Shares in upmarket tonic brand Fevertree (FEVR:AIM) gained 12% to £15.25 after the firm reported a 10% increase in sales last year and confirmed it would pay a final dividend despite the corona crisis.

Turnover for the 12 months to 31 December was £260.5m against £237.4m, driven by strong growth in the large US market. Sales in the UK on the other hand dropped 1% due to a ‘challenging’ market and a tough comparison with 2018, when a hot summer and major sporting events drove a surge in mixer demand.

Continued investment in distribution meant net profits were slightly lower at £58.5m against £61.8m, but the final dividend of 9.88p per share was maintained, lifting the full year payout to 15.08p.


While Fevertree retained its premier position in the UK On-Trade and Off-Trade despite a ‘highly competitive’ market, its bet on the US market has been vindicated with ‘very positive performance’ there and in other growth markets such as Canada, Germany and Australia.

The product portfolio has been broadened to take account of US tastes, and good progress has been made with its ginger range. A deal has also been signed with a key US bottling partner which will boost production capacity.

The company says the new year got off to a ‘solid start’ with trading in January and February in line with forecasts and new account wins in the US.


Although the firm gave no indication of its more recent trading performance, the closure of bars, restaurants and hotels in response to the pandemic will undoubtedly have ‘a material impact’ on current-year sales and earnings.

According to chief executive Tim Warrillow, the firm has worked through various scenarios, resulting in ‘a broad range of outcomes on revenue’ depending on the length of the lockdown in key regions, trading within the Off-Trade channel during the period and the rate of normalisation across the On-Trade post lockdown.

Fevertree’s main advantage over rival brands is its asset-light, outsourced model which means it has greater flexibility to respond to changes in demand. It also means it has less money tied up in its operations so a higher percentage of sales convert directly to cash.

As of 31 December the firm had £128m of cash and zero debt, which together with its strong cash-flow conversion puts it in a ‘robust position’ to withstand a sales slowdown.




Disclaimer: the author owns shares in Fevertree Drinks

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Issue Date: 22 Apr 2020