Hotel Chocolat Annual Report 2019

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FY2019 Annual Report · Hotel Chocolat

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ANNUAL REPORT AND ACCOUNTS

2019

Chocolate. Reinvented.

HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

The leading UK
direct-to-consumer
chocolate company, making
innovative and accessible
luxury chocolates.

‘Hotel Chocolat is the nation’s favourite
premium chocolate brand’

ALLEGRA 2015

Company overview

COMPANY OVERVIEW

2019 HIGHLIGHTS

11% 19%

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Revenue

Underlying EBITDA1

Profit Before Tax

£132.5m

(2018: £116.3m)
Up 14% (13% excl. USA)

£20.7m

(2018: £18.9m)
Up 9% (14% excl. USA)

£14.1m

(2018: £12.7m)
Up 11% (19% excl. USA)

Profit After Tax

Diluted EPS

Final dividend

£10.9m

(2018: £10.0m)

9.5p

(2018: 8.8p)

1.2p

(Full year: 1.8p | 2018: 1.7p)

New
locations

New USA
locations

Japan
joint venture
commenced
trading

Highlights

At a glance

STR ATEGIC REPORT

Chairman’s statement

Our business model

Our markets

Chief Executive’s statement

Our strategy

Financial review

Risk management

GOVERNANCE

Doing the right thing:
Corporate Responsibility

Board of Directors & Leadership team

Corporate governance statement

Audit Committee report

Remuneration report

Directors’ report

Statement of Directors’ responsibilities

FINANCIAL STATEMENTS

Independent Auditors’ 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 Changes in Equity

Notes to the Company
financial statements

Company information

100

For the latest information, view our website at:
www.HotelChocolat.com

900,000

VIP signups

Launch of
Velvetiser to
5 star reviews

Drinks, Ices
& experiences
rollout to more
locations

Underlying EBITDA of £20.7m excludes share-based payment charges and related tax of £0.9m (FY18: £0.7m).

Strategic reportGovernanceFinancial statements

02 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

AT A GLANCE

The leading UK premium chocolate brand, manufacturing innovative
and accessibly priced luxury chocolate. We connect our brand direct to
customers via our 130 Hotel Chocolat locations, online and subscriptions.

Our strong British brand is based on an ethos of:

O R I G I N A L I T Y

AU T H E N T I C I T Y

E T H I C S

We believe in being fresh, creative
and innovative, doing things in a
more intelligent way.

We are the real thing, our focus on
“more cacao, less sugar” results in a
superior taste, drawing on the invaluable
knowledge from farming our own organic
cacao estate.

Doing the right thing, not just saying it.
Engaged Ethics: a sustainably good approach
for cacao, for the planet, for people.

Key Product Ranges

L E I S U R E
Our Wall of Chocolate – over 120 recipes

Drinks + Ices; unique creations,
Choc Shakes and Hot Chocolate etc.

Rare & Vintage – made with the
top 10% of the world’s cacao

Chocolate Lock-In tastings and
School of Chocolate experiences

G I F T
Selection boxes / gift sets
from £5–£500

10x collections per annum for
long established seasonal events

Cacao-based alcohols

Cacao-based beauty, inspired by
nature on our organic cacao estate

S U B S C R I P T I O N
Velvetiser drinking chocolate system
– Refill subscription launching FY20

The Chocolate Tasting Club

What sets us apart

D I R E C T TO
CO N S U M E R

D I F F E R E N T I AT E D
P RO D U C T

Investing in building relationships via our own
channels means we know more about our
customers so we can give better service and
create things that we know they will want, or
test their appetite for more radical concepts.

Rather than copying continental chocolate
traditions, Hotel Chocolat has carved
out a modern British take on luxury
chocolate. Cacao and great design are
at the heart of everything we do.

R E J E C T I O N O F T H E
TRADITIONAL CHOCOLATE
PR I C I N G M O D E L

We believe we have created a new and
better price:quality relationship. Cacao is
the most expensive ingredient, sugar the
cheapest. Check the ingredients, unlike some
rivals, cacao is always our main ingredient.

We sell our chocolate direct to customers and via carefully
selected partners.

The business began in the UK in the 1990s with online and subscription. Our first physical location came later, in 2004, after the
creation of the Hotel Chocolat brand. Physical Hotel Chocolats are a key element in our multi-channel model, symbiotically working
with online and wholesale, varying in size from 100 sq ft up to 5,000 sq ft and trading profitably across all UK regions.

This year we opened two locations in the USA and started up a new joint venture
in Japan. These are two of the three largest economies in the world.

We also operate in Scandinavia with a partner under a franchise system.

116

UK Stores

International locations,
including 8 franchise
and 2 JV

Boutique Hotel
& Cacao Estate
in St Lucia

I N N OVAT I O N
C U LT U R E

V E RT I C A L LY
I N T E G R AT E D

S T RO N G
B R A N D

Balancing prolific new-
concept creation with
a disciplined range
architecture is a key
competitive strength.

We apply our expertise
at every stage to create
superior products at
sustainably strong margins.

The Hotel Chocolat brand
evokes escapism and
contemporary luxury. Our
clear, long-term brand ethos
sustains a healthy culture.

P RO G R E S S I V E
D I G I TA L
M A R K E T I N G

We were born digital,
meaning it’s always at the
centre of our customer
strategies.

Company overviewStrategic reportGovernanceFinancial statements
04 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

Strategic report

DRINKS + ICES

‘Drinks and Ices are proving to be our
most engaging social media content’

Further innovation in our range of Drinks + Ices has created
more reasons to visit, growing the brand’s summertime appeal
in the UK, USA and Japan.

Chairman’s statement

Our business model

Our markets

Chief Executive’s statement

Our strategy

Financial review

Risk management

Company overviewStrategic reportGovernanceFinancial statements06 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CHAIRMAN’S STATEMENT

“ I am pleased to be able to update our stakeholders on
another good year for the Group. Following a year
of accelerating growth in the UK, the business also
made encouraging progress with its tests to develop
and grow the Hotel Chocolat brand across new
products and new international markets.”

Andrew Gerrie
Non-executive Chairman

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Revenue

£132.5m

(2018: £116.3m)
Up 14% (13% excl. USA)

Profit Before Tax

£14.1m

(2018: £12.7m)
Up 11% (19% excl. USA)

OV E RV I E W

P E O P L E

In FY19 the Group’s existing operations
continued to grow and improve
profitability. In addition, the new test
locations in the USA and a JV partner
in Japan are showing encouraging early
results. The Group continues to have
many opportunities and is taking a
disciplined approach to deliver long-term
growth and returns.

R E S U LT S

The Group achieved a pleasing result
in FY19 with revenue of £132.5m and
growth of 14% versus FY18. Profit before
tax grew by 11% to £14.1m. The Group
results included £0.5m of sales and £1.2m
of losses relating to investments in new
locations in the USA which performed in
line with our business plan. Excluding the
USA, Group sales grew +13% and profit
before tax grew +19%.

S T R AT E GY

The growth strategy remains unchanged;
to carefully continue to open more
locations, to invest in digital to make
it increasingly easier for consumers
to access our brand, and work with
selected partners to extend our reach
and accessibility. The profit generation
from these activities supports investment
in; additional manufacturing capacity
and improved efficiency, and the
continued trials in two large international
markets taking a cautious ‘test, learn,
grow’ approach.

The Group continues to be led by a strong
founder-led executive management team
who have built a strong brand and successful
business. I would like to extend my thanks
to the whole Hotel Chocolat team for their
energy and creativity which has delivered
another year of results to be proud of.

Following three successful years of
growth, the Remuneration Committee
has approved the full vesting of the 2016
LTIP award for senior management,
reflecting the outperformance of the
existing operations, and the impact of new
investments in the USA. In total 2.8m share
options will vest and become exercisable.

D I V I D E N D S

The Board is pleased to propose a final
dividend of 1.2 pence per share bringing
the full year dividend to 1.8 pence per
share. If approved by shareholders at the
AGM on 21 November 2019 it will be paid
on 20 December 2019 to shareholders on
the register at 22 November 2019.

O U T LO O K

Despite the challenges and uncertainties
facing the wider economy the strength of
the brand drives great customer loyalty and
we are well positioned for future growth,
with a strong pipeline of opportunities.
Trading since the end of the financial period
is in line with management expectations.

Andrew Gerrie
Non-executive Chairman

User-generated
social media content
demonstrates high levels
of Brand engagement

Company overviewStrategic reportGovernanceFinancial statements08 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

OUR BUSINESS MODEL

We believe that growth and re-investment can
benefit all of Hotel Chocolat’s stakeholders.

Creating

We grow

We own a cacao estate in Saint Lucia called the
Rabot Estate. This is the source of some of the exclusive
beans featured in our Rare & Vintage range, and of
our deep understanding of the cacao growing process.
This knowledge enables us to continuously improve
our relationship with all of our cacao growers worldwide
and further our Engaged Ethics programme which now
covers 100% of the cacao we use.

We design

A dedicated in-house team of designers are
the source of our unique brand aesthetic,
working on everything from the Velvetiser to
the latest Easter egg or marketing campaign.

Everything we do is guided
by the three basic values
that we started with and
will always retain:

Re-investing

We keep getting better

Our culture of continuous improvement drives
a relentless re-investment into everything from
location upgrades to systems technology and
manufacturing.

We Care

Our Engaged Ethics programme drives
a progressively increasing investment
in sustainability, both in the UK and
worldwide.

Making

We manufacture

Our chocolate manufacturing campus in Cambridgeshire
makes 95% of our chocolate products. We love in-house
production because it allows faster innovation, increases
control over quality, protects intellectual property and
improves gross margins.

O R I G I N A L I T Y

AU T H E N T I C I T Y

E T H I C S

Entertaining

We distribute

We run our own Distribution Centre in
Cambridgeshire with our own fleet of vehicles.
Owning the supply chain improves responsiveness,
enabling high levels of product availability, an essential
element in keeping our customers happy.

We own our channels

‘Entertaining while we sell’ is our mantra. Underpinned
by great digital storytelling and a knowledgeable School
of Chocolate qualified team. A complete 100% happiness
guarantee backs up everything we do.

– Digital
– Physical

– Cacao Estate
– Premium wholesale partners

Company overviewStrategic reportGovernanceFinancial statements10 HOTEL CHOCOL AT GROUP PLC · Annual Repor t 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 our products are purchased as gifts and considers that both our competitor set and growth opportunity
are far wider than just traditional chocolate retailing.

U K G I F T I N G

Gifting Market

£20bn1

Hotel Chocolat Share of Market

<1.0%

Strategy

• Continuous product innovation, focused on
chocolate gifting and ‘extension’ categories
including cacao alcohols and cacao beauty

• Grow customer database, increase visit frequency

across all channels

Progress Update

U K C H O CO L AT E

Chocolate Market

£6bn2

<2.5%

• Open more locations across the UK

• Digital upgrades to improve loyalty, acquisition
and conversion via smartphone optimised site

• Extend dietary luxury (vegan, ‘free from’,

“more cacao, less sugar”)

• VIP ME card scheme launched September 2018 attracted

• Opened 14 locations in UK & Ireland in FY19, signed

900,000 active members in the first year

• Introduced wider range of gift-sleeves/bags, making year-
round ranges more relevant to specific gift occasions
whilst reducing reliance on seasonal stocks

• Gift app launching FY20

leases on a further six due to open before Christmas 2019.
‘Upsized’ three existing sites and refitted two locations

• Wholesale grew strongly, supported by the

development of capsule ranges specifically tailored
to each wholesale partner’s customers’ needs

• Subscription app launching in FY20

D R I N K S + I C E S

I N T E R N AT I O N A L

Cafe Market

£8bn3

<0.1%

US & Japan Gifting Markets

>£175bn4

<0.02%

• Roll out of Drinks + Ices to more locations

• Prove site-level economics in USA & Japan (via JV)

• Retro-fit of Drinks + Ices and seating

• Relocate existing sites to larger prime locations with seats

• Grow in-home hot chocolate category

to inform rollout potential

• Franchise in Scandinavia

• New product development to incorporate relevance

for local markets

• Rollout of Drinks + Ices is supporting summer trading,
and giving reasons to visit more frequently year-round
as a leisure activity

• The Velvetiser in-home hot chocolate system launched

to 5-star reviews. New refill flavours and refill
subscription launching this autumn

• Two sites opened in USA, two further leases

signed and website now live

• Two JV locations opened in Japan, website live, three
further locations to open ahead of Spring ‘20 peak

1 Mintel, 2007

2 Canadean, 2014

3 Allegra, 2016

Forbes 2017
Yano Keizei

Company overviewStrategic reportGovernanceFinancial statements12 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CHIEF EXECUTIVE’S STATEMENT

“ In the three years since IPO we have grown sales by 45%
and underlying EBITDA by 67%, with many significant
opportunities ahead. Our mission is to become the leading
direct-to-consumer premium chocolate brand, globally.”

Angus Thirwell
Co-founder and Chief Executive Officer

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Sales

Underlying EBITDA1

Profit Before Tax

£132.5m

(2018: £116.3m)
Up 14% (13% excl. USA)

£20.7m

(2018: £18.9m)
Up 9% (14% excl. USA)

£14.1m

(2018: £12.7m)
Up 11% (19% excl. USA)

R E V E N U E BY C H A N N E L

Sales
Mix

Growth year
on year

Physical
Digital
Partners & B2B

International
Cacao estate & hotel

67%
19%
10%
2%
2%

15%
8%
19%
17%
10%

67%

2% 2%

10%

19%

Underlying EBITDA excludes share-based payment costs and related tax of £0.9m (FY18: £0.7m).

I am pleased to report another year of significant progress for the Group.
Revenue grew by 14% to £132.5m, underlying EBITDA1 increased by 9% to
£20.7m and profit before tax increased by 11% to £14.1m. The UK continues
to deliver sales growth with profits improving faster than sales due to
increasing efficiency and the benefits of scale. Our new test locations in
the US and with our Joint Venture partner in Japan are both delivering
encouraging sales and costs are tracking in line with expectations.

S A L E S C H A N N E L R E V I E W

Our omni-channel model continues to
work well: each channel supports the
others and all channels are in growth.

U K

Physical

Hotel Chocolat locations are a doorway
into instant escapist happiness. We
relentlessly innovate to make our
spaces exciting, relevant, friendly and
experiential. The immediate gratification
of leisure-driven self-purchase is
augmented by carefully selected gifts
for a wide spectrum of occasions and
budgets. Launching multiple seasonal
gift ranges every year means there is
something exciting happening all the time.
We have always understood the need for
our spaces to deliver for our guests on
the leisure and experience level, and I’m
delighted that our work here is gaining
such strong traction; Drinks + Ices and
Chocolate Lock-in tasting experiences
have performed extremely well this year,
with further huge potential, also shown
by the prolific customer-generated
social sharing.

Our existing locations performed very
well over the year, therefore we opened
a further 14 new locations in the UK and
Ireland. We have also seen encouraging
results from investments in upgrades in
existing catchments; Westfield London
(FY19), and Cardiff and Brighton (Q1
FY20) all moved to better locations,
adding Drinks + Ices with seating.
Gateshead Metro Centre, where we
have built a great customer base since
2007, received a Drinks + Ices and
seating upgrade as part of a refit.

Whilst macro-economic trends have created
headwinds, we remain confident that further
new openings can deliver attractive financial
returns and improve customers’ ease of
access to our brand, based on our multi-
channel leisure and gift format.

We observed an acceleration in same-store
sales growth in H2 following the launches
of our Velvetiser in-home hot chocolate
system and VIP ME scheme. This strong
trading performance further improved
the collective EBITDA profitability of
our established sites (open more than
12 months). In addition, our new locations
made a positive contribution to EBITDA
in their maiden part-year.

900,000
registered
members

• VIP ME members shop
more frequently and
spend more per visit.

• Multichannel shoppers
have highest lifetime
value.

