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THG reports £495.6m operating loss

The Hut Group

The Hut Group (THG) has reported a £495.6 million loss in its full year results, attributing the “challenging global environment”.

The online-retailer claims in the year ended 31 December 2022, its performance was impacted by the non-cash impairment of £275.4 million, in addition to certain non-recurring costs which THG “continues to reduce”.

This includes £32.4 million of costs relating to the strategic review stock provision and other associated costs, £18.5 million of incremental international delivery costs, predominantly in Asia, as a result of the absence of traditional delivery routes and elevated costs associated with Covid-19 and £14.8 million of administrative costs.

This also includes, £3.6 million of distribution costs relating to the commissioning of purpose-built new fulfilment facilities, the company revealed.

It also reported a 2.7% increase in sales to £2,239.2 million last year, boosted by a 9.1% growth in THG Ingenuity and a 4.5% increase in its Beauty arm.

The parent company of Cult Beauty, Look Fantastic and MyProtein also provided a statement regarding “alternative performance measures”, to standard IFRS measures, in a bid to “provide stakeholders with additional helpful information on the performance of the business.”

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This comes as shares at the company surged over 40% after it confirmed it had received a preliminary takeover approach from Apollo.

“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,” THG CEO Matthew Moulding said.

“The challenging macro and inflationary environment required decisive action across the business with around £100 million 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.”

He added: “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.

“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.”

Image credit: Shutterstock

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