TIDMTHG
RNS Number : 7697Z
THG PLC
16 January 2024
16 January 2024
THG PLC
Fourth quarter trading statement for the period ended 31
December 2023
Q4 and full year trading in line with expectations and
guidance
Group returned to continuing revenue growth in Q4, at +1.1%
Free cash flow breakeven achieved for FY 2023
Strong balance sheet and liquidity, with c.GBP600m of cash and
available facilities
New and expanded Ingenuity partnerships contributing c.GBP175m
incremental GMV
Q4 2023 Group Trading Performance[1]
Following the sale of the THG OnDemand division earlier in 2023,
the Group completed its strategic review of non-core categories in
H2, resulting in the discontinuation of small legacy brands within
THG Beauty and THG Nutrition.
From Q4 2023, continuing revenue excludes the discontinuation of
these brands, accounting for c.GBP40m (c.2%) of Group FY 2023
revenue (See Appendix for further details).
Q4 2023 FY 2023
--------------------------
GBPm Q4 YoY[2] CCY[3] FY YoY CCY
2023 change change 2023 change change
------ -------- -------- ------- -------- --------
THG Beauty 387.1 +0.5% +2.6% 1,173.5 -4.6% -4.3%
THG Nutrition 166.5 -6.0% -3.9% 658.0 -0.7% +0.0%
THG Ingenuity (external) 44.3 +5.8% +8.1% 153.7 -3.7% -3.3%
Group (continuing)
revenue 597.9 -1.0% +1.1% 1,985.3 -3.3% -2.9%
------ -------- ------- --------
Discontinued revenue[4] 9.9 -80.1% -80.4% 58.9 -68.5% -68.6%
------ -------- -------- ------- -------- --------
Total revenue 607.8 -7.1% -5.4% 2,044.2 -8.7% -8.4%
------ -------- -------- ------- -------- --------
THG Ingenuity
internal revenue 153.4 -9.1% -9.1% 519.7 -13.0% -13.0%
THG Ingenuity
total 197.7 -6.1% -5.7% 673.4 -11.0% -11.0%
------ -------- -------- ------- -------- --------
All comparative figures are continuing CCY unless otherwise
stated.
-- Q4 best quarterly revenue performance of FY 2023: +1.1%.
-- Pleasing Cyber performance, especially across THG Beauty,
supported by accelerating growth in App penetration driving
valuable first party customer data, reducing reliance on paid
marketing channels.
-- The Group delivered an excellent operational performance,
with more orders processed YoY through automated facilities
delivering significant cost savings per unit. Maintaining next day
delivery through Cyber was a key factor in new customer acquisition
and improving customer satisfaction.
-- Q4 was another quarter of positive cash performance[5],
supporting free cash flow breakeven for the year (FY 2022 outflow:
-GBP213m). Cashflow breakeven was delivered alongside c.GBP125m of
capex investments, reflecting the Group's stronger profitability,
improved inventory efficiency, and substantially lower cash
adjusting items YoY.
-- The Group has strong liquidity with c.GBP600m of cash and
available facilities at the period end.
THG Beauty Q4 and FY 2023 highlights
Key Performance FY FY FY FY FY YoY CCY 4 Yr
Indicators 2019 2020 2021 2022 2023 change change change
------ ------ -------- --------
Total revenue
(GBPm) 565.3 832.4 1,227.5 1,285.8 1,206.7 -6.2% -6.0% +113.5%
--------------------- ------ ------ -------- -------- -------- -------- -------- --------
Continuing revenue -4.6
(GBPm) 506.4 745.9 1,152.8 1,230.1 1,173.5 % -4.3% +131.8%
--------------------- ------ ------ -------- -------- -------- -------- -------- --------
Active customers[6]
(,[7]) (m) 4.1 6.9 9.2 9.2 8.5 -7.6% +107.3%
Total orders
(m) 8.3 13.1 17.1 17.5 16.8 -4.0% +102.4%
Average order
values (GBP) 51 55 60 63 64 +1.6% +25.5%
--------------------- ------ ------ -------- -------- -------- -------- -------- --------
-- The Group's Beauty business built on positive Q3 exit
momentum, delivering Q4 revenue growth of +2.6%. Some of the best
performances came from THG's own beauty brands Perricone MD and
ESPA, as well as our retail platform Cult Beauty.
