Join our community of smart investors

Hotel Chocolat raises funds in coronavirus fightback

The chocolatier will continue with its expansion plans
March 20, 2020

Hotel Chocolat (HOTC) has raised £22m from an emergency share placing as it faces the prospect of all of its stores being closed during two of the group’s most lucrative trading periods.

IC TIP: Hold at 232p

Hotel Chocolat, which has been expanding its footprint with new stores in the UK, US and Japan, anticipates a step-up in government measures to combat the coronavirus outbreak, which it accepts is likely to close some or all of its stores. It reported a 5 per cent year-on-year decline in sales in March and faces a significant fall in sales during the Mother’s Day and Easter periods, which together usually account for around 12 per cent of its annual revenue.

The chocolatier initially announced plans to raise £20m, before lifting this to £22m in response to strong demand for the shares. Hotel Chocolat issued 9,777,777 ordinary shares at a price of 225p a share. The new shares, which will begin trading on 24 March, will represent 8.5 per cent of Hotel Chocolat’s enlarged share capital. New shareholders will not receive the 0.6p interim dividend, although it remains to be seen whether Hotel Chocolat will follow other companies and withdraw its payout - it did not lay out plans to do so in its announcement.

Co-founders Peter Thirlwell and Peter Harris, who are also chief executive and development director respectively, together subscribed for 1,777,776 shares. The increase of Hotel Chocolat’s share capital means that their positions in the company will both fall from 31.4 per cent to 29.7 per cent.

Along with securing a bit of breathing space, Hotel Chocolat expects to invest these funds in improving its supply chain, including completing a fourth production line that will add 35 per cent to its chocolate-making capacity. The money will also go towards ongoing UK capital investment and the opening of more Japanese stores.