• Increasing customer

frequency and
maximising lifetime
value across channels,
seasons and ranges is
a key opportunity.

Our strong British brand is based on an ethos of:

O R I G I N A L I T Y

AU T H E N T I C I T Y

E T H I C S

We believe in being fresh, creative
and innovative, doing things in a
more intelligent way.

We are the real thing, our focus
on “more cacao, less sugar” results
in a superior taste, drawing on the
invaluable knowledge from farming
our own organic cacao estate.

Doing the right thing, not just
saying it. Engaged Ethics: a
sustainably good approach for
cacao, for the planet, for people.

Underlying EBITDA excludes share-based payment costs and related tax of £0.9m (FY18: £0.7m).

Company overviewStrategic reportGovernanceFinancial statements14 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CHIEF EXECUTIVE’S STATEMENT continued

“ I would like to thank the whole team for their drive, creativity and
commitment, without which these results would not have been possible.
We are building an ever-stronger team united by common goals and behaviours
that reflect our unchanging brand values of Originality, Authenticity and
Ethics, underpinned by the mantra ‘be brave and be kind’.”

As you may expect, we constantly
evaluate the potential return on capital of
our different growth investment options.
In assessing physical locations, the Board
modelled three scenarios, based on
various growth rates and cost inflation
for our physical store estate:

1) A continuation of the FY19 growth
rates for sales and for overhead costs
– which would mean that store estate
EBITDA profitability would continue to
rise in future years.

2) A more pessimistic scenario reflecting
a drop to negative sales growth and with
externally driven cost inflation at rates
in excess of FY19 – this would still mean
that the retail estate would continue to
generate significant EBITDA profit in five
years’ time. Our average lease length is
5.5 years and our average time to break-
clause is 3.5 years, giving us a good degree
of agility to adapt in a timely manner.

3) However, we continue to focus all our
energies on delivering a third, and better,
scenario which has the scope to generate
a material increase in EBITDA, by:

• Increasing the rate of sales growth,

driven by; product innovation, gaining
a deeper relationship with our
customers via VIP ME, adding more
leisure experiences, and empowering
our store teams to deliver an ever-
better experience for our guests,
tasting and demonstrating more of
our exciting new products.

• Mitigating cost pressures using a

combination of better buying, further
innovation in our processes and
perpetual focus on working smarter,
whilst never compromising on product
quality or service experience.

Digital

Being born digital means that it is
always at the centre of our strategy,
giving Hotel Chocolat an unusually high
proportion of digital sales compared
to other chocolate brands, at 19%. In
the year we welcomed Lysa Hardy, our
first ever Chief Marketing Officer who
brings a breadth of experience in brand
communication, omnichannel marketing,
digital engagement and subscriptions.

• Sales through our own website
increased by 22%. In the year
we focussed on assembling the
elements necessary to drive stronger
growth: investing in a more skilled
and experienced team supporting
the new CMO role and instigating
certain tech upgrades we have been
developing for a while. During FY20
we are insourcing all CRM and email
activity to give greater control and
improved personalisation, digitising
the successful VIP ME loyalty scheme,
launching a gift-sending app, launching
new app-based subscription models,
and improving e-commerce navigation
and conversion. We anticipate each of
these improvements benefitting the
autumn/winter peak for FY20.

• Subscription sales reduced by 26%. We
are not perturbed by this as it is part of
our remodelling plan and reflects our
pause in acquisition marketing for this
part of our model. A new subscription
app is scheduled for launch in H1
bringing with it new offers, intended to
create a sustainable subscription growth
platform for the future. As a result of
the temporary pause in acquisition
marketing, profitability increased year
on year.

Wholesale Partners

We have achieved very encouraging
growth in the year with UK B2B sales
growing by 19%. Each partner is selected
on a careful balance of attributes and
customer demographics, then matched
with a specific capsule collection from our
product range. As these partnerships have
become established, we have been able
to curate capsule ranges that are specific
to the needs of each wholesale partners’
customers. Each partner typically has
less than 10 percent of our total range,
meaning we retain many reasons to visit
our own locations and website, where we
can offer the deepest brand experience
and service, nourishing the brand for the
long term.

• Three further locations are planned to
open ahead of the Spring ‘20 peak.

• The website is live and social outreach

I N T E R N AT I O N A L

USA

FY19 was a significant year for our global
aspirations, opening Hotel Chocolats in
two of the three largest economies in
the world. In both markets the brand has
been well received by customers, with our
approach seen as refreshing and attractive
and our prices perceived as fair value.
With only a part-year of data, our initial
site-level sales are tracking in line with our
expectations, a level at which we believe
we can deliver EBITDA profitability once
supply chain costs are normalised. We are
making continuous improvements to our
sea-freight supply chains driving higher
availability and higher gross margins. Both
our 100% owned business in the US and
the JV in Japan remain sub-scale in this
test phase but we have invested in high
calibre local teams to ensure the brand is
well presented and the foundations are
being laid for potential roll-out, with a
clear success criteria for our ‘test, learn,
grow’ approach.

• Lexington Avenue, New York opened

Nov 2018.

• Garden State Plaza Mall, New Jersey

is being invested in.

opened Feb 2019.

• Both locations featured the full Hotel
Chocolat offer with Drinks + Ices and
seating.

• The gifting seasons are different in

Japan, where Valentine’s and White Day
in February and March generate a sales
peak similar to Christmas in the UK.

• Union Station, Washington DC and

Scandinavia Franchise

• Four Danish locations now open.

• New central Copenhagen location

opening H1 FY20.

• Our partner continues to explore

opportunities for growth in the market
including B2B wholesale, concessions
and opening more locations.

Columbus Circle, a mass transit location
in New York will both be opening in
H1 FY20.

• We are upgrading our US transactional
website and exploring the potential for
wholesale partnerships.

Japan JV

• Laketown Mall, Tokyo opened Nov

2018. Japan’s largest mall.

• Narita Mall, Tokyo opened Feb 2019.

• Both locations feature the full Hotel

Chocolat offer with Drinks + Ices and
prominent seating.

Company overviewStrategic reportGovernanceFinancial statements16 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CHIEF EXECUTIVE’S STATEMENT continued

Key launches for FY20 include Biscuits
of the Gods, aiming to offer the best
chocolate biscuit on the planet, exciting
new Velvetiser chocolate flavours, Dark
Chocolate Mint Cream Liqueur and new
variants of a product the Japanese in
particular have fallen in love with, the
all Chocolate Macaron.

Experiences

Leisure experiences are ever-increasing as
the new luxury, with consumers seeking
to go beyond the purely transactional, but
only with the brands they love. We are well
positioned as an early pioneer and a brand
that enjoys a good degree of consumer
love. It’s an area of strong focus for us. We
are determined to step-up further the
multi-sensory elements at all our Hotel
Chocolat locations. We are extending the
range of experiences we offer, starting
with increased in-store demonstration and
perpetual product sampling, adding
Drinks + Ices for immediate gratification,
all the way up to our most immersive
experiences, the Chocolate Lock-Ins, as
featured in our hit documentary Inside
Hotel Chocolat and now featuring over
twenty different themes including season-
specific evenings and in-depth tastings of
a single chocolate genre.

Wellness

Consumers increasingly want delicious
and hedonistic chocolate that’s also made
with responsible amounts of sugar. Hotel
Chocolat’s 15-year track record of “more
cacao, less sugar” is applied to every single
grade of our chocolate, from whites,
through milks and darks, and our pipeline
of product innovation continues to focus
on ways to reduce sugar further. In August
we refreshed our super-premium Rare &
Vintage range, made from the top 10% of
the world’s cacao harvest and showcasing
our expertise in tree-to-bar chocolate-
making know-how, making us the most
authentic player in premium chocolate.

O P E R AT I O N A L R E V I E W

The key seasonal ranges traded strongly
and our ability to create imaginative and
desirable products continues to be a
carefully nurtured asset. Our vertically
integrated business infrastructure is well
invested and as the business grows, we
remain focused on controlling overheads,
which as a result reduced by 180bps from
52.2% of sales to 50.3%.

In FY19 gross margin reduced by 250bps.
The decline was primarily driven by the
growth of the Velvetiser and Wholesale,
both of which have lower gross margins
but also have lower overhead costs as a
percent of sales. We made 40bps of margin
gains from operational improvements
which were re-invested in sales-driving
activity with VIP me. Further detail is
provided in the Financial review on p25.

Manufacturing Investment

Having invested over £4m in production
capex in the previous two years, in FY19
we focussed on; optimising and fine-
tuning the performance of these new
assets and building detailed capacity
plans for 5-year and 15-year horizons.
We acquired land adjacent to our
freehold factory campus in Huntingdon,
Cambridgeshire and have obtained
outline planning permission that would
ultimately enable us to increase our site

output capacity by more than 200%
as and when required. We focus on
maximising return on capital employed
by improving existing asset utilisation,
only investing in additional productive
assets as and when the capacity is clearly
required. We are well advanced with
plans for a fourth production line, a
capital project of approximately £4m
due to enter service in 2021, the project
will also enable the addition of up to
two further lines by 2024.

B R A N D R E V I E W

We continue to invest in our most
valuable asset, the Hotel Chocolat
brand, at many levels.

Our culture of constant innovation is crucial
in ensuring the brand remains fresh and
relevant. We have always invested heavily in
innovation and creativity, and as a result we
now have many years of new innovations in
the pipeline. Those that we launch will have
made it through our disciplined testing and
trialling approach. Recent highlights included
the Velvetiser, our in-home hot chocolate
system, which launched to the best
customer reviews we have ever received.
Our amazing chocolate-dipped Ice Lollies
were tested this spring and proved so
popular we immediately began a rollout
to more locations.

Engaged Ethics

Consumers expect brands they love to do the right thing, using their resources and influence to make the world a better place
whenever and wherever they can. This has always been a central element of the Hotel Chocolat DNA and we challenge ourselves to
progressively strengthen our programmes and initiatives year-on-year. The three areas we focus on are cacao, the planet and people:

1) Cacao: All of our cacao is sourced

under our Engaged Ethics scheme. We
pay more for our cacao to ensure that
farmers receive a premium, sustainable
farming practices are encouraged, and
to fund productivity and community
projects. Further detail on our progress
in the year is on page 30.

2) The planet: whilst we have always
taken a responsible approach to
packaging, we now explicitly state a
target to further reduce our impact:
100% of our packaging will be
compostable, reusable or recyclable
by 2021. We have already begun
to replace plastics with alternatives
that meet these goals, offer recycling
through our locations for any chocolate
brand’s plastic packaging and will
continue to look for innovative ways
to reduce our impact on our planet.
Further detail is on page 31.

3) People: We know that culture is the
essential ingredient in building winning
teams. Ensuring that our colleagues
are happy at work and feel they can
maximise their potential are key to
engagement. We listen continuously
to employee feedback and are
strengthening our investments in
team development. We are building an
ever-stronger team united by common
goals and behaviours that reflect our
unchanging brand values of Originality,
Authenticity and Ethics, as underpinned
by the mantra ‘be brave and be kind’.
Further detail is on page 32.

The innovation pipeline is strong

P RO D U C T S

C H A N N E L S & F O R M AT S

B R A N D

Velvetiser refills – seasonal
flavours.

Mint cream liqueur for this
Christmas.

Biscuits of the Gods.

New & Improved Easter range.

Subscription app launch.

Upgrade VIP Me from card to app.

Store refits and relocations.

Travel retail test.

Planet pledge, plastic &
sustainability.

Further recipe developments;
more cacao less sugar, more
Vegan recipes.

2nd series of TV show in
production.

Company overviewStrategic reportGovernanceFinancial statements18 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CHIEF EXECUTIVE’S STATEMENT continued

“ We have always understood the need to
deliver leisure experiences for our guests.
Drinks + Ices, and tasting experiences
have performed extremely well this year.”

O U T LO O K

Continued innovation and a relentless focus on customer
happiness aims to generate sales growth. By combining this
with a tight control of costs, we aim to improve returns.

Our growth is in large UK markets with significant headroom,
which gives lots of scope for continued success through both
brand-owned channels and carefully selected wholesale partners.
The defensive attributes of the business are well-honed and include
the strength and integrity of our brand and the agility of vertical
integration. We have reviewed the potential impacts from a ‘hard
Brexit’ and have contingency plans in place to mitigate potential
short-term supply disruptions. We are focussing our international
growth efforts in the US and Japan, two of the world’s largest and
most attractive markets.

The market and wider economy may not be without challenges;
however, I remain confident that our plans for the coming year
and well beyond will deliver sustainable growth. We have a
strong brand and exciting pipeline of opportunities. Our aim
of eventually becoming the global leader in direct-to-consumer
chocolate is firmly in our sights.

Angus Thirlwell
Co-founder and Chief Executive Officer

Customer Insight

In our UK consumer research, two
thirds of premium chocolate buyers
said Hotel Chocolat was their
favourite premium chocolate brand.
They also said they would be happy
to buy more Hotel Chocolat product
if it were easier to access.

We will address this opportunity by:

Opening more ‘Hotel Chocolats’, in a variety
of locations including smaller towns and cities.

2. Developing more and better experiential ‘retail theatre’;

adding Drinks + Ices, seating and lock-ins to more
locations, creating more reasons to visit our locations
more often.

3. Developing new types of subscription to make it

easier to regularly receive Hotel Chocolat at home.

4. Growing carefully with selected wholesale partners, giving
consumers the most convenient choices of how to buy.

Company overviewStrategic reportGovernanceFinancial statements20 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

OUR STRATEGY

We maintain a disciplined approach to capital investment
to deliver improved returns and contain risk.

A focus on proven formats and channels in the UK provides a strong platform to
step up the level of tests in international markets:

1.
GROW UK PHYSICAL SPACE
OPENING NEW LOCATIONS AND TESTING NEW FORMATS AND CATCHMENT TYPES

We continue to open locations and are investing in the existing estate with a
combination of refits and relocations to larger sites.

The EBITDA profitability of our existing estate increased and
new locations made a positive EBITDA contribution in their
first part-year.

In the year we opened 14 new locations in the UK and Ireland
and have invested in refits at Gateshead and Liverpool, three
relocations to larger sites with drinks, ices and seating in
Westfield London, Cardiff and Brighton, and a programme
of refresh activity to enhance the presentation of the brand
in existing locations.

C U S TO M E R S E RV I C E A N D E X P E R I E N C E S

Our retail strategy is focused on developing our teams,
empowering all team members to make more decisions locally
and promoting team diversity to best match the diversity of our
customers. Our unique internal School of Chocolate training
programme creates a depth of knowledge that has allowed us to
roll out Chocolate Lock-Ins. The extension of Drinks + Ices to
more locations create more reasons to visit, driving frequency.

THE ROLLOUT OF EXPERIENCES TO
EXISTING ESTATE IS PROGRESSING WELL

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Our strategy has four pillars:

1.
GROW UK PHYSICAL
SPACE OPENING
NEW LOCATIONS
AND UPGRADING
EXISTING SITES

2.
GROW DIGITAL
SALES INCLUDING
WHOLESALE, WORKING
WITH CAREFULLY
SELECTED PARTNERS

3.
INCREASE
MANUFACTURING
EFFICIENCY AND
CAPABILITY

4.
CONTINUE OUR
‘TEST, LEARN, GROW’
APPROACH IN NEW
INTERNATIONAL
MARKETS

2.
GROW UK DIGITAL SALES
INCLUDING WHOLESALE, WORKING WITH CAREFULLY SELECTED PARTNERS TO MAKE IT EASIER FOR CUSTOMERS TO
ACCESS THE BRAND

In the year we launched VIP Me and have now signed up over 900,000 active shoppers,
giving us the ability to communicate with these engaged customers for the first time.

VIP Me is intended to act as a two-way
fan club, allowing us to share product
news, brand stories, incentives and
prizes that excite our guests, and to
share additional benefits only available
to VIP members.

