As had been outlined in a July update, a strong first half for Fevertree’s (FEVR) off-trade business helped to soften the blow of pub and bar closures. Indeed, off-trade sales – those made in supermarkets and stores – exceeded expectations across all of the drink group’s regions. But despite its depiction of a resilient performance, management cautioned that Fevertree is “not immune” to the current situation, amid prevailing Covid-19 uncertainty. For now, it expects 2020 revenues to land at £235m-£243m, which would represent a 7-10 per cent decline year on year.
Revenues in the UK – Fevertree’s largest market – contracted by a fifth to £48.3m, as on-trade sales slipped by almost two-thirds. In a bid to respond to challenges here, the group moved quickly to adapt to changing consumer behaviour – redirecting marketing expenditure towards at-home drinking via its first ever national TV advert in the UK. It also cited the successful launch of a larger package format in the UK, which delivered a good sales growth rate. At the same time, it injected more money into online retail platforms, which it said drove “significant growth” in this channel across the globe.
Meanwhile, the group’s newer US business fared much better – revenues climbed by almost two-fifths to £27.4m, despite out-of-home shutdowns.
That said, a virus-induced shift in sales and regional mix simultaneously dampened the overall gross margin by 5.1 percentage points to 46.8 per cent. This, in turn, had a knock-on effect on Fevertree’s adjusted cash profit margin, taking this from 31.3 per cent to 22.8 per cent. Still, the group has maintained its planned budget for underlying costs of roughly £60m over the course of the full year, describing coronavirus disruption as "short-term".
Broker Numis expects forecasts pre-tax profits of £44.9m and EPS of 31.5p for the year to December, down from £73.2m and 50.5p in 2019.
| FEVERTREE DRINKS (FEVR) | ||||
| ORD PRICE: | 2,030p | MARKET VALUE: | £ 2.36bn | |
| TOUCH: | 2,006-2,083p | 12-MONTH HIGH: | 2,464p | LOW: 892p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 49 | |
| NET ASSET VALUE: | 199p | NET CASH: | £137m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 117 | 35.0 | 24.4 | 5.20 |
| 2020 | 104 | 21.7 | 15.1 | 5.41 |
| % change | -11 | -38 | -38 | +4 |
| Ex-div: | 24 Sep | |||
| Payment: | 16 Oct | |||
