THG hits record interim revenues and strengthens its board

Technology and retail group THG reported record interim revenues today, but its pre-tax losses increased.

Shares in the group fell when markets opened, dropping 16.73% to 40.80p per share in the first half hour of trading, valuing the group at approximately £510m.

The Manchester-based group revealed a turnover of £1.076bn, for the six months to June 30, 2022, up from 958.830m in 2021, however, the pre-tax loss jumped to £108.186m from £81.339m the previous year.

The group said its widened losses involved non-recurring costs, which continue to reduce, including administrative and distribution costs.

It said it has robust cash on hand of £266m plus an undrawn £170m rolling credit facility. It has a £156m credit approved banking facility and the agreed disposal of £44m non-core freehold asset will further strengthen the group’s balance sheet.

Year-end cash of around £500m is expected, including completion of credit approved three-year term £156m banking facility and the non-core freehold asset disposal (£44m).

Chief executive, Matthew Moulding, said: “I’m proud to report the group achieved record H1 revenues of £1.1bn, delivering +12.3% growth against a challenging global backdrop, alongside a strong prior year performance during lockdown.

“The group continues to deliver significant infrastructure development, which, in turn, has supported market share growth through improved localised service as well as substantial operational savings. The first half of this year saw continued strong customer metrics, with active Beauty and Nutrition customers now 113% higher on a three-year basis.

“Our highly engaged, global customer base, with high repeat rates, is a key asset of the business. Recently achieving 10 million app downloads from launch in early 2020, further strengthens the group’s relationship with consumers and our first party data advantage.”

He added: “Against the tough macro-economic backdrop, we have prioritised our loyal customer base, over maximising near term gross margins focusing on retention and growth of consumers. The strength, resilience and agility of our vertically-integrated business model, coupled with automation, has enabled us to significantly invest in price protection for consumers currently facing unprecedented cost-of-living challenges.

“Supporting our consumers through 2022 has been offset through reducing 2023 capex, with the board viewing this investment as yielding a better return for shareholders and consumers alike in the near term.

“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 and remain on track to be cashflow positive in 2024.”

The group also reported governance progress with appointment of experienced independent non-executives.

Gillian Kent and Dean Moore will joine the board as independent non-executive directors, from September 15.

Gillian has had a far-reaching career in software, internet, digital media and mobile technology businesses and formerly held various senior roles at Microsoft, including managing director MSN UK, where she was responsible for creating one of the UK’s largest online services businesses. Both at Microsoft and in other roles, including as chief executive of the real estate portal Propertyfinder, she established her expertise in building markets and brands for products and services.

Gillian is currently a non-executive director at Ascential, Mothercare, Marlowe and SIG, and former positions include non-executive director at both Pendragon and Dignity.

Dean is a chartered accountant with more than 35 years of public company experience and brings with him a depth of City and finance knowledge, together with significant expertise in the financial services and retail sectors. He was previously chief financial officer at Cineworld Group, N Brown Group, T&S Stores and Graham Group and formerly non-executive chairman of Tuxedo Money Solutions.

He is currently the interim chief financial officer of Dignity, having been an independent non-executive director upon appointment, a non-executive director of Griffin Mining, and senior independent director at both Cineworld Group and Volex.

THG further announces that, after a long period of continued service with the group, Zillah Byng-Thorne, senior independent director, is stepping down from the board with immediate effect, together with non-executive director Andreas Hansson.

Damian Sanders will assume the role of interim senior independent director as THG continues to reshape its leadership to ensure it is best placed to generate long term value creation for shareholders.

As previously announced, the board and nomination committee will continue their search for suitable additional independent non-executive directors to further strengthen the board as appropriate.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “THG declared it had made ‘substantial progress’, but investors who have suffered a 92% share price loss since the company joined the stock market may think otherwise. While it has reported record first-half revenue at £1.1bn, it is still making an operating loss. Costs have been going up and margins are being squeezed.

“THG boasts of a loyal customer base but when it sells commoditised products, this loyalty is going to be tested as consumers look hard for ways to save money – and that could mean buying their protein or beauty products from somewhere else.”

THG’s stock closed the day’s trading at 40.40p per share, a 17.55% fall on the previous day’s close of 49p per share, putting a £503.46m valuation on the group.