Fever-Tree posts double-digit growth but shares fall as investors cash in

Alys Key
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Fever-Tree has widened its range of products (Source: Fever-Tree)

Shares in Fever-Tree faltered this morning as the mixer maker met sales growth expectations.

While the company posted the expected double-digit revenue growth, the City has grown accustomed to seeing it upgrade forecasts and beat expectations.

But Fever-Tree's management told City A.M. that growth is still resilient, with the group making a push into new categories and taking full control of the US business.

The firm also revealed that it has had approaches to work on making an alcoholic drink, but remains focused on mixers.

The figures

Revenue climbed 66 per cent to £170.2m, driven by 96 per cent sales growth in the UK.

The gross profit margin was slightly lower than last year at 53.5 per cent, mostly due to the introduction of a "bespoke" bottle.

Profit before tax jumped to £56.4m. The company proposed a final dividend of 7.6p per share.

Shares were down almost six per cent in mid-morning trading.

Why it's interesting

Neil Wilson of ETX Capital noted that some shareholders are taking a glass half empty approach this morning.

"This would appear to be a relatively cautious statement in the context of the last year or so," he said. "We wait to see whether it’s conservatism or a reflection that keeping up with the sky-high expectations from here on out will be increasingly tough." He said there would be some profit-taking this morning.

But Fever-Tree said there are still several avenues for growth. Towards the end of last year, the company announced it would take full control of its US business and appointed a former LVMH exec as boss of Stateside operations. The full handover comes in June this year, so the full effect of this move will be visible in 2019. Growth in the US was 36 per cent on a constant currency basis in 2017.

Meanwhile, the group has expanded its range of products, releasing seasonal tonics and gift packs which have sold well. It has also claimed the top spot as the UK's favourite off-trade mixer this year.

Founder Tim Warrillow told City A.M. that the company was still focusing on the mixer category, with pairings for whisky and tequila a top priority as the spirits gain popularity. But he added that launching an alcoholic product was not off-limits in the future.

"We've had lots of approaches from people about it over time and it is an interesting category and one we'd give consideration to," he said. "But frankly we've got so much to go after in the mixer market."

What Fever-Tree said

"All in all it really was a fantastic year," Warrillow told City A.M. "We're very pleased because we've seen flavours across all our formats and all our regions. It has really caught the imagination of trade and the consumer."

Earlier this morning he said: "While this is a notable achievement, there remains a significant opportunity in front of us across all our regions as Fever-Tree continues to drive the evolution of the mixer category."

Read more: Editor's Notes: Schweppes vs Fever-Tree

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