16th Mar 2022 12:03
(Alliance News) - Fevertree Drinks PLC's special dividend did little to wow investors on Wednesday with the company set to feel a squeeze on margins as inflation heats up.
The London-based premium tonic water maker reported a pretax profit of GBP55.6 million in 2021, up 7.8% from GBP51.6 million the previous year.
Revenue rose faster, up 23% to GBP311.1 million from GBP252.1 million and up 20% against its last pre-pandemic year. In the UK revenue rose 15% in the year while in the US and Europe revenue rose 33% and 35% respectively.
The company said it is performing well in off-trade in all its key regions. It continued that it expects at-home demand to remain at higher levels than pre-pandemic looking forward.
Fevertree said that on-trade - meaning in places such as bars and restaurants, which have been dogged by lockdowns since 2020 - had continued to recover since the start of the year and looks forward to its first full year of trading in this category since the outbreak of the pandemic.
It declared a final increased dividend of 10.47 pence per share and a special dividend of 42.90p per share as a result of its "confidence in the financial strength of the group". In 2020, the final dividend stood at 10.27p.
Shares in Fevertree were up 0.7% at 1,638.50p on Wednesday in London.
The company explained that commodity prices have increased significantly in recent weeks because of the events in Ukraine and that this has subsequently created uncertainty in relation to input costs.
As a result, Fevertree now expects earnings before interest, tax, depreciation and amortisation to range between GBP63 million and GBP66 million in 2022. This, at best, would represent a 4.8% increase from its 2021 Ebitda figure of GBP63 million.
"Fevertree warned back in January that margins would likely be impacted by rising costs, but bumper shareholder returns haven't been able to quell further market worries about the outlook for margins," said Matt Britzman, an equity analyst at Hargreaves Lansdown.
Fevertree expects sales to rise 14% to 16% next year, but little to none of that dropping through to cash profits, Britzman noted.
This suggests margins of around 17.9%, Britzman said, down from the 19.6% expected.
Adding fuel to the flames, Britzman pointed out that a number of last year's margin headwinds should now be unwinding, mainly increased US shipping costs and the recovery of higher margin bar and restaurant sales, "but that doesn't seem to be the case."
However, he did add that there are some positives for the longer-term investment case: "Growth outside of the saturated UK market looks promising and increased demand for premium alcohol and mixers looks to be stickier than first anticipated."
By Heather Rydings, [email protected]; and Greg Roxburgh, [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Fevertree