10
April 2024
THG PLC
Preliminary FY 2023
results
Continuing adjusted EBITDA of £120.4m (+6.1% margin), vs.
January 2024 guidance of above £117.0m
Group
adjusted EBITDA £114.1m, +78% YoY (FY 2022: £64.1m)
Free cash flow breakeven
achieved
Strong
balance sheet, with c.£600m of cash and facilities
Q4 2023 Group revenue growth
(+1.1%) accelerated in Q1 2024, Group guidance
unchanged
THG PLC ("THG" or the "Group"),
announces its preliminary results for the financial year ended 31
December 2023 ("FY 2023").
FY 2023 Group trading
performance
|
|
|
|
|
£m
|
FY 2023
|
FY 2022
|
YoY[1]
Growth
|
CCY Change[2]
|
THG Beauty
|
1,171.7
|
1,226.0
|
-4.4%
|
-4.2%
|
THG Nutrition
|
657.9
|
662.7
|
-0.7%
|
0.0%
|
THG Ingenuity
(external)
|
154.1
|
159.6
|
-3.4%
|
-3.1%
|
Group (continuing) revenue
|
1,983.7
|
2,048.3
|
-3.2%
|
-2.8%
|
Discontinued revenue
|
61.7
|
191.0
|
-67.7%
|
-67.6%
|
Total revenue
|
2,045.4
|
2,239.2
|
-8.7%
|
-8.4%
|
Gross Margin %[3]
|
42.8%
|
41.3%
|
+150bps
|
|
Continuing adj EBITDA
|
120.4
|
81.2
|
+48.4%
|
|
Continuing adj EBITDA %
|
6.1%
|
4.0%
|
+210bps
|
|
Adj EBITDA
|
114.1
|
64.1
|
+78.0%
|
|
Adj EBITDA %
|
5.6%
|
2.9%
|
+270bps
|
|
Adjusted items - Cash
|
15.8
|
40.1
|
|
|
Adjusted items -
Non-cash
|
34.8
|
305.1
|
|
|
Operating loss[4]
|
185.4
|
495.6
|
|
|
Net Cash /
(Debt)[5]
|
(218.2)
|
(180.6)
|
|
|
All comparative
figures are
continuing CCY unless otherwise stated, all
numbers and
tables subject to rounding
Matthew Moulding, CEO of THG, commented:
"In 2023, we made material progress against our strategic
priorities, delivering significant profit growth following the
support for our consumers through the cost-of-living crisis in
2022. This focus led to the Group delivering record EBITDA after
cash-adjusting items in 2023, higher than at the peak of the
pandemic.
"Having completed our recent infrastructure investment
programme, the Group is now delivering operating leverage. Our
fulfilment network is becoming increasingly optimised through a
combination of robotics automation, AI and the onboarding of new
Ingenuity clients utilising existing
capacity.
"The return to Group revenue growth in Q4 was especially
pleasing, and this momentum has continued into
2024."
Current trading and FY 2024 guidance
·
As we enter FY 2024, overall
Group revenue trends continue to improve, with notable momentum in
Beauty following the strategic changes made during 2023. Whilst the
Yen has weakened further in Q1 2024 impacting THG Nutrition, the
Group's start to the year provides us with confidence in delivering
in accordance with market consensus.
· Operating cashflow is expected to remain strong, supported by
profit growth and lower capex (c.£100m to £110m), which will drive
further free cash flow[6] progress.
Medium-term guidance unchanged
· The
decisive actions taken as a business during 2022 and 2023 have
provided a solid foundation supporting further margin recovery to
our medium-term Group adjusted EBITDA margin target of
c.9.0%.
FY 2023 segmental
summary
£m
|
THG
Beauty
|
THG
Nutrition
|
THG
Ingenuity
|
Other
|
Central
|
Inter-group
elimination
|
Continuing
Total
|
Discontinued
categories
|
FY 2023
Total
|
Revenue
|
1,171.7
|
657.9
|
154.1
|
-
|
-
|
-
|
1,983.7
|
61.7
|
2,045.4
|
Inter-segment revenue
|
-
|
-
|
519.9
|
-
|
-
|
(519.9)
|
-
|
-
|
-
|
Total revenue
|
1,171.7
|
657.9
|
673.9
|
-
|
-
|
(519.9)
|
1,983.7
|
61.7
|
2,045.4
|
adj
EBITDA
|
44.2
|
88.9
|
9.0
|
-
|
(21.8)
|
-
|
120.4
|
(6.3)
|
114.1
|
adj EBITDA %
|
3.8%
|
13.5%
|
1.3%
|
|
-
|
-
|
6.1%
|
-10.3%
|
5.6%
|
FY 2022 segmental
summary
£m
|
THG
Beauty
|
THG
Nutrition
|
THG
Ingenuity
|
Other
|
Central
|
Inter-group
elimination
|
Continuing
Total
|
Discontinued
categories
|
FY 2022
Total
|
Revenue
|
1,226.0
|
662.7
|
159.6
|
-
|
-
|
-
|
2,048.3
|
191.0
|
2,239.2
|
Inter-segment revenue
|
-
|
-
|
597.4
|
-
|
-
|
(597.4)
|
-
|
-
|
-
|
Total revenue
|
1,226.0
|
662.7
|
757.0
|
-
|
-
|
(597.4)
|
2,048.3
|
191.0
|
2,239.2
|
adj
EBITDA
|
33.6
|
51.6
|
19.1
|
-
|
(23.2)
|
-
|
81.2
|
(17.1)
|
64.1
|
adj EBITDA %
|
2.7%
|
7.8%
|
2.5%
|
|
-
|
-
|
4.0%
|
-8.9%
|
2.9%
|
FY
2023 financial highlights
· Total Group
revenue declined 8.4% YoY primarily driven by the positive action
to discontinue loss making categories. Group continuing revenue of
£1,983.7m declined 2.8% as the Group prioritised profitable sales
and territories reflected in the higher quality EBITDA.
· UK was our
key growth market, although international sales remain a
significant portion of Group sales at 54.2% (2022: 57.1%), and
represent a material growth opportunity supported by our global
fulfilment network.
·
Adjusted gross margin expanded to
42.8% (FY 2022: 41.3%), despite high levels of inflation and
currency headwinds.
· Improvements in distribution costs were driven primarily by
the Group's use of automation, which will continue to annualise in
FY 2024. Adjusted distribution costs substantially reduced
year-on-year to 13.2% of revenue (FY 2022: 15.8%).
· Increased
administrative costs primarily reflect marketing cost inflation.
Greater app participation has partially mitigated this and we
expect this ratio to continue to improve.
· Continuing adjusted EBITDA improved substantially to £120.4m
(FY 2022: £81.2m), with a margin of 6.1% (FY 2022: 4.0%). The cost
base of the business is well-positioned for further operational
leverage.
· On a
reported basis, adjusted EBITDA increased to £114.1m (2022:
£64.1m), with a margin of 5.6% (2022: 2.9%).
· Group
operating loss has also seen a substantial improvement to £185.4m
(2022: £495.6m), primarily due to the one-off non-cash impairment
charge of £275.4m in 2022 that did not reoccur in 2023.
· Free cash
flow breakeven was achieved, reflecting improved profitability,
well-controlled working capital driven by reduced stock cover and
lower cash adjusting items.
· With
the support of our banking partners, we extended our Revolving
Credit Facility until May 2026.
· Liquidity position remains exceptionally strong with c.£600m
of cash and available facilities at year end.
Business operational and strategic overview
THG Beauty
· The
leading pureplay in online prestige beauty, one of the fastest
growing categories in retail. A key partner for over 1,300 beauty
brands through its retail sites including Lookfantastic, Cult
Beauty and Dermstore, c.60% of sales are from the high-repeat
skincare and haircare categories.
·
THG Beauty generated revenue of
£1.2bn in FY 2023, comprising online retail (c.80% of revenue),
prestige own brand (c.10%) and manufacturing (c.10%). Within the
online retail channel, over 50% of revenue is generated in the UK,
with c. 20% in the US.
· Active customers have more than doubled since 2019 to 8.5m.
Revenue from returning customers has increased to c.85% of online
D2C revenue.
· Brand
awareness continues to build, with 3.3m new app downloads in 2023
(+32% YOY) and a social media following of 9.5m. In the UK, app
participation grew +4.9% YoY to 20.7%, with this expected to
continue to grow across all geographies. App customers notably
exhibit preferable behaviour, namely AOV and order
frequency.
· In
December, we strengthened our proposition with the acquisition of
prestige skincare brand, Biossance. We will use our expertise and
capabilities to leverage the brand's strong awareness and presence
in offline beauty retailers to further drive growth.
· Through targeted curation, building out our higher margin
retail media proposition and growing our beauty community, we
firmly remain as the industry partner of choice.
THG Nutrition
· Premium sports nutrition brand with category leadership in
both online (c.90% of revenue) and offline spaces across key
markets such as UK, Europe and Asia. Its proven localisation model
allows for rapid scaling internationally, with c.70% of online
revenue overseas.
· D2C
brand Myprotein is the world's largest online sports nutrition
brand, now spanning performance and wellness. The market is
underpinned by prominent tailwinds as health and wellness becomes
an increasingly integral part of consumer lifestyles, with
ecommerce becoming the winning channel due to breadth of range,
convenience and advice.
· Vertically integrated manufacturing capabilities power
innovation, new product development and speed to market. Local
manufacturing will expand from UK, Europe and US into India and
Japan in the second half of 2024, eliminating in part the future
risk from FX volatility.
· Carefully curated
licensing partnerships have unlocked incremental value through
brand awareness, reaffirming Myprotein as one of the leading
authorities in the market, at the forefront of innovation as trends
and customer needs evolve.
· There
remains a significant opportunity to build out the licensed product
base and scale total brand sales through collaborations with major
grocers and food and beverage brands. In the UK, we have delivered
further retail penetration across over 2,500 stores, and you can
now find Myprotein products on shelves in every major UK
grocer.
· It is this
expertise in entering new channels that has driven the brand to
becoming the fastest growing sports nutrition brand in the UK
retail market, further demonstrating our ability to scale, innovate
and diversify - and ultimately tap into new audiences.
THG Ingenuity
· Comprising
leading digital marketing, technology and fulfilment capabilities,
Ingenuity utilises its experience in building category-leading
brands to offer global ecommerce solutions for brand owners and
retailers.
· The
critical components of successful, profitable ecommerce include
attracting new customers and driving traffic, a frictionless
on-site experience and speed of delivery. Bringing together
multiple suppliers in numerous territories is costly and complex.
Our position as a brand owner offers a rare advantage as our
infrastructure has been built through a customer-first lens.
· Through
repositioning our focus towards clients seeking multi-service,
longer-term solutions, monthly recurring revenue is building,
underpinning our future growth.
· Since IPO
we have built and monetised a fulfilment and courier management
proposition to rival established players. Following investment in a
best-in-class, automated distribution network, we are using our
customer advantage to support brands and retailers to cost
effectively acquire and retain customers with a market-leading
delivery service.
· A
selection of new clients and expanded partnerships announced during
the year included: Holland & Barrett (UK ecommerce fulfilment
and courier management services), Disney (media content for Shop
Disney), L'Oreal (US D2C for prestige beauty brands) and Coca-Cola
(UK D2C and fulfilment).
Financial reporting
calendar
· The
Group intends to issue a Q1 2024 trading update by the end of
April.
Analyst and investor
conference call
THG will today host a conference
call and webcast for analysts and investors at 9.00am (UK time) via
the following links:
To register for the webcast,
please use the below link:
https://stream.brrmedia.co.uk/broadcast/660be0e32eae5d4dcf2e63e5
To ask questions, you must dial in
via conference line using the below details:
· UK
dial in: +44 (0) 330 551 0200
· Password: THG Results
For
further information please contact:
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.
Chief Executive Officer's Statement
2023 was a year of material
operational progress and execution for THG, as we continued to grow
our category-leading, global brands through digital transformation,
innovation and impactful partnerships. It was certainly not without
its headwinds, but the Group responded proactively, and emerged
stronger.
Following the challenging global
environment in 2022, we repositioned our three businesses to focus
our resources onto margin recovery and a return to sustainable
revenue growth. Overall, the performance was highly encouraging,
and although we have more work to do in 2024, I am confident we
have the right people, capabilities and expertise to make further
progress.
· We achieved a
Group record EBITDA performance after cash adjusting items and
anticipate further progress towards our medium-term targets during
2024, in line with historical performance.
· Our Beauty
business displayed incredible resilience, despite the first half
being affected by short-term global de-stocking affecting
manufacturing volumes. Our focus on orders that delivered immediate
profitability over ones with a longer payback, meant we fulfilled
more orders closer to our global distribution hubs, driving further
economies of scale.
· THG Nutrition
achieved an impressive performance, and with inflationary pressures
easing, posted substantially higher margin growth year-on-year. The
early results from the major Myprotein rebrand are also encouraging
as we've taken steps to further enhance the premium nature of the
world's No.1 online sports nutrition brand.
· These
actions should strengthen partnership opportunities as we expand
our licensing and offline strategy. The new branding also lays the
groundwork for selective category expansion, supporting our plan of
building Myprotein into a truly global lifestyle brand.
· Across both our consumer businesses, our customer health
remains robust with repeat purchase rates
of above 80%.
