Interactive Investor

Insider: more heavy share buying at Fevertree

14th September 2020 10:56

Graeme Evans from interactive investor


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A Fevertree non-exec whose day job is at the mighty Unilever is pouring more shares into his portfolio.

A Fevertree Drinks (LSE:FEVR) director with vast knowledge of the global beverage market has tucked away more shares in the posh mixers firm following last week's interim results.

Kevin Havelock has worked for Unilever since 1985, with his current role as president of Global Refreshment giving him responsibility for the famous ice cream brands Magnum and Ben & Jerry's. He's also served as chairman of Unilever UK (LSE:ULVR).

As a non-executive director of Fevertree since 2018, Havelock has been a regular buyer of the AIM-listed company's shares, and loaded up in January at under 1,500p.

His latest purchase worth £333,465 was made at an average price of 2,021p after Tuesday's half-year results, when CEO Tim Warrillow expressed confidence that Fevertree will emerge from the Covid-19 crisis in a stronger position than when it entered it.

The latest figures were skewed by the impact of pub closures during the pandemic. However, with shop-based sales being stronger-than-expected the impact on revenues was limited to an 11% decline to £104.2 million. Half-year profits were 38% lower at £21.7 million.

Warrillow said: “Excitement about mixing drinks at home has really taken hold over the lockdown period, attracting more households to the Fever-Tree brand than ever before.”

After the resilient performance for the six months to 30 June, Fevertree has reported an encouraging start to the second half of the year as lockdown restrictions begin to ease. These positive trends prompted the company to increase its dividend by 4% to 5.41p a share, with the payment due to appear in shareholder accounts on 16 October.

The optimism is also based on trading in the US, where the company continues to make inroads in a relatively new marketplace. Despite the impact of Covid-19 on its bar sales, total US revenues for the first half of the year increased by 39% to £27.4 million.

That was much better than forecasts at Barclays Capital for a small decline, with analysts at RBC Capital Markets also noting a “step change in underlying momentum” in the US.

The two firms have price targets of 2,500p, while Nicola Mallard at Investec Securities is more optimistic at 2,600p. However, she has opted to leave earnings forecasts unchanged for this year and next until there's more clarity over how the on-trade channels perform after lockdowns.

That uncertainty is reflected in the recent share price performance, with Fevertree trading in a narrow range just above 2,000p since early July.

The stock had been nearly 4,000p in 2018 after a spectacular run of profit upgrades made the tonics firm one of the most popular shares around. At the time, Fevertree was valued at more than £4 billion, with a whopping forward price/earnings multiple above 70x.

Profit-taking and a subsequent sell-off has been accelerated by the pandemic, with the shares briefly dipping below 1,000p at the height of the market weakness in February and March.

Havelock's purchases have been on both sides of this extraordinary share price story, with deals at 3,808p in July 2018 and as low as 1,464p earlier this year. Havelock, who is a non-executive director at supermarket WM Morrison, currently has a Fevertree stake worth £1.7 million.

Results from Computacenter (LSE:CCC) were also well received last week after the IT services company reinstated its dividend, offered better-than-expected full-year guidance and topped everything off with an earnings accretive acquisition in North America.

Shares surged by more than 11% in the week to reach a fresh record above 2,400p.

The rally from below 1,000p in March follows a series of profit upgrades as the FTSE 250 index company benefits from coronavirus-related trends, such as home working and the greater needs of corporates and public sector organisations at a tricky time for their IT departments.

The record high share price prompted Computacenter CEO Mike Norris to trim some of his stake in the company on Thursday, raising about £2.4 million in the process. Shares fell back 40p to 2,310p on Friday after the trade was disclosed to the market.

The disposal of 100,000 shares at a price of 2,369p involved about 8.2% of his total stake, with Norris still in possession of more than 1.1 million shares built up after more than 20 years as CEO. He first joined the company's sales team in 1984, not long after the business was set up by two British entrepreneurs, Philip Hulme and Peter Ogden.

It's been a member of the London Stock Exchange since 1998, with last week's interims revealing revenues of £2.5 billion and profits of £72.4 million, a rise of 42% on a year earlier.

Credit Suisse raised its earnings per share forecasts by 10% following the results, prompting the bank to lift its target price from 2,350p to 2,561p. Disruption to IT spending decisions from a second wave of Covid-19 appears to be the main threat to progress.


These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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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