-- Performance in the UK (over half of total Beauty revenue) was
especially strong, delivering c.+9% revenue growth in Q4. Continued
improvements in delivery times through fulfilment automation, along
with significant growth in both App participation (14.7% vs 10.8%
Q4 2023) and new users (+95% YoY), have driven growth in our retail
fascias, ahead of that of the total prestige beauty market in the
UK in Q4.[8]
-- 2023's strategy of focusing on higher margin sales, reducing
order volumes that do not deliver target profitability, continued
into Q4. This has reduced some international order volumes in
territories furthest away from local distribution hubs, where
delivery costs are higher, but has supported a stronger Beauty
margin performance.
-- H1 challenges in Beauty manufacturing from industry-wide
de-stocking faded in H2, with a return to growth achieved in the
quarter (+11.6%).
-- A combination of gross margin improvements, a return to
growth in Beauty manufacturing, and significant cost savings from
automation, resulted in a much-improved H2 EBITDA margin
performance.
-- The Group's $20m acquisition of US beauty brand Biossance
completed in late December 2023. The brand was successfully
re-platformed onto Ingenuity technology on 10(th) January.
THG Nutrition Q4 and FY 2023 highlights
Key Performance FY FY FY FY FY YoY CCY 4 Yr
Indicators 2019 2020 2021 2022 2023 change change change
------ ------ ------ ------
Total revenue
(GBPm) 412.9 562.3 659.5 675.1 664.4 -1.6% -0.9% +60.9%
-------------------- ------ ------ ------ ------ ------ -------- -------- --------
Continuing revenue
(GBPm) 399.8 544.1 641.2 662.7 658.0 -0.7% +0.0% +64.6%
-------------------- ------ ------ ------ ------ ------ -------- -------- --------
Active customers
(m) 4.3 6.3 7.2 7.0 6.7 -4.3% +55.8%
Total orders
(m) 8.7 12.3 13.9 13.2 12.8 - 3.0% +47.1%
Average order
values (GBP) 48 47 46 50 49 -2.0% +2.1%
-------------------- ------ ------ ------ ------ ------ -------- -------- --------
-- Full year revenue growth was flat as we managed the business
throughout the year with a focus on profit margins. Following the
normalisation of global commodity prices, strong margin progression
has been delivered through the year with FY 2023 set to be a record
THG Nutrition EBITDA performance, reaping the rewards from the
prior year investment in pricing strategy.
-- The margin potential of the business was further enhanced by
expanding a royalty model with carefully chosen partners in key
territories. Targeted offline Myprotein licensing deals were
launched in our two largest markets: UK (with major grocer,
Iceland), and Japan (with leading distributor, Itochu). THG
Nutrition is extensively involved in all aspects of the development
of products being ranged.
-- These offline partnerships have increased customer
touchpoints and broadened the brand appeal of Myprotein, with
further partnerships and category expansion planned in 2024
(including high protein pancakes, yoghurts and ready to drink
chilled coffee).
-- Revenue from Myprotein products sold under licensing
arrangements scaled rapidly to over GBP36m (FY 2022: c.GBP2m).
Under these arrangements, our licensing partners record the revenue
from products sold i.e. GBP36m, with THG Nutrition receiving a
royalty payment.
-- Accordingly, the total global GMV of THG Nutrition brand
sales in 2023 increased +5% YoY in 2023 (UK +22%, Japan -1%).
-- Currency was something of a headwind during the financial
year and this peaked in Q4 2023. More specifically the 13% decline
in the Japanese Yen vs GBP impacted revenue in the Japanese market,
which is c.15% of THG Nutrition revenue. However, at current rates,
this negative revenue impact will begin to annualise in H2 2024 and
should represent less of a headwind.
