Fever-Tree ‘confident’ premium mixers will survive lockdown

Fever-Tree has committed to pay its final 2019 dividend to shareholders despite losing roughly 45% of its business due to the forced closure of bars, pubs and restaurants.

The soft drinks producer has not furloughed any employees so far, chief executive Tim Warrilow told shareholders in a trading update this morning (22 April), but its on-trade business, which make up roughly 45% of Fever-Tree sales, has been “severely affected”.

However, the remaining 55% of retail sales spiked in the initial weeks of the coronavirus outbreak.

Fever-Tree said it will pay a final dividend to shareholders of 9.88p per share, bringing the total dividend for the year to 15.08p per share.

In a phonecall with analysts this morning, Warrillow said he is confident the mixer group will survive lockdown, due to historical evidence that premium brands tend to fare well in financial crises.

“Through [the 2008 financial crisis] we were a much smaller business but we had encouraging sales,” he said, adding that other categories such as “premium coffee…tend to weather well in a financial crisis and can actually grow.”

Warrillow said the group’s outsourced business model means “we have a low fixed cost base, a small, dedicated team and the flexibility to manage the current challenges.

“The wider long-term trend towards premium spirits and premium long mixed drinks continues and we are confident the Group will be well placed once the current period of disruption and uncertainty ends.”

The group’s revenues in the year to December 2019 were £260.5 million – 10% higher than the year before – leaving the mixer maker debt-free and a net cash flow of £128.3 million.

The company said this was driven by “strong” sales growth in the US, where revenues grew 33% over the course of the year to reach US£47.6 million. The company performed below expectations in the UK, however, due to tough trading conditions, which saw annual sales drop from £134.1m in 2018 to £132.6m last year.

Fever-Tree was due to release its preliminary 2019 fiscal results last month, but delayed their publication following advice from the Financial Conduct Authority.

Shares rose 8% to 1,470.91p when markets opened on Wednesday morning.

Warrillow also said the group has encouraged members of staff to sign up for volunteer initiatives in their local area to support the NHS and those in need as the coronavirus crisis progresses in the UK.