· Ingenuity's pivot to larger, multi-service clients is gaining
momentum, reflected in some key client wins and a strong pipeline.
We were thrilled to be listed in the Gartner's Magic Quadrant™ for
Digital Commerce, in recognition of our ability to provide an
all-encompassing direct-to-consumer journey.
· In
line with our guidance, substantial growth in Group profitability,
along with improved inventory efficiency, led to the Group
delivering £174m of operating cashflow[7] in
2023.
· This
strong operating cash performance allowed the Group to continue to
make £128m of Capex investments in the year, principally into the
UK, while still delivering overall free cash flow breakeven for the
year.
· Following the Group's solid adjusted EBITDA and operating
cash performance, closing net leverage for FY 2023 was c.1.9x,
compared to 2.8x for FY 2022. Continued positive momentum into FY
2024 provides confidence of further degearing.
· With
the support of our long-term banking partners, we extended our
revolving credit facility until May 2026. Whilst we haven't used
this facility since IPO, it affords us continued significant
financial flexibility during uncertain geo-political
times.
·
As noted in the Chair's Statement,
we were delighted to welcome two further independent NEDs, Sue Farr
and Helen Jones, as we expanded our independent Board, while
thanking Iain McDonald for the significant contribution he made to
the Company over many years.
· We
celebrated our meritocratic culture in our Annual Awards, awarding
£150,000 equity to Newcomer of the Year, Employee of the Year, and
Outstanding Contribution, in addition to supporting many
well-deserved promotions across the Group.
·
Following the Group's strong
performance, the Executive Directors would have been eligible for a
bonus opportunity totalling in excess of £1m in 2023. It is likely
that a material proportion of this would have been payable to me,
however, in line with each financial year since IPO, the Executive
Directors unanimously decided to waive their entitlement to a 2023
bonus. In recognition of this, the Group intends to make a
charitable donation of £500,000 targeting homelessness in
Manchester. I also waived my £750k salary in return for the Group
making a charitable donation to The Moulding Foundation.
Business operational performance
As an authority in Beauty, we
continue to attract, retain and develop our customer relationships,
with our proposition refined and elevated by new technology and a
best-in-class delivery service that enhances the customer
experience.
Myprotein has evolved beyond
sports and performance to broader health and wellness categories,
expanding its addressable markets and catering for increased
consumption occasions. Pivotal to this strategy has been creating
ranges with prominent partners in distribution, grocery and chilled
goods - expanding the reach of the brand into offline channels and,
in turn, building awareness and engagement. Commodity challenges
abated during the year and we were able to achieve significant
profitability while undergoing an ambitious brand
repositioning.
Our proprietary technology and
operations platform, THG Ingenuity, is a multi-year development
story, with our fulfilment and operational solutions business now
winning clients in its own right, as the business accelerates the
returns on investment in distribution capacity.
Finally we actively managed our
portfolio through the exit of small legacy brands within Beauty and
Nutrition, and through the sale of OnDemand and ProBikeKit
delivering a cash return.
Financial performance
Much like the previous year, 2023
presented challenges for all businesses in the markets we operate
in. Nevertheless, we are very pleased with how the Group has
responded, making substantial progress towards the targets we
communicated at the outset of the year.
We achieved revenue of £2bn,
reflecting our efforts in executing our strategic review, as we
repositioned several loss-making categories across the Group. This
created strong momentum heading into 2024, and we expect to return
to progressive revenue growth throughout the year.
We repositioned Beauty to
materially improve profitability, with the businesses finishing the
year in constant currency growth. In Nutrition, we set out to
recapture the significant investment we made in margin during 2022,
subsequently achieving an EBITDA margin in excess of our
medium-term guidance. Ingenuity continued to execute its strategic
pivot towards higher value clients, with new client wins and
expanded partnerships accelerating monthly recurring revenue
throughout the year.
We made notable margin
improvements, in part due to the Group's excellent operational
performance. Distribution costs were lower year-on-year, through an
optimised fulfilment network consisting of increased automation and
an improved delivery offering. We will continue to increase
automation in our major hubs to further offset lingering inflation
and move towards our goal of around half of customer orders being
touched by automation.
Operational leverage also
supported improvements in profitability, achieving continuing
adjusted EBITDA of £120m - ahead of our previous
guidance.
Our business has nearly doubled in
revenue since IPO, with our growth capex investment phase already
paying back. Investment in future years will remain at
comparatively modest levels, though still extending and enhancing
our proposition and competitive advantage while the market growth
opportunity remains significant.
Following our strong operating
cash performance in the second half of the year and our recently
extended Revolving Credit Facility, we have a healthy liquidity
position with c. £600m in cash and undrawn facilities providing
substantial liquidity and flexibility, to capitalise on growth
opportunities.
People and purpose
2023 was a year of transformation
for our people as we prioritised attracting top talent, as well as
retaining and nurturing our existing teams. From introducing
wraparound support for working families, to increasing
compassionate leave, we made significant investment in our people,
their wellbeing, and their long-term development at THG.
We launched our social impact
strategy, THG in the Community; our plan for creating positive
social change and making an impact in our local communities. The
strategy is underpinned by three pillars - championing inclusion,
disrupting inequality, and creating opportunities - and revolves
around three key initiatives, all of which have been introduced to
give our people an opportunity to get involved and give
back.
All businesses are accountable for
maintaining a focus on closing the emissions gap. THG is rising to
this challenge by committing a greater number of resources to its
sustainability agenda, ensuring compliance with the ever-increasing
legislative demands and making progress on our 2030 Sustainability
Strategy.
Outlook
We expect long-term channel shift
across our consumer markets to continue, supported by a
track-record of consistently taking market share, and a global,
expanding, high-repeat customer base.
We remain confident of a return to
9% adjusted EBITDA margins in the medium term, and progression into
2024 through:
· a return to revenue growth across
the Group;
· operating leverage improvements across the fixed
infrastructure, including automation; and
· further free cashflow progress.
With a strong balance sheet and
category-leading positions within substantial end markets that
continue to benefit from long-term structural growth, we have
confidence in our ability to deliver long-term value for
Shareholders.
Chief Financial Officer Review
We delivered substantial progress
in our key focus areas in 2023 whilst responding well to
challenging conditions across the globe, notably cash generation,
profitability, with a significant reduction in distribution
costs.
In 2023, we delivered
free cash flow breakeven alongside
a 78.0% improvement in Adjusted EBITDA to £114.1m
(2022: £64.1m) as we rebuild margins to their historic levels.
Following completion of the strategic review, we report a higher
quality result, with significantly lower adjusting items
year-on-year (£50.6m vs 2022: £345.8m) and an improvement in
statutory operating loss of +62.6% to £185.4m (2022:
£495.6m).
CONSOLIDATED INCOME STATEMENT
ALTERNATIVE PERFORMANCE MEASURES[8]
The following table provides
adjusted measures. The Group believes that these alternative
performance measures, which are not considered to be a substitute
for IFRS measures, provide stakeholders with additional helpful
information on the performance of the business. These alternative
performance measures are consistent with how the business
performance is monitored and reported through internal management
reporting to the Board.
|
|
Year ended 31 December
2023
£'000
|
|
Year
ended 31 December 2022
£'000
|
Movement
|
Adjusted gross profit
|
|
876,096
|
|
925,488
|
|
Gross margin % (adjusted)
|
|
42.8%
|
|
41.3%
|
+150bps
|
Adjusted distribution
costs
|
|
(270,694)
|
|
(353,412)
|
|
As a % of revenue
|
|
13.2%
|
|
15.8%
|
+260bps
|
Adjusted administrative
costs
|
|
(491,296)
|
|
(507,962)
|
|
As a % of revenue
|
|
24.0%
|
|
22.7%
|
-130bps
|
Adjusted EBITDA
|
|
114,106
|
|
64,114
|
|
Adjusted EBITDA %
|
|
5.6%
|
|
2.9%
|
+270bps
|
EBITDA losses from discontinued
categories
|
|
6,343
|
|
17,061
|
|
Adjusted EBITDA
(continuing)
|
|
120,449
|
|
81,175
|
|
Adjusted EBITDA (continuing) %
|
|
6.1%
|
|
4.0%
|
+210bps
|
STATUTORY RESULTS
|
|
Year ended 31 December
2023
|
|
Year
ended 31 December 2022
|
|
|
Before Adjusted
Items
|
Adjusted
Items
|
Total
|
|
Before
Adjusted Items
|
Adjusted
Items
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
|
£'000
|
£'000
|
£'000
|
Revenue
|
|
2,045,378
|
-
|
2,045,378
|
|
2,239,229
|
-
|
2,239,229
|
Cost of sales
|
|
(1,189,837)
|
(15,251)
|
(1,205,088)
|
|
(1,333,737)
|
(25,517)
|
(1,359,254)
|
Gross profit
|
|
855,541
|
(15,251)
|
840,290
|
|
905,492
|
(25,517)
|
879,975
|
Distribution costs
|
|
(293,910)
|
(5,061)
|
(298,971)
|
|
(380,652)
|
(22,117)
|
(402,769)
|
Administrative costs
|
|
(678,733)
|
(30,315)
|
(709,048)
|
|
(674,626)
|
(298,145)
|
(972,771)
|
Other operating expense
|
|
(17,664)
|
-
|
(17,664)
|
|
-
|
-
|
-
|
Operating loss
|
|
(134,766)
|
(50,627)
|
(185,393)
|
|
(149,786)
|
(345,779)
|
(495,565)
|
Revenue
During 2023, two key factors
impacted our headline sales performance, firstly the decision to
exit several categories as part of the strategic review and
secondly, the conscious prioritisation of higher margin
sales.
Following the completion of the
strategic review, we successfully executed our plan to exit several
loss-making categories including the sale of THG OnDemand. With
continuing sales declining by only 3.2% in the current
macroeconomic environment and with margin pivot, this is
particularly pleasing when considered against the backdrop of the
total Group reported revenue which has decreased by 8.7% to
£2,045.4m (2022: £2,239.2m).
Importantly, we continue to
benefit from strong underlying customer metrics and behaviours
(Active customers, total orders and average order values),
positioning the group well for the future.
The revenue decrease is driven
by:
- the Group exiting
non-profitable categories. Discontinued categories has resulted in
a reduction in revenue of £129.3m;
- THG
Beauty and THG Nutrition have consciously prioritised higher-margin
sales and reduced order volumes that do not deliver target
profitability leading to a decline in revenues, however we have
benefitted from a stronger margin performance. This has focussed on
reducing sales in territories furthest away from local distribution
hubs, where delivery costs are higher;
- a
one-time destocking across the beauty sector led to a decline in
revenue of THG Beauty manufacturing (reported within THG Beauty)
within the first half of the year which has faded in the second
half and is not expected to recur in 2024;
- THG
Ingenuity continues with its pre-announced strategic re-positioning
that commenced in Q3 2022, focusing on higher value and higher
margin clients which provide improved quality recurring revenue
over the mid to long term. The short-term impact has been a
reduction in non-recurring revenue as the re-positioning is
executed; and
- a continuing uncertainty in the macroeconomic environment
throughout the year.
Whilst the above has impacted
revenue, the Group is pleased to report an improvement in both
gross profit margin and absolute Adjusted EBITDA which, together
with cash generation, have been a key management focus.
Detailed analysis is included
within the segmental section later in this report.
Gross
profit
Adjusted gross profit was £876.1m
(2022: £925.5m) equating to an adjusted gross profit margin of
42.8% (2022: 41.3%), an improvement of 150bps compared to
2022.
Gross profit on a statutory basis
totalled £840.3m (2022: £880.0m) also delivering an increased
margin of 41.1% (2022: 39.3%) and 180bps stronger than
2022.
The cost environment in 2023 has
continued to be challenging with high levels of inflation combined
with the currency headwinds, which continued to develop as we
progressed through the year. More
specifically the 13% decline in the Japanese Yen vs GBP impacted
revenue and margin in the Japanese market within THG Nutrition.
Overall, despite the decline in Japanese Yen, the Group saw a substantially better margin within THG
Nutrition, reflecting the unwind of the price investment made in
2022 for customers and movements in the whey commodity price, which
closed the year at below normalised levels. These commodity prices
are expected to rise to normalised levels during 2024.
Japan is THG Nutrition's' second
largest market and the devaluation in the Yen (from 135 Yen/£ at
IPO in September 2020, to c. 180 Yen/£ at the close of 2023) has
had a material impact on margins. Had the exchange rate been
comparable in 2023 to that at IPO, THG would have made c. £20m more
profit in the year. The Group also has continued to progress plans
for in territory manufacturing in Japan to provide a longer-term
hedge.
In THG Beauty, online retail
(principally Look Fantastic, Cult Beauty and Dermstore) saw gross
profit margin expansion as a result of the de-prioritisation of
lower margin sales and subtle changes to promotional and geographic
strategy. Manufacturing sales were also impacted by well documented
de-stocking in the first half of the year, which also adversely
impacted gross profit margins.
Pleasingly, the result of the
factors above, alongside proactive implementation of cost saving
initiatives, has led to the Group delivering a much improved margin year-on-year whilst exiting the year
in constant currency sales growth.
