Annual Report
For the year ended: 31 December 2023
Company Number: 06539496
THG NUTRITION
THG BEAUTY
THG INGENUITY
2023
Revenue
FY23 £2,045.4m
FY22 £2,239.2m
FY21 £2,179.9m
Adjusted EBITDA margin
FY23 5.6%
FY22 2.9%
FY21 7.4%
Reported operating loss
FY23 £185.4m
FY22 £495.6m
FY21 £137.5m
Adjusted EBITDA
FY23 £114.1m
FY22 £64.1m
FY21 £161.3m
Contents
Strategic Report
Chair’s introduction Page 3
Chief Executive Officer’s review Page 5
Our purpose, vision and values Page 7
Our strategy Page 9
THG Beauty Page 19
THG Nutrition Page 25
THG Ingenuity Page 29
Chief Financial Officer’s review Page 35
Section 172 statement stakeholder engagement Page 47
Non-financial and sustainability information Page 55
Our people Page 57
Sustainability Page 63
Task Force on Climate-related Financial Disclosures Page 69
Risk management and informed decision-making Page 87
Directors’ Report Page 99
Corporate Governance Report Page 107
Audit Committee Report Page 123
Risk Committee Report Page 129
Nomination Committee Report Page 133
Related Party Committee Report Page 139
Sustainability Committee Report Page 141
Directors’ Remuneration Report Page 143
Page 167
Page 229
Governance
Financial Statements
Glossary
Highlights
Who we are
THG PLC operates three distinct businesses in Beauty,
Nutrition and Ingenuity, each scaled from the UK to hold
global leading positions in their respective sectors.
Strategic progress
• Strategic Review leading to discontinuation of
loss-making categories, underpinning profitability
improvements
• THG Nutrition over-delivered medium-term margin
targets and entered new strategic partnerships
through development of offline strategy
• Prioritisation of higher margin sales and territories
reflected in higher quality EBITDA
• Appointment of Sue Farr and Helen Jones to the
Board of Directors, increasing independence
Financial performance
• Group adjusted EBITDA £114.1m, +78% YoY
• Free cash flow breakeven achieved
• Strong balance sheet, with c.£600m of cash
and available facilities
• RCF refinanced to May 2026
Revenue by territory
ROW 15%
(FY22: 17%)
UK 46%
(FY22: 43%)
Europe 21%
(FY22: 20%)
US 18%
(FY22: 20%)
Revenue by business
THG Beauty
£1,171.7m
(FY22: £1,226.0m)
THG Nutrition
£657.9m
(FY22: £662.7m)
THG Ingenuity
£673.9m £154.1m external
(FY22: £757.0m £159.5m external)
Annual Report & Accounts 2023
1 2
Chair’s
introduction
Charles Allen,
Lord Allen of
Kensington CBE
Independent Chair
Introduction
Welcome to our 2023 Annual Report. We are delighted to report
a strong set of results, in particular achieving our cash generation
guidance alongside improved profitability on an adjusted EBITDA
basis.
When I joined THG, I was given a clear mandate to refresh
the Board and further strengthen governance, independence
and diversity. As documented throughout this Annual Report,
we have made significant progress, both in this regard and in
working closely with Matthew Moulding to develop the Senior
Management team and refine the Group’s strategy.
As Chief Executive Officer, Matthew has set a clear strategy for
the Group, supported by Senior Management, who continue to
bring vast amounts of energy to execute this strategy and take
advantage of opportunities for growth.
At Group level, our financial targets are centred on sustainable
growth, cash generation, strengthening the balance sheet and
improving margins. Having reviewed and developed the strategy,
we are focused on initiatives within each business that ultimately
support our objectives as a Group.
In line with our vision to create and grow category-leading brands
on a global scale, I continue to be impressed by the progress
made by each of our three businesses, and, while external
challenges remain prevalent, particularly inflation and higher
interest rates affecting consumer confidence, we have achieved an
impressive financial performance.
Board composition and management
As I discuss later in the Governance Report, the Company
remains committed to ensuring that a robust governance
framework exists throughout the Group, and that the Board is
appropriately structured to guide THG through the next stage of
its governance plans. With reference to my mandate to broaden
the independence and diversity of the Board, we were delighted
to welcome two further independent NEDs, Sue Farr and Helen
Jones during 2023, building upon the progress made with the
appointments of Gillian Kent and Dean Moore in September 2022.
With the appointment of Sue as SID, it is pleasing that one of our
four senior Board positions is now held by a woman, although we
recognise we need to progress further in this regard.
Indeed, we remain committed to further broadening diversity in
line with the FCA’s D&I targets (which are considered further in
the Nomination Committee Report) and meeting the Group’s own
EDI targets, on which further information can be found within the
Sustainability section of this Annual Report. The search to identify
suitable candidates to enhance the composition of the Board will
remain an ongoing focus throughout 2024, to ensure we have the
appropriate balance of skills, knowledge, experience and diversity
on the Board to oversee the successful execution of the Group’s
strategy, and support THG’s ongoing PLC evolution. In addition,
we note the need to ensure that a robust and diverse succession
pipeline is in place throughout the organisation more generally.
On behalf of the Board, I would also like to thank Iain McDonald
for his significant contribution to the Company over his many years
in office and prior to stepping down from the Board at the end
of March. In particular, we have greatly valued his contribution to
strengthening the Board composition, welcoming new NEDs and
developing THG’s strategy. Notably, when Iain stood down from
the Board, we achieved an equal balance of independent and
non-independent Directors (excluding myself), which rectified the
previous departure from Code Provision 11.
Further information on the Board changes which took place during
2023 can be found within the Corporate Governance Report and
the Nomination Committee Report.
Strategy
Sustainable revenue growth is a common objective across
our businesses, and their detailed strategic plans are reviewed
regularly by the Board. During the year, we reviewed and exited
categories that did not meet our returns criteria, while making
substantial investments in areas where we are well-placed and see
specific opportunities to accelerate growth.
In THG Beauty, we made decisions on the categories and markets
to prioritise, with a product-led focus. This multi-year strategy has
redeveloped our retail business and allowed us to build stronger
relationships with our brand partners, particularly in the UK and
US.
In THG Nutrition, we achieved our medium-term margin targets
alongside evolving our brand model into new markets and
categories through selective partnerships. We have an excellent
platform from which to expand our position in health and wellness,
supported by a refreshed brand and look to broaden appeal.
THG Ingenuity was also recognised in the influential Gartner
Magic Quadrant™ for Digital Commerce, acknowledging its
completeness of vision and ability to execute. We will continue to
progress our technology roadmap and deepen partnerships over
multiple services and territories.
Following completion of our expansionary investment in
our global fulfilment infrastructure, we have transformed our
approach to operations, optimising automation to reduce costs,
create efficiencies and, in turn, support our path to positive cash
generation.
People and diversity
Despite a challenging year for the UK jobs market, we continued
to attract and retain top talent within THG during 2023. With a
renewed focus on internal mobility, we provided support for 365
people to move into new roles within the Group, which has not
only strengthened our internal talent pipeline, but helped to create
a resilient and agile workforce for the future.
We also invested in our future talent, onboarding 104 graduates,
24 interns and 100 apprentices. THG Accelerator, our in-house
training programme for graduates from a non-computer science
background, continued to provide a pipeline of diverse technology
talent.
ED&I remained high on our agenda, influencing our talent
attraction strategy across all areas of the Group. We continued
to improve our knowledge and understanding of accessibility
and inclusion in the workplace, and entered a two-year strategic
partnership with Tech She Can to bring more women into the
technology industry.
We are proud of the changes which we have made over the
past 12 months, and plan to make further investment in our
people in 2024.
Sustainability
Our sustainability strategy continues to be embedded across our
businesses, led by our Senior Management and our Sustainability
team. Following a full GHG inventory in 2020, THG submitted its
net-zero targets to the SBTi, which were successfully validated as
follows:
• THG commits that 85% of its suppliers by spend, covering
purchased goods and services and upstream transportation
and distribution, will have science-based targets by 2027.
• THG commits to reducing absolute Scope 1 and 2 GHG
emissions by 42% by 2030 from a 2020 base year.
• THG commits to reducing absolute Scope 1 and 2 GHG
emissions by 97.7% by 2040 from a 2020 base year. THG
also commits to reduce absolute Scope 3 emissions by 90%
within the same timeframe.
Work has already begun to meet these targets and we have also
replaced our Ethical Code of Conduct with our new THG Supply
Chain Standards, which strengthens our approach with our supply
chain.
As a business, we are committed to encouraging environmental
and societal change both through our own operations and as a
key partner for our stakeholder groups. This is supported by our
2030 Sustainability Strategy, ‘THG x Planet Earth’, which details our
goals and targets as we pledge to use our global scale, world-class
talent, and dedication to innovation to act as a force for good.
Outlook
As we turn to the year ahead, we are positive on the outlook for
our markets and anticipate a return to revenue growth during the
year. We will continue to execute our strategy, work deeply with our
partners and be disciplined stewards of the balance sheet.
During 2024 we expect further progress on EBITDA initiatives as
our momentum continues. The new financial year has started well,
especially within THG Beauty, where we recently added Biossance
to our prestige own-brand portfolio. We also expect further good
progress on profit enhancement initiatives which we will balance
with investment in demand generation.
THG is a modern and dynamic company in a traditional
environment. We are building a business fit for the next decade
and beyond, and the Board remains highly supportive of the
strategic direction the CEO and Senior Management team are
pursuing to create value for stakeholders.
Finally, I’d like to thank our 7,000 colleagues around the world for
their commitment and dedication to all of our stakeholders during
this period.
Further information can be found within:
Chief Financial Officer Review (see page 35)
Section 172 Statement Stakeholder Engagement
(see page 47)
Our People (see page 57)
Sustainability (see page 63)
Corporate Governance Report (see page 107)
Nomination Committee Report (see page 133)
Annual Report & Accounts 2023
43
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
CHAIR’S INTRODUCTION
Chief Executive
Officer’s review
Matthew Moulding
Executive Director
and Chief Executive Officer
Chief Executive Officer’s statement
2023 was a year of material operational progress and execution
for THG, as we continued to grow our category-leading, global
brands through digital transformation, innovation and impactful
partnerships. It was certainly not without its headwinds, but the
Group responded proactively, and emerged stronger.
Following the challenging global environment in 2022, we
repositioned our three businesses to focus our resources onto
margin recovery and a return to sustainable revenue growth.
Overall, the performance was highly encouraging, and although
we have more work to do in 2024, I am confident we have the right
people, capabilities and expertise to make further progress.
• We achieved a Group record EBITDA performance after
cash adjusting items and anticipate further progress towards
our medium-term targets during 2024, in line with historical
performance.
• Our Beauty business displayed incredible resilience, despite
the first half being affected by short-term global de-stocking
affecting manufacturing volumes. Our focus on orders that
delivered immediate profitability over ones with a longer
payback, meant we fulfilled more orders closer to our global
distribution hubs, driving further economies of scale.
• THG Nutrition achieved an impressive performance, and
with inflationary pressures easing, posted substantially higher
margin growth year on year. The early results from the major
Myprotein rebrand are also encouraging as we’ve taken steps
to further enhance the premium nature of the world’s No.1
online sports nutrition brand.
• These actions should strengthen partnership opportunities
as we expand our licensing and offline strategy. The new
branding also lays the groundwork for selective category
expansion, supporting our plan of building Myprotein into a
truly global lifestyle brand.
• Across both our consumer businesses, our customer health
remains robust with repeat purchase rates of above 80%.
• Ingenuity’s pivot to larger, multi-service clients is gaining
momentum, reflected in some key client wins and a strong
pipeline. We were thrilled to be listed in the Gartner’s Magic
Quadrant™ for Digital Commerce, in recognition of our ability
to provide an all-encompassing direct to consumer journey.
