THG Plc ($THG)

Good morning, everyone, and thank you for joining us today for our full year 2025 results presentation. It's a pleasure to be here reporting on what has proved to be a landmark year, our first as a consumer-focused group packed with a large number of important initiatives. We delivered a strong full year 2025 performance ahead of both our guidance and market consensus with adjusted EBITDA of GBP 76.6 million, setting a solid base for meaningful progress again in the year ahead. And on the balance sheet, we've deleveraged meaningfully. Our debt facilities are now extended out to the end of 2029, and we ended the year with over GBP 330 million in cash and available facilities, giving us real financial flexibility going forward. At the start of the year, we completed the demerger of THG Ingenuity. And with that, THG became what it is today, a focused consumer-led group built around 2 leading businesses in their respective markets, THG Beauty and THG Nutrition. For the first time since COVID, both businesses delivered full year revenue growth in 2025, with Nutrition delivering 4 consecutive quarters of growth in the year. The group's momentum in the second half was especially encouraging with Q4 delivering our best performance of the year at 7% revenue growth. In THG Beauty, we had a record year for new brand launches and a standout performance in our home territories, particularly Lookfantastic U.K., where we took share in established and high-growth segments. In THG Nutrition, our multi-model strategy is delivering meaningful market share growth and Myprotein delivered nearly 10% revenue growth in H2 despite the model changes across Asia and India initially reducing sales in those regions. A combination of new partnerships, growing offline and licensing channels and category diversification are all contributing to a more balanced and resilient revenue base. We have also seen significant progress regarding our VAT claim, which now totals around GBP 78 million following the prudent treatment of protein, collagen and supplement products over the years, while some of our competitors' 0-rated products. We expect a resolution later this year, which, along with the meaningful free cash flow generation could broadly halve net debt by year-end. So turning to THG Beauty, a business which has seen a significant overhaul to the business model in recent years, which has created a strong and unique platform for our revenue and active customer growth. We had our biggest ever year for new brand launches on the platform. We are firmly the destination of choice for the world's leading beauty brands, and that was very evident in 2025. Our biggest ever new product launch was the Huda Beauty Contour lip stain, a fantastic exclusive that drove enormous engagement and traffic. Beyond this, our advent campaign in peak trading set new records, while THG Beauty had its biggest ever year for exclusive product launches, which is so important for differentiation in a competitive market. THG Beauty also became the biggest U.K. beauty retailer on TikTok Shop, a channel we see as strategically important for reaching the next generation of beauty consumers. And on the own brand side, our biggest launch was the Biossance Eye Serum, which further strengthens our margin-accretive brand portfolio, where we have invested during the year to repackage and reformulate to remain relevant and compelling to beauty regimes. Moving to THG Nutrition and Myprotein specifically. Myprotein is the world's #1 sports nutrition brand with an enviable level of engagement in a rapidly growing and evolving health and wellness demographic. This position of market leadership continues to strengthen. Brand awareness hit record levels this year, achieving our highest ever unaided awareness score in the U.K., where we are clear market leader. Myprotein's aided awareness also reached a record high, further supporting the success of the major rebrand undertaken in 2025. Over half of our target demographic now recognizes the Myprotein logo, which speaks to the scale and effectiveness of our marketing investment and our multi-model approach. Myprotein's progress in offline and licensing expansion has been exceptional with over 43 million products now licensed and sold into global retail. The launch of our Mars products this week serves to build on the uniqueness and quality of the Myprotein brand with the world's largest brands keen to work in partnership and gain access to the Myprotein community. This channel is still early in its growth journey. And when combined with the wider B2B retail partnerships, it's clear why we are confident about the medium-term trajectory for this business despite the well-documented commodity price pressures. Outside of protein powders, activewear is a category to watch. It's a structurally attractive margin-accretive category, and our expectation is this will be delivering a run rate of GBP 100 million in sales within 12 to 18 months after delivering over GBP 50 million of revenues for the full year of 2025. So turning to the outlook. On the full year expectations, we are guiding towards mid-single-digit group revenue growth with gross profit margin improvements year-on-year despite the current record high commodity pricing. We expect to deliver meaningful EBITDA progression, not only from continued sales growth and improving margins, but also from the benefit of significant OpEx savings as we annualize headcount savings while continuing to deliver new savings in utilizing AI. Looking at each business, THG Beauty entered 2026 with strong underlying growth, particularly in the U.K. and U.S., our 2 largest markets. After a slower start to the prior year, the U.S. is performing really well, and our new brand and product pipeline remains very healthy. For Nutrition, we are seeing strong progress across channels with clear actions in place to improve mix and profitability alongside a defined strategy to manage whey price volatility through procurement, diversification and disciplined pricing. Once commodity pricing starts to fall from record highs, hopefully before the end of the year, then we expect this to have a marked impact on profitability growth beyond 2026. On cash, we expect to deliver free cash flow of GBP 25 million to GBP 50 million with CapEx running broadly flat year-on-year, working capital inflows following last year's temporary investment in stock and a reduction in financing costs. Our results demonstrate our continued progress against our strategic vision of becoming the leading destination for prestige beauty and sports nutrition. This alignment between strategy and delivery underpins the strong momentum carried into 2026 in fundamentally strong end markets. So the team are here with me today, and we'll be happy to take some questions. And thank you once again for all your support.

