Why Ho­tel Choco­lat con­tin­ues to be a sweet in­vest­ment

It has re­paid bond debt early and an­a­lysts are up­grad­ing earn­ings fore­casts

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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 yearend 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)

It is see­ing top line growth and mar­gin ex­pan­sion

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