Troubled e-commerce firm THG has delivered the best quarter of its financial year after returning to sales growth.
Group revenues from continuing operations were up 1.1% to £597.9m during its fourth quarter to 31 December 2023. For the year as a whole, sales were still down 2.9%.
In the latest period, the business was boosted by robust sales across its main Beauty division, which delivered growth of 2.6% to £387m. However, its Nutrition unit suffered a 3.9% decline to £166.5m
Following the sale of the THG OnDemand division earlier in 2023, the group noted that it had completed a strategic review of non-core categories in the second half, resulting in the discontinuation of small legacy brands within its Beauty and Nutrition divisions.
THG said it has a strong balance sheet and liquidity, with around £600m of cash and available facilities. Aided by cost savings, the group’s full-year adjusted EBITDA is expected to be above £117m, with group adjusted EBITDA over 75% higher year-on-year.
CEO Matthew Moulding said: “2023 was a year that threw up many challenges for all businesses, and I’m delighted in how the group not only responded to these challenges, but grew stronger through the year.
“A combination of automation and significant cost initiatives delivered in 2022, in addition to a receding inflationary environment, each played a key role in the group delivering an expected record EBITDA performance after cash-adjusting items during 2023.”
Meanwhile, THG announced today that it had struck an agreement with wellness retailer Holland & Barrett (H&B) regarding a new partnership with Ingenuity, its online platform that serves third-party brands.
The three-year agreement will see THG Ingenuity become H&B’s main e-commerce UK and Ireland operational partner, providing fulfilment and courier management services for the retailer’s rapidly growing digital business.
Moulding said: “Holland & Barrett is one of the UK’s largest health and wellness retailers, and a major online player. We’re delighted to be supporting their e-commerce ambitions through underpinning their operational efforts for D2C fulfilment and courier management services, directly into their customers hands.
“We feel this is a true demonstration of how the THG Ingenuity platform can provide incremental services to established brands, delivering operational excellence, becoming world class at a fraction of the cost and in a fraction of the time.”
Anthony Houghton, Chief Operating Officer at Holland & Barrett, added: “Our proposed three-year partnership with THG Ingenuity will mean we can continue to grow at pace with a partner who are industry experts in D2C fulfilment, while we invest in transforming our supply chain capabilities.”
Commenting on the Manchester-based group’s results, Russ Mould, director at investment platform AJ Bell, said: “THG has spent a long time nursing its wounds after the bubble burst on the hype around its business. It became the laughing stock of the UK market, had to stomach large share price losses and then battled takeover interest.
“There are now tentative signs that THG is finding its feet again, which suggests braver investors might start to give it a second look. However, THG needs to show multiple consecutive periods of progress to properly win over the market and we’re still some way off that point.
“How does the scorecard look so far? In the final year just ended, it returned to group revenue growth on a constant currency basis (albeit minimal), achieved free cash flow breakeven, improved margins, won a new deal to handle the fulfilment needs of Holland & Barrett’s online operations and secured work for major brands including PepsiCo and L’Oréal.
“In the context of its earlier problems, that is positive progress, yet there is a lot more work to be done to put this business into decent shape. If it cannot sustain the positive momentum, THG risks falling back into the quicksand.”
NAM Implications:
- THG appear to be inching their way back.
- And have secured fulfilment business from established brands.
- (albeit utilising the most costly part of the online process)
- The business remains an option for stakeholders prepared to take a chance…
