THG Plc

Good morning everybody and thank you for joining us this morning for our interim results. We're going to do things slightly different today than the previous presentations that we've done. We've kept away from doing a walkthrough on a video of our presentation. Instead, what we've done, we've put the presentation online early along with the detailed R&S and then with a lot going on in the group at the moment, we think that a lengthier Q&A section will probably provide more value for everybody. In terms of the H1 itself, I think what I would say is it's been a solid half in general, but the makeup of that half has been somewhat a bit different than maybe we would have anticipated six or 12 months ago. Following the business model changes that we've made through 2022 and 2023, The beauty and ingenuity divisions have delivered record performances. So we're really pleased with the progress that we've made through those business model changes. And we see good momentum there as well coming into the second half and thereafter. So that's been a particularly pleasing performance. We've also got more contract wins with great success. positivity feeding through in terms of the ingenuity progress so again that's that's been solid we've faced some headwinds in the nutrition division probably the the biggest factor that you'll note in there has been through FX we've taken in excess of five million pounds with a profit hit from from FX principally around the Asia and and the well-documented volatility in the Japanese yen. I think one of the things to note from there is whilst that volatility is still there today, as we look forward to 2025, it's probably the first time now for a few years that we've been able to look forward to 2025 or the year ahead with some form of positivity around the FX there. So we're pleased with the direction of travel there, but that has been a frustration for us. One of the things that we've been able to do to handle that FX is we've launched our own manufacturing. So in the sense of being able to manufacture within territory. So that will steadily now start to be able to scale. And that does reduce our reliance and impact from FX volatility in the region. It's certainly done that across Europe and the US and other territories where we've done that through the years. And that's why we don't particularly ever note any volatility in those regions. I think the other area to really bring to everyone's attention is obviously the rebrand. It's been a major rebrand, probably the most, well, certainly the most complex brand rebrand we've ever done. The last time we did a rebrand for MyProtein was in 2018. To give you some idea of the complexity, you're probably looking at thousands and thousands of product lines across different countries in the world in different distribution centers, which compared back to 2018 would have been a fraction of that. And so this has really stepped up the complexity. When you do do a rebrand, obviously what we've chosen to do is we've chosen to limit that disruption to our online business. And if you look at the growth that we're seeing in the offline piece of the nutrition business, that's been particularly strong, minimal disruption there. And our average selling prices going into the offline market are actually in growth. But as we have pushed through the brand changes, we've done that to allowing our own customers to be able to partake in the discounts that you have to put in place to be able to drive through those product changes. Now, as a result, if you were to look back at 2018 at the last rebrand, We took our growth backwards from 24%, I think it was, in 2017 down to 6% in 2018 when we took that rebrand on. And then as we move forward into 2019, that growth then reaccelerated to 20% before then we had the explosive growth that you would have seen through the COVID period, etc., So the key thing that pulls back that growth when we did that rebrand in 2018 is the average selling prices as you implement discounts across the websites to transition the brand from old to new. And that's very similar to what you've seen in this year and in the first half of this year. where average selling prices across the websites have been down around, on a constant currency basis, around 12%. And that's pulled back the revenue in that nutrition division to about 7.5%, I think it is, that we've reported for half one. But what I'm pleased to say is obviously that rebrand is now largely behind us. We started that rebrand in September last year, so we start to comp those numbers. And actually for September this year, as we've stated in the R&S, we're expecting a return to growth for MyProtein, which Given the extent of changes we've put that business through, that's been somewhat of a relief. I don't mind saying that. The summer itself, it never seemed like it was ever-ending, but finally it feels like we've come through with the progress there. I think in terms of the output from the rebrand, just to remind people why we've done this, we've done this to be able to attack a significantly bigger offline market, which we've never really addressed in the past. And through the listings that you've seen of the brand and some of the licensing deals we've done most recently, the Muller and MyProtein partnership together, you can see some real success there. And you're seeing really, really strong growth. So, you know... In half one, I think the number would be in excess of 40% growth in our online retail sales. And so we're seeing great success, and that strategy should pay off for us as we then start to grow