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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 374.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMHOTC
RNS Number : 9727D
Hotel Chocolat Group PLC
25 February 2020
25th February 2020
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 29 December 2019. All numbers shown are after adopting IFRS 16 unless otherwise stated.
Financial highlights:
Hot Features
Premium
-- Revenue up 14% to GBP91.7m (H1 FY19: GBP80.7m)
-- Underlying EBITDA pre IFRS 16 up 7% to GBP18.5m (H1 FY19: GBP17.3m)(1)
-- Profit before tax pre IFRS 16 up 7% to GBP14.9m (H1 FY19: GBP13.8m)
-- Strong balance sheet with net cash at period end of GBP24.3m (H1
FY19: GBP21.8m)
-- Earnings per share up 20% to 11.5p (H1 FY19: 9.6p)
-- Interim dividend of 0.6p per share (H1 FY19: 0.6p)
Period ended Period ended
29 December 2019 30 December 2018
GBP000 GBP000
------------------------------------------------ --- ------------------ ------------------
Revenue 91,716 80,719
Underlying EBITDA(1) (pre IFRS 16) 18,521 17,330
Profit before tax (pre IFRS 16) 14,870 13,847
Basic Earnings per share (pre IFRS 16) 11.3p 9.6p
IFRS 16: benefit to reported Profit before tax 114
IFRS 16: reduction in Tax expense 25
Profit before tax 14,984 13,847
Profit after tax 13,076 10,802
Basic Earnings per share 11.5p 9.6p
----------------------------------------------------- ------------------ ------------------
(1) Underlying EBITDA in H1 FY20 excludes GBP0.5m of share-based charges (H1 FY19: GBP0.4m).
Operational highlights:
-- Strong sales growth reflecting continued brand appeal and ongoing
product innovation
-- 9 new UK locations, ending the period with 125 UK locations
-- International rollout in line with strategy, 2 new locations in
the USA and 3 in Japan
-- New UK and International locations contributed 3 percentage points
to Group sales growth
-- VIP membership grew by +120% to 1.1m active members
-- Velvetiser hot chocolate system; sales increased by over 200% year-on-year;
refill subscription now launched
Angus Thirlwell, Co-founder and Chief Executive Officer of Hotel Chocolat, said:
"This was another strong period for Hotel Chocolat. Our new store openings contributed three percentage points of the growth in the period, with the remaining balance coming from existing locations, digital and wholesale channels. While our new markets in the US and Japan are still in the early stages of development, consumer response to the brand is encouraging, sales are growing, and we believe we have a deliverable plan to achieve attractive returns.
"The Velvetiser in-home hot chocolate system achieved strong growth, with our installed Velvetiser owner base showing great loyalty and enthusiasm for our widening library of flavours, with Tasmanian Mint, Habanero Chilli, and Maple & Pecan hot chocolates becoming instant hits. Our VIP loyalty scheme continued to grow strongly and contributed to double digit EBITDA growth from our physical UK locations.
"Our strong growth came from a wider variety of sales channels than in previous years, which led to some initial challenges in our supply chain. We are now making good progress with investments and upgrades in our supply chain which will fully address these inefficiencies and increase our international and multi-channel supply capability, ensuring we continue to deliver profitable growth."
