Preliminary Results

RNS Number : 1909I

Hotel Chocolat Group PLC

01 December 2022

1 December 2022

Hotel Chocolat Group plc

(" Hotel Chocolat ", the "Company" or the "Group")

Preliminary Results

Hotel Chocolat Group plc, a premium British chocolate maker, today announces its preliminary results for the 52 weeks ended 26 June 2022 ("FY22").

FY22 FINANCIAL HIGHLIGHTS:

●	Revenue increase of 37% to £226.1m (FY21: £164.6m)
	○	UK revenue growth of 35% yoy
	○	UK store sales +23% higher than pre-pandemic (FY19)
●	Underlying EBITDA ¹ of £40.8m (FY21: £28.6m)¹ Underlying EBITDA ¹ margin of 18.0% (FY21: 17.4%)¹
●	Underlying Profit before tax and exceptional costs² of £21.7m (FY21: £9.6m), in line with market expectations
●	Statutory loss after tax of (£9.4m) (FY21: profit of £3.7m)³
●	Statutory loss includes exceptional one-off costs and adjusting items of £30.4m²
●	The Group has substantial headroom within its RCF facility, with £32m unutilised and £9m cash on hand

	52 weeks ended 26 June 2022 £m	Restated³ 52 weeks ended 27 June 2021 £m
Revenue	226.1	164.6

Underlying EBITDA¹	40.8	28.6
Underlying Profit before tax¹	21.7	9.6
Exceptional costs and adjusting items² Statutory (Loss)/Profit after tax³ Basic Earnings per share³	30.4 (9.4) (6.9p)	4.1 3.7 2.9p

¹ Underlying EBITDA and Underlying Profit before tax are Alternative Performance Measures (APMs), as explained in the financial review

² A breakdown of exceptional costs and adjusting items is included in the financial review

³ Restated 52 weeks ended 27 June 2021 - see financial review

FY22 OPERATIONAL HIGHLIGHTS:

Fast Growth and improved operational cash generation

UK sales increased 35% yoy, and +68% vs pre-pandemic (FY19)

●	UK retail stores in growth yoy and +23% vs pre-pandemic (FY19)
●	Active customer database increased by +15% to 2m, with frequency increased by 14%
●	Subscriptions in growth
●	Velvetiser in-home hot chocolate system now established as a long-term category with higher lifetime value

Previously announced strategy adjustments on International

International sales grew 126% but margins remained below internal expectations, leading to adjustment to our international strategy and a prudent approach to capital allocation

	●	Provisions made for exit from current Direct-to Consumer activity in USA
	●	Full impairment in connection with Japan joint venture, which entered civil rehabilitation protection in July 2022 and continues to trade. Discussions ongoing with potential new partnership based on a brand licensing model.
	●	Intent to develop capex-light, risk contained global wholesale model

Strong operational cashflows before movements in working capital of £39.5m (FY21 £28.6m)

	●	Inventories increased by £20m yoy in support of faster growth and in mitigation of post-pandemic supply chain risk, predominantly Velvetiser machines.
	●	Stock cover for FY22 of 5.5 months (FY19 3.5 months) driven by higher Velvetiser inventories. Target to now materially reduce inventory levels
	●	Group remains well capitalised with £41m of headroom comprising £9m cash on hand and £32m of unutilised facilities within £50m RCF facility, immediately prior to the peak cash-generating trading period

Clear plan, focused on brand and profitability

Defined the future shape of the business model

●	Simplified activities, rationalised ranges, and increased focus on full price sales mix (quality over quantity)
●	Innovation pipeline to both reduce unit cost of goods and improve quality
●	Self-help margin opportunities to mitigate inflationary pressure and brand investments in sustainability
●	Developing alternative capex-light approaches internationally, including potential for licensing arrangements and wholesale distribution
●	Transitional costs of strategic adjustment during FY23 in order to target higher margins in future years, including the costs of new second distribution centre
●	Target set of 20% EBITDA margin in FY25 (pre IFRS16 basis)

Investing to strengthen the brand

●

The first cacao harvest was completed as part of the Hotel Chocolat Gentle Farming programme, a major investment in a new approach to cacao farming with the goal of enabling every farmer that supplies Hotel Chocolat to earn a 'living income' by further increasing the price paid for cacao to better reflect local costs of living. In return, farmers must commit to sustainable farming practices, zero deforestation and zero illegal child labour.

●

Achieved an outstanding all-employee Engagement score in the 2022 Best Companies survey, ranking Hotel Chocolat as a "Top ten large company to work for".

Dividend

●	As previously announced, the Board will continue to review potential reinstatement of any dividend relative to the potential opportunities for re-investment in service of profitability and growth.

Current Trading and Outlook:

●	The Group is approximately one third of the way through its trading year, with retail trading in line with last year and online and wholesale sales softer yoy.
●	The Group is adopting a deliberately prudent approach to the outlook on trading, manufacturing controlled levels of seasonal inventory with a strong focus on self-help actions to mitigate inflationary pressures.
●	A focus on "quality over quantity" will target reduced levels of discounting and higher mix of full-price sales, with reduced spend on lower margin online acquisition marketing.
●	With the five largest annual gifting seasons yet to come, the continued shift we're seeing in channel mix towards retail stores offers the opportunity to mitigate the year-to date shortfall, meaning there are a range of potential outcomes for full year expectations*. A further update will be made in January.

* Market consensus prior to this announcement, as at 30 November 2022, is for revenue of £236m and underlying profit before tax of £9.6m.

Board Succession planning

	●	After seven years, Andrew Gerrie, has confirmed his intention to step down as Chairman in 2023 in order to focus on growing commitments to his other business ventures.
	●	Matt Pritchard will also be leaving the business in 2023 to pursue new opportunities following nine years as CFO.

Both Andrew and Matt have indicated their willingness to stand for re-election at the AGM and will continue to be actively involved in the business in order to support an orderly succession and a smooth transition to their successors. Announcement details of the successors will made in due course.

Commenting on the results, Angus Thirlwell, Co-founder and Chief Executive Officer of Hotel Chocolat, said:

"Much of what we are publishing today in terms of the business strategy has already been announced to the market in July.

"Since then, the performance of our retail stores continues to beat 2019 pre-covid levels and subscriptions are in growth too. We have reduced online marketing spend resulting in lower volume, but higher quality full-price sales. Our wholesale partners are also showing caution too.

"The Hotel Chocolat brand has huge resonance with shoppers and despite the macro-economic environment, people are still treating themselves with affordable luxury and remaining loyal and we are winning new customers who recognise our quality. Indeed over half of our Christmas gift range is priced between £2.50 and £8.50.

"It goes without saying that the current environment is challenging on multiple fronts. Over the last few months we have taken decisive steps to reduce risk and to fully pull all our self-help Ievers in both our manufacturing and retailing businesses. One thing is for sure, we will never compromise on the brand standards and values which have built our following to this point.

"We remain fiercely ambitious for the Hotel Chocolat brand for growth in both UK and international markets. Our new stores showcasing the format of the future opened in Norwich and Northampton and are trading very strongly. Internationally we intend to utilise more risk-contained techniques to capitalise on the proven brand appeal in major international markets. We will update on developments in due course.

"As we head into our busiest part of the year, I am confident that the strategic direction we have put in place will improve the prospects of the business for significant years to come. Our decisions to focus on full price sales and quality over quantity, coupled with a resurgence of physical store performance means that we anticipate December will be busier than ever.

"I'd like to personally thank Andrew Gerrie and Matt Pritchard for their contributions to Hotel Chocolat over many years, both having supported the Group through the IPO and throughout the outstanding growth of the business and development of the brand.

"I would like to thank all the Hotel Chocolat team and our partners for their hard work during the year. I am incredibly proud of how Hotel Chocolat has adapted to the disruption caused by COVID-19 and the later challenges. The biggest and final thanks goes to our wonderful customers for their continued loyalty. "

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

The person responsible for arranging for the release of this announcement on behalf of the Company is Matt Pritchard, Chief Financial Officer.

For further information:

Hotel Chocolat Group plc	c/o Citigate Dewe Rogerson + 44 (0) 20 7638 9571
Angus Thirlwell, Co-founder and Chief Executive Officer
Matt Pritchard, Chief Financial Officer

Liberum Capital Limited - Nominated Advisor and Broker	+ 44 (0) 20 3100 2222
Clayton Bush
Edward Thomas
Miquela Bezuidenhoudt

Citigate Dewe Rogerson - Financial PR	+ 44 (0) 20 7638 9571
Angharad Couch
Alex Winch

Notes to Editors:

Hotel Chocolat is a premium British chocolate maker with a strong and distinctive D2C brand. The business was founded by Angus Thirlwell and Peter Harris, who are still executives within the business, and has traded under the Hotel Chocolat brand since 2003. The Group is unusual in being a grower (organic cacao farm in Saint Lucia), a manufacturer (Cambridgeshire, UK) and owning its extensive direct to consumer channels (branded stores, websites). The Group was admitted to trading on AIM in 2016.

CHAIRMAN'S STATEMENT

OVERVIEW

In FY22, for the second consecutive year, we grew strongly in the UK across channels and categories, acquiring new customers and reacting to a changing external landscape. The easing of pandemic restrictions saw physical retail sales and profitability rebound, bolstered by new categories and an increase in the active customer database. This was supported by online and partnerships which continue to play a major role in delivering the brand to consumers at their convenience. The breadth of activity and the pace of growth was the fastest in the Group's history, and on behalf of the Board I would like to thank the whole HC team for working so hard to achieve this. The fast pace of growth included many successful elements and some initiatives that didn't deliver the returns we had targeted. We have therefore made the tough but compelling decision to focus our efforts on those growth drivers that can deliver highest returns relative to risks, over the short to medium term. We have excellent products, a skilled and committed team and a well invested vertically integrated platform which combine to make Hotel Chocolat a strong brand with
great prospects.