Operating
expenses
Distribution costs on a statutory
basis further reduced as a percentage of sales by 340bps compared
to 2022, culminating in a cost of £299.0m (2022: £402.8m), which is
14.6% (2022: 18.0%) of revenue, with total statutory costs
improving by 25.8%. This is testimony to the benefits of the
fulfilment automation deployed and is despite the adverse impact of
national minimum wage increases and labour inflation in
general.
Statutory distribution
costs include one off adjusted items of
£5.1m, which has substantially reduced from the £22.1m reported in
2022. As expected, in line with the reopening of air channels
(specifically in Asia) and the impact of the pandemic lessening,
the costs relating to incremental delivery fees in respect of
Covid-19 have fallen away in 2023, totalling just £2.5m compared to
£18.5m in 2022.
Adjusted distribution costs
of £270.7m (2022: £353.4m) were 13.2% (2022: 15.8%) of revenue.
This 260bps underlying improvement was
driven by the Group's continued focus on network optimisation and
the expanded use of warehouse automation, which has more than
compensated for high levels of labour inflation in the market. This
included the launch of the Group's second AutoStore facility in
North America during 2023. We continue to review the cost base and
plan to continue with the roll out of further automation (all be it
lighter touch) during 2024.
Administrative costs on a
statutory basis totalled £709.0m (2022: £972.8m), an improvement
year-on-year following the one-off non-cash impairment charge of
£275.4m incurred in 2022.
Adjusted administrative costs as a
percentage of revenue totalled 24.0% of revenue (2022: 22.7%).
Within administrative costs, the main increases have been seen
within marketing due to increased spend in certain areas, primarily
brand investment and general media inflation in paid channels.
Greater app participation has partially
mitigated rising marketing costs, with customers acquired at lower
costs through this channel typically ordering more frequently, with higher AOV's due to regular
engagement.
Other operating expense of £17.7m
(2022: £nil) relates to the loss on disposal of three non-core
freehold assets, as planned and completed in the first half of the
year. These three disposals of assets, no longer required by the
Group, generated cash proceeds of £55.5m.
Adjusted EBITDA and Adjusted
EBITDA (continuing)
Reconciliation from Operating loss to Adjusted
EBITDA
|
|
Year ended 31
December 2023
£'000
|
Year
ended 31 December 2022
£'000
|
Operating loss
|
|
(185,393)
|
(495,565)
|
Adjustments for:
|
|
|
|
Amortisation
|
|
68,829
|
58,581
|
Amortisation of acquired
intangibles
|
|
50,543
|
50,394
|
Depreciation
|
|
95,113
|
94,191
|
Adjusted items - cash
|
|
15,824
|
40,090
|
Adjusted items - non-cash
|
|
34,803
|
305,689
|
Other operating expense - non-cash
loss on disposal freehold assets
|
|
17,664
|
-
|
Share-based payments
|
|
16,723
|
10,734
|
Adjusted EBITDA
|
|
114,106
|
64,114
|
Adjusted EBITDA %
|
|
5.6%
|
2.9%
|
EBITDA loss from discontinued
categories
|
|
6,343
|
17,061
|
Adjusted EBITDA (continuing)
|
|
120,449
|
81,175
|
Adjusted EBITDA (continuing) %
|
|
6.1%
|
4.0%
|
Adjusted EBITDA saw a strong
improvement to £114.1m from £64.1m in 2022. This represents a margin of 5.6% (2022: 2.9%), an improvement
of 270bps year-on-year, delivered through the Group's profit
improvement programme and the exit of loss-making categories and
territories.
This is an encouraging result
against a tough macroeconomic backdrop, with the cost base of the
business fundamentally stronger and well positioned for operating
leverage.
When stripping out the EBITDA loss
from discontinued categories, Adjusted EBITDA (continuing) totalled
£120.4m (2022: £81.2m) with a margin of 6.1% (2022: 4.0%), an
improvement of 210bps.
Depreciation and
amortisation
Total depreciation and
amortisation costs were £95.1m and £119.4m respectively (2022:
£94.2m and £109.0m). Included within amortisation is £50.5m
relating to acquired intangibles (2022: £50.4m). This is non-cash
and is principally the depreciation of historic acquisition
consideration through the Income Statement.
Depreciation remained consistent
as a result of the previous investment made across the
network.
Amortisation increased following
the continued investment in our proprietary technology platform
during the period, as expected, with more projects moving from
work-in-progress (WIP) to live in the period generating an
increased amortisation charge. This investment is focused on the
technology to support both internal and external customers and
ensures that we continually enhance the functionality and
capability of the platform.
Operating
loss
Operating loss before adjusted
items totals £134.8m (2022: £149.8m). This loss was a result of the
challenging macroeconomic environment combined with the above
mentioned factors. The actions taken to exit loss-making categories
and territories combined with a return to sales growth are expected
to reduce this loss position in the medium-term.
The Group incurred a much
decreased operating loss in the year of £185.4m (2022: £495.6m).
The decrease is largely as a result of the one-off non-cash
impairment charge of £275.4m in 2022 that has not recurred in
2023.
The loss in 2023 includes one-off
charges incurred during the year, being the loss on disposal of
loss-making discontinued categories totalling £16.4m (2022: £29.3m)
and share-based payment charges of £16.7m (2022: £10.7m). In
addition, the other operating expense of £17.7m (2022: £nil)
relates to the non-cash loss on disposal following the planned sale
of non-core freehold assets which will not recur in future years,
but which generated c.£55.5m of cash for the Group.
Finance costs net of finance
income
Finance costs net of finance
income have increased to £66.6m (2022: £54.2m). This is principally
the result of the additional £156.0m facility obtained in September
2022 with the interest annualising in 2023.
Loss before tax and tax
rate
Reported loss before tax was
£252.0m (2022: £549.7m). The effective tax rate is 1.4% (2022:
1.8%), based on a total tax credit of £3.6m (2022: tax credit
£9.8m). The effective tax rate differs from the average statutory
rate of 23.5%. This is primarily due to a movement in deferred tax
not recognised (-16.2%), and the impact of expenses not deductible
(-5.2%).
At the balance sheet date the
total net deferred tax liability is £55.7m (2022: £76.6m). The
deferred tax liability in respect of intangible assets recognised
on consolidation was £135.3m (2022: £150.8). The deferred tax asset
in respect of tax losses recognised was £29.8m (2022: £54.8m).
There were £96.2m of unrecognised deferred tax assets in respect of
tax losses at the balance sheet date (2022: £57.8m). This
non-recognition has an impact on the income statement tax credit,
and this is one of the primary reasons for the effective tax rate
being below the statutory rate.
Earnings per
share
Loss per share was (£0.19) per
share (2022: £(0.44) per share). Note that in the prior year, if
the non-cash impairment charge was removed, the loss per share for
2022 would have been (£0.21) per share.
Cashflow
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Adjusted EBITDA
|
114,106
|
64,114
|
Working capital
movements
|
48,152
|
23,528
|
Tax paid
|
(5,411)
|
(4,857)
|
Net
cash generated in operating activities before adjusted
items
|
156,847
|
82,785
|
Adjusted items
|
(15,040)
|
(45,071)
|
Net
cash generated in operating activities
|
141,807
|
37,714
|
Purchase of property, plant and
equipment
|
(46,289)
|
(94,854)
|
Purchase of intangible
assets
|
(79,369)
|
(81,564)
|
Proceeds from sale of non-core
freehold assets
|
55,450
|
-
|
Other (primarily interest and lease
repayments)
|
(83,961)
|
(74,649)
|
Acquisition of trade and assets and
subsidiaries net of cash acquired
|
(20,259)
|
(5,691)
|
(Repayments)/proceeds of/from bank
borrowings
|
(25,000)
|
156,000
|
Net
decrease in cash and cash equivalents
|
(57,621)
|
(63,044)
|
Cash and cash equivalents at the
beginning of the year
|
473,783
|
536,827
|
Cash and cash equivalents at the end of the
year
|
416,162
|
473,783
|
Free cash flow[9]
|
(1,135)
|
(213,353)
|
The total cash outflow for the
year was £57.6m (2022: £63.0m) driven by a cash inflow from
operating activities of £141.8m (2022: £37.7m) due to increased
Adjusted EBITDA, lower adjusting items, a well-controlled working
capital cycle and the proceeds from the sale of non-core freehold
assets. The improvements in working capital were seen through
general tighter stock controls, reducing stock holding with no
impact on availability as the stock portfolio normalises following
a period of investment which supported the global warehousing
rollout in previous periods.
Total cash adjusting items before
tax have declined significantly to £15.8m from £40.1m in 2022. The
cash reduction has been driven by lower transportation and delivery
cash costs in relation to Covid-19 from £18.5m to £2.5m with air
channels reopening in Asia. Also, acquisition costs in respect of
restructuring and integration has decreased from £8.0m to less than
£1m.
Through conscious, controlled,
capital expenditure, there has been a reduction in the cash spend
on the purchase of property, plant and equipment in 2023 to £46.3m
compared to £94.9m in 2022. The deployment of our distribution
network is now largely complete and continues to deliver
efficiencies and benefits, reflected in lower distribution costs.
Continued investment within intangible assets, mainly the Ingenuity
platform continues at a similar rate to 2022 totalling £79.4m
(2022: £81.6m). In 2023, £55.5m (2022:
£nil) cash was received in relation to the sale of non-core
freehold assets.
The combination of these cashflow
improvements, has culminated in the group's ability to report free
cash flow breakeven for 2023 (2022: outflow of £213.4m). This
improvement of over £200m has come from strong operating cashflow
improvements, and normalisation of capex expenditure.
During the year, some small, well
considered acquisitions were undertaken to complement the THG
Beauty and THG Ingenuity strategies. This generated a cash outflow
of £20.3m (£5.7m) in 2023, primarily related to the acquisition of
Biossance in December 2023 and City AM in July 2023.
In respect of loans and
borrowings, a scheduled capital repayment of £25.0m (2022: £nil)
was made in relation to the Group's bank borrowings. In 2022, cash
inflows included £156.0m in respect of the new senior secured
facility that was drawn in October 2022.
The Group ended the period with
cash and cash equivalents of £416.2m (2022: £473.8m).
Segmental
Summary
Overview
2023 £m
|
THG
Beauty
|
THG
Nutrition
|
THG
Ingenuity
|
Central
|
Inter-group
elimination
|
Continuing
Total[10]
|
Discontinued
categories
|
FY 2023
Total
|
External revenue
|
1,171.7
|
657.9
|
154.1
|
-
|
-
|
1,983.7
|
61.7
|
2,045.4
|
Inter-segment revenue
|
-
|
-
|
519.9
|
-
|
(519.9)
|
-
|
-
|
-
|
Total revenue
|
1,171.7
|
657.9
|
673.9
|
-
|
(519.9)
|
1,983.7
|
61.7
|
2,045.4
|
Adjusted EBITDA
|
44.2
|
88.9
|
9.0
|
(21.8)
|
-
|
120.4
|
(6.3)
|
114.1
|
Adjusted EBITDA margin
|
3.8%
|
13.5%
|
1.3%
|
-
|
-
|
6.1%
|
-10.3%
|
5.6%
|
2022 £m
|
THG
Beauty
|
THG
Nutrition
|
THG
Ingenuity
|
Central
|
Inter-group
elimination
|
Continuing
Total
|
Discontinued
categories
|
FY 2022
(Restated)
Total
|
External revenue
|
1,226.0
|
662.7
|
159.6
|
-
|
-
|
2,048.3
|
191.0
|
2,239.2
|
Inter-segment revenue
|
-
|
-
|
597.4
|
-
|
(597.4)
|
-
|
-
|
-
|
Total revenue
|
1,226.0
|
662.7
|
757.0
|
-
|
(597.4)
|
2,048.3
|
191.0
|
2,239.2
|
Adjusted EBITDA pre SaaS
costs
|
33.6
|
51.6
|
29.3
|
(23.2)
|
-
|
91.4
|
(17.1)
|
74.3
|
Adjusted EBITDA
|
33.6
|
51.6
|
19.1
|
(23.2)
|
-
|
81.2
|
(17.1)
|
64.1
|
Adjusted EBITDA margin
|
2.7%
|
7.8%
|
2.5%
|
-
|
-
|
4.0%
|
-8.9%
|
2.9%
|
THG Beauty [11]
£m
|
|
|
2023
|
2022
(Restated)
|
Change
%
|
Revenue
|
|
|
1,207.5
|
1,285.9
|
-6.1%
|
Revenue (continuing)
|
|
|
1,171.7
|
1,226.0
|
-4.4%
|
Adjusted EBITDA
(continuing)
|
|
|
44.2
|
33.6
|
31.7%
|
Adjusted EBITDA Margin %
|
|
|
3.8%
|
2.7%
|
+110bps
|
THG Beauty results mainly reflect
the change in strategy to focus on higher margin sales and reducing
order volumes that do not deliver target profitability. THG Beauty
sales declined 6.1% to £1,207.5m, THG Beauty generated an
increased Adjusted EBITDA (continuing) of £44.2m
(2022: £33.6m) an 110bps improvement on margin to 3.8% (2022:
2.7%). This improvement was delivered by better quality sales
improving gross margin, which more than offset the adverse impact
from the one time destocking event seen in THG Beauty manufacturing
in H1 2023. Following the completion of the strategic review, some
small legacy brands within THG Beauty were discontinued, which will
continue to improve the margin into 2024.