For further information:
+ 44 (0) 20 7638
Hotel Chocolat Group plc c/o Citigate 9571
Angus Thirlwell, Co-founder and Chief
Executive Officer
Peter Harris, Co-founder and Development
Director
Matt Pritchard, Chief Financial Officer
+ 44 (0) 20 7638
Citigate Dewe Rogerson - Financial PR 9571
Angharad Couch
Ellen Wilton
Kieran Farthing
Liberum Capital Limited - Nominated Advisor and + 44 (0) 20 3100
Broker 2222
Clayton Bush
James Greenwood
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 locations in the UK and abroad. The Group has a cacao plantation and eco-hotel in Saint Lucia, offering complete cacao immersion through tree-to-bar experiences and wellness treatments. The Group also has a flagship restaurant and cacao 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 Period ended Period ended
29 December 2019 29 December 2019 29 December 2019 30 December 2018
(Pre IFRS16)* IFRS 16 Adj*
GBP000 GBP000 GBP000 GBP000
--------------------------------- ------------------ ------------------ ------------------ ------------------
Revenue 91,716 91,716 80,719
Gross profit 59,633 59,633 53,097
Operating expenses (41,112) 6,048 (35,064) (35,767)
---------------------------------- ------------------ ------------------ ------------------ ------------------
Underlying EBITDA 18,521 6,048 24,569 17,330
Share-based payments (527) (527) (408)
---------------------------------- ------------------ ------------------ ------------------ ------------------
EBITDA 17,994 6,048 24,042 16,922
Depreciation & amortisation (2,982) (5,212) (8,194) (2,793)
Loss on disposal of property,
plant & equipment (12) (12) (24)
Operating profit 15,000 836 15,836 14,105
Finance income 62 62 5
Finance expense (183) (722) (905) (179)
Share of joint venture results (9) (9) (84)
---------------------------------- ------------------ ------------------ ------------------ ------------------
Profit before tax 14,870 114 14,984 13,847
Tax expense (1,933) 25 (1,908) (3,045)
---------------------------------- ------------------ ------------------ ------------------ ------------------
Profit for the period 12,937 139 13,076 10,802
Earnings per share - Basic 11.3p 0.2p 11.5p 9.6p
Earnings per share - Diluted 11.2p 0.2p 11.4p 9.5p
Dividend per share 0.6p 0.6p 0.6p
* The Group has initially applied IFRS 16 at 1(st) July 2019 using the modified retrospective approach. Under this approach comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application. (See Note 2)
CHIEF EXECUTIVE'S STATEMENT
I am pleased to report continued progress for the Hotel Chocolat brand during the 26 weeks to 29 December 2019. Revenue for the period increased by 14% and underlying EBITDA (pre IFRS 16) increased by 7%. Our growth strategy continues to focus on four key themes:
1) UK Physical locations
We opened nine new Hotel Chocolat locations in the UK during the period and generated double-digit increase in EBITDA profitability from our UK estate. Further attractive opportunities remain, which we will continue to evaluate on a site-by-site basis. We are also investing in our existing estate; we re-located in Cardiff and Brighton to larger prime sites with our full offer, and have begun to refit locations, adding our leisure experience with drinks, ices and seating to London Moorgate and Gateshead Metro Centre. Initial results suggest that 'upgrade investment' in existing strong catchments will offer attractive returns as well as nourishing the brand and continuing to add to its appeal.
2) Cautious 'test, learn, grow' approach to new international markets
In the USA, we opened two more locations in the period, bringing the total to four. Consumer reaction is encouraging, and our first location in the USA has now passed its one-year anniversary, generating a modest EBITDA profit in the period. We have a clear and deliverable plan to further improve profitability in the coming years to the point where a rollout model would generate attractive returns.
In Japan, our joint venture partner opened three more locations bringing the total to five. Consumer reaction is similarly encouraging, and our first opening has also now passed its one-year anniversary, generating a modest EBITDA profit in the period. Unlike the UK and the USA, the larger gift-giving seasons are in the second half of our financial year, therefore we anticipate a further improvement in site-level economics in the second half of this coming financial year. Again, we have a clear and deliverable plan to improve profitability in the coming years to the point where a rollout model would generate attractive returns.
3) UK digital proposition
Despite being an early online pioneer, we believe we have under-invested in this part of our model over the last few years. The first half of the financial year saw us make investments to address this, with several new hires and a new suite of tools to make fuller use of the opportunities of our strong brand and burgeoning customer base.
Our new in-sourced CRM system is driving improved customer communication. We launched a new subscription service for Velvetiser refills, and we grew our VIP scheme by over 100 per cent, for which we will shortly be introducing an App.
4) Increase capacity and capture efficiencies from the vertically integrated supply chain
Our gross margin rate declined by 80 basis points due to the increased sales mix of the Velvetiser in-home hot chocolate maker. The initial sale has a lower than average gross margin, but this is offset by the lifetime value of the chocolate refills. We continue to innovate the library of flavours on offer and have now launched a free-delivery subscription service.
