of these global trends, in an unrivalled position. We have the first mover advantage, track record against competition, international footprint, tools, range, global brand recognition and relationships to continue to benefit from and drive this trend forward.

Fever-Tree Team 

This year has been characterised by a lower level of recruitment than we undertook in 2020. We have focused on consolidating the hires made in the last two years, ensuring we have the appropriate internal structures to drive continued success, and integrate the GDP team into the Group. The prevalence of virtual working over the last two years has provided us with more opportunities to connect our teams across every one of our regions, which has been even more important as we grow and become a more global business. Despite our pace of growth, we remain entrepreneurial at heart and work hard to ensure we have a culture that enables all our team, regardless of location, department or level feel they can make a real difference to the business.

Sustainability 

The last 12 months has seen the Group build on the progress and framework established at the beginning of 2021, making real strides forward in several key areas. Most notably perhaps was the announcement in October that all our mixers sold in the UK are now carbon neutral from 2021 onwards alongside a global ambition to achieve carbon neutrality across all regions by 2025. While the way we operate helps to keep our own emissions low, we are holding ourselves to account for the emissions generated through our entire supply chain. We will continue to challenge ourselves and our partners to take steps to mitigate and reduce the carbon footprint of our drinks, reflecting our commitment to making a positive change in this important area.

Further initiatives have included becoming a founding partner of Tesco's Loop trial to promote and trial reusable packaging. From the very beginning, we have taken pride in using infinitely recyclable glass bottles and aluminium cans for our drinks, and continue to investigate ever more sustainable packaging solutions, including refillable options, hence our investment in this initiative with one of our major customers.

Perhaps most pleasing has been the engagement we have seen both internally and externally as we have begun to roll out our sustainability roadmap. Our employees have led from the front, whether it be establishing keeper teams to help with the maintenance and monitoring of the Fever-Tree Tiny Forest in Hammersmith, West London, offering volunteering and mentoring through our partners Future Frontiers and Key 4 Life or fundraising throughout the year for our Charitable partner Malaria No More UK to support the ongoing fight against Malaria, our teams across the globe have been at the heart of our strategy.

Alongside this, we have been focused on ensuring we continue to provide the best environment and culture for our employees to thrive. This has included conducting our first employee wide engagement survey in conjunction with "Best Companies" which resulted in Fever-Tree being accredited as an "Outstanding" firm to work for, establishing a Group wide Diversity and Inclusivity committee to build on our D&I framework as well as providing a forum for our employees to share their experience and learnings.

Summary & Outlook 

2021 has been a year of notable success, as well as significant external challenges, and I am proud of how the business has navigated the volatile environment to deliver a strong set of results. We end the year with increased confidence in the opportunity ahead and our ability to delivery against it across the world.

Our performance in the Off-Trade remained strong, even as the On-Trade re-opened, exceeding our expectations across all our regions. There has never been more excitement around enjoying long mixed drinks at home. These trends along with our growing brand strength and awareness enabled us to drive value share gains in all our key markets, including the UK, US, Europe, Australia and Canada.

The On-Trade also came back strongly as restrictions were lifted, responding to high levels of pent-up demand around the world. The support we committed to our On-Trade partners meant we were well positioned to benefit from a positive re-opening and therefore saw strong growth and distribution gains during the second half of the year. Not only did we end the year with over 50% market share in the UK On-Trade, but we also saw record months of trading across Europe and the US, giving us confidence in our long-term growth plans across our mature and growth regions.

During the pandemic, the strong and secure financial position of the Group has enabled us to remain focused on the long-term opportunity, continue to invest and make strategic progress. We made a number of significant launches, including our Premium Sodas in the UK On-Trade as well as our Lime & Soda in the US, and our Rhubarb & Raspberry Tonic across Europe, all of which are performing ahead of our expectations. In addition, we added to our local US production, commissioning a second bottling line at the end of the year on the East Coast.

