FY22 Interim Results to 30 June 2022

FY22 Interim Highlights

·    Strong top line performance with revenue growth of 14% year-on-year

·    Good recovery in the On-Trade channel during the first half, with consumer demand remaining strong, especially in the US and Southern European markets

·    As highlighted in July, pricing actions in our more established markets and improvements in sales mix only partially mitigated on-going industry-wide inflationary logistics and product cost headwinds, resulting in a 670bps reduction in gross margin

·    We remain confident in the substantial long-term opportunity, and therefore continue to invest for growth, increasing expenditure on the brand, our people and our operations

·    The Group ended the period with a strong balance sheet, underpinned by cash of £100m at period end, following payment of the £50m special dividend announced in March

·    Recommending an interim dividend of 5.63 pence per share, an increase of 2% year-on-year

·    Reiterating guidance from July; FY22 revenue £355m - £365m and EBITDA of £37.5m - £45m

*includes GDP's portfolio brands

Strategic highlights

·    Despite the challenging global operating environment, Fever-Tree has continued to extend its premium market-leading position in the UK, US, Europe and RoW

·    The Group has made significant progress on its strategic priorities since the start of the year

o  We remain the clear market leader in the UK (33% of Group revenue), delivering revenue growth of 6% despite well-reported industry challenges

o  Positioning the brand for long term success in the US (25% of Group revenue). US revenue was up 11% in the first half but underlying demand is significantly higher with reported growth impacted by Trans-Atlantic shipping challenges and a slower than expected ramp up in local production on the East Coast of the US. Our three-year compound annual growth rate at retail in the US is almost three times the growth rate of the total mixer category. We will continue to invest to capture the enormous potential we see for our brand in this market

o  Building scale and share across Europe (33% of Group revenue), with growth of 27% driven by strong performance in Southern Europe where the brand is seeing significant consumer pull and momentum. Across Europe the Group drove around a third of total mixer category growth at retail. As with the US we will continue to invest in building our scale and potential in these markets

o  Positioning the brand for the long term in large growth markets in the RoW (9% of Group revenue), with growth of 7% but adjusting for depletions, underlying growth is nearer 15%. Our immediate focus is on the core markets of Australia and Canada where the brand is performing well, but we are also focused on wider opportunities globally as western drinking habits develop over a longer time horizon

·    More specifically during this six-month period, we are very pleased to report progress on the following growth initiatives:

o  Successful initial trials positioning several Fever-Tree products as premium Soft Drinks in the UK Off-Trade enabling the Group to access a significant adjacent opportunity

o  Extending into non-carbonated cocktail mixers in the US through the acquisition of Powell & Mahoney just after period end to accelerate the brand's entry into this notable new category

o  Important route-to-market evolution in Canada and Japan, securing heavyweight new distribution partners reflecting the size of the opportunity in our Rest of the World region

o  Continued success with new product launches including a Limited-Edition Passionfruit & Lime Tonic in the UK

Tim Warrillow, CEO of Fever-Tree, commented

"Fever-Tree has delivered a robust revenue performance in the first half of 2022, with a particularly strong performance in Europe as the On-Trade recovered. Demand has been strong in the US and we have continued to increase our availability on shelf enabling us to deliver a record month in August, a fantastic achievement by the team.

Alongside driving topline growth, the business remains extremely focused on mitigating the industry-wide cost impacts and whilst we are still highly mindful of the extreme volatility impacting energy-related and logistics costs, we do expect to see a gradual decrease in our exposure over the medium term.

The strength of the Fever-Tree brand is providing exciting opportunities to recruit new consumers and extend into significant adjacent categories, with the opportunity in premium soft drinks in the UK and non-carbonated cocktail mixers in the US both extremely compelling.

The long-term opportunity for the business remains very significant and we continue to focus on investing in our products, marketing activities and our team. As the global leader of the premium mixer category we remain at the centre of the well-established trends to premiumisation and long-mixed drinks whilst also perfectly positioned to explore these incremental opportunities."