W E B S I T E

Website sales grew by 22%. Traffic
increased 31%, with over 80% of the
growth coming from mobiles, which
industry wide have lower conversion.
We have achieved an ‘excellent’ user
rating on Trustpilot and continue
to improve the user experience.
Innovations to create an ever-better
digital experience launching this
autumn include:

• VIP and Velvetiser chocolate apps.

• Love Match; a fun simple way to

quickly identify the chocolates from
our range you are most likely to love.

• In-sourcing the management of email
and CRM. Investing in new systems
will allow us to better segment
customers and match them with more
relevant personal communication
from us.

S U B S C R I P T I O N

Existing members remain highly engaged
and loyal. We deliberately paused new
customer recruitment, sales declined by
26%, whilst profitability increased.

A new subscription app will launch in
FY20 offering new subscription products
including easy Velvetiser chocolate refills.

W H O L E S A L E PA RT N E R S

The performance with our existing
partners exceeded our sales target.
By refining the capsule ranges to match
customer needs we have been able to
grow sales whilst ensuring the full range
is only available via our own channels
giving reasons for both channels to
co-exist and mutually benefit. We now
have a dedicated growth team focussed
on global opportunities, headed up by a
new Director of Global Wholesale role.

Company overviewStrategic reportGovernanceFinancial statements22 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

OUR STRATEGY continued

3.
INCREASE MANUFACTURING EFFICIENCY AND CAPABILITY
DEVELOPING INNOVATIVE NEW PRODUCTS AND IMPROVING GROSS MARGINS

We focus on improving the efficiency and effectiveness of our current production
assets to support near-term growth, and then progressively invest in new assets
only as demand requires.

C A P I TA L P RO J E C T S W I T H I N
E X I S T I N G FAC TO RY

We are now one year in to a three-year project to add a fourth
production line inside the existing factory roofline, which will
deliver over 30% more production capacity from 2021. We
have purchased land adjacent to our freehold factory and have
secured outline planning permission to undertake a phased
expansion, which, as and when required can deliver up to
+200% more capacity in incremental steps, with the ultimate

potential for up to seven production lines. We are investing over
£1m in a new facility to produce Velvetiser Chocolate refills due
to enter service in FY20, delivering increased capacity, improved
gross margins and a wider variety of seasonal flavours.

O P T I M I S I N G P RO D U C T I O N

We have continued to increase production efficiency
and reduce wastage which has contributed 40bps to
gross margin YoY (see page 25).

4.
CONTINUE OUR ‘TEST, LEARN, GROW’ APPROACH
IN OUR TWO NEW INTERNATIONAL MARKETS

The positive customer response has encouraged us to progress
to the next stage of our tests in these new markets of scale.

J A PA N

U S A

S C A N D I N AV I A

The US has the world’s largest chocolate
market and gifting market. Two locations
were opened in FY19 and a further two
locations are expected to open before
the 2019 ‘Holiday’ peak. Sales and local
site-level costs are tracking in line with
expectations. Optimising supply chain
and reducing capex costs have the
potential to create a scalable model.
As expected, the business is loss-making
at this scale and stage.

In July 2018 the Group transferred
its Danish retail business to Retail
Brands, a Danish multi-brand franchise
operator. The aim is to combine the
Hotel Chocolat brand allure with local
operational knowledge and grow a
sustainable business across Scandinavia.
The partner now operates in four
locations in Denmark, and is exploring
growth opportunities from online, B2B,
department store concessions and
further store openings.

Market research suggests that Japan
presents an exciting opportunity, with
strong demographics and a gift-giving
culture centred on the spring seasons of
Valentine’s and White Day.

The Group has an initial 20% stake in a
joint venture and will supply goods on
a wholesale basis under a development
agreement. Having opened two locations
in FY19 a cautious ‘test, learn, grow’
approach will be taken with a further three
locations expected to open in Tokyo this
winter. Put option mechanisms are in place
triggered by business performance metrics,
that would ultimately result in the Group
owning a majority controlling interest. The
Group has loaned £2.5m to the JV on
commercial terms.

Company overviewStrategic reportGovernanceFinancial statements
24 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

FINANCIAL REVIEW

“ Strong UK performance has delivered
Group profit growth and has enabled
investment in international markets.”

Matt Pritchard
Chief Financial Officer

Revenue
Gross profit
Operating expenses
Underlying EBITDA
Share-based payments
Depreciation & amortisation
Impairment (non-recurring)
(Profit)/loss on disposal
Operating profit
Finance income
Finance expense
Profit before tax
Tax

Profit for the period

FY19
£m
132.5
87.3
66.7
20.7
0.9
5.5
0
0
14.3
0.1
0.3
14.1
3.1

10.9

FY19

ex-USA
£m
132.0
87.0
65.3
21.7
0.8
5.4
0
0
15.4
0.1
0.3
15.2
3.1

12.1

FY18
£m
116.3
79.6
60.7
18.9
0.7
4.8
0.3
(0.1)
13.2
0.0
0.6
12.7
2.7

10.0

P E R F O R M A N C E I N D I C ATO R S

The Group monitors its performance using a number of key indicators which are agreed at Board meetings and monitored at
operational and Board level.

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Revenue Growth

Underlying EBITDA1 Margin

Gross Margin

Profit after tax Margin

+14%

+13% excluding USA

15.6%

16.4% excluding USA
(2018: 16.3%)

65.9%

65.9% excluding USA
(2018: 68.4%)

8.2%

9.2% excluding USA
(2018: 8.6%)

Underlying EBITDA excludes share-based payment costs and related tax of £0.9m (FY18: £0.7m).

R E V E N U E
Reported revenue for 52 weeks ending 30
June 2019 was £132.5m. Revenue increased
by 14% compared to the 52 weeks ending
1 July 2018. The new locations in the US
generated £0.5m sales in their first part-
year, having opened too late in the year to
fully capitalise on the seasonal peak. The
US contributed 0.5% percentage points to
Group year on year sales growth with the
rest of the Group growing by 13.5%.

G RO S S M A RG I N
Gross profit as a percent of sales reduced
250 basis points from 68.4% to 65.9%.
Increased efficiency of production and
better buying generated gains of +40bps.
Foreign exchange impacted the sterling cost
of imported raw materials, which reduced
margin by -20bps. The launch of VIP Me,
which is intended to drive visit frequency
and sales volume growth, resulted in -60bps
of costs for sign-up incentives associated
with the initial launch phase. The balance
of the gross margin decline was due to the
growth of Velvetiser and Wholesale, both
of which generate lower gross margins, but
which also have lower overhead operating
expenses as a percent of sales when
compared to higher gross margin areas.

O P E R AT I N G E X P E N S E S
A focus on efficiency and cost control
meant that externally driven cost inflation
was mitigated, this combined with the
favourable mix effect of the lower overhead
Wholesale and Velvetiser channels meant
that overheads as a percentage of sales fell
by 180bps from 52.2% to 50.3%.

U N D E R LY I N G E B I T DA
Whilst EBITDA is not a statutory measure
the Board believe it is helpful to investors to
include it as an additional metric. Underlying
EBITDA as reported excludes non-cash
share-based payment charges and related
tax of £0.9m. (FY18: £0.7m). On this basis,
underlying EBITDA increased by £1.8m

on the prior year, and as a percent of sales
reduced from 16.3% to 15.6%. Within
this figure the US generated an EBITDA
loss of £1m on sales of £0.5m. The rest of
the Group generated underlying EBITDA
growth of 14% with EBITDA margin rising
from 16.3% to 16.4%.

I F R S16 L E A S E S
Effective from FY20 onward, IFRS16 requires
lessees to recognise a lease liability and right
of use asset. Rent expenses will be removed
from operating expenses and depreciation
and interest will increase. Operational cash
flows and business decision-making will be
completely unaffected. The modelled impact
to FY20 operating profit is not expected
to be material. Further detail on the
forecast impact to the financial statement
presentation is provided in Note 2 of the
accounts on page 62.

F I N A N C E I N CO M E
A N D E X P E N S E
Finance expense relates to a working capital
overdraft. The Board intends to finance
its ongoing working capital requirements
using a £22m overdraft facility with Lloyds
bank. Capital expenditure projects will be
financed from operating cashflow. Finance
income relates to interest received on bank
deposits and the £2.5m of loans made to
the Japan JV. The loans to Japan are made
on commercial terms at market rates of
interest and are being used to fund capital
investments and start-up costs.

D E P R E C I AT I O N &
A M O RT I S AT I O N
Depreciation increased as a result of
additional capital expenditure. Capital
expenditure of £8.9m comprised
investments in 16 new locations, re-sites
and refits, a number of IT projects and
operational projects including work-in-
progress upgrades to factory capacity and
capability including a fourth production
line which is due to enter use in 2021.

P RO F I T B E F O R E TA X
Profit before tax increased 11% from £12.7m
to £14.1m. Excluding the reported losses of
the US entity Hotel Chocolat Inc, profit from
the rest of the Group increased by 19%.

TA X AT I O N
The effective rate of taxation is 22.2%
(FY18: 21.5%). This is higher than the
standard rate of 19% mainly due to
permanent timing differences between
depreciation charges and capital
allowances, and overseas losses that are
not deductible against UK corporation tax.

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
Diluted earnings per share were 9.5p (FY18:
8.8p). Profit after tax increased by 10%. The
weighted average number of shares in FY19
was 113m (FY18: 113m). Having delivered a
year of strong growth the Board is pleased
to propose a final dividend of 1.2 pence per
share, bringing the total dividend for the
year to 1.8 pence per share (FY18: 1.7 pence
per share).

C A S H P O S I T I O N
The Group had £5.8m of cash at period-
end, an increase of £5.5m as a result of
increased EBITDA generation and working
capital management.

WO R K I N G C A P I TA L
Closing inventories increased by 2% to
£12.8m, growing more slowly than sales
growth of 14%, this as a result of improved
working capital management. This change
reduced stock cover from approximately
13 weeks in FY18 to 10 weeks in FY19.

Matt Pritchard
Chief Financial Officer

Company overviewStrategic reportGovernanceFinancial statements26 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

RISK MANAGEMENT

The Board is responsible for reviewing risks to ensure that the business
is not exposed to unnecessary or poorly-managed risks.

Whilst review of the risk register is a scheduled item on the annual calendar of Board agenda items, the Board’s consideration of risk
matters is not limited to those occasions. Risks and opportunities are factors which are continually considered when the Board is making
decisions about the business and strategy. The Audit Committee assists the Board in this process by reviewing the risk register as well
as the effectiveness of internal controls, including financial controls.

Risk

Potential Impact

Mitigation

Change from FY18
and Commentary

NEGATIVE
PUBLICITY
AFFECTING THE
BRAND

DISRUPTION
TO SUPPLY OR
PRODUCTION OF
GOODS, OR TO IT
SYSTEMS

INCONSISTENT
QUALITY OR
CONTAMINATION
OF THE GROUP’S
PRODUCTS

INTERNATIONAL
EXPANSION

Negative publicity
affecting the brand could
reduce consumer demand
for the Group’s products.

Disruption to supply or
production of goods, or
to IT systems, could limit
availability of products and
consequently reduce sales.

Inconsistent quality or
contamination of the
Group’s products could
reduce demand for the
Group’s products.

Operating in new
territories may give rise
to increased complexity
and costs.

• The business adheres
to core values of
originality, authenticity
and ethics which result
in a strong brand.

• The Group maintains
a business continuity
plan which is updated
annually and tested
quarterly with the
incident management
team.

• The business applies
strict quality controls
and seeks independent
validation of these
controls by the British
Retail Consortium
(BRC).

The business undertakes
risk assessments on an
ongoing basis.

Production facilities
achieved ‘A grade’
accreditation from
the BRC in 2019.

• The business adopts

a cautious ‘test, learn,
grow’ approach to
each new market.

• Due diligence

undertaken to ensure
appropriate local
partner.

• New position of Chief
Marketing Officer
recruited to increase
executive team
bandwidth.

The business adopts a
‘test, learn, grow’ approach
to international expansion,
combining careful research
and planning with small-
scale tests before making
significant investments.

This strategic report and information referred
to herein was approved on behalf of the Board
on 24 September 2019.

Matt Pritchard
Chief Financial Officer

FOREIGN
EXCHANGE

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 US and
the hotel in Saint Lucia are
denominated in US dollars.

• The Group forecasts
its requirement for
foreign exchange
purchases and hedges
these purchases 18
months ahead.

ECONOMIC
AND POLITICAL
FACTORS BEYOND
THE GROUP’S
DIRECT CONTROL

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 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.

SHORT-TERM
DISRUPTION TO
INTERNATIONAL
SUPPLY CHAINS
AS A RESULT
OF BREXIT

Whilst the Group
manufactures and sells
over 95% of its products
in the UK. ‘No deal’ or
an as yet unspecified deal
may impact upon the
timeliness of imports of
raw materials and exports
of finished goods.

INCREASED
COMPETITION
AND CHANGES
IN CONSUMER
TASTES

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.

• Raw material

purchases planned for
November have been
brought forward to
September. Exports
of finished goods
scheduled to land in
November will be
despatched earlier to
arrive in-market in
October.

• 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 and
customer happiness.

Whilst sterling has fallen,
the Group extends its
currency hedges on a
quarterly basis and is
currently hedged for the
whole of FY20.

Brexit has increased
macro-economic
uncertainty, however
trading in FY19 and since
period-end has remained
in line with the Board’s
expectations.

Whilst the timing and terms
of Brexit remain uncertain,
supply chain contingency
plans are in place and
the Group’s strategy and
risk reviews have been
considering potential Brexit
impacts, mitigations and
opportunities since 2016.

KEY
MANAGEMENT

Loss of key personnel
could impact the Group’s
ability to implement
strategy and the intended
pace of growth.

• 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 enabled the
business to launch share-
based incentives to assist in
retaining key personnel.

Company overviewStrategic reportGovernanceFinancial statements28 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

Governance

ENGAGED ETHICS
‘Our cacao estate in Saint Lucia is where
we first developed our Engaged Ethics
approach to cacao growing, which is now
applied to 100% of our cacao supply’

Doing the right thing:
Corporate Responsibility

Board of Directors & Leadership team

Corporate governance statement

Audit Committee report

Remuneration report

Directors’ report

Statement of Directors’ responsibilities

Company overviewStrategic reportGovernanceFinancial statements30 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

DOING THE RIGHT THING:
CORPORATE SOCIAL RESPONSIBILITY

The Group strives to ensure that its activities positively benefit all stakeholders including
customers, growers, suppliers, employees, shareholders and local communities.

Engaged Ethics is our programme for a kinder approach to our CACAO, OUR PLANET, OUR PEOPLE.

C AC AO

The experience gained by revitalising the cacao sector around our cacao estate in Saint Lucia has shown us that there are a number of
ways to assist in ensuring cacao growing is sustainable:

1
E N G AG E D I R E C T LY
W I T H FA R M E R S A N D
PAY A P R E M I U M

…for cacao grown to
sustainable standards of
stewardship. 100% of the
cacao purchased by Hotel
Chocolat is sourced
in accordance with our
Engaged Ethics standards.

2
H E L P FA R M E R S
I M P ROV E Y I E L D S

3
S U P P O RT LO C A L
CO M M U N I T I E S

4
CO N T I N U O U S
I M P ROV E M E N T

…by providing knowledge,
tools and materials to improve
productivity. Hotel Chocolat
has partnered with a local
NGO, Green Tropic Group,
for over 15 years to support
higher productivity in Ghana.

Hotel Chocolat and the Tasting
Club members have funded
the construction of a health
centre in Osuben, Ghana,
which received certification in
2017 and is now providing care
such as emergency medicine,
midwifery services and
preventative healthcare.

Whilst we are proud that 100%
of our cacao is sourced to our
Engaged Ethics standard we
believe there will always be
ways to further improve. We
are working with University of
Ghana to better understand
where we should prioritise our
next investments to support the
sustainability of cacao growing
communities and independently
assess the impact.