-- Performance in the UK (over 30% of THG Nutrition revenue)
remained strong in Q4, delivering c.+10% revenue growth. While
c.86% of FY 2023 revenue was generated through direct-to-consumer
channels, an increasing focus on offline partnerships led to
Myprotein also being recognised as the fastest growing sports
nutrition brand in the UK retail market. Recent launches include
Sainsbury's, Asda & Iceland, whilst existing partnerships with
Boots, Morrisons & Tesco have been extended.
-- After a 2-year process, local manufacturing will launch in
both Japan and India in 2024, improving delivery timelines, local
product range development and securing significant cost savings.
Local manufacturing in Japan will also largely eliminate future
risk from Yen FX volatility and reverse the estimated impact of
prolonged Yen weakness on EBITDA (estimated c.GBP20m negative
impact in 2023 vs 2020).
THG Ingenuity Q4 and FY 2023 highlights
Q4 2023 FY 2023
---------------------
GBPm Q4 YoY CCY FY YoY CCY
2023 change change 2023 change change
------ -------- -------- ------ -------- --------
External revenue 44.3 +5.8% +8.1% 153.7 -3.7% -3.3%
Internal revenue 153.4 -9.1% -9.1% 519.7 -13.0% -13.0%
------ -------- -------- ------ -------- --------
Total THG Ingenuity
revenue 197.7 -6.1% -5.7% 673.4 -11.0% -11.0%
------ -------- -------- ------ -------- --------
-- Q4 2023 was the first quarter to see the benefits of the
decision taken in 2022 to pivot to more complex, higher margin
Enterprise clients, with external clients delivering double-digit
revenue growth in November and December).
-- Progress in onboarding Enterprise clients continued
throughout 2023, signing major brands including L'Oreal, Access
Corporate Group and PepsiCo, while broadening partnerships with
Asda and Mondelez.
-- Today the Group also announces an agreement in principle to
partner with the UK's leading wellness retailer Holland &
Barrett to provide D2C operational services, taking advantage of
THG's automated distribution facilities and extensive fulfilment
and courier management services to support their rapidly scaling
ecommerce business.
-- Together these partnerships will add c.GBP175m of incremental
GMV to the Ingenuity operations and technology platform during
2024.
-- Monthly recurring revenue[9] continued to build in December
at +14.7% YoY, an acceleration on September's +7.6%.
-- THG's Beauty and Nutrition divisions implemented
profitability improvement plans through 2022 and 2023, which
included the discontinuation of non-profitable categories. As these
divisions return to growth, inter-group revenue will also
benefit.
Outlook and guidance
-- FY 2023 continuing adjusted EBITDA expected to be above
GBP117m, with Group adjusted EBITDA over 75% higher YoY.
-- Exit momentum from 2023 underpins our confidence in all
divisions delivering growth in FY 2024. A more detailed update on
the outlook for FY 2024 will be provided alongside the Group's
Preliminary results in April.
-- FY 2024 should be another year of strong operating cashflow,
c.GBP100m to GBP110m of which is planned to be reinvested into
capex initiatives (FY 2023: c.GBP125m) to underpin long-term growth
and competitive advantage.
-- The Group continues to monitor developments in the Red Sea
region and anticipates minimal impact on stock availability. To
date, the financial impact is not considered to be material.
Strategic update
The Group operates 3 distinct businesses in THG Beauty, THG
Nutrition and THG Ingenuity, each scaled from the UK to hold global
leading positions in their respective sectors. In 2021 the Board
set out the Group's strategy to provide each division with its own
growth and capital platform, through individual public market
listings or partnerships, with THG retaining significant majority
ownership.
This strategy remains unchanged, with readiness work ongoing to
ensure the Group has full optionality. The Group remains on target
to deliver c.9% adjusted EBITDA margins in the medium term.
Matthew Moulding, CEO of THG commented:
"2023 was a year that threw up many challenges for all
businesses, and I'm delighted in how the Group not only responded
to these challenges, but grew stronger through the year.
"A combination of automation and significant cost initiatives
delivered in 2022, in addition to a receding inflationary
environment, each played a key role in the Group delivering an
expected record EBITDA performance after cash-adjusting items
during 2023. This strong EBITDA profitability and efficient stock
management generated positive operating cashflow of c.GBP170m.
