FY17 Preliminary results September 2017
Transcript of FY17 Preliminary results September 2017
FY17 Preliminary results
September 2017
Financial highlights
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 53rd 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 (FY17 nil, FY16 £2.6m)
REVENUE
£105.2m(2016: £91.1m)
+12%YEAR-ON-YEAR1
PROFIT AFTER TAX
£8.8m(2016: £4.1m)
UNDERLYING EBITDA2
£16.3m(2016: £12.4m)
+32%YEAR-ON-YEAR
EARNINGS PER SHARE
7.8p(2016: 3.9p)
PROFIT BEFORE TAX
£11.2m(2016: £5.6m)
+100%YEAR-ON-YEAR
MAIDEN DIVIDEND
1.6p
‘15 ‘16 ‘17
£81.1m£91.1m
£105.2m
‘15 ‘16 ‘17
£7.8m
£12.4m
£16.3m
‘15 ‘16 ‘17
£2.0m
£5.6m
£11.2m
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Operational highlights
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
2 FRANCHISE STORES
IN HONG KONG
12NEW STORES
OPENED
6NEW WHOLESALE
ACCOUNTS FOR FY18
+30%MOBILE CONVERSION
ON NEW WEBSITE
1SUCCESFUL STORE
REFIT TEST
+20% FACTORY
CAPACITY GROWTH
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
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53 weeks ended
2 July 2017
£000
52 weeks ended
26 June 2016
£000
Revenue 105,240 91,089 Revenue growth +12% Year-on-Year1
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 12,395EBITDA 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 3.9Profit 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.
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 53rd week on EBITDA and profit is not material
1) Revenue on Pro forma basis in constant currency
Revenue for 52 weeks ended 25 June 2017 104,169 93,139
Group income statement
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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 53rd 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 53rd 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
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Group balance sheet
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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) 53rd 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 53rd week in FY17 included £4m of payments
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Group cash flow
Source: 1) Mintel 2) Canadean 3) Allegra 6
Positioned for growth
LARGE AND GROWING MARKETS
• £20bn UK gifting market1
• £6bn UK chocolate market2
• £8bn UK cafe market3
• HC has significant headroom in each
• Consumer research shows perceived “lack of
access” is the main barrier to purchase
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
STRONG PLATFORM
• 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
GROWTH FROM PROVEN FORMATS
• Shop+cafe format
• Website growth of +18%
• Subscriptions 2.0 coming soon
• New digital wholesale partners
Operational progress
UK & Ireland 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
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New Sites in FY17 FY18 Openings & Signed Leases
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
OPENED:
Beverley
Clarks Designer Outlet
LEASE SIGNED
Oxford Westgate Centre
Teeside Retail park
Birmingham
Dublin, Dundrum Centre
Shrewsbury
Colchester
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Store portfolio growth
‘16 ‘17 ‘18
80
91
99Including signed
leases
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
Capital investment in new stores
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• 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
Investment in existing stores
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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
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Digital growth opportunity
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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
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Production capacity & capability
FY17 GROSS MARGIN IMPROVED
+110 bps+70% Truffle making capacity
MAIN PRODUCTION LINE UPGRADED ON TIME, ON BUDGET, +20% TOTAL FACTORY CAPACITY.
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)
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
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Key new products
Our largest ever Christmas range over 100 products
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
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Outlook
THANK YOU