• In line with our guidance, substantial growth in Group
profitability, along with improved inventory efficiency, led to
the Group delivering £174m of operating cashflow
1
in 2023.
• This strong operating cash performance allowed the Group
to continue to make £128m of Capex investments in the year,
principally into the UK, while still delivering overall free cash
2
flow breakeven for the year.
• Following the Group’s solid adjusted EBITDA and operating
cash performance, closing net leverage for FY 2023 was
c.1.9x, compared to 2.8x for FY 2022. Continued positive
momentum into FY 2024 provides confidence of further
degearing.
• With the support of our long-term banking partners, we
extended our revolving credit facility until May 2026. Whilst
we haven’t used this facility since IPO, it affords us continued
significant financial flexibility during uncertain geo-political
times.
• As noted in the Chair’s Statement, we were delighted to
welcome two further independent NEDs, Sue Farr and
Helen Jones, as we expanded our independent Board, while
thanking Iain McDonald for the significant contribution he
made to the Company over many years.
• We celebrated our meritocratic culture in our Annual
Awards, awarding £150,000 equity to Newcomer of the
Year, Employee of the Year, and Outstanding Contribution,
in addition to supporting many well-deserved promotions
across the Group.
• Following the Group’s strong performance, the Executive
Directors would have been eligible for a bonus opportunity
totalling in excess of £1m in 2023. It is likely that a material
proportion of this would have been payable to me, however,
in line with each financial year since IPO, the Executive
Directors unanimously decided to waive their entitlement to a
2023 bonus. In recognition of this, the Group intends to make
a charitable donation of £500,000 targeting homelessness
in Manchester. I also waived my £750k salary in return for
the Group making a charitable donation to The Moulding
Foundation.
Business operational performance
As an authority in Beauty, we continue to attract, retain and
develop our customer relationships, with our proposition refined
and elevated by new technology and a best-in-class delivery
service that enhances the customer experience.
Myprotein has evolved beyond sports and performance to broader
health and wellness categories, expanding its addressable markets
and catering for increased consumption occasions. Pivotal to this
strategy has been creating ranges with prominent partners in
distribution, grocery and chilled goods – expanding the reach of
the brand into offline channels and, in turn, building awareness and
engagement. Commodity challenges abated during the year and
we were able to achieve significant profitability while undergoing
an ambitious brand repositioning.
Our proprietary technology and operations platform, THG
Ingenuity, is a multi-year development story, with our fulfilment
and operational solutions business now winning clients in its own
right, as the business accelerates the returns on investment in
distribution capacity.
Finally we actively managed our portfolio through the exit of small
legacy brands within Beauty and Nutrition, and through the sale of
OnDemand and ProBikeKit delivering a cash return.
Financial performance
Much like the previous year, 2023 presented challenges for all
businesses in the markets we operate in. Nevertheless, we are
very pleased with how the Group has responded, making
substantial progress towards the targets we communicated at
the outset of the year.
We achieved revenue of £2bn, reflecting our efforts in executing
our strategic review, as we repositioned several loss-making
categories across the Group. This created strong momentum
heading into 2024, and we expect to return to progressive revenue
growth throughout the year.
We repositioned Beauty to materially improve profitability, with
the business finishing the year in constant currency growth.
In Nutrition, we set out to recapture the significant investment
we made in margin during 2022, subsequently achieving
an EBITDA margin in excess of our medium-term guidance.
Ingenuity continued to execute its strategic pivot towards higher
value clients, with new client wins and expanded partnerships
accelerating monthly recurring revenue throughout the year.
We made notable margin improvements, in part due to the Group’s
excellent operational performance. Distribution costs were lower
year on year, through an optimised fulfilment network consisting
of increased automation and an improved delivery offering. We will
continue to increase automation in our major hubs to further offset
lingering inflation and move towards our goal of around half of
customer orders being touched by automation.
Operational leverage also supported improvements in profitability,
achieving continuing adjusted EBITDA of £120m – ahead of our
previous guidance.
Our business has nearly doubled in revenue since IPO, with our
growth capex investment phase already paying back. Investment
in future years will remain at comparatively modest levels, though
still extending and enhancing our proposition and competitive
advantage while the market growth opportunity remains
significant.
Following our strong operating cash performance in the second
half of the year and our recently extended Revolving Credit Facility,
we have a healthy liquidity position with c. £600m in cash and
undrawn facilities providing substantial liquidity and flexibility, to
capitalise on growth opportunities.
People and purpose
2023 was a year of transformation for our people as we prioritised
attracting top talent, as well as retaining and nurturing our
existing teams. From introducing wraparound support for working
families, to increasing compassionate leave, we made significant
investment in our people, their wellbeing, and their long-term
development at THG.
We launched our social impact strategy, THG in the Community;
our plan for creating positive social change and making an impact
in our local communities. The strategy is underpinned by three
pillars – championing inclusion, disrupting inequality, and creating
opportunities – and revolves around three key initiatives, all of
which have been introduced to give our people an opportunity to
get involved and give back.
All businesses are accountable for maintaining a focus on closing
the emissions gap. THG is rising to this challenge by committing a
greater number of resources to its sustainability agenda, ensuring
compliance with the ever-increasing legislative demands and
making progress on our 2030 Sustainability Strategy.
Outlook
We expect long-term channel shift across our consumer markets
to continue, supported by a track-record of consistently taking
market share, and a global, expanding, high-repeat customer base.
We remain confident of a return to 9% adjusted EBITDA margins
in the medium-term, and progression into 2024 through:
• a return to revenue growth across the Group;
• operating leverage improvements across the fixed
infrastructure, including automation; and
• further free cashflow progress.
With a strong balance sheet and category-leading positions within
substantial end markets that continue to benefit from long-term
structural growth, we have confidence in our ability to deliver long-
term value for Shareholders.
1. Defined as cash generated from operations including a cash receipt of £11.2m from HMRC which was remitted to the Group, but physically cleared the bank on the first
working day of 2024.
2. Free cash flow is defined as total cash flow for the group adjusting for debt (repayments) / proceeds and acquisitions cash flows and in respect of FY 2023 the
inclusion of a cash receipt of £11.2m from HMRC which was remitted to the Group in December 2023 but physically cleared the bank on the first working day of 2024.
For presentation purposes, this is considered to be free cash flow as at 31 December 2023 as a result of the remittance advice received.
Annual Report & Accounts 2023
65
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
CHIEF EXECUTIVE OFFICER’S REVIEW
Leadership
We’re passionate about creating
leaders at all levels. That’s
why we give our early careers
talent access to career-defining
opportunities.
From creating global campaigns
and organising brand events to
presenting to senior stakeholders
and building their professional
networks, life at THG enables
them to go further, faster.
Our purpose
To make an impact through digital
transformation, innovation and expertise.
Our values
We’re incredibly proud to celebrate our diverse
workforce and the unique experiences, skills
and qualities everyone brings to the table. But
there are a few things we all have in common.
Ambition
We think big. We set ourselves ambitious
goals, seeing opportunities where others
see obstacles. We take pride in our work
and view our setbacks as valuable learning
experiences. Our progressive mindset allows
us to deliver better outcomes for our people,
our brands, our clients, our customers and our
communities.
Collaboration
We work together. We share ideas, insights
and skills to create a meaningful impact and
drive positive results for our business. We
listen to each other, we trust each other and
we strive to create an environment where
everyone feels heard.
Innovation
We do things differently. We celebrate
experimentation and champion
entrepreneurial thinking. We find solutions,
not problems, and use our creativity and
resilience to drive continuous improvement.
Decisiveness
We make bold decisions. We use robust
data to make quick, informed and confident
decisions. We take calculated risks and we’re
not afraid to take accountability for our actions.
Leadership
We lead by example. We inspire, motivate
and encourage each other to push the
boundaries of what is possible. We set a
positive example and promote a culture of
meritocracy so that everyone at THG, no
matter their background, age, or experience,
has the opportunity to go further, faster.
Our vision
To create and grow category-leading
global brands on a global scale.
We live and breathe
our values every
single day.
Watch this video to find out
more about our influencer
management platform, THG
Society, that has been designed
and developed in-house by our
tech and marketing teams.
Innovation
Innovation is at the heart of everything
we do at THG. From the technology
we build to the products we develop.
Collaboration
From creative development and
branding, to set build and show
production, our teams at THG
Studios worked together to bring
The Overlap to life.
“We wanted to showcase THG’s talent
in every inch of the design including
branding, carpentry, lighting design,
build, set design, and set dressing. We
also collaborated with some northern
creatives and artists outside of THG to
create a custom wall mural for the set.
Collaboration was key in the overall
vision and mindset
of the team”
– Mike Scott,
Executive Creative
Director.
THG Awards
Te c h
Prolific North Awards:
Large Tech Company of the Year
Status: Shortlisted
Sustainability
Environmental Finance: EMEA Circular
Economy Transition of the Year 2023
Status: Won
Sustainability
Retail Week Awards –
The Responsible Retailer Award
Status: Shortlisted
Ingenuity
Gartner Magic Quadrant™
Status: N/A
Creative
Prolific North Creative Awards:
Inspired Space
Status: Won
Creative
The Drum Roses Awards:
The Guru – MyProtein cyber campaign
Status: Won
Annual Report & Accounts 2023
87
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
7
OUR PURPOSE, VISION & VALUES
Our strategy
Strategic priorities
Build category leadership
positions in beauty, health
and wellness
Make Ingenuity the partner
of choice for commerce
transformation and
sustainability solutions
Deliver engaging
content and innovative
products to our global
customer base
Accelerate growth in core
international territories,
leveraging our local
infrastructure
Drive positive change
with our stakeholders,
through an entrepreneurial,
values-led culture
Medium-term financial priorities
Revenue
growth
Return to historical
adjusted EBITDA
margin of c.9%
Free cash flow
generation
Strong balance
sheet
Market-share
growth in key
territories
Our
stakeholders
Customers
and consumers
We enable brands to have direct
relationships with consumers
by providing a high-quality retail
experience and establishing
a relationship of trust
Our people
We aim to ensure THG
is an inclusive and
supportive environment
with career development
opportunities at all levels,
focused on building the
skills of tomorrow
Society and
communities
We aim to develop digital skills
and tech talent, providing jobs
within local communities to help
promote greater social mobility,
whilst protecting the environments
we operate in and source from
THG Ingenuity
clients
We support clients
on their digital
transformation journeys
through the provision of
technology, operational
and marketing services
Shareholders
We create value for
shareholders through
a focus on sustainable
growth, responsible capital
allocation and balance
sheet stewardship
Suppliers
and partners
We promote open and
transparent working
practices and collaborate
for mutual commercial
success
Annual Report & Accounts 2023
109
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OUR STRATEGY
The Group operates three distinct businesses:
Beauty, Nutrition and Ingenuity, each holding global
leading positions in their respective sectors.
THG Beauty
THG Beauty is a leading digital strategic player within the prestige beauty industry globally, combining
its portfolio of prestige owned brands across skincare, haircare and cosmetics with the provision of a
critical route to market for over 1,300 third-party beauty brands sold through its online retail sites, including
Lookfantastic, Cult Beauty and Dermstore.
THG Beauty’s stated ambition is to be the global digital partner of choice across the beauty
industry, supporting the channel shift to online. This strategy is based upon four key pillars:
1. maintaining its position as the world’s largest online pure-play prestige beauty retailer;
2. supporting global beauty brands in addressing the channel shift in marketing spend from
offline to online;
3. developing a digitally-focused stable of prestige THG-owned brands, providing margin
enhancement and differentiation;
4. providing innovation and product development services directly to the beauty industry.
THG Nutrition
THG Nutrition comprises a family of digital-first health and wellness brands, including the
world’s largest online sports nutrition brand Myprotein.
