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Share Name Share Symbol Market Type Share ISIN Share Description
Hotel Chocolat Group Plc LSE:HOTC London Ordinary Share GB00BYZC3B04 ORD 0.1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -4.50p -1.38% 321.50p 318.00p 325.00p 321.50p 320.00p 320.00p 25,057 08:28:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Food Producers 116.3 12.7 8.8 36.5 362.77

Hotel Chocolat Group PLC Interim Results

26/02/2019 7:00am

UK Regulatory (RNS & others)


Hotel Chocolat (LSE:HOTC)
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6 Months : From Dec 2018 to Jun 2019

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RNS Number : 0652R

Hotel Chocolat Group PLC

26 February 2019

26 February 2019

Hotel Chocolat Group plc

("Hotel Chocolat", the "Company" or the "Group")

Interim Results

Hotel Chocolat Group plc, a premium British chocolatier and omni-channel retailer, today announces its interim results for the 26 weeks ended 30 December 2018.

Financial highlights:

 
 --   Revenue up 13% to GBP80.7m (H1 FY18: GBP71.7m) 
 --   Underlying EBITDA up 10% to GBP17.3m (H1 FY18: GBP15.8m)1 
 --   Excluding new US & Japan start-ups, profit before tax up 11% to GBP14.4m (H1 FY18: GBP12.9m) 
 --   Reported profit before tax up 7% to GBP13.8m (H1 FY18: GBP12.9m) 
 --   Profit after tax up 7% to GBP10.8m (H1 FY18: GBP10.1m) 
 --   Cash flows from operating activities up 18% to GBP29.5m (H1 FY18: GBP24.9m) 
 --   Strong balance sheet with net cash at period end of GBP21.8m (H1 FY18: GBP18.3m) 
 --   Earnings per share up 7% to 9.6p (H1 FY18: 9.0p) 
 --   Interim dividend of 0.6p per share (H1 FY18: 0.6p) 
 

Operational highlights:

 
 --   Strong sales growth across retail, digital & wholesale channels 
 --   Successful Christmas ranges delivered growth 
 --   14 new stores opened in UK & Eire, contributing 4% to Group sales growth 
 --   New VIP Me loyalty card attracted 0.5m active customers 
 --   Velvetiser in-home Hot Chocolat maker launched and exceeded initial expectations six-fold 
 --   Digital growth through own website and new third-party wholesale to digital retailers 
 --   Encouraging launches of first stores in New York, and in Tokyo (with Joint Venture partner) 
 

(1) Underlying EBITDA in H1 FY19 excludes GBP0.4m of share-based charges (H1 FY18: GBP0.4m).

Angus Thirlwell, Co-founder and Chief Executive Officer of Hotel Chocolat, said:

"This has been another period of progress for Hotel Chocolat with strong growth in sales, profits and cash generation. The critical Christmas period was again successful, supported by the launch of our new and innovative Velvetiser Hot Chocolate maker and by a deepening relationship with our customers via the new VIP Me scheme. Both developments will also support our plans for the key spring seasons of Mother's Day and Easter.

"Growth in the UK continued to deliver improvements in profitability which have enabled us to invest in the launch of two new start-ups in New York and Tokyo, both of which are showing encouraging early signs, in terms of customer response and the initial store sales performance.

"I would like to thank everyone in the Hotel Chocolat team for their dedication in delivering another successful Christmas.

"Recent trading, including the Valentine's period, is in line with the Board's expectations and we continue to make good progress against our key strategic objectives of opening more stores, improving our digital capability and increasing our production capacity whilst testing and learning in two large new territories."

For further information:

 
 Hotel Chocolat Group plc                                   c/o Citigate    + 44 (0) 20 7638 9571 
 Angus Thirlwell, Co-founder and Chief Executive Officer 
 Peter Harris, Co-founder and Development Director 
 Matt Pritchard, Chief Financial Officer 
 
 Citigate Dewe Rogerson - Financial PR                                      + 44 (0) 20 7638 9571 
 
 Angharad Couch 
 Ellen Wilton 
 Elizabeth Kittle 
 
 Liberum Capital Limited - Nominated Advisor and Broker                     + 44 (0) 20 3100 2222 
 Clayton Bush 
 James Greenwood 
 Trystan Cullen 
 

Notes to Editors:

Hotel Chocolat is a premium British chocolatier with a strong and distinctive brand. The business was founded in 1993 by Angus Thirlwell and Peter Harris and has traded under the Hotel Chocolat brand since 2003. The Group sells its products online and through a network of stores in the UK and abroad. The Group has a cocoa plantation and eco-hotel in Saint Lucia, offering complete cocoa immersion thorough tree-to-bar experiences and wellness treatments. The Group also has a flagship restaurant and cocoa roastery in London's Borough Market: Rabot 1745. The Group was admitted to trading on AIM in 2016.

