REG - THG PLC - Q1 2024 Trading Statement

THGAnnouncement

23/04/2024 07:00

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RNS Number : 5908L  THG PLC  23 April 2024

23 April 2024

 

 

THG PLC

First quarter trading statement for the period ended 31 March 2024

 

 

Group revenue growth acceleration to +4.5% (Q4 2023: +1.1%)

 

Growth progression in each of the past five consecutive quarters

 

Standout performance in THG Beauty +11.1% (Q4 2023: +2.6%)

 

 

Q1 2024 Group Trading Performance

 

                                 Q1 2024
 £m                              Q1     YoY 1    CCY 2 

                 2024   change   change
 THG Beauty                      267.6  +9.3%    +11.1%
 THG Nutrition                   150.8  -9.0%    -5.8%
 THG Ingenuity (external)        37.0   +4.1%    +5.9%
 Group (continuing) revenue      455.4  +2.1%    +4.5%
 Discontinued revenue 3          4.5    -80.6%   -80.1%
 Total revenue                   459.9  -2.0%    +0.3%

 THG Ingenuity internal revenue  112.6  -8.0%    -8.0%
 THG Ingenuity total             149.6  -5.3%    -4.9%

 

All comparative figures are continuing CCY unless otherwise stated.

 

 ·             Overall Group sales continued to strengthen, with improvements made in each of
               the past five consecutive quarters. Notable strong momentum in Beauty
               offsetting continuing currency headwinds and previously announced rebrand
               transition in Nutrition.

 ·             The strategic focus on higher-margin sales through FY 2023 has been rewarded,
               with continuing revenue growth of +4.5%, building on the +1.1% growth achieved
               in Q4 2023.

 ·             THG Beauty delivered a standout Q1 performance with growth of +11.1% (Q1 2023:
               -12.4%), following targeted changes to geographic strategy through 2023,
               focusing on more profitable customers and territories closest to our global
               distribution hubs.

 

 

THG Beauty Q1 highlights

 

 Key Performance Indicators                              Q1      Q1      LTM       YoY change  LTM

Q1 2024

                                                         2023    2024                          change
 Continuing revenue (£m)                                 244.7   267.6   1,194.6   +9.3%       -0.5%
 CCY growth                                              -12.4%  +11.1%
 Active customers 4  (#_ftn4) (,) 5  (#_ftn5) (LTM) (m)  8.8     8.6               -2.8%
 Total orders (LTM) (m)                                  16.9    17.0              +0.5%
 Average order values (LTM) (£)                          64      63                -1.0%

 

 ·             Positive momentum continued into Q1 with all channels in growth. THG Beauty
               channels are comprised of Retail (c.80% of revenue), own-brand (c.10%) and
               manufacturing (c.10%).

 ·             Performance in the UK (over half of online Beauty revenue) was notably strong,
               ahead of the overall Beauty business at +11.1% growth.

 ·             App participation grew to 24% of online revenue (Q1 2023: 15%), with
               particularly strong participation in the UK at 35%. Increased app revenue
               participation supports deeper relationships with our customers, providing
               valuable first party data and lessening the reliance on paid marketing
               channels.

 ·             THG Beauty further increased market share in the UK total premium beauty
               market 6 , and further enhanced its fragrance credentials with 10 new brand
               launches.

 ·             Customer health remains robust with active customer numbers back in growth (FY
               2023: 8.5m), driven by UK and MENA territories, largely reflecting the success
               of our loyalty program which now has c.2.3m members, having launched in 2022.

 ·             Biossance was migrated onto the Ingenuity platform in January. Early signs are
               positive and we are confident that Biossance will scale to become one of our
               largest own brands, with prominence in the US, both online and across major
               retailers.

 ·             Manufacturing performance was robust through Q1, delivering sales growth
               through a materially reduced cost base following the savings initiatives
               completed in 2023.

