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6
ANNUAL REPORT AND ACCOUNTS
2016
Not all chocolates are created equal
R E G I S T E R E D O F F I C E
Hotel Chocolat Group plc
Mint House
Newark Close
Royston
Hertfordshire SG8 5HL
The leading UK premium chocolate company,
making innovative and affordable luxury chocolates.
We sell our chocolate direct to our customers
via subscription, online and our 83 stores.
Our strong British brand is based
on an ethos of:
Originality · Authenticity · Ethics
Highlights
£91.1m
R E V E N U E ( 2 015 : £ 81.1m)
( P rofor m a £ 92 . 6 m , 2015: £ 82 . 6 m)
+12%
S A L E S G ROW T H
D i g i t a l G r o w t h +2 0 %
R E V E N U E
£91.1m
£81.1m
£75.7m
+57%
E B I T DA G ROW T H
£12.3m
E B I T DA ( p r e - e xc e p t i o n a l )
( 2 015 : £ 7. 8 m)
£8.2m
PROFIT BEFORE TAX (pre-exceptional)
(Profit before tax £5.6m, 2015: £2.9m)
£4.1m
P RO F I T A F T E R TA X
( 2 015 : £ 2 . 0 m)
£8.3m capital investments completed
I N C LU D I N G N E W S TO R E S A N D FAC TO RY U P G R A D E S
14
15
16
E B I T DA (pre-exceptional)
£12.3m
£7.8m
14
15
16
18 Academy of Chocolate Awards
£(1.6)m
WO N
‘Hotel Chocolat is the nation’s
favourite premium chocolate brand’
Allegra 2015
Contents
COMPANY OVERVIEW
Highlights
At a glance
STRATEGIC REPORT
Chairman’s statement
What sets us apart?
Our business model
Our markets
Our strategy
Chief Executive’s statement
Financial review
Risk management
01
08
10
12
14
16
18
20
24
26
GOVERNANCE
Corporate social responsibility
Board of Directors
Corporate governance statement
Audit Committee report
Remuneration report
Directors’ report
Statement of Directors’ responsibilities
28
30
32
35
36
38
40
FINANCIAL STATEMENTS
Independent auditor’s report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flow
Consolidated Statement of Changes in Equity
Notes to the financial statements
Company Statement of Financial Position
Company Statement of Cash Flow
Company Statement of Changes in Equity
Notes to the Company financial statements
Company information
41
42
43
44
45
46
77
78
78
79
81
COMPANY OVERVIEW Highlights
01
Company overviewStrategic reportGovernanceFinancial statements Originality
Company overview
We believe in being fresh, creative and innovative,
doing things in a different way
A STRONG DESIGN ETHOS
For our new Rare & Vintage range, we took inspiration
from pleated fabric to sculpt a beautiful look which is
also perfect for breaking into thin pieces.
02
HOTEL CHOCOL AT GROUP PLC Annual Repor t and Accounts
COMPANY OVERVIEW Originality
03
Strategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Authenticity
Company overview
We are the real thing, our focus on “more cocoa,
less sugar” results in a superior taste
TREE TO BAR CHOCOLATE MAKING
Visitors to our beautiful Saint Lucian plantation hotel,
called Boucan, can make their own chocolate bar from
beans grown on the estate.
04
HOTEL CHOCOL AT GROUP PLC Annual Repor t and Accounts
HOTEL CHOCOL AT GROUP PLC Annual Repor t and Accounts
COMPANY OVERVIEW Authenticity
05
05
Strategic reportGovernanceFinancial statements Company overview
Ethics
We focus on ensuring that we deliver sustainable
outcomes for all our stakeholders; our Engaged
Ethics programme aims to unite cocoa growers
and lovers of fine chocolate, being fair to both
A BLUEPRINT FOR SUSTAINABLE
COCOA GROWING
We partner with more than 150 Saint Lucian growers,
committing to pay a fair price and support productivity
improvements, including the supply of high quality cocoa
seedlings. We are now applying the same techniques to the
higher volume Ghanaian cocoa used in our house blends.
06
HOTEL CHOCOL AT GROUP PLC Annual Repor t and Accounts
COMPANY OVERVIEW Ethics
07
Strategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts At a glance
The leading UK premium chocolate brand, manufacturing
innovative and accessibly priced luxury chocolates. We sell
our chocolate direct to customers via subscription, online
and our 83 stores.
Key product ranges
Company overview
Strategic report
Governance
Financial statements
The story so far
The IPO in May 2016 represents just one milestone
in a journey that began in 1997 with the launch of
our first consumer facing website.
1990s
First website launched
under ‘ChocExpress’ brand
2003
Hotel Chocolat brand created
2008
Factory opens in
Huntingdon, Cambridge
22 stores
2014
New Shop+Cafe format
77 stores
S E L F P U RC H A S E
G I F T & O CC A S I O N
R A R E & V I N TAG E
OT H E R
Selectors
Over 120 flavours
Boxed chocolates
Seasonal specials
Connoisseur’s choice
Provenance & tasting notes
Impulse & children’s gifts
Drinking chocolate
Unique wine and spirits
1998
Tasting Club
subscriptions launched
2004
First store opens in Watford
Geographic footprint
The business began in the 1990s with online and
subscription, and our first physical store followed in 2004.
Our store roll-out plan is informed and supported by a
database showing the buying patterns of our loyal multi-
channel customers. Our store formats range from 100 sq
ft to 6,000 sq ft and trade profitably across the UK. We
are also developing our international retail knowledge with
three stores in Copenhagen.
80 3 1
U K
S TO R E S
DA N I S H
S TO R E S
B O U T I Q U E
H OT E L
2016
IPO
Sales £91.1m
EBITDA £12.3m
83 stores
2012
Boucan Hotel opens
in Saint Lucia
60 stores
Our growth strategy
Open
new stores
I N C LU D I N G
S H O P + C A F E F O R M AT
Upgrade
digital platform
A N D I M P ROV E
G I F T I N G O P T I O N S
Increase capacity
& capability
I N P RO D U C T I O N
A N D S U P P LY C H A I N
Our business model has evolved and grown by making natural extensions to our existing products and services, testing them and once
proven investing in roll-out. There is significant growth headroom in the UK and we will continue to open new stores. Our current website
is successful with digital revenues growing +20% in FY16, but there remains opportunity to add new features and services. We design and
make our own chocolates; investing in manufacturing capacity and capability will allow us to keep pace with sales growth, improve product
margins and develop innovative new products.
08
COMPANY OVERVIEW At a glance
09
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Chairman’s statement
In the year we have cemented the
foundations for future growth.
OV E RV I E W
D I V I D E N D S
“ Our combination of strong
brand and vertically
integrated business model
is starting to deliver
strong results.”
A N D R E W G E R R I E
Independent
Non-executive Chairman
The Group remains in a growth phase and
is presented with many strong investment
opportunities, each of which is assessed
using a disciplined approach to capital
allocation and risk. The Board intends
to invest the IPO proceeds to support
the business strategy, with the goal of
accelerating the growth of the business
and a target of improving returns. The
Board therefore is not recommending a
dividend for FY16 but is committed to
adopting a progressive dividend policy in
future as the business grows.
FY16 represented a landmark year in the
history of Hotel Chocolat (HC). The IPO
in May 2016 marked the next stage of the
development and growth of the business
and provides the capital to accelerate our
growth strategy whilst raising the profile
of the business.
R E S U LT S
The Group achieved a pleasing result in
FY16 with revenue of £91.1m and growth
of 12% versus FY15. Strong control of
costs meant that operating margins
improved with pre-exceptional EBITDA
margin rising from 9.7% to 13.5%.
P E O P L E
The Group continues to be led
by a strong founder-led executive
management team that have built a
successful business. In April, we welcomed
Sophie Tomkins to the Board as a Non-
executive Director. She has already made
a valuable contribution to the Board
and brings excellent experience to her
role as Chair of the Audit Committee. I
would also like to extend my thanks to
the whole Hotel Chocolat team for their
hard work, commitment and for a job
well done.
Strategic report
Originality · Authenticity · Ethics
The Tasting Club
Tasting Club members taste our newest recipes every month. They score the
chocolates and only the best make it into our retail ranges. Club members
are strong supporters of our Engaged Ethics programme; some have also
supported our growth by investing in chocolate bonds.
10
STR ATEGIC REPORT Chairman’s statement
11
Company overviewGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts What sets us apart?
A strong differentiated brand
underpinned by vertical integration.
Strategic report
Strong &
distinctive brand
The Hotel Chocolat brand evokes
escapism and offers a contemporary
take on luxury chocolate.
An in-house design team carefully
curates the look and feel – from
chocolate casting mould creation to
packaging, from recipes to marketing
communications and store fit-outs.
Premium
differentiated
product
Rather
than copying continental
chocolate traditions, Hotel Chocolat
has carved out a modern British take
on luxury chocolate.
aspects of
the product
Many
range have successfully overturned
traditional approaches: for example
our
‘Selector’ wall of chocolates
glass
replaces
cabinet of loose chocolates, offering
wider choice, fresher product and
faster service.
traditional
the
Product
innovation
Innovation is in our DNA, from the
Tasting Club to chocolate bonds, from
award winning new chocolate recipes,
to cocoa gin and the use of cocoa as
a savoury ingredient.
We ensure that strong innovation
is balanced by a disciplined range
architecture, ensuring only
the
edited best of the best feature in our
product ranges.
Vertically
integrated
Being vertically integrated means we
can apply our expertise at every stage
of the process to create superior and
innovative products at
improved
margins, and gives the flexibility to
trade each season responsively.
Owning the sales channels also allows
our teams to pass on their knowledge
and enthusiasm to our guests.
Omni-channel
retail distribution
Progressive
digital marketing
Investing in digital and physical store
distribution channels means we know
more about our customers than would
be possible by following a traditional
FMCG distribution route, so we
can give better service and create
products and services
that our
customers want.
We have our origins in e-commerce.
Not only has this informed our
store roll-out, it means that digital
is always at the centre of our
customer strategies.
12
STR ATEGIC REPORT What sets us apar t?
13
Company overviewGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Our business model
We believe that growth and re-investment can benefit
all of Hotel Chocolat’s stakeholders.
Strategic report
We seek out the best partners to supply
premium ingredients to ensure that our
products set us apart from the competition.
All of our products are developed and
designed in-house and are exclusive to the brand.
With the goal of being the true sector specialist,
we have created a broad product range.
We strive for continual innovation in a disciplined
range framework.
In 2008 we established a dedicated production
facility near Cambridge where we now make
over 95% of our products.
In-house production increases control over
quality, allows faster innovation and improves
gross margins.
We own a cocoa plantation in Saint Lucia called
the Rabot Estate. This is the source of the exclusive
beans used in our Rare & Vintage range and of our
deep understanding of the cocoa growing process. This
knowledge will enable us to continuously improve our
relationship with all of our cocoa growers worldwide.
Everything we do is guided
by the three basic values
that we started with and
will always retain:
Originality
Authenticity
Ethics
Our Engaged Ethics programme
drives investment in sustainability
both in the UK and worldwide.
We Deliver
– Customer happiness
– Employee engagement
– Supply sustainability
– Shareholder value
Our main Distribution Centre is near
Cambridge. The majority of our products
are packaged here and then distributed
to stores using our own fleet of vehicles.
Owning the supply chain improves
responsiveness and enables high levels of
product availability.
We reach our customers through an
omni-channel model. Our focus is on
great service to ensure 100% happiness.
DIGITAL &
SUBSCRIPTION
RETAIL
COCOA
ESTATE
PREMIUM
WHOLESALE
PARTNERS
14
STR ATEGIC REPORT Our business model
15
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Our markets
We operate in four large and growing markets,
all offering significant headroom.
Our differentiated product offer is well placed and has the potential to increase market
share. The Board believes that approximately half of products are purchased as gifts
and considers that both our competitor set and growth opportunity are wider than
just traditional chocolate retailing.
UK
gifting
UK
chocolate
UK
cafes
International
£2 0 BN
M A R K E T1
£6 BN
M A R K E T 2
£8 BN
M A R K E T 3
>£7 0 BN
M A R K E T
H C H A S
<0 . 5 %
S H A R E
H C H A S
<2 . 0 %
S H A R E
H C H A S
<0 .1%
S H A R E
H C H A S
<0 . 0 2 %
S H A R E
S T R AT E GY
S T R AT E GY
S T R AT E GY
S T R AT E GY
• Improve gift products
for stores and online
• Increase range of
hampers and gift packs
• Grow customer database
• Open more stores
across the UK
• Apply Shop+Cafe model
to selected new sites
• Prove store economics
in Denmark
• Digital upgrades improve
loyalty and acquisition,
conversion and tablet
optimised site.
• Extend dietary luxury
(vegan, gluten free,
“more cocoa, less sugar”)
• Test takeaway-only
Hot Chocolat and ice
cream in smaller stores
• Gain international know-
how to be equipped for
larger markets later
• New website brings
international expansion
opportunity
1) Mintel, 2007 2) Canadean, 2014 3) Allegra, 2016
16
Company overview
Company overview
Strategic report
Strategic report
Governance
Governance
Financial statements
Financial statements
In consumer research UK
shoppers named Hotel Chocolat
as their favourite premium
chocolate brand, they also cited
the main reasons for not buying
as “lack of access” and “lack
of awareness”. Opening more
stores and improving digital
will address this opportunity
and capitalise on the significant
market headroom.
STR ATEGIC REPORT Our markets
17
HOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Our strategy
We maintain a disciplined approach to capital investment
to deliver returns and contain risk.
Strategic report
Originality · Authenticity · Ethics
Open new stores
I N C LU D I N G S H O P + C A F E F O R M AT
Continue roll-out of Shop-only format
Continue roll-out of Shop+Cafe format
Our property strategy is targeting new sites
across the UK. Our latest shopfits have
achieved significant reductions in cost per sq ft.
Refit existing sites, resite key
stores to larger, prime sites and
add cafe offer
We will continue to innovate, adding new
ranges and services.
Upgrade digital platform
A N D I M P ROV E G I F T I N G P RO P O S I T I O N
New website in 2017
Responsive design across all
devices including tablet/mobile
International website capability
at marginal cost
Trial a gift-sending app
Increase capacity & capability
I N P RO D U C T I O N A N D S U P P LY C H A I N
Investment in new technology
to increase factory capacity
Redesign products to reduce
packaging cost
Improve gross margins
Our current website launched in 2013 and has
delivered strong growth, with digital revenue
up +20% year-on-year in FY16. However there
are significant opportunities to further enhance
the ease of navigation and increase the number
of gift-sending options. The new website will
launch in 2017 and will also bring the ability to
add international websites more rapidly and at
a lower marginal cost.
Our production facility at Huntingdon opened
in 2008 and has evolved continuously to keep
pace whilst sales have more than doubled. To
accommodate projected future growth we
are investing £10m in a three-year programme
of works that will reduce cost of production
without any compromise in quality and will
allow us to further innovate with new products.
Investing in our store
roll-out
We have profitable store formats from 100 sq ft to 6,000 sq ft. Our new Shop+Cafe
format adds a premium drinks range to our full retail range, giving customers more
reasons to visit, and offers a counter-seasonal sales profile. This allows us to increase
sales and profitability in mature catchments and to open in smaller catchments where
a Shop-only format might not be viable.
18
STR ATEGIC REPORT Our strategy
19
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Chief Executive’s statement
Our results continue to improve and we
see significant opportunity for future growth.
In my first Chief Executive’s statement I am
pleased to report a year of significant progress
for the Group. Revenue grew by 12% to
£91.1m and profit before tax increased
by 91% to £5.6m. We further refined our
business model and all channels achieved
growth, whilst a focus on cost efficiency
resulted in an improved EBITDA margin.
I would like to thank the whole team for
their enthusiasm and tireless commitment,
without which these results would not have
been possible.
“ The brand has continued
S A L E S C H A N N E L R E V I E W
to gain in strength,
meaning we are well
positioned for growth in
all of our markets.”
A N G U S T H I R LW E L L
Co-founder and Chief
Executive Officer
Our multi-channel model continues to work
well: each channel supports the others and
all channels are in growth. Digital growth of
+20% was particularly strong.
Our stores continued to perform well and
the opening of our fifth Shop+Cafe site in
Worcester represented an encouraging step
as we continue to hone this new format. We
will continue to open both pure chocolate
shops and Shop+Cafe formats to best match
the opportunity in each location.
In the year we opened seven new stores in
Regent Street and Tottenham Court Road
in London, Birmingham New Street Station,
Glasgow Braehead, Manchester Market
Street, Manchester Piccadilly Station and
Sheffield Fargate.
