Proactive Investors - Run By Investors For Investors

Fevertree Drinks rediscovers its fizz after initial post-results dip

Fevertree will be expected to deliver some serious sales growth across the pond in 2019 given that it recently opened its first office in New York and signed a key distribution deal
fevertree tonic
Fevertree's frequent guidance upgrades have slowed in recent months

Fevertree Drinks PLC (LON:FEVR) shares rediscovered their fizz on Tuesday afternoon, recovering from their morning losses to become one of the best-performing stocks on London’s AIM market.

The posh tonic maker, which also sells fancy ginger beers, lemonades and a Madagascan cola, went flat in early deals on Tuesday, but it rallied in the afternoon session to sit 5.3% higher at 2,677p shortly before the close.

READ: Fevertree pops higher as it resumes normal service

Revenue grew 40% in 2018 to £237.4mln (2017: £170.2mln), helped by an “exceptional” performance in the UK over summer.

The UK is Fevertree’s home and largest market and it was once again the star performer, with annual sales up 53% year-on-year.

Rest of World sales, which include Australia and Canada, grew 48% year-year-year, while sales in Europe climbed 24%.

US growth slows

Analysts expect the US to be the AIM firm’s longer-term sales driver though, and Fevertree took a step in that direction last summer when it opened an office in New York.

But sales growth slowed substantially across the Pond to 21% as the transition led to some related distribution losses.

Profit margins decreased to 51.8% (2017: 53.5%), reflecting the introduction of the UK sugar tax as well as rising raw material costs, most notably the glass used to make its bottles.

As a result, adjusted underlying earnings (EBITDA) rose by a third to £78.6mln (2017: £58.7mln). Pre-tax profits rose by a similar percentage to £61.8mln (2017: £45.5mln).

Fevertree hiked its final dividend to 10.28p per share (2017: 7.64p), bringing its total payout for the year to 14.50p (2017: 10.65p).

Net cash stood at £83.6mln at the year-end, although this included a £6.1mln loan that has since been paid off.

Steady start to 2019

“2018 was a significant year for Fever-Tree. In the UK, we strengthened our position as the leading mixer brand in the Off Trade,” said chief executive and co-founder Tim Warrillow.

“In the US, we successfully established our own operations and the business made real progress in deepening and widening its presence in multiple European regions.

“As the world's leading premium mixer brand with a strengthening global distribution network we are well set to drive the international opportunity as the move towards the premium long mixed drink continues to gather momentum around the world.

He added: “At this early stage in the year, the group is trading in line with board expectations and we remain excited about the size of the opportunity that lies ahead.”

US market key to justify valuation

“The US market is key for future growth potential and for underpinning its rather lofty multiples,” said Markets.com analyst Neil Wilson.

“Growth in the US needs to come reasonably soon, but we should be confident that Fevertree can continue to benefit from the premiumisation of the drinks business and can replicate in the US with dark spirits what it did with tonic water in the UK.

“The deal with SGWS signed last year is a good sign – we should expect growth rates to pick up in the coming quarters.”

--Adjusts for share price movement and adds analyst comment--

View full FEVR profile View Profile

Fevertree Drinks Timeline

Related Articles

H&T
May 21 2019
H&T investing in digital offeringProfits gain in 2018Outlook upbeat as strategy pays off
drainpipes
May 23 2019
Company is looking for more acquisitions after integration of Metro Rod
medical imaging graphic
June 13 2019
Here we take a closer look at the imaging and diagnostics firm IQ-AI

© Proactive Investors 2019

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use