THG Nutrition is optimally positioned for continued global growth leveraging:
1. long-term trend of consumers becoming increasingly health conscious, and consuming
more nutritional products across a broadening range of categories;
2. proven ability to enter new markets and categories, localising the proposition whilst
maintaining quality and operational excellence;
3. a global community of influencers, affiliates and social media followers driving direct
traffic and brand awareness, in addition to its partnerships with major brands;
4. proprietary customer insights from direct to consumer engagement, supporting new product
development and innovation through its vertically integrated manufacturing capabilities.
THG Ingenuity
THG Ingenuity offers a complete digital commerce solution. Through its expertise in building direct to consumer
brands, developing technology and operational solutions and use of deep data insights, it enables brands to sell
online by providing technology, global fulfilment and digital performance marketing services.
Strategic priorities for the business remain focused on:
1. increasing the value from our existing customer base and investing in long-term new
customer growth across primary verticals of FMCG, beauty and retail;
2. growing its presence within its target markets of UK, Europe and the US;
3. building technology and delivery partnerships that create indirect revenue channels and
extended delivery capacity to help us grow;
4. developing new products and solutions and continuing innovation on the platform.
In 2021 the Board set out the Group’s strategy to provide
each business with its own growth and capital platform,
through individual public market listings or partnerships, with
THG retaining significant majority ownership.
Since setting out this strategy, the Group has completed a
complex and lengthy divisional reorganisation, with each
business now operating stand-alone. A strategic review of loss-
making categories and territories within the THG OnDemand
business was also completed in 2023, leading to its full exit.
Annual Report & Accounts 2023
1211
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OUR STRATEGY
Our business
model
Our businesses
THG Beauty
Comprising the #1 online pure-play prestige beauty retailer
Lookfantastic, in addition to other popular online prestige
beauty retailers including Cult Beauty and Dermstore. In total,
THG Beauty offer more than 1,300 premium brands across the
skincare, haircare, cosmetics, and fragrance categories globally
with leading positions in the UK, US, and Europe. THG Beauty
represents a critical route-to-market for beauty brands seeking
to grow, innovate and connect with global audiences.
Additionally, THG Beauty owns nine prestige brands retailed
through THG’s online multi-brand sites as well as direct
to consumer websites, subscription boxes, and third-party
channels. These brands are primarily skincare, haircare and
cosmetics.
Finally, THG Beauty manufacturing provides a vertically
integrated model for both our own and external prestige
brands. THG Beauty is informed by market and brand trend
insights from its global consumer base to support brand
partners with their new product development capabilities
while its in-house product development and manufacturing
capabilities enables independent brands to scale.
THG Nutrition
A group of digital-first brands spanning the nutrition and
wellness space, led by the world’s largest online sports
nutrition brand, Myprotein. Its vertically integrated model allows
for the business to expand and operate in complementary
markets to sports nutrition such as vegan products, vitamins,
bars, snacks and sportswear within the online and digital
space in key markets including the UK and Asia.
Supporting the online and digital offering is the strategic
advance into international and retail markets through offline
partnerships and licensing agreements, further scaling and
diversifying the global portfolio.
In addition, THG Nutrition boasts its own vertically integrated
manufacturing capabilities, driving product development and
production, shortening timelines to market and enabling the
business to address consumer and market trends ahead of its
competitors, driving higher levels of cross-category purchasing
and brand awareness globally.
THG Ingenuity
Proprietary end-to-end ecommerce platform that powers
digital experience and retail for CPG, beauty and retail brands
globally, creating a seamless experience for consumers.
Clients can purchase end-to-end or modular services to meet
their needs, drawing on the Group’s digital brand building
capability, extensive proprietary ecommerce technology and
physical infrastructure.
As well as being a third-party ecommerce solution, THG
Ingenuity is the operational infrastructure and digital hub that
supports THG Beauty and THG Nutrition, delivering excellence
throughout the supply chain and customer experience. THG
Ingenuity operates a vertically integrated model, allowing the
Group to control the entire customer journey, from design,
manufacturing, product education and discovery, to purchase
and fulfilment.
Its core competencies sit across:
Technology
Since inception nearly 20 years ago, the Group has continually
invested in building its own ecommerce software specifically
designed for the retail of consumer goods globally. Solutions
include the Group’s highly scalable enterprise platform that
powers ecommerce for brands; hosting infrastructure ranging
from dedicated servers and cloud hosting to managed
services; fulfilment technology including warehouse and
delivery management systems and warehouse automation;
and fraud management and detection software.
Operations
Encompassing global fulfilment from a network of 13
warehouses in strategic locations across the world, courier
management, customer services and sustainability solutions
from carbon offsetting and consultancy to plastic recycling.
Marketing
THG’s integrated marketing ecosystem brings together digital
marketing, media, creative content production, translation and
digital services to create a holistic, data-driven digital marketing
strategy across channels, driving scalable and cost-effective
customer acquisition.
Operating model
THG operates a vertically integrated model to deliver products and
services to customers, giving greater control over revenue growth
and costs to deliver profits and cash in the medium-term.
REVENUE
THG Beauty and THG Nutrition sell products direct to consumers across the world. Revenue
is generated on the sale of products and recognised when received by the customer. THG
Ingenuity generates revenue through selling services to THG Beauty and THG Nutrition
alongside third party external customers through a combination of one-off fees for services
such as initial website build, recurring fees for regular services such as marketing, fulfilment or
software licenses, and revenue share on Ingenuity websites.
COSTS
Input costs relate primarily to raw materials for goods manufactured in-house (e.g. whey
used in the manufacture of whey protein within THG Nutrition business) and finished goods
purchased for resale (e.g. third party beauty products retailed by THG Beauty business).
Distribution costs relate to the fulfilment and shipping of orders to customers. THG has
delivered further efficiencies during the year through an innovative warehouse automation
solution, despite the inflationary cost environment. Administrative costs relate primarily to
marketing and people costs.
ADJUSTED EBITDA
THG’s three businesses; THG Beauty, THG Nutrition and THG Ingenuity are profitable
when considering adjusted EBITDA from continuing operations. The Group’s medium-
term adjusted EBITDA target remains c.9%, which is supported by its profit enhancement
programme and in line with historical periods.
CASH FLOW
The Group is targeting to be free cash flow positive from 2024 onwards, with the strategy to
reinvest for growth.
For further information please see: THG Beauty (see page 19), THG Nutrition (see page 25),
THG Ingenuity (see page 29), Chief Financial Officer Report (see page 35), Section 172 report (see page 47)
Annual Report & Accounts 2023
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OUR BUSINESS MODEL
Our marketplace
The substantial and expanding addressable markets in which
we operate in provide clear and compelling opportunities for
growth across our businesses:
THG Beauty
Market description
The global total addressable market for beauty and personal
care was estimated to be £476 billion in 2023, growing 9.5%
year on year. The premium segment, within which we primarily
operate, is set to expand at a CAGR of 6.7% between 2023 –
2027 and anticipated to be valued at £136.6 billion in 2023.
1
One of our key markets, the US, is leading the way in terms
of beauty ecommerce penetration with the highest level at
c.30%, in line with its overall online retail penetration rate. UK
online spending has also been steadily growing throughout
2023, with online penetration remaining higher than pre-
pandemic levels, set to accelerate throughout 2024.
2
Products
THG Beauty comprises leading multi-retail sites, a portfolio
of prestige owned brands and manufacturing capabilities
across multiple categories within the beauty and personal care
market, with leadership positions in key markets, the UK and
US.
Our multi-retail sites Lookfantastic, Cult Beauty and Dermstore
provide a critical route to market for over 1,300 brands across
haircare, skincare, cosmetics, body care and fragrance.
Our vertically integrated owned brand proposition is supported
by manufacturing capabilities in the UK and US, led by flagship
skincare brands Perricone MD and ESPA. These brands aid in
driving new product development as well as product discovery
through partnership opportunities outside of the traditional
beauty market.
Utilising our expansive proposition, THG Beauty seeks to use
its digital expertise and innovation to deliver best-in-class
curation and maximise the beauty customer experience,
encouraging the channel shift from offline to online.
Key trends
The online global beauty and personal care market continues
to grow, supported by increases in online penetration across
the world and advancements in technology, enabling the in-
store customer experience to be emulated online.
Despite wallet pressures, beauty spending remains robust as
consumers pull back from purchasing in higher-price, prestige
markets such as clothing and accessories. Relief in inflation
rates, sequential increases in promotional activity and strong
employment markets are likely to contribute to increased
beauty spending expectations in the near to medium-term.
3
Premium beauty remains a key trend within the global
beauty market, growing 7.7% year on year in 2023, compared
with the overall beauty and personal care market. As
consumers become increasingly focused on product
efficacy and maximising value, prestige beauty is becoming
increasingly attractive. With increased competition in beauty,
premiumisation unlocks value and opportunity within the
market as legacy brands begin to lose market share to prestige,
upcoming brands with loyal followings.
Our position
Our competitive advantage comes from the synergy of our
entire beauty proposition. Through our retail sites and owned-
beauty brands, we can forge both strong brand partner and
customer relationships, supported by our global network of
capabilities that allow access to multiple markets, new product
development, and product discovery, underpinning our
leading positions in key territories, the UK and US. The insights
gained from our customers help to drive innovation and brand
curation, particularly for emerging niche and independent
brands.
The regime-based nature of our key categories, skincare and
haircare, also offer up a competitive advantage as we are able
to use thought-leadership, education and personalisation to
further engage with our global audiences. Repeat-purchases
and low level of trend influence enable us to dictate new
product development opportunities while capitalising on
unlimited online shelf-space that traditional and outdated
channels such as department stores cannot do.
Outlook
The global total addressable beauty and personal care market
is estimated to grow to £636 billion by 2027, at a CAGR of 5.8%
between 2023 - 2027.
4
Online adoption within global beauty is set to follow suit, rising
at a CAGR of 7.7% between 2024 – 2030
5
. This represents the
continued opportunity within the beauty ecommerce space.
Global retail online penetration is set to steadily grow from 26%
in 2023 up to 31% in 2027, with our key markets, the UK and
US having a significant higher ecommerce share at c.30% for
2023.
6
1. Source: Euromonitor.
2. Source: Barclays Online Penetration in 2024 Report.
3. Source: Canaccord Genuity US Equity Research, Industry Update, December 2023.
4. Source: Euromonitor.
5. Source: Grand Research View, Beauty and Personal Care Products Market Report 2030.
6. Source: Barclays Online Penetration in 2024 Report.
Annual Report & Accounts 2023
1615
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OUR MARKETPLACE
THG Nutrition
Market description
THG Nutrition’s total addressable market, including the
sports nutrition, vitamins, weight management products and
sportswear categories, is estimated to amount to around £350
billion globally. THG Nutrition’s main focus is on the sports
nutrition market, which is estimated to amount to £23 billion in
2023. However, the focus has been expanded in recent years
to address wider segments of the global nutrition market.
Products
THG Nutrition’s products span a number of categories
of the global nutrition market, including protein powders,
supplements, vitamins and minerals, bars and snacks, and
drinks. In addition, THG Nutrition offers performance clothing
through its activewear brand MP. THG Nutrition’s products
are primarily distributed direct to consumer through its
own websites, such as Myprotein.com. This allows for close
engagement with the brand’s customers, while also enabling
the brands to offer a wider assortment of products than is
typically available through traditional retail channels, where
the product range is confined by shelf space.
Key trends
The global nutrition market’s growth is supported by the
long-term trend of consumers becoming increasingly health
conscious, and looking to consume more nutritional products.
This is common across a wide range of product categories.
The rate of adoption of healthier products is affected by income
levels, with higher income countries typically consuming
more nutritional products. As lower income countries develop,
we would therefore expect to see higher consumption of
nutritional products, in line with the trends seen in higher
income countries. The adoption of online channels has also
been increasing in the nutrition market, in line with that
seen in many other retail categories. In addition, ecommerce
penetration is expected to grow significantly in a number of
key markets as the online channel in these markets matures.