In the year we also closed three stores that
had reached the end of their leases and
weren’t meeting our returns hurdles, thus
improving the overall profitability of the
retail estate. Since the end of the financial
period we have opened three stores in
Worcester, Peterborough and Chelmsford,
and have signed leases on a further five
including our first Designer Outlet store at
Cheshire Oaks, all of which we expect to be
trading before Christmas 2016.
Our international operations remain at
the exploratory stage and highlights have
included a refit of our Shop+Cafe site in
Copenhagen city centre and the opening
of a new franchised store in Gibraltar, with
our partner Sandpiper, who already operate
Hotel Chocolat franchise stores in Jersey
and Guernsey.
O P E R AT I O N A L R E V I E W
A major focus for the period was on
improving availability to ensure customers
can always find their favourite Hotel Chocolat
products which helped increase sales growth
rates across all channels. The key seasonal
ranges have also traded strongly.
Strategic report
Originality · Authenticity · Ethics
From ‘bean to bar’
For our Rare & Vintage range we carefully source beans from all around the world to
complement those we grow ourselves. Each type of bean is selected to showcase the
variety of flavours that fine cocoa can achieve.
We ensure that the growers are accredited as sustainable, and we commit that our team
will conduct visits to every site.
Our development team then experiments to find the best roasting temperatures and
conching (grinding) times to bring out the delicate flavour of the different beans. This results
in a unique range of some of the best cacao on the planet, priced at an accessible luxury level.
20
HOTEL CHOCOL AT
STR ATEGIC REPORT Chief Executive’s statement
21
Company overviewGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts B R A N D R E V I E W
CO N S U M E R T R E N D S
Mobile
Chief Executive’s statement continued
Further investments are planned for summer 2017
to improve capacity and efficiency.
M A N U FAC T U R I N G
I N V E S T M E N T
Following the end of Easter and preceding
the build-up for the winter peak, each
summer presents our annual ‘window’ to
undertake infrastructure investment.
In summer 2015 we completed a £1.0m
investment to relocate the packing of
our finished products from our factory in
Huntingdon to our nearby Distribution
Centre in St Neots. This change increased
the factory’s capacity by freeing up space,
allowing more efficient and responsive supply
of product and reducing the amount of miles
travelled moving product between our sites.
In summer 2016 we completed a £3.7m
investment installing a mezzanine floor in the
factory and significantly upgrading one of our
three key production lines. This has resulted
in an increase in factory capacity of over 20%
as well as improved efficiency and the ability
to conjure up more exciting recipes.
We also invested to increase our ‘bean to
bar’ manufacturing capacity, enabling us to
produce more of our super-premium Rare &
Vintage product range.
Further investments are planned for summer
2017 to improve capacity and efficiency.
As a result of our continued nurturing
the Hotel Chocolat brand continues to
strengthen. At the beginning of FY16
we relaunched our key boxed chocolate
ranges, improving the packaging and adding
new recipes to increase choice. Over the
Christmas gifting season, redesigned boxed
chocolates proved a particular success.
We won an impressive 18 awards from the
Academy of Chocolate including for our
new Teaolat infusion drinks, our Saint Lucian
Buffalo Milk 65% Chocolate and our new
‘Banana Bread’ chocolate.
We also launched new gift sleeves which
allow guests to quickly personalise a product
for a gift recipient, with early signs being very
encouraging. This is part of our strategy to
become a leading one-stop destination for
gifts, both digitally and in-store.
Wellness
We see an increasing trend that consumers
want uncompromisingly delicious and
hedonistic chocolate that’s also made
with responsible amounts of sugar. Hotel
Chocolat’s 12-year track record of “more
cocoa, less sugar” is applied to every grade
of chocolate, from our whites, through milks
and darks. We carry a very wide range
of darks with cocoa percentages ranging
from 70% all the way up to 100%. Our new
supermilk genre means we can offer a milky
and mellow taste, but with less sugar than
most dark chocolates on the market. Our
award-winning vegan darks also continue to
see significant sales growth.
Experiences
Experiences are becoming increasingly
popular as a new luxury and consumers
are seeking to go beyond the purely
transactional. We are well positioned to
take advantage of this trend. Whilst a
stay at our Boucan Hotel in Saint Lucia
remains the pinnacle, great experiences
are available throughout the UK. We offer
School of Chocolate customer experiences
nationwide, priced from £20 to £120 and
we introduced new brunches and afternoon
teas at our London and Leeds flagships.
Our amazing Hot Chocolat is now available
in more locations as we expand our new
Shop+Cafe format. We intend to continue
to develop the range of experiences we can
offer, showcasing the brand specialisation
from farm to finished product and aspire to
turn customers into advocates.
Living an increasingly mobile and flexible
life is a clear trend. Plans are underway to
make it easier to send an HC gift whilst on
the move with our new digital capability
coming on stream in H1 2017. This will
deliver improved content optimised for
smartphones and tablets.
O U T LO O K
I am confident that our plan for the coming
year is robust. Our capital plans are based
on proven store formats and digital channels,
and on making greater use of existing
production methods and technology. Our
strategy remains on track and our continued
innovation and focus on customer happiness
aim to deliver increased sales, combined with
disciplined capex and a tight control on costs
with the goal of improving returns.
The market and wider economy may not
be without challenges, but we still have
significant addressable market headroom
and benefit from having distribution and
manufacturing directly under our control,
which supports the resilience of our business.
Ensuring that we maintain the strong
relationship we enjoy with our customers
will always be our top priority.
R E V E N U E
Physical
Digital
Wholesale
Cocoa estate
66%
24%
8%
2%
2%
8%
66%
24%
22
STR ATEGIC REPORT Chief Executive’s statement
23
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Financial review
Strong sales growth coupled with improving margins and
cost control have resulted in an improvement in profitability.
“ Investments in proven formats
and in increasing production
capacity have supported
growth. A focus on costs has
improved operating leverage
and profit margins.”
M AT T P R I TC H A R D
Chief Financial Officer
Revenue
Gross profit
Operating expenses
Pre-exceptional EBITDA
Depreciation & amortisation
Exceptional costs
Operating profit
Finance income
Finance expense
Profit before tax
Tax expense
Profit for the period
Period ended
26 June 2016
£000
Period ended
28 June 2015
£000
91,090
60,853
(48,522)
12,331
(3,194)
(2,642)
6,366
172
(947)
5,591
(1,507)
4,084
81,068
53,982
(46,148)
7,834
(4,239)
–
3,463
188
(720)
2,931
(884)
2,047
R E V E N U E
E XC E P T I O N A L CO S T S
Revenue grew by 12% from £81.1m to
£91.1m. An overview of revenue is included
in the Chief Executive’s statement.
G RO S S M A RG I N A N D
O P E R AT I N G E X P E N S E
Gross profit margin improved from 66.6%
to 66.8%, as a result of a focus on efficiency
and better buying, partially offset by ongoing
investment in product quality.
A focus on cost control meant that operating
expenses as a percentage of sales reduced
from 56.9% to 53.3%.
The exceptional costs of £2.6m relate to the
costs of flotation of the Group in May 2016
and to the acquisition of Hotel Chocolat
Estates Limited, Saint Lucia by the Group at
the time of IPO.
F I N A N C E E X P E N S E
A £5.6m loan was taken out with Lloyds
bank in July 2015 and was repaid in full from
operating cash flow prior to the IPO. In
addition the Group made use of an overdraft
facility provided by Lloyds bank. This was
replaced with an £18m 2-year RCF facility in
April 2016.
TA X AT I O N
C A S H P O S I T I O N
P E R F O R M A N C E I N D I C ATO R S
The effective rate of taxation is 27%. This is
higher than the standard rate primarily as a
result of costs relating to the IPO, which are
not allowable for tax purposes.
E A R N I N G S P E R S H A R E ( E P S )
A N D D I V I D E N D S
The capital reorganisation in conjunction
with the IPO increased the number of shares
in issue to 112,837,828 resulting in an FY16
EPS of 3.9p.
The business continues to be in a growth
phase and has recently raised new capital to
finance investment activity with the goal of
increasing returns. Therefore the Board does
not propose a dividend, but intends to adopt
a progressive dividend policy in future years
as the business grows.
The Group had £6.5m of cash at year
end and £6.7m of borrowings in the form
of chocolate bonds where bondholders
receive boxes of chocolate or gift cards in
lieu of interest.
The Group monitors its performance
using a number of key indicators which are
agreed at Board meetings and monitored at
operational and Board level.
WO R K I N G C A P I TA L
R E V E N U E G ROW T H
Closing inventories increased by £2.1m driven
by an investment in inventory to improve
availability for customers which has supported
sales growth, and by a requirement to build
additional inventory in advance of a temporary
factory shutdown to complete capital
investment in July and August 2016.
+12%
Revenue grew 12%
year-on-year
C A P I TA L E X P E N D I T U R E
G RO S S M A RG I N
Capital expenditure of £8.3m comprised
investments in new stores and re-sites, IT
projects and in operational projects including
upgrades to factory capacity and capability.
66.8%
Gross margin improved from
66.6% to 66.8%
P R E - E XC E P T I O N A L
E B I T DA M A RG I N
13.5%
EBITDA margin before exceptional costs
improved from 9.7% to 13.5%.
ACQ U I S I T I O N O F H OT E L C H O CO L AT E S TAT E S L I M I T E D,
S A I N T LU C I A ( H C E S L)
Hotel Chocolat Group Limited acquired HCESL on 24 April 2016. As such the
audited financial statements are required by the Companies Act to include the
activities, assets and liabilities of HCESL from the date of acquisition. The admission
document published prior to the IPO was required to include the results of HCESL
as if the Company had always been a member of the Group. The proforma numbers
below are therefore provided for comparative purposes.
Hotel Chocolat Group plc proforma basis
Revenue
Pre-exceptional EBITDA
Period ended
26 June 2016
£000
Period ended
28 June 2015
£000
92,636
12,270
82,614
8,106
24
STR ATEGIC REPORT Financial review
25
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Risk management
The Board sets out below the principal risks that the Directors consider could impact the business. The Board continually reviews the
risks facing the Group, the controls in place to mitigate any potential adverse impacts and assurance sought to check that the controls are
working effectively. The Board recognises that the nature and scope of risks can change and there may be other risks to which the Group is
exposed so the list is not intended to be exhaustive.
Risk category
Potential impact
Mitigation
Change to
residual risk
in FY 2016
Commentary
I N C R E A S E D CO M P E T I T I O N
A N D C H A N G E S I N
CO N S U M E R TA S T E S
Changes to competition and/or consumer preferences may
reduce demand for the Group’s products.
Increased competition could make it more difficult or more
costly to acquire new store leases.
E CO N O M I C A N D
P O L I T I C A L FAC TO R S
B E YO N D T H E G RO U P ’ S
D I R E C T CO N T RO L
F O R E I G N E XC H A N G E
A downturn in the macro-economy may reduce consumer
demand generally. Costs may be increased by changes to
government policy, including tax changes or other legislation.
The Group purchases many of its ingredients and capital items
in currencies other than sterling. A fall in the value of sterling
would increase the cost of imports.
Revenues from the hotel in Saint Lucia are denominated in US dollars.
K E Y M A N AG E M E N T
Loss of key personnel could impact the Group’s ability to
implement strategy and the intended pace of growth.
• The business adheres to core values of originality,
authenticity and ethics which result in a strong brand.
• The Board strives for continuous improvement to
products and services to increase sales.
• The Board seeks to ensure the brand retains its position
as affordable luxury in order to appeal to a broad range
of consumers and at price points that are appropriate.
• Ongoing focus on cost efficiency assists in mitigating
individual cost increases.
• The Group forecasts its requirement for foreign exchange
purchases and hedges these purchases 18 months ahead.
The Brexit vote has increased macro-
economic uncertainty, however trading
since period-end has remained in line with
the Board’s expectations.
Whilst sterling has fallen, the Group extends
its currency hedges on a quarterly basis and is
currently hedged for the whole of FY17.
• Business plans and initiatives are documented and prepared with
cross-functional input to reduce reliance on single individuals.
• The Remuneration Committee seeks to ensure rewards are
commensurate with performance and aid retention.
The IPO has enabled the business to launch
share-based incentives to assist in retaining
key personnel.
D I S RU P T I O N TO S U P P LY O R
P RO D U C T I O N O F G O O D S ,
O R TO I T S YS T E M S
Disruption to supply or production of goods, or to IT systems,
could limit availability of products and consequently reduce sales.
• The Group maintains a business continuity plan which is
updated annually and tested quarterly with the incident
management team.
The business has extended its risk assessments
to include external as well as internal supply
chain disruption.
I N CO N S I S T E N T Q UA L I T Y O R
CO N TA M I N AT I O N O F T H E
G RO U P ’ S P RO D U C T S
Inconsistent quality or contamination of the Group’s products
could reduce demand for the Group’s products.
• The business applies strict quality controls and seeks
independent validation of these controls by the British
Retail Consortium (BRC).
Production facilities achieved ‘A grade’
accreditation from the BRC in 2016.
N E G AT I V E P U B L I C I T Y
A F F E C T I N G T H E B R A N D
Negative publicity affecting the brand could reduce consumer
demand for the Group’s products.
• The business adheres to core values of originality,
authenticity and ethics which result in a strong brand.
26
STR ATEGIC REPORT Risk management
27
This strategic report and information referred to herein was approved on behalf of the Board on 18 October 2016.
Matt Pritchard
Chief Financial Officer
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Corporate social responsibility
Originality · Authenticity · Ethics
Company overview
Strategic report
Governance
Financial statements
The Board believes that the company has a duty to many
groups in society: customers, growers and suppliers,
employees, shareholders and local communities.
C U S TO M E R S
E N V I RO N M E N T
Initiatives are underway to reduce CO2
emissions, including reducing the number
of vehicle miles travelled and improving
energy efficiency in factories. A new
delivery fleet has significantly reduced
vehicle NO2 and reduced vehicle CO2 by
10% year-on-year. Targeting inefficient
processes also reduces environmental
wastage; smarter use of packaging in our
Distribution Centre will reduce cardboard
consumption in FY17.
CO M M U N I T I E S
We have partnered with Drive Forward
Foundation, an organisation which
supports young people leaving care
by assisting them with the transition
to the world of work. Drive Forward
Foundation helps young people select
the right career and provides support,
giving them confidence to succeed in the
workplace. The collaboration will target
those with the skills and appetite to
succeed in a retail career.
The business is committed to a
philosophy of “more cocoa, less sugar”,
designed to ensure that the product
offers a differentiated cocoa-rich taste,
and with lower sugar content than many
premium chocolate products.
Customer confidence in pricing is also
important. We never go ‘on sale’ before
the end of a season, so the customers
know they are paying a fair price for
their purchase.
E M P LOY E E S
The business measures employee
engagement in every team with a focus
on ensuring that all team members
are listened to and any concerns are
addressed. We believe that an engaged
team will feel greater job satisfaction
and deliver a better experience
for customers.
The Group operates an all-employee
annual performance bonus and a share-
save scheme which launched in August
2016. Career progression is supported
and targets are set to ensure as high
a proportion of vacancies as possible
are filled via internal promotions. The
School of Chocolate diploma is available
to all employees and provides a detailed
understanding of all aspects of cocoa
growing and chocolate making.
The Group strives to ensure that the
business’s activities positively benefit
all stakeholders.
E N G AG E D E T H I C S –
u n i t i n g c o c o a g rowe r s
a n d l ove r s o f f i n e c h o c o l at e
a n d b e i n g f a i r t o b o t h .
The experience gained by revitalising our
cocoa estate in Saint Lucia has shown us
that there are a number of ways to assist
in ensuring cocoa growing is sustainable:
1) Pay a premium for
cocoa grown to sustainable
standards of stewardship.
Hotel Chocolat Group plc is
working with suppliers and is
committed to ensuring that 100%
of its cocoa is certified sustainable
by 2020.
2) Help farmers to increase crop
yields by providing knowledge,
techniques, tools and materials to
improve productivity and where
possible grow ‘fine’ cocoa which can
fetch a higher price. Hotel Chocolat
(HC) has partnered with an NGO,
Green Tropic Group, for 14 years to
support higher productivity in Ghana.
HC has committed to more than
doubling the level of financial support
in FY17 in order to increase the
number of farmers that benefit from
training and resources to improve
productivity and farm incomes.
3) Providing support to local
communities. HC and the Tasting
Club members have funded the
construction of a health centre
in Osuben, Ghana and intend to
continue to invest in similar projects.
