REG - THG PLC - Q4 2024 Trading Statement

THGAnnouncement

23/01/2025 07:00

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RNS Number : 3664U  THG PLC  23 January 2025

23 January 2025

 

 

THG PLC

 

Fourth quarter trading statement for the period ended 31 December 2024

 

 

Successful completion of the Demerger of THG Ingenuity, leaving THG PLC as a
global, cash generative, health & wellness consumer brands group

 

 FY 2024 performance in-line with expectations

 

Gross leverage materially reduced, c. £550m 1  year-end cash and available
facilities

 

Continued confidence in THG Beauty and an improved start to the year in THG
Nutrition online and offline channels

 

 

Strategic update

 

·    THG Ingenuity Demerger successfully completed, leaving THG PLC as a
global, cash generative, health & wellness consumer brands group
comprising THG Beauty and THG Nutrition ("RemainCo").

 

·    Transfer to the equity shares (commercial companies) ("ESCC") category
of the Official List now concluded (6 January 2025), making the company
eligible for index inclusion.

 

 

Outlook and guidance

 

·    During the second half we continued to see improving underlying trends
within Nutrition particularly in the UK, alongside promotional discipline
supporting increased order profitability and margin expansion in Beauty.
Coupled with a strong Q4 for Ingenuity, FY 2024 adjusted EBITDA is expected to
be in-line with the consensus range excluding discontinued categories.

 

·   RemainCo is expected to deliver mid-single digit revenue growth in FY
2025, given continued confidence in prestige beauty demand across our key
markets, and a return to growth in Nutrition, evidenced by a much-improved
start to the year across online and offline channels.

 

·      Ahead of the Demerger, FY 2025 adjusted EBITDA assumptions were
based upon:

 

o  a leaner, more efficient cost base and improved inventory profile;

o  continued execution of the Beauty strategy;

o  a gradual reduction from the current historic whey price highs; and

o  another strong year for THG Ingenuity, supported by a pipeline
underpinning adjusted EBITDA of £40m to £45m.

 

·     Whilst whey price reductions are anticipated to be second half
weighted, new global manufacturing volumes of high concentrate whey protein
will enter the market through Q1 2025, providing optimism of a more normalised
commodity market ahead.

 

·    Depending on the outcome of the recent UK VAT ruling for protein
powders, annual adjusted EBITDA upside could be in the region of c. £10m.

 

·   Over the medium term, revenue growth of mid to high-single digit is
anticipated, with adjusted EBITDA margins consistent with historical levels
(for Beauty and Nutrition), and significantly improved free cash flow.

 

·     Specifically, capital expenditure will reduce to c. £20m pa (FY
2024 pre Demerger guidance: £100m to £110m) and cash lease costs will reduce
to c. £22m pa.

 

·    Future cash generation will facilitate a measured reduction in gross
and net leverage, with RemainCo targeting continued progression to a neutral
net cash / net debt position.

 

 

Q4 and FY 2024 Group Trading Performance( 2 )

 

                                  Q4 2024                               FY 2024
 £m                               Q4        CCY( 3 )      YoY( 4 )      FY          CCY         YoY

                                  2024      change        change        2024        Change       Change
 THG Beauty( 5 )                  348.4     +0.8%         -1.3%         1,108.3     +4.6%       +3.3%
 THG Nutrition                    145.2     -9.5%         -12.7%        579.6       -8.7%       -11.9%
 RemainCo (continuing) revenue    493.7     -2.5%         -5.0%         1,687.9     -0.4%       -2.5%
 THG Ingenuity (external) ( 6 )   58.8      +22.0%        +22.9%        191.8       +16.4%      +15.9%
 Group (continuing) revenue( 7 )  552.4     -0.4%         -2.6%         1,879.6     +1.1%       -0.9%
 Discontinued revenue             13.4      -67.1%        -67.7%        63.0        -56.9%      -57.6%
 Total revenue                    565.9     -5.0%         -7.1%         1,942.7     -3.1%       -5.0%

·   Continuing revenue (including Ingenuity) of £1,879.6m (+1.1%), with
ongoing portfolio management to successfully exit loss-making discontinued
categories. Within own brand beauty, we took the decision to withdraw from
cosmetics and masstige products to focus on the more prominent growth
opportunities in prestige skincare, spa and specialist products. This strategy
is delivering margin enhancements from a more focused, relevant consumer
offering.