STRATEGY

Hotel Chocolat is first and foremost a strong brand in the eyes of our loyal customers. The strong customer relationship though our multiple channels is driven by our values of authenticity, originality and ethics. What is perhaps often overlooked is the degree to which the brand strength is underpinned by our manufacturing skills. We have a well-invested and high-quality production facility in the UK which designs and makes our amazing range of products. A greater focus on leveraging these strengths can unlock scale economies, reduce unit costs and further improve the customer experience and product quality.

The Group continues to retain its long-term international growth ambitions but near-term, will adopt a more focused approach by backing capex light and risk light approaches.

FY22 FINANCIAL OVERVIEW

FY22 Group revenue of £226m (FY21: £165m) was driven by a combination of stronger UK retail sales, and robust growth in customer numbers supported by investment in new categories and increased acquisition marketing. Underlying profit before tax increased 126% to £21.7m.

Our statutory reported loss in FY22 contains a number of material items arising from our strategic decision to prioritise only the best prospects for financial returns. This includes the decision to exit from a number of smaller product categories, and from direct-to-consumer operations in the USA, along with impairment of our loans to the Japan Joint Venture. The statutory loss for the period of £9.4m reflects multiple non-recurring costs relating to the cessation of these activities. The underlying profit before tax of £21.7m represents a pleasing result, evidencing the ongoing success of the core business. A full reconciliation between the statutory reported profit and the alternate or underlying performance measure is included in the Financial Review.

DIVIDEND

Given the opportunities to invest for further growth and returns, the Board has determined that it would not be appropriate to declare a dividend for the period. The Board will continue to review the financial position of the Group in the light of internal growth opportunities and the external environment and intends to recommence progressive dividend payments when appropriate to do so.

BOARD OF DIRECTORS CHANGES

The Group continues to benefit from a strong founder-led management team. As we look towards the next phase of evolution for Hotel Chocolat, I have agreed with the Board that it is the right time to seek a new Board Chair due to my growing business commitments with new ventures.

I will be offering myself for re-election at the coming 2022 AGM in order to provide continuity during the succession process. I would like to thank everyone at HC for a rewarding seven years, and all our stakeholders for their loyalty and commitment. Hotel Chocolat is a great business and it has been a privilege to play a small role in the story so far.

Matt Pritchard, CFO will also be leaving in 2023 after almost nine years at Hotel Chocolat. On behalf of the Board and the whole HC team I would like to thank Matt for his energetic support and commitment through the Group's significant evolution and growth. Matt continues to be actively involved in all parts of the business and will be offering himself for re-election at the AGM in order to support the succession plan and a smooth transition.

OUTLOOK

The Hotel Chocolat Brand is in good health as evidenced by growing sales and progress on sustainability initiatives. Whilst there continues to be external macro-economic challenges including inflationary pressures, the Hotel Chocolat team have continually proven the ability to adapt to changing circumstances whether arising from pandemic, economic factors or from the acceleration in growth across multiple fronts. I therefore remain confident in the ability of the brand and the team to deliver attractive returns.

Our focused strategy has led to the cessation of some activities resulting in transitional costs in FY23 with the goal of higher profit margin thereafter.

The Board have made clear strategic choices to maximise the prospects for the Group, and the business entered FY23 in a strong position. At the date of publication we have two thirds of the year still to trade, including the five largest gift events, and the Board is taking a prudent approach to manage current trading.

ANDREW GERRIE
Non-executive Chairman

CHIEF EXECUTIVE'S STATEMENT

The business achieved another acceleration in sales growth in FY22. Sales of £226m were 37% higher than FY21, and 71% higher than FY19, the last full year before the Covid pandemic disruption. Our compound annual growth rate ("CAGR") over the last two years of 29% compares to a CAGR of 12% in the four years up to FY19 inclusive.

The higher growth rate is testament to a strong brand powering forward on many fronts, driven by the efforts of the whole team. We have also learned that faster growth brings new pressures, challenges and opportunities and have therefore moved swiftly to ensure we have the best prospects for future success with a clear and simple adapted strategy.

In 2019 we added six new growth levers to our existing strategy:

	●	The Velvetiser Hot Chocolate system
	●	VIP loyalty
	●	Digital growth focus
	●	Global wholesale
	●	USA D2C
	●	Japan joint venture

In half two of 2022, we re-rated the growth drivers:

●	VIP loyalty and digital growth focus became part of business as usual, having succeeded in their goals
●	The Velvetiser Hot Chocolate System and Global Wholesale were prioritised for more focus
●	USA D2C and Japan D2C were de-prioritised whilst the Group explored alternative, lower risk, ways to capitalise on the brand appeal in these major markets.

In 2020 the business adapted effectively to the Covid pandemic threat and by 2021 we saw Group sales accelerate rapidly due to the performance of our six growth drivers alongside the re-opening of the economy following the end of lockdowns. In July 2021 we raised £40m from a new equity placing to fund capex and working capital investments to support sales growth whilst profit generation remained Covid-impaired. These funds were deployed and as a result sales growth accelerated further in FY22.

BRAND HEALTH

Our planned investments in the brand delivered measurable improvements for customers, colleagues and farmers.

Our Brand tracker uses market research to assess UK consumer awareness of Hotel Chocolat and the degree of consideration as a business with ethics at its heart. This research shows that we have significant customer growth opportunity, particularly with slightly younger age groups including families with children at home, and especially those who have a personal interest in ethics and sustainability.

In 2021 we launched our Gentle Farming Programme, investing approximately 100 basis points of margin to pay increased prices to farmers in exchange for undertaking a farming approach that encourages a focus on cacao tree pruning to improve plant health and increase yields, and the planting of share trees to encourage biodiversity and help mitigate the impact of climate change. I visited Ghana with the team to meet with farmers and community leaders, the initiative was well received. We will receive our first assurance data shortly which will inform our next phase.

We continued to adhere to our More Cacao Less Sugar approach, with our range meeting Public Health England's targets for sugar, launched Founder Shares in the period, giving every UK employee options for free shares in Hotel Chocolat to encourage teamwork and provide colleagues the opportunity to share in future success.

We were delighted to achieve an 'outstanding' score in our all-employee engagement survey.

FINANCIAL OVERVIEW

Sales

Sales grew by 37% to £226m (FY21: £165m). Sales in the UK increased by 35% and the growth of international grew by 126%.

The performance of our UK channels, and of both our new and existing categories, indicates that the total addressable market for the Hotel Chocolat brand in the UK is greater than we had previously estimated. This is also supported by market research that shows significant potential to appeal to more UK households.

Profit

We reported a statutory loss before tax for the period of (£8.7m), which is clearly disappointing. The loss is reflective of the significant impacts of discontinuing activities in the year that had lower prospects for future returns, relative to the ongoing, proven new successes. Whilst temporarily painful to make these decisions, making choices like this has always been part of Hotel Chocolat's entrepreneurial history.

An analysis of the components of the reported loss and the reconciliation to the alternative performance metric of underlying profit before tax of £21.7m (FY21: £9.6m restated) is provided in the Financial Review.

Faster growth brought with it significant internal growing pains. Our pre-pandemic sales CAGR of 12% shaped a business that doubled revenues every seven years, whereas the latest three-year CAGR of 29% doubles the business size in less than three years. This means decisions on future investments in people, technology, inventory levels and plant and equipment capex need to be made at a much faster pace, with many of these costs needing to be committed in advance of the future sales generation, bringing greater inherent risk. The adjustments to correct for elements of this are very much self-help, being directly controllable by us. Aligning our operating costs and structures to the new shape of the business is the key to the level of future margins and return on capital that I expect from Hotel Chocolat. We have set an internal objective of 20% EBITDA margin by FY25 (pre IFRS 16). It is clear that some of the growing pains were, in retrospect, avoidable and we are enhancing governance and adopting a more risk-contained strategy that prioritises brand health and profitability over higher rates of revenue growth.

An additional factor during H2 of FY22 was the fast deterioration in global consumer outlook, coming so soon after an ebullient H1 sales and profit performance. Although I believe we have reacted speedily, there will be an overhang of some costs into FY23 before we have fully adjusted.

OPERATIONAL REVIEW

Our UK manufacturing operations are a key competitive strength and differentiator. Our ability to manufacture a wide range of unique products is a key source of competitive value. Our skilled team, bespoke factory capabilities and in-house IP all combine to create long term brand strength. In addition, we see significant opportunities to reduce unit costs of production given the recent scaling and future range optimisation.

Throughout the business we intend to increase the focus on the role of manufacturing within our value creation plan. This, we believe, will unlock more of the benefits of our vertical integration and improve margins.

In March we signed a ten-year lease on a 430,000sq ft second DC near Northampton. For peak FY22 we operated with 200,000 sq ft in our own DC with significant inventory held off-site in third-party storage. Bringing all inventory into our own locations supports smoother operation and improved service. In the initial years of the new lease the dual-running costs on our revised sales CAGR projection will temporarily represent a cost headwind of 300bps, with the expectation that this will dilute by FY25.

UK SALES CHANNEL REVIEW

Our multichannel sales model achieved UK sales growth of 35% year-on-year. The mix of sales shifted back towards retail stores and encouragingly we are now seeing higher sales densities in our stores than before the pandemic, with lower property costs. In the period we upsized 4 locations, moving into larger nearby sites, adding more elements to our offer in these towns, which we forecast will drive improved profit per catchment. We anticipate that in future more space growth will come from upsizes than from openings in new catchments.