Consumers are not only turning to online channels for their
purchasing, but also using the internet to inform and educate
themselves of the benefits of nutritional products. Brands that
invest in producing engaging and educational content for their
consumers therefore stand to benefit through offering value to
consumers beyond the purchase of products.
Our position
The competitive landscape within sports nutrition, our primary
market, is fragmented globally, comprising a very small number
of international brands of scale including Myprotein, alongside
a number of smaller brands that operate principally in their
local markets. Myprotein is the largest online sports nutrition
brand globally, and the most internationally diverse.
THG Nutrition is therefore uniquely positioned to capitalise
on this long-term shift towards ecommerce. In addition, we
see THG Nutrition’s online direct to consumer model as
a strategic benefit as consumers increasingly turn to the
internet to educate themselves on the benefits of nutritional
products. THG Nutrition’s connection with consumers through
its websites and apps enables direct engagement with
consumers, which traditional retail brands cannot achieve,
positioning THG Nutrition as a valuable source of engaging
and educational content for consumers. THG Nutrition is
positively differentiated from competitors through its digitally-
native direct to consumer model, its global reach, the extent
of its vertically integrated model, and its broader focus,
spanning the sports nutrition, vegan products, vitamins,
bars and snacks and sportswear categories.
THG Nutrition has also expanded into traditional retail
channels in recent years, principally through convenience
products developed in-house, such as bars and snacks, and
through licensing partnerships that expand the brand into new
product formats, such as frozen food ranges developed with
Iceland.
Outlook
The total addressable market is expected to continue to grow,
reaching approximately £35 billion by 2028
1
, representing
a 9% CAGR (2023 to 2028). The online segment of the
sports nutrition market has historically grown faster than the
overall market; the drivers of this structural growth include
the increasing long-term trend towards healthier lifestyles,
an increased awareness of nutrition, and greater online
engagement of consumers, both in purchasing and educating
themselves on the category.
THG Ingenuity
Market description
THG Ingenuity offers a full service commerce solution for
brands looking to scale their ecommerce operations through
improved online performance and internationalisation.
A shifting labour market, higher-for-longer interest rates,
slower consumer spending and increased costs of advertising
represented ongoing pressures for businesses through 2023.
At the same time, digital innovation continued its far-reaching
impact across new markets, altering existing markets and
challenging the status quo. As brands like Walmart and
Amazon set the standards for customer experience online,
providers that offer cheaper, faster and better will win out.
The most dangerous decision a business can do in this
context, is to take a conservative ‘wait and see’ approach.
THG Ingenuity’s unique advantage in this market context is to
move fast, think bold and be willing to pivot, finding new ways
to interact with end customers, optimise operations and deliver
long-term, sustainable value.
Products
Powering £2 billion online sales for THG’s own brands, serving
over 1,000 Ingenuity customers globally and supported by
c.4,000 employees, Ingenuity’s ecommerce toolkit comprising
technology, operations and marketing solutions propel digital
growth and new market entry:
1. Technology comprises a core commerce platform
which enables brands to sell their products online across
their owned brand site, social channels and marketplaces
supported by the infrastructure required to run and
maintain the platform
2. Fulfilment includes our global payment solutions,
fulfilment capabilities and courier management services,
regulatory, labelling, sustainability and our customer
contact solution.
3. Marketing comprises services that are designed to build
and grow brands in new markets, on a global and local
scale: trading, marketing and data services, creative
strategy, content production, translation and localisation,
retail media and THG’s content creator platform.
Key trends
In 2023, the global ecommerce market was worth $5.8tn,
spurred by the growth in international shopping where
globally 52% of online consumers ordered from both local
and international websites and social commerce including
live stream shopping on channels such as TikTok.¹ This
was accompanied by a resurgence of enthusiasm about
technology’s potential to solve some of the world’s most
complex challenges with GenAI helping to catalyse
progress in both business and society.
Our position
THG Ingenuity has an unrivalled ability to continuously
innovate, optimise and drive efficiencies at pace through
its vertical integration and full ownership of the end-to-end
ecommerce experience. Our investment in GenAI has helped
to overcome structurally higher cost pressures and streamline
operational processes while automation in fulfilment has
increased efficiency, throughput, and accelerated speed
of delivery to the end customer. This is just a small part of
the c.15,000 platform releases deployed annually which are
automatically available to all clients on the platform.
Outlook
Euromonitor expects global ecommerce growth to settle
at a ‘new normal’ growth rate of c.10% per annum from 2024-
2027. In 2023, growth was largely inflation driven through
higher average order values rather than volumes, with analysts
expecting a return to volume-based growth during 2024 across
apparel, footwear, health and beauty and food and beverage.²
1. Source: Forbes, March 2024.
2. Source: Barclays Equity Research, January 2024.
1. Source: Euromonitor.
Annual Report & Accounts 2023
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
OUR MARKETPLACE
THG Beauty
THG Beauty is a disruptive, digital-first premium beauty retailer,
brand owner and manufacturer. We are positioned to offer
prestige product and brand curation across categories such as
skincare, haircare, cosmetics, body care and fragrance, driving
innovation and product discovery, maximising the beauty
experience for our customers.
Our multi-retailer sites comprise Lookfantastic, Cult Beauty
and Dermstore, presenting an expansive beauty offering in key
markets such as the UK and US. Our portfolio of nine prestige
owned brands, led by recently acquired Biossance, Perricone
MD and ESPA, are stocked by over 1,000 global partners in
53 countries, including hotels, spas and salons.
Our business proposition is constantly evolving, remaining
adaptive to customer needs and shifting beauty trends to
ensure we maintain digital and category leadership. We are
continuing to support the channel shift from offline to online
to become the global digital partner of choice across the
beauty industry.
Online retail
c.80% of revenue
Prestige
owned brands
c.10% of revenue
Manufacturing
c.10% of revenue
THG Beauty
Ecosystem
Accelerates value creation from data, and generates superior consumer engagement
Makes us a trusted brand partner providing deeper relationships and enhances offering
Supports a highly engaged, digitally native workforce equipped with best-in-class digital tools
Creates a source of global advantage for our retail banners and drives consumer engagement
Is the enabler to value-accretive and advantaged beauty brand acquisitions
Revenue
FY23 £1,207.5m
FY22 £1,285.9m
FY21 £1,227.5m
FY20 £751.6m
FY19 £478.3m
Active Customers
1
FY23 8.5m
FY22 9.2m
FY21 9.2m
FY20 6.9m
FY19 4.1m
Number of orders
2
FY23 16.8m
FY22 1 7. 5 m
FY21 1 7.1m
FY20 13.1m
FY19 8.3m
Average order value
3
FY23 £64
FY22 £63
FY21 £60
FY20 £55
FY19 £51
1. Active customers is defined as customers who have purchased at least once within the period.
2. Number of orders is defined as orders fulfilled within the period.
3. Average order value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
4. As per third party data and management estimates.
Operational review
During 2023, we consciously prioritised
higher margin sales, and while this decision
led to a decline in headline revenue, we
were encouraged to see resilient and stable
purchase behaviour from our active customer
base.
Reflecting the deprioritisation of certain
geographies, our active customers, and
consequently order numbers, fell year on
year, with the decline slowing throughout
the year. Critically, the behaviour of the active
customer base remained healthy, with average
order value remaining stable and order
frequency improving year on year. This not
only demonstrates the strength of our offering
in key markets but also signifies improving
quality within our existing customer base.
This is supported by our existing customer
repurchase rates, which remain above
80% as we continue to focus on customer
engagement and retention.
Across our global audience, we saw continued
growth in app participation, attracting 3.3
million new users in 2023, +32% year on year,
with notable improvements in app purchases
as a portion of revenue (FY 2023: 14.1%, FY
2022: 10.0%). Notwithstanding the ongoing
macroeconomic uncertainty throughout
the year, the UK, being one of our key and
largest markets, performed strongly, with app
purchases now driving over 20% of sales. This
has underpinned a year on year increase in
active customers in the region, and enabled
growth in our retail fascias ahead of that of the
total UK prestige beauty market.
4
Annual Report & Accounts 2023
2019
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG BEAUTY
In 2023, as part of the Group’s overall strategic review,
THG Beauty decided to discontinue our SkinStore brand
and consolidate all resources behind the strength and value
proposition of our premium, dermaskin-focused US brand,
Dermstore.
Dermstore is the largest community of skin-health experts,
brands and consumers in the US, a key market behind the
UK. With demand continuing to grow for effective skin-health
products, we saw greater value in simplifying the US offering
to one brand.
Since its acquisition (February 2021), THG Beauty has
observed a gradual yet consistent shift in customer purchases
from SkinStore to Dermstore. This is underpinned by
Dermstore’s stronger community engagement, greater basket
sizes and higher customer retention, exemplifying the merit in
operating a single brand proposition in the US.
Our vision is for THG Beauty US to be the leading digital
partner for professional and prestige beauty, and this decision
aligns our aim with our commitment to offering best-in-class
professional expertise, education and products to meet our
customers’ needs.
Strategic highlights
Key performers
The proposition of Cult Beauty as a platform for niche and
emerging beauty brands continues to strengthen, with
significant revenue coming from brands sold exclusively on
Cult Beauty in the UK. This enhances the site’s unique selling
point and enables us to reach a greater audience within the
prestige beauty market, with launches in 2023 including
skincare brand Kinship, supercharged by its proprietary
ingredient Kinbiome, and haircare brand Ceremonia, rooted
in Latin beauty rituals.
In building category leadership positions within the beauty
industry, it is crucial we use customer insights to inform our
decision-making. This will enable us to focus on the right
brand and product curation to serve our customer needs and
enhance our relationships. Understanding our customers at a
deeper level also creates value for the brands we partner with,
unlocking a greater global audience and providing new routes
to market through our multi-retail platforms.
Throughout 2023, we used these data-driven
customer and trend insights to position
ourselves as a thought-leader within the
beauty market. One example of this is
the production of the 2023 Beauty Trend Report, where we
revealed the fastest-growing trends and categories of 2023
and looked forward to what 2024 holds for the industry.
This engagement with customers through traditional media
channels and thought leadership reports not only enhances
brand awareness but also establishes us as an authority on
emerging and current industry trends.
In June 2023, Cult Beauty made a commitment to champion
unedited imagery across its channels as part of its Can’t (Re)
Touch This campaign. Joining forces with Dr Luke Evans,
we have signed the Body Image Pledge to encourage more
transparency and authenticity in the way we portray beauty
to our customers meaning they can be confident the imagery
they see is unaltered. Our Beauty Untouched watermark was
rolled out across our in-house model imagery as part of the
campaign, to make it instantly apparent that the photo had
not been retouched.
Going beyond imagery, we have also revisited our language
guidelines to ensure we are celebrating all bodies instead of
identifying perceived flaws. We are on a mission to broaden
what beauty looks like, creating room for greater representation
and committing to diversity in our casting and content choices.
Loyalty
THG Beauty has seen an increasing impact from the loyalty
programmes across its retail sites, now boasting a over 2
million members, adding 1.3 million members in 2023. We
have seen significant improvement in the quality of customer
health through our loyalty programmes, with overall spend
being at least 31% higher than non-loyalty members. This
increased engagement is underpinned by a double-digit uplift
in average order value and order frequency, helping to drive
incremental sales through greater cross-category and brand
purchase behaviour. For both Lookfantastic and Cult Beauty,
the proportion of our most-engaged customers is progressively
increasing, offering a greater contribution to total loyalty sales.
Our loyalty programmes are proving successful at aiding
customer retention and improving the quality of our customer
base in our key territories through greater personalisation and
product knowledge.
Through our loyalty programmes, the enhanced levels of
data provided have enabled us to continually deepen our
understanding of our customer base, which in turn, leads to
elevated relationships with our brand partners, creating value
through informed decision-making.
