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FeverTree Loses Fizz After Wet Weather

Mixer drinks company, whose shares have rocketed in recent years, says UK sales have been hit by wetter spring weather 

James Gard 23 July, 2019 | 10:51AM

FeverTree

First-half results from FeverTree (FEVR) were badly received by investors despite a rise in revenue, profits and dividends.

Shares in the Aim-listed mixer drinks maker fell 8% to £21, a loss of 200p, amid concerns that growth in the UK is slowing, not helped by a wetter-than-expected spring. It is not the first drinks company to feel the effects of poor weather; last week Irn Bru maker AG Barr warned on profits because of the weather and the effect of the sugar tax.

Fevertree's revenue rose 13% to £117 million in the first six months, pre-tax profits were up 8% to £36.7 million, and cash nearly doubled in the period to £104 million. The interim dividend will be 5.2p, a rise of 23% on the first half of 2018.

While the headline figures sound positive, Helah Miah, investment research analyst at The Share Centre, says a rise of 8% in first-half is actually a “fairly dramatic slowdown by its own standards”. Investors have come to expect a lot of the upstart, which first listed in 2014. 

Tim Warrillow, co-founder of FeverTree, said the company continues to make inroads in the US, adding that the company is well-placed to take advantage of the fashion for mixed drinks, such as ready-to-drink gin and tonic in a bottle, which are taking market share from beer and wine.

While FeverTree started life as a mixer company, it is now offering pre-mixed drinks to compete with similar offerings from Marks & Spencer and other supermarkets as well as brands such as Gordon's. Longer established rival Schweppes has reacted to FeverTree’s success in recent years by starting to offer “premium” mixer products. 

Shares Up 2,200%

Fevertree has been one of the biggest success stories of the Alternative Investment Market in the last decade: its shares floated at 165p in 2014 and hit nearly £40 in 2018, an incredible rise of 2,200% - it would have turned £1,000 into £23,000 over that period.

But shares have struggled in the last year as investors fret about whether the firm’s stellar run can be sustained. Miah notes that the shares are off 50% from their peak and that at current levels, investors may be tempted to back FeverTree. Describing the firm as a “former stock market darling”, he says the slump is "a second chance for investors who may have missed the boat a year ago.”

Among fund groups, Morgan Stanley, Standard Life Aberdeen and Merian have stakes of 6.49%, 6.42% and 4.09% in the firm respectively. FeverTree is held by Standard Life UK Smaller Companies, which has a Gold Analyst Rating from Morningstar after being upgraded in October 2018. The fund was upgraded in October last year to Gold, and analyst Sam Meakin rates the experience and longevity of manager, Harry Nimmo, who has run the fund since inception. According to Morningstar data, FeverTree is not held by the closed-end version of the this fund, Standard Life UK Smaller Companies (SLS), which also has a Gold rating.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fevertree Drinks PLC2,243.00 GBX1.22

About Author

James Gard  is content editor for Morningstar.co.uk

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