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Shares in Hotel Chocolat Group PLC dived on Tuesday after warning on lower sales growth and profit in the year ahead.
Shares in the company were down 49% at 120.00 pence in London on Tuesday morning.
The chocolatier reported strong sales growth in its recently ended financial year, with sales in the 52 weeks to June 26 rising 37% to £226 million from £165 million the year before. This was ahead of market expectations, it noted, which stood at £212 million.
The Royston, Hertfordshire-based firm expects underlying pretax profit for the year will be in line with consensus forecasts, which it cited as £22 million. For the 2021 financial year, it posted profit before tax and exceptional costs of £10.1 million.
However, it cautioned that on a reported basis, it expects to register a loss for the 2022 financial year, swinging from a pretax profit of £7.8 million the year before. This is largely due to impairment provisions - after a revised assessment of the probability of recovering £23 million of loans made to its Japan joint venture - and costs from the closure of retail stores in the US.
Further, it warned that sales growth and profit will be lower in the year ahead as it focuses on ‘profitable drivers’.
It said: ‘Given the current global macro-economic climate, the group will now deliberately focus its efforts over the next three years on its most proven and lowest-risk strategies with the greatest potential for further increased profitability and scaled cash generation.’
The UK has a ‘significantly larger addressable market size’ than previously thought, it said. Its Velvetiser at-home hot drinks maker and Velvetised Cream alcoholic beverages have ‘significant’ further UK market headroom and are capital expenditure-light growth categories.
However, it will scale back investment levels in the US and its Japan joint venture.
The US will become solely online and wholesale when the one remaining store closes in the first half of the 2023 financial year.
In Japan, three consecutive years of Covid disruption to peak trading periods has delayed the business's probability. Hotel Chocolat will continue to fund necessary working capital only.
‘While we expect a temporary lower sales growth rate and profit margin for FY23 as we carry through our adjustments, the result will be a business delivering greater results, with less risk and an even stronger balance sheet with a higher profit percentage growth in FY24 and FY25,’ said Co-Founder & Chief Executive Angus Thirlwell.
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