Wet summer hits sales at Fever-Tree, shares slide

12th Sep 2024 09:30

(Sharecast News) - Shares in Fever-Tree Drinks came under pressure on Thursday, after interim results disappointed.

The tonics and mixer specialist said it had grown market share in all of its key regions in the six months to 30 June, with good growth in the US, its biggest market.

Adjusted earnings before interest, tax, depreciation and amortisation also jumped, surging 79% to £18.2m, after the cost of sales fell and the margin improved.

But weak demand in the UK and Europe weighed heavily on sales. Group revenues eased 2% to £172.9m, and were flat on a constant currency basis.

While sales in the US improved 7%, in the UK they fell 6% and by 12% across Europe. Fever-Tree said the British on-trade had struggled with poor weather and a softer gin category, while off-trade sales were broadly flat.

As at 0915 BST, shares in the AIM-listed firm were down 9% at 784.0p.

Tim Warrillow, chief executive, said: "The Fever-Tree brand performed well against a tough market backdrop.

"The first-half performance in the UK and Europe was impacted by unseasonable weather at the start of summer alongside distributor order phasing in Europe. But we have seen a strong improvement in these regions as the summer belatedly arrive."

Fever-Tree said it had made a "strong start" to the second half, with the brand seeing growth of 13% in July and August.

Warrillow continued: "While the first half was challenging, we are controlling the controllables.

"We are optimistic of an acceleration of growth across the second half."

Fever-Tree is currently targeting brand growth in the second half of around 7% to 10%, resulting in revenue growth between 4% and 5% across the full year.

That is down on March's outlook, however, when Fever-Tree said it was "comfortable" with consensus expectations of around 10% growth for the brand in the current year.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: "Thanks to low debt levels, the balance sheet is in very good shape.

"But this year's profit targets look stretching, which pointed towards underlying cash profit margins nearly doubling to around 15%. And the sky-high valuation's already pricing a lot of this in.

"Many investors will want to see continued signs that expansion in the US is boosting the bottom line before getting too excited."