Fever-Tree could lose fizz from coronavirus impact, analysts warn
20 March 2020, 17:14
A recent downturn in footfall at bars and restaurants due to the coronavirus outbreak could cast a cloud over its outlook for 2020.
Investors in Fever-Tree will be hoping the drinks manufacturer does not lose its fizz, as analysts warn that coronavirus could weigh down on sales.
The tonic maker has reported surging sales in recent years, and is expected to report another year of strong growth when it reveals its figures for the 12 months to December 2019, next week.
However, a recent downturn in footfall at bars and restaurants due to the coronavirus outbreak could cast a cloud over the drink manufacturer’s outlook.
Fever-Tree is expected to hold off on providing profit guidance for the current financial year, as it continues to assess the impact of coronavirus.
It comes amid a testing period for the business, which has seen its shares fall by more than half since Christmas, after a slowdown in sales growth and trading fears regarding the pandemic.
In January, Fever-Tree warned that “subdued Christmas trading” in the UK meant it would fall short of revenue forecasts.
It said it expects sales to have increased by 9.7% to £260.5 million, having previously forecast growth of between 12% and 13% for the year.
Meanwhile, the company is expected to post earnings before tax, interest, depreciation and amortisation (EBITDA) of £76.6 million for the year.
The UK market is expected to see sales affected by the pandemic, with about half of all UK sales made in the on-trade, meaning at bars and restaurants.
While off-trade sales, those in supermarkets and other stores, may be strong as shoppers stockpile, the firm is expected to be particularly affected by hospitality closures and plunging footfall.
Analysts at Jefferies said they expect to “see severe impact from Covid across markets, with the “on-trade business being severely hit”.
The brokerage added that some markets, such as Italy, are expected to be affected by quarantines which also restrict people from getting to the shops.
However, analysts at HSBC said it still expects some “good news” for investors in its latest update.
It said it expects the company to confirm its commitment to the growing US market and predicts a rebound in 2021, although the outbreak is “undeniably going to hurt”.
Rival fizzy drinks manufacturer AG Barr is also expected to update investors on the potential impact of coronavirus when it announces its latest figures on Tuesday.
The Irn-Bru maker said in January that profits for 2019 are expected to be at the top end of forecasts, at just over £37 million, after progress last year.