ii view: Fevertree gets excited about US growth
Growing sales of non-tonic drinks and now partnering with US drinks giant Molson Coors. Buy, sell, or hold?
25th March 2025 16:15
by Keith Bowman from interactive investor
Full-year results to 31 December 2024
- Revenue up 3% to £369 million
- Adjusted profit (EBITDA) up 66% to £50.7 million
- Cash held up 60% to £96 million
- Final dividend of 11.12p per share
- Total 2024 dividend up 2% to 16.97p per share
Chief executive Tim Warrillow said:
"The Fever-Tree brand performed well in 2024, despite the subdued consumer environment. Across every key region, we are gaining market share, with more consumers discovering, enjoying, and becoming loyal to Fever-Tree each year across a growing variety of drinking occasions.
“Looking to the future, our focus remains on unlocking Fever-Tree's long-term potential across the world and capitalising on the unique position the brand has established sitting across alcohol and non-alcohol occasions.”
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ii round-up:
Premium soft drinks maker Fevertree Drinks (LSE:FEVR) today forecast strong revenue and profit growth over the medium term as it increased its 2025 share buyback programme from £71 million to £100 million.
Currency adjusted revenues rose 3% in 2024 to £369 million, driven by gains in US market share for both ginger beer and tonics and boosting sales in the country by 12% to £128 million. In late January, after the period covered by these results, Fevertree signed a sales, distribution and production agreement with US drinks giant Molson Coors Beverage Co Shs -B- Non-Voting (NYSE:TAP), aimed at expanding what is already its biggest business by geographical region.
Shares in the AIM listed company rose 8% in UK trading having come into these latest results up 10% year-to-date. That’s in contrast to a 19% decline at alcoholic beverage maker Diageo (LSE:DGE). The FTSE AIM All Share index is down 3% over that time.
UK sales for the year declined 3% to £111 million, hindered by poor consumer sentiment, particularly during the first half. European sales were flat at £93 million, with Rest of the World up 22% at £32 million, helped by the group’s Australian business.
Aided by improved glass bottle prices and more favourable trans-Atlantic freight costs, Fevertree’s 2024 adjusted profit margin improved to 13.7% from 8.4% the year before. That sent adjusted profit (EBITDA) up 66% from a year ago to £50.7 million, broadly matching City forecasts.
Fevertree remains happy with consensus analyst forecasts for low single digit revenue growth in 2025 and for the adjusted profit margin to come in at around 12%.
The drink makers AGM and an accompanying trading update are likely in early June.
ii view:
Started by Charles Rolls and Tim Warrillow in 2004, Fevertree today employs close to 400 people. Group products include tonics, ginger beer, pink grapefruit, sodas, and lemonades. Non-tonic products now account for almost 30% of UK sales, up from 10% in 2019. Global non-tonic sales total 45%.
For investors, UK sales fell in the past year, hindered by pressured consumer spending. The weather and its impact on demand cannot be forgotten. Demand for alcoholic spirits, regularly mixed with Fevertree drinks, remains soft in certain parts of the world, while overseas sales can bring currency headwinds.
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More favourably, a recent partnership with Molson Coors is expected to assist growth at the US business. Product innovation is fuelling non-tonic sales, with total global sales of 45% compared with just 25% in 2019. Scope for further geographical expansion persists, while net cash held underpins a robust balance sheet.
In all, mixed regional sales and the tough outlook for consumer spending offer caution, as does a high valuation of about 30 times forecast earnings. That said, growing market share in the US and a partnership with Molson Coors are interesting and might be enough to keep this premium soft drinks company on investor watchlists.
Positives:
- Diversified geographical sales
- Net cash held
Negatives:
- Pressured consumer spending
- Potential currency headwinds
The average rating of stock market analysts:
Hold
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