Fever-Tree plunges 20% after losing fizz with profits alert

SHARES in Fever-Tree — one of the most astonishing stock market success stories of the past decade — plunged more than 20% today after the upmarket tonics maker issued a devastating profit warning.

Investors feared the company’s extraordinary stock market success was coming to an end. The company floated on the stock market six years ago at £150 million and peaked in July 2018 at £4.5 billion.

After today’s plunge to a market value of just £1.76 billion, Fever-Tree has lost nearly £3 billion in 18 months.

The drinks firm’s founder and chief executive Tim Warrillow said there was a “subdued end to the year in the UK” and warned its much vaunted expansion into the US will suffer slower growth than before. The extent of FeverTree’s problems highlighted the severity of the slowdown for nearly all consumer-facing businesses, from John Lewis to Morrisons. He said the mixers category here “has clearly not been immune from the consumer belt-tightening seen in recent months”.

Warrillow said UK sales for last year dipped 1% to £132.6 million and cautioned total revenues will be £260.5 million. The City had been expecting £266 million-£268 million. Full-year profits will come in at £58.5 million. Analysts had pencilled in £63.6 million.

Fever-Tree also warned of low double-digit growth in the US next year as it invests more to expand there and looks to lower some prices. It had 33% US sales growth in 2019. It said: “We are confident this will drive significant long-term volume and profit growth.”

The shares fell to the lowest level since 2017, down 424.61p to 1570.39p. Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Falling sales in the UK will inevitably spark fears the gin boom has turned to bust.”

For years, Fever-Tree, named after an African tree from which the tonic’s quinine is drawn, benefited from a surge in customers seeking more premium mixers for gins and whiskies.

Recent years have seen it suffer from more competition, and in November it warned that the performance in its UK off-trade business supplying supermarkets had been behind expectations.

Today it pointed out that last year’s performance in the UK contrasted with a strong previous year boosted by the football World Cup and a royal wedding.

The firm said it expects conditions in the UK to remain challenging in the first half of 2020.

Falling sales in the UK will inevitably spark fears the gin boom has turned to bust Nicholas Hyett, equity analyst at Hargreaves Lansdown