100% of the cacao purchased by Hotel Chocolat is sourced
in accordance with our Engaged Ethics standards.

Seedlings
40,000

free cacao tree seedlings supplied
this year by funded nurseries

Young farmers
52

Trained a further 52 Young
Farmers with 220 trained to date

Training
3 model farms

Educating in best practice to
increase yields, cacao trees now
over a year old with first fruit
expected 2021

Clean Electricity & Water
Solar power

Trialling solar powered street
lights and power for isolated
communities. Funded three new
boreholes including the Osuben
medical centre

P L A N E T

Plastic
At Easter 2019 we launched our
first test of Bagasse, a compostable
alternative to plastic

Recycling
We take and recycle plastic packaging
from any chocolate brand

Planet Pledge
We have committed that 100% of
our packaging will be re-usable or
recyclable by 2021

The Group is committed to being a market leader for sustainable
sourcing, production and consumption, safeguarding the
environment and avoiding the waste of valuable resources.

The Group has set up a Sustainability Committee comprising all
of the Executive Directors plus functional leaders from across
the business. The committee will meet regularly to oversee the
progress of the business against its sustainability goals under
five key themes:

Energy; reducing energy use, reducing CO2 footprint,
and ensuring resilience to climate change impacts.

2 Minimising waste and maximising re-use.

Products and packaging; sustainable sourcing,
production and recycling.

Land and Biodiversity; protecting the environment
and communities.

People; communication and engagement including
suppliers, colleagues and customers.

The committee is working with external experts to benchmark
the current areas of strength and opportunity, to undertake
measurement of carbon footprint, and to set clear KPIs for each
of the five focus areas to track progress.

In the year the Group made progress in a number of areas:

• Introduced new plastic pledge; 100% of our packaging will be

reusable or recyclable by 2021.

• Recycling points in all stores for any brand’s chocolate packaging.

• Energy efficient transport fleet upgrades.

• 100% of electricity derived from renewable sources.

Measurement
of current state
sets priorities

Governance:
ensures drive
and progress

Report progress
against strategy
and action

Sustainability
Action Plan

Mobilise people:
communication
and engagement

Set KPIs &
delivery framework:
What, How, When

Company overviewStrategic reportGovernanceFinancial statements32 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

DOING THE RIGHT THING:
CORPORATE SOCIAL RESPONSIBILITY continued

P E O P L E

C U S TO M E R S

CO M M U N I T I E S

The business is committed to a philosophy of “more cacao, less
sugar” designed to ensure that our products offer a differentiated
and satisfying cacao-rich taste with lower sugar content than many
premium chocolate brands. Our range of chocolate meets Public
Health England’s 2020 target for sugar per gram.

In the year, many teams from across the business took part
in activities to raise money and support local communities,
ranging from sponsored mountain climbs and fancy dress
days, to holding chocolate ‘lock-in’ activities for residents at
Crossreach dementia care.

We work continuously to develop new and improved types. In
FY19 we launched our first ever ‘free from’ chocolate for allergy
sufferers, expanded our ranges suitable for Vegans and have
launched more products containing 100% cacao and 0% sugar.

The success of these initiatives has encouraged us to plan our
first ever company-wide charity week taking place later this year.
Teams from across the business will be encouraged to choose
both a national charity and local projects to support, via a
combination of fundraising activities and company donations.

P E O P L E

E M P LOY E E S

We strongly believe that our team are a key ingredient in the
business and we are undertaking a business-wide programme to
improve communication, to encourage everyone to share their
views, and to feel empowered to make decisions for the good
of the business and our stakeholders. The business regularly
measures employee engagement in every team with a focus on
ensuring that all team members are listened to, and any concerns
addressed with practical action-plans.

We are committed to actively promoting diversity in our team.
By encouraging the greatest possible breadth of experience we
can best meet the diverse needs of our customers. The current
gender composition of our team is as follows:

Headcount by Gender June 2019
Co-founders
Non-executive Directors
Executive Directors
Executives’ direct reports
Line managers
Team members

Female
–
1
1
6
153
911

Male
2
2
2
8
71
373

The Board are committed to ensuring that employees can have
a voice in the boardroom with a regular agenda item to discuss
this. Sophie Tomkins, a Non-executive Director has been given
a special remit to ensure employee views and concerns are fully
represented. Employees have the opportunity to meet in person
with the Board to discuss key issues or alternatively topics can be
presented on their behalf.

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
cacao growing and chocolate making.

Company overviewStrategic reportGovernanceFinancial statements34 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

BOARD OF DIRECTORS & LEADERSHIP TEAM

Experienced, founder led team

Andrew Gerrie (56)
Non-executive Chairman

Sophie Tomkins (50)
Independent
Non-executive Director

Greg Hodder (67)
Independent
Non-executive Director

Angus Thirlwell (56)
Co-founder and
Chief Executive Officer

Appointed date

June 2015

April 2016

May 2017

Co-founded in 1993

Experience, skills and personal qualities

Andrew joined Hotel Chocolat
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 locations
across 49 countries, with sales in
excess of £450m.

Andrew holds a B.Com degree
from Auckland University.

Sophie has considerable public
markets experience gained
through a 17-year career in the
City. Sophie is Non-executive
Director and Chair of the Audit
Committees at CloudCall Group
plc and System1 Group PLC, and
senior Independent Director and
chair of Remuneration committee
at Proactis Holdings PLC.

Sophie qualified as a Chartered
Accountant in 1994 and is a
fellow of the Chartered Institute
for Securities and Investment.

Committee membership

Lead contact for employee
representation in the Boardroom.

Greg was CEO of Charles
Tyrwhitt from 2008 to 2017
and previously CEO of Direct
Wines including Laithwaites and
The Sunday Times Wine Club.
He is currently a Non-executive
Director at Naked Wines
PLC. Greg has considerable
experience of growth through
digital and international retail.

Angus co-founded Hotel
Chocolat 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 Business Growth
Programme and is a committee
member for The Academy of
Chocolate.

Committee membership

Audit Committee

Remuneration Committee

Executive Committee

Chair

Group Board

Peter Harris (64)
Co-founder and
Development Director

Matt Pritchard (45)
Chief Financial Officer

Matt Margereson (48)
Chief Operating Officer

Lysa Hardy (49)
Chief Marketing Officer

Co-founded in 1993

May 2014

2006

September 2018

Peter Harris co-founded Hotel
Chocolat 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 Hotel Chocolat as
Chief Financial Officer in 2014
and is responsible for the finance
function, retail operations 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 joined Hotel Chocolat
in 2006 and is responsible
for product development,
manufacturing, supply chain
and HR.

He has over 20 years of
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.

Lysa joined Hotel Chocolat
in 2018 and is responsible for
marketing, e-commerce and
category management.

She has over 20 years of
experience including CMO
role at Holland & Barrett, Chief
Customer Officer at Joules and a
decade in telecoms subscription
marketing. Lysa is a fellow of the
Marketing Academy.

Company overviewStrategic reportGovernanceFinancial statements36 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CORPORATE GOVERNANCE STATEMENT

“ Good governance supports strategic planning
and sound decision making, and provides
assurance on controls and culture, all of
which drives performance.”

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. The Board
comprises three Non-executive Directors and four Executive Directors. Sophie Tomkins
has no connections with the business and is fully independent. To leverage Greg Hodder’s
considerable experience of launching and growing UK businesses in the US, the Board has
approved him taking on additional mentoring responsibilities relating to the development
of the Group’s new business there. The Board is satisfied that this does not compromise
his independence of thought or judgement and therefore Greg Hodder continues to be
considered by the Board to be fully independent.

The Chairman is responsible for leading the Board, setting its agenda and monitoring its
effectiveness. There is a clear division of responsibility between the Chairman and the
Chief Executive Officer.

G OV E R N A N C E F R A M E WO R K

CUSTOMERS

SUPPLIERS

SHAREHOLDERS

EMPLOYEES

Accountable to

The Board

Responsible for

STRATEGY

PERFORMANCE

GOVERNANCE

CONTROLS

RISK MANAGEMENT

A N I N T RO D U C T I O N
F RO M O U R C H A I R M A N

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. 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.

The Board believes that it complies
with all of the principles of the QCA
Corporate Governance Code for
growing Companies (‘QCA code’).
The corporate governance framework
which the Group operates, including
Board leadership and effectiveness,
Board remuneration, and internal
control is based upon practices which
the Board believes are proportional
to the size, risks, complexity and
operations of the business and
reflective of the Group’s values.

Andrew Gerrie
Non-executive Chairman

B OA R D A N D CO M M I T T E E CO M P O S I T I O N

Executive
Directors

Non-executive
Directors

The Board

The operation of the Board
is documented in a formal
schedule of matters reserved
for its approval, which is
reviewed annually.

Committees

The Board has delegated specific
responsibilities to the Audit and
Remuneration Committees. 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. These terms of reference
are kept under review to ensure they
remain appropriate and reflect any
changes in legislation, regulation
or best practice.

Audit
Committee

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.

Remuneration
Committee

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.

H OW T H E B OA R D O P E R AT E S

B OA R D M E E T I N G S

Non-executive Directors communicate directly with Executive Directors and senior
management between formal Board meetings. The Board met 11 times in the period.
In addition the Board held strategy days in July 2018 and March 2019 specifically to
review growth opportunities and priorities across the medium to longer term.

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 period:

Board

Remuneration

Audit

Andrew Gerrie

Sophie Tomkins

Greg Hodder

Angus Thirlwell

Peter Harris

Matt Pritchard

Matt Margereson

11/11

10/11

11/11

10/11

–

3/3

–

4/4

–

The Board is responsible for the Group’s
strategy and for its overall management.
The strategic report on pages 6 to 27
summarises the Board’s approach to
promote sustainable long-term growth
and value for shareholders. 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.

Company overviewStrategic reportGovernanceFinancial statements38 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CORPORATE GOVERNANCE STATEMENT continued

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, to inform
decision-making, Directors receive
accurate, sufficient 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
and to seek independent advice at the
Group’s expense where appropriate.
The Board reviews its AIM obligations
with its Nominated Advisor annually, and
endeavours to keep up with best practice
governance via seminars, conferences and
training material.

B OA R D CO M M I T T E E S

The Board has delegated specific
responsibilities to the Audit and
Remuneration Committees, details of
which are set out below.

These terms of reference are kept under
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. No new
independent external advice was sought
by the Board or its Committees during
the period.

AU D I T CO M M I T T E E

The Audit Committee is chaired by
Sophie Tomkins and its other members
are Andrew Gerrie and Greg Hodder.
Sophie Tomkins and Greg Hodder are
both considered to be 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 reviews the risk
register to ensure that it is comprehensive
and that appropriate mitigations are in
place. 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.

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.

R E M U N E R AT I O N
CO M M I T T E E

The Remuneration Committee is chaired
by Greg Hodder. 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 46 to
48 contains more detailed information on
the Committee’s role and the Directors’
remuneration and fees.

N O M I N AT I O N S CO M M I T T E E

It is the view of the Board that a separate
Nominations Committee is not required
at present. If 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.

As part of the annual Board evaluation
and strategic review processes, the Board
considered matters relating to Board
composition and succession planning
during the period.

I N T E R N A L CO N T RO L S
& R I S K M A N AG E M E N T

The Board has ultimate responsibility for
the Group’s system of internal control and
for reviewing its effectiveness. Any such
system of internal control can provide
reasonable, but not absolute, assurance
against material misstatement or loss.
However, the Board considers that the
internal controls in place are appropriate
for the size, complexity and risk profile of
the Group.

The principle risks faced by the business
are summarised on pages 26 and 27.

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 agile implementation
whilst mitigating risks;

• Segregation of duties so no individual
can have undue influence or control
over an activity, process or transaction;

B OA R D E X P E R I E N C E

Financial Management

Global business

Leadership & Values

Sales and marketing

Technology & Operations

Retail

• A comprehensive annual budgeting

B OA R D E F F E C T I V E N E S S

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.

The Board conducts annual reviews of
its register of key risks and on a bi-annual
basis seeks independent third party
support to review the risk landscape in
detail, including a consideration of risks,
likelihood, scale of potential impact and
the existence of assurance, mitigation
or appropriate contingencies.

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The Board has undertaken an evaluation
of its effectiveness. Input was obtained
from every Board member on a number
of key topics including:

• The effectiveness of the Board in

setting strategy;

• Confirmation that rigorous and

wide ranging debate of issues was
taking place;

• That decision making was balanced

and objective;

• That the Board was responsive to

new events and new information; and

• That the Board had the appropriate
composition and skill to discharge
its duties.

The Board identified specific actions
including the appointment of an
independent Company Secretary.

The skills and experience of the Board
are set out in their biographical details
on pages 34 and 35. The experience and
knowledge of each of the Directors gives
them the ability to constructively challenge
strategy and to scrutinise performance.
The Board meets regularly with external
experts including the NOMAD to ensure
that it remains abreast of developments
and current best practice.

The Chairman meets individually with each
Director at least once a year to discuss
board and individual effectiveness.

All Directors take part in a thorough
induction process on joining the Board,
tailored to the existing knowledge and
experience of the Director concerned.

Consistent with the Board’s commitment
to active succession planning, a senior
management development programme is
being implemented.

Company overviewStrategic reportGovernanceFinancial statements

40 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CORPORATE GOVERNANCE STATEMENT continued

The Group maintains communication with a wide range of stakeholders
to ensure that their needs, interests and expectations are understood
and reflected within the Group’s strategy.

B U S I N E S S C U LT U R E ,
VA LU E S A N D B E H AV I O U R S

The brand and the business have been
guided from the beginning by the
principles of authenticity, originality
and ethics. This informs every aspect
of business operation and decision
making from the agreement of strategy
to the operational implementation
of the business plan. The business
conducts regular engagement surveys
with all employees and also operates a
number of confidential hotlines to allow
employees to feedback on culture and
behaviours. Sophie Tomkins has taken
the lead on ensuring that all employees
have the opportunity to have their views
represented in the Board room and has
attended business briefings to explain
how this works in practice.

T I M E CO M M I T M E N T S

All Directors recognise the need to
commit sufficient time to fulfil the role.
This requirement is 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

CO N F L I C T S O F I N T E R E S 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. An annual performance
appraisal of Non-executive Directors is
undertaken by the Chairman as part of
the Board evaluation process, at which
time any training or development needs
are addressed. All of the Board attend
business conferences and briefings.

E X T E R N A L A P P O I N T M E N T S

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.

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.

R E L AT I O N S W I T H
S TA K E H O L D E R S

The Group maintains communication
with a wide range of stakeholders
to ensure that their needs, interests
and expectations are understood and
reflected within the Group’s strategy.

Customer feedback is collected from
guests in physical Hotel Chocolat
locations, online reviews and via
social media.

We work directly with cacao growers and
other agricultural producers, and with
organisations that promote their interests
to understand their needs.

We meet with existing and potential
suppliers and visit trade fairs. We also
meet with charities, other activist
groups, academics and specialists to keep
abreast of developments in fields such as
sustainability, recycling and nutrition.

Employee feedback is sought via regular
anonymous surveys, with the opportunity
to discuss topics directly with the Board or
via an intermediary to present topics on
their behalf.

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.

During the year the Board arranged a
capital markets day to update investors
and analysts on the Group’s strategy,
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. In the period the feedback
from shareholders did not give rise to any
material change in business strategy.

Age Distribution

Under 50
29%

50–59
43%

60–69
29%

Average age
55

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
21 November 2019. The Notice
of Annual General Meeting and
the ordinary and special resolutions
to be put to the meeting are included
in the Notice of AGM accompanying
this Annual Report.

Company overviewStrategic reportGovernanceFinancial statements42 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CORPORATE GOVERNANCE STATEMENT continued

The QCA Corporate Governance Code

The Board has adopted the QCA Code. Set out below is how the Board currently complies with the key principles set out in the code.

