Fevertree Drinks PLC

Yeah, thank you. Good morning, everyone, and thank you for joining us. I'm joined today by Andy Branchbrower, our CFO, and I'm delighted to welcome back Anne, our Director of Investor Relations. I'll start with the highlights from the first half before talking about the progress we're seeing in the U.S. and the broader opportunity we're creating as the food street brand continues to evolve. Andy will then take you through the financial performance and outlook before we open up to questions. So turning to the results themselves. We've delivered a strong first half performance with growth across every one of our key regions. Brand revenue increased by 8% at constant currency with the US up 11%. The returns are greater in the UK supported by a strong off-trade performance. Europe up 10% and good progress across the rest of the world. Importantly, that growth was supported by continued market share gains across our key regions, outperforming both the wider mixed category and our competitors. In terms of the financials, adjusted EBITDA margin improved by 20 basis points to 10.9%, while normalized EPS increased by 5%. Lastly, The strength of our balance sheet and cash generation also enabled us to extend the share buyback program by a further $60 million this year. Looking at the first half in a little more detail, there are three things that I'd like to highlight in particular. First, we're encouraged by the progress we're seeing in the US. The Molson Calls Partnership is beginning to deliver the benefits we expected. Distribution is growing. Visibility on shelf is improving, and as a consequence, we saw momentum build through the first half. Second, our diversification strategy continues to gather pace. Whilst our core tonic range performed well, delivering growth of 3%, our wider portfolio increased by 13% in the half, and now represents nearly half of group sales. We're seeing consumers embrace a broader range of fruit tree products than ever before, whether that's in mixed drinks, longer serves, or as a premium soft drinks in their own right. And third, our asset-like model continues to generate significant cash. That allows us to invest behind the long-term opportunity while continuing to return capital to shareholders through the buyback program. When we spoke at the four-year results in March, we talked about three trends that continue to shape the drinks market. Firstly, premiumization. This is long established and forecast to continue, driven by consumers choosing to drink less but better, alongside operators and retailers who value the stronger margins premium products generate. Secondly, longer and lighter drinks. This is driven by consumers' desire to enjoy their spirit drinks mixed as opposed to straight, thus allowing spirit drinks to be lighter in their alcohol strength and longer and more refreshing, making these serves desirable across a wider range of occasions and different times of day, no longer the preserve of late nights. This trend is clearly not being lost on spirit producers who are now pushing and promoting their spirits mixed to a greater extent than ever before. And finally, but equally as importantly for our growing opportunity, is moderation. This means that when people are not drinking alcohol, whether at home, eating out, or socializing with friends, they're still looking for great taste and a sophisticated drinking experience. So all three of these trends are firmly in our favor and driving an ever greater opportunity for the Fevertree brand. As those trends, moderation is the one I'd like to spend a little more time on today. There's often an assumption that if people choose to drink less alcohol, they're somehow stepping away from those social occasions. That's not what we're seeing, and it's not what the data suggests. Across all our key markets, a significant proportion of adults say they intend to moderate their alcohol consumption. In the UK alone, that's around 25 million adults. However, when they're moderating, market analysis suggests that around 70% of occasions where consumers choose not to drink alcohol, they're seeking soft drinks and non-alcoholic alternatives. And this represents a value pool of around £700 million. To put that into perspective, that's larger than the entire UK mixed category today. Yet, despite its size, much of this value pool remains underserved. Beyond non-alcoholic beer, there are still relatively few premium adult alternatives available. So meaning consumers often default into choosing water, tap water, or mainstream soft drinks. And for retailers, pubs and bars, that is a growing challenge. As consumers are still participating in the occasion, but too often the spend attached to that occasion falls away when the choice becomes water or a standard soft drink. As a result, we're seeing increasing interest from both retailers and hospitality operators for premium adult soft drinks that can better meet consumer needs while helping them retain the value of the occasion, thus creating a significant opportunity for Fevertree. We've built a brand around quality, taste, and adult refreshment, and increasingly consumers are choosing our products beyond traditional mixed occasions. So whilst moderation is often discussed as a headwind for the drinks industry, we see it as creating a significant adjacent growth opportunity. Now, identifying an opportunity is one thing, being able to capture it is another, and that is where we believe FUTURE is uniquely positioned. Over the past 20 years, we've built one of the strongest premium brands in drink. Our products and flavors have been developed specifically for adult tastes and adult drinking occasions, and we have strong distribution across both the on-trade and the off-trade in our major markets. Put that together, and we do not believe there's another brand better place to capture this opportunity. Before we move on to the U.S., it's worth taking a step back and reminding ourselves what makes the food-free model so attractive. We've got a premium global brand underpinned by an outsourced business model, allowing us to generate increasing amounts of cash while remaining relatively capital-light. That gives us choices. First and foremost, we can