Chief Executive's statement (inclusive of financial review)

RESULTS

 
                                                          Period ended        Period ended 
                                                      30 December 2018    31 December 2017 
                                                                GBP000              GBP000 
-------------------------------------------------   ------------------  ------------------ 
 
 Revenue                                                        80,719              71,709 
 Gross profit                                                   53,097              49,107 
 Operating expenses                                           (35,767)            (33,316) 
--------------------------------------------------  ------------------  ------------------ 
 Underlying EBITDA                                              17,330              15,791 
 Share-based payments                                            (408)               (367) 
--------------------------------------------------  ------------------  ------------------ 
 EBITDA                                                         16,922              15,425 
 Depreciation & amortisation                                   (2,793)             (2,207) 
 Loss on disposal of property, plant & equipment                  (24)                 (9) 
 Operating profit                                               14,104              13,209 
 Finance income                                                      5                  16 
 Finance expense                                                 (179)               (296) 
 Share of joint venture results                                   (84)                   7 
--------------------------------------------------  ------------------  ------------------ 
 Profit before tax                                              13,847              12,936 
 Tax expense                                                   (3,045)             (2,821) 
--------------------------------------------------  ------------------  ------------------ 
 Profit for the period                                          10,802              10,115 
 Earnings per share - Basic                                       9.6p                9.0p 
 Earnings per share - Diluted                                     9.5p                8.9p 
 Dividend per share                                               0.6p                0.6p 
 

CHIEF EXECUTIVE'S STATEMENT

I am pleased to report continued progress for the Hotel Chocolat brand during the 26 weeks to 30 December 2018. Revenue for the period increased by 13% and underlying EBITDA increased by 10%. Hotel Chocolat delivered growth across all its channels, benefitting from strong new products, successful marketing and loyalty campaigns, and the continued growth of digital wholesale partners. The business remains focused on four key pillars of its growth strategy:

1) Open stores

We opened 14 new stores in the UK and Eire during the period. Our established stores continue to generate attractive returns, and the new stores opened over the last 3 years are achieving their payback targets suggesting that further attractive opportunities remain, which we will continue to evaluate on a site-by-site basis.

There has been much media attention regarding the future of physical retail. Whilst macro-economic trends have undoubtedly created headwinds, we obviously continually evaluate the performance of our stores. We remain confident that further new openings can deliver attractive financial returns and improve customers' ease of access to our brand. All of our stores trading for longer than 12 months are profitable, and the latest vintage of openings are delivering comparable EBITDA per site to that of the earliest stores.

The Board have modelled 3 scenarios, based on various growth rates and cost inflation for our physical estate:

1) A continuation of the FY18 growth rates for sales and for overhead costs would mean that store estate profitability would rise in future years.

2) A more pessimistic scenario, reflecting a drop to negative sales growth, and with externally driven cost inflation at rates in excess of FY18, would still mean that the retail estate would continue to generate significant EBITDA profit in 5 years' time. (Our average lease length is 5 years).

3) As a Board we are focusing all of our energies on delivering a third, and better, scenario which has the scope to generate a material increase in EBITDA, by:

 
 --   Increasing the rate of sales growth, driven by product 
       innovation, gaining a deeper relationship with our customers 
       via the recently launched VIP ME rewards card, and empowering 
       our store teams to deliver an even better experience 
       for our guests. 
 --   Mitigating cost pressures using a combination of better 
       buying, further innovation in our processes, and perpetual 
       focus on working smarter whilst never compromising on 
       product quality or service experience. 
 