Digital and partners continue to complement our retail estate by offering convenient delivery. The combination of all three channels, underpinned by our VIP loyalty programme drives brand awareness and loyalty. Active customers increased by 15% to over 2 million, with frequency also rising by 14%.

INTERNATIONAL REVIEW

The Group intends to utilise risk-contained techniques to capitalise on the brand appeal in major international markets. These will include:

●	brand licensing arrangements (with partners deploying their capital)
●	selective wholesale (into established distribution channels)

USA

Having previously pivoted our D2C model from a retail rollout strategy to an online-led approach in response to the pandemic and market learnings, we saw some encouraging sales performance in the period with sales growing by 145% in the first half of the year. However, we remained dissatisfied with the margins we were achieving due to the complexity of the supply chain and the forecasting inaccuracies for a new business, and with the ongoing heavy demands on senior team bandwidth. We therefore decided near-term, to prioritise development of wholesale routes to market, led by, but not exclusive to, the Velvetised Cream alcohol category, which benefits from long shelf-life and a long-established wholesale distribution infrastructure to connect into with contained risk. In the medium term we see opportunities to progressively build the Hotel Chocolat brand behind this spearhead, utilising the valuable customer, product category, channel and operating model insights we have acquired so far. Provisions and costs relating to the exit from direct-to-consumer channels of £3.5m (further detail can be found in the Financial Review).

The response to the brand, the new and unique products for the American market have been terrific. Our message to our American customers and brand fans is please be patient as we take a few steps back in order to be able to take more steps forward in the medium term.

Japan Joint Venture

We were first approached by a prospective joint venture partner in 2017 and the Japanese JV began trading in 2018. The first two store openings performed encouragingly in FY19. The Group manufactured the majority of products for the JV, and also provided loans for working capital purposes.

By FY20 the partner had opened eight locations and signed leases for further openings with key mall landlords. The Covid pandemic severely disrupted sales during the critical spring 2020 peak for chocolate gifting resulting in lower than forecast sales per store and considerably lower margins. In 2021 the continuation of movement-restrictions had a greater impact than in the UK where the online channel was more developed. It was assumed that for 2022, as happened in the UK, that Covid would not be a major impediment to sales, however the Japanese government reinstated movement restriction guidance again. This was the third year in succession of reduced sales and reduced profitability, the latter steeply increasing as the estate size and consequent scale of impact grew. When the JV partner presented their revised loan-funding proposal for FY23 it was clear that the continued working capital needs would exceed a level that would be appropriate for the Group over the next two to three years, given the real possibility that peak 2023 could again be impacted by movement restrictions. The Directors of the JV began civil restructuring proceedings in July 2022 in order to seek alternative sources of growth capital. At the time of publication this process is ongoing.

As a result of the JV insolvency process the Group has cumulatively fully impaired its loans and equity investment of £23m and recognised guarantees of £6.7m in relation to loans for shopfit capex borrowed by the JV from Japanese banks, subsequently paid in September 2022.

As can be imagined we have asked ourselves many questions as to how we could have done this differently. The size of the prize in Japan* certainly sustained our risk appetite through the three increasingly difficult years of Covid, alongside the loyal enthusiasm of our Japanese fans for all things Hotel Chocolat. In the period the brand achieved recognition of 24% amongst buyers of premium chocolate in Japan, a credible outcome alongside many long-established European brands.

*Japan addressable market size for chocolate gifting estimated by management to be greater than 2x UK for Hotel Chocolat.

Whilst recognising the above, it is clear that shortcomings in downside risk evaluation, and the challenges of assessing the JV's management capability to execute their plan during the two year period when visits to Japan were prohibited did contribute to the outcome. These learnings will be taken forwards into all other current and future HC growth activities.

GROUP OPERATING MODEL

Hotel Chocolat owes its unique brand and market position to a fast-paced evolutionary history. This brings many positive attributes to the model which will always be protected.

We have initiated a 'once in a decade' simplification plan to sharpen our operating model, in furtherance of enhanced returns, our target being 20%+ EBITDA (pre IFRS 16) by FY25, by:

●	providing for costs to exit underperforming activities,
●	range rationalisation and focus on unit cost of goods reduction,
●	increasing our focus on full price mix and tighter inventory levels,
●	operating efficiency and scale economics .

OUTLOOK

Inflation is currently at elevated levels and we are taking a resolute approach to cost reduction to mitigate this, by simplifying our business model and leveraging the opportunities for greater efficiency within our vertically integrated business model.

In previous periods of low consumer confidence, including FY08, Hotel Chocolat grew and earned strong customer loyalty. Our management focus will be skewed towards existing customer retention over new customer acquisition for FY23. Hence our outlook is for a steadier sales profile with ongoing work at pace to reshape the operating cost base.

One thing is for sure, we will never compromise on the brand standards and values which have built our following to this point.

ANGUS THIRLWELL

Co-founder and Chief Executive Officer

FINANCIAL REVIEW

	FY22			FY21
	Underlying before exceptional and adjusting items	Exceptional and adjusting items⁽¹⁾	FY22 Reported	Underlying before exceptional and adjusting items	Exceptional items⁽²⁾	FY21 Restated⁽²⁾



	£m	£m	£m	£m	£m	£m
Revenue	226.1		226.1	164.6		164.6
Cost of sales	(93.8)	(5.5)	(99.3)	(62.9)		(62.9)
Gross profit	132.3		126.8	101.7		101.7
Operating expenses	(91.5)	(24.9)	(116.4)	(73.1)	(4.1)	(77.2)
Underlying EBITDA	40.8			28.6

Share based payments	(0.5)		(0.5)	(0.9)		(0.9)
Depreciation & amortisation	(16.1)		(16.1)	(15.8)		(15.8)
Loss on disposal	(0.5)		(0.5)	(0.1)		(0.1)
Profit/(Loss) from operations	23.8	(30.4)	(6.6)	11.8	(4.1)	7.7
Finance income	1.0		1.0	0.7		0.7
Finance expense	(1.9)		(1.9)	(1.7)		(1.7)
Share of joint venture loss	(1.2)		(1.2)	(1.2)		(1.2)
Profit/(Loss) before tax	21.7	(30.4)	(8.7)	9.6	(4.1)	5.5

Tax expense/(credit)			(0.7)			(1.9)
Profit/(Loss) after tax			(9.4)			3.7

EPS basic			(6.9p)			2.9p
EPS diluted			(6.9p)			2.9p

1 Alternative performance measurements (APMs). See page 16 for purpose and definition of APMs.

2 Restated 27 June 2021, see note 9.

REVENUE

Revenue for the 52 weeks ended 26 June 2022 increased by 37% to £226m, driven by the strength of the groups multi-channel approach. UK sales grew by +35% year on year, driven by physical retail, which grew strongly following the ending of pandemic-related restrictions, significantly more than offsetting a -13% decline in online sales. The overall strength and flexibility of the UK multichannel model is illustrated by UK growth of +64% compared to FY19, the last full year before the pandemic:

Revenues £m	FY22	FY21	FY19
UK channels	214.5m	159.4m	127.7m
International	11.6m	5.2m	4.7m

Whilst international sales grew by +126%, profitability was below expectations, predominantly due to challenges with supply chains. As a result, the Board decided to pause further investments in international direct-to-consumer operations, both in directly controlled operations in the USA, and in the form of any further loans to the Japan joint venture.

GROSS MARGIN

Reported gross margin of 56.1% declined by 570 basis points compared with FY21. 243 basis points or £5.5m of the decline is a result of exceptional provisions relating to inventory; both for underperforming categories in the UK that will be exited during FY23, and provisions for all remaining inventories held in the USA.

Excluding exceptional provisions, gross margin of 58.5% represents a decline of 330 basis points, with two main causes:

●	In response to rapid sales growth forecasts and supply-chain disruption, the Group produced additional inventories which were then sold at reduced prices. In future, the Group will focus on tighter forward inventory cover with the objective of increasing the sales mix of 'full price' items.
●	Increased mix of Velvetiser hot chocolate machines and alcohols manufactured by third parties, which have lower gross margins than in-house production, but also have lower operating expenses as a percent of sales.

OPERATING EXPENSES

Before exceptional costs and adjusting items, operating expenses of £91.5m increased +25% year on year, a slower rate than sales growth of 37%, the majority of the increase was due to increased central costs including marketing and salaried staff in support of the initiatives to drive faster sales growth.

Higher utility prices from April 2022 will remain at the fixed contract rates until May 2023.

Within operating expenses, exceptional costs and adjusting items comprise:

●	£23.3m of exceptional operating expenses which relate to the exit from less profitable elements of the business plan, which are covered in more detail below.
●	A further £1.6m of adjusting items:
	○	The costs of the new lease on a second DC from April 2022, which did not become operational until FY23
	○	The change of accounting policy for Software as a service (SAAS) which is now charged as an operating expense rather than capitalised and amortised. This changes the P&L timing of the expense but not the cashflows or absolute cost over the life of the services.

UNDERLYING EBITDA

Underlying EBITDA of £40.8m or 18.1% of sales compares to £28.6m or 17.4% of sales in FY21. Whilst this is a solid result, in future the Group intends to focus on the most profitable elements of the existing business model, with the objective of delivering improved EBITDA margins in subsequent years.

It is anticipated that FY23 will include costs of transition to the more tightly focused strategy, resulting in temporarily lower EBITDA margins, with the objective of improving margins for FY24 and beyond. Underlying EBITDA is a not a statutory GAAP measure, but is included as an additional performance measure (APM).

