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Hotel Chocolat reports increase in first half earnings as sales grow

Last updated: 09:05 22 Feb 2017 GMT, First published: 08:10 22 Feb 2017 GMT

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Hotel Chocolat posts rise in first half profits

Hotel Chocolat Group plc (LON:HOTC) posted a 28% increase in first half pre-tax profit as the luxury chocolate maker achieved strong sales growth.

In the 26 weeks to 25 December 2016, pre-tax profit rose to £11.2mln from £8.8mln the same period a year earlier.

Revenue, including last April’s acquisition of Hotel Chocolat Estates Limited, Saint Luca, climbed 12% to £62.5mln from £55.7mln as sales grew across retail, digital and corporate channels.

Expansion contributed 4.0% to the group’s sales with the opening of 10 new stores. The company also attributed the growth to robust sales over the Christmas period as it improved its availability and launched new gift ranges.  

“The critical Christmas period was very successful, helped by good availability, popular and innovative new ranges and significantly increased digital transactions,” said chief executive and co-founder Angus Thirlwell.

“We have strong plans in place for the key spring seasons of Mother's Day and Easter and are confident of further progress.”

Underlying earnings (EBITDA) rose 27% to £13.7mln from £10.8mln and underlying EBTIDA  margins increased to 21.9% from 19.7%. 

Hotel Chocolat also swung to net cash of £16.2mln at the end of the period from net debt of £1.0mln the previous year.

Post-period the company launched a new website in January 2017 to address the growing trend of online shopping. The website has already started to see improved mobile conversion and dwell time has increased, the group said.

Looking ahead, Hotel Chocolat said it seeks to mitigate higher cost inflation through vertical integration, UK-based manufacturing, and currency hedging. A weaker pound following the Brexit vote has sent input costs higher for UK retailers.

“A strong differentiated brand that offers great products and customer service, priced as an affordable luxury also provides further mitigation, giving theb confidence in the group's continued progress,” Thirlwell said.

The board did not propose an interim dividend but plans on paying a maiden final dividend, subject to performance.

Liberum reiterated a 'buy' rating and target price of 240p, saying the interims were ahead of expectations. 

"Outperformance in revenue growth alongside margin expansion lays the foundations for a positive outlook in H2 and beyond. The group’s cash flow was very strong with £17m free cash flow generated in the first half, and we note the confident tone that dividends may feature at the time of the preliminaries. 

Shares rose 3.51% to 265.00p in early trading.  

-- Adds broker comment, updates share price -- 

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