2) Increase capacity and capture efficiencies from the vertically integrated supply chain

Our manufacturing operations again delivered improved efficiency and benefitted gross margin rate. However, these gains were offset by our sales growth being partly driven by lower margin but less capital-intensive wholesale accounts and from the new Velvetiser Hot Chocolat maker which is manufactured by a third party at a dilutive margin rate. A full explanation of margin rate is included in the financial review below. The lower margins on the new sales channels are mitigated by lower overheads attaching to these sales.

3) New digital proposition to grow customer base and improve gifting proposition

Digital revenues, comprising website, subscriptions and digital wholesale partners grew by 22%, or by 29% if expressed at retail prices.

 
 --   The website delivered a 25% year-on-year growth driven 
       by an increase in traffic and from sales of the Velvetiser. 
 --   Subscription sales declined by 25% due to the pause of 
       new customer acquisition pending development of new subscription 
       models for hot chocolat consumables. 
 

4) Cautious 'test, learn, grow' approach to new international markets

In late November the Group opened its first joint venture store in Tokyo, shortly followed by its first pilot store in New York, and; the Board believes that both markets offer significant potential for future growth. A modest number of store openings in each market will be used to test the consumer response, the supply chain economics, and to build a business case for potential roll-out. Initial consumer response in both markets has been encouraging; the brand appears to resonate with consumers, the breadth of range is proving popular with local tastes, and pricing has been received as fair and reasonable. Whilst it is too soon to meaningfully conclude on the store economics, the new sites are performing in line with expectations and based on the first 10 weeks of trading both stores would rank as top quartile within the UK estate.

In July 2018 the Group transferred its two Danish stores to a local partner under a franchise development agreement covering the Nordic Region. The partner has opened two further stores in the period.

FINANCIAL REVIEW

Revenue

Group revenue increased by 13% to GBP80.7m. 14 new stores were opened in the UK & Eire during the period contributing 4% to the Group's year-on-year growth. Retail, digital and wholesale all delivered sales growth.

Profit Before Tax

Reported Profit before Tax increased by 7% to GBP13.8m. This profit includes losses of GBP0.5m relating to the launch in the USA and GBP0.1m relating to the Group's 20% interest in the new Japanese joint venture. Excluding the impact of the two international start-ups, Group profit before tax increased by 11% to GBP14.4m.

Gross margin

Gross margin declined by 270 basis points from 68.5% to 65.8%, primarily due to the following four impacts:

 
 --   The Velvetiser is manufactured by a third party resulting 
       in a lower gross margin, but also lower incremental overhead. 
       The mix impact of Velvetiser sales reduced group margin 
       by 100 basis points. 
 --   The New VIP Me loyalty scheme offers customer benefits 
       including some additional discounts, the impact of signup 
       incentive rewards reduced gross margin by 100 basis points. 
 --   Growth of sales from lower margin wholesale accounts 
       reduced gross margin by 30 basis points. These accounts 
       attract minimal incremental overhead. 
 --   Further factory efficiencies improved gross margin by 
       50 basis points, which mitigated 40 basis points of adverse 
       impact from Foreign Exchange due to the decline of sterling 
       in 2016 (foreign exchange purchases are hedged up to 
       18 months in advance). The adverse exchange impact will 
       not continue in H2 and we continue to see opportunities 
       to further improve factory efficiency. 
 

Operating expense

Operating expenses grew by 7%, which was significantly slower than the rate of sales growth, as a result operating expenses as a percent of sales reduced from 46.5% to 44.3%. Inflationary cost increases were partly mitigated by the impact of growing sales from wholesale and the Velvetiser, each of which generate lower incremental overheads than other sales.

Underlying EBITDA

Underlying EBITDA increased 10% to GBP17.3m. Excluding the impact of the launches in the USA and Japan, underlying EBITDA increased 13% to GBP17.8m.

Share based payments

Share-based payment expense of GBP0.4m (H1 FY18: GBP0.4m) related to the share-based Long-Term Incentive Plan and an all-employee Save As You Earn plan.

Foreign currency

The business manufactures the majority of its products in the UK, however it does purchase some premium ingredients in foreign currencies, predominantly Euros. The Group hedges its forecast Euro purchases up to 18 months ahead. The decline in Sterling in 2016 meant that some purchases in H1 FY19 were at lower rates which adversely impacted gross margin and EBITDA by 40 basis points. This adverse impact will reduce in H2.

Finance income and expense

Finance expense of GBP0.2m reflects GBP0.1m of interest on a working capital overdraft, and GBP0.1m of realised interest on foreign exchange hedges.