Governance principles

Compliant

Explanation

Company information

100

Company overviewStrategic reportGovernanceFinancial statements54 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

INDEPENDENT AUDITORS’ REPORT
to the members of Hotel Chocolat Group plc

O P I N I O N

We have audited the financial statements of Hotel Chocolat Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the 52 week period ended 30 June 2019 which comprise the consolidated statement of comprehensive income, the consolidated
statement of financial position, the consolidated statement of cash flow, the consolidated statement of changes in equity, the
company statement of financial position, the company statement of changes in equity and notes to the financial statements, including
a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that
has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 the Financial Reporting Standard applicable in the UK and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June

2019 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.

B A S I S F O R O P I N I O N

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.

CO N C LU S I O N S R E L AT I N G TO G O I N G CO N C E R N

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you were:

• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at
least 12 months from the date when the financial statements are authorised for issue.

K E Y AU D I T M AT T E R S

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How we addressed the Key audit matter in the audit

Valuation of inventory
See accounting policy in Note 2
and inventory Note 18.

As part of calculating inventory
at cost, management include
labour, packaging and overhead
absorption based on a standard
costing model, to calculate the
total cost of an inventory item.

Management are required to
determine the appropriate
deferral of variances based on the
average inventory holding period.

Given the size of the balance
and the judgemental nature of
the calculations in the standard
cost model, there is a risk that
an error could lead to a material
misstatement. Therefore,
inventory is considered a
significant risk and given the
importance of the impact of a
misstatement on key reporting
metrics this is also considered a
key audit matter.

Our audit procedures included:

Raw materials procedures
We selected a sample of raw materials and obtained support for the unit cost. We compared
the unit cost per invoice to the standard cost per period end listing to ensure accuracy and
challenged management on any discrepancies. An extrapolation was performed on any
variances identified.

Finished goods procedures
We selected a sample of finished goods from the period end inventory listing. We have
compared the cost of each sampled item to the standard cost card used by management
to value inventory.

Standard cost variance analysis
We have gained an understanding of the nature of the variances arising between standard
cost and the cash costs of production. We have assessed the accuracy of the information
used by management in the calculation of these variances. We have also assessed the
reasonability of the deferral of variances and performed a sensitivity analysis to stress test
its parameters.

Net realisable value procedures
We considered whether inventory was valued at the lower of cost and net realisable value
by selecting a sample of items and comparing the standard cost to the retail price.

Inventory provision procedures
Provision is made against inventory exceeding levels expected to be required to meet
foreseeable demand within a reasonable period. We challenged the appropriateness of
management’s assumptions and considered evidence to support the validity of assumptions
made by comparing to historic write-off trends and slow moving inventory listings.

Key observations
Nothing came to our attention through our audit testing to suggest that the valuation of
inventory was materially misstated.

O U R A P P L I C AT I O N O F M AT E R I A L I T Y

We consider materiality to be the magnitude by which misstatements, individually or in aggregate, including omissions, could
reasonably influence the economic decisions of users that are made on the basis of the financial statements. We apply the concept
of materiality both in planning and performing our audit, and in evaluating the results of our work. Misstatements below these
levels will not necessarily be evaluated as immaterial as we also take into account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

We determined materiality for the group financial statements as a whole to be £702,000 (2018: £633,000) which represents 5%
of profit before tax.

Performance materiality for the group was set at £526,500 (2018: £475,000) which represents 75% of the above materiality level.

We agreed with the audit committee that we would report to them misstatements identified during our audit above £35,100
(2018: £31,650).

We used profit before tax as a benchmark given the importance of profit as a measure for shareholders in assessing the
performance of the Group.

We determined materiality in respect of the audit of the Parent Company to be £362,000 (2018: £359,000) using a benchmark of
2% of total assets, with performance materiality set at £271,500 (2018: £269,250). For each significant component we allocated a
materiality threshold of 75% of the overall group materiality.

Company overviewStrategic reportGovernanceFinancial statements56 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

INDEPENDENT AUDITORS’ REPORT continued
to the members of Hotel Chocolat Group plc

A N OV E RV I E W O F T H E S CO P E O F O U R AU D I T

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality
which, together with qualitative considerations, help us to determine the nature, timing and extent of our audit procedures on the
individual financial statement areas and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.

The group consists of seven trading entities incorporated in three jurisdictions; the UK, Europe and Rest of World. Statutory audits
are required for the UK entities, and all of the significant components of the group are UK entities, and these are carried out by the
group audit team. No other entities, representing insignificant components have a statutory audit requirement and so procedures
are carried out by the group audit team limited to a number of judgemental areas. The group audit team obtained an understanding
of the internal control environment related to the financial reporting process and assessed the appropriateness, completeness and
accuracy of group journals and other adjustments performed on consolidation.

OT H E R I N F O R M AT I O N

The Directors are responsible for the other information. The other information comprises the information included in the Annual
Report and Accounts, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.

O P I N I O N S 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, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements; and

• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

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

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:

• adequate accounting records have not been kept, 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.

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

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.

AU D I TO R’ S R E S P O N S I B I L I T I E S F O R 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

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

U S E O F O U R R E P O RT

This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Mark RA Edwards (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor
London

24 September 2019

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Company overviewStrategic reportGovernanceFinancial statements
58 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2019

Revenue

Cost of Sales

Administrative expenses

Finance income

Finance expenses

Share of joint venture (loss)/profit

Profit before tax

Tax expense

Profit for the period

Other comprehensive income/(loss):

Derivative financial instruments

Deferred tax charge on derivative financial instruments

Currency translation differences arising from consolidation

Total other comprehensive income/(loss) for the period

Total comprehensive income for the period

Earnings per share – Basic

Earnings per share – Diluted

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

Notes

132,479,543

(45,139,983)

87,339,560

(73,028,333)

14,311,227

68,967

(294,966)

(33,969)

116,331,566

(36,740,859)

79,590,707

(66,360,796)

13,229,911

22,113

(578,760)

35,501

14,051,259

12,708,765

(3,122,486)

10,928,773

(2,729,123)

9,979,642

71,931

16,667

372,795

461,393

11,390,166

9.7p

9.5p

(106,001)

20,561

(168,661)

(254,101)

9,725,541

8.8p

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019

As at
30 June 2019
£

As at
1 July 2018
£

Notes

ASSETS

Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Derivative financial assets
Prepayments
Loan to Hotel Chocolat KK
Investment in JV

Current assets
Derivative financial assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total assets

LIABILITIES
Current liabilities
Trade and other payables
Corporation tax payable
Derivative financial liabilities
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

14
15
16
17
19
20
11

17
18
19
22

17
24

23
17
24
25

26
27
27
27
27
27
27

2,911,586
40,115,095
622,649
–
18,000
2,488,041
8,731
46,164,102

81,299
12,810,049
9,359,766
5,778,205
28,029,319
74,193,421

19,527,743
1,607,069
1,671
16,811
21,153,294

2,757,158
9,106
–
943,627
3,709,891
24,863,185

2,788,152
36,408,775
623,961
68,721
1,643
–
35,501
39,926,753

14,925
12,555,517
7,486,894
235,936
20,293,272
60,220,025

15,545,845
1,328,673
54,691
201,732
17,130,941

2,581,044
–
16,811
879,808
3,477,663
20,608,604

49,330,236

39,611,421

112,838
11,750,056
33,358,932
1,253,355
223,251
6,301
2,625,503
49,330,236

112,838
11,749,487
24,348,409
880,560
223,251
6,301
2,290,575
39,611,421

The financial statements of Hotel Chocolat Group plc, registered number 08612206 were approved by the Board of Directors
and authorised for issue on 24 September 2019. They were signed on its behalf by:

Matt Pritchard

Chief Financial Officer

24 September 2019

Company overviewStrategic reportGovernanceFinancial statements60 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

CONSOLIDATED STATEMENT OF CASH FLOW
For the period ended 30 June 2019

Profit before tax for the period

Adjusted by:

Depreciation of property, plant and equipment

Impairment loss on fixtures and equipment

Amortisation of intangible assets

Net interest expense

Share-based payments

Share of Joint Venture Loss

(Profit)/loss on disposal of property,
plant and equipment and intangible assets

Operating cash flows before movements in working capital

Increase in inventories

Increase in trade and other receivables

Increase 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

– derivative financial liabilities

Cash flows from operating activities

Purchase of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Purchase of intangible assets

Loan to joint venture

Acquisition of joint venture

Cash flows used in investing activities

Dividends paid

Buy back of Chocolate bonds

Sale of shares

Capital element of hire purchase and finance leases repaid

Cash flows (used in)/from 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
30 June 2019
£

52 weeks ended
1 July 2018
£

Notes

14,051,259

12,708,765

4,939,982

4,247,550

–

512,862

225,999

246,262

33,969

44,100

20,054,433

(259,442)

(1,890,866)

4,076,600

21,980,725

40,935

(2,820,395)

–

(110,282)

(180,083)

284,681

509,892

556,647

726,585

–

(88,253)

18,945,867

(2,931,781)

(1,460,333)

277,219

14,830,972

22,113

(2,466,051)

(1,192)

(28,802)

(147,747)

18,910,900

12,209,293

(8,295,817)

(10,645,621)

9,500

(580,795)

(2,460,009)

(7,200)

(11,334,321)

(1,918,250)

–

570

(201,732)

(2,119,412)

5,457,167

235,936

85,102

5,778,205

340,737

(949,229)

–

(11,254,113)

(2,482,432)

(6,505,500)

–

(237,195)

(9,225,127)

(8,269,946)

8,470,178

35,704

235,936

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2019

Share
capital
£

Share
Premium
£

Retained
earnings
£

Translation
reserve
£

Merger
reserve
£

Capital
redemption
reserve
£

Other
reserve
£

Total
£

As at 2 July 2017

112,838 11,749,487 16,851,199

1,049,221

223,251

6,301

1,170,588 31,162,885

Profit for the period

Dividends

Share-based payments

Deferred tax charge on share-
based payments

Other comprehensive income:

Derivative financial instruments

Deferred tax charge on
derivative financial instruments

Currency translation differences
arising from consolidation

–

9,979,642

– (2,482,432)

–

(168,661)

–

9,979,642

– (2,482,432)

726,585

478,842

(106,001)

20,561

–

(168,661)

Equity as at 1 July 2018

112,838 11,749,487 24,348,409

880,560

223,251

6,301

2,290,575 39,611,421

Issue of share capital

Profit for the period

Dividends

Share-based payments

Deferred tax charge on share-
based payments

Other comprehensive income:

Derivative financial instruments

Deferred tax charge on
derivative financial instruments

Currency translation differences
arising from consolidation

–

569

–

– 10,928,773

– (1,918,250)

–

372,795

–

569

– 10,928,773

– (1,918,250)

246,262

71,931

16,667

–

372,795

Equity as at 30 June 2019

112,838 11,750,056 33,358,932

1,253,355

223,251

6,301

2,625,503 49,330,236

Company overviewStrategic reportGovernanceFinancial statements62 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS
For the period ended 30 June 2019

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 21.

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.

The financial statements have been prepared on the historical cost basis, except for the revaluation of derivative financial
instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

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:

IFRS 16 Leases

IFRS 16 ‘Leases’ is a replacement for IAS 17 ‘Leases’ and will be effective for the year ending 28 June 2020
onwards. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases for both the lessee and the lessor. It eliminates the lease classification of leases as either operating leases
or financial leases and introduces a single lease accounting model requiring lessees to recognise a lease liability
reflecting future lease payments and a right-of-use asset for lease contracts.

Relevant leased assets which will be impacted by this new standard include retail property.

The preparations for this standard are substantially complete. The Group intends to adopt the ‘modified
retrospective’ approach whereby for leases previously classified as operating leases the right of use asset
will be measured at carrying amount as if the standard had always been applied, but discounted using the
incremental borrowing rate at the date of initial application. In the period ended 28 June 2020 comparative
information relating to prior years will not be restated.

Impact on the Financial Statements
Statement of Financial Position: Operating leases capitalised at a relevant discount rate to create a ‘Right
of Use’ asset of approximately £53m. A new corresponding lease liability of approximately £57m will be
recognised. The impact of these changes will be a reduction in retained earnings of approximately £3m. The
balance represents amounts already recognised in the financial statements in respect of lease incentives,
prepaid rent and dilapidations.

Statement of Comprehensive Income: Administrative expenses will reduce as rent costs are removed.
Depreciation will increase as the leased assets are depreciated over their useful economic lives. Finance
expenses will increase with an interest charge on the lease liability. The expense in the Income Statement will
be the same over the life of the lease, but the finance charge will be front-loaded as it is recognised using the
effective interest rate method.

Statement of Cash Flow: The presentation of cashflows will be changed, however the total cashflows reported
will not. The operating cash outflows will reduce in line with the reduction of administrative expenses. Cash
flows from financing activities will see a corresponding increase.

There will be no impact to business decisions or operational cash.

2 . ACCO U N T I N G P O L I C I E S CONTINUED

The following standards came into effect for the first time in the period to 30 June 2019:

IFRS 15
Revenue from
Contracts with
Customers

IFRS 15 ‘Revenue from contracts with customers’ is a replacement for IAS 18 ‘Revenues’ and came into
effect for the year ending 30 June 2019 onwards. Revenue in the Group is primarily driven by the sale of goods
to customers, with a single performance obligation of transferring those goods to the customer. That
performance obligation is still considered to be satisfied upon despatch of goods, and as such the adoption
of the standard had had no impact on revenue recognition.

Revenue is recognised in the financial statements when the goods have been despatched or services delivered.
The adoption of the standard has had no impact on existing revenue policies.

IFRS 9 Financial
Instruments

IFRS 9 ‘Financial Instruments’ is a replacement for IAS 39 ‘Financial Instruments’ and came into effect for the
year ending 30 June 2019 onwards. IFRS 9 introduces a single classiﬁcation and subsequent measurement
model for ﬁnancial assets and ﬁnancial liabilities, a new model for recognising provisions based on expected
credit losses and simpliﬁed hedge accounting.

The Group applies the IFRS 9 simpliﬁed approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis,
trade receivables are grouped based on similar credit risk and ageing.

Expected loss rates for CTC member debt are based on historical credit losses experienced over the four
years prior to the period end. Expected loss rates for the recently expanded corporate/wholesale business
are based on historical credit losses experienced over the last 12 months to the period end.

There are no expected losses for retail sales as consideration is received at the point of sale.

This is the first time that the Group has extended a loan facility to a joint venture there is no other historical
information on which to base an expected credit loss. The Group applies the IFRS 9 general approach to
measuring expected credit losses on the joint venture loan. Future expected cashflows of the loan are
discounted to identify any potential impairment.

The expected credit losses in Hotel Chocolat Group are not material.

IFRS 9 introduced changes to hedge accounting, establishing new criteria which are less complex than that under
IAS 39. The Group only holds derivatives for hedging purposes and all are designated as such. Essentially there is
no difference in the treatment of the simple cashflow that the Group undertakes between IAS 39 and IFRS 9.

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 before 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 21
excluding Hotel Chocolat (St Lucia) Holdings Limited. 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.

Company overviewStrategic reportGovernanceFinancial statements64 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 . ACCO U N T I N G P O L I C I E S CONTINUED

Going concern

The Directors have prepared a cash flow forecast covering a period extending beyond 18 months from the financial information
presented as at 30 June 2019.

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.

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 and services is recognised when the goods have been despatched or services delivered.
In physical retail locations revenue is recognised at the point goods are transferred to the customer. For online, partners and B2B
transactions revenue is recognised on despatch of goods. For Cacao estate and hotel revenue is recognised over the duration of
the guests stay. 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, but before finance income or expenses.

Foreign currency translation

The Group’s consolidated financial information is presented in sterling, which is also the parent company’s functional currency.

(i) 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.

(ii) 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.

2 . ACCO U N T I N G P O L I C I E S CONTINUED

Employee benefits
(i) 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.

(ii) 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.

