THG boss says company will ‘double down’ on profits focus after annual loss widens

The head of THG has said his focus will be on making the ecommerce retailer more profitable after its annual loss ballooned, a day after the beleaguered company said it had received a takeover approach from US private equity group Apollo.

Operating losses at the Manchester-based company, which owns websites Lookfantastic and Myprotein, widened to £495mn last year from £137mn in 2021, THG said on Tuesday.

Shares in THG, previously known as The Hut Group, had soared more than 40 per cent on Monday after the group disclosed the approach from Apollo. But following the release of full-year results and a muted outlook for this year on Tuesday, the stock fell 17 per cent in afternoon trading.

The greater annual losses reflected higher distribution and administrative costs, as well as a non-cash hit of £275mn relating to its beauty arm and Ingenuity, its business that helps brands sell online.

Chief executive Matthew Moulding, who co-founded the business in 2004, said that THG “had a strong track record of thriving in difficult environments” and investment in the business “has positioned us incredibly well to now double down on our focus on profit enhancement”.

Adjusted underlying profit, THG’s preferred metric, fell to £64mn from £161mn in 2021. It reported a pre-tax loss of £550mn.

Moulding said he would not comment further on Apollo’s bid during a call with analysts and investors on Tuesday.

Hailed as a promising UK tech group when it listed during the pandemic in 2020, THG has had a bruising run as a public company, with a series of problems damaging investor confidence.

Moulding said while the latest results were “not where we planned . . . this was largely the result of our strategy to minimise the impact of inflation upon our customer base”.

The group’s revenues edged up 2.7 per cent last year to £2.2bn, but THG said they had fallen 8.6 per cent to £469mn in the first quarter. The drop in the first three months of the year was “largely as planned, as a result of prioritising higher margin sales”, THG added.

Revenues at THG’s beauty arm decreased 10.7 per cent year on year to £253mn, while nutrition sales increased 4.5 per cent to £167mn. Ingenuity’s revenues dropped 10.1 per cent year on year to £35mn.

THG ditched several ventures, including the specialist cycling site ProBikeKit, which led to 2,000 job losses last year.

Moulding, who still owns about 25 per cent of the company, said on Tuesday that he would surrender his “golden share”, a stake that gives him the power to veto any takeover, in September. He first made the promise in 2021 in an effort to ease investors’ concern over the company’s governance.

Analysts at Davy said: “THG expects significant [profit] margin recovery, supported by continued abatement of whey costs allied with enhanced operating leverage and the discontinuation of non-core activities.”