THG swings to £76 mln profit on Ingenuity deal; EBITDA slumps 35%

THG (LON:THG) reported a 35% decline in H1 2025 adjusted EBITDA to £24 million on a 7.6% revenue drop to £783.4 million, primarily impacted by a 12.4% revenue fall in its Beauty division despite Nutrition's 1.1% growth. While the company posted a statutory profit of £76.3 million, largely attributable to the demerger of Ingenuity, its loss before tax from continuing operations widened. CEO Matthew Moulding highlighted strategic benefits and reaffirmed full-year guidance, anticipating H2 revenue growth for both segments, with net debt also significantly reduced.

Analysis

THG's first-half 2025 results reveal significant operational challenges, with adjusted EBITDA falling 35% to £24 million on a 7.6% revenue decline to £783.4 million. The headline statutory profit of £76.3 million is misleading as it stems from a £142.4 million one-off gain from discontinued operations; the loss before tax from continuing operations actually widened to £66.7 million from £56.3 million, signaling underlying weakness. Margin compression was a key issue, with the group's adjusted gross margin narrowing to 41.1% and adjusted EBITDA margins falling in both the Beauty (5.2% to 4.2%) and Nutrition (6.5% to 3.9%) divisions, the latter impacted by high whey prices. The Beauty segment was the primary drag on top-line performance, with revenue falling 12.4%. However, the company demonstrated improved financial discipline, evidenced by a narrower free cash outflow of £77.7 million, sharply reduced capital expenditure, and a strengthened balance sheet with net debt set to fall to approximately £220 million pro forma. Management has reiterated its full-year guidance, forecasting a significant second-half acceleration with revenue growth of 1-3% in Beauty and 10-12% in Nutrition, citing market share gains and new brand launches as catalysts.

Key Decisions for Investors

• Investors should critically assess the credibility of management's optimistic H2 guidance, as the forecasted revenue acceleration, particularly the 10-12% growth in Nutrition, starkly contrasts with the weak H1 performance.
• Monitor gross margin trends and key input costs, such as whey prices, as the severe H1 profitability erosion across both major divisions remains a primary risk to the investment thesis.
• While the improved balance sheet and reduced net debt de-risk the company's financial profile, any potential investment should be contingent on tangible evidence of the guided Q3 revenue recovery materializing.