There will be live audio webcast on Tuesday 13^th September 2022 at 10:00am BST. The webcast can be accessed via:

Fever-Tree FY22 Interim Results webcast

For more information please contact:

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Strategic update I Strong performance with On-Trade recovering well

Fever-Tree delivered a strong top line performance in the first half of 2022. Revenue of £160.9m was an increase of 14% year-on-year and was achieved despite the Omicron variant impacting On-Trade performance at the start of the year, alongside logistics disruptions impacting our ability to fulfil against the strong demand we are seeing in the US.

The wider On-Trade market rebounded particularly well in the US and Southern Europe. In the US On-Trade sales have been consistently ahead of pre-Covid, 2019 levels[2], and in Europe sales have built strongly to surpass 2019 levels, supported by the return of the tourism industry to Southern Europe. In the UK the On-Trade has experienced a steadier build, with pre-Covid levels reached at the start of the second quarter².

Fever-Tree has made significant strategic progress since the start of the year. This includes the expansion into two adjacent categories; premium soft drinks in the UK and non-carbonated cocktail mixers in the US, both of which present significant long-term opportunities for the brand. Alongside this, within our core mixers we continue to launch new, innovative products including a Limited-Edition Passionfruit & Lime Tonic in the UK, a Blood Orange Ginger Beer in the US, as well as broadening the distribution of our Premium Soda range across Europe to capitalise on the growing Spritz occasion.

The Group continues to partner with a range of spirits brands across the world, with a greater focus on the On-Trade during the first half of the year as this channel rebuilt and events returned. In addition, we have made two significant route-to-market changes, transitioning to Tree of Life in Canada, and Asahi Breweries in Japan, reflecting the size of the opportunity in those markets.

Alongside driving topline growth, the business remains extremely focused on mitigating the industry-wide cost impacts, as well as more specific cost headwinds, such as elevated sea freight costs, which we will gradually decrease our exposure to through the increasing localisation of production. We are also mindful of the challenges facing our customers and consumers due to rising energy costs and inflation more broadly, but believe we are well-placed with our strong relationships and affordable premium price-point, and therefore remain confident of delivering our plan in the second half of the year.

Doing business in the right way, with our colleagues, communities, and environment in mind, remains central to everything we do at Fever-Tree. In the first six months of 2022 we have focused on our Climate and Conservation branches of our five-branch sustainability framework.

Having become carbon neutral in the UK last year following a full cradle-to-grave lifecycle analysis of our greenhouse gas emissions across, we continue to work towards, and remain committed to, being carbon neutral globally by 2025 using science-based emission reduction targets. A great example of how the business is benefitting operationally, financially and in terms of carbon reduction is through the localisation of our production in the US, and in Australia next year. We are also making progress under our Conservation branch, partnering with All Bar One, one of our largest On-Trade customers in the UK, to support the rollout and conservation of the Tiny Forests network being planted across the UK.

UK I Increasing share and brand awareness

Fever-Tree delivered UK revenue of £53.5m in the first half of the year, an increase of 6% year-on-year.

The On-Trade rebuilt steadily during the period, with Fever-Tree's On-Trade sales increasing by c.73% year-on-year in the first half, as we annualised lockdowns and restrictions during the first half of 2021. The work we did to support our customers during periods of On-Trade closure over the last two years have put us in a strong position and we now have over 50% value share of the mixer category in that channel, which is our highest ever share with an increase of 3.1% compared to pre-Covid levels[3].

The return of events this year has created more opportunities for consumers to enjoy and trial the brand, as well as increasing the brand's visibility. We have increased our presence with Fever-Tree bars at a variety of events around the UK, including Royal Ascot, The Oval and Polo in the Park, enabling us to showcase new drinks and occasions, including a number of Spritz serves, which have been performing particularly strongly.

Alongside mixers, the spirits category continued to perform well, growing its On-Trade sales value by 15.6% and value share by 3.4ppts compared to 2019³, with premiumisation trends just as strong and forecast to continue[4]. Fever-Tree is best placed to capitalise on the movement to premium long mixed drinks and we are increasingly engaging with spirits companies through co-promotions across a number of spirit and mixer occasions, including gin & tonic, whisky & ginger, and vodka & soda.

In the Off-Trade, the Group was lapping a very strong period of sales in this channel last year when the On-Trade was closed, resulting in sales decreasing by 21% compared to H1 2021. Despite this, Fever-Tree has grown volume share within the category, is in more UK households than any other mixer brand[5] and remains the leading premium mixer brand at UK retail, with a rate-of-sale on shelf seven times higher than the average rate-of-sale of other premium mixers[6].

