Fevertree Drinks PLC (LON:FEVR)’s half year revenue rose 14% to £160.9m, led by Europe but reflecting growth across all regions. Bar and restaurant sales showed ‘promising’ signs of a recovery and consumer demand remained strong. As a result, revenue guidance of £355-£365m for the full-year remains intact.
However, cost headwinds have ‘significantly worsened in recent months’, specifically relating to freight and glass costs. First half gross margin is expected to be around 37%, though that’s forecast to fall by the full year mark, to around 33-35%.
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Full year cash profit (EBITDA) is now expected between £37.5-£45.0m, down from £63-£66m.
The shares fell 27.9% following the announcement.
Fevertree Drinks’ Earnings
Matt Britzman, Equity Analyst at Hargreaves Lansdown
“Markets have reacted badly to news that costs are significantly higher than expected. Issues getting inventory into the US mean the group’s been more exposed to soaring freight charges. At the same time, the cost of glass, which makes up 30% of the total cost base, has doubled. The result, a significant hit to gross margin and cash profit guidance for the full year.
We’d hoped that local bottling partnerships in the US would start to ease inventory pressures, but labour shortages have scuppered those plans, at least for now. That means, aside from soaring costs, Fevertree hasn’t been able to fully service the demand that clearly exists. That brings us to the positive side, demand for Fevertree’s products is clearly there and that comes through in the stable revenue guidance. The challenge from here is getting costs back under control, and that’s a hefty challenge.”
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