EXCEPTIONAL AND ADJUSTING ITEMS

The reported result for FY22 includes £28.8m of exceptional items and £1.6m of adjusting items. The exceptional costs relate to the strategic choices to focus on more profitable channels and categories, resulting in provisions, impairments and one off costs of £5.5m within gross margin, and £23.3m within operating expenses. Impairment reversals arise from a combination of improved retail trading conditions and the release of impairments on closed stores. The £1.6m of adjusting items relate to changes in accounting treatment of software, and the expenses for the new DC which did not become operational until the following period.

Further details on exceptional costs and adjusting items are provided in the table below:

	Exceptional Items
FY22 £m	Japan⁽¹⁾	US⁽²⁾	St Lucia⁽³⁾	UK/ Group⁽⁴⁾	Sub-total	Adjusting Items⁽⁵⁾	Total
FY22 Impairment provisions	21.8		1.2	0.4	23.4		23.4
Reversal of prior impairment provisions		(3.5)		(1.7)	(5.2)		(5.2)
Material non-recurring costs	0.6	3.5		6.5	10.6	1.6	12.2
Total	22.4	-	1.2	5.2	28.8	1.6	30.4

1) Japan
£21.8m Provision for expected credit loss on loans, investments and financial guarantee contracts in connection with Japan joint venture
£0.6m relating to onerous contracts
2) US
Reversal of prior impairments of store leases		(3.5)
Provision for stock, onerous contracts, lost deposits and exit costs		3.5
3) St Lucia
£1.2m Impairment of net present value (NPV) of forecast cashflows
4) UK/Group
FY22 Impairment of goodwill on Rabot 1745 Limited				0.4
Reversal of prior impairments of store leases made in FY20				(1.7)
Provision for inventories of discontinued categories				3.0
Organisational design and implementation of new operating model processes				1.0
Write-off of deposit paid to insolvent supplier of capital equipment				2.5
5) Adjusting Items (Operating expenses)
SAAS increase in operational expense and reduction in amortisation						0.6
In-year costs for new DC, not operational until FY23						1.0

JAPAN JOINT VENTURE

Having previously provided financial support to the JV in the form of investments, loans and guarantees, the Directors of the Group concluded that it was inappropriate to continue to advance further working capital to the venture. In July 2022 the JV entered Civil Rehabilitation "Minji Saisei" under the supervision of the Tokyo court. At the date of publication the process is ongoing.

RESTATEMENT OF FY21 FINANCIAL STATEMENTS

Following a helpful and constructive review of the FY21 Annual Report and Accounts conducted by the Financial Review Council's Corporate Reporting Review team, the Directors have revisited a number of items in the FY21 Annual Report and Accounts in relation to the application of IAS 21 and IFRS 9, resulting in prior year restatements of the comparative amounts in the FY21 and FY20 income statement, balance sheet and statement of comprehensive income as set our below. Further information on the scope and limitations of the FRC's engagement can be found in Note 9.

1) Between FY19 and FY22 the Group undertook a series of investments in, and loans to, the Japan Joint Venture and also undertook financial guarantee contracts in respect of loans made by Japanese banks to the Joint Venture. In July 2022 the Group announced the possibility of full impairment of the loans, investments and guarantees, and subsequently full impairment has been reflected in the FY22 Financial Statements. The value of loans, investments and guarantees totalled £29.7m.

In accordance with IFRS 9, £4.5m of the total expected credit losses and impairments should have been charged in FY20, £1.7m in FY21, with the remaining balance of £21.8m recognised in FY22. The restatement does not give rise to any change in Group cashflows, except for a change in the timing of tax (relief/credits) as a result of losses being recognised in earlier periods.

2) In prior periods foreign exchange gains and losses on long-term intercompany loans were posted to the long-term loan reserve. This has now been restated with the retranslation loss of £0.7m shown as Other Comprehensive Income in FY21 in accordance with IAS 21. This adjustment has no impact on cashflows or operating performance and an immaterial impact on corporation tax payable.

The combined effect of the above restatements is as follows:

Group Financial Statement	FY21 as previously reported	FY21
Group Financial Statement	FY21 as previously reported	Restated
FY21 opening balance sheet net assets	£67.0m	£63.0m
FY21 closing balance sheet net assets	£71.7m	£65.8m
Profit for the period	£5.7m	£3.7m
Total Comprehensive Income	£3.3m	£0.7m
EPS	4.5p	2.9p

Further details on the restatements are provided in Note 9. No dividends were paid in the periods affected by restatement, no annual Executive performance incentives were paid, nor were any LTIPs vested.

RENT EXPENSES

In accordance with IFRS 16, rent expense of £11m (FY21: £11.1m) are not reported in operating expenses, being replaced by depreciation of £9.5m (FY21: £9.3m) and interest of £1.2m (FY21: £1.1m).

FINANCE INCOME AND EXPENSE

Finance income of £1.0m is primarily accrued interest owed by the Japan JV, which has been separately impaired within exceptional items.

Finance expense of £1.9m comprises £0.5m of bank RCF interest and £1.2m of interest on leases under IFRS 16, and £0.2m of realised interest on derivative financial instruments.

DEPRECIATION

Depreciation and amortisation of £16.1m compares to £15.8m in FY21. Key capital investments in the period included upgrades to the manufacturing facility, internal fit-out of a newly leased second distribution centre, with 1 new store and 4 relocations to larger sites in existing locations.

LOSS/(PROFIT) BEFORE TAX

Underlying profit before tax of £21.7m (FY21 £9.6m ¹ ) is before exceptional costs and adjusting items totalling (£30.4m) which result in a reported statutory loss before tax of £8.7m (FY21 £5.5m profit). A reconciliation of underlying and reported profit is provided on page 17.

TAX

Tax for the period is a charge of £0.7m (FY21: £1.9m ¹ ) which has arisen despite the statutory loss as the investment related to restated exceptional items are disallowed for corporate taxes. The tax charge is made up of £0.6m current tax credit offset by £1.3m deferred tax charge.

EPS AND DIVIDENDS

The reported loss results in a loss per share of (6.9p) which compares to a restated FY21 EPS of 2.9p. See Note 9 for details of the restatement.

CASH

In the period the Group generated operating cashflows of £39.5m before movements in working capital.

In July 2021 the Group raised £39.3m (net of costs) from a new equity placing to support investments for growth. Capital expenditures in the period totalled £25.7m, and £6.3m was loaned to the Japan JV, with the balance invested in working capital.

At 26 June 2022 the Group had cash on hand of £17.6m with all of the £50m RCF facility remaining undrawn.

As at 29 November 2022 the Group remains well capitalised with £41m of headroom comprising £9m cash on hand and £32m of unutilised facilities within its £50m RCF facility, immediately prior to the peak cash-generating trading period.

¹ Restated 27 June 2021, see note 9.

INVENTORY

Closing inventory of £43.1m represents an increase of £11m year on year. The majority of the increase is due to increased stock-holding of Velvetiser hot chocolate machines. The Group intends to materially reduce inventory levels in future periods, reducing forward cover to a level reflective of prudent sales forecasts with a modest buffer to allow sales outperformance to forecast.

OTHER WORKING CAPITAL

Trade and other receivables increased from £12.4m to £17.5m due to:

●	£2.4m of rates prepayments following the full reinstatement of property rates,
●	£2.9m of prepayment relating to software as a service following the change in accounting policy (previously treated as an intangible asset).

Current liabilities increased from £52.2m to £57.4m primarily as a result of the recognition of £6.7m of liability in connection with Financial Guarantee contracts with the Japan joint venture. These contracts were subsequently settled in full.

GOING CONCERN

The Directors have undertaken a comprehensive assessment in order to conclude that the Group has the ability to trade as a going concern using forecasts drawn up to 31 December 2023, considering the current macro-economic environment and the potential impact of relevant uncertainties facing all businesses, together with the Group's ability to influence its activities and hence the financial position, cashflows and profitability. The Financial Review considers in more detail the groups trading performance and financial position.

In reaching their conclusion the Directors' considerations have included the following factors:

●	That the group continues to operate within its facilities, which are used to fund day to day working capital requirements.
●	The availability of funding in the form of a £50m RCF, committed until July 2024, with the opportunity to extend by a further year to June 2025. Subject to three covenants: of achieving positive cash in January 2023, of net debt to EBITDA (pre IFRS16) of less than 2.5x, and EBITDA to interest greater than 4x.
●	The Group's current cash position as at 29 November 2022, giving £40.7m of headroom within the facility as the business approaches the peak trading period, with two thirds of annual revenues still to achieve and with the five largest seasonal gifting seasons still to come.
●	The ability to progressively reduce working capital levels by leveraging the vertical integration from manufacture to end-consumer, including the ability to use prices to influence demand.
●	The ability to communicate with a database of two million active customers at modest cost in order to stimulate sales demand.
●	Multiple levers of mitigation in the form of discretionary spend-reduction opportunities.
●	Having made significant capital investments to increase capacity in recent years, the Group has sufficient operational headroom to support several years of volume growth and can therefore exercise discretion over the timing of further capex.
●	Consideration of specific factors impacting current and estimated future consumer demand, including channel and category sales performance.
●	Current elevated levels of consumer price inflation, which may create pressure on consumer discretionary spend, leading the Group to prepare a number of possible scenarios for sales demand during the going concern period.

The Directors have modelled a number of scenarios, including a reverse stress test. In the scenarios sales are flexed, along with the impact on related expenses, working capital changes and other mitigations such as cost reduction and timing of capital expenditures. These scenarios are used to evaluate the implications for gross margins, operating expenses, profitability, working capital, capital expenditure and the consequent financial position , including operating within financial covenants attaching to the RCF. For each scenario the Directors have identified relevant actionable mitigating measures that the Group could undertake at its own discretion to adjust future cashflows.