Share options are forfeited when an employee ceases to be employed by the Group unless determined to be a ‘Good Leaver’.
A ‘Good Leaver’ is a participant who ceases employment by reason of death, injury, ill-health or disability.

The Company has discretion to recover the employer’s National Insurance liability from the employee. For the 2016 LTIP the
company has chosen not to, and the liability has been accrued.

Leases
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.

Company overviewStrategic reportGovernanceFinancial statements66 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 . ACCO U N T I N G P O L I C I E S CONTINUED

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.

Management estimates that the useful life of assets is as follows:

Leasehold improvements
Plant and machinery
Fixtures, fittings, equipment, and hardware
Freehold property

– Over the remaining lease term
– 5 to 15 years on a straight line basis
– 5 to 10 years on a straight line basis
– 50 years on a straight line basis

Land held by the Group is not depreciated. 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.

Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets
commences once the assets are ready for their intended use.

Intangible assets

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.

The cost of development and/or implementation of other software utilised by the Group is amortised over the useful economic life
of the software.

Management estimates that the useful life of assets is as follows:

Software
Website development costs

Loan to joint venture

– 3 to 10 years on a straight line basis
– 3 to 5 years on a straight line basis

The loan to a joint venture was initially measured at fair value upon recognition. The loan has subsequently been classified under
IFRS 9 as an amortised cost asset.

The Group applies the IFRS 9 general approach to measuring expected credit losses on the joint venture loan, on the basis of
possible situations and developments that may lead to the joint venture defaulting within a period of 12 months. However, if the
Group believes that significant change has occurred in the credit risk of the joint venture, expected credit losses are reassessed over
the lifetime of the loan.

Relevant information that is accessible without undue cost or effort is used to determine (twice a year) whether the credit risk
has increased significantly and to measure expected credit losses. A significant increase in the risk is deemed to have occurred if
performance of the joint venture has fallen significantly below expectations.

2 . ACCO U N T I N G P O L I C I E S CONTINUED

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.

Interest in other entities

The Group’s joint ventures are entities over which the Group shares joint control and has an interest in the net assets of the entity.
The Group applies equity accounting for joint ventures.

Impairment

Impairment of loans and receivables (including trade receivables) follows a two stage process:

1. Separate identification of specific poorly performing loans and receivables and appropriate impairment;

2. For the remaining loans and receivables an ‘expected loss’ model calculates (on a discounted basis) the expected losses using

year-end balances and the probability of a loss based on historic figures.

(i) Specific 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.

(ii) Expected losses on financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision
for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit
risk and ageing.

Expected loss rates for CTC member debt are based on historical credit losses experienced over the four years prior to the period
end. Expected loss rates for the recently expanded corporate/wholesale business are based on historical credit losses experienced over
the last 12 months to the period end. There are no expected losses for retail sales as consideration is received at the point of sale.

This is the first time that the Group has extended a loan facility to a joint venture there is no other historical information on which
to base an expected credit loss. The Group applies the IFRS 9 general approach to measuring expected credit losses on the joint
venture loan. Impairment of the loan has been calculated by calculating the discounted value of future expected cashflows of this
loan back to current values.

Company overviewStrategic reportGovernanceFinancial statements68 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 . ACCO U N T I N G P O L I C I E S CONTINUED
(iii) Impairment of non-financial assets
Impairment tests on goodwill are undertaken at each reporting period. The carrying values of both tangible and 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.

Operating segments

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.

The Board considers that the Group’s activity constitutes one operating and one reporting segment, as defined under IFRS 8.

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.

2 . ACCO U N T I N G P O L I C I E S CONTINUED

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.

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 boxes 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 these bonds was recognised as a liability. Each year, the cost value of the chocolates is recognised as
an interest expense.

For the bond with a return paid by the way of a Hotel Chocolat gift card which is redeemable for any of Hotel Chocolat’s goods or
services, there is a fixed rate of interest. At inception, the net cash proceeds received for these bonds was recognised as a liability.
Each year the fixed interest rate paid is recognised as an interest expense.

The appropriate treatment in accordance with IFRS, would be to allocate a portion of the consideration received at date of bond
issuance to deferred revenue, recognising revenue and cost of sales when the chocolate is delivered, and initially recognise the
remaining balance as a financial liability at its fair value (i.e. at a discount to its par value given that no cash interest is paid). As with
other financial liabilities measured at amortised cost, the effective interest rate would be calculated on this latter component and
an interest expense recognised as it accretes over time up to its par value and the bond is redeemed.

The difference between this treatment and the Group’s simplified approach has been assessed and is not material.

During the prior period, the Group repaid in full all outstanding ‘Chocolate bonds’ which had been issued in 2010 and 2014.

Financial instruments

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

On initial recognition, financial assets are classified as either fair value through profit or loss, amortised cost or fair value through
other comprehensive income. The classification depends on the purpose for which the financial assets were acquired.

Fair value through profit or loss assets comprise in the money derivatives. They are carried in the Consolidated Statement of
Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income.
There are no other assets classified as fair value through profit or loss.

Amortised cost assets are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market.
They arise principally through the provision of services to customers (eg trade receivables), and through the loan to a joint venture. The
Group’s assets at amortised cost comprise trade and other receivables, loan to joint venture and cash and cash equivalents including
cash held at bank.

The Group applies the simplified approach under IFRS 9 for measuring expected credit losses using a lifetime expected credit loss
provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on
similar credit risk and ageing. Expected loss rates are based on historical credit losses experienced and are then adjusted for current
and forward looking information on factors affecting the Group’s customers.

The Group applies the general approach under IFRS 9 for measuring expected credit losses for the joint venture loan. There is little
historical information on which to base an expected credit loss as this is the first time that the Group has extended a loan facility to
a joint venture. The expected credit losses are based on current and forward looking information affecting the joint venture.

Company overviewStrategic reportGovernanceFinancial statements70 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 . ACCO U N T I N G P O L I C I E S CONTINUED

Financial liabilities

Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the
financial instrument.

On initial recognition, financial liabilities are classified as either fair value through profit or loss, or other financial liabilities

Fair value through profit or loss liabilities comprise out of the money derivatives. They are carried in the Consolidated Statement
of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income.
There are no other liabilities classified as fair value through profit or loss.

Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured
at amortised cost using the effective interest method.

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 when the following criteria are met:

• The hedging instrument is measured at fair value through profit or loss and is with an external party to the Group

• The hedged items are reliably measurable

• The items are managed as a group for risk management purposes

• For cash flow hedges the foreign currency and the reporting period, nature and volume of forecast transactions expecting

to affect profit or loss is specified

• At the inception of hedge there is formal designation and documentation of the hedging relationship, the Group’s risk

management objective and strategy for undertaking the hedge, the hedged item and hedging instrument, and how the
hedge effectiveness will be assessed

• An economic relationship exists between the hedged item and the hedging instrument

• Credit risk does not dominate changes in value

• The hedge ratio is the same for both the hedging relationship and the quantity of the hedged item actually hedged and

the quantity of the hedging instrument used to hedge it

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 the hedging reserve, within 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 hedging 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 hedging 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 within share premium. 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 which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are
discussed below:

• Useful lives of depreciable assets

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. During the period under review management re-assessed the useful
economic lives of plant and machinery at the Huntingdon manufacturing site. As a result of this review some assets have had
their useful economic lives extended and depreciation has reduced by £176,709. Actual useful lives however, may vary due to
unforeseen events.

Company overviewStrategic reportGovernanceFinancial statements72 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

4 . R E V E N U E

Sale of goods and services
Total revenue

Segmental analysis

52 weeks ended
30 June 2019
£
132,479,543
132,479,543

52 weeks ended
1 July 2018
£
116,331,566
116,331,566

The Group operates in five primary revenue channels. The Board of Directors monitors revenue on this basis.

Revenue for each of the channels is as follows:

Revenue by channel
UK

Physical
Digital
Partners & B2B

International
Cacao estate & hotel
Total revenue

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

89,191,751
25,433,629
13,113,986
2,711,060
2,029,117
132,479,543

77,556,475
23,556,922
11,064,022
2,316,328
1,837,819
116,331,566

Below this level the Group is an integrated operation and as such the Board considers the Groups activity constitutes one operating
and one reporting segment.

Revenue by geographical areas is as follows:

Revenue by destination of sale
United Kingdom
Europe
Rest of World
Total revenue

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

127,739,366
1,674,180
3,065,997
132,479,543

112,177,419
2,316,328
1,837,819
116,331,566

Non-current assets are held in the United Kingdom, Ireland, the United States and St Lucia.

Non-current assets for each of the countries is as follows:

Non-current assets
United Kingdom
Ireland
United States
St Lucia
Total non-current assets

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

33,355,962
660,758
1,146,432
11,000,950
46,164,102

29,226,984
385,569
-
10,314,200
39,926,753

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):

Staff cost (see Note 7)

Depreciation of property, plant and equipment (see Note 15)

Impairment of property, plant and equipment (see Note 15)

Amortisation of intangible assets (see Note 14)

Loss/(profit) on disposal of property, plant and equipment and intangible assets

Operating leases:

– Property

– Plant and equipment

Exchange differences

Bad debt expense

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:

Audit fees

Audit related assurance services

Taxation compliance services

Other taxation advisory services

Non-audit fees

7. S TA F F CO S T S

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

35,840,518

4,939,982

–

512,862

44,100

30,658,433

4,247,550

284,681

509,892

(88,253)

11,516,556

10,582,822

225,337

(10,507)

47,527

148,949

106,760

57,940

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

137,500

115,000

12,500

20,042

12,376

44,918

10,000

25,652

17,688

53,340

The average number of employees (including Directors) during the period was made up as follows:

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
30 June 2019

52 weeks ended
1 July 2018

244

1,010

1,254

242

1,006

1,248

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

31,784,738

871,598

2,672,613

511,569

35,840,518

27,433,753

726,585

2,209,489

288,606

30,658,433

Share-based payments includes £626,457 of employers national insurance for 2016 LTIP (1 July 2018: nil).

Company overviewStrategic reportGovernanceFinancial statements74 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

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 includes all members of the executive committee of the Group and a statutory director of the St Lucia
subsidiaries. The number of key management personnel has increased to nine (1 July 2018: eight). Emoluments and benefits include:

Short-term employee benefits

Share-based payments

Social security costs

Post-employment benefits

Total

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

1,495,022

544,152

186,479

29,204

2,254,857

1,114,577

344,984

185,258

17,000

1,661,819

Further information about the remuneration of individual Directors, including the highest paid Director, is provided in the
Remuneration report on pages 46 to 48.

9. S H A R E - B A S E D PAY M E N T S

The Hotel Chocolat Group plc Long-Term Incentive Plan

Under the Hotel Chocolat Group plc 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 Group, three financial years subsequent to the date of the
award. These shares vest after the delivery of the audited net profit figure for the relevant financial year 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:

52 weeks ended 30 June 2019

52 weeks ended 1 July 2018

Number of
share options

Weighted average
exercise price
£

Outstanding at beginning of the period

3,657,000

Granted during the period

Exercised during the period

Forfeited during the period

Outstanding at the end of the period

–

(43,000)

3,614,000

Exercisable at the end of the period

–

1.82

–

2.32

1.81

–

Number of
share options

3,692,000

–

(35,000)

3,657,000

–

Weighted average
exercise price
£

1.83

–

2.92

1.82

–

The awards outstanding at 30 June 2019 have a weighted average remaining contractual life of 0.48 years (1 July 2018: 1.48 years), a
weighted average exercise price of £1.81 (1 July 2018: £1.82) and a range of exercise prices between £1.48 and £2.92.

The Group recognised total expenses related to the above equity-settled share-based payment transactions in the form of options
during the period ended 30 June 2019 of £38,462 (1 July 2018: £559,149).

There were no options granted during the period ended 30 June 2019 (1 July 2018: aggregate fair value of options granted £nil).

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.

9. S H A R E - B A S E D PAY M E N T S CONTINUED

The Hotel Chocolat Group plc Save As You Earn Plan

Under the Hotel Chocolat Group plc Save As You Earn Plan, all employees of the Group who have been employed for a minimum
period set by the Remuneration Committee are eligible to join. In order to participate in the scheme, employees must make a
regular monthly contribution up to an agreed maximum, for a three-year period, after which time employees can utilise the lump
sum to purchase Ordinary Shares in the Group, at a pre-agreed price.

The option to purchase shares is 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:

52 weeks ended 30 June 2019

52 weeks ended 1 July 2018

Number of
share options

Weighted average
exercise price
£

Number of
share options

Weighted average
exercise price
£

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

625,137

102,403

(385)

(55,698)

671,457

–

1.68

2.56

1.48

2.09

1.78

–

553,165

136,863

–

(64,891)

625,137

–

1.48

2.47

–

1.65

1.68

–

The awards outstanding at the end of 30 June 2019 have a weighted average remaining contractual life of 0.71 years (1 July 2018:
1.45 years) and an exercise price of £1.78 (1 July 2018: £1.68).

The Group recognised total expenses related to the above equity-settled share-based payment transactions in the form of the
employee share plan during the period ended 30 June 2019 of £151,081 (1 July 2018: £167,436).

The aggregate of the fair value of these shares granted during the period ended 30 June 2019 was £84,403 (1 July 2018: £170,805).

The fair values were calculated using a Black Scholes model. The inputs used for fair valuing awards granted during the period were
as follows:

Weighted average share price (£)

Exercise price (£)

Expected volatility (%)

Option life (years)

Risk free interest rate (%)

52 weeks ended
30 June 2019

52 weeks ended
1 July 2018

2.56

38.0%

3.5

0.95%

2.47

32.0%

3.5

0.6%

For the schemes which vest in 2019 and 2020 there was an absence of any historical volatility data for Hotel Chocolat Group plc,
therefore the expected volatility was determined by reviewing the volatility of the share price of similar entities which are currently
traded on AIM. For the scheme which vests in 2021 volatility data was available for Hotel Chocolat Group plc.

Share-based bonus entitlement

The Group recognised total expense of £56,719 in relation to a share-based bonus for an employee (1 July 2018: nil). The fair value
of shares was $75,000.

Company overviewStrategic reportGovernanceFinancial statements76 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

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

Finance income

Interest on bank borrowings

Unrealised interest on derivative financial instruments

Realised interest on derivative financial liabilities

Finance leases and hire purchase contracts

Finance charges on Chocolate bonds

Finance expenses

11. I N V E S T M E N T S I N J O I N T V E N T U R E S

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

28,032

40,935

68,967

78,947

35,828

180,083

108

–

294,966

–

22,113

92,373

121

147,747

1,192

337,327

578,760

The Group has an interest in joint venture Rabot 1745 Limited, a separate company incorporated and operating in the United Kingdom.

Ownership has changed as follows:

1 July 2017 to 18 August 2017
19 August 2017 to 13 February 2019
14 February 2019 to 30 June 2019

30.0%
34.5%
32.0%

The Group recognised a loss from its share in this joint venture of £26,769 (1 July 2018: profit of £35,501).

Detail of Rabot 1745 Limited are as follows:

Country of Incorporation:
Registered address:
Principal Activity:

England.
2nd Floor Heathmans House, 19 Heathmans Road, London, SW6 4TJ.
Sale of beauty products.

Summary financial information for Rabot 1745 Limited is as follows:

Current assets

Current liabilities

The following amounts have been included in the amounts above

Cash and cash equivalents

Revenue

Total comprehensive loss

As at
30 June 2019
£

As at
30 June 2018
£

414,035

(379,132)

27,584

379,091

(82,138)

298,794

(71,565)

120,217

380,319

131,014

The summarised financial information is not the Group’s share but the total results of Rabot 1745 Ltd.

11. I N V E S T M E N T S I N J O I N T V E N T U R E S C O N T I N U E D

During the period ended 30 June 2019 the Group acquired a 20% interest in joint venture Hotel Chocolat KK, a separate company
incorporated and operating in Japan for £7,200.