Earnings per share

Earnings per share in the period were 9.6p, a 7% increase on H1 FY18: 9.0p.

Dividend

At the time of the IPO the Directors stated an intention to implement a progressive dividend policy to reflect the expectation of future cash flow. The Board proposes an interim dividend of 0.6p per share which will be paid on 17(th) April 2019 to shareholders on the register on 8(th) March 2019. Mindful of the potential growth opportunities in the USA and Japan, the Board will continue to review the rate of growth in any dividend relative to the potential opportunities for re-investment in service of profitability and growth.

Cash flow and closing cash position

Net cash inflow from operating activities was GBP29.5m (H1 FY18: GBP24.9m) an increase of 18 percent.

Net cash (being cash minus borrowings) at the end of the period was GBP21.8m (H1 FY18: GBP18.3m). The Group has access to an overdraft facility with Lloyds Bank plc to fund seasonal working capital requirements if required.

Major capital projects in the period included new shops, upgrades to the manufacturing facility in Huntingdon, and the development of a new visitor attraction in Saint Lucia.

OUTLOOK

Since the end of the period, trading has continued to be in line with the Board's expectations. The performance of the new stores is encouraging and there is a pipeline of similar potential locations. The Velvetiser and the VIP ME loyalty card scheme both performed well during their initial launch period and will offer significant potential for the future.

In delivering these results in a context of macro-economic uncertainty, the business has demonstrated creativity, resilience and adaptability. Continued delivery against the 4-point strategy will deliver top-line growth and improve profitability in the UK, enabling the Group to invest cautiously in tests in the USA and Japan. A strong differentiated brand which offers great products and customer service and that is priced as an affordable luxury, gives the Board confidence in the Group's continued progress.

Angus Thirlwell, Co-founder and Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 December 2018

 
                                                                                  Unaudited           Unaudited 
                                                                             26 weeks ended      26 weeks ended 
                                                                           30 December 2018    31 December 2017 
                                                                  Notes                 GBP                 GBP 
-------------------------------------------------------------  --------  ------------------  ------------------ 
 
 Revenue                                                                         80,719,280          71,708,557 
 Cost of sales                                                                 (27,622,221)        (22,601,129) 
                                                                         ------------------  ------------------ 
                                                                                 53,097,059          49,107,428 
 
 Administrative expenses                                                       (38,993,208)        (35,898,903) 
                                                                         ------------------  ------------------ 
                                                                   2             14,103,851          13,208,525 
 Finance income                                                    3                  5,332              15,919 
 Finance expenses                                                  3              (178,901)           (296,028) 
 Share of joint venture results                                                    (83,617)               7,332 
                                                                         ------------------  ------------------ 
 Profit before tax                                                               13,846,665          12,935,748 
 
 Tax expense                                                                    (3,044,820)         (2,820,791) 
                                                                         ------------------  ------------------ 
 Profit for the period                                                           10,801,845          10,114,957 
 
 Other comprehensive income: 
 Derivative financial instruments                                                   281,743           (121,114) 
 Deferred tax charge on derivative financial instruments                           (26,181)              11,505 
 Currency translation differences arising from consolidation                        383,683           (361,829) 
                                                                         ------------------  ------------------ 
 Total comprehensive income for the period                                       11,441,090           9,643,519 
                                                                         ------------------  ------------------ 
 
 Earnings per share - Basic                                        4                   9.6p                9.0p 
 Earnings per share - Diluted                                      4                   9.5p                8.9p 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 December 2018