Taking the entire UK mixer market into account, across both channels, Fever-Tree remains the clear leader of the mixer category, with c.45% value share, over twenty times the nearest premium mixer brand, and almost 50% higher than Schweppes[7].

The Group has continued to invest in marketing during the first half of the year, with the launch of our new campaign "We'd say T&G", which included our first national appearance on UK radio stations, aiming to reach 3/4 of all adults during the summer. Our investment behind the brand has proved hugely successful, with Fever-Tree's prompted awareness now as high as 90% amongst spirit and mixer drinkers, and 44% of consumers who drink spirits and mixers claim to know the brand "very well", +5ppts year-on-year and almost 4x higher than the next premium brand[8].

The first half of 2022 has also seen two exciting adjacencies being explored. 

We have long understood that our products' natural ingredients, adult flavour profiles and low-calorie options, alongside the sophistication of our brand, means we are ideally positioned to extend into the premium soft drink occasion. This has been underpinned by initial trials we have conducted with a major UK retailer over the last 12 months, which has seen a small number of our products placed within the soft drink section of the store. The results of this trial have been extremely encouraging with our Ginger Beer SKU rapidly achieving the highest rate of sale for the single serve format within the category, and the range outselling many of the long established premium soft competitors. 

While at a relatively early stage, we believe the category presents a significant long-term adjacency for the brand. In the near term the trial has led to wider, incremental distribution across many of our major UK retail partners and will see the launch of a 4x250m can format to support the roll out in the second half. This will be followed by new flavours and extending into other channels as we build out the opportunity in the coming years.

The second exciting opportunity has been the launch of our first airport bar at Edinburgh airport, which opened in May. This has provided a great way to showcase the brand and increase brand exposure in a new setting where premium long-mixed Fever-Tree drinks are served alongside small sharing plates. The bar has been a big success since opening, with clear consumer demand for the offering in that setting, demonstrating the potential for an exciting new platform to increase the brand's visibility that we can take to other markets globally over time.   

Overall, Fever-Tree has made good progress in the UK during the first half of 2022. We have been encouraged by the brand's performance in the On-Trade as it recovers, as well as increasing our volume share in the Off-Trade, and extending our brand awareness, supported by marketing campaigns, activations and co-promotions. We have also made important strategic steps into exciting new adjacencies as we continue to invest for long-term growth and remain confident about the long-term opportunity in our home market.

US I Positioning the brand for long-term success

Fever-Tree's revenue for the first half of the year increased by 11% to £40.1m (up 9% at constant currency). Demand for the brand remains strong and was significantly ahead of this result, which was impacted by inventory restrictions towards the end of the period caused by disruption and delays in trans-Atlantic shipping alongside a slower than expected ramp of East Coast production.  Following steps taken to address these challenges, inventory is recalibrating post period end and our performance is improving, reflecting the underlying momentum as we refill pipelines with customers and distributors.

The wider On-Trade channel in the US has rebounded quickly, with sales surpassing pre-Covid levels from the start of the year. Fever-Tree's On-Trade sales have also been strong, driven by new mandates and distribution gains, including more than 1,000 new points of distribution in Marriott Hotels, along with new accounts at Disney and Hilton Luxury Hotels. Since the end of 2021 Fever-Tree has increased our number of On-Trade accounts by 20% and our total points of distribution by 33% as we strengthen our position as the premium mixer of choice in this channel.

Alongside the significant progress in the On-Trade, the brand has continued to perform well in the Off-Trade. Our retail sales in H1 increased by 16% year-on-year and 144% compared to 2019[9]. Further, our three-year growth rate (CAGR) is almost three times the growth rate of the total mixer market and we have grown our share by 1.6ppts¹⁰ ensuring that we remain the clear premium mixer market leader in retail, which remains a fast-growing category.

The growth we are achieving in the US is being driven by our multi-channel approach to brand-building, our strategic innovations, and our distribution gains, alongside the supportive macro trends to long mixed drinks. 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. In the first half of the year the brand has focused on a range of campaigns across YouTube, social media, and Hulu with video content highlighting our ingredients, provenance and "how to" mix. We also continued to re-allocate spend back into the On-Trade with pop-up bars to increase brand visibility and provide consumers with a fantastic experience as they enjoy perfectly crafted cocktails using a range of Fever-Tree mixers.

