Investors continue to show a healthy appetite for Hotel Chocolat (HOTC:AIM) today. While the scale of the early market share price rise is modest - up just 4p, or 1.2%, to 340p - it perhaps reflects the stunning rally since joining AIM a little more than a year ago (10 May 2016) at 148p. That's a 130% hike in 14-months.
Today's news on second half trading continues the company's rich vein of positive updates. It also triggers yet another round of earnings upgrades for one of Shares’ Top 10 for 2017 selections at 281.5p.
While inflation is putting a squeeze on UK shoppers, consumers are still finding the cash to purchase the premium British chocolatier’s affordable treats.
Liberum Capital’s forecasts have now been upgraded four times this year, reflecting Hotel Chocolat’s better-than-expected sales performance and the operational gearing in the business.
TASTY UPDATE
Ahead of full year results slated for 27 September, the update reveals sales grew 12% to £104m in the 52 weeks ended 25 June, ‘slightly ahead of market expectations’ and almost £2m higher than Liberum’s forecast prior to today.
Top line progress reflects the opening of 12 new stores, robust organic growth as well as strong growth in the digital business. It is also worth noting that sales have ticked higher despite this year’s hot weather, searing heat never ideal for chocolate sales.
Angus Thirlwell (pictured below), co-founder and CEO, enthuses: ‘Hotel Chocolat has had another good year, with encouraging growth. We are excited about the progress made with our new shop+cafe format stores and our seasonal ranges continue to perform well.’
HUNGRY FOR MORE?
Liberum increases its adjusted profit before tax (PBT) estimate for the year to June from £10.6m to £11.2m, hikes its price target from 340p to 365p and reiterates its ‘buy’ rating on the stock. For the year to June 2018, the broker raises its PBT estimate by 2.2% to £11.8m.
In its note this morning, Liberum says it now expects full year 2017 EBITDA ‘to be 11.5% higher than what we had forecast at the time of the IPO in April 2016’, which shows how strongly Hotel Chocolat has been consistently performing.
A fan of the company’s cash generation, Liberum forecasts a maiden final dividend of 1.5p from this growth and income pick. This is underpinned by forecast year-end net cash of £7.5m and covered a comforting 5.1 times by forecast earnings of 7.7p.
The exciting news for investors is the momentum witnessed last year should continue in the current financial year and then some.
Liberum points out that Hotel Chocolat will see the full effect of new capital projects that came on-stream in September 2016 - factory efficiencies will help mitigate the impact of a foreign exchange headwind - as well as the full benefits of stores opened last year and from the rapid roll out of the cafe model.
In addition, the top line should receive a boost from the launch of a unique cocoa-infused ice cream known as Ice Cream of the Gods, now on sale in 37 locations, as well as from ‘the launch of the new website on a more dynamic platform’. This new site launched early in 2017 offers an improved shopping experience on tablets and smartphones.
