Hotel Chocolat takes encouragement from US and Japan launches

Hotel Chocolat on Tuesday reported interim revenue and profit growth after strong digital sales and very encouraging initial progress from its international expansion in Japan and the United States.

For the half-year ended 30 December the luxury chocolate retailer reported profit before tax of £10.8m, up 7% compared to the same period the year before, while revenue increased by 13% to £80.7m as the company benefited from a well-received range of Christmas products, successful marketing and loyalty campaigns and the continued growth of digital wholesale partners.

The AIM traded company said that digital revenues, from the website, subscriptions and digital wholesale partners grew by 22%, or by 29% if expressed at retail prices.

Meanwhile, underlying EBITDA climbed by 10% to £17.3, while cash and cash equivalents stood at £21.9m at 30 December, down from £25.0m at the same point the year before. The company's interim dividend remained flat at 0.6p per share.

Angus Thirlwell, co-founder and chief executive, said: "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."

The period saw the opening of 14 new stores opened in the UK and Ireland, while Hotel Chocolat's first stores in New York and Tokyo enjoyed "encouraging launches", with the business having expanded to these locations due to a "significant potential for future growth".

Both new sites are performing in line with expectations and, based on the first 10 weeks of trading, would rank as top quartile if they were within the UK estate.

"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," said Thirlwell.

Analysts at Peel Hunt said the results were largely in line with estimates but "are enthralling nonetheless", with EBITDA ahead of a consensus forecast of £17m coming despite a lower gross margin from the impacts of the Velvetiser and VIP club/wholesale plus lower cost ratios.

"Overseas losses (Japan and the US have started very well in sales terms) disguise good progress in the UK. We expect continued excellence from the core business but the game-changer could be the overseas potential and whilst we don’t move numbers today we are ever more convinced that the brand can travel."

House broker Liberum forecasts £130m sales for 2019, feeding through to £20.4m EBITDA, PBT of £13.9m and EPS of 9.6p.

Hotel Chocolat's shares were up 2.94% at 315.00p at 0927 GMT.