Challenges in THG Beauty
manufacturing from industry-wide de-stocking reported in H1 2023,
faded in H2, with a return to more normalised order levels being
experienced into 2024.
Our prestige online retailing and
THG owned-brands continued to perform strongly, despite the
challenging backdrop, benefitting from the growth within the
prestige beauty market alongside the continued trend of digital
channel shift and THG Ingenuity platform services aiding
conversion, with a strong app participation.
AOV's continue to increase
totalling £64 per basket for 2023 (2022: £63), arising from a focus
on customer loyalty (with the launch of LF Beauty+) and continued
investment to drive increased customer engagement in both third
party and THG own brands.
In late December 2023, THG Beauty
completed the acquisition of Biossance. The brand was successfully
re-platformed onto Ingenuity technology in January 2024. This
acquisition provides further opportunity for THG Beauty to embed
new strategic partnerships and benefit from the significant levels
of investment into the brand that were made under the previous
ownership. Since inception in 2015, Biossance has generated global
revenues of c. $300m and is currently stocked in over 1,600 stores
globally including Sephora, Harrods, Space NK, Douglas and
Selfridges plus online through www.biossance.com, Lookfantastic and
Cult Beauty.
THG
Nutrition
£m
|
|
|
2023
|
2022
|
Change
%
|
Revenue
|
|
|
664.3
|
675.1
|
-1.6%
|
Revenue (continuing)
|
|
|
657.9
|
662.7
|
-0.7%
|
Adjusted EBITDA
(continuing)
|
|
|
88.9
|
51.7
|
72.2%
|
Adjusted EBITDA Margin %
|
|
|
13.5%
|
7.8%
|
+570bps
|
THG Nutrition sales marginally
decreased by 1.6% to £664.3m (2022: £675.1m) as we managed the
business throughout the year with a focus on profit margins. An
Adjusted EBITDA of £88.9m (2022: £51.7m) was delivered. This 570bps
improvement on margin of 13.5% (2022: 7.8%) is a record THG
Nutrition Adjusted EBITDA performance, reaping the rewards from the
prior year investment in pricing strategy and, the effect of the
decrease in whey commodity pricing.
The whey commodity prices saw
substantial decreases in the year from abnormally high levels in
2022, these commodity prices are expected to rise initially then
normalise during 2024.
Licensing arrangements continue to
be a high-growth focus area of the business during 2023 and beyond,
with revenue from Myprotein products sold under licensing
arrangements scaling rapidly during the year. During 2023, targeted
offline Myprotein licensing deals were launched in our two largest
markets: UK (with major grocer, Iceland), and Japan (with leading
distributor, Itochu). Such arrangements provide future enhanced
margin potential for the business.
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.£20m negative impact in 2023 vs 2020).
2023 was a significant year in the
evolution of the Myprotein brand, with a global rebrand launched in
the second half of the year. The rebrand represents the latest step
we've made in developing the brand and making it accessible to an
increasingly broad audience since we acquired the brand in
2011.
AOV's marginally decreased to £49
(2022: £50).
Adjusted EBITDA margin is
marginally above the medium-term guidance level previously
communicated. Reflecting the recouping of investment consumer
price protection in 2022.
THG
Ingenuity
£m
|
|
2023
|
2022
|
Change
%
|
External revenue
|
|
154.1
|
159.6
|
-3.4%
|
Internal revenue
|
|
519.9
|
597.4
|
-13.0%
|
Total revenue
|
|
673.9
|
757.0
|
-11.0%
|
Adjusted EBITDA
|
|
9.0
|
19.1
|
-52.7%
|
Adjusted EBITDA Margin %
|
|
1.3%
|
2.5%
|
-120bps
|
THG Ingenuity revenue from
external customers decreased by 3.4% to £154.1m (2022: £159.6m).
Strategic re-positioning commenced in Q3 2022, focusing on higher
value and higher margin clients which provide improved quality
recurring revenue principally through, Software-as-a-Service
licence fees, monthly brand building fees, infrastructure service
fees, revenue share, translation and creative services.
Following an intentional phase of
investment in headcount and expertise to deliver the re-positioned
strategy, new multi-service enterprise client wins have been
secured and onboarding is progressing. Due to this pivot in
strategy, as expected, THG Ingenuity delivered an Adjusted EBITDA
of £9.0m with a margin of 1.3% (2022: £19.1m with a margin of
2.5%), being a 120bps reduction. There continued to be a strategic
exit of smaller accounts and onboarding of multi-service enterprise
clients throughout 2023. As revenue scales and the revenue mix
evolves towards the technology product offering we anticipate
margins will increase towards the Group's five-year aspirational
target of 5%.
Cost-saving initiatives continue
to remain on the agenda with a continued focus on automation
rollout to implement further savings across the cost base into 2024
without impacting service delivery.
Internal revenue of £519.9m (2022:
£597.4m) relates to services provided to the wider THG Group
including platform fees, customer
services, fraud detection services, THG Studios, fulfilment,
postage and marketing services. This revenue is eliminated on
consolidation. Internal revenue declined due to the wider Group
exiting loss-making categories and territories along with lower
group-wide sales, this in turn generated lower volumes for THG
Ingenuity. As these businesses return to
growth, inter-group revenue will also benefit.
Central
costs
£m
|
|
2023
|
2022
|
Change %
|
EBITDA loss from central
costs
|
|
(21.8)
|
(23.2)
|
+6.1%
|
Central costs relate primarily to
the PLC Board remuneration, professional services fees, group
finance, M&A, and governance costs that are not recharged to
the businesses as they principally relate to the operations of the
PLC holding company. The costs reduced in comparison to 2022 as the
Group continued to focus on cost saving initiatives, more than
offsetting increased investment in governance through new Board
appointments and record high levels of macro-inflation in the
economy.
Discontinued categories
£m
|
|
|
2023
|
2022
|
Change
%
|
|
Revenue discontinued
|
|
|
61.7
|
191.0
|
-67.7%
|
|
Adjusted EBITDA from discontinued
categories
|
|
(6.3)
|
(17.1)
|
+62.8%
|
|
Adjusted EBITDA Margin
%
|
|
|
-10.3%
|
-8.9%
|
-140bps
|
|
On 17 January 2023, the Group
confirmed its intention to simplify and streamline its operations,
undertaking a strategic review of loss-making categories and
territories within THG OnDemand. In July 2023, the trade and
assets of THG OnDemand were sold to a Newco led by the
OnDemand management team. The Newco continues to be a client of
Ingenuity, with the provision of technology, operational and
digital services.
In addition, specialist provider
of cycling equipment 'ProBikeKit' was sold to Frasers Group PLC in
Q2 2023. The combined consideration receivable through both
transactions was c. £4m.
During H2, the Group completed its
strategic review of non-core categories resulting in the
discontinuation of small legacy brands within THG Beauty and THG
Nutrition.
The discontinued categories
contributed £61.7m (2022: £191.0m) of revenue and an adjusted
EBITDA loss of £6.3m (2022: loss of £17.1m). Included within
adjusted items are the losses on disposal of these categories
including any write down of assets to their disposal value
totalling £16.4m (2022: £29.3m).
We note the exits don't meet the
criteria under IFRS 5: Non-current assets held for sale and
discontinued operations, as these categories and territories are
not a major component of the Group as defined by the accounting
standard. However, to provide further information on the continuing
revenue and Adjusted EBITDA of the Group these have been presented
separately.
The prior year discontinued
categories have been restated to include consistent categories
disclosed in 2023 to provide a like-for-like comparison. (See note
2 within the financial statements).
Adjusted
items
In order to understand the
underlying performance of the Group, certain costs included within
cost of sales, distribution, administrative and finance costs have
been classified as adjusted items. All material classes of adjusted
items reduced period-on-period.
The largest costs relate to the
non-cash loss on disposal of discontinued and loss making
categories following the strategic review.
Following the sale of the trade and assets of THG OnDemand in July
2023, along with the completion of the strategic review leading to
the discontinuation of small legacy brands within THG Beauty and
THG Nutrition, all assets have been written down to their
recoverable amount expected on exit. This has led to inventory
provisions (within cost of sales) and impairment of other assets,
primarily property, plant and equipment (within administrative
costs) being recognised.
|
2023
|
2022
|
|
£'000
|
£'000
|
Within Cost of sales
|
|
|
Non-cash loss on disposal of
discontinued and loss making categories
|
10,465
|
25,517
|
Inventory provision following
strategic review
|
4,786
|
-
|
|
15,251
|
25,517
|
Within Distribution costs
|
|
|
Transportation and delivery costs
in relation to Covid-19
|
2,456
|
18,504
|
Commissioning - new
facilities
|
2,605
|
3,613
|
|
5,061
|
22,117
|
Within Administrative costs
|
|
|
Non-cash loss on property
portfolio restructure
|
18,369
|
-
|
Loss on property portfolio
restructure
|
851
|
-
|
Non-cash loss on disposal of (or
exit from) discontinued and loss making categories
|
5,969
|
3,763
|
Other costs following the outcome
of strategic review
|
1,515
|
6,942
|
Restructuring costs
|
2,708
|
6,803
|
Acquisitions - restructuring and
integration
|
703
|
8,046
|
Other legal and professional
costs
|
200
|
570
|
Donations
|
-
|
362
|
Non- cash impairment of
assets
|
-
|
269,828
|
Non-cash impairment of non-core
assets held for sale
|
-
|
1,831
|
|
30,315
|
298,145
|
Within Finance costs
|
|
|
Non-cash - revaluation of SBM
option
|
-
|
(601)
|
Total adjusted items before
tax
|
50,627
|
345,178
|
Tax impact
|
(2,835)
|
(11,634)
|
Total adjusted items
|
47,792
|
333,544
|
Cash adjusting items before tax [12]
|
15,824
|
40,090
|
For full details on each category of adjusted item see note 4
to the financial statements.
Balance sheet
Cash and cash equivalents
and net cash before lease liabilities
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Loans and other
borrowings
|
|
(650,037)
|
(679,189)
|
Lease liabilities
|
|
(344,977)
|
(334,376)
|
Cash and cash equivalents
|
|
416,162
|
473,783
|
Sub-total
|
|
(578,852)
|
(539,782)
|
|
|
|
|
Adjustments:
|
|
|
|
Retranslate debt balance at swap
rate where hedged by foreign exchange derivatives
|
|
15,653
|
24,782
|
Net
debt
|
|
(563,199)
|
(515,000)
|
Net
debt before lease liabilities
|
|
(218,222)
|
(180,624)
|
The Group's balance sheet remains
robust closing the period with cash
balances of £416.2m (2022 at £473.8m). The
€600m Term Loan B matures in December 2026 and the incremental
£156m facility matures in Q4 2025. The Group revolving
credit facility of £170m remains undrawn and has
not been drawn post IPO. Post year end, the Group extended its
Revolving Credit Facility by 17 months to May 2026. There will be
no changes to the financial covenants or interest margin beyond the
existing maturity date. From December 2024, the facility will be
£150 million. The extension affords the Group continued significant
financial flexibility during uncertain geo-political
times.
Net debt before lease liabilities
and adjusted for the impact of hedging was £218.2m (2022: £180.6m)
driven by movements in the loans and other borrowings balance and
cash balance.
Net debt was £563.2m (2022:
£515.0m). The increase in net debt
year-on-year includes an increase in lease liabilities, following
the restructure of the property portfolio in the year, with
non-core assets being sold via a sale and leaseback arrangement and
subsequently sublet, generating positive cash flow for the
Group.
Non-current
assets
Property, plant and equipment
totalled £273.2m (2022: £360.0m).
Intangible assets totalled £1,207.4m (2022: £1,275.8m). The
movement in the period was driven by continued investment in the
THG Ingenuity platform and the Group's global warehouse expansion
programme which is now nearing completion. These were offset by the
sale of the non-core freehold assets along with depreciation and
amortisation charges incurred.
