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FeverTree has lowered its annual profits forecast as a result of increasing cost pressures and labour and glass shortages.

The premium drinks mixer producer said in the last eight weeks it has seen “rapid shifts in the operational and cost backdrop” which have materially changed its outlook.

It said labour shortages have impacted its US East Coast production ramp up, resulting in greater UK production required to fulfil against the strong demand in the US, and with it, more exposure to sea freight with rates increasing by up to 50% since the start of the year on key routes

Meanwhile, glass availability has become “severely restricted”, which has limited the opportunity to outperform sales expectations despite strong demand

Additionally, industry-wide cost pressures have increased, most notably glass costs, where the group will see double digit increases over the second half alongside continued logistics cost increases and disruption.

Consequently, it expects a further 400bps to 600bps of margin dilution and as such expect gross margin in a range of 33% to 35% and EBITDA in the range of £37.5m-£45m as it remains committed to investing in marketing expenditure, people and innovation.

On the sales front, the group delivered a “solid” first half revenue performance as the on-trade showed “promising” signs of recovery.

FeverTree’s UK revenue grew by 6% in the first half of 2022. The on-trade was impacted by the Omicron variant at the start of the period, before momentum built as the half progressed.

Off-trade sales declined by 21% in the first half of the year as the group lapped a lockdown period in 2021, mirroring a re-balancing of the whole category as some sales shift back to the on-trade.

Demand for FeverTree in the US remains “very strong”. An 11% revenue increase year-on-year (9% at constant currency) was “encouraging” against the challenging backdrop of port congestion and labour shortages which culminated in inventory shortages impacting sales towards the end of the period.

Total European revenue for the first half of the year was up 27% (31% at constant currency), while rest of the world grew by 7% against strong comparatives with underlying growth of 15% across the region.

FeverTree maintained its full year revenue guidance range of £355m-£365m on the back of its solid top-line growth.

Tim Warrillow, CEO of Fever-Tree commented: “Whilst we are seeing positive top line performance and expect to deliver good revenue growth for the full year, the challenging logistical and cost headwinds we highlighted previously have significantly worsened in recent months and we now expect them to notably impact our full year margins.

“The business is working on a large number of initiatives, and more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the same time ensure we can satisfy the strong demand we are seeing in our growth regions.

“Despite the current challenges of the volatile logistical and cost environment, we continue to make good progress across our regions. The strong and growing consumer demand for the brand, our exciting pipeline of innovation, and the growing interest in long-mixed drinks, gives us more confidence than ever in the long-term opportunity.”

FeverTree shares have sunk 27.9% on the profits warning back to 864.5p

Morning update

The group behind health food distributor Tree of Life is in talks with lenders to secure its future as it battles supply chain issues and rampant inflation.

It follows a failed attempt to find a buyer for Health Made Easy, owner of Tree of Life and sister company The Health Store, earlier this year.

The group is now in negotiations with banking partners to agree new facilities to move forward.

Health Made Easy also restructured its management team, with former Tree of Life boss John Weaver appointed group CEO and turnaround specialist Stuart Gould brought in to work alongside him and take on responsibilities from outgoing CFO David Main.

Health Made Easy hired mid-market M&A advisor FinnCap Cavendish to explore a potential sale but the process – codenamed ‘ProjectHogwarts’ – ended without success.

Cole said it wanted to find investors to provide “scope and capital for further development” on the back of a record performance in 2020/2021.

He added Brexit had “significantly impacted efforts” to achieve the sale.

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On the markets this morning, the FTSE 100 is up 0.6% to 7,083.8pts.

Risers include McBride, up 2.7% to 17.1p, THG, up 2.7% to 73.6p and British American Tobacco, up 2.6% to 3,453.5p.

Along with FeverTree, fallers include Britvic, down 6.9% to 791p, Bakkavor, down 5.4% to 84.3p and Deliveroo, down 2.1% to 85.6p.

Yesterday in the City

The FTSE 100 fell back 1.6% to 7,039.8pts yesterday.

SSP Group dropped 4.7% to 225.8p despite its third quarter revenues rising to 83% of pre-pandemic totals.

Other fallers included Ocado, down 5.3% to 770p, Just Eat, down 3.4% to 1,168p, FeverTree, down 3.3% to 1,199p, Coca-Cola Europeacific Partners, down 3% to €48.95, Deliveroo, down 2.9% to 87.4p, Associated British Foods, down 2.7% to 1,552p and Greggs, down 2.5% to 1,824p.

The day’s few risers included Bakkavor, up 5.6% to 89.1p, Naked Wines, up 1.7% to 154.6p, PayPoint, up 0.5% to 577p and Premier Foods, up 0.4% to 105.4p.