FY17 Preliminary results September 2017
Financial highlights 91.1m 81.1m 105.2m 12.4m 16.3m 11.2m 7.8m 5.6m 15 16 17 15 16 17 2.0m 15 16 17 REVENUE 105.2m (2016: 91.1m) +12% YEAR-ON-YEAR 1 UNDERLYING EBITDA 2 16.3m (2016: 12.4m) +32% YEAR-ON-YEAR PROFIT BEFORE TAX 11.2m (2016: 5.6m) +100% YEAR-ON-YEAR PROFIT AFTER TAX 8.8m (2016: 4.1m) EARNINGS PER SHARE 7.8p (2016: 3.9p) MAIDEN DIVIDEND 1.6p 1. Reported revenue is for 53 weeks, (FY16 52 weeks). Revenue growth is for 52 weeks in constant currency on a pro forma basis (FY17 104.2m, FY16 93.1m). Hotel Chocolat Estates St Lucia (HCESL) was acquired by the group in April 2016, the pro forma includes the results for HCESL for the entirety of both periods. The impact of the 53 rd week on reported EBITDA and profit is not material. 2. Underlying EBITDA is stated before share-based payments (FY17 0.6m, FY16 0.1m) and exceptional costs relating to the IPO (FY17nil, FY16 2.6m)
Operational highlights 12 NEW STORES OPENED 2 FRANCHISE STORES IN HONG KONG 6 NEW WHOLESALE ACCOUNTS FOR FY18 +30% MOBILE CONVERSION ON NEW WEBSITE +20% FACTORY CAPACITY GROWTH 1 SUCCESFUL STORE REFIT TEST GROWTH STRATEGY IS ON TRACK 1. Open stores & new shop+cafe format 2. Increase capacity and capture efficiencies from the vertically integrated supply chain 3. New digital site to grow customer base and improve gifting proposition 15 OPERATIONAL HIGHLIGHTS Strong Seasonal ranges, product innovation and good availability drove increases in existing store and online sales Opened 12 stores in UK, pipeline is strong. Now have 16 shop+cafe format stores, with ability to flex offer for each location. Success of new format suggests stores are viable in smaller catchments than shop-only format Hong Kong franchise partner opened two stores in Q4 FY17, in advance of peak winter gifting season 6 new wholesale accounts since period end, increasing customer convenience New website increased mobile conversion by 30%, over half of site traffic now comes from mobiles & tablets Factory investment: capacity increased by over 20%, gross margin +110bps Year-on-Year Encouraging early results from refit of Milton Keynes store 2
Group income statement 53 weeks ended 2 July 2017 000 52 weeks ended 26 June 2016 000 Revenue 105,240 91,089 Revenue growth +12% Year-on-Year 1 Cost of sales (33,758) (30,237) Gross margin increased by 110bps from 66.8% to 67.9% Operating expenses (55,135) (48,457) Operating cost ratio reduced by 80bps from 53.2% to 52.4% Underlying EBITDA 16,347 12,395 EBITDA growth +32% Year on Year EBITDA margin improved by 190bps from 13.6% to 15.5% Exceptional costs - (2,642) Costs relating to flotation in May 2016 Share based payments (562) (65) Depreciation & amortisation & loss on disposal (3,857) (3,322) Operating profit 11,928 6,366 Finance income 3 172 Prior year interest from related party (HC Estates, St Lucia) Finance expenses (726) (947) Includes 0.1m non-cash interest on FX derivatives (FY16: 0.1m) Profit before tax 11,205 5,591 Tax expense (2,441) (1,507) Profit for the period 8,764 4,084 Profit growth +115% Year on Year EPS basic and diluted 7.8 3.9 Profit for the period divided by the weighted average number of shares in issue (FY17 113m, FY16 103m). Number of shares in issue is unchanged since IPO. 1) Revenue on Pro forma basis in constant currency Revenue for 52 weeks ended 25 June 2017 104,169 93,139 Proforma revenue includes results of HC Estates Ltd, Saint Lucia in both years, whereas statutory basis above excludes for part of the prior year. HC Estates was acquired by the Group in April 2016. The impact of the 53 rd week on EBITDA and profit is not material 3
Group balance sheet As at 2 July 2017 000 As at 26 June 2016 000 Non-current assets Intangible assets 2,338 1,857 Property, plant and equipment 31,398 26,111 Capital investments in factory and new stores Derivative financial assets - 85 Prepayments 7 7 Deferred tax asset 214-33,957 28,060 Current assets Derivative financial assets 307 439 Inventories 9,878 6,604 More efficient production plan; 12 weeks forward stock cover (FY16 9 weeks) Trade and other receivables 6,021 5,535 Cash and cash equivalents 8,470 6,475 53 rd week in FY17 included 4m of payments, comparable week 12.5m vs 6.5m FY16 24,676 19,053 Total assets 58,633 47,113 Current liabilities Trade and other payables 16,633 16,334 53 rd week included 4m of payments, comparable week 20.6m vs 16.3m Corporation tax payable 1,105 611 Derivative financial liabilities 137 - Borrowings 3,371 433 3.4m of chocolate bonds potentially repayable June 2018 Provisions - - 21,246 17,378 Non-current liabilities Other payables and accruals 1,934 1,485 Derivative financial liabilities 34 - Deferred tax liabilities - 79 Borrowings 3,504 6,643 3.5m of chocolate bonds potentially repayable July 2018 Provisions 751 464 6,223 8,671 Total liabilities 27,469 26,049 NET ASSETS 31,164 21,064 56 4
