BRITISH CACAO GROWER

Chocolate. Reinvented.

FY20 Preliminary Results

September 2020

Financial Highlights

1

1. Underlying EBITDA is pre IFRS16, and excludes share-based payment charges and related tax and exceptional non-cash impairment charges

2. Exceptional costs are non-cash impairment charges of £10m (FY19: nil)

STRONG FINANCIAL POSITION: Net cash of £16.5m and liquidity headroom of £51.5m as at 20 September.

Operational Highlights

COVID-19 HAS ACCELERATED OUR

EXISTING GROWTH STRATEGIES

• UK lockdown immediately prior to Easter gift season resulted in lower sales and higher variable costs

• Rapid and safe business-wide actions partly mitigated impact and also improved ongoing resilience and flexibility

• Customer loyalty evidenced by multichannel switching, informing our investments for short and medium term

Strategic Focus:

1. Continue to improve luxury gifting

2. In-home growth via Velvetiser and new subscriptions

3. Leisure, leveraging new lifestyle physical format

4. Customer loyalty across channels: new digital loyalty app

OPERATIONAL HIGHLIGHTS

UK CHANNEL FLEXIBILITY & RESILIENCE IMPROVED

• Retail locations closed for 12 weeks at Easter, with factory closed for 8 weeks. Digital growth of over 150%Swift, safe and dynamic response to shifting customer demand

• Existing multichannel plans accelerated; DC capacity increased with multichannel flexibility, improved website, new products and new services

• VIP loyalty database and improving customer engagement

• Equity raised for growth investment and to mitigate near-term volatility

MAKING PROGRESS ON INTERNATIONAL MODEL

• Whilst Covid-19 has impacted results, market attractions remain strong

• Japan JV(1): physical locations attractive, rents set as a percent of sales

• Pursuing digital opportunity in USA

2

1. Current minority interest in Japan JV only consolidates to the extent of the initial equity investment of £7k

FY20

Post IFRS16

£m

Impact of

adoption

of IFRS 16

FY20

Pre IFRS16

£m

FY19

£m

Revenue 136.3 – 136.3 132.5 Revenue growth 3% Year on Year (+14% H1, -14% H2)

Cost of sales (53.3) – (53.3) (45.1) Gross margin -500bps due to temporary closures of Retail and the factory

Operating expenses (61.4) 12.1 (73.5) (66.7) Overheads grew +10% (Pre IFRS16), rising from 50.3% of sales to 54.0%

Underlying EBITDA 21.6 12.1 9.4 20.7

Share based payments (0.4) – (0.4) (0.9)

Depreciation & amortisation & loss on disposal (17.3) (10.9) (6.4) (5.5)

Operating profit 3.9 1.3 2.7 14.3

Finance income 0.2 – 0.2 0.1

Finance expenses (1.7) (1.4) (0.3) (0.3)

Underlying Profit before tax 2.4 (0.1) 2.5 14.1

Non Cash Impairment (10.0) (3.2) (6.8) – Non-cash impairment including goodwill, selected Retail locations & Saint Lucia

Reported Profit/(Loss) Before Tax (7.5) (3.3) (4.3) 14.1

Tax expense / (credit) 1.1 – 1.1 (3.1)

Profit/(Loss) for the period (6.5) (3.3) (3.2) 10.9

EPS/(LPS) – basic (5.5) (2.7) 9.7Profit for the period divided by the weighted average number of shares in

issue (FY20: 118m, FY19: 113m)

EPS/(LPS) – diluted (5.5) (2.7) 9.5

3

Group Income Statement

As at

28 June 2020

£m

As at

30 June 2019

£m

Non-current assets

Intangible assets 2.9 2.9

Property, plant and equipment 41.0 40.1

Right of use asset 40.7 –

Derivative financial assets 0.1 –

Prepayments – –

Loan to Japan Joint venture 5.7 2.5

Deferred tax asset 0.6 0.6

91.0 46.2

Current assets

Derivative financial assets 1.1 0.1

Inventories 13.9 12.8

Trade and other receivables 6.9 9.4

Corporation Tax receivable 1.5 –

Cash and cash equivalents 28.1 5.8 Equity placing for growth investment raised £22m