 

·    A standout performance from THG Beauty (+4.6%), with broad and
consistent gains across skin, cosmetics and fragrance categories in the UK,
offsetting a transitional year for THG Nutrition where promotional activity in
support of the rebrand was elevated to clear old brand stock. The strength of
the Myprotein brand is reflected in the successful launch of multiple major
brand licensing agreements, as well as strong offline sales growth
(c.+29%).( 8 )

 

·   Average order values (+10% Myprotein UK and +8% on Lookfantastic UK) and
conversion rates via Apps continue to increase (vs other channels), with 1.6m
new app users in Q4 2024. There remains significant opportunities to enhance
spend and acquire new customers to apps as we continue to improve
functionality to deliver a highly personalised experience.

 

·   Following the business model transformation, focusing on larger, more
profitable Enterprise clients, outturn expectations for THG Ingenuity were
upgraded in September. This positive momentum accelerated further through Q4,
delivering external revenue growth of +23%.

 

·     The Group has strong liquidity with c. £400m of cash and £150m
undrawn Revolving Credit Facility at the period end, ahead of the Demerger
which completed on 2 January 2025.

 

 

THG Beauty Q4 2024 highlights

 

·    A strong retail and own brand performance with growth in every quarter
(excl. manufacturing). Beauty continues its strategy to deliver a leading
digital customer experience, product assortment and elevated brand
positioning, whilst generating sustainable, profitable growth with a focus on
key UK and US markets.

 

·  During the last 18 months, refinements to the operating model, marketing
strategy and ongoing portfolio management has driven beneficial movements in
retention, order frequency and customer lifetime value (+8% YoY). This is
demonstrated by a growing Lookfantastic loyalty scheme with 2.8m members.

 

·    Across the UK online beauty market, Cult Beauty and Lookfantastic were
the only two participants to grow their brand share of search( 9 ),
strategically important as we consciously shift our marketing efforts to a
brand centric approach with customers meeting our ideal beauty profile, less
reliant on price in the long term.

·    In the UK, all categories saw YoY growth over the peak trading period
with fragrance being the standout performer (order value +32%). Lookfantastic
also recorded twice as many visits over the cyber period than the nearest
beauty peer.( 10 )

·      In Q4, Lookfantastic became the first specialist beauty retailer to
partner with established British brand, The White Company, in addition to
other new listings across categories including cosmetics, fragrance and
fast-growing dermatological skincare.

 

 

THG Nutrition Q4 2024 highlights

 

·   The UK had a stronger performance during Q4 (vs Q3), although well
documented challenges in the Asia market relating to FX movements continued to
weigh on trading performance in the region. To defend margins, promotional
activity was reduced whilst currency movements and high commodity prices
stabilise.

 

·    Following the major global rebrand, decisive actions were taken to
position the business for a return to sustainable revenue growth and margin
accretion. Initiatives supporting new customer acquisition and brand awareness
through everyday great value have been implemented, leading to growing
consumer engagement and advocacy.

 

·   Myprotein is the most 'top-of-mind' sports nutrition brand in the
UK( 11 ), and the category leader in driving consumers through the purchase
funnel - ranked #1 in turning brand awareness into consideration and #1 in
converting buyers into brand loyalists.( 12 )

 

·   Alongside marketing strategy refinements, we have improved the user
experience through SKU rationalisation, site speed and functionality
enhancements. As a result brand recommendation is up +16% YoY, with Myprotein
the UK's most preferred sports nutrition brand.( 13 )

 

·   Evolving to an on-site D2C operating model in India has accelerated
growth and new customer acquisition, as we continue to selectively invest in
developing markets where Myprotein has a clear advantage, with a competitive
quality and value proposition.

 

·   Licensing and retail partnerships continue to drive offline revenue
growth in the UK with 14 new licensed products launched in H2 2024, alongside
core Myprotein range extension in UK convenience and US grocers.

 

0% UK VAT protein powders Tribunal judgement, 9 January 2025

 

·   The Group notes the First Tier Tribunal decision in Global By Nature
Limited, selling protein products under the 'Sunwarrior' brand. The Tribunal
ruled that protein powder products sold by Sunwarrior should be subject to 0%
UK VAT, and accordingly, Sunwarrior was eligible for a retrospective VAT
repayment.

 

·    Since the VAT rules in relation to Sports Drinks were implemented in
2012, THG has paid UK VAT against its powdered products in line with market
practice and HMRC guidance relating to the VAT treatment of protein powders.
In the event that THG can make a successful claim by leveraging the arguments
in the recent case, a 4-year retrospective repayment claim for two key
Myprotein powdered products - Impact Whey Protein and Impact Whey Isolate - is
estimated to be worth c. £30m.