In supplying more growth channels, we encountered some inefficiency in our internal supply chain which resulted in overheads increasing by 50 basis points. Having identified the root causes, an investment programme is already underway to prepare our supply chain in advance of the 2020 winter peak.
FINANCIAL REVIEW
Revenue
Group revenue increased by 14% to GBP91.7m. Nine new locations were opened in the UK during the period contributing three percentage points of the Group's year-on-year growth. Retail, digital and wholesale all delivered sales growth.
Profit Before Tax
Profit before tax (pre IFRS 16) increased by 7% to GBP14.9m. IFRS 16 has been applied at 1(st) July using the modified retrospective approach under which comparative information is not restated. Reported Profit before tax increased by 8% to GBP15.0m.
Gross margin
Gross margin declined by 80 basis points from 65.8% to 65.0% driven by the mix impact of Velvetiser sales. Whilst the initial sale of Velvetisers are at a lower gross margin, the recurring chocolate refills have a higher purchase frequency than our other products.
Operating expense
Operating expenses (pre IFRS 16) grew by 15%, ahead of the rate of sales growth, with additional costs of fulfilment during the winter peak. As a result, operating expenses as a percent of sales increased from 44.3% to 44.8%. The transition to IFRS16 resulted in reported Operating expenses of 38.2% of sales.
Underlying EBITDA
Underlying EBITDA (pre IFRS 16) increased 7% to GBP18.5m.
Share based payments
Share-based payment expense of GBP0.5m (H1 FY19: 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.
Finance income and expense
Finance expense (pre IFRS 16) of GBP0.2m reflects GBP0.1m of interest on a working capital overdraft, and GBP0.1m of realised interest on foreign exchange hedges. Post IFRS 16 Finance Expense is GBP0.9m. Finance income of GBP0.1m is driven primarily by unrealised interest on foreign exchange hedges.
Earnings per share
Basic earnings per share in the period (pre IFRS 16) increased 18% to 11.3p (H1 FY19: 9.6p). Post IFRS 16 Earnings per share were 11.5p. The exercise of the 2016 Long Term Incentive Plan and Save-As -You-Earn schemes in the period resulted in corporation tax deductions, giving an effective tax rate of 13.0% (pre IFRS-16) (H1 FY19 22.0%).
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 15th April 2020 to shareholders on the register on 6(th) March 2020. 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 GBP30.2m (H1 FY19: GBP29.5m) an increase of 2 percent.
Net cash (being cash minus borrowings) at the end of the period was GBP24.3m (H1 FY19: GBP21.8m). 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 Hotel Chocolat locations, refits of existing locations, upgrades to the manufacturing facility and Distribution Centre.
OUTLOOK
Since the end of the financial reporting period, trading has continued to be in line with the Board's expectations. The performance of the new locations is encouraging and there is a future pipeline of similar potential locations. The Velvetiser and the VIP Me loyalty card scheme both performed well during their second year and both offer significant future growth potential.
In delivering these results in a context of continued macro-economic uncertainty, the business has demonstrated creativity, resilience and adaptability. Delivery against the four-point strategy will result in top-line growth and improve profitability in the UK, enabling the Group to invest in the growing new markets of USA and Japan. A strongly 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.
Adoption of IFRS 16 "Leases"
The Group has initially applied IFRS 16 "Leases" as at 1(st) July 2019. A right of use asset and a lease liability is included on the balance sheet, and depreciation and interest have been charged to the income statement, replacing rental charges through operating expenses. The change has no impact to cash flow and therefore has no impact to the Board's decision-making.
Discount rates ranging between 2% and 3.5% have been applied using a portfolio approach. The discount rate is based on the Bank of England Base rate, modified to account for credit premium and the remaining lease term. Store leases have been stratified using a number of factors including:
- the remaining lease term at date of adoption - store contribution and payback
The weighted average incremental borrowing rate applied at the date of transition was 2.5%.
The Group has adopted the modified retrospective approach, under which comparative information is not restated. The cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application.
