THG Plc

Good morning and thank you for joining us for our H1 2026 results. We've delivered a very strong first half with good revenue growth, a significant step up in profitability and a much improved free cash flow position. Just as importantly, we're seeing clear evidence that the changes we've made to the group over recent years are now delivering. This morning I'll take you through the H1 performance, the progress we're making on margins and cash flow and the key trends shaping both nutrition and beauty. I'll then finish with the outlook for the remainder of the year before we take questions. Before getting into the numbers, I think it's worth spending a moment on how we've arrived here. Over the past few years, we've made some significant changes to THG. Since 2022, we've materially simplified the group. We've sold non-core businesses, reduced our geographic footprint and focused our resources on fewer, larger markets where we have a proven right to win. The de-merger of THG Ingenuity at the start of 2025 was a major milestone in that journey. It's transformed THG from a capex-heavy, cash-consumptive operating model into a capital-like group focused on two market-leading global businesses, THG Nutrition and THG Beauty. We've also demonstrated the significant unrecognized value within the group. The sale of Claremont ingredients for £103 million last year is a good example of this, and we'd continue to consider similar opportunities where they make sense. Alongside this simplification, we've been relentless on costs. Over the past 18 months alone, group headcount has reduced by approximately 25%. We continue to scrutinize our supplier base and increasingly use AI and robotics to drive efficiency across the business. But what's particularly important is that none of this has come at the expense of growth. We fundamentally reshape the group while continuing to grow the top line and invest behind our strongest opportunities. So today, THG is a much simpler business. We have two market leading digital first businesses operating in attractive global growth markets. A lot of the heavy lifting has now been done. We are now firmly in execution mode. And that brings me to the H1 results. Group revenue increased by 7.2% to £828.7 million, reflecting strong momentum across the business. In nutrition, our omnichannel strategy continues to deliver. We grew revenue across both online and offline channels, creating a broader and increasingly resilient business. In beauty, we continue to take market share across our core territories. In the UK, Look Fantastic and Cult Beauty delivered exceptional growth of 6.7%. But the most important feature of H1 is the quality of that growth. Revenue growth, combined with the operational efficiencies we've delivered across the group, drove a significant improvement in profitability. Adjusted EBITDA reached 42.8 million, more than double the prior year when adjusting for the disposal of Claremont ingredients. and that improvement in profitability is increasingly translating into cash. We delivered a significantly improved free cash flow position in H1, giving us confidence in the group's ability to generate sustainable, positive free cash flow from here on. Cash generation remains one of our key priorities. The changes we've made to THG have fundamentally improved the cash characteristics of the group. Following the ingenuity demerger, capital expenditure and lease payments have reduced substantially. We've refinanced our debt facilities through to the end of 2029, disposed of selective assets, reduced leverage and lowered our cash interest costs. As a result, we enter H2 with real confidence in our ability to deliver 25 to 35 of positive free cash flow for the full year. That confidence is underpinned by the H1 delivery of 42.8 million adjusted EBITDA with LTM EBITDA of 95.4 million. We also expect the normal seasonal working capital inflow in H2. Supplemented by further initiatives to optimise stock holdings and improve working capital across the group. I also want to briefly update you on THG Nutrition's VAT claim. HMRC has informed us that it is dealing with a significant volume of industry-wide claims covering more than 300 products across nearly 100 brands. As a result, HMRC requires additional time to assess the accuracy of those claims and now expects to provide us with an update by the end of October 2026. Turning to nutrition, the sports nutrition market is going through a major structural shift. What was once a category predominantly focused on dedicated athletes has rapidly moved into the mainstream. Consumers are increasingly focused on protein, health and active lifestyles. Wearable technology is accelerating that trend and GLP-1 usage is creating another significant driver of protein consumption. Against that backdrop, we believe MyProtein is exceptionally well positioned. And the scale the brand is now achieving globally is significant. During H1, we sold approximately 58.5 million MyProtein branded products worldwide. That compares with approximately 37.2 million in H1 last year. We believe this makes MyProtein the world's number one sports nutrition brand by unit volume and by some distance, selling at least twice the number of products of our nearest global competitor. And there's another important point. Despite already operating at this scale, MyProtein grew branded unit volumes by 57% in half one. We believe that makes MyProtein not only the largest sports nutrition brand globally by unit volume, but also the fastest growing amongst the established global competitor set. That combination of scale and growth is incredibly powerful. and it reflects the work undertaken during 2023 and 2024 to reposition and globally rebrand my protein. We are now seeing the benefits of that work across multiple channels and categories. We've launched new products designed to help consumers manage the impact of whey inflation. Our expansion into adjacent categories is delivering strongly, with active ware producing another standout performance in half one. Licensing also continues to grow rapidly. The strength and recognition of the MyProtein brand is enabling us to establish two-way licensing partnerships with some of the world's largest consumer groups. There is plenty more to come. We have a strong pipeline of new products and licensing partnerships progressing through half two, which we'll announce in due course. At the same time, we've had to navigate an extraordinary whey inflation cycle. Since 2021, whey protein costs have increased approximately five fold. That creates obvious pressure both for consumers and for industry margins. But our response has been to adapt the business rather than simply absorb those pressures. We've expanded into licensing, new