Consolidated statement of comprehensive
income
|
|
2023
|
2022
|
|
|
Total
|
Total
|
|
Note
|
£'000
|
£'000
|
|
|
|
|
Revenue
|
2
|
2,045,378
|
2,239,229
|
Cost of sales
|
|
(1,205,088)
|
(1,359,254)
|
Gross profit
|
|
840,290
|
879,975
|
Distribution costs
|
|
(298,971)
|
(402,769)
|
Administrative costs
|
|
(709,048)
|
(972,771)
|
Other operating expense
|
|
(17,664)
|
-
|
Operating loss
|
3
|
(185,393)
|
(495,565)
|
Finance income
|
6
|
13,329
|
2,359
|
Finance costs
|
6
|
(79,900)
|
(56,522)
|
Loss before taxation
|
|
(251,964)
|
(549,728)
|
Income tax credit
|
|
3,592
|
9,771
|
Loss for the financial year
|
|
(248,372)
|
(539,957)
|
|
|
|
|
Other comprehensive (expense)/income
|
|
|
|
Items that may be subsequently
reclassified to profit or loss:
|
|
|
|
Exchange differences on translating
foreign operations, net of tax
|
|
(46,255)
|
62,953
|
Net (loss) / gain on cash flow
hedges
|
|
(5,220)
|
9,753
|
Total comprehensive expense for the financial
year
|
(299,847)
|
(467,251)
|
Basic and diluted loss per share
(£)
|
|
(0.19)
|
(0.44)
|
Adjusted EBITDA
|
|
|
2023
|
2022
|
|
Note
|
£'000
|
£'000
|
Operating loss
|
|
(185,393)
|
(495,565)
|
Adjustments for:
|
|
|
|
Amortisation
|
7
|
68,829
|
58,581
|
Amortisation of acquired
intangibles
|
7
|
50,543
|
50,394
|
Depreciation
|
8, 14
|
95,113
|
94,191
|
Adjusted items - cash
|
4
|
15,824
|
40,090
|
Adjusted items - non-cash
|
4
|
34,803
|
305,689
|
Other operating expense - non-cash
loss on disposal freehold assets
|
|
17,664
|
-
|
Share-based payments
|
5
|
16,723
|
10,734
|
Adjusted EBITDA[13]
|
|
114,106
|
64,114
|
Consolidated statement of financial
position
|
|
2023
|
2022
|
|
Note
|
£'000
|
£'000
|
Non-current assets
|
|
|
|
Intangible assets
|
7
|
1,207,383
|
1,275,762
|
Property, plant and
equipment
|
8
|
273,171
|
360,041
|
Right-of-use assets
|
14
|
303,635
|
294,309
|
Investments
|
|
1,400
|
1,400
|
Other financial assets
|
|
7,999
|
21,567
|
|
|
1,793,588
|
1,953,079
|
Current assets
|
|
|
|
Assets held for sale
|
8.2
|
-
|
21,397
|
Inventories
|
9
|
297,143
|
373,271
|
Trade and other
receivables
|
10
|
271,782
|
264,949
|
Other financial assets
|
|
1,915
|
301
|
Current tax asset
|
|
-
|
2,377
|
Cash and cash equivalents
|
11
|
416,162
|
473,783
|
|
|
987,002
|
1,136,078
|
Total assets
|
|
2,780,590
|
3,089,157
|
Equity
|
|
|
|
Ordinary shares
|
|
7,072
|
6,903
|
Share premium
|
|
2,024,824
|
2,024,452
|
Merger reserve
|
|
615
|
615
|
Capital redemption
reserve
|
|
523
|
523
|
Hedging reserve
|
|
(20,020)
|
(6,221)
|
Cost of hedging reserve
|
|
25,283
|
16,704
|
FX reserve
|
|
15,604
|
61,859
|
Retained earnings
|
|
(1,032,234)
|
(803,096)
|
|
|
1,021,667
|
1,301,739
|
Non-current liabilities
|
|
|
|
Borrowings
|
13
|
621,011
|
648,197
|
Other financial
liabilities
|
|
-
|
4,189
|
Lease liabilities
|
14
|
301,440
|
290,381
|
Provisions
|
|
22,130
|
18,840
|
Deferred tax
|
|
55,698
|
76,598
|
|
|
1,000,279
|
1,038,205
|
Current liabilities
|
|
|
|
Contract liability
|
|
22,864
|
34,256
|
Trade and other payables
|
12
|
638,350
|
636,440
|
Borrowings
|
13
|
29,026
|
30,992
|
Current tax liability
|
|
1,266
|
-
|
Lease liabilities
|
14
|
43,537
|
43,995
|
Provisions
|
|
3,838
|
3,530
|
Other financial
liabilities
|
|
19,763
|
-
|
|
|
758,644
|
749,213
|
Total liabilities
|
|
1,758,923
|
1,787,418
|
|
|
|
|
Total equity and liabilities
|
|
2,780,590
|
3,089,157
|
Consolidated statement of changes in equity
|
|
Ordinary
shares
|
Share
premium
|
Merger
reserve
|
Capital Redemption
reserve
|
FX
reserve
|
Hedging
reserve
|
Cost of Hedging
reserve
|
Retained
earnings
|
Total
equity
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 1 January 2022
|
|
6,684
|
2,022,311
|
615
|
523
|
(1,094)
|
(12,964)
|
13,694
|
(274,015)
|
1,755,754
|
Loss for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(539,957)
|
(539,957)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
Impact of foreign
exchange
|
|
-
|
-
|
-
|
-
|
62,953
|
-
|
-
|
-
|
62,953
|
Movement on hedging
instruments
|
|
-
|
-
|
-
|
-
|
-
|
6,743
|
3,010
|
-
|
9,753
|
Total comprehensive (expense)/ income for the
period
|
|
-
|
-
|
-
|
-
|
62,953
|
6,743
|
3,010
|
(539,957)
|
(467,251)
|
Issue of ordinary share
capital
|
|
219
|
2,141
|
-
|
-
|
-
|
-
|
-
|
-
|
2,360
|
Share-based payments
|
5
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,734
|
10,734
|
Deferred tax effect in
equity
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
142
|
142
|
Balance at 31 December 2022
|
|
6,903
|
2,024,452
|
615
|
523
|
61,859
|
(6,221)
|
16,704
|
(803,096)
|
1,301,739
|
Balance at 1 January 2023
|
|
6,903
|
2,024,452
|
615
|
523
|
61,859
|
(6,221)
|
16,704
|
(803,096)
|
1,301,739
|
Loss for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(248,372)
|
(248,372)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
Impact of foreign
exchange
|
|
-
|
-
|
-
|
-
|
(46,255)
|
-
|
-
|
-
|
(46,255)
|
Movement on hedging
instruments
|
|
-
|
-
|
-
|
-
|
-
|
(13,799)
|
8,579
|
-
|
(5,220)
|
Total comprehensive (expense)/ income for the
period
|
|
-
|
-
|
-
|
-
|
(46,255)
|
(13,799)
|
8,579
|
(248,372)
|
(299,847)
|
Issue of ordinary share
capital
|
|
169
|
372
|
-
|
-
|
-
|
-
|
-
|
-
|
541
|
Share-based payments
|
5
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
16,723
|
16,723
|
Deferred tax effect in
equity
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,511
|
2,511
|
Balance at 31 December 2023
|
|
7,072
|
2,024,824
|
615
|
523
|
15,604
|
(20,020)
|
25,283
|
(1,032,234)
|
1,021,667
|
Consolidated statement of cash flows
|
|
2023
|
2022
|
|
|
Note
|
£'000
|
£'000
|
|
Cash flows from operating activities before adjusted cash
flows
|
|
|
|
|
Cash generated from
operations
|
|
162,258
|
87,642
|
Income tax paid
|
|
(5,411)
|
(4,857)
|
Net
cash generated from operating activities before adjusted cash
flows
|
|
156,847
|
82,785
|
Cash flows relating to adjusted
items
|
|
(15,040)
|
(45,071)
|
Net
cash generated from operating activities
|
|
141,807
|
37,714
|
Cash flows from investing activities
|
|
|
|
Acquisition of subsidiaries net of
cash acquired
|
|
(20,259)
|
(5,691)
|
Proceeds from sale of non-core
freehold assets
|
|
55,450
|
-
|
Purchase of property, plant and
equipment
|
|
(46,289)
|
(94,854)
|
|
Purchase of intangible
assets
|
|
(79,369)
|
(81,564)
|
Interest received
|
6
|
13,329
|
2,359
|
|
Net
cash used in investing activities
|
|
(77,138)
|
(179,750)
|
Cash flows from financing activities
|
|
|
|
Proceeds from issuance of ordinary
shares net of fees
|
|
-
|
(73)
|
Interest paid
|
|
(47,803)
|
(27,923)
|
(Repayment of) / proceeds from bank
borrowings
|
|
(25,000)
|
156,000
|
Repayment of lease
liabilities
|
14
|
(49,487)
|
(49,012)
|
Net
cash flow from financing activities
|
|
(122,290)
|
78,992
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
(57,621)
|
(63,044)
|
Cash and cash equivalents at the
beginning of the year
|
|
473,783
|
536,827
|
Cash and cash equivalents at the end of the
year
|
11
|
416,162
|
473,783
|
Notes to the Consolidated Financial
Statements
1. Basis of
Preparation
a. General
information
THG PLC (company number 06539496)
is a public company limited by shares and incorporated in England
and Wales. It has a standard listing on the London Stock Exchange
and is the holding company of the Group. The address of its
registered office is Icon 1 7-9 Sunbank Lane, Ringway, Altrincham,
United Kingdom, WA15 0AF. The Company is the parent and the
ultimate parent of the Group, the financial statements comprises
the results of the Company and its subsidiaries ("the Group"). The
financial period presented here is for the 12 months ending 31
December 2023, and a prior period comparative of the 12 months
ending 31 December 2022.
b. Basis of preparation
The consolidated financial
statements, have been prepared in accordance with UK-adopted
international accounting standards ("IFRS") and, as regards the
parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006. The financial statements
have been prepared on the historical cost basis, except for
derivatives which are held at fair value.
The financial information included
in this preliminary statement of results does not constitute
statutory accounts within the meaning of section 435 of the
Companies Act (the "Act"). These Condensed Consolidated Financial
Statements of THG PLC and its subsidiaries apply the same
accounting policies, presentation and methods of calculation as
those followed in the preparation of the Group's consolidated
financial statements for the year ended 31 December 2022, which
were prepared in accordance with International Financial Reporting
Standards ('IFRS') as issued by the International Accounting
Standards Board and were also prepared in accordance with IFRS
adopted by the European Union ('EU'), the Companies Act 2006 and
Article 4 of the EU IAS Regulations.
The statutory accounts for the 12
months ending 31 December 2023 were approved by the Board of
Directors on 09 April 2024. The Auditors of the Group made a
report thereon under Chapter 3 or part 16 of the Act. This report
was unqualified and does not contain a statement under sections 498
(2) or (3) of the Act.
The statutory accounts for the 12
months ending 31 December 2022 have been delivered to the registrar
of Companies, and the Independent Auditors of the Group made a
report thereon under Chapter 3 or part 16 of the Act. This report
was unqualified and does not contain a statement under sections 498
(2) or (3) of the Act.
The financial statements are
presented in pounds sterling, rounded to the nearest hundred
thousand unless otherwise stated. The Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements of the Group.
The accounting policies adopted by
the Group in the current year are consistent with those adopted
during the year ended 31 December 2022.
There have been no new or amended
accounting standards or interpretations adopted during the year
that have had a significant impact on the Group's financial
statements.
There are no standards,
interpretations or amendments to IFRS that have been issued but are
not yet effective that are expected to have a material impact on
the Group's financial statements.
2. Segmental reporting and
revenue
The Directors have assessed the
criteria and considerations under IFRS 8 'Operating Segments' in
order to identify operating segments within the Group. For the year
to 31 December 2022, the Group's activities were divided into the
following segments THG Beauty, THG Nutrition, THG Ingenuity, THG
OnDemand (disclosed under the discontinued categories segment), THG
Luxury and THG Experience. The THG Luxury and THG Experience
segments were aggregated due to being below the quantitative
thresholds as set out in IFRS 8 and were reported separately under
Other Central costs.
During 2023, THG Luxury and THG
Experience have been reported to the Chief Operating Decision Maker
(CODM) as part of the THG Beauty segment. On this basis, the
Directors have concluded that for 2023, the Group has four
operating segments. The prior year segmental analysis has been
represented to provide a like-for-like comparison.
The following table describes the
main activities for each reportable operating segment:
Segment
|
Activities
|
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
|
THG 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. THG Ingenuity also includes media related
services.
|
Discontinued categories
|
During the year, certain
loss-making categories and territories primarily within THG
OnDemand along with some additional small legacy brands within THG
Beauty and THG Nutrition have been approved for disposal, or
exited. These exits do not meet the criteria under IFRS 5:
Discontinued operations at the balance sheet date, as these
categories and territories are not a major component of the Group
as defined by the accounting standard, however, management began to
report the financial results of these categories separately in
their reporting to the CODM, as such the result has also been shown
in the same format within this note.
|
Central costs relate primarily to
the PLC Board remuneration, professional services fees, group
finance, M&A, risk (insurance) and governance costs that are
not recharged to the divisions as they principally relate to the
operations of the PLC holding company.
The CODM is the executive Board
directors, who makes key operating decisions for the business. The
CODM receives daily financial information at the combined Group
level, along with monthly information at a business level and uses
this information to allocate resources, make operating decisions
and monitor the performance of each of the businesses.
The measure of the Group's profit
or loss used by THG's management team is Adjusted EBITDA comprising
operating loss less interest, tax, depreciation, amortisation,
shared-based payments and adjusted items. This is reconciled to the
nearest IFRS measure (loss before tax) in the below
table.