A summary of the impact on the Group income statement and balance sheet is as follows:
Impact on the Group income statement H1 FY20 H1 FY19
GBP000 GBP000
------------------------------------- -------- --------
Operating expenses:
Rent 6,048 -
Depreciation (5,212) -
Net reduction in Operating expenses 836 -
Finance expenses (722) -
Net increase to Profit before tax 114 -
Tax 25 -
Net increase to profit after tax 139 -
Impact on the Group balance sheet H1 FY20 H1 FY19
GBP000 GBP000
---------------------------------- --------- --------
Right of use asset 50,728 -
Lease liability (54,926) -
Retained earnings 1,289 -
Angus Thirlwell
Co-founder and Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 29 December 201 9
Unaudited* Unaudited
26 weeks ended 26 weeks ended
29 December 2019 30 December 2018
Notes GBP'000 GBP'000
------------------------------------------------------------- -------- ------------------ ------------------
Revenue 91,716 80,719
Cost of sales (32,083) (27,622)
------------------ ------------------
59,633 53,097
Operating expenses (43,797) (38,993)
------------------ ------------------
3 15,836 14,104
Finance income 4 62 5
Finance expenses 4 (905) (179)
Share of joint venture results (9) (84)
------------------ ------------------
Profit before tax 14,984 13,846
Profit before tax and IFRS 16 14,870 13,846
IFRS 16 Operating expenses 836 -
IFRS 16 Finance expenses 4 (722) -
Tax expense (1,908) (3,045)
------------------ ------------------
Profit for the period 13,076 10,801
Other comprehensive income:
Derivative financial instruments (518) 282
Deferred tax charge on derivative financial instruments 42 (26)
Currency translation differences arising from consolidation (227) 384
------------------ ------------------
Total comprehensive income for the period 12,373 11,441
------------------ ------------------
Basic Earnings per share pre/post IFRS 16 5 11.3p/11.5p 9.6p
Diluted Earnings per share pre/post IFRS 16 5 11.2p/11.4p 9.5p
* The Group has initially applied IFRS 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application. (See note 2)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 29 December 201 9
Unaudited Unaudited Audited
As at As at As at
29 December 2019 30 December 2018 30 June
GBP'000 GBP'000 2019
Notes GBP'000
------------------------------------------- -------- ------------------ ------------------ ---------
ASSETS
Non-current assets
Intangible assets 3,244 2,729 2,912
Property, plant and equipment 6 45,009 39,082 40,115
Right of use asset 2 50,728 - -
Investment in joint ventures - 32 9
Loan to joint venture 3,970 706 2,488
Derivative financial assets 12 109 -
Other receivables and prepayments - 9 18
Deferred tax asset 278 319 623
103,241 42,986 46,165
Current assets
Derivative financial assets - 206 81
Inventories 16,222 9,436 12,810
Trade and other receivables 10,230 9,549 9,360
Cash and cash equivalents 24,299 21,879 5,778
------------------ ------------------ ---------
50,751 41,070 28,029
Total assets 153,992 84,056 74,194
LIABILITIES
Current liabilities
Trade and other payables 7 34,758 27,146 19,528
Corporation tax payable 712 3,016 1,607
Derivative financial liabilities 404 - 2
Lease liabilities 2 11,705 - -
Borrowings - 118 17
47,579 30,280 21,154
Non-current liabilities
Other payables and accruals 7 - 2,861 2,757
Derivative financial liabilities - - 9
Lease liabilities 2 43,221 - -
Provisions - 936 944
43,221 3,797 3,710
Total liabilities 90,800 34,077 24,864
NET ASSETS 63,192 49,979 49,330
EQUITY
Share capital 116 113 113
Share premium 15,825 11,750 11,750
Retained earnings 43,760 33,909 33,359
Translation reserve 1,026 1,264 1,253
Merger reserve 223 223 223
Capital redemption reserve 6 6 6
Other reserves 2,236 2,713 2,626
------------------ ------------------ ---------
Total equity attributable to shareholders 63,192 49,979 49,330
------------------ ------------------ ---------
* The Group has initially applied IFRS 16 at 1 July 2019 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application. (See note 2)
CONSOLIDATED STATEMENT OF CASH FLOW
For the period ended 29 December 201 9
Unaudited Unaudited
26 weeks ended 26 weeks ended
29 December 2019 30 December 2018
Notes GBP'000 GBP'000
---------------------------------------------------------------- -------- ------------------ ------------------
Profit before tax for the period 14,984 13,847
Adjusted by:
Depreciation of property, plant and equipment 6 2,727 2,482
Depreciation of Right of use asset 5,212 -
Amortisation of intangible assets 255 311
Loss of joint ventures 9 84
Net interest expense 845 173
Share-based payments 527 408
Loss on disposal of property, plant and equipment and
intangible assets 12 24
------------------ ------------------
