British gin craze to boost results for tonic maker Fevertree, shares soar

(Reuters) - A gin craze sweeping through Britain prompted tonic water maker Fevertree Drinks Plc FEVR.L to forecast full-year results "comfortably ahead" of its expectations and sent its shares up 15 percent.

FILE PHOTO: Products from the drinks company Fever Tree are displayed in London, Britain May 11, 2016. REUTERS/Neil Hall/File Photo

Fevertree, which sells premium flavoured tonic water and other carbonated mixers, has rapidly grown over the last few years as UK sales of high-end gin surged.

Britons spent £461 million on gin in 2017, a 32.5 percent increase from a year earlier and three times the sales seen in 2009, the Office for National Statistics said here earlier this month.

The 13-year-old company, named after the colloquial term for the cinchona tree, the bark of which produces tonic water ingredient quinine, has also been launching products that can be used to make cocktails based on vodka, rum and whisky.

Fevertree said it had signed two new distribution arrangements - one in the United States with wine and spirits distributor Southern Glazer, and the other with Spain’s Grupo Damm, the maker of Estrella Damm beer.

While the UK market brought in more than half of Fevertree’s sales in 2017, analysts reckon the premium mixers market in the United States provides a large growth opportunity for the company over the medium term.

Fevertree ramped up its U.S. investment over the last six months, setting up an office in New York and taking distribution in-house.

Shares of Fevertree, which listed in November 2014 at 165 pence, were up 8 percent at 3,736 pence in morning trade.

The company has grown into one of the largest on London’s junior AIM market, with a market value of around 4.06 billion pounds.

Fevertree raised its interim dividend by 40 percent to 4.22 pence per share.

Adjusted earnings before interest, tax, depreciation and amortisation rose to £34 million in the six months ended June 30, from £25.2 million a year earlier.

Revenue rose 45 percent to £104.2 million.

Brokerage Investec raised its estimate of the company’s full-year revenue by about £15 million to £220 million.

Fevertree said a UK sugar tax, introduced in April, had a dilutive impact on its reported gross margin percentage, but no impact on gross margin in cash terms. It said it had passed through the levy on the sale of its non-light range of products in the UK.

Reporting by Justin George Varghese in Bengaluru; Editing by Saumyadeb Chakrabarty and Dale Hudson