“more cocoa, less sugar”
We believe cocoa is the most important ingredient in great chocolate so it
will always be the main ingredient listed first on the back of our packs, even
for milk and white chocolate. For many of our competitors, sugar will be listed
as the main ingredient. We believe customers can taste the difference.
28
GOVERNANCE Corporate social responsibility
29
HOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Board of Directors
Experienced founder-led team
A N D R E W G E R R I E (53)
A N G U S T H I R LW E L L (53)
P E T E R H A R R I S (61)
M AT T P R I TC H A R D (42)
M AT T M A RG E R E S O N (4 5)
S O P H I E TO M K I N S (47 )
Independent
Non-executive Chairman
Co-founder and
Chief Executive Officer
Co-founder and
Development Director
Chief Financial Officer
Chief Operating Officer
Independent
Non-executive Director
Audit Committee Chair
Remuneration Committee member
Remuneration Committee Chair
Audit Committee member
Andrew Joined HC as Non-executive
Chairman in June 2015 and has extensive
retail experience, having served as CEO of
Lush Cosmetics from 1994 to 2014. During
this period Lush grew to over 900 stores
across 49 countries, with sales in excess
of £450m.
Andrew holds a B.Com degree
from Auckland University
Angus co-founded HC with Peter Harris
in 1993 and has a particular focus on brand
strategy, product and channel models,
marketing and creative.
Angus attended Cranfield School of
Management and is a committee member
for The Academy of Chocolate.
Peter Harris co-founded HC with Angus
Thirlwell in 1993 and is responsible for
real estate, legal and intellectual property.
Peter qualified as a Chartered Accountant
in 1979.
Matt joined HC as Chief Financial Officer
in 2014 and is responsible for the finance
function and retail operations.
Matt joined HC in 2006 and is responsible
for product development, manufacturing,
supply chain, HR and IT.
He has over 20 years of experience
of finance gained in blue chip retail
organisations.
Matt qualified as a Certified Accountant
in 1998.
Matt has 23 years’ experience in operations
and supply chain management.
Matt completed an MBA in 2013 and is
a member of the Chartered Institute of
Logistics and Transport.
Sophie has considerable public markets
experience gained through a 17-year career
in the City with several investment banks.
Sophie is currently Non-executive Director
and Chair of the Audit Committee at
CloudCall Group plc.
Sophie qualified as a Chartered Accountant
in 1994 and is a fellow of the Chartered
Institute for Securities and Investment.
FAVO U R I T E P RO D U C T:
FAVO U R I T E P RO D U C T:
FAVO U R I T E P RO D U C T:
FAVO U R I T E P RO D U C T:
FAVO U R I T E P RO D U C T:
FAVO U R I T E P RO D U C T:
Fruit & Nut Frenzy
Giant Slab to share
Breakfast at our restaurant:
avocado on toast with cocoa
nibs – and a 100% Hot Chocolat
Chocolate-covered almonds
Saint Lucia 70% “La Pepineire”
Grown on a single grove
within the Rabot Estate
Pistachio Praline with a
cocoa infusion
Peanut Butter Selector
30
GOVERNANCE Board of Directors
31
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Company overview
Strategic report
Governance
Financial statements
Corporate governance statement
AN INTRODUCTION
FROM OUR CHAIRMAN
In this section of our report we have set out our approach to
governance and provided further information on how the Board
and its committees operate. This is our first annual report as an
AIM-listed entity.
As an AIM-listed entity, the Group is not subject to and does not
comply with the requirements of the UK Corporate Governance
Code. However, the Directors recognise the value and importance
of good corporate governance and are fully accountable to the
Group’s stakeholders including shareholders, customers, suppliers
and employees.
We are also mindful of the recommendations of the QCA
Corporate Governance Code for Small and Mid-Size Quoted
Companies (“QCA guidelines”). The corporate governance
framework which the Group operates, including Board leadership
and effectiveness, Board remuneration, and internal control, is set
out below.
T H E CO M P O S I T I O N O F T H E B OA R D
The Board is responsible to the shareholders and sets the Group’s
strategy for achieving long-term success. It is also ultimately
responsible for the management, governance, controls, risk
management, direction and performance of the Group. From
flotation the Board comprised two Non-executive Directors and
four Executive Directors. The two Non-executive Directors are
fully independent.
H OW T H E B OA R D O P E R AT E S
The Board is responsible for the Group’s strategy and for its overall
management. The operation of the Board is documented in a formal
schedule of matters reserved for its approval, which is reviewed
annually. These include matters relating to:
• The Group’s strategic aims and objectives
• The structure and capital of the Group
• Financial reporting, financial controls and dividend policy
• Setting budgets and forecasts
• Internal control, risk and the Group’s risk appetite
• The approval of significant contracts and expenditure
• Effective communication with shareholders
• Any changes to Board membership or structure
B OA R D M E E T I N G S
B OA R D CO M M I T T E E S
Nominations Committee
Non-executive Directors communicate directly with Executive
Directors and senior management between formal Board
meetings. The Board as now constituted first met collectively in
April 2016 and in total met five times in the period. In addition the
Board held a strategy day on 1 August 2016 specifically focused on
digital growth.
Directors are expected to attend all meetings of the Board, and of
the Committees on which they sit, and to devote sufficient time to
the Group’s affairs to enable them to fulfil their duties as Directors.
In the event that Directors are unable to attend a meeting, their
comments on papers to be considered at the meeting will be
discussed in advance with the Chairman so that their contribution
can be included in the wider Board discussion. The following table
shows Directors’ attendance at scheduled Board and Committee
meetings during the year:
Board
Remuneration
Audit
Andrew Gerrie
Sophie Tomkins
Angus Thirlwell
Peter Harris
Matt Pritchard
Matt Margereson
5/5
5/5
4/5
5/5
5/5
5/5
1/1
1/1
–
–
–
–
1/1
1/1
–
–
(Guest 1/1)
–
B OA R D D E C I S I O N S A N D AC T I V I T Y
D U R I N G T H E P E R I O D
The Board has a schedule of regular business, financial and
operational matters, and each Board Committee has compiled
a schedule of work to ensure that all areas for which the Board
has responsibility are addressed and reviewed during the course
of the year. The Chairman, aided by the Company Secretary, is
responsible for ensuring that the Directors receive accurate and
timely information. The Company Secretary compiles the Board
and Committee papers which are circulated to Directors prior to
meetings. The Company Secretary also ensures that any feedback
or suggestions for improvement on Board papers is fed back to
management. The Company Secretary provides minutes of each
meeting and every Director is aware of the right to have any
concerns minuted.
The Board has delegated specific responsibilities to the Audit and
Remuneration Committees, details of which are set out below.
Each Committee has written terms of reference setting out its duties,
authority and reporting responsibilities. Copies of all the Committee
terms of reference are available on the Group’s website. It is intended
that these terms of reference will be kept under continuous review to
ensure they remain appropriate and reflect any changes in legislation,
regulation or best practice. Each Committee comprises Non-
executive Directors of the Group.
Audit Committee
The Audit Committee is chaired by Sophie Tomkins and its other
member is Andrew Gerrie; both are fully independent. The Audit
Committee has primary responsibility for monitoring the quality
of internal controls and ensuring that the financial performance of
the Group is properly measured and reported on. It receives and
reviews reports from the Group’s management and auditor relating
to the annual accounts and the accounting and internal control
systems in use throughout the Group. It also advises the Board on
the appointment of the auditor, reviews their fees and discusses the
nature, scope and results of the audit with the auditor. The Audit
Committee meets at least twice a year and has unrestricted access
to the Group’s auditor. The Chief Financial Officer attends the
Committee meetings by invitation.
Remuneration Committee
The Remuneration Committee is chaired by Andrew Gerrie. Its
other member is Sophie Tomkins. The Remuneration Committee
reviews the performance of the Executive Directors and makes
recommendations to the Board on matters relating to their
remuneration and terms of employment. The Remuneration
Committee also makes recommendations to the Board on
proposals for the granting of share options and other equity
incentives pursuant to any share option scheme or equity incentive
scheme in operation from time to time. The remuneration and
terms and conditions of appointment of the Non-executive
Directors of the Group are set by the Board. The Chief Executive
Officer and Chief Financial Officer are invited to attend for some
parts of the Committee meetings where their input is required
although they do not take part in any discussion on their own
benefits and remuneration.
The Remuneration report on pages 36 to 37 contains more
detailed information on the Committee’s role and the Directors’
remuneration and fees.
The Board is newly formed and is considered by its members to
be appropriately sized for the needs of the business. As such it is
the view of the Board that a separate Nominations Committee is
not required at present. In the event that the needs of the business
change, a Nominations Committee will be formed. It has been
agreed that the main Board will undertake the activities of Board
appointments, re-election and succession, with a view to ensuring
that the Board is composed of individuals with the necessary skills
and to promote a culture that fosters diversity.
B OA R D E F F E C T I V E N E S S
The skills and experience of the Board are set out in their
biographical details on pages 30 to 31. The experience and
knowledge of each of the Directors gives them the ability to
constructively challenge strategy and to scrutinise performance.
All the Directors have been members of the Board since the
Group’s listing on AIM in May 2016 and took part in a thorough
induction process prior to joining the Board. It is intended that, in
the future, on joining the Board, new Directors will undergo a formal
programme which will be tailored to the existing knowledge and
experience of the Director concerned.
T I M E CO M M I T M E N T S
All Directors have been advised of the time required to fulfil the
role prior to appointment and were asked to confirm that they can
make the required commitment before they were appointed. This
requirement is also included in their letters of appointment. The
Board is satisfied that the Chairman and Non-executive Directors
are able to devote sufficient time to the Group’s business.
There has been no significant change in the Chairman’s other
time commitments since his appointment.
D E V E LO P M E N T
The Company Secretary ensures that all Directors are kept abreast
of changes in relevant legislation and regulations, with the assistance
of the Group’s advisers where appropriate. Executive Directors are
subject to the Group’s performance review process through which
their performance against predetermined objectives is reviewed and
their personal and professional development needs considered. It
is intended that an annual performance appraisal of Non-executive
Directors will be undertaken by the Chairman as part of the Board
evaluation process, at which time any training or development needs
will be addressed.
32
GOVERNANCE Corporate governance statement
33
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Corporate governance statement continued
Audit Committee report
E X T E R N A L A P P O I N T M E N T S
R E L AT I O N S W I T H S H A R E H O L D E R S
The Group maintains communication with institutional shareholders
through individual meetings with Executive Directors, particularly
following publication of the Group’s interim and full period results.
Private shareholders are encouraged to attend the Annual General
Meeting at which the Group’s activities are considered and questions
answered. General information about the Group is also available on
the Group’s website (www.hotelchocolat.com). The Non-executive
Directors are available to discuss any matter stakeholders might
wish to raise, and the Chairman and independent Non-executive
Directors will attend meetings with investors and analysts as
required. Investor relations activity and a review of the share
register are standing items on the Board’s agenda.
A N N UA L G E N E R A L M E E T I N G (AG M )
The Annual General Meeting of the Group will take place on
1 December 2016. The Notice of Annual General Meeting and
the ordinary and special resolutions to be put to the meeting are
included at the end of this Annual Report and financial statements.
As appropriate, the Board may authorise Executive Directors to
take Non-executive positions in other companies and organisations,
provided the time commitment does not conflict with the Director’s
duties to the Group, since such appointments should broaden their
experience. The acceptance of appointment to such positions is
subject to the approval of the Chairman.
CO N F L I C T S O F I N T E R E S T
At each meeting the Board considers Directors’ conflicts of
interest. The Group’s Articles of Association provide for the
Board to authorise any actual or potential conflicts of interest.
D I R E C TO R S ’ A N D O F F I C E R S ’
L I A B I L I T Y I N S U R A N C E
The Group has purchased Directors’ and Officers’ liability
insurance during the period as allowed by the Group’s articles.
E L E C T I O N O F D I R E C TO R S
All continuing Directors of the Group will offer themselves for
election or re-election at the Annual General Meeting (see
note below).
I N T E R N A L CO N T RO L S
The Board has ultimate responsibility for the Group’s system of
internal control and for reviewing its effectiveness. However, any
such system of internal control can provide only reasonable, but not
absolute, assurance against material misstatement or loss. The Board
considers that the internal controls in place are appropriate for the
size, complexity and risk profile of the Group. The principal elements
of the Group’s internal control system include:
• close management of the day-to-day activities of the Group by
the Executive Directors;
• an organisational structure with defined levels of responsibility,
which promotes entrepreneurial decision making and rapid
implementation whilst mitigating risks;
• a comprehensive annual budgeting process producing a detailed
integrated profit and loss, balance sheet and cash flow, which is
approved by the Board;
• detailed monthly reporting of performance against budget; and
• central control over key areas such as capital expenditure
authorisation and banking facilities.
The Group continues to review its system of internal control to
ensure adherence to best practice, whilst also having regard to its size
and the resources available. The Board considers that the introduction
of an internal audit function is not appropriate at this juncture.
On behalf of the Board, I am pleased to present the Audit
Committee report for the period ended 26 June 2016. The Audit
Committee is responsible for ensuring that the financial performance
of the Group is properly reported and reviewed. Its role includes
monitoring the integrity of the financial statements (including annual
and interim accounts and results announcements), reviewing internal
control and risk management systems, reviewing any changes to
accounting policies, reviewing and monitoring the extent of the non-
audit services undertaken by external auditors and advising on the
appointment of external auditors.
M E M B E R S O F T H E AU D I T CO M M I T T E E
The Committee consists of two independent Non-executive
Directors: me (as Chair) and Andrew Gerrie. Matt Pritchard
may attend Committee meetings by invitation. The Committee
met once in the period. The Board is satisfied that I, as Chair of
the Committee, have recent and relevant financial experience.
I am a Chartered Accountant and I am currently Chair of the
Audit Committee at CloudCall Group plc. A representative
from Chadwick Corporate Consulting acts as Secretary to the
Committee. I report the Committee’s deliberations at the next
Board meeting and the minutes of each meeting are made available
to all members of the Board.
D U T I E S
The main duties of the Audit Committee are set out in its
terms of reference, which are available on the Group’s website
(www.hotelchocolat.com). The main items of business considered
by the Audit Committee during the year included:
also assesses the auditor’s performance. Having reviewed the auditor’s
independence and performance, the Audit Committee recommends
that BDO LLP be reappointed as the Group’s auditor at the next AGM.
AU D I T P RO C E S S
The auditor prepares an audit plan for the review of the full period
financial statements. The audit plan sets out the scope of the audit,
areas to be targeted and audit timetable. This plan is reviewed and
agreed in advance by the Audit Committee. Following the audit, the
auditor presented its findings to the Audit Committee for discussion.
No major areas of concern were highlighted by the auditor during
the period, however areas of significant risk and other matters of
audit relevance are regularly communicated.
I N T E R N A L AU D I T
At present the Group does not have an internal audit function
and the Committee believes that management is able to derive
assurance as to the adequacy and effectiveness of internal controls
and risk management procedures without one.
RISK MANAGEMENT AND INTERNAL CONTROLS
As described on page 34 of the corporate governance report, the
Group has established a framework of risk management and internal
control systems, policies and procedures. The Audit Committee
is responsible for reviewing the risk management and internal
control framework and ensuring that it operates effectively. During
the period, the Committee has reviewed the framework and the
Committee is satisfied that the internal control systems in place are
currently operating effectively.
• review of the FY16 audit plan and audit engagement letter;
W H I S T L E B LOW I N G
• review of suitability of the external auditor;
• review of the financial statements and Annual Report;
• consideration of the external audit report and management
representation letter;
• going concern review;
• review of the risk management and internal control systems; and
• meeting with the external auditor without management present.
RO L E O F T H E E X T E R N A L AU D I TO R
The Audit Committee monitors the relationship with the external
auditor, BDO LLP, to ensure that auditor independence and objectivity
are maintained. Noting the tenure of BDO LLP (since FY12), the
Committee will keep under review the need for external tender. As
part of its review the Committee monitors the provision of non-audit
services by the external auditor. The breakdown of fees between audit
and non-audit services is provided in Note 6 of the Group’s financial
statements. The non-audit fees relate to tax advice for the Group and
transaction services in support of the flotation. The Audit Committee
The Group has in place a whistleblowing policy which sets out
the formal process by which an employee of the Group may, in
confidence, raise concerns about possible improprieties in financial
reporting or other matters. Whistleblowing is a standing item on
the Committee’s agenda and updates are provided at each meeting.
During the period, there were no incidents for consideration.
A N T I - B R I B E RY
The Group has in place an anti-bribery and anti-corruption policy
which sets out its zero-tolerance position and provides information
and guidance to those working for the Group on how to recognise
and deal with bribery and corruption issues. During the period,
there were no incidents for consideration.
