TIDMTHG
RNS Number : 8357I
THG PLC
21 April 2022
This announcement contains inside information
21 April 2022
THG PLC
Preliminary FY 2021 results and first quarter trading
statement
Record full year revenue and adjusted EBITDA performance at
GBP2.2bn and GBP161m respectively, building on the strong momentum
from 2020 (FY 2020: GBP1.6bn, GBP151m)
Strong revenue growth expected for FY 2022; +22.0% to +25.0%
YoY(1) CCY (before the c.1.0% revenue impact of Russia /
Ukraine)
FY 2021 saw significant global infrastructure investment,
underpinning sustainable long-term competitive advantage
THG PLC ("THG" or the "Group"), the proprietary technology
platform specialising in taking brands direct to consumers ("D2C")
globally, announces its preliminary results for the financial year
ended 31 December 2021 ("FY 2021"), together with its trading
update for the three months ending 31 March 2022 ("Q1 2022").
FY 2021 Group Trading Performance
GBPm FY 2021 FY 2020 YoY(2) YoY Growth 2 Year 2 Year
Growth CCY(3) Growth Growth
CCY
-------- -------- ------- ----------- ------- -------
THG Beauty 1,117.8 751.6 +48.7% +51.8% +133.7% +138.1%
THG Nutrition 659.5 562.3 +17.3% +20.9% +59.7% +63.3%
THG Ingenuity 194.3 137.3 +41.5% +43.2% +51.9% +56.5%
THG OnDemand 128.1 101.3 +26.5% +29.5% +119.3% +122.1%
Other 80.2 61.1 +31.3% +28.0% +28.0% +25.5%
-------- -------- ------- ----------- ------- -------
Group Revenue 2,179.9 1,613.6 +35.1% +38.1% +91.2% +95.1%
-------- -------- ------- ----------- ------- -------
Gross Margin
%(4) 44.7% 45.2%
-------- -------- ------- ----------- ------- -------
Adj EBITDA(5) 161.3 150.8 +7.0%
-------- -------- ------- ----------- ------- -------
Adj EBITDA% 7.4% 9.3%
----------- ------- -------
Net Cash / (Debt)(6) 44.4 282.8
-------- -------- ------- ----------- ------- -------
Ingenuity Commerce
Revenue 45.4 19.3 +135.2% +135.2% +512.3% +512.3%
---------------------- -------- -------- ------- ----------- ------- -------
(1) Any reference to revenue growth throughout this document is
on a constant currency basis ("CCY"). Removing fluctuations arising
from translation of foreign exchange by restating prior year
numbers at current year exchange rates
(2) YoY defined as year-on-year statutory sales growth
(3) CCY defined as constant currency basis
(4) Gross Margin % is presented before the impact of depreciation and amortisation
(5) Adjusted EBITDA is defined as operating profit before
depreciation, amortisation and adjusted items
(6) Net Cash / (Debt) is cash and cash equivalents less debt
before lease liabilities, on a hedged basis (see note 14)
Q1 2022 Group Trading Performance
GBPm Q1 2022 Q1 2021 YoY YoY Growth 2 Year 2 Year
Growth CCY Growth Growth
CCY
------- ------- ------- ---------- -------
THG Beauty 264.7 220.8 +19.9% +19.7% +128.3% +131.3%
THG Nutrition 160.6 146.3 +9.8% +12.6% +45.0% +50.1%
THG Ingenuity 51.9 40.4 +28.6% +28.1% +62.2% +63.9%
THG OnDemand 25.5 26.4 -3.7% -3.6% +106.0% +107.7%
Other 17.6 13.4 +31.0% +32.8% +50.5% +50.8%
------- ------- ------- ---------- ------- -------
Group Revenue 520.2 447.3 +16.3% +17.2% +84.0% +87.9%
------- ------- ------- ---------- ------- -------
Ingenuity Commerce
Revenue 11.8 7.9 +47.9% +47.9% +326.1% +326.1%
-------------------- ------- ------- ------- ---------- ------- -------
Matthew Moulding, CEO of THG, commented:
"In our first full year as a public company, 2021 saw us scale
revenue and expand our business model, well ahead of targets set at
IPO. We delivered a record revenue performance for the year, with
Group revenue up +38% year-on-year to GBP2.2bn. On a two-year
basis, THG has grown revenues +95%; effectively doubling the size
of the business.
"Alongside significant revenue growth, FY 2021 saw us acquire
and successfully integrate a number of complementary businesses,
deepening our vertical integration across both Beauty and Nutrition
and expanding our reach to consumers across the globe.
"The operational resilience and performance of our Ingenuity
infrastructure, especially during our peak trading period was a
highlight, as was the opening of our automated warehouse at our
ICON technology campus, delivering material improvements and cost
savings across our global storage and delivery infrastructure.
"Our technology platform is now powering an expansive list of
global brands across a multitude of sectors, and the number of
third-party websites has almost doubled during the year.
"We also continued to progress governance within the Group
through the year, and I was delighted to announce last month the
appointment of Lord Charles Allen as our independent Non-Executive
Chair. Charles' extensive boardroom experience will help the Group
continue to drive profitable and sustainable growth, and to meet
the highest standards of corporate governance.
"You will all be aware that there has been significant
speculation about possible third party interest in THG. I can
confirm that the Board has received indicative proposals from
numerous parties in recent weeks. The Board has concluded that each
and every proposal to date has been unacceptable, failing to
reflect the fair value of the Group, and confirms that THG is not
currently in receipt of any approaches. We continue to focus on
delivering our exciting growth strategy across a number of large
global sectors, and prepare to step up to the premium segment of
the LSE at the appropriate time.
"I would like to thank all THG colleagues for their dedication
and hard work in helping us achieve such a strong performance for
the year. We remain confident in delivering our strategic growth
plans for the year ahead and beyond, with full support from the
Board and our new Chairman."
Outlook and market demand
-- Q1 2022 saw very encouraging consumer demand levels against a
particularly challenging comparable global lockdown period in 2021,
with the second quarter starting in line with expectations.
-- Through its fully integrated D2C model, THG has significant
pricing power given its global leadership positions in high repeat,
large scale Beauty and Nutrition markets.
-- The Group is fully aware of the significant impact of
short-term cost inflation on both global consumers and supply
chains alike. THG intends to limit the impact of cost pressures on
our consumers by maximising efficiencies in our operating model,
absorbing some of the pricing pressures, and raising prices at a
lower rate to underlying input costs.
-- We believe the recent and rapid inflationary environment is
largely transitory, and THG will, as far as possible, continue to
shield consumers from these adverse macro-economic conditions. The
Group's consumer first focus remains to build the long-term, loyal
customer base, with c.80% of revenues generated from returning
customers each year.
Guidance
-- Whilst market commentary cautions continued pressure on
consumer spending due to macro-economic factors, at this stage of
the year the revenue guidance outlined on 18 January 2022 remains
unchanged at +22.0% to +25.0% CCY (before the c.1.0% revenue impact
of Russia / Ukraine). The high repeat nature of the Group's D2C
businesses supports this outlook, along with a high quality
pipeline for THG Ingenuity Commerce, where we reiterate previous
revenue guidance of GBP108.0m to GBP112.0m.
-- The near-term environment has evolved significantly since
January due to a number of global factors including; the war in
Ukraine, Covid-19 related lockdowns in Asia, and inflationary
pressure across almost all cost lines. FX, whey commodity prices
and inflation remain the key adjusted EBITDA margin drivers for FY
2022, and ongoing automation in the network, vertical integration
and cost saving actions will help to offset some of these
pressures.
-- Given the continually evolving external considerations, the
Board anticipates FY 2022 adjusted EBITDA to be broadly in line
with FY 2021, with a weighting to H2 2022. The full year effect of
anticipated improvements primarily expected in the second half
across whey commodity prices, business model efficiencies driving
improved operating leverage and increased Ingenuity Commerce
revenues, all support continued margin recovery in 2023 and a
return to 9.0% to 10.0% adjusted EBITDA in the medium-term.
-- An improving commodity market, alongside significant
operating investments made during FY 2021 in talent, technology and
infrastructure, provide operational leverage for the Group to
confidently rebuild towards historical adjusted EBITDA margins in
the region of 9.0% to 10.0% over the medium-term. This includes the
extension of its vertical integration strategy through in-housing
production of own-brand beauty and nutrition ranges.
-- Our medium-term margin confidence is supported by the
transitory nature of a proportion of the cost inflation pressure,
particularly concerning whey input costs which we expect to
stabilise in H2 2022; the partial offsetting of non-transitory
labour cost increases by automation; and increased revenue
participation of Ingenuity Commerce which is margin accretive.
-- The Group is well progressed through its investment in
expanding its global fulfilment network, and therefore capital
expenditure for the Group in FY 2022 is expected to be c. GBP200m
(FY 2021: GBP189m). As per the guidance communicated at IPO, capex
is expected to fall to between 5.5% to 6.5% of revenue over the
medium-term.
FY 2021 financial highlights
-- Strong revenue growth at +38.1% increasing Group revenues to
GBP2.2bn with 58% international revenue participation. Following
the acquisition of Dermstore, USA revenues now account for over 19%
of Group.
-- Returning customers generated 78% of D2C Group revenues (FY
2020: 76%), reinforcing the repeat nature of our digital brands,
Ingenuity's frictionless retailing environment and the enduring
nature of consumer channel shift to online.
-- The Group's measure of gross profit margin at 44.7%, is
broadly in line with prior years, with gross profit growth of
+33.7% on FY 2020 driven by strong underlying trading margins in
Nutrition, Beauty and Ingenuity Commerce.
-- Adjusted EBITDA of GBP161.3m, at a margin of 7.4% (vs 9.3% in
FY 2020) reflects FX movements, company investment in talent and
infrastructure, increasing raw material costs (principally whey),
and freight costs which saw a marked acceleration in H2 2021.
-- The Group incurred an operating loss of GBP137.5m impacted by certain non-recurring costs:
o GBP43.0m of non-recurring Distribution costs (principally
transportation, delivery and fulfilment costs associated with
Covid-19, which are declining as expected and now running at half
of the levels seen at the peak FY 2020 position);
o GBP33.2m of administrative costs (principally acquisition
related costs including legal and professional fees) which are
included within adjusted items reflecting the non-underlying nature
of these costs.
o A GBP53.0m non-cash cost in respect of impairment within THG
Experience, THG Luxury and THG OnDemand divisions.
-- Strong liquidity position with net cash of GBP44.4m at year
end (excluding lease liabilities), cash of over GBP530m and a
GBP170m undrawn revolving credit facility. The Group's bank
facilities have long tenures, specifically, the EUR600m Term Loan B
matures in December 2026 and the GBP170m revolving credit facility
matures in December 2024.
FY 2021 strategic and operational highlights
-- Over $1.0 billion capital raised to support the continuation
of the Group's disciplined M&A strategy. Dermstore, Bentley
Labs, Cult Beauty and Brighter Foods all remain on track to be
successfully integrated as outlined at the time of acquisition.
-- Well invested fulfilment and manufacturing capacity at key
locations globally to support THG's own-brands and Ingenuity
clients, including the Icon Technology campus at Manchester
Airport. This helped facilitate shipping of over 137 million units
from its global fulfilment network in the year, a 74% increase on
FY 2019.
-- 16.4m active THG Beauty and THG Nutrition customers, +95% increase vs 2019.
-- Strategic relationships formed with leading social media, MarTech and automation partners.
-- Launch of the Group's 2030 Sustainability strategy with a key
commitment to offset historical operational emissions.
-- THG recognised as one of the 'Best Companies' Top 25 Best Big Companies to Work for 2021.
First quarter 2022 highlights
-- Revenue growth of +17.2% YoY and +87.9% over a 2 year period,
a strong result considering the particularly challenging comparable
global lockdown period, with the long-term trend towards e-commerce
continuing to support new customer acquisition and retention.
-- THG Beauty delivered sales growth of +19.7% YoY, with
partnerships across leading brands continuing to strengthen across
the retail destination sites with 24 new partners joining the
platform in Q1.
-- THG Nutrition delivered revenue growth of +12.6% YoY, with a
record quarter for the UK. B uilding on its extended in-house
production and innovation integration capabilities, 95 new SKUs
were launched during the quarter.
-- Group apps continue to drive improvements in order values and
time between orders, with i nfluencers also playing an important
role in cost efficient marketing, generating c.10% of total Group
D2C revenue for Q1 2022 on a tracked(7) basis.
Ingenuity Commerce Q1 2022 highlights
-- THG Ingenuity continues to support clients extending their
digital strategies internationally, with 77% of live sites in major
territories.
-- Whilst unprecedented inflationary pressures and the
geo-political environment have brought caution to capital
deployment plans, digital transformation projects remain essential,
reflected in the strength of the THG Ingenuity new business
pipeline, further to the scaling of the sales team.
-- Average recurring revenue per website and Annual Revenue
Run-Rate in Q1 2022 is in line with expected levels, with the
seasonal uplift in Gross Merchandise Value processed over the peak
trading period elevating the Q4 2021 position.