The Group remains well-placed financially with a cash position at year end of £166.2m 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. We are of course mindful of the impact that the uncertainty and instability of the last two years has had on our gross margins.  Our focus remains on driving growth and ensuring we are equipped to manage the scale and complexity of a global business.  This requires us to invest in our processes, systems and to move to local production partners at the appropriate point whilst also investing ahead of demand in key markets. We are continuing to develop our global production footprint and can look forward with confidence to opportunities to capture economies of scale, optimise local inventory holdings and reduce our exposure to global sea freight over the coming years.

We are mindful of the terrible events unfolding in Ukraine and related geopolitical uncertainty and will continue to monitor any future impacts this may have on our business. Alongside this, there remains a global backdrop of inflationary pressure against which we are employing a range of mitigating actions to offset some of the ongoing significant cost headwinds.

Despite this, we continue to be excited by the global growth of spirits, trends to long mixed drinks and increasing popularity of premium serves, all of which have accelerated during the last two years. In addition, new supportive trends such as mixology at home, along with our ever-increasing brand awareness and range of mixers to cater to more consumer occasions makes us increasingly confident in the opportunity ahead for the Group.

Finance review

The Group capitalised on strong Off-Trade momentum and its commitment since the start of the pandemic to continue to invest in the brand and product innovation to deliver revenue of £311.1m (2020: £252.1m), achieving growth of 23% despite the on-going On-Trade restrictions, disruption and uncertainty caused by COVID-19.

Performance in the Off-Trade was consistently strong across regions, with the brand gaining market share in our key growth markets, whilst On-Trade performance was encouraging despite being impacted by restrictions in the first half of 2021 and towards the end of the year.

We have continued to make good strategic progress, with successful new product launches and continued investment in marketing, sustainability and our people. As a result of our strategic focus and our initiatives throughout the pandemic we have strong momentum in a number of exciting growth markets, including the US, Canada, Australia as well as across our European markets, further positioning us as a truly global brand and the clear leader of the premium mixer opportunity.

As was the case across the industry, the Group was impacted throughout 2021 by considerable disruption to global logistics networks, most notably through the availability and pricing of sea freight and HGV drivers across our regions, which negatively impacted gross margin. Despite the increased level of logistics costs, we continued to invest for the long-term, and as a result, the adjusted EBITDA margin reduced to 20.2% (2020: 22.6%). As we move into 2022 conditions remain challenging, with continued disruption and significant headwinds in product and logistics costs, but we are working to mitigate the impact of these increases and as usual remain focussed on driving margin improvement over the medium term alongside our strong top line growth.

The Group generated an adjusted EBITDA of £63.0m (2020: £57.0m), returning to growth with an increase of 10.3% on 2020. Operating cash flow conversion remained strong at 91.7% (2020: 95.8%) and we end the year with an improved cash position of £166.2m (2020: £143.1m). As a reflection of our confidence in the financial strength of the Group, the Board is recommending a final dividend of 10.47 pence per share, an increase of 2% year-on-year, as well as a special dividend of 42.90 pence per share.

Gross Margin  

Gross margin of 42.1% represents a reduction from the 46.2% gross margin reported in 2020. Whilst there were marginal impacts from net foreign currency headwinds and the impact of consolidating a full year of GDP portfolio brand revenue, the most significant impact on gross margin was the increase in logistics costs.

The disruption to global logistics networks had multiple impacts on gross margin, including increased UK logistics costs driven by shortages of HGV drivers and significantly increased Trans-Atlantic freight charges for the shipping of product to the US. In order to mitigate the impact of uncertainty of sea freight availability we took the decision to build inventory in the US in the first half of the year. This successfully ensured continued product availability in the US, however, it also resulted in elevated storage charges and, at the end of the year, we were required to book a £1.3m provision against inventory approaching its expiry date. The unsold inventory largely related to a narrow range of new product lines which were shipped to the US early in 2021 ahead of expected new distribution in both the Off and On-Trade channels which was subsequently delayed until later in the year due to the on-going impact of COVID-19.