The Group recognised a loss from its share in this joint venture of £7,200.

Detail of Hotel Chocolat KK are as follows:

Country of Incorporation:
Registered address:
Principal Activity:

Japan.
MG Meguro Ekimae 2-15-19, Kamiosaki, Shinagawa-ku, Tokyo 141-0021
Sale of chocolate.

Summary financial information for Hotel Chocolat KK can be found in Note 20.

12 . 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 previous periods

Origination and reversal of timing differences

Total tax expense

Factors affecting current tax charge:

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

3,122,556

(7,424)

(10,675)

3,104,457

407

17,622

3,122,486

2,695,564

(85,126)

29,406

2,639,844

10,273

79,006

2,729,123

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 year multiplied by the standard rate of corporation tax
Effects of:
Expenses not deductible for tax purposes
Permanent depreciation
Adjustment in respect of prior years
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
Overseas tax
Tax expense

52 weeks ended
30 June 2019
£
14,051,259
19.00%
2,669,739

52 weeks ended
1 July 2018
£
12,708,765
19.00%
2,414,665

29,557
281,245
(7,016)
(31,558)
18,416
161,537
566
3,122,486

68,077
246,908
(74,853)
(9,105)
2,499
45,197
35,735
2,729,123

Company overviewStrategic reportGovernanceFinancial statements78 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

12 . TA X AT I O N C O N T I N U E D

The Group’s effective tax rate for the period ended 30 June 2019 was 22.2% (1 July 2018: 21.5%). The effective rate is an
amalgamation of UK and European rates for the periods reported. At 30 June 2019 the Group has tax losses to carry forward
against future profits of the Irish branch of £297,000 (1 July 2018: £103,000). The tax value of such losses amounted to
approximately £37,000 (1 July 2018: £13,000), have no expiry date and have been recognised as a deferred tax asset.

13 . 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
30 June 2019
£

52 weeks ended
1 July 2018
£

10,928,773

9,979,642

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 share in issue for the period – basic

112,838,191

112,837,828

52 weeks ended
30 June 2019

52 weeks ended
1 July 2018

Effect of dilutive potential shares:

Share-based payments – Hotel Chocolat Group plc Save as You Earn Plan

Share-based payments – Long Term Incentive Plan 2016

Weighted average number of shares in issue used in the
calculation of earnings per share (number) – Diluted

Earnings per share (pence) – Basic

Earnings per share (pence) – Diluted

271,405

1,617,021

244,987

–

114,726,617

113,082,815

9.7

9.5

8.8

As at 30 June 2019, the total number of potentially dilutive shares issued under the Hotel Chocolat Group plc Long-Term Incentive
Plan was 830,000 (1 July 2018: 3,657,000). Due to the nature of the options granted under this scheme, they are considered
contingently issuable shares and therefore have no dilutive effect.

For further information on the movements in the share capital, please refer to Note 26.

14 . 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))

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

945,004

1,966,582

2,911,586

934,918

1,853,234

2,788,152

14 . I N TA N G I B L E A S S E T S C O N T I N U E D

(a) Goodwill arising on consolidation

At beginning of period

Translation differences

At end of period

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

934,918

10,086

945,004

938,408

(3,490)

934,918

The goodwill figure has been derived from two separate corporate transactions; the first for £683,534, for the corporate business
and the second, for £251,384, for the acquisition of Hotel Chocolat Estates Limited, St Lucia. The Group has estimated the value
in use of these businesses and their respective cash generating units based on a discounted cashflow model which adjusts for risks
associated with the assets. The discount rate applied is a pre-tax rate of 10%.

The forecasts for the corporate business are based over a 5-year projection period, use past experience and apply an annual growth
rate of 2%. The key assumptions used in the discounting cashflow were the sales and EBITDA figures (based on board approved
plans), the future growth rate and the discount rate. Management consider that reasonably possible changes in assumptions would
be an increase in the discount rate of 1% point or a reduction in the growth rate of 1% point. As an indication of sensitivity, when
applied to the value in use calculation a 1% point increase in discount rate, 1% point reduction in growth rate or a 10% decrease in
sales or EBITDA, would not have resulted in any material impairment of goodwill in the year.

(b) Computer software and website costs

Cost:

At beginning of period

Additions

Exchange difference

At end of period

Amortisation:

At beginning of period

Amortisation charge

Exchange difference

At end of period

Net book value

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

2,957,815

625,289

1,005

3,584,109

1,104,581

512,862

1,617,527

1,994,322

963,493

–

2,957,815

594,689

509,892

–

1,104,581

1,966,582

1,853,234

Included in computer software is £569,111 relating to finance system software which has a remaining useful economic life of nine years.

Company overviewStrategic reportGovernanceFinancial statements80 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

15 . P RO P E RT Y, P L A N T A N D E Q U I P M E N T

Freehold
property
£

Leasehold
improvements
£

Furniture
& fittings,
equipment
& hardware
£

Plant &
machinery
£

Total
£

12,588,855

734,999

606,892

(236,084)

(122,296)

–

28,418,804

6,735,380

(259,713)

(4,029)

16,319,351

2,576,577

–

58,062,009

9,918,849

(495,797)

(126,325)

12,837,367

734,999

34,890,442

18,895,928

67,358,736

567,231

156,847

–

607

733,256

950

–

15,796,562

2,918,523

(151,603)

284,681

(95,701)

9,567,378

1,171,230

–

26,664,427

4,247,550

(151,603)

284,681

(95,094)

724,685

734,206

18,752,462

10,738,608

30,949,961

12,112,682

793

16,137,980

8,157,320

36,408,775

12,837,367

734,999

34,890,442

18,895,928

67,358,736

–

1,589,584

(68,193)

416,127

–

(743,041)

4,726,534

(2,727,832)

38,309

743,041

1,946,508

(41,292)

–

8,262,626

(2,837,317)

454,436

14,774,885

734,999

36,184,412

21,544,185

73,238,481

724,685

–

157,518

(68,193)

–

1,632

815,642

734,206

18,752,462

10,738,608

30,949,961

–

793

–

160,159

3,625,732

(2,709,079)

–

15,528

(160,159)

1,155,939

(6,445)

–

4,939,982

(2,783,717)

–

17,160

734,999

19,844,802

11,727,943

33,123,386

13,959,243

–

16,339,610

9,816,242

40,115,095

52 weeks ended 1 July 2018

Cost:

As at 2 July 2017

Additions

Disposals

Translation differences

As at 1 July 2018

Accumulated depreciation:

As at 2 July 2017

Depreciation charge

Disposal

Impairment

Translation differences

As at 1 July 2018

Net book value

As at 1 July 2018

52 weeks ended 30 June 2019

Cost:

As at 1 July 2018

Reclassifications

Additions

Disposals

Translation differences

As at 30 June 2019

Accumulated depreciation:

As at 1 July 2018

Reclassifications

Depreciation charge

Disposal

Impairment

Translation differences

As at 30 June 2019

Net book value

As at 30 June 2019

As at 30 June 2019, the net book value of freehold property includes land of £2,930,823 (1 July 2018: £2,817,709), which is
not depreciated.

Included above are assets held under finance leases and hire purchase agreements. As at 30 June 2019, the net book value of
such assets within computer software and hardware is £274,547 (1 July 2018: £395,586).

15 . P RO P E RT Y, P L A N T A N D E Q U I P M E N T C O N T I N U E D

During the period, assets were re-classified to more accurately represent their asset class.

Included in Freehold Property is £3,767,475 of assets under construction (1 July 2018: £2,302,203).

Included in Furniture & fittings, equipment & hardware is £340,120 of assets under construction (1 July 2018: £1,129,774).

Included in Plant & machinery is £2,137,056 of assets under construction (1 July 2018: £2,294,675).

16 . D E F E R R E D I N CO M E TA X A S S E T A N D L I A B I L I T Y

Deferred taxation asset

Reconciliation of deferred tax balances:

Balance at beginning of period

Deferred tax charge for the period through income statement

Deferred tax charge for the period through other comprehensive income

Deferred tax charge for the period through Statement of Changes in Equity

Balance at end of period

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

622,649

623,961

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

623,961

(18,047)

16,667

622,649

213,819

(89,261)

20,561

478,842

623,961

The provision for deferred taxation consists of the tax effect of timing differences in respect of:

Fixed asset differences

Short-term differences

Derivative financial instruments

Share-based payments

Unused trade losses

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

(742,509)

252,464

(13,179)

1,088,705

37,168

622,649

(533,939)

121,272

(29,846)

1,053,580

12,894

623,961

At 30 June 2019, the Group had £221,000 of unrecognised deferred tax assets (1 July 2018: £64,000).

Deferred tax is calculated using the rate that is expected to be in force on the date the temporary differences are expected to
reverse. For temporary differences expected to reverse in the 52 week period ended 28 June 2020 a rate of 18.5% has been used.
For any remaining temporary differences expected to reverse after 28 June 2020 a rate of 17.0% has been used.

Company overviewStrategic reportGovernanceFinancial statements82 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

17. D E R I VAT I V E F I N A N C I A L I N S T RU M E N T S

Derivative financial assets:
Current
Foreign currency forward contracts

Non-current
Foreign currency forward contracts

Derivative financial liabilities:
Current
Foreign currency forward contracts

Non-current
Foreign currency forward contracts

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

81,299
81,299

–
–

1,671
1,671

9,106
9,106

14,925
14,925

68,721
68,721

54,691
54,691

–
–

All derivatives held by the Group are designated as hedging instruments. The Group has elected to adopt the hedge accounting
requirements of IFRS 9 Financial Instruments. The Group enters hedge relationships where the critical terms of the hedging
instrument and the hedged item match, therefore, for the prospective assessment of effectiveness a qualitative assessment is
performed. Hedge effectiveness is determined at the origination of the hedging relationship. Quantitative effectiveness tests are
performed at each period end to determine the continued effectiveness of the relationship. There are no forecast transactions for
which hedge accounting had previously been used, but which are no longer expected to occur.

The fair value of the derivative financial assets and 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, within other reserves in
equity as at 30 June 2019, 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 assets in the Consolidated Statement of
Financial Position.

The gross contractual cash flows for the forward contracts as at 30 June 2019 was £14,309,722 (1 July 2018 £17,446,374). The
movement in the fair value on forward contracts in the period of £71,931 profit (1 July 2018: £106,001 loss) has been included within
other comprehensive income in the Consolidated Statement of Comprehensive Income.

18 . I N V E N TO R I E S

Raw materials

Finished goods

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

2,674,910

10,135,139

12,810,049

3,592,960

8,962,557

12,555,517

Total inventory recognised as an expense in the Statement of Comprehensive Income during the period was £44,573,997 (1 July
2018: £36,341,318).

19. 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

Non-current

Prepayments

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

918,306

384,200

8,057,260

9,359,766

18,000

1,053,758

419,544

6,013,592

7,486,894

1,643

2 0 . LOA N TO H OT E L C H O CO L AT K K

During the period Hotel Chocolat signed a loan agreement with Hotel Chocolat KK. The loan is denominated in sterling and interest
is payable on a quarterly basis. Hotel Chocolat KK first drew down on the loan in July 2018 and during the period made further
drawdowns bringing the total loan balance including interest to £2,488,041 at 30 June 2019. The loan facility has been extended to
Hotel Chocolat KK from July 2018 to December 2023.

Interest is charged on a commercial basis and accrues quarterly.

Summarised financial information for Hotel Chocolat KK is set out below.

Current assets

Non-current assets

Current liabilities

Non-current liabilities

The following amounts have been included in the amounts above

Cash and cash equivalents

Revenue

Total comprehensive loss

The following amounts have been included in the amounts above

Depreciation and amortisation

Interest income

Interest expense

Income tax

The summarised financial information is not the Group’s share but the total results of Hotel Chocolat KK.

As at
30 June 2019
£

905,972

962,567

(469,985)

(2,515,371)

199,738

1,435,419

(1,068,674)

(97,948)

(27,648)

824

Company overviewStrategic reportGovernanceFinancial statements84 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

21. 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 30 June 2019 are as follows:

Name

Direct Holding

HOTC Limited

Hotel Chocolat Limited

The Chocolate Tasting Club plc

Hotel Chocolat UK Holdings Ltd

HC International Limited

Hotel Chocolat USA Inc

Principal activities

Holding Company

Manufacturer and
Distributer of chocolates

Chocolate Retailer

Holding Company

Hotel Chocolat (St Lucia) Holdings Limited Holding Company

Indirect Holdings

Hotel Chocolat Retail Limited

Hotel Chocolat Europe Limited

Hotel Chocolat EU Retail Limited

Chocolate Retailer
and Restauranteur

Chocolate Retailer

Hotel Chocolat Corporate Limited

Dormant

Country of
business /
incorporation

England & Wales1

Malta2

USA3

St Lucia4

England & Wales1

HCIP Limited

CTC Distribution GmbH

Chocolate Tasting Club Inc

Hotel Chocolat Inc

HCLEX Inc

HCGSP Inc

HC Union Inc

Trademark Holder

Malta2

Chocolate Distributer

Switzerland5

Chocolate Distributer

Chocolate Retailer

Property Holding Company

USA3

Hotel Chocolat Estates Limited

Hotel & Cocoa Plantation

St Lucia6

Registered addresses:
1 Mint House, Newark Close, Royston, Herfordshire, SG8 5HL, United Kingdom.
2 Suite 3, Tower Business Centre, Tower Street, Swatar, BKR4013, Malta
3 c/o Ruberto, Israel & Weiner, PC, 7th Floor, 255 State Street, Boston, MA 02109, USA
4 Foster Capital Inc, Robin Kelton Building, Choc Bay, Castries, St Lucia
5 Bahnhofstrasse 23, 6301 Zug, Switzerland
6 #20 Micoud Street, Castries, St Lucia

Proportion
of ordinary
shares
directly held
by parent

Proportion
of ordinary
shares held by
the Group

100%

Country of
business /
incorporation

Registered
Number

Proportion
of ordinary
shares held by
the Group

England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1
England & Wales1

05131765
07087702
06841292
07648840
07256434
08497588
08450491
07273442
06943897
06969589
06974431
07330700
08745825
08745828
07693373
06932089
07538281
06966865
07716562
06915444
07883740
07330699
07398952
06944026
08208760
06932093
07649613
07910349
06931016
07792376
07367105
06916365
07273951
08450794
06916337
07289903
08745773
06944023
07289847
08022899
08458654
06481305

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%

21. 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

Name
Indirect Holdings – exempt from audit*
Hotel Chocolat Stores Limited*
Rabot Estate UK Limited*
Almondhill Properties Limited*
Apricothill Properties Limited*
Applehill 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*
Gingerhill Properties Limited*
Grapehill Properties Limited*
Groundnuthill Properties Limited*
Guavahill Properties Limited*
Hazelnuthill Properties Limited*
Hotel Chocolat DK Limited*
Lemonhill Properties Limited*
Limehill Properties Limited*
Macadamiahill Properties Limited*
Mandarinhill Properties Limited*
Mangohill Properties Limited*
Melonhill Properties Limited*
Olivehill Properties Limited*
Orangehill Properties Limited*
Papayahill Properties Limited*
Peachhill Properties Limited*
Peanuthill Properties Limited*
Pearhill Properties Limited*
Pearmainhill Properties Limited*
Pecanhill Properties Limited*
Pinenuthill Properties Limited*
Pippinhill Properties Limited*
Plumhill Properties Limited*
Russethill Properties Limited*
Satsumahill Properties Limited*
Sloehill Properties Limited*
Walnuthill Properties Limited*

Principal activities

Chocolate Distributor
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company
Property Holding Company

Hotel Chocolat Group plc has issued a parental guarantee exempting the company from the requirements of the Companies Act 2006 related to the audit of individual accounts by virtue of
s479A of the Act.

Company overviewStrategic reportGovernanceFinancial statements86 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 2 . 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

The Group has an overdraft facility. The interest rate is charged at 1.25% over base rate.