-- In support of its proprietary marketing ecosystem, THG
Ingenuity has formed a partnership with fast growing affiliate
marketing platform Awin, enabling Ingenuity clients to leverage a
growing global network of over 240,000 active affiliate partners.
Awin's platform supports customer re-engagement to optimise
conversion and has already played a significant role in developing
THG own-brands affiliate programme. David Lloyd, Chief Customer
Officer at Awin commented, "We are delighted to partner with THG
Ingenuity as their marketing technology platform of choice. This
extends our relationship to benefit THG Ingenuity's growing
high-quality client base, who are seeking to accelerate their own
digital strategies through affiliate partnerships."
Q1 Q4 Q3 Q2
2022 2021 2021 2021
------ ------
Number of live client websites(8) 202 187 163 133
Average recurring revenue
per website(9) (GBPm) 0.16 0.24 0.17 0.17
Recurring Revenue %(10) 76% 72% 59% 55%
Annual Revenue Run-Rate(11)
(GBPm) 51 61 44 37
----------------------------------- ------ ------ ------ ------
(7) Tracked is based on revenues via link last click attribution
and codes which may have a last click attribution of other digital
channels
(8) Number of websites defined as website with a specific domain
name/URL live at the end of the period.
(9) Average recurring revenue per website is presented on an
annual basis.
(10) Based on total Ingenuity Commerce revenue.
(11) Annual Revenue Run-rate is based on annualised recurring
revenue and trailing 12 months non-recurring revenue.
Analyst and investor conference call
THG will today host a conference call and webcast for analysts
and investors at 9.00am (UK time). Call details are available from
thg@powerscourt-group.com .
For further information please contact:
Investor enquiries - THG PLC
Kate Grimoldby Investor.Relations@thg.com
Media enquiries:
Powerscourt - Financial PR adviser Tel: +44 (0) 20 7250
1446
Victoria Palmer-Moore/Nick Dibden/Nick thg@powerscourt-group.com
Hayns
THG PLC
Viki Tahmasebi Viki.tahmasebi@thg.com
S
Notes to editors
THG ( www.thg.com ) is a vertically integrated, digital-first
consumer brands group, retailing its own brands in beauty and
nutrition, plus third-party brands, via its proprietary,
end-to-end, e-commerce technology, infrastructure and
brand-building platform (THG Ingenuity) to an online and global
customer base. THG's business is operated through the following
businesses:
THG Beauty : The globally pre-eminent digital-first brand owner,
retailer and manufacturer in the prestige beauty market, combining
its prestige portfolio of eight owned brands across skincare,
haircare and cosmetics, the provision of a global route to market
for over 1,300 third-party beauty brands through its portfolio of
websites, including Lookfantastic, Dermstore, Cult Beauty and
Mankind and the beauty subscription box brand GLOSSYBOX.
THG Nutrition : A group of digital-first Nutrition brands, which
includes the world's largest online sports nutrition brand
Myprotein, and its family brands (Myvegan, Myvitamins, MP Clothing
and Myprotein Pro), with a vertically integrated business model,
supported by six THG production facilities.
THG Ingenuity: Ingenuity Commerce provides an end-to-end direct
to consumer e-commerce solution for consumer brand owners under
'Software as a Service' (SaaS) licences. The wider Ingenuity
division provides stand-alone digital services, including hosting,
studio content, translation services and beauty product development
and manufacturing.
THG OnDemand : Personalisation and customisation is a key
offering within THG OnDemand, enabling brands to offer unique
products to a vast range of consumers across THG's global
territories through websites including Zavvi, IWOOT and Pop in a
Box.
Other : Luxury D2C websites including Coggles, AllSole and
MyBag, in addition to THG Experience. The latter comprises prestige
events locations at Hale Country Club & Spa, King Street
Townhouse Hotel and Great John Street Hotel, providing deeply
experiential brand building environments, most notably in support
of THG Society, the Group's proprietary influencer marketing
platform.
Cautionary Statement
Certain statements included within this announcement may
constitute "forward-looking statements" in respect of the group's
operations, performance, prospects and/or financial condition.
Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words and
words of similar meaning as "anticipates", "aims", "due", "could",
"may", "will", "should", "expects", "believes", "intends", "plans",
"potential", "targets", "goal" or "estimates". By their nature,
forward-looking statements involve a number of risks, uncertainties
and assumptions and actual results or events may differ materially
from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be
met and reliance should not be placed on any forward-looking
statement. Additionally, forward-looking statements regarding past
trends or activities should not be taken as a representation that
such trends or activities will continue in the future. No
responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future
events or otherwise. Nothing in this announcement should be
construed as a profit forecast. This announcement does not
constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase any shares or other
securities in the Company, nor shall it or any part of it or the
fact of its distribution form the basis of, or be relied on in
connection with, any contract or commitment or investment decisions
relating thereto, nor does it constitute a recommendation regarding
the shares or other securities of the Company. Past performance
cannot be relied upon as a guide to future performance and persons
needing advice should consult an independent financial adviser.
Statements in this announcement reflect the knowledge and
information available at the time of its preparation.
THG PLC
The Digital Brands Group
Preliminary FY 2021 results
Executive Chair and Chief Executive Officer's Statement
2021 marked our first full year as a public company and I would
like to begin by expressing my gratitude to all THG colleagues for
their dedication and hard work in helping us achieve such strong
growth in the year. We have scaled revenue and expanded our
business model well ahead of targets given at the time of our IPO
back in September 2020, and are well placed to manage the
inflationary pressures and effects of the pandemic on global supply
chains thanks to our investment in automation and vertical
integration strategy.
The Group will continue to evolve and operate to the highest
standards of corporate governance. In this regard following an
international search initiated in October 2021, we are delighted
Charles Allen, Lord Allen of Kensington CBE, joined THG in March
2022 as independent Non-Executive Chair.
Charles has extensive boardroom experience across a range of
sectors, and chaired many similar large, successful, dynamic
companies, and his appointment will enable me to focus my attention
on delivering the Group's plans for growth.
During the year we also announced a number of strategic options
for 2022 and beyond, including our plans to step up to the Premium
segment of the London Stock Exchange's Main Market and separate THG
Beauty by way of a listing or strategic partnership. I will work
closely with Charles and the Board to continually review these
strategic options and we look forward to updating you on progress
during 2022 as our plans take shape.
At the time of our IPO we reconfirmed THG's purpose to reinvent
how brands connect to consumers globally - to be best in class at
building, growing and accelerating brands in order to deliver
long-term sustainable growth for our shareholders. We announced a
meaningful financial and trading partnership with SoftBank in May
2021.
As part of the announcement, we set out our intention to
commence a separation of THG's key business units and we are on
track to complete this during H1 2022. The separation will simplify
the corporate divisional structure and provide the Group with
material optionality and the flexibility to enter into future
strategic partnerships to generate value accretion for our
stakeholders.
A pivotal year for online commerce
2021 was a pivotal year for online commerce globally, with
changes evident right across our business and key markets as
consumers and brands increasingly adopt digital ways of engaging.
The pandemic has changed the way business is conducted and
consumers behave, creating opportunities for THG to invest in
support of our strategic growth ambitions.
2021 was a year of investment across our entire business in the
following areas:
- our infrastructure - completion of the state-of-the-art ICON
Technology campus in Manchester;
- our Ingenuity platform - expansion of our global distribution network including automation;
- our global footprint - acquisition of Dermstore to accelerate US growth; and
- our people - we welcomed over 3,000 employees to the Group.
E-commerce remains a winning channel with increased convenience
due to enhanced delivery and fulfilment infrastructure, increased
product and category range and deeper engagement with brands
selling direct to consumer "D2C".
THG Beauty, the global number one pure play online prestige
beauty retailer, saw significant growth over the year, active
customers around the world rose by 2.3 million to 9.2 million. THG
Nutrition, the world's largest online D2C sports nutrition brand,
grew its active customers from 6.3 million to 7.2 million around
the globe.
Demand in our large and high growth consumer and technology
markets remains strong and we have observed new and existing
customer behaviour metrics consistent with the pre-pandemic
environment, such as stable average order values and high customer
repeat rates. Revenue from returning Lookfantastic and Myprotein
customers represented c.80% of sales in FY 2021, with
influencer-led digital marketing delivering high return on
investment.
T he performance and resilience of our Ingenuity infrastructure
was also a highlight, with robust operational performance both
through our websites and our global distribution network
dispatching over one million units per day at peak periods,
supporting a frictionless customer journey.
Financial performance
We were delighted to report significant revenue growth across
all divisions during the important peak trading period and to have
delivered record annual sales of GBP2.2 billion (+38% revenue
growth year-on-year 'YoY'). Organic growth was positive in both
Beauty and Nutrition, despite challenging comparatives, with
two-year organic growth in both divisions over 50%, ahead of
medium-term guidance.
The Group delivered adjusted EBITDA of GBP161m, alongside a loss
before tax of GBP(186)m. The loss was principally driven by
adjusted items, which include the excess costs for transportation,
delivery and fulfilment costs in relation to Covid-19, alongside
the commissioning of new warehouses and non-recurring acquisition
fees. Additionally, there has been an increase in both amortisation
and administrative expenses driven by acquired intangibles and
investment in additional headcount in FY 2021 ahead of future
revenue growth, with an element of operating leverage anticipated
in FY 2022.
We retain a focus on cost discipline whilst maintaining our
strategy of investing for growth and continue to benefit from a
healthy liquidity position with net cash excluding lease
liabilities of GBP44m, cash on hand of over GBP530m and a GBP170m
undrawn revolving credit facility .
Scaling D2C brands through strategic investment
To support our THG Nutrition portfolio of global, digital-first
brands, we are committed to investing in and building best-in-class
BRC AA Grade product innovation and manufacturing facilities. The
acquisition of Brighter Foods reflects a continuation of this
vertical integration strategy, further enhancing the Group's new
product development and in-house manufacturing capabilities.
We have brought in-house decades of product know-how and
innovative resource in the formulation and production of
high-quality nutritional snack bars. Reducing lead-times for new
product development and retail launches, while ensuring product IP
remains exclusive, supports Myprotein's position as the largest
online D2C sports nutrition brand globally, whilst also delivering
substantial cost synergies.
Within our Beauty division, we expanded our offering in the
important US market with the acquisition of Dermstore, the leading
US pure-play online prestige and professional skincare business.
This was followed by the addition of Cult Beauty, the favoured
partner for independent brands, into our global portfolio of
destination beauty websites.
Alongside enhancing THG's relationships with its key global
beauty partners, these acquisitions accelerate the implementation
of our strategy to be the global digital partner of choice across
the beauty industry. Our beauty retail proposition is highly
complemented by best-in-class, in-house product innovation and
manufacturing, with a high quality portfolio of prestige
own-brands.
Ingenuity and operational excellence
In recognition of the continuing trend towards digital commerce,
we remain committed to invest in fulfilment capacity at key
locations globally to support THG's own-brands and Ingenuity
clients. This investment enhances the customer journey, in addition
to accessing an extended addressable market through fulfilment-only
solutions via an extended and more efficient global warehouse
network.
We also made the bold decision to bring forward the opening of
our automated warehouse at our Manchester ICON campus which
dispatched its first order in September 2021.
Globalising a digital brand is incredibly complex and expensive
with a high failure rate, which is why so few brand owners have
ever done it successfully across multiple territories. The
migration of websites trading substantial GMV is not without
execution risk and the Group's experience in this regard has
delivered meaningful improvements to the all-important customer
experience. This positions Ingenuity as a partner of choice for
brands looking to invest in and develop their digital and
cross-border strategies.
Our Ingenuity operational infrastructure and technology platform
is now powering an expansive list of global brands across a
multitude of sectors, and the number of third-party websites on the
platform has more than doubled during the year.
Sustainability
Our sustainability vision is to leave the world a better place
than we found it. It will take real responsibility and commitment
from every one of our people, suppliers and stakeholders, working
in partnership to help us achieve our shared goals.
As a vertically integrated business, we are acutely aware of the
impact that big businesses can have on the environment, and the
great responsibility and influence we hold with our people,
communities and suppliers in the UK and internationally. Our
sustainability goals reinforce the direction in which THG is
travelling, providing a formal structure with targets underpinned
by science, data and technology, and driven by our talented people
all over the world. Integral to this, is our commitment to offset
all our historical operational emissions by the end of 2025 ; and
as part of this, we were pleased to have planted some 830,000 trees
in 2021 through THG Eco.
We have always been fast-paced, agile and responsive to changes
in our markets, and our sustainability strategy is no different -
while we have our sights set on the year 2030 for the majority of
our milestone targets, we will do our best to achieve more and work
in partnership with others to accelerate the pace of positive
change. We are committed to using our global scale and dedication
to innovation, to act as a force for good.
THG in the community
In 2022, we will develop and publish a new Group-wide Social
Impact strategy to define our approach to charitable giving and
maximise THG's impact in our local and global communities.
Most recently, o ur HR teams have worked around the clock to
provide physical and mental health support to our Ukrainian
colleagues around the world and our security teams have helped to
safely relocate some of our colleagues and their families who made
the difficult decision to leave their homes in Ukraine. We are also
continuing to support our Ukrainian colleagues here in the UK,
including assisting those who are making arrangements for their
loved ones to join them as soon as they are able to.