that segment quite considerably. I think a few other things to touch on from the half one, touching on the outlook. So we stated in there that we'd expect to be within consensus, albeit at the lower end of consensus. And just to remind people that we took a 5 million plus FX hit just in Asia with the Japanese yen in the first half, and that volatility still lingers for us for this year. um so naturally we'd expect that to be a key factor there's not a lot we can do with fx particularly other than localized which is something we've been working on for the last couple of years but hopefully that will become a a good tailwind for us next year and then and and and and then We can put all that behind us. I think other things to note, obviously, we're very aware that there's been a spike in the way pricing in the markets at the moment on the commodity side of things. We've got a good history of how to navigate that for those that have been involved or a stakeholder in THG through 2022. You will see that we stood firm on pricing. providing and helping our customers with support through the cost of living crisis. And we really dug deep in there. And then the following year we delivered record profitability ever in the nutrition division. as that was rewarded. So we've got a good plan of attack in terms of how we do that and we'll respond in the market depending on how that volatility sits. But we don't expect that to be a long-term volatility in any event. So it's obviously worth noting that. i think the other things to note is obviously around things like the balance sheet so you'll see an increase in the net debt at the half year which is transitory a few items in there you know the underlying free cash generation the business is actually stronger than the prior year in the prior year we had a some freehold disposals of 55 million and then also in this last 12 months we've made 20 million pounds worth of acquisitions All of that said, what we're expecting is, well, we had some VAT balances that are set to unwind by the end of this quarter, which is material, and that comes back our way. Also, the mix in our creditors, where nutrition creditors are worth double the creditor days. So from a working cap perspective, as you pull back from your nutrition division, you'll see less working capital benefit temporarily now as we return to growth that reverses. So that's quite a material point. And then I think the final point I would say is naturally the capex is continually reducing. So we'd expect a materially lower capex in the second half and also through to next year. So lots of positives for us there in terms of the outlook, in terms of that performance. But, you know, clearly there's plenty of work to do for us to make sure we're on a really strong footing for 2025. I think some other things that we've got in the update today, which obviously of key interest to people, we have the step up that we've been waiting for the FCA to finalise the rules and the guidance there. So that's now there and clearly we'll be making the step up in due course. And if there's any Q&A on that, I'm sure Damien can help with that. And then at the same time, we've outlined our work that we're doing on the Ingenuity demerger. So I'd expect, naturally, quite a few questions. And I know the team have been speaking with the analysts this morning and running them through that. I think, look, taking a step back, we have three very sizable businesses two of which are very cash generative, highly profitable businesses. And then we have the Ingenuity business, which is an infrastructure play where we invest our surplus cash into Ingenuity to build an asset for the future. Maybe something you might see similar to when Sky was building out its network and Sky dishes across or many other infrastructure plays that people would know about. what's clear for us is that in an environment of high interest rates, that cash-generative businesses are valued quite different than businesses that are doing an infrastructure play. We've had extensive discussions now with shareholders over the past year, and what is clear is I think we're all aligned that Having an infrastructure business as part of the group is probably, as a listed business, something that shareholders would prefer to see more value in other uses of capital than building that asset. So obviously, we are super passionate about that asset and see incredible value and opportunity with it. And so that's something that we've been exploring in great detail. We've obviously done a lot of work over the summer on this project and before. We've now received all the necessary tax clearances from HMRC to be able to go forwards and do this. We obviously did extensive separation work across the group throughout 2021 and 2022 on an £8 million project to basically rewire the group's operating system so they can operate independently. That's all been successfully done. And so that's something that the board and stakeholders are looking at in terms of the right steps in which we should look at potentially doing that demerger. I think, you know, save, there'll obviously be quite a bit of questions. So rather than me just keep going on around any of those points and trying to guess what the Q&A is, we'll probably leave that for the next section. But just to give everyone a few moments to make any notes and come back with any further thoughts, what we've now got is a brief business video just touching on some of those points from H1, touching on the rebrand and things like that. and then we'll move into Q&A and go in much more detail.

