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Fevertree loses its fizz after profit warning

By Michele Maatouk

Date: Monday 20 Jan 2020

Fevertree loses its fizz after profit warning

(Sharecast News) - Fevertree shares tumbled on Monday after the posh tonics maker said full-year revenue was set to miss the company's expectations following "subdued" Christmas trading in the UK, with earnings expected to fall 5% from 2018.
In an update for the year to the end of December, Fevertree said full-year sales rose 9.7% to £260.5m, with growth in the US, Europe and the rest of the world, while the UK was hit by subdued trading over Christmas. The company said in a trading update in November that it was expecting to report full-year revenue of between £266m and £268m, which would have been 12-13% growth on the year.

"As reported, the wider retail environment in the UK experienced a challenging Christmas with the mixer category not immune from the weak consumer confidence and corresponding slowdown in spending," it said.

"Whilst Fevertree remained the clear market leader, the expected improvement in trading during this important period did not materialise with the macroeconomic uncertainty leading to a subdued end to the year across both the on and off-trade," it said.

Sales in the UK fell 1% over the year to £132.6m. Sales in the US were up 33% to £47.6m, while Europe and the rest of the world saw 16% and 32% increases to £64.4m and 15.8m, respectively.

Fevertree now expects earnings to decline by 5% compared from 2018, with margins ending the year behind its expectations as it continues to invest in the brand.

At 0915 GMT, the shares were down 21% at 1,568.50p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the update "made for ugly reading".

"The problem is that Fevertree's past successes mean expectations are high. Year-on-year growth of 9.7% would be music to the ears of many consumer goods groups, but Fevertree's rating means investors demand more of it, and if it loses its sparkle the shares will quickly go flat - as they have been today.

"Incumbents in Fevertree's new markets have learnt from Schweppes' mistakes, and with tonic water less popular outside the UK in any case, it looks set to be an uphill struggle from here.

"We should be clear, Fevertree has an excellent business model with a very strong brand. The question is whether it's premium mixers can continue to justify a premium rating."


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