51.5 28.0

Total assets 142.5 74.2

Current liabilities

Trade and other payables 27.2 19.5

Lease liabilities 11.0 –

Corporation tax payable – 1.6

Derivative financial liabilities 0 –

Borrowings – –

38.3 21.2

Non-current liabilities

Other payables and accruals 0 2.8

Lease liabilities 36.0

Derivative financial liabilities 0.3 –

Provisions 1.0 0.9

37.3 3.7

Total liabilities 75.5 24.9

NET ASSETS 67.0 49.3 56

Group Balance Sheet

4

5

Group Cash Flow

52 weeks ended

28 June 2020

£m

52 weeks ended

30 June 2019

£m

Profit/(Loss) before tax for the period (7.5) 14.1

Adjusted by:

Depreciation, amortisation & impairment 27.3 5.5

Net interest expense 1.5 0.2

Other non-cash expenses 0.4 0.3

Operating cash flows before movements

in working capital21.6 20.1

Changes in working capital 5.3 1.9

Cash inflow generated from operations 27.0 22.0

Income tax paid (2.5) (2.8)

Interest received 0 0

Interest paid (1.7) (0.3) Includes (£1.4m) relating to IFRS16 leases, (£0.2m) relating to derivative financial liabilities.

Cash flows from operating activities 22.9 18.9

Cash flows from/(used in) investing activities (17.2) (11.3) Includes (£3.1m) loans to Japan joint venture (FY19: £2.5m)

Cash flows from/(used in) financing activities 16.7 (2.1) Placing proceeds of £22m, (£7.8m) of payments relating to IFRS16 liabilities

Net change in cash and cash equivalents 22.3 5.5

Cash and cash equivalents at beginning of period 5.8 0.2

Foreign currency movements (0.1) 0.1

Cash and cash equivalents at end of period 28.1 5.8

5

(80.0%)

(40.0%)

0.0%

40.0%

W/E

05/01

Easter

fortnight*

FY20

Yr end

28/06

W/E

13/09

Retail YOY £m Online YoY £m

Improving Sales Trend, Increasingly Multichannel

6

All UK Retail

locations close

(Two weeks before

Easter sales peak)

UK Retail

re-opens

(Father’s Day fell one

week later, 21/06/20 vs

16/06/19)

UK Retail & Online, combined YOY Sales %

UK Retail & Online YOY Sales £m

*Easter fell on 12/4/20 vs 19/04/19 so two weeks data

combined to reduce timing distortion

0

FY20 Operational Results

7

H1 Underlying EBITDA +£1mYoY H2 Underlying EBITDA (-£12m) YoY

H1 Growth driven

by brand strength,

product innovation

and VIP loyalty

Impact of channel

mix and increase of

capex-light third-

party products

including Velvetiser

9 new locations

Higher supply-chain

costs at peak

Investments in

digital, marketing

and innovation

teams & systems

Retail closed for

12 weeks over

Easter, normally

generate 70% of

H2 sales

Saint Lucia Hotel

closed March to

September

Costs to collect

stock from retail &

pre-bundle for

online

Fixed costs from 8

week factory

closure to

implement safe

distancing

Clearance costs

post-Easter having

built inventory for

+14% YoY growth

Continued

investments in

digital, marketing

and innovation

Net of furlough

support and rates

relief

H1 FY19

Underlying

EBITDA

Sales Volume

+14% YoY

Margin rate

(80bps)

Overheads

increase

£5.3m (+15%)

H1 FY20

Underlying

EBITDA

H2 FY19

Underlying

EBITDA

Sales Volume

-14% YoY

Margin rate

(1370bps)

Overheads

increase

£1.5m (+5%)