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Thank you. Ladies and gentlemen, if you'd like to ask an audio question, please press star 1 on your truffle keypad. So that is star 1 if you wish to ask a question. Today's first question is coming from Wayne Brown calling from Librem. Please go ahead.

Morning, gents. A lot to get through, so I'll keep my questions brief. I think I've got three, maybe four if I may be a bit bold. On nutrition, I know that the rebranding from an operational perspective and the product looks great, et cetera. But clearly, if you can just run through what's gone slightly wrong with the guidance that was given, is it the fact that there were elements of the actual rebranding and getting through the old product that didn't go according to plan or just explain whether disconnects happened on that front? And then if I may take them maybe all up front. And then on Japanese yen, That has moved 10%, I think, in the last three months positively. So just curious if the impact of that is going to be seen in H2 this year or next year. And I don't want to sound glum or negative, but could the timing of opening the facility then just be the wrong timing, and how should we be thinking about that in the numbers? And then on ingenuity and separating that out, I think that's clearly, in our view, very interesting and exciting and should get people focused on some of the parts in due course. But just curious on two fronts on that. What could happen that the split does not happen? So what are the risks in this actually not occurring? And then maybe you could just speak about the cash attractions that what could look like in the Remain Co., if you could ring sense and fund ingenuity. Thank you.

So, Wayne, I'll tell you, this is probably useful for everybody, really. Maybe the best thing we could do is actually just go one question at a time. So ask as many as you want, because I'll forget them all. But I think the first question there, sorry, Wayne, was the one around what's potentially gone wrong with the rebrand on the mass protein business. I mean, look, I think you do a rebrand... when your momentum's good, right? That's got to be the golden rule. Now, you wouldn't ever go into a major overhaul rebrand into headwinds. So to wind back to when we took the decision to do, you know, these things take an awful lot of planning and an awful lot of work. So to get to this point of a rebrand, probably behind the scenes, there's been 18 months worth of work going on to get to that position. and then and then you make the decision and then and then you go and you want to order all your product in and you start to do all your campaigns so once you make that decision you make that decision and you go so we did that in september is when products started to feed through onto the website so that decision would have been taken much earlier in the year as we as we start to do that now The momentum, you'll recall, for MyProtein last year was really strong, record profitability, incredible performance, probably generated £90 million thereabouts of profitability with free cash flow of that and some potentially getting into the detail. but so so you make that decision then when you when you've got the right momentum that would always be the right time to do the rebrand now the kind of things that have changed since then obviously has been that you know the the the wider market has been a bit more challenging through the currency movements you wouldn't have wanted to lean into that there's been a secondary bounce in some of the commodity pricing with a bit you know whether that's a dead count dead cat bounce or or whatever You know, you've seen some of that. So you've got those kind of factors that feed into it. What will always be the case is you're sat there with over £100 million worth of stock, let's say, when you go into a rebrand. So you're not... Some of that will be in raw materials. Most of it will be in finished goods. What you're not going to do is sensibly go out and job that stock out to then start again with new brand... Also, it would be almost impossible to do because you've so many product lines, et cetera. So you've got to decide on your channel in which you're going to manage that. So we've managed that through directly to our customers. And that then means that your website looks messy because you've got basically like walking into a car showroom and having an old Audi model alongside new Audi models. And it never gives the best feel and experience, et cetera. And it's quite difficult for the marketeers in terms of how they're doing their channels. And so you make that decision. That's always going to affect your average selling prices, as it did in 2018. But doing that, leaning into the FX market, where you've got that hit out there, that's explosive volatility. I think anyone who puts up the GB to the Japan yen graph now, you'll just see how horrendous that has been through the first half. But not just the first half now, this has been for three years, four years in the making. Every year it's been getting worse. And we all know the reasons, for those that follow currencies, know the reasons as to why they look to be unwinding now. which then kind of leads on, I think, Wayne, to another point that you said is, have you done this too late now in terms of your localised sourcing? Localised sourcing can never be too late. Now, what we've not done in this territory is we've not gone and spent a lot of capex building our own manufacturing unit, shoring the places like the US and huge facility in Europe, huge in the UK, et cetera. We've done that, but as our first entry point into anything ever, we do it through third parties. And so we've done it in India and we've now done it in Japan. We've got a third party, the big players out there, and they help us do the manufacturing and so on and so forth. And it's nascent and it starts to grow and that's how you handle it. So it's not too little too late for that. And actually, we'll be sat there punch in the sky once that currency continues to come back, as you've seen the 10% movement we've seen of late. This time last year, though, it's broadly flat right now, but there was a big dip that happened as well, and then it went back up. So what we sat there knowing is all things being equal, this is a really nice tailwind for us for next year. I think the other questions that you had on there, there was the ingenuity stuff. What else did I miss on the rebrand? Was there something else there, Wayne?