Tracking consumer drinking trends enables us to innovate in the most impactful way, creating mixers to pair with popular, fast-growing and premiumising spirits. The launch of our Sparkling Pink Grapefruit mixer exemplifies this, as mixing it with either Tequila, the fastest growing and most premium spirit, or Vodka, the largest spirit category, creates a perfect Paloma or Spritz serve. It's therefore no surprise that Sparkling Pink Grapefruit has been our fastest growing new product launch, and continues to contribute c.50% to the total sparkling grapefruit category growth¹⁰. The latest exciting addition to the portfolio this month is Blood Orange Ginger Beer, with the aim of replicating the success we've had adding flavours to our Tonic range as a way to stimulate growth by recruiting new consumers and prompting existing consumers to try something new.

Alongside extending our range of carbonated mixers, we are also extending into the significant opportunity within the non-carbonated cocktail mixer category in the US. This segment of the mixer market is the same size as the Tonic Water and Ginger Beer markets combined and is growing and premiumising at pace¹⁰. We believe Fever-Tree is well-placed to enter this category, given our established credentials as the US's largest premium mixer, our proven track-record in innovation to compliment popular spirits, and our strong customer relationships and route to market. Consequently, in August 2022 we acquired Powell & Mahoney, a premium non-carbonated US cocktail mixer brand, with national retail listings and an asset light business model with an established production partner. We believe the acquisition will provide Fever-Tree with the ideal platform to accelerate its entry into this exciting adjacent category.

As demonstrated above, the Group's ambition and confidence in the US opportunity continues to grow. We have been encouraged by our performance in the On-Trade, our momentum in the Off-Trade, and continue to see new opportunities for growth in this substantial market.

Europe I Strong first half, building on a well-established foundation

Our European business delivered a strong first half performance with revenue for the first half increasing by 27% year-on-year (31% at constant currency), driven by a strong return of the On-Trade in our key European markets. The main contributors to this outperformance have been Italy, France and Spain where increasing retail distribution has led to market share gains alongside the strong On-Trade rebound, as well as increasing brand awareness driven by investment in television marketing campaigns in Spain and Italy over the past 12 months.

The On-Trade started the year with various restrictions still in place but accelerated in the second quarter fueled by pent-up demand and the return of tourism. Consequently, the On-Trade made up just over 50% of Fever-Tree's European revenues in the first half of 2022.  Both channels have seen good growth compared to pre-Covid levels, contributing to a total sales growth of over 50% since 2019.

Fever-Tree continues to perform strongly and drive premiumisation across Europe. In the Off-Trade, Fever-Tree contributed to just under a third of the total branded mixer category value growth across Europe over the last year[10], well ahead of any other premium brand. We are extending our premium leadership across our markets, with particularly strong performances over the last three years in France and Italy, where we've grown five times and four times faster than the market respectively¹¹.

We have continued to invest across the region with a range of marketing activities, from traditional above-the-line campaigns to On-Trade activations, social media campaigns, and television adverts. A lot of the focus in our above-the-line campaigns have been on our new, bright, eye-catching flavours, such as Rhubarb & Raspberry which command consumer attention and make the brand instantly visible. We have also continued our good work in the Off-Trade during covid, with significant retail displays and co-promotions, both of which have driven more distribution and sales.

As the On-Trade has returned, we have been able to increase our marketing activities in this important channel, using large flagship accounts to increase the brand's presence with Fever-Tree branded chairs, parasols, glassware and 'Perfect Serve' menus to ensure the brand is being enjoyed across a range of occasions.

The business has also been investing in online and television-based campaigns more recently, including our first ever comprehensive digital and social media campaign in Belgium and The Netherlands to showcase our ingredient quality and how to create serves using our "perfect pairings". This activity has been achieving high levels of engagement and can be used as a blueprint for similar projects across other markets. In addition, the brand launched its first ever television advert in Italy, a national campaign with a 30 second advert focusing on our "3/4" message, ingredients and quality. We have already seen a significant impact from this campaign, with a 60% increase in our brand awareness across the country after the advert aired in May and June[11].