While the protection and safety of our colleagues has been our
top priority, we know that urgent support is needed beyond our
immediate network. We have been liaising with national and
international partners to determine the best way we can help them
provide practical support.
In March 2022, we confirmed that GBP1.2 million in product
donations will be made available from our warehouse in Poland to
support those affected by the conflict and we are working with our
local partners to distribute essential items such as food, clothing
and hygiene products to the areas in greatest need.
We also continued to support charities helping people cope with
the devastating impacts of Covid-19, including donating funds to
charities in India helping to provide relief aid and vital oxygen
facilities in struggling rural communities.
Our culture and people
Driven by ambition, innovation, collaboration and
entrepreneurship, our culture and the people at THG are integral to
the Group's success. From more than 95 nationalities, our
colleagues bring a wealth of experience and talent, working
together to deliver exceptional results right across the
business.
This value recognition is reflected in our rapidly evolving
people proposition, with a dedicated diversity and inclusion
committee leading on a dynamic strategy to identify areas of
opportunity and drive positive cultural change through inclusive
policies and practices. The enhancements of our wellbeing platform
are a commitment to employee wellbeing and support, while our
investment in new staff benefits is designed to show our people our
appreciation for their outstanding contributions.
With the implementation of a new pension scheme to include an
increased company contribution, the opportunity to purchase
additional annual leave days, enhanced maternity and paternity
packages, and our 'salary sacrifice', Techscheme and Cycle to Work
Scheme, our employee benefits reflect our investment in our
people.
Named one of the UK's 25 Best Big Companies to Work For in 2021,
THG fosters an environment built on the foundations of teamwork,
diligence and excellence. I would like to thank all colleagues for
their continued contributions to the Group and welcome all new
starters to join us in achieving our ambitions.
Onwards
We are making long-term strategic decisions for THG as we
recognise the enormous opportunity that the structural shift to
online e-commerce will bring. During 2021, we invested GBP1 billion
across infrastructure, technology and acquisitions to further
develop the long-term growth prospects of the Group and completed
many transformational projects on a global scale.
The investment that we have made in our global manufacturing,
fulfilment and distribution network provides capacity and
capabilities to continue to build leading positions in our core
markets across Technology, Beauty and Nutrition, supplemented by
in-housing recycling infrastructure to support our target of
recycling more plastic than we produce.
Our vision has not changed. THG Beauty and THG Nutrition are
focused on becoming the undisputed digital leaders in their
categories. THG Ingenuity aims to be the leading technology
platform for the enterprise market, powering digital transformation
for brands globally. Whilst we have made substantial progress and
remain committed to executing our strategic growth plans, we are
naturally disappointed that this has not translated into tangible
shareholder returns. The management team, with our Board's full
support, remains wholly focused on delivering our strategic growth
plans in 2022 to drive shareholder value.
THG PLC
The Digital Brands Group
Preliminary FY 2021 results
Chief Financial Officer Review
Following an exceptional 2020 for THG, 2021 also saw a strong
performance, delivering record annual revenue of GBP2.2bn, an
increase of 35% (38% on a constant currency basis). The year
achieved healthy organic sales growth across all divisions with
two-year group organic growth of over 50%, robust delivery through
the acquisitions integrated throughout the year along with new
contract wins in Ingenuity Commerce.
Year ended 31 December Year ended 31 December
2021 2020
Before Adjusted Total Before Adjusted Total
Adjusted Items Adjusted Items
Items Items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CONSOLIDATED INCOME STATEMENT
------------------------------------------ ---------- ------------ -------------- ------------ ----------
Revenue 2,179,910 - 2,179,910 1,613,625 - 1,613,625
Cost of sales (1,225,506) - (1,225,506) (900,472) - (900,472)
--------------- ---------- ------------ -------------- ------------ ----------
954,
Gross Profit 404 - 954,404 713,153 - 713,153
Distribution
Costs (386,928) (43,012) (429,940) (295,020) (55,240) (350,260)
Administrative
costs (575,711) (86,216) (661,927) (372,627) (472,098) (844,725)
--------------- ---------- ------------ ---------- ------------ ----------
Operating (loss)/profit (8,235) (129,228) (137,463) 45,506 (527,338) (481,832)
FINANCIAL SUMMARY: Adjusted
profit measures
------------------------------------------ ---------- ------------ ---------- ------------ ----------
Gross profit
(before depreciation
and amortisation) 974,767 - 974,767 729,590 - 729,590
Distribution
costs (before
depreciation
and amortisation) (369,120) (43,012) (412,132) (284,741) (55,240) (339,981)
Administrative
costs (before
depreciation
and amortisation) (444,371) (86,216) (530,587) (294,049) (472,098) (766,147)
--------------- ---------- ------------ ---------- ------------ ----------
EBITDA 161,276 (129,228) 32,048 150,800 (527,338) (376,538)
Depreciation (70,478) - (70,478) (48,055) - (48,055)
Amortisation (99,033) - (99,033) (57,239) - (57,239)
--------------- ---------- ------------ ---------- ------------ ----------
Operating (loss)/profit (8,235) (129,228) (137,463) 45,506 (527,338) (481,832)
--------------- ---------- ------------ ---------- ------------ ----------
Note The table above shows financial results for gross profit,
distribution costs and administrative costs before the impact of
depreciation and amortisation, which are shown as separate lines
below EBITDA. For statutory presentation, cost of sales includes
charges of GBP20.4m (2020: GBP16.4m), while distribution and
administrative costs include GBP17.8m (2020: GBP10.3m) and
GBP131.3m (2020: GBP78.6m) of depreciation and amortisation charges
respectively.
The financial year in review
Revenue
Group revenues increased 35% to GBP2,180m (2020: GBP1,614m) and
38% on a constant currency basis, culminating in 2-year total sales
growth of 95% (constant currency). All divisions delivered strong
growth as the wider consumer shift to digital channels continued
apace. THG Beauty performed particularly well with revenues of
GBP1,118m, representing 51% (2020: 47%) of total revenue after
delivering 49% year on year growth. In Beauty, strong organic sales
growth was complemented by the acquisitions of Dermstore, Bentley
and Cult Beauty. THG Nutrition sales grew 17% to GBP660m whilst THG
Ingenuity revenues grew 42% year on year to GBP194m with the
Ingenuity Commerce division growing 135%.
International sales accounted for 58% (2020: 61%) of total Group
revenue, after very strong UK growth of 46% year on year driven by
both organic growth and the contribution of acquisitions. The most
significant acquisitions in the year were Dermstore in February,
Bentley in June and Cult Beauty in August, which generated a
combined GBP253m of revenue post acquisition. These acquisitions
will each further enhance the THG Beauty offering and provide
additional scale to our US Beauty operations, with North America
now contributing 19% of group revenue. The D2C websites of these
entities were successfully re-platformed to Ingenuity ahead of
schedule.
THG Beauty and THG Nutrition achieved double-digit organic
growth in 2021 despite annualising very strong sales growth in
2020. This is reflected in organic growth of over 50% (before
acquisitions) on a 2-year basis, which is higher than the
medium-term guidance of 20-25% per annum provided at IPO.
Approximately 60% of THG's D2C revenues are not in pounds
sterling which drives currency conversion fluctuations in both
revenue and EBITDA. As the pound has strengthened in 2021, we have
seen an impact in our reported growth of c.290 basis points in the
full year.
Ingenuity Commerce revenue of GBP45.4m (2020: GBP19.3m) includes
recurring revenue of 62% (2020: 48%). Recurring revenue includes
SaaS licence fees, monthly brand building fees, infrastructure
service fees, revenue share and a number of additional services
such as translation and creative services.
Non-recurring revenue of GBP17.2m (2020: GBP10.0m) includes
one-time technology fees covering the costs of the design and
development of the website and integration fees for bringing
partners onto the Ingenuity platform across a range of services
enabling Ingenuity Commerce customers to benefit from a
sophisticated suite of technology options. Whilst these are
non-recurring on a site-by-site basis, we consider that such fees
will be received in future periods as clients expand and as our
technology offering continues to evolve.
Gross profit
Gross profit increased to GBP954m from GBP713m with a margin of
43.8% (2020: 44.2%) on a statutory basis. Gross profit (before
depreciation and amortisation) was GBP975m equating to a gross
profit margin of 44.7%, which was 50bps lower year on year. This
margin position was delivered despite the ongoing global supply
chain challenges, commodity inflation and foreign exchange
headwinds that particularly impacted the retail sector in the
second half of the year.
The Group was able to partially mitigate some of these headwinds
by utilising the strength of the THG Ingenuity platform and its
robust fulfilment and delivery infrastructure, which limited the
impact of supply chain inflation to the Group whilst the
triple-digit growth of high-margin Ingenuity Commerce also provided
a mix benefit to gross margin.
Operating expenses
Distribution costs totalled GBP430m (2020: GBP350m), which is
19.7% of revenue, a decrease of 200bps compared to 2020. This
reduction is driven by both lower levels of adjusted items and cost
efficiencies. Adjusted items fell year on year reflecting lower
transportation costs in relation to Covid-19. Cost efficiencies
were driven by the continued investment in THG's global fulfilment
network, which included the investment in THG's first automated
AutoStore facility in Manchester.
Distribution costs (net of adjusting items, depreciation and
amortisation) as a percentage of revenue, fell by 70bps on the
comparative period totalling 16.9% of revenue, again reflecting the
Group's ongoing investment across several key efficiency
initiatives.
Administrative costs totalled GBP662m (2020: GBP845m) which is
30.4% of revenue, a decrease of 2200bps on 2020. The decrease is
primarily due to the one-off share-based payment charge of GBP332m
in 2020 following IPO, which did not recur in 2021.
Administrative costs (net of adjusting items, depreciation and
amortisation) as a percentage of revenue, increased by 216bps year
on year driven by a continued investment in people to support
acquisition integration and to expand the Ingenuity Commerce
offering, alongside additional regulatory and compliance costs,
resulting from being a publicly-listed company.
Adjusted EBITDA
Adjusted EBITDA rose to GBP161m from GBP151m, an increase of
7.0% year-on-year. This represents a margin of 7.4% (2020: 9.3%)
reflecting substantial cost headwinds in the second half of the
year. Consistent with the wider market, the factors impacting H2
were commodity inflation (notably in whey protein), foreign
exchange movements, increased costs of warehouse labour and freight
and duty. The impact of these market headwinds trebled in H2
relative to H1 and we believe much of this pressure is short term
and will dissipate over time, either through mitigation actions
under management control (price management and cost control) or
will normalise in the wider economy.
Adjusted EBITDA is an alternative performance measure, the table
below reconciles back to the nearest appropriate GAAP measure,
operating loss:
GBP'm 2021 2020
--------------------------------------- ---------- ----------
Operating loss (137,463) (481,832)
Adjustments for:
Adjusted item - share-based payments - 331,624
Adjusted item - impairment of assets
held for sale and sale and leaseback
costs - 105,138
Adjusted items - other 129,228 90,576
Depreciation 70,478 48,055
Amortisation 99,033 57,239
Adjusted EBITDA 161,276 150,800
----------------------------------------- ---------- ----------
Depreciation and amortisation
Total depreciation and amortisation costs were GBP70m and GBP99m
respectively (2020: GBP48m and GBP57m) an increase of 61% on the
prior year, as THG invested GBP48m in its proprietary technology
platform during the period. Depreciation charges increased
year-on-year reflecting the increase in right of use assets
acquired from business combinations in the period, while
amortisation charges increased year-on-year primarily driven by the
additional intangible assets that arose from the 13 acquisitions
completed since 29 September 2020.
Adjusted items
In order to understand the underlying performance of the Group,
certain costs included within distribution, administrative and
finance costs have been classified as adjusting items. These items
principally relate to acquisition-related restructuring and
integration costs, transportation, delivery and fulfilment cost
increases in relation to Covid-19:
2021 2020
------------------------------------------- -------- --------
GBP'000 GBP'000
------------------------------------------- -------- --------
Within Distribution costs
Transportation, delivery and fulfilment
costs in relation to Covid-19 26,628 39,175
Commissioning - new facilities 16,384 15,907
Decommissioning - legacy facilities - 158
------------------------------------------- ------------ --------
43,012 55,240
Within Administrative costs
Share-based payments - 331,624
Restructuring costs 10,233 14,308
Impairment of assets within Experience, 53,008 -
Luxury and OnDemand divisions
Impairment of certain intangible 2,982 -
and tangible assets associated
with Software-as-a-service arrangements
Impairment on assets held for sale, and
sale and leaseback charges - 105,138
Donations and other Covid-19 costs 1,090 11,108
Acquisitions - restructuring and
integration 5,328 5,736
Acquisitions - legal and professional
costs 13,575 4,184
------------------------------------------- ------------ --------
86,216 472,098
Within Finance costs
Softbank option - non-cash 601 -
Total adjusted items before tax 129,829 527,338
Tax impact 11,901 3,784
------------------------------------------- ------------ --------
Total adjusted items 141,730 531,122
------------------------------------------- ------------ --------
For full details on each category of adjusted item see note 4 to
the financial statements.
