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THG reveals loss as it explores Apollo buyout

Sophie Smith
18 April 2023

THG, which recently received a takeover offer from US buyout firm Apollo, has reported an operating loss of £495.6 million for the year ending 31 December 2022.

Gross profit margin fell to 41.3%, compared to 44.7% in 2021. This reflects THG's strategy to "partially shield consumers from adverse macroeconomic conditions and a period of unusually high raw material costs." Adjusted EBITDA totalled £64.1 million. 

Total revenue increased 2.7% to £2.2 billion. THG Ingenuity, the group's ecommerce solutions offer, saw sales rise 9.1% over a year and 78.9% over two years. International sales accounted for 57% of total group revenue, with sales growth in the UK reinforcing THG's "strong position and continued consumer demand in this core market".

Looking ahead, the group expects revenue growth of low-to-mid single-digits for FY23. Adjusted EBITDA is anticipated to be in line with the company consensus, with a "significant weighting" in the second half of the year.

Matthew Moulding, CEO of THG, said: "While FY22 adjusted EBITDA was not where we planned at the start of the year, this was largely the result of our strategy to minimise the impact of inflation upon our customer base. This investment in their retention, and longer term growth, was the principle driver behind the reduction in gross margin.

"The challenging macro and inflationary environment required decisive action across the business with around £100 million of efficiency savings delivered. A much-improved outlook on many key cost inputs gives us confidence in an improved financial performance as the year progresses."

The news follows THG's initial takeover proposal from Apollo Global Management. In a statement on Monday, the group said it had received a “highly preliminary and non-binding indicative proposal” to acquire the whole business. However, it did not disclose the terms or valuation of the proposal.

“There can be no certainty that any firm offer will be made,” the group added. Apollo must announce whether it plans to make a firm offer or walk away by a deadline of 15 May, in line with takeover regulations.

Last year, the company received a £2.1 billion takeover approach by a consortium led by Belerion and King Street Capital Management but rejected the move. The suitors walked away from talks soon after while interest from British property developer Nick Candy also fizzled out.

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