categories and trade retail while developing new cost-focused products to give consumers greater choice. And despite further whey inflation during H1, we still delivered solid margin progression. We are now also beginning to see signs of change in the whey market. Significant new supply is entering the market and we're finally seeing evidence of stabilisation together with indications of forthcoming price reductions. If that continues, it would provide a meaningful tailwind as we move into 2027. Combined with the structural changes we've already made to the nutrition business, This gives us increasing confidence in the trajectory towards our targeted 12% EBITDA margin. Turning to beauty. We are fortunate to operate in another attractive global growth market. But the way consumers discover and buy beauty is changing rapidly. Premium Beauty continues to grow while online continues to take share from traditional bricks and mortar retail. At the same time, live shopping, social commerce and now agentic commerce are fundamentally changing product discovery. That plays directly to our strengths. Beauty brands increasingly need digital partners capable of reaching and engaging with younger consumers across these emerging channels. And THG Beauty is already demonstrating its leadership here. I'm pleased to confirm that Look Fantastic is recognised as the number one multi-brand beauty retailer on TikTok shop for 2026. That matters not simply because of the sales generated directly through TikTok. Our presence across TikTok and other social platforms also drives brand awareness, attracts new customers, and ultimately generates incremental traffic back to our own websites. It creates a powerful customer acquisition engine. And we intend to stay at the forefront of how the market evolves. and so I'm also pleased to announce a new partnership with Google with THG Beauty participating in three pilot programs over the next six months. These pilots will help ensure we remain at the forefront of how beauty products are discovered and purchased in an AI first world. We're also benefiting from other rapidly developing consumer trends. K-Beauty continues to grow strongly, while GLP-1 medication is beginning to influence beauty and wellness regimes. Being early to these trends allows us to bring new customers onto our platforms and strengthen our relevance with brand partners. During H1, we added more than 50 new brands across our sites, including the recent addition of prestige brand Clarins. Our proposition is increasingly differentiated. We combine deep relationships with premium global brands leading digital capabilities, AI, social commerce expertise, and market leading global fulfillment. Our focus in H2 is simple. Continue taking share and ensure THG Beauty remains at the forefront of the digital beauty market. There is another important part of the beauty business that is sometimes less visible, our manufacturing operations. We have significant beauty manufacturing businesses in both the UK and the US, developing and manufacturing products for some of the world's leading prestige beauty brands. These operations not only generate revenue and profit, they give us valuable insight into emerging brand and product trends and deepen our relationships with global beauty partners. Our UK operation is the country's largest prestige beauty manufacturer. It delivered a stellar half-won, supported by new contract wins and continued cost discipline. In the US, the new business pipeline remains strong. However, the business experience delays in receiving packaging components as a result of the homeless straight issues which constrained dispatchers during half one. Those orders haven't disappeared, they've merely been delayed. As that backlog is dispatched, we expect a strong Q4 from the US manufacturing business. Finally, turning to the outlook. The strong H1 performance means LTM adjusted EBITDA to June now stands at £95.4 million, leaving us well positioned to deliver full year expectations. Looking at Q3, across our core brands and markets, trading has remained encouraging. with approximately 5% revenue growth achieved in July and August. However, we did see some softness in other parts of the business including from the impact of introduction of EU duties which we are in the progress of mitigating as well as some phasing of on-brand sales. Encouragingly, September has started well. The gifting season is now underway and we've seen a positive early customer response including to our all-important Advent Calendars where we expect to sell over 250,000 units this year. For Q3, we expect constant currency sales growth of approximately 2% with earnings and cash remaining robust. For Q4, we expect revenue growth to accelerate to approximately 6-7%. Within nutrition, Myprotein's branded unit volumes are expected to continue their rapid growth trajectory. Following 58.5 million units sold in half one, Myprotein remains on track to sell approximately 130 million branded units for the full year of 2026. And alongside that growth, our focus on cash remains absolute. We remain on track to generate 25 to 35 million of positive free cash flow in the full year, while continuing to grow market share and progress margins. Looking further ahead, the combination of EBITDA growth and improving cash flow through 26 and 27, together with the conclusion and receipt of the HMRC VAT claim, should see group net debt reduced to approximately one times leverage for full year 2027. and there is potential upside beyond that. Following the £103 million sale of Claremont last year, we continue to receive third party interest in a number of non-core assets. Should any meaningful transaction materialise over the year ahead, the group would move into a net cash positive position by the end of full year 27. We also remain confident in the sustainability of our baseline divisional EBITDA margins of more than 6% for THG beauty and more than 12% for THG nutrition. For nutrition specifically, improving visibility on weight costs and continued diversification of revenues provide confidence in returning to those medium term margin levels. So, stepping back, the direction of travel is clear. We have simplified THG. We have two market leading global businesses. We are growing revenue and taking market share and at the same time margins are expanding. Cash generation is improving materially and at the same time the balance sheet is strengthening. A lot of the hard work and restructuring is now behind us and our focus from here is on execution. Delivering profitable growth, sustained positive free cash flow and the significant value we believe exists within THG. Thank you all for joining us today. We would now be happy to take your questions.