Operating loss
The Group incurred an operating loss in the year of GBP137m
(2020: GBP482m) as a result of underlying cost price inflation as
well as adjusted items, principally: the excess costs for
transportation, delivery and fulfilment in relation to Covid-19
(GBP27m non-recurring); one-off commissioning costs of new
facilities (GBP16m); and other restructuring and acquisition
related costs (GBP29m). There has also been a non-cash impairment
recognised in the year for certain non-core divisions totalling
GBP53m and following the IFRIC agenda decision in 2021, we have
determined that GBP3m of SaaS-related costs no longer meet the
criteria for recognition as an asset under IAS 38. There were no
impairments identified within THG Beauty, THG Nutrition and THG
Ingenuity.
Additionally, administration costs (before adjusting items,
depreciation and amortisation) increased from 18.2% of revenue in
2020 to 20.4% of revenue in 2021. This increase was largely driven
by additional investment in headcount ahead of future revenue
growth, with an element of operating leverage anticipated in
2022.
The lower loss in 2021 is primarily due to the one-off
share-based payment charge of GBP332m in 2020 following the IPO,
which did not recur in 2021.
Operating loss before adjusting items totals GBP8m (2020: Profit
of GBP46m). This decrease is due to the impact of the increase in
costs as set out above. This is consistent across the industries we
operate in and this is considered a temporary impact.
Finance costs
Adjusted finance costs decreased to GBP49m (2020: GBP53m) as a
result of the revolving credit facility ("RCF") remaining undrawn
for all of 2021 (partially drawn in 2020) combined with the
full-year impact of a decreased total borrowings balance following
the divestment of Propco in H2 2020 which contributed to a
reduction of GBP12m year-on-year in bank charges and interest. This
was partially offset by an increase of GBP8m in respect of interest
on lease liabilities.
Loss before tax and tax rate
Reported loss before tax was GBP186m (2020: GBP535m). The
effective tax rate is 25.88% (2020: 0.4%), based on a total tax
credit of GBP48m (2020: GBP2m). The effective tax rate differs from
the average statutory rate of 19%. This is primarily due to a
movement in deferred tax not recognised (13.3%), the impact of the
UK corporation tax rate change from 19% to 25% on deferred tax
(7.14%), and expenses not deductible (-11.33%). The non-deductible
expenses principally comprise exceptional costs associated with
acquisitions.
The business combinations in the year give rise to a deferred
tax liability in respect of intangible assets recognised on
consolidation of GBP141m. At the balance sheet date the total
deferred tax liability in respect of intangible assets recognised
on consolidation of GBP152m. As a result, all potential deferred
tax assets arising in the year or previously unrecognised are fully
recognised at the balance sheet date. This deferred tax asset
recognition has a material impact on the income statement tax
credit, and is the primary reason for the effective tax rate
exceeding the statutory rate. The income statement tax credit is a
non-cash item.
Earnings per share
Loss per share was (GBP0.13) per share (2020: loss per share of
GBP(0.66)).
Cash flow
2021 2020
---------------------------------------------------- ---------- ----------
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Loans and other borrowings (489,865) (526,159)
Lease liabilities (349,173) (236,185)
Cash and cash equivalents 536,827 773,581
----------------------------------------------------- ---------- ----------
Sub-total (302,211) 11,237
Adjustments:
Retranslate debt balance at swap rate where hedged
by foreign exchange derivatives (2,548) 35,403
Net cash / (debt) (304,759) 46,640
Net cash before leases liabilities 44,414 282,825
----------------------------------------------------- ---------- ----------
THG closed 2021 with net cash of GBP44m with strong liquidity
available through cash on hand of GBP537m plus the additional
GBP170m undrawn revolving credit facility. The Group generated
operating cash flows of GBP23m (2020: GBP76m), closing the year
with cash generated from operations before adjusted items of GBP96m
(2020: GBP177m).
Within this, working capital movements generated a net cash
outflow of GBP65m (2020: inflow of GBP26m). Uncertainty in global
supply chains has led to the Group holding more stock during the
year to ensure availability of key products, combined with working
capital investment to support global warehouse expansion and
acquisition integrations. We expect to see a return in reduction in
stock cover levels over 2022.
The Group invested GBP768m (2020: GBP102m) of cash in
acquisitions to further its strategic objectives through key
vertical integration and expansionary acquisitions. The primary
share issuance in May 2021, which generated GBP760m cash net of
fees, replenished the available cash resources of the Group. A
further cash investment of GBP112m was made in Property Plant and
Equipment and GBP78m in intangible assets (primarily the ingenuity
platform) as part of investing and growing the infrastructure of
the Group. This resulted in a net decrease in cash during the year
of GBP237m (2020: increase GBP461m) with the Group holding GBP537m
of cash and cash equivalents at year end. In addition the Group has
an undrawn revolving credit facility of GBP170m and all debt
facilities are long-dated.
Balance sheet
Property plant and equipment and intangible assets
Property plant and equipment increased to GBP336m (2020:
GBP240m) with intangible assets including goodwill increasing to
GBP1,507m (2020: GBP674m). This was driven primarily by business
combinations generating goodwill, intellectual property and brands
on acquisition of a combined GBP888m. Additional investment was
also made in the THG Ingenuity platform totalling GBP48m plus
fitout of the new state-of-the-art ICON campus with property, plant
and equipment additions totalling GBP126m. These were offset by the
depreciation and amortisation charges incurred.
Cash and cash equivalents and net cash before lease
liabilities
The Group's balance sheet remains robust closing the year with
cash balances of GBP537m (2020: GBP774m), positioning the Group
well to deliver long-term value. All debt facilities are
long-dated, with the EUR600m Term Loan B maturing in 2026.
Year-end net cash before lease liabilities and adjusting for the
impact of hedging was GBP44m (31 December 2020: GBP283m), a
reduction of GBP239m year on year driven by the investment in
acquisitions, property plant and equipment and intangible assets in
the year totalling GBP958m which has been offset by the primary
equity raised in the year and cash generated from trading.
The Term Loan B secured in December 2019, together with the
equity proceeds from the IPO and primary equity raise in May 2021
has provided THG with substantial available cash reserves, and
management consider THG is in a strong position to weather any
further market uncertainty. THG's strong cash flow model will
provide further liquidity to re-invest in the business's
infrastructure, most notably the proprietary Ingenuity
platform.
Consolidated statement of comprehensive income
2021 2020
--------------------------------------------- ------ ------------ ----------
Total Total
--------------------------------------------- ------ ------------ ----------
Notes GBP'000 GBP'000
--------------------------------------------- ------ ------------ ----------
Revenue 2 2,179,910 1,613,625
Cost of sales (1,225,506) (900,472)
--------------------------------------------- ------ ------------ ----------
Gross profit 954,404 713,153
Distribution costs (429,940) (350,260)
Administrative costs (661,927) (844,725)
--------------------------------------------- ------ ------------ ----------
Operating loss 3 (137,463) (481,832)
--------------------------------------------- ------ ------------ ----------
Finance income 6 623 205
Finance costs 6 (49,447) (53,012)
--------------------------------------------- ------ ------------ ----------
Loss before taxation (186,287) (534,639)
Income tax credit 48,213 2,010
--------------------------------------------- ------ ------------ ----------
Loss for the financial year (138,074) (532,629)
--------------------------------------------- ------ ------------ ----------
Other comprehensive (expense)/income
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on translating
foreign operations, net of tax (272) (582)
Net gain/(loss) on cash flow hedges 11,391 (4,991)
--------------------------------------------- ------ ------------ ----------
Total comprehensive expense for the financial
year (126,955) (538,202)
----------------------------------------------------- ------------ ----------
Basic and diluted loss per share (GBP) (0.13) (0.66)
Earnings before interest, taxation, depreciation, amortisation, impairment
and adjusted items (Adjusted EBITDA)
2021 2020
---------------------------------------------- -------- ----------- -----------
Notes GBP'000 GBP'000
---------------------------------------------- -------- ----------- -----------
Operating loss (137,463) (481,832)
Adjustments for:
Adjusted items - share-based payments 4 - 331,624
Adjusted items - other 4 129,228 195,714
Depreciation 9,15 70,478 48,055
Amortisation 8 99,033 57,239
---------------------------------------------- -------- ----------- -----------
Adjusted EBITDA* 161,276 150,800
---------------------------------------------- -------- ----------- -----------
*Adjusted EBITDA is defined as operating profit before
depreciation, amortisation and adjusted items. The results for the
year are derived from continuing activities. The comprehensive
expense is 100% attributable to the owners of the Parent
Company.
Consolidated statement of financial position
2021 2020
--------------------------------- ---- --------- ---------
Note GBP'000 GBP'000
--------------------------------- ---- --------- ---------
Non-current assets
Intangible assets 8 1,506,292 674,293
Property, plant and equipment 9 335,620 240,221
Right-of-use assets 15 310,282 193,887
Investments 1,400 -
2,153,594 1,108,401
--------------------------------- ---- --------- ---------
Current assets
Inventories 10 466,781 302,678
Trade and other receivables 11 263,929 246,546
Current tax asset - 1,797
Other financial assets 2,700 15,849
Cash and cash equivalents 12 536,827 773,581
--------------------------------- ---- --------- ---------
1,270,237 1,340,451
--------------------------------- ---- --------- ---------
Total assets 3,423,831 2,448,852
--------------------------------- ---- --------- ---------
Equity
Ordinary shares 6,684 6,061
Share premium 2,022,311 1,287,171
Merger reserve 615 615
Capital redemption reserve 523 523
Hedging reserve (12,964) (18,003)
Cost of hedging reserve 13,694 7,342
FX reserve (1,094) (822)
Retained earnings (274,015) (138,361)
--------------------------------- ---- --------- ---------
1,755,754 1,144,526
--------------------------------- ---- --------- ---------
Non-current liabilities
Borrowings 14 489,113 524,288
Derivative financial liabilities - 2,563
Lease liabilities 15 305,831 207,274
Provisions 15,623 -
Deferred tax 73,766 5,944
--------------------------------- ---- --------- ---------
884,333 740,069
--------------------------------- ---- --------- ---------
Current liabilities
Contract liability 36,143 32,912
Trade and other payables 13 676,563 499,698
Borrowings 14 752 1,871
Current tax liability 4,118 -
Lease liabilities 15 43,342 28,911
Provisions 883 865
Other financial liabilities 21,943 -
--------------------------------- ---- --------- ---------
783,744 564,257
--------------------------------- ---- --------- ---------
Total liabilities 1,668,077 1,304,326
--------------------------------- ---- --------- ---------
Total equity and liabilities 3,423,831 2,448,852
--------------------------------- ---- --------- ---------
Consolidated statement of changes in equity
Ordinary Share Employee Merger Capital FX Hedging Cost Retained Total
shares premium Benefit reserve Redemption reserve reserve of earnings equity
Scheme reserve Hedging
reserve reserve
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Balance at
1 January
2020 4,381 230,718 175 615 523 (240) (6,134) 464 237,183 467,685
Loss for the
year - - - - - - - - (532,629) (532,629)
Other
comprehensive
expense:
Impact of
foreign
exchange - - - - - (582) - - - (582)
Movement on
hedging
instruments - - - - - - (11,869) 6,878 - (4,991)
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Total
comprehensive
(expense) /
income
for the
period - - - - - (582) (11,869) 6,878 (532,629) (538,202)
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Issue of
ordinary
share capital 2,079 1,056,453 - - - - - - (100,087) 958,445
Share
buy-backs (399) - - - - - - - (1,506) (1,905)
Share-based
payments 5 - - - - - - - - 331,624 331,624
Deferred tax
effect of
share-based
payments - - - - - - - - 2,966 2,966
Impact of
non-equity
settlement of
previous
share-based
payment
schemes - - (175) - - - - - (75,912) (76,087)
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Balance at 31
December 2020 6,061 1,287,171 - 615 523 (822) (18,003) 7,342 (138,361) 1,144,526
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Balance at
1 January
2021 6,061 1,287,171 - 615 523 (822) (18,003) 7,342 (138,361) 1,144,526
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Loss for the
year - - - - - - - - (138,074) (138,074)
Other
comprehensive
expense:
Impact of
foreign
exchange - - - - - (272) - - - (272)
Movement on
hedging
instruments - - - - - - 5,039 6,352 - 11,391
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Total
comprehensive
(expense) /
income
for the
period - - - - - (272) 5,039 6,352 (138,074) (126,955)
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Issue of
ordinary
share capital 623 735,140 - - - - - - - 735,763
Deferred tax
effect in
equity - - - - - - - - 2,420 2,420
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Balance at 31
December 2021 6,684 2,022,311 - 615 523 (1,094) (12,964) 13,694 (274,015) 1,755,754
-------------- ---- -------- --------- -------- ------- ---------- ------- -------- ------- --------- ---------
Consolidated statement of cash flows
2021 2020
---------------------------------------------- ---- --------- ---------
Note GBP'000 GBP'000
---------------------------------------------- ---- --------- ---------
Cash flows from operating activities
before adjusted cash flows
---------------------------------------------- ---- --------- ---------
Cash generated from operations 95,954 176,949
Income tax paid (7,095) (3,104)
--------------------------------------------- ---- --------- -----------
Net cash generated from operating activities
before adjusted cash flows 88,859 173,845
Cash flows relating to adjusted items (65,528) (98,277)
============================================= ==== ========= ===========
Net cash generated from operating activities 23,331 75,568
--------------------------------------------- ---- --------- -----------
Cash flows from investing activities
--------------------------------------------- ---- --------- -----------
Acquisition of subsidiaries net of
cash acquired 7 (768,490) (101,949)
Divestment of subsidiaries - (10,003)
Purchase of investments (1,400) -
Purchase of property, plant and equipment (111,553) (174,886)
Purchase of intangible assets (77,620) (64,486)
Interest received 6 323 205
---------------------------------------------- ---- --------- ---------
Net cash used in investing activities (958,740) (351,119)
--------------------------------------------- ---- --------- -----------
Cash flows from financing activities
--------------------------------------------- ---- --------- -----------
Proceeds from issuance of ordinary
shares net of fees 760,230 905,823
Share buy-backs - (1,905)
Interest paid (25,359) (35,383)
Repayment of bank borrowings - (168,221)
Proceeds from bank borrowings - 53,791
Repayment of lease liabilities 15 (36,216) (17,206)
Net cash flow from financing activities 698,655 736,899
--------------------------------------------- ---- --------- -----------
Net (decrease) / increase in cash and
cash equivalents (236,754) 461,348
Cash and cash equivalents at the beginning
of the year 773,581 312,233
--------------------------------------------- ---- --------- -----------
Cash and cash equivalents at the end
of the year 12 536,827 773,581
--------------------------------------------- ---- --------- -----------
Notes to the Consolidated Financial Statements
1. Basis of Preparation
a. General information
THG PLC (company number 06539496) is a public company limited by
shares and incorporated in England and Wales. It has a standard
listing on the London Stock Exchange and is the holding company of
the Group. The address of its registered office is 5th Floor,
Voyager House, Chicago Avenue, Manchester Airport, Manchester,
England M90 3DQ. The Company is the parent and the ultimate parent
of the Group, the financial statements comprises the results of the
Company and its subsidiaries ("the Group"). The financial period
presented here is for the 12 months ending 31 December 2021, and a
prior period comparative of the 12 months ending 31 December
2020.