continue investing behind the global opportunity for the brand, whether through marketing, innovation, or, where it makes strategic sense, potential acquisitions. At the same time, were able to maintain a strong balance sheet and return surplus cash to shareholders. Put simply, it's a model that allows us to invest the growth while continuing to deliver attractive shareholder returns. Turning now to the US, which remains our largest long-term growth opportunity. When we reported our full year results in March, we said that 2026 would be about moving into the execution phase That's exactly what the team has focused on during the first half. We've seen strong engagement right across the Molson Corp system. We've launched our first national marketing campaign in the US, and we've achieved our highest ever retail value share in both tonic and ginger beer. And importantly, we've seen sales build through the period. As the chart shows, off-trade sales growth improved from 6% in Q1 to 11% in Q2 and then to 16% through July and August. It's still early days, but what we're seeing is consistent with our belief in the benefits this partnership can deliver. We spent quite a bit of time discussing the national marketing campaign at our full year results, so I won't go through all of the detail again today. The important point is that for the first time, we're supporting the brand in the U.S. with marketing investment at a significantly greater scale. The campaign remains rooted in what has always made Feet Tree successful, our mixing credentials and our reputation for quality. Together with Molson Courts, we now have the ability to support the brand nationally in a way you simply couldn't before, giving us a much stronger platform from which to grow the brand. And that support extends well beyond advertising. We're investing in experiential activity against the brand that consumers have, while improving execution across both retail and the on-trade. And what Mawson Calls brings is scale and a significantly greater execution capability. For a brand like Fevertree, where rate of sale is already strong, improvements in availability can make a meaningful difference over time. So as we've discussed before, there are three key drivers of growth. Distribution breadth, distribution depth, and velocity. And we're adding accounts, improving execution and visibility in store, and supporting the brand with significantly greater marketing investment. And what's encouraging is that these drivers are beginning to reinforce one another. As execution improves, distribution expands. As distribution expands, awareness and trial increase. And as rates of sales strengthen, retailers are willing to give the brand more space. And together, we're beginning to see that flying wheel start to work. So let me turn now to our broader portfolio strategy. As we've discussed before, diversification has been part of the future strategy for many years. The starting point was to establish the brand's premium quality, taste and flavour credentials through the sophisticated position of cocktails and mixing. That remains the foundation of the business today. But the ambition was always to use those credentials to broaden the range of occasions in which consumers choose fruity. We have a broad portfolio serving different tastes, markets and occasions. And within that portfolio, we're putting increased investment behind five key flavors where we see particularly attractive opportunities for global growth. These graders already account for around half of group sales and contributed approximately 85% of our growth in the first half. Their strength is their versatility. They work across several major spirit categories, but they are also increasingly enjoyed as premium soft drinks in their own right. That gives them relevance across both alcoholic and non-alcoholic occasions. And we're supporting that opportunity through focus, marketing and innovation. Marketing helps us communicate the versatility of these products more effectively, while innovation enables us to respond to emerging consumer trends and specific opportunities in the local markets. So while the products and priorities may differ by market, the approach is consistent. We're building on the strength of our mix of business and creating more reasons for consumers to choose Fevertree. In terms of marketing, our latest campaign, Straight Up or Mixed, It's a Matter of Taste, celebrates the versatility mentioned in the previous slide while remaining rooted in what matters most to the brand. Great taste. In the UK, it reached around 11.5 million adults and delivered a sales uplift of 22% for the featured flavours. We're now adapting that campaign for a number of our more mature international markets, including France, Canada, Belgium, and Australia. It's a good example of how we're evolving the way we talk about the brand and supporting our key growth flavors internationally. In terms of innovation, our approach is deliberately focused. In the UK, our non-alcoholic ready-to-drinks allow us to play a leading role in a fast-developing part of the market. They were developed in response to retailed demand for non-alcoholic drinks, with the flavour, complexity and quality consumers would expect from an alcoholic serve. We've been very pleased with how they are performing, having secured good distribution across the major grocers and are bringing new, younger shoppers into the non-alcoholic category. In Australia, the opportunity is different. Lemon Lime and Bitter is already a well-established adult soft drink in that market. Our role is to bring Feedertree's quality, taste, and premium credentials to an occasion consumers already understand. The product has secured good distribution in Coles and Woolworths, supported by strong retail visibility, and we're encouraged by the early momentum. So these are two very different products, but they reflect the same disciplined approach. In one market, we're helping shape an emerging caskery. In another, we're premiumizing an established local favorite. Both build national inhibitory strengths and create more reasons for consumers to choose the brand. And with that, I'll hand over to Andy to take you through the financial performance.