Group cash flow 53 weeks ended 2 July 2017 000 52 weeks ended 26 June 2016 000 Profit before tax for the period 11,205 5,591 Adjusted by: Depreciation, amortisation & impairment 3,745 3,194 Net interest expense 723 775 Other non-cash expenses 674 193 Operating cash flows before movements in working capital 16,347 9,753 68% increase driven by sales growth & cost control Changes in working capital (3,020) (1,088) 53 rd week impact Cash inflow generated from operations 13,327 8,665 Income tax paid (1,832) (549) Interest paid (440) (690) Cash flows from operating activities 11,055 7,426 Cash flows used in investing activities (8,384) (5,957) Cash flows from/(used in) financing activities (828) 10,583 IPO proceeds in prior year Net change in cash and cash equivalents 1,843 12,052 Cash and cash equivalents at beginning of period 6,475 (5,697) Foreign currency movements 152 120 Cash and cash equivalents at end of period 8,470 6,475 53 rd week in FY17 included 4m of payments 5
Positioned for growth DIFFERENTIATED BRAND & PRODUCTS LARGE AND GROWING MARKETS 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 20bn UK gifting market 1 6bn UK chocolate market 2 8bn UK cafe market 3 HC has significant headroom in each Consumer research shows perceived lack of access is the main barrier to purchase GROWTH FROM PROVEN FORMATS STRONG PLATFORM Shop+cafe format Website growth of +18% Subscriptions 2.0 coming soon New digital 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 Source: 1) Mintel 2) Canadean 3) Allegra 6
Operational progress
Store portfolio growth Opened 12 stores in FY17, further 8 stores will open in H1 FY18 Less than 20% of store estate currently features the additional café offering 99 Including signed leases UK & Ireland Store portfolio growth: New Sites in FY17 SHOP+CAFE Worcester Chelmsford Bury St Edmunds Cheshire Oaks Designer outlet Euston station Covent Garden Piazza Glasgow Buchannan Street Belfast Donegall Square Peterborough SHOP ONLY Clapham Junction Station Crawley Wandsworth FY18 Openings & Signed Leases OPENED: Beverley Clarks Designer Outlet LEASE SIGNED Oxford Westgate Centre Teeside Retail park Birmingham Dublin, Dundrum Centre Shrewsbury Colchester 80 91 16 17 18 58
Capital investment in new stores Shop+cafe format: Full retail range with the addition of: Drinks-led cafe: Hot Chocolat, coffee and Ice Cream of the Gods Reduced capex cost per square foot without compromising premium feel Chocolate the majority of sales, with higher sales & profit for a given catchment Can flex to make best use of available space: Small/Travel Euston Station: shop+takeaway only cafe Large Glasgow Buchanan St: shop + 50 seat cafe Designer Outlets Cheshire Oaks & Clarks Village 9
Investment in existing stores Ice Cream of the Gods rolled out to 40 stores for Summer 2017, counter-seasonal trading In-house School of Chocolate diploma gives staff the knowledge to deliver Chocolate Lock-ins; paid-for tasting events after trading hours. Events are profitable and increase brand affinity, now in 38 stores Refit of an existing store (Milton Keynes) in Summer 2017, initial results encouraging suggesting scope to roll out cafe retrofits 10
Digital growth opportunity Website Results Sales +18% New site launched in H2 New Features: Improved content Mobile & tablet compatible (conversion increased 29%) Majority of traffic is now from mobiles Build your own gift hamper tool In Development Mobile app launches in 2018: Easiest gift sending Enables a loyalty rewards programme 11
Tasting Club subscriptions Results Sales -5% Year-on Year Profit increased as result of operational & web synergies Progress in FY17 Single customer account Distribution in-sourced to improve customer service Tested a new weekly format Mbox In Development Phase I (2017) Improve gift subscriptions Develop & test more new subscription formats Test new acquisition routes (digital, video) Phase II (2018 and beyond) Invest in profitable new customer acquisition Test new club products and price points Mbox weekly subscription launches 2018 12
Production capacity & capability +70% Truffle making capacity MAIN PRODUCTION LINE UPGRADED ON TIME, ON BUDGET, +20% TOTAL FACTORY CAPACITY. FY17 GROSS MARGIN IMPROVED +110 bps FY18 Increase existing asset utilisation; reduce downtime & material wastage, longer production runs Capital project to increase liquid chocolate capacity Commence planning & consent process to extend factory (target completion 2020) Longer-term capacity and margin drivers Partial automation of packing (completion 2019) New production line for solid shapes (2020) 513
Key new products Highlights Gift event focus continues, including new Birthday grand slab and occasion sleeves including Simply Thanks, Congratulations, Eid, Diwali, and tourist souvenirs Wider Vegan range Supermilk Pure, the first milk chocolate bar with no added sugar at all Children s - HC Quality without compromise, with cute designs Halloween Advent Portion controlled Prices from 2 to 10 514
Our largest ever Christmas range over 100 products
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 Wellness (more cocoa less sugar) Experiences (rollout of Shop+cafe format to more locations) Mobile (new website provides platform, app in development) Current trading is encouraging New stores performing well, strong pipeline for sites Cafe retrofit into existing store delivering encouraging early uplift Test and learn approach to new opportunities, including wholesale, international and new subscriptions 16
THANK YOU