Thank you. Ladies and gentlemen, if you wish to ask a question over the phone, please signal by pressing star 1. Again, it is Star 1 to ask a question over the phone. We will follow up in just a moment, still out of signal. We now have a fast question from John Stinson from Beedle Hunt. Please go ahead.

I'll start on licensing if we can on nutrition. Obviously going really well, particularly in the UK, particularly with both new agreements coming on screen and existing ones are scaling well. Can you talk about the opportunities that exist to take either existing licenses into European and other territories or indeed for some new relationships for licenses moving to Europe and other territories? Second question just on those GLP-1 trends and how they impact the business. Can you talk a little bit more about what's coming through in MPD as a direct consequence of this and sort of shopping trends both online and offline directly down to GLP-1? I've got just a quick one on the acquisition actually, I'm on the mic. Just to talk about the state of play, any potential disposals please?

I missed the last question there, sorry. The state of play on Any potential variables? Not easy to answer the first two particularly because certainly the first one around licensing just around some of the confidentiality that we have and giving competitors the heads up sometimes on some of the actions that we're doing. That said, you're absolutely right that quite often what we would do with a licensing agreement, in fact more often than not, any major licensing agreement typically starts in one territory and then gets expanded beyond that into other territories as we see the given success. So what I would say is some of the major ones that you will have seen that we've announced in the past six months or more have seen really good success. So the licensing part has been particularly strong for my protein and it's strong for all parties that are involved. So we bring new customers. We've got obviously a very big global following. These brands want to access these types of consumers and so by partnering together we're bringing our customer base to their products. and so we've done that typically in where the markets that were strongest we almost always start in the UK sometimes in the US as well we've got some US first partnerships particularly and even in Asia we have we have a few that are Asia specific but certainly with the UK and the US once we've launched there we would then typically Once we've proved the success of both parties, we'll then go and roll that out. So that's why you can get really good confidence in the volume growth that we're seeing around some of these licensing deals. And that's both ways. So where we license our brand out or where we license these big brands in. So you're seeing really good progress on... you know some of the dairy products that we have in in grocers across the UK at the moment so you shouldn't be surprised to see if that expands into other territories you know even with other brands including existing brands and then similarly we've got some really big major global confectionery brands that we we're going to some territories with and and we should be set to expand them too so there's a lot more of that coming and some some really interesting things as well around the licensing side where we're targeting specific channels so we look at it from a how do we get into that channel we think that's a really good marketing opportunity for us and a revenue opportunity and people touch those and so on. goes into the shake team in five guys but that's just the start really scratching the surface that you should see some pretty substantial expansion across the the coffee market and you know which is a really really good touch point for us so we're looking at all of those channels and licensing deals are one of the key ways that we'll get into that and we'll keep you posted on yeah we'll announce them as we expand some of these major partnerships Second question you asked was on GLP-1 products. Look, I think your key focus on GLP-1 is just driving mainstream into the protein market. So I think to a degree, yes, we launched GLP-1 focused products, but actually it's the education point. So if you're a mainstream consumer and you're coming in, you're being