Operating cash flows before movements in working capital 24,571 17,329
Decrease/(increase) in inventories (3,412) 3,120
Decrease/(Increase) in trade and other receivables (3,111) (2,071)
Increase in trade and other payables and provisions 15,590 12,645
------------------ ------------------
Cash inflow generated from operations 33,638 31,023
Interest received 6 1
Income tax paid (2,541) (1,320)
Interest paid on:
(722) -
* interest paid - IFRS leases
* derivative financial instruments (104) (100)
* bank loans and overdraft (45) (61)
------------------ ------------------
Cash flows from operating activities 30,232 29,543
------------------ ------------------
Purchase of property, plant and equipment (7,362) (5,632)
Proceeds from disposal of property, plant and equipment 79 10
Investment in joint venture (7)
Loan to joint venture (1,482) (779)
Purchase of intangible assets (480) (242)
Cash flows used in investing activities (9,245) (6,650)
------------------ ------------------
Proceeds on issue of shares 4,078 1
Capital element of hire purchase and finance leases repaid (17) (101)
Payment of IFRS16 lease liabilities (5,065) -
Dividends paid (1,386) (1,241)
Cash flows used in financing activities (2,390) (1,341)
------------------ ------------------
Net change in cash and cash equivalents 18,597 21,552
Cash and cash equivalents at beginning of period 5,778 236
Foreign currency movements (76) 91
Cash and cash equivalents at end of period 24,299 21,879
------------------ ------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 29 December 201 9
Capital
Share Share Retained Translation Merger redemption Other
capital Premium earnings reserve reserve reserve reserves Total
GBP000s GBP000s GBP000s GBP000s GBP 000s GBP000s GBP000s GBP 000s
--------------- ----------- ----------- ---------- ------------- ---------- ----------- ---------- -----------
As at 1 July
2018 113 11,749 24,348 881 223 6 2,291 39,611
Issue of share
capital - 1 - - - - - 1
Share-based
payments - - - - - - 408 408
Deferred tax
charge on
share-based
payments - - - - - - (241) (241)
Profit for the
period - - 10,802 - - - - 10,802
Dividends paid - - (1,241) - - - - (1,241)
Other
comprehensive
income:
Derivative
financial
instruments - - - - - - 281 281
Deferred tax
charge on
derivative
financial
instruments - - - - - - (26) (26)
Currency
translation
differences
arising from
consolidation - - - 384 - - - 384
----------- ----------- ---------- ------------- ---------- ----------- ---------- -----------
Equity as at
30 December
2018 113 11,750 33,909 1,265 223 6 2,713 49,979
Share-based
payments - - - - - - (162) (162)
Deferred tax
charge on
share-based
payments - - - - - - 242 242
Profit for the
period - - 127 - - - - 127
Dividends paid - - (677) - - - - (677)
Other
comprehensive
income:
Derivative
financial
instruments - - - - - - (210) (210)
Deferred tax
credit on
derivative
financial
instruments - - - - - - 43 43
Currency
translation
differences
arising from
consolidation - - - (12) - - (12)
Equity as at
30 June 2019 113 11,750 33,359 1,253 223 6 2,626 49,330
Capital
Share Share Retained Translation Merger redemption Other
capital Premium earnings reserve reserve reserve reserves Total
GBP000s GBP000s GBP000s GBP000s GBP 000s GBP000s GBP000s GBP 000s
--------------- ----------- ----------- ---------- ------------- ---------- ----------- ---------- -----------
Equity as at
30 June 2019 113 11,750 33,359 1,253 223 6 2,626 49,330
Adjustment on
initial
application
of IFRS 16 - - (1,289) - - - - (1,289)
Opening Equity
as at 1 July
2019 113 11,750 32,070 1,253 223 6 2,626 48,041
Issue of share
capital 3 4,075 - - - - - 4,078
Share-based
payments - - - - - - 466 466
Deferred tax
charge on
share-based
payments - - - - - - (380) (380)
Profit for the
period - - 13,076 - - - - 13,076
Dividends paid - - (1,386) - - - - (1,386)
Other
comprehensive
income:
Derivative
financial
instruments - - - - - - (518) (518)
Deferred tax
charge on
derivative
financial
instruments - - - - - - 42 42
Currency
translation
differences
arising from
consolidation - - - (227) - - (227)
----------- ----------- ---------- ------------- ---------- ----------- ---------- -----------
Equity as at
29 December
2019 116 15,825 43,760 1,026 223 6 2,236 63,192
----------- ----------- ---------- ------------- ---------- ----------- ---------- -----------
N OTES 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 30 June 2019 and that are expected to be applied in the Group's Annual Report and Accounts for the period ended 28 June 2020. There are new or revised standards that apply to the period beginning 1 July 2019 but they do not have a material effect on the financial information for the period ended 29 December 2019, with the exception of IFRS 16 detailed below.