The brand continues to make excellent progress across Europe, with good growth in all our markets over the last three years and an acceleration in Southern Europe in H1 2022 as the On-Trade re-opened and tourism returned. We continue to premiumise and drive growth in the mixer category, extending our market-leading position and remain the only premium mixer brand with significant scale across the region. Our strong investment behind the brand is indicative of our confidence in the opportunity across Europe, supported by macro trends such as the increasing popularity of long mixed drinks and premiumisation of the spirit category.

RoW I Good progress in key markets with significant route to market evolutions

Fever-Tree delivered revenue of £15.0 million in our Rest of the World region in the first half of the year, a 7% increase compared to H1 2021 (5% at constant currency). We were lapping some strong comparators from last year but our underlying growth across the region was slightly stronger, at c.15% when we look at depletions.

In Australia, Fever-Tree grew by 53% in the Off-Trade over the last year and is driving all of the growth and premiumisation in the mixer category. The Tonic category is doing particularly well as Gin & Tonic continues to lead the growth of long mixed drinks, especially at the premium end, and Fever-Tree Tonics are growing four times faster than the wider Tonic category[12]. We continue to win new shelf space, with more than 2,000 additional points of distribution secured in Coles in the first half of the year and our new can format enhancing sales through the recruitment of new consumers to the brand. As well as increasing the brand's presence on shelf, we continue to activate the brand in the On-Trade. Our latest Gin & Tonic Festival was held in Brisbane after the success of the event in Sydney last year, extending the brand's presence across the country with consumers and the trade.

In Canada, consumers are increasingly drinking and premiumising their long-mixed drinks as both spirit and mixer categories continue to premiumise. Fever-Tree is helping to drive the growth and premiumisation of the mixer category, increasing our sales at over five times the rate of the total mixer category over the last three years. This growth has come across all key mixer categories, with Ginger Beer doing particularly well in the first half of 2022 and new launches in the Soda & Sparkling category adding to our growth as we expand our portfolio into Spritz occasions. As well as expanding into new categories, Fever-Tree continues to hold approximately a third of the market share in the Tonic category and has grown to c.28% of the Ginger Beer category, an increase of 6ppts in the last year[13].

As we look to the long-term opportunity in Canada, we have also made a significant step-change in our route-to-market this year by transitioning to a new much more powerful distributor, Tree of Life. With over 70 years of experience in the Canadian market, Tree of Life are well-positioned to support our growth ambitions in the market, with their strong sales team, broad, multi-channel coverage, and comprehensive geographic reach.

In Asia we have also made an important change to our route-to-market. The brand has agreed to take on Asahi Breweries as our new distribution partner in Japan, with a three-year exclusive deal starting in January 2023, this move is reflective of Asahi's belief in the significant future opportunity of the premium mixer and adult soft drink category and we are excited about working with a company of their size and influence to go after the opportunity in this potentially valuable market.

The Group continues to grow strongly in this region, where we see substantial growth opportunities in a number of markets. We have extended our premium market-leading position in Australia and Canada and continue to take steps to position us for longer term opportunities across markets as the long-mixed drink trend gathers momentum globally. 

Operational review

The Group continues to expand its global production network, with ten sites currently providing capacity and flexibility as we scale globally, with further expansion expected in 2023. While this has diversified our production volumes away from our core UK bottler, as we build volumes through regional production networks we will recapture economies of scale and be in a strong position to drive improvements in costs per unit. In addition, increasingly localising our US and Australian production over the next two years will reduce our exposure to sea freight costs, as well as reducing our carbon footprint.

The level of disruption and uncertainty remains high, with rapid shifts in the operational and cost backdrop. Specifically, labour shortages at our East Coast bottler in the US have impacted our ramp up, resulting in greater production volumes required from the UK, and has increased our exposure to sea freight costs in the short-term. We are working closely with our US bottling partner, who have reinforced their senior management team in recent weeks and we have co-authored a detailed operational plan focussed on recruitment, training and additional shift patterns in order to increase daily output levels over the remainder of the year.

In addition, glass availability will be restricted across our suppliers in the second half of the year, which will limit our opportunity to deliver revenue upside despite the strong demand we're seeing across our markets. We are working with our suppliers to secure our 2023 glass requirements against a backdrop of inflationary cost pressure, driven predominantly by the currently elevated gas pricing.