CASE STUDY
Category expansion
In 2023, our category dynamics continued to strengthen, most
notably within fragrance, through the addition of new brands to site
and new product development from legacy brands. The category’s
performance on our retail sites has demonstrated an ability to
overcome its predominantly sensory nature, as consumers begin to
embrace the shift towards purchasing fragrance online.
As our fragrance offering continues to grow, and accounts for an
increasing proportion of sales, our position within prestige beauty
continues to strengthen. Fragrance continued to outperform the
overall premium beauty and personal care market in 2023 (8.0% vs.
7.7% respectively), highlighting the value yet to be unlocked, with
fragrance category growth on our sites exceeding that even further
(+22% in 2023). The fragrance market in the UK is valued at c.$2
billion, with an online penetration of 46.1%, providing opportunities
for us to continue to grow market share in key areas of the
fragrance category and build category leadership in one of our key
territories.
Annual Report & Accounts 2023
2221
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG BEAUTY
CASE STUDY
Biossance
The most recent addition to
our owned brand portfolio is
US-based, prestige skincare
brand Biossance, acquired in
December 2023. Biossance
is leading the way in science-
backed skincare, born out of
its proprietary fermentation
technology used to bio-design
new and high-performing
ingredients.
Currently stocked in over
1,600 stores globally, the
brand’s curated skincare
range is centred on its
ingredient technology and
commitment to sustainability.
Evidenced through strong
performance on our retail sites
prior to acquisition, we look
to support its growth with
our significant experience in
the prestige skincare market
as an innovator and beauty
brand owner. Building upon
its strong brand presence and
awareness, Biossance is set
to unlock further value and
audience reach in our key
markets, the US and UK.
Foundation Finder
In August 2023, Lookfantastic launched AI and data-driven
ecommerce beauty tool, Foundation Finder, designed to
match customers with their perfect foundation shade. The
Foundation Finder combines cutting-edge technology with
scientific precision to bring the traditionally in-store shade-
matching experience into online beauty.
Customers can access the shade-matching experience
through a simple questionnaire asking about their current
foundation, preferred coverage, type and finish. Using data
from over 3,400 foundation samples, colour matches are
found from multiple brands by determining the closest
match.
The Foundation Finder tool aims to transform the way
consumers shop the category, making online product
discovery and customer experience increasingly more
accurate. Individuality and inclusivity sit at the heart of
the breakthrough innovation, which seeks to empower
customers, not only by taking the guesswork out of
purchasing, which can be a barrier to conversion, but
by catering to a wide range of skin tones and textures.
This ensures that the tool is accessible and useful for
all consumers regardless of beauty preferences and
complexion requirements.
Own brand
The collective strength of our owned brand portfolio has been
leveraged to double-down in key territories such as the UK
and US. With a focus on brand equity and customer affinity,
we can further build on leading positions with key partners
and channels, optimising both product and customer reach.
Expanding on our existing global owned-brand presence
in over 450 spas and 65,000 hotel rooms in 58 countries,
both flagship skincare brands ESPA and Perricone MD have
partnered with leading brands to further enhance their global
footprint.
ESPA built on its leadership position in the wellness and
amenities space by partnering with global designer guest
amenity provider, Vanity Group. Complementing this, ESPA
can now be found on yachts such as the Ritz-Carlton,
Scenic Eclipse and River Fleet, as well as on Etihad Airways
following an exclusive partnership across the airline and
Armani Beauty. Prestige holistic skincare brand Perricone MD
also entered the travel retail market, now being represented
on Virgin Airlines, Aer Lingus and British Airways, further
increasing the global reach of the brand.
Future outlook
Our aim is to become the global digital partner of choice
across the beauty industry, continuing to build upon our
position as the world’s largest online pure-play beauty
retailer. The focus remains on sustainable growth in our
key markets, maximising the value from our retail offerings,
prestige owned brand proposition and manufacturing
capabilities.
We will continue to leverage our category and digital
leadership to support global beauty brands in addressing
the shift from offline to online. Our brand relationships
remain key to ensuring that we can provide first-to-market
products and continually innovate, supported by our
manufacturing capabilities and owned brand offering,
which remain a point of differentiation for THG Beauty.
Our customers are a crucial part of our success.
Engagement and retention strategies remain a focus,
enabling us to continue evolving our targeted proposition,
enhance personalisation and ensure data-driven decision-
making across the business.
Our diverse proposition and global footprint continue
to support our competitive advantage, enabling us to
remain the leading digital destination for beauty consumers,
delivering best-in-class products and category expertise
to our global audience.
Annual Report & Accounts 2023
2423
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG BEAUTY
THG Nutrition
THG Nutrition is a collection of sports nutrition and wellness
brands, led by Myprotein, the largest online sports nutrition
brand globally. With a global rebrand launching in the second
half of 2023, Myprotein is now positioned to target an even
broader demographic range of consumers. Our newly defined
mission is to empower everyone to lead a healthier, more
active life – delivered through our wide range of products and
expert guidance. This approach has seen awareness in our key
markets rise significantly, while also seeing considerable uplifts
in our key brand perception metrics.
Our brands are delivered to our global customer base through
localised direct to consumer websites, powered by the THG
Ingenuity platform, enabling consumers from all over the world
to experience the nutritional benefits of our products and join
the Myprotein community. The brand spans sports nutrition,
vegan products, vitamins, bars and snacks and sportswear,
with further categories being launched through our in-house
product development capabilities and through licensing
partnerships. 2023 saw us make significant further strategic
advances across international markets, retail, licensing, and
new product innovation, as we continue to build a globally
scaled, digital-first, leading nutrition, and wellness brand
portfolio.
Operational review
While continuing revenue growth was flat on a constant
currency basis , our focus on enhancing profit margins drove
a record-breaking performance in THG Nutrition’s EBITDA in
2023, and the building blocks are in place to achieve long-term
sales growth across all markets and product categories.
The margin potential of the business was further enhanced
through the development of licensing partnerships with
carefully chosen partners in key territories. Examples of this
were Myprotein licensing deals launched in our two largest
markets: UK (with major grocer, Iceland), and Japan (with
leading distributor, Itochu). Within each partnership, THG
Nutrition remains extensively involved in all aspects of product
development and branding.
Currency represented a notable headwind during 2023, with
the impact of this peaking in the fourth quarter of 2023. This
impact was most acutely felt in the Japanese market, where
the Japanese Yen declined c.13% versus pound sterling.
Performance in the UK, which accounts for over 30% of
THG Nutrition revenue, remained strong in Q4, delivering
c.10% revenue growth. While c.86% of FY 2023 revenue was
generated through direct to consumer channels, an increasing
focus on offline partnerships led to Myprotein also being
recognised as the fastest growing sports nutrition brand in the
UK retail market. Recent launches include Sainsbury’s, Asda
& Iceland, whilst existing partnerships with Boots, Morrisons &
Tesco have been extended.
Revenue
FY23 £664.4m
FY22 £675.1m
FY21 £659.5m
FY20 £562.3m
FY19 £412.9m
Active Customers
1
FY23 6.7m
FY22 7.0m
FY21 7. 2 m
FY20 6.3m
FY19 4.3m
Number of orders
2
FY23 12.8m
FY22 13.2m
FY21 13.9m
FY20 12.3m
FY19 8.7m
Average order value
3
FY23 £49
FY22 £50
FY21 £46
FY20 £47
FY19 £48
Strategic highlights
2023 was a significant year in the evolution of the Myprotein
brand, with a global rebrand launching in the second half
of the year. The rebrand included a newly designed logo
that will act as a halo logo across all Myprotein brands,
along with redesigned packaging for all stock keeping
units (SKUs), designed to make the brand inclusive to a
broader demographic of consumers. The rebrand is aligned
with our commitment to breaking down the barriers of the
fitness industry, and empowering everyone to live healthier,
more active lives. It represents the latest step we’ve made
in developing the brand and making it accessible to an
increasingly broad audience since we acquired the brand
in 2011.
In 2023, THG announced a landmark multi-year partnership
with Williams Racing. The partnership saw Myprotein become
Williams Racing’s Official Nutrition Partner, where Myprotein
will focus on driving the Williams team and its audiences
towards a healthier, more active lifestyle, which aligns with
THG Nutrition’s strategic objective. Myprotein will support
the Williams team with products, guidance and know-how to
maximise and enhance team performance, while participating
in a number of joint campaigns to promote the benefits of
healthy and active lifestyles.
As part of the multi-year partnership, Myprotein and Ingenuity
branding will be present on the FW45 racing cars and in the
team environment, including drivers’ race suits and Williams
Racing team kit. This global brand exposure, and alignment
with one of the world’s fastest growing sports and most
successful teams, will serve to accelerate the awareness
and positioning of the Myprotein brand globally, further
strengthening its positioning as a globally diverse and leading
nutrition brand.
New product development
THG Nutrition’s direct to consumer model provides THG
Nutrition with millions of daily demand insights from its
customer base, with these insights fed directly into new
product development decisions. As testament to the success
of our new product development, the Myprotein brand was
recognised by several industry bodies in 2023, including
Myvitamins Pre-workout Gummies winning the “Best pre-
workout” award at the Men’s Health and Women’s Health
awards, and the “Myprotein Triple Layered Bar” winning
“Best Protein Bar” at the European Specialist Sports Nutrition
Alliance Awards.
We also pride ourselves on being first to market with a number
of key innovations, with the launch of Whey Forward in the US
and Asia markets as a notable recent example. This animal-
free performance protein caters for a broader range of dietary
requirements, while not compromising taste and performance.
Whilst the rebrand has been focused on broadening our
appeal to the wider wellness consumer, we continue to focus
on addressing the needs of our core customer with the launch
of Origin, a range of traditional sports nutrition products
designed to maintain our leading position within our traditional
customer base.
1. Active customers is defined as customers who have purchased at least once within the period.
2. Number of orders is defined as orders fulfilled within the period.
3. Average order value is defined as the average order value per customer order on a gross revenue basis, inclusive of any shipping revenue.
“Whenever we’re developing a product
the most important thing to remember
is the customer needs and the problem
we’re trying to solve.”
- Brett Hamer, Product Director -
Myprotein
Annual Report & Accounts 2023
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG NUTRITION
THG Nutrition continues to play a leading role in driving
innovation across a number of product categories. Following
the global rebrand, Myprotein is now better positioned to
move into new product categories, expanding the range of
products we can offer to our existing customers, while also
bringing new customers to the brand, while also continuing
to serve our main market of sports nutrition. As the nutrition
market continues to grow and evolve, the rebrand provides
the platform for Myprotein to best address consumers’
changing tastes and preferences. As discussed further in the
licensing section, we are also increasingly leveraging licensing
partners to aid our expansion into new retail channels, product
categories and purchasing occasions.
Our new product development capabilities are complemented
by in-house manufacturing across seven facilities, which
manufacture c.80% of THG Nutrition’s products by revenue.
Through our vertically integrated product development and
production model, we can shorten the typical new product
development (NPD) timelines from c.12 to 15 months to six
to nine months. Consequently, we are first to market with
many industry innovations, and are able to bring highly-
targeted products to consumers at regular intervals, which
serves to enhance customer satisfaction and drive higher
levels of purchasing frequency. Our THG Nutrition production
facilities also service a number of large third party FMCG
businesses and sports nutrition brands, which validates the
breadth and depth of capabilities in product development and
manufacturing.
Territory expansion
Currency proved to be a headwind affecting international
performance during 2023, with this peaking in Q4 2023,
with a 13% decline in the Japanese yen versus pound sterling
impacting revenue in the Japanese market, which is c.15%
of THG Nutrition revenue.
We continue to invest in localising the Myprotein brand in
key international markets, and after a two-year process, local
manufacturing will launch in Japan, India and Australia in 2024,
improving delivery timelines, local product range development
and securing significant cost savings. Local manufacturing in
Japan will also largely eliminate future risk from yen exchange
rate volatility and reverse the estimated impact of prolonged
yen weakness on EBITDA.
