What the Analysts Say23 Jul 2019 11:34
Shore Capital said the results are around 3% below its estimates, with slightly lower revenue growth than forecast and a more marked margin decline. It had been expecting revenue growth of 14.1% and EBITDA of £37.8m.
Analyst Alex Smith said: "We see recent share price weakness and the associated de-rating as a good opportunity to buy into the long term wider premium mixer global structural growth story.
"We expect the company to take the opportunity in the results presentation to help alleviate concerns over slowing growth/ increasing competition in the UK and share some soundbites on growing consumer traction in the US and Europe."
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "For most companies, a 7% rise in cash profits would have investors singing. The problem for Fevertree is good numbers aren't necessarily good enough, with high hopes for exponential growth mixed into a fairly lofty valuation. Today's disappointment stems from the group's admission it's simply become too big a fish in the relatively small UK pond, and sales growth is duly tempering in response.
"Future growth potential lies in the US, and the size of the potential market is certainly an exciting prospect. The problem is it's not clear if the same level of demand for premium mixers can be drummed up in our American cousins as we've seen in the UK. A trend towards more premium drinking habits is allegedly starting to catch on, but it's currently more geared towards dark spirits like Whiskey and Rum that puts Fevertree's ginger ales and colas centre stage - and the competitive landscape there is crowded. To satisfy expectations, Fevertree needs to see a taste for tonic take off stateside, and there's no guarantee that will happen.
"In Fevertree's favour is its stellar business model, which sees it outsource the majority of its operations, like bottling and distribution. Even as it ramps up expansion efforts, it's a comfort to see it stick to this modus operandi - it gives the group far more flexibility and makes expansion cheaper. With the potential for short term disruption arising from Brexit, extra agility is no bad thing
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