FY18 Preliminary results. September 2018

Transcription

1 FY18 Preliminary results September 2018

2 Financial Highlights 116.3m 105.2m 16.3m 18.9m 11.2m 12.7m 91.1m 12.4m 5.6m 81.1m 7.8m 4.1m REVENUE 116.3m (2017: 105.2m) +11% YEAR-ON-YEAR UNDERLYING EBITDA m (2017: 16.3m) +16% YEAR-ON-YEAR PROFIT BEFORE TAX 12.7m (2017: 11.2m) +13% YEAR-ON-YEAR PROFIT AFTER TAX 10.0m (2017: 8.8m) EARNINGS PER SHARE 8.8p (2017: 7.8p) FINAL DIVIDEND 1.1p (Full Year 1.7p, FY17 1.6p) 1. Underlying EBITDA is stated before non-cash share-based payments (FY18 0.7m, FY16 0.6m) 2

3 Operational Highlights 15 NEW STORES OPENED 3 NEW INTERNATIONAL VENTURES 6.5m CHOCOLATE BONDS REPAID IN FULL 100% ENGAGED ETHICS COCOA SUPPLY VIP ME REWARDS CARD LAUNCHED SEPT 18 2 NEW WHOLESALE ACCOUNTS FOR FY19 GROWTH STRATEGY IS ON TRACK 1. Open stores 2. Increase capacity and capture efficiencies from the vertically integrated supply chain 3. Grow digital customer base and improve gifting proposition, develop new subscription models 4. Cautious test, learn grow approach to new international markets; pilot store in US and Japan joint venture 15 OPERATIONAL HIGHLIGHTS Strong Seasonal ranges, product innovation and good availability drove increases in existing store and online sales Opened 15 stores, pipeline remains strong. Now have 30 shop+cafe format stores, with ability to flex offer for each location Chocolate Bonds repaid in full to customers, now debt-free Factory capacity increased by over 25% Production efficiency gains enabled re-investment in cocoa price ensuring 100% of cocoa purchases now apply the Engaged Ethics sustainability principles first developed in St Lucia Danish operation now franchised with development agreement covering Scandinavia. VIP ME rewards card launched September 2018, provides visibility of our retail shoppers for the first time, enabling a deeper relationship with the brand 2 new wholesale accounts since period end, increasing customer convenience 3

4 Group Income Statement 52 weeks ended 1 July 2018 m 53 weeks ended 2 July 2017 m Revenue Revenue growth +11% Year-on-Year Cost of sales (36.7) (33.8) Gross margin increased from 67.9% to 68.4% Operating expenses (60.7) (55.1) Operating cost ratio reduced from 52.4% to 52.2% Underlying EBITDA EBITDA growth +16% Year-on-Year EBITDA margin improved by 80bps from 15.5% to 16.3% Share based payments (0.7) (0.6) Depreciation & amortisation & loss on disposal (4.7) (3.9) Impairment (non-recurring) (0.3) - Operating profit Adjustment to valuation of Danish assets to reflect agreed price for the transaction which completed in FY19 Finance income 0 - Finance expenses (0.6) (0.7) Includes 0.1m non-cash interest on FX derivatives (FY16: 0.1m) Profit before tax Tax expense (2.7) (2.4) Profit for the period Profit growth +13% Year-on-Year EPS basic and diluted 8.8p 7.8p Profit for the period divided by the weighted average number of shares in issue (FY18 113m, FY17 113m). Number of shares in issue is unchanged since IPO 4

5 Group Balance Sheet As at 1 July 2018 m As at 2 July 2017 m Non-current assets Intangible assets Capital investments in IT Property, plant and equipment Capital investments in factory and new stores Derivative financial assets Prepayments Investment in JV Deferred tax asset Current assets Derivative financial assets Inventories More efficient production plan; 13 weeks forward stock cover (FY17 12 weeks) Trade and other receivables Cash and cash equivalents m of chocolate bonds repaid prior to the FY18 period end Total assets Current liabilities Trade and other payables Corporation tax payable Derivative financial liabilities Borrowings Chocolate bonds repaid in FY Non-current liabilities Other payables and accruals Derivative financial liabilities Borrowings Chocolate bonds repaid in FY18 Provisions Total liabilities NET ASSETS

6 Group cash flow 52 weeks ended 1 July 2018 m 53 weeks ended 2 July 2017 m Profit before tax for the period Adjusted by: Depreciation, amortisation & impairment Net interest expense Other non-cash expenses Operating cash flows before movements in working capital Changes in working capital (4.1) (3.0) Cash inflow generated from operations Income tax paid (2.5) (1.8) Interest paid (0.2) (0.4) Cash flows from operating activities % increase driven by sales growth & cost control Cash flows used in investing activities (11.2) (8.4) Cash flows from/(used in) financing activities (9.2) (0.8) Includes repayment of 6.5m of Chocolate Bonds in FY18 Net change in cash and cash equivalents (8.2) 1.8 Cash and cash equivalents at beginning of period Foreign currency movements Cash and cash equivalents at end of period

