Fever-Tree issues profit warning after flat Christmas

Shares in the drinks maker plunge by 24% as sales dip

(Image credit: (Ilya S. Savenok/Getty Images for NYCWFF))

The drinks manufacturer Fever-Tree has issued a profit warning and cut its sales forecast for the second time in two months.

Chief executive, Tim Warrillow, said Fever-Tree had endured a subdued end to the year in the UK, when full-year sales dipped 1% to £132.6m.

The company’s shares plunged 24% after the company announced it expected full-year profits to be about 5% lower in 2019 than in 2018, when Fever-Tree reported a 34% jump in pre-tax profits to £76m.

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The Guardian says shares in the “former stock market darling” were trading at £15.05 on Monday, the lowest level since April 2017.

Describing the trading update as “ugly reading,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said Fever-Tree’s falling sales will “inevitably spark fears the gin boom has turned to bust”.

However, Bloomberg says that the company is being “squeezed” precisely because the gin and tonic market is “crowded”.

The decline in sales in the UK contrasted with a 33% jump in the US, a 16% climb in Europe and a 32% rise in the rest of the world for Fever-Tree.

Although the tonic maker said the US growth was “particularly encouraging” it warned that its investment plans will curb 2020 growth in the region, which it now expects to hit low double digits this year.

Fever-Tree was started by Plymouth Gin boss Charles Rolls and advertising executive Tim Warrillow. The two men, who met in 2003, launched the company in 2005.

It is named after the everyday name for the cinchona tree, from whose bark the natural anti-malarial drug and core tonic water ingredient, quinine, is produced.

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