[Operator Instructions] Our first question this morning is from John Stevenson of Peel Hunt.

I've got 2 or 3 questions, but I'll try and maybe I'll keep it to 2. But I think start with the VAT claim. And just on the VAT claim, you're still treating sales as being standard rated at the moment and paying that over to HMRC. And then secondly, assuming HMRC confirms that protein powders are going to be 0 rated, does this go into cheaper pricing for consumers, do you think? Second question is then on Nutrition's margin recovery prospects this year. There's obviously a lot of moving parts. There's strong growth in apparel. We've got offline licensing the [indiscernible] sales. Can you just sort of chat through the drivers of how you see things panning out this year? And then maybe finally for throw in the last one. Obviously, you sold claim of last year. What are your thoughts on potential of further sales of noncore assets? I guess, what do you consider to be noncore?

So on progress with the back claim more generally then, look, I think we've got a bunch of claims in with the revenue that totaled about GBP 78 million. And you're absolutely right. The revenue have lost their appeals against the vast majority of the items in there. And so now -- but there have been competitors now for a number of years that took that approach anyway. So naturally, we took a very prudent approach where we continued to hand over VAT monies to HMRC and then follow the situation closely. Now in terms of the treatment of VAT, this year, clearly, we'll be changing that treatment. It's probably an ideal time as well really to be changing that treatment because whey pricing is not only on record highs, it's on explosive highs as there's been a number of market forces that have just caused almost a tulip moment in the commodity. And so naturally, we're in a really good position to be able to absorb that versus our competition, especially now as we've got the benefit of the 0-rated VAT to be able to apply. In terms of what that means for consumers, I think over time, naturally, consumers are going to see some benefit. But given that THG has been operating already by subsidizing the products that's -- whilst our competitors have 0 rated or some of them have done, then as a result, we've already taken that competitive position. So we would expect to see significant margin improvements, both from falling whey prices and from the VAT treatment. So they are 2 significant tailwinds that we look forward to unlocking whilst whey pricing sits at the levels that it sits at today, we're probably not going to see the true benefits of that for a number of months, but we are looking forward to that feeding through. In terms of your question on margin progression for Myprotein, naturally, there are a good number of opportunities ahead that set the scene for a very strong margin recovery, not least whey pricing, but put that one to one side. You've then got VAT, so we can put that one to one side. But as we touched on in the presentation, we've sold 43 million products through licensing and offline into global retail last year, which is bigger than any other nutrition brands total product sales globally. So that's just our licensing and offline business model. Now the licensing side of that is pure profit, so that's great for margins. But the off-line retail sales, we've entered that market on a low-margin basis, almost running that channel at a breakeven to slightly negative to slightly positive, depending on the given period. Now as we've now built a significant installed base, we will continue to build that base because we're seeing fantastic opportunities. But then naturally, there's going to be a really strong period where we can start to make significant improvements in that margin stack as well. And then other points I touched on, I think, just in the opening intro there. You may have heard categories, new categories that we've entered into, such as the activewear is really accretive. I mean, to give you an idea of just the trading margin on that, that trading margin in that category has evolved from 42% trading margin on a much lower sales number just a couple of years ago to where currently we're trading margin around 60% in that category on a much greater scale. So as categories like that, creatine and other collagens and various other products that we've launched expand, then become a greater part of the sales mix, we'll see significant margin progression through the Myprotein division. Factors we can't control, just explosions in whey pricing will naturally cause some near-term volatility from time to time, but we are very confident that the underlying factors driving that volatility will pass, and there will be a much more normalized market at some point in the not-too-distant or 12 months, 18 months at the very latest because there is so much new supply coming into the market, too. And then the final question, I think, was around other assets that we have. The group is full of really high-quality small businesses that don't get much recognition outside of the group. We have had bids against a number of those businesses, not least one of those divisions or one of those small businesses at the end of last year, we had an approach on it didn't meet our valuation, which would have been a very significant number. But we're not -- we have no interest in letting assets go high-quality assets that are trading incredibly well, whilst they might not necessarily be at the forefront of what the market sees THG as, we see great value in them. So unless we're going to get a proper valuation, we won't let them go. But again, this year, there are other assets, different assets, again, where we've had significant interest posed to us. But each and every time, we're very clear, we don't waste any time. We know what assets are worth like you saw with Claremont. If someone wants to pay a proper price and it's the right thing for the group, then naturally, we would do that. Should we do one of those this year, I suspect that would take us to net debt-free given the VAT point and the size of the value that we'd be looking at for one of those small businesses.

