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It has repaid bond debt early and analysts are upgrading earnings forecasts
Thursday 07 Jun 2018 Author: James Crux

Premium British chocolatier Hotel Chocolat (HOTC:AIM) is in an increasingly sweet situation. Its consistent improvement in cash flow generation has allowed for the early repayment of £6.4m of ‘Chocolate Bonds’ debt.

Back in 2010 and 2014, the company’s Chocolate Tasting Club subsidiary issued two bonds which paid a return in the form of luxury boxes of chocolate or Hotel Chocolat Gift Cards, the cost value of these items recognised as an interest expense each year.


Bond proceeds were invested in UK manufacturing and new store openings in the UK and Ireland, as well as in cocoa sustainability projects in St Lucia and Ghana.

Reiterating its ‘buy’ rating with a 410p target price, Liberum Capital has nudged up its 2019 and 2020 earnings forecasts to account for the lower annual interest bill, while the broker’s year-end net cash forecasts also move north on the news.

‘While the retail backdrop of poor footfall and inclement weather has been used as a frequent excuse in reporting across the UK retail space, we suspect Hotel Chocolat’s ranging, strength of offer and innovation has helped it trade through this period relatively well compared to the broader market,’ thunders Liberum.

The brokerage reckons Hotel Chocolat is in a very small group of UK retail companies which are seeing top line growth and margin expansion. (JC)

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