- Guidance ranges set
- UK sales fall
Fevertree (FEVR) shares were marked down by 10 per cent after the premium tonics and mixers supplier undershot consensus revenue growth forecasts and warned about the “material” impact of higher energy costs on glass manufacturing.
Total revenues rose by 11 per cent to £344mn in the year to 31 December 2022, below analyst hopes of £357mn according to FactSet. Sales contracted by 2 per cent in the company’s biggest market, the UK, but rose by double-digits in its other locales. The best showing was in the US, where there was a 23 per cent top line uplift.
Chunky cost inflation continues to cause difficulties for the business. Management expects “further double-digit percentage increases” in key costs this year and said that volatile energy prices will add £20mn to its glass costs in 2023 compared to pricing in the first quarter of last year.
While Fevertree expects to deliver adjusted cash profits in line with expectations for 2022, forecasts for this year suggest a further softening of margins. Management set out guidance ranges of £390mn-£405mn for revenue and £36mn-£42mn for Ebitda for 2023, with annual cash profits only expected to be "in-line" with last year.
RBC Capital Markets analysts said this guidance “is very disappointing given previous comments about further profitability improvements to come as freight costs eased and local supply in the US ramped up.” They added that the update “does not reassure” over Fevertree’s profitability trajectory.
We are also not reassured. And the valuation remains at unjustifiably lofty levels – the shares trade at 43 times forward earnings, according to FactSet. Sell at 1,048p.
Last IC view: Sell, 1,059p, 13 Sep 2022
