(Alliance News) - THG PLC on Thursday cut its earning guidance for 2022 despite narrowing its interim loss, amid a board shake-up as two directors left and two joined.
THG is a Manchester-based online beauty products company.
In the first six months of the year, pretax loss narrowed to GBP22.3 million from GBP66.7 million year-on-year. Revenue climbed 12% to GBP1.1 billion from GBP958.8 million.
THG shares were 21% lower at 38.48 pence each in London on Thursday morning. The stock is down 94% over the past 12 months.
The company said that despite revenue growth, particularly in the UK, its gross profit margin fell to 42% from 47% a year ago as this "primarily reflects the strategy to partially shield consumers from adverse macro-economic conditions and a period of unusually high raw material costs".
THG explained the strategy by citing customer retention and future growth.
It also noted a SoftBank Group Corp option non-cash cost of GBP601,000, compared to a profit of GBP38.1 million a year ago. This was the result of a terminated partnership with SB Management Ltd, a subsidiary of Softbank, which it cancelled in July due to "global macroeconomic conditions".
"The value of the option as at December 31, 2021 was GBP600,000 [compared to] GBP38.1m as a[t] June 30, 2021, meaning that the movement in the first half of 2022 was much lower than a year earlier. As this was a material, non-recurring transaction the revaluation effects of this option have been presented as an adjusted item," THG explained.
In May 2021, THG signed a financial and trading partnership with Softbank, under which both companies would explore potential commercial agreements with each other. As part of the deal, Softbank would subscribe for USD730 million in THG shares, as well as hold the option to subscribe for a 20% interest in THG Ingenuity for USD1.6 billion, implying an enterprise value of USD6.2 billion at the time.
THG Ingenuity comprises the Hut group owner's Ingenuity platform IP as well as its operating trade and assets. However, as a result of the terminated agreement, this call option is no longer able to be exercised.
Looking ahead to the full year, THG now expects adjusted earnings before interest, tax, depreciation and amortisation to come in at a range of GBP100 million to GBP130 million, including a revenue growth of around 10% to 15%, up from GBP2.18 billion in 2021.
Earlier this year, it had been expecting adjusted Ebitda of GBP161 million, in line with the previous year.
Meanwhile, two non-executive directors are departing and two new ones have been appointed.
The two new directors are Gillian Kent, who is also a non-executive director at Ascential PLC, Marlowe PLC and SIG PLC, and Dean Moore, who is interim chief financial officer at Dignity PLC and former CFO at Cineworld Group PLC, N Brown Group PLC, T&S Stores PLC and Graham Group PLC.
One of the two leaving directors is Zillah Byng-Thorne, the CEO of magazine publisher and online media firm Future PLC. Byng-Thorne is senior independent director for THG and was appointed to the board in 2018. She will become deputy chair of Trustpilot Group PLC in October, which the Copenhagen-based online review platform announced on Thursday.
The other leaving director is Non-Executive Director Andreas Hansson, leaving after just under one year as director as he was appointed in October 2021.
Damian Sanders, who has been a director of THG since 2020, will take the role of interim senior independent director.
The changes at THG all became effective on Thursday.
By Tom Budszus; tombudszus@alliancenews.com
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