Disruption and uncertainty are on-going as we proceed into 2022, and we anticipate significant headwinds in both logistics and product costs. Against this backdrop we are focused on mitigating actions, with the ramping up of local production on the East Coast of the US, alongside a fully functioning West Coast production line, essential in reducing our exposure to elevated Trans-Atlantic freight costs, as well as allowing for lower inventory holdings in the US.  We are also working on a number of initiatives, including transitioning to new warehousing locations in the US closer to our bottling lines as well as multiple other projects across the Group all of which are aimed at driving improvements in gross margin over the medium term.

Operating expenditure 

Despite the on-going impact of COVID-19 on our On-Trade revenue, and the impact of global logistics disruption on our gross margin, we continued to focus on the significant opportunity ahead for the Group and invest in the brand, our people and our capabilities. This led to underlying operating expenses[12] increasing by 14.6% to £67.9m (2020: £59.3m), reducing to 21.9% of Group revenue (2020: 23.5%).

We invested in TV advertising campaigns in the UK and Spain, upweighted digital marketing spend across regions and executed strong On-Trade activations across the summer period.  Premium spirit brands are more engaged than ever in seeking co-promotional opportunities to drive serves resulting in multiple significant campaigns across our key markets.  Total marketing spend from the Group remained strong at 9.3% of Fever-Tree brand revenue (2020: 9.9%). 

Staff costs and other overheads increased to £38.7m (2020: £34.1m). Following a significant increase in headcount in 2020 we recruited less this year, consolidating the team and continuing to integrate the GDP staff and operations following the acquisition in July 2020. We will continue to build the team in 2022, to invest ahead and underpin the increasing scale, scope and complexity of the business. Whilst we will necessarily increase our headcount, we intend to remain a lean organisation, and preserve the entrepreneurial culture and operational agility that has served the Group so well to date.

Whilst underlying operating expenses reduced as a percentage of revenue to 21.9%, this was not sufficient to offset the decrease in gross margin and as a result, the adjusted EBITDA margin reduced to 20.2% (2020: 22.6%). Despite this reduction in margin, due to the strong revenue performance adjusted EBITDA returned to growth in 2021, increasing by 10.3% to £63.0m (2020: £57.0m)

Amortisation charges increased to £1.5m (2020: £1.1m) following a full year of amortisation of the intangible asset created on acquisition of GDP in July 2020. Depreciation charges also increased to £3.2m (2020: £2.7m), largely driven by the reusable packaging system in Germany, including the launch of a new 750ml glass bottle format. Finally, share based payment charges increased to £2.7m (2020: £1.9m).

As a result of the increases in amortisation, depreciation and share based payment charges, the 10.3% increase in adjusted EBITDA translates to a 8.3% increase in operating profit to £55.6m (2020: £51.3m) and profit before tax of £55.6m (2020: £51.6m), an increase of 7.7%.

Tax 

The effective tax rate in 2021 increased to 19.7% (2020: 19.1%), driven by an adjustment to deferred tax in relation to future UK corporation tax rate changes.

Earnings Per Share 

The basic earnings per share for the year are 38.29 pence (2020: 35.86 pence) and the diluted earnings per share for the year are 38.19 pence (2020: 35.76 pence).

In order to compare earnings per share year on year, earnings have been adjusted to exclude amortisation and the UK statutory tax rates have been applied (disregarding other tax adjusting items). On this basis, normalised earnings per share for 2021 are 39.70 pence per share and for 2020 were 36.72 pence per share, an increase of 8.1%.

Working Capital 

We began 2021 with elevated levels of inventory as we sought to mitigate the impact of on-going COVID-related disruption alongside the UK's exit from the EU. Whilst we were able to navigate the latter with minimal disruption, supply chain uncertainty contributed to the decision to build inventory further in the first half of 2021, notably in the US. During the second half we reduced inventory levels in the US as West Coast production ramped up and as we approached commissioning of an East Coast bottling line. As a result, year-end inventory levels were £36.2m, a reduction of £2.5m from 2020 (2020: £38.7m).