7 Positioned For Growth DIFFERENTIATED BRAND & PRODUCTS Core brand ethos of: ORIGINALITY, AUTHENTICITY AND ETHICS Differentiated taste More cocoa, less sugar Accessible luxury: prices from 1 to 300 High rate of product innovation within disciplined range architecture Consumer research shows high advocacy LARGE AND GROWING MARKETS 20bn UK gifting market 1 6bn UK chocolate market 2 8bn UK cafe market 3 HC has significant headroom in each UK consumer research shows perceived lack of access is the main barrier to purchase Cautious test, learn, grow approach to international markets GROWTH FROM PROVEN FORMATS STRONG PLATFORM Shop+cafe format Website growth of +14% Velvetiser in-home chocolate system supports new subscription models New wholesale partners Vertical integration is responsive whilst also protecting intellectual property Now leveraging top line growth Further economies of scale available Ability to increase capacity at factory and distribution centre in modular increments Source: 1) Mintel 2) Canadean 3) Allegra 7

8 Operational progress 8

9 Investment in new stores FY18 Opened 14 stores in UK and 1 in ROI Total UK estate of 104 stores Over 30% of store estate now features the drinks offering Reduced capex cost per square foot by 10% without compromising premium feel All established UK stores are EBITDA profitable FY19 and beyond Further 9 leases signed, to open in H1 FY19 Focus on experiential aspects including drinks & ice cream, engaging service, sampling and the new VIP ME rewards card to drive loyalty & frequency 9

10 Digital & Wholesale Website results Sales increased +14%, mobile conversion increased 8% New digital wholesale partners offer customers most convenient way to access brand. At retail price, the sales made via new digital wholesale partners would add a further 11% to website growth New developments for autumn 2018 Launched in September, the VIP ME rewards card offers treats to shoppers and gives visibility of multichannel buying Gift Finder selects the perfect gift by answering 3 simple questions and Whoosh Mobile Gift-sending via SMS Two further wholesale partners launching this autumn 10

11 Subscriptions Results Paused new customer recruitment. Sales -14% Year-on-Year Existing customers remain very loyal and are the bedrock of our chocolate development process Improved access to the brand via other channels has meant that acquiring new subscribers via traditional marketing routes not currently cost-effective New developments Launching Autumn 2018, the Velvetiser in-home hot chocolat system makes barista-grade drinks at the touch of a button Designed by Hotel Chocolat, engineered by Dualit Single-serve pouches of shaved chocolat in variety of flavours for ongoing purchase / subscription Phase II (2018 and beyond) Invest in profitable new customer Tasting Club and Velvetiser acquisition, leveraging enlarged retail database Recruited new position of Chief Marketing Officer, starts September 11

12 Production capacity & capability Capacity increased by >25% CAPITAL INVESTMENT, IMPROVED PRODUCTION PLANNING AND CONTINUOUS IMPROVEMENT FOCUS HAVE FUNDED COCOA SUSTAINABILITY INVESTMENT AND MITIGATED FX IMPACT FY18 GROSS MARGIN IMPROVED +50 bps FY18 1.4m Capital project to increase molten chocolate capacity completed January Continuous improvement philosophy at team level, combined with small capex investments to remove rate-limiting factors have unlocked material additional capacity and deferred the need for a fourth production line until 2021 Margin improvements funded the sustainability investments in cocoa price and mitigated the FX impact of lower sterling on ingredient imports Longer-term capacity and margin drivers New production line for solid shapes within existing factory roofline (2021) Planning process commenced for roofline extension, modular approach to adding 5 th, 6 th, 7 th lines only when required 12

13 International Japan USA Denmark Hong Kong Growth Strategy Joint venture with Japanese management team Company-owned stores with in-country management Franchise and development agreement with local partner Franchise and development agreement with local partner Management Team In-country team led by Chris Horobin, former CEO of QVC Japan and Hiro Nagasse, former Vice President, Digital Commerce at QVC Japan In-country management team recruited. Greg Hodder, Non-executive Director, will be heavily involved in overseeing US strategy and has a wealth of experience growing British brands in the US, including Charles Tyrwhitt shirts Experienced Danish multibrand franchise operator. If store opening target for Denmark is achieved partner has option to extend to wider Nordic region. Progress update First store in Tokyo scheduled to open this winter First store in New York scheduled to open this winter Existing Danish stores transferred to partner and two further stores opened Seeking new franchise partner following change of strategy by incumbent 9 13

14 Key New Products Innovation highlights Over 200 new products launched in the year, including: Velvetiser hot-chocolat system & single serve pouches New chocolat cream liqueur New Mint Thins and Coffee Thins Wider Vegan range, first ever Free From products in development Chocolat Macarons Luxe Fruit and Nuts Seasonal Gingerbread Hot Chocolat Salted Caramel Penguins Giant Wreath Box 5 14

15 Outlook Strong differentiated brand with accessible luxury price points Occasion-driven purchasing and relatively modest average spend per visit relative to demographics Vertical integration increases flexibility Well positioned to capitalise on consumer trends More cocoa less sugar Experiences (rollout of drinks & ice cream to more locations) Mobile (gifting apps, VIP Me rewards gives visibility of retail buyers and grows database) Current trading is encouraging Trading in line with management expectations New stores performing well, strong pipeline for sites Test, learn, grow approach to new opportunities: Wholesale International New subscriptions 15

16 Our cocoa estate in Saint Lucia where we first developed the Engaged Ethics approach to cocoa growing, now applied to 100% of our cocoa supply WE LL STOP AT NOTHING TO MAKE THE BEST CHOCOLATE ON THE PLANET THANK YOU 16