[Operator Instructions] there is another questions came in at this time, the question will be coming from Grace Gilberg calling from Jefferies.

I have a few, if I may. The first one around Nutrition. Can you -- I mean, you already actually answered a little bit on the previous question, but can you speak a bit more about some of the cross-selling opportunities in that division and how you'll be able to consistently defend that segment or within Myprotein against some of the more specialized players out there. So whether it's around athleisure or other nutrition brands, that would be really helpful. And then the last 2 I have are also on Beauty. So obviously, Beauty is another -- a larger component of the group and becoming more and more critical to the business. Can we speak a little bit more about the growth targets outside of the U.K. and how you're consistently defending the Beauty proposition there outside the U.K.? And then my last one is probably a bit more general. But it would be helpful to understand a little bit more of the mix shift within Beauty and how we're thinking about moving between makeup and skin care. Obviously, skin care such a huge boom in the pandemic. We've seen that come back a little bit. But how do you think about your beauty businesses being working between both of those segments that would be really helpful.

Nutrition, how does it defend against specialist players, et cetera. I think one of the key things is we do have a significant community not only at the consumer level, but also at a marketing level. So the strength of the brand, the quality of the product that we put into the marketplace means that as long as we execute well, we can really work well with the Myprotein community. The strength of that community is reflected for online retailers. So if you were to ever speak to any of the people that have taken Myprotein into store, you'll see that we have a big impact on traffic going to offline retailers into certain product categories. So I think we've talked in the past about Iceland with the Myprotein partnership there and the quite material impact that's had on their footfall and customer demographic. But even if you go to major retailers such as the scale of Tesco's, you'll go into there, and we'll be one of -- literally the only player in the market that can bring together in retail, in a big retailer like that, one big branded bay, which is pulling together multiple product categories. And it will -- then when you look at the Greencore proposition we've had, the number of people we will -- the brand will bring to the lunchtime meal deal aisle in a retailer will dramatically change because there's Myprotein products that are positioned in there. So what that's telling you is the community that we're operating in is passionate about the brand, there's trust in the brand. And we can -- as long as we deliver real quality, we can put new areas into them. And just the likes of the partnership with Mars, et cetera, does show you that the scale of recognition that there is across the wider industry of the power of the brand that we've got. And then if you looked at the athleisure wear progress we've got there just because that's one that you mentioned, we've been able to increase margins by 50% in absolute terms on the product. We've been able to move our price point significantly and -- but it's all been supported by an incredible level of quality. So if you were to go and try the product, et cetera, you will see that the quality of the design as well as the marketing that's going behind it is exceptional. So the influencer community globally can relate to the Myprotein product on so many different levels in their life that they can become true, true brand ambassadors rather than one day pushing a bit of Myprotein and the next competitor 2, 3, 4 and 5, they can actually live the brand. I think then we got on to Beauty. Did we go straight into Beauty then? Yes. And I've got Lucy here with me. And actually, instead of me answering that, I should let Lucy have a word, it's her specialism and.