The comparative financial information for the period ended 30 June 2019 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 30 June 2019 have been delivered to the Registrar of Companies.
The auditors' report on the accounts for 30 June 2019 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. Significant accounting policies
Directors have taken into account the historic positive cash flows, growth in business and the inherent risks and uncertainties facing the business, and have derived forecast assumptions that are the Directors' best estimate of the future development of the business. The forecasts and projections, which take into account the projected trading performance of companies within the Group's combined bank facilities, show that the Group will be able to operate within the level of its current facilities. On this basis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the consolidated financial information.
Except for the first time adoption of IFRS 16 detailed below, the interim financial results have been prepared by applying the accounting policies that were applied in the preparation of the 2019 Annual Report and Accounts which are published on the Hotel Chocolat website, www.hotelchocolat.com . The changes to accounting policies outlined below are also expected to be reflected in the Group's consolidated financial statements as at the year ending 28 June 2020.
Other than IFRS 16 there are no new or amended standards effective in the period which has had a material impact on the interim consolidated financial information.
IFRS 16 "Leases"
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessor. It eliminates the lease classification of leases as either operating leases or financial leases and introduces a single lease accounting model requiring lessees to recognise a lease liability reflecting the future lease payments and a right-of-use asset for lease contracts.
a. Transition method and practical expedients applied
The Group has applied the modified retrospective transition approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures.
On transition to IFRS 16 the group elected to apply the following practical expedients on a lease by lease basis as allowed by the standard:
-- apply a single discount rate to a portfolio of leases with
reasonably similar characteristics
-- to rely upon previous assessments of onerous leases
-- apply the short term and low value exemptions
Lease payments for low value or short term leases where the Group has elected not to recognise a right-of-use asset and lease liability are charged as an expense on a straight line basis.
At the date of commencement of property leases the Group determines the lease term to be the full term of the lease, assuming that any option to break or extend is not likely to be exercised. Leases are regularly reviewed and will be revalued if it becomes likely that a break clause or option to extend will be exercised. The weighted average incremental borrowing rate applied at the date of transition was 2.5%.
b. Right of use assets
The Group recognises a right-of-use asset at the lease commencement date. The right-of-use asset is measured as their carrying amount as if IFRS 16 has been applied since the commencement date, discounted using the lessees incremental rate at the date of initial application. Subsequent to measurement, right-of-use assets are amortised on a straight line basis over the remaining term of the lease or over the remaining economic life of the asset if assessed to be shorter.
c. Lease liabilities
The lease liabilities are measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 July 2019. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained over a similar term in a similar economic environment. Judgement is required to determine an approximation with consideration given to the Groups borrowing facilities and Bank of England Base rates adjusted by an indicative credit premium and a lease specific adjustment.