No, no, no. I think, no, no, you didn't miss anything. You answered that well. I think just the last question in two parts was on the ingenuity, why could the split not happen? So what risks are there that we should think about? And then just look at the cash attractions that would remain in remain code if you ring fence and fund ingenuity separately.

Yeah, sure. Look, the cash attraction point kind of follows on to the next point, which is, you know, both of those businesses are highly cash generative with minimal capex. So as a result, you can sit there and and that we, you know, our stakeholders ourselves now having got four or five years experience of the markets. we recognise that that's very attractive for being listed, to have those assets generating that cash and being able to do dividends and share buybacks, et cetera, instead of diverting those funds into technology and infrastructure, which then builds a new business model. And so I think those cash attractions are really clear. Obviously, if you were to take a step back, the rough maths would have been, free cash flow of the Remain Co. would have probably been somewhere in the order of £80 million plus in the prior year, in 2023, versus for those that follow the detail of our numbers, I think we had a free cash flow of about minus 13. So what that then means is, well, ingenuity was about minus 97, 90, you know, something like that. So to give you that minus 13. So you're putting that money into ingenuity to build that asset. So if you then take a step back and say, how were those businesses performing? Well, in 2023, we had nutrition performing and beauty and ingenuity undergoing their business model changes. So if you were to think, well... nutrition should be firing for next year and there's no reason why we'd expect beauty not to be firing then the core remain core business should be performing incredibly well which means that you've got a very cash generative business because for the past three years there's always been something in one of the divisions that we've been overhauling So as a result, then, the attractiveness is pretty clear for all to be there and what that could then mean for the market. And you've got two very strong standout assets that people can start to focus on. Then what you've got is ingenuity. You're probably not far off as a standalone business, a billion dollars of revenue. in a profitable business at EBITDA level, but with significant depreciation charges and various other things, which I know is not, in a high interest environment, not the most ideal scenario to be in because you get these huge depreciation charges and you end up with big reported losses and things like that. And so taking that away, having a billion dollar type revenue business you know, strong, positive EBITDA growth, great trajectory, but requiring cash investment to do that, that is something that, you know, having spoken to our stakeholders, we've got a strong view that actually there's a lot of support for that as a standalone business. And it's actually the combination that's posing the biggest challenge. And so, look, we can never say with certainty that anything's going to happen, right? That's for sure. Otherwise, we'd be announcing... Categorically, we've done it today. What I can say is that's a very strong level of feedback we've had from our stakeholders, internally from us running the business, and our passion for ingenuity is better today than it's ever been, reflected in more contract wins, etc. We just want to make sure each of our divisions, as we announced in 2021, have got the right platform in which to go on and fulfil their potential.

OK, thank you very much. And any views as to why this merger might not take place, or is that getting into territory that you're not comfortable in discussing?

