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Fever-Tree's 2017 earnings and sales jump but shares fall flat on profit-taking

Shares fell despite strong full-year results and a positive outlook as investors were expecting more of the tonic water maker
The company has had an encouraging start to 2018, said CEO Tim Warrillow

Fever-Tree Drinks PLC (LON:FEVR) served up a 64% jump in full year earnings as growing demand for gin in the UK boosted sales of its tonic water.   

Adjusted underlying earnings (EBITDA) rose to £58.7mln in 2017 from 335.8mln the previous year.

Revenue gained 66% to £170.2mln from £102.2mln, driven by a 96% surge in UK sales. The UK is the company’s largest market, accounting for 52% of sales last year. 

Sales were supported by Britain’s love of gin. Data from the Wine and Spirit Trade Association showed sales of gin grew 27% to 51 million bottles last year.

Chief executive and founder, Tim Warrillow, said the company has had an "encouraging start to 2018 and remain confident that we are increasingly well positioned to deliver further growth across the business".

Good but not good enough for investors

Despite the strong results and positive outlook, shares fell 5.4% to 2,556p in morning trade.

“The market has become rather accustomed to Fevertree beating expectations and upgrading guidance (January’s was the sixth in a year), so when results are just moderately ahead, things look a little flat," said Neil Wilson, senior market analyst at ETX Capital.

"We note very strong results today of course but the outlook for 2018 seems a less sparkling than we are used to, with management simply saying it is ‘encouraging’, which explains why we’re seeing a bout of profit-taking in early trade."

International sales grow

Fever-Tree also delivered growth outside of the UK with sales in the US – its second largest market – up 39%. In Continental Europe, sales rose 44% while the rest of the world, which includes Australia and Canada, saw sales increase 57%.

The gross margin fell to 53.5% from 55.2% as product costs rose after introducing a new bespoke glass bottle for its mixed carbonated drinks in the second half. But the company said the margin was ahead of its expectations.

The group had net cash of £50.9mln at year end, compared to £26.9mln in 2016.

Fever-Tree hikes dividend

Fever-Tree recommended a final dividend of 7.64p, taking the total for the year to 10.65p, compared to 6.25p in 2016.

The company ended 2017 as the number one mixer brand by value in the UK Off-Trade channel.

READ: Fever-Tree bubbles higher with 2017 results set to beat forecasts thanks to “exceptional” Christmas

It was also named the best-selling and number one trending tonic water in Drinks International's survey of world's top 250 bars for the fourth year running.

“We have continued to see strong growth across all our regions with the UK once again delivering an exceptional performance culminating in Fever-Tree ending the year as the leading mixer brand at UK retail,” Warrillow, said.


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