b. Basis of preparation
The consolidated financial statements, have been prepared in
accordance with UK-adopted international accounting standards
("IFRS") and, as regards the parent company financial statements,
as applied in accordance with the provisions of the Companies Act
2006. The financial statements have been prepared on the historical
cost basis, except for derivatives which are held at fair
value.
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of section 435 of the Companies Act (the "Act"). These
Condensed Consolidated Financial Statements of THG PLC and its
subsidiaries apply the same accounting policies, presentation and
methods of calculation as those followed in the preparation of the
Group's consolidated financial statements for the year ended 31
December 2021, which were prepared in accordance with International
Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board and were also prepared in
accordance with IFRS adopted by the European Union ('EU'), the
Companies Act 2006 and Article 4 of the EU IAS Regulations.
The statutory accounts for the 12 months ending 31 December 2021
were approved by the Board of Directors on 20 April 2022 . The
Auditors of the Group made a report thereon under Chapter 3 or part
16 of the Act. This report was unqualified and does not contain a
statement under sections 498 (2) or (3) of the Act.
The statutory accounts for the 12 months ending 31 December 2020
have been delivered to the registrar of Companies, and the Auditors
of the Group made a report thereon under Chapter 3 or part 16 of
the Act. This report was unqualified and does not contain a
statement under sections 498 (2) or (3) of the Act.
The financial statements are presented in pounds sterling,
rounded to the nearest hundred thousand unless otherwise stated.
The Directors consider it appropriate to adopt the going concern
basis of accounting in preparing the financial statements of the
Group.
The accounting policies adopted by the Group in the current year
are consistent with those adopted during the year ended 31 December
2020, except for the adoption of new accounting standards and
amendments to existing standards in 2021 as set out below:
-- Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39
Interest Rate Benchmark Reform Phase 2
The amendments noted above do not have a significant impact on
the Group's financial statements.
There are no standards, interpretations or amendments to IFRS
that have been issued but are not yet effective that are expected
to have a material impact on the Group's financial statements.
2. Segmental reporting and revenue
The Directors have assessed the criteria and considerations
under IFRS 8 'Operating Segments' in order to identify operating
segments within the Group. The Directors concluded that the Group
has one segment, as the Ingenuity platform underpins the Group's
operations. The Chief Operating Decision Maker (CODM) is the Chief
Executive, who makes the key operating decisions for the business.
The CODM receives daily financial information at the combined Group
level, and uses this information to allocate resources, make
operating decisions and monitor the performance of the Group as a
whole.
While the Group only has one operating segment, to increase
transparency, the Group has included additional disclosure
analysing revenue split by division.
2021 2020
----------- ------------------------------------------------------- -------------
GBP'000 GBP'000
Beauty 1,117,835 751,621
Nutrition 659,531 562,327
Ingenuity 194,273 137,275
Other 208,271 162,402
----------- ------------------------------------------------------- -------------
Total 2,179,910 1,613,625
----------- ------------------------------------------------------- -------------
Beauty relates to website and business to business sales of
owned and third-party Beauty brands. Nutrition relates to sales of
products from wholly owned nutrition brands. Ingenuity revenue
relates to the provision of services relating to web-platform,
alongside revenue generated from product development, marketing and
fulfilment for third-party clients (revenue recognised under IFRS
15), and revenue from webhosting (revenue recognised under IFRS
16). Additionally, THG Eco which is new in 2021, has been included
within Ingenuity to provide sustainability solutions and consulting
services for THG's own operations, THG's suppliers, partners and
customers. Other relates to revenue generated from THG OnDemand,
THG Experience and THG Luxury.
Ingenuity revenue is contract based and therefore an element is
recognised over time; all other revenue streams are recognised at a
point in time. Of the total revenues recognised for THG Ingenuity,
GBP75.6m (2020: GBP66.8m) is recognised over time.
Below is an analysis of revenue by region (by destination):
2021 2020
------------- ------------------------------------------------------ -------------
GBP'000 GBP'000
UK 909,452 622,663
USA 406,489 207,835
Europe 458,027 397,216
Rest of the
world 405,942 385,911
------------- ------------------------------------------------------ -------------
2,179,910 1,613,625
------------- ------------------------------------------------------ -------------
As the Group operates as one segment, no measure of segmental
assets or liabilities is disclosed in this note.
As part of the planned separation of business units in H1 FY22,
the Group are reviewing the segmental reporting and will update
this as required by IFRS 8 in 2022.
The Group's non-current assets by geography are as follows:
2021 2020
------------------- ---------- ----------
GBP'000 GBP'000
UK 1,891,133 1,041,405
Europe 37,966 48,894
Rest of the world 224,495 18,102
------------------- ---------- ----------
2,153,594 1,108,401
------------------- ---------- ----------
3. Operating loss
Operating loss has been arrived at after charging /
(crediting):
2021 2020
----------------------------- ---- -------- ---------
Note GBP'000 GBP'000
----------------------------- ---- -------- ---------
Employee costs 260,892 171,368
Share-based payments 5 - 331,624
Depreciation on fixed
assets 9 38,269 33,813
Depreciation on right-of-use
assets 15 32,209 14,242
Amortisation of intangibles 8 99,033 57,239
Government grants (1,662) (1,065)
Net foreign exchange
gain 444 (574)
4. Adjusted items
These are items which are material in nature and include, but
are not limited to, costs relating to acquisitions, disposals and
significant events or programmes, some of which span multiple
years. These items are excluded from adjusted EBITDA as management
believe their inclusion distorts the underlying trading
performance. This is consistent with the way that financial
performance is measured by management and reported to the
Board.
2021 2020
--------------------------------------- -------- ------------
GBP'000 GBP'000
--------------------------------------- -------- ------------
Within Distribution costs
Transportation, delivery and
fulfilment costs in relation
to Covid-19 26,628 39,175
Commissioning - new facilities 16,384 15,907
Decommissioning - legacy facilities - 158
---------------------------------------- -------- ------------
43,012 55,240
Within Administrative costs
Share-based payments - 331,624
Restructuring costs 10,233 14,308
Impairment of assets within 53,008 -
Experience, Luxury and OnDemand
divisions
Impairment of certain intangible 2,982 -
and tangible assets associated
with Software-as-a-service
arrangements
Impairment on assets held for
sale, and sale and leaseback
charges - 105,138
Donations and other Covid-19
costs 1,090 11,108
Acquisitions - restructuring
and integration 5,328 5,736
Acquisitions - legal and professional
costs 12,225 2,529
Other legal and professional
costs 1,350 1,655
---------------------------------------- -------- ------------
86,216 472,098
Total adjusted items before
finance costs 129,228 527,338
---------------------------------------- -------- ------------
Within Finance costs
Non-cash - revaluation of SBM 601 -
option
--------------------------------------- -------- ------------
Total adjusted items before
tax 129,829 527,338
---------------------------------------- -------- ----------
Tax impact 11,901 3,784
---------------------------------------- -------- ----------
Total adjusted items 141,730 531,122
---------------------------------------- -------- ----------
Transportation, delivery and fulfilment costs in relation to
Covid-19
Covid-19 has had a direct and measurable impact on the Group's
cost to fulfil delivery of goods to customers across its global
network, through reduced commercial flights and closures of key
shipping lanes. The additional cost to complete these deliveries
has been recognised as an adjusted item, and while there is
uncertainty around the length of disruption the pandemic will have
on global supply chains, the Group does not consider this to be a
recurring cost. The costs incurred were as a result of the
following:
-- In order to maintain the Group's pre Covid-19 levels of
customer experience, the Group had to address the challenges caused
by commercial flights being reduced during the pandemic to minimal
levels. The Group secured THG exclusive chartered flights in order
to be able to uphold its service levels, generating an identifiable
increase in costs versus non-exclusive passenger flights, which
were used pre Covid-19.
-- Our delivery partners passed on to the Group additional
surcharges specifically identified on invoices as a response to
operating during the pandemic.
-- Due to the impact of Covid-19, a number of key supply routes
were disrupted or closed. This necessitated identifying and
sourcing alternative viable routes to fulfil the obligations on the
Group to serve its customers, which created identifiable external
costs relating to alternative routes that had to be taken due to
the impact of Covid-19 on the Group's courier and logistics
providers ability to operate in the pandemic.
Commissioning - new facilities
The Group has embarked on a strategic project to transform the
Group's global infrastructure footprint and capability, moving away
from the smaller sized facilities which were fit for purpose in the
past, into larger purpose-built distribution facilities to support
the strategic objectives of the Group.
Under this project, the Group has commissioned a number of these
purpose-built facilities over the years, including a campus at
Manchester Airport, UK ("Icon") and New Jersey, US. Work on the
Icon facility began in August 2020 and is ongoing with an expected
completion date of August 2022. The New Jersey project began in
April 2021 and went live in November 2021.
Due to the scale and complexity of these sites, commissioning of
these facilities and integration into the Group's existing
distribution network can span more than one accounting period,
taking up to 18 months in total for a specific site, a relatively
short period compared to the useful economic life of the asset.
During the commissioning and integration period, costs relating to
the set-up, integration and testing of the new facilities are
included within adjusted items as these costs are not expected to
be recurring for each specific site and do not reflect the
underlying cost base of the Group. Such costs include:
-- Additional costs are incurred relating to the period of
testing and commissioning that is required to ensure a facility is
operating as expected. Such costs are non-underlying and therefore
included within adjusting items;
-- Costs relating to the migration of production operations and
processes to the new sites as part of this expansion of the
fulfilment network include testing of new production processes and
resolution of any commissioning protocols required before
production is fully operational;
-- Bulk internal warehouse transfers from existing THG facilities are often required during the set-up/commissioning period for a new facility. These costs are non-underlying in nature; and
-- Additional shipping costs are incurred when the products
within a single customer order is fulfilled by shipping from two
different warehouses, due to stock being split across two sites
during the commissioning period for a new facility. This results in
duplicated postage costs on a single order.
The costs above are identified through internal processes and
controls which isolate the impact of commissioning new facilities.
For some of these costs, the amounts included within adjusted items
are calculated by taking the excess costs per unit versus the
normalised rate, which is set based on historical information or
third-party data.
Further material charges are anticipated as the respective
projects are completed, the quantum of which is subject to change
throughout the project as unforeseen events arise through to
completion. Of the projects open as of year-end, the material
commissioning costs relate to the new warehouse facilities across
the Group. The commissioning costs remain ongoing and are expected
to be completed in H1 of 2022. Although a cost in both 2020 and
2021, it relates to different sites and therefore, is not deemed to
be a recurring cost as these are costs incurred on new sites in
2021.
Decommissioning - legacy facilities
As the Group's larger purpose-built facilities have become fully
operational, the Group has exited its legacy warehouses swiftly to
minimise excess capacity and cost. There is commonly a period of
overlap of operations of both a legacy warehouse and the new
facility designed to replace it, and duplicated costs are recorded
as adjusted items as they do not reflect the underlying cost base
of the Group.
