FY16 Results Presentation October 2016 Highlights Key metrics - - PowerPoint PPT Presentation

FY16 Results Presentation

October 2016

Highlights

Key metrics

£91.1m Revenue (proforma £92.6m) +12% £12.3m EBITDA (pre-exceptional) +57% £8.2m Profit before tax (pre-exceptional) +181% £6.7m Net profit after tax (pre-exceptional) +229%

Growth strategy is on track

Open stores & new “Shop+Cafe” format Increase capacity and capture efficiencies from the vertically integrated supply chain New digital proposition to grow customer base and improve gifting proposition

Operational highlights

Sales growth driven by digital, boxed range re-design, and improved on-shelf availability Completed £8.3m of capex projects:

• Factory investment completed on time, capacity increased by over 20%
• Opened net +4 stores in FY16, pipeline is strong with further 8 stores to open by Christmas 2016
• Latest iteration of Shop+Cafe format opened in Worcester and trading strongly
• New website on track for launch in first half of 2017

Group Income Statement

3 52 weeks ended 26 June 2016 £000 52 weeks ended 28 June 2015 £000 Revenue 91,090 81,068 Revenue growth +12% Year on Year Cost of sales (30,237) (27,086) Gross margin up from 66.6% to 66.8% Operating expenses (48,522) (46,148) Operating costs reduced from 56.9% to 53.3% Pre-exceptional EBITDA 12,321 7,834 EBITDA growth +57% Year on Year Depreciation & amortisation (3,194) (4,239) Useful economic life reviewed on IFRS conversion Exceptional costs (2,642) – Operating profit 6,366 3,463 Finance income 172 188 Finance expenses (947) (720) Profit before tax 5,591 2,931 Tax expense (1,507) (884) Tax rate of 27% as result of IPO costs Profit for the period 4,084 2,047 Earnings per share – Basic and Diluted 3.9p Proforma basis Includes results of HC Estates Ltd, St Lucia for full 12 months, whereas statutory basis includes results for 2 months from date of acquisition in April 2016 Revenue 92,636 82,614

EBITDA Bridge

5

• All channels delivered sales growth, +12% Year on Year
• Gross margin improved by 20bps, combination of better buying, improved production planning, partly offset by investments in quality
• Operating costs grew slower than sales at +5% Year on Year

£0m £4m £8m £12m FY15 EBITDA Sales Volume +12% Margin Rate +20bps Operating Expenses +5% Yr on Yr FY16 Underlying EBITDA IPO costs FY16 EBITDA

£7.8m £12.3m £9.7m 4

Group Cash Flow

5 52 weeks ended 26 June 2016 £000 52 weeks ended 28 June 2015 £000 Profit before tax for the period 5,591 2,931 Adjusted by: Depreciation, amortisation & impairment 3,194 4,371 Net interest expense 775 531 Other non-cash expenses 193

• –

Operating cash flows before movements in working capital 9,753 7,833 25% Increase driven by sales growth & cost control Changes in working capital (1,088) (315) Investment to improve on-shelf availability Cash inflow generated from operations 8,665 7,518 Income tax paid (549) (74) Interest paid (690) (625) Cash flows from operating activities 7,426 6,819 Cash flows used in investing activities (5,957) (3,126) Cash flows from/(used in) financing activities 10,583 (197) Includes IPO proceeds Net change in cash and cash equivalents 12,052 3,496 Cash and cash equivalents at beginning of period (5,697) (9,134) Foreign currency movements 120 (59) Cash and cash equivalents at end of period 6,475 (5,697) 5

Group Balance Sheet

5 As at 26 June 2016 £000 As at 28 June 2015 £000 Non-current assets Intangible assets 1,857 1,554 Property, plant and equipment 26,111 12,294 Acquisition of HC Estates Ltd St Lucia: £8.9m capitalised from trade and other receivables to fixed assets Prepayments 7 – Deferred tax asset 150 216 28,125 14,064 Current assets Inventories 6,604 4,494 Trade and other receivables 5,535 13,672 Corporation tax recoverable

• 167

Cash and cash equivalents 6,475 4,940 £6.5m of cash provides funding for rollout programme 18,614 23,273 Total assets 46,739 37,337 Current liabilities Trade and other payables 16,334 12,210 Corporation tax payable 611

• Derivative financial liabilities

555

• Bank overdraft
• 10,637

Borrowings 433 955 17,933 23,802 Non-current liabilities Other payables and accruals 1,485 1,775 Derivative financial liabilities 85