2023
|
THG Beauty
£'000
|
THG
Nutrition
£'000
|
THG
Ingenuity
£'000
|
Central
PLC
£'000
|
Inter-group
elimination
£'000
|
Result before discontinued
categories (1)
£'000
|
Discontinued
categories
£'000
|
2023
Total
£'000
|
External revenue
|
1,171,742
|
657,911
|
154,052
|
-
|
-
|
1,983,705
|
61,673
|
2,045,378
|
Internal revenue
|
-
|
-
|
519,871
|
-
|
(519,871)
|
-
|
-
|
-
|
Total revenue
|
1,171,742
|
657,911
|
673,923
|
-
|
(519,871)
|
1,983,705
|
61,673
|
2,045,378
|
Adjusted EBITDA
|
44,238
|
88,929
|
9,039
|
(21,757)
|
-
|
120,449
|
(6,343)
|
114,106
|
Margin %
|
3.8%
|
13.5%
|
1.3%
|
-
|
-
|
6.1%
|
-10.3%
|
5.6%
|
Depreciation
|
|
|
|
|
|
|
|
(95,113)
|
Amortisation
|
|
|
|
|
|
|
|
(119,372)
|
Share-based payments
|
|
|
|
|
|
|
|
(16,723)
|
Adjusted items
Other operating expense
|
|
|
|
|
|
|
|
(50,627)
(17,664)
|
Operating loss
|
|
|
|
|
|
|
|
(185,393)
|
Finance income
|
|
|
|
|
|
|
|
13,329
|
Finance costs
|
|
|
|
|
|
|
|
(79,900)
|
Loss before
taxation
|
|
|
|
|
|
|
|
(251,964)
|
1. During 2022, and
2023 certain loss-making categories and territories within non-core
divisions were placed under strategic review and subsequently
management has exited these areas. The exit doesn't meet the
criteria under IFRS 5: Discontinued operations as these categories
and territories are not a major component of the Group as defined
by the accounting standard, however, to provide further information
on the ongoing revenue and Adjusted EBITDA of the Group the result
of these operations has been presented separately in the above
table.
An element of THG Ingenuity
revenue is contract based and therefore is recognised over time;
all other revenue streams are recognised at a point in time. Of the
total revenues recognised for THG Ingenuity, £67.7m (2022: £73.8m)
is recognised over time.
Segment assets and liabilities are
not disclosed because they are not regularly reported or reviewed
by the Board.
2022
|
(Restated)
THG Beauty
£'000
|
(Restated)
THG
Nutrition
£'000
|
THG
Ingenuity
£'000
|
Central
PLC
£'000
|
Inter-group
elimination
£'000
|
Result before discontinued
categories
£'000
|
(Restated)
Discontinued
categories
£'000
|
2022
Total
£'000
|
External revenue
|
1,225,977
|
662,737
|
159,541
|
-
|
-
|
2,048,255
|
190,974
|
2,239,229
|
Internal revenue
|
-
|
-
|
597,420
|
-
|
(597,420)
|
-
|
-
|
-
|
Total revenue
|
1,225,977
|
662,737
|
756,961
|
-
|
(597,420)
|
2,048,255
|
190,974
|
2,239,229
|
Adjusted EBITDA pre SaaS
costs
|
33,585
|
51,647
|
29,304
|
(23,178)
|
-
|
91,358
|
(17,061)
|
74,297
|
Adjusted EBITDA
|
33,585
|
51,647
|
19,121
|
(23,178)
|
-
|
81,175
|
(17,061)
|
64,114
|
Margin %
|
2.7%
|
7.8%
|
2.5%
|
-
|
-
|
4.0%
|
-8.9%
|
2.9%
|
Depreciation
|
|
|
|
|
|
|
|
(94,191)
|
Amortisation
|
|
|
|
|
|
|
|
(108,975)
|
Share-based payments
|
|
|
|
|
|
|
|
(10,734)
|
Adjusted items
|
|
|
|
|
|
|
|
(345,779)
|
Operating loss
|
|
|
|
|
|
|
|
(495,565)
|
Finance income
|
|
|
|
|
|
|
|
2,359
|
Finance costs
|
|
|
|
|
|
|
|
(56,522)
|
Loss before taxation
|
|
|
|
|
|
|
|
(549,728)
|
The segmental result for 2022 has
been restated within the above table. There is no change to the
previously reported Total revenue, Adjusted EBITDA, Operating loss
or Loss before taxation. During FY22, THG Luxury and THG Experience
were reported separately (within 'Other'). From 1 January 2023,
these results have been internally reported as part of THG
Beauty. The results for THG Beauty and THG
Nutrition have also been restated for the discontinued categories
to show a like-for-like comparison for all categories reported
internally as discontinued in 2023.
The result of both of these
adjustments is that for 2022, segmental revenue has been restated
as follows; THG Beauty £(9.0)m, THG Nutrition £(12.4)m, Other
£(50.9)m and discontinued categories £72.3m. Segmental
Adjusted EBITDA has been restated as follows; THG Beauty £0.7m, THG
Nutrition £(0.1)m, Other £1.9m and discontinued categories
£(2.5)m.
The Group has provided an analysis
of external revenue by region (by destination):
|
2023
|
2022
|
|
£'000
|
£'000
|
UK
|
937,125
|
960,535
|
USA
|
379,977
|
446,542
|
Europe
|
427,713
|
449,783
|
Rest of the world
|
300,563
|
382,369
|
|
2,045,378
|
2,239,229
|
The Group has provided an analysis
of external continued revenue by region (by
destination):
|
2023
|
2022
|
|
£'000
|
£'000
|
UK
|
918,351
|
899,656
|
USA
|
348,414
|
370,330
|
Europe
|
421,032
|
423,905
|
Rest of the world
|
295,908
|
354,364
|
|
1,983,705
|
2,048,255
|
The Group's non-current assets by
geography are as follows:
|
2023
|
2022
|
|
£'000
|
£'000
|
UK
|
1,189,386
|
1,257,689
|
Europe
|
120,459
|
145,057
|
Rest of the world
|
475,744
|
550,333
|
|
1,785,589
|
1,953,079
|
3.
Operating
loss
|
|
2023
|
2022
|
|
Note
|
£'000
|
£'000
|
Operating loss has been arrived at
after charging /
(crediting):
|
Adjusted items - cash
|
4
|
15,824
|
40,090
|
|
Adjusted items -
non-cash
|
4
|
34,803
|
305,689
|
|
Other operating expense - non-cash
loss on disposal freehold assets
|
8
|
17,664
|
-
|
|
Employee costs
|
|
253,446
|
275,145
|
|
Share-based payments
|
5
|
16,723
|
10,734
|
|
Depreciation on fixed
assets
|
8
|
55,691
|
50,896
|
|
Depreciation on right-of-use
assets
|
14
|
39,422
|
43,295
|
|
Amortisation
|
7
|
68,829
|
58,581
|
|
Amortisation of acquired
intangibles
|
7
|
50,543
|
50,394
|
|
Government grants
|
|
(1,598)
|
(1,752)
|
|
Net foreign exchange (loss) /
gain
|
|
(201)
|
1,424
|
|
4.
Adjusted
items
These are items which are material
in nature and include, but are not limited to, costs relating to
acquisitions, disposals and significant events or programmes, some
of which span multiple years. These items are excluded from
adjusted EBITDA as management believe their inclusion distorts the
underlying trading performance. This is consistent with the way
that financial performance is measured by management and reported
to the Board.
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Within Cost of sales
|
|
|
|
Non-cash loss on disposal of
discontinued and the exiting of loss making categories
|
|
10,465
|
25,517
|
Inventory provision following
strategic review
|
|
4,786
|
-
|
|
|
15,251
|
25,517
|
|
|
|
|
Within Distribution costs
|
|
|
|
Transportation and delivery costs
in relation to Covid-19
|
|
2,456
|
18,504
|
Commissioning - new
facilities
|
|
2,605
|
3,613
|
|
|
5,061
|
22,117
|
Within Administrative costs
|
|
|
|
Non-cash loss on property
portfolio restructure
|
|
18,369
|
-
|
Loss on property portfolio
restructure
|
|
851
|
-
|
Non-cash loss on disposal of (or
exit from) discontinued and loss making categories
|
|
5,969
|
3,763
|
Other costs following the outcome
of strategic review
|
|
1,515
|
6,942
|
Restructuring costs
|
|
2,708
|
6,803
|
Acquisitions - restructuring and
integration
|
|
703
|
8,046
|
Other legal and professional
costs
|
|
200
|
570
|
Donations
|
|
-
|
362
|
Non- cash impairment of
assets
|
|
-
|
269,828
|
Non-cash impairment of non-core
assets held for sale
|
|
-
|
1,831
|
|
|
30,315
|
298,145
|
|
|
|
|
Total adjusted items before finance costs
|
|
50,627
|
345,779
|
Within Finance costs
|
|
|
|
Non-cash - revaluation of SBM
option
|
|
-
|
(601)
|
Total adjusted items before tax
|
|
50,627
|
345,178
|
Tax impact
|
|
(2,835)
|
(11,634)
|
Total adjusted items
|
|
47,792
|
333,544
|
Cash adjusting items before tax[14]
|
|
15,824
|
40,090
|
Non-cash loss on disposal of (or exit from) discontinued and
loss making categories
On 17 January 2023, the Group
confirmed its intention to simplify and streamline its operations,
undertaking a strategic review of loss-making categories and
territories primarily within THG OnDemand. In July 2023, the trade
and assets of THG OnDemand were sold to a Newco led by the
existing OnDemand management team. This resulted in adjustments in
respect of inventory provisions recognised within cost of sales and
impairment of other assets, primarily property, plant and equipment
included within administrative costs being recognised, and
therefore an overall loss on disposal, to reflect the recoverable
value of the associated assets.
During the second half of the
year, the Group completed its strategic review of non-core
categories. As a result in January 2024, approval was obtained for
further discontinuation of some additional small legacy brands
within THG Beauty and THG Nutrition.
This resulted in adjustments in
respect of inventory provisions recognised within cost of sales and
impairment of other assets, primarily property, plant and equipment
within administrative costs being recognised to reflect the
recoverable value of the associated assets.
The total costs incurred regarding
these loss making categories are £16.4m (2022: £29.3m) recognised
within cost of sales and administrative costs respectively at
£10.5m (2022: £25.5m) and £5.9m (2022: £3.8m).
These costs are deemed to be
one-off, non-cash losses to enable and complete the exit of
loss making areas of the business.
Associated income in respect of
costs arising for discontinued categories has been set out in note
2.
Inventory provision following strategic review of business
operations
Following the strategic review
including THG Beauty manufacturing, efficiencies were identified
that would support long-term cost savings. Consistent with this a
one-off provision was recognised in respect of inventory that is no
longer required to drive forward the operations. This is a one-off
item that will not recur following the completion of this
review.
Transportation and delivery costs in relation to
Covid-19
The Group was severely impacted by
high surcharges from suppliers in respect of routes travelling
through and into Asia during the Covid-19 pandemic and extended
lockdown periods. However, this impact lessened during 2022, with
costs reducing further throughout 2023 as prices have normalised
back to pre-covid levels. This item will not continue into
2024.
The impact of rising costs was not
fully passed on to customers. On this basis, it is not possible to
reliably measure any associated revenues associated with the
operational costs.
Commissioning - new
facilities
Consistent with strategic
priorities which include warehouse optimisation, the Group has
continued its commissioning of the campus at Manchester Airport, UK
("Icon") and New Jersey, US. Both warehouses are now operational,
although further automation continues to be implemented in both
sites to further efficiency gains. The majority of the costs
incurred during the period relate to the Autostore automation of
the New Jersey warehouse and the transfer of stock to this
facility. Associated costs are expected to have been fully incurred
by the end of the first half of 2024.
Loss on property portfolio restructure
During the year, as part of the
cost reduction programme, the Group completed a review of the
properties held within its portfolio, streamlining space where
possible to gain efficiencies. Following consolidation of
warehousing and offices across the Group, some properties across
the portfolio are now vacant and not currently being utilised to
generate economic benefits for the group.
Where possible assets held in
leased properties have been sold or repurposed. However, residual
leasehold improvement assets in respect of vacated properties have
been fully impaired, being a one- off loss arising from the
streamlining exercise undertaken. A provision has also been
included for such unavoidable costs that are expected on these
vacant leased properties over the remaining life of the
lease.
Other costs following the outcome of strategic
review
As part of the strategic review
the Group has consolidated acquired warehouses into the existing
THG network.
The costs that have been incurred
as part of this process, include:
· Those incurred to relocate the stock across the fulfilment
network.
· Restructuring costs associated with the dual running of
facilities, severance payments and other third party costs such as
rent and utilities.
All costs recognised within
adjusted items are from the point of management's decision to exit
the acquired warehouse. The costs associated with the
decommissioning of these warehouses are considered to be one-off
costs and are incremental to the ongoing trading of the
group.
Restructuring costs
Costs within restructuring are
those incurred in executing and embedding the Group's
simplification project which was previously announced as part of
the strategic review. Current year costs relate directly to one-off
costs arising following the decision to discontinue certain
categories which are not expected to recur.
Acquisitions - restructuring and
integration
On 26 July 2023 the Group
purchased City AM. The costs incurred during the year relate to the
integration of the acquisition within the wider THG Group and the
dual running of warehouse facilities of businesses acquired in
recent years. The size and nature of acquisitions and the
complexity of the integration plan has led to costs being incurred
over an extended post-acquisition period. It is expected that the
costs will continue to further reduce in 2024.
Other legal and professional costs
The Group incurs legal and
professional costs that are non-recurring, one off in nature and
not related to trading activities. These costs are included as
adjusted items and can include, but are not limited to, legal costs
for one off matters and other fees associated with investor
activities. The legal and professional
costs incurred during 2023 relate directly to the purchase of City
AM and Biossance.
Donations
There has been no donations
recognised in adjusted items within 2023.
