REG - THG PLC - Q3 2023 Trading Statement

THGAnnouncement

17/10/2023 07:00

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RNS Number : 3011Q  THG PLC  17 October 2023

17 October 2023

 

 

THG PLC

Third quarter trading statement for the period ended 30 September 2023

 

 

Q3 2023 Group revenue performance of -4.4% (-2.1% CCY), +480bps improvement on
Q2 CCY

 

Group returned to CCY revenue growth in September at +3.2% (-0.3% reported)

 

Positive free cash generation of +£5m over LTM

 

Full year revenue and adjusted EBITDA guidance unchanged

 

 

Q3 2023 Group Trading Performance

 £m                          Q3      YoY 1  (#_ftn1)  CCY 2  (#_ftn2)  YTD      YoY      CCY

                             2023    change           change           2023     change   change
 THG Beauty                  272.0   -4.4%            -2.0%            810.7    -8.5%    -8.9%
 THG Nutrition               156.2   -4.6%            -2.3%            496.9    0.2%     0.4%
 THG Ingenuity               155.7   -8.8%            -8.4%            475.7    -13.0%   -13.0%
 Inter-group elimination     -117.4  -10.5%           -3.9%            -366.3   -14.5%   -7.7%
 Group (continuing) revenue  466.5   -4.4%            -2.1%            1,417.0  -5.5%    -5.7%

 

Quarterly Revenue Performance

 

 Group (continuing) revenue change  Q4      Q1     Q2     Q3

                                    2022    2023   2023   2023
 Reported                           -6.3%   -5.6%  -6.5%  -4.4%
 Constant currency                  -11.3%  -8.1%  -6.9%  -2.1%

 

Q3 2023 highlights

·     Best quarterly revenue performance in the last year: -4.4% on a
continuing basis (-2.1% CCY).

 

·    Performance improved each month in the quarter, with the Group
returning to CCY growth in September (-0.3% reported, +3.2% CCY). Full year
revenue guidance of 0% to -5% remains unchanged.

 

·      Each division continues to make progress against its stated
strategy to return to sales growth and rebuild margins:

 

o  The impact of global de-stocking on our beauty manufacturing business has
eased, supporting a return to growth for THG Beauty in September (+1.7%, +5.1%
CCY). The strategy of focusing on higher margin sales while reducing orders
that do not deliver an immediate return has supported a much-improved Q3
margin performance.

 

o  THG Nutrition revenue performance reflects the rebrand launch, temporarily
reducing new product launches while the new branding is being rolled out.
Notwithstanding this brief interruption, the division delivered a record Q3
adjusted EBITDA, reaping the rewards from the investment in pricing strategy
made during peak inflation.

 

o  Whilst Enterprise sales cycles have been longer than anticipated in THG
Ingenuity, progress is reflected in September sales performance (-2.3%), from
H1 (-14.9%). Monthly recurring revenue 3  (#_ftn3) continued to build in
September at +7.6%, an acceleration on June's +6.2%, underpinned by growth in
existing clients, and new business.

 

·   Growth in UK active customers in THG Beauty and THG Nutrition was
supported by investment in the customer proposition with extended next day
delivery cut offs and UK delivery times at their fastest ever level (17%
quicker than Q3 2021).

 

·   Group stock levels have continued to normalise whilst retaining
improved availability, supporting another quarter of strong cash
performance 4  (#_ftn4) , contributing to a £5m inflow for the LTM 5 
(#_ftn5) .

 

·      Revenue, adjusted EBITDA and cash generation guidance remains
unchanged for FY 2023.

 

·   Successful completion of the Group's three-year global infrastructure
roll-out, and the strong efficiencies these investments are delivering, means
we now anticipate FY 2024 capex spend will be c.£30m less than previously
guided at £100m to £110m (FY 2023 guidance c.£135m).

 

·      In addition, we continue to monitor the FCA listing regime review
in respect of the move to the Premium segment, with our preparation and focus
on the implementation of the outcome when the conclusion is announced.

 

 

 

Matthew Moulding, CEO of THG commented:

 

"Q3 has been another strong quarter of progress across the Group, with each
division delivering improved performances. The pivots made within each
division to ensure they thrive in a high inflation global environment are
bearing fruit.

 

"The momentum with which we exited Q3 was especially pleasing, with the Group
returning to positive constant currency revenue growth of +3.2% in September,
driven by a strong performance across our Beauty division.

 

"We remain focussed on restoring margins to pre-inflation levels while
continuing to focus on cash generation. This is reflected in a best ever Q3
profit performance from our Nutrition division. Our cash discipline has been
excellent, reflected in delivering positive free cash flow of £5m, despite
making c.£140m of capex investments, over the last twelve-month period. The
steps we have taken will further underpin the future cash generation of the
Group.

 

"Both our operations and inventory are well positioned ahead of peak trading,
with the benefits of our investment in UK and US automated fulfilment centres
enhancing the customer proposition through accelerated delivery times,
positively influencing customer contact rates and overall satisfaction.