2 3 . 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

24 . B O R ROW I N G S

Current

Finance and lease hire purchase liabilities

Unamortised costs of issue

Total current borrowings

Non-current

Finance and lease hire purchase liabilities

Total non-current borrowings

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

5,778,205

235,936

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

7,848,496

5,292,888

2,082,303

4,304,056

19,527,743

2,757,158

6,800,747

2,574,971

761,544

5,408,583

15,545,845

2,581,044

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

16,811

–

16,811

–

201,732

–

201,732

16,811

Total borrowings

16,811

218,543

During the prior period, the Group repaid in full all outstanding ‘chocolate bonds’ which had been issued in 2010 and 2014.

24 . B O R ROW I N G S CONTINUED

Maturity of debt

52 weeks ended 1 July 2018

In one year or less or on demand

In more than one year but not more than two years

Total non-current borrowings

Total borrowings

52 weeks ended 30 June 2019

In one year or less or on demand

In more than one year but not more than two years

Total non-current borrowings

Total borrowings

Finance lease and
hire purchase
liabilities
£

201,732

16,811

218,543

16,811

–

16,811

The Group has a bank overdraft facility which is secured by a charge over the Groups assets and cross guarantees. The interest rate
is charged at 1.25% over base rate.

The existing 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 0%.

2 5 . P ROV I S I O N S

Non-current

Lease dilapidations provision

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

943,627

879,808

The dilapidations provision relates to potential rectification costs expected should the Group vacate its head office, distribution site
or retail locations.

Company overviewStrategic reportGovernanceFinancial statements88 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

2 5 . P ROV I S I O N S CONTINUED

The movement in dilapidations provision is summarised below:

52 weeks ended 1 July 2018

At beginning of period

Released through profit and loss

Amounts capitalised during the period

At end of period

52 weeks ended 30 June 2019

At beginning of period

Released through profit and loss

Amounts capitalised during the period

Exchange difference

At end of period

Lease dilapidation
provision
£

750,629

(20,057)

149,236

879,808

(25,571)

88,104

1,286

943,627

Provisions for 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.

26 . S H A R E C A P I TA L

Allotted, called up and fully paid:

Ordinary shares of £0.001 each

As at 30 June 2019

As at 1 July 2018

112,838,213

112,838

112,837,828

112,838

The Board proposes a final dividend of 1.2p per share (1 July 2018: 1.1p) being a total of £1,354,059 (1 July 2018: £1,241,216), for
approval at the next AGM.

Period ending 30 June 2019:

385 ordinary shares were issued during the period ending 30 June 2019 to satisfy shares allotted under the Company’s Save as
You Earn plan.

Period ending 1 July 2018:

There were no movements in the Ordinary shares of Hotel Chocolat Group plc during the period ending 1 July 2018.

27. 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 30 June 2019 are presented in the Consolidated Statement of
Changes in Equity.

The share premium represents the amounts subscribed for share capital in excess of the nominal value of the shares.

During the period the Group paid a dividend of 1.7p (1 July 2018: 2.2p) per share £1,918,250 (£2,482,432) out of retained earnings,
being a final dividend of 1.1p per share in relation to the period ended 1 July 2018 (1 July 2018: 1.6p) and an interim dividend of 0.6p
per share in relation to the period ended 30 June 2019 (1 July 2018: 0.6p).

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.

The merger reserve arose when the Company undertook a share for share exchange with the companies listed in Note 21 and is
not distributable by way of dividends.

Retained earnings are the current net profits in the Consolidated Statement of Comprehensive Income.

The capital redemption reserve represented the aggregate nominal value of all the ordinary shares repurchased and cancelled by
the Group.

Other reserves includes the movements in share-based payments and derivative financial instruments. For further details, refer to
Notes 9 and 17 respectively.

2 8 . L E A S E CO M M I T M E N T S

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
30 June 2019
£

52 weeks ended
1 July 2018
£

11,039,898

31,372,912

17,021,423

59,434,233

259,317

165,607

424,924

9,842,294

27,895,009

17,888,405

55,625,708

315,797

356,605

672,402

Company overviewStrategic reportGovernanceFinancial statements90 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

29. 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 30 June 2019 (1 July 2018: £ nil).

3 0 . R E L AT E D PA RT Y T R A N S AC T I O N S

The remuneration of the key management personnel of the Group are disclosed in Note 8. Interests and related party transactions
are disclosed below. The Group has an interest in joint venture Rabot 1745 Limited, a separate company incorporated and
operating in the United Kingdom. The primary activity of Rabot 1745 Ltd is the manufacture and sale of beauty products.

Ownership has changed as follows:

1 July 2017 to 18 August 2017
19 August 2017 to 13 February 2019
14 February 2019 to 30 June 2019

Andrew Gerrie holds 50%.

30.0%
34.5%
32.0%

During the period, the Group purchased goods from Rabot 1745 Limited with a value of £483,075 (1 July 2018: £366,935). At the
period end £27,896 was outstanding (1 July 2018: £nil).

The contractual arrangement provides the Group with only the rights to the net assets of the joint arrangement, with the rights to
the assets and obligations for liabilities of the joint arrangement resting primarily with Rabot 1745 Limited. Under IFRS 11 this joint
arrangement is classified as a joint venture and has been included in the consolidated financial statements using the equity method.

During the year the Group obtained a 20% interest in joint venture Hotel Chocolat KK, a separate company incorporated and
operating in Japan. The primary activity of Hotel Chocolat KK is the sale of chocolate and related products.

During the period, the Group sold goods and recharged costs to Hotel Chocolat KK with a value of £669,771. The Group also
extended long-term loan facilities to Hotel Chocolat KK. At the period end a total of £2,488,041 was outstanding.

Hotel Chocolat Ltd agreed to provide working capital funding to Hotel Chocolat KK. During the period Hotel Chocolat KK
borrowed £2,488,041 all of which is outstanding at the period end.

The contractual arrangement provides the Group with only the rights to the net assets of the joint arrangement, with the rights to
the assets and obligations for liabilities of the joint arrangement resting primarily with Hotel Chocolat KK. Under IFRS 11 this joint
arrangement is classified as a joint venture and has been included in the consolidated financial statements using the equity method.

The Group rents property in the ordinary course of business from Harwell Management, a company in which Peter Harris and
Angus Thirlwell have a material interest. The rentals (inclusive of building insurance) totaled £202,109 in the period ended 30 June
2019 (1 July 2018: £182,920). There were no amounts due at either period end.

During the period family members of the Directors stayed at the Group’s hotel in St Lucia. Total amounts paid equalled $8,725
(1 July 2018: $16,209) and there are no amounts outstanding at the balance sheet date (1 July 2018: £nil).

In the prior period, on 31 May 2018 Hotel Chocolat Estates Limited, a subsidiary located in St Lucia, sold and transferred the
freehold titles of two plots, one each to Angus Thirlwell and Peter Harris for a price of £170,368 per plot. This resulted in a total
profit on disposal of £98,029. There were no amounts outstanding at the period end (1 July 2018: £nil).

No other amounts were due to Directors (1 July 2018: £nil).

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

1,302,506

2,488,041

5,778,205

9,568,752

1,473,301

–

235,936

1,709,237

81,299

83,646

11,091,501

16,811

5,056,146

16,164,458

9,183,573

218,543

5,152,399

14,554,515

10,777

54,691

31. 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

Financial assets

At amortised cost

Trade and other receivables (excluding prepayments)

Loan to Hotel Chocolat KK

Cash and cash equivalents

At fair value

Derivative financial assets

Financial liabilities

At amortised cost

Trade and other payables

Total borrowings

Accruals

At fair value

Derivative financial liabilities

In the Directors’ view, the fair value of the Group’s borrowings is considered equal to their carrying value.

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 than 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 17 for further information.

There have been no transfers between levels in the period.

Company overviewStrategic reportGovernanceFinancial statements92 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

32 . 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 17 for further information about the Group’s foreign currency
forward contracts.

Interest Risk
The Group is exposed to interest rate risk on its overdraft facility, which carries interest at variable rates on amounts which are
overdrawn. The overdraft facility is typically used on a short-term basis 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.

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.

Ageing analysis:

Trade receivables

Up to three months

Three to six months

Above six months

Impairment provision

Total

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

926,236

15,152

14,565

(37,647)

918,306

931,760

73,181

67,430

(18,613)

1,053,758

These receivables are not secured by any collateral or credit enhancement.

The Group applies the IFRS 9 simplified approach to measure credit losses using a lifetime expected credit loss provision for
trade receivables.

Expected loss rates for CTC member debt are based on historical credit losses experienced over the four years prior to the period
end. The expected loss rate is 0.8% and results in a loss provision of £407.

Expected loss rates for the recently expanded partners & B2B business are based on historical credit losses experienced over the
12 months prior to the period end. There have not been any credit losses over this period. The expected loss rate is 0% and the
expected loss provision is nil.

The impairment provision of £37,647 relates to £37,240 of specifically provided debt and £407 of expected credit losses.

Credit risk for the loan receivable from the joint venture has not increased significantly since its initial recognition. Credit risk for
trade receivables has not increased significantly since their initial recognition.

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

715,453

202,853

–

918,306

1,045,823

2,236

5,699

1,053,758

32 . F I N A N C I A L R I S K M A N AG E M E N T CONTINUED

The exposure of credit risk for trade receivables by geographical region is as follows:

United Kingdom

Europe

Rest of World

Total

Liquidity risk

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 1 July 2018

Trade and other payables

Derivative financial instruments

Borrowings

52 weeks ended 30 June 2019

Trade and other payables

Derivative financial instruments

Borrowings

Within one year
£

One to two years
£

Two to five years
£

13,933,676

11,265,218

201,732

25,400,626

16,238,573

12,161,057

16,811

28,416,441

402,296

6,181,156

16,811

6,600,263

–

2,148,666

–

2,148,666

–

The amounts detailed within derivative financial instruments relate to the gross contractual cash flows of the Group’s forward contracts.

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.

Company overviewStrategic reportGovernanceFinancial statements94 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

33 . 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 24 September 2019, the date of approval of the
financial statements by the Board.

3 4 . 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.

COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2019

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

Share based payment reserve

Total equity attributable to shareholders

As at
30 June 2019
£

As at
1 July 2018
£

Notes

10,664,472

6,754,765

2,605,497

9,360,262

20,024,734

316,223

10,418,210

8,728,097

192,578

8,920,675

19,338,885

458,956

19,708,511

18,879,929

112,838

11,750,056

6,239,571

6,301

1,599,745

19,708,511

112,838

11,749,487

5,657,820

6,301

1,353,483

18,879,929

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 30 June 2019 is
£2,500,000 (1 July 2018: profit £5,003,980).

The financial statements of Hotel Chocolat Group plc, registered number 08612206 were approved by the Board of Directors and
authorised for issue on 24 September 2019. They were signed on its behalf by:

Matt Pritchard

Chief Financial Officer

24 September 2019

Company overviewStrategic reportGovernanceFinancial statements96 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

COMPANY STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2019

Share
premium
£

Retained
earnings
£

Capital
redemption
reserve
£

Share
based
payment
reserve
£

Total
£

11,749,487

3,136,272

6,301

626,898

15,631,796

–

5,003,980

(2,482,432)

–

726,585

–

5,003,980

(2,482,432)

Share
capital
£

112,838

–

As at 2 July 2017

Share based payments

Profit for the period

Dividends paid

Equity as at 1 July 2018

112,838

11,749,487

5,657,820

6,301

1,353,483

18,879,929

Share based payments

Issue of share capital

Dividends paid

Profit for the period

–

569

–

(1,918,249)

2,500,000

–

246,262

–

569

(1,918,249)

2,500,000

Equity as at 30 June 2019

112,838

11,750,056

6,239,571

6,301

1,599,745

19,708,511

The opening reserves as at 2 July 2017 were previously stated without the inclusion of the share based payment reserve.
See Note 36 for more information.

NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the period ended 30 June 2019

35 . 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 under the historical cost convention and in accordance with FRS 102 the Financial
Reporting Standard applicable in the United Kingdom and the Republic of Ireland. The principal accounting policies, which have
been applied consistently, are set out below.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also
requires management to exercise judgement in applying the Company’s accounting policies.

In preparing the separate financial statements of the parent company, advantage has been taken of the following disclosure
exemptions available in FRS 102:

• only one reconciliation of the number of shares outstanding at the beginning and end of the period has been presented as the

reconciliations for the Group and parent company would be identical;

• no statement of cashflow has been prepared for the parent company;

• disclosures in respect of the parent company’s share-based payment arrangements have not been presented as equivalent

disclosures have been provided in respect of the Group as a whole; and

• no disclosure has been given for the aggregate remuneration of the key management personnel of the parent company as their

remuneration is included in the totals for the Group as a whole.

Investments

Fixed asset investments comprise investments by the Company in the shares of subsidiary undertakings. At the end of each financial
period, the Directors review the carrying amount of the Company’s investments to determine whether there is any indication that
those assets have suffered an impairment loss. They are stated at cost less provisions for diminution in value.

Financial assets

Financial assets, other than investments and share based payments, are initially measured at transaction price (including transaction
costs) and subsequently held at cost, less any impairment. Impairments are calculated on an incurred loss basis.

The Company’s assets at amortised cost comprise trade and other receivables, and cash and cash equivalents including cash held
at bank.

Financial liabilities

Financial liabilities are classified according to the substance of the financial instrument’s contractual obligations rather than the
financial instrument’s legal form. Financial liabilities are initially measured at transaction price (after deducting transaction costs)
and subsequently held at cost, less any impairment.

Share-based payments

Details of the Group’s share option schemes are provided in Note 9 to the consolidated financial statements.

The Company grants share options under the share-based schemes directly to employees of its subsidiaries. In accordance
with the provisions of the plan, the cost of the share-based payments will be recorded by each subsidiary as an expense, with a
corresponding credit to a share-based payment reserve. The Company, over whose share options are issued, recognises an increase
in the investment in the related subsidiary and a credit to the share-based payment reserve. The fair value of the employee service is
based on the fair value of the equity instrument granted.

Company overviewStrategic reportGovernanceFinancial statements98 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts

NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
For the period ended 30 June 2019

3 6 . I N V E S T M E N T S

Cost

At beginning of period

Share based payments

At end of period

Carrying amount

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

10,418,210

246,262

10,664,472

9,691,625

726,585

10,418,210

10,664,472

10,418,210

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 21.

The investment balance has been restated to include share based payment charges which are on-charges of subsidiary entities.
A corresponding entry has been made in the share based payment reserve. The impact on the opening investment balance in the
prior year is £626,898.

37. 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

Amounts due from Group undertakings

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

–

6,754,765

288,030

8,440,067

8,728,097

3 8 . C A S H A N D C A S H E Q U I VA L E N T S

To the extent a disclosure is relevant to both the Hotel Chocolat Group and Company financial statements, refer to the Group
financial statements.

39. T R A D E A N D OT H E R PAYA B L E S

Accruals

Amounts due to Group undertakings

Total trade and other payables

52 weeks ended
30 June 2019
£

52 weeks ended
1 July 2018
£

300

315,923

316,223

300

458,656

458,956

4 0 . S H A R E C A P I TA L A N D R E S E RV E S

The share capital, share premium, retained earnings, share based payment reserve and the capital redemption reserve are
consistent with Hotel Chocolat Group plc financial statements. Refer to Notes 26 and 27 of the Group financial statements.

41. 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 30 June 2019 (1 July 2018: £nil).

42 . 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 37 and 39 respectively, of the Company financial statements.

There are no employees during either period. The remuneration of the Directors of the Company is disclosed within the
Remuneration Report on pages 46 to 48.

Interests and related party transactions are disclosed in Note 30 of the Group financial statements.

Company overviewStrategic reportGovernanceFinancial statements100 HOTEL CHOCOL AT GROUP PLC · Annual Repor t and Accounts