We also launched our new Myprotein India direct to consumer
website in late 2023, which represents a key milestone in
developing our India business. The US represents a key
strategic market for future growth, with offline partners such
as Costco being used to build brand awareness and sales to
complement our digital sales channels.
Retail
The licensing partnership with Iceland Foods that launched in
January 2023 has proven to be one of the stand-out successes
for the Myprotein brand in the year, with first year retail sales of
£28 million significantly outpacing our expectations. Myprotein
is now distributed in all of Iceland’s 1,000+ UK stores and
online through the Iceland website, with further new products
to enable further sales growth in 2024. The range provides
healthier and more nutritionally complete versions of many
popular meals, and includes fully prepared meals, pizzas,
wraps, ingredients, desserts and ice creams, and therefore
aligns with our strategic values of empowering our consumers
to live healthier and more nutritious lives. The launch has
added incremental purchasing occasions to our existing
Myprotein customer base, while also bringing new customers
to the brand. The partnership highlights the strength of the
Myprotein brand, the largest online D2C sports nutrition brand
globally, and the scale of opportunity for further licensing deals,
both within the UK and internationally.
Total global Gross Merchandise Value (GMV) of THG Nutrition
brand sales in 2023 increased by +5% year on year in 2023
(including +22% growth in the UK) when licensing sales are
considered. As THG Nutrition further develops its licensing
opportunity, we intend to increase disclosure on total retail
sales to enable investors to form a more complete picture of
total THG Nutrition brand sales, including licensing sales.
Major licensing and partnership developments
Myprotein is currently the fastest growing sports nutrition
brand in the UK retail market
4
, recently launching in
Sainsbury’s, Asda and Iceland and extending our distribution
with existing partners such as Boots, Morrisons and Tesco. The
expansion of in-store distribution in 2023 demonstrates the
wide appeal of the brand and the leading brand awareness we
hold in the UK market.
It is important to stress that we regard store sales as
complementary to our online sales, as the products sold in
store are convenience products (single unit meals, bars, snacks
and drinks) that are not typically available online. Further,
we see the purchase of single unit products as aiding brand
awareness, growing brand equity and encouraging the repeat
purchase of multi-pack product variants online.
Customers
The THG Nutrition customer base remains highly engaged,
with high rates of repeat purchase. We continue to work on
increasing our share of revenue through channels that incur
no or very low marketing costs. A key driver of this was the
launch of our mobile apps in 2021, with mobile apps now
accounting for around 20% of THG Nutrition online revenue.
App customers also exhibit more favourable purchasing
dynamics, generating higher AOVs and purchasing products
more frequently than non-app customers.
We continue to look at new and innovative ways of connecting
with and deepening relationships with our customers. An
example of this was the recent Myprotein-sponsored HYROX
event in Manchester, which involved over 7,500 athletes and
fitness enthusiasts. HYROX combines both running and
functional strength work, and is hosted in indoor sports halls
where spectators can watch the whole of the event. It serves
to enhance awareness of Myprotein’s growing authority in the
endurance market, which is aligned with our strategic objective
of making the brand inclusive to a wider demographic of
consumers. Such partnerships also serve to strengthen and
grow the Myprotein community.
A recent YouGov poll also demonstrates the strength of
Myprotein brand affinity in the UK, with Myprotein leading all
competitor brands on the ‘awareness to consideration’ (the
conversion of consumers aware of the brand to considering
a purchase), ‘consideration to purchase’ (the conversion of
consumers considering a purchase to making a purchase)
and ‘purchase to preference’ (the conversion from a customer
being a purchaser to it becoming their preferred brand)
metrics. Myprotein also had the highest unaided awareness
of any brand in the category, with over one in five UK
consumers spontaneously naming Myprotein when asked
to name a sports nutrition brand. We also have quickly built
strong equity of our new Mycon logo, with over half of those
aware of Myprotein having now seen the new logo now
recognising the Mycon as our logo. In the same survey,
Myprotein also ranked first for customer satisfaction in the
UK and second in Germany.
Future outlook
The significant progress made in 2023 in brand development,
strategic partnerships, new product development and retail
expansion leaves the THG Nutrition business optimally placed
to continue to grow in 2024 and beyond.
The 2023 global rebrand further strengthens our identity as
a brand that resonates with a wider audience, not just the
regular gym goer, and enables us to expand the brand to new
groups of consumers and to new purchasing occasions. The
global rebrand has been complemented by increased retail
distribution, mostly notably through the Iceland licensing
agreement, and new strategic partnerships, such as those
with Williams Racing and HYROX.
4. Source: Nielsen.
Annual Report & Accounts 2023
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG NUTRITION
Our proposition resonates with our clients because we are a
digital brand builder and global online retailer ourselves. We
understand the pressures that our customers face operating
online and we solve for them, sharing our own learnings and
insights from entering new markets and geographies.
High-growth brands require capital infrastructure to accelerate
growth and provide optionality for the future. At the same time,
traditional retailers need to maximise the viability of their legacy
platforms and move their brands into the future operating world,
reducing cost to serve and driving profitability. THG Ingenuity is
relevant to both.
We help brands:
• enter new markets through local capabilities, infrastructure
and expertise, by enabling access to a full suite of
ecommerce capabilities while allowing their internal
technology teams to retain control of the front-end
experience
• become asset light in their operations through relatively low
capital investment
• improve the customer experience to positively impact
sentiment and lifetime value
THG Ingenuity is one of a few solutions in the market able to cater
to all these needs in global territories.
Our unique advantage is our ability to think big and bold,
challenge, and quickly pivot, find new ways to interact with end
customers, develop sustainable products and solutions and
deliver long-term value. This is achieved through our track record
in supporting the growth and internationalisation of our largest
clients THG Beauty and THG Nutrition.
Through 2023:
• We continued our strategic repositioning, focusing on higher
value and higher margin clients to drive quality, recurring
revenue. This included:
• launching new D2C and omnichannel experiences for
customers in our retail vertical
• an agreement to provide D2C operational services to the
UK’s leading health and wellness retailer – our first major
standalone fulfilment partnership
• we extended our footprint in the US, winning new customer
contracts and building on-the-ground teams
• we secured new alliances with Rithum (formally
Commercehub) and PwC, which will extend THG
Ingenuity’s platform solution into marketplaces, supporting
our scaling ambitions through PwC’s delivery teams
• we deployed c.15,000 platform releases, introducing further
automation and AI into our platform and through our supply
chain, developed entirely by our in-house technology
teams, resulting in an improved customer experience and
guaranteeing greater operational resilience for the future.
Monthly recurring revenue increased +14.7% YoY in December
2023 as the strategic repositioning towards multi-service
enterprise clients bedded in.
THG Ingenuity
A provider of ecommerce solutions for brands and retailers built
through two decades of investment and expertise gained in
scaling category leading brands. THG Ingenuity exists to navigate
the complexities of acquiring new audiences and driving traffic,
facilitating a frictionless ecommerce experience and distributing
products to consumers all over the world. The critical components
of ecommerce, technology, fulfilment and marketing are
supported by a vertically integrated proprietary platform.
THG Ingenuity offers a full service digital commerce
solution, designed to remove D2C complexity.
Comprising the core components of successful ecommerce, technology, fulfilment and marketing,
we help retailers and brands solve the complexities of acquiring new audiences and selling and
distributing their products to consumers globally.
Technology
• Our packaged solution of commerce technology, omnichannel, marketplace, CRM, app and fraud taken
as self-serve or fully-managed by our team of in-house ecommerce experts.
• Helping brands accelerate growth, cost-effectively enter new markets, develop core capabilities and
strengthen in-house expertise.
• Our platform modularity removes complex and costly integrations by allowing customers to flexibly select
our headless solution and their choice of modular products.
• Helping brands accelerate technology roadmaps and speed of evolution whilst reducing cost to serve.
Fulfilment
• Market-leading, global fulfilment infrastructure and courier management services which continually
improve the speed, quality of delivery and experience to every customer.
• Helping brands become asset light, reduce operating costs and improve their customer experience.
Marketing
• Our unique mix of creative content production, campaign execution, influencer management
and retail media to attract new audiences, cost effectively.
• Helping brands combat rising marketing costs by acquiring new audiences in new channels with
digital campaigns.
Annual Report & Accounts 2023
3029
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG INGENUITY
Technology
Our technology supported 138 million platform searches and up to 52,000 orders per hour over Cyber Weekend in 2023
(23 – 27 November), whilst our proprietary fraud platform captured £182.6 million of fraudulent attempts in 2023 (an increase
of 24% in fraudulent attempts versus last year).
Clients can integrate elements of their existing technology stack flexibly with our modular platform.
Attractive &
Easy Navigation
Inspiring
Engagement
Frictionless
Checkout
Secure Order
Processing
Fast & Reliable
Delivery
Helpful Customer
Assistance
Data-driven
Insights
Secure
Infrastructure
Commerce Technology
Customer
& Loyalty
Payment,
Tax & Duties
Fulfilment
Customer
Care
Data Analytics
and Reporting
Secure
Cloud
Core
Commerce
Mobile,
Web & App
CRM &
Loyalty
Fraud
Engine
Merchandising
& Inventory
Management
200+ Global
Courier
Services
Multi-channel
incl. WhatsApp
& Social
Real-time
Data
Hosting
Infrastructure
Content
Management
System
AI
Engine
Community
Building
50+ Global
Payment
Solutions
Carrier
Management
Warehouse
Management
System
Ai-Powered
Response
Too l s
AI & ML
Capabilities
Global
Coverage
Search
Special Offer
Engine
Customer
Segmentation
Tax & Duty
Calculation
End-to-end
tracking
Returns
Handling
Returns
One Business
Data View
Automation
& Control
DTC
Commerce
Functionality
Order
Management
System
Audience
Management
Multi-
Currencies
Multi-
fulfilment
Options
Cross Border
Shipping
Buyer &
Telephone
Ordering
SKU-level
Analytics
Digital Asset
Management
Product
Information
System
Campaign
Management
Basket
Optimisation
3P Marketplace
Management
Omni-channel
Capabilities
Customer
Feedback
Reporting
& BI
In 2023 we launched our Headless Commerce solution which gives clients even greater flexibility of deployment of relevant
commerce applications whilst allowing brands to retain ownership of their look and feel on the front end. As we continued to
innovate, our use of machine learning models and generative AI technology were infused further into the platform to develop
multiple new use cases, including a features offering, personalised product advice, guidance and customer support.
Our AI Roadmap
2018
AI Journey Begins
RECs - CEB+ & FBT+
Product Misattribution
Language & Profanity Detection
2019
Intelligent CS
Review Moderation
Sentiment & Topic Extraction
Churn Prediction
2020
Fraud Detection
Colour Matching
Foundation Finder v1
NVIDIA Partnership
2021
Visual
Recommendations
CLV Prediction
Attack Detection
2022
Demand Forecasting
Warehouse & Logistics
Optimisation
Foundation Finder v3
2023
Vector Search
Semantic Search
Generative AI
Platform Intelligence Customer Intelligence Seamless Commerce
Fulfilment
Our fulfilment network spans 13 distribution centres,
shipping to 195 countries, with capacity to dispatch
750,000 orders a day from our UK automated facility.
86% of THG Ingenuity’s technology platform customers
adopt our fulfilment services. Supported by new client
wins including Holland & Barrett and Williams Racing,
we recently launched THG Ingenuity’s unique fulfilment
and courier management offering as a standalone service.
Enabling clients to take advantage of our extensive
fulfilment know-how and distribution infrastructure.
Due to our vertically integrated platform, we have total
control over the delivery experience allowing us to
continually improve the speed and quality of service
to every customer - whether that be via designing and
implementing software to increase throughput via our
fulfilment channel, or by having the ability to segment
and delight the most valuable customers with free, faster
delivery. In 2023, we upgraded over four million UK
customer orders to next day services free of charge.