 

"The Group is exceptionally well invested with a strong balance sheet, with
each division well positioned to grow market share in any market conditions."

 

 

 

Analyst and 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/650d93e739ad9f961be9df87
(https://stream.brrmedia.co.uk/broadcast/650d93e739ad9f961be9df87)

 

 

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

 

·     Confirmation password: THG - Q3 Update

·     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/Nick Hayns/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

Reported revenue change %   Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023
 THG Beauty                  16.7%    19.2%    3.0%     -9.4%    -10.7%   -10.2%   -4.4%
 THG Nutrition               9.8%     -5.8%    3.0%     4.2%     4.5%     0.2%     -4.6%
 THG Ingenuity               17.9%    11.1%    -2.5%    -14.1%   -14.3%   -15.4%   -8.8%
 Inter-group elimination     10.6%    10.2%    -4.2%    -14.0%   -15.5%   -17.1%   -10.5%
 Group (continuing) revenue  16.6%    9.4%     3.0%     -6.3%    -5.6%    -6.5%    -4.4%
 Other (Discontinued)        -10.1%   -2.7%    -17.6%   -34.9%   -58.8%   -76.3%   -97.6%
 Group revenue               14.9%    8.6%     1.6%     -8.3%    -8.3%    -10.3%   -9.5%

 

Constant currency change %  Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023
 THG Beauty                  21.5%    15.2%    -4.7%    -14.5%   -13.8%   -10.5%   -2.0%
 THG Nutrition               12.4%    -8.5%    -3.1%    -1.2%    3.1%     0.3%     -2.3%
 THG Ingenuity               18.2%    10.7%    -3.4%    -14.7%   -14.6%   -15.4%   -8.4%
 Inter-group elimination     10.6%    10.2%    -4.2%    -14.0%   -9.7%    -9.2%    -3.9%
 Group (continuing) revenue  20.5%    6.1%     -3.9%    -11.3%   -8.1%    -6.9%    -2.1%
 Other (Discontinued)        -10.9%   -2.7%    -17.9%   -35.0%   -58.8%   -76.3%   -97.6%
 Group revenue               18.2%    5.7%     -4.8%    -13.0%   -10.9%   -10.4%   -7.4%

 

 

 

 Constant currency change %  Q1 2022  Q2 2022  Q3 2022  Q4 2022  Q1 2023  Q2 2023  Q3 2023
 THG Beauty                  21.5%    15.2%    -4.7%    -14.5%   -13.8%   -10.5%   -2.0%
 THG Nutrition               12.4%    -8.5%    -3.1%    -1.2%    3.1%     0.3%     -2.3%
 THG Ingenuity               18.2%    10.7%    -3.4%    -14.7%   -14.6%   -15.4%   -8.4%
 Inter-group elimination     10.6%    10.2%    -4.2%    -14.0%   -9.7%    -9.2%    -3.9%
 Group (continuing) revenue  20.5%    6.1%     -3.9%    -11.3%   -8.1%    -6.9%    -2.1%
 Other (Discontinued)        -10.9%   -2.7%    -17.9%   -35.0%   -58.8%   -76.3%   -97.6%
 Group revenue               18.2%    5.7%     -4.8%    -13.0%   -10.9%   -10.4%   -7.4%

 

 

 

 

 

ENDS

 

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
complete digital commerce solution, Ingenuity, to an online and global
customer base. THG's business is operated through the following divisions:

THG Beauty: A digital-first brand owner, retailer and manufacturer in the
prestige beauty market, with a portfolio of own-brands across skincare,
haircare and cosmetics. Through its retail websites, including Lookfantastic,
Dermstore, Cult Beauty and the beauty subscription box brand GLOSSYBOX, it is
a route to market globally for over 1,300 third-party premium brands. THG
Beauty also operates prestige spa and experience venues, in addition to luxury
clothing and homeware D2C sites.

 

THG Nutrition: A group of digital-first Nutrition brands, which includes the
world's largest online sports nutrition brand Myprotein and its family of
brands (Myvegan, Myvitamins, MP Activewear and MyPRO), with a
vertically-integrated business model supported by global THG production
facilities.

 

THG Ingenuity: Ingenuity provides a complete digital commerce solution for
consumer brand owners across its three pillars of technology, digital
marketing and operations. Being part of the THG group, Ingenuity is uniquely
placed to bring relevant, practical and international expertise in every area
of commerce.

 

 

 

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  (#_ftnref1) YoY defined as year-on-year statutory sales growth.

(( 2  (#_ftnref2) )) CCY defined as constant currency basis

 3  (#_ftnref3) Monthly Recurring Revenue comprises software-as-a-Service
license fees, monthly brand building fees, infrastructure service fees,
revenue share, translation and creative services.

 4  (#_ftnref4) Group free cash flow is calculated after working capital, net
capital expenditure, adjusting items, tax and financing (prior to debt capital
repayments and consideration on acquisitions).

 5  (#_ftnref5) Last twelve month period ending September 2023.

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