Sophie Tomkins
Chair of the Audit Committee
34
GOVERNANCE Audit Commit tee repor t
35
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
Remuneration report
I am pleased to present this remuneration report, which sets out the remuneration policy and the remuneration paid to the Directors
for the period. Hotel Chocolat Group plc is listed on the Alternative Investment Market (AIM) and, as such, the following disclosures are
prepared on a voluntary basis for the Group.
CO M P O S I T I O N A N D RO L E
The Remuneration Committee’s members are Andrew Gerrie, who is the Chairman of the Committee, and Sophie Tomkins. The
Committee operates under the Group’s agreed terms of reference and is responsible for reviewing all senior executive appointments
and determining the Group’s policy in respect of the terms of employment, including remuneration packages of Executive Directors. The
Remuneration Committee met once during the period and plans to meet at least twice a year going forward.
R E M U N E R AT I O N P O L I C Y
The objective of the Group’s remuneration policy is to attract, motivate and retain high quality individuals who will contribute fully to the
success of the Group. To achieve this objective, the Group provides competitive salaries and benefits to all employees. Executive Directors’
remuneration is set to create an appropriate balance between both fixed and performance-related elements. Remuneration is reviewed
each year in light of the Group’s business objectives. It is the Remuneration Committee’s intention that remuneration should reward
achievement of objectives and that these are aligned with shareholders’ interests over the medium term. Remuneration consists of the
following elements:
• Basic salary;
• Performance-related annual bonus;
• Long-Term Incentive Plan; and
• Pension contribution.
E X E C U T I V E D I R E C TO R S ’ S E RV I C E CO N T R AC T S
The Executive Directors signed new service contracts with the Group on admission to AIM. These are not of fixed duration. Angus
Thirlwell and Peter Harris’ contracts are terminable by either party giving twelve months’ written notice. Matt Pritchard and Matt
Margereson’s contracts are terminable by either party giving six months’ written notice.
N O N - E X E C U T I V E D I R E C TO R S
The remuneration policy for 2017 will operate as follows:
Executive
Angus Thirlwell
Peter Harris
Matt Pritchard
Matt Margereson
Non-executive
Andrew Gerrie
Sophie Tomkins
Basic salary/fee Maximum bonus
Pension
£235,000
£215,000
£215,000
£215,000
£50,000
£35,000
40%
40%
40%
40%
–
–
£5,350
£3,000
£2,150
–
–
–
Maximum bonus opportunities for the 2017 financial year are disclosed in the table above. The 2017 bonus will be assessed against Group
profit and against personal performance objectives.
The profit element of the bonus will adjust from zero at a threshold profit level, up to 40% for a stretch profit growth. Personal performance
against pre-determined objectives will be appraised by the Remuneration Committee. If a Director does not achieve one or more of their
personal objectives their profit-related bonus payment will reduce on a pre-determined sliding scale.
Challenging performance targets have been set. The actual performance targets are not disclosed as they are considered to be
commercially sensitive.
LO N G -T E R M I N C E N T I V E P L A N
Annual awards to Executive Directors under this plan are underpinned by financial performance measures. Angus Thirlwell and Peter Harris
are not part of the Long-Term Incentive Plan.
Matt Pritchard and Matt Margereson have been granted options under the Group’s Long-Term Incentive Plan. The proportion of the total
option shares vesting is subject to testing against a performance condition, being the audited net profit after tax for the financial period
ended 30 June 2019. The performance thresholds are not disclosed as they are considered to be commercially sensitive.
Date of grant
Number of ordinary
shares under option
Exercise price Exercise period
04.05.16
04.05.16
800,000
800,000
148p
04.05.19–03.05.26
148p
04.05.19–03.05.26
The Non-executive Directors signed letters of appointment with the Group on admission to AIM for the provision of Non-executive
Directors’ services, which may be terminated by either party giving three months’ written notice. The Non-executive Directors’ fees are
determined by the Board.
Matt Pritchard
Matt Margereson
D I R E C TO R S ’ R E M U N E R AT I O N
The following table summarises the total gross remuneration of the Directors who served during the period to 26 June 2016.
If you have any comments or questions on anything contained within this remuneration report, I will be available at the AGM.
2016
Basic
2015
Basic
salary/fee
Bonus
Pension
Total
salary/fee
Bonus
Pension
Total
Andrew Gerrie
Chair of the Remuneration Committee
Executive
Angus Thirlwell
Peter Harris
Matt Pritchard
Matt Margereson
Non-executive
Andrew Gerrie
Sophie Tomkins
235,840
232,634
202,404
202,404
7,820
6,641
47,200
47,200
40,250
40,250
–
–
5,358
3,000
2,024
–
–
29
288,398
282,834
244,678
242,654
7,820
6,670
236,000
236,000
182,500
185,417
–
–
47,200
47,200
38,100
37,083
–
–
5,360
3,000
1,825
–
–
–
288,560
286,200
222,425
222,500
–
–
36
GOVERNANCE Remuneration repor t
37
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Company overview
Strategic report
Governance
Financial statements
Directors’ report
The Directors present their report together with the audited financial statements for the period ended 26 June 2016.
P O L I T I C A L D O N AT I O N S
The corporate governance statement on pages 32 to 34 also forms part of this Directors’ report.
R E V I E W O F B U S I N E S S
The Chairman’s statement on page 10 and the strategic report on pages 10 to 27 provide a review of the business, the Group’s trading for the
period ended 26 June 2016, key performance indicators and an indication of future developments.
R E S U LT A N D D I V I D E N D
The Group made no political donations in the financial period.
D I S C LO S U R E O F I N F O R M AT I O N TO AU D I TO R
As far as the Directors are aware, there is no relevant audit information (that is, information needed by the Group’s auditor in connection
with preparing their report) of which the Group’s auditors are unaware, and each Director has taken all reasonable steps that he or she
ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the
Group’s auditors are aware of that information.
The Group has reported its Consolidated Financial Statements in accordance with International Financial Reporting Standards as adopted by
the European Union.
F I N A N C I A L I N S T RU M E N T S
The Group’s results for the period are set out in the Consolidated Statement of Comprehensive Income on page 42. The Group has applied
FRS 101: Reduced Disclosure Framework to the Company accounts for the period ended 26 June 2016.
Hotel Chocolat Group plc acquired Hotel Chocolat Estates Limited, Saint Lucia (HCESL) on 24 April 2016. As such the audited financial
statements are required by the Companies Act to include the activities, assets and liabilities of HCESL from the date of acquisition.
The Group’s IFRS profit after tax for FY16 was £4.1m (FY15: £2.0m). The Group’s FY16 revenue of £91.1m (FY15: £81.1m), gross margin
of 66.8% (FY15: 66.6%) and FY16 adjusted EBITDA of £12.3m (FY15: £7.8m) represent a successful period for the business. The Group
continued to strengthen its position.
Proforma basis
IFRS (acquisition basis)
26 June 2016
£000
92,636
67.0%
12,270
3,561
28 June 2015
£000
82,614
65.9%
8,106
1,887
26 June 2016
£000
91,090
66.8%
12,331
4,084
28 June 2015
£000
81,068
66.6%
7,834
2,047
Period ended
Revenue
Gross margin %
Adjusted EBITDA
Profit after tax
The Board is not recommending a dividend.
D I R E C TO R S
The Directors of the Group during the period were:
Executive
Angus Thirlwell
Peter Harris
Matt Pritchard
Matt Margereson
Non-executive
Andrew Gerrie
Sophie Tomkins
The names of the Directors, along with their brief biographical details are given on pages 30 to 31.
D I R E C TO R S ’ I N T E R E S T S
The Directors’ interests in the Group’s shares and options over ordinary shares are shown in the remuneration report on page 37.
No Director has any beneficial interest in the share capital of any subsidiary or associate undertaking.
The Group also purchased and maintained throughout the financial period Directors’ and Officers’ liability insurance in respect of itself and
its Directors.
The financial risk management objectives of the Group, including credit risk, interest rate risk and foreign exchange risk, are provided in
Note 31 to the Consolidated Financial Statements on pages 72 to 74.
S H A R E C A P I TA L S T RU C T U R E
At 26 June 2016, the Group’s issued share capital was £112,838 divided into 112,837,828 ordinary shares of 0.1p each. The holders of
ordinary shares are entitled to one vote per share at the meetings of the Group.
S H A R E O P T I O N S C H E M E S
Details of employee share schemes are set out in Note 9 to the Consolidated Financial Statements.
P U RC H A S E O F OW N S H A R E S
Details of shares purchased by the Group are set out in Note 24 to the Consolidated Financial Statements.
G O I N G CO N C E R N
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
P O S T B A L A N C E S H E E T E V E N T S
The Board considers that no material post balance sheet events occurred between the end of the period and the date of publication of this report.
F U T U R E D E V E LO P M E N T S
The Board intends to continue to pursue the business strategy as outlined in the strategic report on pages 10 to 27.
E M P LOY E E I N VO LV E M E N T P O L I C I E S
The Directors believe that the involvement of employees is an important part of the business culture and contributes to the successes
achieved to date (view our corporate social responsibility statement on page 28).
AU D I TO R
BDO LLP has expressed its willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
A N N UA L G E N E R A L M E E T I N G
The Annual General Meeting will be held on 1 December 2016. The ordinary business comprises receipt of the Directors’ report and
audited financial statements for the period ended 26 June 2016, the re-election of Directors, the reappointment of BDO LLP as auditor
and authorisation of the Directors to determine the auditor’s remuneration. The Notice of Annual General Meeting and the ordinary and
special resolutions to be put to the meeting are included at the end of this Annual Report and financial statements.
A P P ROVA L
This Directors’ report was approved on behalf of the Board on 18 October 2016.
Matt Pritchard
Chief Financial Officer
38
GOVERNANCE Directors’ repor t
39
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Statement of Directors’ responsibilities
Independent auditor’s report
To the members of Hotel Chocolat Group plc
Company overview
Strategic report
Governance
Financial statements
The Directors are responsible for preparing the strategic report, the Annual Report and the financial statements in accordance with
applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial period. Under that law
the Directors have elected to prepare the Group’s Consolidated Financial Statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union, and the Company Financial Statements in accordance with FRS 101: Reduced
Disclosure Framework.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to
prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative
Investment Market.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure
that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
W E B S I T E P U B L I C AT I O N
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial
statements are published on the Group’s website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group’s
website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements
contained therein.
We have audited the financial statements of Hotel Chocolat Group plc for the period ended 26 June 2016 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position and Company Statement of Financial Position,
the Consolidated Statement of Cash Flow and Company Statement of Cash Flow, the Consolidated Statement of Changes in Equity
and Company Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
R E S P E C T I V E R E S P O N S I B I L I T I E S O F D I R E C TO R S A N D AU D I TO R S
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
S CO P E O F T H E AU D I T O F T H E F I N A N C I A L S TAT E M E N T S
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.
O P I N I O N O N F I N A N C I A L S TAT E M E N T S
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs as at 26 June 2016 and of
the Group’s profit for the period then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
O P I N I O N O N OT H E R M AT T E R S P R E S C R I B E D BY T H E CO M PA N I E S AC T 2 0 0 6
In our opinion the information given in the strategic report and Directors’ report for the financial period for which the financial statements
are prepared is consistent with the financial statements.
M AT T E R S O N W H I C H W E A R E R E Q U I R E D TO R E P O RT BY E XC E P T I O N
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Mark RA Edwards (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
18 October 2016
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
40
FINANCIAL STATEMENTS Independent auditor¹s repor t
HOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
For the period ended 26 June 2016
As at 26 June 2016
Revenue
Cost of sales
Administrative expenses
Finance income
Finance expenses
Profit before tax for the period
Tax expense
Profit for the period
Other comprehensive income:
Derivative financial liabilities
Deferred tax charge on derivative financial liabilities
Currency translation differences arising from consolidation
Total comprehensive income for the period
Earnings per share – Basic and Diluted
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
Notes
4
5
10
10
11
21
11
12
91,089,824
81,068,364
(30,237,009)
(27,086,522)
60,852,815
53,981,842
(54,486,943)
(50,519,091)
6,365,872
172,106
(946,884)
5,591,094
(1,507,290)
4,083,804
(581,959)
114,446
896,053
4,512,344
3,462,751
188,489
(719,808)
2,931,432
(884,209)
2,047,223
–
–
(380,039)
1,667,184
3.9p
20.1p
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Prepayments
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Corporation tax recoverable
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Corporation tax payable
Derivative financial liabilities
Bank overdraft
Borrowings
Non-current liabilities
Other payables and accruals
Derivative financial liabilities
Borrowings
Provisions
Total liabilities
NET ASSETS
EQUITY
Share capital
Share premium
Retained earnings
Translation reserve
Merger reserve
Capital redemption reserve
Other reserves
Total equity attributable to shareholders
As at
26 June 2016
£
As at
28 June 2015
£
As at
29 June 2014
£
Notes
13
14
17
15
16
17
19
20
21
19
22
20
21
22
23
24
25
25
25
25
25
1,856,800
26,111,111
7,461
149,903
28,125,275
6,604,104
5,534,835
–
6,475,446
18,614,385
46,739,660
16,334,191
611,051
554,529
–
432,544
17,932,315
1,485,090
85,075
6,643,212
464,486
8,677,863
26,610,178
1,553,433
12,294,264
–
215,993
14,063,690
4,493,841
13,672,466
166,709
4,939,924
23,272,940
37,336,630
12,210,082
–
–
10,637,314
954,521
23,801,917
1,774,731
–
7,298,718
668,898
9,742,347
33,544,264
1,512,191
14,030,984
–
240,019
15,783,194
3,926,952
15,131,549
952,873
4,796,735
24,808,109
40,591,303
14,006,130
–
–
13,931,197
723,613
28,660,940
1,143,491
–
7,723,393
939,715
9,806,599
38,467,539
20,129,482
3,792,366
2,123,764
112,838
11,749,487
8,087,350
353,126
223,251
6,301
(402,871)
20,129,482
103,418
–
4,003,546
(542,927)
223,251
5,078
–
3,792,366
107,078
–
1,956,323
(162,888)
223,251
–
–
2,123,764
The financial statements of Hotel Chocolat Group plc, registered number 08612206 were approved by the Board of Directors and
authorised for issue on 18 October 2016. They were signed on its behalf by:
Matt Pritchard
Chief Financial Officer
18 October 2016
42
FINANCIAL STATEMENTS Consolidated Statement of Financial Position
43
HOTEL CHOCOLAT GROUP PLC Annual Report and AccountsCompany overviewStrategic reportGovernanceFinancial statements Consolidated Statement of Cash Flow
For the period ended 26 June 2016
Consolidated Statement of Changes in Equity
For the period ended 26 June 2016
Share
capital
£
Share
Premium
£
Retained
earnings
£
Translation
reserve
£
Merger
reserve
£
Capital
redemption
reserve
£
Other
reserves
£
As at 30 June 2014
Profit for the period
Capital redemption
Shares issued in the period
Other comprehensive
expense for the period
107,078
–
(5,078)
1,418
–
Equity as at 28 June 2015
103,418
Profit for the period
Capital redemption
–
(1,223)
–
–
–
–
–
–
–
–
Shares issued in the period
10,643 11,989,487
Costs of issue of equity shares
Share-based payments
Derivative financial liabilities
Deferred tax charge on
derivative financial liabilities
Other comprehensive
income for the period
–
–
–
–
–
(240,000)
–
–
–
–
1,956,323
(162,888)
223,251
2,047,223
–
–
–
–
–
–
(380,039)
–
–
–
–
4,003,546
(542,927)
223,251
4,083,804
–
–
–
–
–
–
–
–
–
–
–
–
–
–
896,053
353,126
–
–
–
–
–
–
–
–
–
–
5,078
–
–
5,078
–
1,223
–
–
–
–
–
–
–
–
Total
£
2,123,764
2,047,223
–
1,418
(380,039)
3,792,366
4,083,804
–
–
–
–
–
–
–
– 12,000,130
–
(240,000)
64,642
64,642
(581,959)
(581,959)
114,446
114,446
–
896,053
Equity as at 26 June 2016
112,838 11,749,487
8,087,350
223,251
6,301
(402,871) 20,129,482
Profit before tax for the period
Adjusted by:
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Net interest expense
Share-based payments
Loss on disposal of property, plant and equipment and intangible assets
Operating cash flows before movements in working capital
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables and provisions
Cash inflow generated from operations
Interest received
Income tax paid
Interest paid on:
– finance leases and hire purchase loans
– bank loans and overdraft
Cash flows from operating activities
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiary
Cash flows used in investing activities
(Buy back)/issue of Chocolate bonds
Capital element of hire purchase and finance leases repaid
Repayment of bank loans
Cost of issue of new equity
Issue/(buy-back) of shares
Cash flows from/(used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Foreign currency movements
Cash and cash equivalents at end of period
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
Notes
5,591,094
2,931,432
14
14
13
10
9
5
29
19
19
2,516,632
4,044,602
–
676,977
774,778
64,642
128,874
9,752,997
(2,294,585)
(309,174)
1,516,121
8,665,359
109
(548,994)
(30,020)
(660,663)
7,425,791
131,998
194,542
531,319
–
–
7,833,893
(566,890)
1,252,819
(1,001,379)
7,518,443
–
(74,019)
(31,654)
(593,801)
6,818,969
(5,625,076)
(2,889,611)
200,000
(760,224)
228,006
–
(235,784)
–
(5,957,294)
(3,125,395)
(145,000)
(378,462)
(654,021)
(240,000)
12,000,130
10,582,647
12,051,144
(5,697,390)
121,692
6,475,446
406,500
(439,850)
(160,416)
–
(3,660)
(197,426)
3,496,148
(9,134,462)
(59,076)
(5,697,390)
44
FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity
45
HOTEL CHOCOLAT GROUP PLC Annual Report and AccountsCompany overviewStrategic reportGovernanceFinancial statements
Notes to the financial statements
For the period ended 26 June 2016
1. G E N E R A L I N F O R M AT I O N
Hotel Chocolat Group plc (the Company, and together with its subsidiaries, the Group) is a company incorporated in the United Kingdom
under the Companies Act. The registered office of the Company is Mint House, Newark Close, Royston, Hertfordshire, SG8 5HL, United
Kingdom. The registered company number is 08612206. A list of all of the Company’s subsidiaries is presented in Note 18.
