The Hut Group revenues soar but one-off costs mean it's loss-making

By

Sandra Halliday

Published
Apr 15, 2021

The Hut Group (THG) swung to an operating loss in its 2020 financial year as one-off items drove it into the red. However, the company’s revenues surged during the period and adjusted EBITDA was up as much as 35%.

Additionally, it updated on the first quarter and said it has seen continued revenue momentum with 58% growth in the first three months of the year.

But first, those FY20 figures. In the year to December 31, the company saw revenues rising 41.5% to £1.6 billion with international revenues accounting for more than 60% of the total. And following the acquisition of Dermstore, US revenue is expected to account for over 20% of the total in the future. 

Meanwhile, adjusted EBITDA was up 35% at £151 million after £2.6 million of self-funded furlough costs. But it incurred an operating loss of £481.8 million, due to a £331.6 million non-cash share based payments charge and other costs linked to its IPO and Covid. However, excluding non-cash and one-off adjustments, the group generated operating profit of £45.5 million, up from £33.5 million in 2019.

All that came as its various divisions over-performed during the year. The company said revenue at THG Ingenuity — its third-party e-commerce solutions service — rose 7.3% to £137.3 million. That came as revenues for Ingenuity Commerce sites rose 160.4% with 324% growth in live sites.

And its beauty retail operation, THG Beauty, saw revenue rising a healthy 57.1% to £751.6 million. It also said THG OnDemand revenue surpassed £100 million, representing 69.1% growth year-on-year “as personalisation and print on demand services were increasingly sought after by consumers and brand owners”.

The group gross profit margin at 45.2%, was 40bps ahead of 2019, with gross profit up 42.8% on 2019 driven by strong underlying trading margins in Nutrition, Beauty and Ingenuity Commerce.

The year was helped by significant growth in new customer numbers (+10.7m), beauty box subscribers (+39%), and the number of orders (+58% for Beauty) as consumers “were increasingly engaged through digital channels enabling discovery of new products and emerging brands via curated content”.

It added that consistently strong repeat rates were reinforced by “very encouraging new customer repeat conversion metrics, supported by an increasing proportion of customers acquired via branded apps”.

And through THG Society, influencer partnerships grew to over 19,000 via a dedicated recruitment programme, optimising marketing investment to support growth in active Beauty customers to 6.9 million.

Finally, as mentioned, the new year has started well. In Q1, THG Beauty continued its powerful performance with a 90.4% rise to £220.8 million. THG Ingenuity was up 32.1% to £146.3 million (with Ingenuity Commerce revenue rising nearly 190% in the quarter) and OnDemand rose 114% to £26.4 million, With all other operations taken into account, total group revenue in Q1 reached £447.3 million.