Financial review

The Group has continued to make strategic progress in the first half of 2022, whilst navigating the on-going logistics disruption and intensifying cost headwinds prevalent across the industry.

Revenue of £160.9m (H1 2021: £141.8m), with growth of 14% (14% at constant currency) was a strong performance, with the On-Trade showing promising signs of recovery and demand remaining strong, especially in our growth markets.

The Group generated an adjusted EBITDA of £22.0m (H1 2021: £29.2m), a 24.7% decrease year-on-year. As anticipated, gross margins have been impacted by inflationary cost pressures and continued exposure to elevated Trans-Atlantic freight costs, which were only partially off-set by an improved channel and regional mix, and pricing actions taken in our more established markets. Despite these impacts we continue to invest behind the brand, our team and our operations as we remain focused on the significant opportunity ahead.  Operating expenditure has been maintained at 23.7% of Group revenue (H1 2021: 23.5%) and as a result, the impacts on gross margin have translated to a reduction in EBITDA margin to 13.6% (H1 2021: 20.6%).

Whilst working capital improved, the reduction in EBITDA margin drove a lower level of operating cash flow conversion, which alongside the payment of the £50m special dividend announced at the 2021 full year results in March, has resulted in a reduction in cash held to £100.0m (H1 2021: £133.2m).  The balance sheet remains strong and the Board is recommending an interim of dividend of 5.63pence per share, an increase of 2% year-on-year.  

Gross margin

Gross margin of 37.4% represents a reduction from the 44.1% gross margin reported in the first half of 2021. The main factors impacting gross margin were:

·    Inflationary cost increases impacting underlying product costs and logistics costs across regions.

·    Further increases in the underlying cost of sea freight, with on-going exposure to Trans-Atlantic freight costs as UK-produced stock is required to underpin US growth until East Coast production increases to the required levels.

·    Whilst both pricing actions in our established regions and changes in channel and regional mix drove margin improvement, this was not sufficient to off-set the impact of the inflationary headwinds in the first half.

As previously guided, we expect inflationary cost pressures to have an increased impact in the second half of the year. Whilst disruption and uncertainty remain elevated across categories, the most notable impacts are expected to relate to the cost of glass bottles, where a sustained elevation in gas price is being passed through by suppliers against a backdrop of limited glass availability across the Group's suppliers in the UK and Europe. Alongside this, a slower ramp up of the East Coast bottling line than planned has necessitated an increased level of UK production for the US, and a continued exposure to elevated Trans-Atlantic freight costs in the second half, where underlying charges on key routes are up c. 50% since the beginning of the year.

Our team is extremely focused on navigating the current challenges we are facing. In the short term, we are working closely with our network of suppliers to secure our 2023 requirements, and with our US bottling partner to ensure the East coast production line is ramping up to required levels in order to reduce our exposure to Trans-Atlantic shipping charges in 2023.

We continue to invest in the operational capabilities that will underpin the growth opportunity.  We have made experienced new hires in our global supply chain team and are working on a substantial program of activities to mitigate near term inflation, and crucially, to also set the business up for longer term profitable growth. These actions can be broadly grouped into four key areas:

1.   Expanding our production footprint: establishing capacity closer to our key growth markets to minimise transport costs, optimise our inventory holdings and facilitate quicker reactions to market dynamics, with a focus on establishing US canning and Australian bottling during 2023.

2.   Optimising our existing footprint: working closely with our current partners to drive efficiency and effectiveness as we manage our increasing complexity. 

3.   Procurement: leveraging our global scale, widening and on-shoring our supplier base, such as sourcing glass locally in the US, and ensuring our contracts are calibrated for both the current disruptive environment and our longer term growth as we scale through our regionalised production footprint.

4.   Technology: underpinning all of the above is a wide-ranging programme to embed technology across our global operations that will give us best in class ways of working, data and insights to manage near term disruption, as well as underpinning our future growth.