 
                                                                Unaudited           Unaudited        Audited 
                                                                    As at               As at          As at 
                                                         30 December 2018    31 December 2017         1 July 
                                                                      GBP                 GBP           2018 
                                                Notes                                                    GBP 
-------------------------------------------  --------  ------------------  ------------------  ------------- 
 ASSETS 
 Non-current assets 
 Intangible assets                                              2,729,264           2,547,958      2,788,152 
 Property, plant and equipment                   5             39,081,643          34,677,619     36,408,775 
 Investment in joint ventures                                      31,975               7,332         35,501 
 Loan to joint venture                                            705,909                   -              - 
 Derivative financial assets                                      108,875               8,564         68,721 
 Other receivables and prepayments                                  9,371              17,851          1,643 
 Deferred tax asset                                               318,895             381,825        623,961 
                                                               42,985,932          37,641,149     39,926,753 
 Current assets 
 Derivative financial assets                                      206,447              73,724         14,925 
 Inventories                                                    9,435,849           9,034,330     12,555,517 
 Trade and other receivables                                    9,548,902           6,494,705      7,486,894 
 Cash and cash equivalents                                     21,879,026          24,994,989        235,936 
                                                       ------------------  ------------------  ------------- 
                                                               41,070,224          40,597,748     20,293,272 
 Total assets                                                  84,056,156          78,238,897     60,220,025 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables                        6             27,145,789          25,808,949     15,545,845 
 Corporation tax payable                                        3,016,364           2,818,241      1,328,673 
 Derivative financial liabilities                                       -              52,491         54,691 
 Borrowings                                                       117,677           3,482,482        201,732 
                                                               30,279,830          32,162,163     17,130,941 
 Non-current liabilities 
 Other payables and accruals                     6              2,861,683           2,546,523      2,581,044 
 Borrowings                                                             -           3,191,677         16,811 
 Provisions                                                       935,975             825,852        879,808 
                                                                3,797,658           6,564,052      3,477,663 
 Total liabilities                                             34,077,488          38,726,215     20,608,604 
 
 NET ASSETS                                                    49,978,668          39,512,682     39,611,421 
 
 EQUITY 
 Share capital                                                    112,838             112,838        112,838 
 Share premium                                                 11,750,056          11,749,487     11,749,487 
 Retained earnings                                             33,909,034          25,160,751     24,348,409 
 Translation reserve                                            1,264,243             687,392        880,560 
 Merger reserve                                                   223,251             223,251        223,251 
 Capital redemption reserve                                         6,301               6,301          6,301 
 Other reserves                                                 2,712,945           1,572,662      2,290,575 
                                                       ------------------  ------------------  ------------- 
 
 Total equity attributable to shareholders                     49,978,668          39,512,682     39,611,421 
                                                       ------------------  ------------------  ------------- 
 

CONSOLIDATED STATEMENT OF CASH FLOW

For the period ended 30 December 2018

 
                                                                                       Unaudited           Unaudited 
                                                                                  26 weeks ended      26 weeks ended 
                                                                                30 December 2018    31 December 2017 
                                                                       Notes                 GBP                 GBP 
------------------------------------------------------------------  --------  ------------------  ------------------ 
 
 Profit before tax for the period                                                     13,846,665          12,935,748 
 Adjusted by: 
 Depreciation of property, plant and equipment                          5              2,482,075           1,952,705 
 Amortisation of intangible assets                                                       311,363             253,983 
 Loss of joint ventures                                                                   83,617 
 Net interest expense                                                                    173,569             280,109 
 Share-based payments                                                                    408,194             366,538 
 Loss on disposal of property, plant and equipment and intangible 
  assets                                                                                  24,253               9,417 
                                                                              ------------------  ------------------ 
 
 Operating cash flows before movements in working capital                             17,329,736          15,798,500 
 Decrease/(increase) in inventories                                                    3,119,669             755,985 
 Decrease/(Increase) in trade and other receivables                                  (2,071,379)           (484,352) 
 Increase in trade and other payables and provisions                                  12,645,018          10,064,095 
                                                                              ------------------  ------------------ 
 Cash inflow generated from operations                                                31,023,044          26,134,228 
 Interest received                                                                           708                  84 
 Income tax paid                                                                     (1,319,577)         (1,116,051) 
 Interest paid on: 
 
        *    finance leases and hire purchase loans                                            -             (1,192) 
 
        *    derivative financial instruments                                           (99,828)            (82,542) 
 
        *    bank loans and overdraft                                                   (61,272)               (777) 
                                                                              ------------------  ------------------ 
 Cash flows from operating activities                                                 29,543,075          24,933,750 
                                                                              ------------------  ------------------ 
 
 Purchase of property, plant and equipment                                           (5,632,011)         (6,136,967) 
                                                                                           9,500 
 Proceeds from disposal of property, plant and equipment                                                           - 
 Investment in joint venture                                                             (7,200)                   - 
 Loan to joint venture                                                                 (778,800)                   - 
 Purchase of intangible assets                                                         (241,427)           (257,524) 
 Cash flows used in investing activities                                             (6,649,938)         (6,394,491) 
                                                                              ------------------  ------------------ 
 