Look, Wayne, I can't really get into too much on that, but what I would say is, look, we obviously... If, just to take a step back, if Ingenuity is not in THG as a very large scale business, probably got about 4,000 staff in that business with that billion dollars of revenue and strong EBITDA performance, it's fair to say it can have its own banking and funding and finance facilities of quite a substantial scale. And then on top of that, it's obviously an attractive asset in that sector to some considerable degree. So it's not like we're exiting something in any way, shape or form. This is all really going to be around making sure that our current stakeholders can partake. That's an important point. One thing that's probably isn't entirely clear is we we won't be forcing anybody to not be part of Ingenuity should we go down this route. This is something that all stakeholders will be able to partake in because it's got its ability to be able to go on its own way and to do that very successfully. So look, there's no reason logically as to why something would stand in the way of this. We know that from a stakeholder perspective that there'd be support there for it. We know that it can stand alone on its own feet with a good banking package behind it, etc. But until these things ever happen, there's always a risk.

Thank you very much. That's very clever. Cheers.

Thank you. Our next question today will be coming from Monique Pollard of Citi. Please go ahead.

Hi. Morning, everyone. Three questions for me as well, if I can, please. The first question is just on the guidance, so the EBITDA guidance, we were talking about the low end of the range, and it seems to me that to get to that low end of the range, you need about a 12% adjusted EBITDA margin for nutrition in the second half of the year. I'm just wondering if that's the right way to think about it and whether that's reasonable, just given the commentary that sort of, you know, it's

in september now that we're sort of exiting and getting back to growth in that nutrition segment yeah sure so look i think uh the the other points to put into account into that as well is got to be how the other businesses are performing as well so the sure i think just on a straight line basis the 12 is probably the accurate uh basis in which to look at it and you know in the offline business we deliver that and more um What I wouldn't rule out as well is some of the strong performances we might see in other parts. I think it's fair to say that both ingenuity and beauty have outperformed in the first half beyond anyone's expectations externally. and there's no reason why that might not be the case as well for the second half. I mean, look, key trading is ahead, so can't be certain with anything. And we also, quite rightly, Molly, will react to however the market is because we do, I know much to the frustrations of many people, we always take long-term decision-making and we're passionate about that. So, you know, when there are these moments of volatility, we will go away and we'll figure out what's the right thing for the business. And if that meant that we didn't deliver 12% in nutrition for that period, then we would do that for the right reasons. Now, we would hope that there are positives elsewhere in the group that would offset that. um i mean as an example though there are there are there are things that provide us with various tailwinds uh into the second half you know products that my protein hasn't been able to have on site because of the rebrand even basic things like the advent calendar wasn't there last year and that's that that that's going to be launched any day and you know these are these are nice accretive things in terms of the beauty side of things sure you know um it's been a tougher half one for nutrition but with beauty we've now come into half two launch the advent calendars and that's a big revenue driver for that division and those have gone incredibly well as we've come into the second half and we'd expect to sell out of those very very soon. So there are aspects everywhere, but I think those maths are broadly correct, Molly, in terms of what you've said. And equally, though, we wouldn't hesitate on taking the right decisions, and if that meant that we don't do 12% in that division, we won't do it, right? But what that will mean, as we've proved in previous years, is that nutrition will have an even stronger period next year because we'll have done the right things for that business.

Understood. Thank you. The second question I had was just on beauty. I was wondering if you could give us any sense of the trends that you've seen across the different segments. So, you know, your two biggest segments, skincare and hair care, but also the smaller segments, the fragrance and cosmetic. And if you could call out anything that led to that sort of deceleration that we saw in the beauty performance in the second quarter versus the first quarter, please.