The costs associated with the decommissioning and closure of
these facilities, from the period they are deemed to be surplus to
the closure/exit date, are included within adjusted items. These
costs are not expected to be recurring however they can span
accounting periods. There are no decommissioning costs in the
current period.
Share-based payments
The Group operates share-based compensation plans, under which
the Group receives services from employees as consideration for
equity instruments (options or growth shares) of the Company. The
fair value of the employee services received in exchange for the
grant of the equity instruments is recognised as an expense and
included within adjusted items. Due to the nature of these schemes,
they can run over multiple years and can be considered to be
recurring. The charge relating to share-based payments has been
treated as an adjusting item as the underlying driver for the share
awards (e.g. the IPO) is also an adjusting item. There are no
share-based payment charges in the current period and any future
charges will not be considered adjusting items.
Restructuring costs
In 2021 the Group committed to undertaking a review of its
corporate structure as part of the intended separation of its key
business units. The Group incurred costs in relation to the
divisional separation of GBP7.5m. This is expected to be completed
in H1 FY22 with costs being incurred until the end of FY22.
In 2020 the Group undertook a number of restructuring actions in
order to prepare the Group for Admission onto the London Stock
Exchange. These actions were focused on simplification of the Group
structure. The Group also incurred costs in relation to the IPO
listing in September 2020 which include legal and professional fees
and listing fees. The IPO related costs are material, non-recurring
expenditure, as a result of the Group's listing on the London Stock
Exchange and have therefore been presented within adjusted
items.
Impairment
Impairment of assets within Experience, Luxury and OnDemand
divisions
In May 2021, the Group set out its intention to commence a
separation of its key business units within a timeframe of fifteen
calendar months. The separation, when complete, will involve the
establishment of several subgroups of companies to cover each
business unit. At the date of signing the annual report, this
exercise remains ongoing.
A one off, non-cash impairment of GBP53.0m has been recognised
in respect of THG Experience, THG Luxury and THG OnDemand business
units. For THG Experience, this relates to sites within the
portfolio which are under construction at the year end. For THG
Luxury and THG OnDemand this has arisen due to the recoverable
amount being reviewed at a more granular level than was previously
possible following the commencement of the separation of the
business units. There were no impairments identified within THG
Beauty, THG Nutrition and THG Ingenuity.
Impairment of certain intangible and tangible assets associated
with Software-as-a-service arrangements
The Group hold various arrangements for SaaS solutions. Given
the IFRIC agenda decision, the Group has chosen to update its
accounting treatment and policy for IAS 38 Intangible Assets
accordingly.
We have determined that GBP3.0 million of SaaS related costs no
longer meet the criteria for recognition as an asset under IAS 38.
Accordingly, this amount has been expensed in full and has been
disclosed as an adjusting item because it arises from the one off
introduction of interpretations to accounting guidance.
Impairment on assets held for sale and sale and leaseback
charges
In the prior year Impairments of GBP64.5m were recognised. As
the Covid-19 lockdown in the UK significantly impacted the
hospitality and leisure sector, management reviewed both the
value-in-use and the market value of King Street Hotel and Great
John Street Hotel. Within 2020, a GBP29.4m impairment loss was
recognised in respect of these hotels. This is a non-cash charge
that will not recur. Following this, these hotels and a number of
the Group's freehold properties were being marketed for sale. These
properties were required to be treated as held for sale assets in
line with IFRS 5 'Non-current assets held for sale and discontinued
operations'. As a result of this, the Group recognised an
impairment for the difference between the fair value of the assets
held for sale and their historic carrying value.
The need for the impairment was driven by construction
obligations to complete the build of some properties to the
required specification, resulting in a GBP35.1m impairment.
Subsequently all these assets were disposed of on 11 September 2020
as part of the Propco divestment. The remainder of the charge
relates to sale and leaseback transactions. This reflects a
reduction in the right-of-use asset held in accordance with IFRS 16
and is driven by the derecognition of freehold assets, that have
been replaced with leases which have a shorter useful economic
life. These were non-cash one-off impairment charges on these
properties.
There have not been any such impairments in 2021.
Donations and other Covid-19 related costs
As part of its Covid-19 response, the Group made several
charitable donations, totalling GBP1.1m for the year ended 31
December 2021. In 2020, GBP6.6m including GBP1.0m in cash were
donated to Manchester charities, with the remainder relating to
additional costs incurred as part of making the business Covid-19
secure (temperature sensors, PPE etc) for its people and customers.
This is expected to be non-recurring.
Acquisitions - restructuring and integration
Where the Group completes acquisitions, it derives value by
achieving synergies in the post-acquisition period by restructuring
the acquired businesses and integrating them into the Group. During
this restructuring and integration phase there are a number of
non-recurring costs incurred by the Group which are classified as
adjusted items. These costs include, but are not limited to:
-- Duplicated costs whilst the integration plan is executed.
These often relate to termination of pre-acquisition agreements
that were in place and exit costs associated (such as closure of
old facilities or head offices);
-- As part of the integration plan itself, additional
non-recurring costs may be incurred which do not relate to the
underlying trading operations of the Group, including, but are not
limited to, system integration testing and validation, costs of
moving equipment to new sites and department relocation or set-up
costs; and
-- Costs of staff exiting the business, including redundancy
costs, earnouts or bonus payments relating to the integration plan.
Integration plans can often result in moving offices
geographically, a change in management structure or redefining the
roles and needs of departments or individuals. As a result, some
employee redundancy costs are incurred. Payments are also made to
employees for successful delivery of integration plans.
Depending on the size and nature of the acquisition and the
complexity of the integration plan, acquisition restructuring and
integration costs can be incurred for up to 12 months post
acquisition.
Acquisitions - legal and professional costs
The Group periodically considers and analyses potential
acquisition targets and recognises there is inherent complexity and
risk associated with acquisitions. The Group manages this by
employing external professional advisors to perform legal,
financial, commercial and tax due diligence on targets. These costs
relate to opportunities the Group identifies and pursues, of which
a portion result in successful acquisitions by the Group. Such
legal and professional costs are classified as adjusting items as
they relate to significant strategic transactions and, except for
the transactions in question, the business would not have incurred
these costs and as a result these costs are deemed to be
non-recurring costs that do not relate to the underlying trading
operations of the business.
Other legal and professional costs
The Group incurs legal and professional costs that are
non-recurring, one-off in nature and not related to trading
activities. These costs are included as adjusted items and can
include, but are not limited to, costs associated with equity
raises that occurred before the IPO, and other fees associated with
investor activities.
Non-cash - revaluation of SBM option
In 2021, the Group has recognised a GBP0.6m charge in relation
to the valuation of the call option entered into with SBM, that
allows them to invest directly into a 19.9% stake in THG Ingenuity
for $1.6bn. This implies a value of $6.3bn (GBP4.5bn) for THG
Ingenuity. This is a derivative instrument, an option that holds
value for SBM and consequently falls under the provisions of IFRS 9
'Financial Instruments'. The liability represents the difference
between the fair value of the call option today, and its value at
grant date. Given the upside opportunity for SBM and the value in
the derivative, the option represents an asset to SBM and a
liability on the Group's balance sheet. This is a qualitatively
material, non-recurring transaction and thus the valuation effects
of this option have been presented as an adjusted item.
5. Share-based payments
The Group has previously operated share-based compensation
plans. Due to the strong performance of the Group stock on the
London Stock Exchange post IPO, all the share schemes detailed
below vested in full during 2020. There are no active schemes as at
31 December 2021. Prior to vesting, at each balance sheet date, the
Group revised its estimate of the number of options and shares
expected to vest upon the satisfied completion of the specific
vesting conditions and the vesting period.
The fair value of the employee services received in exchange for
the grant of the equity instruments was recognised as an expense in
adjusted items in 2020.
All the share-based compensation plans were equity-settled and
valued by a Monte Carlo simulation. The details of these plans are
given below:
2017 growth share scheme - E ordinary shares:
A Long-term Incentive Plan (LTIP) was introduced during 2018.
Under this scheme, the Group issued equity settled management
shares. The scheme was only exercisable on an exit (non-market
condition), had EPS targets based on adjusted EBITDA (non-market
performance condition), and had an exit hurdle price (market
condition). The scheme had a service condition requiring employees
to remain in employment for three years from grant until the date
each of the EBITDA targets is met. In 2020, these shares vested
fully, triggered by the IPO.
A new scheme, across 3 new share classes, was issued in 2020
prior to the IPO, subject to a post IPO market capitalisation
hurdle of GBP6.5bn rising to GBP7.25bn. In 2020, the scheme shares
fully vested, triggered by share price increases achieved after the
IPO.
F ordinary shares: under this scheme, the Group issued
equity-settled management shares. The scheme runs over 3 years to
2022, vesting equally across those 3 years as EBITDA targets are
met. The scheme also contained a hurdle that vested all the shares
in the event of an IPO that attained a market capitalisation of
greater than GBP5.25bn.
G ordinary shares: this scheme represents equity-settled
management shares that vest over a 3 year period to 2022 based on
market capitalisation targets, starting at 75% vested at a market
capitalisation of GBP6.5bn, and further vesting in 8.3% increments
each GBP0.25bn of further market capitalisation.
H ordinary shares: this scheme represents equity settled
management shares, that vest based on the GBP6.5bn market
capitalisation hurdle noted above.
6. Finance income and cost
2021 2020
GBP'000 GBP'000
Finance income
Bank interest receivable 323 205
Derivative financial instrument 300 -
-------------------------------- ------- ----------
623 205
Finance costs
Bank interest payable and
charges 36,496 48,491
Interest on lease liabilities 12,350 4,521
Revaluation of SBM option 601 -
-------------------------------- ------- ----------
49,447 53,012
-------------------------------- ------- ----------
7. Business combinations
Details of the acquisitions are as follows:
Business Country of Nature of Date of acquisition Consideration Percentage
incorporation activity GBP'000 ownership
---------------------- --------------- ------------------------ -------------------- ------------- --------------
Professional skincare
Dermstore USA online retailing 2 February 2021 260,898 100%
England and
Indigo Environmental Wales Recycling provider 3 March 2021 6,316 (a) 100%
Motion picture
England and distribution
Arrow Films Wales activities 5 March 2021 18,490 (b) 100%
England and
More Trees Wales Tree planting 1 April 2021 3,227 (c) 100%
Vitamin, mineral
Private Label England and and supplement
Nutrition Wales manufacturer 16 April 2021 2,667 100%
England and
Preston Plastics Wales Recycling provider 27 April 2021 18,881 (d) 100%
Manufacturing and
developing cold-pressed
England and and cold form snack
Brighter Foods Wales bars 11 May 2021 43,800 (e) 100%
Prestige skincare
and haircare
Bentley Laboratories USA manufacturing 15 June 2021 179,956 100%
England and
Cult Beauty Wales Online beauty retailer 03 August 2021 291,302 100%
a. Includes GBP1.8m of contingent consideration dependent upon
performance targets post acquisition
b. Includes GBP3.0m of contingent consideration dependent upon
performance targets post acquisition
c. Includes GBP2.7m of contingent consideration dependent upon
performance targets post acquisition
d. Includes GBP6.0m of contingent consideration dependent upon
performance targets post acquisition
e. Includes GBP1.2m of contingent consideration dependent upon
performance targets post acquisition
The Group also paid GBP0.6m on 28 July 2021 for the trade and
certain assets of Morvélo, a retailer of cycling clothing.
Reason for business combination
Dermstore, Cult Beauty and Bentley Laboratories expand THG's
presence in the beauty sector with globally recognised brands,
including in the US market and also provide in-house skincare and
haircare new product development capabilities and
manufacturing.
Brighter Foods and Private Label Nutrition enhance THG's
vertical integration strategy with the production and retail of
bars, vitamins, minerals and supplements and will accelerate future
development in this area.
Indigo Environmental, Preston Plastics and More Trees form part
of THG Eco and are part of THG's strategy to off-set THG's existing
usage and footprint and to enhance THG's processing capabilities to
provide sustainability solutions and consulting to THG's suppliers,
partners and customers.
Arrow Films will facilitate THG's vertical integration of retail
and wholesale physical film content as well as providing digital
opportunities and growth potential in this area.
Contingent consideration
The contingent consideration arrangements require the Group to
pay the former owners based on performance targets post
acquisition. The potential undiscounted amount of all future
payments that the Group could be required to make under the
contingent consideration arrangements is between GBPnil and
GBP19.3m. The performance targets are based on EBITDA or
revenue.
The fair value of the contingent consideration arrangements of
GBP14.7m was estimated by applying the probability of the hurdles
being reached. The fair value estimates are based on an assumed
probability of 76%.
