Fever-Tree profit falls 54% in first half of year

There was both good and bad news from premium mixers group Fever-Tree when it announced its results for the latest six months.

The good news was that Fever-Tree has made much progress in America and has increased its share of several European markets.

The bad news was that the results were weak and the company has cut its profit forecast for the full 12 months.

Fever-Tree now predicts that its core profit for the year will be between £30 million and £36 million, compared with its previous forecast of between £36 million and £42 million.

In the six months to the end of June 2023, Fever-Tree’s core profit fell by 54% to £10.2 million compared with the first half of 2022 as earnings halved largely because the continuing high cost of glass squeezed margins despite product price increases.

The company said its 670-basis point drop in gross margins was in line with its expectations.

Despite proposing a 2% increase in the interim dividend, the shares fell by more than 1% to £12.80.

Even so they stand 60% above where they were in autumn 2022 when they were hit by US supply problems and the additional transport costs caused by the war in Ukraine.

The good news for investors was that revenue rose by 9% to £175.6 million, largely due to the American market achieving 40% growth and becoming the group’s largest region by sales.

Chief Executive Tim Warrilow said the “stand out” performance in the US “reflects how well established the brand is becoming in the world’s largest premium spirit market.”

The group expects full-year revenues of between £380 million to £390 million, reflecting the impact of the poor weather in the UK over the key summer period.

Fever-Tree said it had achieved its highest ever market share by value in the UK and that it had been encouraged by the initial response to the introduction of its range of cocktail mixers and adult soft drinks.

In the six months to the end of June the group took 45% by value of the UK market, which was 50% above the slice held by its biggest rival, Coca-Cola-owned Schweppes.

The dismal weather in July and August had, however, reduced expected sales.

To counter that, Fever-Tree is “making good progress” in combatting inflation and says it is keeping to its gross margin guidance of between 31% to 33% for the full year to Christmas.

It said: “We remain committed to investing in the substantial future opportunity for the brand across our regions.”

“Due to a combination of softening inflationary headwinds and the benefit of the actions we are taking this year, we are confident of delivering significant margin improvement, setting up the group for strong, profitable growth going forward.

“Reflecting the momentum in our key growth regions, we are comfortable with current market revenue growth rate expectations for 2024 and expect to deliver an improved FY24 EBITDA margin of about 15%, which is ahead of current market expectations.