Hotel Chocolat opens new credit line as Easter sales hit by lockdown

In an update to the City today, the chocolate specialist said it had increased its banking facilities by opening a new £35m line of credit with Lloyds Bank, which replaced its existing £10m overdraft facility.

It said that the new credit, on top of the £22m of investment it recently raised from investors, would “fund growth capital investment and provide operational headroom” for the business.

The new credit facility is comprised of two separate tranches, with the first £25m expiring in December 2021 and provided under the terms of the government’s coronavirus large business interruption loans scheme and a £10m facility provided by its bank under normal commercial terms, which will run until the end of this year.

As long as the £25m government loan is in place, Hotel Chocolat said it would be restricted from paying out dividends and, as a result, retained the option to cancel “all or part” of the loan at any time.

Hotel Chocolat also provided a brief trading update, which said that “as anticipated” the closure of its store network due to the ongoing coronavirus lockdown “had had a material impact on trading” during the Easter period.

However, the retailer said it had “been able to rapidly leverage its direct to consumer multichannel model to redirect demand to online”.

While this had not fully mitigated losses from its store estate, Hotel Chocolat said it had been “encouraged by the agility and resilience of [its] business model and continues to explore further avenues for online growth whilst working safely”.

Co-founder and chief executive Angus Thirlwell said: “Hotel Chocolat is a strong brand with differentiated products, a loyal customer base and a vertically integrated direct-to-consumer business model built for agility.

“It is a reflection of these attributes that we have been able to add additional banking cover to the over-subscribed equity placement in March. The financial headroom gives us greater resilience against ongoing disruption and enables us to move onwards with longer-term growth opportunities.

“Every day at Easter, the online demand exceeded the quantity of orders we could accept, due to the requirements to ensure safe working, combined with the short adjustment period. With the plans we are putting in place over the next few months, we aim to be able to switch the vast majority of demand to online should the need arise in the future.”