Premium tonic water-to-ginger beer supplier Fevertree Drinks (FEVR:AIM) has served up yet another positive trading statement which triggers a further round of earnings upgrades. The high-end carbonated mixers play expects full-year profits will be 'comfortably ahead' of expectations following terrific trading during the Christmas run in.
Stellar 2015 performers as the chart shows, shares in the soft drinks concern fizz 5% higher to 614.5p as a tasty pre-close update reveals better-than-expected growth rates, perhaps needed to sustain the upwards trajectory and support a rather punchy valuation.
'Fever-Tree' flags a 2015 'beat' following strong festive trading, no doubt boosted by the company's first TV advertisement. The beverages business traded so strongly in the final two months of calendar 2015 that second half sales should show 77% year-on-year growth, taking full-year revenue 71% north to around £59.2 million.
As Shares outlined in our recent Griller interview with co-founder and CEO Tim Warrillow, the Fever-Tree brand was launched by Charles Rolls, co-founder and executive deputy chairman and Warrillow in 2005, the pair having identified long-term growth in premium spirits that was not matched by any premium offering in the mixers category.
Since flotation in late 2014, Fever-Tree’s share price has fizzed higher with its compelling global organic growth story attracting investors. The company has first mover advantage in premium mixers, which speak for a tiny portion of a mature overall mixer market and are piggy-backing on spirits market premiumisation; consumers are more than prepared to pay for a high-end mixer to wash down their gin, vodka, rum or whisky tipple of choice.
Refreshingly, even in the UK, Fever-Tree's most mature market, full-year sales are expected to be the best part of 85% ahead of 2014. This reflects strong performances in both the 'On-Trade' channel (hotels, bars and restaurants) and the 'Off-Trade' channel (retailers), where customers include Waitrose, Tesco (TSCO), J Sainsbury (SBRY) and Marks & Spencer (MKS).
Fever-Tree was originally founded with global growth in mind, since the premium spirit industry is very international, and 70% of revenue was generated away from UK shores last year. Warrillow is guiding towards annual growth of around 65% in both the USA and Rest of Europe regions, with Rest of World sales growth expected to be circa 50% ahead. 'We have continued to widen and deepen our penetration with growth across our product range in all our regions,' says Warrillow. 'We remain well positioned in our markets and look forward to the future with confidence.'
Significantly, our Griller article also highlighted the attractions of Fever-Tree's asset-light, outsourced business model, which enables the small cap to churn out lots of cash. In today's statement, Fever-Tree says its free cash flow and balance sheet have remained strong - Shore Capital sage Phil Carroll forecasts year-end net cash of £12.1 million - and flags 'significant cash balances still to collect given the strength of trading over the Christmas period'.