THG makes pre-tax loss of £252m but Moulding hails Q4 momentum
THG made a pre-tax loss of £252.0m (2022: £549.7m) on reduced annual revenues, but claims the withdrawal from loss making categories and changes to the business gives it “momentum” into the first quarter of 2024.
Total group revenue declined 8.4% year on year primarily driven by the positive action to discontinue loss making categories, the company said.
Group continuing revenue of £1,983.7m declined 2.8% as the Group prioritised profitable sales and territories which it says are reflected in the higher quality EBITDA numbers.
THG Ingenuity, the group’s ecommerce engine, which it outsources to external customers as well as its own divisions, was also strategically re-positioned in 2023 to focus on higher value and higher margin clients which will “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.
The drop in revenue due to exiting non-profitable categories amounted to £129.3m.
Matt Moulding
Overall, THG founder and chief executive Matt Moulding preferred to focus on the “record EBITDA” in the results, and said: “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.”
Of the three divisions of the business THG Beauty generated revenue of £1.2bn in the year, with most revenues in 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.
Moulding said THG Nutrition achieved “an impressive performance, and with inflationary pressures easing, posted substantially higher margin growth year-on-year.”
He also said its ecommerce engine Ingenuity is “gaining momentum” as it pivots to larger, multi-service clients.
Moulding also revealed that the executive directors, himself included, have forgone their bonus entitlements for the year.
“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,” he said.