H2 FY20

Underlying

EBITDA loss

£17.3m£18.5m

£3.4m

(£9.0m)

5

Strategy Evolved to Accelerate Growth

8

2021 and beyond:

“To become the leading global direct-to-consumer

premium chocolate brand”

2016 to 2020:

“The Leading UK Premium Chocolate Brand”

GROWTH PILLARS:

1) Grow UK Physical salesLocations, experiences, formats

2) Grow UK DigitalEase of access via digital and wholesale

3) Increase ManufacturingEfficiency, capacity, product innovation

4) InternationalTest, Learn, Grow

1) Luxury GiftingTake-home & delivered gifts

2) In-homeVelvetiser and subscriptions

3) LeisureImpulse self-purchase and experiences

A channel-agnostic approach, provided we can both deliver a premium

customer brand-experience, and achieve our financial returns.

Opportunity to Accelerate

Source: 1) Mintel 2) Canadean 3) Allegra .4) Forbes, Harper Dennis Hobbs, Yano Keizai

• £20bn UK gifting market1

• £6bn UK chocolate market2, £8bn café market3

• US & Japan markets 3-5 times larger than UK4

• Low market share offers headroom for growth

Large and growing markets

• Brand resonates in UK, USA, and Japan,

• Differentiated taste “More cacao, less sugar”

• Accessible luxury. prices from £1 to £350 spanning

self-purchase and gifting

• Founder-led culture, innovation a long-term

strength

Differentiated brand & products

• Vertical integration is responsive whilst

also protecting intellectual property in products

• Further economies of scale available to improve

chocolate manufacturing margin

• 3rd party manufacturing for ‘extension’ categories

• Recent investments to increase distribution capacity

with greater multichannel flexibility designed in

Strong & flexible platform

• USA and Japan business models both similar to UK

• Digital gifts & subscriptions offer strong potential

• Committed to Hotel Chocolat physical model,

improving offer, anticipating lower property costs

• Carefully selected digital wholesale partners

complement owned channels for wider access

Growth Opportunities

9

Progress on our Three Strategic Growth-Drivers

Luxury giftingRationalised existing range ‘tail’ to make space for innovation pipeline:

• Range extension with new gifts at both higher and lower price points

• Vegan Nutmilk gift assortments launching soon

• VIP app will deliver the easiest gift sending experience

• Completely new ranges for key Japan Valentines and White Day 2021 gifting seasons

In-home recurring purchase & subscriptions• Velvetiser: Increasing user-base, with fantastic customer reviews.

Wider range of flavours, new lattes launch this autumn

• Subscriptions: Inventing Room, for innovation,

Recurring Purchase, for price and convenience,

Rabot Coterie, for sustainability and super-fine cacao

Leisure• Physical retail is key to driving brand engagement

• Japan property market is based on turnover rents = retail is thriving as a result

• Japan leading the development of new lifestyle formats with more year-round

reasons to visit and greater competitive differentiation

10

126 UK physical locations

• Sales currently lower YOY, but improving trend post-lockdown; smaller towns and retail parks strongest with central London softer

• Unparalleled ability to drive brand engagement through impulse self-treats, engaging customer service and product demonstrations. Recruited 1.3m VIP’s

• 67% of leases have a break or end in the next 24 months, with potential for renegotiation

• Anticipate adjustment in property market, bringing new opportunities in 2021 and beyond

Customers that were once ‘retail-only’ are increasingly also buying online

• Post-lockdown, almost half of UK sales generated by online, recurring purchase and digital partners

• Investments in people, systems and supply-chain to step-change capacity, flexibility and customer services, engaging 1.3m active VIP members (+50% YoY)

• For the winter gifting peak will hold inventory in DC later into the season to maximise responsiveness to changes in channel mix

Multichannel Focus

11

Operational Capacity & Capability

12

Manufacturing capacity increased by 50%

Freehold site with capacity to grow from current three lines to seven, further increasing capacity by +130%