In making their assessment the Directors have reviewed management forecasts based on scenarios reflecting full-year sales growth/(decline) of +5%, (-9%), (-15%), (-20%) and (-30%).

The directors have considered the impact of mitigations and the Group's ability to implement these changes at its own discretion. The Directors have also considered the probability of each sales scenario, concluding that the more extreme sales decline scenarios are of remote probability. As a result, the Directors have concluded that the use of the going concern basis of accounting is appropriate because there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the company to continue as a going concern in the period to 31 December 2023.

ALTERNATIVE PERFORMANCE MEASURES (APMS)

Management believes that Underlying EBITDA, Underlying Operating Profit and Underlying Profit before tax are useful measures for investors because these are measures closely tracked by management to evaluate the Group's operating performance and to make financial, strategic and operating decisions. These may help investors to understand and evaluate, in the same manner as management, the underlying trends in operational performance on a comparable basis, period on period.

Alternative Performance Measure	Closest equivalent IFRS measure	Definition/reconciling items
Underling EBITDA	Profit/(Loss) from operations	Underlying EBITDA is defined as earnings before net finance costs, depreciation and amortisation, profit/loss on disposal of assets, share-based payment charges (and related taxes), share of profit/loss of JV, tax and exceptional and adjusting items.
Underlying Operating Profit	Profit/(Loss) from operations	Underlying Operating profit is defined as profit/loss from operations before net finance costs, share of profit/loss of JV and exceptional and adjusting items.
Underlying Profit before tax	Profit before tax	Underlying Profit before tax is defined as profit/loss before tax excluding exceptional and adjusting items.

RECONCILIATION OF ADDITIONAL PERFORMANCE AND STATUTORY MEASURES

Underlying EBITDA

	52 weeks ended	52 weeks ended*
	26 June 2022	27 June 2021
	£000	£000
Profit/(Loss) from operations	(6,596)	7,726
Less:
Exceptional items	28,779	4,075
Adjusting items	1,621	-
Share based payments	453	911
Depreciation & amortisation	16,059	15,796
Loss on disposal of non-current assets	516	112
Underlying EBITDA	40,832	28,620

Underlying operating profit

	52 weeks ended	52 weeks ended*
	26 June 2022	27 June 2021
	£000	£000
Profit/(Loss) from operations	(6,596)	7,726
Less:
Exceptional items	28,779	4,075
Adjusting items	1,621	-
Underlying operating profit	23,804	11,801

Underlying profit before tax

	52 weeks ended	52 weeks ended*
	26 June 2022	27 June 2021
	£000	£000
Profit/(Loss) before tax	(8,719)	5,535
Less:
Exceptional items	28,779	4,075
Adjusting items	1,621	-
Underlying profit before tax	21,681	9,610

* Restated for the period ended 27 June 2021 - see note 9.

MATT PRITCHARD

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 26 June 2022

	Notes		Restated*
		52 weeks ended	52 weeks ended
		26 June 2022	27 June 2021
		£000	£000
Revenue		226,133	164,551
Cost of Sales		(93,810)	(62,877)
Cost of Sales - Exceptional	2	(5,501)	-
Gross profit		126,822	101,674

Operating expenses*		(110,140)	(89,873)
Operating expenses - Exceptional*	2	(11,849)	(2,119)
Impairment of financial assets- Exceptional*	2	(11,429)	(1,956)
(Loss)/Profit from operations	3	(6,596)	7,726
Finance income*	4	1,035	711
Finance expenses	4	(1,910)	(1,650)
Share of joint venture post-tax results (loss)*		(1,248)	(1,252)
(Loss)/Profit before tax*		(8,719)	5,535

Tax expense*		(720)	(1,857)
(Loss)/Profit for the period*		(9,439)	3,678

Other comprehensive (loss)/income:
Items that may be subsequently reclassified to profit or loss:
Gains / (losses) on cashflow hedges		1,451	(1,897)
Deferred tax (credit)/charge on derivative financial instruments		(385)	308
Currency translation differences arising from consolidation		(355)	(825)
Currency movement on net investment*		1,297	(730)
Deferred tax charge on net investment currency movement*		(324)	183
Forex reclassified to inventory*		96	143
Other comprehensive income/(loss), net of tax*		1,780	(2,818)
Total comprehensive (loss)/income for the period*		(7,659)	860

Earnings per share - Basic*	5	(6.9p)	2.9p
Earnings per share - Diluted*	5	(6.9p)	2.9p

* Restated 52 weeks ended 27 June 2021 - see note 9.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 26 June 2022

	Notes		Restated*	Restated*
		As at 26 June 2022	As at 27 June 2021	As at 28 June 2020
		£000	£000	£000
ASSETS
Non-current assets
Intangible assets		1,818	3,976	2,897
Property, plant and equipment	6	68,579	53,496	41,868
Right of use asset	6	51,560	30,357	39,848
Deferred tax asset		-	662	1,395
Derivative financial assets		-	-	92
Loan to Joint Venture*		-	3,269	336
Investments in Joint Venture*		-	2,409	757
		121,957	94,169	87,193
Current assets
Derivative financial assets		668	-	1,100
Inventories		43,062	32,038	13,916
Trade and other receivables		17,541	12,421	7,492
Corporation tax receivable		3,264	2,128	1,520
Cash and cash equivalents		17,569	10,046	27,503
		82,104	56,633	51,531
Total assets		204,061	150,802	138,724

LIABILITIES
Current liabilities
Trade and other payables	8	(39,441)	(42,223)	(27,251)
Lease liabilities	7	(10,390)	(9,061)	(10,993)
Other financial liabilities		(6,660)	-	-
Derivative financial liabilities		(48)	(925)	(27)
Provisions		(907)	-	-
		(57,446)	(52,209)	(38,271)
Non-current liabilities
Other payables and accruals	8	-	(2)	(31)
Lease liabilities	7	(44,145)	(30,503)	(35,960)
Other financial liabilities*		-	(642)	(216)
Deferred tax liability		(1,130)	-	-
Derivative financial liabilities		(38)	(28)	(327)
Provisions		(2,919)	(1,585)	(959)
		(48,232)	(32,760)	(37,493)
Total liabilities		(106)	(84,969)	(75,764)

NET ASSETS		98,383	65,833	62,960

EQUITY
Share capital		137	126	126
Share premium		78,014	38,684	37,627
Retained earnings*		13,499	22,938	19,260
Translation reserve		399	754	1,579
Merger reserve		223	223	223
Capital redemption reserve		6	6	6
Other reserves*		6,105	3,102	4,139
Total equity attributable to shareholders		98,383	65,833	62,960

* See note 9 for explanation of restatements as at 28 June 2020 and 27 June 2021.

The financial statements of Hotel Chocolat Group plc, registered number 08612206 were approved by the Board of Directors and authorised for issue on 30 November 2022. They were signed on its behalf by:

Matt Pritchard

Chief Financial Officer
30 November 2022

CONSOLIDATED STATEMENT OF CASH FLOW

For the period ended 26 June 2022

	Notes		Restated*
		52 weeks ended	52 weeks ended
		26 June 2022	27 June 2021
		£000	£000
(Loss)/Profit before tax for the period*		(8,719)	5,535
Adjusted by:
Exceptional items*	2	28,779	4,075
Share of JV loss*		1,248	1,252
Depreciation of property, plant and equipment	6	6,506	5,543
Depreciation of right of use assets	6	9,545	9,287
Amortisation of intangible assets		565	965
Reversal of amortisation (SaaS)		(557)	-
Gain on lease modification		162	(25)
Net interest expense*	4	875	939
Share-based payments		621	911
Loss on disposal of non-current assets	3	516	112
Loss on fair value adjustment to joint venture*	3	-	46
Operating cash flows before movements in working capital		39,541	28,640
Increase in trade and other receivables		(3,286)	(4,718)
Increase in inventories		(20,267)	(19,673)
(Decrease)/ increase in trade and other payables and provisions		(4,217)	13,819
Cash inflows generated from operations		11,771	18,068
Interest received		28	-
Income tax paid		(533)	(1,152)
Interest paid on:
- bank loans and overdraft		(642)	(328)
- derivative financial liabilities		(165)	(198)
- lease liabilities		(1,181)	(1,121)
Cash flows from operating activities		9,278	15,269

Purchase of property, plant and equipment		(24,212)	(18,632)
Purchase of intangible assets		(1,504)	(1,551)
Loan to joint venture		(6,300)	(3,607)
Acquisition of joint venture		-	(300)
Cash flows used in investing activities		(32,016)	(24,090)

Issue of ordinary shares		40,343	347
Costs associated to issue of ordinary shares		(1,002)	-
Capital element of leases		(9,650)	(8,773)
Cash flows from/(used in) financing activities		29,691	(8,426)

Net change in cash and cash equivalents		6,953	(17,247)
Cash and cash equivalents at beginning of period		10,046	27,503
Foreign currency movements		570	(210)
Cash and cash equivalents at end of period		17,569	10,046

* Restated 52 weeks ended 27 June 2021 - see note 9.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 26 June 2022

	Share capital £000	Share Premium £000	Retained earnings* £000	Translation reserve £000	Merger reserve £000	Capital redemption reserve	Other reserves* £000	Total
	Share capital £000	Share Premium £000	Retained earnings* £000	Translation reserve £000	Merger reserve £000	£000	Other reserves* £000	£000
Equity as at 29 June 2020	126	37,627	23,290	1,579	223	6	4,139	66,990
Prior period adjustments	-	-	(4,030)	-	-	-	-	(4,030)
Restated* Equity as at 29 June 2020	126	37,627	19,260	1,579	223	6	4,139	62,960

