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Venture Capital - the £25m-£50m FCF guidance may or may not include the annualised upside from zero-rating the VAT. But it does not include the £78m cash claim

The net debt yes, but not EBITDA (held at consensus, which has remained unchanged despite the VAT updates)

Reminder on the VAT:

Jan25 update - £30m claim (relating to prior 4 years) with £10m annual EBITDA upside

Jan26 - £55m claim

Mar26 - £78m claim (including £18m for supplements)

Based on run-rate since Jan25, annual EBITDA upside appears to be at least £20m-£25m. If they send it all to the bottom-line (i.e. don't start investing in customers again by reducing prices) then that should return Nutrition EBITDA margin to 9%.

This is make or break time now for THG PLC. 12 working days supposedly left for the update from HMRC. Hopefully we should get an update in the pre-AGM trading statement on morning of 24th June. I would like to see them guiding minimum £120m EBITDA and top-end of FCF forecast ($45m-£50m, which I think already takes into account the VAT win).

Likewise, hoping that the resolution on Capital Reduction is because Management believe the VAT is in the bag.

Here's to a strong June, it's needed

FY26 guidance currently stands at c£100m EBITDA and £25m-£50m FCF.

We have c£70m of bridging items between EBITDA and FCF as guided by Management (capex £20m-£25m, leases £20m, interest TBC but would expect £25m-£30m this year still.

I believe margin accretion from zero-rating the VAT should equate to £15m-£20m annualised benefit. Management guided £10m annual benefit in Jan25 if successful, but since then the claim has grown £48m over 15 months, so I think it's considerably more than the original guidance.

On that basis, I'm tempted to assume a successful VAT claim will land us an EBITDA guidance uplift, and they will then guide to the top-end of the FCF range.

In my view, Management are targeting £100m FCF by 2028 through the following:

1) Mid-to-high single digit revenue growth - provides £20m FCF benefit

2) Nutrition division margin recovery (from est c7.5% in 2026) to 12% through whey price recovery - £25m benefit

3) FCF generation in 2027 and 2028 alone should at the minimum wipe out net debt - £10m interest benefit, notwithstanding any strategic asset disposals (another Claremont could save close to £10m interest again)

Obviously there are execution risks, such as whey price recovery, Management actually flowing this through to margin rather than just reducing the price to the customer, and reported revenue growth actually matching the CCY numbers.

What next? If the VAT refund does land, why not run another Capital Markets Day, 5 years on from the last disaster. This time to present the above picture and message to the market that if you don't value us accordingly, the FCF will be used aggressively to drive value (e.g. through buybacks).

Shein has partnered with THG Fulfil to launch a suite of enhanced services for UK sellers on its marketplace, Retail Week can reveal.

The Chinese fast-fashion giant has partnered with THG Fulfil in the UK to offer a “direct integration” of its marketplace, meaning orders can “flow straight from the Shein marketplace in THG Fulfil’s advanced network, creating a frictionless, end-to-end process for sellers”.

Shein said the partnership will make the marketplace “more intuitive” for UK sellers to access “tools, logistics and visibility to reach international markets”.

Speaking exclusively to Retail Week, Shein senior director of brand operations EMEA Christina Fontana said: “THG Fulfil allows an additional logistic service that’s much easier for the sellers to use. Everything about what we’re doing is improving the experience for the sellers, to make it easier for them to sell on the platform, because in our model, they do need to do a lot of the work.”

Fontana said Shein chose to partner with THG Fulfil because “they specialise in fulfilment. They’re a leader in Europe. They’re a leading company in their field.”

Shein launched its marketplace in the UK in 2024. It is also active in Germany, France, Italy, Spain, Portugal, Austria, Romania, the Netherlands, Sweden and Poland.

While there are around 2,500 UK sellers on Shein marketplace, Fontana said that adding better services comes back to the retailer’s “obsessive” focus on customers.

Alongside the partnership, THG has been named Shein’s official beauty partner.

THG Ingenuity chief revenue officer Darren Rajanah said: “We are proud to partner with Shein and provide the powerful fulfilment and courier management infrastructure that will help brands succeed on its marketplace.

“Our technology offers sellers a distinct competitive advantage, creating a seamless process for launching on the platform and ensuring their customers receive a world-class delivery experience. We are excited to be named Shein’s official partner and look forward to supporting brands of all sizes as they scale and grow.”

Think the truth is we don’t know about competitors and just have to trust Matt’s word. As you say though, likely the competitors would only have started zero-rating it from around Jan25 though, not the seven years.

It’s Jan25 dated back 4 years.

