Interactive Investor

ii view: Fevertree toasts overseas sales growth

24th March 2022 12:08

Keith Bowman from interactive investor

Costs are hurting, but does the payment of a special dividend underline confidence in the future? We assess prospects. 

Full-year results to 31 December

  • Revenue up 23% to £311 million 
  • Adjusted profit (EBITDA) up 11% to £63 million
  • Gross profit margin down to 42.1% (2020: 46.2%)
  • Final dividend of 10.47p per share
  • Total dividend for the year up 2% to 15.99p per share
  • Special dividend of 42.9p per share

Guidance:

  • Expects full-year 2022 revenue growth of between 14% to 17%
  • Expect full-year 2022 EBITDA of between £63 million and £66 million

Chief executive Tim Warrillow said:

“Our growing momentum reflects the brand's increasing presence and popularity around the world, nowhere more so than the US where we finished the year as the No.1 Tonic Water brand by value at US retail.

“Whilst the tragic situation in Ukraine has resulted in significant uncertainty in relation to our input costs in the short term, the long-term global opportunity for Fevetree remains substantial and we are as confident as ever in the brand's ability to capitalise on this.”

ii round-up:

Fevertree (LSE:FEVR) is a premium soft drinks maker whose products are sold in more than 75 countries. 

Its carbonated drinks, regularly used as mixers with alcoholic spirits, are supplied to customers including hotels, restaurants, bars and cafes or on-trade outlets, as well as supermarkets and off-licenses or off-trade retailers. 

Fevertree drinks include tonics, ginger ales, ginger beer, cola, sodas and lemonades.

For a round-up of these latest results, please click here.

ii view:

Launched in 2005, Fevertree today employs around 250 people. Headquartered in West London, the drinks manufacturer came to the UK stock market in 2014. The UK currently generates its biggest slug of sales are almost 40%, followed by Europe at around 28%, the US at 25%, and the rest of the world the balance. 

For investors, a downgrading of expected adjusted profit (EBITDA) for 2022 on continued cost pressures is clearly disappointing. The estimated price/earnings ratio sits above that for fellow beverage makers such as Diageo (LSE:DGE) and Britvic (LSE:BVIC), suggesting the shares are not necessarily cheap, while the ongoing conflict in Ukraine and a cost-of-living crisis almost globally could have some dampening impact on future sales. 

That said, management action addressing costs includes an expected 2023 move to open a further local bottling plant in the USA. Sales in both the US and Europe continue to outpace those in the UK, while demand for spirits, according to Fevertree itself, is growing ahead of beer and wine. A double-digit improvement in net cash has also helped enabled the payment of a special dividend, leaving eligible shareholders sat on a total historic dividend return of over 3% - not bad in an era of ultra-low interest rates. In all, and while near-term headwinds remain, scope for longer term optimism look to persist. 

Positives: 

  • Diversified geographical sales
  • Payment of a special dividend 

Negatives:

  • Battling cost headwinds
  • Uncertain outlook

The average rating of stock market analysts:

Strong hold

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