 

 

THG Nutrition Q1 highlights

 

 Key Performance Indicators       Q1     Q1     LTM       YoY        LTM

Q1 2024

                                  2023   2024              change    change
 Continuing revenue (£m)          165.7  150.8  643.0     -9.0%      -4.3%
 CCY growth                       +3.7%  -5.8%
 Active customers (LTM) (m)       6.9    6.7              -2.8%
 Total orders (LTM) (m)           13.0   12.6             -2.7%
 Average order values (LTM) (£)   51     48               -5.3%

 

 ·             Myprotein continues to be the fastest growing sports nutrition brand across UK
               retailers with the brand's Q1 retail GMV more than doubling YoY 7 . We
               extended distribution by over 1,000 stores in Q1 with launches across sports
               nutrition and vitamins ranges in Asda, Boots and Tesco taking UK retail doors
               to c. 5,000 8 .

 ·             The Myprotein rebrand roll-out, the biggest in its 20-year history, made good
               progress through Q1, with c.40% of products available now under the new
               branding in the UK and Europe. Early results from the rebrand are very
               promising, with strong brand awareness growth in the UK, moving from 48%
               (Aug'23) to 52% (Mar'24) 9 , supported by the launch of high-performance range
               'Origin'. Elevating the brand in this way will position it well for global
               offline and licensing opportunities.

 ·             Q1 Nutrition revenue growth was held back by a c.16% devaluation of the
               Japanese Yen YoY (15% of THG Nutrition revenues), as well as expected
               availability gaps as the product range transitions to the new branding.

 ·             Continued devaluation risk with the Japanese Yen is being addressed with the
               launch of local manufacturing in H2, as well as through licensing agreements,
               where local partners recognise full revenue value and THG receives a
               percentage as a royalty.

 ·             Local manufacturing in India successfully launched in Q1, allowing products to
               be more quickly tailored to the needs of the local market, while reducing
               lengthy supply chains in the movement of goods from the UK to India. We expect
               India to become a key market for Nutrition over the next three years.

 ·             We further expanded our category reach with Iceland and our UK licensing
               partnerships with ready-to-drink (Jimmy's coffee) and chilled goods
               (Bakeaway). Physical customer touchpoints supporting UK brand awareness now
               includes c.1,500 retail doors via licensed products, enabling us to enter new
               in-store locations.

 ·             Internationally, a physical presence through c.20,000 stores across Europe,
               Japan and the US is expected to help drive the mix of total GMV from brand
               sales towards 25% offline over the medium-term.

 ·             The contribution from licensing partnerships improved THG Nutrition's total
               GMV in Q1 2024 to -3.5%, with UK total brand sales +6.2% YoY.

 ·             Overall customer numbers in growth since December 2023, underpinned by the
               store channel performance with online active customer numbers in-line with
               year-end, with notable growth in UK, India and MENA.

 

 

THG Ingenuity Q1 highlights

 

                              Q1 2024
 £m                           Q1     YoY      CCY

                              2024   change   change
 External revenue             37.0   +4.1%    +5.9%
 Internal revenue             112.6  -8.0%    -8.0%
 Total THG Ingenuity revenue  149.6  -5.3%    -4.9%

 

 ·             THG Ingenuity external revenue: Monthly recurring revenue 10  continued to
               build in March at +26.3% YoY, an acceleration on December (+14.7% YoY).

 ·             The first dispatches under the Holland & Barrett partnership completed in
               March as part of an eight week phased migration project, demonstrating speed
               and accuracy of execution while maintaining full stock availability and a full
               suite of delivery services.

 ·             During Q1 THG Ingenuity delivered numerous contract wins, including a
               partnership with fashion and lifestyle brand White Stuff on their brand
               re-launch into Germany. Through a fully localised technology, digital
               marketing and fulfilment strategy to better serve White Stuff's growing German
               customer base, the relaunch delivered +75% YoY revenue growth (Feb'23 to
               Feb'24).

 ·             Our fulfilment network is becoming increasingly optimised through automation
               and AI to drive best-in-class delivery and customer service (86% of THG brand
               Trustpilot reviews rated 5* in Q1).