 Proceeds on issue of shares                                                                 569                   - 
 Buy back of Chocolate bonds                                                                   -           (110,500) 
 
 Capital element of hire purchase and finance leases repaid                            (100,866)           (136,328) 
 Dividends paid                                                                      (1,241,220)         (1,805,405) 
 Cash flows used in financing activities                                             (1,341,517)         (2,052,233) 
                                                                              ------------------  ------------------ 
 
 Net change in cash and cash equivalents                                              21,551,620          16,487,026 
 Cash and cash equivalents at beginning of period                                        235,936           8,470,178 
 Foreign currency movements                                                               91,470              37,785 
 Cash and cash equivalents at end of period                                           21,879,026          24,994,989 
                                                                              ------------------  ------------------ 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 30 December 2018

 
                                                                                     Capital 
                     Share        Share      Retained    Translation     Merger   redemption       Other 
                   capital      Premium      earnings        reserve    reserve      reserve    reserves         Total 
                       GBP          GBP           GBP            GBP        GBP          GBP         GBP           GBP 
---------------  ---------  -----------  ------------  -------------  ---------  -----------  ----------  ------------ 
 
 As at 2 July 
  2017             112,838   11,749,487    16,851,199      1,049,221    223,251        6,301   1,170,588    31,162,885 
 Share-based 
  payments               -            -             -              -          -            -     366,538       366,538 
 Deferred tax 
  charge on 
  share-based 
  payments               -            -             -              -          -            -     145,145       145,145 
 Profit for the 
  period                 -            -    10,114,957              -          -            -           -    10,114,957 
 Dividends paid          -            -   (1,805,405)              -          -            -           -   (1,805,405) 
 Other 
 comprehensive 
 income: 
 Derivative 
  financial 
  instruments            -            -             -              -          -            -   (121,114)     (121,114) 
 Deferred tax 
  charge on 
  derivative 
  financial 
  instruments            -            -             -              -          -            -      11,505        11,505 
 Currency 
  translation 
  differences 
  arising from 
  consolidation          -            -             -      (361,829)          -            -           -     (361,829) 
                 ---------  -----------  ------------  -------------  ---------  -----------  ----------  ------------ 
 Equity as at 
  31 December 
  2017             112,838   11,749,487    25,160,751        687,392    223,251        6,301   1,572,662    39,512,682 
 
 Share-based 
  payments               -            -             -              -          -            -     360,047       360,047 
 Deferred tax 
  charge on 
  share-based 
  payments               -            -             -              -          -            -     333,697       333,697 
 Loss for the 
  period                 -            -     (812,342)              -          -            -           -     (812,342) 
 Other 
 comprehensive 
 income: 
 Derivative 
  financial 
  instruments            -            -             -              -          -            -      15,113        15,113 
 Deferred tax 
  credit on 
  derivative 
  financial 
  instruments            -            -             -              -          -            -       9,056         9,056 
 Currency 
  translation 
  differences 
  arising from 
  consolidation          -            -             -        193,168          -            -           -       193,168 
 Equity as at 1 
  July 2018        112,838   11,749,487    24,348,409        880,560    223,251        6,301   2,290,575    39,611,421 
 
 
 
 
 
 Equity as at 1 
  July 2018        112,838   11,749,487    24,348,409        880,560    223,251        6,301   2,290,575    39,611,421 
 Issue of share 
  capital                -          569             -              -          -            -           -           569 
 Share-based 
  payments               -            -             -              -          -            -     408,194       408,194 
 Deferred tax 
  charge on 
  share-based 
  payments               -            -             -              -          -            -   (241,386)     (241,386) 
 Profit for the 
  period                 -            -    10,801,845              -          -            -           -    10,801,845 
 Dividends paid                           (1,241,220)                                                      (1,241,220) 
 Other 
 comprehensive 
 income: 
 Derivative 
  financial 
  instruments            -            -             -              -          -            -     281,743       281,743 
 Deferred tax 
  charge on 
  derivative 
  financial 
  instruments            -            -             -              -          -            -    (26,181)      (26,181) 
 Currency 
  translation 
  differences 
  arising from 
  consolidation          -            -             -        383,683          -            -           -       383,683 
                 ---------  -----------  ------------  -------------  ---------  -----------  ----------  ------------ 
 Equity as at 
  30 December 
  2018             112,838   11,750,056    33,909,034      1,264,243    223,251        6,301   2,712,945    49,978,668 
                 ---------  -----------  ------------  -------------  ---------  -----------  ----------  ------------ 
 

NOTES TO THE INTERIM FINANCIAL INFORMATION

   1.             Basis of preparation 

The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union.