Operating expenditure

Underlying operating expenses increased by 14.5% in the first half of the year to £38.2m (H1 2021: £33.3m) and remained broadly consistent with the prior year at 23.7% of Group revenue (H1 2021: 23.5%)

We continue to invest behind the brand, including a radio advertising campaign in the UK and first national television advertising in Italy, where we are seeing strong growth.  Our marketing spend in the first half of the year was 10.2% of Fever-Tree brand revenue (H1 2021: 9.9%) and we expect it to remain at this level for the remainder of the year.  Staff costs and other overheads increased by 13.8% and remained consistent at 13.9% of Group revenue in the first half of the year (H1 2021: 13.9%). 

The Group generated an adjusted EBITDA of £22.0m, a 24.7% decrease on the first half of 2021 (H1 2021: £29.2m).  The dilution in gross margin, due mainly to inflationary cost pressures and continued exposure to elevated Trans-Atlantic freight charges, coupled with maintained levels of underlying operating expenditure as a proportion of revenue, has resulted in a retraction in adjusted EBITDA margin to 13.6% (H1 2021: 20.6%).

Depreciation reduced marginally to £1.6m (H1 2021: £1.8m) whilst amortisation remained flat at £0.8m (H1 2021: £0.8m). Share based payments increased to £2.2m (H1 2021: £1.3m).  As a result of these movements, the 24.7% decrease in adjusted EBITDA translates to a 31.2% decrease in operating profit to £17.4m (H1 2021: £25.3m). 

Tax

The effective tax rate in the first half of 2022 was 19.8% (H1 2021: 19.5%) and was in line with expectations.

Earnings per share

The basic earnings per share for the period are 12.10 pence (H1 2021: 17.47 pence) and the diluted earnings per share for the period are 12.08 pence (H1 2021: 17.44 pence), a decrease of 30.7%. 

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 2022 are 12.87 pence (2021: 18.14 pence), a decrease of 29.1%.  

Balance sheet and working capital

Working capital increased marginally to £76.3m (H1 2021: £73.8), improving to 23.1% of last twelve months' revenue (H1 2021: 25.5%).  Period end receivables increased at a slower rate than revenue growth and recoverability has remained strong, with a comparable ageing profile year on year.  Whilst inventory levels increased in line with revenue, period end inventory is more weighted to goods in-transit to the US compared to goods in warehouse, reflecting the inventory pinch points experienced in the US towards the end of the period as UK-produced goods were held on vessels unable to enter congested US ports.

Whilst working capital has improved, the reduction in EBITDA margin has resulted in cash generated from operations reducing to 6% of adjusted EBITDA (H1 2021: 22%).  We expect working capital to further reduce in the second half of the year and drive improvement in operating cash flow conversion. 

Cash and Dividend

The Group's cash position reduced in the first half of the year as a result of paying the special dividend announced at the 2021 full year results in March, alongside a reduction in operating cash flow conversion.  The Group continues to retain a strong cash position of £100.0m, and this not only underpins our confidence in navigating the challenging operating environment but also allows us to continue to focus on making the correct strategic choices for the long-term health of the Fever-Tree brand and success of the business.  

As a reflection of our confidence in the financial strength of the Group the Directors are pleased to declare an interim dividend of 5.63 pence per share, 2% ahead of the 2021 interim dividend. The dividend will be paid on 21 October 2022, to shareholders on the register on 30 September 2022.

Post period event

In August the Group completed the acquisition of Powell & Mahoney LLC ("P&M"), a premium non-carbonated cocktail mixer company based in the US for a deal value of $5.9m. P&M operate an outsourced business model, and the Group will inherit a strong relationship with a local US bottler alongside a well-established footprint of listings within US retail.  The acquisition will provide the platform for the Group to accelerate its entry into the non-carbonated cocktail mixer category in the US, with exciting Fever-Tree innovation to announce in due course. 

FY22 Outlook and 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.

We continue to operate within an exceptionally challenging environment and our team remains focused on balancing the mitigation of on-going cost challenges whilst prioritising continuity of supply.  Uncertainty and the risk of disruption remains elevated, whilst wider inflationary cost pressures, especially with respect to underlying energy pricing, will continue to impact our business as well as impacting our suppliers, production partners, customers and consumers. 

Whilst we acknowledge this elevated uncertainty, our performance has remained in line with the revised guidance provided in July, and so are reiterating our revenue guidance range of £355 million to £365 million for the full year, with a gross profit margin in a range of 33% to 35%, and an EBITDA range of c. £37.5 million to £45 million.