Subsequently, the lease liability is increased by the interest cost on the lease liability and decreased by the lease payments made. It is re-measured if there is a modification, a change in lease term or a change in the fixed lease payment.
d. Impacts on the financial statements (i) Balance sheet
The impact on the balance sheet on transition is summarised below:
1 July 2019
GBP000
--------------------- ------------
Right of use assets 50,603
Lease liabilities (54,249)
Deferred tax asset 255
Prepayments (2,258)
Accruals 2,492
Retained Earnings 1,289
d. Impacts on the financial statements (continued)
The table below shows a reconciliation from the total operating lease commitment as disclosed at 30 June 2019 to the total lease liabilities recognised in the accounts immediately after transition:
1 July 2019
GBP000
--------------------------------------------------------------------------------------------- ------------
Operating lease commitment at 30 June 2019 per the Groups consolidated financial statements 59,859
Discounted using the incremental borrowing rate at 1 July 2019 (6,510)
Recognition exemption for lease of low values assets / short term leases (1,413)
Finance lease liabilities recognised at 30 June under IAS 17 2,313
Total lease liabilities recognised at 1 July 2019 54,249
The Group presents right-of-use assets separately in the consolidated balance sheet. The carrying amounts of right-of-use assets are as below:
Property, Plant and Equipment
GBP000
----------------------------- ------------------------------
Balance at 1 July 2019 50,603
Balance at 29 December 2019 50,728
The Group presents lease liabilities separately in the consolidated balance sheet.
(ii) Income statement
The Group has recognised amortisation and interest costs in respect of leases that were previously classified as operating leases in the income statement, rather than rental charges. During the period ended 29 December 2019, the Group recognised GBP5.2m of additional amortisation charges and GBP0.7m of additional interest costs in respect of these leases.
(iii) Reserves
The Group has applied IFRS 16 using the modified retrospective approach, whereby the initial right-of-use asset was measured at carrying amount as if the standard had always been applied, but discounted using the incremental borrowing rate at the date of initial application. The lease liability was measured at the present value of the remaining lease payments. The mismatch between the liability and asset value at transition is taken to reserves. The Group has taken GBP1.3m to reserves at the start of the period.
3. Profit from operations
Profit from operations is arrived at after charging:
Unaudited Unaudited
26 weeks ended 26 weeks ended
29 December 2019 31 December 2018
GBP000 GBP000
------------------------------------------------------------------------- ------------------ ------------------
Staff cost 23,924 17,630
Depreciation of property, plant and equipment 2,727 2,482
Amortisation of intangible assets 255 311
Depreciation of Right of Use asset 5,212 -
Operating leases:
* Property - 5,832
* Plant and equipment - 129
Loss on disposal of property, plant and equipment and intangible assets 12 24
Exchange differences (88) 35
Bad debt expense 18 20
------------------ ------------------
4. Finance income and expenses
Unaudited Unaudited
26 weeks ended 26 weeks ended
29 December 2019 30 December 2018
GBP000 GBP000
--------------------------------------------------------- ------------------ ------------------
Interest on bank deposits 6 1
Unrealised interest on derivative financial instruments 56 4
Finance income 62 5
------------------ ------------------
Interest on bank borrowings 79 78
Realised interest on derivative financial liabilities 104 100
Finance leases and hire purchase contracts - 1
IFRS 16 Interest charge 722 -
------------------ ------------------
Finance expenses 905 179
------------------ ------------------
5. 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
29 December 2019 30 December 2018
GBP000 GBP000
--------------------------------------------- ------------------ ------------------
Profit after tax for the period pre IFRS 16 12,937 10,801
IFRS 16 adjustment to profit before tax 114
IFRS 16 adjustment to tax 25
Profit after tax for the period 13,076 10,801
------------------ ------------------
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
29 December 2019 30 December 2018
------------------------------------------------------------------------- ------------------ ------------------
Weighted average number of shares in issue used in the calculation of
earnings per share (number)
- Basic 114,197,428 112,838,213
Share-based payments - Hotel Chocolat Group plc Save As You Earn Plan 566,898 340,202
LTIP 2016 unexercised options 418,810
Weighted average number of shares in issue used in the calculation of
earnings per share (number)
- Diluted 115,183,136 113,178,415
Basic Earnings per share (pence) - pre/post IFRS 16 11.3/11.5 9.6
Diluted Earnings per share (pence) - pre/post IFRS 16 11.2/11.4 9.5
------------------ ------------------
As at 29 December 2019, the total number of potentially dilutive shares issued under the Hotel Chocolat Group plc Long-Term Incentive Plan was 301,073 (30 December 2018: 3,657,000). Due to the nature of the options granted under this scheme, they are considered contingently issuable shares and therefore have no dilutive effect.