Yeah, sure. So I think just to talk about the various categories, if you take Olaplex out of the hair care sector, actually that's really strong. But Olaplex has been, you may recall, had a really strong... couple of years and then and then you know I've suffered a few knock backs and so those guys have faded away a bit but but the rest of that that category is really strong skincare remains really solid for ourselves as well I think fragrance continues to to get stronger and stronger for us and even in cosmetics you know cosmetics is especially for cool beauty is going incredibly well So I think it's fair to say that as a sector, it's alive and kicking and going really well. We've put fragrance into one of the advent calendars. So for Cult Beauty, it has two advent calendars. They look very similar, but one's got fragrance in, which is a hazmat product, so it can't go on planes. So only the UK got to choose that this year. So you could choose between that and a different one that didn't have the fragrance in. The fragrance advent calendar sold out within the first week, which is just wild and ridiculous, really. The other one's about to sell out as well. But there was limited volumes, obviously, that were put in place. So that gives you an idea of how that market is shifting. I think premium beauty is doing incredibly well, and I'd be surprised if the wider beauty market isn't similarly doing well. very well i think in terms of uh you know why did you know q2 maybe be a little bit slower than than um than q1 for beauty it's it really just in the roundings you know there's a lot that we're doing around profitability focus and so you know you'll see a stronger second quarter profitability for in the first quarter. If you recall some of those business model changes, we've pulled back from servicing less profitable customers and orders that are further away from DC centres. So that was a lot of the change that we put through the business. We remain very focused on continuing to do that, irrespective of how that might affect the top line. But I think what you'll see is, you know, especially in... So far, the start to peak for beauty has been strong... I don't think there's any guessing away as well from the fact that there's been channel shift go the other way since COVID. So when they had the channel shift online, I think the high street has seen some significant wins going the other way since the reopening after COVID that online players have had to battle with. My guess would be that that channel shift is starting to move back the other way now and maybe that's starting to be evidenced a bit as well. But there's nothing in that Q2 slightly softer top line that would have been supported by a much stronger bottom line that came through there.

That's very clear. Thank you. And then the final question was just whether you were able to quantify in any way the potential positive buying flows from the transfer to equity share category on the stock exchange.

Hi, Monique. A few different numbers from different bankers, but isn't it always us? Probably 60 million plus if you look at the direct index funds and then those that will shadow or track those index funds. So that's 60 million shares with an estimated caveat to that number.

Understood. Thank you very much.

Thank you. What are your questions, Ben? Our next question today will be coming from Charlie Rothbard of HSBC. Please go ahead.

Good morning, everyone. Thank you, actually, for taking the call. I just wanted to ask you a quick question about what the – I appreciate you haven't given the granular detail in the release, but what would make up the balance sheet for ingenuity and what would have to sit there from the main code to support it?

So there's kind of like a... Obviously, we're well advised on this in terms of the process and the like. There would be a circular that we would distribute which has got the full breakdown of the different balance sheets and how that would look. So there's not really a great deal of detail that we can provide ahead of that. It would be remiss of us to do that. Instead, what we can do is point to sort of the cash... positions and of each business area. Now, what I can say is on our first estimates of ahead of a circular, it's probably safe to assume for, and this is public information as I'm told as well within quite a few analyst reports, but We'd anticipate about £150 million worth of cash outflow in Ingenuity to the point at which it turns free cash flow positive, which is about three years out. And so, which is dramatically down from the investments which have gone into it. And as I talked before, I think in 2023, in the 90s of cash investment, that cash outflow, free cash flow that it used up. So if you think from the 1st of January, it's probably three years, 150 million of outflow. So that's probably the most pertinent number, I think, to be able to give to you. The actual breakdown of what the balance sheets say of which assets and all the rest of it would go into a circular. And then how we would fund that 150 million. Clearly, as a strong EBITDA business, there would be an element of a facility go into it, and then there'd be other funds that would go into it as well.

Okay, that's really tight. Thank you very much indeed.

Thanks, sir. We'll now move to John Stevenson of Peel Hunt. Please go ahead. Your line is open.

