Indulge in Hotel Chocolat

The premium chocolate company - which joined the market midway through 2016 - has a brand focused strongly on its original, authentic and premium-minded product range, such as its £160, 100-chocolate Signature Cabinet chocolate box, or its more affordable 200g tubs of pink champagne truffles at £20 a pop. The brand combines British flavours with an exotic name, which gives it appeal to both UK residents and international shoppers. The latter are more likely to visit one of the group's travel outposts, which should benefit from higher foreign visitor numbers while the pound remains low.

Inaugural full-year results to the end of June 2016 were strong, with revenues up 12 per cent and a leap in underlying profits before cash from £2.9m to £8.2m, which was helped by a £1.5m drop in the depreciation charge. Meanwhile, tight cost controls meant cash profit margins (before depreciation and amortisation) surged by 340 basis points to 13.5 per cent. Brokers expect margins to continue to grow towards 14.7 per cent by 2019 as a result of a three-year investment programme, and recent trading suggests forecasts are very much targets to be beaten.

The company spent £3.7m on a new mezzanine floor at its factory in its last financial year and significantly upgraded one of three key production lines, all of which resulted in a 20 per cent increase in capacity as well as improved efficiency. There's a lot to be said for Hotel Chocolat's vertically-integrated model, which means it has control over the majority of its operations, from design and manufacture to in-store sales. The model does entail additional capital requirements, though.

Digital revenues - which include online orders as well as the group's tasting club memberships - also grew 20 per cent, with a new website scheduled to launch during the first or second quarter of 2017. And strong progress is being made with new products and ranges, including speciality hampers for Christmas and an improved selection of products for children.

Pre-Christmas store openings have exceeded analysts' expectations, with Liberum having to increase its expectations for EPS growth in FY2017 and FY2018 on the basis of nine new openings, rather than the originally forecast five. There are also three concept stores in Denmark, which are said to be a "test case" ahead of a possible international rollout. It's important to remember that Hotel Chocolat is funding the store rollout from internally generated cash flow. We see the group's approach to new openings and internal improvements as disciplined, particularly in light of the decision to close three underperforming stores last year when those leases expired.