Premium mixer company Fevertree Drinks plc has reported a significant improvement in profitability in 2024 as revenue growth in the US and improved margins helped boost the bottom line.
Once a darling of UK small-cap investors, Fevertree suffered a period of slow and falling sales, which saw shares fall from grace in 2021, never to recover.
Today’s 7% jump in shares would suggest investors are mildly optimistic things could be about the improve for the tonic water specialist.
The London-listed firm saw its Fever-Tree brand revenue growth accelerate to 7% in the second half of the year, delivering 4% growth for the full year on a constant currency basis.
This was driven primarily by the company’s performance in the United States, where revenue grew by 12%.
Fevertree reported a substantial 540 basis point improvement in gross margin, which contributed to a 66% increase in Adjusted EBITDA to £50.7 million, in line with market expectations. The company’s EBITDA margin rose by 530 basis points to 13.7%.
This is all welcome news for investors.
The company’s strong financial performance has enabled it to recommend a final dividend of 11.12 pence per share, representing a 2% increase year over year.
In addition, investors will be delighted to see Fevertree has extended its share buyback programme by an additional £29 million, bringing the total to be returned to shareholders over FY25 to £100 million.
US growth
Cracking America isn’t easy but, despite problems in the UK, Fevertree has successful established a strong presence and the region is now the group’s single largest geography in terms of revenue.
However, in a strategic shift in their approach to the US, Fevertree announced a significant post-year-end development in the long-term strategic partnership with drinks giant Molson Coors on 30 January 2025 who will have exclusive sales, distribution, and production rights for the Fever-Tree brand in the United States.
The partnership aims to leverage Molson Coors’ scale and expertise to accelerate Fever-tree’s growth in the US market, capitalising on opportunities across both alcoholic and non-alcoholic categories.
“In return for handing over a stake in its business, Fevertree’s getting access to Coors’ broad production, distribution and marketing resources,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“It’s hoped that this will help drive the next leg of growth in the US, which has already become the tonic-maker’s largest market.”
Fevertree recognised £5.0 million in exceptional items relating to the transition to this partnership during the reporting period.
Fevertree’s Outlook
Following the announcement of the strategic partnership with Molson Coors, Fevertree expects to deliver strong Group revenue and EBITDA growth over the medium term. However, the company has cautioned that FY25 will be a transition year for the US business.
Fevertree reaffirmed guidance, stating they are comfortable with consensus expectations of low single-digit Group revenue growth and approximately 12% Group Adjusted EBITDA margin for the coming year.
Investors seemed content with the update, and shares traded at the highest level since October 2024 in early trading.