THG returns to revenue growth and slashes gross debt after reshuffle

E-commerce group THG said it has returned to revenue growth and substantially reduced its gross debt after a period of operational restructuring, sending its shares higher on Thursday.

The MyProtein and LookFantastic owner reported that changes to its beauty and nutrition divisions are beginning to deliver, with the beauty arm returning to revenue growth in the third quarter and the group holding £279.4 million in cash and available facilities following a refinancing. THG confirmed an early-August sale of Claremont Ingredients to Nactarome Group for £103 million in cash, which generated a reported £51 million profit and was aimed at lowering the company’s debt burden.

THG’s group revenue for the half-year to 30 June fell 2.6% on a constant-currency basis to £783.4 million. Adjusted EBITDA for the period was £24.0 million, down from £37.1 million a year earlier, and the pre-tax loss widened to £66.7 million from £56.3 million. The company said gross margin slipped to 41.1% from 42.6% a year earlier largely because of record whey prices hitting its Nutrition division.

By division, THG Beauty revenue declined 5.9% on a constant-currency basis to £479.9 million, a fall the company attributed principally to portfolio rationalisation and withdrawal from certain European and Asian markets. THG Nutrition grew 3.1% in the period at constant currency, and management forecast second-half revenue growth for Nutrition of between 10% and 12%.

Chief Executive Matthew Moulding said the first half had been "a transformative period" and stressed that momentum improved through the second quarter and into the third. "A slower start to the year in Beauty, alongside record whey prices in Nutrition, initially held back performance, but we saw clear improvement in Q2, in particular supported by Myprotein offline retail and licensing sales," he said, adding that the company expects margins to improve in the latter half of the year and that H2 will be the group's most profitable and cash-generative period.

The group simplified its structure earlier in the year by spinning off its loss-making technology platform Ingenuity in January, a move management said was intended to revive shareholder value and focus the business on its consumer-facing brands. THG also completed a refinancing that it said had "substantially" reduced gross debt while leaving the business with the cash and facility headroom reported on Thursday.

Market reaction was positive: THG shares rose 8.16%, or 2.34p, to 31.00p on Thursday, though the stock has fallen more than 45% over the past year. The company’s trading update and balance-sheet actions signal an attempt to stabilise performance after a volatile period and position the group for a stronger second half, according to management.

THG’s half-year report, the Claremont sale in August and the January spin-off together form a timeline of moves aimed at simplifying operations, strengthening liquidity and improving profitability as the group navigates commodity pressure in Nutrition and the effects of portfolio shifts in Beauty.