Hi, thanks. Morning, guys. Yeah, another demerger question. I guess, are there any implications for the future service agreements and margin structures that are required to deliver the successful demerger relative to the current agreements that the businesses have got with ingenuity at the moment? Essentially, I suppose, does the pricing structure need to change an ongoing basis um and the second question uh just on nutrition obviously you know rashka's new agreements in place this year both in terms of the retail partners and licensed income can you put a sort of number on the annualized gmv you'll have in place by the year end

Sure. So on the ingenuity service agreement, we already have one in place actually from the separation work that we did. It's a proper standalone arm's length, which has actually been through another review as part of its legal contractual terms. So there's not anticipated to be any differences, any changes to that other than the standard reviews that are in place. And so that work has all been done and plays with that agreement. So then coming on to the second question in terms of the various agreements we've got. So the GMV on the Muller agreement, for example, that only went live in a week ago, I think. So that's going to be some while before we get the GMV value from those kind of contracts kicking off. But obviously, we'd expect that to take a decent part of the market share, which then hopefully gets to roll out into more international markets and so on and so forth. But we are expecting considerable success there i think where we were i think i don't know if it was in the rns but if the sales for the half one for nutrition were back seven and a half percent from memory it was about the gmv improvement took you back to six point something six point four six point eight there we are so so so that gives you an idea there of that positive gmv we obviously expect that to scale quite considerably from here on But, you know, what is certain is we're in GMV growth in September all day long. And, you know, I'd expect that for the rest of the year. So, yeah, we are expecting the brand to, you know, get further and further reach. And we've got other exciting partnerships in the pipeline as well.

Okay. Actually, while I'm on the mic, I have just one more on beauty. Obviously, you know, margins are already back at 6%. And I guess when we look at the business, you know, retail media is only going to grow from here. The mix of prestige brands, I guess, only grows from here. So what's your view in terms of medium term margins?

Look, I think it's definitely got the potential, right? So one of the things we've done is quite an extensive cost saving exercise throughout THG, you know, and getting that operating leverage to feed through is where the real next level of upside is. So if we can get all of our divisions now working together to take a step back in terms 2021, all three divisions are firing. 2022, all three are going through a business model overhaul, reacting to the new world. 2023, we have one of those businesses firing in nutrition. And then we have two now, and then hopefully for the third for next year. So all three. Now, throughout that period, we have undergone extensive cost-saving exercises and really to make sure that we can get that operating leverage to feed through. So it's not just the case of beauty, it'll be nutrition as well. When we saw that great operating leverage in nutrition last year, we expect that to be the norm and potentially better. beauty, hopefully with that operating leverage too, that starts to feed through and give us that potential to go on for another target level there afterwards. I wouldn't put a number on it today, but what I would say is what's getting missed, I guess, quite easily in our numbers is the success we've had in the fulfillment line. I mean, the fulfillment line, if anyone that takes a look at it, all of that automation, the robots, we've actually got tomorrow AutoStore are doing their investor day here on our campus to showcase. But across all of our distribution and fulfillment job, that's got to have been the best performance from that team in any aspect of THG. The savings are incredible. Now, that actually delivers serious operating leverage because I think if you were just to look year on year, I haven't got the number in front of me, but I wouldn't be surprised if it's 150 basis points lower on a $2 billion basis. revenue business, that's a cracking number. And then you keep doing that. They're the kind of things that if you keep eking more and more out of that line, that should feed through to the operating leverage of every division.

Brilliant. That's very clear. Thank you, Matt.

Thank you. I want your questions, Mr. Stevenson. Ladies and gentlemen, that will conclude today's question at this session. I turn the call back over to Mr. Matthew Moulding for any additional or closing remarks. Thank you.

OK, well, look, thank you, everybody. I think in terms of that half one, that's that, you know, I can speak on behalf of the team. It's been a pretty brutal exercising, putting the business through change and adapting. And I think, you know, I'd just like to say thank you to the wider team that have really put the effort and energy in. It's not been not been the easiest of periods in which to go and make all that happen. And I'm just delighted in various aspects of the progress that we've made, but also very much aware there's plenty for us to do for going forward as well and for the rest of the year and into next year. I'd also just like to thank all the stakeholders who supported us in taking long-term views and making the changes to the business models as we see fit and choose to do. And our confidence is that we are going to be able to repay that with... with some outstanding numbers to come in the future. So thank you.