 

·   The decision in its current form does not automatically entitle THG to a
VAT repayment. An update will be communicated as and when relevant.

 

 

Matthew Moulding, CEO of THG commented

 

"I'm impressed by the Group's agility and resilience during a year of
significant change for THG, ranging from the Demerger of our Ingenuity
business, to the sale or discontinuation of some non-core business units, and
a major global rebrand of Myprotein in Nutrition.

"Our Beauty business had a standout year, underpinned by strong performances
in the UK and US. The continued success of our customer loyalty and reward
program, and the opening of our first-ever Lookfantastic physical store,
further cement our leadership position in the global Beauty market. These
achievements demonstrated significant progress against our strategic
priorities and set the stage for an even more remarkable 2025.

"Despite the transitory headwinds, Myprotein achieved several notable
successes: entry into the dairy market through the launch of a long-term
partnership with Müller; the commencement of a co-manufacturing relationship
in Japan, the expansion of our Iceland partnership, and many other licensing
and retail listing agreements. We are excited to further deepen our retail
expansion strategy internationally in the forthcoming year.

 

"I would like to thank everyone involved at THG for their immense efforts
during a transformative year for the business. I'm looking forward to further
strong progress in 2025."

 

 

 

Analyst and Institutional investor conference call

THG will today host a conference call for analysts and institutional investors
at 9am (UK time) via the following link:

https://stream.brrmedia.co.uk/broadcast/678a87af5945eb4301335497
(https://stream.brrmedia.co.uk/broadcast/678a87af5945eb4301335497)

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

·      Confirmation password: THG Q4

·      UK-Wide: +44 (0) 33 0551 0200

·      UK Toll Free: 0808 109 0700

 

 

 

Enquiries to:

 Investor enquiries - THG PLC

 Kate Grimoldby, Director of Investor Relations and Strategic Projects  Investor.Relations@thg.com (mailto:Investor.Relations@thg.com)

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

 THG PLC                                                                media-enquiries@thg.com

 

 

Notes to editors

 

THG PLC is a global e-commerce group headquartered in Manchester, UK,
operating through two leading consumer businesses: THG Beauty and THG
Nutrition.

THG Beauty operates prominent online platforms including Lookfantastic,
Dermstore and Cult Beauty, offering a valued route to market for over 1,300
third-party brands, alongside a specialist portfolio of owned brands.

THG Nutrition, led by Myprotein, the world's largest online sports nutrition
brand, spans multiple health and wellness categories, delivering its products
both directly to consumers and through strategic offline partnerships
worldwide.

 

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.

 

 

Appendix

 Quarterly Reported Growth Rate

                                Q1 2023  Q2 2023  Q3 2023  Q4 2023  FY       Q1 2024  Q2 2024  Q3 2024  Q4 2024  FY

                                                                    2023                                          2024
 THG Beauty                     222.1    254.0    244.1    353.1    1,073.3  248.4    261.3    250.1    348.4    1,108.3
 THG Nutrition                  165.7    171.0    154.8    166.4    657.9    150.8    149.0    134.5    145.2    579.6
 RemainCo (continuing) revenue  387.8    425.0    398.9    519.5    1,731.2  399.2    410.4    384.6    493.7    1,687.9
 THG Ingenuity (external)       38.2     38.5     41.0     47.8     165.5    39.7     46.2     47.1     58.8     191.8
 Group Continuing revenue       426.0    463.5    440.0    567.3    1,896.7  438.9    456.6    431.7    552.4    1,879.6
 Discontinued revenue           43.4     36.4     27.2     41.7     148.6    21.0     17.5     11.1     13.4     63.0
 Total revenue                  469.4    499.9    467.2    609.0    2,045.4  459.9    474.0    442.8    565.9    1,942.7

 THG Ingenuity (internal)       122.3    126.5    117.4    153.6    519.9    112.6    113.0    98.9     138.3    462.9
 THG Ingenuity (total)          160.5    165.0    158.5    201.4    685.4    152.3    159.2    146.0    197.0    654.6

 

