THG Plc

Good morning everyone and thank you for joining us for THG's half-year results presentation. As I said in the statement this morning, trading momentum continues to build positively with the strategic changes implemented last year across both THG Beauty and THG Nutrition now bearing results. H1 was a performance of two halves. We entered the year following a period of focused execution, implementing significant strategic initiatives and model changes across the group, including the completion of the demerger of our tech and robotics division, Ingenuity. In THG Beauty, we disposed of some of our smaller operations, commenced the cycle of investment in our portfolio of own brands, and took the decision to prioritise retail trading in the UK and the US. In THG Nutrition, the MyProtein global rebrand was a major talking point last year, and it's been important to gauge sentiment from existing D2C customers, new consumers, and our developing network of retail and licence partners. It's clear the positive reaction to the new positioning of MyProtein is starting to speak for itself with accelerating sales growth and a rapid rollout across offline retail. In a dynamic consumer environment, our results demonstrate the resilience of our digital first model. And as we move through Q3, I'm pleased to say the group is delivering positive growth across both our businesses. Three key achievements from H1 stand out. First is the successful return to growth for our THG nutrition division, which delivered 3% revenue growth, driven by a return to growth in new customers, as well as significant expansion of our offline retail offering across Europe, the US and Asia. Secondly, in THG Beauty, we delivered a resilient trading performance despite a slower start to the year. While strategic changes impacted the headline number in the second quarter, we saw our UK beauty retail business grow at its fastest rate since Q1 2024, proving the strength of our market-leading platforms and active database quality. And finally, we've strengthened and de-geared our balance sheet by extending facilities to December 2029 and reducing gross debt by £374 million. Alongside the refinance, following an unsolicited approach in half to 2024, the group sold Claremont Ingredients, a small manufacturing business within THG Nutrition. The proceeds have been received, which accelerates our plans to move the group towards a net cash position. Claremont is the UK's leading independent flavour manufacturing lab for sports nutrition and was acquired in late 2020 for £52 million to accelerate MyProtein's product development and global licensing ambitions. The disposal for over £100 million marks a significant return on that investment, with MyProtein's supply chain protected through a long-term supply contract, ensuring we continue to benefit from Claremont's capabilities while also gaining access to the broader international expertise of the Nactorome Group. These actions, combined with remaining focused on cost-saving initiatives, have laid a strong foundation for the second half of the year and beyond. OK, so let's turn to the headline financial performance for half one. Group revenue was £783 million, which was 2.6% down on the prior year, reflecting the significant strategic actions we've taken, particularly within THG Beauty. The majority of beauty's H1 revenue decline can be attributed directly to the planned discontinuation of certain operations and disposals, as well as the effect of withdrawing from certain sales activity in Europe and Asia. Encouragingly, beauty is back in growth in Q3, as expected, reflecting the benefits made from last year's model changes. THG Nutrition's return to growth in both Q1 and Q2 reflected the positive response to the global rebrand, helping to drive new customer growth as well as a rapid rollout of our offline model. As previously announced, Group Adjusted EBITDA for the period was £24 million, at an EBITDA margin of around 3.1%. Despite strong sales growth, continued high input costs in nutrition weighed on margin performance for the business during H1. MyProtein has a much shorter supply chain than peers, and so sharp movements in commodities are felt sooner. The wider market has now caught up, allowing MyProtein's vertically integrated D2C model to return to strength, with both sales and margins now returning to growth. Beauty retail, the largest part of our beauty division, performed well in half one, especially in Q2, supported by a strong and resilient UK beauty market. In our beauty own brands division, the timing of large orders into major customers has fallen later this year, which impacted profitability of our Perricorn MD brand during half one. An improved order pipeline is in place across our key beauty brands for H2, including for Perricorn. Turning to our balance sheet and cash flow, our financial health remains robust with cash and available facilities of around 270 million at half one, which is prior to the Claremont disposal proceeds and prior to our seasonally strong cash generative period for the year. We maintain strong capital discipline with capital expenditure materially reduced, helped by the demerger of ingenuity. Looking at our businesses in more detail, THG Beauty Revenue stood at 480 million, with UK Performance a real highlight, gaining market share in the second quarter. This is reflected in our brand health metrics, with prompted awareness for Look Fantastic reaching its highest level in Q2 this year. We've launched over 70 major new brands on site and refined our product listings to keep our proposition fresh. The underlying health of our beauty customer base is strong and our loyalty programmes continue to grow, now reaching well over 3 million members. These customers purchase more frequently and have a higher spend per account. Revenue from returning customers has increased, reflecting the success of these loyalty programmes. Average order values and conversion rates via our apps continue to grow as well, and there remains a significant opportunity to enhance app functionality to deliver an even more personalized experience for our customers. In THG Nutrition, we return to growth, delivering revenue of 304 million for the half. D2C new customer growth returned in the first half, reflecting a shift in marketing investment to upper funnel campaigns to build brand equity following the rebrand. Our offline retail expansion across all key geographies, including the rollout of MyProtein products in U.S. Walmart stores, also supported both revenue growth and brand awareness. Product innovation remains a core strength where we've successfully launched over 200 products across four very different categories. These launches use multi-touch campaigns that help expand our category leading ranges and meet changing consumer preferences. Our nutrition customer metrics tell a positive story. MyProtein is clearly the UK's most preferred sports nutrition brand, leading the category in brand consideration. Our offline performance has been exceptional, with more customers purchasing the MyProtein brand than ever. as our offline channels rapidly expand. We now sell over 750 different product lines across five distinct categories through the offline retail channel and our products are already available in over 34,000 doors globally. Now let's look ahead. The second half of the year has started well, and we are now entering the key trading weeks of the second half, with THG Beauty back in growth, helped by strengthening home market demand. The launch of our advent calendars has been the strongest in our history, and we expect gross profit margins to remain at our medium-term target levels, supported by improving performance from our own brands. To prioritise long-term market share gains and customer loyalty, MyProtein will limit price increases, underpinning further acceleration of its installed base in global offline retail, as well as supporting D2C new customer growth. We are confident in this strategy to protect long-term market share and loyalty. Our guidance for the full year 2025 remains unchanged, while our performance and strategic actions give us confidence in our medium term targets. So in summary, THG has delivered a resilient first half performance, underpinned by a pleasing Q2 performance. Both businesses are now back in growth as we enter the key trading period of the year, and we've opted to deleverage the balance sheet with cash from a strategic high return disposal. Thank you again for joining us this morning. And we will now open the floor for questions.

Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing star 1 on your telephone keypad. Again, that is star 1 for your questions today. Up first, we have Patrick Folin from Barclays. Please go ahead.

Hi, good morning, everyone. Thanks for taking my questions. Just a couple from me. How should we think about the nutrition margin going forward as you find the balance between margin improvement and top line growth while weight prices hang in the balance? And secondly, it looks like we're in a time period where protein is the most invoked category in the consumer world. Can you maybe share with us any expectations you have on your Walmart launch and if there's anything else you are excited about within your portfolio? especially considering the second half top line guide for nutrition. And if I can squeeze one more in, can you update us on the UK VAT situation regarding protein powders? Thank you.