"Despite consciously reducing capex levels from previous years,
we still made significant investments in the Group's long-term
future and extend competitive advantages. In 2023 we reinvested
c.GBP125m of the Group's positive operating cashflow into capex
initiatives, mainly within the UK economy.
"The return to revenue growth for both our Beauty & external
Ingenuity clients were clear Q4 highlights, especially given the
number of changes made to their business models over the past 18
months. But arguably the most pleasing performance came from our
recently automated global fulfilment network. Q4 order volumes were
delivered in record times, with average global delivery times
reduced by 1 day. These widespread service improvements were
achieved alongside a meaningful reduction in the cost of
fulfilment.
"The decision in 2022 to support consumers through the
cost-of-living crisis, sacrificing near term profits for long-term
customer loyalty, bore fruit in 2023. This, and the easing of
commodity inflation, will help Nutrition to deliver a record profit
performance in the year, despite a 13% devaluation in the Japanese
Yen in 2023 - Nutrition's second biggest market.
"Whilst the economic background remains uncertain there are some
optimistic signs, with consumer cost of living pressures set to
ease further in 2024. We are confident that the investments and
decisions made throughout the year position the Group well to build
upon the positive exit momentum."
Corporate governance update
THG also today announces an update on the structure of its
Remuneration Committee. Helen Jones has succeeded Dean Moore as
Chair of the Committee. Helen has been a director on the THG Board
and a member of the Remuneration Committee since July 2023. Dean
Moore remains on the Committee alongside Sue Farr (Senior
Independent Director) and Gillian Kent (Independent Non-Executive
Director).
We continue to monitor the FCA listing regime review in respect
of the move to the Premium segment.
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/6581acb1eefadbc2f3e42521
To ask questions, you must dial in via conference line using the
below details:
-- Confirmation password: THG Q4 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
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 thg@powerscourt-group.com
Hayns/Russ Lynch
THG PLC
Viki Tahmasebi Viki.tahmasebi@thg.com
APPIX
Quarterly reported revenue growth rates, adjusted for additional
discontinued categories
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
2022 2022 2022 2022 2023 2023 2023 2023 2023
------- ------- ------- ------- ------- ------- -------
THG Beauty +20.8% +21.9% +4.1% -8.2% -9.3% -8.6% -2.8% +0.5% -4.6%
THG Nutrition +11.3% -5.0% +4.0% +4.9% +5.7% +1.3% -3.8% -6.0% -0.7%
THG Ingenuity +17.9% +11.1% -2.5% -14.1% -14.3% -15.4% -8.8% -6.1% -11.0%
Inter-group
elimination +10.6% +10.2% -4.2% -14.0% -15.5% -17.1% -10.5% -9.1% -13.0%
------- ------- ------- ------- ------- ------- ------- ------- -------
Group (continuing)
revenue +19.6% +11.0% +4.0% -5.2% -4.3% -5.1% -3.2% -1.0% -3.3%
------- ------- ------- ------- ------- ------- ------- ------- -------
Other (discontinued) -18.8% -10.8% -18.5% -34.2% -51.8% -63.8% -77.8% -80.2% -68.5%
------- ------- ------- ------- ------- ------- ------- ------- -------
+ + +
Group revenue 14.9% 8.6% 1.6% -8.3% -8.3% -10.3% -9.5% -7.1% -8.7%
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Quarterly constant currency revenue growth rates, adjusted for
additional discontinued categories
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
2022 2022 2022 2022 2023 2023 2023 2023 2023
------- ------- ------- ------- ------- ------- -------
THG Beauty +16.1% +9.2% -10.0% -18.7% -12.8% -8.8% +0.1% +2.6% -4.3%