The Group’s principal activities are that of the manufacture and retail of chocolate in the United Kingdom and overseas.
2 . ACCO U N T I N G P O L I C I E S
The principal accounting policies applied in the preparation of the consolidated financial information are set out below. These policies have
been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The consolidated financial information has been prepared in accordance with International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union.
For all periods up to and including the period ended 28 June 2015, the Group prepared its financial statements in accordance with United
Kingdom Generally Accepted Accounting Principles (UK GAAP). These financial statements for the period ended 26 June 2016 are the first
the Group has prepared in accordance with IFRS. Refer to Note 34 for information on how the Group adopted IFRS.
At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards
applicable to the Group have been published but are not yet effective, and have not been adopted early by the Group. These are listed below:
Standard/
interpretation
IFRS 9 Financial
Instruments (2009)
and amendment
IFRS 15 Revenue
from Contracts with
Customers
IFRS 16 Leases
Content
IFRS 9 ‘Financial instruments’ is effective for periods commencing on or after 1
January 2018 subject to endorsement by the EU. IFRS 9 is a replacement for IAS
39 ‘Financial Instruments’ and covers three distinct areas. Phase 1 contains new
requirements for the classification and measurement of financial assets and liabilities.
Phase 2 relates to the impairment of financial assets and requires the calculation of
impairment on an expected loss basis rather than the current incurred loss basis.
Phase 3 relates to less stringent requirements for general hedge accounting.
IFRS 15, ‘Revenues from Contracts with Customers’, replaces IAS 18, ‘Revenues’,
and introduces a five step approach to revenue recognition based on performance
obligations in customer contracts. The International Accounting Standards Board
(‘IASB’) has proposed to issue some clarifications and to defer the standard’s
effective date of 1 January 2017 to 1 January 2018. The effective date for the Group
is also subject to EU endorsement.
IFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and
the supplier (‘lessor’). IFRS 16 completes the IASB’s project to improve the financial
reporting of leases and replaces the previous leases Standard, IAS 17 Leases, and
related Interpretations.
The impact of the adoption of the Standards listed above, has not yet been assessed.
Applicable for financial
years beginning on/after
1 January 2018
1 January 2018
1 January 2019
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Basis of consolidation
The consolidated financial information incorporates the financial statements of the Group and all of its subsidiary undertakings. The
financial statements of all Group companies are adjusted, where necessary, to ensure the use of consistent accounting policies. Acquisitions
are accounted for under the acquisition method from the date control passes to the Group. On acquisition, the assets and liabilities of a
subsidiary are measured at their fair values. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is
recognised as goodwill.
As allowed under IFRS 1, any acquisitions or group reorganisations which occurred after the transition date to IFRS have not been restated
but instead the previous accounting treatment has been adopted. During the period ended 29 June 2014, Hotel Chocolat Group Limited
(now plc) was incorporated and undertook a share for share exchange with the direct subsidiaries listed in Note 18. This has been
accounted for under the basis of merger accounting given that the ultimate ownership before and after the transaction remained the same.
Merged subsidiaries undertakings are treated as if they had always been a member of the group. Any difference between the nominal value
of the shares acquired by the Company and those issued by the Company to acquire them is taken to the merger reserve.
Going concern
The Directors have prepared a cash flow forecast covering a period extending beyond 18 months from the financial information presented
as at 26 June 2016.
The Directors have taken into account the historic positive cash flows, growth in business and the inherent risks and uncertainties facing
the business, and have derived forecast assumptions that are the Directors’ best estimate of the future development of the business. The
forecasts and projections, which take into account the projected trading performance of companies within the Group’s combined bank
facilities, show that the Group will be able to operate within the level of its current facilities. On this basis, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they
continue to adopt the going concern basis of accounting in preparing the consolidated financial information. The financial information does
not include any adjustments that would result from the going concern basis of preparation being inappropriate.
Revenue recognition
Revenue is the total amount receivable by the Group for goods and services supplied, excluding VAT and trade discounts.
Revenue arising from the sale of goods is recognised when the risks and rewards of owning the product has been transferred to the buyer
at the point of sale, which is generally on delivery. Revenue is recognised when the amount of revenue can be reliably measured and it is
probable that the future economic benefit will flow to the entity.
Operating profit
Operating profit is stated after all expenses, including those considered to be exceptional, but before finance income or expenses. Exceptional
items are items of income or expense which because of their nature or size require separate presentation to allow shareholders to better
understand the financial performance of the year and allow comparison with prior periods.
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Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 2 . ACCO U N T I N G P O L I C I E S CONTINUED
Foreign currency translation
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Leases
The Group’s consolidated financial information is presented in sterling, which is also the parent company’s functional currency.
a) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the Consolidated
Statement of Comprehensive Income. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities
denominated in foreign currencies at the reporting period end exchange rates are also recognised in the Consolidated Statement of
Comprehensive Income.
b) Group companies
The results and financial position of Group entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities at each period end are translated at the prevailing closing rate at the date of the Consolidated Statement of Financial
Position;
• income and expenses for each period within the Consolidated Statement of Comprehensive Income are translated at the rate of
exchange at the transaction date. Where this is not possible, the average rate for the period is used; and
• on consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognised in other
comprehensive income and accumulated in the translation reserve as a separate component of equity.
Employee benefits
a) Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the associated
services are rendered by employees of the Group.
b) Defined contribution plans
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of
the Group. The annual contributions payable are charged to the Consolidated Statement of Comprehensive Income. The Group also
contributes to the personal pension plans of some Directors at the Group’s discretion.
Share-based payments
A transaction is accounted for as a share-based payment where the Group receives services from employees, Directors or third parties and
pays for these in shares or similar equity instruments.
The Group makes equity-settled share-based payments to certain employees and Directors. Equity-settled share-based schemes are
measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant, measured by use of an appropriate
valuation model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the period
services are received, based on the Group’s estimate of shares that will eventually vest.
The Company is not liable for employer’s National Insurance on the difference between the market value at date of exercise and exercise
price and therefore this expense is not accrued for.
Operating leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Rentals
applicable to operating leases are charged against profits on a straight line basis over the period of the lease.
Onerous lease provisions relate to the present value of the obligation under a lease where the unavoidable costs of the lease exceed
the economic benefit expected to be received from it.
Dilapidation provisions relate to potential rectification costs expected should the Group vacate any of its retail locations.
Hire purchase agreements and finance leases
Leases where the lessee retains substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets held
under hire purchase agreements and finance leases are capitalised and disclosed under property, plant and equipment at cost. The capital
element of the future payments is treated as a liability and the interest element is charged to the Consolidated Statement of Comprehensive
Income on a straight line basis.
Property, plant and equipment
Property, plant and equipment is stated at historic cost, including expenditure that is directly attributable to the acquired item, less
accumulated depreciation and impairment losses.
For the period ended 28 June 2015, depreciation was provided to write off cost, less estimated residual values, of all property, plant and
equipment, except for investment properties and freehold land, evenly over their expected useful lives, calculated at the following rates:
Leasehold property
Plant and machinery
– Over the remaining lease term
– 20% straight line
Fixtures, fittings, equipment, computer software and hardware
– 20% straight line
Freehold property
– 2% straight line
As no finite useful life for land can be determined, related carrying amounts are not depreciated. The useful life, the residual value and the
depreciation method is assessed annually.
During the accounting period ended 26 June 2016, management reviewed its estimates of the useful economic life of tangible assets.
Management now estimates that the useful life of assets is as follows:
Leasehold property
Plant and machinery
– Over the remaining lease term
– 5 to 10 years on a straight line basis
Fixtures, fittings, equipment, computer software and hardware
– 5 to 10 years on a straight line basis
Freehold property
– 50 years on a straight line basis
The application of this change is from 29 June 2015 and has not been retrospectively applied.
The impact of these changes in the accounting period to 26 June 2016 is a reduction in the depreciation charge of £1,222,091.
The carrying value of the property, plant and equipment is compared to the higher of value in use and the fair value less costs to sell on
an annual basis. If the carrying value exceeds the higher of the value in use and fair value less the costs to sell the asset then the asset is
impaired and its value reduced by recognising an impairment provision.
48
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Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Intangible assets
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Impairment
Goodwill arising on the acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and the fair
value of the assets and liabilities acquired. Positive goodwill is capitalised.
Impairment tests on the carrying value of goodwill are undertaken:
• at the end of the first full financial period following acquisition and at the end of every subsequent financial period; and
• in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable.
Website development costs where Group companies’ websites are expected to generate future revenues in excess of the costs of
developing those websites, together with expenditure on the functionality of the website is capitalised and treated as an intangible asset.
Expenditure incurred on maintaining websites and expenditure incurred on developing websites used only for advertising and promotional
purposes is written off as incurred.
Software which is not an integral part of hardware assets is stated at historic cost, including expenditure that is directly attributable to the
acquired item, less accumulated amortisation and impairment losses.
For the period ended 28 June 2015, amortisation was provided to write off cost, less estimated residual values, of all intangible assets,
except for goodwill, evenly over their expected useful lives, calculated at the following rates:
Software
Website development costs
– 20% straight line
– 20% straight line
During the accounting period ended 26 June 2016, management reviewed its estimates on the useful economic life of intangible assets.
Management now estimates that the useful life of assets is as follows:
Software
Website development costs
– 3 years on a straight line basis
– 3 years on a straight line basis
The application of this change is from 29 June 2015 and has not been retrospectively applied.
The impact of these changes in the accounting period to 26 June 2016 is an increase in the amortisation charge of £361,910.
Inventories
Inventories are carried at the lower of cost or net realisable value. The costs of raw materials, consumables, work in progress and finished
goods are measured by means of weighted average cost using standard costing techniques. The cost of finished goods comprises direct
production costs such as raw materials, consumables, utilities and labour, and production overheads such as employee costs, maintenance
and indirect factory costs. Standard costs are reviewed regularly in order to ensure relevant measures of utilisation, production lead-time
and appropriate levels of manufacturing expense are reflected in the standards.
Net realisable value is calculated based on the revenue from sale in the normal course of business less any costs to sell. Due allowance is
made for obsolete and slow moving items.
a) Impairment of financial assets
All financial assets (other than those categorised at fair value charged through the Consolidated Statement of Comprehensive Income), are
assessed at the end of each reporting period as to whether there is any objective evidence of impairment as a result of one or more events
having an impact on the estimated future cash flows of the asset.
An impairment loss in respect of loans and receivables financial assets is recognised in the Consolidated Statement of Comprehensive
Income and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the financial asset’s original effective interest rate.
In a subsequent period, if the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed through the Consolidated Statement of
Comprehensive Income to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what
the amortised cost would have been had the impairment not been recognised.
b) Impairment of non-financial assets
The carrying values of intangible assets are reviewed at the end of each reporting period for impairment when there is an indication that
the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The
recoverable amount of the assets is the higher of the assets’ fair value less costs to sell and their value in use, which is measured by reference
to discounted future cash flow.
An impairment loss is recognised in the Consolidated Statement of Comprehensive Income immediately.
In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a
subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to
the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment
loss been recognised. The reversal is recognised in the Consolidated Statement of Comprehensive Income immediately.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Consolidated Statement of
Financial Position differs from its tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
• investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled
or recovered.
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Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Operating segments
2 . ACCO U N T I N G P O L I C I E S CONTINUED
Financial instruments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the management team including the Chief Executive Officer and Chief
Financial Officer.
Financial instruments are classified according to the substance of the contractual arrangements into which the Group enters. An equity
instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.
Financial assets
The Board considers that the Group’s activity constitutes one operating and one reporting segment, as defined under IFRS 8.
Management reviews the performance of the Group by reference to total results against budget.
On initial recognition, financial assets are classified as either financial assets at fair value through income statement, held-to-maturity
investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.
The total profit measures are operating profit and profit for the period, both disclosed on the face of the Consolidated Statement of
Comprehensive Income. No differences exist between the basis of preparation of the performance measures used by management
and the figures in the Group financial information.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call, together with other short-term highly liquid investments which
are not subject to significant changes in value and have original maturities of less than three months. The Group’s bank facilities are provided
under a group facility.
Equity
Equity comprises the following:
• Share capital: the nominal value of equity shares
• Share premium
• Retained earnings
• Translation reserve
• Merger reserve
• Capital redemption reserve
• Other reserves
Chocolate bonds
The Chocolate Tasting Club plc, a subsidiary of the Group, has issued two chocolate bonds which pay a return in boxes of luxury chocolates
or, for one of the bonds a Hotel Chocolat gift card. For the bonds with a return in the form of luxury chocolates, the coupon is fixed
by number of boxes and can only be settled by the delivery of chocolate. At inception, the net cash proceeds received for the bond are
recognised as a liability. Each year, the cost value of the chocolates is recognised as an interest expense.
The classification depends on the purpose for which the financial assets were acquired. The Group classifies all its financial assets as loans
and receivables.
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified
as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest
method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables
when the recognition of interest would be immaterial. The Group’s loans and receivables financial assets comprise trade and other
receivables and cash and cash equivalents as included in the Consolidated Statement of Financial Position.
Financial liabilities
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.
All financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised
cost using the effective interest method other than those categorised as fair value through income statement.
Fair value through the income statement category comprises financial liabilities that are either held for trading or are designated to eliminate
or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for
trading unless they are designated as hedges. Foreign currency forward contracts were designated as hedges and are included in the Group’s
financial statements at fair value.
A financial liability is de-recognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same party on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and
the difference in the respective carrying amounts is recognised in the income statement.
Hedge accounting
Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met:
For the bond where there is a return paid by way of a Hotel Chocolat gift card which can be redeemed at Hotel Chocolat stores, cafes,
restaurants and online, there is a fixed rate of interest. At inception, the net cash proceeds received for the chocolate bonds are recognised
as a liability. Each year the fixed interest rate paid is recognised as an interest expense.
• At the inception of the hedge there is formal designation and documentation of the hedging relationship and the Group’s risk
management objective and strategy for undertaking the hedge.
• For cash flow hedges, the hedged item in a forecast transaction is highly probable and presents an exposure to variations in cash flows
that could ultimately affect profit or loss.
• The cumulative change in the fair value of the hedging instrument is expected to be between 80-125% of the cumulative change in the fair
value or cash flows of the hedged item attributable to the risk hedged (i.e. it is expected to be highly effective).
• The effectiveness of the hedge can be reliably measured.
• The hedge remains highly effective on each date tested. Effectiveness is tested on a six-monthly basis.
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Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 2 . ACCO U N T I N G P O L I C I E S CONTINUED
Cash flow hedges
The effective part of forward contracts designated as a hedge of the variability in cash flows of foreign currency risk arising from firm
commitments, and highly probable forecast transactions, are measured at fair value with changes in fair value recognised in other
comprehensive income and accumulated in other reserves. The Group uses such contracts to fix the cost of foreign currency transactions in
the functional currency of the Group entity concerned.
