Fevertree Drinks joins Air Partner in extending incredible rally

These two investor favourites have staged a spectacular recovery in recent weeks. Here’s how.

4th June 2020 14:11

Two investor favourites have staged a spectacular recovery in recent weeks, but others have been less fortunate.

Two companies whose shares have rocketed during the lockdown gave investors more reasons for cheer today despite huge uncertainty over their outlook for the rest of 2020.

Fevertree Drinks (LSE:FEVR) has more than doubled in value to 2,078p since 23 March, with the hugely popular AIM-listed stock consolidating those gains this morning, when it revealed that stay-at-home drinkers had boosted sales from UK retail outlets by 24% during April.

Air Partner (LSE:AIR), meanwhile, is up a spectacular 500% over the same period, including a 12% rise today after it reported high levels of activity in its freight and group charter divisions.

The rallies from lows seen in March - Fevertree was at its weakest since 2016 and Air Partner the cheapest since 2000 - have been sustained by the prospect of lockdown restrictions easing.

As well as robust UK trade, Fevertree has seen continued progress in the United States after reporting that off-trade sales had grown “extremely strongly”. It continues to make inroads in this relatively new marketplace, with January's new pricing strategy being well received.

Source: TradingView. Past performance is not a guide to future performance.

Fevertree, however, warned it remained hard to predict how sales overall will perform once pubs and clubs re-open from the lockdown, with the process likely to be gradual and cautious. Air Partner had a similar message as it admitted that visibility was limited beyond this month, with the repatriation work behind some of its recent success expected to slow.

The aviation services company is starting to see the early signs of recovery in its private jets division, having seen weak activity throughout the pandemic.

Source: TradingView. Past performance is not a guide to future performance.

The mood of uncertainty noted by Air Partner and Fevertree was reflected in the wider London market today, with the recovery stocks involved in the rebound of the FTSE 100 index to its highest level in three months now on the back foot.

Rolls-Royce (LSE:RR.) and Premier Inn owner Whitbread (LSE:WTB) owner fell 4%, while results today from Intermediate Capital Group and Pennon also led to 3% declines for both companies.

FTSE reshuffle: the results

Carnival (LSE:CCL), Meggitt (LSE:MGGT) and Centrica (LSE:CNA), whose demotion to the FTSE 250 index later this month was confirmed by last night's closing prices, all remained in negative territory. The other relegated stock, easyJet (LSE:EZJ), rose 1% to continue the resurgence seen since mid-May.

The quartet will be replaced in the FTSE 100 index on 22 June by cyber security firm Avast (LSE:AVST), Ladbrokes owner GVC Holdings (LSE:GVC), Homeserve and B&Q and Screwfix business Kingfisher (LSE:KGF). New arrivals in the FTSE 250 index include AO World (LSE:AO.) and 888 Holdings (LSE:888), while Marston's (LSE:MARS), McCarthy & Stone (LSE:MCS), Stagecoach (LSE:SGC), Senior (LSE:SNR), Hyve Group (LSE:HYVE) and Elementis (LSE:ELM) are among those dropping out of the second-tier.

The quarterly reshuffle follows one of the most turbulent periods in stock market history, with the FTSE 100 index still 17% lower than its January high point.

The impact of Covid-19 and the subsequent lockdown has been particularly tough on the car industry, with the Society of Motor Manufacturers and Traders today reporting a 89% slump in new car registrations for May.

The figure of around 20,000 reflected digital buying as car showrooms have only been open since 1 June. Dealership Lookers (LSE:LOOK) added today that it had taken retail orders for 2,865 new and used vehicles in the past two weeks, representing a like-for-like drop of 51% on a year ago.

Having announced the closure of 15 dealerships in November, the company has identified a further 12 dealerships for closure, consolidation or refranchising, This will leave it with a portfolio of 136 sites, with a restructuring set to save the company about a £50 million a year also involving some 1,500 job cuts.

The lockdown has come at a particularly difficult time for Lookers, having issued two profit warnings in the past year. The discovery of potentially fraudulent transactions in one of its operating divisions has led to its 2019 results being delayed until later this month.

Lookers said its net debt at the end of May stood at £57 million, which compares with a current market value of £90 million. Its £250 million revolving credit facility expires in March 2022, with discussions ongoing with lenders about amending covenants.

Today's update helped Lookers shares to rally 6% to 24.25p, having fallen from 62p in January to 11p by mid-March.

The prospect of long-awaited consolidation in the sector was raised in May when Pendragon (LSE:PDG) said it had spoken to Lookers about a potential tie-up. The talks failed to last, with Pendragon shares today down 1% at 8.35p and Vertu Motors (LSE:VTU) up 3% to 31.2p.

Source: TradingView. Past performance is not a guide to future performance.

Among AIM-listed stocks, pub company Young & Co's Brewery (LSE:YNGA) was down 2% at 1,130p after reporting a 14% drop in adjusted earnings per share to 60.18p for the year to 30 March.

The pandemic had a significant impact on the results, with the closure of its pubs for the final 10 days of the year and the preceding downturn in trade causing a £13 million hit to revenues.

There was a dipropionate impact on profits of £7.7 million due to the limited opportunity for mitigating actions. CEO Patrick Dardis praised support measures by the Chancellor, including the £14.5 million relief the company will receive from the business rates holiday.

He added:

“The board expects the business to be in a position to return to profitable growth when this unprecedented period is at an end and conditions allow.”

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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