- Revenue guidance slashed by half
- Consensus profit downgrade of 7% to 10%
- Margin recovery to continue
Shares in premium mixer company Fevertree Drinks (FEVR:AIM) tumbled 9% to a new eight year low after the firm cut its full year revenue forecast amid disappointing trading reflecting a subdued UK consumer and poor weather.
The latest slump in the shares takes year-to-date losses to 21% compared with a 3% fall in the FTSE AIM 100 index. The shares remain 71% below their post-pandemic peak of around £27.42.
Chief executive Tim Warrillow commented: ‘The Fever-Tree brand performed well against a tough market backdrop. We continued to deliver double digit revenue growth in the US at constant currency, as well as a strong performance in our ROW (Rest of the World) region.
‘The first half performance in the UK and Europe was impacted by unseasonable weather at the start of summer alongside distributor order phasing in Europe, but we have seen a strong improvement in these regions as the summer belatedly arrived.
WHAT IS THE FINANCIAL IMPACT?
In March, the posh mixers company guided for 10% full year revenue growth and a doubling of EBITDA (earnings before interest, tax, depreciation, and amortisation), representing a margin on sales of 15%.
Despite a strong start to the second half, which saw revenue growth of 13% in July and August, the company slashed full year growth to a range of 4% to 5% across the Fever-Tree brand.
Significant operational progress and receding inflation in freight costs mean the firm is on track to deliver a circa 6% uplift in gross margin.
Analysts at Jefferies note this is the first time the company has revised revenue downward, which is likely to put pressure on consensus forecasts.
Analysts at Panmure Liberum estimate the cut to sales guidance implies a 7% to 10% downgrade to consensus adjusted EBITDA expectations of £57.1 million, representing a 14% margin on sales.
CONTINUED RECOVERY
The company said it expected continued margin recovery in the second half and ongoing improvements in the medium term. It added that its ‘strong’ balance sheet provides ‘significant’ competitive advantage over competitors in terms of its ability to invest for growth.
The board declared a 2% increase in the first-half dividend to 5.85p per share and said it anticipated being in a position to return surplus cash to shareholders during 2025.