If a highly probable forecast transaction results in the recognition of a non-monetary asset, the cumulative loss/(gain) is added to/(subtracted
from) the cost of the asset acquired (“basis adjustment”). Otherwise the cumulative gain or loss recognised in other comprehensive income
is reclassified from the cash flow hedge reserve to profit or loss at the same time as the hedged transaction affects profit or loss. The two
transactions are recognised in the same line item.
If a forecast transaction is no longer considered highly probable but the forecast transaction is still expected to occur, the cumulative gain
or loss recognised in other comprehensive income is frozen and recognised in profit or loss in accordance with the policy set out in the
paragraph above. Subsequent changes in the fair value of the derivative are recognised in profit or loss. If the Group closes out its position
before the transaction takes place (even though it is still expected to take place) the cumulative gain or loss on changes in fair value of the
derivative is similarly recognised in accordance with the policy set out in the paragraph above. If, at any point, the hedged transaction is no
longer expected to occur, the cumulative gain or loss is reclassified from the cash flow hedge reserve to profit or loss immediately.
Equity instruments
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved for distribution.
3 . S U M M A RY O F C R I T I C A L ACCO U N T I N G E S T I M AT E S A N D J U D G E M E N T S
The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the
Directors to exercise their judgement in the process of applying the accounting policies which are detailed above. These judgements are
continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The key estimates and underlying assumptions concerning the future and other key sources of estimation uncertainty at the statement of
financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial period are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate
is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and
future periods.
The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities
are discussed below:
3 . S U M M A RY O F C R I T I C A L ACCO U N T I N G E S T I M AT E S A N D J U D G E M E N T S CONTINUED
Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be
supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at
an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of
highly uncertain matters including management’s expectations of:
• growth in EBITDA, calculated as adjusted operating profit before depreciation and amortisation;
• long-term growth rates; and
• the selection of discount rates to reflect the risks involved.
The Group prepares financial budgets on an annual basis, and monitors predicted financial performance and cash flow on a rolling
monthly basis. These budgets and analyses are used in the calculations.
Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow
projections, could significantly affect the Group’s impairment evaluation and hence results.
• Valuation of intangible assets
The determination of the fair value of assets and liabilities including goodwill arising on the acquisition of businesses, website
development expenditure and software, which is expected to generate future economic benefits, is based, to a considerable extent,
on management’s judgement.
The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset where no active market
for the assets exists. The use of different assumptions for the expectations of future cash flows and the discount rate would change the
valuation of the intangible assets.
Allocation of the purchase price affects the results of the Group as finite life intangible assets are amortised, whereas indefinite life
intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to
indefinite life and finite life intangible assets.
4 . R E V E N U E
Sale of goods
Total revenue
Segmental analysis
52 weeks ended
26 June 2016
£
91,089,824
91,089,824
52 weeks ended
28 June 2015
£
81,068,364
81,068,364
The Group operates in three main geographic areas: UK, Europe and Rest of World. The Board of Directors monitors revenue on this basis.
• Useful lives of depreciable assets
Revenue for each of the geographical areas is as follows:
Management reviews the useful lives of depreciable assets at each reporting date to ensure that the useful lives represent a reasonable
estimate of likely period of benefit to the Group. Actual useful lives however, may vary due to unforeseen events.
• Impairment
IFRS requires management to undertake an annual test for impairment of indefinite life assets and, for finite life assets, to test for
impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Revenue by location
United Kingdom
Europe
Rest of World
Total revenue
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
88,915,149
1,879,240
295,435
91,089,824
78,621,649
2,040,081
406,634
81,068,364
The geographical allocation of revenue has been updated to reflect the current basis monitored by the Board.
Non-current assets not held in the United Kingdom amount to £9,409,036 in the period ended 26 June 2016 (28 June 2015: £160,603).
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Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts
5 . P RO F I T F RO M O P E R AT I O N S
Profit from operations is arrived at after charging/(crediting):
7. S TA F F CO S T S
The average number of employees (including directors) during the period was made up as follows:
Staff cost (see Note 7)
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Loss on disposal of property, plant and equipment and intangible assets
Operating leases:
– Property
– Plant and equipment
Exchange differences
Exceptional costs
Bad debt expense
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
24,835,020
2,516,632
–
676,977
128,874
8,189,509
145,185
48,725
2,642,177
126,967
22,444,632
4,044,602
131,998
194,542
–
7,865,974
185,133
(281,005)
–
43,016
Production staff
Administrative staff
Total
The cost of employees (including Directors) during the period was made up as follows:
Wages and salaries
Share-based payments
Social security costs
Pension costs
Total
52 weeks ended
26 June 2016
52 weeks ended
28 June 2015
195
737
932
158
671
829
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
22,842,934
20,603,231
64,642
1,778,662
148,782
–
1,704,244
137,157
24,835,020
22,444,632
Exceptional costs for the period ended 26 June 2016 relate solely to the acquisition of Hotel Chocolat Estates Limited and the admission to
trading on AIM.
6 . AU D I T A N D N O N - AU D I T F E E S
An analysis of auditors’ remuneration is as follows:
8 . R E M U N E R AT I O N O F K E Y M A N AG E M E N T P E R S O N N E L
Key management personnel represent those personnel which hold a statutory directorship of a company within the Group. Directors’
emoluments and benefits include:
Audit fees
Audit related assurance services
Taxation compliance services
Other taxation advisory services
Corporate finance services
Other services
Non-audit fees
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
117,900
45,212
185,560
126,336
308,500
39,828
705,436
76,200
–
111,494
71,283
–
–
182,777
Short-term employee benefits
Share-based payments
Post-employments benefits
Total
The above fees for the period ended 26 June 2016 include exceptional costs totaling £389,172 (28 June 2015: £ nil).
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
1,206,628
1,418,122
38,715
10,383
1,255,726
–
12,018
1,430,140
56
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Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 9. S H A R E - B A S E D PAY M E N T S
The Hotel Chocolat Group plc 2016 Long-Term Incentive Plan
Under the Hotel Chocolat Group plc 2016 Long-Term Incentive Plan, the Group gives awards to Directors and staff subject to the
achievement of a pre-agreed net profit figure for the financial year of the Company ending 30 June 2019. These shares vest after the
delivery of the audited net profit figure for financial year ending 30 June 2019 has been announced.
Awards are forfeited if the employee leaves the Group before the awards vest, except under circumstances where the employee is
considered a ‘Good Leaver’.
Details of the share awards outstanding are as follows:
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Forfeited during the period
Outstanding at the end of the period
Exercisable at the end of the period
52 weeks ended
26 June 2016
52 weeks ended
28 June 2015
Number of
share options
Weighted average
exercise price
£
Number of
share options
Weighted average
exercise price
£
–
2,972,000
–
–
2,972,000
–
–
1.48
–
–
1.48
1.48
–
–
–
–
–
–
–
–
–
–
–
–
The awards outstanding at the end of 26 June 2016 have a weighted average remaining contractual life of 3.25 years (28 June 2015: nil) and
an exercise price of £1.48 (28 June 2015: £ nil).
The Group recognised total expenses related to the above equity-settled share-based payment transactions in the form of options during
the period ended 26 June 2016 of £64,642 (28 June 2015: £ nil).
The aggregate of the fair value of the options granted during the period ended 26 June 2016 was £1,292,820 (28 June 2015: £ nil).
The fair values were calculated using a Black Scholes model. The inputs used for fair valuing awards granted during the period was as follows:
Weighted average share price (£)
Exercise price (£)
Expected volatility (%)
Option life (years)
Risk free interest rate (%)
52 weeks ended
26 June 2016
52 weeks ended
28 June 2015
1.48
1.48
32.0%
10.0
0.8%
–
–
–
–
–
In the absence of any historical volatility data for Hotel Chocolat Group plc, the expected volatility was determined by reviewing the
volatility of the share price of similar entities which are currently traded on AIM.
10 . F I N A N C E I N CO M E A N D E X P E N S E S
Interest from related party
Interest on bank deposits
Other income
Finance income
Interest on bank borrowings and overdraft
Interest on derivative financial liabilities
Finance leases and hire purchase contracts
Finance charges on Chocolate bonds
Finance expenses
11. TA X AT I O N
UK corporation tax
Adjustment in respect of previous periods
Overseas corporation tax
Total current tax charge
Deferred tax:
Adjustment in respect of prior periods
Origination and reversal of timing differences
Total tax expense
Tax on derivative financial liabilities
Deferred tax
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
171,997
188,336
109
–
172,106
572,150
57,645
30,020
287,069
946,884
–
153
188,489
400,902
–
31,654
287,252
719,808
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
1,409,454
(93,207)
10,507
1,326,754
(2,518)
183,054
1,507,290
114,446
114,446
887,114
(26,931)
–
860,183
–
24,026
884,209
–
–
58
59
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 11. TA X AT I O N CONTINUED
Factors affecting current tax charge:
The tax assessed on the profit for the period is different to the standard rate of corporation tax in the UK. The differences are
explained below:
Profit on ordinary operations before income tax
Weighted average standard rate of corporation tax
Profit for the period multiplied by the standard rate of corporation tax
Effects of:
Expenses not deductible for tax purposes
Permanent depreciation
Adjustment in respect of prior periods
Adjust closing deferred tax in respect of change in future rate of taxation
Adjust opening deferred tax in respect of change in future rate of taxation
Movement to unrecognised deferred tax
Tax expense
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
5,591,094
20.00%
1,118,219
338,860
200,852
(95,725)
10,878
2,359
(68,153)
1,507,290
2,931,432
20.75%
608,272
50,438
229,908
(27,381)
7,073
(9,033)
24,932
884,209
The Group’s effective tax rate for the period ended 26 June 2016 was 27.0% (28 June 2015: 30.2%). The effective rate is an amalgamation of
UK and European rates for the periods reported. The change from year to year has been particularly affected by the costs incurred by the
Group in relation to the admission to trading on AIM. The majority of the costs are considered to be capital for tax purposes and therefore
not deductible. At 26 June 2016 the Group has tax losses to carry forward against future profits of £21,000 (28 June 2015: £217,000). The
tax value of such losses amounted to approximately £4,000, have no expiry date and have not been recognised as a deferred tax asset.
12 . E A R N I N G S P E R S H A R E
Profit for the period used in the calculation of the basic and diluted earnings per share:
Profit after tax for the period
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
4,083,804
2,047,223
The weighted average number of shares for the purposes of diluted earnings per share reconciles to the weighted average number of shares
used in the calculation of basic earnings per share as follows:
Weighted average number of shares in issue used in
the calculation of basic earnings per share (number)
Earnings per share – Basic and Diluted (pence)
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
103,411,610
10,200,040
3.9
20.1
Due to the nature of the options granted under the Hotel Chocolat Group plc 2016 Long-Term Incentive Plan, they are considered to be
contingently issuable shares and therefore have no dilutive effect.
For further information on the movements in the share capital, please refer to Note 24.
13 . I N TA N G I B L E A S S E T S
Goodwill arising on consolidation (Note (a))
Computer software and website costs (Note (b))
(a) Goodwill arising on consolidation
At beginning of period
Acquired on business combinations (see Note 29)
At end of period
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
914,098
942,702
1,856,800
683,534
869,899
1,553,433
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
683,534
230,564
914,098
683,534
–
683,534
The recoverable amount of the goodwill has been determined on a value in use basis. This has been based on the performance of the
business and management’s forecasts, which assume that the business will perform at least as well as the market generally. The forecasts
take into account management’s experience and are discounted at a pre-tax rate of 10%.
(b) Computer software and website costs
Cost:
At beginning of period
Additions
Disposals
At end of period
Amortisation:
At beginning of period
Amortisation charge
Disposals
At end of period
Net book value
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
1,652,098
760,224
(18,987)
1,416,314
235,784
–
2,393,335
1,652,098
782,199
676,977
(8,543)
1,450,633
942,702
587,657
194,542
–
782,199
869,899
60
61
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 14 . P RO P E RT Y, P L A N T A N D E Q U I P M E N T
15 . D E F E R R E D I N CO M E TA X A S S E T
52 weeks ended 28 June 2015
Cost:
As at 29 June 2014
Additions
Translation differences
As at 28 June 2015
Accumulated depreciation:
As at 29 June 2014
Depreciation charge
Impairments
Translation differences
As at 28 June 2015
Net book value
As at 28 June 2015
52 weeks ended 26 June 2016
Cost:
As at 29 June 2015
Acquisition on business combinations
Additions
Disposals
Translation differences
As at 26 June 2016
Accumulated depreciation:
As at 29 June 2015
Depreciation charge
Disposal
Translation differences
As at 26 June 2016
Net book value
As at 26 June 2016
Freehold
property
£
Leasehold
property
£
Furniture & fittings,
Equipment, Computer
software & hardware
£
Plant &
machinery
£
Total
£
2,840,841
734,999
–
–
–
–
19,110,012
2,268,415
(59,341)
9,343,245
32,029,097
169,390
2,437,805
–
(59,341)
2,840,841
734,999
21,319,086
9,512,635
34,407,561
251,082
28,409
–
–
730,406
950
–
–
10,510,017
2,841,888
131,998
(61,416)
6,506,608
1,173,355
–
–
17,998,113
4,044,602
131,998
(61,416)
279,491
731,356
13,422,487
7,679,963
22,113,297
2,561,350
3,643
7,896,599
1,832,672
12,294,264
2,840,841
8,244,800
35,009
–
348,805
11,469,455
279,491
51,943
–
77,178
408,612
734,999
–
–
–
–
21,319,086
505,625
2,342,334
(1,425,415)
157,562
9,512,635
34,407,561
–
5,191,022
8,750,425
7,568,365
(41,069)
(1,466,484)
–
506,367
734,999
22,899,192
14,662,588
49,766,234
731,356
950
–
–
13,422,487
1,601,429
(1,106,985)
96,070
7,679,963
862,310
(41,069)
–
22,113,297
2,516,632
(1,148,054)
173,248
732,306
14,013,001
8,501,204
23,655,123
11,060,843
2,693
8,886,191
6,161,384
26,111,111
Included above are assets held under finance leases and hire purchase agreements which, as at 26 June 2016 had a net book value of
£557,454 (28 June 2015: £869,845).
Deferred taxation asset
Reconciliation of deferred tax balances:
Balance at beginning of period
Deferred tax charge for the period through Statement of Comprehensive Income
Deferred tax credit for the period through Statement of Changes in Equity
Balance at end of period
The provision for deferred taxation consists of the tax effect of timing differences in respect of:
Fixed asset differences
Short-term differences
Derivative financial liabilities
Share-based payments
52 weeks ended
26 June 2016
£
149,903
149,903
52 weeks ended
28 June 2015
£
215,993
215,993
52 weeks ended
26 June 2016
£
215,993
(180,536)
114,446
149,903
52 weeks ended
28 June 2015
£
240,019
(24,026)
–
215,993
52 weeks ended
26 June 2016
£
(28,015)
51,733
114,446
11,739
149,903
52 weeks ended
28 June 2015
£
154,765
61,228
–
–
215,993
At 26 June 2016, the Group has unrecognised deferred tax assets amounting to £42,000 (28 June 2015: £128,000).
16 . I N V E N TO R I E S
Raw materials
Finished goods
52 weeks ended
26 June 2016
£
1,906,706
4,697,398
6,604,104
52 weeks ended
28 June 2015
£
1,025,109
3,468,732
4,493,841
17. T R A D E A N D OT H E R R E C E I VA B L E S
There were no material receivables which were past due but not impaired at the end of any period.