• Borrowings

6,643 7,299 Chocolate Bonds from customers Provisions 464 669 8,677 9,743 Total liabilities 26,610 33,545 NET ASSETS 20,129 3,792 6

Operational Progress

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 £165
• High rate of product innovation within disciplined

range architecture

• Consumer research shows high advocacy

Source: 1) Mintel 2) Canadean 3) Allegra

8

Strong Platform

• Vertical integration is responsive whilst also

protecting intellectual property

• Well invested infrastructure / head office
• Starting to leverage top line growth
• Further economies of scale available
• Experienced & stable management team

Large & Growing Markets

• £20bn UK gifting market1
• £6bn UK chocolate market2
• £8bn UK cafe market3
• All markets in growth
• HC has significant headroom in each
• Consumer research shows perceived “lack of

access” remains the main barrier to purchase

Growth from Proven Formats

• UK Retail: all stores now EBITDA profitable
• 7 new stores in FY16, 8 planned in H1 FY17
• Digital sales +20% in FY16, new website launching in

2017

60 70 80 90 Start of FY16 7 new openings 3 closures End of FY 16 3 new openings 5 leases signed Forecast Dec 2017

Store Rollout

UK Store portfolio growth:

• Opened 7 new stores in FY16, closed the only 3 loss-making stores in UK at end of leases
• Completed 4 store re-locations resulting in improved profitability
• Further 3 stores opened since year end with an additional 5 leases signed, will be trading before Christmas 2016

5

FY16 FY17 to Date FY17 Leases signed Opened: London, Regent Street London, Tottenham Court Road Birmingham New St station Manchester Piccadilly station Manchester Market Street Glasgow, Braehead centre Sheffield, Fargate Opened: Worcester (with cafe) Peterborough Chelmsford (with cafe) Committed London Euston Station Bury St Edmunds (with cafe) Cheshire Oaks (1st Designer Outlet Centre) Clapham Junction Station Crawley Closed Luton Airport Telford Kensington

76 80 88 9

Full retail range, with the addition of:

• Drinks-led cafe offer: Hot Chocolat,

T eaolat infusions, Coffee, impulse snacks and ‘Ice Cream of the Gods’

• New fixtures and ‘modular’ fit out reduce capex cost per square foot without compromising premium feel

10

Latest Shop+Cafe in Worcester

Launching in 2017

• Improved content
• Mobile & tablet compatible
• International capability at reduced cost
• Gift sending app

11

New Website in Development

Investment in Production Capacity & Capability

Continuous in-line printing on the new main production line allows faster and uninterrupted production

• Main production line upgraded for filled chocolates: new mezzanine installed to better utilise factory cubic volume, line speed increased by >50%
• New ‘bean to bar’ manufacturing facility installed for super-premium Rare &

Vintage range. Capacity increased >500%, producing improved quality liquid chocolate ‘couverture’ at reduced cost per kilo

5

New plant to convert Rare & Vintage beans: improved quality and increased capacity

12

Batch production of Rare & Vintage: St Lucian 85%

Gifting

UK gifting market at £20bn per annum is over three times larger than the UK chocolate market. Estimate that approx half of HC products are bought as gifts Personalisation

• Sleeves launched summer 2016: personalise any box for a specific gift occasion. Choose a flavour then choose a message
• Gives ability to create gift propositions for additional seasonal events (e.g Eid, Thank

Y

• u T

eacher, tourist gifts etc) Improved Channels

• New website will improve gift sending options including mobile apps

New Range

• Leveraging British identity

5 13

New Product Pipeline

New Rare & Vintage range launched October 2016:

• 20 super-premium fine cocoa recipes
• ‘Bean to bar’ production using our new facility
• Simpler packaging: improved product quality at lower retail price
• Can now purchase as part of the ‘Selector’ multi-buy offer

Improved children’s ranges:

• stronger packaging imagery
• portion controlled
• launching for Christmas 2016

New modular gift hampers:

• launching in stores for Christmas 2016
• priced from £20 to £50
• Can also personalise your own hamper online

5 14

Current Trading & Outlook

The Brand is well positioned to capitalise on consumer trends of:

• Wellness (more cocoa less sugar)
• Experiences (rollout of Shop+Cafe format to more locations)
• Mobile (new website in 2017)

Outlook

• Further 3 stores opened since year end and further 5 committed to open before Christmas 2016
• Improved store pipeline across all store formats (small shop only, Shop+Cafe, outlet, station etc)
• New stores are performing well
• Encouraging trading
• New website on track to launch in H1 of 2017

5 15

Thank You

Hotel Chocolat Group plc – Results Disclaimer

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