Thank you, Tim, and good morning, everyone. We set out here the financial highlights, with performance driven by the U.S. and the U.K. returning to growth, whilst EBITDA is growing ahead of revenue even after a step change in U.S. marketing investments. Cash conversion has remained strong, with a 60 million share buyback in progress, building on the 100 million buyback from last year. So, turning the page. US revenue grew by 11% of constant currency, with the Molson Coors partnership starting to deliver real benefits, as just described by Tim. The UK delivered a return to growth, with revenue up 3% following our successful straight-up or mixed marketing campaign, which launched just ahead of the good summer weather. Whilst tonic sales are broadly flat in the UK, growth is being driven by our Beyond Tonic products, which now represent almost a third of UK sales. Whilst wider challenges remain in the on-trade channel, we retain our market-leading distribution footprint and share there. Meanwhile, in the off-trade, we're performing well, growing strongly and extending our leadership position, gaining a further 2% value share. In Europe, whilst reported revenue growth benefited from positive shipment paving, underlying growth was a solid 4% year-on-year, driven by strong ginger beer performance, where we are delivering more than half of the category's growth at retail, and now hold almost 40% value share of the ginger beer category across Europe. And finally, in the rest of the world, reported revenue increased by 5%, with underlying growth marginally ahead of that at 6%. And whilst Tonic remains in good growth, again, our diversification strategy is gaining traction, with Beyond Tonic over 40% of the sales makes and growing well. So turning to the segmental P&L view. In the US, we saw a reduction in EBITDA margin as expected, largely reflecting upweighted marketing investments. As we've previously presented, we anticipate step changes in U.S. profitability over the medium term, as production is onshore and the incremental marketing investment moderates to more typical levels, with these step changes underwritten by our U.S. profit guarantee. Whilst on the ground, the journey begins in earnest, with the onshoring of our cans business, with production trials beginning this autumn and ramping up from there. In the rest of the group segment, we've continued to deliver margin recovery, and this is after the impact of a £2.6 million provision to cover the 2026 UK on trade EPR levy. And whilst nothing's changed in our position here, the legal challenge has not progressed since March. We await the next steps, and as such, the provision is required under accounting rules. And whilst the geopolitical backdrop remains volatile, the significant steps we've taken in recent years to improve supply chain resilience continue to hold us in good stead. The team is doing a fantastic job, but from a cost perspective, our bottles and cans are materially hedged for energy impacts across 2026, 2027 and 2028. Finally, central costs have reduced as a percentage of adjusted revenue as we leverage the technology investments implemented in recent years, providing a tailwind to group EBITDA margins as expected. On announcing the Molson Coors partnership last January, we pointed to the increasingly positive impact this would have on working capital and cash conversion. Here we look back at the 18-month period since that announcement, highlighting the strong cash generation, working capital improvement and shareholder returns that we have delivered. On completion of the current buyback, we will have returned 160 million to shareholders, and inclusive of the equity issue to Molson Coors, we'll have reduced the number of shares in issue by circa 7% over this period. Turning to outlook, we've continued to trade well over summer and remain confident of delivering in line with expectations. We expect US revenue growth to accelerate as the year progresses, whilst in the rest of the group we expect to deliver good underlying growth, although reported revenue will be impacted in Europe as phasing benefits from the first half of the year unwind. From a profitability perspective, US tariff refunds received in the second half will offset the four-year impact of the incremental 2.6 million EPL provision. and we remain confident of delivering EBITDA in line with expectations. This year's working capital profile will be similar year on year and significantly below historic levels. And so, just as we set out last January when announcing the Molson Coors Partnership, 2025 was the transition year and in 2026 we're investing in the US opportunity, both of which have dampened earnings in the short term. But we are drawing closer now to 2027 and 2028, where we expect to see a step change in the US and therefore group profitability, as the benefits of local US production are felt, followed by a normalisation in US marketing investment. Consistent delivery this year provides a strong platform from which to deliver against consensus expectations of the circa 60% uplift in EBITDA over the next two years, with the quantum of that uplift materially underpinned by guaranteed US profits. Not only this, but an improving working capital profile as U.S. production ensures means that the increase in profitability will be outstripped by further improvements in cash generation, with the expectation that the group will generate at least $100 million of free cash flow across 27 and 28. And whilst that can be deployed to fuel further growth, excess cash will be returned to shareholders, just as we've demonstrated through the $160 million share buyback deployed over 25 and 26. With that, I'll pass back to Tim.

Thanks, Andy. So to summarize, the Molson-Crawls partnership is really beginning to deliver the benefits we expected, with stronger execution, growing sales momentum, and increasing confidence in the long-term opportunity. Secondly, our diversification strategy continues to gain traction. A wider portfolio outside of our core tonic range now represents almost half of group sales. and we're increasingly broadening the occasions in which consumers choose Fevertree. And thirdly, our asset-like cash-generative business model continues to provide us with significant flexibility. It allows us to invest behind future growth while continuing to deliver attractive returns to shareholders. So with that, I'll open up to any questions.