The following intangible assets were recognised at
acquisition:
Dermstore Indigo Arrow More Private Preston Brighter Bentley Cult Total
Environmental Films Trees Label Plastics Foods Laboratories Beauty
Nutrition
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible
assets -
brands 216,949 180 3,000 - 228 488 1,200 19,989 252,702 494,736
Intangible
assets -
customer
lists - 493 5,700 - 1,001 2,596 24,700 26,014 - 60,504
Intangibles
- other
intellectual
property - - - - - - - 3,119 - 3,119
Deferred tax (56,407) (156) (2,078) - (290) (731) (6,315) (12,771) (61,744) (140,492)
-------------- --------- ------------- --------- --------- --------- --------- --------- ------------ --------- ---------
Total fair
value on
acquisition 160,542 517 6,622 - 939 2,353 19,585 36,351 190,958 417,867
-------------- --------- ------------- --------- --------- --------- --------- --------- ------------ --------- ---------
The amounts recognised in respect of the fair value of
identifiable assets acquired and liabilities assumed are as set out
in the table below. The exercise to determine the fair value of the
acquired assets and liabilities is complete, however this will
continue to be reviewed within the twelve-month post acquisition
measurement period and therefore remains provisional at the date of
approval of these financial statements.
The provisional fair values of the assets and liabilities and
the associated goodwill arising from the acquisitions are as
follows:
Dermstore Indigo Arrow More Private Preston Brighter Bentley Cult Total
Environmental Films Trees Label Plastics Foods Laboratories Beauty
Nutrition
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible
assets 216,949 673 8,700 - 1,229 3,084 25,900 49,122 252,702 558,359
Property,
plant
and equipment - 1,439 50 - 598 3,462 5,045 5,301 1,078 16,973
Right-of-use
asset 3,969 1,191 136 - 392 44 60 14,986 4,459 25,237
Inventories 18,016 275 811 - 508 93 2,695 14,840 14,592 51,830
Trade and
other
receivables 1,558 1,294 2,086 - 131 1,471 1,378 10,746 3,773 22,437
Cash and cash
equivalents 9,698 572 7,479 11 477 178 2,646 703 20,595 42,359
Trade and
other
payables (18,819) (1,107) (5,178) (32) (611) (520) (2,652) (9,703) (27,263) (65,885)
Lease
liabilities (3,670) (672) (113) - (320) (44) - (14,263) (3,806) (22,888)
Provisions (298) (519) (22) - (72) - (60) (723) (654) (2,348)
Deferred tax (57,142) (396) (2,078) - (290) (1,149) (6,630) 504 (62,757) (129,938)
--------------- --------- ------------- ------- ------- --------- -------- --------- ------------ --------- ---------
Net assets
acquired 170,261 2,750 11,871 (21) 2,042 6,619 28,382 71,513 202,719 496,136
--------------- --------- ------------- ------- ------- --------- -------- --------- ------------ --------- ---------
Goodwill 90,637 3,566 6,619 3,248 625 12,262 15,418 108,443 88,583 329,401
--------------- --------- ------------- ------- ------- --------- -------- --------- ------------ --------- ---------
Purchase
consideration 260,898 6,316 18,490 3,227 2,667 18,881 43,800 179,956 291,302 825,537
--------------- --------- ------------- ------- ------- --------- -------- --------- ------------ --------- ---------
Transactions
costs 2,430 237 336 182 198 547 781 1,245 3,518 9,474
--------------- --------- ------------- ------- ------- --------- -------- --------- ------------ --------- ---------
Purchase consideration in total was GBP825.5m, which comprised
of cash totalling GBP810.8m plus contingent consideration totalling
GBP14.7m. Transaction costs comprise mainly of advisor fees,
including financial, tax and legal due diligence costs and these
are included in acquisition - legal and professional costs in
adjusted items in note 4.
Goodwill
The goodwill is attributable to the cost synergies and
cross-selling opportunities that are expected to be achieved from
incorporating the businesses into the Group's platform. This will
support existing operations. In the case of Bentley Laboratories,
includes the expertise and skillset of the workforce which will
lead to a further enhancement of our presence in the divisions in
which the Group operate. Bentley has an industry-leading research
and development team of 25 who are at the forefront of its clients'
innovation strategies, with over 650 unique formulations and over
700 new product launches since 2017. The Goodwill for Cult Beauty
and Dermstore also includes a significant amount for the expertise
and skillset of the workforce, reflecting the existence of a
well-trained, organised and efficient workforce of over 200 people
for Cult Beauty and approximately 100 for Dermstore. The Goodwill
for all acquisitions apart from Bentley Laboratories is not
deductible for tax purposes.
Cash flows arising from the acquisitions were as follows:
Dermstore Indigo Arrow More Private Preston Brighter Bentley Cult
Environmental Films Trees Label Plastics Foods Laboratories Beauty Total
Nutrition
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Purchase
consideration 260,898 6,316 18,490 3,227 2,667 18,881 43,800 179,956 291,302 825,537
Contingent
consideration - (1,750) (3,000) (2,738) - (6,000) (1,200) - - (14,688)
Cash and
cash
equivalents
acquired (9,698) (572) (7,479) (11) (477) (178) (2,646) (703) (20,595) (42,359)
--------------- --------- ------------- -------- ------- ----------- -------- -------- ------------ -------- --------
Net cash
flows 251,200 3,994 8,011 478 2,190 12,703 39,954 179,253 270,707 768,490
--------------- --------- ------------- -------- ------- ----------- -------- -------- ------------ -------- --------
Amounts of revenue of the acquirees since the acquisition date
included in the consolidated statement of comprehensive income for
the reporting period, and the revenue of the combined entities for
the current reporting period as though the acquisition date for all
business combinations that occurred during the year had been
acquired at the beginning of the annual reporting period are as
follows:
Revenue contributed Full year revenue
in year of in year of
GBP'000 acquisition acquisition
---------------- -------------------- ------------------
Dermstore 148,672 160,601
Arrow 14,149 16,275
THG Eco* 8,693 10,869
Private Label
Nutrition 1,809 2,877
Brighter Foods 10,877 17,755
Bentley Labs 32,000 57,780
Cult Beauty 71,923 174,169
*THG Eco includes More Trees, Preston Plastics and Indigo
Environmental
The profit before tax contributed in the year of acquisition and
in the full year of acquisition has not been disclosed. Following
acquisition, the entities are fully integrated into THG utilising
the Shared Service Centre, operating platform and supply chain. As
such the profit before tax metric information is not readily
available at this level.
During 2021, the Group has concluded on the fair value of the
net assets in respect of acquisitions completed in 2020, resulting
in a decrease of GBP0.7m in net assets and a corresponding increase
in goodwill.
8. Intangible assets
Platform
development Intellectual New Product
Goodwill costs property Brands Development Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- --------------- --------------- ----------- ------------ ------------
Cost or valuation
At 1 January 2020 370,684 139,937 93,168 103,214 2,576 709,579
Additions 1,115 39,917 21,857 743 2,189 65,821
Business combinations
(note 7) 51,827 - 32,884 6,544 - 91,255
Currency translation
differences (1,942) (112) (1,160) (331) - (3,545)
At 31 December 2020 421,684 179,742 146,749 110,170 4,765 863,110
----------------------- ----------- --------------- --------------- ----------- ------------ ------------
At 1 January 2021 421,684 179,742 146,749 110,170 4,765 863,110
Additions 78 47,587 24,135 2,559 3,710 78,069
Business combinations
(note 7) 329,401 - 63,623 494,736 - 887,760
Transfers - (6,919) 1,474 (1,474) 195 (6,724)
Disposals - (1,611) (41,249) (566) - (43,426)
Currency translation
differences 3,919 28 2,858 1,933 1 8,739
-------------------------- ------- ------------- ------------- ---------- -------- ---------
At 31 December 2021 755,082 218,827 197,590 607,358 8,671 1,787,528
-------------------------- ------- ------------- ------------- ---------- -------- ---------
Accumulated amortisation
At 1 January 2020 270 75,265 44,092 12,521 631 132,779
-------------------------- ------- ------------- ------------- ---------- -------- ---------
Amortisation - 28,451 18,309 9,745 734 57,239
Currency translation
differences - (276) (780) (145) - (1,201)
-------------------------- ------- ------------- ------------- ---------- -------- ---------
At 31 December 2020 270 103,440 61,621 22,121 1,365 188,817
-------------------------- ------- ------------- ------------- ---------- -------- ---------
At 1 January 2021 270 103,440 61,621 22,121 1,365 188,817
Amortisation - 36,894 35,921 24,682 1,536 99,033
Transfers - (3,438) - - - (3,438)
Impairment loss 33,359 1,759 4,637 - - 39,755
Disposals - (1,568) (41,249) (566) - (43,383)
Currency translation
differences - (4) 420 36 - 452
---------------------- --------------- ------------- ------------- ----------- ---------- ---------
At 31 December 2021 33,629 137,083 61,350 46,273 2,901 281,236
---------------------- --------------- ------------- ------------- ----------- ---------- ---------
NBV
At 1 January 2020 370,414 64,672 49,076 90,693 1,945 576,800
At 31 December 2020 421,414 76,302 85,128 88,049 3,400 674,293
---------------------- --------------- ------------- ------------- ----------- ---------- ---------
At 31 December 2021 721,453 81,744 136,240 561,085 5,770 1,506,292
---------------------- --------------- ------------- ------------- ----------- ---------- ---------
Included within Intellectual property is GBP3.3m (2020: GBP2.5m)
of capitalised costs incurred to obtain a contract with a customer.
The costs relate to sales commissions paid to sales personnel upon
initial acquisition of a customer contract. Amortisation of GBP0.6m
(2020: GBP0.3m) was recognised in the period in relation to these
assets.
9. Property, plant and equipment
Computer
Motor Plant and Fixtures equipment Freehold
vehicles machinery and fittings and software buildings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
Cost
At 1 January
2020 2,510 79,702 71,216 68,136 220,225 441,789
Additions 320 27,860 13,513 13,609 161,653 216,955
Business
combinations - 1,383 169 25 20 1,597
Currency
translation
differences - (374) (169) (1,257) 1,204 (596)
Disposals (775) (38,491) (10,294) (13,571) (279,351) (342,482)
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 31 December
2020 2,055 70,080 74,435 66,942 103,751 317,263
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 1 January
2021 2,055 70,080 74,435 66,942 103,751 317,263
Additions 119 45,277 36,125 28,667 15,991 126,179
Business
combinations 213 11,877 765 738 3,380 16,973
Transfers - - - 6,722 - 6,722
Currency
translation
differences (1) (541) (859) (44) 131 (1,314)
Disposals (54) (245) (3,016) (2,551) (250) (6,116)
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 31 December
2021 2,332 126,448 107,450 100,474 123,003 459,707
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
Accumulated
depreciation
At 1 January
2020 1,430 32,436 19,878 24,294 8,052 86,090
Depreciation 317 13,552 7,803 8,466 3,675 33,813
Impairment - - - - 29,367 29,367
Currency
translation
differences - (152) (125) (1,009) 2 (1,284)
Disposals (652) (36,798) (7,114) (13,273) (13,107) (70,944)
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 31 December
2020 1,095 9,038 20,442 18,478 27,989 77,042
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 1 January
2021 1,095 9,038 20,442 18,478 27,989 77,042
Depreciation 250 11,623 6,833 17,174 2,389 38,269
Impairment - 5,533 2,555 1,224 67 9,379
Transfers - - - 3,438 - 3,438
Currency
translation
differences - 242 (147) 26 67 188
Disposals (54) (251) (1,344) (2,330) (250) (4,229)
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 31 December
2021 1,291 26,185 28,339 38,010 30,262 124,087
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
NBV
At 1 January
2020 1,080 47,266 51,338 43,842 212,173 355,699
At 31 December
2020 960 61,042 53,993 48,464 75,762 240,221
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
At 31 December
2021 1,041 100,263 79,111 62,464 92,741 335,620
----------------- ---------------- ------------- ----------------- ----------------- ------------- -------------
10. Inventories
2021 2020
----------------------- ------------------------------------------------------ -----------
GBP'000 GBP'000
Goods held for resale 378,605 247,841
Raw materials 80,542 46,554
Goods in transit 7,634 8,283
----------------------- ------------------------------------------------------ -----------
466,781 302,678
----------------------- ------------------------------------------------------ -----------
Goods in transit relate to goods whose control is still to be
transferred to the customers as of the reporting date. The cost of
inventories recognised as an expense and included in cost of sales
amounted to GBP891.2m (2020: GBP884.0m). The value of inventories
written down and recognised as an expense in the statement of
comprehensive income in the year was GBP7.6m (2020: GBP3.3m).
Within goods held for resale is a GBP3.0m (2020: GBP2.6m) right to
recover asset which represents the carrying value of inventory
expected to be received back from customers as returns.
11. Trade and other receivables
2021 2020
------------------------------------ ------------------------------------------------- ---------
GBP'000 GBP'000
Trade receivables 119,567 76,643
Less: loss allowance (2,268) (1,945)
------------------------------------ ------------------------------------------------- ---------
Net trade receivables 117,299 74,698
------------------------------------ ------------------------------------------------- ---------
Prepayments 21,372 14,757
Accrued income 58,329 45,414
Other taxation and social security 26,883 39,164
Other receivables 40,046 72,513
------------------------------------ ------------------------------------------------- ---------
263,929 246,546
------------------------------------ ------------------------------------------------- ---------
Trade and other receivables are principally denominated in
Sterling.
