Inflationary fallout from the war in Ukraine has forced an earnings downgrade at Fevertree Drinks, although the pain for shareholders was eased by the declaration of a £50 million special dividend.
The shock of the profit warning sent shares in the premium mixers group down 9.5 per cent in early trading. That was quickly replaced by delight at the dividend prospect, with the shares closing 147½p, or 9.1 per cent, up at £17.74½.
On top of a full-year dividend of 15.99p, up 2 per cent year-on-year, the company dipped into its net cash pot of £166.2 million, up 16 per cent on this time last year, to declare its first special dividend of 42.9p per share. Tim Warrillow, co-founder and chief executive of Fevertree, said: “I’m not suggesting [the special dividend] will be an annual fixture, but this year’s payout is a signal of our confidence and shows this is a business that generates cash.”
Fevertree was established in 2004 by Warrillow and Charles Rolls to make high-quality tonic for the premium gin market. It now sells a range of mixers in more than 75 countries, with America, Canada, Australia and Germany among its biggest markets.
In the year to the end of December, the group reported a 23 per cent jump in revenues to £311.1 million, with Britain up 15 per cent to £118.3 million and the United States up 33 per cent to £77.9 million. Europe was also up 33 per cent at £78.6 million.
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Its underlying earnings increased by 11 per cent to £63 million, despite a fall in the margin from 22.6 per cent to 20.2 per cent because of disruption to its supply chain, while pre-tax profits rose from £51.6 million to £55.6 million.
Warrillow, 47, said that the group had grown strongly across all markets, with sales through the “off-trade” — shops and supermarkets — remaining ahead of 2019 levels. Sales through the “on the trade” — pubs, bars and restaurants — had recovered strongly from the first-half lockdowns, he said. He added that the group sold “next to nothing” in Russia and Ukraine and had stopped selling in those countries entirely.
Guidance on revenues for the coming year was unchanged at £355 million to £365 million, but the inflationary impact on costs from the war in Ukraine and sanctions on Russia led to a cut in forecast underlying earnings by £6 million from a range of £69 million to £72 million to between £63 million and £66 million.