THG mentioned their claim could be £30m in Jan25, £55m in Jan26 and that’s now increased to £78m in Mar26. Unclear why it seems to be increasing at a faster pace but clearly the upside to margins is material. Likewise as mentioned, if competitors aren’t charging and the VAT ruling does not go our way, they are going to have a double-hit (P&L and balance sheet).

Note also that the equity analysts mention they aren’t building the VAT refund into their models yet, so again upside here.

From the below link, it looks like ingenuity has already been diluted by 25%. Surely not…

https://find-and-update.company-information.service.gov.uk/company/05016010/filing-history

How sad on Moulding’s part. Confirms how I will vote at this AGM then. What harm would it have done to engaged with that comment?

And as mentioned by someone yesterday, he has however liked a comment from some idiot saying “despite the constant whining you must get from investors”. Whining?!

Encourage all others to respond to Moulding’s LinkedIn and question - you said you will look after private investors, so when will you engage ahead of AGM or do you just not care.

Left the following comment on Moulding’s latest LinkedIn post:

“Hi Matt.

Will you be sending out comms to private investors ahead of the AGM regarding why they should vote for re-election of the Board?

Of course, all members of the Board are almost certain to be re-elected, but the general consensus amongst the chat groups / boards seems to be to vote Against and vote for change.

2-3 years on from rejected bids, we are now down at 24p - less than 15% of the bid price. How long can this go on for? Everyone should invest long-term but we’re now almost 3 years on from the previous drop to 32p. Your audience would be forgiven for thinking that the share price was a quid or 2 from your LinkedIn comms.

Appreciate that action has been taken with the Demerger. However, the messaging was that RemainCo would be highly profitable and cash generative, yet the FY24 results didn’t add confidence on that front. Why has THG not guided for FY25 FCF?

Disclaimer that this is an anonymous account - many on the chat groups have said they have been banned by you previously for airing their displeasure. Please remember that whilst some comments might have been rash, these are often shareholders who have lost a huge amount and some concerns raised have later materialised in trading performance.

Thanks“

All well and good the exciting forecasts but we’ve seen it before. There’s always something that goes wrong with THG performance in any given year.

I haven’t seen Jefferies report but the £130m EBITDA forecast in 2026 doesn’t seem to move the FCF dial crazily (£50m post interest maybe?), unless there are other balancing items they are factoring in?

Does anyone have detail on what Matt has said before about whey price sensitivity please? Eg each 10% fall / rise equates to X amount of ebitda impact?

Hi Oke

Not sure I agree unfortunately unless I’m missing something. Only mention of the £77m FCF I can find was in the demerger rns on 10th October and related to 2023. This was later revised to £80m in the demerger doc. Key point is that whilst this was post interest payment, it included £75m of positive working cap movement.

For 2024, as we saw from last night’s RNS, ebitda of £92m and FCF (pre interest) of £44m. I think the balancing items between the two are capex (£20m), tax (£5m) and lease payments (£22m as per demerger doc).

If interest is maintained at similar rate (c7%), then interest will be about £28m, leaving FCF post interest of c£15m in 2024.

For 2025, the only uplift to this is ebitda consensus of £103m, up from £92m. So you might land with FCF of £25m (not accounting for any other movements like wcap).

The £120m ebitda you mention includes ingenuity and is for 2024, which is obviously no longer relevant for this.

FCF to me seems disappointing. Good news is the debt becomes a problem for a few years time again. Now would like to see margin recovery from whey price falls

Oke you have mentioned £77m and £85m FCF in 2025. Where are you taking these numbers from?

Okehurst where are you taking the £77m FCF for 2025 from?

All the details can be taken from the RNS already:

£92m ebitda

2.6x leverage

£239m net debt

£396m debt

£157m cash (plus £150m undrawn rcf)

FCF of £44m pre interest

Interest rate assume euribor plus 4.5% (flat to previous term loan b agreement as per MM’s LinkedIn comments), equates to c7%

Interest of £28m pa (7% on £396m)

FCF post interest of £16m

Yes wonder if the EU and UK will just automatically follow now.

Does the US change impact boohoo directly too?

De minimus exemption is ending in the US from Tuesday. Should impact likes of Shein and Temu

Reardon where are you taking that from for debs?

20m odd website views in December is serious numbers - up there with the Shein .co.uk website

Https://frasers-cms.netlify.app/assets/files/financials/doc_.pdf

Website stats for dec:

-Flat yoy in December. First time flat since I’ve been recording.

-avg yoy down 10% June-nov

-debs 20.3m views up 37% yoy

- Karen Millen 24% up

- booohoo and boohooman down 14%

-plt -12%, plt us-6%

- other brands down about 50% yoy

Obvious caveats to reliability of data but trends feel broadly right based on recent results