Total group revenue for Hotel Chocolat increased by 37 per cent to £226m (FY21: £165m), ahead of market consensus expectations and by 70 per cent compared to the financial year ended 30 June 2019 (FY19: £133m) with FY19 being the last full equivalent period prior to the impact of the Covid-19 pandemic.
H2 growth remained very robust at 32 per cent, against stronger comparatives in Q4 FY21 following the end of “lockdowns” affecting UK retail from April 2021, when Group sales growth began to accelerate.
The Board anticipates underlying FY22 profit before tax will be in line with market consensus, statutory reported profit for FY22 is expected to be a loss, being affected by the outcomes of an internal business review, predominantly as a result of non-cash impairment provisions and costs arising from discontinued activities including the closure of retail stores in the USA.
Having raised £40m of new equity in July 2021 to support growth investments, the business will now deliberately focus its efforts over the next three years on its most proven and lowest-risk strategies with the greatest potential for further increased profitability and scaled cash generation.
Its VIP loyalty and digital will continue, now forming a core part of “business as usual” growth in the UK, without requiring material additional investment in the near term. Velvetiser hot chocolate system and Velvetised chocolate cream alcohol continue as capex-light growth categories, with significant further UK market headroom, and the potential for risk-contained capex-light international wholesale growth. In response to the change in the global macroeconomic environment, investment levels in the USA, which will become wholesale and online only, and the Japan joint venture will be materially reduced, with ongoing investment limited to essential working capital only.
In the UK, the brand strength and multichannel model drove sales growth of 35 per cent vs FY21, and 68 per cent vs FY19. VIP loyalty customers now account for 71 per cent of UK direct-to-consumer sales by value (FY21 44 per cent).
Angus Thirlwell co-founder and CEO said: “The Hotel Chocolat brand is achieving very strong growth in the UK, and we are pleased to have beaten sales expectations and expect to meet underlying profit expectations for FY22.
“The way the market has rapidly changed for all businesses in the second half certainly emphasises the resilience value of investments that we have made over the last 20 years: in building a differentiated brand with strong customer loyalty, a unique and desirable product range, and our own, dependable UK chocolate factory.
“A year of exceptional sales growth following two years of reactionary tactics to the pandemic has left clear opportunities for us to proactively streamline overheads and improve gross margins. We have set ourselves the target of becoming a 20% EBITDA margin business within three years by applying systemisation, automation, and capacity investments to our 70% larger scale (FY22 vs FY19).
“While we expect a temporary lower sales growth rate and profit margin for FY23 as we carry through our adjustments, the result will be a business delivering greater results, with less risk and an even stronger balance sheet with a higher profit percentage growth in FY24 and FY25.
“We have discovered that our UK market can be a lot bigger for us than we thought a year ago, thanks to the new drinkable chocolate products (Velvetiser & Velvetised Cream alcohol) and the way our digital and stores businesses are performing.”
Share