Whilst there have been donations
in 2023 totalling £0.3m, these items have been included within the
normal course of trade and therefore recognised outside of adjusted
items. In 2022, in addition to donations made in the normal course
of trade, the Group donated £0.4m related to aid in the form of
nutrition and hygiene products to charities assisting with the war
in Ukraine which was deemed to be a one off item and was therefore
recorded in adjusted items and have not recurred.
Impairment of assets
In 2022, an impact of the
divisional reorganisation was that the assets and cash flows of
each division were separately identifiable. The result being the
identification of additional cash-generating-units ('CGUs'). This
more granular review, combined with significant acquisitions within
THG Beauty division generating a substantial amount of intangible
assets; the market price for many technology businesses falling;
and the macroeconomic, inflationary and interest rate pressures in
the wider market generated one-off impairment charges of £183m
within the THG Beauty CGU and £87m within the THG Ingenuity
CGU.
No impairment has occurred in
2023.
Impairment of non-core assets held for sale
No impairment of non-core assets
held for sale has occurred in 2023.
In 2022, an impairment charge of
£1.8m was recognised against non-core assets that met the criteria
to be classified as held for sale under IFRS 5. The net book value
of these assets was reclassified to current assets and an
impairment charge has been recognised for the difference between
the selling price and the carrying value.
5. Share-based
payments
The Group
operates a share-based compensation plan, under which the Group
receives services from employees as consideration for equity
instruments (options) of the Company. A total of 35,529,895 shares
were issued in the 12 months to 31 December 2023. The shares issued
during the year are as follows:
- On 27 January 2023 a total of 34,969,541 options were granted
with 234,929 of these shares only vesting if targets linked to ESG
are met. The fair value of the employee services received in
exchange for the grant of the equity instruments is recognised as
an expense in the Statement of Comprehensive Income with the
corresponding increase to equity.
o 1,410,209 shares vested on 31 December 2023;
o The remaining awards vest in two equal tranches. The second
and third tranches for each separate grant will vest on 31 December
in the following two years respectively.
- On 1 December 2023 a further 560,283 options were granted.
The awards vest in three equal tranches, with the first being 31
December following the date of grant. The second and third tranches
for each separate grant will vest on 31 December in the following
two years respectively.
|
2023
|
2022
|
|
£'000
|
£'000
|
Expense arising from
equity-settled share-based payment transactions
|
16,723
|
10,734
|
The following table shows the
shares granted and outstanding at the beginning and end of the
year:
|
2023
Number of
shares
|
2023
Weighted average exercise
price
|
2022 Number of shares
|
2022
Weighted average exercise price
|
As at 1 January
|
41,796,012
|
£0.06
|
-
|
£0.00
|
Granted during the year
|
35,529,824
|
£0.01
|
43,352,699
|
£0.05
|
Forfeited during the
year
|
(5,324,678)
|
£0.00
|
(1,556,687)
|
£0.02
|
Exercised during the
year
|
(3,283,098)
|
£0.00
|
-
|
£0.00
|
As at 31 December
|
68,718,060
|
£0.03
|
41,796,012
|
£0.06
|
Exercisable as at 31 December
|
19,975,803
|
£0.00
|
12,308,805
|
£0.10
|
The key inputs to calculate the
charge are the share price at the date of grant and an assumption
around those not remaining in continued employment, spread across
the vesting period. Achievement of performance conditions have been
considered where appropriate. The range of exercise prices are
£0.00 to £0.10, and the weighted average remaining contractual life
is 8.8 years. The weighted average share price at date of exercise
of shares exercised during the year was £0.75.
6.
Finance income
and cost
|
2023
|
2022
|
|
£'000
|
£'000
|
Finance income
|
|
|
Bank interest
receivable
|
13,329
|
2,359
|
|
|
|
Finance costs
|
|
|
Bank interest payable and
charges
|
65,140
|
42,791
|
Interest on lease
liabilities
|
14,760
|
14,332
|
Revaluation of SBM
option
|
-
|
(601)
|
|
79,900
|
56,522
|
7.
Intangible
assets
|
Goodwill
£'000
|
Platform development
costs
£'000
|
Intellectual
property
£'000
|
Brands
£'000
|
New Product Development
£'000
|
Total
£'000
|
Cost or valuation
|
|
|
|
|
|
|
At 1 January 2022
|
755,082
|
218,827
|
197,590
|
607,358
|
8,671
|
1,787,528
|
Transfers
|
-
|
2,592
|
-
|
-
|
-
|
2,592
|
Additions
|
-
|
55,513
|
20,736
|
353
|
4,513
|
81,115
|
Business combinations
|
2,375
|
-
|
-
|
-
|
-
|
2,375
|
Currency translation
|
33,520
|
348
|
6,110
|
33,045
|
29
|
73,052
|
Disposals
|
-
|
(9,031)
|
(464)
|
-
|
-
|
(9,495)
|
At 31 December 2022
|
790,977
|
268,249
|
223,972
|
640,756
|
13,213
|
1,937,167
|
|
|
|
|
|
|
|
|
At 1 January 2023
|
790,977
|
268,249
|
223,972
|
640,756
|
13,213
|
1,937,167
|
|
Transfers
|
-
|
-
|
(1,627)
|
103
|
1,524
|
-
|
|
Additions
|
-
|
60,775
|
19,988
|
83
|
798
|
81,644
|
|
Business combinations
|
2,318
|
-
|
1,816
|
4,329
|
-
|
8,463
|
|
Currency translation
|
(18,901)
|
(199)
|
(8,730)
|
(17,606)
|
(8)
|
(45,444)
|
|
Disposals
|
(1,175)
|
(31,226)
|
(24,078)
|
(376)
|
(310)
|
(57,165)
|
|
At 31 December 2023
|
773,219
|
297,599
|
211,341
|
627,289
|
15,217
|
1,924,665
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
|
|
At 1 January 2022
|
33,629
|
137,083
|
61,350
|
46,273
|
2,901
|
281,236
|
|
Transfers
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Amortisation
|
-
|
39,837
|
28,980
|
38,274
|
1,884
|
108,975
|
|
Impairment loss
|
271,003
|
-
|
2,194
|
20
|
373
|
273,590
|
|
Currency translation
|
-
|
443
|
3,263
|
3,386
|
7
|
7,099
|
|
Disposals
|
-
|
(9,031)
|
(464)
|
-
|
-
|
(9,495)
|
|
At 31 December 2022
|
304,632
|
168,332
|
95,323
|
87,953
|
5,165
|
661,405
|
|
At 1 January 2023
|
304,632
|
168,332
|
95,323
|
87,953
|
5,165
|
661,405
|
Transfers
|
-
|
97
|
(130)
|
33
|
-
|
-
|
Amortisation
|
-
|
38,520
|
26,893
|
52,474
|
1,485
|
119,372
|
Impairment loss
|
-
|
240
|
-
|
-
|
-
|
240
|
Currency translation
|
(1,651)
|
766
|
(5,418)
|
(2,437)
|
(2)
|
(8,742)
|
Disposals
|
-
|
(30,853)
|
(23,468)
|
(362)
|
(310)
|
(54,993)
|
At 31 December 2023
|
302,981
|
177,102
|
93,200
|
137,661
|
6,338
|
717,282
|
|
|
|
|
|
|
|
NBV
|
|
|
|
|
|
|
At 1 January 2022
|
721,453
|
81,744
|
136,240
|
561,085
|
5,770
|
1,506,292
|
At 31 December 2022
|
486,345
|
99,917
|
128,649
|
552,803
|
8,048
|
1,275,762
|
At 31 December 2023
|
470,238
|
120,497
|
118,141
|
489,628
|
8,879
|
1,207,383
|
Included within intellectual
property is £5.4m (2022: £4.4m) of capitalised costs incurred to
obtain a contract with a customer. The costs relate to sales
commissions paid to sales personnel upon initial acquisition of a
customer contract. Amortisation of £1.0m (2022: £0.8m) was
recognised in the period in relation to these assets.
No impairment has been recognised
during the year.
8.
Property, plant
and equipment
|
Motor
vehicles
£'000
|
Plant and
machinery
£'000
|
Fixtures and
fittings
£'000
|
Computer equipment and
software
£'000
|
Leasehold improvements and
freehold buildings
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
|
At 1 January 2022
|
2,332
|
126,448
|
107,450
|
100,474
|
123,003
|
459,707
|
Additions
|
12
|
16,370
|
40,461
|
21,446
|
17,309
|
95,598
|
Transfers to assets held for
sale
|
-
|
-
|
(6,831)
|
-
|
(17,071)
|
(23,902)
|
Transfers
|
-
|
(2,592)
|
-
|
-
|
-
|
(2,592)
|
Currency translation
differences
|
-
|
3,137
|
2,461
|
2,031
|
478
|
8,107
|
Disposals
|
(27)
|
(263)
|
(2,148)
|
(5,232)
|
-
|
(7,670)
|
At 31 December 2022
|
2,317
|
143,100
|
141,393
|
118,719
|
123,719
|
529,248
|
|
|
|
|
|
|
|
At 1 January 2023
|
2,317
|
143,100
|
141,393
|
118,719
|
123,719
|
529,248
|
Additions
|
111
|
11,209
|
6,707
|
12,224
|
2,829
|
33,080
|
Business combinations
|
-
|
-
|
8
|
11
|
19
|
38
|
Transfers
|
-
|
5,430
|
(37,869)
|
3,009
|
29,430
|
-
|
Currency translation
differences
|
-
|
(302)
|
743
|
(532)
|
(515)
|
(606)
|
Disposals
|
(165)
|
(6,474)
|
(4,117)
|
(281)
|
(45,875)
|
(56,912)
|
At 31 December 2023
|
2,263
|
152,963
|
106,865
|
133,150
|
109,607
|
504,848
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
At 1 January 2022
|
1,291
|
26,185
|
28,339
|
38,010
|
30,262
|
124,087
|
Depreciation (note 3)
|
323
|
16,238
|
9,799
|
21,018
|
3,518
|
50,896
|
Impairment of assets held for
sale
|
-
|
-
|
1,831
|
-
|
-
|
1,831
|
Transfers to assets held for sale
(note 8.2)
|
|
-
|
(1,831)
|
-
|
(674)
|
(2,505)
|
Currency translation
differences
|
-
|
840
|
409
|
1,083
|
131
|
2,463
|
Disposals
|
(27)
|
(160)
|
(2,148)
|
(5,230)
|
-
|
(7,565)
|
At 31 December 2022
|
1,587
|
43,103
|
36,399
|
54,881
|
33,237
|
169,207
|
|
|
|
|
|
|
|
At 1 January 2023
|
1,587
|
43,103
|
36,399
|
54,881
|
33,237
|
169,207
|
Depreciation (note 3)
|
340
|
14,494
|
13,489
|
21,310
|
6,058
|
55,691
|
Impairment loss
|
-
|
1,064
|
987
|
115
|
10,950
|
13,116
|
Currency translation
differences
|
-
|
(342)
|
232
|
(581)
|
(187)
|
(878)
|
Disposals
|
(170)
|
(1,949)
|
(51)
|
(257)
|
(3,032)
|
(5,459)
|
At 31 December 2023
|
1,757
|
56,370
|
51,056
|
75,468
|
47,026
|
231,677
|
|
|
|
|
|
|
|
NBV
|
|
|
|
|
|
|
At 1 January 2022
|
1,041
|
100,263
|
79,111
|
62,464
|
92,741
|
335,620
|
At 31 December 2022
|
730
|
99,997
|
104,994
|
63,838
|
90,482
|
360,041
|
At 31 December 2023
|
506
|
96,593
|
55,809
|
57,682
|
62,581
|
273,171
|
8.2
Assets held for sale
During 2022, the Group committed
to a plan to sell some non-core freehold buildings that were no
longer in use by the Group and not required to execute its future
strategy. In accordance with IFRS 5: Non-current assets held for
sale and discontinued operations, the assets were classified as
held for sale on the Groups statement of financial position at 31
December 2022.
During 2023, the assets held for
sale were sold generating cash proceeds of £13.5m.
There were no assets held for sale
as at 31 December 2023.
|
2023
|
2022
|
Assets classified as held for sale
|
£'000
|
£'000
|
Transfer from property, plant and
equipment (note 8)
|
-
|
21,397
|
|
-
|
21,397
|
9.
Inventories
|
2023
|
2022
|
|
£'000
|
£'000
|
Goods held for resale
|
225,600
|
296,133
|
Raw materials
|
67,427
|
72,327
|
Goods in transit
|
4,116
|
4,811
|
|
297,143
|
373,271
|
Goods in transit relate to goods
whose control is still to be transferred to the customers as of the
reporting date. The cost of inventories recognised as an expense
and included in cost of sales amounted to £1,079.9m (2022:
£1,272.9m). The value of inventories written down and recognised as
an expense in the statement of comprehensive income in the year was
£5.1m (2022: £8.6m). Within goods held for resale is a £2.4m (2022:
£3.0m) right to recover asset which represents the carrying value
of inventory expected to be received back from customers as
returns.
10.
Trade and other
receivables
|
2023
|
2022
|
|
£'000
|
£'000
|
Trade receivables
|
110,912
|
121,122
|
Less: loss allowance
|
(2,056)
|
(1,805)
|
Net trade receivables
|
108,856
|
119,317
|
Prepayments
|
28,483
|
28,362
|
Accrued income
|
36,428
|
40,004
|
Other taxation and social
security
|
59,185
|
33,748
|
Other receivables
|
38,830
|
43,518
|
|
271,782
|
264,949
|
Trade and other receivables are
principally denominated in
Sterling.
