THG has reported an increase in revenue but missed its downgraded EBITDA expectations for 2022.
Group revenues increased 2.7% to £2.2bn for the financial year ending December 31, which resulted in a two-year total sales growth of 38.8%.
The online retailer recorded adjusted EBITDA of £64.1m for the period, which THG chief executive Matt Moulding said was “not where we planned at the start of the year”.
Back in September THG had guided 2022 adjusted EBITDA of £100m-£130m, but in January revised it by between 30% to 38% to between £70m to £80m.
THG, which is in line for a buyout from private equity firm Apollo Global Management, anticipates that in 2023 it will be in line with the company consensus and group revenue will grow.
The retailer recorded a widened operating loss of £495.6m due to costs relating to strategic review, stock provision, international delivery costs and administrative costs. THG’s operating loss in 2021 was £137.5m.
Meanwhile, THG reported an 8.6% decline in group revenue in its trading update for the three months ending March 31, but said profitability had improved over the quarter.
The group plans to rebuild towards adjusted EBITDA margins of around 9% over the medium term, which is supported by expected growth within THG Beauty and THG Nutrition.
THG chief executive Matthew Moulding said: “We continue to make good progress on executing our strategy of building a leading digital-first consumer brands group, powered by our own technology and global fulfilment operations. I am hugely proud of the THG team who have delivered another record revenue performance.
“While FY 2022 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 principal driver behind the reduction in gross margin.
“The challenging macro and inflationary environment required decisive action across the business with around £100m 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.
“In THG Ingenuity, we appointed a highly experienced CEO to focus on long-term, higher-value enterprise accounts. The repositioning of the division is on track with the strategy now paying dividends, evidenced by recent announcements and a strong 2023 pipeline.
“We are nearing completion of a three-year major infrastructure investment programme. While this has inevitably involved significant investment and transition costs, the less than two-year return on investment is pleasing. The global capability it now provides gives us increased confidence in our ability to continue to capture market share while accelerating both profitability and free-cash-flow generation.
“We have the technology infrastructure and the global fulfilment capability which, coupled with our continuous engagement with our millions of customers worldwide who love the high-quality products we present to them leaves us well positioned to capitalise on this path of growth.”
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