Fever-Tree warns over 2022 earnings, cites higher costs

16th Mar 2022 08:14

(Sharecast News) - Posh tonic maker Fever-Tree warned over its 2022 earnings on Wednesday, pinning the blame on rising costs, which have been exacerbated by the Russia-Ukraine conflict.

"As highlighted in January, there remains a global backdrop of inflationary pressures against which we are employing a range of mitigating actions," the company said. "However, commodity prices have increased dramatically in recent weeks because of the terrible events unfolding in Ukraine and this has created significant uncertainty in relation to input costs."

As a result, the group now expects to deliver FY22 earnings before interest, tax, depreciation and amortisation of between £63m and £66m, down from previous guidance of £69m to £72m. Revenue is expected to grow between around 14% and 17% to £355m to £365m.

For the year to the end of December 2021, Fever-Tree posted an 8% jump in pre-tax profit to £55.6m, with revenue up 23% to £311.1m.

The company recommended a final dividend of 10.47p a share, up 2% on the year, and a special dividend of 42.90p.

Co-founder and chief executive Tim Warrillow said: "Our fantastic team has delivered a great set of results with impressive revenue growth in all our key markets during another year of uncertainty and disruption. Our growing momentum reflects the brand's increasing presence and popularity around the world, nowhere more so than the US where we finished the year as the No.1 Tonic Water brand by value at US retail. This is a significant achievement and matches the position we have held in the UK, as well as several European markets, for a number of years.

"Whilst the tragic situation in Ukraine has resulted in significant uncertainty in relation to our input costs in the short term, the long-term global opportunity for Fever-Tree remains substantial and we are as confident as ever in the brand's ability to capitalise on this."

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "Management pointed to the ongoing crisis in Ukraine and its impact on commodity prices as the cause for concern over rising costs. But a number of the ongoing margin headwinds that we saw last year 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.

"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. However, when investors are expected to pay 36.6 times earnings for a slice of the pie, any miss on guidance is always going to hit the shares hard."

At 0930 GMT, the shares were down 1.6% at 1,601p, having fallen to as low as 1,456.09p earlier.