11.
Cash and cash
equivalents
|
2023
|
2022
|
|
£'000
|
£'000
|
Cash and cash
equivalents
|
416,162
|
473,783
|
Cash and cash equivalents includes
amounts receivable of £3.5m (2022: £3.1m) from banks and £16.7m
(2022: £17.4m) from payment providers, for credit and debit card
transactions. Such amounts clear the bank shortly after the
transaction takes place.
12.
Trade and other
payables
|
2023
|
2022
|
|
£'000
|
£'000
|
Trade payables
|
368,855
|
321,709
|
Accruals
|
182,922
|
244,553
|
Other taxation and social
security
|
82,351
|
58,811
|
Other payables
|
-
|
1,880
|
Government grants
|
2,343
|
2,635
|
Contingent consideration on
acquisitions
|
1,879
|
6,852
|
|
638,350
|
636,440
|
The Directors consider the
carrying amount of trade and other payables approximates to their
fair value when measured by discounting cash flows at market rates
of interest as at the balance sheet date.
Contingent consideration on
acquisitions is measured at fair value using unobservable inputs
(level 3 of the fair value hierarchy). The unobservable inputs used
in the fair value calculation include internal data such as
forecasts, budgets and actual results to date. The fair values are
sensitive to changes in EBITDA or revenue given that these key
metrics are what the performance targets are based on. The
reduction year-on-year is driven by payments made of
£3.4m.
Included within trade payables is
£43.1m (2022: £53.7m) due to suppliers that participate in the
Group's supply chain financing agreement. The agreement does not
change the suppliers agreed payment terms directly with the
Group.
13.
Interest bearing
loans and borrowings
|
|
2023
|
2022
|
|
Note
|
£'000
|
£'000
|
Current
|
|
|
|
Bank borrowings
|
|
29,026
|
30,992
|
Lease liabilities
|
14
|
43,537
|
43,995
|
|
|
72,563
|
74,987
|
Non-current
|
|
|
|
Bank borrowings
|
|
621,011
|
648,197
|
Lease liabilities
|
14
|
301,440
|
290,381
|
|
|
922,451
|
938,578
|
Bank borrowings relate
predominantly to the 7-year Euro term loan B, undrawn 5-year
revolving credit facility and an incremental facility obtained
during the prior year. The revolving credit facility is provided by
Barclays, HSBC, Santander, Citibank, NatWest and JPM. The term loan
B carried an interest rate of 4.50% plus EURIBOR and the revolving
credit facility interest rate is SONIA. The Group increased its
bank borrowings in 2022 with an incremental facility obtained plus
Commercial Facility Loan. This loan is provided by the Groups
existing lenders and carries a base rate of Daily RFR (SONIA). The
floating element of the term loan B is hedged by interest rate
derivatives. Management note that EURIBOR is being reformed as a
benchmark rate and are in dialogue with its lending and hedging
partners to minimise the impact on the Group as transition occurs.
If interest rates moved by 100bps, the Group's loss before tax
would be c.£7.3m higher / lower (2022: c.£3.7m) and the subsequent
move on the derivative valuation would cause equity to be c.£15.5m
higher / lower (2022: c.£18.5m) as a result of the same
move.
Net debt consists of loans and
lease liabilities, less cash and cash equivalents, defined as
referenced in note 14. For the purpose of the Group's net debt
calculation, loans that are denominated in foreign currency are
translated at the effective hedged rate where applicable. Net
(debt)/cash is an alternative performance measure and is not
defined under IFRS. A reconciliation to the most directly
comparable IFRS measure is included below:
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Loans and other
borrowings
|
|
(650,037)
|
(679,189)
|
Lease liabilities
|
|
(344,977)
|
(334,376)
|
Cash and cash
equivalents
|
|
416,162
|
473,783
|
Sub-total
|
|
(578,852)
|
(539,782)
|
|
|
|
|
Adjustments:
|
|
|
|
Retranslate debt balance at swap
rate where hedged by foreign exchange derivatives
|
|
15,653
|
24,782
|
Net debt
|
|
(563,199)
|
(515,000)
|
Net (debt)/cash before lease liabilities
|
|
(218,222)
|
(180,624)
|
14.
Leases
Set out below are the carrying amounts of
the right-of-use assets recognised
and movements during the period:
|
Motor
vehicles
£'000
|
Plant and
machinery
£'000
|
Computer equipment and
software
£'000
|
Land and
buildings
£'000
|
Total
£'000
|
As at 1 January 2022
|
378
|
374
|
2
|
309,528
|
310,282
|
Additions
|
-
|
-
|
-
|
13,608
|
13,608
|
Depreciation (note 3)
|
(173)
|
(213)
|
(1)
|
(42,908)
|
(43,295)
|
Lease modifications
|
-
|
-
|
(1)
|
17,856
|
17,855
|
Disposals
|
-
|
-
|
-
|
(11,426)
|
(11,426)
|
Currency translation
differences
|
5
|
3
|
-
|
7,277
|
7,285
|
As at 31 December 2022
|
210
|
164
|
-
|
293,935
|
294,309
|
As at 1 January 2023
|
210
|
164
|
-
|
293,935
|
294,309
|
Additions
|
1,920
|
(3)
|
-
|
59,475
|
61,392
|
Depreciation (note 3)
|
(568)
|
(45)
|
-
|
(38,809)
|
(39,422)
|
Lease modifications
|
98
|
-
|
-
|
(10,377)
|
(10,279)
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
Currency translation
differences
|
(4)
|
(3)
|
-
|
(2,358)
|
(2,365)
|
As at 31 December 2023
|
1,656
|
113
|
-
|
301,866
|
303,635
|
Set out below are the carrying
amounts of lease liabilities and the movements during the
period:
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
As at 1 January
|
|
334,376
|
349,173
|
Additions
|
|
56,708
|
6,620
|
Accretion of interest
|
|
14,641
|
14,130
|
Payments
|
|
(49,487)
|
(49,012)
|
Lease modifications
|
|
(8,864)
|
17,820
|
Disposals
|
|
-
|
(13,510)
|
Currency translation
differences
|
|
(2,397)
|
9,155
|
As at 31 December
|
|
344,977
|
334,376
|
Current
|
|
43,537
|
43,995
|
Non-current
|
|
301,440
|
290,381
|
The Group had total cash outflows
for leases of £49.5m in 2023 (2022: £49.0m).
The following are the amounts
recognised in the year in the consolidated statement of
comprehensive income:
|
2023
|
2022
|
|
£'000
|
£'000
|
Depreciation expense on
right-of-use assets
|
39,422
|
43,295
|
Interest expense on lease
liabilities
|
14,641
|
14,130
|
|
54,063
|
57,425
|
|
|
|
15.
Earnings per
share
The following table reflects the
income and share data used in the basic and diluted EPS
calculations:
|
|
2023
|
2022
|
Loss for
the financial year (£'000)
|
|
(248,372)
|
(539,957)
|
Weighted
average number of ordinary shares for basic EPS
|
|
1,296,925,602
|
1,239,485,253
|
Basic and
Diluted EPS (£'s)
|
|
(0.19)
|
(0.44)
|
|
|
|
|
|
In 2022, if the impact of
impairment charges in the year was removed, the Basic and Diluted
EPS would have been £(0.21).
The basic loss per share has been
calculated by dividing the loss attributable to the Group by the
weighted average number of ordinary shares in issue.
The diluted loss per share has
been calculated by adjusting the weighted average number of shares
for the effects of the D, E, F, G and H shares, assuming full
vesting of all potentially dilutive shares.
Basic and diluted earnings per
share are equal since the effect of all potentially dilutive shares
outstanding was anti-dilutive.
16.
Related Party
Transactions
The Directors' interests in the
ordinary share capital of the Company at the balance sheet date are
detailed below:
|
£ per
share
|
Ordinary Shares
2023
|
Ordinary
Shares 2022
|
Number
|
Number
|
M J Moulding
|
0.005
|
249,294,545
|
249,294,545
|
M J Moulding
|
1
|
360
|
361
|
J A Gallemore
|
0.005
|
4,216,826
|
3,638,116
|
J A Gallemore
|
1
|
3,174
|
3,174
|
I McDonald
|
0.005
|
2,505,943
|
2,505,943
|
D Sanders
|
0.005
|
21,926
|
21,926
|
C Allen
|
0.005
|
2,400,000
|
2,400,000
|
S Farr
|
0.005
|
67,397
|
n/a
|
|
|
258,510,171
|
257,864,065
|
In addition to the shareholdings
noted above, the Directors had the following interests in vested
Shares issued under previous incentive arrangements at the balance
sheet date. These shares carry no voting rights.
|
|
2023
|
2022
|
2023
|
2022
|
|
Date of
award
|
Subscription/exercise price
£
|
Subscription/exercise price £
|
Number
|
Number
|
M J Moulding
|
Dec-19
|
0.23
|
0.23
|
43,641,266
|
43,641,266
|
M J Moulding
|
Aug-20
|
0.33
|
0.33
|
20,197,808
|
20,197,808
|
M J Moulding
|
Aug-20
|
0.28
|
0.28
|
7,733,792
|
7,733,792
|
M J Moulding
|
Aug-20
|
0.26
|
0.26
|
-
|
-
|
J A Gallemore
|
Dec-19
|
0.23
|
0.23
|
185,476
|
185,476
|
J A Gallemore
|
Aug-20
|
0.33
|
0.33
|
2,666,963
|
2,666,963
|
J A Gallemore
|
Aug-20
|
0.28
|
0.28
|
4,000,537
|
4,000,537
|
I McDonald
|
Dec-19
|
0.23
|
0.23
|
185,476
|
185,476
|
|
|
|
|
78,611,318
|
78,611,318
|
The Group has not provided any
interest free loans to the Directors in 2023 (2022: none). In
previous years the Group provided £0.3m of interest free loans to
the Directors for them to subscribe for shares as part of the
employee benefit scheme which remain outstanding at the balance
sheet date.
The Group has in place an
agreement on commercial terms with Moulding Capital Limited to
provide property, facilities and project management services to the
entity and its subsidiaries. This agreement generated £307,720
(2022: £269,017) for the Group recognised within administrative
expenses.
Prior to the IPO which took place
in September 2020, THG divested the Propco Group, an entity now
wholly owned by the Group's CEO. The Propco Group owns property
assets occupied and utilised by THG and its operating
businesses.
The amounts recognised on the
Group's balance sheet in relation to the leases with Propco in the
year are as follows:
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Right-of-use asset
|
|
154,682
|
159,000
|
Lease liability
|
|
174,457
|
178,694
|
The amounts recognised on the
Group's statement of comprehensive income in relation to the leases
with Propco in the year are as follows:
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Depreciation arising on
right-of-use assets
|
|
10,066
|
11,277
|
Expense recognised in financing
costs
|
7,198
|
8,182
|
Impairment arising on property
plant and equipment
|
9,663
|
-
|
The table below gives further
detail around the leases in place:
Number of
properties
|
Residual lease term date
divestment
|
FY23
rent
£'000
|
9
|
0-4
years
|
962
|
12
|
12-14
years
|
3,285
|
7
|
18-24
years
|
9,923
|
28
|
|
14,170
|
The following table shows the
amounts receivable from or payable to Propco which are outstanding
at the balance sheet date. These include balances in relation to
lease agreements and where the Group has paid suppliers on behalf
of the Propco Group, or vice versa. Such situations arise due to
Propco suppliers using legacy details to submit invoices or where
payments are made on behalf of THG by Propco for property related
costs rechargeable to THG as a tenant per lease.
|
2023
|
2022
|
Related party
|
Amounts owed by related
parties
|
Amounts owed to related
parties
|
Amounts
owed by related parties
|
Amounts
owed to related parties
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Aghoco 1442 Ltd
|
-
|
29
|
-
|
100
|
Allenby Square Ltd
|
-
|
7
|
-
|
190
|
MCL Alpha PropCo Ltd
|
-
|
-
|
-
|
161
|
MCL Icon Unit 3 PropCo S.à
r.l.
|
-
|
74
|
-
|
296
|
MCL Gadbrook PropCo Ltd
|
-
|
34
|
-
|
242
|
MCL Icon Unit 4 PropCo
Ltd
|
-
|
45
|
-
|
217
|
MCL PV PropCo Ltd
|
-
|
-
|
-
|
45
|
MCL A&A PropCo Ltd
|
-
|
-
|
-
|
241
|
MCL GJS PropCo Ltd
|
-
|
35
|
-
|
195
|
MCL HCC
PropCo Ltd
|
-
|
75
|
-
|
285
|
MCL KS PropCo Ltd
|
-
|
63
|
-
|
225
|
Moulding Capital
Limited
|
-
|
-
|
-
|
10,454
|
MCL Wroclaw sp. Z.o.o
|
-
|
1
|
-
|
-
|
MCL ICON S.à r.l
|
-
|
170
|
-
|
1,101
|
MCL Icon Unit 2 PropCo
Limited
|
-
|
292
|
-
|
953
|
|
-
|
825
|
-
|
14,705
|