TIDMTHG
RNS Number : 9057M
THG PLC
17 January 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
17 January 2023
THG PLC ( "THG" or the "Group")
Trading statement for the period ended 31 December 2022
Record sales in FY 2022 with comprehensive cost action taken to
increase profitability
H2 2022 cash generation driving strong balance sheet
THG PLC ("THG" or the "Group"), the proprietary technology
platform specialising in taking brands direct to consumers ("D2C")
globally, announces its trading update for the period ended 31
December 2022 ("FY 2022").
-- Record sales of GBP2.25 billion in FY 2022, with +9.4% growth
in THG Beauty and THG Nutrition primary territories(1) .
-- Significant investment in price strategy through 2022 to
support long-term customer retention, alongside new customer growth
in established and emerging markets.
-- Cost base well positioned following completion of divisional
reorganisation, with c. GBP100 million of cost savings and
efficiencies identified and implemented in FY 2022. A further GBP30
million of savings targeted for delivery during FY 2023.
-- Free cash generation2 of c. GBP50 million in H2 2022, driving
strong balance sheet and liquidity with c. GBP640 million of cash
and available facilities at year end.
-- THG Ingenuity gaining momentum following the pivot to focus
on higher value and higher margin contracts, with further major
contracts close to agreement, building upon the recent expansion of
the Matalan strategic partnership.
-- Simplification of the Group leading to a strategic review of
loss-making categories and territories within the THG OnDemand
division, underpinning FY 2023 profitability improvements.
-- Expected adjusted EBITDA for FY 2022 on a continuing basis in
line with current market expectations. Medium-term adjusted EBITDA
margin guidance of >9.0% reiterated.
FY 2022 Group trading performance
GBPm FY 2022 FY 2021 YoY Growth YoY 2 Year
(excl Growth Growth
Russia)
THG Beauty 1,185.6 1,117.8 +6.1% +57.7%
THG Nutrition 672.4 659.5 +2.0% +19.6%
THG Ingenuity 208.1 194.3 +7.1% +51.6%
------- ------- ---------- ------- -------
Core Divisional
Revenue 2,066.1 1,971.6 +4.8% +42.4%
------- ------- ---------- ------- -------
THG OnDemand (under
review) 106.4 128.1 -16.9% +5.0%
Other (under review) 80.1 80.2 -0.1% +31.2%
------- ------- ---------- ------- -------
Group Revenue 2,252.6 2,179.9 +4.1% +3.3% +39.6%
------- ------- ---------- ------- -------
Ingenuity Commerce
Revenue 46.9 45.4 +3.3% +142.9%
---------------------- ------- ------- ---------- ------- -------
FY 2022 highlights
-- FY 2022 Group revenue growth of +4.1% (+3.3% reported), with
+9.4% growth in THG Beauty and THG Nutrition primary territories
supported by localised infrastructure.
-- The full-year Group outturn reflects:
o the proactive decision to discontinue a proportion of
loss-making OnDemand sales, primarily across international markets,
using the peak trading period to reduce residual inventory
impacting revenue and profitability;
o lengthier onboarding of higher revenue and margin Ingenuity
partnerships; and
o disruption in the UK courier network during December impacting
online gifting demand in Beauty in particular.
-- Key customer indicators including average order values,
repeat rates and active customer numbers all remain in growth vs Q4
2020, demonstrating the resilience of beauty, health, and wellness
categories, and continued adoption of digital channels post
pandemic, particularly in the UK.
-- Successful completion of the Group's divisional
reorganisation driving continued profit progression through greater
divisional cost transparency, the removal of duplicated costs,
procurement and payroll efficiencies. Group-wide headcount
reduction of c. 2,000 employees following elevated investment over
recent years, achieved through managed attrition alongside
continued recruitment of digital talent.
-- Normalisation of inventory levels as expected through H2
2022, with c. GBP75 million reduction in Group stock vs December
2021, supporting free cash generation of c. GBP50 million in H2
2022.
-- Cash on hand at year end of c. GBP470 million, with GBP170
million undrawn revolving credit facility available. Year-end net
debt of c. GBP200 million, reducing to c. GBP160 million upon
receipt of GBP40 million of proceeds from non-core freehold asset
disposals in H1 2023.
THG Ingenuity
-- In Q3 2022, the Group announced a re-positioning of THG
Ingenuity to focus on larger, higher revenue and higher margin
clients with high-quality recurring revenues. Exiting a number of
smaller contracts while pausing additional lower value partnerships
has enabled THG Ingenuity to fully capitalise on larger scale, more
complex, long-term opportunities.
-- This strategy is now delivering tangible results with the
Group confirming that it is in advanced discussions to provide
long-term software solutions for several significant enterprise
clients, in addition to the expansion of its strategic partnership
with UK retailer Matalan.
-- During 2023, the Group expects to add over GBP1 billion
incremental GMV to the Ingenuity platform.
Outlook and guidance
-- Following the Group's divisional reorganisation, the Board
has commenced a strategic review of trading activities outside of
THG Beauty, THG Nutrition and THG Ingenuity. These core divisions
are expected to deliver adjusted EBITDA on a continuing basis of c.
GBP100 million3 for FY 2022, reflecting the removal of c. GBP20
million of losses from discontinued revenues.
-- While the decision to discontinue certain trading activities
has occurred already, the full outcome of the review will complete
in H1 2023.