Trade and other receivables increased in line with revenue growth to £70.3m (2019: £56.0m). Our strong relationships, proactive engagement with customers and appropriate levels of credit insurance position us well to continue to manage the on-going credit risk. However, we recognise that the current external environment contributes to an elevated level of credit risk and consequently increased our credit loss provision at year end to £3.1m (2020: £1.2m).  The movement in trade and other receivables was partially offset by an increase in trade and other payables to £49.4m (2020: £42.4m).

As a result of the above movements, there was only a marginal increase in working capital of £4.7m to £57.1m (2020: £52.4m) and therefore working capital improved to 18.3% of revenue (2020: 20.8%), which resulted in cash generated from operations of 91.7% (2020: 95.8%).

Capital Expenditure 

Due to the structure of the Group's business model, capital expenditure requirements remain low, with additions of £5.8m in the year (2020: £2.5m). The additions in the year included continued investment in reusable packaging in Germany, reflecting the growth in that market.

Cash Position 

The Group continues to retain a strong cash position, with cash at year end increasing by 16% to £166.2m (2020: £143.1m). This platform provides a significant competitive advantage over many of our premium mixer competitors globally and has allowed the Group to remain focused on driving strategic progress over the last two years despite the disruptions caused by COVID-19.

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 take advantage of opportunities to upweight and accelerate investment as they arise.

Whilst not a priority or essential component of the Group's plans, we also remain vigilant with regards to M&A opportunities that would further assist with the delivery of our strategy, as demonstrated by the acquisition of GDP in 2020. Where the Board considers there to be surplus cash held on the Balance Sheet it will consider additional distribution to shareholders.

Dividend 

The Group remains committed to a progressive dividend policy and as such, the Board is recommending a final dividend of 10.47 pence per share in respect of 2021 (2020: 10.27 pence per share).  If approved, this would bring the sum of the interim and final ordinary dividend in respect of 2021 to 15.99 pence per share (2020: 15.68 pence per share).

In addition to this, reflecting the strong year end cash position, on-going cash generation and confidence in the execution of the 2022 plan and beyond, the Board considers it appropriate to recommend a special dividend of 42.90 pence per share. If approved, this would bring the total dividend for 2021 to 58.89 pence per share (2020: 15.68 pence per share).

If approved by shareholders at the AGM on 19 May 2022 the final dividend will be paid on 27 May 2022 to shareholders on the register on 7 April 2022.

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 disruption caused by the pandemic during 2021, targeted performance was adjusted accordingly as the year progressed. Group revenue growth was strong and ahead of 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 +23.4% in 2021 (2020: -3.2%).

Gross margin %

The Group achieved a gross margin of 42.1% in 2021 (2020: 46.2%).

Adjusted EBITDA margin %

The Group achieved an adjusted EBITDA margin of 20.2% in 2021 (2020: 22.6%).

Fevertree Drinks plc

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2021

Fevertree Drinks plc

Consolidated statement of financial position

At 31 December 2021

Fevertree Drinks plc

Consolidated statement of cash flows

For the year ended 31 December 2021

 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 2020. 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 2021 or 2020. Statutory accounts for the years ended 31 December 2021 and 31 December 2020 have been reported on by the Independent Auditor. The Independent Auditor's Report on the Annual Report and Financial Statements for 2021 and 2020 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 2020 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2021 will be delivered to the Registrar in due course.

2. Revenue

An analysis of turnover by geographical market is given below:

3. Earnings per share

4. Dividends

In the financial year ended 31 December 2021 dividends were paid with a value of £18,399,903 (being £11,966,441 at 10.27 pence per share in respect of the year ended 31 December 2020, and £6,433,462 at 5.52 pence per share in respect of the six months ended 30 June 2021). The Directors are proposing a final dividend of 10.47 pence per share and a special dividend of 42.90 pence per share, totalling £62,202,735 for 2021. This dividend has not been accrued in the consolidated statement of financial position.