Fevertree fizzes higher as full-year sales impress
Posh mixers maker Fevertree Drinks said on Thursday that it expects full-year revenue to have risen 39% as sales in the US took off.
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In an update for the year to 31 December 2018, the company said revenue is expected to come in at around £236m.
This was driven by revenue growth of 52% in the UK, with a robust rate of sales growth in both the on and off-trade channels. Fevertree said the UK enjoyed "outstanding" trading during the summer and finished the year with a strong performance over Christmas. In addition, it further strengthened its position as the number one mixer brand by value in the UK off-trade whilst continuing to broaden its distribution across the on-trade.
Meanwhile, it made "significant" operational progress in the US, with full-year revenue growth of 21%. In Continental Europe, full-year revenue is expected to be around 24% higher than the year before, with positive momentum across a number of key territories. In the rest of the world, revenue is expected to be up 48%.
Fevertree said its year-end net cash position is anticipated to be in line with board expectations, while the outcome for the full year will be "comfortably" ahead.
Co-founder and chief executive officer Tim Warrillow said: "We have seen very strong momentum across the business during 2018. The UK delivered an exceptional performance while Europe has seen positive performance resulting in growth accelerating in the second half. We are particularly encouraged by the progress to date in the USA and the strong platform for further growth this provides.
"The progress we have seen during the last 12 months means we enter 2019 very well positioned and remain optimistic about the long-term global opportunity ahead.
"Drinking habits are changing. The rise of premium spirits and the advent of premium mixers has reinvigorated and re-established the quality and enjoyment of the long-mixed drink, be it a gin & tonic, vodka & ginger beer or whiskey & ginger ale to name but a few. Fevertree is at the forefront of this trend, broadening the appeal of the spirits category, drawing in new consumers and with it providing a genuine alternative to the beer and wine occasion."
At 1535 GMT, the shares were up 15% to 2,979p.
Russ Mould, investment director at AJ Bell, said the update revealed "a corker of a performance".
"A lot is riding on the business being a hit in the US. Many British companies have failed to emulate success at home in other geographical territories so it is pleasing to see Fevertree being one of the lucky few to have the right ingredients to crack the market.
"Having a good product doesn’t guarantee you success in another country. A lot is also riding on understanding cultural differences and being red hot on marketing. Fevertree is working with North America’s largest wines and spirits distributor, Southern Glazer’s, and so far it looks like the two are having a whale of a time.
"Fevertree is a true British success story and being able to spread its wings abroad is important for several reasons. It helps to champion the UK as a source of British business excellence and it provides welcome diversification so Fevertree isn’t dependent on one market. It also helps to fuel momentum in its investment case which has seen shareholders enjoy stellar returns since the business joined the stock market in 2014."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Fevertree still has its fizz. UK drinking habits have changed - we’re opting for long drinks rather than just wine and beer for post-work and weekend tipples. Clearly, that’s a shift that’s served up a treat for Fevertree.
"Growth rates have been very impressive, particularly in the UK, which is good news given it accounts for over half of group revenues. There are lingering concerns about the rate of that growth going forward though, because Fevertree is a now a big fish and can’t keep growing forever.
"That means the group’s working hard to pursue growth elsewhere, particularly in the US. The early signs in America are good, but the group has its work cut out if it’s to emulate the stratospheric success achieved in the UK. A lot of that rests on stateside sales of its colas and ginger ales - the appetite for tonic hasn’t yet landed across the pond. Given the shares trade on a lofty rating, there won’t be much room for forgiveness if global growth goes flat."
Numis said that as the UK growth rate matures, investor attention has increasingly focused on the trajectory of the US business.
"We believe that the successful transition of the US in-house and the distribution agreement with Southern Glazer's Wine and Spirits means that it has a strong platform from which to exploit the substantial growth opportunity in the USA. At this stage profit upgrades of circa 4% reflect the top-line beat. We reiterate our buy rating and increase our target price from 3,450p to 3,600p to reflect upgrades."