Quarterly constant currency revenue growth rate

                                Q1 2023  Q2 2023  Q3 2023  Q4 2023  FY       Q1 2024  Q2 2024  Q3 2024  Q4 2024  FY

                                                                     2023                                        2024
 THG Beauty                     -14.3%   -9.6%    +0.0%    +2.0%    -5.1%    +13.6%   +3.5%    +3.2%    +0.8%    +4.6%
 THG Nutrition                  +3.8%    +2.0%    -1.4%    -4.0%    +0.0%    -5.8%    -9.2%    -10.5%   -9.5%    -8.7%
 RemainCo (continuing) revenue  -7.4%    -5.3%    -0.6%    +0.0%    -3.2%    +5.4%    -1.5%    -2.1%    -2.5%    -0.4%
 THG Ingenuity (external)       -10.9%   -7.8%    -1.0%    +9.3%    -2.5%    +5.8%    +21.0%   +15.2%   +22.0%   +16.4%
 Group Continuing revenue       -7.8%    -5.5%    -0.6%    +0.7%    -3.2%    +5.5%    +0.4%    -0.4%    -0.4%    +1.1%
 Discontinued revenue           -33.1%   -44.4%   -56.7%   -48.0%   -45.6%   -50.5%   -51.5%   -58.6%   -67.1%   -56.9%
 Total revenue                  -11.1%   -10.1%   -7.6%    -5.4%    -8.5%    +0.2%    -3.4%    -3.9%    -5.0%    -3.1%

 THG Ingenuity (internal)       -15.5%   -17.1%   -10.5%   -9.0%    -13.0%   -8.0%    -10.6%   -13.5%   -11.7%   -11.0%
 THG Ingenuity (total)          -14.4%   -15.1%   -8.2%    -5.3%    -10.7%   -4.7%    -3.3%    -6.1%    -3.8%    -4.4%

 

Quarterly reported revenue

                                Q1 2023  Q2 2023  Q3 2023  Q4 2023  FY       Q1 2024  Q2 2024  Q3 2024  Q4 2024  FY

                                                                     2023                                         2024
 THG Beauty                     -10.1%   -8.0%    -1.2%    +1.9%    -3.9%    +11.8%   +2.9%    +2.5%    -1.3%    +3.3%
 THG Nutrition                  +5.7%    +1.8%    -3.8%    -6.0%    -0.7%    -9.0%    -12.8%   -13.1%   -12.7%   -11.9%
 RemainCo (continuing) revenue  -3.9%    -4.3%    -2.2%    -0.8%    -2.7%    +2.9%    -3.4%    -3.6%    -5.0%    -2.5%
 THG Ingenuity (external)       -9.4%    -7.6%    -2.5%    +7.1%    -2.9%    4.1%     +20.0%   +14.7%   +22.9%   +15.9%
 Group Continuing revenue       -4.4%    -4.6%    -2.2%    -0.2%    -2.7%    +3.0%    -1.5%    -1.9%    -2.6%    -0.9%
 Discontinued revenue           -36.1%   -47.7%   -58.8%   -51.4%   -48.6%   -51.6%   -52.0%   -59.0%   -67.7%   -57.6%
 Total revenue                  -8.6%    -10.0%   -9.5%    -6.9%    -8.7%    -2.0%    -5.2%    -5.2%    -7.1%    -5.0%

 THG Ingenuity (internal)       -15.5%   -17.1%   -10.5%   -9.0%    -13.0%   -8.0%    -10.6%   -15.7%   -10.0%   -11.0%
 THG Ingenuity (total)          -14.1%   -15.1%   -8.6%    -5.7%    -10.8%   -5.1%    -3.5%    -7.9%    -2.2%    -4.5%

 

 

 

ENDS

 

 

(#_ftnref1) (( 1 )) Year end cash balance includes placing proceeds, prior to
THG Ingenuity Demerger (02.01.25).

(#_ftnref2) ( 2 ) All figures throughout this release are presented on an
unaudited basis.

(#_ftnref3) ( 3 ) CCY defined as constant currency basis.

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

(#_ftnref5) ( 5 ])Excluding certain THG Experience assets which were demerged
within THG Ingenuity.

(#_ftnref6) (( 6 )) THG Ingenuity demerged from THG PLC on 02.01.25. This
includes revenue from the certain THG Experience assets previously reported
within THG Beauty.

(#_ftnref7)  7  Group (continuing) revenue refers to revenue before
discontinued categories as previously defined.

(#_ftnref8) ( 8 ) Offline revenue comprises B2B and licensing royalties
(excluding manufacturing).

(#_ftnref9) (( 9 )) Data taken from November 2024 against pureplay e-retail
competitors. Share of search data: Google.

(#_ftnref10) (( 10 )) Similarweb.

(#_ftnref11) ( 11 ) With 1 in 5 UK consumers spontaneously naming Myprotein
when asked to name a sports nutrition brand.

(#_ftnref12) ( 12 ) November 2024, YouGov Brand Tracking Research.

(#_ftnref13) ( 13 ) Most preferred and most recommended brand among 12 sports
nutrition brands in November 2024, YouGov Brand Tracking Research.

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