Profit for the period*	-	-	3,678	-	-	-	-	3,678
Loss on cash flow hedges	-	-	-	-	-	-	(1,897)	(1,897)
Deferred tax charge on derivative financial instruments	-	-	-	-	-	-	308	308
Currency translation differences	-	-	-	(825)	-	-	-	(825)
arising from consolidation	-	-	-	(825)	-	-	-	(825)
Currency movement on net investment*	-	-	-	-	-	-	(730)	(730)
Deferred tax on net investment currency movement*	-	-	-	-	-	-	183	183
Cash flow hedge transferred to inventory*	-	-	-	-	-	-	143	143
Total comprehensive income	-	-	3,678	(825)	-	-	(1,993)	860
for the period:	-	-	3,678	(825)	-	-	(1,993)	860
Transactions with owners:
Issues of share capital	-	1,057	-	-	-	-	-	1,057
Share-based payments	-	-	-	-	-	-	911	911
Deferred tax charge on share-based payments	-	-	-	-	-	-	(11)	(11)
Current tax of share-based payments	-	-	-	-	-	-	56	56
Restated* Equity as at 27 June 2021	126	38,684	22,938	754	223	6	3,102	65,833

Loss for the period	-	-	(9,439)	-	-	-	-	(9,439)
Gain on cash flow hedges	-	-	-	-	-	-	1,451	1,451
Deferred tax charge on derivative financial instruments	-	-	-	-	-	-	(385)	(385)
Currency translation differences	-	-	-	(355)	-	-	-	(355)
arising from consolidation	-	-	-	(355)	-	-	-	(355)
Currency movement on net investment	-	-	-	-	-	-	1,297	1,297
Deferred tax on net investment currency movement	-	-	-	-	-	-	(324)	(324)
Cash flow hedge transferred to inventory	-	-	-	-	-	-	96	96
Total comprehensive income	-	-	(9,439)	(355)	-	-	2,135	(7,659)
for the period:	-	-	(9,439)	(355)	-	-	2,135	(7,659)
Transactions with owners:
Issues of share capital	11	39,330	-	-	-	-	-	39,341
Share-based payments	-	-	-	-	-	-	629	629
Deferred tax charge on share-based payments	-	-	-	-	-	-	239	239
Current tax of share-based payments	-	-	-	-	-	-	-	-
Equity as at 26 June 2022	137	78,014	13,499	399	223	6	6,105	98,383

* Restated 52 weeks ended 27 June 2021 - see note 9 .

Notes to the preliminary information

1. Basis of preparation

The financial information in this preliminary announcement has been extracted from the audited consolidated financial statements for the period ended 26 June 2022 and does not constitute the statutory accounts for the Group.

The consolidated financial information has been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 ("IFRS"). The financial statements have been prepared on the historical cost basis, except for the revaluation of derivative financial instruments, JV loan and financial guarantee contracts that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

New standards, amendments and interpretations, that were effective in FY22, impacting the Group that have been adopted in the annual financial statements for the year ended 26 June 2022, and which have given rise to changes in the Group's accounting policies are set out below. None of these changes had a material impact upon the financial statements.

●	Amendment to IFR S 16, 'Leases' - Covid-19 related rent concessions
●	Interest rate benchmark reform impacting:
	○	IFRS 7 'Financial Instrument Disclosure',
	○	IFRS 9 'Financial Instruments',
	○	IFRS 16 'Leases' and
	○	IAS 39 'Financial Instruments'
●	IFRIC: Configuration or customisation costs in a Cloud Computing Arrangement (IAS38 Intangible Assets)

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments are effective for annual reporting periods beginning on or after 1 January 2022.

New standards, amendments and interpretations which are not yet effective at the reporting date are set out below:

●	Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and A nnual Improvements 2018-2020 (All issued 14 May 2020)
●	Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (issued on 12 February 2021) - not endorsed by the UKEB
●	Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on 12 February 2021) - not endorsed by the UKEB

Going concern

The Board has concluded that it is appropriate to adopt the Going Concern basis.

In reaching their conclusion the Directors' considerations have included the following factors:

●	That the group continues to operate within its facilities, which are used to fund day to day working capital requirements.
●	The availability of funding in the form of a £50m RCF, committed until July 2024, with the opportunity to extend by a further year to June 2025. Subject to three covenants: of achieving positive cash in January 2023, of net debt to EBITDA (pre IFRS16) of less than 2.5x, and EBITDA to interest greater than 4x.
●	The Group's current cash position as at 29 November 2022, giving £40.7m of headroom within the facility as the business approaches the peak trading period, with two thirds of annual revenues still to achieve and with the five largest seasonal gifting seasons still to come.
●	The ability to progressively reduce working capital levels by leveraging the vertical integration from manufacture to end-consumer, including the ability to use prices to influence demand.
●	The ability to communicate with a database of two million active customers at modest cost in order to stimulate sales demand.
●	Multiple levers of mitigation in the form of discretionary spend-reduction opportunities.
●	Having made significant capital investments to increase capacity in recent years, the Group has sufficient operational headroom to support several years of volume growth and can therefore exercise discretion over the timing of further capex.
●	Consideration of specific factors impacting current and estimated future consumer demand, including channel and category sales performance.
●	Current elevated levels of consumer price inflation, which may create pressure on consumer discretionary spend, leading the Group to prepare a number of possible scenarios for sales demand during the going concern period.

In making their assessment the Directors have reviewed management forecasts based on scenarios reflecting full-year sales growth/(decline) of +5%, (-9%), (-15%), (-20%) and (-30%).

2. Exceptional items

		Restated*
	52 weeks ended	52 weeks ended
	26 June 2022	27 June 2021
	£000	£000
Impairment related to joint venture investment*	21,836	1,764
Saint Lucia impairment	1,200	216
Goodwill impairment	425	-
Store impairment (release)/charge	(5,225)	2,095
Material non-recurring events: operating costs	5,042	-
Total operating expenses - exceptional	23,278	4,075
Material non-recurring costs: margin	5,501	-
Total exceptional items	28,779	4,075

* Restated 52 weeks ended 27 June 2021 - see note 9

Impairment related to joint venture investment

Credit loss on loans

There is an impairment charge of £11,429k during the year ended 26 June 2022 (27 June 2021: restated £1,956k) related to the revised assessment of probability of recovery of loans made to the Japan joint venture over the period 2018 to 2022.

Credit loss on guarantees

There is an impairment charge of £5,936k during the year ended 26 June 2022 (27 June 2021: restated -£192k) related to guarantees provided by the Group in respect of external finance leases of the Japan joint venture which were called when the Japan joint venture obtained Court approval for Civil Rehabilitation restructuring proceedings (Minji Saisei).

Impairment on equity investment

There is an impairment charge of £4,471k during the year ended 26 June 2022 (27 June 2021: £nil) related to the recognition of losses in the joint venture in Japan.

Saint Lucia impairment

There is an impairment of £1,200k during the year ended 26 June 2022 (27 June 2021: £216k) relating to the assets of the Saint Lucia business. The charge in 2022 related to the decline in the value of the Project Chocolat visitor attraction due to the continuing impact of COVID-19 on tourism in Saint Lucia in FY21. The charge in 2021 was due to a decline in the value of the land and property and also due to the impact of COVID-19.

Goodwill impairment

There is an impairment charge of £425k during the year ended 26 June 2022 (27 June 2021: £nil) related to goodwill which arose from the acquisition of Rabot 1745 Limited. The goodwill related to the Rabot 1745 range of beauty products which is no longer supportable as Rabot 1745 Limited is no longer trading.

Store Impairments

US Gain on remeasurement of lease liabilities

There is an impairment release of £3,491k during the year ended 26 June 2022 (27 June 2021: £2,069k charge) relating to the release of lease liabilities of the closed US stores. The prior year charge increased the impairment to 100% of the value of remaining plant & equipment and right of use assets under IFRS 16, in recognition of poor trading conditions and the decision to close the US stores.

UK Store impairments

There is an impairment release of £1,734k during the year ended 26 June 2022 (27 June 2021: £26k charge) relating to fixed assets and right of use assets of stores. The release is primarily due to the improved trading conditions during the period as well as management's assessment of future cashflows over the remaining lease period for each store. The key assumptions used in the future cashflows were sales and EBITDA (based on board approved plans), assumed nil growth rate for 5 years and a discount rate of 9.670% (27 June 2021: 9.335%).

Material non-recurring events - Operating costs

Capital cash deposit impairment

There is a provision of £2,477k during the year ended 26 June 2022 (27 June 2021: £nil) for doubtful recovery of a cash deposit made to a manufacturer of capital equipment that went into administration.

New sale and operation planning process

Non-recurring professional fees of £809k have been incurred during the year ended 26 June 2022 (27 June 2021: £nil) in relation to the implementation of a new sales and operation planning process.

US exit costs

There are exit costs of £611k during the year ended 26 June 2022 (27 June 2021: £nil) which relate to the doubtful recovery of rent deposits and staff redundancy costs.

Restructuring costs

There is an expense of £181k during the year ended 26 June 2022 (27 June 2021: £nil) related to staff redundancy costs.

Onerous contracts

Forward contracts for items of stock had been entered into to support activities in the US and Japan markets. Following management's decision to exit these markets, £964k has been provided for (27 June 2021: £nil).

Material non-recurring events - Margin

Discontinued UK stock lines

There is a provision of £2,959k during the year ended 26 June 2022 (27 June 2021: £nil) related to the decision to exit certain UK product categories.

US stock provision

There is a provision of £2,542k during the year ended 26 June 2022 (27 June 2021: £nil) related to the reduced value of US stock following the decision to exit the US market.