THG Nutrition +9.8% -10.5% -4.9% -1.8% +4.2% +1.4% -1.4% -3.9% +0.0%
THG Ingenuity +18.2% +10.7% -3.4% -14.9% -14.6% -15.4% -8.4% -5.7% -11.0%
Inter-group
elimination +10.6% +10.2% -4.2% -14.0% -15.5% -17.1% -10.5% -9.1% -13.0%
------- ------- ------- ------- ------- ------- ------- ------- -------
Group (continuing)
revenue +16.4% +2.1% -7.5% -14.4% -7.1% -5.5% -0.5% +1.1% -2.9%
------- ------- ------- ------- ------- ------- ------- ------- -------
Other (discontinued) +40.9% +70.6% +37.9% +6.0% -50.7% -63.8% -78.3% -80.4% -68.6%
------- ------- ------- ------- ------- ------- ------- ------- -------
Group revenue +18.2% +5.7% -4.8% -13.1% -10.9% -10.4% -7.4% -5.4% -8.4%
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Quarterly revenue growth rates (as per Q3 2023 trading statement
discontinuation)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
2022 2022 2022 2022 2023 2023 2023 2023 2023
------- ------- ------- ------- ------- ------- -------
THG Beauty +16.7% +19.2% +3.0% -9.4% -10.7% -10.2% -4.4% -1.0% -6.2%
THG Nutrition +9.8% -5.8% +3.0% +4.2% +4.5% +0.2% -4.6% -6.5% -1.6%
THG Ingenuity +17.9% +11.1% -2.5% -14.1% -14.3% -15.4% -8.8% -6.1% -11.0%
Inter-group
elimination +10.6% +10.2% -4.2% -14.0% -15.5% -17.1% -10.5% -9.1% -13.0%
------- ------- ------- ------- ------- ------- ------- -------- -------
Group (continuing)
revenue +16.6% +9.4% +3.0% -6.3% -5.6% -6.5% -4.4% -2.1% -4.5%
------- ------- ------- ------- ------- ------- ------- -------- -------
Other (discontinued) -10.1% -2.7% -17.6% -34.9% -58.8% -76.3% -97.6% -100.0% -83.7%
------- ------- ------- ------- ------- ------- ------- -------- -------
Group revenue +14.9% +8.6% +1.6% -8.3% -8.3% -10.3% -9.5% -7.1% -8.7%
---------------------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Quarterly constant currency revenue growth rates (as per Q3 2023
trading statement discontinuation)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY
2022 2022 2022 2022 2023 2023 2023 2023 2023
------- ------- ------- ------- ------- ------- -------
THG Beauty +21.5% +15.2% -4.7% -14.8% -13.8% -10.5% -2.0% +0.7% -6.0%
THG Nutrition +12.4% -8.5% -3.1% -0.5% +3.1% +0.3% -2.3% -4.5% -0.9%
THG Ingenuity +18.2% +10.7% -3.4% -14.9% -14.6% -15.4% -8.4% -5.7% -11.0%
Inter-group
elimination +10.6% +10.2% -4.2% -14.0% -15.5% -17.1% -10.5% -9.1% -13.0%
------- ------- ------- ------- ------- ------- ------- ------- -------
Group (continuing)
revenue +20.5% +6.1% -3.9% -11.3% -8.1% -6.9% -2.1% -0.2% -4.2%
------- ------- ------- ------- ------- ------- ------- ------- -------
Other (discontinued) -10.9% -2.7% -17.9% -35.0% -58.8% -76.3% -97.6% -99.9% -83.7%
------- ------- ------- ------- ------- ------- ------- ------- -------
Group revenue +18.2% +5.7% -4.8% -13.1% -10.9% -10.4% -7.4% -5.4% -8.4%
---------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
ENDS
Notes to editors
THG PLC operates 3 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]) All figures throughout this release are presented on an
unaudited basis.
[2] YoY defined as year-on-year statutory sales growth.
([3]) CCY defined as constant currency basis.
[4] Discontinued revenue also comprises OnDemand and ProBikeKit
(2023 disposals)
[5] 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).
[6] THG Beauty KPIs exclude Glossybox beauty subscriptions and
THG Luxury.
[7] Active customers is defined as customers who have purchased
at least once within the period.
[8] As per third-party data and management estimates.
[9] Monthly Recurring Revenue comprises software-as-a-Service
license fees, monthly brand building fees, infrastructure service
fees, revenue share, translation and creative services.
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END
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