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THG PLC (LSE:THG) has announced its financial results for the first half of 2024 (H1 2024), revealing a solid performance in the face of mixed market conditions. The company expects its most profitable period to come in the second half of the year, particularly in the Beauty and Ingenuity segments, which are expected to offset a year-over-year decline in the Nutrition business.
Despite challenges, including the ongoing headwinds from the Japanese Yen—which had a £5 million impact on H1 results—THG is optimistic about exiting Q3 2024 with revenue growth in the Nutrition division. The recovery in average selling prices (ASPs) is helping bolster this segment. THG anticipates closing the year towards the lower end of the analyst consensus EBITDA range.
H1 2024 Financial Performance
For H1 2024, THG reported group continuing revenue of £911.1 million, a 2.2% year-over-year (YoY) increase. Strong growth in the Beauty and external Ingenuity divisions helped offset declines in online Nutrition. Total revenue for the period, including discontinued categories, was £934.0 million, reflecting a 1.7% decline compared to H1 2023. THG has been actively simplifying its business, discontinuing certain categories and focusing on core operations, leading to a sharp reduction in revenue from discontinued operations (£22.9 million in H1 2024 vs £58.9 million in H1 2023). Meanwhile, the Group saw a robust 9.9% increase in UK revenues.
Customer loyalty and engagement continue to strengthen, with a notable rise in app participation. In H1 2024, 26% of THG's direct-to-consumer (D2C) revenue came from app users, up from 16.1% in the previous year.
Beauty and Ingenuity Drive Margin Expansion
THG’s adjusted gross margin remained stable during the first half, with improvements in the Beauty and Ingenuity divisions offsetting weaker results in Nutrition. THG Beauty, in particular, benefited from its strategic shift away from lower-margin territories, driving margin growth in its online retail business. On the other hand, the Nutrition segment faced challenges from product clearance following a rebrand and a resurgence in whey price inflation during Q2 2024, which dampened overall margin performance.
Cost Efficiencies Boost Profitability
The Group’s continued investment in automation and global delivery network optimization contributed to a substantial reduction in distribution costs, down to 11.5% of revenue YoY. These operational efficiencies have led to faster order processing, later cut-off times, and quicker deliveries, enhancing THG’s market-leading service standards. This focus on logistics has also supported the growth of recurring revenue in the Ingenuity division.
Administrative costs remained well-controlled, thanks to refined marketing strategies and an increase in app engagement. Despite inflationary pressures in marketing spend and investments to boost brand awareness, THG has maintained a disciplined approach to cost management. Additionally, organizational initiatives launched in Q3 2024 are expected to streamline operations further, driving a leaner structure and supporting long-term margin growth.
Stable EBITDA Despite Headwinds
For H1 2024, THG reported continuing adjusted EBITDA of £52.3 million, slightly higher than the £51.5 million posted in H1 2023. The EBITDA margin of 5.7% reflects effective cost management and improved profitability in Beauty and Ingenuity, which helped offset lower online ASPs in Nutrition, foreign exchange headwinds from Asia, and increased whey input costs. On a reported basis, including losses from discontinued categories, adjusted EBITDA improved to £48.8 million, compared to £47.1 million in H1 2023.
As THG enters the second half of the year, it is optimistic about delivering continued growth in key areas and further enhancing profitability.
