Preliminary FY 2025 results

THG PLC (AIM:THG) has reported its preliminary results for the financial year 2025, showcasing a significant turnaround with a profit after tax of £54.1 million, a stark contrast to the £326.1 million loss recorded in 2024. This improvement is attributed to strategic disposals and a robust performance in the second half of the year, which exceeded market expectations. The company achieved a continuing constant currency revenue growth of 2.3%, with Adjusted EBITDA reaching £76.6 million, surpassing both internal guidance and consensus estimates. Notably, THG's balance sheet has been notably strengthened, highlighted by a £162 million reduction in gross debt and £103 million in cash proceeds from the sale of Claremont Ingredients. Furthermore, the company has extended its debt facilities to 2029, providing a more stable financial footing as it moves into FY 2026.

The results reflect a broader strategic transformation for THG, particularly following the completion of the THG Ingenuity demerger, which aimed to simplify the group and unlock its cash generation potential. The company exited FY 2025 with a revenue growth of 7.2% in Q4, indicating strong momentum as it enters 2026. The performance of THG Beauty was particularly noteworthy, with a 16.2% growth in the UK and Ireland, driven by the Lookfantastic brand. The nutrition segment also demonstrated resilience, with growth across all quarters, supported by an expanded retail footprint that now includes over 40,000 doors.

From a financial standpoint, THG's Adjusted EBITDA of £76.6 million, while lower than the previous year's £83.3 million, was still ahead of the anticipated £74 million. The operating profit of £8.1 million marks a significant recovery from the prior year's loss of £147.9 million, underscoring the effectiveness of the company's restructuring efforts. The balance sheet has been deleveraged significantly, with net debt expected to reduce to between £110 million and £130 million before any strategic asset disposals. This reduction will be driven by anticipated free cash flow generation of between £25 million and £50 million, alongside potential VAT repayments related to the ongoing HMRC case concerning protein powder VAT treatment.

However, while the outlook for FY 2026 remains unchanged, there are inherent risks that could impact THG's performance. The company has noted that its guidance assumes no material escalation in geopolitical disruptions that could affect supply chains or consumer demand. Additionally, the revenue exposure to affected Middle Eastern regions was less than 1.5% in FY 2025, suggesting that while the direct impact may be limited, any significant geopolitical events could still pose a risk to overall market sentiment and operational stability.

In terms of valuation, THG's current market capitalisation stands at £505.6 million. When compared to direct peers within the same market cap tier, it is essential to assess how THG's financial metrics stack up. For instance, THG's Adjusted EBITDA margin of 4.5% is slightly below that of peers such as THG Beauty and Nutrition, which have shown stronger growth trajectories. The company’s recent performance indicates a recovery path, but it remains to be seen how effectively it can sustain this momentum in the face of external challenges.

Looking ahead, THG's next measurable catalyst will likely be the resolution of its HMRC case regarding VAT treatment, which could yield additional cash inflows. The timing of this resolution remains uncertain, but it is a critical factor that could enhance the company’s liquidity position and further support its growth initiatives.

In conclusion, THG's preliminary FY 2025 results indicate a significant turnaround, supported by strategic disposals and a strong operational performance. While the company has made substantial progress in deleveraging and restructuring, the outlook for FY 2026 will depend on its ability to navigate potential risks and sustain revenue growth. Given the positive trajectory and the anticipated free cash flow generation, this announcement can be classified as significant, marking a pivotal moment for THG as it seeks to solidify its position in the market and enhance shareholder value.

Key insights

• ●THG achieved a £54.1m profit, a turnaround from a £326.1m loss.
• ●Adjusted EBITDA reached £76.6m, exceeding guidance.
• ●Free cash flow generation expected between £25m and £50m.

Disagree with this article?