 ·             THG Ingenuity internal revenue: The Group implemented profitability
               improvement plans through 2022 and 2023, which included the discontinuation of
               non-profitable categories in addition to the sale of OnDemand. As both Beauty
               and Nutrition return to growth, internal revenue will also benefit, albeit at
               a slower rate than external sales, given anticipated volume of contract wins.

 

 

Outlook and guidance

 

 ·             Expectations for FY 2024 and medium-term guidance remain unchanged from the FY
               2023 Preliminary results statement on 10 April 2024, with a continued focus on
               revenue growth, margin progression and cash generation.

 ·             Group revenue growth in H1 is anticipated to be in the range of +2.0% to +5.0%
               on a continuing basis (-1.0% to +2.0% reported), moving towards high single
               digits in the second half, reflective of the onboarding of new contracts
               within Ingenuity, growth in offline sales within THG Nutrition and full
               Myprotein rebrand product availability.

 ·             Following developments in the Middle East, the Group continues to monitor the
               situation, with Israel accounting for c. 1% of Group sales, weighted towards
               Nutrition.

 

 

Matthew Moulding, CEO of THG commented:

 

"Following the Group's return to revenue growth in Q4 2023, it's pleasing to
report an acceleration in Q1, which is testament to the hard work and
dedication of our people, who've remained focused on the task in hand despite
the tough macro-economic backdrop.

 

"It's also clear that the accelerated infrastructure investments made during
2019-2022, specifically into our fulfilment network and tech capabilities, are
playing a significant part in delivering competitive advantage. With this
major capex program behind us, these investments will continue delivering
meaningful savings, which accelerate further as new Ingenuity partners are
onboarded.

 

"The Q1 performance of our largest business THG Beauty, is especially
encouraging. The operating model changes made throughout 2023, including
focusing on more profitable territories and customers, temporarily impacted
growth for much of last year, however, since Q4, we are seeing tangible
benefits from these actions. This is reflected in THG Beauty's loyalty
membership reaching 2.3m people at the end of Q1, less than two years after
launch.

 

"Beauty delivered double digit growth in the quarter, with a high-quality,
loyal customer base bringing greater profitability per order across a more
efficient cost base.

 

"Ingenuity, having pivoted towards larger, multi-service partners, is now also
seeing the benefits of its own model changes. Another quarter of solid
external revenue growth at +5.9%, is underpinned by monthly recurring revenue
growth of +26.3%.

 

"The response to the Myprotein elevation rebrand has been fantastic. While
these changes naturally impact short term revenues as old and new branded
products are swapped out, the strong positive response from online consumers
and offline retail partners alike underpins confidence once full product
availability is restored."

 

 

 

Analyst and Institutional investor conference call

 

THG will today host a conference call for analysts and institutional investors
at 8:30am (UK time) via the following link:

 

https://stream.brrmedia.co.uk/broadcast/6620e6b140524def7b49c88e
(https://stream.brrmedia.co.uk/broadcast/6620e6b140524def7b49c88e)

 

To ask questions, you must dial in via conference line using the below
details:

 

·     Confirmation password: THG Q1 Results

·     UK dial in: +44 (0) 33 0551 0200

·      US dial in: +1 786 697 3501

 

 

For further information please contact:

 

 Investor enquiries - THG PLC
 Greg Feehely, SVP Investor Relations                                    Investor.Relations@thg.com (mailto:Investor.Relations@thg.com)

 Kate Grimoldby, Director of Investor Relations and Strategic Projects

 Media enquiries:
 Powerscourt - Financial PR adviser                                      Tel: +44 (0) 20 7250 1446
 Victoria Palmer-Moore/Nick Dibden/Russ Lynch                            thg@powerscourt-group.com (mailto:thg@powerscourt-group.com)

 THG PLC

 Viki Tahmasebi                                                          Viki.tahmasebi@thg.com (mailto:Viki.tahmasebi@thg.com)

