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Shares in Fevertree Drinks (LSE:FEVR) dropped by 10% to 780p after the company reported a smaller-than-anticipated profit rebound for the first half of the year, despite flat overall sales. The company declared a 2% increase in its interim dividend to 5.85p and expressed optimism about accelerating growth in the second half of 2024, which has begun on a positive note.
In the first six months of the year, Fevertree generated revenue of £170.6 million, which remained flat on a reported basis but rose by 2% when adjusting for currency fluctuations. Geographically, sales saw a mixed performance. In the US, where Fevertree became the largest market last year, sales increased by 10%. However, sales in the UK declined by 6%, while Europe saw a 10% decrease. In contrast, sales in the rest of the world surged by 57%.
Underlying profits (EBITDA) experienced significant growth, rising by 79% to £18.2 million. The company’s gross margin also improved, reaching 35.9%, up from 30.7% a year ago. This margin expansion was attributed to a new glass supply contract, better trans-Atlantic freight rates, and increased selling prices. Profit before tax saw a remarkable rise, climbing to £13.2 million from just £1.4 million the previous year. This follows a 24% drop in profit before tax and a 23% decrease in EBITDA in the prior year.
Chief executive Tim Warrilow attributed the weaker performance in Europe and the UK to "unseasonable weather" during the early summer months. However, he noted a much stronger trading performance in the second half of the year across all regions. Warrilow also emphasized the company’s focus on “controlling the controllables,” which has helped Fevertree navigate a challenging market environment and improve profit margins.
Looking ahead, Fevertree has issued guidance for revenue growth of 4-5% for the full year, with an expected improvement in gross margins by around 600 basis points. Warrilow expressed optimism about accelerated growth in the second half of the year.
Despite the company's positive outlook for the remainder of the year, analysts pointed out that the first-half EBITDA fell below expectations. They also noted that the guidance for branded revenue growth had been reduced from the previously anticipated 10%, reflecting more conservative projections for the year.