-- The combined impact of the lower full-year sales outturn, the
dilutive impact of loss-making categories under review, alongside
the timing of impending new Ingenuity contracts results in an
expected adjusted EBITDA outturn range of GBP70 million to GBP80
million(4) for FY 2022.
-- Margin recovery confidence in FY 2023 and beyond supported by:
o the full year effect of the GBP100 million cost savings
actioned, including exiting loss-making categories;
o US warehouse automation live in Q1 2023; and
o substantially lower raw material buying costs (principally
whey), with reduced buying prices YoY confirmed for Q1 2023.
-- A dedicated focus on high-margin categories and relatively
low maintenance capital expenditure supports the Group's
expectation of being broadly free cash flow neutral in FY 2023, and
significantly free cash flow positive in FY 2024.
Matthew Moulding, CEO commented:
"In a year that presented numerous challenges across the world,
I'm proud that the THG team has delivered another record revenue
performance at GBP2.25 billion. Amongst many highlights, I'm
especially pleased with the progress of Ingenuity, successfully
competing with major global technology giants to transform digital
operations for global retailers and brands.
"With the completion of the divisional reorganisation, and
around GBP100 million of annual efficiency savings already
delivered, the Group enters 2023 with strong momentum to achieve
substantial margin expansion. Core commodity prices used within our
Nutrition division have seen significant deflation since their
record highs in 2022, giving us confidence in significant profit
progression as we move through the year ahead, against a much
reduced Group cost base. We remain highly confident of delivering
adjusted EBITDA margins in excess of 9.0% over the medium-term.
"Our delivery of c. GBP50 million free cashflow in H2 2022,
coupled with c. GBP640 million of cash and facilities at year end,
mean we are well positioned for further operational and strategic
progress, notwithstanding the continued macroeconomic
uncertainty."
For further information please contact:
Investor enquiries:
Kate Grimoldby, Head of Investor Relations Investor.Relations@thg.com
Media enquiries:
Powerscourt - Financial PR adviser Tel: +44 (0) 20 7250
1446
Victoria Palmer-Moore/Nick Dibden/Nick thg@powerscourt-group.com
Hayns
THG PLC
Viki Tahmasebi Viki.tahmasebi@thg.com
S
Notes to editors
THG is a vertically integrated, digital-first consumer brands
group, retailing its own brands in beauty and nutrition, plus
third-party brands, via its proprietary, end-to-end, e-commerce
technology, infrastructure and brand-building platform (THG
Ingenuity) to an online and global customer base. THG's business is
operated through the following businesses:
THG Beauty : The globally pre-eminent digital-first brand owner,
retailer and manufacturer in the prestige beauty market, combining
its prestige portfolio of eight owned brands across skincare,
haircare and cosmetics, the provision of a global route to market
for over 1,300 third-party beauty brands through its portfolio of
websites, including Lookfantastic, Dermstore, Cult Beauty and
Mankind and the beauty subscription box brand GLOSSYBOX.
THG Nutrition : A group of digital-first Nutrition brands, which
includes the world's largest online sports nutrition brand
Myprotein, and its family brands (Myvegan, Myvitamins, MP
Activewear and MyPRO), with a vertically-integrated business model,
supported by global THG production facilities.
THG Ingenuity: Ingenuity Commerce provides an end-to-end direct
to consumer e-commerce solution for consumer brand owners under
'Software as a Service' (SaaS) licences. The wider Ingenuity
division provides stand-alone digital services, including hosting,
studio content, translation services and beauty product development
and manufacturing.
THG OnDemand : Personalisation and customisation is a key
offering within THG OnDemand, enabling brands to offer unique
products to a vast range of consumers across THG's global
territories through websites including Zavvi, IWOOT and Pop in a
Box.
Other : Luxury D2C websites including Coggles, AllSole and
MyBag, in addition to THG Experience. The latter comprises prestige
events locations at Hale Country Club & Spa, King Street
Townhouse Hotel and Great John Street Hotel, providing deeply
experiential brand building environments, most notably in support
of THG Society, the Group's proprietary influencer marketing
platform.
Cautionary Statement
Certain statements included within this announcement may
constitute "forward-looking statements" in respect of the group's
operations, performance, prospects and/or financial condition.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words and
words of similar meaning as "anticipates", "aims", "due", "could",
"may", "will", "should", "expects", "believes", "intends", "plans",
"potential", "targets", "goal" or "estimates". By their nature,
forward-looking statements involve a number of risks, uncertainties
and assumptions and actual results or events may differ materially
from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be
met and reliance should not be placed on any forward-looking
statement. Additionally, forward-looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. No
responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future
events or otherwise. Nothing in this announcement should be
construed as a profit forecast. This announcement does not
constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase any shares or other
securities in the Company, nor shall it or any part of it or the
fact of its distribution form the basis of, or be relied on in
connection with, any contract or commitment or investment decisions
relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the Company. Past performance
cannot be relied upon as a guide to future performance and persons
needing advice should consult an independent financial adviser.
Statements in this announcement reflect the knowledge and
information available at the time of its preparation.
[1] Includes the UK, US and key international territories with
attractive market sizes and THG localised product, digital content
and physical infrastructure (accounting for over 50% of Group FY
2022 revenue)
[2] Group free cash generation is calculated after working
capital, capital expenditure, adjusting items, tax and financing
(prior to debt capital repayments)
[3] Prior to SaaS cost reclassification
[4] Prior to SaaS cost reclassification now expected to be c.
GBP10 million for FY 2022
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