The accounts have been prepared in accordance with accounting policies that are consistent with the Group's Annual Report and Accounts for the period ended 1 July 2018 and that are expected to be applied in the Group's Annual Report and Accounts for the period ended 30 June 2019. There are new or revised standards that apply to the period beginning 2 July 2018 but they do not have a material effect on the financial information for the period ended 30 December 2018.

The comparative financial information for the period ended 1 July 2018 in this interim report does not constitute statutory accounts for that period under 435 of the Companies Act 2006.

Statutory accounts for the period ended 1 July 2018 have been delivered to the Registrar of Companies.

The auditors' report on the accounts for 1 July 2018 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

   2.             Profit from operations 

Profit from operations is arrived at after charging:

 
                                                                                     Unaudited           Unaudited 
                                                                                26 weeks ended      26 weeks ended 
                                                                              30 December 2018    31 December 2017 
                                                                                           GBP                 GBP 
-------------------------------------------------------------------------   ------------------  ------------------ 
 
 Staff cost                                                                         17,629,785          15,957,108 
 Depreciation of property, plant and equipment                                       2,482,075           1,952,705 
 Amortisation of intangible assets                                                     311,363             253,983 
 
 Loss on disposal of property, plant and equipment and intangible assets                24,253               9,417 
 Operating leases: 
 
        *    Property                                                                5,831,625           5,435,700 
 
        *    Plant and equipment                                                       129,264              94,391 
 Exchange differences                                                                   34,702              85,702 
 Bad debt expense                                                                       20,035              20,037 
                                                                            ------------------  ------------------ 
 
   3.             Finance income and expenses 
 
                                                                     Unaudited           Unaudited 
                                                                26 weeks ended      26 weeks ended 
                                                              30 December 2018    31 December 2017 
                                                                           GBP                 GBP 
---------------------------------------------------------   ------------------  ------------------ 
 
 Interest on bank deposits                                                 708                  84 
 Unrealised interest on derivative financial instruments                 4,624              15,835 
 Finance income                                                          5,332              15,919 
                                                            ------------------  ------------------ 
 
 Interest on bank borrowings                                            78,134              57,410 
 Realised interest on derivative financial liabilities                  99,828              82,542 
 Finance leases and hire purchase contracts                                939               1,192 
 Finance charges on Chocolate bonds                                          -             154,884 
                                                            ------------------  ------------------ 
 Finance expenses                                                      178,901             296,028 
                                                            ------------------  ------------------ 
 
 
   4.             Earnings per share 

Profit for the period used in the calculation of the basic and diluted earnings per share:

 
                                             Unaudited           Unaudited 
                                        26 weeks ended      26 weeks ended 
                                      30 December 2018    31 December 2017 
                                                   GBP                 GBP 
---------------------------------   ------------------  ------------------ 
 
 Profit after tax for the period            10,801,845          10,114,957 
                                    ------------------  ------------------ 
 
 

The weighted average number of shares for the purposes of diluted earnings per share reconciles to the weighted average number of shares used in the calculation of basic earnings per share as follows:

 
                                                                                     Unaudited           Unaudited 
                                                                                26 weeks ended      26 weeks ended 
                                                                              30 December 2018    31 December 2017 
-------------------------------------------------------------------------   ------------------  ------------------ 
 
 Weighted average number of shares in issue used in the calculation of 
  earnings per share (number) 
  - Basic                                                                          112,838,213         112,837,828 
 Share-based payments - Hotel Chocolat Group plc Save As You Earn Plan                 340,202             214,728 
 
 Weighted average number of shares in issue used in the calculation of 
  earnings per share (number) 
  - Diluted                                                                        113,178,415         113,052,556 
 
 Earnings per share (pence) - Basic                                                        9.6                 9.0 
 Earnings per share (pence) - Diluted                                                      9.5                 8.9 
                                                                            ------------------  ------------------ 
 

As at 30 December 2018, the total number of potentially dilutive shares issued under the Hotel Chocolat Group plc Long-Term Incentive Plan was 3,657,000 (31 December 2017: 3,667,000). Due to the nature of the options granted under this scheme, they are considered contingently issuable shares and therefore have no dilutive effect.