This initiative was then extended across the East and
West Coast of the US.
1.5 days
Average UK standard click to
delivery timeframe 2023
>450,000
5* Trustpilot reviews 2023
CASE STUDY
Automated Fulfilment
THG Ingenuity houses some of the biggest and most
efficient automated technology in the world, allowing us
to successfully receive and dispatch up to 750,000 units
per day from one of our UK facilities, with the capacity
to achieve even more. Pick robotics is complimented by
automated sortation with capability to sort 14,000 shipments
per hour. The same automated facility at THG’s ICON
campus services external clients alongside THG’s own
brands, dispatching over 38m units in 2023. This is set to
grow to close to 70m in 2024, increasingly expanding its
category breadth from beauty, nutrition, fashion, electronics,
luxury and homeware.
An extension of this automated technology was deployed in
April 2023, in New Jersey, US. This time, THG Ingenuity built
the software capability to drive all automated instruction
itself as an incremental adaptation to its own WMS
(Warehouse Management Software); Voyager. This allowed
THG Ingenuity total control of all data points, increasing
the ability to squeeze efficiencies in real time via machine
learning and AI.
Our investments in automated fulfilment allow us to virtually
eliminate picking errors whilst substantially reducing labour
requirements.
More information provided in Section 172 (pages 47 to 54).
Annual Report & Accounts 2023
3231
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG INGENUITY
Marketing
In 2023, we completed over 1,500 creative projects, totalling
125,000 artwork and 14,000 video assets in 70 countries. Our
global influencer network helped THG brands and Ingenuity
customers achieve over 11 million global social media followers
with an ambassador reach of over 100 million.
We design and provide fully integrated creative solutions
that draw new audiences into brands at an emotional level.
We supercharge growth through our unique mix of content,
influencers, performance marketing and media planning.
CASE STUDY
In 2023, Disney worked with THG Ingenuity
to produce a brand advert to relaunch Shop
Disney as Disney Store. This is an exciting
time for Disney, as fans are keen to see the
return of the Disney Store, where you can
“shop the stories you love”. Part of the brief
was to remind key audiences that Disney
Store has something for everyone, for all
fans and families, including luxury, toys,
clothes, costumes and homeware.
Working with Disney teams in both the
US and UK, THG Ingenuity ran the entire
project, from strategy and creative concepts
to production to video editing. The advert
was broadcast on television across North
America and EMEA and on social channels.
This work forms part of an exciting and
growing partnership where THG Ingenuity
continues to bring the Disney magic to life.
You can view the advert here
Future Outlook
As we continue to execute our strategy through 2024, our focus remains on:
• New customer growth across our core verticals of beauty, FMCG and retail whilst increasing the value
from our existing customer base and investing in continuing long-term new customer relationships
• Scaling our presence within our target markets of UK, Europe and US
• Building a network of technology and delivery partnerships to create indirect revenue channels and
extend delivery capacity to help THG Ingenuity as we scale
• Developing new products and solutions and continuing innovation on the platform
CASE STUDY
Future of Commerce
In September, THG Ingenuity held its annual flagship brand event, Future of Commerce, which brought
together our global customers for two days of thought-leadership, product launches and shared lessons
across all areas of ecommerce. This year, the event doubled its capacity. Attendees (both in person and
online) heard from speakers including entrepreneurs, and tech analysts, alongside some of our own
clients, including Kraft-Heinz, Mondelez, Coca-Cola, and Pentland and THG’s own executive leaders.
“It’s safe to say the future of tech is simply more speed. It’s not going to slow down.
Innovation is going to speed up and complexity is going to become way worse than it
is today. The decision to build our own technology to manage these complexities and
accelerate the speed with which we can innovate is in our DNA.”
- Schalk Van Der Merwe, Group CTO
“Data tells us that an emotional reaction is 3,000 times quicker than one of rational thought.
If you take that data point alone and you layer it onto how we spend, where we spend and
how quickly we hit purchase, you can tell the impact that making that emotional connection
will have with your consumer. So if you think of creating a brand ethos that drives those
consumers back, it must be about how they feel when they’re shopping and how they feel
when they’re connecting to your brand.”
- Melissa Labelle, Managing Director, Studios
“Operations is the most valuable part of the entire chain and the part that customers care
about more than the credit it gets. It’s the least sexy, most complicated, can be expensive,
often overlooked, largest lever for cost control and customer trust and because of this, it
is often outsourced. We tackled it because it is hard, but it means we can control every
customer touchpoint, globally.”
- Tom Killeen, COO, THG Ingenuity
Annual Report & Accounts 2023
3433
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
THG INGENUITY
Chief Financial
Officer’s review
“We delivered substantial progress in our key
focus areas in 2023 whilst responding well
to challenging conditions across the globe,
notably cash generation, profitability, with
a significant reduction in distribution costs.
In 2023, we delivered free cash flow
breakeven alongside a 78.0% improvement
in Adjusted EBITDA to £114.1m (2022: £64.1m)
as we rebuild margins to their historic
levels. Following completion of the strategic
review, we report a higher quality result,
with significantly lower adjusting items year
on year (£50.6m vs 2022: £345.8m) and an
improvement in statutory operating loss of
+62.6% to £185.4m (2022: £495.6m).”
Damian Sanders
Executive Director and Chief Financial Officer
Consolidated income statement
Alternative performance measures
1
The following table provides adjusted measures. The Group
believes that these alternative performance measures, which
are not considered to be a substitute for IFRS measures,
provide stakeholders with additional helpful information on
the performance of the business. These alternative
performance measures are consistent with how the
business performance is monitored and reported
through internal management reporting to the Board.
Year ended 31 December 2023 Year ended 31 December 2022 Movement
£’000 £’000
Adjusted gross profit 876,096 925,488
Gross margin % (adjusted) 42.8% 41.3% +150bps
Adjusted distribution costs (270,694) (353,412)
As a % of revenue 13.2% 15.8% +260bps
Adjusted administrative costs (491,296) (507,962)
As a % of revenue 24.0% 22.7% -130bps
Adjusted EBITDA 114,106 64,114
Adjusted EBITDA% 5.6% 2.9% +270bps
EBITDA losses from discontinued categories 6,343 1 7,06 1
Adjusted EBITDA (continuing) 120,449 81,175
Adjusted EBITDA (continuing) % 6.1% 4.0% +210bps
1. The table shows financial results for gross profit, distribution costs and administrative costs before the impact of adjusted items, depreciation, amortisation and share-based payments.
The impact is as follows:
- For statutory presentation, gross profit includes charges of £15.3m (2022: £25.5m) for adjusted items and £20.6m (2022: £20.0m) for amortisation and depreciation;
- For statutory presentation, distribution costs include charges of £5.1m (2022: £22.1m) for adjusted items and £23.2m (2022: £27.2m) for amortisation and depreciation;
- For statutory presentation, administrative costs include charges of £30.3m (2022: £298.1m) for adjusted items and £170.7m (2022: £155.9m) for amortisation and depreciation and £16.7m
(2022: £10.7m) for share-based payments.
Statutory results
Year ended 31 December 2023 Year ended 31 December 2022
Before
Adjusted Items
Adjusted
Items
Total Before
Adjusted Items
Adjusted
Items
Total
£’000 £’000 £’000 £’000 £’000 £’000
Revenue 2,045,378 - 2,045,378 2,239,229 - 2,239,229
Cost of sales (1,189,837) (15,251) (1,205,088) (1,333,737) (25,517) (1,359,254)
Gross profit 855,541 (15,251) 840,290 905,492 (25,517) 879,975
Distribution costs (293,910) (5,061) (298,971) (380,652) (22,117 ) (402,769)
Administrative costs (678,733) (30,315) (709,048) (674,626) (298,145) (972,771)
Other operating expense (17,664) - (17,664) - - -
Operating loss (134,766) (50,627) (185,393) (149,786) (345,779) (495,565)
Revenue
During 2023, two key factors impacted our headline sales
performance, firstly the decision to exit several categories
as part of the strategic review and secondly, the conscious
prioritisation of higher margin sales.
Following the completion of the strategic review, we
successfully executed our plan to exit several loss-making
categories including the sale of THG OnDemand. With
continuing sales declining by only 3.2% in the current
macroeconomic environment and with margin pivot, this
is particularly pleasing when considered against the backdrop
of the total Group reported revenue which has decreased
by 8.7% to £2,045.4m (2022: £2,239.2m).
Importantly, we continue to benefit from strong underlying
customer metrics and behaviours (active customers, total
orders and average order values), positioning the group well
for the future.
The revenue decrease is driven by:
• the Group exiting non-profitable categories. Discontinued
categories has resulted in a reduction in revenue of
£129.3m;
• THG Beauty and THG Nutrition have consciously
prioritised higher-margin sales and reduced order
volumes that do not deliver target profitability leading
to a decline in revenues, however we have benefitted
from a stronger margin performance. This has focussed
on reducing sales in territories furthest away from local
distribution hubs, where delivery costs are higher;
• a one-time destocking across the beauty sector led
to a decline in revenue of THG Beauty manufacturing
(reported within THG Beauty) within the first half of
the year which has faded in the second half and is not
expected to recur in 2024;
• THG Ingenuity continues with its pre-announced strategic
re-positioning that commenced in Q3 2022, focusing on
higher value and higher margin clients which provide
improved quality recurring revenue over the mid to long
term. The short-term impact has been a reduction in non-
recurring revenue as the re-positioning is executed; and
• a continuing uncertainty in the macroeconomic
environment throughout the year.
Whilst the above has impacted revenue, the Group is
pleased to report an improvement in both gross profit margin
and absolute Adjusted EBITDA which, together with cash
generation, have been a key management focus.
Detailed analysis is included within the segmental section later
in this report.
Gross profit
Adjusted gross profit was £876.1m (2022: £925.5m) equating
to an adjusted gross profit margin of 42.8% (2022: 41.3%), an
improvement of 150bps compared to 2022.
Gross profit on a statutory basis totalled £840.3m (2022:
£880.0m) also delivering an increased margin of 41.1% (2022:
39.3%) and 180bps stronger than 2022.
The cost environment in 2023 has continued to be challenging
with high levels of inflation combined with the currency
headwinds, which continued to develop as we progressed
through the year. More specifically the 13% decline in the
Japanese Yen vs GBP impacted revenue and margin in the
Japanese market within THG Nutrition.
Overall, despite the decline in Japanese Yen, the Group saw a
substantially better margin within THG Nutrition, reflecting the
unwind of the price investment made in 2022 for customers
and movements in the whey commodity price, which closed
the year at below normalised levels. These commodity prices
are expected to rise to normalised levels during 2024.
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
CHIEF FINANCIAL OFFICER’S REVIEW
Japan is THG Nutrition’s second largest market and the
devaluation in the Yen (from 135 Yen/£ at IPO in September
2020, to c. 180 Yen/£ at the close of 2023) has had a material
impact on margins. Had the exchange rate been comparable
in 2023 to that at IPO, THG would have made c. £20m more
profit in the year. The Group also has continued to progress
plans for in territory manufacturing in Japan to provide
a longer-term hedge.
In THG Beauty, online retail (principally Lookfantastic, Cult
Beauty and Dermstore) saw gross profit margin expansion
as a result of the de-prioritisation of lower margin sales and
subtle changes to promotional and geographic strategy.
Manufacturing sales were also impacted by well documented
de-stocking in the first half of the year, which also adversely
impacted gross profit margins.
Pleasingly, the result of the factors above, alongside proactive
implementation of cost saving initiatives, has led to the Group
delivering a much improved margin year on year whilst exiting
the year in constant currency sales growth.
Operating expenses
Distribution costs on a statutory basis further reduced as a
percentage of sales by 340bps compared to 2022, culminating
in a cost of £299.0m (2022: £402.8m), which is 14.6% (2022:
18.0%) of revenue, with total statutory costs improving by
25.8%. This is testimony to the benefits of the fulfilment
automation deployed and is despite the adverse impact of
national minimum wage increases and labour inflation in
general.