12. Cash and cash equivalents
2021 2020
--------------------------- ------------------------------------------------------- ---------
GBP'000 GBP'000
Cash and cash equivalents 536,827 773,581
--------------------------- ------------------------------------------------------- ---------
Cash and cash equivalents includes GBP12.5m (2020: GBP26.5m) of
amounts receivable from banks for credit and debit card
transactions, which clear the bank shortly after the transaction
takes place.
13. Trade and other payables
2021 2020
------------------------------------------ ----------------------------------------- --------
GBP'000 GBP'000
Trade payables 297,539 254,637
Accruals 326,957 220,415
Other taxation and social security 28,259 18,577
Other payables 6,160 3,001
Government grants 2,592 2,518
Contingent consideration on acquisitions 15,056 550
676,563 499,698
------------------------------------------ ----------------------------------------- --------
The Directors consider the carrying amount of trade and other
payables approximates to their fair value when measured by
discounting cash flows at market rates of interest as at the
balance sheet date.
Contingent consideration on acquisitions is measured at fair
value using unobservable inputs (level 3 of the fair value
hierarchy). The unobservable inputs used in the fair value
calculation include internal data such as forecasts, budgets and
actual results to date. The fair values are sensitive to changes in
EBITDA or revenue given that these key metrics are what the
performance targets are based on.
Included within trade creditors is GBP42.3m due to suppliers
that participate in the Group's supply chain financing agreement.
The agreement does not change the suppliers agreed payment terms
directly with the Group.
14. Interest bearing loans and borrowings
2021 2020
------------------- ----- -------- --------
Note GBP'000 GBP'000
------------------- ----- -------- --------
Current
Bank borrowings 752 1,871
Lease liabilities 15 43,342 28,911
------------------- ----- -------- --------
44,094 30,782
------------------- ----- -------- --------
Non-current
Bank borrowings 489,113 524,288
Lease liabilities 15 305,831 207,274
------------------- ----- -------- --------
794,944 731,562
------------------- ----- -------- --------
Bank borrowings relate predominantly to the 7-year Euro term
loan B and undrawn 5-year revolving credit facility. The revolving
credit facility is provided by Barclays, HSBC, BNP Paribas,
NatWest, Citibank, JPM and Santander. The term loan B carried an
interest rate of 4.50% plus EURIBOR and the revolving credit
facility 3.75% plus LIBOR. The floating element of the term loan B
is hedged by interest rate derivatives. Management notes that
EURIBOR is being reformed as a benchmark rate and are in dialogue
with its lending and hedging partners to minimise the impact on the
Group as transition occurs.
If interest rates moved by 10bps, the Group's loss before tax
would be c.GBP1.9m higher / lower, and the subsequent move on the
derivative valuation would cause equity to be c. GBP1.0m higher /
lower as a result of the same move.
Net debt consists of loans and lease liabilities, less cash and
cash equivalents, defined as referenced in note 15. For the purpose
of the Group's net debt calculation, loans that are denominated in
foreign currency are translated at the effective hedged rate where
applicable. Net cash / (debt) is an alternative performance measure
and is not defined under IFRS. A reconciliation to the most
directly comparable IFRS measure is included below:
2021 2020
---------------------------------------------------- ---------- ----------
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Loans and other borrowings (489,865) (526,159)
Lease liabilities (349,173) (236,185)
Cash and cash equivalents 536,827 773,581
----------------------------------------------------- ---------- ----------
Sub-total (302,211) 11,237
Adjustments:
Retranslate debt balance at swap rate where hedged
by foreign exchange derivatives (2,548) 35,403
----------------------------------------------------- ---------- ----------
Net (debt) / cash (304,759) 46,640
----------------------------------------------------- ---------- ----------
Net cash before leases liabilities 44,414 282,825
----------------------------------------------------- ---------- ----------
15. Leases
Set out below are the carrying amounts of the right-of-use
assets recognised and movements during the period:
Computer
Plant and equipment Land and
Motor vehicles machinery and software buildings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------------- -------------- -------------------- --------------- ---------------
As at 1 January 2020 537 845 16 36,575 37,973
Additions 179 154 - 183,144 183,477
Depreciation (note 3) (164) (328) (16) (13,734) (14,242)
Lease modifications - - - 2,019 2,019
Disposals - - - (15,335) (15,335)
Currency translation
differences (13) (6) - 14 (5)
---------------------------- ---------------- -------------- -------------------- --------------- ---------------
As at 31 December 2020 539 665 - 192,683 193,887
---------------------------- ---------------- -------------- -------------------- --------------- ---------------
As at 1 January 2021 539 665 - 192,683 193,887
Additions 44 - 6 156,467 156,517
Depreciation (note 3) (172) (274) (4) (31,759) (32,209)
Lease modifications - - - (427) (427)
Disposals - - - - -
Impairment - - - (6,856) (6,856)
Currency translation differences (33) (17) - (580) (630)
As at 31 December 2021 378 374 2 309,528 310,282
---------------------------------- -------- -------- -------- ------------ --------
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
2021 2020
GBP'000 GBP'000
---------------------------------- ------------ --------------
As at 1 January 236,185 38,465
Additions 137,601 223,896
Accretion of interest 12,350 4,521
Payments (36,216) (17,206)
Lease modifications (443) 2,019
Disposals - (15,308)
Currency translation differences (304) (202)
----------------------------------- ------------ --------------
As at 31 December 349,173 236,185
----------------------------------- ------------ --------------
Current 43,342 28,911
Non-current 305,831 207,274
----------------------------------- ------------ --------------
The Group had total cash outflows for leases of GBP36.2m in 2021
(2020: GBP17.2m).
The following are the amounts recognised in the year in the
consolidated statement of comprehensive income:
2021 2020
GBP'000 GBP'000
------------------------- ------------------------------------------------------------------------- ----------------
Depreciation expense on
right-of-use
assets 32,209 14,242
Interest expense on
lease
liabilities 12,350 4,521
------------------------- ------------------------------------------------------------------------- ----------------
44,559 18,763
16. Earnings per share
The following table reflects the income and share data used in
the basic and diluted EPS calculations:
2021 2020
-------------- ------------
Loss for the financial
year (GBP'000) (138,074) (532,629)
Weighted average number of ordinary
shares for basic EPS 1,099,043,113 804,280,441
Basic and Diluted EPS
(GBP's) (0.13) (0.66)
The basic loss per share has been calculated by dividing the
loss attributable to the Group by the weighted average number of
ordinary shares in issue.
The diluted loss per share has been calculated by adjusting the
weighted average number of shares for the effects of the D, E, F, G
and H shares, assuming full vesting of all potentially dilutive
shares.
There was no change in the diluted earnings per share, since the
effect of all potentially dilutive shares outstanding was
anti-dilutive.
17. Related Party Transactions
The Directors' interests in the ordinary share capital of the
Company at the balance sheet date are detailed below:
GBP per Ordinary Shares Ordinary Shares
share 2021 2020
---------------
Number Number
--------------- -------- ------------------------------ ----------------
M J Moulding 0.005 233,441,525 135,470,561
M J Moulding 1 361 361
J A Gallemore 0.005 3,638,116 3,638,116
J A Gallemore 1 3,174 3,174
D P Murphy 0.005 14,566,016 14,566,016
D P Murphy 1 - -
I McDonald 0.005 2,505,943 2,189,039
I McDonald 1.000 - -
Z Byng-Thorne 1 - 750
Z Byng-Thorne 0.005 69,765 -
T Hall 0.005 33,557 -
D Sanders 0.005 21,926 -
--------------- -------- ------------------------------ ----------------
254,280,383 155,868,017
--------------- -------- ------------------------------ ----------------
In addition to the shareholdings noted above, the Directors had
the following interests in vested Shares issued under previous
incentive arrangements at the balance sheet date. These shares
carry no voting rights.
2021 2020 2021 2020
--------------- ----------- ---------------------- ---------------------- ----------- ------------
Date Subscription/exercise Subscription/exercise Number Number
of award price GBP price GBP
--------------- ----------- ---------------------- ---------------------- ----------- ------------
M J Moulding Dec-19 0.23 0.23 43,641,266 43,641,266
M J Moulding Aug-20 0.33 0.33 20,197,808 20,197,808
M J Moulding Aug-20 0.28 0.28 7,733,792 30,296,620
M J Moulding Aug-20 0.26 0.26 - 89,612,682
J A Gallemore Dec-19 0.23 0.23 185,476 185,476
J A Gallemore Aug-20 0.33 0.33 2,666,963 2,666,963
J A Gallemore Aug-20 0.28 0.28 4,000,537 4,000,537
D P Murphy Dec-19 0.23 0.23 370,953 370,953
I McDonald Dec-19 0.23 0.23 185,476 185,476
Z Byng-Thorne Dec-19 0.23 0.23 - 98,673
--------------- ----------- ---------------------- ---------------------- ----------- ------------
78,982,271 191,256,454
--------------------------- ---------------------- ---------------------- ----------- ------------
The Group has not provided any interest free loans to the
Directors in 2021. In 2020 the Group provided GBP0.3m of interest
free loans to the Directors for them to subscribe for shares as
part of the employee benefit scheme. The share-based payments
expense associated with the Directors was nil (2020:
GBP293.6m).
During the year, 89,612,682 H Shares held by M J Moulding were
paid up and converted into listed Ordinary Shares, leading to a
reduction in the unpaid share capital included within other
receivables (note 11) of GBP30.5m.
On 27 August 2020, the Group entered into a 5-year agreement on
commercial terms with Moulding Capital Limited (previously named
Kingsmead Holdco Limited) to provide property, facilities and
project management services to the entity and its subsidiaries.
This agreement generates GBP635,000 for the Group per annum
recognised within administrative expenses.
Prior to the IPO which took place in September 2020, THG
divested the Propco Group, an entity now wholly owned by the
Group's CEO. The Propco Group owns property assets occupied and
utilised by THG and its operating businesses.
The amounts recognised on the Group's balance sheet in relation
to the leases with Propco in the year are as follows:
2021
GBP'000
-------------------- ---------
Right-of-use asset 218,279
Lease liability 262,797
The amounts recognised on the Group's statement of comprehensive
income in relation to the leases with Propco in the year are as
follows:
2021
GBP'000
---------------------------------------------------- ---------
Depreciation arising on right-of-use
assets 12,723
Expense recognised in financing costs 10,663
Impairment arising on right-of-use-assets 6,856
Impairment arising on property plant and equipment 8,156
The charge to the Group's statement of comprehensive income in
2021 for the settlement of obligations under these related party
leases was GBP20.0m (2020: GBP5.7m), the table below gives further
detail around the leases in place:
Number of properties Residual lease Rent per annum FY21 rent GBP'000
term date divestment GBP'000
--------------------- ---------------------- --------------- ------------------
9 0-5 years 962 962
1 7 years 3,207 3,207
12 13-15 years 3,285 3,288
8 19-25 years 14,065 12,589
--------------------- ---------------------- --------------- ------------------
30 21,519 20,046
--------------------- ---------------------- --------------- ------------------
The following table shows the amounts receivable from or payable
to Propco which are outstanding at the balance sheet date. These
include balances in relation to lease agreements and where the
Group has paid suppliers on behalf of the Propco Group, or vice
versa. Such situations arise due to Propco suppliers using legacy
details to submit invoices or where payments are made on behalf of
THG by Propco for property related costs rechargeable to THG as a
tenant per lease:
2021 2020
--------------------------- ------------------------------------ ------------------------------------
Related party Amounts owed Amounts owed Amounts owed Amounts owed
by related to related by related to related
parties parties parties parties
--------------------------- ----------------- ----------------- ----------------- -----------------
GBP'000 GBP'000 GBP'000 GBP'000
Aghoco 1442 Ltd - 217 13 98
Icon 3 Holdco Ltd - - 253 -
FIC Shareco Ltd - - 5 -
THG HQ PropCo Ltd - - 30 -
Allenby Square Ltd - 532 71 302
THG Alpha PropCo Ltd - 192 - 20
THG Omega PropCo Ltd - 1,243 - 1,120
THG Icon Unit 3 Propco
S.Ã r.l. - 296 - 267
THG Gadbrook PropCo
Ltd - 242 - 218
THG Icon Unit 4 PropCo
Ltd - 217 - 195
THG PV PropCo Ltd - - - 41
THG A&A PropCo Ltd - 241 - 217
THG GJS PropCo Ltd - 465 - 401
THG HCC PropCo Ltd - 355 - 315
THG KS Propco Ltd - 225 - 269
THG Unit 3 PropCo
S.Ã r.l. - - 2,310 -
Moulding Capital Limited - 47 - -
THG Wroclaw sp. Z.o.o - 645 - -
THG Icon S.Ã
r.l - 1,101 - -
THG Icon Unit 2 PropCo
Limited - 953 - -
- 6,971 2,682 3,463
--------------------------------------------- ----------------- ----------------- -----------------
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END
FR ZZGZDGMFGZZG
(END) Dow Jones Newswires
April 21, 2022 02:01 ET (06:01 GMT)
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