   5.             Property, plant and equipment 
 
                                                                        Furniture & 
                                                                          fittings, 
                                                                         Equipment, 
                                                                  Computer software 
                        Freehold property            Leasehold           & hardware    Plant & machinery 
                                      GBP             property                  GBP                  GBP         Total 
                                                           GBP                                                     GBP 
-------------------- 
 
 26 weeks ended 31 
 December 2017 
 Cost: 
 As at 2 July 2017             12,588,855              734,999           28,418,804           16,319,351    58,062,009 
 Additions                        321,661                    -            3,999,331            1,271,020     5,592,012 
 Disposals                              -                    -              (9,417)                    -       (9,417) 
 Translation 
  differences                   (345,612)                    -              (6,002)                    -     (351,614) 
 As at 31 December 
  2017                         12,564,904              734,999           32,402,716           17,590,371    63,292,990 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 Accumulated 
 depreciation: 
 As at 2 July 2017                567,231              733,256           15,796,562            9,567,378    26,664,427 
 Depreciation charge               79,898                  475            1,312,304              560,028     1,952,705 
 Disposal                               -                    -                    -                    -             - 
 Translation 
  differences                     (6,710)                    -                4,949                    -       (1,761) 
 As at 31 December 
  2017                            640,419              733,731           17,113,815           10,127,406    28,615,371 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 Net book value 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 As at 31 December 
  2017                         11,924,485                1,268           15,288,901            7,462,965    34,677,619 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 26 weeks ended 30 
 December 2018 
 Cost: 
 As at 1 July 2018             12,837,367              734,999           34,890,442           18,895,928    67,358,736 
 Additions                        388,316                    -            3,761,655              607,334     4,757,305 
 Disposals                              -                    -          (2,701,232)             (15,000)   (2,716,232) 
 Translation 
  differences                     410,550                    -               42,132                    -       452,682 
 As at 30 December 
  2018                         13,636,233              734,999           35,992,997           19,488,262    69,852,491 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 Accumulated 
 depreciation: 
 As at 1 July 2018                724,685              734,206           18,752,462           10,738,608    30,949,961 
 Depreciation charge               97,867                  475            1,714,166              669,567     2,482,075 
 Disposal                               -                    -          (2,682,480)              (1,625)   (2,684,105) 
 Translation 
  differences                       9,304                    -               13,613                    -        22,917 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 As at 30 December 
  2018                            831,856              734,681           17,797,761           11,406,550    30,770,848 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 Net book value 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 As at 30 December 
  2018                         12,804,377                  318           18,195,236            8,081,712    39,081,643 
                      -------------------  -------------------  -------------------  -------------------  ------------ 
 
 

As at 30 December 2018, the net book value of freehold property includes land of GBP2,941,238 (31 December 2017: GBP2,767,923), which is not depreciated.

Included above are assets held under finance leases and hire purchase agreements. As at 30 December 2018, the net book value of such assets within plant & machinery is GBP nil (31 December 2017: GBP269,690) and within computer software & hardware is GBP335,067 (31 December 2017: GBP456,106).

   6.             Trade and other payables 
 
                                 Unaudited           Unaudited 
                            26 weeks ended      26 weeks ended 
                          30 December 2018    31 December 2017 
                                       GBP                 GBP 
---------------------   ------------------  ------------------ 
 Current 
 Trade payables                  4,091,494           4,554,352 
 Other payables                  3,933,504           2,855,517 
 Other taxes payable             8,317,253           7,625,446 
 Accruals                       10,803,538          10,773,634 
                        ------------------  ------------------ 
                                27,145,789          25,808,949 
                        ------------------  ------------------ 
 Non-current 
 Other payables                  2,861,683           2,546,523 
                        ------------------  ------------------ 
                                 2,861,683           2,546,523 
                        ------------------  ------------------ 
 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR DELFLKLFXBBF

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February 26, 2019 02:00 ET (07:00 GMT)

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