 APPENDIX

 Quarterly reported revenue growth rates

                            Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023  Q4 2023
 THG Beauty                  +21.2%   +22.1%   +4.1%    -8.1%    -9.3%    -8.4%    -2.6%    +0.8%
 THG Nutrition               +11.3%   -5.0%    +4.0%    +4.9%    +5.7%    +1.3%    -3.8%    -6.0%
 THG Ingenuity               +17.9%   +11.1%   -2.5%    -14.1%   -14.3%   -15.4%   -8.8%    -5.8%
 Inter-group elimination     +10.6%   +10.2%   -4.2%    -14.0%   -15.5%   -17.1%   -10.5%   -9.0%
 Group (continuing) revenue  +19.8%   +11.0%   +4.1%    -5.1%    -4.3%    -5.0%    -3.1%    -0.8%
 Other (discontinued)        -19.2%   -11.0%   -18.2%   -34.1%   -51.0%   -63.3%   -77.2%   -79.2%
 Group revenue               +14.9%   +8.6%    +1.6%    -8.3%    -8.3%    -10.3%   -9.5%    -6.9%

 

  Quarterly constant currency revenue growth rates

                            Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023  Q4 2023
 THG Beauty                  +25.4%   +18.4%   -3.3%    -13.3%   -12.4%   -8.5%    -0.3%    +2.5%
 THG Nutrition               +14.8%   -8.0%    -2.0%    +2.0%    +3.7%    +2.0%    -1.4%    -4.0%
 THG Ingenuity               +18.2%   +10.6%   -3.3%    -14.9%   -14.7%   -15.4%   -8.5%    -5.4%
 Inter-group elimination     +10.6%   +10.2%   -4.2%    -14.0%   -15.5%   -17.1%   -10.5%   -9.0%
 Group (continuing) revenue  +23.7%   +7.8%    -2.6%    -10.1%   -7.0%    -5.1%    -0.8%    +1.1%
 Other (discontinued)        -19.2%   -11.0%   -18.2%   -34.2%   -51.0%   -63.3%   -77.2%   -79.2%
 Group revenue               +18.0%   +5.9%    -4.3%    -12.7%   -11.0%   -10.1%   -7.6%    -5.3%

 

 

 Quarterly constant currency revenue growth rates

                             Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023  Q4 2023
 THG Beauty                  +25.4%   +18.4%   -3.3%    -13.3%   -12.4%   -8.5%    -0.3%    +2.5%
 THG Nutrition               +14.8%   -8.0%    -2.0%    +2.0%    +3.7%    +2.0%    -1.4%    -4.0%
 THG Ingenuity               +18.2%   +10.6%   -3.3%    -14.9%   -14.7%   -15.4%   -8.5%    -5.4%
 Inter-group elimination     +10.6%   +10.2%   -4.2%    -14.0%   -15.5%   -17.1%   -10.5%   -9.0%
 Group (continuing) revenue  +23.7%   +7.8%    -2.6%    -10.1%   -7.0%    -5.1%    -0.8%    +1.1%
 Other (discontinued)        -19.2%   -11.0%   -18.2%   -34.2%   -51.0%   -63.3%   -77.2%   -79.2%
 Group revenue               +18.0%   +5.9%    -4.3%    -12.7%   -11.0%   -10.1%   -7.6%    -5.3%

 

 

 

 

 

ENDS

 

Notes to editors

THG PLC operates three distinct businesses in Beauty, Nutrition and Ingenuity,
each scaled from the UK to hold global leading positions in their respective
sectors.

 

 

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  YoY defined as year-on-year statutory sales growth

(( 2 )) CCY defined as constant currency basis

 3  The Group completed its strategic review of non-core categories in H2
2023, resulting in the discontinuation of small legacy brands within THG
Beauty and THG Nutrition

 4  THG Beauty KPIs exclude Glossybox beauty subscriptions and THG Luxury

 5  Active customers is defined as customers who have purchased at least once
within the period

 6  As per third-party data and management estimates

 7  Nielsen data, sports nutrition brands, total coverage, data to 23/03/2024

 8  Nielsen data, sports nutrition brands, total coverage, data to 23/03/2024

(( 9 )) Source: YouGov Brand Tracker, March '24

 10  Monthly Recurring Revenue comprises Software-as-a-Service license fees,
managed service fees, revenue share, fulfilment and creative services

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