3. (Loss)/Profit from operations

(Loss)/Profit from operations is arrived at after charging/(crediting):

	Notes		Restated*
		52 weeks ended	52 weeks ended
		26 June 2022	27 June 2021
		£000	£000
Staff costs		55,731	51,591
Government grants received¹		(94)	(553)
Depreciation of property, plant and equipment	6	6,506	5,543
Depreciation of right of use asset	6	9,545	9,287
Amortisation of intangible assets		565	965
Reversal of amortisation (SaaS)		(557)	-
Loss on disposal of non-current assets		516	112
Loss on fair value adjustment to joint venture		-	46
Exceptional items²		28,779	4,075
Loss/(profit) on exchange differences		(346)	(55)
Research & expenditure credit		-	44
Write down of inventory recognised as an expense		9,797	3,098
Bad debt expense		(2)	(6)

1 Governm ent grants received include the Retail Hospitality Leisure Grant Fund and the Closed Business Lockdown Payment.

2 See note 2 - Exceptional items

* Restated 52 weeks ended 27 June 2021 - see note 9

4. Finance income and expenses

		Restated*
	52 weeks ended	52 weeks ended
	26 June 2022	27 June 2021
	£000	£000
Interest from related party*	967	656
Interest on bank deposits	68	3
Unrealised interest on derivative financial instruments	-	52
Finance income	1,035	711

Interest on bank borrowings	552	328
Unrealised interest on derivative financial instruments	12	-
Realised interest on derivative financial liabilities	165	201
Interest on lease liabilities	1,181	1,121
Finance expenses	1,910	1,650

* Restated 52 weeks ended 27 June 2021 - see note 9.

5. Earnings per share

(Loss)/profit for the period used in the calculation of the basic and diluted earnings per share. Diluted (loss)/profit per share is capped at the basic earnings per share as the impact of dilution cannot result in a reduction in the loss per share.

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:

		Restated*
	52 weeks ended	52 weeks ended
	26 June 2022	27 June 2021
Weighted average number of share in issue for the period - basic	136,313,568	125,573,623
Effect of dilutive potential share:
Save as You Earn Plan	172,020	29,711
Long-term incentive plan	125,380	169,669
Founder Shares	113,536	-
Weighted average number of shares in issue used in the calculation	136,724,504	125,773,003
of earnings per share (number) - Diluted	136,724,504	125,773,003
Basic earnings per share (pence)	(6.9p)	2.9p*
Diluted earnings per share (pence)	(6.9p)	2.9p*

* Restated 52 weeks ended 27 June 2021 - see note 9.

As at 26 June 2022, the total number of potentially dilutive shares issued under the Hotel Chocolat Group plc Long-Term Incentive Plan was 3,649,911 (27 June 2021: 285,289). Due to the nature of the options granted under this scheme, they are considered contingently issuable shares and therefore have no dilutive effect. On 23 July 2021, the Company announced the completion of an equity placing for a total of 11,112,913 new ordinary shares.

6. Property, plant and equipment

			Freehold property	Leasehold improve-ments	Furniture & fittings, equipment & hardware			Plant & machin-ery			Right of use asset		Total
			£000	£000	£000			£000			£000		£000
52 weeks ended 27 June 2021
Cost:
As at 28 June 2020			17,038	1,397	39,838			26,816			54,830		139,919
Additions			4,523	567	2,066			12,176			5,468		24,800
Disposals			(5)	(80)	(280)			(157)			(5,872)		(6,394)
Translation differences			(1,609)	-	(343)			(1)			(555)		(2,508)
As at 27 June 2021			19,947	1,884	41,281			38,834			53,871		155,817
Accumulated depreciation & impairments:
As at 28 June 2020		(3,267)		(768)		(26,173)			(13,013)			(14,982)		(58,203)
Depreciation charge		(168)		(142)		(3,789)			(1,444)			(9,287)		(14,830)
Disposal		-		-		275			133			2,431		2,839
Impairment		(216)		-		(419)			-			(1,676)		(2,311)
Translation differences		225		68		248			-			-		541
As at 27 June 2021		(3,426)		(842)		(29,858)			(14,324)			(23,514)		(71,964)

Net book value:
As at 27 June 2021		16,521		1,042		11,423			24,510			30,357		83,853

52 weeks ended 26 June 2022
Cost:
As at 27 June 2021		19,947		1,884		41,281			38,834			53,871		155,817
Additions		2,715		93		4,481			16,923			31,159		55,371
Disposals		(3)		-		(1,154)			(126)			(4,122)		(5,405)
Reclassification²		-		-		(1,453)			-			1,453		-
Translation differences		1,588		-		402			3			20		2,013
As at 26 June 2022		24,247		1,977		43,557			55,634			82,381		207,796
Accumulated depreciation & impairments:
As at 27 June 2021	(3,426)			(842)	(29,858)		(14,324)			(23,514)			(71,964)
Depreciation charge	(253)			(192)	(3,852)		(2,209)			(9,545)			(16,051)
Disposal	-			-	1,082		-			2,244			3,326
Reclassification²	-			-	610		-			(610)			-
Impairment¹	(1,200)			-	1,130		(2,477)			604			(1,943)
Translation differences	(371)			-	(654)		-			-			(1,025)
As at 26 June 2022	(5,250)			(1,034)	(31,542)		(19,010)			(30,821)			(87,657)
Net book value:
As at 26 June 2022	18,997			943	12,015		36,624			51,560			120,139

1 The following impairments were made in the period ended 26 June 2022: Saint Lucia estate impairment charge £1,200k (27 June 2021: £216k), Store imp airment release £1,734k (27 June 2021: £2,095k charge) and capital cash deposit impairment charge £2,477k (27 June 2021: £nil).

2 Reclassifications represent right of use assets previously categorised within furniture & fittings, equipment & hardware.

As at 26 June 2022, the net book value of freehold property includes land of £4,509k (27 June 2021: £3,806k), which is not depreciated. Included in freehold property is £2,438k of assets under construction (27 June 2021: £2,997k). Included in Furniture & fittings, equipment & hardware is £2,005k of assets under construction (27 June 2021: £448k). Included in Plant & machinery is £7,475k of assets under construction (27 June 2021: £14,610k).

7. Leases

The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate (IBR). The determination of the discount rate is considered to be a significant judgement. The discount rate applied ranged between 2.0% and 4.8% (27 June 2021: 2.0% and 3.5%).

All leases where the Group is a lessee are accounted for by recognising a right of use asset and a lease liability except for:

●	Leases of low value assets, and
●	Leases with a term of 12 months or less.

Amounts recognised in the consolidated statement of financial position

Right of Use Assets	Land & buildings	Equipment	Total
Right of Use Assets	£000	£000	£000
At 28 June 2020	39,623	225	39,848
Additions to right of use assets	5,468	-	5,468
Amortisation	(9,068)	(219)	(9,287)
Effect of modification of lease	(1,693)	-	(1,693)
Derecognition	(1,748)	-	(1,748)
Impairment	(1,676)	-	(1,676)
Foreign exchange	(555)	-	(555)
As at 27 June 2021	30,351	6	30,357
Additions to right of use assets	31,159	-	31,159
Amortisation	(9,539)	(6)	(9,545)
Reclassification	843	-	843
Effect of modification of lease	(1,281)	-	(1,281)
Derecognition	(597)	-	(597)
Impairment	604	-	604
Foreign exchange	20	-	20
As at 26 June 2022	51,560	-	51,560

Lease liabilities	Land & buildings	Equipment	Total
Lease liabilities	£000	£000	£000
At 28 June 2020	46,674	279	46,953
Additions to lease liabilities	5,534	-	5,534
Interest expense	1,117	4	1,121
Effect of modification of lease	(1,717)	-	(1,717)
Derecognition	(1,790)	(9)	(1,799)
Lease payments	(9,697)	(207)	(9,904)
Foreign exchange	(624)	-	(624)
As at 27 June 2021	39,497	67	39,564
Additions to lease liabilities	29,604	-	29,604
Interest expense	1,181	-	1,181
Effect of modification of lease	(4,331)	-	(4,331)
Derecognition	(989)	-	(989)
Lease payments	(10,764)	(67)	(10,831)
Foreign exchange	337	-	337
As at 26 June 2022	54,535	-	54,535

During period ended 26 June 2022, a new lease for a distribution centre in Northampton was entered into and £24,703k is included in the additions of the right of use assets and lease liabilities. This lease term is 10 years, the Group has no right to extend or terminate the lease and there are no variable lease payments associated with the lease arrangement.

	52 weeks ended 26 June 2022	52 weeks ended 27 June 2021
	£000	£000
Non-current	44,145	30,503
Current	10,390	9,061
Total lease liabilities	54,535	39,564

Leases - cash outflow

	52 weeks ended 26 June 2022	52 weeks ended 27 June 2021
	£000	£000
Capital element of lease cash outflows	9,650	8,773
Interest element of lease cash outflows	1,181	1,121
Low value lease cash outflows	4	1
Short term lease cash outflows	892	537
Variable lease cash outflows	3,661	1,667
Total contractual cashflows	15,388	12,099

Amounts recognised in the consolidated statement of comprehensive income

	Land & buildings	Equipment	Total
	£000	£000	£000
52 weeks ended 27 June 2021
Depreciation charge on right of use assets	9,069	218	9,287
Impairment	1,676	-	1,676
Interest on lease liabilities	1,117	4	1,121
Expenses related to low value leases	-	1	1
Expenses related to short term leases	386	151	537
Expenses related to variable lease payments¹	1,667	-	1,667
As at 27 June 2021	13,915	374	14,289
52 weeks ended 26 June 2022
Depreciation charge on right of use assets	9,539	6	9,545
Impairment	(604)	-	(604)
Interest on lease liabilities	1,181	-	1,181
Expenses related to low value leases	-	4	4
Expenses related to short term leases	116	776	892
Expenses related to variable lease payments¹	3,612	49	3,661
As at 26 June 2022	13,844	835	14,679

1 The amount recognised in the income statement that arises from rent concessions to which the Group has applied the practical expedient under IFRS 16 for the period ended 26 June 2022 is £407k (27 June 2021: £726k).

