Fever-Tree profits ‘worsened’ by cost of headwinds

Fever-Tree has revealed that it anticipates gross margins of around 37% and an EBITDA margin of around 14% for the first half due to the reported impact of logistics and cost of headwinds having “worsened” in recent months. The business expects this to continue to impact the business during the second half also, resulting in a revised EBITDA guidance of between £37.5m and £45m for the full year. However, Fever-Tree has reportedly delivered a solid first half revenue performance, as the On-Trade showed promising signs of recovery. As a result, the group is maintaining its revenue guidance range of £355m to £365m for the full year. This comes as consumer demand remains strong and the brand is reportedly focused on driving a number of initiatives to prioritise availability, whilst also mitigating the on-going impact of the current logistics and cost headwinds. The company reports that its revenue grew by 6% in the first half of 2022 in the UK, with a year-on-year growth of 73%, which is said to have been “in-line” with the brand’s expectations. However, Fever-Tree's Off-Trade sales saw a decline by 21% in the first half of the 2021 lockdown period. Whilst the first half was said to be “softer than expected”, the brand has increased its volume share at grocery during H1 and look forward to its “typically strong” summer and Christmas trading periods. In addition, the company expects a further 400bps to 600bps of margin dilution, and as such, expects gross margin in a range of 33% to 35% as a result of this exceptionally challenging environment, alongside some limited sales mix and FX hedging impacts. Tim Warrillow, CEO of Fever-Tree, said: "Fever-Tree has delivered a solid revenue performance in the first half of 2022. Whilst we are seeing positive top line performance and expect to deliver good revenue growth for the full year, the challenging logistical and cost headwinds we highlighted previously have significantly worsened in recent months and we now expect them to notably impact our full year margins. “The business is working on a large number of initiatives, and more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the same time ensure we can satisfy the strong demand we are seeing in our growth regions.” He added: “Despite the current challenges of the volatile logistical and cost environment, we continue to make good progress across our regions. The strong and growing consumer demand for the brand, our exciting pipeline of innovation, and the growing interest in long-mixed drinks, gives us more confidence than ever in the long-term opportunity."