Statutory distribution costs include one off adjusted items
of £5.1m, which has substantially reduced from the £22.1m
reported in 2022. As expected, in line with the reopening of air
channels (specifically in Asia) and the impact of the pandemic
lessening, the costs relating to incremental delivery fees in
respect of Covid-19 have fallen away in 2023, totalling just
£2.5m compared to £18.5m in 2022.
Adjusted distribution costs of £270.7m (2022: £353.4m) were
13.2% (2022: 15.8%) of revenue. This 260bps underlying
improvement was driven by the Group’s continued focus on
network optimisation and the expanded use of warehouse
automation, which has more than compensated for high levels
of labour inflation in the market. This included the launch
of the Group’s second AutoStore facility in North America
during 2023. We continue to review the cost base and plan to
continue with the roll out of further automation (albeit lighter
touch) during 2024.
Administrative costs on a statutory basis totalled £709.0m
(2022: £972.8m), an improvement year on year following the
one-off non-cash impairment charge of £275.4m incurred in
2022.
Adjusted administrative costs as a percentage of revenue
totalled 24.0% of revenue (2022: 22.7%). Within administrative
costs, the main increases have been seen within marketing
due to increased spend in certain areas, primarily brand
investment and general media inflation in paid channels.
Greater app participation has partially mitigated rising
marketing costs, with customers acquired at lower costs
through this channel typically ordering more frequently,
with higher AOV’s due to regular engagement.
Other operating expense of £17.7m (2022: £nil) relates to
the loss on disposal of three non-core freehold assets, as
planned and completed in the first half of the year. These three
disposals of assets, no longer required by the Group, generated
cash proceeds of £55.5m.
Adjusted EBITDA and Adjusted EBITDA (continuing)
Reconciliation from Operating loss to Adjusted EBITDA Year ended 31 December 2023
£’000
Year ended 31 December 2022
£’000
Operating loss (185,393) (495,565)
Adjustments for:
Amortisation 68,829 58,581
Amortisation of acquired intangibles 50,543 50,394
Depreciation 95,113 94,191
Adjusted items – cash 15,824 40,090
Adjusted items – non-cash 34,803 305,689
Other operating expense – non-cash loss on disposal freehold assets 17,664 -
Share-based payments 16,723 10,734
Adjusted EBITDA 11 4 ,106 64,11 4
Adjusted EBITDA % 5.6% 2.9%
EBITDA loss from discontinued categories 6,343 1 7,06 1
Adjusted EBITDA (continuing) 120,449 81,175
Adjusted EBITDA (continuing) % 6.1% 4.0%
Adjusted EBITDA saw a strong improvement to £114.1m from
£64.1m in 2022. This represents a margin of 5.6% (2022: 2.9%),
an improvement of 270bps year on year, delivered through the
Group’s profit improvement programme and the exit of loss-
making categories and territories.
This is an encouraging result against a tough macroeconomic
backdrop, with the cost base of the business fundamentally
stronger and well positioned for operating leverage.
When stripping out the EBITDA loss from discontinued
categories, Adjusted EBITDA (continuing) totalled £120.4m
(2022: £81.2m) with a margin of 6.1% (2022: 4.0%), an
improvement of 210bps.
Depreciation and amortisation
Total depreciation and amortisation costs were £95.1m and
£119.4m respectively (2022: £94.2m and £109.0m). Included
within amortisation is £50.5m relating to acquired intangibles
(2022: £50.4m). This is non-cash and is principally the
depreciation of historic acquisition consideration through the
Income Statement.
Depreciation remained consistent as a result of the previous
investment made across the network.
Amortisation increased following the continued investment
in our proprietary technology platform during the period,
as expected, with more projects moving from work-in-
progress (WIP) to live in the period generating an increased
amortisation charge. This investment is focused on the
technology to support both internal and external customers
and ensures that we continually enhance the functionality and
capability of the platform.
Operating loss
Operating loss before adjusted items totals £134.8m
(2022: £149.8m). This loss was a result of the challenging
macroeconomic environment combined with the above
mentioned factors. The actions taken to exit loss-making
categories and territories combined with a return to sales
growth are expected to reduce this loss position in the
medium-term.
The Group incurred a much decreased operating loss in the
year of £185.4m (2022: £495.6m). The decrease is largely as a
result of the one-off non-cash impairment charge of £275.4m
in 2022 that has not recurred in 2023.
Annual Report & Accounts 2023
3837
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
CHIEF FINANCIAL OFFICER’S REVIEW
The loss in 2023 includes one-off charges incurred during the
year, being the loss on disposal of loss-making discontinued
categories totalling £16.4m (2022: £29.3m) and share-based
payment charges of £16.7m (2022: £10.7m). In addition, the
other operating expense of £17.7m (2022: £nil) relates to the
non-cash loss on disposal following the planned sale of non-
core freehold assets which will not recur in future years, but
which generated c.£55.5m of cash for the Group.
Finance costs net of finance income
Finance costs net of finance income have increased to £66.6m
(2022: £54.2m). This is principally the result of the additional
£156.0m facility obtained in September 2022 with the interest
annualising in 2023.
Loss before tax and tax rate
Reported loss before tax was £252.0m (2022: £549.7m). The
effective tax rate is 1.4% (2022: 1.8%), based on a total tax credit
of £3.6m (2022: tax credit £9.8m). The effective tax rate differs
from the average statutory rate of 23.5%. This is primarily due
to a movement in deferred tax not recognised (-16.2%), and the
impact of expenses not deductible (-5.2%).
At the balance sheet date the total net deferred tax liability is
£55.7m (2022: £76.6m). The deferred tax liability in respect of
intangible assets recognised on consolidation was £135.3m
(2022: £150.8). The deferred tax asset in respect of tax losses
recognised was £29.8m (2022: £54.8m). There were £96.2m of
unrecognised deferred tax assets in respect of tax losses at the
balance sheet date (2022: £57.8m). This non-recognition has
an impact on the income statement tax credit, and this is one
of the primary reasons for the effective tax rate being below the
statutory rate.
Earnings per share
Loss per share was (£0.19) per share (2022: £(0.44) per share).
Note that in the prior year, if the non-cash impairment charge
was removed, the loss per share for 2022 would have been
(£0.21) per share.
Cashflow
2023 2022
£’000 £’000
Adjusted EBITDA 114,106 64,114
Working capital movements 48,152 23,528
Tax paid (5,411) (4,857)
Net cash generated in operating activities before adjusted items 156,847 82,785
Adjusted items (15,040) (45,071)
Net cash generated in operating activities 141,807 37,7 14
Purchase of property, plant and equipment (46,289) (94,854)
Purchase of intangible assets (79,369) (81,564)
Proceeds from sale of non-core freehold assets 55,450 -
Other (primarily interest and lease repayments) (83,961) (74,649)
Acquisition of trade and assets and subsidiaries net of cash acquired (20,259) (5,691)
(Repayments)/proceeds of/from bank borrowings (25,000) 156,000
Net decrease in cash and cash equivalents (5 7,621) (63,044)
Cash and cash equivalents at the beginning of the year 473,783 536,827
Cash and cash equivalents at the end of the year 416,162 473,783
Free cash flow
2
(1,135) (213,353)
1.
2. Free cash flow is defined as total cash flow for the group adjusting for debt (repayments) / proceeds and acquisitions cash flows and in respect of FY 2023 the
inclusion of a cash receipt of £11.2m from HMRC which was remitted to the Group in December 2023 but physically cleared the bank on the first working day of 2024.
For presentation purposes, this is considered to be free cash flow as at 31 December 2023 as a result of the remittance advice received.
The total cash outflow for the year was £57.6m (2022: £63.0m)
driven by a cash inflow from operating activities of £141.8m
(2022: £37.7m) due to increased Adjusted EBITDA, lower
adjusting items, a well-controlled working capital cycle and
the proceeds from the sale of non-core freehold assets. The
improvements in working capital were seen through general
tighter stock controls, reducing stock holding with no impact
on availability as the stock portfolio normalises following a
period of investment which supported the global warehousing
rollout in previous periods.
Total cash adjusting items before tax have declined significantly
to £15.8m from £40.1m in 2022. The cash reduction has been
driven by lower transportation and delivery cash costs in
relation to Covid-19 from £18.5m to £2.5m with air channels
reopening in Asia. Also, acquisition costs in respect of
restructuring and integration has decreased from £8.0m
to less than £1m.
Through conscious, controlled, capital expenditure, there
has been a reduction in the cash spend on the purchase of
property, plant and equipment in 2023 to £46.3m compared
to £94.9m in 2022. The deployment of our distribution network
is now largely complete and continues to deliver efficiencies
and benefits, reflected in lower distribution costs. Continued
investment within intangible assets, mainly the Ingenuity
platform continues at a similar rate to 2022 totalling £79.4m
(2022: £81.6m). In 2023, £55.5m (2022: £nil) cash was received
in relation to the sale of non-core freehold assets.
The combination of these cashflow improvements, has
culminated in the group’s ability to report free cash flow
breakeven for 2023 (2022: outflow of £213.4m). This
improvement of over £200m has come from strong operating
cashflow improvements, and normalisation of capex
expenditure.
During the year, some small, well considered acquisitions
were undertaken to complement the THG Beauty and
THG Ingenuity strategies. This generated a cash outflow of
£20.3m (£5.7m) in 2023, primarily related to the acquisition of
Biossance in December 2023 and City AM in July 2023.
In respect of loans and borrowings, a scheduled capital
repayment of £25.0m (2022: £nil) was made in relation to
the Group’s bank borrowings. In 2022, cash inflows included
£156.0m in respect of the new senior secured facility that was
drawn in October 2022.
The Group ended the period with cash and cash equivalents
of £416.2m (2022: £473.8m).
Segmental Summary - Overview
2023
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity
Central Inter-group
elimination
Continuing
Total
3
Discontinued
categories
FY 2023
Total
External revenue 1,171.7 657. 9 154.1 - - 1,983.7 61.7 2,045.4
Inter-segment
revenue
- - 519.9 - (519.9) - - -
Total revenue 1,1 7 1.7 65 7. 9 673.9 - (519.9) 1,983.7 61.7 2,045.4
Adjusted EBITDA 44.2 88.9 9.0 (21.8) - 120.4 (6.3) 114.1
Adjusted EBITDA
margin
3.8% 13.5% 1.3% - - 6.1% (10.3%) 5.6%
2022
£m
THG
Beauty
THG
Nutrition
THG
Ingenuity
Central Inter-group
elimination
Continuing
Total
Discontinued
categories
FY 2022
(Restated)
Total
External revenue 1,226.0 662.7 159.6 - - 2,048.3 191.0 2,239.2
Inter-segment
revenue
- - 5 97.4 - (597.4) - - -
Total revenue 1,226.0 662.7 75 7.0 - (5 9 7. 4) 2,048.3 191.0 2,239.2
Adjusted EBITDA
pre SaaS costs
33.6 51.6 29.3 (23.2) - 91.4 (17.1) 74.3
Adjusted EBITDA 33.6 51.6 19.1 (23.2) - 81.2 (17.1) 64.1
Adjusted EBITDA
margin
2.7% 7.8% 2.5% - - 4.0% -8.9% 2.9%
3. During 2022, and 2023 certain loss-making categories and territories within non-core divisions were placed under strategic review and subsequently management has exited
these areas. The exit doesn’t meet the criteria under IFRS 5: Discontinued operations as these categories and territories are not a major component of the Group as defined by
the accounting standard, however, to provide further information on the ongoing revenue and Adjusted EBITDA of the Group the result of these operations has been presented
separately in the above table.
Annual Report & Accounts 2023
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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
CHIEF FINANCIAL OFFICER’S REVIEW