Grace. So in terms of our focus outside of the U.K., you'll remember a number of years ago that we did choose to exit some of our other territories that we operated in. So we fully exited Asia, and we significantly pulled back and rightsized the business in Europe. Now we do still have a small business in Europe. But in terms of where our focus and investments are going at the minute, that is solely on the U.K. and the U.S., where we believe there is plenty of headroom for us to make significant gains in each of these markets over the next few years. The U.S. is performing strongly for us. We have quite a nice defensible proposition in the U.S. where the focus is on high-value clinical skin care, which is quite different to what the likes of Ulta and Sephora and Amazon are offering. It's very much regime-based. So we have mixed baskets and there's a lot of interaction with the consumer to help them figure out what skin care regime is right for them. And then your next question, I think, was around category and what dynamics we're seeing within the category. And we're actually fairly broad in terms of our category mix across beauty, the category for us is around the same size as skin, hair and makeup with fragrance being the smallest for us on the contrary to what the overall beauty category sees. So we've been able to take advantage of growing our fragrance portfolio ahead of the market over the last couple of years, and that has driven a significant amount of growth. We're actually seeing really healthy growth within cosmetics. And like you said, while skin care growth has tailed off coming out of the pandemic, it's actually still been relatively strong for us. And then in terms of hair care, that's seen a huge boom in the category over the last couple of years. Actually, that's well looked fantastic came from. So there was a time where Lookfantastic held around 80% market share in professional hair care online. Naturally, as some other players have come online into that category, that has diminished somewhat. So hair care for us is about defending our kind of stewardship and leadership in that category. So we've actually seen fairly broad brush positive growth across all of those categories over the last 12 months or so and into this year. And we don't see the skin care dropping off to be a huge problem for us, albeit the trends within skin care are evolving every day.

Our next question is a follow-up question from John Stevenson, calling from Peel Hunt.

Just a couple more. You've opened your second look fantastic store, I think, down in sort of Bristol Way. How has that gone? What's that done for the sort of the online halo and you got any plans for more this year? And then second follow-up, just on the licensing pipeline within Nutrition, both in terms of existing partnerships and potential for new ones, if you could chat a little bit about what's to come this year?

Look, I think I'll answer this one for Lucy because Lucy would love to open 10 or 12 stores and put some CapEx into doing that. And logic says we get quite a fast payback on some of these stores, right? I think when we open a store, we get a payback depending on how much support we get in various areas, but you'd be talking a 2-year payback on opening a store. Obviously, offline is a challenged market more generally for the longer term structurally, but beauty is a category that's in material growth. So as a result, we will be opening more stores. There'll be a steady, relatively slow progress of opening stores physically if that will be solo our brand. But that said, we will -- there's actually an increasing chance we're going to do partnership with other players where we will take over the running of their stores and rebrand them into ours. So -- which is a lower CapEx. They've already got the traffic footfall. We bring a lot to the offering. So as a result, that's something that we are actively exploring to. Now if we did that, that would accelerate the number of stores that we would have out there quite materially. So look, I think every store that you open broadly adds a couple of million quids worth of revenue. So -- it's in the grand scheme of our beauty business of, what, GBP 1.2 billion, GBP 1.3 billion of revenue. It's not massive, but it's -- what we do see is real brand value, marketing value, et cetera, in having a small estate. But we won't be rushing to open 10 more in the next 12 months, but there will be steady progress. Yes. Sorry, yes. So look, Neil, do you want to touch on a couple of -- I mean, we can't name them, but just some ideas around the licensing progress.

From a licensing standpoint, you'll see us continue to roll out our Mars partnership. So you'll see -- it's been mentioned already, but the Mars product has been launched this week, and that's took off to a great start. You'll see more of the Mars partnership come to life throughout the year. And you'll see -- continue to see more partnerships in the flavor profile space and probably more leaning towards the U.S. market. From a licensing out standpoint, you'll see the rollout of the Greencore and further rollout of -- in the food to go area. And then you'll also see us playing in new spaces like ready-to-drinks as well.

Any other one, John, while we got yet.

No, that's good for now. Thanks, no.

All right.

As we have no further questions at this time, I'll turn the call back over to Matthew Moulding for any additional or closing remarks.

Okay. Well, thanks, everybody. Just a big thank you to all the team in making this happen. It's a pretty been a lively year, much appreciated, and I appreciate the support of all the shareholders and stakeholders. All the best.