Maturity analysis of Lease Liabilities

Lease liabilities	52 weeks ended 26 June 2022	52 weeks ended 27 June 2021
Lease liabilities	£000	£000
Maturity analysis - contractual undiscounted cashflows
Less than one year	10,610	10,237
Between one and two years	11,023	9,470
Between two and five years	21,993	20,377
After five years	18,062	7,481
Total contractual cashflows	61,688	47,565

8. Trade and other payables

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates
to fair value.

	52 weeks ended 26 June 2022	52 weeks ended 27 June 2021
	£000	£000
Current
Trade payables	19,830	13,962
Other payables	1,471	11,250
Other taxes payable	3,011	330
Accruals and deferred income	15,129	16,681
	39,441	42,223
Non-current
Other payables and accruals	-	2
	-	2

9. Prior year restatement

Following a helpful and constructive review of the FY21 Annual Report and Accounts conducted by the Financial Reporting Council's Corporate Reporting Review team, the Directors have revisited a number of items in the FY21 Annual Report and Accounts in relation to IAS21 ('The Effects of Changes in Foreign Exchange Rates') and IFRS9 ('Financial Instruments'), resulting in restatements of the comparative amounts in the FY21 balance sheet and statement of comprehensive income and position at 28 June 2020 as set out overleaf.

The restatements arose in response to specific enquiries made by the FRC, and the Directors have liaised with both the FRC and its auditors during the process of formulating the restatements which are the responsibility of the Directors.

The FRC's review is based solely on the contents of the FY21 Annual Report and Accounts and does not benefit from detailed or other knowledge of the business. The FRC's remit is to consider compliance with reporting requirements, not to verify accounts or provide assurance that accounts are correct in all material respects. As such the FRC's enquiry should not be relied upon by the company or any third party, including but not limited to investors and shareholders.

Fair valuation of loan to Japan joint venture and assessment of the expected credit loss

On 13 July 2018 the Group and the Japan joint venture entered into a loan facility of £4.5 million.

The Loan Facility Agreement has historically been classified and measured at amortised cost. At the initial recognition date, the Group concluded that the agreed interest rate represented a market rate of interest based on simple analysis. Therefore, at initial recognition the fair value of the Loan Facility Agreement was determined to be equivalent to the transaction price. The Loan Facility Agreement was subsequently measured at amortised cost using the effective interest rate ("EIR method").

On the initial recognition date and subsequent reporting periods, the Group did not determine an expected credit loss ("ECL") as the Directors believed there was no change in credit risk and the probability of default had been determined as nil. The Group has reperformed its analysis in relation to the market rate of interest and the expected credit loss.

The Group has concluded that the agreed interest rate did not represent a market rate of interest at initial recognition and at subsequent drawdowns above the agreed facility amount. The difference between the agreed interest rate and the market rate of interest gives rise to a difference between the fair value at initial recognition and the transaction price. For each draw down, this difference has been recognised as an adjustment to the investment in joint venture.

Additionally, the Group has reperformed the expected credit loss calculation and has determined that an expected credit loss should have been recognised following an assessment that the financial asset was credit-impaired. As a result, the fair value of the loans to the joint venture at initial recognition and the carrying amount at each subsequent reporting date have been recalculated and revised.

The impact on the restatement was to impair the Loan to Joint Venture by £5,369k as at 28 June 2020 and by a further £3,515k during the period ended 27 June 2021. Additionally, the Investment in Joint Venture was increased by £757k as at 28 June 2020 and by a further £1,652k during period ended 27 June 2021.

Classification and measurement of Financial Guarantee Contracts ('FGCs')

Financial guarantee contracts were issued by the Group to Sumitomo Mitsui Finance and Leasing Company Limited (or "Sumitomo") in relation to 22 leases entered into between Sumitomo and the Japan joint venture from 1 October 2019 to 27 June 2021. The Group has not previously accounted for the guarantees as financial guarantee contracts in accordance with the requirements of IFRS 9 and no amounts were previously recognised within the financial statements with respect to these contracts, other than the disclosure of the existence of and the total value of the guarantees. The Group reassessed the accounting treatment.

Following a review of the accounting treatment, the Group has concluded that the guarantees meet the definition of a financial guarantee contract as per IFRS 9. At initial recognition, the guarantees should be measured at fair value. Subsequent to initial recognition, the guarantees should be measured at the higher of the following values:

●	the amount of t he loss allowance determined in accordance with IFRS 9; and
●	the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15.

The guarantees were issued by Hotel Chocolat Group Plc for nil consideration, i.e., no premium was paid or received. The Group has concluded that the fair value of the guarantees at initial recognition is equivalent to the benefit received by the Japan joint venture in obtaining an agreed rate of interest on the lease contracts that is below the market rate of interest. Therefore, the fair value of guarantees is considered to be the difference between the present value of the lease cashflows discounted using a market rate of interest and the agreed rate of interest. In addition, an expected credit loss ("ECL") is calculated in accordance with the requirements of IFRS 9 and is compared to the fair value at each subsequent reporting date.

The impact of the restatement to recognise FGC was £216k for 28 June 2020 and increased by a further £426k for 27 June 2021. The corresponding entries were recorded as an increase to the Group's investment in the Japan joint venture.

Consequential amendments

During the period ended 28 June 2020 the deferred tax asset was restated to £1,395k from £597k due to an increase in tax losses carried forward following the above restatements. The deferred tax asset unwound in the year ended 27 June 2021 as tax losses were used. In addition, for the period ended 27 June 2021, an additional tax credit was recognised of £282k in respect of the above restatements.

Following increases in the carrying value of the investments in joint venture as a result of the above restatement, the Group has recognised its share of the joint venture losses for the period 27 June 2021 of £998k (26 June 2020: £606k).

Currency movement on net investment reclassification to Other Comprehensive Income

In response to the FRC review, the currency loss arising on the retranslation of the net investment in foreign subsidiaries of £730k has been restated to be shown as part of other comprehensive income in line with IAS 21 rather than being taken directly to equity. A deferred tax credit of £183k has been recognised at a rate of 25% .

Cash flow hedges transferred to inventory

In addition to the adjustments from the FRC enquiries, management have considered other adjustments taken directly to equity for the period ended 27 June 2021 and note that the cash flow hedges transferred to inventory should also be recognised in other comprehensive income.

Impact on prior periods

Each affected financial statement line item has been restated for the comparative period, including the opening statement of financial position as at 28 June 2020. As a result of the changes to the income statement for the period ended 27 June 2021, basic and diluted EPS reduced by 1.6p.

The following tables summarise the impacts on the Group's consolidated financial statements:

Consolidated Statement of Financial Position (extract)	As at 28 June 2020	Total adjustments	As at 28 June 2020 (restated)
	(as previously reported)
	£000	£000	£000
Investment in joint venture	-	757	757
Loan to joint venture	5,705	(5,369)	336
Corporation tax receivable	1,520	-	1,520
Deferred tax asset	597	798	1,395
Other assets	134,716	-	134,716
Total assets	142,538	(3,814)	138,724

Financial guarantee contract	-	(216)	(216)
Other liabilities	(75,548)	-	(75,548)
Total liabilities	(75,548)	(216)	(75,764)
Net assets	66,990	(4,030)	62,960

Retained earnings	23,290	(4,030)	19,260
Other equity	43,700	-	43,700
Total equity	66,990	(4,030)	62,960

	As at 27 June 2021	Total adjustments	As at 27 June 2021 (restated)
Consolidated Statement of Financial Position (extract)	(as previously reported)
	£000	£000	£000
Investment in joint venture	-	2,409	2,409
Loan to joint venture	12,153	(8,884)	3,269
Corporation tax receivable	1,049	1,079	2,128
Deferred tax asset	479	183	662
Other assets	142,334	-	142,334
Total assets	156,015	(5,213)	150,802

Financial guarantee contract	-	(642)	(642)
Other liabilities	(84,327)	-	(84,327)
Total liabilities	(84,327)	(642)	(84,969)
Net assets	71,688	(5,855)	65,833

Retained earnings	28,976	(6,038)	22,938
Other equity	42,712	183	42,895
Total equity	71,688	(5,855)	65,833

Consolidated Statement of Comprehensive Income (extract)	As at 27 June 2021	Total adjustments	As at 27 June 2021
	(as previously reported)		(restated)
	£000	£000	£000
Gross Profit	101,674	-	101,674
Operating expenses	(89,873)	-	(89,873)
Exceptional items	(2,311)	(1,764)	(4,075)
Profit from Operations	9,490	(1,764)	7,726

Finance income	238	473	711
Finance expenses	(1,650)	-	(1,650)
Share of joint venture post-tax results	(254)	(998)	(1,252)
Profit before tax	7,824	(2,289)	5,535

Tax expense	(2,139)	282	(1,857)
Profit for the period	5,685	(2,007)	3,678

Other comprehensive (loss)/income	(2,414)	-	(2,414)
Currency movement on net investment	-	(730)	(730)
Deferred tax charge on net investment currency movement	-	183	183
Cash flow hedges transferred to inventory	-	143	143
Total comprehensive income for the period	3,271	(2,411)	860

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

FR EAFAFELEAFEA

Companies

Hotel Chocolat Group (HOTC)

Full Archive

UK 100

Latest directors dealings

All directors dealings today