* The Group has initially applied IFRS 16 at 1(st) July 2019 using the modified retrospective approach. Under this approach comparative information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial application. (See Note 2)
6. Property, plant and equipment
Furniture &
fittings,
Equipment,
Computer
Freehold Leasehold software & Plant & Right of use
property property hardware machinery asset Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------
26 weeks ended 30 December 2018
Cost:
As at 1 July
2018 12,837 735 34,890 18,896 - 67,358
Additions 388 - 3,762 607 - 4,757
Disposals - - (2,701) (15) - (2,716)
Translation
differences 411 - 42 - - 453
As at 30
December 2018 13,636 735 35,993 19,488 - 69,852
---------------- ---------------- ---------------- ---------------- ---------------- ---------
Accumulated
depreciation:
As at 1 July
2018 725 734 18,752 10,739 - 30,950
Depreciation
charge 98 1 1,714 670 - 2,483
Disposal - - (2,682) (2) - (2,684)
Translation
differences 9 - 14 - - 23
As at 30
December 2018 832 735 17,798 11,407 - 30,772
---------------- ---------------- ---------------- ---------------- ---------------- ---------
Net book value
---------------- ---------------- ---------------- ---------------- ---------------- ---------
As at 30
December 2018 12,804 - 18,195 8,081 - 39,080
---------------- ---------------- ---------------- ---------------- ---------------- ---------
26 weeks ended 29 December 2019
Cost:
As at 30 June
2019 14,775 735 36,184 21,544 - 73,238
IFRS 16 opening
adjustment - - (695) - 50,603 49,907
---------------- ---------------- ---------------- ---------------- ---------------- ---------
As at 1 July
2019 14,775 735 35,489 21,544 50,603 123,145
---------------- ---------------- ---------------- ---------------- ---------------- ---------
Additions 586 18 3,647 4,178 5,507 13,936
Disposals - - (401) - - (401)
Translation
differences (339) - (67) - (179) (585)
As at 29
December 2019 15,022 753 38,668 25,722 55,931 136,095
---------------- ---------------- ---------------- ---------------- ---------------- ---------
6. Property, plant and equipment (continued)
Furniture &
fittings,
Equipment,
Computer software
Freehold property Leasehold & hardware Plant & machinery Right of use
GBP000 property GBP000 GBP000 asset Total
GBP000 GBP000 GBP000
-------------------- ------------------- ------------------- -------------------- ------------------- ---------
Accumulated depreciation:
As at 30 June 2019 816 735 19,845 11,727 - 33,123
IFRS 16 opening adjustment - - (353) - - 353
------- ---- ------- ------- ------- -------
As at 1 July 2019 816 735 19,492 11,727 - 32,770
------- ---- ------- ------- ------- -------
Depreciation charge 80 - 2,059 588 5,212 7,939
Disposal - (309) - - (309)
Translation differences (11) - (21) - (9) (41)
------- ---- ------- ------- ------- -------
As at 29 December 2019 885 735 21,221 12,315 5,203 40,359
------- ---- ------- ------- ------- -------
Net book value
------- ---- ------- ------- ------- -------
As at 29 December 2019 14,137 18 17,447 13,407 50,728 95,737
------- ---- ------- ------- ------- -------
As at 29 December 2019, the net book value of freehold property includes land of GBP2,853,955 (31 December 2018: GBP2,941,238), which is not depreciated.
7. Trade and other payables
Unaudited Unaudited
26 weeks ended 26 weeks ended
29 December 2019 30 December 2018
GBP000 GBP000
--------------------- ------------------ ------------------
Current
Trade payables 10,504 4,091
Other payables 4,376 3,934
Other taxes payable 9,566 8,317
Accruals 10,312 10,804
------------------ ------------------
34,758 27,146
------------------ ------------------
Non-current
Other payables - 2,861
------------------ ------------------
- 2,861
------------------ ------------------
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 BZLLLBLLBBBE
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February 25, 2020 02:00 ET (07:00 GMT)
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