advised you need to take protein because you're going to be deficient. and so on. and directly say, right, that's a perfect GLP-1 product. What we'll do is just say, you know, this is something that a GLP-1 consumer in the mainstream can understand quite readily and will address it in that kind of fashion. So it's educating the mainstream market is a real focus of ours as opposed to here's that product. and then the final thing on assets doing another Claremont look the truth is we've had a number of bids against a number of assets which would be deemed as non-core to some people we've always got strategic reasons as to why we have these things but if the valuation is correct then of course and it makes sense to us then we'll go and do that and so look, there's no progress that I would give an update on here. To date we've said no to all offers that have come in for any of our assets so far because we just don't deem that they're a fair reflection on the strength and value of them. But that doesn't mean that at some point in the near future we might come with some different news on that.

That's really helpful Matt, thank you.

Thank you. As a final reminder to ask a question over the phone, please signal by pressing star 1. We will pause for a moment to allow you to signal. It will be very current and no further questions. I would just like to hand over to Matt for closing remarks.

Well listen, thank you everybody.

Apologies, we have a pop-up question from A follow-up question from John Stevenson from Fuelhouse.

Sorry, I'm running out of time. I'll go with one more, please. Just on the AI in beauty, obviously GA is still pretty nascent, but it seems to be a lot more prevalent in beauty. Can you talk a little bit about the trends you're seeing there, and I guess if there's any more detail you can give on the Google trials?

I'll let Lucy, because we've got Lucy here, she can answer on some of the trends that we're seeing around Adiantic and the things that we're introducing. But I think just to touch on the Google trials, obviously Plc plugged into Ingenuity and they've got a big partnership with Google and Google have got a stake in Ingenuity. As they're launching products, obviously their first preference is to go to a scale player like Plc and get those guys live, but I'll let Lucy touch on that.

Yeah, we're actually not, there's not much more we can disclose on the Google partnership and visas right now, but there'll be something coming in the next couple of months. In terms of where we're using AI within our own infrastructure and to build out the customer experience, and we recently launched our beauty assistant or beauty advisor across both sites and we are seeing over one percent of customers engaging with that right now and the customers who do engage with that are seven times more likely to go on and purchase and so really exciting stats but a lot of work for us to do so you know we've got lots of exciting things in the pipeline as we start to build that out we've done various testing on customer tools for things like Makeup Try On, Skin Diagnostics, which we will look to integrate into that beauty advisor in the coming months. In terms of what we are seeing from LLMs and how that's changing the customer journey in beauty, Up to half of customers now do a lot of their research via LLMs ahead of coming to the website. We're seeing a four times uplift in traffic to the site that is coming referred by LLMs, albeit it's still a fairly small proportion of overall traffic. And we're really well positioned with our digital heritage and as a natively digital retailer. with all the work we've done over the many years in traditional SEO. We're really well positioned for GEO to be one of the kind of number one mentioned retailers within the assistants and LLMs when people are asking for West by Beauty products and beauty recommendations.

Okay, great. Thank you for that.

Yeah, that's helpful as well. Thank you. Thank you. With this, I'd like to hand the call back over to Matt for Bluenechromax. Over to you, sir.

Okay everybody, well thank you very much for taking the time this morning and thanks to all of our stakeholders for their support over the past 12 months. Really appreciate it and we look forward to updating you on our Q3 and Q4 performances ahead.