Current
Trade receivables
Other receivables
Prepayments
Related parties
Non-current
Prepayments
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
839,304
128,324
4,567,207
–
5,534,835
7,461
7,461
584,863
93,959
4,425,220
8,568,424
13,672,466
–
–
62
63
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 18 . I N V E S T M E N T I N S U B S I D I A R I E S
The Group’s operating subsidiaries as at 26 June 2016 are as follows:
Name
Direct Holding
HOTC Limited
Hotel Chocolat Limited
The Chocolate Tasting Club plc
HC International Limited
Hotel Chocolat USA Inc
Hotel Chocolat (St Lucia)
Holdings Limited
Indirect Holdings
Hotel Chocolat Retail Limited
Hotel Chocolat Stores Limited
Rabot Estate UK Limited
Hotel Chocolat Europe Limited
Hotel Chocolat Corporate Limited
HCIP Limited
HC Sales Limited
CTC Distribution GmbH
Chocolate Tasting Club Inc
Hotel Chocolat Inc
Hotel Chocolat Estates Limited
HCRF Inc
Almondhill Properties Limited
Applehill Properties Limited
Apricothill Properties Limited
Bananahill Properties Limited
Braeburnhill Properties Limited
Bramleyhill Properties Limited
Brazilnuthill Properties Limited
Cashewhill Properties Limited
Chestnuthill Properties Limited
Colanuthill Properties Limited
Crispinhill Properties Limited
Croftonhill Properties Limited
Datehill Properties Limited
Dulcethill Properties Limited
Gingerhill Properties Limited
Grapehill Properties Limited
Principal activities
Holding Company
Manufacturer and
Distributor of chocolates
Chocolate Retailer
Holding Company
Holding Company
Holding Company
Country
of business /
incorporation
England & Wales
England & Wales
England & Wales
Malta
USA
St Lucia
England & Wales
Chocolate Retailer
Property Holding Company
England & Wales
Chocolate Retailer and Restaurateur England & Wales
England & Wales
Chocolate Retailer
England & Wales
Dormant
Malta
Trademark Holder
Malta
Chocolate Distributor
Switzerland
Chocolate Distributor
USA
Dormant
USA
Dormant
St Lucia
Hotel & Cocoa Plantation
USA
Dormant
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
England & Wales
Property Holding Company
18 . I N V E S T M E N T I N S U B S I D I A R I E S CONTINUED
Proportion of
ordinary shares
directly held by
parent
Proportion of
ordinary shares
held by the
Group
Name
Principal activities
Indirect Holdings cont inued
Country
of business /
incorporation
Proportion of
ordinary shares
directly held by
parent
Proportion of
ordinary shares
held by the
Group
Groundnuthill Properties Limited
Property Holding Company
England & Wales
Guavahill Properties Limited
Property Holding Company
England & Wales
Hazelnuthill Properties Limited
Property Holding Company
England & Wales
Hotel Chocolat DK Limited
Property Holding Company
England & Wales
Hotel Chocolat NL Limited
Property Holding Company
England & Wales
Kiwihill Properties Limited
Property Holding Company
England & Wales
Lemonhill Properties Limited
Property Holding Company
England & Wales
Limehill Properties Limited
Property Holding Company
England & Wales
Macadamiahill Properties Limited
Property Holding Company
England & Wales
Mandarinhill Properties Limited
Property Holding Company
England & Wales
Mangohill Properties Limited
Property Holding Company
England & Wales
Melonhill Properties Limited
Property Holding Company
England & Wales
Olivehill Properties Limited
Property Holding Company
England & Wales
Orangehill Properties Limited
Property Holding Company
England & Wales
Papayahill Properties Limited
Property Holding Company
England & Wales
Peachhill Properties Limited
Property Holding Company
England & Wales
Peanuthill Properties Limited
Property Holding Company
England & Wales
Pearhill Properties Limited
Property Holding Company
England & Wales
Pearmainhill Properties Limited
Property Holding Company
England & Wales
Pecanhill Properties Limited
Property Holding Company
England & Wales
Pinenuthill Properties Limited
Property Holding Company
England & Wales
Pippinhill Properties Limited
Property Holding Company
England & Wales
Plumhill Properties Limited
Property Holding Company
England & Wales
Raisinhill Properties Limited
Property Holding Company
England & Wales
Russethill Properties Limited
Property Holding Company
England & Wales
Satsumahill Properties Limited
Property Holding Company
England & Wales
Sloehill Properties Limited
Property Holding Company
England & Wales
Walnuthill Properties Limited
Property Holding Company
England & Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
64
65
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 19. C A S H A N D C A S H E Q U I VA L E N T S
For the purpose of the statements of cash flows, cash and cash equivalents comprise the following:
Cash and cash equivalents
Bank overdraft
52 weeks ended
26 June 2016
£
6,475,446
–
6,475,446
52 weeks ended
28 June 2015
£
4,939,924
(10,637,314)
(5,697,390)
In April 2016, the Group negotiated a two-year, bilateral revolving credit facility (RCF), which replaces the overdraft facility.
In the previous financial periods, the bank overdraft was secured by a charge over the Group’s assets and cross guarantees. The interest
rate charged until 4 October 2014 was 2.0% over base rate. On 5 October 2014, the interest rate was increased to 3.9% over base rate and
subsequently reduced to 3.2% over base rate on 1 July 2015. Following the repayment of the loan in March 2016, the interest rate on the
overdraft facility was reduced to 2.0% over base rate.
2 0 . T R A D E A N D OT H E R PAYA B L E S
Current
Trade payables
Other payables
Other taxes payable
Accruals
Non-current
Other payables and accruals
21. D E R I VAT I V E F I N A N C I A L L I A B I L I T I E S
Current
Foreign currency forward contracts
Non-current
Foreign currency forward contracts
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
5,439,251
3,416,370
810,114
6,668,456
16,334,191
1,485,090
1,485,090
4,631,750
1,629,735
1,418,345
4,530,252
12,210,082
1,774,731
1,774,731
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
554,529
554,529
85,075
85,075
–
–
–
–
The fair value of the derivative financial liabilities are split between current and non-current depending on the remaining maturity of the
derivative contract and its contractual cash flows.
The fair value of foreign currency forward contracts are based on observable information on exchange and interest rates. The hedged
forecast transactions denominated in foreign currency are expected to occur at various dates within the next 18 months. Gains and losses on
foreign currency forward contracts which have been recognised in the hedging reserve in equity as at 26 June 2016, will be recognised in the
Consolidated Statement of Comprehensive Income in the periods during which the hedged forecast transaction occurs.
The maximum exposure to credit risk at the reporting date is the fair value of the derivative liabilities in the Consolidated Statement of
Financial Position.
21. D E R I VAT I V E F I N A N C I A L L I A B I L I T I E S CONTINUED
The movement in the fair value on forward contracts in the period of £581,959 (28 June 2015: £ nil) has been included within other
comprehensive income in the Consolidated Statement of Comprehensive Income.
There are no forecast transactions for which hedge accounting had previously been used, but which are no longer expected to occur.
2 2 . B O R ROW I N G S
Current
Finance and lease hire purchase liabilities
Chocolate bonds
Bank loans
Unamortised costs of issue
Total current borrowings
Non-current
Finance and lease hire purchase liabilities
Chocolate bonds
Unamortised costs of issue
Total non-current borrowings
Total borrowings
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
425,544
102,000
–
527,544
(95,000)
432,544
35,462
6,610,000
6,645,462
(2,250)
6,643,212
397,750
–
556,771
954,521
–
954,521
441,718
6,857,000
7,298,718
–
7,298,718
7,075,756
8,253,239
Finance and lease
hire purchase
liabilities
£
Chocolate
bonds
£
Bank loans
£
Total
£
Maturity of debt
52 weeks ended 28 June 2015
In one year or less or on demand
In more than two years but not more than five years
In more than five years
Total non-current borrowings
397,750
441,718
–
441,718
–
556,771
954,521
6,857,000
–
6,857,000
–
–
–
7,298,718
–
7,298,718
Total borrowings
839,468
6,857,000
556,771
8,253,239
52 weeks ended 26 June 2016
In one year or less or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Total non-current borrowings
Unamortised costs of issue
Total borrowings
425,544
102,000
35,462
–
–
35,462
–
–
6,610,000
–
6,610,000
–
461,006
6,712,000
–
–
–
–
–
(97,250)
(97,250)
527,544
35,462
6,610,000
–
6,645,462
(97,250)
7,075,756
66
67
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 2 2 . B O R ROW I N G S CONTINUED
2 3 . P ROV I S I O N S CONTINUED
Chocolate bonds pay a return either in boxes of luxury chocolates or by way of a Hotel Chocolat gift card. For those bonds with a return
in the form of chocolate, the coupon is fixed by number of boxes. For bonds where there is a return paid by way of a Hotel Chocolat gift
card, there is a fixed rate of interest. The interest as stated on issue of the bonds ranged between 6.7% and 7.3%.
Provisions for onerous leases and dilapidations are inherently uncertain in terms of quantum and timing, not least because they involve
negotiations with landlords at future dates. The figures provided in the financial statements represents management’s best estimate of the
likely outflows to the Group.
Chocolate bonds are repayable subject to formal notice given six months prior to a redemption note. In order to redeem the bond,
notice must be given by January and payment is made in July of the same year. For the chocolate bonds issued in June 2010, where notice
has been given the amount repayable is shown within current liabilities. The remaining bonds for which notice has not yet been given are
shown within non-current liabilities. The first notice date for the chocolate bonds issued in June 2014, will be January 2017 and therefore all
amounts are shown within non-current liabilities. Both bonds are unsecured.
On 27 April 2016, the Group negotiated a two-year, bilateral revolving credit facility (RCF). Interest is charged at 1.9% over base rate and a
commitment fee of 0.8% is due on the available commitment not yet drawn down.
In the previous financial period, interest on the bank loan was charged at 3.9% over base rate. The bank loan was repaid in March 2016 and
was secured by a charge over the Group’s assets and cross guarantees.
The hire purchase and finance leases are secured by a charge over the related fixed assets and have incurred interest at an effective annual
rate of 2.0%.
2 3 . P ROV I S I O N S
Non-current
Onerous lease provision
Lease dilapidations provision
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
–
464,486
464,486
192,143
476,755
668,898
The onerous lease provision relates to the present value of the obligation under a lease where the unavoidable costs of the lease exceed
the economic benefit expected to be received from it.
24 . S H A R E C A P I TA L
Allotted, called up and fully paid:
Ordinary shares of £0.01 each
Ordinary shares of £0.001 each
GS1 shares of £0.0001 each
GS2 shares of £0.0001 each
Period ending 26 June 2016:
As at 26 June 2016
As at 28 June 2015
Shares
–
£
–
Shares
£
10,200,040
102,000
112,837,828
112,838
–
–
–
–
112,837,828
112,838
–
3,298,500
10,880,000
24,378,540
–
330
1,088
103,418
On 3 May 2016, 10,200,040 Ordinary shares of £0.01 each were sub-divided into 102,000,400 Ordinary shares of £0.001 each.
On 4 May 2016, 3,248,620 GS1 shares were converted to 324,862 Interim Shares of £0.001 each and on 10 May 2016, 2,569,156
Interim shares of £0.001 each were converted to Ordinary shares of £0.001 each.
On 3 May 2016, 49,880 GS1 shares of £0.0001 and 240,000 GS2 shares of £0.0001 were cancelled and on 10 May 2016, the remaining
11,940,000 GS2 shares were purchased by Hotel Chocolat Group plc and cancelled.
On 12 August 2015, 1,300,000 GS2 shares were allotted and issued at par, for cash. On 10 May 2016, 8,108,108 new Ordinary shares
were issued at £1.48 per share, for cash, pursuant to the admission of Hotel Chocolat Group plc to AIM.
On 4 May 2016, a bonus issue of 160,164 Ordinary shares of £0.001 each were allotted and issued. On 10 May 2016, a bonus issue of
2,244,294 Interim shares of £0.001 was allotted and issued.
Period ending 28 June 2015:
The dilapidations provision relates to potential rectification costs expected should the Group vacate its retail locations.
On 6 May 2015, 3,298,500 GS1 shares of £0.0001 and 10,880,000 GS2 shares of £0.0001 were allotted and issued at par, for cash.
The movements in onerous lease provisions and dilapidations provisions are summarised below:
52 weeks ended 28 June 2015
At beginning of period
Released through profit and loss
Amounts capitalised during the period
At end of period
52 weeks ended 26 June 2016
At beginning of period
Released through profit and loss
Utilised during the period
Amounts capitalised during the period
At end of period
Onerous lease
provision
£
Lease
dilapidation
provision
£
339,750
(147,607)
–
192,143
192,143
-
(192,143)
-
–
599,965
(295,245)
172,035
476,755
476,755
(57,269)
-
45,000
464,486
Total
£
939,715
(442,852)
172,035
668,898
668,898
(57,269)
(192,143)
45,000
464,486
On 25 November 2014, 110,949 ‘B’ shares of £0.01, 110,946 ‘C’ shares of £0.01, 142,955 ‘D’ shares of £0.01 and 142,952 ‘E’ shares of
£0.01 were repurchased and cancelled on 4 December 2014.
68
69
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 2 5 . R E S E RV E S
This note explains material movements recorded in shareholders’ equity that are not explained elsewhere in the financial statements. The
movements in equity and the balance sheet at 26 June 2016 are presented in the Consolidated Statement of Changes in Equity.
52 weeks ended 28 June 2015
At beginning of period
Capital redemption
Issued during the period for cash
At end of period
52 weeks ended 26 June 2016
At beginning of period
Capital redemption
Issued during the period for cash
Bonus issue during the period
Costs of issue of new equity
At end of period
Share
capital
£
107,078
(5,078)
1,418
103,418
103,418
(1,223)
8,238
2,405
–
112,838
Share
premium
£
Capital
redemption
reserve
£
–
–
–
–
–
–
11,991,892
(2,405)
(240,000)
11,749,487
–
5,078
–
5,078
5,078
1,223
–
–
–
6,301
The capital redemption reserve represented the aggregate nominal value of all the ordinary shares repurchased and cancelled by the Group.
The merger reserve arose when the Company undertook a share for share exchange with the companies listed in Note 18 and is not
distributable by way of dividends.
The translation reserve represents cumulative foreign exchange differences arising from the translation of the financial statements of foreign
subsidiaries and is not distributable by way of dividends.
Other reserves includes the movements in share-based payments and derivative financial liabilities. For further details, refer to Notes 9 and
21 respectively.
27. C A P I TA L CO M M I T M E N T S
There were no amounts contracted for but not provided for as at 26 June 2016 (28 June 2015: £ nil).
2 8 . R E L AT E D PA RT Y T R A N S AC T I O N S
Remuneration of Directors and other transactions
The remuneration of the key management personnel of the company are disclosed in Note 8. Interests and related party transactions are
disclosed below.
The Group rents property in the ordinary course of business on an arm’s length basis from Harwell Management Limited, a company in
which P M Harris and A Thirlwell have a material interest. The rentals totalled £180,000 in the period ended 26 June 2016 (28 June 2015:
£40,000). In the prior period, the rent for three quarters’ was waived. There were no amounts due at either period end.
No other amounts were due to directors (28 June 2015: £nil).
Trading transactions
As explained in Note 29, Hotel Chocolat Group plc completed the acquisition of Hotel Chocolat Estates Limited during the period
and loans to the value of £8,901,181 were capitalised as part of the transaction. Prior to the acquisition, Hotel Chocolat Estates Limited
was considered a related party as the entity was jointly controlled by P M Harris and A Thirlwell.
29. ACQ U I S I T I O N O F H OT E L C H O CO L AT E S TAT E S L I M I T E D
On 24 April 2016, the Group completed the acquisition of Hotel Chocolat Estates Limited. The acquisition comprised of the 136 acre
Rabot Estate in Saint Lucia, which currently includes a working cocoa plantation with propagation nurseries, a ‘tree to bar’ chocolate making
experience for paying visitors, and a luxury boutique hotel called Boucan, which comprises 14 guest rooms, a spa and a 60-cover restaurant;
and the 85 acre Delcer Estate in Saint Lucia which comprises largely undeveloped land.
Hotel Chocolat Group plc capitalised a loan due from Hotel Chocolat Estates Limited to the value of £8,901,181 and paid £54,921 in return
for 100% of the issued share capital.
The book values of identifiable assets and liabilities acquired and their fair value to the Group was as follows:
Book Value
£
Adjustment
£
Fair Value
£
2 6 . L E A S E CO M M I T M E N T S
Identifiable assets and liabilities acquired:
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
Land and buildings
Operating leases which expire:
Within one year
In two to five years
In over five years
Other
Operating leases which expire:
Within one year
In two to five years
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
7,177,794
20,184,525
12,273,996
39,636,315
115,080
133,518
248,598
5,506,791
12,755,081
5,961,877
24,223,749
–
–
–
Property, plant & equipment
Trade and other receivables
Cash
Trade and other payables
Total net assets
Fair value of consideration paid:
Cash
Capitalisation of loan receivable from Hotel Chocolat Estates Limited
Total consideration
Goodwill arising (Note 13)
5,996,413
129,082
282,927
(436,896)
5,971,526
2,754,012
–
–
–
2,754,012
8,750,425
129,082
282,927
(436,896)
8,725,538
54,921
8,901,181
8,956,102
230,564
On acquisition, Hotel Chocolat Estates Limited held trade and other receivables with a book and fair value of £129,082 representing
contractual receivables of £129,082. The Group therefore expects to collect all contractual receivables.
