THG faces takeover bid as FY losses widen

THG has seen its operating loss more than double to £495.6m in the preliminary results for FY22, which closely follow rumours of a fresh takeover bid from US private equity firm Apollo. The group attributed its losses to a non-cash impairment of £275.4m, as well as costs relating to a strategic review, incremental international delivery costs, administrative costs and distribution costs for commissioning new fulfilment facilities. Adjusted EBITDA for the year was also not where it “planned at the start of the year” at £64.1m, according to the group, largely due to the impact of inflation on its customer base and investments made over the period towards customer retention. The group said it had worked to “limit consumer exposure to commodity cost increases to prioritise retention and growth in the global customer base” over the year. Nonetheless, revenues grew by 2.7% to £2.24bn, up from £2.18bn the prior year, which resulted in a two-year sales growth of 38.8%. Certain loss-making categories and territories, primarily within THG OnDemand, were placed under strategic review over the period, with the board deciding to exit the majority of these categories during 2023. In response to recent press speculation, THG yesterday confirmed it was “currently in receipt of a highly preliminary and non-binding indicative proposal” from Apollo to acquire the business. However, THG said there can be “no certainty that any firm offer will be made”, and that a further announcement will be made “if and when appropriate”. It added that Apollo now has until 5:00pm (GMT) on 15 May to make a firm takeover offer for the group. Commenting on the preliminary results, CEO 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 principle driver behind the reduction in gross margin.” He added: "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. "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 whilst accelerating both profitability and free cash flow generation.”

THG faces takeover bid as FY losses widen

Apollo now has until 5:00pm (GMT) on 15 May to make a firm takeover offer for the group

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