Factory closed for eight weeks from March in order to implement safe-distancing measures, resulting in 10%

slower line-speeds, but now more than mitigated by:

• Commercial range rationalisation, with range tail removed

• Introduction of third shift, increasing output capacity by c.50%

• Improved planning, reducing changeover downtime and improving asset utilisation

As a result, commissioning of the fourth line will now be deferred from FY21 to FY22

• New Velvetiser refill line commissioned, increasing capacity and reducing cost per unit. 2nd line in 2021

• Enlarged facility for bean-to-bar fine cacao and vegan Nutmilk under construction, triples capacity 2021

• New “Inventing Room”, a small-batch facility for Wonka-esque creations for new subscriptions

Supply-chain capacity increased by 100%

• In July, took possession of 10,000 square metre leasehold extension on our existing site, doubling the size

of the existing DC, giving the opportunity to fit-out with increased multichannel flexibility. The additional

capacity is now operational.

International Outlook

USA

•

•

•

JAPAN(1)

•

•

•

•

EVALUATION CRITERIA FOR INTERNATIONAL

14

(1) Japan joint-venture structure:

13

Development of Lifestyle Location Format

1514

•

•

Environment and Sustainability

15

Continued progress on our four focus areas:

OUR PLANET

• Commitment to net zero carbon by 2030

• 100% of packaging to be recyclable or reusable by 2022

OUR FARMERS

• 30% YoY increase in farmers registered to our Engaged Ethics scheme in Ghana

• Educational ‘tree-to-bar’ visitor attraction on our farm in Saint Lucia opens in FY21

OUR COMMUNITIES

• First ever business-wide charity week in March raising money for Mind, our charity partner

• Extended our colleague discount to NHS workers with over 60,000 morale-boosting parcels shipped

• Launch of anti-racism working group in response to Black Lives Matter to drive awareness and inclusion

OUR TEAM – THE HOTEL CHOCOLAT FAMILY

• All furloughed workers received ‘top-up’ to 100% of normal pay in line with non-furloughed colleagues

• Improved team communication with “The Pod” our internal social media and personal development app

• Achieved our best ever all-employee engagement score in our September 2020 survey

8

Innovation Pipeline

16

THE INNOVATION PIPELINE IS STRONG

NEW PRODUCTS

Lattes for Velvetiser

NutmilkVegan truffles, caramels

and pralines for gifting

Velvetised Chocolate Cream

Liqueurs in four flavours

New Valentine’s and White Day

ranges for Japan

CHANNELS & FORMATS

Four new subscription offers:

Inventing Room · Curated Collections

Patrons of Rabot · Recurring purchase

New gift-sending VIP app

Lifestyle format with more food and

drinks including Rabot Estate Coffee and

dedicated space for beauty

Digital-first growth plan for USA

BRAND

Second series of TV show

Continued sustainability progresson people, planet and cacao

Diversity and Inclusion: new employee-led steering group

New educational and brand-enhancing visitor experience in Saint Lucia:

‘Project Chocolat’

Strong differentiated brand with “accessible luxury” price points

• Occasion-driven purchasing and relatively modest average spend-per-visit relative to demographics.

• Many gift occasions throughout the year, lower ticket impulse and leisure experiences all-year round.

Exciting opportunities for future growth

• Increasing capability to serve customer across channels

• New categories and new territories are encouraging

• Deploying equity investment for in capex to drive future growth

Trading is in line with expectations

• UK Retail recovering trend post-lockdown, online and partners in strong growth

• Have increased near-term resilience and increased working capital facility

• Confident for medium to long-term opportunity

Outlook

17

“WE HAVE WORKED HARD TO ADAPT TO THE CHALLENGES OF 2020 AND TO ACCELERATE OUR PLANS. AS A RESULT, WE ARE ON THE PATH TO BECOMING THE LEADING GLOBAL DIRECT-TO-CONSUMER PREMIUM CHOCOLATE BRAND”

Thank you