The goodwill arising on the Hotel Chocolat Estates Limited acquisition is not deductible for tax purposes.
70
71
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts 29. ACQ U I S I T I O N O F H OT E L C H O CO L AT E S TAT E S L I M I T E D CONTINUED
31. F I N A N C I A L R I S K M A N AG E M E N T CONTINUED
Since the acquisition date, Hotel Chocolat Estates Limited has contributed £295,435 to Group revenues and a loss of £71,191 to Group
profit. If the acquisition had completed on 29 June 2015, the total Group revenues for financial year ending 26 June 2016 would have been
£92,636,086. The total Group profit for the same period would have been £3,561,008. This proforma information is for illustrative purposes
only and is not necessarily an indication of the revenues and results of the Group that actually would have been achieved had the acquisition
been completed on 29 June 2015, nor is it intended to be a projection of future results.
3 0 . C AT E G O R I E S O F F I N A N C I A L I N S T RU M E N T S
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order
to minimise this risk the Group endeavours only to deal with companies which are demonstrably creditworthy. In addition, a significant
proportion of revenue results from cash transactions. The aggregate financial exposure is continuously monitored. The maximum exposure
to credit risk is the value of the outstanding amount of trade receivables. The management do not consider that there is any concentration
of risk within trade receivables.
Financial assets
At amortised cost
Trade and other receivables (excluding prepayments)
Cash and cash equivalents
Financial liabilities
At amortised cost
Trade and other payables
Total borrowings
Accruals
Bank overdraft
At fair value
Derivative financial liabilities
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
975,089
6,475,445
7,450,534
8,785,864
7,075,756
6,668,456
–
22,530,076
9,247,246
4,939,924
14,187,170
7,099,035
8,253,239
4,530,252
10,637,317
30,519,843
581,959
–
In the Directors’ view, the fair value of the Group’s borrowings is considered to be equal to their carrying value.
31. F I N A N C I A L R I S K M A N AG E M E N T
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk and
price risk), credit risk and liquidity risk.
Market risk
Foreign exchange risk
The Group enters into foreign currency forward contracts in order to manage the exposure to foreign exchange risk which arises
on transactions denominated in foreign currencies. Refer to Note 21 for further information about the Group’s foreign currency
forward contracts.
Interest Risk
The Group is exposed to interest rate risk from its RCF, which carries interest at variable rates on amounts which are drawn down.
Drawdowns are typically short-term and used to fund working capital.
Price risk
Price risk is the risk that oscillation in the price of key input costs will affect the profitability of the business. The Group manages this risk by
agreeing long–term prices with suppliers where possible.
Ageing analysis:
Trade receivables
Up to three months
Three to six months
Above six months
Impairment provision
Total
These receivables are not secured by any collateral or credit enhancement.
The exposure of credit risk for trade receivables by geographical region is as follows:
United Kingdom
Europe
Rest of World
Total
Liquidity risk
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
843,137
91,093
–
(94,926)
839,304
618,632
9,847
159,983
(203,599)
584,863
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
821,902
4,486
12,916
839,304
533,975
50,888
–
584,863
The Group currently holds cash balances to provide funding for normal trading activity. The Group also has access to both short-term and long-
term borrowings to finance individual projects. Trade and other payables are monitored as part of normal management routine.
Borrowings and other liabilities mature according to the following schedule:
52 weeks ended 28 June 2015
Trade and other payables
Borrowings
Bank overdraft
52 weeks ended 26 June 2016
Trade and other payables
Borrowings
Within
one year
£
One to
two years
£
Two to
five years
£
10,791,737
979,060
10,637,314
22,408,111
15,524,077
583,215
16,107,292
1,774,731
–
–
–
8,067,913
–
1,774,731
8,067,913
1,485,090
102,311
1,587,401
–
7,328,692
7,328,692
72
73
Notes to the financial statements continuedFor the period ended 26 June 2016Company overviewStrategic reportGovernanceFinancial statementsFINANCIAL STATEMENTS Notes to the financial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Notes to the financial statements continued
For the period ended 26 June 2016
31. F I N A N C I A L R I S K M A N AG E M E N T CONTINUED
3 4 . T R A N S I T I O N TO I F R S CONTINUED
Capital risk management
The Group’s capital management objectives are:
• to ensure the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits
for other stakeholders; and
• to provide an adequate return to shareholders by pricing products and services commensurate with the level of risk.
To meet these objectives, the Group reviews the budgets and forecasts on a regular basis to ensure there is sufficient capital to meet
the needs of the Group.
The capital structure of the Group consists of shareholders’ equity as set out in the Consolidated Statement of Changes in Equity.
All working capital requirements are financed from existing cash resources and borrowings.
Fair value hierarchy
The financial instruments on the Hotel Chocolat Group plc Consolidated Statement of Financial Position are measured at either fair value or
amortised cost.
Cash and cash equivalents, trade and other receivables, trade and other payables, accruals and borrowings have been excluded from this
analysis as they are recognised in the financial statements at their carrying value which also approximates the fair values of those financial
instruments; therefore, no separate disclosure for fair value hierarchy is required.
The financial instruments are grouped into Levels based on the degree to which the inputs used to calculate the fair value are observable.
– Level 1 fair value measurements are those derived from quoted process (adjusted) in active markets for identical assets and liabilities.
– Level 2 fair value measurements are those derived from inputs other that quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from process).
The Group measures its derivative financial liabilities relating to foreign currency forward contracts at fair value and these are grouped as
Level 2 instruments. Movements on the underlying value of financial instruments of foreign exchange contracts have been measured versus
market rates and therefore are easily identifiable. Refer to Note 21 for further information.
There have been no transfers between levels in the period.
32 . E V E N T S S U B S E Q U E N T TO T H E R E P O RT I N G DAT E – G RO U P A N D CO M PA N Y
There have been no material events subsequent to the period end and up to 18 October 2016, the date of approval of the financial
statements by the Board.
33 . U LT I M AT E CO N T RO L L I N G PA RT Y
The Directors believe that there is no ultimate controlling party of the Group.
3 4 . T R A N S I T I O N TO I F R S
In preparing the financial statements, the Group’s opening Consolidated Statement of Financial Position was prepared as at 30 June
2014, the Group’s date of transition to IFRS. The historical financial information for the period ended 28 June 2015 has therefore been
prepared in accordance with IFRS. Previously, the Group prepared its financial statements for this period in accordance with Generally
Accepted Accounting Principles in the United Kingdom (UK GAAP).
Accordingly, the Group has prepared financial information which complies with IFRS applicable for periods ended on or after 28 June
2015, as described in the summary of significant accounting policies. In restating its UK GAAP financial statements, the Group has made
provision for additional lease incentives and reversed a charge for the amortisation of goodwill in accordance with accounting policies
described below. The Group has also recognised certain non-current assets as intangible rather than tangible assets.
A summary of the impact of transition to the Consolidated Statement of Financial Position is as follows:
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Corporation tax recoverable
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Bank overdraft
Borrowings
Non-current liabilities
Other payables and accruals
Borrowings
Provisions
Total liabilities
NET ASSETS
EQUITY
Share capital
Retained earnings
Translation reserve
Merger reserve
Capital redemption reserve
Total equity attributable to shareholders
Notes:
52 weeks ended
28 June 2015
52 weeks ended
28 June 2015
As previously
reported under
UK GAAP
£
As reported
under IFRS
£
478,469
13,164,163
215,993
13,858,625
4,493,841
13,672,466
166,709
4,939,924
23,272,940
37,131,565
12,210,082
10,637,314
954,521
23,801,917
1,495,306
7,298,718
668,898
9,462,922
33,264,839
1,553,433
12,294,264
215,993
14,063,690
4,493,841
13,672,466
166,709
4,939,924
23,272,940
37,336,630
12,210,082
10,637,314
954,521
23,801,917
1,774,731
7,298,718
668,898
9,742,347
33,544,264
3,866,726
3,792,366
103,418
3,534,979
–
223,251
5,078
3,866,726
103,418
4,003,546
(542,927)
223,251
5,078
3,792,366
Website development costs and software which are not an integral part of hardware assets have been reclassified to intangible assets under IFRS. Under UK GAAP, these costs
were included as part of property, plant and equipment.
Goodwill is not amortised but is subject to annual impairment review under IFRS. Under UK GAAP, goodwill is amortised.
Lease incentives are recognised over the lease term, on a straight line basis under IFRS. Under UK GAAP, lease incentives are recognised over the shorter of the lease term and
the period ending on a date from which it is expected the prevailing market rental will be payable, on a straight line basis.
74
FINANCIAL STATEMENTS Notes to the f inancial statements
75
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Notes to the financial statements continued
For the period ended 26 June 2016
Company Statement of Financial Position
As at 26 June 2016
3 4 . T R A N S I T I O N TO I F R S CONTINUED
A summary of the impact of transition to the Consolidated Statement of Financial Position is as follows:
Equity reported in accordance with UK GAAP
Transition adjustments:
Amortisation of goodwill
Lease incentives
Equity reported in accordance with IFRS
52 weeks ended
28 June 2015
£
52 weeks ended
29 June 2014
£
3,866,726
2,117,521
205,065
(279,425)
3,792,366
170,888
(164,645)
2,123,764
A summary of the impact of transition to the Consolidated Statement of Comprehensive Income is as follows:
Profit reported in accordance with UK GAAP
Foreign exchange translation differences
Total recognised gains and losses for the financial period in accordance with UK GAAP
Transition adjustments:
Amortisation of goodwill
Lease incentives
Total comprehensive income in accordance with IFRS
52 weeks ended
28 June 2015
£
2,127,826
(380,039)
1,747,787
34,177
(114,780)
1,667,184
ASSETS
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
NET ASSETS
EQUITY
Share capital
Share premium
Retained earnings
Capital redemption reserve
Total equity attributable to shareholders
As at
26 June 2016
£
As at
28 June 2015
£
Notes
37
38
39
40
41
41
41
9,064,727
9,064,727
1,498,362
1,224,248
2,722,610
11,787,337
108,496
108,496
–
–
–
108,496
482,420
482,420
–
–
11,304,917
108,496
112,838
11,749,487
(563,709)
6,301
11,304,917
103,418
–
–
5,078
108,496
The financial statements of Hotel Chocolat Group plc, registered number 08612206 were approved by the Board of Directors and
authorised for issue on 18 October 2016. They were signed on its behalf by:
Matt Pritchard
Chief Financial Officer
18 October 2016
76
FINANCIAL STATEMENTS Company Statement of Financial Position
77
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Company Statement of Cash Flow
For the period ended 26 June 2016
Notes to the Company financial statements
For the period ended 26 June 2016
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
Notes
35 . CO M PA N Y F I N A N C I A L S TAT E M E N T S
As permitted by section 408(3) of the Companies Act 2006, a separate Statement of Comprehensive Income, dealing with the results of the
Parent Company, has not been presented. The Parent Company profit for the period ended 26 June 2016 is £563,709 (28 June 2015: £ nil).
Loss for the period
Operating cash flows before movements in working capital
Increase in other receivables
Increase in accruals
Interest paid – borrowings
Cash flows used in operating activities
Acquisition of subsidiary
Settlement of intercompany balances
Cash flows used in investing activities
Cost of issue of new equity
Proceeds from issue of shares
Cash flows from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(563,709)
(563,709)
(124,226)
146,229
(113,000)
(654,706)
(54,921)
(9,826,125)
(9,881,046)
(240,000)
12,000,000
11,760,000
1,224,248
–
1,224,248
39
39
–
–
–
–
–
–
–
–
–
–
–
–
–
Company Statement of Changes in Equity
For the period ended 26 June 2016
As at 30 June 2014
Capital redemption
Shares issued in the period
Equity as at 28 June 2015
Loss for the period
Capital redemption
Shares issued in the period
Costs of issue of new equity
Equity as at 26 June 2016
Share
capital
£
107,078
(5,078)
1,418
103,418
–
(1,223)
10,643
–
112,838
Share
premium
£
Retained
earnings
£
Capital
redemption
reserve
£
–
–
–
–
–
–
11,989,487
(240,000)
11,749,487
–
–
–
–
(563,709)
–
–
–
(563,709)
–
5,078
–
5,078
–
1,223
–
–
6,301
Total
£
107,078
–
1,418
108,496
(563,709)
–
12,000,130
(240,000)
11,304,917
3 6 . ACCO U N T I N G P O L I C I E S
To the extent that an accounting policy is relevant to both Hotel Chocolat Group and Company financial statements, refer to the Group
financial statements for disclosure of the accounting policy.
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 (FRS 100): Application of Financial
Reporting Requirements and Financial Reporting Standard 101 (FRS 101): Reduced Disclosure Framework. The principal accounting policies
adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods
presented, unless otherwise stated.
The financial statements have been prepared on a historical cost basis, except for the revaluation of certain properties and financial
instruments. The presentation currency used is sterling.
Disclosure exemptions adopted in preparing these financial statements the Company has taken advantage of all disclosure exemptions
conferred by FRS 101.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU-endorsed IFRS;
• the effect of future accounting standards not yet adopted; and
• disclosure of related party transactions with other wholly owned members of the Group headed by Hotel Chocolat Group plc.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures are included in
the company’s consolidated financial statements. These financial statements do not include certain disclosures in respect of:
• share-based payments;
• financial instruments (other than certain disclosures required as a result of recording financial instruments at fair value); or
• fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value).
The Company has adopted a change in reporting GAAP during the current period to FRS 100 and FRS 101. In previous years the financial
statements were prepared in accordance with applicable UK accounting standards. This change has not resulted in any amendments to the
presentation or measurement to any balances and as such no transition disclosures have been provided.
37. S U B S I D I A RY U N D E RTA K I N G S
Investments in subsidiaries held by the Company as non-current assets are stated at cost less any provision for impairment.
Cost
At beginning of period
Additions
At end of period
Carrying amount
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
108,496
8,956,231
9,064,727
9,064,727
108,496
–
108,496
108,496
A list of the significant investments in subsidiaries, including the name, proportion of ownership interest, country of operation and country
of registration can be found in Note 18.
78
FINANCIAL STATEMENTS Notes to the Company f inancial statements
79
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts Notes to the Company financial statements continued
Company information
For the period ended 26 June 2016
3 8 . T R A D E A N D OT H E R R E C E I VA B L E S
There were no material receivables which were past due but not impaired at the end of any period.
Other receivables
Prepayments
Amounts due from related parties
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
124,226
5,000
1,369,136
1,498,362
–
–
–
39. C A S H A N D C A S H E Q U I VA L E N T S
The cash flow statement on page 78 gives a breakdown of cash movements in the year. To the extent a disclosure is relevant to both the
Hotel Chocolat Group and Company financial statements, refer to the Group financial statements.
4 0 . T R A D E A N D OT H E R PAYA B L E S
Accruals
Amounts due to related parties
Total trade and other payables
41. S H A R E C A P I TA L A N D R E S E RV E S
52 weeks ended
26 June 2016
£
52 weeks ended
28 June 2015
£
146,229
336,191
482,420
–
–
–
The share capital, share premium and the capital redemption reserve are consistent with Hotel Chocolat Group financial statements.
Refer to Notes 24 and 25 of the Group financial statements.
42 . C A P I TA L CO M M I T M E N T S
There were no amounts contracted for but not provided for as at 26 June 2016 (28 June 2015: £nil).
43 . R E L AT E D PA RT Y T R A N S AC T I O N S
Amounts owed by and to subsidiaries are disclosed in Notes 38 and 40 respectively, of the Company financial statements.
The remuneration of the key management personnel of the company are disclosed in Note 8 of the Group financial statements.
Interests and related party transactions are disclosed in Note 28 of the Group financial statements.
R E G I S T E R E D O F F I C E
Mint House
Newark Close
Royston
Hertfordshire SG8 5HL
CO M PA N Y W E B S I T E
www.hotelchocolat.com
CO M PA N Y S E C R E TA RY
Peter M Harris
A DV I S E R S
Nominated Adviser and Broker
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Legal Advisers to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
AU D I TO R S
BDO LLP
55 Baker Street
London W1U 7EU
R E G I S T R A R S
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
80
FINANCIAL STATEMENTS Company information
81
Company overviewStrategic reportGovernanceFinancial statementsHOTEL CHOCOLAT GROUP PLC Annual Report and Accounts H
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6
ANNUAL REPORT AND ACCOUNTS
2016
Not all chocolates are created equal
R E G I S T E R E D O F F I C E
Hotel Chocolat Group plc
Mint House
Newark Close
Royston
Hertfordshire SG8 5HL