Fever-Tree (LON: FEVR) shares experienced a fall following the release of its FY25 preliminary results, which revealed a decline in both profit and UK revenue.
The mixer company, while highlighting positive strategic progress, reported a drop in adjusted EBITDA and a slight dip in UK revenue, unsettling markets.
The headline numbers showed a mixed performance. Total adjusted revenue increased by 2% to £375.3 million, but adjusted EBITDA fell by 16% to £42.4 million. Diluted EPS also declined by 11% to 18.62 pence per share, and normalised EPS decreased by 14% to 24.12 pence per share.
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Despite the profit dip, Fever-Tree is rewarding investors with a 2% increase in the ordinary dividend to 17.31 pence per share. The company also completed a £100 million share buyback and has a further £30 million buyback in progress, signaling confidence in its cash-generative model.
The market reaction suggests concern over the profit decline and the continued challenges in the UK market. However, the strong US performance and diversification efforts offer a potential upside, leading to a mixed outlook and potential volatility in the short term.
A key factor impacting profitability was a post-period-end adjustment to provide for a potential £2.8 million charge relating to the UK Extended Producer Responsibility (“EPR”) Levy. Excluding this, adjusted EBITDA would have been £45.2m, in line with previous guidance. The company is challenging the Environment Agency’s view on the classification of certain glass formats for EPR purposes.
“2025 was a pivotal year for Fever-Tree,” commented Tim Warrillow, CEO and Co-founder, highlighting the strategic partnership with Molson Coors in the US as a “significant opportunity to take Fever-Tree to the next level in our largest growth market.”
Warrillow also noted, “Fever-Tree is increasingly enjoyed as the world’s leading premium mixer, but also as a premium soft drink.”
Despite the challenges, Fever-Tree maintains a positive outlook for 2026, with expectations remaining in line with market forecasts. The company’s strong brand, market leadership, and diversified portfolio position it well for future growth.
Analyst Summary: Bull and Bear Cases
Bull Case:
- Strong brand performance in the US, even through the Molson Coors transition, sets the stage for accelerated growth in 2026.
- Products beyond tonic now account for 45% of group revenue, demonstrating the success of Fever-Tree’s broadening relevance.
- Continued market share gains in Europe, particularly with Ginger Beer, reinforce the company’s category leadership.
Bear Case:
- Adjusted EBITDA fell by 16% to £42.4 million, and UK revenue experienced a slight dip.
- Diluted EPS declined by 11% and normalised EPS decreased by 14%, reflecting lower profitability.
- A potential £2.8 million charge for the UK Extended Producer Responsibility (EPR) Levy could further impact profits.
- Continued challenges in the UK home market are a cause for concern.
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